Port Bureau New - September 2012

Port Bureau News September 2012

www.txgulf.org

Low Sulfur Crude Oil An Outlook for Imports into the Houston-Galveston Region

The 83rd Annual Maritime Dinner Honoring Jerry Nagal, Chairman—Rickmers Linie

Spotlight on Mike Mangan Vice President, Business Development—Houston Fuel Oil Terminal Company

A Container Vessel Traverses the Houston Ship Channel at Dusk

Port Bureau Staff Bill Diehl Jeannie Angeli David Cooley Al Cusick Cristina Gomez Janette Molina Christine Schlenker Patrick Seeba Josh Whitehead

Board of Directors *Dennis Hansell—Chairman *Steve Stewart—1st Vice Chair *Capt. Bill Hennessey—2nd Vice Chair *John Taylor—Sec./Treas. *Tom Marian—Immediate Past Chair *David Ellis *Charles H. Flournoy *Capt. John G. Peterlin III *Vinny Pilegge *Nolan Richardson *Capt. Richard Russell *Captain Robert Thompson *Len Waterworth *Nathan Wesely April Bailey Jim Black Robert Blades Ken Burnett Mike Drieu Robert Garcia Celeste Harris Jason Hayley Mehdi Hejazi Kevin Hickey Guy W. Hitt Charlie Jenkins Mike Mangan Brad Maxcey Jerry Nagel Bernt Netland Colin Scott Capt. Christos Sotirelis Tim Studdert *Denotes Executive Committee Members

Captain’s Corner

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Sunset? I Say Sunrise on the Value of our Ports

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As most people here know, the Sunset Staff Report for the Port Authority came out in August. If you haven’t read it yet, we’ve provided a short review highlighting the Sunset Advisory Committee’s recommendations later in the newsletter. As part of the process I testified in front of the Sunset Advisory Committee in Austin on September 5th, and I’d like to share with you some of my thoughts that I shared with the Committee.

The entire point of the review process is to point out things that could use improvement, so the report never mentions any of the good things about the Port Authority or about the Port of Houston. The PHA is in a unique position of operating as a government entity in a competitive environment, and as such has to balance its duties as a public steward with operating as a business. With that said, I would like to address the Sunset’s concerns from an industry, and more optimistic, point of view.

The Houston maritime community is facing a period of growth brought on by anticipated increases in freight movement due to the booming Texas population and exploration of natural gas through the fracturing process. As the federal sponsor of the Houston Ship Channel, the Port Authority is addressing the environmental and infrastructure issues of moving more cargo through proper channel and terminal development. It oversees development and maintenance of the federal channel in partnership with US Army Corps of Engineers. The Port Authority also works closely with federal partners such the United States Coast Guard, the National Transportation Safety Board and others to address safety, security and environmental issues and to ensure stability and efficient movement of cargo.

With regards to dredging, the PHA has been active in lobbying for the Realize America’s Maritime Promise (RAMP) Act on the federal level – legislation which seeks to ensure that monies paid in tax by ship channel users for the purpose of channel maintenance are appropriated by Congress for their intended purpose. At a time when most legislative bodies have remained radio silent on the topic of dredging, some East coast swing-state ports are breaking that silence and lobbying as states for federal dredging funding. The ports of Texas could use Austin’s support to get the funds needed to get the infrastructure development required to remain competitive. The Sunset report even points out that none of the Texas ports receive much attention from the State of Texas, and that may “stretch the State’s current piecemeal approach to transportation planning.” Our state needs to realize, and soon, that Texas ports move 25% of national tonnage and need just as much attention as road, rail, and air.

The Sunset report outlines administrative shortcomings that can be addressed at Port of Houston Authority. But to be clear, our industry focus is having a deep, wide, and efficient channel to operate in. For 100 years the Port of Houston Authority has grown and adapted to global market conditions. We know our ports are crucial to Houston and Texas and by working together, we move more ships here than any other port in the United States. Our Port Authority compliments our effective, productive businesses, and we look forward to many more years of effective partnership and continued growth.

The Staff Report started by saying: “The Port of Houston Authority is not a broken organization.” I agree with that statement and anticipate that this Sunset review process will help the Port Authority remain effective, efficient and competitive, and I welcome the Sunset Advisory Committee’s review and interest in our community.

Mississippi Grain Barges Hampered by Drought and Isaac

Exploding Swamp Rats!

The storm surge caused by Hurricane Isaac may actually help save the marshland – by destroying massive numbers of nutria, the large invasive rodent species not-so-fondly referred to as “swamp rats.”

Nutria feed on the roots of marshland vegetation, and without the root structures in place, the fine soil quickly erodes, leaving large holes in the marsh.

Along the Mississippi coastline alone, an estimated 20,000 nutria corpses line the beaches, presenting a temporary health hazard as the bodies decompose in the summer heat upwards of 90 degrees. Several local officials, including Hancock County Supervisor David Yarborough and Waveland, Hancock Mayor David Garcia, have noted cleaning up the carcasses is proving difficult as the putrid pests keep exploding.

Federal hazardous waste contractors are performing most of the clean-up, although even wearing hazmat suits has not prevented some of the workers from quitting the repulsive task.

Heavy rains from the remnants of Hurricane Isaac have helped ease the drought conditions of the lower Mississippi River enough for the US Coast Guard to increase the recommended draft from 9 feet to 10 feet, although it is still two feet below normal river levels. Shippers will be able to carry about 200 tons more per barge with the extra foot of draft; however, it is unlikely that the amount of rain received was sufficient to maintain the new draft for long in light of the record drought. The wind and storm surge brought by Isaac was strong enough to reverse the flow of Mississippi as far north as Belle Chasse, LA for nearly 24 hours on August 28, partially due to the very low level of the river.

While rain is welcome to the drought -stricken Midwest, the heavy winds and possible flooding in the area may damage crops ready for harvesting. Approximately 60% of US grain exports come through the Mississippi River, and the record drought coupled with last year’s record flooding has caused signifiMidwest drought conditions per- cant decreases in crop production and insist decreasing crop production creases in prices for grains. This year, the river’s water level has been low enough to limit the number of barges transiting at a time and force shippers to light-load their barges, which means that more barges are needed to do the same amount of work, but fewer barges are getting through. Barge traffic on the Mississippi is down 14% year-to-date according to Army Corps of Engineers data and empty barges are unable to reach crops ready for harvest due to the shallow and narrow river.

Although parts of Mississippi and the Port of New Orleans were shut down for a few days, some grain traders have anticipated that the storm’s effect on exports will be minimal due to already reduced volumes. The high prices of corn and wheat have already slowed reIsaac Approaching the Gulf Coast cent export demand, and an increasing share of soybean exports are moving to market through the Pacific Northwest.

Throughout the summer, the Army Corps has had eight to nine dredges trying to clear various parts of the Mississippi in an attempt to maintain a minimum 9 foot draft and 300 foot wide channel. The lower Mississippi River is usually low in September and October, but dangerously low river levels since July prompted Maj. Gen. John W. Peabody, commander of the Mississippi Valley Division Army Corps, to say, “The worst is ahead of us.” - C. Schlenker, GHPB

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Houston Ship Channel Infrastructure Survey An Outlook for Imports into the Houston-TX City Area In recent years, the Houston Ship Channel has suffered from a lack of maintenance dredging that has impacted commerce and is only getting worse with time. The Harbor Maintenance Tax that we have counted on to provide necessary funding for maintenance dredging is not being fully used by appropriators to keep our nation’s ports deep and wide.

Along with the federal sponsor of the Ship Channel, the Port of Houston Authority, we have been talking to our congressional delegation about legislation such as the Realize America’s Maritime Promise Act (H.R. 104 & S. 412) for several years and our local legislators know the need for a steady funding stream for infrastructure. What we want to show the federal administrators and legislators now is that Houston port region industries are investing in facilities to meet future demands of commerce and that the government needs to fulfill its obligations to maintain the federal infrastructure: the ship channel. To do this, we are asking port region companies and facilities to fill out a survey that will allow us to present statistics for infrastructure spending by private industry.

We will use this information to generate an aggregated monetary amount and representative anecdotal evidence of the costs borne by Port users to maintain, repair, and develop their businesses in the Port region.

As a trade organization whose members represent more than 90% of the ships moving on our channel, the Port Bureau is collecting this information so that no company or entity will be privy to anything that may be considered a trade secret.

No company names will be used to identify specific amounts, projects, or comments unless we receive specific permission.

For further information and a link to the survey, visit our website at www.txgulf.org.

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The Constitution Sails Across Boston Harbor The world’s oldest commissioned naval vessel, the USS Constitution, sailed under her own power for only the second time in over one hundred years on August 19th to commemorate the bicentennial of her stunning victory over the British HMS Guerriere during the War of 1812. The Constitution was pulled by tug into the harbor, then sailed across the Boston Harbor for 17 minutes before getting tugged to Fort Independence to fire a 21-gun salute.

At 215 years old, the ship first sailed in 1797 as the third frigate constructed for the newly-reactivated US Navy, and is the only one of the six original frigates still in existence. The Constitution is made of Georgian southern live oak, one of the densest and strongest trees available.

The strength of her 21-inch thick hull allowed her to withstand direct cannon-fire from the Guerriere during the 35-minute long cannon fight, earning her the nickname “Old Ironsides.”

Constitution’s current mission is “to promote understanding of the Navy’s role in war and peace through educational outreach, historic demonstration, and active participation in public events,” and as a commissioned US Navy vessel, she is manned by about 60 Navy personnel.

“Old Ironsides” is berthed at Charlestown Navy Yard near Boston, is open to the public year round for educational tours, and is tugged into the Boston Harbor about once a year for special events and demonstrations.

83rd Annual Maritime Dinner 18 August 2012

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Honoring Jerry Nagel—Chairman, Rickmers Linie (America)

Port Bureau and Community Members, Thank you for your support of our 83rd Annual Maritime Dinner honoring Jerry Nagel, Chairman of Rickmers Linie (America). The evening was a smashing success from what I saw and I'm glad to see so much of our industry together enjoying each other's company and socializing after hours.

I especially want to thank our table sponsors; I'm heartened to report that we had tremendous participation by Port Bureau Members and saw over 50 tables of members representing all facets of our industry. I got to speak with many of you over the course of the evening and am glad to hear that you were enjoying yourselves and getting a chance to sample everything from the open bar and wine pull to the auction and lively discussion at your tables.

One of the greatest strengths of the Port Bureau is the diversity of our membership - from terminals and tugs to carriers and chandlers, and so events like this where the community gets to know each other better are critical to our success.

Over the course of the year, we provide Marine Exchange services to the waterfront and help companies better understand the port community, but no mission is more critical to our success than encouraging cooperation, networking and camaraderie among our community. With your invaluable support and loyal participation, I'm proud to say: Mission Accomplished.

Dennis Hansell Chairman of the Board

Charles Flournoy

Ceres Gulf EP America WATCO Companies/Greensport Industrial Park Houston Fuel Oil Terminal Company Intercontinental Terminal Company Manchester Terminal Corporation Moran Gulf Shipping Rickmers-Linie San Jacinto College Suderman & Young Towing Co. University of Houston Vopak

AET AllTrans Port Services Amegy Bank Best Bet Marine Services Blades International Coastal Cargo Danner’s Inc. Frost Bank Global Diving & Salvage/Wild Well Control Gulf Stream Marine Houston Mooring Company HUB International Rigg Norton Lilly Pannell Kerr Foster/Comerica Bank Odfjell USA The Port of Galveston The Port of Texas City Ports America Royston Rayzor SAGCD ILA Schröder Marine Services Shrader Engineering St. Joseph Medical Center T. Parker Host Agencies TARGA Resources West Gulf Maritime Association Whitney Bank

Low Sulfur Crude Oil An Outlook for Imports into the Houston-TX City Area Summary The outlook for the number of ships delivering foreign crude oil to the Houston-Texas City area could be potentially reduced by 2-7 light-loaded Aframax ships a month. Based on the equivalent of about 45 light-loaded Aframax ships currently delivering imported crude oil to the area, this would be a reduction of 4% to 16%. If this occurs, it would be the result of increased domestic oil production that reduces the need for imported oil and would be evolving during the next 6-9 months.

This outlook is predicated on the current installed refining capacity, its configuration, the current depth of the ship channel, and a forecast of future domestic oil production.

Background: The Crude Oil Supply Crude oil imports into the Houston-Texas City refining complex have averaged 1.5 million BD since the late 1990’s with a peak of 1.75 million BD in 2004. Today, oil imports are further affected because of an increase in domestic oil production, predominantly low sulfur shale oil. As a result, total oil imports are slightly declining.

Regarding domestic supply, oil production, which has been on a general decline since the mid1980’s, has recently turned slightly upward since 2009. This is a result of applying improved enhanced oil recovery techniques that liberated oil from shale that is usually present in many oil bearing geologic formations. Increased oil production from utilizing this enhanced recovery technique has added a net increase of over 400,000 BD to domestic oil supplies. The two big contributors to this increase are from the Bakken production in North Dakota and the Eagle Ford production in south and central Texas.

So What’s the Impact?

The Eagle Ford production could marginally increase the supply of low sulfur crude oil into the Houston-Texas City area, which consequently would further reduce the import of foreign low sulphur crude oils. However, the impact of this new oil production, because of its very high quality (crude oil 40°- 45° API and condensate 50°- 60° API), could limit its penetration into the Houston-Texas City refinery market.

An efficient refining process prefers the quality of an input that when refined creates an output that is equally distributed throughout the complete refined product spectrum. A very light crude oil, when refined, concentrates its product yield in the light end of the refined product stream - gases, gasoline, and naphtha. To balance such a yield in order to maintain processing efficiency, the refiner blends a very light crude

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oil with another grade of oil, usually of a lower gravity that characteristically does not contain a high volume of light ends. While such a type of crude oil exists, it is available from a few places throughout the world. Refiners are therefore limited in their choice of possible blending alternatives.

Consequently, a very light crude oil, when part of a refining feedstock stream, is generally consumed in small quantities.

In the Houston area, there are potentially four refiners as prime candidates for processing Eagle Ford Crude Oil. However, all but one has either domestic production or captive foreign oil production available in their supply portfolio, which could further limit the demand of Eagle Ford Crude Oil. As a result, while Eagle Ford Crude Oil may indeed penetrate the Houston-Texas City market, it may not eliminate the need for low sulphur crude oil imports.

Conclusion Based on an analysis of crude oil imports into the Houston-Texas City area, recent low sulphur crude oil imports have averaged between 250,000 and 300,000 BD. This is the equivalent of one lightloaded Aframax vessel every two or three days or 10 to 15 ship deliveries a month.

However, increased domestic oil production from the Eagle Ford formation could compete with foreign oil supplies. This could occur between now and 1Q13 (next 6-9 months) when the planned logistics systems (barge or pipeline projects) would all be completed and Eagle Ford Crude Oil could potentially supply local refiners with an additional 115,000 BD of feedstock. This reduces foreign low sulphur crude oil imports by 2-7 light-loaded Aframax ships each month and is based on published planned pipeline completion schedules, various estimates of Eagle Ford production, and ultimate refiner demand.—D. Cooley, GHPB

The Port of Houston Authority Sunset Report Excerpts and Analysis from the Sunset Staff Report In early August, the Sunset Advisory Commission of the Texas House of Representatives released its staff report of the Port of Houston Authority. The main purpose of the Staff Report is to discuss recommendations for adjustments to the Port Authority’s operation and governance, giving almost no attention to the positive aspects of the Port and Port Authority, though admitting its overall good health. The report acknowledges several times that the Port Authority is in a unique position of trying to operate both as a governmental entity and a competitive business. The following is a summary of the recommendations of the Sunset Commission’s report, focusing on eight areas of improvement.

Issue 1: Restore Public Trust in the Commission The Sunset Review’s recommendations include modernizing the Port Commission’s appointment structure and instating best practices for ethics and governance between the Commission and the Port Authority staff.

Action items: § Governor-appointed member of Commission with required business experience § Members of the Commission elect Chair § Limit Commissioner tenure to no more than 12 years § Define Commission as a policy-making body, leaving PHA staff to perform operations functions § Require a formal code of ethics and best practices between Commission and staff Issue 2: Improve Stakeholder Trust in the Authority While acknowledging that the Port Authority has attempted to make its own progress in this area in recent years, the Sunset Review holds the posi-

6 tion that more can be done to involve the public and effectively respond to public concerns, increasing public and stake- 18 holder trust in the Port Authority’s actions. Public support is essential to permitting and voter bond approval.

Action items: § Proactively engage stakeholders through open forums, town hall meetings, etc. § Go beyond minimum requirements established by the Open Meetings Act § Increase usability and information available on PHA website, including community outreach information § Develop a standard process to receive and respond to complaints

Issue 3: Strategic Planning The PHA’s Strategic Initiatives document shows that the Port Authority is working on a long-term planning process, but the Sunset Review found several aspects of the strategic planning process that could use improvement, namely that it focuses too little on overarching goals and that there are no performance indicators. The current mid-range plan lacks prioritization of capital needs, especially for some older facilities.

Action items: § Develop a long-range (10-20 year) plan including operating environment assessments, high-level goals, and strategies to meet those goals § Develop mid-range (5 year) financial and capital plan that reflects strategic prioritization of needs § Develop short-range (1 year) budget and capital plan § Publish all plans to the public with sensitive business information redacted Issue 4: Internal Auditing According to the Sunset Review, “The Authority has never had a standard internal audit function, unlike many public and private sector organizations.” The Port Authority has attempted to address this issue since 2010, but has been locked in dispute with the Harris County Auditor regarding the County Auditor’s role in internal auditing for PHA. The County Auditor believes she is statutorily required to report to the State District Judges, while the PHA maintains that internal auditing should be reported to the Port Commission. The Sunset Review recommends a modernization of the PHA’s internal auditing process, including repealing certain laws and provisions applying to auditing of PHA. The Sunset Review also mentions that the County Auditor can only provide financial auditing, while PHA requires a comprehensive audit function encompassing financial, managerial, and compliance risk auditing.

Action items: § Establish an internal audit function § Remove statutory requirement that County Auditor is the PHA’s auditor, and instead have County Auditor perform an occasional financial audit oversight role § Repeal certain outdated and inefficient session law and Texas Water Code provisions applying to the County Auditor’s statutorily required audit duties for the Port Authority Issue 5: Promotion and Development Fund Transparency The Sunset Review holds the position that, while many Promotion and Development Fund expenditures are reasonable, some expenditure decisions do not reflect good return on investment. A broad statute and a lack of clear spending policies lead to confusion and occasional public controversy in P&D spending. The main recommendation is to increase transparency and accountability of spending.

Action items: § Adopt publicly available policies governing Promotion and Development Fund spending § Adopt travel and expense policies for staff and Commissioners Issue 6: Procurement Practice Inconsistent The Sunset Review looked at ways procurement could occur more efficiently due to the large volume and monetary value of PHA’s procurement contracts and small business contracts. The essence of the findings is that PHA should unify the procurement practices across divisions and should consider adopting procurement standards found in other large businesses.

Action items: § Consolidate procurement functions into a single office § Review, consolidate, and update procurement policies § Improve record-keeping § Reevaluate the amount of small business participation, and move small business promotional activities to Public Affairs § Improve process to evaluate and award contracts Issue 7: More Proactive Safety Program Once again noting that PHA is currently working toward improving safety, the Sunset report highlights a few more areas of improvement to consider while implementing a comprehensive safety program, including improving organization and resource management, involving related departments such as Environmental Affairs, and conducting more formal safety enforcement.

Action items: § Develop a safety program that addresses Authority employees, tenants, and outside workers § Involve relevant divisions in design and implementation of an Authority-wide safety program § Consider what division should run the safety program (currently Operations) § Institute return to work program (under development) to boost morale and save money Issue 8: Commission should have more active role as Pilots Board The Sunset Commission admits the excellent safety history of the Houston Pilots and the strong vetting of pilots by the Houston Pilots Association and the Authority’s Pilot Board Investigation and Recommendation Committee and Application Review Committee. Despite this, the Sunset report recommends more information flow between the Houston Pilots Association and the Pilot Board and more oversight by the Commission in its role as Pilot Board.—C. Schlenker, GHPB

Port Watch Tom Marian—Buffalo Marine Service

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Trend of 2012 Continues—Odds are Up

While August has been a month of contrasts – drought in the upper Mississippi River and Isaac-induced flooding in the lower Mississippi – the July maritime picture continued 2012’s yo-yo pattern of the odd months compensating for the even month’s performance. Thus, as the second half of the year unfolded, vessel activity was up as compared to the preceding even-month of June.

All told, Texas ports saw a 3% uptick in deep draft vessels and an even better 5.1% increase in brownwater movements throughout the Houston Ship Channel.

Overall, it was a rather consistent month across the board as every port but Sabine posted healthy gains. Yet, in most cases, the monthly gains were not enough to push the bulk of the ports into positive territory for the year. On a year-to-date basis, total deep draft arrivals are down a mere 0.4% for the state. The declines were led by the ports of Galveston and Freeport which are off 15.2% and 13.6% respectively. On a positive note, both ports experienced very healthy gains for the month – 14.3% and 17.6% respectively. The opposite end of the spectrum was occupied by Brownsville which has proven remarkably resilient as of late with a monthly jump of nearly 47% and a year-to-date improvement of 29%.

To its north, Corpus Christi enjoyed a very strong month with 22% more arrivals but remained flat for the year with ½% fewer vessel calls. Texas City also notched up nicely by over 8% for the month; however, this was still not enough to bolster its yearto-date performance over 2011 as it remains 1.1% off last year’s pace. The Bayou City kept chugging forward as 698 deep draft arrivals resulted in a just-over 1% monthly gain and kept things in positive territory by 2% for the year.

As previously mentioned, this month’s “goat of a port” was claimed by Sabine with a marked 20% decrease – a number that certainly did not help the year-to-date arrival totals which are off by 2%. Given Sabine’s thirst for crude oil, these numbers are not completely unexpected as domestic crude from shale gas has displaced a significant amount of foreign crude. Further evidence of the shale gas bonanza is the year-to-date 19.2% decrease in the number of tank vessels that have called on the Port of Houston – a total that was not helped by a 9.2% monthly wane. Conversely, cheaper feed stocks have bolstered exports transported in chemical tankers (up 1.6% for the month and 93% for the year) and LPG vessels (15% monthly increase for a total year-to-date improvement of over 13%). All of this positive economic activity has played a role in the arrival of a greater number of car carriers (over33% for the year and another monthly increase of nearly 17%) and general cargo ships (a positive month-to-month change of 12.6% and year-to-date rise of 9.4%). Bulk commodities into the Port of Houston rose a modest 2% for the month but remained nearly 10% below last year’s pace. Ro/Ro vessel arrivals made an impressive showing for July with 5 – a far better cry than June’s 0 arrivals. Nevertheless, this vessel category remains 7% below last year’s arrival numbers. Finally, container vessels turned out a respectable 6% gain in July but has failed to keep pace with 2011’s gains by just over 1%.

If one were to discount the “shale gas gold rush” things may be a little less rosy throughout Texas ports. Intuitively the numbers should be even better when compared to 2011 but it appears that the national economic growth numbers will mirror last year’s subpar performance. Granted, the marked shift in the movement of liquid cargoes into the refinery infrastructure from foreign bottoms to domestic tank barges has had a very positive effect on the regional ship building industry. This, in and of itself, has produced an enormous ripple effect for secondary and tertiary services. Like anything else in economics things that rise too rapidly have a tendency to fall just as fast. As such, it will be very interesting to see what the impact on the tows will be when the refineries are fed by newly-constructed pipelines versus tank barges. So where are things heading? If the even-odd trend continues overall arrivals in August should be down and perhaps Isaac will play a bit of a hand in that. On the flip side, August 2012 also brings with it a blue moon and you know what that say about those! - T. Marian, Buffalo Marine

Spotlight on Mike Mangan Vice President, Business Development—Houston Fuel Oil Terminal Company Originally from Long Island, New York, Mike Mangan graduated from the Zarb School of Business at Hofstra University in Hempstead Long Island before beginning his career as a Manhattan banker. “Well, I started with the Bank of Tokyo—Mitsubishi then Dresdner Kleinwort Wasserstein in Manhatten and worked with the energy and utility companies on project financings.”

Working to finance power plants, pipelines and other industrial infrastructure, from his office at the corner of Water and Wall Street in Manhattan, Mike financed projects with the largest energy companies in the country - Enron, El Paso, Reliant, and others. "That was interesting - some of the tasks were corporate balance sheet work, but most of it was helping to get power plants and other large projects online." Mike reflects, "for example, the El Dorado power plant in Las Vegas - I worked on that, and a cogeneration facility that's still online at Lyondell down here in Houston. That was actually a lot of fun, because I got to finance it on the bank side, then when I came down to Houston later, I got to manage them from a corporate standpoint at my next job."

Looking to do more development work, Mike came down to Houston to work for Reliant Energy. "The goal at the time was to go back to New York, but my wife and I loved Houston. And at the end of the day, if you want to do something, you really need to be in the capital of whatever you're doing: since I wanted to stay in Energy, Oil & Gas… that means Houston." So moving down to Houston, Mike began work on some of the non-regulated projects for Reliant - cogeneration facilities in Mississippi, a coal-fire plant in Pennsylvania, and asset transactions in New York, New Jersey and Maryland.

Soon afterwards, Mike moved on to another large Houston energy giant: Enron. "Yeah, that was an interesting time: I went to Enron post-bankruptcy with the attorneys there who were dividing up the structure of the company. There was a lot of reliving the past - I'd done a lot of Enron deals with Dresner Kleinwort Wasserstein, so as much as I enjoyed the work, it was somewhat sad - the unwinding of everything I'd done from the other side of the table for years." In addition to bittersweet but compelling work, Enron also had a unique corporate culture at the time. "After the bankruptcy, Enron was like something out of a commercial where they'd come around and ask you if you needed a pen." Mike continued, "So… they'd give you your pen for the week. If you needed post-its, you'd have to find the person in charge of post it notes, so if someone had a client coming in, they may have been scrambling around the office seeing who had extra supplies."

As the Enron job wound down, a controller friend convinced Mike to give Weingarten reality a try, so Mike moved to the large real estate investment trust and began work running their treasury department. "There are a lot of great people at Weingarten, and given my background, I started working on joint ventures and financing for them – Weingarten would contribute the assets to a joint venture, then put financing on top." Finding Weingarten a great place to work, but looking to get back into the energy sector, when an opportunity came up at the Houston Fuel Oil Terminal Company, Mike jumped at the chance.

“At the time, Houston Fuel Oil was owned by private equity, but they were beginning the process of selling the company." Mike worked with the team at Houston Fuel Oil to put together the sales package, did management presentations and worked the bidding process until Alinda Capital Partners bought the terminal from the previous owner, ArcLight Capital Partners.

"That was a funny deal because of the timing - what actually held up the deal were our Hurricane Ike bonds - because of the company’s ownership structure, we actually had to have some paperwork signed by the governor, but at the time, Governor Perry was busy with his presidential campaign, so it was a bit of work to

ensure that we could get in contact with the staff and make sure that his office processed the materials."

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Excited about his work at Houston Fuel Oil, Mike noted that the company is moving forward with expanding operations on the channel. "We've continued to expand the company, we’re bringing 1.5 million barrels of new capacity on line this year, of which we've already finished 400,000 barrels. We also completed a new ship dock in July of last year and added two ten-car rail racks on the north side of the terminal." Taking lessons from his career in the banking industry, Mike stresses the importance of proper prior planning. "We may be in the middle of expansion, but we're already looking ahead to what we need to do next to continue to grow."

In addition to being a board member of the Port Bureau, Mike is married to his wife Deana of Queens, NY . Mike and Deana knew each other in college, but re-met years later by chance on their way to the subway in New York City. The couple has five-year old twins, Cadence and Michael, so when asked about his free time, Mike laughs and says "Well, they're getting to the age where I mostly play taxi driver. Soccer, Gymnastics, Swimming… I watch it all" Houston Fuel Oil Terminal Company (“HFOTCO”) is a leading marine terminal for storage of residual fuel oil and crude oil. HFOTCO owns and operates a world-class, 13.8 million barrels storage terminal, and is the largest provider of residual fuel oil storage in the U.S. Gulf Coast. HFOTCO’s assets are located on a 312-acre footprint at the widest point of the Houston Ship Channel. The Company stores, blends, and transports residual and crude oil via pipeline, barge, rail, truck and ship for major oil companies, refiners, carbon black manufacturers, international trading firms and bunker suppliers. HFOTCO’s size, strategic location, diverse customer base, and extensive transportation infrastructure create the most attractive and liquid trading platform for residual fuel oil in North America.

Upcoming Events at the Port Bureau: 13 September

Commerce Club Luncheon ASAC Michael Anderson, FBI

19 September

Coast Guard Foundation Dinner

4 October

Greater Houston Coffee Association Annual Luncheon

5 November

GHPB Captain’s Cup Golf Tournament

8 November

Houston Ship Channel Security District Annual Luncheon

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