Houston 20/20:Building the Economy of Tomorrow

Infrastructure & Business

H. Thomas Kornegay, PE, PPM

Kornegay & Company, LLC

Maritime Consultant

Brief History Port of Houston

1900 Storm

USACE completed channel construction 1914

First Port Director – Col. Benjamin Casey Allin III

HCHSC Navigation District formed 1921

Port Terminal Railroad formed 1924

First Container Move April, 1956

Port Commission

Seven Members

Serve 2 year terms

Serve without compensation

Can be reappointed

Staff

Present Director – Col. Leonard Waterworth

About 600 employees

Largest departments are Security, Maintenance, Fire Protection and Accounting

Container Terminals are operated by PHA, all other facilities are operated by private companies

Facilities

City Docks

Container Terminals

Grain Elevators

JacintoPort

Southside

Bulk Plant

Private Facilities

Petroleum Based

General Cargo

Grain Elevator

Economic Impact

The impacts are measured for the year 2011

Four types of impacts are measured:

• Jobs

• Employee earnings

• Business revenue

• State and local taxes

Economic Impact

REVENUE/ECONOMIC OUTPUT ($ Millions)

PHA FACILITIES PRIVATE

TERMINALS

TOTAL

Direct Business Revenue $3,627.7 $9,716.2 $13,343.8

Local Purchases $1,236.1 $3,310.7 $4,546.7

Related Users Output $110,571.4 $50,042.6 $160,614.0

TOTAL $115,435.2 $63,069.4 $178,504.5

STATE AND LOCAL TAXES ($ Millions)

PHA FACILITIES PRIVATE TERMINALS TOTAL

Direct $83.30 $148.60 $231.90

Re-spending/Local Consumption $245.20 $437.60 $682.80

Indirect $43.30 $115.90 $159.10

Related User Taxes $2,186.10 $1,205.40 $3,391.50

TOTAL $2,557.90 $1,907.40 $4,465.30

Economic Impact

Economic Impact

Jobs PHA Private Total

Direct 19,767 34,186 53,952

Induced 25,468 45,597 71,065

Indirect 13,548 3,6287 49,835

Related Users 592,501 25,9467 851,968

TOTAL 651,284 375,537 1,026,820

Economic Impact

Economic Impact

PERSONAL INCOME

($ Millions)

2011 2006 Change

Direct $2,936 2,834 $102

Re-spending/Local

Consumption

$8,643 7,449 $1,194

Indirect $2,014 3,148 ($1,134)

Related User Income $42,930 25,835 $17,096

TOTAL $56,523 39,265 $17,258

Economic Impact

STATE AND LOCAL TAXES ($Millions)

2011 2006 change

Direct, Induced, Indirect

$1,074 1,262 ($189)

Related Users $3,391 2,428 $963

TOTAL $4,465 3,691 $774

Federal Channel Constructed and Improved by USACE

Port Authority is the Local Sponsor

Share Cost

Furnish ROW and DMDA

Recently Improved by Deepening to 45 feet

Maintenance is the Main Issue

WRDA 1986

WRDA 1986 The non-Federal share of navigation project costs

increased dramatically with WRDA-86.

10 percent for projects with depths of less than 20 feet

25 percent for projects between 20 and 45 feet deep

50 percent for projects over 45 feet deep

At completion the non-Federal sponsors must pay an additional 10 percent cash (No Change)

no overall net loss of the Nation's remaining wetlands base

Harbor Maintenance Trust Fund The Harbor Maintenance Trust Fund was created in

1986 to provide a stable long-term source of funding to pay maintenance costs in federally maintained harbors. The tax is imposed on users of the system, particularly shippers of goods passing through those harbors. The revenues total as much as $1.3-1.6 billion annually.

Uncommitted balance in the Trust Fund continues to grow, reaching $6.1 billion at the beginning of FY12

Houston Ship Channel Dredging Operations and Maintenance

Allocation for FY 2010 $24,189,000

Allocation for FY 2011 18,798,000

Allocation for FY 2012 17,831,000

President Budget FY 2013 19,701,000

Amount That Could Be Used for FY 2013 $33,174,000

The Panama Canal and the HSC were both completed in 1914.

The dimensions of the original Panama Canal locks are:

1000 ft long, 110 ft wide & 41 ft deep

The dimensions of the new addition:

1400 ft long, 180 ft wide & 60 ft deep

Type 2004 2005 2006 2007 2008 2009 % Ch. 2004-09

Tanker 19,316 20,118 21,231 21,724 20,907 19,641 1.7

Product 11,572 12,217 13,282 13,277 12,662 11,815 2.1

Crude 7,744 7,901 7,949 8,447 8,245 7,826 1.1

Container 18,279 18,542 19,591 19,863 18,735 18,206 -0.4

Dry Bulk 11,631 11,406 12,508 11,040 10,363 8,587 -26.2

Ro-Ro 5,317 5,663 6,318 6,077 5,964 4,951 -6.9

Vehicle 3,065 3,652 4,182 4,084 4,102 3,336 8.8

Gas 916 969 961 917 769 704 -23.1

LNG 173 203 213 202 171 201 16.2

Combo 459 414 334 235 180 135 -70.6

General 3,967 3,935 4,054 3,948 3,660 3,336 -15.9

All Types 59,885 61,047 64,997 63,804 60,578 55,560 -7.2

Source: Maritime Administration

The New Lane will allow larger vessels to traverse the canal in one way traffic through the new locks.

This is NOT a doubling of the locks or the lanes as some advertisements have insinuated

It MAY be a doubling of the Volume by Weight and may more than double the Value of the cargo traversing the canal.

“If one were to ask 10 experts to give you their opinion regarding the impact of the opening of the third set of new, improved, and larger Panama Canal locks (effectively slated for 2015), they would likely receive 10 different, well thought, thorough prognostications.”

-John Larkin, Stifel Nicolaus

Assuming a 2014 panamax version vessel sails

Panama at max draft of 50’, it’ll arrive east coast

ports at about 48.5’, more or less. There will be fuel

burn, further lightening the vessel, but that may be

offset by ballast intake. 48.5’ paints a challenging

picture for most USEC ports

Continued-

source: Bruce Cashon, Ceres Terminals Inc.

Max draft is typically calculated based on 14 tons/teu.eastbound typical cargo weighs in much lighter – in the 9-10

tons/teu range.

Taking the likely scenario – a new panamax vessel sailing Panama at

46’- 48’ (TFW) would arrive USEC ports in the 44.5’ - 46.5’ range.

Again, it’ll probably be less given actual cargo weights.

Unlike carriers, who’s assets are mobile, terminal operators and Ports

are committed to a location, which is a conspicuous risk element.

source: Bruce Cashon, Ceres Terminals Inc.

Ships will continue to get bigger

Shippers and carriers need gateway (port) options -- Expanded Panama

Canal increases the options

Container trade will continue to grow long-term

Physical capacity expansion of ports has an

upward limit (EC & GC ports have more expansion capabilities)

Port productivity is key to ability to handle long term container trade growth (Houston has proven they have the ability to increase productivity to the second highest in the world—at increased cost)

Source: world shipping council

Today—NO

Can we be ready in time—YES

We need to get the container terminal channels deepened.

The Terminals are ready

The Equipment is ready