Houston's Major Port Expansion Moves Ahead

IN YEARS to come, it may well be that Houston's history is seen as two distinct parts: before and after Bayport.

Certainly, the dismissal earlier this year of the major legal objections to the mammoth port expansion project, followed swiftly by the official groundbreaking on June 21, had all the hallmarks of a watershed event for Houston's port community.

In the aftermath, the combination of satisfaction and relief coursing through the Port of Houston Authority was almost palpable. As PHA chairman Jim Edmonds put it: 'While this has been a long process, the system does work.'

A long process indeed: the PHA first applied for permission to build the new terminal project six years ago, aware that pressure on its facilities was building fast, that other ports along the Gulf Coast were contemplating expansion projects of their own, and that if it did not act fast to consolidate its position as the region's major container hub it risked losing it to an aggressive rival. One year later, local voters agreed to a $387m bond issue to help fund it. But then progress ground to a halt.

In the years that followed, local communities banded together with environmental and preservation groups to fight Bayport, and with considerable success. In response, the PHA put the project through a sweeping overhaul of its original plans in a bid to address legitimate complaints on quality-of-life and environmental grounds. In large part, it succeeded.

Until very recently, however, it still appeared that this would not be enough to satisfy some of the project's opponents, who believed other sites would be less disruptive to man and nature and sought to block the project with a suit in federal court. This was filed not against the port itself but against the Army Corps of Engineers, which had approved the Bayport plan.

It was this suit that was tossed out in May by Judge Vanessa Gilmore of the southern district in Texas, who found that 'the actions of the Corps fully considered and complied with the requirements of the National Environmental Policy Act and the Clean Water Act' in assessing the environmental impact of the project.

Once that ruling came through, the PHA immediately began moving ahead with the project it had been preparing for in the preceding months. As of mid- August, according to Mr Edmonds, projects worth $110m had been contracted for and were moving ahead. The first dock, complete with 1,660 ft of wharf and 65 acres of container yard space, is due to be completed by June 2006 and design work on the second dock should get under way soon, he said.

The initial plans for Bayport called for it to be built out over 15 to 20 years, with an eventual 7,000 ft of wharf capable of accommodating seven containerships, a 378-acre storage yard and handling capacity of 2.3m teu, effectively trebling the port's existing capacity. Multiple cruise berths are also part of the master plan.

As Mr Edmonds says, however, the pace of construction could well be accelerated if market demand continues to grow at its current pace, with full build-out over 10 to 15 years perfectly feasible. As the Bayport plans were being drawn up, he says, 'we were modelling for 3%-5% annual growth, but we've been getting an average 10% annual growth for some time.'

That in turn 'makes for an interesting financial dilemma', he adds, noting that discussions on how to finance an accelerated construction schedule, and how to operate the terminal as new phases move into gear, are still going on.

'We're looking at different alternatives, like running it ourselves, or going into joint ventures with private terminal operators. Most all of the major terminal operators have expressed an interest, but we have a clean sheet of paper right now.'

As he admits, however, fast-rising demand has put intense pressure on Houston's existing container facility at Barbour's Cut, increasing the pressure for quick decisions on the future. 'Barbour's Cut is a whole other issue,' he says. 'It is already operating at more than capacity. It is 30 years old. And it needs renovations in its own right; probably $50m-60m worth but they are the kind of projects we can pay for out of cash flow as we can afford it.'

Container volumes continue to surge through Houston, which serves a population of 30m within 500 miles of the city and a rich industrial market to boot.

For the year through July, Houston handled 764,736 teu, 12% up on the 684,455 teu handled in the first seven months of 2003, according to PHA figures.

As with so many US ports, the relentless rise of Asia is one reason for the surge in traffic.

Asia accounted for 46,330 teu or 5.17% of the 896,267 teu that moved through the port in 2002, according to PIERS. Last year, Asia's contribution rose to 81,370 teu or 8.97% of the Houston's total haul of 907.342 teu.

As Mr Edmonds says, strong growth looks assured for some time to come.

It is one of the factors that, he says, makes him relatively relaxed about the prospect of a new port coming on stream at Texas City on the Gulf Coast; he believes there will be business enough for everyone.

And it is one reason that, as the Bayport project finally gets under way, the PHA is already looking at the possibility of developing Pelican Island in the south of Galveston Bay as its next container facility.