Men's Breakfast Report, March 2013
The Men’s Breakfast Group met Saturday, March 9th with Glenn Carlson, CEO of the Port of Freeport. Glen has worked in the maritime industry for most of his life. He worked for Sealand shipping company for over twenty years. Before coming to Freeport he was a manager at the port of Wilmington, North Carolina.
He first presented a slide show about the impact of the port and the jobs it creates and the impact on the community. He also presented data about the nature of the shipments into and out of the port. Many of the shipments in the statistics do not go directly through the port’s docks. For example, BASF has its own terminal for handling ammonia imports and Dow, of course, has its own docks for chemicals. The liquefied natural gas terminal is also separate. A huge blip in the port tonnage occurred in 2011 when a ship brought in a load of natural gas and then another ship came in days later and removed it. The LNG terminal was built to import natural gas but became almost useless as soon as it was completed because fracking caused the price of US natural gas to fall well below the world price.
One of the main imports here is fresh fruit, especially bananas, with three companies bringing in bananas. These imports are now entirely handled by containers so little labor is needed to unload them. On the return trip to Central America the containers are loaded with general cargo. Another important product is rice, handled by American Rice Co. They primarily ship rice grown in Texas. Their business is being impacted by the continuing drought since many rice farmers are not able to get allocations of water for growing the rice. With less Texas rice they have to compete with other ports for rice grown elsewhere. Another product they handle is windmills. This business has fallen off recently because of poor economics of wind energy and stiff competition from Corpus Christi since many windmills are going to south Texas.
The port has an advantage over other ports on the Gulf Coast in that the docks are close to deep water, which reduces transit time and pilot fees. They also have a large area for storing cargo after it has landed or before being exported.
The port has a project for widening and deepening the channel. The channel between the jetties will be widened to 600 feet from 400feet. This will allow two boats to pass in the channel. It will also allow nighttime operation since greater width is required for safety at night. It will make it easier for large ships, such as the newer LNG tankers, to use the port. Deepening will allow larger ships to use the port. Freeport has the advantage over Houston in that the channel can be deepened. There are over 1000 pipelines below the Houston Ship Channel so deepening it would be impractical. One obstacle to the deepening is that the Federal government will pay 75% of the cost of dredging a channel to 40 feet, but only 50% for dredging to 50 feet. Dredging will therefore require a huge investment by the port and will require a general obligation bond to pay for it. This will have to be approved by the voters who turned down a bond to pay for building Berth Seven.
A big constraint for the port is railroad capacity and railroad rates. Union Pacific has a monopoly and they charge like a monopoly. Their railroad is almost at capacity so it would be difficult to increase rail traffic significantly. Various solutions were discussed. One would be a short line railroad that would enter the port along the levy and connect to Union Pacific further north. Union Pacific has said that they will not allow a short line railroad to connect to their tracks. Another is to bring a track from a competing railroad, such a Burlington Northern into the port. The problem with this is that this would be very expensive, with railroad tracks costing about one million dollars per mile.
Glenn did mention the expansion Berth Seven, which has been plagued with problems, and said that it will be ready in a couple of months.
As usual, the men had an interesting discussion and a good breakfast. The next meeting will be April 13th.