Texas Maritime Public Infrastructure Projects to Watch
Congress passed and President Joe Biden signed into law the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Act (BIA) on Nov. 15, 2021, and the Inflation Reduction Act (IRA) on Aug. 16, 2022. These two laws represent the largest commitment ever of federal dollars to infrastructure projects. The nation’s maritime ports and waterways make up a substantial part of that infrastructure enabling the carriage of goods to and from U.S. ports and within the nation’s inland waterways. The rivers of Texas, the Sabine and Neches, Brazos (through Port Freeport) and Rio Grande, and the state’s navigable channels, including the Houston Ship Channel and the Corpus Christi Ship Channel, are the arteries that enable the transmission of goods of all kinds worth billions of dollars between Texas, other U.S. states and the global economy.
In Texas, through the Port Infrastructure Development Program (PIDP), the BIA has already begun funding the U.S. Army Corps of Engineers’ (ACOE) channel improvement project for the Matagorda Ship Channel ($4 million), the Commerce Department’s project to assess the shoreline at Old River Cove to create a marsh restoration plan ($275 million), the Transportation Department’s design and construction of the MALSR Pier in Galveston ($4.3 million), the Brownsville dock repair and renovation project ($3.9 million), the Beaumont container-on-barge infrastructure project ($26.4 million), and the Bayport Container Terminal Expansion ($18.3 million).
One caveat to projects involving federal funding to purchase equipment, materials or commodities that require transportation by ocean vessels—50% of such goods must be transported aboard U.S. flag vessels. To that end, the recipient of federal funding must submit all ocean bills of lading to the Maritime Administration (MARAD) and the U.S. contracting officer for review. Waivers are only available from the president, the secretary of defense or Congress in the event of an emergency. This Cargo Preference requirement apparently is creating an impediment to the submission of federal grant applications because of the added cost attendant to employing relatively scarce U.S. flag vessels.
Congress funded the IRA to provide $3 billion worth of grants to reduce air pollution at U.S. ports by supporting the purchase and installation of zero-emission equipment and technology. The IRA also includes $2.6 billion in funding to support coastal-resilience projects. The Texas General Land Office has more than 100 such projects in the offing. Further, the IRA provides tax credits to support the development and production of renewable energy and carbon capture projects. For example, for wind energy facilities, including offshore wind, the IRA increases the credit from a base of .03 cents per kilowatt hour of electricity produced to 0.5 cents per kw, and creates tax credits to produce blades, nacelles and towers manufactured on American soil.
Last year, the Bureau of Ocean Energy Management (BOEM) auctioned off two sites in the Gulf of Mexico for wind farm development, one off Texas and the other off Southwestern Louisiana. While offshore wind leases off New York were selling in the billions, these Gulf auctions generated a paltry $5.6 million by comparison and only for the lease off Louisiana. The primary impediment appears to be the lack of state-backed electricity purchases to guarantee a return on the considerable capital investment required to bring these projects online. Nevertheless, BOEM has recently announced its intention to auction four lease areas off Texas and Louisiana in 2024.
Meanwhile, ACOE (through subcontractors) is dredging the Corpus Christi Channel to a project depth of 54 feet. The channel is now deep enough to allow very large crude carriers (VLCCs) to berth at two terminals—South Texas Gateway (STGT) and Enbridge thereby eliminating the need for offshore lightering and the additional risks and cost attendant to such operations. VLCCs often exceed 1,000 feet in length and have the capacity to carry around 2 million barrels of West Texas Intermediate crude oil. ACOE is also working with Port Houston to widen the Houston Ship Channel from 530 to 700 feet and deepen upstream segments to 46.5 feet.
The U.S. Maritime Administration also provides annual funding of around $20 million to small shipyards to make capital and related improvements. These grants are capped at 75% of the project’s estimated cost and are available to shipyards that employ fewer than 1,200 production employees. In 2023, for example, Southwest Shipyard in Channelview, Texas received a grant of $1.2 million for sandblasting and painting equipment upgrades, and Sterling Shipyard in Port Neches received a $1 million grant to purchase a floating dry dock to expand the facility’s shipyard repair capacity.
Another project that Congress has authorized but yet to fund is the Ike Dike, part of the Texas Coastal Project designed to prevent a repeat of the devastation wrought by Hurricane Ike upon Galveston in 2008. The project envisions the construction of gates analogous to those that protect the Netherlands and Venice from flooding together with strengthening the Galveston seawall and adding dunes along Galveston Island and the Bolivar Peninsula. Latest projections show that the project could exceed $57 billion, of which 35% must be paid by local governments. Whether this project ever gets off the ground is problematic but consider that a Category 5 storm taking a beeline on the Houston Ship Channel likely would shut down the single largest seaport in the United States and the largest petro-chemical refinery complex in North America. The impact would profoundly affect the multi-trillion-dollar U.S. economy.
The state of Texas has also recently passed legislation that provides $200 million to fund the Maritime Infrastructure Program (MIP) and earmarks another $40 million for the Seaport Connectivity Program to improve roads and highways to relieve congestion near the state’s ports. Eligible projects for funding under the MIP include port security, transportation and facility projects, for example, channel dredging, acquisition of container cranes, and acquisition and improvement of land and facilities that support maritime port purposes, among others. In concert with a $15.75 million contribution from the Galveston Wharves, the MIP awarded $42.3 million in state funding to the Galveston Wharves to support a major cargo infrastructure project.
As is evident, there is a wealth of maritime infrastructure development occurring in Texas. This article scratches the surface and does not address the significant capital investments undertaken by port authorities and private companies within the state. Maritime infrastructure is a critical component to the health of the Texas economy, and though work to enhance that infrastructure is underway, there is much more that needs doing to keep Texas’ arteries strong and vibrant.
"Texas Maritime Public Infrastructure Projects to Watch," by Keith Letourneau was published in Texas Lawyer on March 26, 2024
Reprinted with permission from the March 26, 2024, edition of the Texas Lawyer © 2024 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.