Companies using the Houston Ship Channel unveiled a plan Wednesday that would use port-issued bonds and industry-paid fees to fund half of the roughly $1 billion project to widen and deepen the waterway.
The proposal received a lukewarm reception from the Port Commission, however, and will likely be reworked.
“They just need to work a little more creatively on how the industry is going to participate in the funding of its share of the project,” said Ric Campo, chairman of the commission overseeing Port Houston.
The project would widen the Galveston Bay portion of the Houston Ship Channel to 700 feet from the current 530-foot width and deepen parts of the channel’s shallower upstream segments to accept ships with 45-foot drafts. And to accelerate the timeline of this project, which would take at least a decade under the federal government’s traditional process, industry has committed to paying $500 million to fund the work. Wednesday was the first time a proposal was publicly presented to the Port Commission.
The bond proposal was floated because it wasn’t deemed plausible for public companies to simply write checks to underwrite the public-sector project, said Vincent DiCosimo, executive director of the Coalition for a Fair and Open Port, which advocates on behalf of industry, particularly energy companies.
Instead, the coalition asked the Port Authority to issue $500 million in bonds on behalf of industry. This would cover the industry’s up-front costs, and those bonds would be repaid over 30 years through fees charged to ships (excluding container ships, which already pay fees to use Port Houston facilities) entering and exiting the ship channel. These fees couldn’t be charged until the project is completed, shifting risk to the port, which has already committed to paying $500 million for its half of the project.
“Industry is incredibly supportive. We want to participate,” DiCosimo said. “If this doesn’t work, where do we go?”
DiCosimo, also an executive at midstream energy company Targa Resources, emphasized that there isn’t time to waste as the port hopes to have Congress review and consider authorizing the widening and deepening project later this year.
Campo raised concerns that additional fees would encourage ships to call on other ports, though DiCosimo said he’d spoken with companies that said the fees were negligible and wouldn’t be an issue. At Targa Resources, for instance, he said ships already pay roughly $25,000 in a variety of fees charged for entering and exiting the port. Another $4,000 fee, which would be the approximate cost for its ships measuring 850 feet long and 120 feet wide, wouldn’t be a significant increase.
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Commissioners also raised concerns that the Port Authority would be stuck with the bonds regardless if industry repays those fees. For instance, there’s a legal nuance that might limit how many vessels could be charged the fee.
Chuck Zabriskie, an investment banker in the energy sector with 30 years of experience, who did not provide his company’s name, received a round of applause after arguing that the industry should and could find a way to fund this project up front and without using port bonds.
“In the scheme of the investments that already exist,” he said, “and the context of the benefits of the channel widening and deepening to the channel participants, this has compelling economics.”