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Spill brings concerns of potential economic impact
Economic impact: Closure of Ship Channel could bring refineries to a standstill
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Emergency crews work along a barge that spilled oil after it was struck by a ship near the Texas City Dike on Sunday. Dozens of ships are in involved in clean-up efforts.
By Kiah Collier and Erin Mulvaney
March 23, 2014 | Updated: March 23, 2014 11:43pm
The Houston Ship Channel remained closed to marine traffic Sunday as efforts continued to remove up to 168,000 gallons of heavy oil that spilled into Galveston Bay on Saturday afternoon, inciting concerns about potential widespread economic impact and closure of the eight refineries that make up the world’s second-largest petrochemical complex.
The 52-mile Ship Channel, connecting the country’s largest exporting port to the Gulf of Mexico, will not reopen until the water is clear of the fuel oil that spilled after a ship and barge collided near the Texas City Dike, which officials said Sunday could take several days, if not weeks.
The normally busy waterway sometimes closes for up to several days this time of year when heavy fog affects visibility, but government and industry officials said Sunday a closure lasting longer than that could force refineries to shut down and lead to millions of dollars in economic losses.
“An extended closure to one of the busiest commercial ports in the world would have a major economic impact on the companies waiting in queue,” said maritime lawyer Thomas C. Fitzhugh III, president of the Longshore Institute.
The precautionary closure of Gulf Coast refineries in 2008 during Hurricane Ike sent gasoline prices skyrocketing in the southeastern U.S., to more than $5 a gallon in some areas.
Bill Day, a spokesman for Valero Corp., the largest U.S. refiner, said Sunday it was too early for the company to estimate how the closure will impact its refinery production rates.
Massive daily impact
But industry officials said that refineries are dependent on constant shipments, meaning that they are almost immediately affected when ship traffic is halted during a closure.
Thomas Marian, in-house counsel for the Buffalo Marine Service, which owns a fleet of barges - the bulk dedicated to fueling ships - said refineries need to be stocked at 90 percent to 95 percent of capacity at all times.
With hundreds of ships stalled, “significant amounts of cargo will be placed on hold,” he said, noting that for his company, closure of the channel has an economic impact of about $7 million a day per ship.
A Ship Channel closure lasting four days or more would cause significant economic problems, he said, particularly with the movement of chemicals, including molten sulphur and shale gas.
“You can go a few days without significant repercussions,” said Capt. Bill Diehl, president of the Greater Houston Port Bureau, a maritime industry group. “With a long-term closure you will see a big financial impact.”
The eight refineries using the Ship Channel make up about 12 percent of U.S. refining capacity, according to government statistics. Economic impact data calculated for the Port of Houston Authority in 2012 shows daily commerce along the waterway, home to more than 150 private industrial facilities, totals more than $300 million.
Marian said the spill is considered an upper-medium level spill, making it nowhere close to one of the top 10 biggest in history, but that it could have a particularly adverse affect on shipping activity because it occurred near a key intersection where he estimated some 11,000 ships pass through every month.
The spill occurred near what is called the The Texas City Y, so named because it’s the point where ships can turn west to enter the Port of Texas City or continue along the Ship Channel.
Financial impact unclear
Harris County Commissioner Jack Morman, whose Precinct 2 encompasses a large portion of the Ship Channel, said a closure lasting a day or two is not a big deal, but that he was told by Port of Houston Authority officials this one could last longer.
“It is concerning when you start getting closures of multiple days in a row,” he said. “I think one day, like I said, is not unheard of and certainly wouldn’t be too disruptive but multiple days you start really having an impact on our local economy, and regionally and nationally as well … It just really highlights the importance of the Ship Channel and what they do out there.”
Port of Houston Authority Chairman Janiece Longoria said Sunday it is “unclear at this point how long the channel may be closed or the financial impact to industry stakeholders, and to POHA and its customers,” but that a Ship Channel closure is “always of concern to the Port of Houston Authority and to all Houston Ship Channel users.”
Nathan Wesely, president of West Gulf Maritime Association, noted the Coast Guard has established an emergency safety zone in the area where the spill occurred that is enforceable through March 29, meaning the closure could last until then.
“The sooner they open it, the less disruption there will be,” he said. “With ships backed up and trying to get in and get out, the economic impact gets worse.”
Energy and shipping are not the only industries affected.
Representatives from Carnival Cruise line and Royal Caribbean reported Sunday that thousands on board their ships were waiting to dock in Galveston, and said they were having to revise cruise schedules.
“Carnival sincerely apologizes to its guests for this disruption to their vacation plans,” the cruise line said in a statement.
Morman said it is “too early to tell what happened” on Saturday that led to the spill, but expressed confidence in the U.S. Coast Guard’s ability to act swiftly, noting they are well aware of what is at stake.
“I know those guys are top notch so I’m very confident that we’ve got the best and brightest working on it, it is just a matter of how quickly can they get things done and get everybody back to business,” he said. “I know that’ll happen as soon as possible, it’s just a matter of when would that be?”
Diehl, at the Port Bureau, said the level of ship traffic has remained steady in recent years in attributing the crash to heavy fog. No restrictions were in place, however, he said.
“On a day like yesterday, what you normally do is wait until the fog burns off,” he said.