Some Fear Texas Unprepared for Panama Canal Expansion

_{*Clarification appended}

After more than a decade of hype, the Panama Canal is scheduled to open an expanded channel next year. For the first time, massive ships the length of four football fields will be able to pass through the canal, quickly traveling between the Pacific Ocean and the Atlantic Ocean.

Roughly 2,000 miles north, the historic event is renewing a debate: Is Texas properly prepared to capitalize on the canal expansion, or is it letting a huge opportunity sail by?

Panamanians voted in 2006 to modernize the canal, allowing it to handle more ships and, crucially, bigger ones. Currently, the Panama Canal can accept ships big enough to carry up to 4,800 shipping containers. But the global shipping industry has moved increasingly toward larger vessels, hulking goliaths that can hold nearly three times as many containers.

The ability of these larger ships to move through the canal will disrupt some major shipping routes, particularly those between the U.S. and East Asia. One analysis predicts that as much as 10 percent of shipping containers from East Asia will shift from the West Coast to other U.S. ports by 2020.

On Tuesday, during a three-day economic development trip to Cuba, Gov. Greg Abbott will tour the Port of Mariel, a port 30 miles west of Havana that has been dredged 60 feet deep to handle the larger ships that will travel through the expanded Panama Canal. The visit is likely to draw comparisons to Texas ports, none of which are dredged to as deep a level, according to various port officials.

“Incredible opportunities lay ahead for Texas with the expansion of the Panama Canal,” Lt. Gov. Dan Patrick said last month. “However, if we do not prepare our ports for the next generation of super ships, we could lose out to other states along the Gulf and East Coasts.”

Patrick is among those pushing Texas lawmakers to take a renewed look at the Canal expansion. Last month, he asked a Senate committee to study the issue. He and House Speaker Joe Straus are also in talks to create an interim legislative committee on Texas ports, Patrick spokesman Keith Elkins said.

Approximately 20 percent of all U.S. port tonnage goes through Texas ports, according to John LaRue, executive director of the Port of Corpus Christi and chairman of the Texas Department of Transportation’s Port Authority Advisory Committee. Three of the state’s 16 ports — Houston, Beaumont and Corpus Christi — are among the 10 busiest in the country, according to federal data.

Originally, the canal expansion was scheduled to be completed in 2014, in time for the canal’s 100th anniversary. If Panama officials complete the project next year as currently planned, few if any Texas ports will be able to handle the largest ships that will be able to travel through the expanded locks, LaRue said.

Yet that doesn’t mean Texas won’t gain from the canal’s expansion. A January report by the Texas Department of Transportation notes that ports have financed more than $300 million in improvements since 2010, driven in large part by an effort to gain a foothold in the battle over new shipping business following the canal’s expansion.

Those projects, funded mostly by port fees and some federal money, are preparing some Texas ports to berth larger ships, even if they still won’t be able to handle the largest ships traveling through the expanded canal, according to John Roby, spokesman for the Port of Beaumont.

“An inch of additional depth makes a whole lot of difference,” Roby said. “If we can bring larger crude oil tankers here, if they can pick up an extra inch of two, that leads to millions of dollars of savings over the course of a year.”

The Port of Houston is one of the busiest container ports in the country. LaRue said that port will be able to handle ships 45 feet deep. That falls short of the largest ships that will be able to go through the expanded canal — those that are 50 feet deep and holding 12,000 containers, but those ships were more likely to choose to dock at ports on the East Coast, he said. 

"If you were doing like what a lot of the East Coast ports are doing, building on speculation, I think it would be a waste," LaRue said.

For Texas to see a bigger impact from the canal would take major investments both in the state’s ports and the connecting roads and freight rail lines. But the size of that opportunity might not be as big as some boosters had hoped.

“This myth has developed that just because they’ve created this third channel, suddenly all these ships are going to come to Texas instead of going to the West Coast,” said Harris County Judge Ed Emmett. “That’s just not true.”

In 2012 and 2013, Emmett led a committee created by the Texas Department of Transportation to assess the impact of the canal expansion. The group’s report found that exports stand to see a boost, particularly liquefied natural gas, but that Texas ports won’t see a big uptick in imports. The largest ships traveling from East Asia to the U.S. will still largely find West Coast ports more attractive because freight rail or trucks would still be able transport cargo from those ports to most of the country faster than it would take for a ship to travel to the Gulf Coast, according to the report,

Nearly three years later, Emmett said he believes the report’s predictions hold up. The best way to help the ports in the near-term, he said, was to look at the recommendations of the state's Freight Advisory Committee, which he currently chairs and is designed to help TxDOT determine where to beef up the state's network for moving freight throughout the state.

"If we don’t have the infrastructure in place, it doesn’t matter how great the port is," Emmett said. "Boxes can’t move out of the port."

Clarification: This story has been updated to reflect that cargo coming through West Coast ports is transported to other parts of the country by freight rail in addition to trucks.