The Impact of Deepening the Sabine-Neches Waterway on Business Activity in Jefferson County, the Surrounding Region, Texas, and the United States
The Sabine-Neches Waterway is a critical component of US port infrastructure which is likely to grow in importance. Terminals and ports served by the Waterway support industries crucial to economic activity in the local area and throughout the United States, such as refining and petrochemicals. The Waterway is also integral to imports and exports of crude oil and natural gas.
According to the US Bureau of the Census, the value of goods and services exported in 2016 totaled $2.2 trillion (goods were $1.5 trillion and services were $0.7 trillion), while imports were $2.7 trillion (goods were $2.2 trillion and services were $0.5 trillion).1 Furthermore, foreign trade activity is projected to expand over time.
The Sabine-Neches Waterway generates economic activity through its ongoing operations and by supporting the development of industries in the local area. Currently, significant improvements to the Waterway are under consideration. The Waterway has not been significantly upgraded since the 1960s (though it has been maintained). With the expansion in the size of vessels enabled by the Panama Canal enhancement, the need for widening and deepening US ports has increased. Moreover, the industries supported by the Waterway have the potential for substantial incremental growth due to major emerging factors such as the development of the US liquified natural gas (LNG) industry and the lifting of the oil export ban. Both of these phenomena are occurring within a framework in which advances in oil and gas extraction technology have dramatically increased potential domestic production over an extended period.
The Perryman Group (TPG) was recently asked to quantify the current economic impact of the Sabine-Neches Waterway and public and private port and related facilities supported by the Waterway as well as potential effects of deepening the Waterway on business activity in Jefferson County, the immediately surrounding area of Texas and Louisiana which is directly served by the Waterway, the Southeast Texas Region, Texas, and the United States. This report presents the results of the analysis, updating prior (2010 and 2013) assessments
by The Perryman Group to reflect changing conditions.
International Trade Growth
International trade drives a substantial portion of US business activity across a spectrum of industries. Trade volumes have increased substantially over the past several decades. In 1992, US exports of goods and services totaled almost $616.9 billion and imports were just over $656.1 billion. In 2016, as noted, US exports reached $2.2 trillion, while imports totaled more than $2.7 trillion. Although trade volumes decreased slightly over the past few years after peaking in 2014, expectations are for trade volumes to continue to rise in the future, increasing the importance of port and waterway infrastructure.
In addition, the completion of the Panama Canal expansion has allowed cargo carriers to utilize larger ships, called post-Panamax vessels, which enhance efficiencies and reduce costs. As of 2012, these vessels comprised 16% of the world’s container fleet but accounted for 45% of the fleet’s capacity. Due to the efficiencies of scale they provide, such vessels are expected to dominate world trade in the future. 2030, they are expected to comprise 27% of the world’s container fleet, accounting for 62% of its capacity.
Competitive forces will drive investments and operations to the most cost-effective locations, and ports and waterways accommodating larger vessels will have an advantage in attracting future locations and expansions in sectors requiring maritime resources.
Ports Served by the Sabine-Neches Waterway
The approximately 64 miles of the Sabine-Neches Waterway connects the Gulf of Mexico to ports in Port Arthur, Beaumont, and Orange, Texas. Several public and private ports in the region are served by the Waterway including the Port of Beaumont, the Port of Port Arthur, the Port of Orange, and other public and private ports/terminals (such as Chevron-Phillips, ExxonMobil, Total Petrochemicals, and Motiva, among others). The combined cargo at the Port of Beaumont and Port of Port Arthur in 2015 was almost 122.957 million short tons, making the Sabine Neches Waterway the fourth largest in the US in terms of volume. In previous years, the Waterway ranked as high as number three in the US.
The Port of Beaumont
The Port of Beaumont is located about 40 miles inland from the Gulf of Mexico and Intracoastal Waterway. The nearby Mississippi River connects Beaumont with such cities as Minneapolis, Chicago, St. Louis and Memphis. There are also three major rail carriers and five major roadways that are linked to the Port.
The Port of Beaumont celebrated its Centennial anniversary in 2016 and has recently completed $74 million in capital improvements, including new interchange and holding rail space as well as other infrastructure enhancements. The newest facility is Jefferson Energy.