Prepared Remarks

Captain William G. Schubert

Maritime Administrator

Greater Houston Port Bureau’s 75^th Anniversary

Houston, TX

Thursday, November 18, 2004

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Good evening. Thank you very much for inviting me. I am honored to be your guest and celebrate with you the 75th anniversary of the Greater Houston Port Bureau. I bring warm greetings from President George W. Bush and Secretary of Transportation Norman Y. Mineta.

These are exciting times in the maritime industry. We at MARAD have made great strides in promoting the maritime industry, the results of which can be seen both on a national level and, specifically, here in Texas.

Thanks to many of you in this audience, the Port of Houston Authority continues to be the leading port of the U.S. Gulf Coast, handling approximately 65 percent of the market share. As such, the port has become a dominant player in the container and cargo business, handling roughly two-thirds of all container traffic in the Gulf of Mexico.

Furthermore, Houston has staked out a powerful role in re-establishing sea trade with East Asia. Last year, the Port of Houston and the Panama Canal Authority entered into a business agreement aimed at attracting more goods from Asia by promoting the route. Since 2002, trade with Asia, via the Port of Houston, has increased by 28 percent, which is at least in part attributable to the new agreement.

In fact, in 2002, 9.4 million tons of Asian goods entered the U.S. via the Port of Houston, transported solely by ocean vessels. It is anticipated that by the end of 2004 this figure will jump to approximately over 12 million tons, again, a significant increase.

The Port of Houston has become a focus of interest for other reasons as well. As our economy continues its recovery, West Coast ports are not only congested, but are also grappling with labor problems. Factor in a congested railway system and it becomes easy to see why shippers are seeking alternatives. And frequently the option of choice is bypassing the logjam by shipping through the Panama Canal to Houston. Most assuredly, this selection is good news for the local economy.

Over the next two decades, trade is expected to increase dramatically, by as much as two or, in some cases, three times its current rate. Houston will be a part of that growth and must be prepared for it. The need to pursue new and innovative transportation options will become increasingly evident as traditional surface transportation modes, such as highways and railways, reach capacity. In fact, we are already witnessing to a shipping and transportation “crunch” in the U.S.

That’s why President Bush and his administration have placed unprecedented focus on how we can make more, and better, use of our waterways to improve our overall transportation system.

As part of that focus, Secretary Mineta initiated a broad review of our maritime policies in partnership with MARAD. The result of this review is a comprehensive Marine Transportation System/maritime industry initiative called SEA-21.

Some elements of the SEA-21 initiative have already been approved by Congress and were signed into law by President Bush in the American Job Creation Act of 2004.

The Sea-21 initiative addresses the maritime component of our overall transportation system and includes a Short Sea Shipping component.

Short Sea Shipping, broadly defined, is all marine transportation with the notable exception of trans-oceanic shipping. In other words, Short Sea Shipping includes shipping along the U.S. coasts as well as to and from Canada, the Great Lakes, all inland waterways, and the Gulf of Mexico (including Mexico, the Caribbean, and Latin America). So its importance to Houston is obvious.

The Short Sea Shipping initiative is designed to increase the amount of freight moved by water and to work in partnership with other intermodal transportation systems. It is not intended to take business and jobs from trucks and railroads, but rather to complement the transportation taking place along these overloaded systems. The result will ease congestion on our roads and highways, and add capacity to our multi-modal transportation network.

It is easy to envision how short sea shipping can be combined with other modes of transportation to give us an efficient, environmentally-friendly transportation system-one that will support economic growth far into the future.

For example, using barges to move containers not only could help alleviate West Coast container traffic volumes, but could also offer a cost-effective way to move freight across our entire nation.

Texas is already familiar with Short Sea Shipping service.

Just this past October, the Osprey Line kicked off the inaugural sailing of its Short-Sea Coastal service between the ports of Houston and Tampa. The Sea Trader, a U.S.-flag container vessel, calls at Barbours Cut in Houston, and in Tampa, where Osprey Line has established a terminal operation with full depot container services.

Within the next two months, Osprey is expected to announce new services from Houston to Chicago and to Brownsville, Texas. Short Sea Shipping has established a strong foothold, or should I say a secure anchor, in the Houston maritime industry.

Now let me turn to another vital topic, the security of our nation.

Secure and efficient maritime transportation go hand-in-hand.

We in MARAD believe that the flow of commerce must mesh seamlessly with requirements for national security. The Department of Transportation and the Maritime Administration are working to improve worldwide maritime transportation systems in a way that balances the efficiency of cargo transport with the need for security of transport.

The Maritime Transportation Security Act (MTSA), signed by President Bush in November 2002, seeks to strengthen security at the nation's seaports. Under the MTSA, the U.S. Coast Guard has partnered with MARAD and other federal agencies to develop a viable set of security regulations for our industry. In support of this goal, MARAD is encouraging development of innovative security technology for commercial maritime applications.

One way MARAD has begun to encourage this technology is with the Port Security Grant Program. This program has awarded 568 million dollars to applicants who demonstrate a willingness to explore the application of technologies such as electronic seals, vessel tracking, and electronic notification of vessel arrival to improve security systems already in place at their port. In addition, the program has assisted national seaports with the financing of facility and operational security improvements.

As some of you are aware, the first round of Port Security Grants was announced on February 28, 2002. As of today, we have financed 1,215 projects.

Currently, MARAD, in cooperation with the Coast Guard, the Transportation Security Administration (TSA), and the Office of Domestic Preparedness in the Homeland Security Office, is working on the fifth round of Port Security Grants for U.S. ports. I am pleased to report that as of today we have allocated $150 million.

Here in Texas, the Houston-Galveston COTP zone received $42,797,980 for 86 projects while the Corpus Christi COTP zone received $19,872,692 for 29 projects. Clearly, we are off to a strong start.

In addition to the logistical concerns related to security onboard our nation’s vessels and at our ports, we also are working to expand and improve training for maritime security personnel.

As many of you know, Congress specifically gave DOT, via MARAD, the responsibility for maritime training under Section 109 of the MTSA.

MARAD is well-suited to undertake this assignment, and is currently working on it with the U.S. Merchant Marine Academy (USMMA)—our nation’s premier institution in the field of maritime education.

The USMMA team, through its collaborative relationship with the Coast Guard and the Government of India, has written three model maritime security courses for the International Maritime Organization. These courses were reviewed by an international validation panel and are now the established global standard for maritime security education and training. Certainly, international acceptance of our model courses is an indication of the high quality, professional work done by the team.

Finally, let me update you on Liquefied Natural Gas (LNG) training.

According to current forecasts, shipments of LNG will increase dramatically worldwide in order to meet growing demands for energy. The increased LNG shipments create a corresponding demand for qualified officers and crews for shipboard jobs.

Now let me shift my sights to discuss the Ready Reserve Force (RRF). As you know, MARAD is responsible for a fleet of ships, called RRF. The fleet delivers military equipment and other supplies to deployed U.S. Forces in peacetime and war.

The first Houston RRF outporting contract was done in December of 1995. The following statistics will provide you with a better understanding of the impact of the Ready Reserve Force had on the Texas economy, specifically Houston.

Texas region ships (RRF and NDRF vessels)

Outport Berthing / Layberthing Expenditures:

Port        # ships    $ To the Economy – millions

Houston      4            $2.3M + > $13M in vessel generate repairs, crews, ship manager

Beaumont    2             0.7 + > $6.5M in vessel generate repairs, crews, ship manager

Orange        1             0.3 + > $3.3M in vessel generate repairs, crews, ship manager

Another important factor in the economic development of the region can be seen in the Port of Houston’s ranking in our nation.

This audience is certainly aware of the fact that in 2002, the greater Houston area, ranked as number 2 in the nation by cargo tonnage. The Port of Houston itself reported a total tonnage of $28,659,972 of which breakbulk tonnage consisted of $3,565,151. Clearly, the Port of Houston is doing an outstanding job of developing and implementing a sound business agenda.

In closing, my remarks this evening have centered on intermodal transportation security issues, maritime training, and economic issues, all of which affect the nation and, specifically, Texas. As history has shown us, the great State of Texas has played an integral role in America’s maritime industry. It goes without saying that your potential for future contributions is, well . . . Texas-sized.

On behalf of the Bush Administration and MARAD, thank you for inviting me to be with you, and thank you for your kind attention.

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