A Texas law that has largely pitted the energy and container trades against each other at the Port of Houston has sparked interest from the Federal Maritime Commission.
In a letter sent Tuesday addressed to the Port of Houston Authority Port Commission and the Houston channel pilots board, Federal Maritime Commissioners Carl Bentzel and Louis Sola warned that the law, which is meant to promote safety in the Houston Ship Channel (HSC), “could severely hamper” the competitiveness not only of the port but of the entire Gulf of Mexico container trade.
“While the legislation was purported to remedy the safe navigational operation of Neo-Panamax vessels in the confines of the HSC, we understand there were no reports of any safety issues under the previous safety regime,” the letter states.
“It appears the restrictions had more to do with concerns about management of the waterway and potential restrictions on access. We are evaluating whether the current regulatory provisions restricting access of larger sized vessels into the HSC, are in fact being discriminatorily applied to the container shipping industry.”
The law in question, SB 2223, which went into force in September 2019, banned access of any vessel larger than 1,100 feet to the HSC absent approval by the newly authorized Board of Pilot Commissioners. The law was in response to recent shutdowns of two-way traffic in the channel to allow newer, larger container ships to pass. The shutdowns caused delays to smaller vessels, namely oil and product tankers prevalent in the channel that were also incurring demurrage costs due to the delays.
The law is to remain in effect until the pilots board establishes rules that ensure such larger vessels can be safely operated under two-way traffic conditions.
“Opinions on the benefits and detriments of this law are largely split between the energy and container carrier interests, whereas the longer containerships are more susceptible to being regulated by this new law than the average tanker,” noted the law firm Eversheds Sutherland.
Bentzel and Sola point out that while the recent federal authorization of the $885 million project to widen the HSC will help restore two-way traffic, “the reality is that a project of such magnitude, with environmental approval, engineering, and construction, will be a multi-year endeavor and could endure unforeseen delays,” they wrote.
“Simply put, the completion time frame for widening of the HSC does not appear to synch up with the current rapid container market growth and future demand the Gulf region is experiencing. Delaying the utilization of the HSC as a conduit to the Port of Houston’s marine terminals for Neo-Panamax shipping could cause a permanent change in the pattern of delivery of containerized cargo to the entire Gulf Coast and impact the South Atlantic containerized port services.”
The FMC commissioners also took issue with the legitimacy of a related bill signed into law in 2019, which restructured what had been shared oversight of HSC navigation between the Port of Houston Authority and the pilot board. The change gave the pilot board jurisdiction over large-vessel traffic decisions.
“We are unaware of examples in the United States where a local Commission is empowered to unilaterally restrict interstate and foreign commerce,” Bentzel and Solas stated, emphasizing that other states with similar large-ship navigational safety issues have addressed them by coordinating federal, state and local management plans under the purview of the U.S. Coast Guard.
Their letter also points to U.S. container volumes increasing 23% from November 2019 to November 2020 as a result of the pandemic as consumer demand soared for e-commerce and essential supplies such as PPE. “At a time when national, state, and local maritime industry leaders are struggling to increase maritime capacity throughout the country, the enactment of the HSC restrictions seems shockingly out of step and dangerously short sighted.”
Given the FMC’s mandate to establish and oversee nondiscriminatory regulatory processes and to assess the reasonableness of shipping practices, the commissioners requested the agencies answer a set of questions. They included whether the Coast Guard was consulted before implementing SB 2223, the number of Neo-Panamax vessel transits prior to the law going into effect, and actions taken to adopt new rules to restore two-way traffic for all vessels.
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