Opinion: Sun, sand and tankers? Port Aransas battles big oil and gas ambitions

PORT ARANSAS — For generations of Texans, our very first memory of summer at the beach begins with driving aboard a tiny ferry at a place called Harbor Island, last stop on the Texas mainland.

Turning off the engine and setting the brake, we have rolled down our windows, filling our noses with moist salt air and our ears with the screeches of seagulls. Kids jump out to stare over the side at the frolicking of the little sand trout. The boat docks in Port Aransas only a few minutes later, which means one thing: sunny vacation on the world’s longest barrier island.

But this place, and lots like it up and down the Gulf Coast, now find themselves in the way of a desperate natural gas industry. For months, there has been far too much oil and gas, with prices ranging from unprofitable to marginal. Investors had already started throwing up their hands at the industry before the coronavirus pandemic.

Industry’s response? To double down, in part by gambling on a new generation of leviathan tankers that will help them compete in foreign markets they hope will save them. Problem is, the tankers are too big for these shallow harbors so the Trump administration is obliging with a hefty bailout, bad money after good, in the form of $4 billion of taxpayer-funded dredging and approvals on new plants and docks, holding the promise of tanks, machines and pipelines — progress, some might say, even if it all wrecks America’s southern coastline.

What does this mean for the vacationers and the sand trout? It won’t be pretty.

A shared waterway

The coastline of the Gulf of Mexico is a working person’s waterway. It’s not fancy. It’s a simple place of crab boils, bars and bays.

The flats, inlets and beaches are watercolor subtle: Upon careful inspection there are birds and fish, clams and crabs. By night, the wind speaks, swishing the palm fronds. The tourists wash in, constant as the tide.

They began coming in the early 1900s when Port Aransas was known as Tarpon, Texas for its vast supply of the massive silver sport fish. Sturdy little wooden Farley boats, built right here, brought the unknown and the famous alike to search for the finned phenom.

For its part, the oil and gas industry has been caught unprepared for the short-term rivalry of Saudi Arabia and Russia as well as the rapid transition from petroleum to green energy around the world. Global demand for fossil fuels showed signs of slowing last year. And the industry is cornered by investors. Major hedge funds and private equity firms are snubbing new investments and scrutinizing existing ones.

Now, in the midst of the coronavirus crisis, prices and rig counts have dropped. In addition, Blackrock, State Street and even foreign sovereign wealth funds in Ireland and Norway won’t invest unless industry finds a way to cut the very footprint of the product it sells: carbon.

The era of peak demand for oil is approaching — where supply exceeds profitable demand — and 49 billion gallons of U.S. oil will not be economically recoverable according to Rystad Energy, a leading Norwegian energy consulting firm. The situation with natural gas is not all that different. In Corpus Christi, a liquid natural gas plant appears to have been canceled and the port has canceled or postponed over $100 million of its own related construction projects.

“The capital providers voted with their feet,” Bobby Tudor, the chairman of the Greater Houston Partnership said at the influential business group’s 2020 annual meeting. “And to put icing on the cake, a consensus has emerged among scientists, business leaders and the general public that climate change is a real problem that requires urgent attention from all of us, and that we therefore will be using less hydrocarbon-based energy sources.”

Houston’s response is to feverishly try and reinvent itself, transforming from the “Oil Capital of the World” to “Energy Capital of the World.” At least key elected, business and education leaders have embraced the idea of such a transition, though the industry continues to push for more dredging to prevent a traffic jam of container ships and exports derived from the oil and gas boom. Houston’s relationship with industry is a push and pull. Meanwhile, smaller towns such as Port Aransas that have fewer resources end up easy prey for industry.

That means building pipelines, tanks, pumps and ports to accommodate a new, bigger generation of ships. And it means dredging. Lots of it. A new generation of tankers is here — ones for oil and liquid natural gas.

The new liquid natural gas ships are approximately 1,000 feet long. And at a cost of about $250 million, according to the International Group of Liquified Natural Gas Importers, these beasts carry 267,000 cubic meters of natural gas. But they also have drafts, or require a depth, of 39 feet of water.

And that’s more than a lot of bays, harbors and channels can accommodate. In 2018, the LNG carrier Arctic Blizzard struck a buried pipeline at Sabine Pass, one of the largest LNG terminals in operation. Immediately after, ships with drafts of more than 32 feet deep were not permitted. Eight vessels were then stalled, unable to get into port.

In too deep

So, in its infinite wisdom, the Port of Corpus Christi — a powerful, state-chartered landlord with an unelected board — has concluded that its desperately poor region’s future lies in the past.

The port wants to dredge the current ship channel down to 80 feet for the new oil tankers and gouge 60 feet deep into Harbor Island, just across from Port Aransas, for natural gas producers. Some 6.5 million cubic yards of soil and fill then will have to be dumped somewhere.

Instead of shallow waters and birds where tourists wait for the ferry, a massive complex of pipes, pumps, storage tanks and docks would rise, accommodating two behemoth tankers; nearby new tankers have already begun loading 80,000 barrels of crude oil each hour from a new pipeline to the mainland. √Price tag for Harbor Island: $1 billion, not including $100 million of dredging in and around Corpus Christi.

Last fall, investors soured on Harbor Island. Concluding that more oil and gas in a world glutted with both was a bad investment, the Carlyle Group, the giant private $201 billion equity fund in Washington, D.C., abruptly pulled out of Harbor Island. That left just one investor, Berry Group.

The city of Port Aransas, it turned out, wanted none of it. While the port authority owns the land, the land is in city limits, giving city leaders the power to impose a moratorium on new development.

“All that dredging and everything, it’s just too much intake and discharge in that narrow channel,” said Glenn Martin, owner of Woody’s Sports Center, a charter service on the town waterfront and a former mayor.

The powerful port authority struck back: terminating the city’s lease for the entire municipal marina, right in the heart of town. The city then sued the port authority. Closing the marina, said Mayor Charles Bujan to a local television news station, KRIS, “would kill tourism in Port Aransas, period.”

The economic vision driving this dispute? A strategy reminiscent of that which middle-aged Mr. McGuire confided poolside to the hopeful young Benjamin Braddock in the 1967 classic movie “The Graduate.” The future, he said, “is plastics.”

“Our future is to become a manufacturing center for basic chemicals and plastics, to add value to the ‘Texas gold’ that is crude oil. Short-sighted people think only of exporting oil, and that is the necessary first step to bring the oil here,” Richard Bowers, a retiring port authority board member and founder of a petrochemical company, wrote in the Corpus Christi Caller-Times.

Grousing that universities, museums and the Texas State Aquarium wanted tens of millions of dollars from the port, he went on: “But the real goal must be to make things out of (oil), to add value and to create wealth. Those basic industries will attract downstream manufacturers as well as a plethora of support businesses.”

And the big competitor that “budding” Corpus Christi should topple, according to Bowers? Houston — home to the largest petrochemical complex in the nation.

Enter the Trump administration, with socialism for oil and gas companies. The Trump administration’s new budget proposes $100 million for dredging for the Corpus Christi port authority, double the previous year. And so it goes along all of America’s southern coast; the U.S. Army Corps of Engineers even magically found another $2 billion it didn’t spend on other things last year and will spend it on dredging, from Calescieu Pass, La., through Mississippi.

Granted, not all dredging is bad and not all dredging is a favor to the oil and gas industry. On the Atlantic Coast, dredging some 40 feet down is meant to allow bigger ships carrying retail cargo through the Panama Canal to Savannah and Charleston. But even that might be missing the tide; global trade is slowing, not ramping.

What can we cherish?

Eventually the tarpon stopped coming to Port Aransas.

It probably wasn’t the fish’s choice. As Stephen Harrigan wrote in Texas Monthly, three things happened: Dams increased salinity, oil and gas production rose and ship channels were gouged deeper. The silver king vanished, likely into the deep water farther offshore.

As a result, I’ve never seen a tarpon here but I did catch the biggest redfish of my life on the flats right near where pipelines, tanks and megaships would block the horizon, courtesy of a federal bailout. But here’s the rub: The funding for all this dredging is stuck in Congress. In other words, there’s a chance to sink it.

In reality, the economic case for throwing all this taxpayer money at the LNG industry just isn’t there, either. Tourism generates $1 billion in the Corpus Christi area annually. The region’s plan for a vast network of plants, pipelines, railroad and docks promises to generate $5 billion over nine years but that is roughly a half-billion dollars yearly in local economic impact. And exports by Houston-headquartered Cheniere Energy have fallen to the lowest level in nearly 18 months, anyway, as international orders have been canceled, according to Platts.

The decision hanging over Harbor Island and Port Aransas is a test of our values as modern Texans. Will we sink good money after bad for a dying fossil fuel business, enriching a few, as we have for a century? Or, in hard economic times will we flash a new set of values to preserve the natural and cultural heritage of Texas?

This is the longest barrier island in the world. If we can’t cherish that, what can we cherish? So, this will be a defining test for Texans.

Parker is the author of “Lone Star Nation: How Texas Will Change America.”

This article was corrected Monday at 7 a.m. The sole invesor left in the Harbor Island project is the Berry Group, a construction firm with a deep portfolio in the oil and gas industry, not Berry Global, a major plastics manufacturer. In addition, the article implied that crude oil could be transferred to tankers at Harbor Island. Crude oil will be transferred to a new generation of tankers elsewhere in the Corpus Christi area.