Robby Burdge Port of Victoria SHALE Cover Story

Sea of Change: Port of Victoria

For hundreds of years, ports have served an important role in the establishment and spread of commerce. Coastal cities experienced exponential growth as seafarers traveling to and from these and other locations, providing more expansive trade opportunities and economic security. As civilizations grew, canals were built. This allowed for even greater commerce after the establishment of port cities, as people could live farther away from major sources of water but still have access to goods and services.

Fast-forward to modern times, and ports are still significant, though their cargoes have evolved: Spices are now petrochemicals, pottery is machinery, and wheat is oil. When the oil and gas industry in Texas began to swell as it entered and progressed into the new millennium, the need for greater infrastructure to handle transportation of the produced natural resources similarly grew in earnest. Much of the transportation of these resources occurred via roads and highways; this added to already burgeoning traffic, especially in the Greater Houston metropolitan area. Houston’s proximity to the Gulf of Mexico historically made it an area of critical logistical importance.

In recent times, however, alternative options have been sought out to better distribute the sheer magnitude of cargo entering and exiting Texas along the Gulf of Mexico. While pipelines are oftentimes the cheapest form of transport for crude oil, certain physical limitations make it difficult to utilize this method for all areas — oil can only flow so far as the pipeline infrastructure is built out. Large barges are a useful workaround to ship and move crude oil domestically.

Port of VictoriaIn the last few years, using barges as floating storage has also become more commonplace in the industry, as investors seek to arbitrage the spread between the current depressed West Texas Intermediate pricing and the assumed increase in price in the months that follow, otherwise known as contango. Though the reasons are myriad, the opportunity was there for the taking for other Texas port cities to become even more involved in these operations. The Port of Victoria — through the competent, thoughtful decision-making process of its leaders both past and present — has emerged as a rising star among its brethren port cities not only in Texas but across the United States, as well.

Though the Port of Victoria is credited with a present economic impact of approximately $10 billion for the South Texas region, its beginnings were much more modest. As Lynn M. Alperin provides in History of the Intracoastal Waterway, business owners and community leaders from Victoria, Texas, laid the formative groundwork in 1905 for what would become a network of navigable waters from the Great Lakes in the northeastern United States down to the Gulf of Mexico and along the Texas and Louisiana borders.

The impetus for this decision was the potential cost savings that would be achieved with this method versus transport over land, which would set the tone for the present-day Port of Victoria. This network would eventually become known as the Intracoastal Waterway, a major network of waters and channels that plays a large role in domestic shipping and transportation of materials.

Port of VictoriaToday, the Port of Victoria’s economic impact looms much larger than what could have been conceived by those Victoria citizens who over 100 years ago set into motion the events necessary for the port to exist in its current form. Victoria arguably became a proper port in 1968, when the 35-mile Barge Canal was completed — construction on this structure began in 1951. Over the years, various improvements have benefited the port. In 1988, Congress authorized a widening and deepening of the Barge Canal, which commenced in 1995 and was ultimately completed in March 2002. The timing of this major improvement seems quite prescient, as less than a decade later the Eagle Ford Shale roared to life.

Just prior to the Eagle Ford’s awakening, Robby Burdge assumed a leadership role at the port. He was appointed in July 2007 after approval to expand the Port Commission from three to five members was secured during the 2007 legislative session, and became Chairman in 2012. Commissioners serve two-year terms, and the Commission is essentially a self-directed body. Notably, the port’s Commissioners are not paid, including Burdge — they are local business owners and entrepreneurs volunteering their time and expertise for the benefit of the community at large.

The Port of Victoria has positioned itself as a major commercial hub in the state of Texas under Burdge’s leadership, having anticipated the potential seismic shift in activity and commerce that the Eagle Ford represented several years ago. The Port of Victoria and Eagle Ford Working Together The Port of Victoria has played an integral role in the South Texas economy for decades. Yet, the discovery of the Eagle Ford less than a decade ago has accelerated its growth and magnified its overall importance and impact in a relatively short period of time.

As Burdge joined the Commission around this time, possibly no one else has a better perspective on this meteoric growth and influence. “There is no doubt the Eagle Ford has been a game changer, and what that has done for the port has been phenomenal,” Burdge observes. Prior to the Eagle Ford, major products that traveled through the port included chemicals, farm products, sand and gravel. For the resounding majority of the port’s existence, crude oil was not a commodity that passed through its waterways. In the several years since the Eagle Ford became a major shale player, oil exports traveling through the port soared from zero to over 2 million barrels per month. The port also has a million-barrel on-site storage capacity. As a result of the Eagle Ford’s reliance on hydraulic fracturing, there was also a jump in the amount of sand being imported via the port to be used as proppant in stimulated horizontal wells.

Port of VictoriaThough the Eagle Ford boom provided more opportunities and revenue for some time, current decreased crude oil prices have not negatively affected the port, which has secured long-term leases with certain clients. Some of these leases last as long as 30 years, which will allow the port to better weather vacillations in commodity pricing and industry slowdowns. “From an oil and condensates perspective, we are roughly 15 percent off,” Burdge notes. “Our frac sands are down considerably, around 50 percent. What we have seen, quite frankly, has not been across the board across our clients. Some clients who have positioned themselves with futures have either picked up or maintained compared to others who have slowed down.” During the recent shale boom, myriad loads of proppant were transported through the port. With 2016 came a decrease in these shipments. However, gravel and grains still frequent its docks, just as they always have. With the influx of activity, the port has been able to use the commensurate increase in revenues and fees and then reinvest that capital into improving its facilities.

“We have taken every dollar that we pull in as net revenue and we have poured that back into infrastructure,” says Burdge. “That has allowed us to rely more on the revenue base from our clients out there and to rely less on the taxpayers. So it has been a great win-win for how public-private partnerships are supposed to work, and how government should work as far as reducing taxpayer burdens while allowing industry to take the lead.” Chairman Burdge credits the Eagle Ford Shale with playing a large role in what the port has been able to accomplish in the last decade or so, and believes that it has taken the local area to greater heights with all deliberate speed. “The Eagle Ford Shale, quite frankly, has allowed the Port of Victoria to move light-years ahead with respect to our growth and preparing ourselves for additional growth,” he says. “Without the Eagle Ford and without that movement, would we be where we are today? Probably 20 years from now.”

Port of VictoriaHaving the foresight to realize the Eagle Ford’s potential as an opportunity for the port before it even began production cannot be overstated. Chairman Burdge points out that “early on there was a lot of speculation on the potential of what the Eagle Ford was going to be, so the port and our resource team looked at the liquid dock and began to look at the costs associated and the potential revenue. We went to the Railroad Commission and shared with them what our plans were. Their input and guidance validated where we thought the Eagle Ford was going and it allowed us to move forward and position ourselves so that when the growth did occur, we were ready.” Both entities proactively worked together to achieve a mutually beneficial result, which has since then become a staple for the port and its leaders — seeking out viable symbiotic partnerships. Ultimately, the Port of Victoria’s planning and calculated risk-reward assessment paid off.

“Oil and gas has without a doubt been the driver that has allowed the port to grow not just rapidly, but has prepared us and put us on the map globally for site selection crews who are looking at expanding into South Texas or the U.S.,” Burdge notes.

Although the price of oil is lower in early 2016 than industry members would prefer, the recent repeal of the crude oil export ban should bode well for the port going forward. “We think it’s still a little too early to tell, but I do believe that by lifting the ban, it gives shale producers a stronger arm in an already cutthroat global market,” Burdge says. “It will have benefits down the road, without a doubt.” A Sleepy Little Port Now on the Radar The Port of Victoria is fortuitously situated slightly east of the Eagle Ford Shale. It would be shortsighted, though, to chalk up the port’s success to sheer proximity. Intermodal options of waterway, rail, and a four-lane divided highway mean it has long possessed the infrastructure to handle commercial transportation through a variety of avenues. Recent improvements and expansions have augmented the port’s previous features, as it adjusts to a future of increased dependence on the Eagle Ford Shale. These improvements include but are not limited to liquid cargo docks, railway expansion and improvements to nearby roadways and pipelines.

A major asset for the port has been public-private partnerships — that is, a government entity joining forces with a private sector organization to achieve a mutually beneficial result. Just as the port is willing to work with other governmental agencies (like the Railroad Commission of Texas), it is inclined to offer companies the same opportunity. These arrangements with the private sector are oftentimes beneficial for all. For example, the private entity provides the capital to either build or improve the governmental agency’s facility; the creation or improvement of that facility makes the area surrounding that municipality more attractive for businesses; and different private entities are subsequently convinced to work with the municipal government in creating or improving another facility or structure that will serve both parties. Various partnerships and investments over a period of decades have made the Port of Victoria a highly competitive aquatic ingress and egress location in Texas, as well as in the Greater Gulf of Mexico. “I believe the Port of Victoria is that last frontier on the Texas coast because of what we have for highway access, water access, and with dual rail,” Burdge says.

The case studies are numerous. The public-private partnership between the port and Equalizer — a shipper that utilizes rail, barge, and truck transport — was cemented 7 years ago, when they sought certain improvements to the port facilities. “Equalizer is a perfect example of a company that saw the market changing and was able to adapt to that,” notes Burdge. A long-standing partner with the Port of Victoria, the shipper approached the port’s leadership about upgrading the docking facility they used at the time, as well as extending the existing rail. Working together, the desired improvements and upgrades were agreed upon and executed.

Port of VictoriaDevall Towing, which operates a barge fleet in multiple Texas waterways, was in a position to join forces with the Port of Victoria. Devall provided the capital for the construction of an improved fleeting area, and it subsequently operates that facility on a day-to-day basis. Burdge describes the relationship as the “perfect use of public-private partnership. The port did not have to come up with capital dollars, or incur debt or sell bonds. We were able to work with Devall, and it’s been a win-win for everyone.” In pursuing both of these opportunities, public-private partnerships have helped both parties meet their overall goals and objectives.

Although the port prefers to work cooperatively to bolster its facilities, that doesn’t mean it can’t provide for itself when needs arise. For example, it recently upgraded and automated a manually operated lift bridge. This improvement had just over a $1 million price tag but should recuperate at least half of its cost and reduce burden on local taxpayers when those savings are realized. Final approval on this project was secured in late 2015, and the lift bridge is now fully operable remotely. Though the process took longer than port leaders anticipated, the bridge still serves as a model for similar waterways throughout Texas and the United States.

Though Burdge and his colleagues on the Port Commission have achieved great success working with private enterprise, the port is not the only organization in Victoria responsible for drawing business to the area. The Victoria Economic Development Corporation (VEDC) serves as a partner alongside the Port of Victoria, and it played a major role in bringing Caterpillar into the local business community. Many members of the local community favored partitioning a large industrial site nearby to woo multiple parties, but the VEDC held fast to its belief that it could attract a more sizable client by keeping the property intact. This is oftentimes an onerous task, but the VEDC’s efforts were rewarded when Caterpillar announced that the large plot and its comparable economic incentives were just what it was looking for. Though the corporation does not occupy any property owned by the Port of Victoria, it may still play a significant role. In all likelihood, Caterpillar will eventually use a specialized heavy-haul corridor that is approved by legislation and designed for shipping cargoes too cumbersome to travel 150 miles by road from the Port of Houston. As the Port of Victoria is a mere 12 miles away from the site, it is well-positioned for the task.

As proof of the port’s commitment to continued growth, it was recently granted McCallum Sweeney certification — one of only three sites in the state of Texas to have earned this distinction. Burdge notes that this honor will be “extremely beneficial” for the port going forward. Developed by American Electric Power (AEP), this credential identifies an industrial site as fully serviceable by utilities and whose further development will not be impinged by unforeseen legal, environmental or geological complications.

As busy as they’ve been, the port and its leadership show no signs of slowing down. Even though commodity prices are currently caught in the midst of a generational downtrend, Burdge notes that the port is “on the shortlist for a few potential projects,” some of which may be rather sizable. “We’re hopeful they may be game changers for the Port of Victoria and the South Texas region.”

Port of VictoriaRegardless of potential future clients, it is fair to say that the future is bright in any economic environment. Visionary Leadership In 2007, just as the Eagle Ford began to garner more attention and notoriety in the industry, the Commission was authorized to expand from three to five members. As a result of this growth, Robby Burdge was added to the roster. Although Burdge now serves as Chairman, he admits that he was not always attuned to the port’s crucial role in South Texas. “While I knew the port was out there, I was not an expert by any means as to really understand the true asset that the port [is], not only here locally, but what it has in the state of Texas and what it has nationally,” he explains. By all means, Chairman Burdge is now fully aware of the port’s importance and enjoys his role as its leader. “The port is an organization that is fun — it’s fun because of the model that we have in place. We have five Commissioners, four who are entrepreneurs and one who is a prior county judge. We have an exceptional resource team of experts in their field — whether it be legal, engineering, marketing, economic development — that I believe are visionaries,” explains Burdge.

If it sounds like Burdge is apt to praise his team and the community before himself, that’s because he is. “I have to give great kudos to prior Commission Chairman Lee Swearingen and prior Commissioner Paul Guthrie, because both of them had the vision to work with prior Mayor Will Armstrong,” says Burdge, complimenting his predecessors. “The Port of Victoria is not about one person — we’re all equal parts of the wheel, and everybody plays an extremely important part in moving it forward. That’s why I believe we are a well-oiled machine, and we are really blessed to have a great resource team. We feel that our job is to provide that vision for the port, to ensure that both short-term and long-term decisions are consistent, and to give the experts the tools to implement that vision.”

With Burdge at the helm, the port has sought to reduce its financial reliance on local taxpayers, instead opting to augment capital obtained through the private sector — whether through public-private partnerships, leases, or other fees collected by site occupants — to support its operations and facilities. “Thanks to the financial expertise and leadership of former chairman and current Commissioner Robert Loeb and the business experience of Commissioner Elton Calhoun, we’ve lowered the tax rate and increased private business at the port,” says Burdge. The data bears this out: From 2008 to 2015, the percentage of taxpayer-provided revenues declined dramatically from 63.6 percent to 26 percent. Burdge is very proud of this statistic, noting that he and the Commission intend to be “great stewards of taxpayer money.” The combination of pro-business growth and sage use of those taxes is a powerful tandem that serves the community well. The port only employs four people, and several consultants. The Commissioners are mostly local entrepreneurs who volunteer their time and knowledge for the betterment of the community. “The Commissioners have a sense of service that allows the operation to run at peak efficiency,” says Port of Victoria Spokesperson Mike Sizemore. “The results are what they are,” asserts Burdge. “You can look at them over time and see that we have continued to be very proactive, but at the same time we understand our fiduciary responsibility and stewardship to the community.”

Port of VictoriaWere it not for Sizemore speaking glowingly about Robby Burdge, it might not be clear to those outside of Victoria County what a key catalyst the Chairman has been in the growth of the port.

“Robby’s a little bit modest — he’s such a leader and visionary on where this community can go and where the port can go,” Sizemore observes. “Without his leadership, this would not have been possible. His motto is, ‘God, family, team, then me,’” which is a mind-set that Sizemore believes Burdge exudes every day. “We are very fortunate to have Robby Burdge as our Chairman — we need more Texans like Robby Burdge.”

Burdge marvels at how difficult it would be in today’s world to create the Intracoastal Waterway upon which the Port of Victoria relies. “There’s no way that could be done today, with respect to environmental and other issues, with respect to a national perspective.” Those are the words of someone who is very happy and grateful to have the opportunity to guide the port into the future. Although colleagues like Mike Sizemore give effusive credit to Burdge, it should not come as a surprise that he would humbly defer credit to those around him. “It’s an honor to work with a great group of folks that make this volunteer position fun.”

For more information on the Port of Victoria, visit www.portofvictoria.com.

Leave a Reply

Your email address will not be published. Required fields are marked *

Share via