Surge of oil and gas flowing to Texas coastline triggers building boom, tensions

PORT ARANSAS — To the east, the Gulf of Mexico stretches out, blue-green and sparkling. To the west and north, flounder and trout meander in a chain of bays. People flock here to fish. Others come to this beach town near Corpus Christi to kayak, parasail or admire the hundreds of bird species on the barrier island, which is deep into rebuilding efforts after Hurricane Harvey damaged or destroyed 85 percent of the buildings here last year.

A perfect location, from a certain point of view, to put not one but two crude-oil export terminals for ships so big they’re called supertankers.

Those proposals are part of a historic buildout of oil and gas infrastructure in the United States as it becomes a top exporter of both fuels. Texas, home to the most prolific oilfield in the country, is at the epicenter of the frenzy. More than 80 plants, terminals and other projects are in the works or planned up and down the state’s Gulf Coast, from Port Arthur to Brownsville, according to a Center for Public Integrity and Texas Tribune review of corporate plans. Companies have been laying enough pipeline in Texas in the last several years to stretch from the Atlantic to the Pacific three times over, more than 8,000 miles in all.

Oil and gas production in the U.S. has skyrocketed, particularly in the Permian Basin, most of which underlies West Texas. Producers there are employing new drilling technologies to meet — some would say prolong — the global demand for fossil fuels. When Congress lifted decades-old federal restrictions on crude exports at the end of 2015, a move that came on the heels of rule changes throwing open the doors for exports of natural gas, it set off a mad dash. Companies want to get oil and gas from West Texas to the Gulf Coast and, from there, abroad.

Much of the infrastructure is headed for just two regions: Houston — America’s oil capital — and Corpus Christi, where a port previously focused on oil imports is battling it out with Houston to be the country’s No. 1 location for moving crude to other nations. Each shipped out more than $7 billion in crude during the first nine months of the year, up from less than $1 billion two years earlier, according to U.S. Census Bureau figures. Terminals once used to bring oil in are pushing it the other direction.

“At the end of 2015 ... we had the first shipment of crude that was exported,” said John LaRue, executive director of the Port of Corpus Christi. “And now, as I’m sure you know, it’s a constant surge.”

Oil and gas export growth means jobs paying good wages. In Corpus Christi, it’s responsible for roughly 800 new positions so far with another 1,600 expected in the next four years, plus several thousand temporary jobs constructing all those facilities, according to an analysis by Texas A&M University-Corpus Christi’s Jim Lee.

But it also intensifies a tragic quandary bedeviling the Gulf. Heavy industry there pumps out greenhouse gases warming the climate, upping the risks of powerful storms that, in turn, endanger those same facilities and everything around them. Harvey, which dumped more rain than any other U.S. storm on record, damaged hundreds of thousands of homes in Texas last year, killed at least 68 people and, particularly around Houston, sparked industrial spills, air pollution and explosions.

Many of the proposed, under-construction or recently built facilities along the Texas Gulf are in areas that felt Harvey’s bite. Just in the Corpus Christi region, those projects include about nine new or expanding crude oil terminals, a liquefied natural gas terminal, two refined petroleum products terminals and several plants for processing a component of natural gas into a building block of plastic products. Two of those plants, each approved for tens of millions of dollars in tax breaks, are expected to be among the largest of their kind in the world. And roughly seven pipelines are planned or under way to move more oil and gas here from western and southern Texas.

The Corpus Christi liquefied natural gas terminal — which just began operations and already has expansions planned — received permits to release up to 5.8 million tons of greenhouse gases each year, according to an analysis by the Environmental Integrity Project, a research and advocacy group. That’s the equivalent of nearly 1 ½ coal-fired power plants. Other parts of this new supply chain, which extends into the Louisiana side of the Gulf, will facilitate greenhouse gases pumped out in Asia, Europe and beyond.

“There is some irony or poetic justice, depending on your point of view, in having all these greenhouse-gas emitters being the most vulnerable to climate change, but there are a lot of people living around them, and it’s not such a good deal for them,” said Eric Schaeffer, executive director of the Environmental Integrity Project and a former head of civil enforcement at the U.S. Environmental Protection Agency.

The development boom also sets up a clash over the future of the mid-Gulf, a less industrial and more tourism-focused part of the Texas coast than Houston.

From the Port of Corpus Christi’s perspective, the new export business is a huge plus. “You’re going to see more development, more industry, more jobs,” said Eddie Martinez, the port’s business development representative, as he cruised in a boat along the ship channel in June, passing oil tankers and new projects.

But as the growth spills beyond the port’s industrial spine, it’s upending some communities.

The idea of building crude-oil terminals in Port Aransas to serve ships extending the length of four football fields — requiring a much deeper ship channel in that area — has residents and business owners there up in arms.

“Everyone I speak to says they’re against this,” said Neesy Tompkins, who moved to town in 1978 after falling in love with its natural beauty.

“What they’re proposing is an environmental disaster,” said John Donovan, who lives part-time in town and helped form a new group, the Port Aransas Conservancy, that is pressing back on the oil-terminal proposals.

This type of development boom on the coast isn’t unprecedented, but it hasn’t happened for decades, said Michael Webber, acting director of the Energy Institute at the University of Texas at Austin. World War II kicked off a building spree that extended into the 1950s, he said. This time around, soaring production is the trigger. In the Permian Basin, companies are extracting double the amount of crude oil and natural gas they did four years ago.

“We’re seeing massive buildout,” Webber said. “Export infrastructure, chemical infrastructure, you name it.”

The town that fish built

Port Aransas, a city of about 4,000 full-time residents, runs on tourism. Fishing is a big part of that — it's no accident the community spent a little over a decade around the turn of the last century named for a fish, the enormous tarpon. This is a place that calls itself the fishing capital of Texas, a spot where President Franklin D. Roosevelt once came to try his luck. There’s a tournament for anglers nearly every weekend in the summer. Faced with hurricane-wrecked government facilities from the police station to the library, the city council decided to fix the marina first — to get boaters and their dollars back to town.

“That’s the lifeblood of Port Aransas,” said Councilwoman Joan Holt. “Next to the beach, but the beach was in perfect shape.”

More than a century ago the U.S. Army Corps of Engineers dredged a deepwater port at Harbor Island, partly within city limits. The Humble Oil and Refining Co. built an oil terminal there. But shippers preferred the Corpus Christi port, opened in 1926. These days, big ships pass through the waters alongside Port Aransas to get to Corpus Christi, farther inland. Offshore oil rigs are stored on Harbor Island, but the terminal and its leaking oil tanks are long gone.

For years, though, officials with the Port of Corpus Christi — now the owner of a substantial piece of Harbor Island — have seen development potential there.

They’ve filed for a permit to build a desalination plant on the island to ensure their burgeoning clientele has enough water amid droughts that climate change is poised to worsen. This is also where they want to put a crude oil export terminal with at least two loading docks. In October they said The Carlyle Group, a private-equity firm, plans to develop the project and have it running by late 2020. Three days later, the infrastructure firm Magellan Midstream Partners said it is considering building another supertanker crude-oil terminal on the island.

Port officials were setting themselves up for a war, and they knew it. In the early 1970s, residents here fought off a similar proposal by the port authority — a terminal for oil imports in that case. In 2014, the city rezoned the land to prevent refineries and comparable development after the port tried to strike a deal with a company that wanted to build a complex of oil and gas processing plants.

This time, though, port officials may have the upper hand. Across from Harbor Island is the city’s marina — that key part of the local economy — and the port owns that property as well. The lease was set to expire in March. Shortly before announcing plans for the oil terminal, port officials negotiated a new contract for the marina that includes language ensuring the lease “will immediately terminate” if the city again moves to make the zoning more restrictive, according to documents released to the Center for Public Integrity and The Texas Tribune under a public-information request.

Dan Pecore, who manages a maritime museum and wooden boatbuilding complex in Port Aransas, calls that “extortion.” Pecore, a founding member of the Port Aransas Conservancy, is upset at the port for inserting the language and the city for agreeing to it. He thinks the timing is unfair to residents still trying to put their lives back together post-Harvey. After the hurricane tore the roof off his home, he had to live 30 miles away until July, when he could finally find another place to rent in town.

The port declined to comment on the marina contract. In a written statement, it said, “We are firmly committed to BOTH our economic development mandate, and our environmental stewardship mandate.” When it announced its partnership with Carlyle in October, the port said, “The result could produce up to a $50 billion annual reduction to the national trade deficit. Importantly, the City of Corpus Christi would benefit from the thousands of direct and indirect jobs as well as billions in incremental economic activity.”

The port already has the go-ahead to deepen its ship channel from 47 to 54 feet. Now, for the Harbor Island project, it’s considering depths of at least 75 feet in that area. Among dredged U.S. channels, only the Port of Long Beach in California would top that, according to the U.S. Army Corps of Engineers, and it requires dredging infrequently because it is naturally deep.

This is the part of the Harbor Island project that most worries Holt, a fish biologist who became a councilwoman after retiring from the University of Texas at Austin’s Marine Science Institute in Port Aransas. The local catch is plentiful because the larval fish spawned offshore get swept into seagrasses in the shallow water alongside the city, where they’re protected from predators. With a much deeper channel, it seems to her, comes a risk they could get stuck there and die.

Channel deepening can cause more seawater to end up in bays, which can harm the plants and animals there, said Stefan Talke, an associate professor of civil and environmental engineering at Portland State University in Oregon. And in some port communities, deeper channels have amplified tides and worsened storm surge, increasing the flooding from hurricanes. He recommends careful study.

“If we’re going to make decisions, like invest all this money to deepen, we should have a clear-eyed view of what the trade-offs are,” he said.

The Port of Corpus Christi, in its written statement, said it is “partnering with multiple academic and research institutions to ensure the highest levels of science are applied at every step of the process.”

As the port defends its project, it’s aggressively opposing a competing development plan — an oil export facility proposed by the logistics firm Trafigura about 15 miles offshore, south of Corpus Christi. Port officials claim that project, not their own, could be the environmental disaster. For the port, the offshore plan poses a different sort of threat: It could mean millions of dollars in lost revenue as supertankers forgo the ship channel, said Sandy Fielden, director of oil and products research for Morningstar, an investment research firm. Port officials argued that Trafigura’s federal permit application was incomplete and hired a lobbying firm as part of their push to get state leaders to block construction.

It’s an unusual move, Fielden said. It shows, in the rush to grab a share of the export bounty, just how pitched the competition is. Trafigura, whose project is one of four that companies are considering constructing off the coast of Texas, said in a statement that such offshore ports are operated safely around the world and its project would “complement, not replace, exports from other facilities.” Members of the fledgling Port Aransas Conservancy, for their part, think handling crude offshore would be the less-risky option.

In June, when the plan for Harbor Island was still one crude-oil terminal rather than two, Tammy and James King went out in their fishing boat on a beautiful morning. The Kings, who live part time in Port Aransas, tooled past other boats, a parasailer, brown pelicans in search of a meal and the Lydia Ann Lighthouse, a local landmark overlooking marshland and tiny lakes where kayakers roam.

The Kings paused where three channels meet: the Lydia Ann, where baby fish hide in seagrasses; the Aransas, which leads to two bays with water sometimes called as clear as gin, full of trout, redfish and other marine life; and the Corpus Christi ship channel. Twenty miles to the north is the Aransas National Wildlife Refuge, where whooping cranes were brought back from the brink of extinction — about 500 were there last winter, compared with just 15 in 1941 — and where scientists and visitors see hundreds of other species, from the reddish egret to the spotted chorus frog.

The Kings, who work in real estate, aren’t against growth or oil and gas. They get income from royalties on production, including in West Texas, where they live when they’re not in town. But they don’t understand the zeal to develop Port Aransas.

“There’s a great port in Corpus Christi with all the industrial infrastructure,” James King said over the thrum of his engine. “Why build industrial infrastructure here?”

Expanding ports, shrinking neighborhoods

The Port of Beaumont didn’t export a drop of crude oil in 2015. This year through September, the Texas seaport near the Louisiana state line moved out nearly $6 billion worth — almost three times the amount it shipped during the same months last year, according to U.S. Census Bureau data.

All but one of the top 10 ports for crude shipped abroad are on the Gulf Coast, most in Texas. Beaumont is behind only Corpus Christi and Houston as they vie for first place. Related exports are also rising, from refined oil to propane and other liquids that come with natural gas production. And around the Port of Brownsville alone, companies have proposed a trio of terminals to export liquefied natural gas, known as LNG.

Parts of the new export supply chain, particularly the LNG terminals, are getting big tax breaks to locate along the coast. The LNG facility under construction in Freeport, about 70 miles south of Houston, will avoid more than half a billion dollars in taxes over the 10-year lifespan of its agreements with three school districts, according to the Texas Comptroller of Public Accounts. That’s a more than 75-percent break.

Dale Craymer, president of the Texas Taxpayers and Research Association, whose membership includes companies receiving such breaks, said the state must compete for export facilities with its Gulf Coast neighbor. Louisiana has a lower property tax rate and offers an automatic, 10-year break on property taxes.

But in Dick Lavine’s view, schools are giving up much-needed revenue from projects that “very likely would have located there without an incentive.” Lavine, a senior fiscal analyst for the left-leaning Center for Public Policy Priorities, an Austin-based think tank, said the obvious place to put an oil or gas export facility is on the coast of the state at the heart of the U.S. drilling boom. Companies planning to build two of the LNG terminals in Brownsville did not pick new sites when they were turned down for tax breaks by a school district, a sign that at least some deal-sweeteners aren’t necessary.

Storm protections, meanwhile, won’t be coming nearly as quickly as the new infrastructure.

Extensive storm modeling by top Texas scientists has shown that if a hurricane hit near the southern end of Galveston Island outside Houston — something that almost happened in 2008 — storm surge would pour into the Port of Houston, dislodging thousands of storage tanks full of crude oil and hazardous chemicals.

In October, a decade after Hurricane Ike prompted calls to safeguard the Texas coast, the state and U.S. Army Corps of Engineers finally recommended a plan: building an earthen levee down the two barrier islands that sit between the Houston area and the Gulf, with a gate to shut ahead of a storm.

That “coastal spine” would shield the fourth-largest city and biggest refining and petrochemical complex in the nation. Dozens of refineries and chemical plants line the 52-mile Houston Ship Channel. Tens of billions of dollars in new natural gas processing and chemical facilities are in the works there.

But the protection Texas is contemplating, including dunes and beach restoration on parts of the industrializing lower coast, is years away. A final recommendation isn’t expected until 2021, and then it begins the potentially long process of winning state and congressional approval to pay the expected $23 billion to $31 billion cost of the project. (The estimated expense of Hurricane Harvey damage: $125 billion.)

In July, the Trump administration announced the state would receive nearly $4 billion toward the construction of new coastal levees north of Port Arthur and to shore up existing coastal levees in that city and Freeport — projects that were already in the queue for federal funding. But that’s only 65 percent of that project’s cost. The state of Texas will have to put up the rest, and that is not a done deal.

Steve Everley, spokesman for Texans for Natural Gas, an industry-funded advocacy group, isn’t worried about the industrial buildup coming in advance of storm protections. The oil and gas sector has invested heavily in storm preparedness and proved it can weather big hurricanes, he wrote in an email.

“Within weeks after Harvey’s landfall, 20 of the 24 refineries that shut down had restarted, and 70 percent of petrochemical production was back online,” he wrote.

But so many instances of air and water contamination occurred in the hurricane’s wake that Gov. Greg Abbott suspended some pollution rules in storm-affected counties — and didn’t reinstate them for seven months. Bob Stokes, president of the Galveston Bay Foundation, a conservation group, thinks Harvey showed that the petrochemical industry — smaller facilities in particular — isn’t prepared and that no one is requiring them to do better.

“Somebody should be forcing that issue,” he said, “and unfortunately I’m at a loss for how to do it.”

The state official who oversees coastline protection is George P. Bush, the Texas land commissioner and nephew of former President George W. Bush. He said he’s “absolutely” concerned about new facilities built in harm’s way, including those coming in on the lower coast, where no levee is planned. But he thinks the Corpus Christi channel deepening could help. The material dredged off the ship channel floor can be turned into wetlands that offer some defense from storms, he said.

As to research showing that deepening can worsen storm surge, Bush said he’s aware of “a back and forth on that.”

“The clear upside is that you have more trade and commerce,” he said.

Corpus Christi isn’t the only Texas port trying to deepen its ship channel to accommodate big tankers and keep the growth coming. The Corpus Christi plans are just far more expansive, and they come on the heels of another infrastructure project to make way for those ships.

Corpus Christi’s iconic, aging Harbor Bridge is being replaced with a taller span, part of a $1 billion project that will allow some of the world’s largest vessels to pass underneath. It will also further isolate Hillcrest, a historically segregated neighborhood long afflicted by heavy air pollution. On Hillcrest’s western boundary, two oil refineries pump out toxic, cancer-causing chemicals; to the north, oil and gas tanks line the ship channel; to the south, vehicles spew exhaust on Interstate 37. The bridge project will relocate U.S. Highway 181 just east of the neighborhood, which is largely African-American and Hispanic.

Health fears have long hung over the neighborhood. The federal Agency for Toxic Substances and Disease Registry said in 2016, after a years-long investigation, that inhaling the mixture of chemicals discharged in the area known as Refinery Row over the long term increases the risk of cancer. The agency also said that hydrogen sulfide, a gas with a rotten-egg stench that’s deadly at high levels, regularly wafts over the area at concentrations that can cause headaches and difficulty breathing. (The state agency charged with protecting air quality contested those findings.)

The bridge was the final straw for some residents, who filed a federal civil rights complaint against the Texas Department of Transportation. The outcome: a fund to help homeowners move out, with the initial $20 million coming from the port.

The option to relocate is good, said Pastor Adam Carrington with the Brooks A.M.E. Worship Center in Hillcrest, except for the people left behind. Some are stuck, unable to qualify for the assistance because of liens on their property or problems proving they are the legal owners. Others don’t want to abandon the only homes they’ve known.

In June, Carrington rolled through the vanishing neighborhood in his car, longtime resident Lamont Taylor in his back seat, both pointing out houses marked for demolition, overgrown lots where other homes once stood and people with nowhere else to go.

“This lady here lives in a tent, unfortunately,” Taylor said, looking out the window at the woman’s Harvey-damaged home.

Erin Gaines, a staff attorney at Texas RioGrande Legal Aid, which represented residents in the bridge complaint, said officials should take a lesson from Hillcrest amid the industrial growth coming to the region. But she’s seen no sign that it’s sunk in yet.

“Our question is, are we going to learn anything from the past in terms of these fence-line communities and not having appropriate buffers between them and industry?” she said. “Or are they going to keep expanding industry and creating new fence-line communities?”

North of Corpus Christi, ExxonMobil and SABIC are planning one of the world’s largest ethane crackers, a petrochemical plant that will process a component of natural gas in a manner, ExxonMobil said, that “protects the environment, as well as the health and safety of our employees and neighbors.” The mayor of Gregory, the tiny city nearby, is all for it. In Portland, also close to the site, residents organized to try to stop it.

Gregory is a city at the intersection of three highways, with a railroad bisecting it, everything passing by en route to somewhere else. Jessica Ortiz, who lives here, and her daughter, Jenna Adams, who was raised here, drove around in June, naming the few businesses left in town and the ones shuttered by Harvey as they explained why they’re excited about the plant. Maybe Gregory would get more restaurants, more jobs, more residents. Maybe their family would benefit, too.

Adair Apple, who started a Portland citizens group opposing the development, also saw the plant through the lens of what it would mean for the area — pollution. Faced with the likelihood that Exxon would get all the permits it applied for, her family moved out.

“I don’t want to have to worry about my daughters’ health,” said Apple, who now lives on the south side of Corpus Christi, away from industrial development.

More is almost certainly headed to the area near her former home. Errol Summerlin, a retired lawyer who lives in Portland and is continuing the fight over the Exxon permits, drove by farmland northeast of the city in June, saying he expected the nearly 3,000 acres will flip to industrial uses. A month later, the Port of Corpus Christi would announce that it planned to purchase the properties to market for development.

Summerlin drove several miles farther north and pulled over to the side of Highway 188, on a bridge overlooking mudflats. Storm water from the Exxon facility was at that point proposed (and since approved by the state) to flow through here, and he was afraid that plastic pellets from the plant would be swept along for the ride and eaten by birds.

Then he saw a flash of shocking pink — roseate spoonbills landing in the marsh. He got out of his car. Standing on the shoulder, momentarily silent, he watched the spindly-legged birds rooting in the shallow water for a meal.

Center for Public Integrity reporter Rachel Leven contributed to this story.