Flights Over Houston Ship Channel to Assess Reopening

U.S. authorities are planning inspection flights over the Houston Ship Channel, home to 11 percent of the nation’s refining capacity, as the waterway remains closed for a fourth day.

The flights over the channel and Galveston Bay will start as soon as there’s enough light to assess conditions for reopening, U.S. Coast Guard Petty Officer Matthew Schofield said in a telephone interview. The channel closed March 22 after a collision between a barge and a bulk carrier caused 4,000 barrels of fuel oil to spill.

“We don’t have an assessment for reopening,” Schofield said. “They’re holding a unified command meeting right now and at the end of the meeting they may have a better idea.”

Schofield said 101 vessels are waiting to go inbound or outbound from the Port of Houston and Texas City. The channel is closed from just north of Texas City down to its entrance, at Bolivar. To reopen the channel, the Coast Guard needs an uncontaminated lane for ship traffic and to be sure the traffic won’t impede cleanup, Captain Brian Penoyer said yesterday at a press conference in Texas City.

The Galveston Bolivar ferry has been given permission to to operate and will run from 7 a.m. to 7 p.m., the Coast Guard said.

Reducing Rates

Exxon Mobil Corp. (XOM) said it reduced rates at its 560,500-barrel-a-day refinery in Baytown, Texas, because of the closing and anticipates a second reduction midweek. Valero Energy Corp. (VLO), Marathon Petroleum Corp. (MPC) and Royal Dutch Shell Plc (RDSA) also own all or part of refineries on the 52-mile (84-kilometer) shipping lane. The combined capacity is 2.1 million barrels a day, said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

“The impacts are delays in crude deliveries and shipping out of gasoline and diesel,” Lipow said by telephone. “A closure of four to five days becomes serious. Refiners don’t have enough crude on hand or storage of finished products for that long a delay.”

The closing’s impact is similar to that caused by fog, Greg Bram, senior vice president of supply chain for Valero, said yesterday in New Orleans, where he was attending the Howard Weil energy conference. Fog can close the channel for days.

Refiners can use more domestic crude from pipelines when shipments are delayed, Bram said. Valero has two refineries on the channel, in Texas City and Houston, with combined capacity of more than 300,000 barrels a day.

Six Collisions

The spill occurred when a barge being towed by the vessel Miss Susan was struck at 12:35 p.m. local by the 585-foot bulk carrier Summer Wind, causing one of the barge’s six tanks to leak fuel oil, the Coast Guard said. The fuel from the remaining five tanks has been transferred and the vessel will be moved to a local shipyard, the Coast Guard said.

Workers refloated the barge, whose tanks were carrying 22,000 barrels of ship fuel at the time of the incident near Texas City, Texas, Lieutenant Junior Grade Kristopher Kidd, a spokesman for the Coast Guard, said yesterday.

There were six collisions in the channel last year, Coast Guard data show. Incidents closed the waterway for 26 hours in 2013, compared with 5.5 hours in 2012 and 157.2 hours in 2011. An average day on the channel in 2013 saw 38 tankers, 22 freighters, one cruise ship, 345 tows, six public vessels, 297 ferries, 25 other transits and 75 ships in port.

Migratory Birds

The damage to bird habitats appears to be contained to the immediate vicinity of the spill, Audubon Texas said in an e-mailed statement. The group is the state program of the National Audubon Society. Hundreds of thousands of birds are arriving in Galveston Bay at this time of year for spring migration.

The vessel was identified as Kirby Barge 27706, according to the Port of Houston Authority. Kirby Inland Marine LP, the company that owns the Miss Susan and the barge, declined to comment when reached by phone yesterday.

There were about 27 vessels working to skim and recover the oil, aided by containment booms stretching for more than 71,000 feet, the Coast Guard said.

The estimated economic impact of closing the channel is an $330 million a day, according to the port authority.

“This is like a hurricane or a tropical storm,” Peter Fasullo, a principal at Houston-based energy consultant EnVantage Inc., said by telephone. “The ship channel could be shut for several days or even a week.”

In 2013, an average of 2.15 million barrels a day of products like gasoline and diesel were exported from the Gulf Coast, and 3.76 million barrels of day of crude were imported, according to the Energy Information Administration.

To contact the reporter on this story: Barbara Powell in Houston at bpowell4@bloomberg.net

To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Richard Stubbe, Charlotte Porter

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