A Tons of Sizzle and SeasoningMore than 5,500 tons oI extra virginolive oil passed through the PortoI Houston last year -- en routeto kitchens across the country

B Producing the ProduceThe Port 01 Houston handled morethan 9,000 tons 01 fresh fruitsand vegetables in 2001

C Business is BloomingThe Port oI Houston imports nearly

5o tons oI cut Ilowers -- providingnatural air lresheners to millions oIU.S. homes and businesses

D First-Class SeatingFine upholstered couches are amongthousands o]~ tons oI ]~urniture enteringthe U.S. via the Port oI Houston each year

THE PORT

I-8oo-688-36z5. www.portofhouston.com

More than $44 billion worth o]c goods come through the Port oI:

Houston Authority each year, on the way to consumers in Texas

and across the nation. That’s how the Port o]~ Houston built a

world-class portfolio as a catalyst for regional, national and

international growth.

THE PORTDELIVERS Contents April/May 2003, a bi-monthly publication.

On the CoverPercolating Prosperity

Java and jobs are comingto Houston.

features

6 Better and CleanerThan all the RestThe Port of Houston is recognizedfor environmental practices.

12 From Russia with OilThe first direct shipments ofRussian crude oil to U.S. viathe Port of Houston.

18 Moving MoreThan Just AirThe Port of Houston handles theintricate operation of transport-ing components for 81 windturbine towers.

4

11

17

2O

22

23

24

28

A Welcome ComebackNorwegian Cruise Line is bringingback its extremely popular seven-dayTexaribbean cruises to the Portof Houston.

Another Record-breaking YearDespite rising costs and a weak economy,the Port of Houston tops itself.

Bonds IssuedThe Port of Houston AuthorityCommission approved the issuanceof more than $23 million in bonds.

CommemoratingFallen ComradesThe Port of Houston remembers friendslost during 9/11.

Thompson-DraperReappointedThe Harris County CommissionersCourt reappointed Cheryl Thompson-Draper by unanimous vote.

Longoria AppointedAttorney Janiece M. Longoria cele-brates her appointment to the Portof Houston Authority Commissionby Houston City Council.

Economic PowerhouseRecently released figures show thatthe Port of Houston’s economicmuscle continues to flex and groweven stronger.

Highlighting How the PortDelivers the GoodsBuilding local and national consumerawareness of the Port of Houston.

THE PORT OF HOUSTON

AUTHORITY

James T. EdmondsChairman

Kase L. LawalVice-Chairman

Steve PhelpsCommissioner

James W. Fonteno, Jr.Commissioner

Jimmy A. BurkeCommissioner

Cheryl Thompson-DraperCommissioner

Janiece LongoriaCommissioner

Executive Office

Port of Houston Authority11 l East Loop NorthP.O. Box 2562Houston, TX 77252-2562Phone: 713-670-2400Fax: 713-670-2429

Executive DirectorH. Thomas Kornegay

Managing DirectorWade M. Battles

Director of Trade DevelopmentJohn P. Horan

Director of AdministrationJames O. Eldridge

Director of Public AffairsArgentina James

Director of FacilitiesJames B. Jackson

Director of OperationsJohn T. Scardasis

General CounselMartha T. Williams

Harris County AuditorRichard Rhodes

Field Offices

New YorkJack Wojewnik1650 Sycamore Avenue, Suite 23Bohemia, NY 11716Phone: 631-244-3757Fax: 631-244-3757

South AmericaArturo GamczTorre Centrue, Local #2 PB, Suite 916Avelaida Venezuela, Urb. El RosalCaracas, Venezuela 1060Phone: 0-582-421-5615Fax: 011-582-976-7063

This publication is not copyrighted and permission is givenfor the reproduction or use of any original materials, pro-vided credit is given to the Port of Houston Authority.Additional information, address changes, extra copies, oradvertising specifications may be obtained by writing to thePort of Houston Magazine.

The Port of Houston Magazine is published by the Portof Houston Authority, P.O. Box 2562, Houston, Texas77252-2562, and is distributed free to maritime, industrialand transportation interests in the United States and for-eign countries.

Visit the Port of Houston online

www. portofhouston, corn

Our dedicated marine and transportation specialistsknow how to navigate the port industry. They’re backed bythe sizable resources of the nation’s #1 business bank* toprovide all the financial services you need, including termloans and working capital lines of credit, internationaltrade finance, treasury management, and more. Plus,they’re empowered with local decision-making authority.Let the country’s top business bank help you chart acourse to greater success. Call Comerica today.

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www.comerica.com"Comerica Incorporated again ranks first nationally among the top 50 bank holding companies in commercial loans as a percent of total assets by Sbesbunoff information Services, inc., 2002.

"We are

Cruise Line to

line

erary

"We have brought the

ships to the consumers,

rather than asking them

to fly across the country

to get to the ships’.’

comel~ acl(!Texas has been successful in offering cruise consumers

desirable destinations in Mexico and the Western

Caribbean. In 2001, approximately 90,000 cruise passen-

gers explored those destinations on cruises from Houstonand Galveston, according to Business Research &

Economic Advisers.

The data revealed $325 million in direct spending by

the cruise industry and its passengers in Texas during2001 generated an economic impact of $667 million,

more than 5,250 jobs throughout the state, and $207 mil-

lion in wages and salaries.

"Houston is a great drive-up market as well as an

extremely attractive port of embarkation, especially for

consumers in the western half of the United States who

won’t have to catch the red-eye all the way to the East

Coast in order to experience a Western Caribbean

cruise," explained Veitch.

"Norwegian Cruise Line opened up cruising from the

Gulf ports in 1997 with our breakthrough Texaribbean

program from Houston, and we are excited to be going

back there to build on the original success we had in

Houston," Veitch stressed.The Norwegian Sea entered service in 1988, and is a

42,000-ton vessel with a capacity of 1,518 guests and a

crew of 630. The ship offers a wide variety of amenities

including restaurants and dining areas, a casino, pools, an

ice cream parlor, and a full-service spa. Prices for the

Houston-based cruises begin at $399 per person. ̄

Visit www.ncl.com for details.

and Cleaneri! °

Never content merely to be a follower, the

Port of Houston Authority has become the

first U.S. port to attain the highest standard

of environmental practices recognized in the

world, ISO 14001.

The compliance review conducted by Det Norske

Veritas verified that the Port Authority’s Environmental

Management System (EMS) meets the 1SO 14001 stan-

dard. The rewards for such an achievement are immenseand include not only a cleaner environment, but also

tremendous respect from professional peers, clients,

potential customers, and the community.

"Achieving compliance with ISO 14001 certainly

enhances the prestige and competitive business advan-

tage of the Port," says Jim Edmonds, chairman of the Port

of Houston Authority. "We look forward to expanding

global business opportunities with companies that share

the Port’s unwavering commitment to sound environ-

mental management systems."

The Port of Houston was prepared for the ISO 14001

certification process because of previous participation in

the U.S. Environmental Protection Agency’s (EPA) ini-

tiative to train public entities in employing an EMS. The

Port Authority and 13 other public entities across the

country were chosen for this two-year program.

EMS PROCESSES AND PROCEDURESThe Port Authority learned the EMS set of manage-

ment processes and procedures and can now analyze,

control and reduce the environmental impact of the Port

Authority’s activities. The Port Authority’s EMS focuses

on improving air quality, reducing waste, and improving

the quality of stormwater runoff.

aspect of life through its creation of industry-wide, inter-

national recognized standards. One example is the stan-

dardization of telephone and bank cards so that they can

be used all over the world. Other examples include film

speed code, screw threads, symbols for automobile con-trol switches, and freight containers.

"It is a very fine accomplishment on the part of thePort to develop an EMS and to achieve the ISO 14001,

which is no easy matter," points out Jim Home, nationalEMS project manager in the EPA Office of Water.

"What is also really important about Houston is the

dedication shown throughout the organization from the

top management on down to getting this done," empha-

sizes Home. "There seems to be really strong commit-

ment all the way from Tom Kornegay to the shop floor,

and that’s what really made it successful."

ISO 14001 CERTIFICATIONThe ISO 14001 certification takes this same approach

with the management of an organization’s impact on the

environment. "Attaining this ISO certification means

that an organization understands the environmental

aspects of its economic activities, has a system in place

for managing the environmental challenges it faces, and

continually improves its performance with regard to

the environment," explains Laura Fiffick, the Port

Authority’s environmental affairs manager.

"Implementing the EMS at the Port of Houston

Authority has done a lot of good," points out Tom

Kornegay, executive director of the Port Authority. "It

has gotten the employees involved in environmentalissues and allowed them to understand why we do certain

things. It has created a situation where the employees

buy into the process, because they know why it is impor-

tant and what effect it has."

Fiffick sees a number of benefits to an ISO 14001 cer-

tification for the Port of Houston Authority. One is in

terms of liability.

"What is also really important about Houston is thededication shown throughout the organization from the

top management on down to getting this done."

ISO 14001 was developed by the International

Organization for Standardization just 10 years ago. This

came on the heels of the worldwide organization’s success

with standardization of quality assurance through the

ISO 9000 series.Since its inception in 1947, the ISO has maintained

its mission of promoting "the development of standard-

ization and related activities in the world with a view tofacilitating the international exchange of goods and ser-

vices, and developing cooperation in the spheres of intel-

lectual, scientific, technological and economic activity."

The organization’s work can be seen in almost every

"We are working with our underwriters to see if we

can get a break in our insurance due to ISO certifica-

tion," emphasizes Fiffick. "Other companies have seen

such reductions.

"In fact, the EPA set up a meeting at the WhartonSchool of Business and I went up there with the Port’s

insurance agent. We sat across the aisle from our under-

writers, so we got a chance to talk about how great theEMS process has been for the Port," says Fiffick. "They

had no idea we were involved."

Fiffick also believes that ISO 14001 certification willplace the Port Authority in a different light with the

Texas Commission on Environmental Quality (TCEQ),

the state’s environmental regulatory agency. "TCEQ

and EPA vigorously promote an EMS system, because

they believe it is a proactive way of managing your envi-

ronmental issues which result in fewer problems and

higher compliance."

IMPLEMENTING AN EMS"Implementing an EMS can mean incentives such as

paying fewer fees, having fewer inspections or less fre-

quent reporting," explains Fiffick. "Now that we are ISO

14001 certified, I can sit down with the Port Authority’s

core team and come up with a list of things we can ask for

from TCEQ and see what they decide to give us."

The ISO 14001 certification will be used in the mar-

keting materials for the Port of Houston Authority, and

may one day affect decisions by potential customers of the

Port. Fiffick believes that the ways in which private

industry utilizes ISO 14001 certification may eventually

spill over into the Port operations arena.

"There are some large companies who tell their

vendors that if they are not ISO 14001 certified, then

they will not work with them. Obviously, the port indus-try is not at this point yet, but it might be some day,"

speculates Fiffick.

The Port of Brisbane in Australia has been ISO 14001certified since June 2000. Their experiences with the cer-

tification confirm Fiffick’s projections of the value of ISO

14001 certification.

INCREASED CONFIDENCEAccording to the Port of Brisbane’s General Manager

of Planning and the Environment, Rick Morton,

"Accreditation of the Port of Brisbane Corporation’s

environmental management system to ISO 14001 level

has resulted in business, government and communitystakeholders having a high level of confidence that the

port operates in an environmentally responsible manner.

This increased confidence has had a range of benefits to

the corporation and is of particular importance as most of

the port’s operations are undertaken adjacent to areas ofhigh conservation value," Morton said.

"The corporation was the first port in Australia to

receive ISO 14001 accreditation and consequently isviewed by other businesses as a leader in the area of envi-

ronmental management," continues Morton. "This

perception has assisted the corporation in attracting

new clients to the port, as they recognize that the

corporation is a progressive operator. Many businesseswith a strong focus on environmental issues are keen to do

business with an organization that has a similar emphasis.

"Regulatory agencies often portray the Port ofBrisbane Corporation as an example of how business can

operate successfully near environmentally sensitive areas

with demonstrably minimal impacts. Implementation of

the ISO-accredited Environmental Management System

has enabled regulators to refine the typically detailed

conditions associated with various permits/approvals,"

concludes Morton.

The lessons gained through the EPA program and the

EMS process have been extremely valuable. "The Port

Authority has a different perspective now on our envi-

ronmental issues," stresses Fiffick. "Before it was the old

command and control structure which was very reactive.A new regulation would be issued, and we would scram-

ble just to be able to meet that regulation.

"An EMS turns all that around. It makes you look at

the ways your facility impacts the environment and then

manages that situation by reducing your impact on the

environment. By doing this, we can reduce our compli-

ance requirements, and then everything falls into place,"

concludes Fiffick.

The EPA is pleased with the leadership the Port of

Houston Authority is demonstrating. "I really appreciate

the fact that Laura and her staff have been so willing to

talk to other people in the public sector, not just other

ports, but anybody who wants to talk to them and find

out about their experiences," states Horne.

"Whenever I get inquiries, Houston is always one

of the ones I mention as the one to talk to," Home adds."It is not just what they have done for their own organi-

zation. What they are willing to do for others makes

Houston stand out. What Houston is doing really embod-

ies what EPA is trying to achieve through the EMS

program and the PEER (Public Entity Environmental

Management System Resource) center."

Total container volume leaped 10 percent to 1,159,789

TEUs (twenty-foot equivalents) over the 1,057,869 TEUs

handled in 2001. Barbours Cut Container Terminal shoul-

dered the bulk of the container volume, posting 1,063,076

TEUs as compared with 911,903 TEUs in the previ-

ous year.Total container tonnage surged to new levels as well in

2002. The Port Authority topped 2001’s 10,119,938 short

tons by reaching 10,858,068 short tons in

2002. Barbours Cut’s portion totaled

9,992,136 short tons, up from 8,833,183

short tons in 2001.

The Bulk Materials Handling Plant also

hit a new high of 3,846,720 short tons, a 29

percent increase over the 2,979,139 short

tons posted in 2001.

"These results show that despite rising

costs and a weak economy, the Port

authority’s operations are efficient, our

facilities are in excellent shape, and our

people remain committed to our customers," points out

Jim Edmonds, chairman of the Port Authority.

"Still, despite the increased container volume and ton-

nage, the rate of growth in the Port Authority’s container

traffic is actually slowing, because we are running out of

space. We simply do not have the capacity to serve every-

one who wants to bring containers through the Port. The

need for thc Bayport Container Terminal is absolutely

clear," Edmonds emphasizes.

Volume surges in bulk materials, general cargo, auto

imports and exports, and bagged goods all contributed to

record-level operating revenue of nearly $108.5 million in

2002, an increase of one percent over $106.9 million in

2001. Barbours Cut’s share was a record $66 million, up a

hefty 13 percent from $58.5 million in 2001.

The Port Authority’s 2002 net income totaled nearly

$7 raillion, a 70 percent decline from $23.5 million net

"These resultsshow thatdespite risingcosts anda weakeconomv, thePort A uthoritytsoperationsare effTcient~"

income recorded in 2001. Lower returns on

the Port Authority’s portfolio of bonds and

other market investments as well as higher

health care premiums, property insurance

rates, and legal fees all combined to drag

down net income.

During 2002, the Port Authority con-

tinued to feel the impact of U.S. trade

sanctions against steel imports, which fell

to just under 1.9 million short tons, an 18

percent drop from 2.4 million short tons in

2001. Last summer, in a move to help offset

the sanctions, Port commissioners lowered the wharfage

rate on all imported iron and steel products by approxi-

mately 29 percent to $1.65 per short ton from $2.32 per

short ton.The Port commissioners extended the temporary

wharfage reduction on steel and iron imports through the

end of 2003. However, 3 percent tariff increase was imple-

ruented to cover rising expenses related to operations at

the Turning Basin and Barbours Cut terminals. ¯

Texas and Russia always have onegeophysical asset in common: oil.Now, through the first direct shipments of Russian

crude oil to the U.S. via the Port of Houston, thecommon ground grows stronger each day.

In July 2002, YUKOS Oil Company, Russia’s largest fully privatizedintegrated oil company, delivered 1.72 billion barrels on the tankerAstro Lupus. Seven subsequent shipments in 2002 brought the total to10.88 billion barrels of Russian crude.

"It is fitting that the first direct shipments of Russian

crude oil to the United States comes via the Port of

Houston," says Jim Edmonds, chairman of the Port

of Houston Authority. "This is the sixth largest port in

the world, and home to a $15 billion petrochemical com-

plex that is the largest in the nation and second largest in

the world.

"As the gateway to the Gulf of Mexico, the Port of

Houston provides easy access to U.S. markets for Russian

crude," Edmonds points out.

"This shipment symbolizes the first step toward what

we hope will become a fruitful partnership between

YUKOS and refiners in the United States," states Bruce

Misamore, YUKOS’ chief financial officer and deputy

chairman of its management committee.

"As we expand our production, the United States can

become a new market for YUKOS and Russia. While

"It is fitting that the

first direct shipments of

Russian crude oil to the

United States comes via

the Port of Houston."

many logistical challenges remain, we believe that thesepilot shipments will put us on the path to creating an effi-

cient system of providing a stable source of non-OPEC

crude oil for the U.S.," assures Misamore.The oil shipments also fulfill the federal government’s

desire to deepen relations with Russia. "The president’s

national energy policy recommended more dialogue

between energy-producing and consuming countries,"explains Mike Smith, assistant secretary of the Office

of Fossil Energy. "This is a prime example of howtwo nations can work with the ever-changing global

marketplace in order to strengthen the economies of

both countries."

Thus far, YUKOS is pleased with the outcomes of the

shipments to the U.S. "When we analyzed the econom-

ics of the first two oil deliveries to international traders

for subsequent shipment to the American market, wecould see that this fundamentally new export direction

looks quite promising indeed," says YUKOS RM

President Nikolay Bychkov. "Our calculations show that

the economics of shipping oil to the U.S. from Black Sea

ports can compare favorably with shipping to Europe."

The main factors affecting the economics of shipping

oil to the U.S. are world crude price dynamics, the price

differential between Brent and WTI, the amount of thediscount applied to WTI when shipping to the U.S. mar-

ket, and transportation costs.

In view of the relationship between these factors,

YUKOS plans to continue its pilot program of crude

deliveries to international traders for shipment to the

U.S. market, in order to ascertain the reliability of themodel over a longer time span. YUKOS also plans to con-

tinue shipments of Russian crude oil to the U.S. ̄

PERCOLATING

PROSPERITYJava and jobs are coming to Houston as a result of the NewYork Board of Trade (NYBOT) designation of green coffeeport status for the Port of Houston. The decision makes Houstonan approved delivery point for the Coffee "C" futures contracts traded on

the NYBOT’s Coffee, Sugar & Cocoa Exchange. It becomes effective with

the March 2005 contract, which began trading April 1, 2003.

"The New York Board of Trade is always looking at

ways to keep our products, such as the Coffee "C" con-

tract, current with industry practices," said Patrick

Gambaro, Interim Chief Operating Officer of NYBOT.

"Establishing Houston as a new NYBOT delivery port

signifies its value as a commercial point of entry for thisimportant world commodity."

Port Chairman Jim Edmonds expressed great pride at

hearing the news. "The Port of Houston’s designation as

a green coffee port will have a tremendous impact on our

local and regional economy. Coffee traders from all over

the world now have several great incentives to do busi-

ness here."

The Port of Houston Authority filed its application

with the NYBOT last year after Harris County voters

approved Proposition 3, a state constitutional amend-

ment that exempts all green coffee and raw cocoa

imports stored in Harris County from ad valorem taxes.

State Sen. Mario Gallegos and State Rep. Joe E. Moreno

authored the legislation that put Proposition 3 on the

November 2001 ballot."Our Texas legislators and voters all have a reason to

beam with pride," stated Alistair Macnab, executive

director of the Greater Houston Port Bureau. "The excit-ing growth strategies envisioned by the association may

now move confidently forward."

According to the Greater Houston Coffee Association,

Houston’s coffee port designation will increase direct and

indirect jobs in the coffee industry by as much as 15 per-

cent. Houston’s coffee imports are expected to grow to

approximately 3.7 million bags annually -- more than

double the 1.8 million bags imported in 2002 -- as a

result of the amount of transportation/distribution ware-house space available locally.

Changes are already under way in response to the cof-fee port designation. Gulf Winds International, which

provides warehousing services,

distribution, over the road andlocal drayage for clients such as

Coffee America, is expanding

to meet anticipated demand for

coffee storage facilities.

"We have signed a lease on

a brand new, state-of-the-art ........high-end, 180,000 square-foot

warehousing and distribution

center on East Barbours Cut

Boulevard, across from Maersk

Sealand’s Terminal," ’explains

Steve Stewart, president of Gulf

Winds International. "We needthe additional space because we

are pretty full where we are.With the anticipated volume

from the coffee exchange status,

we reconfigured our existing ’.i

space for the increased coffee

and still needed more space."

Stewart attended theNational Coffee Association

annual convention and discov-

ered that Houston’s new coffee

port status was "a very hot topic of conversation. The

traders and importers are very excited about it. The word

I’m hearing is that Houston can expect to see significant

increase in business," points out Stewart.

"Some of my present customers have told me that they

will be moving their coffee out of New York and NewOrleans and bringing it to Houston as a result of the

exchange designation," Stewart continues. "Every single

person I have talked to has been extremely supportive and

felt it was long overdue for Houston to be designated.

Houston is only the fourth coffee exchange port in the

United States, and the only one west of the Mississippi.

It makes a lot if sense to a lot of people for us to have cof-

fee here.

"It is a huge business opportunity for everyone involved

in the coffee supply process, including the carriers, thestevedores, the terminal operators, the truckers, the bro-

kers, the fumigators, the weighers, the samplers, and

the warehouses, not to mention the coffee companies

themselves," Stewart concludes. "Everyone involved in

transportation has an opportunity to participate."

The Greater Houston CoffeeAssociation is working with sev-

eral banks and trade organiza-

tions to develop ways to help

local small businesses connect

with the thriving coffee industry

and work with coffee sellers,buyers, retailers and transporters

to help Houston become one of

the major distribution centers

for coffees imported from Asia,

Latin America and Africa.

"The Port has delivered theopportunity that poises Houston

for continued economic growth,"

stated Tom Kornegay, executive

director of the Port of Houston

Authority. "We’ve cleared the

way for local businesses to take

their enterprises to exciting newheights as dynamic key players

in global trade and commerce."

Noting Houston’s proximity

to 20 million consumers inthe greater southwestern U.S.,

Kornegay says, "This is a vital

component in the Port Authority’s strategy. We view

this as a natural progression in our role as a world-class

trading point."In fact, plans are already brewing to take the green cof-

fee port status to the next level, according to Carlos

deAldecoa, president of Cadeco Industries Inc. and alsopresident of the Greater Houston Coffee Association.

Since the 1920s, Cadeco Industries has been involved inall aspects of coffee, from farming, decaffeination, storage,

bulk processing, and trading with operations in Mexico,

Houston and Spain.

"Applying for designation from the LIFFE (London

International Financial Futures Exchange) is our next

challenge," asserts deAldecoa. "Our designation from

the New York Board of Trade has paved the road

for obtaining the same status with the London exchange."

The LIFFE trades in Robusta coffees in much thesame way as the New York Board of Trade handles

Arabica coffees. ̄