McAllen EDC: Large Leaderboard

Across South Texas, from the Rio Grande Valley up to Corpus Christi and Laredo, there’s a story of dynamic growth, new investment and a strong economy to be told.

What’s at the heart of our economic muscle? It’s a strong Texas oil and natural gas sector.

The direct and indirect benefits that flow from a strong energy economy are also driving our region forward in so many ways.

Sergio Contreras

Most often you hear about the big numbers. Texas’ oil and natural gas sector contributes substantial tax revenue to local communities, school districts and the state of Texas. Last year alone, Texas’ oil and natural gas producers contributed $9.4 billion in state and local taxes and state royalties. On a per employee basis, the oil and natural gas taxes and royalties is the most paid by any industry sector – six times more than other business sectors, in fact.

But, those big numbers and impact aren’t driven just by traditional West Texas oil counties. In Webb County, for example, oil and natural gas accounts for 31 percent of the local tax base. That’s money for roads, schools and essential services that our communities rely on and that make cities attractive for corporate relocations, expansion and investment.

And, then there’s the indirect benefits that come along with a strong energy sector. Our ports of entry are booming due to the trade of oil and natural gas, which we see come across the Port of Brownsville and our land ports of entry.

Recent investments in infrastructure, including the Port of Brownsville, have made South Texas, our coastal communities and border region a burgeoning hot spot for new investment.

It was the Water Resources and Development Act (WRDA) of 2016 that is authorizing the Brownsville Ship Channel deepening project. More specifically, the Brazos Island Harbor Channel Improvement Project was one of 28 water infrastructure projects nationwide that was included in the U.S. Army Corps of Engineers recommendations to Congress.

By deepening the channel by 10 feet, the Port of Brownsville will become one of the deepest ports in the Gulf of Mexico.

The impact of this project cannot be understated. A deeper channel improves the port’s infrastructure and increases the region’s global competitiveness.

In fact, when CSC Sugar launched its new packaging and distribution operations at the Port of Brownsville this spring, it was the infrastructure, along with easy access to rail and cargo lines that the company said attracted them to Brownsville.

By further diversifying our economy, Texas’ coastal, Valley and border regions will continue to flourish and that’s good news for our local workforce and the families that call the region home.

Energy projects like NextDecade Rio Grande LNG, Texas LNG and Annova LNG combine the state’s strong energy sector with the infrastructure and logistical benefits that our region offer employers and investors. These projects will put the region on the map and at the leading edge of international energy distribution.

The tax revenue such investment generates will help fund essential services and infrastructure across the region, but more important, is the direct impact on the lives and livelihoods of our residents.

Ernst & Young estimated that the construction phase of the Annova project alone over the next four to five years would generate 675 jobs and approximately $324 million in direct income.

The three proposed LNG projects are forecasted to bring 6,300 jobs to our region during the construction phase and add approximately 515 permanent jobs with an average salary of $70k.

Engineering, technology and manufacturing jobs go hand in hand with a strong Texas energy sector. And, it’s a history of smart local and state tax and regulatory policy that’s helping put our region on the map in even bigger ways.

Let’s make sure our state and local leaders keep Texas ripe for continued economic growth and investment and that we continue to support the strong energy sector that’s at the heart of our economy.

Editor’s Note: The main image accompanying the above guest column shows the Port of Brownsville. Photo courtesy of TxDOT.

City of San Benito large leaderboard

2 COMMENTS

  1. Ho hum, not the “LNG is the greatest thing since white bread” thing again.

    JOBS

    RIO GRANDE LNG & CB&I: Permanent jobs paying $70 thousand will be offered mostly by NextDecade’s Rio Grande LNG — if it ever really launches. But won’t most of THOSE jobs be going to CB&I trained folks already working similar jobs in the Gulf? Transferring to Rio Grande LNG as those jobs wind down and NextDecade starts filling its permanent positions? At least that’s what I got from “US shale gas-advantaged projects strain toward finish line,” 11-07-2016, Oil & Gas Journal, http://www.ogj.com/articles/print/volume-114/issue-11/special-report-worldwide-construction-update/us-shale-gas-advantaged-projects-strain-toward-finish-line.html.

    Quote: “With construction slated to begin in less than a year, NextDecade has had ‘intensive discussions with CB&I about their training programs for construction labor,’ said van Vliet [Rene van Vliet, chief operating officer of NextDecade]. ‘CB&I has been successful in recruiting and training a significant group of labor from South Texas, in particular the Rio Grande Valley, where our project will be built. Many of these workers are currently occupied on comparable CB&I projects on the Gulf of Mexico, and, as such, will be suitably prepared for our project when it moves forward. In addition, the anticipated timing of our project is advantageous as many other projects will be winding down as ours ramps up, helping to ease the strain on workforce resources.'”

    Quote: “One of CB&I’s distinguishing characteristics versus other EPC contractors [Engineering, Procurement, and Construction] is that CB&I utilizes its own construction workforce, helping to reduce cost and raise quality,” he said. “CB&I does not subcontract all of its construction work and simply act as a managing contractor.”

    AND LOCAL CONTRACTORS? ““Very few general contractors in the Valley can bond at the level these projects will require, at least $50-60 million” (From “Brick by Brick – Building the Valley,” Eileen Mattei, August 2016, Valley Business Report, http://www.valleybusinessreport.com/featured/brick-by-brick-building-the-valley/).

    ECONOMIC HOUSE OF CARDS?

    NextDecade’s REVERSE MERGER WITH HARMONY MERGER CORP: And NextDecade’s recently announced reverse-merger deal with Harmony Merger Corp (http://www.harmonymergercorp.com/). What’s that all about? Is it to help NextDecade to raise enough money through stock market sales to move its Rio Grande LNG and Rio Bravo Pipeline projects forward here while building a similar LNG operation on land it recently pre-leased near Texas City, TX? Or is it a way to build the NextDecade house of cards ever higher, sell it off to stock market investors, and get out before the house of cards collapses?

    NextDecade’s DEAL WITH GE OIL & GAS: Looking at some of NextDecade’s other deals, it’s hard to figure out if it’s a good investment or just a publicity stunt. In another deal that makes both it and GE Oil & Gas look good, t’s agreed to buy its turbines and compressors from GE. But part of THAT deal is a financial in which GE will provide NextDecade with a common equity investment and Next Decade will allow GE to invest an undisclosed amount in Rio Grande LNG project-level equity and debt financing at the time NextDecade make the Final Investment Decision to actually build the Rio Grande LNG project.

    NextDecade’s DEAL WITH FLEX LNG: And what about NextDecade’s deal with FLEX LNG (http://www.flexlng.com/) that will enable the CEO’s of both companies to join forces again in a way that generated good publicity for both. FLEX specializes in building or remodeling ships to combine LNG storage capacity with LNG regasification equipment. That way, a LNG tanker ship can off-load natural gas directly into natural gas pipelines at ports lacking regasification facilities. The promise is that this makes NextDecade more flexible and thereby better able to succeed in the ever changing and competitive LNG markets around the world. A real deal or just a sales deal? Looks like NextDecade hasn’t made any LNG yet and FLEX hasn’t put any ships in the water yet, so all we have so far is promises, promises, promises.

    RIO GRANDE LNG RELATED DEBT? Wish I could dig deeper into “NextDecade is reported to have mandated SG as financial adviser for the debt on its Rio Grande LNG export project in Brownsville, Texas, and Macquarie is said to be leading the equity-raising.” But a subscription required for the full story at http://www.pfie.com/nextdecade-hires-advisers-on-rio-grande/21288455.article

    NextDecade, RIO GRANDE LNG, PELICAN ISLAND LNG, TEXAS CITY PRE-LEASE TWO STEP? NextDecade pre-leased land near Texas City earlier this year to build a LNG operation there that could turn out to be the largest industrial development in Galveston County in at least a decade.” Or not. It can back out of its Texas City area pre-lease pretty easily. The same way it backed out of its supposed $6 billion dollar Pelican Island LNG project in Corpus. Here today, gone tomorrow.

    NextDecade could afford to back out of Pelican. Back then the story was that its tiny size would work in Pelican’s favor in terms of LNG spot sales. Now the story is that the land available on Pelican Island wasn’t large enough to be a good investment. But NextDecade can’t pull out of its Rio Grande LNG and Rio Bravo combo project here without collapsing.

    TEXAS LNG CHANGES START DATE TO 2022: Meanwhile, Texas LNG has decided to try a “Pluto gameplan,” delaying its planned 2020-2021 start date to 2022. And it’s not alone: “Several US gas export projects have pushed back the expected start of their commercial operations, according to company updates that began posting this week on the US Department of Energy’s website.” According to “Several US gas export projects [including Texas LNG] delay planned start dates,” Laura Brooks, 04-04-2017, S&P Global, http://www.platts.com/latest-news/natural-gas/austin/several-us-gas-export-projects-delay-planned-21353922?hootpostid=e50b68b70a797cc2e25d997696986733

    BANKRUPTCY THE ONLY ALTERNATIVE? Of course the “RGV 3” LNG companies are making big, bold, optimistic promises. They have to keep big investment money flowing their way. The time and money they’ve spent here makes bankruptcy their only alternative.

    WINNERS AND LOOSERS: So back to the questions about NextDecade’s reverse merger deal with Harmony. Will it help NextDecade come out economically ahead if its LNG projects collapse? Will its Limited Liability Corporation structure limit its economic losses? So that the real losers will be those poor souls who bought worthless shares of common stock generated by this merger? What about contractors stuck with unpaid bills for supplies and services rendered?

    WHAT DO YOU THINK? Anybody else have questions about all the LNG company promises? How much of our future should we bet on the RGV 3? It’s time for truth or consequences. House of cards or a good bet? Simply in terms of economics and good business practices. Setting aside all the other important issues involved (even health issues and environmental issues).

  2. Ho hum, not the “LNG is the greatest thing since white bread” thing again.

    JOBS

    RIO GRANDE LNG & CB&I: Permanent jobs paying $70 thousand will be offered mostly by NextDecade’s Rio Grande LNG — if it ever really launches. But won’t most of THOSE jobs be going to CB&I trained folks already working similar jobs in the Gulf? Transferring to Rio Grande LNG as those jobs wind down and NextDecade starts filling its permanent positions? At least that’s what I got from “US shale gas-advantaged projects strain toward finish line,” 11-07-2016, Oil & Gas Journal, http://www.ogj.com/articles/print/volume-114/issue-11/special-report-worldwide-construction-update/us-shale-gas-advantaged-projects-strain-toward-finish-line.html.

    Quote: “With construction slated to begin in less than a year, NextDecade has had ‘intensive discussions with CB&I about their training programs for construction labor,’ said van Vliet [Rene van Vliet, chief operating officer of NextDecade]. ‘CB&I has been successful in recruiting and training a significant group of labor from South Texas, in particular the Rio Grande Valley, where our project will be built. Many of these workers are currently occupied on comparable CB&I projects on the Gulf of Mexico, and, as such, will be suitably prepared for our project when it moves forward. In addition, the anticipated timing of our project is advantageous as many other projects will be winding down as ours ramps up, helping to ease the strain on workforce resources.'”

    Quote: “One of CB&I’s distinguishing characteristics versus other EPC contractors [Engineering, Procurement, and Construction] is that CB&I utilizes its own construction workforce, helping to reduce cost and raise quality,” he said. “CB&I does not subcontract all of its construction work and simply act as a managing contractor.”

    AND LOCAL CONTRACTORS? ““Very few general contractors in the Valley can bond at the level these projects will require, at least $50-60 million” (From “Brick by Brick – Building the Valley,” Eileen Mattei, August 2016, Valley Business Report, http://www.valleybusinessreport.com/featured/brick-by-brick-building-the-valley/).

    ECONOMIC HOUSE OF CARDS?

    NextDecade’s REVERSE MERGER WITH HARMONY MERGER CORP: And NextDecade’s recently announced reverse-merger deal with Harmony Merger Corp (http://www.harmonymergercorp.com/). What’s that all about? Is it to help NextDecade to raise enough money through stock market sales to move its Rio Grande LNG and Rio Bravo Pipeline projects forward here while building a similar LNG operation on land it recently pre-leased near Texas City, TX? Or is it a way to build the NextDecade house of cards ever higher, sell it off to stock market investors, and get out before the house of cards collapses?

    NextDecade’s DEAL WITH GE OIL & GAS: Looking at some of NextDecade’s other deals, it’s hard to figure out if it’s a good investment or just a publicity stunt. In another deal that makes both it and GE Oil & Gas look good, t’s agreed to buy its turbines and compressors from GE. But part of THAT deal is a financial in which GE will provide NextDecade with a common equity investment and Next Decade will allow GE to invest an undisclosed amount in Rio Grande LNG project-level equity and debt financing at the time NextDecade make the Final Investment Decision to actually build the Rio Grande LNG project.

    NextDecade’s DEAL WITH FLEX LNG: And what about NextDecade’s deal with FLEX LNG (http://www.flexlng.com/) that will enable the CEO’s of both companies to join forces again in a way that generated good publicity for both. FLEX specializes in building or remodeling ships to combine LNG storage capacity with LNG regasification equipment. That way, a LNG tanker ship can off-load natural gas directly into natural gas pipelines at ports lacking regasification facilities. The promise is that this makes NextDecade more flexible and thereby better able to succeed in the ever changing and competitive LNG markets around the world. A real deal or just a sales deal? Looks like NextDecade hasn’t made any LNG yet and FLEX hasn’t put any ships in the water yet, so all we have so far is promises, promises, promises.

    RIO GRANDE LNG RELATED DEBT? Wish I could dig deeper into “NextDecade is reported to have mandated SG as financial adviser for the debt on its Rio Grande LNG export project in Brownsville, Texas, and Macquarie is said to be leading the equity-raising.” But a subscription required for the full story at http://www.pfie.com/nextdecade-hires-advisers-on-rio-grande/21288455.article

    NextDecade, RIO GRANDE LNG, PELICAN ISLAND LNG, TEXAS CITY PRE-LEASE TWO STEP? NextDecade pre-leased land near Texas City earlier this year to build a LNG operation there that could turn out to be the largest industrial development in Galveston County in at least a decade.” Or not. It can back out of its Texas City area pre-lease pretty easily. The same way it backed out of its supposed $6 billion dollar Pelican Island LNG project in Corpus. Here today, gone tomorrow.

    NextDecade could afford to back out of Pelican. Back then the story was that its tiny size would work in Pelican’s favor in terms of LNG spot sales. Now the story is that the land available on Pelican Island wasn’t large enough to be a good investment. But NextDecade can’t pull out of its Rio Grande LNG and Rio Bravo combo project here without collapsing.

    TEXAS LNG CHANGES START DATE TO 2022: Meanwhile, Texas LNG has decided to try a “Pluto gameplan,” delaying its planned 2020-2021 start date to 2022. And it’s not alone: “Several US gas export projects have pushed back the expected start of their commercial operations, according to company updates that began posting this week on the US Department of Energy’s website.” According to “Several US gas export projects [including Texas LNG] delay planned start dates,” Laura Brooks, 04-04-2017, S&P Global, http://www.platts.com/latest-news/natural-gas/austin/several-us-gas-export-projects-delay-planned-21353922?hootpostid=e50b68b70a797cc2e25d997696986733

    THE ANNOVA LNG / EXELON CONNECTION: Texas LNG is 96% owned by Exelon (http://www.exeloncorp.com), the largest operator of nuclear power plants in the United States. It’s also the largest electric holding company in the United States by revenue, is also the largest regulated utility in the United States. However, nuclear energy is having trouble competing with natural gas, solar, and wind generated electricity suppliers (see, for example, “As the industry struggles, is it ‘time to recognize the nuclear show’s over’?,” Rob Nikolewski, 04-17-2017, http://www.latimes.com/business/la-fi-nuclear-woes-20170417-story.html).

    Therefore, Exelon is working hard to expand its solar and wind power operations at the same time it continues to nuclear energy as a clean energy source. It’s also trying to expand into the retail electric energy business by acquiring Pepco Holdings Inc.– which provides electricity to Washington, D.C. and parts of Maryland, Delaware, and New Jersey. The merger was blocked but then approved by the D.C. Public Service Commission. Exelon has recklessly proceeded raise electrical customer rates and dissolve Pepco — as if the acquisition is a done deal. However, opponents to the deal have challenged and appealed the legality of the deal (“Public Got No Say In Exelon Utility Merger, DC Justices Told,” Keith Goldberg, 02-07-2017, Law360, https://www.law360.com/articles/889405/public-got-no-say-in-exelon-utility-merger-dc-justices-told).

    Bottom line: The Annova / Exelon connection seems to more worrisome than reassuring.
    BANKRUPTCY THE ONLY ALTERNATIVE? Of course the “RGV 3” LNG companies are making big, bold, optimistic promises. They have to keep big investment money flowing their way. The time and money they’ve spent here makes bankruptcy their only alternative.

    WINNERS AND LOOSERS: So back to the questions about NextDecade’s reverse merger deal with Harmony. Will it help NextDecade come out economically ahead if its LNG projects collapse? Will its Limited Liability Corporation structure limit its economic losses? So that the real losers will be those poor souls who bought worthless shares of common stock generated by this merger? What about contractors stuck with unpaid bills for supplies and services rendered?

    WHAT DO YOU THINK? Anybody else have questions about all the LNG company promises? How much of our future should we bet on the RGV 3? It’s time for truth or consequences. House of cards or a good bet? Simply in terms of economics and good business practices. Setting aside all the other important issues involved (even health issues and environmental issues).