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Port Bureau News Port Bureau News November 2010 www.txgulf.org What’re Wrong with These Pictures? Spotlight on Don Welch Managing Partner—Midpoint Partners, LLC Bilge Management & MARPOL

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Page 1: nov2010 news

Port Bureau News Port Bureau News November 2010 www.txgulf.org

What’re Wrong with These Pictures?

Spotlight on Don Welch

Managing Partner—Midpoint Partners, LLC

Bilge Management & MARPOL

Page 2: nov2010 news

Bill Diehl

Jeannie Angeli

Al Cusick

Cristina Gomez

Janette Molina

Patrick Seeba

John Smith

Board of Directors *Tom Marian—Chairman

*Dennis Hansell—1st Vice Chair.

*Mike Drieu—2nd Vice Chair.

*John Taylor—Secretary /Treas.

*Robert H. Blades

*Alec Dreyer

*Charles H. Flournoy

*Thomas C. Pace

*Capt. John G. Peterlin III

*Richard Russell

*Steve Stewart

*Nathan Wesely

Jim Black

Ken Burnett

Jan Crittenden

Celeste Harris

Jason Hayley

Kevin Hickey

Guy W. Hitt

Charlie Jenkins

Shareen Larmond

Kathy Murray

Jerry Nagel

Vinny Pilegge

Nolan Richardson

Lloyd Schwing

Earl Smith

Tim Studdert

Lawrence Waldron

Armando Waterland

Don Welch

Contents/Port Bureau Mission/Staff/Board of Directors 1

St Joseph Medical Center 2

Captain’s Corner 3

2010 Captain’s Cup Golf Tournament 4

Bilge Management & Inspection_ ___________ 5-7

Port Watch 8

Case Studies in MARPOL Violations 9-10

2010 Breakbulk Americas Conference 11

Spotlight on Don Welch—Midpoint Partners 12

October Commerce Club Photos 13

HarborLights Vessel Tracking Program 14

TWIC Card Replacement Update Back Cover

Port Bureau Staff

Our mission is to foster economic growth and regional cooperation across a diverse in-

terest of public and private stakeholders that rely upon or benefit from the commercial

synergy of the greater Houston port community

To be knowledgeable of all aspects of the port so that we can provide our members

information and assistance to grow their businesses.

Services

To our valued members, we provide:

Real-Time and Historical Vessel Traffic Information for Houston, and the Ports of Texas

Expertise, Consulting, and Assistance in Maritime Affairs

Business Relationships and Networking Opportunities in the Houston Port Community

Vision

Mission

Port Bureau News

1

Page 3: nov2010 news
Page 4: nov2010 news

Captain’s Corner “Protect our Environment and our Marine Lives”

In December, 2009, an engineer on the M/V Iorana passed a note to a Customs

and Border Patrol (CBP) officer, informing them of an illegal discharge of oily water from

the bilge tank. The Coast Guard later interviewed the engineer, who detailed how it was

done and requested governmental assistance – you can read the entire letter on page 9 of

the newsletter. As you’ll read, the shipping company was fined $4 million dollars with the

four whistleblowers dividing up $500,000.

I was recently in India, speaking with the Masters and Chief Engineers of Executive Ship Management

(a member company of the Port Bureau) about MARPOL compliance. They were holding their annual 3 day

officers’ seminar at their beautiful training facility in Lonavla, India, just north of Mumbai, focusing on ship

source pollution, bilge management techniques, and potential legal retributions. It was a great experience

for me to visit India and spend time with these international mariners that so frequently call on our port.

In this newsletter you’ll read a basic overview of some of the MARPOL topics we discussed and see

three cases that highlight the penalties incurred from committing a crime and then attempting to cover it

up. Even though less than 1% of all MARPOL cases investigated elevate to a criminal nature, when they do

they have a sizable impact on the company. As I explained to the mariners, environmental management

must become part of your corporate culture; if you lie about an incident, coerce others into lying about an

incident, or cover up evidence, you will be held liable with the potential for criminal prosecution.

In the letter the engineer on the M/V Iorana wrote, he begged the inspectors to “protect our envi-

ronment and our marine lives.” Take that with a grain of salt if you’d like, given the amount of money he

made off the report, but the point is valid: we

have an inherent duty to protect our environ-

ment. Do it because of the imposing fine that

looms on the horizon, do it because of how tar-

nished your public reputation can be after a $4

million dollar lawsuit, or do it because it’s the

right thing to do, but, whatever the reasoning

behind it, we must all take responsibility for the

stewardship of the waters we do

business on. –Bill Diehl, GHPB 3

Page 5: nov2010 news

2010 Captain’s Cup

Thank you to all our

Sponsors & Participants

Aaron Oil

Accutrans

Alexander/Ryan Marine

Alliant

Amegy Bank

Baumann Marine Service

Bell Ryniker & Latourneau

Blessey Marine Services

Bludworth Marine

Briggs & Veselka Company

Buffalo Marine Service

CLM Towing, LLC

Coating Systems & Supply

Cummins

Danner’s Inc.

ECHO Marine, LTD

Emerson

EmKay Marine Services, LLC

Frost National Bank

Garner Environmental

Gulf Winds International

HDR

Hines Furlong Line, Inc.

Houston Fuel Oil Terminal

Houston Mooring Company

Houston Pilots

HUMANA Inc.

J2S Services

John Bludworth Shipyard

Kirby Inland Marine, LP

Marine Compliance

Marine Healthcare Services

Moran Gulf Shipping

Port Terminal Railroad Assn.

Port of Texas City

Rickmers Linie (Americas)

Rio Marine, Inc.

SAVAGE Marine

Sneed Shipyard

Southwest Ocean

Southwest Shipyard

Suderman & Young Towing

Team Services

Texas Mooring, Inc.

Trinity Marine Products, Inc.

Vopak Terminals

Wells Fargo

Wholesale Electric

Page 6: nov2010 news

What is MARPOL?

MARPOL, or the International Convention for the Pre-vention of Pollution from Ships 73/78 publishes a set of regula-tions to address marine pollution on the high seas. The inter-national accords address dumping, oil pollution, and represent 169 countries, including over 98% of the world’s vessel ship-ping tonnage.

MARPOL annexes address six areas of focus including: I. Oil II. Noxious Liquid Substances Carried in Bulk III. Harmful Substances Carried in Packaged Form IV. Sewage V. Garbage VI. Air Pollution

MARPOL is a series of international agreements which bind the member countries to enforce agreed-upon standards. In the United States, the MARPOL agreements are codified into the Federal Water Pollution Control Act, the Oil Pollution Act, the Comprehensive Environmental Response Compensation and Liability Act, and the Act to Prevent Pollution from Ships. The US Coast Guard, with the right to inspect and examine vessels upon the high seas for the purpose of suppressing violations of US law, is tasked with boarding vessels to ensure compli-ance with US laws and regulations. Because the costs of sludge and oil disposal is high and oily water separators and incinerators have a tendency to be difficult and costly to maintain, inspectors realize there is a temptation for vessel owner/operators to cut corners and discharge their waste at sea.

What Happens During an Inspection?

The Coast Guard marine inspection team generally begins their inspection by going to talk to the Master of each vessel. The inspecting officer then takes an initial look at the vessel’s documentation such as their certificates, deck log, and equipment logs. The inspection then moves into the engine room, where the inspector will usually ask to run the equipment such as the vessel’s oily water separator

Bilge Management

5

Keeping Your Engine Room Clean

What do the regulations say?

For all oil tankers and any other vessel over

400 GRT, discharge of oil from machinery

spaces is PROHIBITED except when the fol-

lowing conditions are met:

1) Ship must be proceeding en route

2) The oil content of discharged effluent

must be less than 15 parts per million

3) The ship must have, in operation, an oil

discharge monitor & control system, oily

water separating or filtering equipment

4) Bilge water cannot be mixed with oil car-

go residue or cargo pump room bilges

Page 7: nov2010 news

or incinerator.

During an in-spection, the in-specting officer pays attention to the first impressions he gets of a vessel, the atti-tudes of on-board personnel, vessel equipment and any inconsistencies that can be found. The Master and Mates are professionals, so

the inspector expects and assesses their knowledge of the ship’s condition and equip-ment. Appraising the condition of machinery, the inspector will carefully watch the ship’s crew when running equipment to make sure the engineering team is profi-cient in following procedure and safety requirements. The inspection team also will take account of spares and

machine parts on board to see if they are consistent with the vessel’s re-ported equipment usage.

Common problems during an inspection have to do with inconsist-encies between vessel written records and the observed state of equip-ment. For example, if records indicate that the incinerator has been in constant operation during a particular voyage, however there are no ma-chine spares on board, and no record of alarms or equipment failures, the inspector will begin to look further into the pattern of fuel usage, accumu-lated oil records, and discharge reports.

But How Would Inspectors Ever Know?

The rate of fuel consumption versus oil/sludge creation can be mathe-matically modeled. In the same manner, the rate of burning/separation and discharge can be calculated and tracked. After calculating fuel usage and sludge buildup, an inspector can analyze the records visually on a graph and have a vis-ual record of inconsistencies. This is another clue that spurs the inspecting officer to take a closer look at the engine room, machinery, and question the crew more thoroughly.

What If I don’t Comply?

When an inspector finds a discrepancy and begins an investigation, the Coast Guard has several avenues to address the grievance:

Notice of Violation: A notice of violation, also known as an NOV or Ticket, and operates much like a moving violation in a motor vehicle written out by traffic police. There are instructions that include the penalty assessed and the proce-dure for appeal.

Class I/II & Judicial Civil Penalties: Civil penalties that can be assessed come with

(Continued on page 7)

Page 8: nov2010 news

a graduated scale of maximum penalties and are generally measured by a dollar amount per barrel of oil or report-able quantity of a hazardous substance.

Criminal Prosecution: When engaging in criminal prosecution, the Coast Guard gathers as admissible evidence for prosecution, maintains a chain of custody of all relevant material, and attempts to prove beyond a shadow of a doubt that a crime has occurred. When this happens, the company is subject to large fines, and those persons re-sponsible can be subject to prison sentences. After criminal prosecution, the company is often subject to a lengthy probationary period which involves constant auditing and oversight over the company’s practices and policies.

The Coast Guard does not reach out puni-tively to discipline the hard working men and women of the sea. Rather, enforcement measures taken by the government are there to prevent egregious violations of US law and to safe-guard mariners. There are provisions in the law that reward operators who have problems and report them and then work to correct the system-ic problems that allowed them to occur in the first place. The government and regulators work to ensure that these destructive crimes against the environment are dealt with for if left unchecked,

they would threaten future generations, not only of mariners, but of nations and the world. –Patrick Seeba, GHPB 7

Page 9: nov2010 news

Three Quarters Down—Not Too Hot, Not Too Cold September’s vessel arrival numbers continued the regrouping trend that

seems to embody regional maritime commerce in 2010. Houston experienced its se-

cond-highest month for the year in terms of vessel arrivals with a very small increase

of less than 1% over the previous month. Yet, this was still noteworthy since Septem-

ber’s 30 days is a day shy of August. While there were only two other Texas ports

that experienced vessel arrival gains from August to September (i.e., Sabine up 13%

and Corpus Christi with a 8% increase), all of these ports – with the exception of Free-

port – are well above 2009’s numbers.

It is interesting to note that Sabine’s September arrivals which largely consists

of tank vessels was contrary to a decrease in tank vessel calls in the Ports of Houston,

Freeport and Texas City. Overall, the tank vessel calls appear to balance out lower

demand against firmer pricing that is most likely tied to the weakening dollar. Anoth-

er worthy bright spot in the numbers is the fact that Sabine put up its strongest numbers for the year and Corpus

Christi had its second strongest month.

Closer to home, the Port of Houston’s break bulk numbers were down 14% over the last month but saw a

gain of 12% on the bulk carrier side. Steel, chemi-

cals and containers were all very positive as each

category matched or exceeded last month’s per-

formance with chemical tank vessels leading the

charge. The fact that there appears to be more

than base inventory replenishment on the chemi-

cal products side of the ledger lends credence to

the notion that a recovery is at hand albeit mod-

est in nature.

Thus, as the final quarter of the year un-

folds, no big surprises appear to be in store as

consumers slowly re-enter the market place in

preparation for the holiday season. –Tom Marian,

Buffalo Marine Service

Port Watch Tom Marian—Buffalo Marine Service

Page 10: nov2010 news

Violating MARPOL Three Case Studies in Violation & Prosecution

Though many companies are taking specific, forward-thinking measures to ensure compliance with US & Internation-al laws, there are still organizations that take the chance that they won’t get caught. Furthermore, vessel owners, masters, and engineers that violate the law sometimes take their efforts a step farther and attempt to cover up their indiscretions. Though opinions differ on the egregiousness of environmental violations, the crimes of obstruction of justice, coercion, and destruction of evidence are simply not tolerated by judges and juries. Increasingly, the ability to bring criminal prosecutions against vessel masters and engineers responsible for discharges is raising the stakes for violating the law.

In January 2010, Customs & Border Protection inspectors in Baltimore boarded the M/V Iorana where they were passed a note asking inspectors to “protect our environment and our marine lives”. The note led inspectors to inspect the vessel’s oily water separator which was discovered to have used a 103 foot bypass hose to route oily discharge through the vessel’s boiler blow-down system and pump sludge overboard. After a crew member’s cellphone camera video revealed de-tails of the bypass, the vessel owners released this joint statement:

Approximately 23 cubic meters of oil contaminated sludge and bilge waste (approximately 6,000 gallons) were dumped overboard in December 2009 during the voyage from Gibraltar to Baltimore using the 103-foot bypass hose. The flanges where the bypass hose was connected were repainted before arriving in port in order to cover up tool marks caused when the bypass hose was connect-ed and disconnected. The bypass was used at night, and plastic bags filled with oil soaked rags used to clean the bilge tank, which was contaminated with sludge and cleaned with diesel fuel, were dumped overboard at night. Additional episodes of illegal discharges took place after the ship's first voyage in June 2009 and contin-ued through the middle of December 2009. … Senior ship officers made false statements to the Coast Guard, crew members were told to lie to the Coast Guard, and evidence of illegal dumping was destroyed.

The company, Irika Shipping, SA was fined $4 million of which $500,000 was distributed to the four whistleblowing crew members. The company was also sentenced to serve a five year probation which includes a detailed compliance and auditing program and oversight by court appointed inspectors.

“There should be no tolerance for those who deliberately despoil the environment” noted Judge Reginald Lindsay as he pronounced a record-setting $37 million dollar penalty against Overseas Shippinng Group (OSG) for criminal violations of the Clean Water Act, Oil Pollution Act, and the Act to Prevent Pollution from Ships as well conspiracy and obstruction of jus-tice.

Between 2001-2003, OSG deliberately con-cealed illegal discharges of sludge and oily waste by falsifying their oil record books and hiding the equip-ment used for their transgressions. During the three year investigation, OSG continued to commit criminal infractions on six different vessels. An example of the infractions from the Justice Department’s report:

“OSG made illegal releases of oily waste from approxi-

Case One: The M/V Iorana

Case Two: Overseas Shipping Group

Page 11: nov2010 news

mately August 2001 to October 2003 from the M/T Uranus into waters off the coast of New England, in close proximity to Maine and Massachusetts, including Mt. Desert Island and the island of Nantucket. Discharges were made from the M/T Uranus through a long flexible hose trailed overboard at night, then through a hard bypass pipe that the ship’s fitter was forced to make, and at a later point in time, by flushing an oil detecting sensor with fresh water. In another case, OSG violated the Clean Water Act by know-ingly discharging approximately 2,640 gallons of oily waste and sludge from the M/T Neptune off the coast of North Carolina.”

The case was assisted by crew members including an engi-neer from the M/T Overseas Shirley who testified that the ship’s chief engineer habitually discharged sludge in excess of 40,000 gallons to sea. Also testifying were crew members from

the M/T Ania, M/T Alcesmar, M/T Overseas Portland, and M/T Pa-cific Sapphire. In all, over 12 OSG tankers were found to have com-mitted criminal environmental violations, and the fine plus proba-tionary period is the largest fine issued to a shipper to date for envi-ronmental violations.

When the chief engineer and second engineer of the M/V Cygnus, a roll-on roll-off car carrier found to be discharging contami-nated oily water and sludge into the ocean, they were both sen-tenced to prison terms, followed by deportation. US officials found a flexible hose used to bypass the vessel’s oily water separator and fresh paint on the overboard valve where the crew had attempted

to cover up the evidence of their discharge. When asked by inspectors if the bypass hose was used for illegal discharge, Duk Jo Jeong, the chief engineer replied that no discharge had occurred, that all of the accumulated sludge had been burned off in the vessel’s incinerator. During the trial, Jeong admitted that this had been a false report and that all of the waste oil had been discharged into the ocean.

The number of cases for environ-mental violations is increasing. More notice-ably, other countries are prosecuting viola-tions of local laws that echo MARPOL agree-ments. Venezuela, the UK, Pakistan, Thai-land, France, Australia, Canada and Denmark are just a sample of the nations which have become increasingly aggressive in going after polluters. Several states, including Ger-many, the UK, and the Netherlands have been publically active in pursuing satellite surveillance programs that allow regulators to watch vessels pollute on the high seas. In 2002, a member of Boyang Marine’s corporate board was prosecuted on the grounds that he had knowledge of the violations. In the same prosecution, the Master of a Boyang vessel was sentenced to six months in prison. As enforcement strategies tighten and penalties increase, vessel owners and operators are under increasing pressure to ensure their own compliance—lest they be held responsible for and subject to civil and criminal penalties. –Patrick Seeba, GHPB

10

Case Three: M/V Cygnus

Growing Trends

Page 12: nov2010 news

With over 3,800 attendees and 265 exhibitors, the 21st

Annual Breakbulk Transportation Conference & Exhibition held

at the George R. Brown Convention Center was a resounding

success. Planned in Houston for the first time, the 2010 Break-

bulk Conference’s exhibitors included Port Bureau members

American Shipping and Chartering, Bertling Logistics, Ceres,

Chipolbrok, Clipper, Gulf Stream Marine, Intermarine, Morris

Export Services, the Port of Brownsville, the Port of Galveston,

the Port of Houston Authority, Ports America, Richardson Ste-

vedoring & Logistics, Rickmers-Linie, and SSA Marine.

During the two-and-a-half day event, attendees heard

speakers such as David Hammerle from Bechtel, and Robert Drew from

Tata Steel International as well as panel discussions about the role of

freight forwarders in logistics management, the outlook for heavy-lift/

project cargo, capital investment in South America, and evolving con-

tract strategies. Side sessions and impromptu meetings also sprang up

around the exhibit hall and conference facility.

As a transportation hub of both sea and air traffic, the Houston

conference offered companies the opportunity to easily bring employ-

ees from around the world and the wide spectrum and background of attending organizations was striking.

Not only did the 2010 conference boast a record number of attendees, but the tone and tenor of the week was

set by a businesslike environment. Starting with boat tours of the

Houston Ship Channel aboard the M/V Sam Houston, a business

run, golf tournament, and opening reception, sponsors such as

the Port of Houston Authority also insured that interested cus-

tomers were able to see and sample the Houston area industry

and atmosphere. With steady traffic through the exhibition halls

on both days, professional networking and socialization was bal-

anced with discussions business discussions and plans to move

forward as an industry to meet future challenges.

11

Chipolbrok representatives prepare for the exposition

GHPB Staff use HarborLights to show the scope and

diversity of cargo and traffic in the Houston Port Region.

Gulf Stream Marine demonstrates their

breakbulk capabilities and expertise

Page 13: nov2010 news

“It all comes down to developing your idea. After that it takes pa-tience, persistence and perseverance.” Born in Okmulgee, OK, an hour south of Tulsa and an hour southwest of the tank farms of Cushing, Don Welch has oil in his blood. His grandfather was a driller in Pennsylvania, and his great-grandfather worked on teams moving oilfield equipment at the beginning of the last century.

In his early teens Don moved to Alabama where he began his studies at the University of Alabama. After a few years, Don had to leave his econom-ics classwork to support his family. He began working for Phillips Pipeline Company loading trucks and railcars with gas and diesel at their Birmingham facility.

From Alabama, Don moved to Tampa where he worked as a clerk, then moved on to Arlington, TX. In 1977, Don found himself in Houston. As the Pasadena terminal superintendent for Phillips, Don learned the Houston pipeline system by listening to old timers detailing various connections and choke points. Today, he knows the complete labyrinth of pipelines in Houston as well as a taxi driver would know a city map. “If you’re not in the pipeline business, you may not realize that there are almost as many pipelines in the Houston area as there are roads”, notes Don.

In 1992, Don was transferred to St. Louis as a terminal superintendent, but three years later, he resigned that position to come back to Houston where he worked as the Vice President — Operations for Oiltanking Hou-ston.

In 2001, Don began full time consulting, working to streamline terminal operations and use efficiency stud-ies to improve customers’ processes. During this time, he got involved with Coastal Caverns, a partnership that developed salt domes in the Spindletop area in East Texas for use as underground storage facilities for liquid hy-drocarbons.

Then in 2005 Don founded Midpoint Partners, LLC. and brought in Stephen Senter and Blake Trahan, associ-ates from Don’s prior positions. Their company works to help its partners and clients capture new business, advise on operations, and develop long-term strategies and business plans. With their track record of success from com-panies such as Oiltanking, Magellan, Vopak, Phillips, and Chevron/Unocal, Midpoint Partners is focused on using their knowledge of the petroleum and pipeline facilities along the gulf coast to focus on safe and profitable trans-portation logistics.

Midpoint Partners specializes in developing green field terminal and pipeline assets that create value while maintain-ing high standards of performance and safety as well as acquir-ing interests and managing underutilized assets that will be transformed into earnings contributors. With access to capital and decades of experience, Midpoint Partners manages assets

by improving their marketing, business development, and operating plans to meet the needs of refining, mar-keting, and trading customers.

Don and his wife Germaine have been married for 29 years are proud of their eight children and twelve grandchildren. In addition to his work at Midpoint Partners, Don is active in the Greater Houston Port Bureau, where he served as Chairman of the Board from 2001 to 2006. After stepping down as Chairman of the Board, Don has remained active as a board member, and when he finds the time, enjoys travelling and playing a round or two of golf.

Spotlight on Don Welch Managing Partner—Midpoint Partners, LLP

12

Page 14: nov2010 news

x

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Page 15: nov2010 news

Take the Guesswork Out of Your Business

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present, see the future with Har-

borLights.

Where’s Your Information Coming From?

HarborLights vessel movement infor-

mation is updated in real-time by the

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Greater Houston Port Bureau

W H E N I S Y O U R S H I P C O M I N G I N ?

Anybody can throw numbers at

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mean. When thousands of dollars an

hour hang in the balance, accuracy isn’t a

luxury - it’s a necessity.

Other organizations can offer you

AIS tracking systems that show you where

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your vessels and your business are more

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have to guess when your vessel will arrive,

but with HarborLights, you’ll know.

Developed by Dave Morrell of

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Don’t bet your success on guess-

work, use HarborLights to take your busi-

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WWW.TXGULF.ORG Greater Houston Port Bureau—111 East Loop North—Houston, TX—77029 713.678.4300

Page 16: nov2010 news

GREATER HOUSTON PORT BUREAU

111 East Loop North

Houston, TX 77029

713.678.4300 ph

713.678.4839 fax

www.txgulf.org

Do You Have a Damaged TWIC Card? Replace Your Card for $60.00

The USCG, PHA, and other agencies have been investigating malfunc-

tioning TWIC cards, and earlier this month, USCG Sector Houston-Galveston

issued a Marine Safety Information Bulletin to announce that TWIC holders

can replace their card for $60.00.

While waiting time for a replacement card is normally between five

and ten days, the damaged cards will remain active until the new cards are

picked up and activated. If you believe you need to replace your TWIC card

because of a damaged internal antenna which prohibits you from using the

card in a contactless mode, please contact 1-866-DHS-TWIC (1-866-347-

8942), or if you have questions, please contact LT Castaneda, USCG at 713-

671-5165.

Reaching 1200+ Professionals in

the Houston Port Region, contact

the Port Bureau at (713) 678 4300,

or [email protected] to arrange

for either 1/6 page, 1/2 page, full

page, or back cover advertise-

ments.

Advertise in the Port Bureau News