FINANCIAL EDGE, RAILWAY AGE NOVEMBER 2025 ISSUE: Just about everybody has at one point in their life mused about the paradoxical nature of the weather forecaster, the most common refrain being something akin to “I’d like to get paid for being wrong all the time.” Pity then the people responsible for predicting the severity of the Atlantic hurricane season.
With one month remaining in the 2025 Atlantic hurricane season, predications of an above average season (that’s 13-18 named storms) feel like it has fallen quite flat as there has been only one named storm that has made landfall in the U.S. in 2025 (Chantal in July).
Around most coastal regions the word “Hurricane” is a bad word. Another bad word in those regions is “drought.” The lack of big storms and low rainfall has drought level conditions permeating the Texas Gulf region. Specifically in the Corpus Cristi area, drought conditions are heading into their third year. The dearth of available water is creating long-term havoc for the chemical facilities populating the region.
The Wall Street Journal reported in October that the City of Corpus Cristi expects to be unable to meet industrial and residential demands for water within the next 18 months. This is the result of a three-year period with below average rainfall. Attempting to address the situation, the city agreed to purchase water rights to a nearby aquifer for $169 million. This would allow the city to draw 12 million gallons of water from the aquifer per day. The water would be available just as the city expects to run out.
Corpus Cristi is home to plastics plants and refineries owned and operated by LyondellBasell, Flint Hills, OxyChem and Chevron, among others (see Google Map, above). It is also close to the Matagorda, Texas, area, which houses an additional plethora of chemical plants.
As noted in several “Financial Edge” columns, the chemicals rail loadings segment has been a bright spot over the past few years. This growth is expected to continue. Economic uncertainty, tariffs and a growing presence in China in the petrochemical space has caused some near-term weakness for some products in the segment.
The weakness is causing disruption in the space. Recently, Exxon announced a decision to delay construction on a $10 billion plastics facility in Calhoun County (in Matagorda Bay), whose offtake was meant to serve the Chinese market. The plans to delay construction also followed the rejection by a county district judge of a 50% reduction in property taxes for Exxon in exchange for building the facility.
Don’t mistake correlation for causation. The issues facing the petrochem market right now are global in scale and have a long tail that has yet to be unwound.
Still, there is the water issue. Right now, Corpus Christi is drawing water from nearby wells before attempting to pivot to drawing water from the Gulf Coast Aquifer. Farmers in counties neighboring the wells and aquifer are worried about their wells running dry and about increased levels of salinity in the water they draw from the same aquifer. (For those from urban areas, salt water = dead crops.) Potential plans for a desalination plant were scrapped. The county was afraid limitless water would incentivize additional industrial investment.
Water issues consistently run through industrial expansion, production and global trade. The situation in the Panama Canal remains tense as Panama pursues a $1.6 billion modification to address water issues. By some estimates, Texas will be in a water emergency by 2030 (and that is after a decades-long process building man-made reservoirs to serve the Dallas Fort Worth Metroplex).
While moving water by rail could be the “next big thing,” more likely is an increase in the cost of chemical-related production and a winnowing away of some of the current U.S.-based competitive advantages in the chemical space. That could turn the growth story into a contraction narrative as production of commodities moves to countries with water supplies that can be routed to serve industry.
As climate patterns evolve, expect water considerations to become more prominent in industrial project development. It may not be a headline grabber for the next three and a half years or so, but root around a little bit and you’ll see that there’s a tangible level of concern about the tension between supply, industrial demands and booming residential demand. Stress on industrial growth is not a positive for the rail economy, long-term.
At least for 2025, the forecasters do get their comeuppance; they get credit as long as a storm gets a name. In the Atlantic Basin, catastrophic Melissa is the season’s 14th named storm. See—above average after all.
