The Port of Bay City lies on the banks of the Texas Colorado River about 15 nautical miles upriver (20 kilometers or 12 miles) northwest of Matagorda Harbor. The Port of Bay City is about 125 nautical miles (127 kilometers or 78 miles), via the Gulf Intracoastal Waterway, southwest of the Port of Houston. Seat of Matagorda County, the Port of Bay City is surrounded by prairie and many creeks that empty into Matagorda Bay. The 2010 US Census reported a population of just over 17.6 thousand in the Port of Bay City.
Now extinct as a tribe, the Karankawa people lived in the area of the future Port of Bay City before European settlers entered the area. When the Spanish came to the Port of Bay City area in 1519, the Karankawa were a nomadic people, possibly descended from Carib Indians from the Caribbean. By 1793, some Karankawa had become Christians and lived at a mission in Refugio on nearby Copano Bay. Traditional Karankawa lived with the Lipan Apache people.
Stephen F. Austin brought American settlers to the future Port of Bay City area in the early 1820s, and conflicts with the Karankawa were frequent. Siding with Mexico during the Texas War of Independence, Karankawa Chief Jose Maria and many of his warriors were killed. In 1858, Juan Nepomuceno Cortina attacked and killed all of a Karankawa band. In 2009, a Brownsville, Texas, man claimed to be the last Karankawa. Although his claims could not be verified, the Desert Storm veteran alleged that he had artifacts and knew some words of the Karankawa language.
The Port of Bay City was founded in 1984 when Colorado mining millionaire David Swickheimer and partners G.M. Magill, N.M. Vogelsang, and Nicholas King formed the Bay City Town Company. They purchased almost 260 hectares, giving 2.5 square kilometers (one square mile) for the Port of Bay City townsite.
The Bay City Breeze published its first issue before one building had appeared in the Port of Bay City. The issue promoted the new community and promised to build a courthouse if the county government would move there. The same year, county voters selected the Port of Bay City as their new county seat. Only then did the Bay City Breeze admit that the city did not really exist yet.
The former grand jury room at Matagorda, a small house, was moved to the Port of Bay City as a courthouse, and D.P. Moore's dry-goods store contained the post office. In 1900, the Port of Bay City got its first telephone, and the Bay City Rice Mills finished its rice warehouse in 1901. By that time, the Port of Bay City was home to four grocers, three tool stores, and three saloons as well as butcher shops, confectioners, drug stores, and barbershops. The Port of Bay City also had a cotton gin, a lumberyard, bakery, a laundry, a blacksmith shop, and factories that made bricks and brooms. The Cane Belt Railroad came to the Port of Bay City in 1901.
The Port of Bay City was incorporated as a city in 1902 when about two thousand people lived there. In 1904, oil was discovered in the Port of Bay City. By 1914, over three thousand people lived there, and the Port of Bay City had three railroads. It was the center of a prosperous rice-producing area. By then, there were two rice mills, four cotton gins, three banks, and a cooling station for vegetables and fruits in the Port of Bay City.
Being flooded regularly by the Colorado River, the Port of Bay City installed dams and levees in 1924. After that, the town continued to grow, even in the face of the Great Depression.
In the 1950s, the Port of Bay City gained a new public library and an office for the United States Army Reserve. In the 1960s, an airport was constructed, and a new barge canal linked the Port of Bay City to the Gulf Intracoastal Waterway. In 1960, the Celanese Chemical Company built a petrochemical plant and became the Port of Bay City's biggest employer. Occidental Chemical Company also brought jobs to the Port of Bay City.
In the 1980s, the Port of Bay City continued to grow, and the city limits were expanded. By the 1990s, the Port of Bay City was a shipping center for Matagorda County's oil industry, and it was served by the Union Pacific and Burlington Northern and Santa Fe railroads.