Documents reveal effort to reduce opposition to port oil plan

Companies spelled out approach prior to announcing project

By Aaron Corvin, Columbian port & economy reporter

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The proposal to build the largest oil terminal in the Pacific Northwest in Vancouver stretches back to January, when Tesoro Corp. and Savage Companies presented the Port of Vancouver with a highly lucrative deal and a plan to win political support and deflect critics.

Public records obtained by The Columbian show that the companies spelled out their approach to the project, designed to handle as much as 380,000 barrels of crude per day, in a Jan. 23 "statement of interest" document: "We will develop (with involvement from Port management) a comprehensive community outreach and government relations plan that would be implemented prior to, and in anticipation of, environmental and land use permitting and the (State Environmental Policy Act)process," the companies wrote in the 42-page letter to Mike Schiller, the port's general manager of operations.

"Implementation of this plan will occur prior to any public notice or the filing of permit applications in order to encourage early collaborative stakeholder communication, garner support for the Project, and reduce the risk of potential opposition," it read.

The collaborative strategy between the publicly owned port and the two corporations reveals the high stakes for both sides in seizing opportunities created by mid-America's oil boom. Emails and other records generated by the port and Tesoro and Savage suggest the parties hoped to carefully manage what would be the Northwest's largest oil-handling plan in a way that would minimize controversy and address potential public concerns early on.

On July 6, the process got a horrible jolt.

That's when a fiery oil train derailment in Lac-Megantic, Quebec, vaporized a large swath of the downtown, killed 50 people, forced the evacuation of 2,000 and prompted investigations.

It galvanized opponents of the oil-by-rail plan in Vancouver and left port commissioners with more questions than answers. Brett VandenHeuvel, executive director of Columbia Riverkeeper, urged commissioners to delay a vote on a lease, request more public safety information and require the companies to produce a derailment and fire response plan. At the same time, activists seeking to stop fossil-fueled climate change are poised to launch protests of planned oil and coal terminals in the Northwest.

A little earlier, at the end of June, the plan seemed to be coming to fruition. The port had convened four public workshops for commissioners to vet the oil terminal proposal, including listening to experts address how they'd handle potential oil spills in the Columbia River and possible leaks from oil-bearing trains. Although the proposed crude-oil facility had attracted opposition from regional and national environmental activists, port commissioners appeared to be on pace to OK a lease arrangement on July 23.

Port commissioners still remain scheduled to review and possibly approve a lease on that date, but commissioners said they didn't want to rush a lease deal in light of the Quebec calamity.

Exclusive negotiations between the port and Tesoro and Savage — already extended once before — are set to expire on July 31. It's not unusual for the port to lengthen such talks. Commissioner Brian Wolfe said senior port managers are "really nervous about losing" the proposed oil terminal — one of the port's biggest, and perhaps most controversial, prospects. However, Wolfe added, "if we're as good a port as Tesoro-Savage say, then there's room to extend the exclusivity agreement."

A direct route

Tesoro and Savage weren't the only companies to come to Vancouver looking to take advantage of the U.S. oil boom. The port had already been getting numerous inquiries "around the movement of crude oil and liquid petroleum," said Theresa Wagner, the port's communications manager. So it decided to ask for formal proposals.

Late last year, it received statements of interest from "four entities," Wagner said. Tesoro-Savage "was the team we felt was the best fit for the port."

And Tesoro-Savage liked what it saw in the port's expanding rail network, capable of efficiently and cost-effectively handling single-commodity unit trains, which form a chain of 118 cars. The port's location also attracted the companies, who want to haul oil from the Bakken shale formation in North Dakota — where oil is extracted by hydraulic fracturing — to Vancouver. "We are the most direct route from the Midwest on rail," Wagner said.

The companies arrived flexing financial muscle. Their joint venture "is able to provide the capital required to build and operate the Port Facility without relying on external sources of financing," Mark Smith, a Tesoro vice president, and Kent Avery, a senior executive with Savage, wrote to Schiller.

Tesoro and Savage also identified a "compensation structure" that would bring "compelling and distinctive value" to the port, including rail car and wharfage fees, service and facility fees, and a lease. The amounts are unknown -- the port declines to divulge them. Citing exemptions under state public records law, the port withheld revenue figures and certain other information before it released documents to The Columbian.

Commissioners are slated to publicly review potential lease terms on July 22.

By mid-April, the relationship between the port and the companies blossomed. Port staff worked with Tesoro and Savage leaders to manage the public announcement of the crude oil proposal on April 22. That's not unusual in the port's dealings with potential tenants. The companies would herald the oil terminal plan after the close of the stock market.

"It is absolutely critical that we not 'make public' any announcements before the Tesoro/Savage group," the port's executive director, Todd Coleman, wrote to commissioners in an April 19 email. "These sensitivities are crucial when dealing with publicly traded companies."

The news release was only one part of a larger public-relations effort made by the companies and port officials.

That effort included, on the same day as the announcement, a meeting in Olympia between company and port officials and top members of Gov. Jay Inslee's administration: Maia Bellon, director of the state Department of Ecology and Brian Bonlender, director of the state Department of Commerce.

"It was informational only," Jaime Smith, a spokeswoman for Inslee, said in an email to The Columbian.

Company and port representatives also met with Vancouver Mayor Tim Leavitt and City Manager Eric Holmes.

Leavitt said in an email that the "purpose of the meeting was to meet key project proponent staff and to receive a brief introduction to the project."

"The meeting ended with a commitment to keep in touch as the proposal advances," Leavitt said.

Tesoro and Savage would spend up to $100 million to build an oil-handling operation that would receive crude by train from the Bakken site. It would be the largest such operation among 11 Washington and Oregon refineries and port terminals that are planning, building or already running oil-by-rail operations.

Eventually, the oil would be transferred from the Port of Vancouver to ships bound for refineries in Washington, California and Alaska, where the oil would be processed for domestic purposes, including gasoline for cars and trucks.

Tesoro and Savage officials have said the project will generate an estimated 250 temporary construction jobs and up to 120 full-time workers, most of them hired locally. But their proposal faces a long haul, even if it wins a lease deal from commissioners.

The state Energy Facility Site Evaluation Council would scrutinize the proposed crude oil facility and make a recommendation to Gov. Inslee, who has the final say.

The council's review could take up to a year or more. The companies hope to launch the terminal in 2014.

Wagner, the port's communications manager, said the port has built its rail and other facilities for versatility, so that it's capable of moving different commodities and attracting many potential tenants.

"We don't think it's the only opportunity," she said of the Tesoro-Savage proposal, but "it's definitely one we're interested in pursuing."

'A little stressed'

Regional and national environmental activists are girding to stop it.

In proposed oil and coal terminals, they see increased train traffic and risks to the environment. And they view Vancouver as an emerging epicenter in the movement against fossil-fueled climate change.

VandenHeuvel, the Columbia Riverkeeper leader, told commissioners during a July 9 public hearing that they should demand a full public safety analysis now, before signing a lease, instead of kicking the issue to the state Energy Facility Site Evaluation Council.

Author and environmental activist Bill McKibben, founder of 350.org — a global grass-roots organization aimed at fighting climate change — will take a boat tour this morning of the port site where Tesoro and Savage want to build an oil terminal. This evening, McKibben will speak at Clark College.

And on July 27, hundreds of demonstrators are expected to turn out by land and water to protest planned coal and oil shipments.

Asked about the attention opponents are putting on the proposed Vancouver oil terminal, Matt Gill, Tesoro's external affairs senior manager, said in an email: "We understand the benefits of the Commission hearing from the community before making its decision on the lease. We believe this is a positive project for Vancouver, and we look forward to engaging with the public throughout the extensive EFSEC process."

Commissioner Jerry Oliver, president of the port's board, is generally favorable to approving a lease with Tesoro and Savage. But he also ticked off several questions he wants answered after the catastrophe in Quebec. What safeguards do operators build into trains parked in Clark County communities? And what type of rail cars would Tesoro use to haul oil? Canadian officials have said they're examining the soundness of the oil-bearing cars the train was hauling before the explosion in Quebec.

An explosion, Commissioner Wolfe told The Columbian on July 9, "wasn't supposed to happen."

In a more recent interview, Wolfe, elected to the port's board in 2005, said the enormous pressure on the port over the oil facility plan may be unprecedented.

"To my memory, the Port of Vancouver has not been met with this attention focused on it over a project," he said. "So everybody's a little stressed."

Staff writer Stevie Mathieu contributed to this story

Aaron Corvin: http://twitter.com/col_econ;http://on.fb.me/AaronCorvin; 360-735-4518; aaron.corvin@columbian.com