Port of Vancouver jockeys for oil transfer terminal

By Aaron Corvin, Columbian port & economy reporter

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Public workshops

The Port of Vancouver Board of Commissioners will convene two public workshops this coming week as it continues to examine a proposed crude-oil facility.

Both discussions will occur after the board's regular public meeting, to be held 9:30 a.m. Thursday at 3103 N.W. Lower River Road.

The first workshop will focus on the state Energy Facility Site Evaluation Council's role in the process.

The other will feature a presentation by Tesoro Corp. and Savage Companies.

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A distant U.S. oil boom is creating an opportunity for the Port of Vancouver to fill its expanding rail tracks, pump up revenues and create jobs.

But the opportunity, in the form of a crude oil transfer terminal, comes with risks to the environment. And, for the first time, the final go-ahead would have to come from Washington's governor instead of the port's Board of Commissioners.

The plan offered by Tesoro Corp. and Savage Companies is designed to initially handle 120,000 barrels of oil per day with the potential to expand to 280,000 barrels. Under a regulatory framework stretching to 1970, the companies must secure final approval from Democratic Gov. Jay Inslee.

The governor recently signed a bill into law that will produce recommendations for reducing carbon emissions -- triggered by the burning of fossil fuels such as oil and coal -- to fight global warming. Nevertheless, port managers hope the project wins Inslee's favor. They are laying the groundwork to move it ahead, including crafting terms of a lease agreement they hope to recommend to the port's three elected commissioners by July 23.

The port’s executive director, Todd Coleman, said this is the first time the port has considered a project that must also undergo a public review by the state’s Energy Facility Site Evaluation Council in a process that leads to the governor’s desk. “Obviously,” Coleman said, “if we didn’t believe in the project, we would not be putting it forward.”

Dan Riley, vice president of state and local government affairs for Tesoro, said the project will create hundreds of construction and permanent jobs -- filled mostly by local workers -- and will increase demand for "the North American manufacturing of rail cars."

Environmentalists, already raising concerns about three proposals to export coal from the Pacific Northwest to Asia, are turning their attention to the crude-oil proposal, which isn't the only one in play in the Northwest. During a recent port workshop, members of the Sierra Club and Columbia Riverkeeper expressed concerns about the potential for oil spills in the Columbia River Gorge, which is the most likely route for oil-hauling trains.

It would be "an incredible disaster if there were ever a spill of any kind, coal, oil, whatever it might be, out there," said Lehman Holder, a Vancouver resident and Sierra Club leader in Southwest Washington. "We will be keeping an extremely close eye on this operation."

Rail expansion crucial

Under the plan by Tesoro and Savage, crude oil would be shipped to the port by rail from the Bakken shale formation in North Dakota, where oil is extracted by hydraulic fracturing. Eventually, the oil would be transferred from the port 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.

The companies would spend up to $100 million on new facilities at the port. Construction work would generate an estimated 250 temporary jobs. The operation would create up to 80 permanent jobs.

Crude oil would be a new addition to the liquid bulk materials the port handles, further diversifying its cargo mix and helping the port weather dips in the economy.

In 2012, the port averaged about one unit train (a unit train, forming a chain of 118 cars, carries one commodity) every two days. None carried petroleum products. The crude oil operation -- which Tesoro and Savage hope to launch in 2014 -- would initially add one to two unit trains per day. That would increase to four unit trains per day once the operation hits its peak.

It's the kind of business for which the port has been planning: Its West Vancouver Freight Access project, a $275 million expansion of the port's rail network, was crucial in enticing Tesoro and Savage to make their proposal.

However, the project brings the potential for environmental harm. It would involve handling oil over water and hauling the commodity by rail.

"All oil is toxic," said Curt Hart, a spokesman for the Washington State Department of Ecology. "Crude oil also lasts longer in the environment. It doesn't break down quickly."

Rules are in place for regulating the transfer of oil over water. For example, companies must give Ecology advanced notice of oil transfers, put in place containment booms before oil is moved or, if "pre-booming" wouldn't be effective, have other response equipment ready, Hart said.

"Since our pre-booming rules were put in place in 2007," Hart emailed to The Columbian, "the number of spills and the amount spilled during these fuel transfers over water has greatly diminished."

Risk has increased

Historically, Washington state has gotten its crude oil by way of Kinder Morgan's Trans Mountain pipeline system, delivering Alberta crude, and from oil tankers and barges, mostly transporting crude from the Alaska North Slope.

But that's changing as refiners seek to absorb the U.S. oil boom and as rail offers an advantageous transportation option. Early last fall, the first oil shipments by rail began with the opening of a rail terminal at Tesoro's refinery in Anacortes.

Other similar operations include one in Tacoma and another in Clatskanie, Ore., both receiving Bakken crude oil. Others are proposed, including the Tesoro-Savage venture in Vancouver and at least two others in Grays Harbor County.

Since early last fall, when the state started seeing the first oil shipments arrive by rail, Hart said, "there have been no crude oil spills" from unit trains. However, he added, "the risk of a potential crude oil spill from a train has increased, and will continue to increase, as more and more oil reaches Washington by rail."

The Federal Railroad Administration and BNSF Railway -- which stands to carry many of the new oil loads -- say they're prepared to prevent and respond to oil spills.

William Ellings, a hazardous materials specialist with the Federal Railroad Administration, recently discussed with the port the "non-accident release" of hazardous materials. That refers to the unintentional leakage of a dangerous material caused by, say, a defective valve rather than a train derailment or collision.

In 2010, the commodity labeled "alcohols" had 81 non-accident releases in the U.S. and Canada, topping a list of 14 commodities, according to Ellings. With zero such leaks that year, crude oil wasn't on the list.

In 2012, however, crude oil shot to No. 1, with 108 non-accident releases as more oil was moved by rail, Ellings said. Still, he said, when you measure the number of non-accident releases per 1,000 tank-car originations, crude oil is "way down the list." Hazardous materials account for 5 percent of total freight rail, according to BNSF Railway, and moving hazardous materials by rail is 16 times safer than moving them on roads.

Railroads are required to report all spills, Roxanne Butler, a spokeswoman for BNSF, said in an email to The Columbian. "It is important to note that most rail spills are small and happen during the filling of the tank car -- not as it is moving."

Most tank cars are owned by petroleum and chemical companies or leasing companies, Butler said. And BNSF possesses plans and personnel to respond to hazards, she said. Those include 28 "hazmat" employees based in six locations: Vancouver, Portland, Pasco, Seattle, Everett and in the Spokane/Hauser, Idaho area. And those employees are supported by environmental contractors "around our network," Butler said.

Additionally, BNSF provides free training for emergency responders. In 2010, for example, the company "sent a computer-based training program on hazardous materials and response to every fire department within two miles of our rail lines," Butler said.

'A constant reminder'

Tesoro's environmental and workplace safety records aren't clean.

For example, the company recently agreed to pay a $1.1 million penalty to resolve violations of federal air pollution laws. The U.S. Environmental Protection Agency reached the agreement with the company over alleged violations of the Clean Air Act at four refining facilities that produce gasoline.

In an email to The Columbian, Riley, the Tesoro vice president, said the company "takes its environmental compliance obligations very seriously and worked diligently with EPA and the Justice Department to resolve the issues raised in this matter."

Riley also said Tesoro has established programs to "improve energy efficiency and reduce greenhouse gas emissions across its systems."

Tesoro is a defendant in two lawsuits filed by local governments in California alleging the company polluted groundwater. The company says it will "vigorously assert our defenses against these claims," according to SEC documents.

Last year, Tesoro received an offer from the Bay Area Quality Management District to settle 35 notices of violation, alleging breaches of air quality regulations, for $512,000. The company says its reviewing the allegations and believes a resolution would not have "a material impact" on its bottom line.

A planned workplace health and safety inspection of the company's site at the Port of Vancouver in 2010 turned up no problems, according to the Washington State Department of Labor & Industries.

However, that same year Tesoro received a $2.39 million fine -- the largest ever assessed by L&I -- for an explosion at its Anacortes refinery that killed seven workers. Labor & Industries said the blast was entirely preventable. It cited Tesoro for 39 "willful" violations and five "serious" violations of state workplace safety and health regulations.

Tesoro appealed the fine. It's being heard at the state Board of Industrial Insurance Appeals.

Riley said by email that "the event at our Anacortes refinery serves as a constant reminder to all of us the importance of our dedication to process and personal safety." Tesoro continually strives "to make improvements to our processes and have identified several action items, which have been and are being implemented to ensure this continuous improvement."

Riley said its partner in the proposed oil facility at the Port of Vancouver -- Savage Companies, a supply-chain management company -- will oversee the facility's operation. Savage shares a similar commitment to safety and proactively reduces or eliminates hazards, Riley said. "In 2011, Savage was voted one of the 10 safest companies in America by EHS Today magazine."

Governor 'ultimately decides'

If port commissioners approve a lease deal with the companies, it will mark an important step forward. But it also will represent only a beginning.

That's because the proposed crude-oil project will undergo examination by the state Energy Facility Site Evaluation Council, a one-stop place for evaluating requests for permits to build certain major non-hydro energy projects.

The council is made up of a chairperson, appointed by the governor, and representatives from five state agencies, including the departments of Ecology and Commerce.

Stephen Posner, the council's manager, said the agency has yet to receive a permit application from Tesoro and Savage.

When the review begins, Posner said, two local government representatives would be added to the council -- a voting appointee from the city of Vancouver and a non-voting appointee from the Port of Vancouver. The review process may take up to a year or more to complete.

Eventually, the council would make a recommendation to the governor, who may say yes, no or send the proposal back to the council for more work. Although port commissioners may approve a lease deal in late July, Coleman said, the agreement will still hinge on the companies meeting certain milestones, including obtaining the state's approval.

It's possible the review process will turn up things that suggest the crude-oil project shouldn't get a green light, Coleman said. He said his hope is that once the governor sees the "full record," he'll sign off on it.

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