Tesoro, Savage officials address concerns

They discuss safety, environmental issues with oil-terminal plan

By Aaron Corvin, Columbian port & economy reporter

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The yearlong regulatory journey to decide the fate of what would become in Vancouver the largest oil-handling operation in the Pacific Northwest officially launched Tuesday evening. Ahead of Tuesday's environmental scoping hearing, convened by the Washington State Energy Facility Site Evaluation Council, the companies proposing the controversial project — Tesoro Corp. and Savage Companies — offered to field questions from The Columbian and to explain their joint venture.

On Tuesday morning, inside Gray's at the Park at the Hilton Vancouver Washington, Columbian reporters Aaron Corvin and Eric Florip met for more than an hour with Kelly Flint, senior vice president and general counsel for Savage Companies, Mark Smith, vice president of development-supply and logistics for Tesoro and Jennifer Minx, senior manager of corporate communications for Tesoro.

In a wide-ranging interview, those officials responded to numerous questions, including about their respective companies' responsibilities in running the planned oil terminal, Gov. Jay Inslee's role in the EFSEC process, and oil train, spill and global warming concerns.

Under the Tesoro-Savage plan, oil would be hauled to the Port of Vancouver by train from the Bakken shale formation in North Dakota, where crude is extracted by hydraulic fracturing. The oil would be stored at the port and transferred to ships headed to U.S. refineries, which would convert the crude into transportation fuels.

The oil-by-rail operation, at its peak, will involve four unit trains (each composed of 100 to 110 rail cars) coming into the port and leaving it per day, according to the companies.

The companies say the $110 million oil project's benefits include generating about 250 temporary construction jobs, 120 full-time jobs, filled mostly with local workers, and boosting tax revenues for Vancouver and the state.

Here are some of the highlights from that interview:

On the two companies' responsibilities over the proposed oil-by-rail facility, capable of handling as much as 380,000 barrels of crude per day:

Flint said Savage is in charge of designing and building the facility.

"We have designed and built these crude-by-rail facilities before," he said. During operation, Savage would "operate the rail side and storage side," Flint said, receiving trains from BNSF Railway, unloading the crude, maintaining the pipeline and operating pumps to move the oil into storage tanks.

Tesoro "will operate the dock," Flint said, receiving ships coming to take on crude, attaching hoses and working with Savage "to activate the pumps to send the crude" to the dock for loading onto vessels.

Smith said Tesoro "will be the coordinator of any kind of (oil) spill responses" and that it contracts out to Clean Rivers Cooperative for oil-spill response services. Tesoro has superintendents at all of its marine terminals "and there will be one assigned" in Vancouver.

Under the joint venture, the oil facility won't own any oil, Flint said, but will provide a service to customers. Tesoro will be a customer, Flint said, but "there will be other customers."

Flint said part of loading oil onto ships will involve pre-booming the site to contain potential oil spills. "All of that equipment will be there at the docks," he said.

On the public concern about Tesoro's tarnished workplace safety and environmental records, including Tesoro's $2.39 million fine by the Washington State Department of Labor & Industries for violations related to a 2010 refinery explosion in Anacortes and a recent 20,000-barrel oil leak in North Dakota:

Smith said that "if you look back on our history, our real history, not just those two events, we have a pretty good safety and environmental record, especially when it comes to all the different areas in the U.S. where we operate" marine transportation services, including Alaska, Puget Sound, L.A. and the San Francisco Bay. "We have a really good safety record" in all those areas, including operating in sensitive areas.

On whether the companies can guarantee that there will be no oil spills on the Columbia River:

"I can't guarantee that I'll be here tomorrow," Smith said.

Minx said that "it's important to note we take environmental stewardship very, very" seriously at Tesoro and at "each of our facilities we have an operating plan and we also have a response plan in the unlikely event that something were to happen … we would be able to respond quickly and we're confident that the facility here will be no different."

That's why Tesoro has partnered with Savage, Minx added, "which has great experience in not only designing and constructing these facilities but operating them as well."

Flint said "we build every capability" — including both spill prevention and control — "into the system and the operation" to handle such emergencies.

"We conduct multiple spill drills each year," Smith said, adding that "we perform … spill drills at all different locations yearly in preparation for anything to happen."

On concerns about tank cars — known as DOT-111s — that carried Bakken crude involved in the explosion in Quebec that leveled a town and killed 47 people. The cars fell under renewed scrutiny for what federal officials had previously said were serious design flaws. Those flaws, officials said, mean DOT-111s can break open in an accident, leading to a chain reaction of oil spills and other destructive impacts:

"We don't control the rail cars, we don't ship the crude," Flint said. The rail cars, for the most part, will be owned by the customer, which includes refiners like Tesoro.

The railroad must accept the cars, Flint said, and ultimately the railroad is responsible for making sure the cars they're pulling are safe. "It's a heavily regulated industry," Flint said. "It's getting a lot of attention. There's been some changes to regulations already. We anticipate there will be more." And (BNSF Railway) anticipates there will be more. "We expect (BNSF Railway) to fully comply with all applicable regulations," including inspections of rail cars and equipment to ensure oil will be hauled safely.

Flint went on: There are a range of rail cars that fall under the DOT-111 classification, and DOT-111s built today "are different from those built 20 years ago."

Smith said all of Tesoro's rail cars "are the new" DOT-111s, those purchased "from 2011 and beyond." These more recent DOT-111 cars are not the pre-2011 cars that have become a concern for the public, according to Smith.

Smith said the railroad is responsible for hauling the oil to the port and that Tesoro and Savage will be responsible for ensuring the tank cars are safe and secure once inside the oil terminal.

On the fact that Washington Gov. Jay Inslee, a Democrat, in reviewing an eventual recommendation by EFSEC, will have the final say over whether the oil terminal gets built and whether the companies are lobbying the governor, who wrote a book about fighting global warming by building a clean-energy economy:

Flint said there are "strict rules" that are part of the EFSEC process and "the governor is part of that regulatory process, and so lobbying is not appropriate." The governor "ran on not only a platform of concern about climate change but also economic development. If we can demonstrate through (the) EFSEC process that this is an appropriate project, we're confident (Inslee) will see that."

Flint added that the companies, which have never used the EFSEC process before, understand that the EFSEC process "contemplates the governor (who may say yes, no or send the proposed oil facility back to the council for more work) acting on the recommendation, not acting arbitrarily."

On the future of fossil fuels, the potential for alternative energy and global warming:

Smith said "our outlook is for either flat or decreasing demand for carbon-based fuels into the future, so we're working on other renewable projects to supplement" fossil fuels as their use goes down. "We want to be a provider for all transportation fuels as those technologies get developed. We're trying to get ahead of that process."

Flint said that "we all see that eventually the country and the world (will) move to alternative fuels." He went on: The lease with the port is for 10 years, with an option to renew, so at the end of the 10 years, "we and the port will look at the facility and the demand and decide whether we want to extend."

Smith said that in the lease "we have it so that" if renewable fuels become more viable "this (meaning the companies' proposed oil-handling facility at the port) could be a perfect place for (renewable fuels) to be distributed … we have that in the lease."

Smith added that "we'd have to make more" investments in the facility and modifications to enable it to handle renewable fuels.