Skids greased for oil terminal behind closed doors

Port agreed to negotiate exclusively with Tesoro, Savage before public heard a word about proposal

By Aaron Corvin, Columbian Port & Economy Reporter

Published:

 

About this series

The Columbian's three-day series is the result of a months-long examination of more than 1,700 public documents; testimony and remarks delivered during public meetings; and interviews with open-government experts, Port of Vancouver officials, and others.

The public documents analyzed include more than 300 pages of depositions taken of port commissioners as part of an ongoing lawsuit that accuses the port of violating the state's open public meetings law in deciding the oil terminal lease.

The initial lawsuit, filed in October 2013, cited information contained in a July 31 story by The Columbian that first revealed apparent breaches by the port of the open public meetings law. For the series, the newspaper obtained other documents through public disclosure requests. Those records include port emails, commission agenda materials and an internal report.

-- Aaron Corvin

A COLUMBIAN SPECIAL INVESTIGATION

Three-part series

SUNDAY: Commissioners defer key decisions to port staff.

TODAY: Sealing the oil terminal deal behind the scenes.

TUESDAY: The port faces political fallout.

Different approaches to safety

Federal and state officials are responding in different ways to public safety and environmental concerns about oil train accidents, as the shipment of crude by rail has grown dramatically.

Since 2006, the U.S. and Canada have seen at least 24 oil train accidents involving a fire, derailment or significant amount of fuel spilled, according to an analysis by The Associated Press. The fiery derailment of an oil train on May 6 in rural central North Dakota was the fifth this year, AP reported.

In response to concerns, Washington Gov. Jay Inslee signed into law last week a measure aimed at boosting the safety of oil transportation. Among other provisions, the law requires railroads hauling crude oil to show their ability to pay for oil spill cleanup. Meanwhile, federal regulators recently unveiled rules requiring a new tank car standard with better protections and mandating the use of electronically controlled brakes.

As The New York Times reported earlier this month, "lawmakers and safety advocates said the (federal) regulations did not go far enough in protecting the public, while industry representatives said some provisions would be costly and yield few safety benefits."

-- Aaron Corvin

Oil terminal decision timeline

o 2012: Port sees oil by rail as opportunity.

o Early 2013: Tesoro-Savage recommended as best potential tenant, "probably" during a closed-door executive session, according to one commissioner.

o April 9, 2013: Port commission receives pitch from Tesoro and Savage executives during closed-door executive session.

o April 18, 2013: Port email shows Tesoro approved the project and the joint venture with Savage.

o April 19, 2013: Port email shows exclusive negotiating agreement signed with Tesoro-Savage.

o April 22, 2013: Companies announce plan to build oil terminal.

o May to July 2013: Port commission convenes series of public workshops to discuss safety, other issues.

o July 6, 2013: Oil train derails, explodes in Lac-Megantic, Quebec, destroying much of the downtown and killing 47 people.

o July 22, 2013: Eve of lease vote; commissioners take public testimony, overwhelmingly against the oil terminal; port holds closed-door executive session.

o July 23, 2013: Port commission unanimously approves oil terminal lease.

o Oct. 2, 2013: Three environmental groups sue the port, alleging it violated the state's public meetings law.

o Oct. 22, 2013: Port commission convenes new public hearing, re-votes unanimously to approve contract.

o December 2014: Environmental groups revise open meetings lawsuit, alleging the port illegally excluded public from some of at least nine meetings in 2013. In response, port admits it held closed-door executive sessions about the oil terminal lease on seven dates but denies wrongdoing.

Canadian Press files The oil train derailment disaster in downtown Lac-Megantic, Quebec, on July 6, 2013, increased awareness and safety concerns about the proposed oil terminal in Vancouver.

Even the most vigilant of Port of Vancouver watchers couldn’t have foreseen how the port and two private companies were paving the way behind closed doors for quick local approval of what would be the nation’s largest oil-to-marine transfer terminal.

Before the public had heard a single word about the terminal, the port had agreed to negotiate exclusively with Tesoro Corp., a petroleum refiner, and Savage Companies, a transportation company, on their potential use of Terminal 5 and other port facilities. In court depositions, two of the three elected commissioners gave conflicting statements about whether the commission had approved the exclusive discussions or whether the port’s CEO, Todd Coleman, used his administrative authority to sign off on it.

The dealings included a private pitch by Tesoro and Savage officials – with a BNSF Railway executive in attendance – to the port’s elected commissioners: Nancy Baker, Jerry Oliver and Brian Wolfe. And, on the eve of a vote on a lease for the oil transfer terminal, commissioners held a secret meeting to discuss public comments, and to ask questions about safety and pollution liability insurance, public records show. A lawsuit against the port alleges commissioners’ discussions went far beyond what is allowed in closed-door executive sessions.

These details and more are emerging only now, largely because of the paper trail and depositions generated by the lawsuit that accuses the Port of Vancouver of violating Washington’s open public meetings law in deciding the oil terminal contract.

The court documents, coupled with additional public records obtained by The Columbian, help piece together, for the first time, the story of how the port cloaked its pursuit of a deal to link Vancouver to the crude bubbling up from North Dakota’s Bakken shale formation.

Experts in the state’s open meetings law and open-government advocates, interviewed by The Columbian, say the port violated the spirit, if not the letter, of the law in excluding the public from key parts of the oil terminal lease discussion. On a broader level, they argue, the port’s commissioners and administration should have engaged the public sooner rather than later about the potentially community-defining project.

“As elected officials, you should not act arrogantly, as though you’re suddenly the font of all wisdom,” said Toby Nixon, president of the Washington Coalition for Open Government, a former state lawmaker and current Kirkland City Council member. “The collective wisdom of the people is always greater than even the most brilliant body of three or seven people. That’s why you want to have public engagement early and often.”

‘Safety and reliability’

The port’s journey to the oil terminal starts with a hunt for cash to pay for its signature venture: the $275 million West Vancouver Freight Access project. That project’s goals: expand rail tracks, speed the movement of cargo, attract companies, generate jobs.

By 2012, the port had lined up the Australian mining giant BHP Billiton as a potential exporter of potash, a crop fertilizer, for a possible long-term lease.

But the global company wasn’t going to start shoveling money the port’s way until it finished a mine in Canada, Wolfe said under questioning as part of the open meetings lawsuit against the port.

Meanwhile, the port was “facing a considerable expense” from the freight-rail expansion project, Wolfe said in the deposition he gave to Elizabeth Zultoski, a Seattle attorney representing three environmental groups in that lawsuit. “So we had to produce some kind of revenue.”

Coleman and his staff saw that “crude by rail was a coming market,” according to Wolfe, first elected to the port commission in 2005.

Coleman privately checked in with each commissioner. “He was testing the water, so to speak, to see if the commissioners would say no,” Wolfe recalled.

But the discussion went further. The lawsuit accuses the port of illegally excluding the public from some of at least nine closed-door meetings between Feb. 11 and July 22 of 2013. The port’s first unanimous vote to approve the oil terminal lease came on July 23.

Commissioners say they don’t remember certain details, but each of them told Zultoski that Coleman and port staff formally presented the oil terminal idea to them sometime in 2013 and that discussions “probably” occurred in a closed meeting.

Wolfe said the commissioners “probably” discussed a scoring matrix, ranking Tesoro No. 1 among other companies considered for the oil terminal project, during a Feb. 11 closed-door session.

Oliver recalled that commissioners received the administration’s recommendation of Tesoro-Savage as the best potential tenant in early 2013. That recommendation, he said, “probably” occurred during a closed-door session.

Baker said the administration “probably” presented the oil terminal idea in a closed-door session and that when the idea came up, commissioners told Coleman to “research it.”

The port’s April 9 executive session is a key focal point of the open meetings complaint. The stated purpose of that closed-door commission meeting was: to discuss a minimum price for selling or leasing land for the oil terminal. Under state law, the port was required to stick to a minimum price discussion. Yet, three Tesoro executives, five Savage executives and BNSF Railway’s general director of industrial products all streamed into the meeting room for a discussion that lasted for about three hours.

Tesoro and Savage executives pitched port commissioners on Tesoro’s “high-performing culture” and “safety and reliability,” Savage’s focus on “giving back to the community,” and a wide range of other topics that filled a 51-page slide presentation.

This month, Baker told The Columbian that the April 9 executive session “may be illegal” but that it allowed commissioners to understand the project sought by Tesoro and Savage. “You talk to somebody (to) exactly understand what the program is going to be before you even think about making a decision,” she said.

She added: “We’re expected to act like a business.”

During the secret meeting, Tesoro and Savage invited commissioners to visit Tesoro’s oil-by-rail facility in Anacortes, which is operated by Savage.

The commissioners accepted, traveling to the site on separate dates. It’s not clear when, in 2013, they made their visits to the facility in Anacortes. Coleman accompanied Baker and Oliver on their trips. Wolfe visited the site with a “hunting buddy,” according to his deposition.

Not long after the April 9 closed-door meeting, the oil terminal deal intensified.

In an April 18 email, Curtis Shuck, the port’s then-director of economic development and facilities, informed his fellow port administrators that Tesoro officials had approved the project at the port and had signed off on the joint venture with Savage.

On April 19, Coleman sent an email to Baker, Wolfe and Oliver informing them of an exclusive negotiating agreement with Tesoro-Savage. The companies “have committed significant resources to get crude flowing as soon as possible” and are “committed to corporate social responsibility,” he wrote.

On April 22, Tesoro and Savage publicly announced their plan for the terminal.

‘A good handle on it’

Still, the port commission had yet to sign off on the lease.

But the port’s administration wasn’t taking a passive stance about how the project would be received by the community. Before publicly presenting the oil terminal to commissioners, the port checked in with interest groups and reported the conversations to Tesoro and Savage. For example, on April 24, Patty Boyden, the port’s director of environmental services, and Andrew Ness, then a port spokesman, met with leaders of the region’s Sierra Club chapter: Lehman Holder and Linda Wolfe, Commissioner Wolfe’s wife.

Boyden reported the conversation to Tesoro, Savage and port officials, and EnviroIssues, a company hired by the Tesoro-Savage joint venture for public relations purposes.

According to Boyden’s email account of the meeting, the Sierra Club members said the port was a good partner. But they had concerns: number of rail cars, oil spills, increased use of fossil fuels, the impacts of hydraulic fracturing.

Between May and July, commissioners held a series of public meetings, dubbed “workshops” by the port. During those meetings, commissioners heard from the Federal Railroad Administration, the Maritime Fire and Safety Association, and the state Energy Facility Site Evaluation Council, among others.

Commissioners also got public presentations from representatives of the companies they’d welcomed privately on April 9: Tesoro, Savage and BNSF Railway.

Now aware of the proposed oil terminal, people started showing up.

William Ellings, a hazardous materials specialist with the Federal Railroad Administration, told commissioners on June 11 that while no one is happy with any discharge of hazardous material, “we’ve got a good handle on it.”

The reassurance fell apart less than a month later.

On July 6, 2013, a train carrying Bakken crude to a refinery in Maine derailed and exploded in Lac-Megantic, Quebec. The blast destroyed much of the downtown. It killed 47 people. A mass evacuation ensued.

Critics cited the catastrophe as a reason for commissioners to slow down, back off.

Two days after the calamity, Columbia Riverkeeper and Sierra Club fired off a 10-page letter to Baker, Oliver and Wolfe. In it, they called out Tesoro’s trail of documented environmental and workplace safety violations. After the Lac-Megantic disaster, regional media buzzed with questions about the potential local implications.

Commissioners appeared to hit the pause button. They also held four closed-door executive sessions in July following the Lac-Megantic disaster on July 9, 16, 17 and 22.

In his court deposition stemming from the open meetings lawsuit, Wolfe confirmed to Zultoski that “some” of the discussions of the calamity in Canada occurred in executive session.

In response to the disaster, Zultoski asked, did commissioners demand additional restrictions on Tesoro-Savage?

The port added a clause in the lease giving the port final say “on whether they met their – what we believed their safety standard ought to be,” Wolfe responded.

By way of context, if the companies win a construction permit from the state Energy Facility Site Evaluation Council, it would likely come with conditions imposed by the evaluation council to lessen the severity of the oil terminal’s impacts. After that, disagreement between Tesoro-Savage and the port about a final safety and operations plan isn’t likely.

On July 22, the eve of the commissioners’ vote on the lease, protesters gathered outside the port’s office to hold a vigil for the Lac-Megantic victims. That same day, Columbia Riverkeeper submitted another letter to commissioners, urging them to postpone a lease decision in light of “compelling evidence” that “Bakken crude poses unique risks for explosion.”

Inside the port commission’s meeting room, a crowd that spilled into the lobby testified overwhelmingly against the oil terminal. “Where’s the lease?” one man yelled.

Twice during the meeting, Commissioner Oliver told people that commissioners would gather later that night for a closed-door executive session to discuss what people told them “and how that impacts our deliberations.”

Although Oliver later told The Columbian he misspoke and should have cited “real estate” as the reason for excluding the public, Wolfe’s deposition to Zultoski indicates that commissioners and port administrators met privately to discuss the public testimony.

Wolfe said he asked Coleman about “the insurance limits” – an apparent reference to public concerns that $25 million in pollution legal liability wasn’t enough to cover a disaster on the scale of Lac-Megantic – “and about our control over ultimate safety issues.”

Then July 23 arrived – the morning of the vote.

Before they voted, the commissioners spoke. They said the port was committed to safety. They said the lease was an opportunity to further invest in economic development. They said the proposed project would undergo a state-level impact analysis.

Their unanimous vote green-lighted the lease.

After the meeting, Theresa Wagner, then the port’s communications manager, refused to provide the lease to The Columbian, saying the newspaper had to file a public records request. The next day, Barbara Ayers, then a city of Vancouver spokeswoman, sent an email to City Attorney Ted Gathe. Ayers had noted The Columbian’s online account of Wagner’s stonewall and wanted Gathe’s opinion of it.

Gathe replied that it ” just looks bad for a public agency in a high-profile situation like the port to refuse to provide a lease that the commissioners just approved.” Later, the port released the lease with redactions.

Another lease vote

The port was ready to move on to the next steps.

However, conflict over the port’s secretive vetting of the oil terminal was only beginning to take root.

On July 30, 2013, The Columbian published a story questioning the legality of the July 22 executive session.

On Oct. 2, Columbia Riverkeeper, Sierra Club and Northwest Environmental Defense Center filed a lawsuit alleging the port violated the state’s public meetings law. The complaint initially centered on the port’s mishandling of the July 22 executive session. The groups would later expand it.

Not long afterward, the port backpedaled.

On Oct. 17, a Thursday, the port issued a late-afternoon press release: it would take a revote on the oil terminal lease during the port commission’s public meeting on Oct. 22, a Tuesday.

One of the opponents to show up on Oct. 22 was Barry Cain, president of Gramor Development, which is pursuing a $1.3 billion commercial/residential redevelopment of Vancouver’s waterfront less than two miles from the oil terminal. Cain repeated concerns he’d raised on July 22 about safety and the oil terminal’s potential impacts on the waterfront redevelopment.

Commissioners voted unanimously to re-approve the lease.

In June 2014, the port announced that its potential lease deal with BHP Billiton, the would-be exporter of potash at Terminal 5, was off. Years of negotiations came to naught, ending hope for what would have been a major revenue source for the port.

Also in the summer of 2014 – roughly a year after the oil terminal lease was first approved – Gathe, the Vancouver city attorney, retired. His retirement after two decades with the city wasn’t a permanent vacation from civic life, though.

In January 2015, Gathe joined the board of Taxpayers for a Responsible Public Port, the political action committee gunning to push the port in the direction of greater transparency.

He became part of the backlash against the oil terminal and the port’s way of doing business.