Oil terminal backers: New jobs created outweigh environmental worries

By Brooks Johnson, Columbian Business Reporter and Dameon Pesanti, Columbian staff writer

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About the proposed oil terminal

Tesoro Corp. and Savage Cos., operating as Vancouver Energy, want to build a 360,000-barrel-per-day rail-to-marine oil terminal at the Port of Vancouver. The terminal would handle up to four 120-car oil trains per day and load an average of one oil tanker per day to ship out the Columbia River. The largely North Dakota-sourced oil would then be bound for West Coast refineries.

The proposal is 3 years old and remains under the review of the state Energy Facility Site Evaluation Council. Five weeks of trial-like adjudication hearings are currently taking place and will wrap up in Vancouver the last week of July. Together with the findings of those hearings and a finalized environmental impact statement, the council will make a recommendation to the governor whether to approve the project. The governor gets final say, though his decision can be appealed to the state Supreme Court.

— Brooks Johnson

Vancouver Energy is making a lot of promises.

Like how it can build and safely operate the nation’s largest oil terminal at the Port of Vancouver.

Or how it can turn a profit for its owners, Tesoro Corp. and Savage Cos.

Or how it can give West Coast refineries new access to domestic crude oil.

“So what does this mean to me, as someone in Vancouver?” said Vancouver Energy General Manager Jared Larrabee. “A huge part of the economic value is in labor income.”

Those not fighting the rail-to-marine terminal for its potential to be an environmental disaster may be embracing it as an economic engine that will provide “multiplier effects” in addition to paychecks.

“When we talk about it in the community, we usually bring up the 176,” Larrabee said, referencing the number of people management expects to directly employ when the terminal is fully operational.

That number, produced by Boston-based consultants Analysis Group in 2014, is often touted by project proponents with the 320 temporary construction jobs, 440 off-site jobs and hundreds more “induced” jobs created or supported by new money coming into the region.

The region’s economy, according to the Analysis Group report, also benefits from the terminal through up to $2 billion in combined labor income, tax revenues and profits resulting from 15 years of operation.

Of course, it’s always more complicated than that.

“All those economic expectations and job numbers are tied to how much volume they move through that facility. If they’re not based on sound economics then the rest of it falls apart,” said Eric Jessup, associate director of the Freight Policy Transportation Institute at Washington State University.

He noted Analysis Group’s report doesn’t specify how much oil would have to move through the terminal. Nor does it address how much difference there would need to be between global oil prices and domestic crude prices for terminal operations to be profitable.

“Most energy experts … forecast (global) crude oil to be below $50 for a long, long time. I have to believe they’re not going to be able to move as much volume through that facility as they thought,” he added.

However, Jeff Hymas, spokesman for Vancouver Energy, said in an email the assessment is “completely independent of the cost of a barrel of oil, and attempting to link the two together would be incorrect. These rates and fees are based on other factors such as the number of railcars received, number of barrels handled and non-variable service fees.”

Larrabee said Vancouver Energy realizes the oil market fluctuates, but believes there is enough long-term demand for oil that the project is still worthwhile.

“We’ve always viewed it as a long-term project. The energy industry goes through cycles. The fundamentals of the project remain.”

Family-wage jobs

Vancouver Energy’s $210 million terminal would be the nation’s largest, and it would be built with union labor. Vancouver Energy has a memorandum of understanding with local unions.

“They’d have the highest wages, benefits, and safety conditions in the industry — that was one pitch they made to us,” said Willy Myers, executive secretary treasurer of the Columbia Pacific Building and Construction Trades Council. He said Vancouver Energy and the unions will negotiate after the project is approved for construction.

In its report, Analysis Group estimates the project will generate $31.4 million in labor income during the first two construction phases. The report increased job and revenue estimates from what Tesoro and Savage originally touted when the project was unveiled in 2013.

Larrabee didn’t specify what each of the 176 on-site and 440 off-site jobs would be, but he said they’d be high-paying.

“In every case, it’s family-wage jobs,” he said, adding pay will fall in the range of $60,000 to $100,000 a year or more. “These are good jobs, which range across skill sets and education backgrounds.”

According to Larrabee, a young person could work at the terminal until retirement so long as the project maintained government approval.

Vancouver Energy has a 20-year lease with the Port of Vancouver. Approval from the state Energy Facility Site Evaluation Council can last the same duration. If Vancouver Energy were to obtain renewals, then the terminal’s lifespan could extend beyond oil.

“Facilities like this have a much longer lifespan,” Larrabee said, and it doesn’t just have to handle crude oil. Ethanol, biofuels or other as-yet unknown fuel could be sent through the facility. “We’re building infrastructure for (an energy future).”

The port stands to benefit from lease payments and fees to the tune of $45 million per year, according to the Analysis Group report.

“To contrast, annual revenue from last year $38 million,” port spokeswoman Abbi Russell said. “That kind of paints a picture for what kind of game-changer it will be.”

Timothy P. Nadreau, a research faculty member of the School of Economic Science at WSU, also examined the Analysis Group’s economic impact report. He said the report should have offered the number of jobs in ranges rather than pinpointed figures, but overall, he said it was made with good methodology. Still, he said it excluded a few factors that would allow another economist to verify it.

“The best way to do these technical reports is (to write them so) that another economist can take the results and replicate it,” he said. “To do so would have taken me quite a bit of time to isolate and reverse engineer what they’ve done. But by and large I don’t have a problem with the numbers they provided.”

Oil trains

“Bring energy independence and jobs to Vancouver,” reads a company flier extolling the virtues of the terminal.

It’s not enough to wave the prospect of jobs and expect a rubber stamp from a state known for stringent environmental regulations, as the past three years of the terminal’s permitting review have shown. Those jobs are dependent, after all, on Vancouver Energy bringing four unit trains with up to 120 cars each through the Columbia River Gorge and into Vancouver every day and loading, on average, a ship full of oil to head down the Columbia River every day.

The state evaluation council’s rules set out three arguably arbitrary guidelines for giving a project the green light: “Ensuring through available and reasonable methods that the location and operation of such facilities will produce minimal adverse effects on the environment … enhancing the public’s opportunity to enjoy the esthetic and recreational benefits of the air, water and land resources; and providing abundant power at reasonable cost.”

With the image of black smoke staining the blue Gorge sky June 3 near Mosier, Ore., undoubtedly burning in the minds of the council members, the “minimal adverse effects” argument may be the toughest for Vancouver Energy to win.

But the company won’t own train cars or ships. It won’t even own the oil that passes through the terminal.

“The rail transport of crude oil to the facility is not the responsibility of (the company),” reads a filing Vancouver Energy made before adjudication hearings started last month. “Vessel transport to and from the terminal is not part of (the company’s) terminal activity.”

The company has pledged to allow only the newest, safest rail cars to serve the terminal and to require a tugboat escort for oil tankers. Yet the evaluation council shouldn’t take marine and rail concerns into consideration at all, argue Vancouver Energy’s lawyers.

“Those transportation operations are regulated by federal agencies, and any efforts by (the council) to regulate those are preempted,” reads the filing.

Vancouver Energy is looking for a site certification, and as such wants the council only to consider what happens on site, where oil is unloaded, stored and piped to ships.

And though there are still risks of spills, fires and explosions, the company reasons in its filing: “Impacts are acceptable to the extent that the harm from such impacts is outweighed by the need for the energy facility.”

Larrabee can talk at length about the culture of safety that Tesoro and Savage bring to their operations.

“Safety goes all the way back to our hiring process,” he said. “We look for integrity and leadership skills. … Every employee has stop-work authority.”

That will never be enough to quell the concerns of environmental groups and others who see the terminal as an unacceptable and unnecessary risk. Even assistant state attorney general Matthew Kernutt, charged with representing the public’s interest in the environment during the terminal’s review, says the risks are high.

“As shown by the recent oil train incident in Mosier, Oregon, consideration of the risks associated with the transportation of crude oil through the state is crucial to (the council’s) evaluation,” Kernutt wrote. “Human error piloting a vessel in the Columbia River or one broken bolt on a track could lead to a significant environmental and public safety disaster.”

But it’s up to the evaluation council and the governor whether the terminal ever gets built. Vancouver Energy will need to convince those decision-makers that beyond the company’s power to create hundreds of jobs, it can take responsibility for hundreds of river miles.