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Oil Companies, Vancouver Port At Standoff Over August Deadline

March 24, 2016

Nearly three years ago, the Port of Vancouver signed a lease with companies that want to build the largest oil-by-rail terminal in the country. But the project has not gone as planned and may now be running out of time.

The Port of Vancouver has until Aug. 1 to decide if it wants to opt out of a lease with companies planning to build the terminal.

The opposition to the proposal has been intense, with the brunt of it felt by leaders at the port.

“The interesting thing in this whole phenomena has been the passion of the opponents," said port Commissioner Brian Wolfe.

In 2013, Wolfe voted to sign the lease with Tesoro Corporation, an oil company, and Savage Industries, a logistics firm.

“There’s no passion to be in favor of something like this," he said.

The proposed terminal, called the Vancouver Energy Project, would move 360,000 barrels of crude oil daily from the Bakken region of Montana and North Dakota. The oil would travel through the Columbia River Gorge to Vancouver by rail. From there, it would be loaded onto ships bound for West Coast refineries.

Tesoro-Savage says it would create about 300 construction jobs in the short term and another 200 jobs once it’s up and running. Despite the low price of oil, project backers say the terminal is needed to meet the West Coast's demand.

The proposal is now slowly working its way through Washington state’s permitting process. But it’s faced with a deadline that could prove problematic, if not ultimately fatal.

Under the lease, the terminal’s backers have three years to get the permits they need — and that three-year window runs out in August.

If the deadline isn’t met, the lease allows the Port or the project’s backers the ability to get out.

“Here we are nearly three years later and that date is coming up," said Abbi Russell, a spokeswoman with the Port of Vancouver.

As a public agency, the port has an obligation to generate jobs and economic activity. Russell said the lease was structured with that three-year time frame as a way to protect both the port and Tesoro-Savage.

“It helps us ensure that that land doesn’t get tied up," she said. "We can come back and say, 'OK, this land needs to be available for projects that are going to bring that benefit to the community and the port.'"

It’s highly unlikely, if not impossible for the Vancouver Energy Project to win state approval by August. A major component of Washington’s environmental review won’t be complete until the end of July. Most projections show there won’t be a decision until sometime next year.

Tesoro-Savage wasn’t able to provide someone to comment for this story, but project spokeswoman Tina Barbee said in a statement the project is moving forward.

“We have a strong partnership with the Port and remain committed to our Vancouver Energy project," Barbee wrote. "We do not have additional information to share right now on timing or any additional considerations.”

Environmental groups say now is the time for the port to get out of its lease.

Dan Serres, conservation director for Columbia Riverkeeper, said not only have trains carrying oil derailed and exploded, but the facility itself poses a danger to nearby neighbors.

Serres said area residents have also been clear in public comments and a recent election for port commissioner that they don't want the oil terminal built.

“We look at the period between now and Aug. 1 as being the real opportunity for the Port of Vancouver to get out of this project," Serres said, "because after Aug. 1, the port may not necessarily have that opportunity.”

After the deadline, Serres said, both parties become more locked into the lease.

“Without some separate additional agreement, the Port of Vancouver may be waiving its ability to escape the lease in an unfettered way," he said.

Starting in August, Tesoro-Savage will owe the port $3 million in rent on a project that has little chance of returning a profit anytime soon. Observers and port officials, like commissioner Wolfe, think the companies will be reluctant to pay and instead ask for an extension.

“Think about it now," Wolfe said. "If you were staring at starting to owe $3 million for a lease you couldn’t really use until you get your permit, would you do that or would you ask for an extension?”

A rendering of what the Vancouver Energy Project would look like at the Port of Vancouver. The facility could move 360,000 barrels of crude oil from rail to ship every day.

Courtesy the Vancouver Energy Project