August 18, 2009

Comments of Commissioner – Vice President,  Floyd Holcom regarding the East Skipanon Peninsula and the Port of Astoria

Fellow Commissioners and Citizens,

Simply because a Port can lease or sell property for private purposes does not mean it should do so.  Just because a company promises Jobs and Money, doesn’t mean it will happen, especially when it comes to the Port of Astoria!  Several recent histories of industrial promise to the Port of Astoria is proof of that.  I would hope that it wasn’t the case, but this Port needs to become cautious and learn due diligence.

I believe a number of questions remain to be answered regarding the Port of Astoria’s Lease of East Skipanon Peninsula and any obligation we have to renew that lease, not the least of which is who provided the legal advice that supported the decision to sign the one-sided and completely inappropriate sublease five years ago. 

I am puzzled why this Port believes it has no option other than to continue for an extended period of time to lease, and thus tie up, questionable State owned land (which I believe is Port owned land) for speculative private developments that does not seem to support the primary purpose and mission of this Port. 

I am dumbfounded that the Port would want to play this role, given that the proposed development by Oregon LNG is both unlikely to ever take place and provides no real economic contribution to the success of this Port or our ability to encourage other marine-dependent commercial and industrial activities or other real businesses that could sustain the efforts of the Ports Mission.

For example, the proposed golf course development, which was the very basis on which this Port entered into an agreement with DSL, is questionable whether or not it will ever be built.  It has been forgotten that it was Oregon LNG’s zoning change request to the City of Warrenton that effectively prevents a golf course from ever being constructed as promised to our citizens by the same group of leaders who turned midstream and leased it to Calpine, now Oregon LNG.

From a marine context, if a Port District pays to lease land from the State for a potential long term or future purchase, it is usually for the purposes of expanding the Port’s own operations or for the purpose of planned and timely marine related development that adds to the business of the Port District and thus contributes to its financial success and the success of its District.  Yet, with this lease, the Port of Astoria and its citizens will not see a dime and continues to be a drain on the capital of the Port. 

In fact, it is highly unusual to see a public Port subleasing land for far less that market value, (which I’d estimate is worth at least $500,000 per year), to speculative developers for extended periods of time with no development and no legal obligation to ever turn a shovel of dirt.

In my opinion, to suggest that this Port is now obligated to continue its own lease simply to accommodate and the threat of massive lawsuits, the subtenant is a perverting  the public purposes that this Port District was created to further and surely challenges and violates its own resolutions it has passed to prevent such action.

If the Port of Astoria is actually obligated legally, which I believe is still an open question, then I want to know why the Port ever agreed to such a sublease and I question whether or not the Port acted in reliance on good advice or a clear understanding at the time it entered the sublease. 

Because while a Port can sell or lease land for private development purposes, it should only do so when the public interest is served by such action and only when the sale or lease directly advances the best interests of that public body and public, not private, purposes of the Port.  That is not the case here today.

If the Port feels locked in to re-leasing the State land, then I ask, who is responsible for that significant mistake? And for what purpose did the Port ever make a deal producing that result.  This entire series of events has the appearance of an arrangement that advances someone’s interest other than that of the Port of Astoria and the public it serves.  

I can only assume that it why the Department Of Justice continues to investigate this matter.

As I look at the lease between the State and the Port, it’s clear to me that that the Port has no obligation under the terms of this contract to extend the original lease or to sublease any component of the leased property. 

Rather, the Port of Astoria has the option, not the obligation, to renew the five year lease for two (2) thirty year terms.  As I have been told by the remain two Commissioners, Larry Pfund and Dan Hess from the era, and I assume that the lease provides for that option because it was anticipated that the development would occur in the original five year term with infrastructure in place that would then justify the subsequent commitment by the Port to pay rent for an additional thirty years since it now controlled land upon which a major marine development had been constructed.  

The sublease to Oregon LNG has essentially the same lease and renewal terms as the Port’s lease to DSL.  Thus at first glance the sublease would seem to obligate the Port to continue to lease land for Oregon LNG for sixty years, regardless of whether Oregon LNG ever develops the property for any purpose.  I believe that result would be very difficult to defend in court if the Port initiated an action for rescission of the contract and despite OLNG threats of devastating lawsuits, the PUBLIC’s best interest needs to be preserved.

Given the recent lawsuit filed against the Port from the subtenant, the Port should be consulting unbiased and un-conflicted lawyers concerning the opportunity to rescind this questionable agreement.  I don’t believe that is occurring here today.

Clearly, the Port should have linked the sublease to the lease reserving the option to renew its own lease or not as it chose, for any reason, including the failure to develop the project within the five year initial term.  I doubt that the Port ever contemplated 65 years of rent for the privilege of having a subtenant that never develops the land.  That is hardly an appropriate use of public property or public money.  Its not in the projected budgets, not at the initial agreement, and not any subsequent, which creates additional questions to its legitimacy.

I am also not aware of any Public Port, or anyone in business as a matter of fact, that would regularly lease land to private developers for less than market value for long periods of time without any development obligation.  Since that appears to be the case here, and that is why I am asking these questions.

Another question that has yet to be answered is whether the development contemplated originally is even feasible given other impediments to this project, including unresolved ownership issues, conflicts with county roads and questions concerning conflict of interest among parties or lawyers.  The Port’s lawyers should have been looking at those issues and for any other opportunity to escape this very poorly (On the Ports Side) drafted sublease, of which I have asked for without much success.

To help answer those questions, this Port appointed a special counsel to review those documents, and I  asked that he be allowed to present the results of that analysis to the public, and not to have those findings kept secret, since secrecy is how we ended up with this mess we now find ourselves in.

Speaking of secrecy, even today, we have just publically learned that Oregon LNG is proposing to use 150 Ambient Air Vaporizers (AAVs), 60’ high, to regassify the LNG.  This is essentially a giant fog machine.  Oregon LNG’s own reports show that under certain conditions, fog would envelop the entire Weyerhaeuser facility, a good portion of the Skipanon River and the marina on the south west side of the Skipanon.  The use of this technology at this scale has never been tested or proven.  IN OLNG’s own documents to FERC, Fog conditions could impact shipping and air traffic because of reduced visibility, and possibly create other biological impacts to wetlands exposed to below-normal temperatures and conditions. 

Yet, almost no discussion about the impacts of this giant fog machine has taken place before this Port.  Instead, these potential impacts have been kept quiet by the developer, hoping no one would notice.  Well, I noticed.  And so have others.

In conclusion, absent (1) real assurance that the development will occur in compliance with the law and that it will ensure that the Port will receive thirty years of prompt rent payment and protection from all other risk as the landlord; and (2) adequate financial assurance or guarantees from the subtenant to eliminate financial risk for the Port; and (3) receipt of rent at market rates; why would the Port not be working very hard to end this sublease?   How is the public interest being served and protected here?  As a taxpayer of the Port District, I have been asked and want hard answers to these hard questions.

I for one am not scared by the bullying legal tactics, underlying and threats of Mr. Hansen and his attorneys.  I find these tactics a typical smokescreen to hide the issues that are being criminally investigated now.

My fellow commissioners and interested individuals who have come tonight, if you think that this Port’s signing a lease with DSL tonight will end this debate, I’m afraid the nature of this issue will continue to be questioned beyond tonight and beyond the next 30-60 years based on the thought and promises that it would be put to bed.  The Simple Fact that a Criminal Investigation is occurring is grounds for delay.

So, until these questions are answered, I cannot and will not support a lease renewal.  I would hope the Public,( that includes the Port and DSL), could receive an additional time extension from DSL to allow the DOJ to complete its criminal investigation and allow the Port to get to the bottom of these issues once and for all.  There is not one businessman I know that would sign agreement that is enveloped in a Criminal Investigation, would you?