The Gristle

Dickering Docks

Wednesday, July 23, 2014

DICKERING DOCKS: As Cherry Point races to become the energy export mecca of the Pacific Northwest, efforts are simultaneously underway that could cripple Whatcom’s ability to economically benefit from that activity.

Scores endured a warm day in the Shuksan Middle School gymnasium last week to shine light through the holes in a plan to complete a second dock at BP’s Cherry Point Marine Terminal. Completion of a North Wing addition to the refinery’s existing dock would expand capacity at the Northwest’s largest oil terminal—and, with it, the number of tankers operating on the Salish Sea.

Just as the proponents of the Gateway Pacific Terminal attempted to attach their proposed coal pier to a 1999 permit issued for a much smaller facility that envisioned no coal, the BP proposal rides on much earlier assumptions about petroleum transfer, assumptions made even before British Petroleum acquired the facility from ARCO in 2000.

In 1971, the Cherry Point dock was permitted for the construction of two berths. A Y-shaped design, the South Wing was designed to receive crude from Alaska’s North Slope reserves and to ship refined petroleum products. A second berth, the North Wing, was not completed but provided design flexibility to increase capacity to receive North Slope crude or to export the products of refined petroleum. Interestingly, the primary supply to Cherry Point for many years was not the North Slope, but reserves from western Canada; and similarly, the proposed expansion is not based upon North Slope reserves but on the opening of new fields in the Bakken complex in North Dakota, delivered in quantity by train. Thus are newly imagined, pernicious uses slipped in on existing permits decades old.

The dock permit itself wedged in through an important window, the National Environmental Policy Act of 1970 and the more pointed and restricted Magnuson Amendment of 1977, which attempted to limit oil supertankers on Puget Sound, building on the Coastal Zone Management Act and Marine Mammal Protection Act sponsored by that famous senator earlier in that decade.

The amendment, in part, bans the federal government from granting permits to build or modify a terminal or dock in Puget Sound—or any other of the state’s navigable waters east of Port Angeles—to increase the amount of oil such facilities can handle. Applicants say the North Wing infrastructure was effectively grandfathered when the dock concept was permitted.

In 1996, the U.S. Army Corps of Engineers approved a permit for the North Wing addition, without benefit of an environmental impact statement. At the time, Corps officials agreed that oil tankers are safer when they’re berthed and unloading than when they’re anchored elsewhere and waiting a turn at the dock. Making the process more efficient also makes it safer, the officials decided. A court disagreed the Corps had the power to make that determination without public review and mandated a scoping process for an increase in vessel traffic on Puget Sound.

The proposed expansion is well timed for the completion of a $60 million rail loop at BP’s Cherry Point refinery. The two-mile long extension increases the refinery’s portfolio by about 20,000 barrels per day of Bakken crude, or about 10 to 15 percent of the facility’s product capacity.

The expansion is also proposed at a moment of tremendous profits for the petroleum giant, with BP posting about $3.22 billion in profits in the first three months of this year, down only slightly from the record-breaking profits of 2013.

Curious, then, in the midst of this expansion BP is simultaneously seeking a downgrade in the valuation their Cherry Point property with the Washington State Board of Tax Appeals, a downgrade that would reduce the company’s property tax burden and shift that burden to county residents.

County Assessor Keith Willnauer reports their efforts are still moving, glacially, through appeal. Willnauer reported the appeal and its effects to Whatcom County Council in March.

The Cherry Point refinery is currently assessed at about $975 million, including the dock. BP has added improvements to its asset in excess of $500 million without paying any additional sales tax. Nevertheless, the company claims the entire value of their asset is less than they’ve spent on improvements in the past five years. In their appeal, BP officials asserted the property might be worth as little as $475 million. That lower assessed value would reduce BP’s property tax bill from $10.34 million to $7.44 million, leaving residents to pick up the difference—an additional $78 per year in property tax for an average priced home in struck taxing districts.

“It’s just illogical for a company as sophisticated as BP to spend $500 million on new construction to create an asset that’s worth less than $500 million,” County Council member Rud Browne commented. “It lacks credibility.”

BP arrived at that miniscule value based on the sale price of two ancient and diseased hulk refineries surplused in Texas and California they declared set the market price here—like selling a 1978 AMC Gremlin and declaring that price governs the sticker on a new Lexus.

“It’s less than they’ve put into the facility in the last four or five years, let alone what its existing value was that they were content to pay for more than a quarter of a century,” Council member Pete Kremen observed.

“Just the mere fact that BP has chosen to sell refineries in Texas and in California is a demonstration that they are making this particular facility at Cherry Point one of their flagship refineries in the country,” Kremen added, noting a new refinery has not been permitted in the United States for more than 35 years. “Because they sold those facilities, Cherry Point is even more valuable.”

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