Tell the Department of State Lands not to give sweetheart deals to LNG companies!
As reported in the Sunday Oregonian, the State of Oregon is leasing 92 acres of waterfront industrial state-owned land for an LNG terminal for just $38,400 per year. This is 3000% less than comparable leases:
| Site | Acres (uplands) | Annual Lease | Price per acre |
| Coos Bay LNG | 147 | $1,920,000 | $13,061 |
| North Tongue Point (Astoria) | 30 | $350,000 | $11,666 |
| Skipanon, Oregon LNG | 92 | $38,400 | $41 |
Call or write the Governor and the State Land Board!
Why did the Oregon Department of State Lands give the LNG company such a sweetheart deal for public land?
The Sunday Oregonian and The Daily Astorian feature stories (below) about our allies at the Columbia River Business Alliance and their request for an investigation. The attached letter calculates that at this low lease rate the State of Oregon would lose $62.5 million dollars over the 65-year lifecycle of the lease.
Why is this lease important? After the initial 5-year lease expired, the Department of State Lands granted a two-year extension. Now Oregon LNG wants the State to enter into a 30-year lease with Oregon LNG having the option for an additional 30 years after that. The State can say no! At the very least, the Department of State Lands must get fair market value of the lease – which is $1,000,000 per year instead of $38,400.
Call or write Governor Kulongoski, the State Land Board, and Louise Solliday, Director of the Department of State Lands.
Tell them:
1. The State should revoke the lease for this sweetheart deal. The lease is an embarrassing mismanagement of State land and money.
2. The State should not enter into a 30-year lease for an LNG terminal on our State land. LNG is bad for Oregon. It is outrageous to use my State land and waste my tax dollars for LNG.
3 Governor Kulongoski, who vowed to protect Oregonians in the LNG process, should investigate this mismanagement.
Contact these decision makers today!
Governor Kulongoski
Phone: (503) 378-4582, click to email: http://www.oregon.gov/Gov/contact_us.shtml
160 State Capitol
900 Court Street
Salem, Oregon 97301-4047
The Oregon State Land Board – the Land Board, which oversees the Department of State Lands and makes decisions on important leases, is:
Governor Kulongoski
Secretary of State Kate Brown, oregon.sos@state.or.us, (503) 986-1523
Treasurer Ben Westlund, Oregon.Treasurer@state.or.us, (503) 378-4329
While the State Land Board did not make the original lease decision, they should be aware of our concerns.
Michael Carrier, Natural Resources Policy Director
(503) 986-6525, Michael.carrier@state.or.us
| 255 Capitol Street NE, Suite 126 |
Louise Solliday, Department of State Lands Director
Email: louise.c.solliday@state.or.us (503) 986-5224
775 Summer St. NE, Suite 100
Salem, OR 97301
Lease deal for proposed LNG terminal site in Astoria draws fire
By Scott Learn, The Oregonian
November 07, 2009, 10:02PM
Opponents of a proposed liquid natural gas terminal near Astoria are asking Gov. Ted Kulongoski for an investigation into a lease of public land to Oregon LNG to build the plant.
They question the lease deal, negotiated in 2004 by the Port of Astoria's since-fired director, the Oregon Department of State Lands and Calpine, the predecessor to Oregon LNG.
A key objection: The appraisal backing the annual lease price of $38,400 was based on using 92 acres on the Skipanon Peninsula as a links golf course, not a $1 billion LNG terminal.
The Columbia River Business Alliance, which opposes LNG plants, says that understated the property value and lease revenues to the state, which flow to Oregon's common school fund.
The alliance, a pro-environment nonprofit based in Astoria, filed the request Friday. Peter Huhtala, the group's executive director, called the lease rate "absurd."
The Port of Astoria had been planning for a golf course on the property, obtaining a $384,000 appraisal in March 2004 based on that use. The golf course didn't pan out.
Lease agreements arranged seven months later expressly include the intended use as an LNG terminal. The Port did not obtain a new appraisal based on that use, and the state didn't ask for one.
"They said, 'Hey, we have this appraisal laying around here for a golf course, let's use that,'" Huhtala said. "It doesn't compare with an industrial site."
The investigation request adds to the LNG controversy in Oregon. The terminals are potential economic boons but have raised environmental concerns about the plants and pipelines.
The office of Attorney General John Kroger, an LNG opponent, recently finished an investigation of former Port of Astoria Director Peter Gearin, concluding that Gearin improperly helped obtain public relations work for his then-girlfriend with Calpine.
Huhtala is running against Oregon Rep. Brad Witt, D-Clatskanie, citing Witt's support for the LNG terminal.
Oregon LNG and the Port of Astoria are suing each other over the lease. Oregon LNG wants a 30-year lease extension included in the original lease as it pursues government permits. The Port wants a two-year extension, saying it doesn't want to get locked into a 30-year deal if the terminal isn't built.
Peter Hansen, Oregon LNG's chief executive officer, said opponents are grasping at straws to try to kill the LNG deal. The company needs the 30-year extension to attract private investment, he said. Under the lease, approved by the Port commission in November 2004, the extension would trigger a reappraisal of the property every five years, he said.
The terminal would pay an additional $10 million in property taxes, including $250,000 to the Port, Hansen said. The attorney general's investigation included inquiries about the lease with no mention of it in the AG's final report.
The land, created from dredge spoils in the 1920s, had seen little market interest since then, Hansen said. "If it was so valuable, why didn't anybody snap it up?"
The lease was a three-way transaction: The Port transferred the land to the Department of State Lands to resolve title questions, then leased it back for $38,400 a year -- 10 percent of the property's appraised value. The Port leased the property to Calpine for the same amount.
Calpine later filed for bankruptcy, and the lease ended up with Oregon LNG. Hansen worked for both companies.
Huhtala's group estimates the lease should be bringing in "at least" $1 million a year based on other deals struck in Astoria and Coos Bay. But it's not clear those deals are comparable. The Astoria transaction includes land with extensive improvements.
In 2004, the underlying zoning of the property was recreational, not industrial. It's common procedure, however, for appraisers to value land based on the intended use, said John Brenan, research director for The Appraisal Foundation. After 2004, Oregon LNG successfully got the property rezoned to accommodate the LNG terminal.
Louise Solliday, director of the Department of State Lands, said the land is likely worth more in an industrial use. But given the hurdles faced by the LNG terminal, it made sense to base the lease on the existing zoning, she said.
"If we end up with (a terminal), the new lease rate will reflect that," Solliday said.
Jack Crider, the current Port of Astoria director, said he supports the LNG terminal and the appraised value may not be far off, given the economic downturn. But the lease was "a bad business deal, " given hundreds of thousands of dollars the Port has spent in legal costs and staff time.
The sublease to Oregon LNG gives the company the upper hand in requesting a 30-year extension, he said. "The craziness of the whole agreement is the Port really doesn't have a lot of rights," Crider said.
A Kulongoski spokeswoman said the office is reviewing the investigation request.
-- Scott Learn
| 11/9/2009 11:06:00 AM | ||||||||
Undervalued lease is source of controversy By CASSANDRA PROFITA The Daily Astorian The Port of Astoria's unprofitable 2004 liquefied natural gas lease in Warrenton has long been labeled a blunder by new Port leaders and LNG opponents. But until recently, most of the blame has been placed on 2004 Port leaders for rushing the lease approval without public input and neglecting to collect any revenue or even cover their own costs on the deal. The Port leases 92 acres on the Skipanon Peninsula from Oregon Department of State Lands for $38,400 and subleases it to Oregon LNG for the same amount. Now, documents recently secured through a public record request are adding a new source of controversy to the dubious land deal and bringing the state's role in the approval process into question. Records show the land appraisal that set the value of the Skipanon site at $384,000 - which determined the $38,400 annual lease rate - was completed while the Port was making plans to develop a golf course there. Although DSL's lease with the Port and the sublease with Oregon LNG clearly identify an LNG terminal as the intended use, the leased value of the land is based on a proposed recreational - not marine industrial - development. On Friday, LNG opponents with the Astoria-based Columbia River Business Alliance sent a letter to Gov. Ted Kulongoski criticizing the state for going along with the 2004 land appraisal and asking for an investigation of why DSL approved an "outrageously undervalued" lease. "Why would they accept an appraisal for a golf course when they know the land is going to be used for the purpose of an LNG terminal?" CRBA Executive Director Peter Huhtala asked. "By November 2004, it was all about LNG, not a golf course." Looking for a way out Huhtala said the undervalued appraisal explains why Oregon LNG pays so much less per acre than the competing LNG developer in Coos Bay, Jordan Cove, and offers another reason why the Port and the state should get out of the lease deal. Oregon LNG pays $418 an acre monthly for the Skipanon property, which is bare land made of dredge spoils, while Jordan Cove pays $13,061 per acre every month for a 147-acre site in Coos Bay. The Skipanon leases were signed in November 2004, and the zoning of the site was changed to allow for an LNG development about a year later. The leases stipulate that the site must be reappraised every five years, but the first reappraisal hasn't been done yet. Huhtala, who is running for the state representative seat held by Brad Witt, D-Clatskanie, asked the governor Friday to help the Port of Astoria by revoking DSL's arrangement with the Port and renegotiating a better deal. He argues the Skipanon site is worth at least $1 million, and not leasing the land based on that value is costing the state's common school fund millions long-term. The Port and Oregon LNG are suing each other over the lease in two different courts. Oregon LNG is charging the Port with breach of contract for accepting a two-year extension of the initial five-year lease term with DSL and delaying a 30-year renewal, which the company's sublease depends on. While Oregon LNG tries to force the Port to renew the master lease for 30 years, the Port is trying to get out of the sublease by suing the company in Clatsop County court for not holding up its end of the bargain. "The Port should not have to go this alone," Huhtala said. "The state was culpable in the whole mess from the very beginning and should be obligated to extricate the Port and the people from this bad deal." New details revealedThe Oregon Department of Justice recently released evidence that former Port Executive Director Peter Gearin engaged in official misconduct while arranging the Port's LNG lease deal, using his position to get his then-girlfriend Susan Trabucco a public relations job with Oregon LNG's predecessor, Calpine Corp.But that's not all the investigation uncovered. Since DOJ released documents related to the Gearin investigation, hidden details about the lease have come to light, including the fact that: • the Port gave away 14 acres of its own property in 2004 and then leased it back from the state to speed up the deal with the now-bankrupt LNG developer Calpine Corp.; and • the low price tag on the lease helped the LNG project survive Calpine's 2005 bankruptcy and made it a more attractive investment for New York holding company Leucadia National Corp., which purchased the lease and rights to the development for $4.25 million in January 2007. In his interview with state investigators, Hansen said Calpine's lease in Warrenton was "in the firing line" along with many other contracts and leases that were terminated in the bankruptcy process. While the company would have been willing to pay more for the lease initially, he said, had the price been higher, "it would have been kicked out." Hansen also said the reason he was pushing for a speedy lease approval from the Port was because the developers of the competing Bradwood Landing project were trying to convince Calpine executives to back their project 38 miles up the Columbia River instead of developing an independent terminal in Warrenton. "We got into this kind of funny situation where you had the Houston office of Calpine working with Bradwood to join the Bradwood project and the Portland office of Calpine pushing to do Calpine's own project out in Warrenton," Hansen said, according to the interview transcript. "So there was, shall we say, some competitive pressure." Gearin said it was at Hansen's request that he arranged a Port commission meeting to approve the Calpine lease on short notice in November 2004. The staff report on the lease was drawn up the day before the Friday afternoon meeting, Gearin said in his interview. Ownership issues settled quickly and quietlyAccording to Port and DSL documents, Port administrators knew the Port owned about 14 of the 96 acres requested by Calpine in 2004.But the exact lines of ownership on the filled property had been in dispute for years. To lock in the lease with Calpine quickly, Gearin decided the Port should quit claim all 96 acres to Oregon Department of State Lands, including the property that the Port already owned. The quitclaim deed cleared up ownership issues at the site and allowed the Port to lease the land back from the state without issue. But that part of the deal wasn't discussed with the Port Commission before the lease was approved. "There always has been an issue there. It's been going on forever," said Port Executive Director Jack Crider. "That was the easiest way to do it. They were doing things quickly. On the face of it, the staff report and everything looked reasonable. The biggest thing is the commissioners weren't told the truth by the staff." Crider said the Port's ownership might not have made any difference to commissioners, and they might have approved the lease anyway, especially because much of the Port's ownership was wetlands that wouldn't be used for the LNG terminal footprint. "It was a piece of property they'd tried to develop for years," said Crider. "If you looked at what they were trying to accomplish back then, they were on a roll cleaning up the Port, leasing it out, getting development started. They were pretty proud of what they were doing back then." The Port of Astoria had a policy of leasing land at 10 percent of its fair market value when Calpine came knocking, but the land on the Skipanon had been slated for an 18-hole golf course since 2000. The land appraisal was completed in March of 2004 by Weed & Associates a couple months before Calpine quietly floated the possibility of LNG to Port leaders. Critics say that saving time might have been the reason the Port used the existing appraisal, but that doesn't explain why the state went along with it. "What they did is they appraised it as a golf course, and the state accepted that appraisal,"?said Crider. "The fault would be the state accepted the appraisal based on the current zoning. They could have said, 'Gee whiz, that appraisal's not good.' But they never did that." | ||||||||
| 11/10/2009 12:00:00 PM | ||
| Why, indeed? State officials are complicit in the charade that gave Oregon LNG a bargain lease The Daily Astorian, Editorials
| ||
