Environmental Liabilities
Question: How
dangerous is it to leave the mercury in the Bellingham Bay
rather than removing it?
Answer: Mercury is a toxic chemical and one of about 60 for
which the Department of Ecology and the other agencies have established cleanup
standards for marine sediments. Mercury is also a naturally occurring
element that has been part of the Bellingham
Bay ecosystem
forever. There are mercury-containing ores in the Cascades that are
eroded by the Nooksack
River and end up in the Bay.
The natural background levels in the Bay range from about 0.1 to 0.5 parts per million
(ppm). So Ecology’s cleanup standard for
mercury is aimed at remediating areas that that exceed
safe background levels to protect both public health and the Bellingham Bay
ecosystem.
In Bellingham Bay,
the cleanup areas are determined by a combination of biological tests to
protect aquatic organisms and risk assessments to protect people that consume
seafood from the Bay. Ecology has set the cleanup standard for surface
sediments at 1.2ppm. Currently, there are only three sample locations in
the Whatcom Waterway area which exceed that chemical standard and biological
standards to protect aquatic organisms. There are no restrictions on fish or
shellfish collection associated with mercury problems. But because of the
concerns about mercury, the Port is working with the agencies to perform a very
comprehensive remediation project that will safely cap certain areas and remove
others. The result will ensure that both the ecosystem and public health
are protected over the long term.
Question: Why isn’t Georgia Pacific being held accountable for the
clean up of this site?
Answer: Under the proposed transaction, the Port would agree to
take on contractual responsibility for performing specific cleanup activities
in exchange for ownership of certain Georgia-Pacific properties. This type
of contractual agreement exchanges value for value, ( i.e.,
cleanup responsibility for property value), but would not change Georgia-Pacific’s
liability under state and federal law. The Port is not “indemnifying”
Georgia-Pacific for any and all responsibilities. Rather, the Port is
only agreeing to perform cleanup actions for known contamination at the
properties. In addition, Georgia-Pacific would also purchase an insurance
policy to cover potential unknown contamination, regulatory changes, and any 3rd
party claims associated with the contamination. This transaction would
therefore put the property in public ownership and ensure that the site will be
cleaned up to a higher standard, in support of the community’s vision for mixed
use waterfront. But it would not make the community taxpayers responsible for
other environmental liabilities that will be retained by Georgia-Pacific.
Question: Does anyone know how much
mercury G-P brought to Bellingham
and how much of it is accounted for. Are those kinds of records available to
you?
Answer: Our consulting team and GP
officials have told the Port that, beginning in the 1970's, GP operated a process
that recovered mercury from waste products. The mercury was recycled and reused
in the chlor-alkali plant process. At the time, this
was a cutting-edge recycling process. Slightly modified versions of this
process were later adopted nation-wide as part of federal EPA standards for
managing the recycling of mercury waste residuals. Now, of course, we're
managing mercury with much more stringent regulatory requirements.
The
Port has asked GP whether they've ever performed a "mercury
audit". We have been told that this
has been a goal of EPA's, but that there's never been an accurate and
successful methodology to really quantify the amount of mercury obtained for
use in the chlor-alkali process, and the amounts
discharged through wastewater, stack emissions, soil volatilization, etc. There's
just not enough good information to quantify the precise amount of mercury that
came to the site, or that was recovered and recycled.
The
approach the agencies are using now is less theoretical and instead, based on
practical and achievable results. They've establish cleanup standards for all
media (soil, vapor, groundwater, marine sediments). The standards vary according to planned
future use (industrial v. unrestricted).
When Ecology makes a determination about the appropriate cleanup
standard, the responsible party is directed to meet that standard. There is not typically an additional effort
to try to determine an historical waste-in/waste-out calculation to determine
whether all the mercury is accounted for.
Timing:
Question: What happens if we
do not "rush" into this very costly plan? Why not wait another 6
months until the Port, City and residents can more carefully weigh the costs
and benefits?
Answer: The tentative
land acquisition agreement between the Port and GP that was
reached in June, expires at the end of
the year. This is because GP is interested in moving ahead with selling
its property. If an agreement is not reached by the end of the year, the
two parties could possibly reach a new agreement or agree to postpone a
decision. At this time, however, the June 2004 offer expires at the end of
2004. The Port believes the due diligence process has allowed for a careful
consideration of the costs and benefits. The Port encourages the community
to comment on this proposal and to learn more by attending upcoming meetings or
visiting our web site www.portofbellingham.com
Question: After having spent
$700,000, in due diligence is the commission obligated to push this proposal
through?
Answer: No. From the very
beginning, the Port Commissioners have said they will weigh this decision
carefully to determine the long-term costs and benefits for the community.
They recognized that a thorough due diligence process would be expensive
and was essential. The four-month due diligence scientific, planning and
financial research process cost the Port about $700,000. In addition, approximately $5 million has been spent over
the past 10 years studying and researching the entire Bellingham Bay
Cleanup and conducting parts of that cleanup. This includes money
spent by the Department of Ecology and other project partners.
Project Costs and Funding
Question: How will infrastructure costs be paid for with $750MM to
$1 billion of buildings, e.g., roads, sewer lines and treatment facilities,
water lines, electricity, natural gas? Does the Port anticipate the city,
the county, the state, private utilities and/or private developers can be induced
to pay these costs and pass them along to their existing customers/taxpayers?
Answer: The proposal being considered would involve the Port paying for GP's
environmental cleanup and development of public moorage and essential marine
bulkheads; the City paying for construction and development of roads, sewers,
water and other utilities and the development of public parks; and the private
sector or other public agencies purchasing property from the Port and paying
their own construction and development costs. The City would pay for its
portion from newly generated property taxes on the higher value site.
The enhanced property values would
come from private investment. Following approval of the development plan
by the City and Port, and after the environmental remediation and
infrastructure is installed, properties would become available for purchase.
Developers would construct the property improvements (buildings) consistent
with the approved plan. The $750 million to 1 billion dollar figure represents
the estimated assessed value for the purposes of calculating property taxes of
both land and buildings over
the 20+ year anticipated construction timeline.
Question: What are some worse case scenarios and what would
their impact be on the Port, the City and residents?
Answer: This is a long-range
project and in any long-range project there are numerous risks and variables to
consider. The Port Commission is reviewing the due diligence research to
determine whether the benefits outweigh the risks. One way the Port has
reduced the risks is with thorough scientific, financial and planning research
to get a true understanding of the potential costs. After the
cleanup costs were calculated, we were able to have independent
insurance firms cross check our information by reviewing all of the same
research and determining their cost estimates for the cleanup. This independent
evaluation confirmed our cost estimates.
We recognize that there still is the
possibility that the cleanup costs may exceed our estimates. That is why we are
insisting GP pay for a cost-capping environmental cleanup insurance policy.
This policy will provide coverage for costs exceeding our estimates up to $80
million.
We do not believe the grant assurances from
the Department of Ecology will be impacted by the leadership changes at the
state as a new governor takes office. We have worked hard to build strong
relationships with Ecology officials at many different levels within the
organization and our state legislative delegation supports this project. We
believe the state of Washington
is a solid partner for this project.
As for the real estate market, all
indications are that land sales in Whatcom
County will continue to
stay strong and get stronger. We anticipate the land will sell over the course
of 10 to 20 years and we have developed a budget that matches that
anticipation. Our land sales projections are quite conservative.
Question: The marina portion of this proposal costs as I understand
it are, $23.5 m cleanup costs, plus $10.4 m visitor moorage and bulkhead work,
plus $16.3 m development. Are these amounts correct? It was stated
that moorage tenants would pay for this, using the correct numbers what can (we
are slip holders at Squalicum) we expect in moorage
fee increases?
Answer: The Port has developed cost estimates for
the repair and replacement of the bulkheads along Whatcom Waterway and the
construction of 1200 feet of linear visitor moorage and visitor service
facilities at the Waterway.
The estimated cost to repair/replace bulkheads and construct the visitor
moorage facilities is $10.4 million. These costs will be repaid using a
combination of grants and revenue from visitor moorage fees.
Additionally, the Port has developed cost estimates for the cleanout of
the ASB lagoon, the construction of the new marina and the operation of the new
marina along with maintaining and operating Squalicum
and Blaine
marinas. These cost estimates are based
on completing the cleanout and construction of the first phase of the new
marina by 2011 and the second phase by 2015 to meet expected market demand.
There are two different rates that are calculated – one with receiving
assistance from the Washington State Department of Ecology Toxic Waste Cleanup
fund and one without any cleanout grants.
The Port has a moorage rate charged to all customers of the Port’s Marinas. All customers
pay for all costs associated with these two marinas’ operation, maintenance and
capital costs for expansion and replacement.
The Port has calculated moorage rates that would reflect these costs for
the new marina using this same approach. Shown is the difference between what
the moorage customers would pay in 2011 and by 2020: without adding any new
marina and; adding the new marina with and without cleanup assistance. The
resulting, estimated,
moorage rates are as follows:
2011 2020
- No new marina
– maintain Squalicum and Blaine $6.25 $9.07
- Construct new
marina and receive cleanout grants $6.25 $9.65
- Construct new marina but receive no cleanout grants $6.48 $11.58
Insurance:
Question: Does the Port have a response to the concerns raised
about the reliability of AIG as an
insurance carrier?
Answer: We took those concerns seriously
and we conducted an additional review of AIG's reputation. We found
that AIG is the only AAA-rate
insurance agency in the world. The Port does recognize that with a 30-year
policy that here is a possibility of the financial position of AIG weakening. To be on the safe side, we are
including provisions in the policy which would address this potential and
minimize the Port's risk by escrowing funds, seeking reinsurance, etc.. We
believe that with appropriate drafting of this policy that policy disputes will
be minimized.
Question: Why isn’t the Port getting insurance to cover the cleanup
at the ASB Lagoon?
Answer: The Port has a clear understanding of this cleanup and
believes it is unlikely to be at risk for significant cost overruns. This is
because the site is confined to a specific area that will be cleaned out and
our testing has demonstrated that the contamination has not spread beyond the
lagoon. Cost containment insurance for the lagoon is available, but Port
experts determined the potential cost risks are not significant enough to merit
purchasing such a policy.
Redevelopment
Question: How will the average city resident benefit from
developing this land?
Answer: Our community is facing
tremendous growth pressures. Current city and county growth projections
indicate that we can expect the growth trend to continue. One benefit
of redeveloping the GP property is that it could be an ideal location to
provide urban, multifamily housing at a central location that is well
served by public transportation and is close to numerous employers. Recent
community surveys have shown that people are unhappy with the urban
sprawl into rural areas and the GP property could slow that sprawl be
allowing growth in an area that already has had development.
The average city resident could benefit
from development of the GP property in several ways. First the
increased property tax would help pay for essential city services. The assessed
value of the GP property in 1994 was $60 million, which generated $774,000 in
property taxes. By 2004, the demolition and reduction of use of the property
made the assessed value of it drop to $24 million, generating just $244,000 in
property tax. This has made it difficult for local government agencies and
schools that rely on property tax revenue. Our forecasts show that the site
could be worth up to $1 billion when fully developed, which would generate
$9 to $12 million in property taxes for our city and schools.
Question: Is there a market
for the improvements proposed (i.e., offices and stores), particularly with
considerable vacancies in an aging Bellingham Central Business District, and
with this same CBD actively
challenged for customers by businesses in the burgeoning Guide, Fairhaven,
Sunset Drive, Sehome Village and Barkley districts?
Answer: Ultimately, the private sector will determine if this area
and its location will be a worthwhile investment. Based on developer interest
to date, we believe it will be, although complete redevelopment may take 20+
years. There has been great interest - especially for centrally located job creating
activities and residential units. By prioritizing residential and employment
activities, the development of the area should enhance rather than compete with
the existing CBD.
The Port believes it is in
the community’s best interest to jump-start the redevelopment process through
acquisition, remediation and infrastructure installation rather than allow the
ground to lie vacant and unproductive for decades as has occurred in other
city’s waterfront industrial areas when industry leaves.
Question: If the Port
retains ownership of the purchased property and successfully remediates all of the environmental problems between grants
from other governmental entities and an insurance policy, why would private
business invest substantial sums for such a speculative project when they
would, at best, have only a long-term ground lease, and the buildings would
ultimately revert to the Port?
Answer: The Port’s development strategy for much of the Georgia
Pacific main campus area is to sell,
rather than lease, the land. This is different than for other Port waterfront
holdings. By offering the property for sale to developers at market rates, this
property would compete as any other area of the City. The developer who took
the development risk would benefit for any appreciating land or building values
under their ownership. The community benefits because the property is on
the property tax roles.
