Port of Vancouver says potash export deal is off

More than three years of negotiations fail to produce final accord


By Aaron Corvin, June 20, 2014, The Columbian

A lucrative lease deal at the Port of Vancouver that would have triggered thousands of temporary construction jobs and garnered at least $250 million in private capital investment is off, at least for now.


The port said Friday that it and BHP Billiton, the Australian mining giant, have ended nearly four years of exclusive negotiations to export potash, a crop fertilizer, at the port. The two parties allowed an agreement that gave BHP exclusive rights to nearly 100 acres of property at Terminal 5 to expire as of June 16, the port said.


The break in the two parties’ relationship undercuts the port’s push to land a major revenue-producing tenant at its rail-looped Terminal 5. When it publicly announced a preliminary agreement with BHP in 2010, the port welcomed a visit and supportive remarks about the project from Washington’s then-Gov. Chris Gregoire. Now the dimmed prospect for a final, cash-generating potash deal raises questions about the port’s ability to further invest in its niche attraction for industrial tenants: rail transportation.


Port officials expressed a mixture of optimism and frustration about the end of exclusive talks with BHP. “It was just the plodding that BHP Billiton seemed to be taking to get the mine done,” port Commission President Brian Wolfe said, expressing irritation over the company’s ongoing work to produce potash from its Jansen mine in Canada’s Saskatchewan province. “We can’t just be sitting here waiting.”


Yet, Wolfe and port administrators said the port still enjoys a good relationship with the company and remains open to landing its planned potash export venture at a different port site in the future. And with the nearly 100-acre parcel back on the market, they said, the port will be able to show it off to other prospective tenants.


“We’re confident that we can find a new tenant for Terminal 5 in the near future,” Todd Coleman, the port’s executive director, said in a news release. “It’s an extremely attractive property due to its size and access to river, road and rail transportation.”


In a statement emailed to The Columbian on Friday, Bronwyn Wilkinson, a spokeswoman for BHP Billiton, said the company remains confident the port’s Terminal 5 “would meet our needs if a viable alternative rail solution can be identified. However, we are taking this opportunity to explore all alternative logistics options.”


Wilkinson said the company, for four years, negotiated with BNSF Railway and Canadian Pacific “regarding the provision of rail services.” The company, she said, was “unable to reach agreement regarding the rail service” into Terminal 5.


In a phone interview, she declined to comment on why the parties were unable to reach a rail-service agreement.


Asked whether a proposal by Tesoro Corp. and Savage Companies to build the Northwest’s largest oil-by-rail terminal at the port, using a portion of Terminal 5, entered into potash negotiations, Wilkinson reiterated that the port “would meet our needs if a viable alternative rail solution can be identified.”


In her emailed statement, she said BHP Billiton remains committed to investing in its Jansen mine and that it will continue to study port options in Canada and the U.S., including the Port of Vancouver.


‘A big deal’


In 2010, BHP Billiton, a global mining, metals and petroleum company based in Melbourne, Australia, chose the port’s Terminal 5 as its preferred site for a new potash-export facility.


Plans called for BHP to build an export operation for potash, a natural mineral fertilizer that improves crop yields, including handling, storage, dock and rail facilities. The company would haul potash by rail from its Jansen mine to the port, where it would then be loaded onto ships bound primarily for Asia.


To tout the preliminary deal, the port held a press conference in August 2010 featuring then-Gov. Gregoire.


“We had stars in our eyes back in 2010,” Wolfe said Friday. “They’re a big deal,” he added of BHP.


Progress was made, including site improvements and entry agreements. Delays ensued, though. A weak global economy, in part, contributed to the project’s slowdown.


As recently as January, BHP said its $2.6 billion project to finish the excavation and lining of the Jansen mine’s production and service shafts “is expected to resume in February 2014.” And the port said that month it hoped to secure a final, 30-year lease agreement with the company by mid-2014. The port anticipated the project would go under construction anywhere from one to two years after the lease was approved.


Altogether, the port extended its exclusivity arrangement with BHP seven times, Theresa Wagner, a spokeswoman for the port, said Friday.


But the final deal never materialized.


It would have been significant.


Although the project would not have generated many permanent jobs (at one point, a BHP official estimated 40 full-time positions) its scale was projected to create thousands of temporary construction jobs, on top of a $250 million private capital investment.


The project’s freight implications were enormous: The port now handles about 5 million metric tons of cargo annually. BHP expected to ship 8 million metric tons of potash annually from the port. The parties never released estimated project revenues, but Wagner said Friday “it was a significant amount, one of those large revenue-producing projects.”


The port envisioned spending the revenue generated by the potash deal on expanding rail and other infrastructure to spur further economic growth.


‘A strong position’


Indeed, the port’s signature venture is its $275 million West Vancouver Freight Access project, an effort to expand and streamline its rail network to move cargo by train more efficiently. A 2010 study, conducted for the port by Moffatt & Nichol, says development of the West Vancouver freight-rail project is “highly dependent” on the port landing a tenant for Terminal 5, which would increase port revenues.


Wagner said Friday the break in exclusive talks with BHP does not jeopardize the West Vancouver freight-rail project because the port “only moves forward on projects we can fund.”


The port’s exclusivity agreement with BHP required the company to pay fees to keep the property off the market. The Columbian previously confirmed that, at the end of 2012, BHP had paid the port about $2.24 million. Wagner said Friday the port, at the behest of BHP, no longer discloses the exclusivity-fee amounts.


Wagner said the company made improvements on its once hoped-for Terminal 5 site, including utilities and soil stabilization work. She said the port is optimistic about being able to successfully market the property for other uses. “The economy is turning, we’re seeing more interest in things,” she said.


Port officials said Friday a potash deal with BHP could still happen, since the port owns multiple properties, including Columbia Gateway, which is more than 500 acres. A portion of Columbia Gateway, which is currently not shovel-ready, could accommodate BHP in the future.


“And because our relationship with BHP Billiton remains positive, we’re in a strong position to work with them in the future,” Coleman said in the port’s news release.


Wolfe said Friday the port will have opportunities to land other companies at Terminal 5. It “may not be of BHP Billiton magnitude,” he said, but “something will happen.”


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