Targa Backs Out of Port of Tacoma Oil Terminal Project

By John Gillie, September 6, 2013, The News Tribune

Targa Sound Terminal’s plans to build a $150 million bulk liquids distribution facility at the Port of Tacoma died Friday.

The company told the port in a formal termination letter that  its studies over the last seven months showed a new tank farm wouldn’t be economically viable.

Targa Sound Terminal President Troy Goodman told port Chief Executive Officer John Wolfe that the company’s plans for a long-term lease of the port-owned site of the former Kaiser Aluminum smelter wouldn’t be moving forward.

The company had planned to use the site to build a rail yard and tank farm to receive and distribute crude oil and biofuel from the upper plains states brought to the Puget Sound area in 100-car trains.

“We used the feasibility period to thoroughly evaluate the option of leasing the property and expanding our operations. In spite of the tremendous support we received and our best efforts, we regret that we have been unable to identify an economical path forward for our project. For this reason, we have given notice to port staff that Targa is terminating the lease for the former Kaiser site.” said Goodman in a letter to Wolfe.

The signing of the preliminary agreement for the site earlier this year was a critical step forward for the port in its efforts to diversify its business.  The terminal would have employed some 50 full-time workers. Likewise, it would have created dozens more jobs in the railroad and shipping businesses that would have serviced the terminal.

Targa paid the port a total of $700,000, $100,000 a month, during its feasibility evaluation period.

In anticipation of the terminal’s construction, the port began planning and construction of two long lead tracks to serve the terminal and other facilities along the Blair Waterway. The port also took steps to complete final environmental cleanup of the 96-acre former smelter site.

Port spokeswoman Tara Mattina said those projects would continue.

“Those tracks will serve any future developments in that area, and the environmental cleanup will have to be done no matter who eventually occupies the site,” she said.

Mattina said the port, while disappointed that the Targa deal fell through, is optimistic that the Kaiser site will find a productive use.

“It’s one of the few shovel-ready sites on the West Coast with water access that could handle a large operation,” she said.

Both before and after Targa signed its deal, the port had seen significant interest from other companies.

The port likely will continue to market the site for bulk transportation purposes rather than attempting to create yet another container terminal on the site.

The port bought the World War II smelter with its 500-foot-tall smokestack in 2003. That smelter was one of a half-a-dozen aluminum plants built before or during World War II to take advantage of cheap electric power produced by Columbia River dams and the demand for aluminum in the aircraft industry in the Puget Sound area.

Kaiser, which bought the smelter from the federal government in 1947 for $3 million, operated the facility until 2000. The company blamed low prices for aluminum, rising energy prices and a two-year strike for forcing it to close the plant. But Kaiser reportedly resold the still relatively low-cost power it had contracted for the plant on the open market for $460 million.

The port demolished 75 buildings on the site and recycled more than 1.5 million pounds of metals salvaged from those buildings to offset the restoration costs.

Since the recession struck in 2007, the port has attempted to broaden its base of business. It has revived its log export business, bolstered its break bulk shipping traffic and leased some of its property to shipyards. The recession caused the port to lose about 25 percent of its vital containerized cargo business.

Targa said it will continue to operate its existing terminal along the Tideflats’ Hylebos Waterway.

“Targa remains committed to Tacoma and we will continue to grow as your neighbor at our existing facility. We continue to invest millions in our existing facility; this month we plan to start the construction of several new tanks,” Goodman told the port.

” We will pursue other growth projects in our region, and we look forward to a time when we may resume our discussions with you about including the former Kaiser property in our expansion plans,” he said.

Targa’s oil terminal was one of a handful of new petroleum terminals being built or expanded in the Pacific Northwest.  Among those was an expanded terminal at Tacoma’s U.S. Oil refinery and at refineries in Northwest Washington.

The availability of less expensive crude oil from new discoveries in the Bakken Formation in North Dakota has prompted Puget Sound refineries to shift some of their crude oil sourcing from Alaska and overseas to the upper plains.

In recent months the burgeoning transport of crude oil in long unit trains has come under increasing scrutiny after a crude oil train caught fire in an Eastern Canada community.

Goodman said Friday that there was little he could add to what he had told Wolfe in the termination letter.

“It was just a combination of commercial, schedule and regulatory issues that combined so we just couldn’t do it,” he said.

Targa intends to continue growing at its existing facility, he said.

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