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Has the Port Commission of Coos Bay Handled Shipbreaking, Their Land Deal for the Liquefied Natural Gas (LNG) Terminal, and Other Issues with Due Diligence?

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This web page is by Range (Richard) Bayer of Bayer Research; click to email comments.
Last Revised: 2 Feb. 2008.

What's New on related web pages:
* State of Oregon Opposition to the Bradwood Landing LNG Terminal and Support of the Coos Bay LNG Terminal (27 January 2008)
* Proposed Coos Bay Shipping Container Facility (APM Terminals) and Jordan Cove LNG Terminal (August 2007)
* Oregon Senate Bills 432 and 643 Signed into Law in 2007: Shipbreaking Only in Dry Dock for Large Ships in Oregon (August 2007)

For more recent information about LNG at Coos Bay than on this web page:


Table of Contents for Ths Web Page

(Sections below on this web page have not been updated since Nov. 2006-Feb. 2007.)

Purpose of This Page: Handling of Issues, Keyword Index, and Bibliography
The State Port of Coos Bay Commissioners, the Governor's Charge to the State Commission, the Port's Vision, and the Port's Executive Director
Contact Governor Ted Kulongoski with Concerns about the State Port of Coos Bay Commission
.....4 February 2007 Letter to Governor Kulongoski: Port Commission of Coos Bay Not Following Governor's Directives (separate web page)
.....9 February 2007 Letter to Governor Kulongoski: State of Oregon's Enabling of Jordan Cove LNG Terminal (separate web page)
Tools for Citizens To Express Their Opinions
Have the State Port of Coos Bay Commissioners Directed the Port Like a Successful Business?
Are the State Port of Coos Bay Commissioners Complying with Oregon Policy for Governments?
Have the State Port Commissioners Acted with "Reasonable Care" or Exercised "Due Diligence" in Approving Their Land Deal for the Jordan Cove LNG Terminal?

Liquefied Natural Gas (LNG)
.....Timetable for the State Port Commission's Land Deal for the Jordan Cove LNG Facility
.....Expenditures for LNG Terminal and Projects Apparently Dependent upon the LNG Terminal Amount to $1-2 Billion. (Summary in Table 1)
.....The Target Market for Jordan Cove's Natural Gas Is California
.....Will the Expanded Jordan Cove LNG Terminal and Pacific Connector Gas Pipeline Compete with the Coos County Gas Pipeline?
.....Is Bob Braddock's Promise that the Coos County Will Have the Cheapest Natural Gas on the West Coast Plausible?
.....Are the State Port of Coos Bay's Explanations that If the Port Had Not Provided Land for the LNG Terminal That It Would Have Been Built Anyway Questionable? (Summary in Table 2)
.....Lobbyist and Former State Senator Ken Messerle and LNG
.....Oregon Economic and Community Development Department's (OECDD) Involvement with Port Projects
.....Have Taxpayers Helped Pay for the Jordan Cove LNG Project?
.....Citizen Opposition to the Jordan Cove LNG Terminal and the Associated Pacific Connector Gas Pipeline
.....News Media Coverage of Port Commission, LNG, and Pipeline Issues
.....How Realistic Is the South Coast Development Council Inc.'s (SCDC) Economic Impact Report for the Proposed Coos Bay LNG Terminal? (separate web page)

Other, Non-Shipbreaking Issues
Other Recent Port Commission Actions that Show that Important Decisions Are Made in Executive Sessions and/or Do Not Include Meaningful Public Input
.....Project TK (Tokuyama)
.....Coos Bay As a Gateway Port with Container Shipping (Project April)
.....Pay Raise for Port Executive
.....Other Businesses

Shipbreaking
Will There Be Meaningful Citizen Involvement in the Port Commission's Decision about Shipbreaking?
Environmental Recycling Systems (ERS) and Public Relations for Proposed Ship Recycling at Coos Bay

Bibliographies
Keyword Index to Ship Recycling and Other Relevant Port of Coos Bay Issues
.....A. Oregon International Port of Coos Bay's Web Site Items Related to Ship Scrapping, LNG, Project TK, and Gateway Port
.....B. Newspaper Articles Starting in February 2006 Related to Coos Bay Shipbreaking
.....C. Sampling of Other Articles, Editorials, or Letters about the Port of Coos Bay Activities Not Directly Related to Ship Salvaging"
.....D. Some Corporate, Community, and Government Web References Relevant to Jordan Cove LNG Terminal and Pacific Connector Gas Pipeline


Purpose of This Page: Handling of Issues, Keyword Index, and Bibliography
Last Update: 13 November 2006

Initially, I had planned this page to be only about shipbreaking that had been proposed for Coos Bay. Shipbreaking is also known as ship scrapping, ship recycling, ship salvaging, or ship dismantling. The Port of Coos Bay is seemingly only referring to this euphemistically as ship recycling. As I have researched this issue, I have realized that ship scrapping is only one of several major Port of Coos Bay issues and that the Port is likely to decide the ship recycling issue like it has other issues. Accordingly, this page is still about ship salvaging, but other Port of Coos Bay issues are also included.

During December 2005-January 2006, Coos Bay's newspaper, The World, had five news stories and one editorial about Bay Bridge Enterprises LLC and their proposal to construct an in-water ship recycling facility at Newport. The World did this in part because Bay Bridge had also considered Coos Bay, and a rumor had surfaced that Bay Bridge was still interested in Coos Bay.

On 10 February 2006, The Oregonian reported that Governor Kulongoski announced that ship recycling in Oregon would not get state support unless it was done in drydocks. Bay Bridge's method of in-water ship recycling would not be adequate.

On Feb. 16, the Port of Coos Bay announced that shipbreaking companies were interested in Coos Bay (Port-A2b and Port-A3). One ship salvaging company, Environmental Recycling Systems, has been named in The World (B2). However, no companies have been identified by the Port, which is in keeping with the Port's policy of keeping the names of companies with which they are negotiating confidential (e.g., Project TK). After the Port's announcement, The World has done extensive coverage of shipbreaking issues with 25 news articles during February-June. Most of these articles were by The World's Elise Hamner.

This web page has a Keyword Index based on several bibliographies:
1) Port of Coos Bay's news releases and Minutes of Commission meetings (Bibliography A)
2) newspaper items about shipbreaking (Bibliography B)
3) an incomplete sample of newspaper items about other Port of Coos Bay issues (Bibliography C).
4) corporate, community, and government web references to Jordan Cove LNG terminal and Pacific Connector Gas Pipeline (Bibliography D)

An examination of references in these bibliographies suggests that the Coos Bay Port Commission is neither likely to seek nor include meaningful public involvement in the Commission's decision about shipbreaking or other developments. These bibliographies are also useful in learning more about ship salvaging and in determining how the Commission handles issues.

Surprisingly, I found only a single sentence about the Coos Bay shipbreaking issue since the Port's interest in ship scrapping was announced in February 2006 in any other publication other than The World through July 15 (B37). However, this issue as well as the proposed Jordan Cove Liquefied Natural Gas (LNG) facility and associated 231-mile pipeline to the California border (see Figure 1) and proposals to make Coos Bay a gateway to the interior would greatly affect southwestern Oregon by the Port of Coos Bay. Further, taxpayers of Oregon may contribute to the construction of the shipbreaking facility (B25), and the Oregon Economic and Community Development Department (OECDD) provided $15 of the $25 million loans for the Weyerhaeuser and Jordan Cove Energy Project LNG terminal land deal.

So Oregon International Port of Coos Bay activities are an Oregon issue, particularly since the Port of Coos Bay is a State Port, and its Commissioners are appointed by the Governor, confirmed by the Oregon Senate, and may not be re-appointed or can be asked to resign by the Governor.

[Return to Table of Contents or go to Proposed Shipbreaking (Ship Recycling) of U.S. Maritime Administration (MARAD) or Navy Ships in Oregon or Washington]


The State Port of Coos Bay Commissioners, the Governor's Charge to the State Commission, the Port's Vision, and the Port's Executive Director

Last Update: 4 February 2007

According to the Port of Coos Bay Commission page, the current Commissioners are David Kronsteiner (President), Caddy McKeown (Vice-President), Dan Smith (Secretary), Brady Scott (Treasurer), and Jerry Hampel. The Commission page has links to biographical information about each and also states:

"Oregon International Port of Coos Bay is designated a State Port, consequently members of the Board of Commissioners are appointed by the Governor and confirmed by the Oregon Senate for 4-year terms."

Thus, Port of Coos Bay Commissioners are not elected like those for other Oregon coastal ports (see Oregon Revised Statute [ORS] 777.135 and 777.925 in Chapter 777, C1a). The Port of Coos Bay Commissioners are neither responsible to local voters nor to local elected officials.

In December 2003, Governor Ted Kulongoski decided to replace all five Commissioners for the Port of Coos Bay. He did so by saying he would not re-appoint two Commissioners, calling at least two other Commissioners and asking them to resign, and the remaining Commissioner resigned for "personal reasons" on the same day that the Governor called the other Commissioners to ask them to resign (C1a, C1b, C1c). The Governor announced four of his Commission appointments on the day after asking the Commissioners to resign (C1a). According to articles in The World, the Governor's actions were controversial (C1a, C1b, C1c) and (C5):

"Most of the commissioners he appointed had no direct ties to the port and very little knowledge of its interworkings."
The Governor administered the oath of office to the new Commissioners in January 2004 (C1c). The World editorialized (C1b):
"Because Coos Bay's is a state port, its board is appointed by the governor. Traditionally, the governor's office and the port publicly announce openings on the board and ask those interested in serving to apply for an appointment. Not this time. Those who will be charged with managing this multi-million-dollar agency were picked with no public notification. Instead, the governor's office schmoozed with some local movers and shakers, got some suggestions and made the appointments."

The World also editorialized about the oath ceremony for the new Commissioners (C1c):

"Before he administered the oath, the governor encouraged the new board members to forge partnerships with the cities and the county, with private business and economic development agencies. And perhaps mindful of the dissention that divided the former port board, Gov. Kulongoski reminded the new commissioners that 'bickering is not persuasive in Salem or in Washington, D.C.' "

As stated in the Minutes for the Commission's July 2005 meeting, Governor Kulongoski's charge to the Port of Coos Bay Commissioners included (Port-A1a) (boldface added):

"The major goal of this commission must be to develop a long-term plan for the Port as part of the economic revival of the South Coast region. The Port is a tremendous asset for the local economy, and it must be part of any economic plan. While there are many organizations dealing with economic development, only the Port of Coos Bay can determine the future role of the Port. That is your main task.
...
"And finally, I ask that you work closely with local and regional partners to be sure that your plans are part of a community consensus about economic revival here. The Cities of Coos Bay and North Bend must be part of any discussion on land use, and the counties have a direct interest as well. Private sector businesses, labor and economic development agencies must come to the table. I am asking that you develop a community consensus on how to proceed. As you know, you will probably need state and federal resources to realize your goals, and one thing we look for is that the whole community is behind a plan. Eternal bickering is not persuasive in Salem or Washington, D.C.!"

The Port of Coos Bay states that the Port's Vision (Port-A1a, Port-A11: p. 4) is to:

"Promote optimal use of Coos Bay's deep-water port for the enhancement of the economy and quality of life in the region."

The Port's Vision is thus not just for economic development. Developing a community consensus before making decisions is important in determining what is important economically as well as for maintaining the "quality of life" of residents.

Within seven months of being appointed and without a permanent Port General Manager, the Port Commissioners covertly worked to attract the Jordan Cove LNG terminal, and they publicly supported it in August 2004 (C1da, C1db).

On 5 January 2005, Jeffrey Bishop started work for the Port of Coos Bay as General Manager, and Bishop's proposal to change his title to Executive Director was approved by the Commission by March 2005 (Port's "Executive Director" web page, C1la, C1lb). At the time of the appointment, the Port Commissioners had only one year of experience as Port Commissioners. Jeffrey Bishop's biography on the Port of Coos Bay's "Executive Director" web page states:

"Prior to joining the Port of Coos Bay, Bishop served as Industrial Development Manager for the Port of Tacoma, Washington, for three years, where he was responsible for the marketing of industrial property, management of business relations for the port's bulk commodity customers, and management of Foreign-Trade Zone No. 86, the sixth largest general-purpose zone in the U.S. by import value. He also spent five years with the Port of Pasco, Washington, serving as Director of Properties & Development. ... Bishop also has extensive experience in public administration, serving as City Manager of Sulphur, Oklahoma, and City Administrator in the cities of Jerome, Idaho, Connell, Washington, and Lansing, Kansas."

Bishop's terms of five and three years at two Ports seem short for developing long-term programs or projects as large as the $500 million LNG facility and the $600 million Project TK (Table 1), but he "inherited" the LNG terminal dealings since the Port Commission had already come out in support of it five months before (C1da, C1db). Bishop did not mention any personal experience with working in Oregon before coming to the Port of Coos Bay. However, within two months of starting at the Port of Coos Bay, Bishop was working to purchase Weyerhaeuser's 1,300 acres on the North Spit (Port-A1c, C4f) and with the Japanese company Tokuyama (Project TK; C22b).

The actions of the new Port Commissioners have been controversial. The Port Commissioners do not appear to have followed Governor Kulongoski's directive to build a community consensus before deciding development plans (e.g., the Jordan Cove LNG facility). Further, some Port Commission decisions seem at odds with the intention of Oregon open meeting policies. The Port Commission's handling of the LNG issue has upset many citizens, with a death threat to a Port official about the LNG issue (C40), and a Coos Bay citizen urging residents who opposed the LNG facility to write the Governor to replace the Commissioners (C39).

[Return to Table of Contents or go to Proposed Shipbreaking (Ship Recycling) of U.S. Maritime Administration (MARAD) or Navy Ships in Oregon or Washington]


Contact Governor Ted Kulongoski with Concerns about the12:41:37 PM Thu, Jan 31 2008 Port of Coos Bay Commission

Last Update: 11 December 2006

Please note that the Port Commission's land deal with Jordan Cove Energy Project is a completely separate process from the Federal Energy Regulatory Commission's (FERC) review of Jordan Cove's LNG terminal plan. For the FERC process, see Federal Energy Regulatory Commission and U.S. Coast Guard (2006), Jordan Cove's FERC Filings (http://www.jordancoveenergy.com/filings.htm), Citizens Against LNG, Friends of Living Oregon Waters (FLOW), Umpqua Watersheds, and Jordan Cove Retort. Citizens can still become involved in the FERC process (see FERC: For Citizens).

The Governor appointed the Port of Coos Bay Commissioners, so the Governor is the only elected official with any authority over them. If citizens have concerns about actions taken by the Commissioners, citizens could contact the Governor as Richard Guenther suggested in his 7 Sept. 2006 "Letter to the Editor" (C39).

During a 31 July 2006 forum, Kulongoski "said he would support locating a liquefied natural gas terminal in Oregon, preferably in the Coos Bay area" (Williams 2006, C32d). How can the State of Oregon fairly and impartially be part of the certification process or regulate LNG terminals proposed for Oregon on the Columbia River (e.g., Bradwood Landing), after the Governor has supported the Jordan Cove LNG terminal and the State of Oregon provided the loan that enabled the land deal for the Jordan Cove LNG terminal to be viable (see Project Phoenix and Port's Explanations)?

EMAIL: fill out form at http://governor.oregon.gov/Gov/contact_us.shtml

PHONE: Governor's Citizens' Representative Message Line at 503.378.4582

FAX: 503.378.6827

MAIL: Governor Ted Kulongoski
160 State Capitol
900 Court Street
Salem, Oregon 97301-4047

4 February 2007 Letter to Governor Kulongoski: Port Commission of Coos Bay Not Following Governor's Directives (separate web page)

9 February 2007 Letter to Governor Kulongoski: State of Oregon's Enabling of Jordan Cove LNG Terminal (separate web page)


Tools for Citizens To Express Their Opinions

Last Update: 10 December 2006

Citizens need to get involved, if they have concerns.

The coverage of the Jordan Cove LNG and associated pipeline issues by Oregon news media has often seemed one-sided in favor of the LNG terminal or has lacked investigative reporting of claims made by pro-LNG interests. For example, several news media favorably reported the pro-LNG South Coast Development Council Inc.'s (SCDC) economic report for the proposed Coos Bay LNG terminal. However, it does not take much scrutiny to determine that the report does not appear realistic. Also, Jordan Cove LNG's Bob Braddock claimed that Coos County would have the cheapest natural gas in the West if their LNG facility was built, and The World reported this as news, without investigating if this was a realistic claim. The news media have also reported pro-LNG press releases as news. In effect, the news media have provided apparently free infomercials "selling" readers the purported benefits of the Jordan Cove LNG terminal.

One major reason for the one-sided coverage is that companies promoting the LNG terminal and pipeline have public relations staff and financial resources to get their message across (see Citizen Opposition to the Jordan Cove LNG Terminal and the Associated Pacific Connector Gas Pipeline). Further, citizen or citizen groups have apparently seldom used press releases, a tool that pro-LNG forces have used very effectively. Citizens or groups with concerns about the Port Commission or in opposition to the LNG terminal and pipeline do not have the resources or appear to have the public relations savvy of pro-LNG interests. Pro-LNG interests also appear to have been very effective in lobbying Port Commissioners and State of Oregon officials for their cause.

Concerned citizens may improve their communication with the news media and governmental officials by using the following resources:


Have the State Port of Coos Bay Commissioners Directed the Port Like a Successful Business?

Last Update: 3 February 2007

Many citizens fault government when it appears incompetent, inefficient, or wasteful. They then often suggest that government should be run more like business. But is the Oregon International Port of Coos Bay being operated like a successful, long-term business?

The Port Commission Has Not Followed Its "CEO's" Directives

Governor Ted Kulongoski is the State of Oregon's equivalent to a company's Chief Executive Officer (CEO). In business, the CEO's directives are to be followed. The Governor appointed all Oregon International Port of Coos Bay Commissioners in 2004 and directed them to "be sure that your plans are part of a community consensus about economic revival here" (Port-A1a). But the Commissioners have failed to develop community consensus before concluding the Port's deal for the Jordan Cove LNG terminal. In addition, the Commissioners appear to be making no effort to develop community consensus before deciding Project TK and some other issues.

The Governor's directives to the Commissioners also included (Port-A1a): "The Cities of Coos Bay and North Bend must be part of any discussion on land use, and the counties have a direct interest as well." The Commission mentioned that Coos County was included in negotiations for the Jordan Cove LNG deal after signing the Letter of Intent, but the Commission did not mention if the cities of Coos Bay and North Bend were included (Port-A1c). In late July and early August 2006, the Coos Bay and North Bend City Councils refused to take a stand about the LNG facility (C32b, C33a). If the Commission did not include the Cities in the Jordan Cove LNG deal, then the Commissioners failed another of the Governor's directives.

The State Port Commission Has Not Included Its "Shareholders"

In business, the company is beholden to its shareholders. The Port's shareholders are residents within the Port district as well as other Oregonians, since the Port of Coos Bay is a State Port. It may take more time and effort in the short-term for the Port to meaningfully include the shareholders. But it pays dividends in the long-term when:

  1. major economic development projects are adequately explained before decisions are made
  2. shareholder questions are fully and honestly answered before major decisions are made
  3. shareholders are included in the decision-making process.
Then shareholders will come to "own" projects and be more supportive of current and future projects. By the Commissioners' deciding the Jordan Cove LNG deal and other deals without including the Port's shareholders until after the decisions had already been made, shareholders may justifiably feel that these deals have been forced on them and are not "theirs."

The Commissioners' decisions that exclude the input of shareholders may seemingly work in the short-term. However, the Commission does so at the cost of a loss of trust by the shareholders, who could fail to support the Port in the future. Indeed, there has already been a Letter to the Editor in The World suggesting voters write the Governor to replace the Port Commissioners because of their LNG actions (C39).

The State Port Commission Has Not Exercised Due Diligence Like a Successful Business Would

A successful business would use reasonable care and due diligence before making major decisions involving hundreds of millions of dollars. But it is questionable if the Port Commissioners exercised due diligence in their Jordan Cove LNG land deal (Table 1).

Further, a successful business would negotiate with all partners of a venture, not just the the partner responsible for the development of the venture. Otherwise, the venture may not be operated favorably to the business. Yet, Port Commission negotiations and interactions for the LNG venture with Jordan Cove Energy Project have only been publicly noted as being with Bob Braddock of Energy Projects Development LLC. But Energy Projects Development LLC is the minority partner in the Jordan Cove Energy Project and is only "responsible for the successful development of the proposed LNG facility" (Fort Chicago 2005). Once the LNG facility is developed, then the majority partner Fort Chicago and possibly Energy Fundamentals Group (both of Canada) can operate the facility with little input from the Port, and this may be detrimental to other potential Port partners such a container-shipping facility (Project April).

The State Port Commission Has Not Well Served Its Business Partners

In business, it is important to serve one's partners well. The Port could have best served its business partner, Jordan Cove Energy Project, by trying to meaningfully include the public before deciding the Weyerhaeuser land deal involving the Jordan Cove LNG developers. The Commission could have held hearings and perhaps even a vote before signing the Letter of Intent for the Weyerhaeuser land purchase and Jordan Cove LNG lease/sale option deal, before voting to approve loans in April 2006, or at least before money exchanged hands and legal paperwork was signed in May and June 2006. But the Commission chose to proceed with the deals without public input and to try to build community consensus only after "the check is in the bank." If the public had been included, there would have been an opportunity for community consensus. Then the deal could have proceeded with public support, if the public chose to do so. Now there is controversy and distrust among residents of the Coos Bay area as well as among Coos County citizens who are affected by the pipeline from the LNG facility to near the California border (see Figure 1; see Keyword Index for LNG and Pipeline).

[Return to Table of Contents or go to Proposed Shipbreaking (Ship Recycling) of U.S. Maritime Administration (MARAD) or Navy Ships in Oregon or Washington]



Are the State Port of Coos Bay Commissioners Complying with Oregon Policy for Governments?

Last Update: 13 November 2006

The Port of Coos Bay Commission is a State Commission, so Oregon's "Membership Handbook for Boards and Commissions" would apply. Page 4 of the Handbook indicates that "effective" board members "Recognize the board must operate in a public and open manner" and that:

"Oregon is known for an open form of government that allows for citizen participation and involvement. Two illustrations of this are the public records and open meetings laws that have been on the books for many years. These laws are designed to protect public interest, and to make sure the public's business is conducted in an open forum."

Oregon Revised Statutes (ORS) Chapter 192 deals with public meetings by government and includes:

"192.620 Policy. The Oregon form of government requires an informed public aware of the deliberations and decisions of governing bodies and the information upon which such decisions were made. It is the intent of ORS 192.610 to 192.690 that decisions of governing bodies be arrived at openly. [1973 c.172 §1]"

ORS 192.660 in ORS Chapter 192 lists several situations where governmental bodies can meet in executive sessions. Executive sessions are defined in ORS 192.610 as "any meeting or part of a meeting of a governing body which is closed to certain persons for deliberation on certain matters." In particular, ORS 192.660(2)(e) indicates that executive sessions can be held:

"To conduct deliberations with persons designated by the governing body to negotiate real property transactions."

The Port of Coos Bay Commissioners have met and deliberated in executive sessions about property deals until the "deal's done." A June 2006 article in The World about Commission Vice-President Caddy McKeown (C22a) reported:

"McKeown defended the port's secrecy in trying to recruit Tokuyama and other prospective industrial companies. In executive sessions, allowed under Oregon's 'open meetings laws, we can deliberate on the sale of property until the deal's done,' she said. 'In my mind, that's the way it should be done. It's all about the land.' "

The Port's definition of negotiations for land deals is narrow. In discussing Project TK, the World reported that Port staff indicated (C22a): "Talks never progressed to the point of negotiations." However, many citizens would consider the Port's discussing "costs for services and real estate" with Tokuyama as revealed in August 2005 (C4c) and presenting, in the Port's words, a "very attractive proposal" to Tokuyama in March 2006 (Port-A6: Item 5A) to be negotiating. The Port was clearly offering deals for Project TK before the public had a chance to comment about whether Project TK was advisable in view of environmental and aesthetic concerns that The Oregonian noted but that the Port and The World did not mention.

The Port Commissioners also have deliberated in executive sessions about the Jordan Cove LNG land deal and made decisions before notifying the public about the deal or including the public in making the decisions. It is legal to meet in executive sessions for "deliberations with persons designated by the governing body to negotiate real property transactions," and it is prudent to conduct the details of such negotiations in private. However, it is also prudent to include public input in deciding whether property transactions should occur or not before the final negotiations about the details starts. This is particularly true for controversial issues such as the Jordan Cove LNG terminal or potentially controversial issues such as Project TK that may have safety, environmental, or aesthetic effects. If open meetings are not held that meaningfully include public input about whether property deals should be conducted or not, then the public will justifiably feel that they are not included and wonder about what other "back-room" deals have been or are being made.

At a Port Commission meeting in February 2005, Marvin Caldera asked the Commissioners about a proposed raise to a Port executive, but the Commissioners approved the raise without answering (C1lb, C1o). Port Commissioner Brady Scott stated about the Commission's response (C1lb):

"There's nothing written in stone saying we have to respond to somebody's comment in the public comment period. We had all the information we needed."

A report about the March 2005 Port Commission meeting stated (C1o):

"[Commissioner Jerry] Hampel also vigorously defended the board's integrity and disputed accusations the commissioners operated in secret. 'We have never, ever, broken the code of ethics,' Hampel said after the meeting. 'That's absurd. We've done everything in the open.' ... Yet the board does have the legal right to private meetings, [Commissioner Caddy] McKeown said. While members have to approve motions in public, board members can hold some discussions in closed executive sessions. 'People don't always see the things we're working on, because we can't discuss them,' said McKeown. 'We do have a lot of irons in the fire - there are a lot of projects we're in pursuit of.' "

Commissioner Hampel's assertion that the Commission does "everything in the open" is not supported by the Commission's actions that do not include meaningful public input before making decisions about the land deal for the Jordan Cove LNG terminal, Project TK, and at least two other actions. The Commissioners may ceremoniously formalize decisions in public, but that is not the same as including public input before making major decisions.

In response to the February and March 2005 Port Commission meetings, The World editorialized (C1n) about the appointed Port Commissioners who started in January 2004 (C1a, C1b, C1c, C5) (boldface added):

"There's no doubt previous port commissions were fractious. Meetings often were colored by fiery debates and disagreement. There was plenty of discussion and when the smoke cleared, it was usually apparent why they took action. It's distressing the new commission members made these important - and expensive - decisions with little public dialogue. ... When they received the oath of office, the commissioners were charged by the governor with establishing a vision and moving the port into profitability. With little explanation, the board took a step that is costing nearly a quarter of a million dollars annually for two employees."

The Port Commissioners appear to continue to ignore some public input at Commission Meetings. For example, during the January 2006 meeting, three citizens each spoke about different subjects (use of North Spit settling pond, decommissioning of Cape Arago Lighthouse, and LNG) during the "Public Comments" period. The Commission's Minutes and The World's report of the meeting do not show a response or interest by the Commissioners in the comments (Port-A2a: Item 3, C6a).

At the Port Commission's 16 March 2006 meeting, North Bend resident Jody McCaffree spoke to the Commissioners (Port-A5: Item 3, C9). The World reported (C9)(boldface added):

" 'I'm frustrated because I feel like we're just accepting any junk industry without researching it,' McCaffree said. 'I think it needs to be opened up for public debate instead of charging ahead.'
"Port commissioners listened and moved onto other topics without comment."

Only after the Commission approved and signed contracts and money exchanged hands for the Weyerhaeuser and Jordan Cove LNG land deal during April-9 June 2006 did the Commission finally start addressing public concerns about the land deal. During the Commission's June 15 and July 20 meetings, the Commission appeared to respond to public concerns about the LNG terminal (Port-A9: Item 4, Port-A10). However, during the July 20 meeting (Port-A10), the Commission seemed to try to encourage citizens to leave before commenting by using three tactics: pushing the public comment period back towards the end of the meeting, interrupting the comment period to do additional business, and limiting each citizen to 4 minutes of comments. In contrast, public comments were given at the start of other Port Commission meetings (e.g., Port-A1a, Port-A5, Port-A6, Port-A8, Port-A9).

On 2 August 2006, the Commission answered some questions about the Memorandum of Agreement with Jordan Cove in The World (C33b). Only in August did the Commission finally put material to address concerns about their LNG land deal on the Port's web site (Port-A11, Port-A12a, Port-A12b). This material was first publicized in The World on Sept. 13 (C41a).

Minutes for the June 2006 Port of Coos Bay Commission meeting (Port-A9: Item 4) indicate that citizen Jody McCaffree did not think the Commission was doing enough to inform the public about meetings. So she requested the Port to inform her of meetings. However, the Commission is often deliberating in executive sessions that are not open to the public. Consequently, even if the Port tells citizens about public meetings, citizens are not allowed at executive sessions where deliberations occur until, as Commission Vice-President Caddy McKeown states (C22a), the "deal's done."

Is the Port of Coos Bay Commission following the intent of ORS 192.620 that "decisions of governing bodies be arrived at openly"?

[Return to Table of Contents or go to Proposed Shipbreaking (Ship Recycling) of U.S. Maritime Administration (MARAD) or Navy Ships in Oregon or Washington]



Have the State Port Commissioners Acted with "Reasonable Care" or Exercised "Due Diligence" in Approving Their Land Deal for the Jordan Cove Liquefied Natural Gas (LNG) Terminal?

Last Update: 15 January 2007

Black's Law Dictionary (1999:204) defines "reasonable care":

As a test of liability for negligence, the degree of care that a prudent and competent person engaged in the same line of business or endeavor would exercise under similar circumstances. -- Also termed "due care"; "ordinary care"; "adequate care"; "proper care."

And Black's Law Dictionary (1999:204) defines "care" as:

1. Serious attention; heed (written with care)
2. Under the law of negligence, the conduct demanded of a person in a given situation. Typically, this involves a person's giving attention both to possible dangers, mistakes, and pitfalls and to ways of ensuring that these risks do not materialize (standard of care).

Black's Law Dictionary (1999:468) defines "due diligence":

The diligence reasonably expected from, and ordinarily exercised by, a person who seeks to satisfy a legal requirement or to discharge an obligation.

Boards and Commissions need to use due diligence in discharging their obligations as board members or commissioners in reaching decisions. For example, a Grand Jury found that a School Board in California "did not exercise due diligence" (Santa Barbara Grand Jury 1997: Finding 1).

Below are items asking whether the Port Commissioners acted prudently, with reasonable care, or exercised due diligence in approving the Commission's land deal for the Jordan Cove LNG terminal:

  1. Would a prudent Commissioner follow the directives of the Governor who appointed the Commissioner? The Governor directed the Port of Coos Bay Commissioners to develop community consensus for the Port's economic plans before proceeding (Port-A1a). Yet the Commissioners clearly have not done so for their land deal with Jordan Cove Energy Project before approving loans, signing contracts, and exchanging money in April-June 2006. Only afterwards have the Commissioners tried to develop community consensus to support the decisions that they had already made.

    Because the Commissioners did not build community consensus for the Jordan Cove project before approving the land deal and the exchange of money, there is now considerable controversy and bickering in the Coos Bay area (e.g., search The World for "LNG"), which is exactly what the Governor directed the Commissioners to avoid (Port-A1a, C1c). Were the Commissioners negligent in not following the Governor's directives?

  2. In a controversial issue as the Jordan Cove LNG issue, would prudent Commissioners follow Oregon's "Membership Handbook for Boards and Commissions" guideline on p. 4 that the "authority to act is granted to the board as a whole, not to individual members"? Further, p. 5 states as "common sense" that:
    "No board member should make decisions or take unilateral action without the consent of the board as a whole. ... Board members should remember they are seen as representatives of the board when they appear at industry or professional gatherings. They must take care not to appear to be speaking for the board unless specifically authorized by the board to do so."

    However, Port documents indicate that Commission President David Kronsteiner testified on his own about the position of the entire Commission. The Commission's Minutes state that on 11 July 2006 Kronsteiner "gave testimony on behalf of the Port before the Federal Energy Regulatory Commission (FERC) and the U.S. Coast Guard in reference to the Jordan Cove Energy Project L.P. (Docket No. PF06-25-000) and the Pacific Connector Gas Pipeline, L.P. (Docket No PF06-26-000)" (Port-A10: Item 6A). A Federal Energy Regulatory Commission (FERC) transcript of the meeting also indicates that Kronsteiner testified "on behalf of the Port" (Kronsteiner 2006:53), and the FERC transcript and Commission's Minutes indicate that Kronsteiner testified about (Kronsteiner 2006:54, Port-A10: Item 6A):

    "The commitment of the Port of Coos Bay to cooperatively work with FERC, the U.S. Coast Guard and other stakeholders to support the eventual development of the Jordan Cove Energy Project and the Pacific Connector Gas Pipeline."
    The meeting in question was the July 11 public meeting held by the Federal Energy Regulatory Commission and U.S. Guard at Southwestern Oregon Community College in Coos Bay (Kronsteiner 2006, C24a, C27). The World reported that "David Kronsteiner, president of the Oregon International Port of Coos Bay" was one of a very few people to make "positive statements" about the proposed Jordan Cove LNG project (C27).

    Kronsteiner's testimony had evidently not been approved by the other Commissioners and evidently was legally questionable because at the Commission's July 20 meeting, the Port's attorney "recommends the ratification of this testimony by the full Board" (Port-A10: Item 6A). This resulted in Commissioner McKeown making a motion to ratify Kronsteiner's testimony and Commissioner Hampel seconding it (Port-A10: Item 6A). Since only three of the five Commissioners were present at this meeting (Kronsteiner, McKeown, and Hampel), Kronsteiner's own vote was needed to provide the third vote that would be a majority of the five member Commission (Port-A10: Item 6A).

  3. Would a prudent Commissioner follow Oregon's "Membership Handbook for Boards and Commissions" guideline to focus on the needs of the "general public"? On p. 3-4 of the Handbook, it is written:
    "It is important to keep in mind that all members have been appointed to the board to serve the public at large. The concerns and points of view of all interested parties must be represented and considered, but ultimately, the primary responsibility of every board member is to protect the health, safety and welfare of the general public.

    "If you were recommended by a professional association or special interest group, you will be expected to provide the board with your technical expertise, and to bring the point of view of the group to the board. However, you were not appointed to serve only as the representative of a specific group. When the group's interest conflicts with that of the general public, your primary responsibility is to the public. All board members must work for the benefit of the public first, with the good of any particular profession, industry or special interest group taking a secondary position."

    The Commission did not demonstrate that the LNG project is in the interest of the "general public" before approving the land deal for it. Many constituents of the Port have great concerns about their "health, safety and welfare" because of the LNG project. The only publicized survey informally indicated that only 7 of 39 people were for it, 15 were undecided, and 14 were against it on 12 June 2006 (C21). At the only formal public hearing in which citizens could testify about it, only about a "handful" of the approximately 90 speakers spoke in favor of it on 11 July 2006 (C27). The World editorialized for a vote about the Jordan Cove LNG facility in September 2006 because of divided community opinion (C38).

  4. Would a Commissioner acting with reasonable care study the financial history of LNG terminals in the United States? The U.S. Dept. of Energy's Energy Information Agency (2001) noted:
    "LNG in the United States has a sketchy past. Because of rising natural gas prices in the 1970s, LNG project sponsors anticipated large profits and constructed the four U.S. LNG receiving terminals in existence today. Dreams of high profits never materialized, however, because natural gas prices began a precipitous decline after their 1983 peak, and all but one of the four were mothballed. The facility at Everett, Massachusetts, remained in operation only because it was located in a heavily concentrated market center where demand was high and the cost of bringing conventional supplies to market by pipeline was high enough to exceed the cost of LNG (74). In 1989, the Lake Charles, Louisiana, facility was reactivated (75), mainly to receive spot cargos.
    "For close to 20 years, LNG was not considered to be an economical source of natural gas. As a result of the high 2000-2001 prices and the growing demand for natural gas, interest in LNG has renewed to the point that not only are the other two facilities, at Elba Island, Georgia, and Cove Point, Maryland, reopening (Elba reopened in October 2001), but at least 13 new facilities have been proposed to serve U.S. markets (Table 8)."
    U.S. LNG terminals may be structurally sound, but they appear financially uncertain. Is it prudent for the Port Commission not to include the public in the decision-making process for such a risky venture? Is the Port Commission building a "house of cards" with its development plans that can collapse if the price of natural gas drops or if LNG becomes too expensive or is in short supply?

  5. Would a prudent Commissioner have researched LNG terminals and realized that they are very controversial in the United States because of health, safety, and security issues? After such research, would a prudent Commissioner have realized that it would be essential to have documentation to show due diligence before making the land deal for the Jordan Cove LNG facility because of the controversy about LNG facilities and Oregon's policy of open government? Would it have not been prudent for the Commission to document that they exercised due diligence by having an independent study, conducting public hearings or open forums, and soliciting documented input from a diversity of experts before voting to approve and exchanging money for the Jordan Cove LNG land deal like they did in April-June 2006? Especially after several citizens had directly asked the Commission to do independent studies or have public hearings (Keyword: Citizens)? And after The World editorialized in February 2006 to include citizens in public decisions about industrial development, including LNG, "before public officials are headed into the final curve on the road to decision-making" (B1)?

  6. Would it be prudent for the Commission not to rely on information mostly supplied by LNG proponents before making a decision to approve a land deal for it? The Port appears to have relied heavily on materials directly or indirectly supplied by Jordan Cove's Bob Braddock, who as a 33% owner of Energy Projects Development LLC (Jordan Cove Energy Project 2004:2), certainly has a self-interest in constructing the LNG facility. Commission President Kronsteiner said about Braddock (C1db): "He's a very good source of information." The Minutes of a Port Commission meeting indicate that the Port's Martin Callery (Port-A1b: Item 5C):
    "commented that he has been working a lot with Bob Braddock and the Jordan Cove Energy Project. Port staff had the opportunity to meet with Mr. Braddock's engineering consultants on what the Port is involved in, and how staff can help with their project."

    However, Braddock's promise that the Coos Bay area would have the cheapest natural gas on the West Coast seems questionable, so relying on his information may also be questionable.

    The Commission privately worked with the South Coast Development Council Inc.'s Director Ron Opitz to attract the Jordan Cove LNG developers to Coos Bay in 2004; Opitz had formerly worked for NW Natural gas (C1da, C1db). A prudent person would probably recognize that Opitz may have a point of view favoring LNG. Two Commissioners visited a LNG facility in Japan and discussed their operations with LNG facility staff (Port-A10: Item 4A)--again, this source of information could be expected to favor LNG.

    Where is the Commission's documentation that they did a balanced review of LNG facilities and their consequences before approving the Port's land deal with Jordan Cove LNG developers?

  7. Would it be prudent for the Commission to have sound explanations for why they approved their land deal for the Jordan Cove LNG facility? The Port has argued that the LNG facility was coming anyway, so the Port could use the facility to "leverage" this into purchase of the Weyerhaeuser property, construction of a multi- dock and dredging of a shipping turn basin (see Port's Explanations and Gateway Project). However, it is questionable that the LNG project would have succeeded without the Port's help because it would have been the smallest in the United States and Jordan Cove Energy Project itself has stated that their initial site at Roseburg Forest Products was inadequate (see Port's Explanations). The Port's land deal resulted not only in making the facility larger, more financially viable, and more able to compete with the proposed Bradwood Landing LNG terminal (Bradwood 2006, which is further along in the permitting process than Jordan Cove), but it could also result in LNG tanker traffic that could affect other ships and boaters.

  8. Would a prudent Commissioner have researched the Jordan Cove LNG facility and associated Pacific Connector Gas Pipeline and discovered that they involved over $1 billion dollars of development in February 2006 (Table 1)? The Port may have conducted due diligence on how to leverage the LNG land deal to expand the Port, but do the Commissioners have documentation to show their due diligence in determining the possible consequences of these investments and facilities?

  9. Did the Commissioners exercise due diligence to discover the competition that will occur between the proposed Pacific Connector and the taxpayer-funded Coos County pipeline? The proposed Pacific Connector Gas Pipeline has upset many people in southwestern Oregon (see Keyword: Other Pipeline). It could also result in Coos County taxpayers paying for a pipeline that may not pay for itself and that may become obsolete as soon as the Pacific Connector is completed. The Commission's land deal for the Jordan Cove LNG terminal is directly linked to the Pacific Connector Gas Pipeline because the Coos County gas pipeline is too small to output all natural gas from the proposed Jordan Cove LNG terminal, and the Jordan Cove LNG terminal needs a pipeline to carry the gas away to be approved (C8b).

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Did the State Port Commissioners act with "reasonable care" or conduct "due diligence" before covertly attracting and, in August 2004, publicly supporting the Jordan Cove LNG facility (C1da, C1db)? Before privately negotiating with the Jordan Cove LNG developers and publicly signing a Letter of Intent with Weyerhaeuser for purchasing 1,300 acres of land and executing a lease/sale option with Jordan Cove in October 2005 (Port-A1c; Timetable for Port's LNG Land Deal)? Before signing contracts for loans and exchanging money ("the check is in the bank") for the Weyerhaeuser land sale and Jordan Cove land deal in May-June 2006? Before the Port Commission's President testified to the Federal Energy Regulatory Commission (FERC) and U.S. Coast Guard on 11 July 2006 in favor of the LNG project without prior approval from the other Port Commissioners (Kronsteiner's Testimony)? If not, is the Port Commission negligent?

In June and July 2006, the Port of Coos Bay stated that it now has a "two year contingency/due diligence period" about their land deal with Jordan Cove LNG developers (Port-A2a: Item 6A, C19). But would a prudent Port Commission have already conducted due diligence before approving the Jordan Cove LNG land deal (see Timetable for Port's LNG Land Deal)? Port of Coos Bay staff have been noted as performing due diligence (Port-A1c, Port-A11: p. 24), but it is also the responsibility of the Commissioners to exercise due diligence.

The Port of Coos Bay continues to demonstrate a lack of due diligence because they did not host a balanced program about the risks of spills for LNG tankers and terminals during the 6 December 2006 LNG demonstration paid for by Jordan Cove Energy Project.

The Port proposed a process with public forums for an "open and balanced discussion" for shipbreaking issues in February 2006 that could be described as conducting due diligence, so they are aware of the importance this process to be prudent (Port-A2b, Port-A3). Why did they not also do so for the Commission's land deal for the Jordan Cove LNG facility?

Have the Port Commissioners handled Project TK and other issues with due diligence? Or do the Commissioners have a pattern of making decisions without including the public or seeking independent reviews as a reasonable Commissioner would before approving projects involving hundreds of millions of dollars or that could greatly affect the Coos Bay area (Table 1)?

If citizens have concerns about the Port of Coos Bay Commissioners, their only recourse may be to contact Governor Kulongoski, who appointed the Commissioners and who may not re-appoint a Commissioner or who can ask a Commissioner to resign as Governor Kulongoski has done in the past (see Port of Coos Bay Commissioners).

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Timetable for the State Port Commission's Land Deal for the Jordan Cove LNG Facility

Last Update: 21 January 2007

Please note that the Port Commission's land deal with Jordan Cove Energy Project is a completely separate process from the Federal Energy Regulatory Commission's (FERC) review of Jordan Cove's LNG terminal plan. The Port Commission now seems to try to lay all responsibility for the LNG facility siting on FERC, but it has been the Port Commission's actions and land deal that have given Jordan Cove LNG developers a viable project that is more likely to be approved by FERC.

Below is a timetable for some of the events relevant to the Port Commission's land deal with the Jordan Cove LNG terminal developers.

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Because of the Energy Policy Act of 2005 (C3b, C3c), the Port Commission's land deal was the only chance for local government and citizens to approve/disapprove the LNG facility on Port property. After the Commission's deal went through, local citizens can only comment to federal agencies that will make the final decision about permitting the LNG facility. However, comments by local citizens may not make much difference because federal agencies may believe that they have a mandate to approve a LNG facility over local and state objections as a consequence of the passage of the Energy Policy Act in 2005 (C3b, C3c).

Perhaps the LNG terminal deal is good for the Oregon International Port of Coos Bay (Port-A1c, Port-A9: Item 6A, Port-A10: Item 4A, Port-A12a, Port-A12b, C4f). But the Port Commission completed the Weyerhaeuser and Jordan Cove Energy Project land deal without meaningful public input and without developing community consensus before making decisions. This seems to violate the intent of Oregon's open government policy and is also contrary to the Governor's directive to the Commissioners to develop a community consensus for its development projects. The Commission's handling of the Jordan Cove LNG issue signals the public that they will probably also not be invited to provide meaningful input into future Port deals.

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Expenditures for LNG Terminal and Projects Apparently Dependent upon the LNG Terminal Amount to $1-2 Billion

Last Update: 13 November 2006

The Jordan Cove Energy Project LNG terminal and the Pacific Connector Gas Pipeline are dependent upon each other. Without the large LNG facility there would be no need for the new pipeline because the current 12-inch Coos County/NW Natural gas pipeline would be sufficient. Without the Pacific Connector Gas Pipeline's capability of handling 1 billion cubic feet of gas daily (Pacific Connector Gas Pipeline 2006a), the current Jordan Cove LNG terminal design with a billion cubic feet daily capacity would not be possible. To get FERC approval an LNG terminal facility must be able to output all gas (C8b).

The Jordan Cove LNG facility needs to be able to produce 1 billion cubic feet of natural gas daily in order to compete with the 1.3 billion cubic feet production of the proposed Bradwood Landing LNG facility (which is further along in the permitting process) and to show FERC that there is a need for the Jordan Cove LNG terminal (Jordan Cove Energy Project 2006e: section 1.1.1 "Purpose and Need", Jordan Cove Energy Project 2006f: "Alternatives").

The siting of Project TK (Tokuyama) at Coos Bay appears to be dependent upon the successful siting of the Jordan Cove LNG facility because Tokuyama's proposed $600 million plant needs the cheap natural gas that would be supplied by the Jordan Cove LNG facility as an energy source (Port-A10: Item 4D, C22c, C35).

The Port's Gateway Port project depends upon the Jordan Cove LNG facility for financing.

Jordan Cove's Bob Braddock says that their LNG terminal will also attract other energy-based industries (Jordan Cove Energy Project 2005:42, C7). Braddock also promised that "Coos County will have the lowest natural gas prices on the West Coast," though this seems unrealistic.

Table 1.  Estimated expenditures totaling over $1 billion for facilities apparently dependent upon Jordan Cove Energy Project's LNG terminal. See text for discussion.

Projected Expenditure   

Project

$500+ million  

Jordan Cove Energy Project LNG facility (Jordan Cove Energy Project 2006d, C32a, C32b)

$750-850 million  

Pacific Connector Gas Pipeline (C8b, C32c)

$600 million

Project TK ($600 million in August 2006, C35; $500 million in June 2006, C22c; it was revealed in July 2006 that Project TK has expanded in scope [Port-A10: Item 4D])