(EDITOR’S NOTE: This is the first story in a two-part series about recent developments in the attempt of Harbor-Works Development Authority to acquire a site on the Port Angeles Harbor that is owned by Rayonier Inc.
(This link will take you to the three-page July 21 letter from Rayonier to Harbor-Works — http://issuu.com/PeninsulaDailyNews/docs/rayonierletter?mode=embed&layout=http%3A%2F%2Fskin.issuu.com%2Fv%2Flight%2Flayout.xml&showFlipBtn=true )
PORT ANGELES — Rayonier has told Harbor-Works that it will not sell the site of its former pulp mill to the public development authority.
In a surprise letter sent last week to the Harbor-Works Development Authority, Rayonier Vice President Michael Herman wrote that the company has “no further interest in pursuing a transaction with HW [Harbor-Works] at this time.”
The move comes about two weeks before the Harbor-Works board was to decide whether to acquire the former mill site and puts nearly two years of effort to place the largest undeveloped property on the North Olympic Peninsula under public ownership in serious jeopardy.
Charles Hood, Rayonier vice president of corporate affairs, said Thursday that the company’s plan is now to hold on to the property at least until its required level of environmental cleanup –and the extent of the company’s liability for paying for it — is determined.
In his letter, Herman cited concerns with Harbor-Works’ plan to acquire the property through phases and an inability to ensure a cap on the company’s cleanup liability.
He also accused the public entity of violating a confidentiality agreement regarding negotiations.
The 75-acre property on the eastern shore of Port Angeles Harbor is contaminated by heavy metals, PCBs and dioxin left from 68 years of a pulp mill operation.
The Rayonier mill closed in 1997 and the cleanup of the site has been under the state Department of Ecology since 2000.
Harbor-Works Executive Director Lincoln denied that the terms of the confidentiality agreement have been violated.
“We’ve tried to keep negotiations very confidential,” he said.
Lincoln said the letter came as a complete surprise, partially since his final proposal to the company had yet to be presented.
“I think Rayonier is making a horrific mistake,” he said.
In his reply letter to Rayonier sent Thursday, Lincoln requested that the company reconsider its decision and expressed astonishment that it would withdraw from negotiations when the public development authority is on the verge of completing its final proposal.
“Since Rayonier has yet to see our proposal or the specific elements of the proposed transaction, we are at a loss to understand the timing and dismissive tone of your letter,” he wrote.
Lincoln and other local leaders, hoping that negotiations can restart, say the move by Rayonier could be nothing more than an eleventh hour attempt to strike a better deal.
Hood said that’s not the case, and there will be no reconsideration.
“Where we are in the process of cleanup, I don’t know if we will ever cede the property to a third party without knowing the extent of our liability,” he said.
Hood said that’s been the company’s position all along.
So why had the company negotiated with Harbor-Works?
Hood said Rayonier was interested in negotiations with Harbor-Works because of the possibility of the public development authority being able to allocate additional funds for cleaning up the property, and therefore, allow the company being able to cap its cleanup liability.
“We thought that there may be some opportunity for shared liability,” he said.
“But once we discovered in our case there wasn’t that opportunity, then we were already at the end of it basically.”
Hood said Rayonier came to that conclusion this spring, but agreed to an extension to the negotiations at the request of Harbor-Works.
What the company means by shared liability, he said, is a contribution to the cleanup effort from Harbor-Works. That contribution was expected to come in the form of a grant from Ecology’s toxics cleanup account.
That expectation was nothing new.
A document, which outlined the ground rules for how the property would transfer to Harbor-Works, says that the public development authority would seek such funding for cleanup from the state agency.
The document, titled “Proposal from the city and Port of Port Angeles for the Rayonier site,” was reviewed by Rayonier as late as April 2008, according to e-mails between the company and the city.
The City Council approved the formation of Harbor-Works, with support from the port, a month later.
It was chartered to acquire the property, direct its redevelopment, and help expedite the cleanup of the land.
The Ecology cleanup funds have been out of Harbor-Works’ reach from the start because the state agency has maintained that it cannot allocate any money unless the public development authority has ownership of the property.
Until that is done, not a cent of that can be set aside, said Rebecca Lawson, regional manager of Ecology’s toxics cleanup program.
Rayonier spokeswoman Robin Keegan and Hood said the company will continue to clean up the property under supervision of Ecology.
“Our commitment to the community remains the same,” Keegan said.
“We will clean up the property and we will pay for it.”
The company also expects to finalize a sales agreement with the city for a tank on the property despite the failed negotiations with Harbor-Works.
City Manager Kent Myers said Friday that those negotiations are going well, and he expects the City Council to consider approval of a purchase agreement at its Aug. 17 meeting.
Acquisition of the 5-million-gallon tank — which would temporarily store untreated sewage and storm water that would otherwise overflow into the harbor during heavy rainfall — was one of the reasons why the city created the public development authority.
If negotiations can’t be restarted, Lincoln said he expects that the Harbor-Works board will hold a special meeting Aug. 16 to consider whether the public entity should dissolve.
ON MONDAY: What Harbor-Works supporters and opponents say about the Rayonier announcement.
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Reporter Tom Callis can be reached at 360-417-3532 or at tom.callis@peninsuladailynews.com.
