Oil storage and transport operation in Portland pushing city for permit allowing expansion

With operations in Portland, Texas-based Zenith Energy has been transporting crude oil from North Dakota and Canada by rail and loading it onto ships for distribution since 2017. The company has been operating on an old land-use permit that was granted before Zenith began its operations. The company needs an air permit from the Oregon Department of Environmental Quality but it can’t do that without first getting the land-use permit from the city of Portland. Environmental groups have been lobbying city hall for months to deny the permit, based in part on the city’s own commitment to reduce greenhouse gas emissions and use of fossil fuels. Zenith is expected to sue the city if it’s denied the permit. We talk with Susan Smith about this project, the permits Zenith needs to continue and what legal issues the city has been weighing.

This transcript was created by a computer and edited by a volunteer.

Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Any day now, the City of Portland is expected to announce a decision on whether or not it will grant a permit to the Zenith Energy Company. Zenith transfers and stores petroleum products like crude oil at a terminal in Northwest Portland. Over the last three years, the company has increased its oil by rail transport nearly 17 fold. If the City denies this permit and if that denial were to withstand legal challenge, it could mean the end of Zenith’s operations in Portland. If the City grants the permit, Oregon’s Department of Environmental Quality would move forward with its own deliberations on a separate Air Quality Permit. It’s a complicated story, but a lot is at stake. Susan Smith is here to help us understand this. She’s a Law Professor at Willamette University who specializes in Environmental and Natural Resource Law. Susan Smith. Welcome to Think Out Loud.

Susan Smith: Thanks so much Dave.

Miller: Let’s start with the basics here. I should note that you’re not working for either Zenith or the various groups that want the city to deny this permit. What is Zenith currently doing in Portland?

Smith: Really, what we have is Zenith receives tar sands and other crude oil, like Bakken Oil from Dakota by rail. It has 84 above-ground tanks that can hold a little over 1.5 million barrels of oil. Then it takes that stored oil and pumps it into oil tankers that are docked across the street at the Chevron dock. This is a facility in Northwest Portland in the Industrial Area. Then the ships take that crude oil and tar sands oil to other places in the United States and then abroad for refining.

Miller: Zenith Energy is just the latest company to operate at this location. It took over in 2017. What’s the larger history of this site?

Smith: What we have in the Zenith facility is a facility that was originally an asphalt plant. It was built way back in 1947, and as you can imagine, not built to today’s environmental standards at all. It operated as an asphalt plant, but was then turned into a crude oil refinery and went ahead and refined oil in Portland until Arc Logistics bought the plant sometime after... they got rid of the refinery in 2012. And then they turned it into a bulk oil terminal or a place where you have oil storage and transfer.

Miller: Kind of a middleman for our fossil fuel world.

Smith: Absolutely.

Miller: Zenith is operating under a permit that expired almost a decade ago. The permit that we can talk about, not the Portland question now, but one that the State DEQ gives out. This permit expired almost a decade ago. How does that work?

Smith: Well this is a permit for a major source and so it’s called a Title Five Permit, which makes it federally enforceable, which means people can go ahead and sue in terms of citizens’ suits. And the government, the federal government can take enforcement action as well as the state. So it’s a big source, a major source permit called a Title Five Permit. That sort of permit is good only for five years. So the permit that Zenith is currently operating under is a 2007 permit, that should have expired in 2012. The owner at the time was Paramount Petroleum, and they filed an application for a renewed permit in 2012. DEQ has not yet processed that permit. Understandably, State law says, well if they’ve gone ahead and applied for a permit and the government hasn’t just gotten around to issuing the permit, then they can continue to operate until the government makes a decision. And so really DEQ has been sitting on this permit for what is almost a decade now.

Miller: As part of DEQ’s process now to grant a new permit related to the Clean Air Act, they have said to the city, you need to do a Land Use Compatibility Statement. That’s the permit, if that’s even the right word, that the city, the Bureau of DEQ Services is considering right now, what exactly is a Land Use Compatibility Statement?

Smith: It’s a certification that the facility needs. Portland’s Land Use Law, that it is consistent with Portland’s Comprehensive Land Use Plan.

Miller: So let’s talk about this. Six years ago, the city council in Portland adopted a policy to quote, ‘Actively oppose expansion of infrastructure whose primary purpose is transporting or storing fossil fuels in or through Portland or adjacent waterways.’ It also, specifically voted to oppose oil by rail transportation through and within the city of Portland. That all seems pretty cut and dry and it goes back a couple years now. So how is this even an issue?

Smith: The nub of the question is, at least from Zenith’s perspective, they haven’t expanded anything. From their perspective, they’ve got the same old storage tanks that they always had. So, there hasn’t been an expansion of the facility. Unfortunately, they’re wrong. They have expanded the facility. They have added three rail platforms that are designed to process fossil fuel, and as you mentioned in your introduction, they’ve made a 17-fold increase in the amount of what we call throughput, the amount of oil traveling through the plant, and that actually increases the amount of emissions from the plant. There’s not a 1-1 relationship, but a 17 fold increase in the amount of oil flowing through the plant, does mean that there is a substantial increase in the amount of air pollutants that are being emitted from the facility. So at least from my perspective, I would call that an expansion of infrastructure. Even though they haven’t created more storage tanks,...

Miller: There was the infrastructure increase of the rail tracks, as you noted, I guess, to make it possible to move more oil trains faster.

Smith: That’s right. They added three platforms that move fossil fuels. They did that in 2018. Then, just more recently they said, oh by the way, we’re going to add some bio-fuel rail platforms. You know, and that was something that the city approved in April.

Miller: We talked, just last week, about the recent report commissioned by the city and the county, Multnomah County and City of Portland, detailing the likely effects of a Cascadia Subduction Zone earthquake on the six mile stretch of oil storage tanks along the Willamette River. The exact area we’re talking about. Could the catastrophic results of an earthquake like that be factored into a decision on whether or not to grant this permit?

Smith: Yes, at least in terms of the Air Quality Permit. DEQ can turn down an Air Quality Permit where a use constitutes nuisance. And I think under Oregon law, you could call this use a nuisance, certainly unless there is some retrofitting of all these oil tanks. You have to understand these are really aging oil tanks, that if they let loose 1.5 million barrels of crude oil and tar sands, the oil is very heavy. If it goes into the river, it’s right next to the river, it will blanket the bottom of the river and kill the river basically, and all the life in it, including the salmon. And we won’t have to worry about salmon being endangered and threatened anymore. They’ll be extinct. In addition, there’s a possibility, maybe a probability, I don’t know the exact science, but there is certainly a possibility that all of that oil will explode, and we’ll get a massive, massive explosion.

Miller: Now, I should note that despite part of what we’ve just been talking about, the sense I’ve gotten from hearing bits from opponents of Zenith Energy and from articles, is that it seems likely the city is going to grant this permit because they have fears that they’ll be sued by Zenith and that they would lose that suit. What kinds of arguments would you expect from Zenith?

Smith: Well, I think on the Land Use Compatibility Statement, what Zenith will say is that they have been allowed to continue to operate. That the city, implementing its climate policy, went ahead and said as far as regulations, with respect to bulk terminals we’ll allow existing terminals to go ahead and be there, but we won’t allow any expansion or new facilities. And so they would just argue, hey, we’re an existing facility. I think the city actually is miscalculating, because it seems to me that we have had an expanded facility here, and I think Zenith is improperly focusing on the fact that they haven’t expanded their storage tanks. Storage tanks are not the only thing that gives off air emissions, which by the way, is what we’re trying to talk about when we’re talking about a Land Use Compatibility Statement for an Air Permit. It is the throughput of the oil through the facility that has increased, and in my mind certainly constitutes an expansion. And on top of that you’ve got the fact that they had to expand the infrastructures to make that happen.

Miller: Susan Smith, thanks very much for helping us understand the situation. I appreciate it.

Smith: Yeah, Thank you so much, Dave.

Miller: Susan Smith is a Willamette University Law Professor who specializes in Environmental and Natural Resource Law.

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