An incentive program that pays ocean-going ships to use low-sulfur fuel while docked at the Port Seattle is bound for an overhaul after a state audit said it constitutes an illegal gift of public funds.
According to the audit, the port exceeded its authority when it funded the program. In mid- 2009, the port entered into an agreement with the Puget Sound Clean Air Agency to administer the program, which was designed to reduce diesel emissions from maritime industry activity in the Puget Sound Region.
The agreement provided $2.2 million through June 2012 for the At-Berth Clean Fuels (ABC Fuels) Incentive Program, which reimbursed shipping lines to use low-sulfur fuel while at berth. Reimbursements ranged from $1,200 to $2,850, depending on the amount of low-sulfur fuel used; the port says the program has reduced the soot emitted by ocean-going ships on the Seattle waterfront by a third.
In audit results that were released Dec. 4, however, it’s stated that the port knew prior to funding the ABC Fuels program that it wasn’t legally able to participate in it.
“Prior to the July 2009 agreement with the (Clean Air) Agency, the port performed a legal analysis to determine whether it had the authority to administer air-pollution reduction programs,” the audit states. “The port concluded that certain aspects of air-pollution reduction programs were outside of its authority and entered into an agreement with the Agency to operate the ABC Fuels program. The port may not pay another party to perform the activities it is not authorized to do.”
The audit also faulted the port’s agreement with the Clean Air Agency for not providing the port with a right to refuse payment or other remedy should the Agency spend the money for purposes beyond the port’s authority and for the port not being able to pre-approve Agency expenditures of port funds to ensure they were for allowable purposes.
The audit goes on to recommend that the port create internal controls to ensure that in the future public funds are only spent on allowable activities and contracts with third parties “sufficiently describe the work to be performed and monitoring is performed to ensure the work is completed before payment is made.”
The port has responded to the findings by saying that the ABC Fuels program “has been lauded by the maritime business community” has resulted in a 34 percent reduction of diesel emissions of ocean-going vessels while at berth.
Seattle also disputed the audit’s determination that agreement did not allow the port to refuse payment or provide a remedy if the Puget Sound Clean Air Agency spent the money for purposes beyond the port’s authority.
“If the PSCAA had spent money beyond the specified scope, the port could have brought a legal action for damages and specific performance,” Seattle said in a written response. “The port also had the ability to terminate the contract for any reason after giving proper notice to PSCAA.”
But the port also conceded that the program would be reviewed and that it would work with the Washington State Auditor’s Office to reconfigure the program so that the concerns expressed in the audit are met.
