Thursday, May 8, 2014

Port of Everett Seeking Shipyard Cleanup Bids

By Mark Edward Nero

The Port of Everett has begun soliciting bids for the final phase of its Everett Shipyard Cleanup project, a mostly in-water job that has a price tag of between $5.2 million and $6 million.

The port says it hopes the cleanup, which is being done in partnership with the Washington state Department of Ecology, will be a catalyst for establishing better environmental health and economic prosperity to its section of the marina.

The scope of the contract includes dredging of about 11,000 cubic yards of sediment, or 700 dump truck loads of contaminated sediment; removing about 3,500 cubic yards of contaminated soil along the shoreline; removing old L, M and N-Central Docks; removing hundreds of creosote treated bulkhead and dock pilings; removing the 14th Street haul-out structure; reconstructing about 360 linear feet of bulkhead with modern environmentally safe materials; constructing a public access path along the new bulkhead and installing a new public access wharf.

Bids are due May 28, with a contract award expected to come in June. Work on the project is planned to begin in August, with a wrap up planned for early 2015.

Those seeking more information on bidding may contact Lisa Lefeber of Port of Everett Public Affairs at or (425) 388-0617 or Seth Preston, the Toxics Cleanup Program communications manager with the state Department of Ecology, at or (360) 584-5744.

DEIR: Yusen Project Would Cause ‘Significant’ Environmental Impacts

By Mark Edward Nero

A proposed project to renovate the Yusen container terminal at the Port of Los Angeles could cause “unavoidable significant impacts,” according to a newly-released draft Environmental Impact Statement/Report.

The draft EIS/EIR, which was released May 5, was prepared by the Port of LA in conjunction with the US Army Corps of Engineers for the Yusen Terminals Inc. (YTI) Container Terminal Improvements Project, located at Berths 212-224 at the Port of Los Angeles.

According to the draft EIS/EIR, implementation of the proposed project or one or more of the alternatives would result in significant impacts in the areas of air quality and meteorology; greenhouse gas emissions; and biological resources.

“No feasible mitigation measures are available that would avoid all of the potential impacts or reduce all impacts to less-than-significant levels,” the report states. “Therefore, potential impacts to these resource areas are considered significant and unavoidable.”

In addition, the report states, implementation of the project would result in significant impacts in the areas of groundwater & soils, but that those impacts could be mitigated.

The terminal proposal entails improving Berths 214-216 wharves, increasing berth depth from minus-45 to minus-53 feet, and improving Berths 217-220 wharves to make way for 100-foot gauge gantry cranes, and deepening to a minus-47 feet berth depth. The project would also construct additional on-dock rail yard capacity for YTI.

YTI, a subsidiary of Nippon Yusen Kabushiki Kaisha (NYKK), operates marine cargo terminals in Los Angeles and Oakland and provides stevedore and terminal service to container shipping lines. YTI has a long-term lease with the Port of LA for operation of the terminal through 2016, and has said it plans to exercise its option to extend its lease through 2026. A copy of the document is available for public review at the Port of Los Angeles website:

The public comment and review period for the draft EIS/EIR is from May 2 through June 16, 2014. During this time, the port will accept written comments and will host a public meeting at 6 pm Tues., May 20 at the Port of Los Angeles Administration Building, 425 S. Palos Verdes St., San Pedro, to present its findings and provide opportunity for public comment.

POLB Loses Suit Filed by Ex Employee

By Mark Edward Nero

The Port of Long Beach was ordered by the Los Angeles Superior Court on April 29 to pay a former employee $1.1 million related to a discrimination case the woman filed against the city in 2010.

The former employee, Sharon Jordan, was the secretary of government affairs for the port until being fired in 2010. After her termination, she sued, alleging she was retaliated against for filing a discrimination report against her employer and for complaining about her job conditions.

Jordan, who was named the port’s secretary of government affairs in February 2008, had also worked for many years as an administrative assistant for the port, which is overseen by the City of Long Beach. She said that although she had previously received only positive reports regarding her performance while working at the port, treatment of her changed in 2008 after her husband became seriously ill.

Jordan said after that point, she was asked by her then-supervisor for regular updates on her husband’s condition, which was followed by criticism of her work and job performance and an unsuccessful attempt by her then-supervisor to demote her. Jordan took medical leaves of absence in July 2009 and May 2010 because of issues at work with her supervisor. She eventually asked to be transferred to another position, but was denied and then fired in July 2010. Her firing came several weeks after she filed a discrimination complaint against the port.

As a result of her termination, she lost her medical insurance; her husband died in January 2011.

"We're obviously disappointed with the verdict," said City of Long Beach assistant city attorney Monte Machit. "We're taking a look at the transcript to see if we will appeal."

Machit didn't say when a decision could come, but he mentioned that under state law, the city has up to 60 days from when a judgment is handed down to file an appeal.

BNSF to Spend Millions in Wash. Rail Expansion

By Mark Edward Nero

BNSF Railway says it plans to spend about $235 million in Washington state in 2014 to expand rail capacity, replace and maintain the network infrastructure and continue its implementation of train control technology.

The railway says it plans to spend about $1 billion this year to improve and expand rail capacity in states along its Northern Corridor, which spans the northern US between the Pacific Northwest and Chicago.

“Our capital investments along the Northern Corridor are critical to expanding our capacity to support the region’s rapidly growing economy,” BNSF Railway President and Chief Executive Officer Carl Ice said.

Expansion projects in Washington State include:
• Constructing second mainline track at various locations on the route between Cheney, Washington and Mesa, Washington.
• Constructing two new staging tracks near Everett, Washington.
• Installing a power switch at Anacortes, Washington.
• Planned property improvements to enhance operations at the intermodal facilities in Spokane and South Seattle, Washington.

Planned maintenance projects include:
• Surfacing and undercutting of more than 1,200 miles of track.
• Replacing about 60 miles of rail, and;
• Replacing more than 113,000 ties.

Some of the projects that are expected to help expand capacity and improve traffic flow for freight and passenger trains on those routes are already underway, according to the railway.

Overall, BNSF says it’s making $5 billion in capital investment in 2014, up $1 million from the then-record amount of $4 billion that it spent in 2013.

A map of the railway’s 2014 spending plan is available at

Tuesday, May 6, 2014

Property Leasing Considerations
in the Maritime Industry

By Carrie A. Ivy

Many maritime businesses lease appropriately zoned land adjacent to or near waterways, and commercial leases in the maritime industry have special complexities and nuances. As compared to commercial lease agreements, maritime industry leases are often for a greater term and can include dry land, shoreline, and marine areas. It is crucial to consider limitations on shoreline development, access, use, and zoning, and there are special insurance considerations as well. There are also very often hazardous material risks or liabilities to be investigated in advance and which should be allocated in the lease document.

Permits for the use of state-owned aquatic lands and submerged lands are issued by the regulating local and state authorities, and vary among municipalities. Check with your local jurisdiction to confirm regulations for your area.

Due Diligence Property Investigation
Before negotiating the terms of the lease, it is wise to perform a due diligence investigation to confirm that the intended business activity is permissible under local zoning regulations, shoreline development restrictions, and other regulations. A maritime land use expert can be instrumental in this investigation.

The tenant most often is required to accept the property as-is, and should therefore build a feasibility and/or due diligence contingency into the lease negotiations to identify impediments and issues with the property before committing to the lease.

Tenants are often charged with the costs of upkeep, maintenance, and repair of the property and improvements. The feasibility contingency should provide the tenant the right to evaluate the suitability of the premises for its intended uses including everything from demographics, general site conditions and regulatory matters to the availability and condition of utilities, ingress and egress, and the availability and evaluation of financing. Many property owners will not allow soil testing or a Phase 2 environmental assessment survey due to the reporting requirements. If a Phase 2 assessment is allowed, the feasibility contingency should last long enough to complete soil testing with permits to determine whether any immediate hazardous materials remediation is required or whether the tenant may proceed with improvements.

Arriving at Fair Lease Terms
Rent is often calculated based upon a combination of square footage, moorage, parking, access, and other amenities. Some state-owned aquatic lands rents are calculated by statute. Increases to rent are most frequently calculated based upon the fair market rent, a set increase, or the Consumer Price Index. Leases of Port district property may require a bond for security of the payment of rent. Property taxes and building maintenance costs are frequently the tenant’s obligation.

Landlords and tenants should give strong consideration to operating, leasing, or owning the property through a business entity, such as a corporation or limited liability company, to limit personal liability for known and unknown liabilities. Assuming the owner and tenant are both entities, the entities are the proper parties to the lease, not the individuals. Some landlords request a personal guaranty of the lease obligations by the owner of the business entity/tenant.

The provisions of a maritime lease may differ from a typical commercial lease agreement. Because obtaining permits for new uses can be difficult and because regulations typically become more restrictive over time, lease terms may stretch ten to fifteen years or longer. A non-conforming use may be grandfathered into a more restrictive regulatory scheme, allowing the business to continue. A shorter lease term increases the risks of administrative red tape.

It may be challenging to accurately identify the leased premises area, especially when that includes shorelines and docks. The best solution may be to attach an accurate survey or drawing. Negotiate adequate protections for foreseeable contingencies, for example, a tenant’s right to rebuild a dock or pier that is damaged in a storm, deterioration, or other casualty.

Leases usually restrict the permissible business uses at the premises. A typical landlord will prefer to tailor the permitted uses closely to the tenant’s actual business operation. In contrast, it is often in a tenant’s best interest to state the permitted uses in more expansive language.

Tenants may request competitive exclusions in their leases, which limit the landlord’s right to lease nearby property to competing business. While it’s true that several businesses operating in the same industry in a close proximity can bring the desired business to the area and increase a tenant’s bottom line, direct competition with a nearby business can have an opposite effect.

HazMat Issues are Red Hot 
Allocation of hazardous materials liability between the property owner and business operator for cleanup, mitigation, and recovery is an important consideration in a maritime lease. Federal, State, and local statutes, regulations, and administrative agencies provide an extensive framework of liability, contribution requirements, fees, and fines. Liability for hazardous materials under Federal and State regulations is most often joint and several. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund) of 1980 and state counterparts impose liability on any past or present owner, tenant, contractor, or other responsible party. CERCLA’s strict joint and several liability effectively results in charging the entire costs of cleanup to each and every party responsible. The rub is that many parties may be long gone, out of business, or beyond the reach of the courts. If the government is able to identify just one party that contributed the polluting condition, that party can be liable for the entire cost of the cleanup. “Strict liability” is a legal standard that imposes liability without fault whatsoever. Formation of a legal business entity such as a corporation or limited liability company can help to protect the personal assets of the individual owner under some but not all circumstances.

Parties may allocate in the lease agreement liabilities for hazardous materials. A property owner may agree to indemnify and hold harmless a tenant for all pre-existing hazardous materials existing at the property at the commencement of the lease. Leases often impose liability on the tenant for all pollution caused by the tenant during the lease term and further require the tenant to indemnify and hold the owner harmless from fines and cleanup costs for those pollution events. An indemnification and hold harmless agreement only provides protection so long as the obligated party remains solvent and subject to suit. Problems of proof will exist and it may be difficult to prove the timing and source for pollution events. Bear in mind that these lease provisions are effectively a contract between owner and tenant and the statutory liabilities are imposed regardless of the lease provisions. It is wise to check with your insurance professional to determine what forms of coverage may be available. While a property owner typically requests a broad prohibition on the use and storage of hazardous materials, the tenant should consider a carve-out for hazardous substances used in its business.

Ownership of Property and Improvements
Lease agreements must reflect the ownership of the personal property and fixtures within the premises. Frequently, a landlord reserves the right, but not the obligation, to retain ownership of all property permanently affixed to the premises (‘fixtures’) at the end of the lease term. Tenants are often obligated to remove all fixtures and improvements at the end of the lease term and to repair any resulting damage. Some leases state that the owner reserves the option to retain all fixtures at the end of the lease. Tenants should carefully identify all trade fixtures and reserve ownership of the trade fixtures. It is crucial to negotiate these provisions before signing the lease.

Equipment, tools, and machinery used in the maritime sector are frequently financed. The landlord and tenant will usually be asked to sign agreements with the lender to assist in securing the lender’s loan. If the landlord refuses to sign, the loan may not happen, the tenant will be impaired in its ability to do business, and in turn, the tenant may default. Therefore, it may be in the best interests of all concerned for the loan to be approved.

Insurance Considerations
Casualty insurance covering the marine industry is unique with coverage unavailable in other industries. Most leases state the minimum insurance requirements for tenant and sometimes the owner. Business owners should not rely upon the lease requirements alone in selecting levels, amounts, and types of coverage. The insurance professional should review the lease agreement prior to the final negotiation stage to confirm the requirements are realistic and not cost-prohibitive for the tenant. Business owners should carefully consider their entire business operations and obtain appropriate additional insurance coverage.

For many maritime activities, coverage under the Longshore and Harbor Workers Act (LHWCA) will be required. Business owners should consider obtaining additional protection including ship builders risk hull insurance, port risk insurance, business interruption coverage and products completed operations coverage. Most policies have broad exclusions for hazardous materials liability. In turn, business owners should verify the existence of insurance by their ship owner customers such as hull & machinery, protection & indemnity (P&I), and LHWCA coverage.

Marine property owners are often very sophisticated and are willing to take all steps necessary to insulate themselves from current and future liabilities. This can be a challenge for small maritime industry business owners that have limited funds or negotiating leverage. Some business owners are more than willing to give up fair lease terms in exchange for access to the coveted property, but that trade may come at a high cost. Irrespective of whether a property owner is willing to negotiate fair and reasonable lease terms, the tenant should first focus on completing its due diligence to identify potential and actual issues affecting the business.

Take Away Points
We routinely recommend that property owners and tenants form a legal entity or entities through which to operate their business and for the protection of personal assets of the owner. Take care to analyze and obtain appropriate insurance coverage with sufficient limits. Before entering into a binding lease agreement, a tenant should perform its due diligence. Carefully review the lease with legal counsel. Be prepared to negotiate lease terms that are unacceptable. Armed with information obtained in the investigation, the parties are in a better position to negotiate fair lease terms. Most parties have at least some leeway in negotiating appropriate terms.

Carrie Ivy has worked as an attorney with Mullavey Prout Grenley & Foe LLP, an established law firm located in the Ballard neighborhood of Seattle, since 2004. Her practice focuses on real estate and maritime issues, including leasing transactions and commercial disputes. She can be reached at

Tacoma Commission Approves Conversion Plant Lease

By Mark Edward Nero

The Port of Tacoma Commission on May 1 unanimously approved a 30-year lease with Northwest Innovation Works Tacoma for a planned $1.8 billion plant that would convert natural gas to methanol, a colorless, biodegradable liquid that evaporates in air.

The plant would sit on a 90-acre site that once was home to a Kaiser Aluminum smelter between the Hylebos and Blair waterways. The port bought the property in 2003 with the intent of remediating it and returning it to productive use.

Under the agreement, Northwest Innovation would lease about 90 acres site and have non-exclusive use of the port’s East Blair 1 wharf and 16 acres associated with the wharf. The lease also includes an 18-to-24-month period for feasibility studies, a three-year construction period and a 25-year operations period, as well as an option for a 25-year extension.

Production is scheduled to begin in 2019.

“Natural gas will arrive at the site via pipeline and then it will depart by export by vessel to Asia” via the port’s East Blair Terminal, Lou Paulsen, the port’s director of strategic operations and risk management told the Commission during the meeting.

The plant would employ about 1,000 workers during construction and 200 workers when in full production, according to the port.

When operational, the plant would ship methanol to Asian countries for use in the production of olefin, a key compound in the manufacture of a wide range of products, including seat cushion, carpets and cellular phones.

Although some area residents testified before the commission that they were concerned about possible environmental pollution resulting from the project, Northwest Innovations President Joe Smith said the plant would be outfitted with the most contemporary pollution control measures available.

Port of Portland Sells Acreage to BNSF

By Mark Edward Nero

An improving auto market and recent influx of domestically produced vehicles for regional and international markets have prompted the sale of 5.4 acres from the Port of Portland to BNSF Railway, the port said May 5.

BNSF Railway’s 27-acre North Rivergate Vehicle Facility, located in the Rivergate Industrial District, is expanding operations and capacity to include enhanced administrative support, vehicle staging and parking. The adjacent port-owned property was acquired to offer additional capacity and a rail easement to support expansion.

“BNSF Railway’s investment and growth plans for their auto business are aligned with the port’s business objectives to enhance the Portland region as a hub for auto logistics,” Port of Portland real estate program manager Joe Mollusky said.

BNSF’s automotive rail network provides access to automotive plants throughout the United States and Mexico. Cars and trucks are received by rail in BNSF Railway’s Rivergate facility, processed and then distributed by truck to auto dealerships or exported by ship. Portland, which is already one of the largest auto import gateways in the US, is also a fast growing gateway for auto exports. Autos are handled at two of the Port of Portland’s four marine terminals.

The port was primarily an import gateway until 2012, but automotive exports to South Korea and China have been experiencing strong growth over the past couple of years. Additionally, exports to China began in October 2013, prompting a $2.8 million expansion of Auto Warehousing Company’s vehicle processing facility at the port’s Terminal 6.

Portland is the second largest auto import gateway on the US West Coast and fifth largest in the nation.

Port Metro Vancouver Expediting Truck GPS Program

By Mark Edward Nero

Port Metro Vancouver and the governments of Canada and British Columbia on May 2 announced joint funding of $1.71 million for an expedited initiative to outfit the remainder of the port’s container truck fleet with Global Positioning System (GPS) technology.

With the completion of the initiative, Port Metro Vancouver says it will be the only port in North America to have a full truck fleet using GPS-monitoring. The GPS technology is expected to provide a complete, accurate and real-time base of data enabling insight to routing and operational information to help manage congestion and wait times.

Under an existing GPS program, about half the trucks hauling goods to and from the port were outfitted with GPS transponder units between 2012 and 2013. The remaining trucks are to be outfitted with GPS units as part of the expedited initiative, which is expected to be completed by this July.

The initiative is the result of a March 26 agreement between the governments of Canada and British Columbia and Port Metro Vancouver reached agreement with members of the United Truckers Association and labor union Unifor.

The agreement resulted in the end of a 28-day strike at the port by drayage truck drivers. The expedited implementation of Port Metro Vancouver’s GPS Program represents one point in a 15-point joint action plan agreed to by both sides that the port says will provide a framework for long-term stability in the container trucking industry.

The current round of funding is being split amongst three contributors, with Transport Canada providing $ 855,000, Port Metro Vancouver $ 595,000, and the BC Ministry of Transportation and Infrastructure providing $ 260,000. This brings the total cost of the program, which started in 2013, to over $2.5 million.

Port of Coos Bay Hires Chief Engineer

By Mark Edward Nero

The Port of Coos Bay has hired Chuck Steffensmeier as its new chief engineer, the port announced May 5.

In his new role, Steffensmeier will have primary responsibility for agricultural operations and marine terminals in the Coos Bay harbor, as well as engineering oversight for rehabilitation and upgrade of the port’s Coos Bay rail line, which serves southwest Oregon. According to the port, railroad design and construction with a focus on rail-related structures such as bridges are Steffensmeier’s specialties, and he is said to have an extensive background in maintenance, permitting and project management.

In addition to working on rail projects, the port says he’s expected to be involved in a number of marine structure projects the port is pursuing in its Charleston facilities and elsewhere.

Steffensmeier has over 25 years’ experience in rail engineering, having previously worked for various engineering firms and railroads during his career, including Union Pacific Railroad, the Alaska Railroad, Metrolink-Southern California Regional Rail Authority and most recently with the San Diego Association of Governments (SANDAG) in San Diego.

He also previously worked as a professional engineer for HNTB Corp., Hanson Wilson, Inc. and HDR Engineering, Inc.

Steffensmeier holds a Bachelor degree in Civil Engineering from the University of Nebraska-Omaha, a Masters in Civil Engineering from the University of Colorado-Denver, and in 2001 received an MBA from the University of Nebraska-Omaha.

He holds professional registrations in California, Colorado and Nebraska, is applying for his Oregon certification, according to the port.