Chevron wants SLO to pay $11 million for development

September 22, 2011

By JOSH FRIEDMAN

The San Luis Obispo City Council reviewed and endorsed Tuesday a proposed 322-acre Tank Farm development project designed by the Chevron Corporation, but would not commit to reimburse the developer $11.1 million in costs.

Chevron plans on constructing business parks and manufacturing centers on its property located on the north and south sides of Tank Farm Road between Broad and South Higuera streets. Amenities are to include bike paths, hiking trails and city sanctioned open space

Planners are also considering building baseball fields and luring a hotel to the area in close proximity to the San Luis Obispo County Regional Airport.

Due to San Luis Obispo Municipal Code Subdivision Regulation 16.20.110, adopted in 2006, Chevron actually stands to collect payments from the city when terms are reached. On the grounds that the project is improving neighboring properties, the city intends to “reimburse” the company a prorated amount.

To determine the amount owed to Chevron, the city hired a third party, Goodwin Consulting Group, which calculated the “fair share” Chevron must invest in order to implement the project. Goodwin concluded that the project should cost Chevron $6.1 million, which is $11.1 million short of the company’s projected cost of $17.4 million.

Hence, Goodwin suggested the city “reimburse” Chevron $11.1 million to remain in compliance with its own regulations. The consultant group wrote in its report that the project was only feasible if the city paid Chevron the full amount.

“Without reimbursements, it looks like the project doesn’t work; with reimbursement the project looks to be feasible,” the report says.

Chevron agreed with Goodwin’s findings, and one of its representatives lobbied the council Tuesday night to commit the $11.1 million in its entirety.

“We overspend, and we ask for those fees to come back to us,” said Bill Almas, Chevron project manager. “We’re not asking for anything from the city except to spend money to reimburse us.”

Though the city council did not commit to “reimbursing” Chevron the entire $11.1 million, each council member endorsed the project as a whole and the idea of compensating the company for its effort in improving the community.

Assistant City Manager Michael Codron said the city is exploring the idea of paying Chevron through fee credits from future development plans and inspections in the project area.

Like the council, members of the community expressed overwhelming support for the Chevron project. During public comment, only one San Luis Obispo resident opposed the development plan.

“A deal with Chevron is a deal with the devil,” Will Powers said. “[They are] polluters, human rights violators, murderers of indigenous people… generally terrible stewards of planet earth.”

Vice mayor John Ashbaugh disagreed.

“I see so many benefits from this agreement that I don’t see how we can tell Chevron to take a hike,” Ashbaugh said.

Ashbaugh also warned that choosing to turn down Chevron’s proposal would surely lead to the assumption of the project by the county. The property is currently located in the county and the council intends to have it annexed.

Likewise, Mayor Jan Marx said it is time to move forward on the project.

“This will be like our version of Central Park,” Marx said. “Not that we are New York City, but it is like having a big park in the middle.”

In order to reduce traffic congestion and make the area more accessible, much of the proposed project consists of road expansion. If Chevron’s plan comes to fruition, Tank Farm Road will expand to a four-lane street with a center divider, and Prado Road and Margarita Avenue will each extend to Broad Street.

The energy giant also promises to clear an old and dangerous reservoir, known as “the coliseum,” which is located beside the airport runway along the flight path.

Chevron anticipates construction beginning in two years and taking 25 years to complete. Although Chevron’s project application was accepted by the San Luis Obispo Planning Commission in 2009, the corporation still must negotiate a contract with the city before construction can begin.







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R.Hodin

This is big, couldn’t find one mention of it on the daily competition’s website, not even in the upcoming gov’t meetings notices, so a tip of the hat to CCN for yet another important local news scoop

bobfromsanluis

“Ashbaugh also warned that choosing to turn down Chevron’s proposal would surely lead to the assumption of the project by the county. The property is currently located in the county and the council intends to have it annexed.” … okay, let the county lead on the project; DONE! It would seem to me that the municipal code would not apply if the city simply did not annex the area; can anyone explain to me anything different? Let the county take the lead, let the county dicker with Chevron over the costs involved. IF this project ever does get off the ground and start up, let the city then negotiate with Chevron over development fees, transfer fees, what ever fees the city requires of large developments (when they are not giving away prime downtown parking spaces for almost nothing, like to the Copelands for the Court Street project, the proposed China Town project, and the developer of the almost-approved project on Garden/Marsh/Broad Streets). The city leaders would be more than stupid to spend one nickel of taxpayer monies to Chevron for this proposed toxic nightmare, period. IF the entire 11 Million dollars can be done with tricks of accounting without spending any city funds, go for it; if not, step away and leave it alone, please.

Typoqueen

I agree. Perhaps the problem for the city is that they can’t build out because of this property. LAFCO has a strict policy of no islanding. In other words the city can’t annex around this bit of property or it will become an island and that’s not allowed.

bobfromsanluis

Oh, and as a side note:

For all of 2010, Chevron’s profit rose to $19 billion, from $10.5 billion in 2009.

“Financially and operationally, 2010 was an outstanding year,” Watson said in a statement. “Earnings and cash flow increased significantly in 2010 as a result of higher prices for crude oil, higher net oil-equivalent production and improved refined product sales margins.”

Do you get that? Chevron increased their year-to-year profit by eight and half BILLION in 2010, and they are complaining about 11.2 million? Holy Crap!

Link to the article where I cut ‘n pasted the quotes: Here

R.Hodin

A million here, a million there. Pretty soon we’re talking about real money.

slobody

What’s up, Bob, you unamerican or something? Isn’t it the American way to take taxpayers’ money ($11 mil for Chevron, $10 for Westpac’s Garden Street Terraces, $20 for the Copelands’ Chinatown just to name a few) and transfer the loot to rich developer and corporate types? Hey, that’s the slotown way. The belief our city government cares about us is a myth best busted up. We have a whole city department, called “economic development,” whose sole job is figuring how to hand out loot that belongs to the people to business. So helping Chevron boost its bottom line is just another facet of business as usual at slo city hall. The real question is why this loot transfer isn’t considered news by any of our “media.”

melanie63

WOW! This is the most absurd idea ever! We are going to pay Chevron $11 million to help them “fix” a site that has been contaminated since 1926? For some trails and open space I wouldn’t let my dog walk on! Honey, get the kids, let’s go take a hike at Contamination Park in SLO! I hear it is just lovely!

R.Hodin

We’ve walked our dog there in the past, before we were shot at by a neighboring property owner. It’s an interesting place, with evidence of the tremendous explosion and fire from 1926, even fused concrete. before I saw it, I had no idea that concrete could be melted by an oil fire.

There are specific areas which are fenced off and covered to keep out wildlife, on the North side of Tank Farm. Other than that there appears to be little on the surface to suggest toxins which could affect animals. Cows have been run on all of the land for decades, by the rancher whose land will become the larger portion of the Margarita Expansion.

The city (or county?) did subsurface testing a few years back, IIRC in preparation for the pipeline which was laid along Tank Farm, and testing showed oil, gasoline and other oil products below the surface. My biggest concern would be the water table pollution.

Does the city need more open space here? There’s already great open space on the ridge just north, and there’ s savannah to the south. My pet peeve with the city is that they require street landscaping on commercial lots, plant monster trees that fall on cars, and try to make the downtown resemble a park, yet there is infinitely more beauty to be found just a few minutes away in the open space areas. It seems to be a bipolar affliction.

slobody

It would cost too much to clean up this dirty land for urban use — that’s why we’re talking open space. Double standard on toxic cleanup.

Cindy

I noticed that Chevron say’s that Unocal caused the contamination. They say Unocal spilled 6 million barrels (429 gallons each) of oil. But it turns out that Chevron acquired Unocal or merged in 2005 so everyone here is correct in my opinion. Why should the taxpayers foot the bill for Chevron to clean up their mess? They bought the liabilities when they bought the Corporation and this contamination has been long standing.

A bigger question is why wasn’t Unocal ever required to clean it up? It’s been sitting there since 1926!

SLOChildrenAtPlay

I’m suprised that Chevron blamed Unocal for the mess, and didn’t simply blame nature (the lightning that started the 1926 fire).

Anyway, Unocal became a wholly owned subsidiary of Chevron in 2005. IMO, if you assume the assests of a company – you assume it’s liabilities too!

The historical accounts say that four reservoirs and fourteen steel tanks were damaged in the fire, for a toal of over 8 MILLION barrels spilled. Wasn’t there only 4.9 million barrels spilled by B.P. in the Gulf of Mexico?

I posted a link to the Tribune’s archives regarding the Tank Farm fire in 1926 – down near the bottom of this page in response to one of Cindy’s other posts.

Cindy

Thank You for the link. I love nostalgia and this was an interesting read. I enjoy the casual and conversational writing style back then. ” If your newspaper isn’t in your post office slot, check with the postmaster. He is holding today’s news paper behind the counter. He is taking advantage of our headlines to collect delinquent payments”. (or something like that, LOL)

Funny how people used to think back then. I was floored to read that they planned to pump all the oil from the reservoirs that were ablaze (3,250,000 barrels at the time) onto an oil tanker docked off Avila Beach and when those tanks were full, the plan was to pump the rest into the OCEAN!! Reason being is that they wanted to save the 2 “Expensive reservoirs” that hadn’t ignited yet. They didn’t have time and in the end the entire 8,000,000 barrels blew up……. and to think, all they needed to avoid this was a lightening rod.

They noted that Unocal’s insurance company paid out the largest settlement ever (apart from the SF quake).$9,000,000 and then Unocal abandoned the site and now we all get to pay.

zaphod

What happened to that nine million in 1920s $ ? would go a long way restoring the site today.

Cindy

Yes, $9,000,000 was a huge amount of money back then, it still is! I don’t know if you read the link that SloChildren posted but the story is quite detailed. The explosion’s and fire did massive damage to entire block’s, not to mention that it was raining oil over a half mile radius. The explosions alone knocked down homes in the neighborhood and the fire raged on for 3 days’. A few people perished, many were injured and if you consider that Unocal lost their Tank Farm, I have no doubt they pocketed whatever portion of the 9MIL the insurance allocated to them and then we know that they found another site to contaminate.

R.Hodin

At the outside of the bend in San Luis Creek, just past the golf course and before the creek heads out to sea, there is still a layer of hardened oil from the spill. San Luis creek was aflame all the way to the ocean!

easymoney

Very good question cindy, and this being prime land.
I had friends back in the 70’s who lived along the creek and there was always oil appearing in the swimming holes each year. The oil companies are liable for all the cleanup…

SLOChuck

More evidence Katie is just plain ol’ nuts.

smartmouth

No Way Jose!

SLOChildrenAtPlay

I guess now that SLO has its $875k double deck bus, $1.4 million fire truck, and one of the highest paid city managers in the state – what does the “city who has everything” buy next? How about spending $11 million on 322 acres of tar soaked land?

I always wondered how Chevron would finally get rid of all that contaminated land on Tank Farm road. Who would have ever thought that the city of SLO, and it’s seemingly bottomless pockets full of money would help Chevron clean-up and develop the property?

I guess only in San Luis Obispo do oil companies make a profit from cleaning up their own contamination. Your tax dollars at work.

easymoney

“Due to San Luis Obispo Municipal Code Subdivision Regulation 16.20.110, adopted in 2006, Chevron actually stands to collect payments from the city when terms are reached. On the grounds that the project is improving neighboring properties, the city intends to “reimburse” the company a prorated amount.”
Looks like a city code meant to entice developers in to build inside the city reserve line and then reimburse them for upgrading surrounding neighborhoods and commercial properties.
Regardless of what the a companies name is or what they do for a living, the proposed property is a blight, a toxic waste site and has never had anything substantial built on it since the 1920’s when the fire and oil spill took place.
Any developer will be facing huge costs just to get the dirt back to a buildable state, remember what happened in Avila Beach?

Typoqueen

Yes but in the case of Avila I don’t believe that the county shelled out any dough for that. Chevron polluted the ground now Chevron should pay to clean it up. I’m going to out into my yard and pour a bunch of toxic Draino and arsenic on my lawn, perhaps the city will get me a new a lawn and help me sells my home at a profit….oh wait I’m not a big corp, that won’t work. $17 mill is not that big of a deal for Chevron, they can handle that easily but as I said that $11 mill hurt SLO. That is the stupidest municipal code that I’ve ever seen.

oto

easymoney, I too, was reminded of the Avila Beach oil spill and “buyout” of the town’s real property by the same company that was responsible for the spill–Unocal.

I, too, see the pattern emerging of the tortfeasor reaping the benefits of the tort (or crime, depending upon one’s point of view.) It’s like doggie hygiene in reverse: even dogs don’t sleep where they crap.

Why does SLO County need to pay oil companies to come here? I’m betting if the County were to put it to a vote, most residents would rather have SLO pay them to stay out. Once Chevron gets a foothold in the County, further oil development is next step.

The County Counsel’s Office has quietly assisted in the purchase of land with oil on it for years. The Planning Dept.’s subdivision review board has the county’s written policy on these purchases, according to former employee Larry Kelly.

If lawbreakers are prohibited by law from making a financial profit on their crimes, should corporate polluters and tortfeasors be treated any differently?

Oil Corporations can well afford to develop without being reimbursed for construction costs. It would be bad public policy to pay an oil company to develop on land acquired by the oil company after an oil company polluted the land, made it unuseable, and destroyed its value for agricultural use, as it was originally zoned.

Moreover, the idea of an oil company offering to develop if the city will foot the bill sounds like such bad business that it gives the impression that bureaucrats who wrote the muni code (ref. “easymoney’s” cite to SLO Muni Code 16.20.110, which I have not yet read,) were making a law for the purpose of hiding a “kickback” or “slush fund.”

Slush fund: ” a fund of money set aside for illegal purposes, such as for bribing public officials.”

Kickback: “A payment for help in making a profit.”

Definitions are from the Oxford American Dictionary.

Who is “Goodwin Consulting Group?” Who is Goodwin? Are they local?

Where are their written, PUBLISHED analyses of Chevron’s estimated construction and project costs? Or haven’t they actually crunched the numbers yet?

Is Goodwin Consulting Group related to Goodwin the retired former San Luis Obispo police officer, or a member of his family? Is there a conflict of interest between the city and the consulting group?

It will be interesting to see how this plays out, and it will tell us about who our elected Supervisors really are.

Typoqueen

What am I missing here? Why is the city as well as the citizens in favor of reimbursing or basicly giving Chevron (one of the wealthiest corps in the world) 11mill? Yes, it might improve the area but Chevron is going to make a huge profit off of this. The plan for all developement is to improve the area in which they are building on, are we going to start paying all the developers? This just seems like more of the what is one of the biggest issues that is dividing our country, the middle class and poor are once again flipping the bill for the wealthy. 11 mill is a lot of $$ for the city of of SLO but it’s a drop in the bucket for Chevron. They come in and polute the area and then say ‘now pay for us to profit even more off of you middle class boneheads’.

Cindy

I was curious about this project too. The 11Mil reimbursement seemed odd and also…………

Where I was born and raised, a reservoir is a large natural spring fed body of water that provides drinking water to the township. So I was very baffled when I saw the following statement. “The energy giant also promises to clear an old and dangerous reservoir, known as “the coliseum,” I thought huh? Now how can a reservoir be dangerous and since when does a spring fed body of water get old? That was my first clue! I glanced at a draft of the project maps on line (Chevron Restoration Development).

It appears that the area they are developing will require a great deal of remediation. If I’m not mistaking 250 acres will be cleaned up (contaminated soils removed) and left to open space and a park. It appears that the city operates a water treatment facility in that area.

I just wonder exactly what it was that caused all this contamination to begin with (didn’t have time to study the draft)? Maybe the ponds weren’t lined and leaked sewage or maybe an oil company caused it in the first place! I do know that the drinking water is also contaminated with nitrates in that area off Tank Farm. There are businesses in the area with city notices in the bathrooms warning people not to drink the tap water! No doubt, Chevron is expert when it comes to cleaning up contaminants.

SLOChildrenAtPlay

The term “reservoir” also refers to the storage of petroleum, and other liquids.

“The Coliseum” is the remnants of a large crude oil reservoir off of Tank Farm road that dates back to the early 1900s. It was destroyed in the huge 1926 Tank Farm Fire, which was caused by lightning. The remains of the round cement bunker are huge, and resemble the ruins of the Coliseum in Rome.

I was born and raised in SLO, and until now – nobody ever thought that Tank Farm road would be developed because of how badly contanimated it is with heavy tar. But then nobody ever thought the city would pay the oil company $11 million to clean up it’s own mess, just so they can grab the land from the county.

Nice to see the city of SLO continue to spend it’s money wisely. How many other cities the size of SLO do you know that are paying oil companies to clean up their own mess in the middle of this recession?

Cindy

Thanks for the information. That is very interesting. I’m curious about the other reservoirs out there. I saw at least 5-6 of them on the map. I should think those have to be cleaned up as well?

I did notice that the company responsible for the contamination is/was Unocal. They are the same company that caused so much damage in Avila Beach. I can’t imagine that Chevron is responsible for cleaning up Unocal’s mess for free? What I am wondering is since this property is on County land, why doesn’t the city leave the problem with the county, rather than annex it and spend 11 million?

SLOChildrenAtPlay

Cindy……..here is a link to the Tribune’s archives regarding the Tank Farm fire in 1926. It was a real mess!

http://sloblogs.thetribunenews.com/slovault/2010/01/27/san-luis-obispo-tank-farm-fire/

Typoqueen

That was a great article, thanks for finding it. I had no idea how big the explosions were from that disaster, very dramatic/traumatic.

I also found this info in that article, I didn’t know about this. Our poor central coast has been riddled with oil disasters:

“The S.S. Montibello, the largest ship in the Union Oil fleet at the time was heading a flotilla of tankers steaming to Avila to offload oil. (The tanker would be sunk by a Japanese submarine in WWII off the Cambria coast.)”

I knew that the Japanese were off of the coast in Goleta, my dad was involved in that but I didn’t know that they were off of the coast of Cambria and that they actually attacked us there. I wonder what happened to the oil on that tanker, it must have been a lot of oil as it was their largest ship.

LittleAcorn

Hmm … maybe all the property owners in the county can get the county to pay each of us development fees? I don’t understand why SLO city would pay anyone to develop their property. I thought the city was complaining about not having any money.

Btw – the S.S. Montebello, built in 1921, was 440 ft long and in 1941 sank about four miles off Cambria in 900 ft of water. A 1996 survey of the vessel estimated that there are still 75,000 barrels of crude oil in the hold.

Typoqueen

Why in the hell aren’t they getting the oil out of that tanker? I do believe that they have the technology to do that.

Cindy

900 ft of water is mighty deep. The barrels would probably fail against the pressure to raise them from such a depth. It’s a near impossible task if you consider that they would require a submersible robot with the flexibility to lift and gently leverage the barrels into a containment tank and seal it, all 75,000 of them and then they still have to raise them 900feet to the surface. It’s probably more realistic to clean the oil up as it surfaces. One barrel at a time hopefully.

mkaney

Chevron, Unocal, it’s all Standard Oil to me.

R.Hodin

Jus think how much happiness $11 Million would buy!