Plaquemines Parish Council Member Richie Blink brought before the council this month a series of emails between Port of Plaquemines officials and private firms working to develop an oil export terminal that show what Blink described as “several key missteps made by our port” in the process of negotiating the terminal deal.
The emails suggest that the port, a public agency, agreed to purchase the land for the terminal at a price higher than its appraised value, and then later worked with one of the firms to seek out a second appraisal to justify the agreed upon price.
Blink brought the communications — which he had obtained from an environmental group opposed to the terminal project — to the council’s attention at its Oct. 10 meeting. He described the maneuvers as “appraiser shopping.”
“The optics of the nature of the transaction are so questionable, I feel like the best thing to do is to turn the light on and put them in light of day,” Blink told the council.
A joint project of the port, Tallgrass Energy LP and Drexel Hamilton, an investment firm, the proposed $2.5 billion Plaquemines Liquids Terminal would receive crude oil from a pipeline also proposed by Tallgrass for export overseas.
Its designated site is directly adjacent to the state’s planned $1.4 billion Mid-Barataria Sediment Diversion — a large and ambitious project proposed in the state’s Coastal Master Plan — and could reduce the amount of sediment captured by the diversion and increase the risk of other environmental problems such as oil spills. A study of the proposed coal terminal previously cited for the property found that that that project would have reduced the sediment captured by the diversion by as much as 17 percent.
But earlier this year, the oil terminal project got an initial OK from state coastal officials, who found that it was “not inconsistent” with the Master Plan, NOLA.com/The Times-Picayune reported.
Under the deal, the port owns the property, but Tallgrass and Drexel Hamilton donated the money to purchase it through a partnership company, Plaquemines Liquids Terminal, LLC.
‘We need an appraiser who can get the appraisal from $24MM up to $30.5MM’
The 600-acre property, near Myrtle Grove on the Mississippi’s west bank, was previously owned by RAM Terminals, the company that had planned to develop the coal terminal. That project, which faced scrutiny due to its location near the planned diversion project, died in late 2017 when a necessary permit expired. The Port of Plaquemines had already begun working with Drexel Hamilton on the new proposal.
The site was appraised at $23.45 million in December 2017. A second appraiser contracted by the port valued the property at $31.9 million in June 2018. However, documents show that by February, months prior to receiving this second appraisal, the port had already drafted an agreement with a sale price of $30.5 million, $7 million more than the initial appraisal.
Location of the proposed terminal.
A local developer purchased the property for just $5.5 million in 2007 before selling it to RAM for $25 million four years later, according to parish land records.
The emails, obtained through a public records request by Healthy Gulf, an environmental advocacy organization, show that the port leadership and its representatives sought out a second appraiser who would justify the price already agreed to months earlier.
In an April 18, 2018 email, the port’s lawyer, Ken Rathburn, wrote to Port Deputy Director Paul Matthews: “We need an appraiser who can get the appraisal from $24MM up to $30.5MM.”
Rathburn informed Matthews that one of their private sector partners on the project, Eric Zampol of Drexel Hamilton, was “working on it, and will have some names for me, hopefully next week.”
In an email sent a few days later, Matthews followed up directly with Zampol: “You previously mentioned having an appraiser that will be able to give us an appraisal that justifies the purchasing price. Where are we on that?” After receiving the names of two proposed appraisers, Rathburn asked, “Have you ascertained they are in a position to appraise the property as we discussed?”
‘Making sausage’
Following Blink’s presentation on the emails at the Oct. 10 meeting, Port Director Sandy Sanders disputed that the emails showed anything improper.
“To caveat all of this, we’re doing a forensic on us, as we say, ‘making sausage,’” he said. “We’re putting a deal together. Anytime you put a deal together, even if it’s just a car buying deal, people get cross, there’s winners and losers. But a good deal is when it’s good for the seller and good for the buyer.”
In response to a question from Council Member Mark Cognevich about the multiple appraisals, Sanders said the initial appraisal was too low, and that RAM wouldn’t have accepted it.
“We looked at it and we just said ‘this ain’t going to fly.’ Everyone agreed, they’re not going to accept this,” Sanders said.
Rathburn added that when the port had previously asked RAM if they would sell it for less than $30 million, “they flatly refused. They would not sell it for any less than what they ultimately sold it for and they did that begrudgingly.” (In a January 2018 email, a consultant informed port officials that RAM had told him that the company would require an offer in the “high twenties.”)
Rathburn said that the port and its private partners sought to avoid potentially lengthy litigation with RAM over the sale price.
After Sanders and Rathburn gave their explanations, Blink implored, “Please no more appraiser shopping. Just terrible.”
The Louisiana Attorney General’s office has repeatedly opined that “the purchase of immovable property for a price that exceeds the appraised value of the property would be tantamount to a donation of public funds,” which is prohibited by the state constitution.
Though the port had drafted a purchase agreement prior to the higher appraisal, it didn’t actually purchase the property until November 2018, after the second appraisal had been obtained.
“As far as I’ve seen, nothing illegal has happened,” Blink said in an interview with The Lens. “But it’s definitely outside of my moral boundaries.”
Port officials declined to comment on this story. And Zampol did not respond to a request for comment.
At the council meeting earlier this month, Rathburn further defended the higher purchase price by noting that the purchase was financed by one of the port’s private partners on the project, Tallgrass, rather than the port itself, “without us ever having to put up a penny for it.”
But while Tallgrass may have put up the $30.5 million, that doesn’t mean the project is free: when the port assumed ownership of the project, that took the land off the parish’s tax rolls.
Under agreements between the port, Drexel Hamilton and Tallgrass, the companies’ have to pay rent through a payment-in-lieu-of-taxes arrangement, based on property taxes they would owe if they owned the site. However, starting in late 2022, the companies can pull out of the lease at any time without penalty.
“If Tallgrass had owned the property, the tax assessor would be collecting property taxes at the true ad valorem rate,” said Faye Matthews,* legal policy advisor with the National Wildlife Federation. “Now that’s not the case. The property is sitting: it is owned by the port, no taxes are being collected.”
Steve Cochran, associate vice president for coastal resilience at the Environmental Defense Fund, worries that the financial risk taken on by the port could propel the project forward, despite its likely harmful consequences.
“It puts pressure on the permitting process that ought not be there. A permit ought to be looked at based on the purpose of the permit, not on whether a ‘yes’ or a ‘no’ creates an additional problem for taxpayers,” he said. The deal was clearly made, he argued, “to create incentives for this to move forward whether its a good idea or not.”
“They’re desperate to finally bring something here— they’ve been promising everyone for years that this is going to be the busiest port in America,” said Kendall Dix of Healthy Gulf. “[The port] is a public agency. It’s not supposed to be in the business of getting the deal done no matter what.”
*Correction: An earlier version of this story misquoted Faye Matthews as saying, “If Tallgrass had owned the property, the tax appraiser would be assessing the property at the ad valorem rate.” (Oct. 28, 2019)