Relying on Invalidated Report, Port Moves Forward on Lease

Staff Reporter

Despite pending reforms and a pledge to adopt more transparent leasing policies, officials at the Port of Los Angeles are moving ahead with a lease renewal and expansion that appears to skirt environmental laws, according to a source close to port operations.

The contract in question dates back to the late 1990s, when port officials signed a letter of intent granting terminal operator Trans Pacific Container Service Corp. the right to expand into berths 142 through 146 when they became available.

The company moved to the port two years ago, after building a 1,000-foot-long wharf whose construction relied on a 1997 environmental impact review that was later discredited.

Subsequently, the port ordered another EIR, which port officials say will cover additional expansions by Trans Pacific, commonly known as TraPac.

According to the source near the port, TraPac also signed a contract that was never presented to the Board of Harbor Commissioners for approval.

According to this source, port officials are waiting for the new EIR to be completed before bringing the contract before the board, in order to give the appearance of complying with laws that require a completed report before new leases are signed.

"All the contracts say if there is a change in government rules and regulations, then the contracts have to be changed accordingly. This one has not been," the source said.

Ralph Appy, the port's director of environmental management, acknowledged that the port is relying on the 1997 EIR in granting TraPac permission to use the wharf and backlands of berths 142-146.

He said these uses were approved prior to the lawsuit that invalidated the 1997 EIR, and that the new EIR, being conducted by the Army Corps of Engineers, would examine TraPac's expansion plans, including additional wharfage and a new rail yard.

"I think there is a time warp going on here," Appy said.

Theresa Adams Lopez, a port spokeswoman, denied that the port has a new contract with TraPac, which is owned by Toyko-based steamship line Mitsui O.S.K. Lines Ltd.

Frank Pisano, vice president of TraPac, termed the agreement with the port a letter of intent one that he considers binding.

"There is always a danger when you renew a lease," said Pisano. "(But) we see it as a commitment: 'When the land becomes available it will be yours.' If it wasn't honored, we'd contest it, that's for sure. We'd go to court."

He did not return follow-up calls seeking comment on the existence of a contract.

EIR comes first

Over the past year, the port has come under intense criticism over its business practices, starting with an audit conducted for the office of City Controller Laura Chick.

Chick's audit, released last summer, sharply criticized the port for conducting business behind closed doors, without proper documentation and without publishing requests for proposals.

Since then, the port has been developing a draft of new policies drawing from Chick's recommendations, including sending out RFPs for new lease deals and conducting environmental reviews for new contracts.

Port Executive Director Larry Keller has pledged to adhere to these draft policies pending final approval of the new policies.

Meanwhile, Keller and other port officials have been summoned to testify before grand jury probes of contracting practices at the port and the two other revenue-generating city departments, the airport and the water and power department.

On May 18, the city Ethics Commission stepped in, demanding information about TraPac's "contract and/or lease" for berths 136 through 146, including supporting documentation and information about staff evaluations and recommendations.

(The terminal operator's existing 15-year lease on the adjacent berths, 136-139, expired in October 2002. Pisano said TraPac has been using that space on a contract extension while it waits for the completed EIR.)

Pisano said he had not been contacted by the commission and does not know what the agency is looking for. "I know we haven't done anything illegal so I'm not too worried about it," said Pisano.

In addition to the TraPac contract, the ethics commission is demanding information about several other port deals, including the leasing of space to Evergreen America Corp. and its terminal operator, Marine Terminals Corp.; Maersk Sealand; Matson Navigation Co.; San Pedro Forklift Co. and Wilmington-based Contessa Foods.

Barbara Freeman, a spokeswoman for the commission, would not comment on its investigation.

The port has a June 8 deadline for turning over the documents.

China Shipping precedent

Under the California Environmental Quality Act, in effect since 1969, the port is not allowed to grant or promise a lease to any company before the environmental review is completed.

CEQA was created to mandate that public agencies make fully informed economic and environmental decisions when awarding contracts.

"That is so the agency does not pre-commit to a project before they've analyzed the impact," said Julie Masters, a senior project attorney with the Natural Resources Defense Council. "They can't possibly know that information until they've done the EIR."

The 1997 EIR, covering the port's West Basin, was discredited in October 2002 when the NRDC successfully sued the port to halt construction of the China Shipping Container Lines terminal due to the lack of a proper EIR.

The port and the NRDC later agreed to a $60 million settlement to pay for environmental mitigation programs so the terminal could open.

"That's what got (the port) into trouble with China Shipping," said Gail Ruderman Feuer, senior attorney for the NRDC. "It wasn't just that the (West Basin EIR) was old, it was not for the particular project that went in."

TraPac has invested at least $70 million to construct the wharf on berths 142-146, install four 135-foot-tall cranes and purchase container yard equipment. One steamship has been docking at the expanded terminal area per week, according to TraPac.

"If they have started their expansion plans without concluding the CEQA process, that would violate the law," Ruderman Feuer said. "There's no question if you build a new wharf then an environmental review is first required to look at the impact of the ships that will come to that wharf. If they are moving into additional space which is a new assignment, they need to perform an environmental review."

The port is conducting a new EIR that will cover virtually the entire facility. But that study will not be concluded until next spring at the earliest, with the Army Corps of Engineers' study to follow three or four months later, the source said.

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