Zenith Likely to Expand, Continue to Store Volatile Fuels in Portland Even as it Cuts Crude Oil

April 09, 2024 [Oregon Live]- The fight over Zenith Energy’s future in Portland is about to heat up – again.

The Oregon Department of Environmental Quality soon will launch the public review of an air quality draft permit for Zenith that, if approved, would cement the fossil fuel storage company’s future in Northwest Portland – as long as it stops storing crude oil in its tanks in the city within the next 3 ½ years.

The Houston-based Zenith has promised to transition to lower-carbon fuels produced from renewable resources such as plants and animal fats.

Environmental activists and state regulators have complained about Zenith’s lack of transparency, disregard for regulations and broken promises during its six-year tenure in Portland, leading to deep skepticism about its transformation from a major crude oil storage company to an eco-friendly business.

Portland officials, on the other hand, now see the company as an essential part of the city’s climate response after just two years ago making clear they stood against Zenith’s core business. They are banking on Zenith’s help in carrying out Portland’s first-in-the-nation policy to fully replace petroleum diesel sold in the city with cleaner renewable fuels.

The city’s shifting treatment of Zenith has exposed tensions over how Portland should reduce carbon emissions – and what the consequences of its green policies are.

Zenith’s application for a new air permit, which would dictate how much pollution the company is legally allowed to emit, could actually pave the way for Zenith’s expansion in Portland. The application shows that, while Zenith plans to eliminate crude oil from its local portfolio by 2027, that shift would allow it to vastly increase the total amount of fuels it offloads, stores and reloads at its Portland terminal, according to an analysis of the application by The Oregonian/OregonLive.

The city’s shifting treatment of Zenith has exposed tensions over how Portland should reduce carbon emissions – and what the consequences of its green policies are.

WHY ZENITH ATTRACTS FIERCE OPPOSITION

Zenith Energy is one of 11 companies operating major fossil fuel terminals on the Willamette River – a 6-mile stretch along U.S. 30 between the Fremont Bridge and the southern tip of Sauvie Island known as the Critical Energy Infrastructure hub.

More than 90% of Oregon’s fuel supply comes through this hub, which has more than 400 active storage tanks with the capacity to hold at least 350.6 million gallons of fuels, mostly gasoline, diesel, liquified natural gas and renewable fuels such as biodiesel and ethanol.

Zenith, like most of the other companies operating at the hub, offloads and stores fuels at its terminal before transferring them to ships or trucks bound for refineries, local markets and other destinations. Zenith doesn’t produce, own or sell the fuels stored in its tanks.

In recent years, intense opposition to Zenith has galvanized the region’s environmental community and many local residents – not because it’s the most polluting company at the hub but because it was one of the few new fossil fuel operations to come into Portland at a time when the city was trying to move away from hosting such businesses.

The opposition came on the heels of activists working to restrict new fossil fuel infrastructure in Portland and the Pacific Northwest. They forced the city to pull support from a propane export terminal that the Canadian company Pembina planned to build here. And, in Vancouver, they pushed to kill what would have been the largest oil-by-rail terminal in the country.

In 2016, the Portland City Council voted to limit the expansion and new construction of fossil fuel terminals; the policy has successfully withstood several legal challenges.

A year later, Zenith bought a former asphalt refinery at the riverfront – one of 21 terminals in 12 states it purchased that year from Arc Logistics LLC. Within a few months, the company began transporting large amounts of tar sands oil to Portland on long trains from Canada and North Dakota, surprising regulators, who received no advance notice of the dramatic increase in oil-by-rail shipments and who worried about the fuel’s toxic inhalation hazards, high flammability and spill risks.

Early on, city officials and state regulators said they believed Zenith was switching away from tar sands, but it continued to store the fuel. Zenith also failed to conduct a state-required preparedness drill for a crude oil spill.

Instead, it set out to expand its operations, performing months of construction work without a permit at its terminal, leading the state Department of Environmental Quality to fine it nearly $25,000 for “flagrant’ conduct. Zenith also settled a lawsuit over the same permit violation, agreeing to pay $115,000 to the Audubon Society of Portland, now known as the Bird Alliance of Oregon.

Despite a 2018 promise to Oregon regulators that its planned terminal expansion would not lead to an increase in fuels or emissions, Zenith continued to increase the amount of fuels it moved every year through its terminal. The company later said the increase was a temporary response to a higher market demand for crude.

“They misled regulators and the public about their intent and activities,” said Nick Caleb, an attorney with the Breach Collective, a Eugene-based climate-justice advocacy organization that tracks and opposes Zenith’s operations.

The company has maintained that it has been upfront about the fuels it stores and has operated in full compliance with city and state permits.

CITY FLIP-FLOPPED ON ZENITH

State regulators eventually took a closer look at Zenith. In 2021, the DEQ told the company to secure a new land-use credential from Portland as a condition of receiving an air quality permit renewal.

That same year, the city of Portland denied the land-use credential, saying “the extent of the fossil fuel activity and potential adverse impact on the environment and historically marginalized groups [are] not compatible with the [city’s] Comprehensive Plan policies.” Zenith appealed the decision, and the city vigorously defended it in court, prompting the company to file an appeal with the Oregon Supreme Court.

A year later, with Zenith’s appeal still pending, the city suddenly reversed course. With little fanfare or public input, Portland in October 2022 signed off on a new Land Use Compatibility Statement for the company, allowing five more years of crude oil storage and transfer after Zenith promised it would transform itself into a “renewable fuels” storage company by 2027.

The approval came just three days before the Oregon Supreme Court declined to review a lower court ruling that had upheld the city’s authority to deny the land-use credential.

Two months later, the city voted to phase out the sale of petroleum diesel in Portland by 2030, gradually replacing it with renewable fuels. Officials said Zenith’s ability to store renewable diesel and biodiesel would help implement the city’s policy to reduce emissions from medium and heavy trucks within a few short years.

Environmental, labor and community organizations urged the city to reconsider the Zenith approval. They said electrifying truck fleets was more viable, because moving and storing renewable fuels comes with the same risks inherent to moving and storing conventional fossil diesel.

The groups also accused public officials of failing to follow their own rules when granting Zenith the land-use approval. Youth climate activists took up the issue, launching protests and marches.

This past December, Multnomah County commissioners sided with Zenith’s opponents, asking state regulators to deny the company’s air quality permit because it “continues to be a fossil fuel company that presents a danger to the community.”

The city repeatedly declined to review or rescind Zenith’s land-use credential. Commissioner Carmen Rubio said Zenith’s approval was administrative in nature and was processed like every other land-use decision. Electrification of private and public truck fleets remained a target, the city said, but would take a few decades to complete.

But an investigation by Portland’s city auditor last month concluded that Zenith had attempted to influence city officials in violation of lobbying rules by communicating and meeting with bureau directors and commissioners in the fall of 2022, including during a special tour of Zenith’s terminal.

The audit found that the company violated city code by not reporting the lobbying and that it more than likely used the communication to gain approval of its land-use credential. Zenith officials didn’t dispute that the contacts had occurred but said they didn’t amount to lobbying. The audit entailed no fines, but recommended Zenith participate in lobbying regulation training.

POTENTIAL TO DOUBLE FUELS STORED

Now armed with Portland’s land credential approval, Zenith has applied for a new air pollution permit that would cap its allowed emissions at a lower level than its current permit. The new permit would entail less frequent state inspections and company reporting requirements than Zenith’s current permit.

An air quality permit defines a facility’s maximum emission capacity. But typically, actual emissions are lower than what the permit allows, said David Graiver, a DEQ air quality permit writer who is working on Zenith’s application.

The application shows the company would be allowed to increase the total amount of fuel moving through its terminal once it phases out crude oil in 2027.

If approved, the new permit would require Zenith to emit less than 39 tons per year of volatile organic compounds, known as VOCs, a group of air pollutants that can cause irritation to the eyes, nose and throat, damage to the liver, kidney and central nervous system and, in some cases, cause cancer.

Under its current permit, the company’s potential to emit is capped at 179 tons per year of VOCs, though Zenith is currently emitting far below that cap: 43 tons of VOCs in 2023, according to its annual report filed with the state.

Because renewable fuels emit less hazardous air pollution than crude oil, the company, once it phases out crude, would be able to more than double the amount of fuels it offloads and stores and still meet the new permit’s lower pollution ceiling. This, in turn, would likely lead to an increase in train, truck and marine traffic.

The application briefly mentions Zenith’s plans to expand its terminal by adding more railcar racks and potentially constructing new storage tanks for renewable fuels or other non-fossil fuel products. Earlier this year, Portland approved three new pipelines for Zenith’s renewable fuels.

Zenith officials said that how much and what kind of fuel it moves through its Northwest Portland terminal in the future can’t be predicted and will depend on future market needs. The company said it’s anticipating increased demand for renewable fuels in the region, potentially leading to an increase in the amount of fuel it stores.

WHAT FUELS WOULD ZENITH STORE

Until 2027, Zenith can keep storing and moving crude oil – last year, as in previous years, it again increased the amount of crude it moved through Portland, according to the annual report the company submitted to the state.

Zenith officials said 49.1% of the contracted storage capacity of the terminal is renewable fuel right now, including renewable diesel, biodiesel and sustainable aviation fuel. This is up from 28.5% in early 2023.

As for its post-2027 plans, Zenith points to the approved land-use credential, in which the company estimates that renewable fuels will make up 96 percent of its fuels after 2027 – dependent “upon actual market forces and additional infrastructure investments at or around” the terminal. Neither the land-use credential nor the air permit application require a specific percentage of renewable fuels.

The application, meanwhile, introduces a new fuel – renewable naphtha, also called bionaphtha – that Zenith says it may handle at its terminal. Renewable naphtha is not mentioned in the land-use credential approved by Portland leaders.

Fossil-based naphtha, derived from refining crude oil, has been around for decades. It’s used to make paint thinner, lighter fluid, fuel for camp stoves and cleaning agents. Bionaphtha is a relatively new byproduct of renewable diesel and sustainable aviation fuel – both made chiefly from cooking oil. In the U.S., renewable naphtha is being used in gasoline blends, while in Europe it’s increasingly used to manufacture plastics, solvents and other chemicals.

Zenith officials said the company hasn’t stored any naphtha in the last five years and no more than about 5% of the Portland terminal’s storage capacity has historically been used for naphtha.

Renewable naphtha, like its fossil naphtha counterpart, is an extremely flammable liquid and vapor. It has the greatest tendency to evaporate of all the fuels that Zenith will handle, potentially increasing the likelihood of explosions or fires in case of an accident.

Zenith officials said fuels are flammable by nature and it has extensive measures in place to reduce the likelihood of a release and to respond immediately to contain a release in the unlikely event one occurs.

The actual amount of renewable naphtha that Zenith might store in the future isn’t known and the company declined to comment on its plans. But the application shows the company is capable of handling vast amounts of the fuel and still stay within its emission limits.

The air permit application also seems to have a discrepancy, saying in one place that Zenith plans to continue moving and storing fossil fuels other than crude oil after 2027, including jet fuel and low-sulfur diesel, and in another stating the company will transition “to exclusively handling renewable fuels and non-fuel products.” The application also says other products may be added in the future as markets change.

WHAT ABOUT EMISSIONS?

In videos, posters and online materials, Zenith says its transition to renewables will both make Portland’s air significantly cleaner and lower the city’s carbon footprint.

Zenith’s permit application considers two distinct sources of pollution: the group of hazardous air pollutants known as VOCs and climate-warming carbon dioxide emissions from Zenith’s operations.

When it comes to the VOCs, Portland officials and Zenith have touted a nearly 80% decrease in the air pollutants because Zenith’s emission cap would drop from the existing 179 tons per year allowed under its current permit to 39 tons per year under the new permit.

But the new cap would be so close to what the company currently emits — 43 tons of VOCs in 2023 – that the actual decrease would be significantly smaller than 80%.

Carbon emissions caused when Zenith loads and unloads mostly biofuels at its terminal after 2027 will fall slightly but not substantially – by about 12% – because some of the equipment at the terminal – natural gas-powered boilers and heaters – will continue to emit greenhouse gasses.

Zenith’s air permit application doesn’t directly deal with the overall carbon footprint claims that the company and city have touted. They’re referring to the downstream effects of renewable fuel use, arguing that trucks running on plant-based fuel will emit less carbon dioxide.

The issue has become controversial.

Renewable fuels “have approximately 60-80% lower carbon emissions on a lifecycle basis than petroleum diesel and emit substantially less particulate matter, a major source of harmful air pollution,” according to the city of Portland.

Using those figures, Zenith, in turn, has widely claimed that “renewable fuels emit 80% less carbon dioxide than traditional fossil fuels.”

Bill Peters, interim Oregon clean fuels program manager at the state Department of Environmental Quality, said it’s more accurate to put the percentage at 45-80%, depending on the fuel’s feedstock and the lifecycle carbon intensity of the fuel.

But even those emission reductions would be uncertain. In recent years, studies have challenged the carbon neutrality of biofuels, which require large amounts of land and can displace edible crops or forests.

“We really can’t put a precise number on the climate effects of each biofuel… I’m not confident that they are helping us mitigate climate change and they might be making matters worse,” said Richard Plevin, a research scientist who has spent years modeling the climate impacts of biofuels as a consultant for the U.S. Environmental Protection Agency and California’s Air Resources Board.

Commissioner Dan Ryan, who oversaw the Bureau of Development Services when it gave Zenith the stamp of approval, and Commissioner Rubio, now in charge of that bureau, declined to comment on the air permit application.

City officials point to rigorous inspection measures in the land-use credential that will ensure Zenith doesn’t store any crude oil after 2027.

But environmental groups say phasing out crude oil doesn’t negate the hazards of storing and transporting by rail large amounts of renewable fuels.

“The real question should be, is this going to result in a real-world reduction of harm?” said Kate Murphy, a senior community organizer with the nonprofit Columbia Riverkeeper. “Zenith will be increasing [the amount of fuel it moves] and hence its traffic to create more risk for communities and the ecosystem.”

Environmental groups also point out that Zenith’s future fuel storage plans are highly dependent on the needs of the world’s fuel producers. In recent years, major energy companies have walked back their environmental pledges to reduce emissions and invest in renewable fuels, expanding fossil fuel production instead. And fuel-producing countries are now planning to ramp up their fossil fuel extraction – despite climate pledges to phase out those fuels.

As for Zenith, it remains a fossil fuel company, despite its transition to renewables in Portland. The six other terminals it operates across the U.S. are dedicated to fossil fuel storage.

WHAT’S NEXT: PUBLIC REVIEW

The state’s April 17 informational meeting will focus on the Department of Environmental Quality’s air quality monitoring and other programs that regulate Zenith, including the fuel tank seismic stability and spill preparedness programs.

Later this spring, DEQ will launch a 35-day or longer public comment period on Zenith’s draft permit. It will include a public hearing.

Once public comments are closed, the agency will review the feedback and respond to comments before coming to a permanent decision to issue or deny the permit. If there are significant changes to the permit’s scope, those changes may have to go through another public comment period.

If the DEQ were to deny Zenith’s permit, the company would be able to continue operating for 60 days under its previously issued air quality permit. Zenith also could request an administrative hearing, temporarily placing the denial on hold.

Free Trial: Access 13,300 Tank Terminal and Production Facilities

13,300 tank storage and production facilities as per the date of this article. Click on the button and register to get instant access to actionable tank storage industry data