Seven lots in Block 206, formerly owned by the Union Oil Company, could be traded for tideland lots at Nordic Drive and Dock Street, owned by the borough.
Petro Marine Services is proposing to trade property they purchased from the former Union Oil Company for borough owned property they currently lease on which a warehouse and the Southeast Island Fuel gas station is situated.
On their end of the deal, there would be no changes, said Bob Volk, plant manager for the company, who brought the idea before the harbor advisory board first, looking to garner some support for the prospective deal.
The property to possibly be exchanged is the old Union Oil facility at Nordic Drive and Tango Street, acquired by the business in 1999 along with another parcel sold in 2005 to become the Petersburg Cold Storage. This could actually wind up being a better deal for the borough, Volk said.
If the swap goes through, the Nordic Drive warehouse would be put to use as a maintenance facility and mixed storage for borough departments, as well as providing much needed parking.
Harbormaster Glo Wollen said, "Rather than spending a lot of time running around, borrowing from one department or another, we could put it all in one location."
"We've been talking about this almost as long as I've been on the harbor board - we need a place," she said. "We also have an issue with impounding - right now we have to get behind other departments to use the police impound lot. I've been turned down three times this summer impounding boats because they did not have the room."
The Petro Marine property was appraised by Ramsey Appraisal Resource under the hypothetical condition that fueling related equipment and infrastructure were removed and that the property was certified free of contaminants.
The former Union Oil property appraised in 2012 for about $370,000 compared to $280,000 for the borough property.
Assemblyman Kurt Wohlhueter asked Volk in what form and over what time that difference would be paid off, presuming everything worked out and the borough approved the swap. Volk said that he couldn't speak for a certainty, but that his first thoughts went to credit to be placed towards other leases with the borough, adding that Petro Marine would endeavor to work with the borough on the matter.
"A ten year sort of thing would be easier to swallow," Wohlhueter said. "It would be a slam dunk for me if it was stretched out, rather than a one year."
The borough's parcel leases at an annual rate of one tenth the market value of the land, but was appraised by Ramsey without the gas station building which is owned by Curt and Kristi Birchell.
The property currently is leased by Petro Marine and part of the property is sublet to the station operators, Volk said.
"So that's rent the city would be losing every year," said Assemblyman John Havrilek, who attended the meeting.
"We thought it would be much cleaner if we just owned the property - we've got pipelines zoned through it and we've got gas tanks sitting on it," Volk said.
"I was very open with the Petro folks - if everything comes across the way it does on the surface, this might be a good deal for both parties," Borough Manager Stephen Giesbrecht said after the meeting. "The big unknown is the environmental study, which is how much cleanup is going to be required. I'm cautiously optimistic, but I'm sure there are folks, including on the assembly, that might look at it a different way. Tidelands are very valuable."
Giesbrecht added that staff also would be addressing Havrilek's concerns on lease revenues versus property tax revenues on the deal, as well as other details needing clarification.
"The environmental piece, that's probably going to take longer," Giesbrecht said. "We'll probably have to go back and forth with Petro on that. I think there's still a lot of unknowns. We'll get (the assembly) a bunch of information and let them take it from there."
Still, any deal would have to wait a while, as the old Union Oil facility still needed a bit of work, Volk added.
"We're going to take the tanks out, I'm sure that'll be one of the questions," he said, adding that the Alaska Department of Environmental Conservation (AKDEC) had, since 2012, given the facility a clean bill of health. "It's not a contaminated site. Ted Smith, the owner of Union Oil, when he moved that tank farm, all the soil under where the tanks are now, was cleaned. Then he put in a secondary containment, which was a concrete floor with a membrane on the concrete."
But, in due diligence, another environmental assessment would need to take place after the tanks were removed, ensuring the property was in adequate health, he added. "For sure, we're going to have to knock out one of the walls to get at the tanks. The cement will all stay and the existing walls will stay."
As for the six tanks currently in the facility, two were too old for anything but scrap, while the remaining four would be repurposed, put on cribs to await a need at other Petro Marine facilities later on, he said.
Initial AKDEC tests in 1994 noted diesel contamination at the site, which proved resistant to bioremediation, leading to major earthmoving in 2007 when Petro Marine replaced a significant amount of soil at the site, though lingering contamination was noted along the fence bordering Nordic Drive. Later AKDEC visits in 2011 and 2012 noted that no further indications of contamination were present.
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