PORT ANGELES — The Harbor-Works Public Development Authority — which was counting on state Department of Ecology grant money if it took over liability for the cleanup of the 75-acre site now owned by Rayonier, Inc. — has lost its place in line for funding from the state agency for the next two years.

Orville Campbell, Harbor-Works board chairman and former Port Angeles deputy mayor, said on Wednesday that he had not been notified by Ecology that Harbor-Works won’t be considered for funding during the next two years.

He said he couldn’t speculate on how this would affect the public development authority’s ability to fulfill its charter.

“I don’t have an answer to how we are going to do it, but we are going to go ahead with the process,” he said.

“We need to have some conversations with Ecology.”

Harbor-Works charter

Harbor-Works is chartered by the city of Port Angeles and Port of Port Angeles with assisting in the cleanup of the Rayonier property, contaminated with toxic chemicals left by the company’s pulp mill, which operated on the Port Angeles waterfront for 68 years before closing in 1997.

Harbor-Works could, according to its charter, accomplish its mission by acquiring some, if not all, of the former mill site.

In order to be eligible for Ecology funding, a public entity must be a liable party — through ownership of contaminated property — and have a formal agreement with Ecology, said Rebecca Lawson, regional section manager for Ecology’s toxics cleanup program.

If Harbor-Works became a liable party, the public development authority’s board members expected to be able to apply for an Ecology grant that could cover 50 percent of the cost of the Rayonier site cleanup.

Marian Abbett, Ecology’s Rayonier site manager, has estimated that the cleanup would cost tens of millions of dollars.

But money from Ecology will not be available to Harbor-Works for at least two years, Lawson said this week.

Ecology expects its July 2009 to July 2011 biennium budget to significantly cut its spending power, so the state agency is prioritizing environmental cleanup projects.

This means that the projects that are not ready now will be left empty-handed.

“There are more projects ready to go than there is funding available,” Lawson said.

Although Harbor-Works was on a list of potential projects during budget planning last year, Lawson said that the public development authority is no longer being considered for the funding because Ecology can’t be assured that it will be ready to participate in the environmental cleanup of the Rayonier property within the next two years.

“With the way we prioritize, a big component of that is readiness to proceed,” Lawson said.

“We’re not going to sit on a moment for a project that might happen.”

Lawson said that Ecology requested $65 million for its remedial action grant program — which is used to cover about 50 percent of cleanup costs for public entities like Harbor-Works — for the biennium budget, but Gov. Christine Gregoire slashed that figure down to $37 million in her recommendation to the state Legislature.

Redevelopment, harbor

The public development authority also is chartered with directing the property’s redevelopment and with facilitating planning for Port Angeles Harbor and the shoreline.

Harbor-Works has yet to begin negotiations with Rayonier over any transfer of the company’s property.

Campbell voiced concern over Ecology’s priorities.

“We’re going to have to talk to Ecology about where they are with the priorities around Rayonier and Port Angeles Harbor,” he said.

Ecology has supervised the Rayonier cleanup since 2000.

The U.S. Environmental Protection Agency called the Rayonier site “moderately contaminated,” perhaps 2 or 3 on a scale of 10, in 2000.

The Lower Elwha Klallam tribe is also a partner in the cleanup, and remnants of a Klallam village are buried under some of the property.

Cleanup completion date

Lawson previously said cleanup should be completed by the end of 2012.

She said on Wednesday that a plan for cleanup should be completed by the end of 2012, but she couldn’t say when the cleanup itself will be complete.

Budget cuts also will make it difficult for Ecology to conduct more soil and water testing for the Rayonier cleanup.

Ecology tested harbor water last summer and sampled soil off the Rayonier around the city last fall in search of contamination from the former mill.

Lawson said that, under Gregoire’s proposed biennium budget, there is no new funding for such testing.

She said Ecology would have to use leftover money from the current budget to fund more testing if the state Legislature approves Gregoire’s proposed funding cuts.

The purpose of the testing is to determine the extent of Rayonier contamination.

Lawson said that testing has been a problem from the beginning.

Although the responsibility for doing such testing is on the polluter, Lawson said, Ecology did it itself because of Rayonier’s disagreement over where testing should occur.

Charles Hood, Rayonier vice president of corporate affairs, has said the company has been hesitant about conducting testing beyond its property boundary because it is concerned that it could become liable for contamination it didn’t cause.

The test results are due in the spring, and Lawson said Ecology will bill Rayonier for the testing if it finds that the company is responsible for contamination found.

If Rayonier challenges those findings, she said, the issue could be resolved in court.

Both Rayonier and Harbor-Works would be liable parties if the public development authority acquires the property, Lawson said, whether or not they have a liability agreement between themselves.

If Harbor-Works agrees with Rayonier to assume responsibility for the cleanup and can’t fulfill that role, Lawson said, Ecology would look to the company to again become the lead in the cleanup.

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Staff writer Paul Gottlieb contributed to this report.

Reporter Tom Callis can be reached at 360-417-3532 or at tom.callis@peninsuladailynews.com.