PORT ANGELES — Rayonier Inc. executives have verbally agreed to lease a large water tank on their 75-acre property at the north end of Ennis Street to the city of Port Angeles for three years.

This was the result of a two-hour meeting with two Port Angeles City Council members and three city staff members at Rayonier’s corporate headquarters in Jacksonville, Fla., on Thursday, according to City Manager Kent Myers, who was briefed on the meeting by telephone, and Charles Hood, Rayonier vice president of corporate affairs.

The lease would be for three years, Myers said. A lease agreement hasn’t been signed, he added, and its details, such as cost of the lease, haven’t been determined.

The city wants to own the tank, Glenn Cutler, city public works director, has said.

At the meeting, city representatives and Rayonier executives agreed that if a transfer of ownership of the 5-million-gallon tank to the city occurs, it would coincide with the Harbor-Works Public Development Authority getting control of the rest of the property, Hood said.

“We got on the same page that it needs to be one transaction,” Hood said.

Those attending the meeting were Cutler; Nathan West, economic and community development director; Deputy Mayor Betsy Wharton; City Council member Dan Di Guilio; and Bill Bloor, city attorney.

The group also was joined by Orville Campbell, Harbor-Works Board of Directors chairman.

Myers said a lease agreement will be developed and presented to the City Council for approval in February.

The lease would allow the city to proceed with its engineering designs for using the tank — which it ultimately wants to own — in order to nearly eliminate sewage from overflowing and entering marine waters during heavy rainfall.

“It’s a step forward,” Myers said. “It allows us to proceed with that project.”

The city is under a state Department of Ecology order that it must reduce sewage overflow events to no more than four a year by the end of 2015.

Sewage overflows occur when storm water enters the city’s sewer system and overflows its containment barriers, sending untreated sewage into Port Angeles Harbor and Strait of Juan de Fuca.

There were 69 overflows in 2007.

Although the city does not have ownership of the tank, proceeding with its engineering design work through a lease would allow it to avoid missing the 2015 deadline.

Cutler has said the city would not be able to meet the deadline unless it acquired the tank or got access to it by April 1.

Ecology could fine the city $10,000 a day if it misses the 2015 deadline.

The tank would store sewage until it can be treated by the city’s sewer treatment plant, which is adjacent to the Rayonier property.

The city estimates it will cost between $32 million and $42 million to come into compliance with Ecology’s order. It is borrowing money from Ecology to fund the project.

Cutler had estimated the cost of the trip to talk with Rayonier executives to be between $750 and $1,000 a person. He said the trip was necessary because the city had to convey how important this issue is.

Cost of tank?

Cutler has also said that the city intends to acquire the tank at no cost, which Hood said has still to be determined.

“There was no specific financial offer,” Hood said.

He said the company has yet to apply a value on the tank.

The city’s goal in forming Harbor-Works was that Rayonier would give the tank to the city at no cost, and in exchange, the public development authority, which it formed with the Port of Port Angeles in May, would take on cleanup liability of the Rayonier property.

The property has been an Ecology cleanup site since 2000 and is contaminated with pockets of PCBs, dioxins, arsenic, cadmium, mercury, lead and other hazardous contaminants created during the 68 years a Rayonier pulp mill operated there. The mill closed in 1997.

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

Remnants of an ancient Lower Elwha Klallam village are buried under some of the property, and the tribe is a partner in the cleanup.

City documents on the formation of Harbor-Works refer to Rayonier paying the public development authority the estimated cost of cleanup, though no agreements have been made.

Ecology estimates that the cleanup will be completed by December 2012 and cost tens of millions of dollars.

Liability not discussed

Hood said cleanup liability wasn’t discussed other than it would be settled when, and if, Harbor-Works acquires the property.

He said Rayonier wants a transaction concerning the tank and right of ways to the city and property to Harbor-Works to occur at the same time, because the company is concerned that use of the tank would a deter a third party from purchasing the property.

The city’s plans include pipes covered by a 2- to 3-foot berm of soil that would run parallel to the Waterfront Trail through the property to the tank.

So far, the city has received $10 million in loans for the project. It is repaying the loans through $2-a-month increases in utility rates that have gone on for about four years and will last between 12 and 15 more.

Cutler said that additional loans will be available in summer 2011 if the city completes the design work by August 2010.

On that time line, construction of pipelines to the tank, a pump station and modifications to the city’s water treatment plant could begin by April 2013.

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