Port commissioners approved a pair of contracts totaling nearly $12 million for work at Harbor Island meant to prepare it for a proposed crude oil storage terminal in Port Aransas capable of fully loading Very Large Crude Carriers. The terminal is part of the port’s plan to dredge part of its ship channel from the entrance to Harbor Island down to 75 feet to accommodate full loading of the massive vessels.

The commission approved a nearly $5.4 million contract with Rockport-based Derrick Construction Company Inc. to demolish three existing docks at Harbor Island that are no longer in use. In addition, commissioners approved a 25-year, $6.5 million contract with AEP to provide electric power to Harbor Island, where the proposed terminal will be located on port property.

“I think what we did on Harbor Island today absolutely sets the tone for the future of the Port of Corpus Christi,” Port Commission Chairman Charlie Zahn, a resident of Port Aransas, said. “We took a couple of huge steps today to make that a reality, and when I have people in the community that I’ve lived in for 49 years question me about it, I look them right in the eye and say, ‘We’re going to build an oil export terminal on Harbor Island, and you can take it to the bank.‘”

Port leaders have said that the proposed Harbor Island project is necessary to maintain and further its status as the No. 1 exporter of crude oil in the nation. A channel deepening project that would take the port’s channel depth to 54 feet is in the works now, but it would only accommodate full loading of Suezmax vessels capable of carrying 1 million barrels of crude oil.

The $6.5 million contract with AEP will pay for four breakers that will be installed in a substation to be constructed by AEP to provide power to the port’s proposed crude oil terminal. The exact location is still being discussed, but port commissioners made it clear they would have an issue with allowing other customers doing a competing project to access the substation if it is built on port property.

“We have concurrence from AEP that the portion of the transmission infrastructure supported under this contract by the port would be used directly and exclusively for port assets,” Pollack said.

But the portion of the infrastructure covered by that exclusivity is just the breakers, not the substation itself. Port CEO Sean Strawbridge said the cost of the project and other Harbor Island work will be passed on to the port’s customers through definitive agreements in the form of capital recovery fees.

Port Commissioner Wayne Squires questioned whether the money that the port was going to spend on the infrastructure project could benefit a “competitor” in the form of the Ed Rachal Foundation.

Squires said that he and other members of the port’s Long Range Planning Committee were concerned that the foundation was looking at establishing a crude oil terminal of its own on foundation land on Harbor Island.

“Are we getting all the money to go into this, and then we’re feeding our competitor?” Squires asked. “And that’s what we want to know. Are we?“

“That’s the issue that we have, that if it’s on our property, and we’re paying for it, we should be the only beneficiary,” Strawbridge later said.

Bradley Lenz, with AEP, said that the electricity company already has electrical transmission improvements in progress to North Padre Island. Further upgrades will need to be done from Aransas Pass across the Redfish Bay Causeway that leads into Harbor Island, he added.

“We have to have that agreement (with the port) in place in order to provide those upgrades,” he said. “So, if you don’t sign the agreement, those upgrades wouldn’t go in place.” “We can’t build out without having a customer there,” he added.

More: Port of Corpus Christi’s Harbor Island plans get scaled back

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Lentz also said that AEP was legally obligated to provide service to any other customer who wanted power on Harbor Island, as it would have to come from the substation in question. That company would be required to pay the same $6.5 million cost for four breakers, if that’s what it wanted, he added.

“We can’t work with the port to block a customer from coming in there — that’s not legal from where we stand,” Lentz said.

Paul Altheide, CEO of the Ed Rachal Foundation, on Thursday said that the group was hoping that one of its tenants on foundation-owned land on Harbor Island would be able to develop a “petroleum product transit” method on the 320 acres it owns at Harbor Island, near the ferry landing.

Altheide said that the foundation is always on the lookout for opportunities to generate revenue to help fund its charitable operations, and a terminal project fits that category. The group recently bought the “Castle House” in Corpus Christi and also purchased the Frost Bank building near downtown Corpus Christi.

He questioned what he felt were “uninformed” comments made by port commissioners and Strawbridge on Tuesday about the foundation’s intentions, as well as the concerns about providing access to the foundation to the substation. As far as Altheide is concerned, he said there’s enough global demand for crude that others should be able to benefit from it without negatively impacting the port.

He said the port has also taken exception to the fact that the foundation does not pay a port franchise fee.

“They feel like any revenue we generate takes revenue from them,” Altheide said. “We won’t really diminish revenue to the port because we think there’s so much demand for crude) internationally.”

“Our impact on the port will be insignificant,” he added.

The port’s goal is to have its Harbor Island terminal operational by 2020. The AEP agreement can be terminated if the port doesn’t get agreements in place from customers to warrant the upgrades, and the port would be responsible to AEP for costs the company incurs up to that point.

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