Port finances in jeopardy after ethanol deal

By Joel Wittnebel/The Oshawa Express

The ghost of the ethanol plant has come back to haunt the Oshawa Port Authority.

After a closed-door arbitration between the port and FarmTech earlier this year, it has been revealed that the port will be on the hook for a $4.1 million settlement deal.

In the recently released financial statements for the port authority for 2016, the auditor raises serious concerns about the impact the payout will have on the port’s future, noting the settlement and associated legal fees “casts significant doubt upon the Port Authority’s ability to continue as a going concern.”

The final settlement was unwelcome and surprising news for the port’s board.

“We were really surprised at the decision that the arbitration came up with, surprised might be a mild word,” says Gary Valcour, chair of the Oshawa Port Authority board. “But, it was a process and that’s what happens, you go to court and things happen.”

Valcour says the board is looking at all of their options in order pay off the settlement. The payment terms of the settlement deal have not been made public.

“Overall, it’s distressing in the sense that you don’t like to see that sort of number, but at the same time, it’s a one-off, one item issue,” he says. “The board is looking at it, we’re talking to all of our stakeholders and reviewing what our options are.”

The same was said by port board member Bruce McArthur.

“It’s not a good day when your liabilities outnumber your assets…plain and simple,” he says. “The board is examining every possible avenue in order to correct this situation.”

The port being a federal entity, one of those stakeholders is Transport Canada, representatives for which have told The Express they are following the situation in Oshawa closely.

“Transport Canada is aware of the arbitration at the Oshawa Port Authority and is monitoring the situation; however, the department was not involved in the business arrangement, dispute or resulting arbitration,” states Julie Leroux, communications advisor with Transport Canada.

Additionally, Leroux points to the Canada Marine Act which states the port is responsible for any obligation or liability from operating as a Canada Port Authority. The federal government limits the Oshawa Port Authority’s total borrowing amount to $500,000.

“In our conversations with the ministry, we retain, I would say certainly, the confidence of the Minister of Transport in terms of the value of the operation of the port,” Valcour says. “If we come up with a solution that’s sensible, the minister is really happy about that because it’s off his or her plate and off we go.”

The situation got the attention of councillors at city hall, some of whom are worried about what this could mean for the future of the port, and Oshawa’s waterfront.

“I certainly don’t want to see the port shut down, but I also don’t want them to continue if what it means is that they are going to grab anything and everything in order to raise money to pay off this debt,” says Councillor Nester Pidwerbecki. “I would certainly be against anything that would be environmentally detrimental to the Second Marsh, or to the waterfront that we have and that we want to develop.”

Neither Valcour or McArthur would comment on the options being pursued at this point.

“If it does happen that they do something silly, like crushed rocks or stuff like that, that are going to cause a lot of dust and noise and possibly prohibit our involvement, the city, and with other developers to develop that, then obviously I would have some very deep concerns,” Pidwerbecki added.

For Mayor John Henry, the numbers are certainly concerning, and he anticipates some kind of explanation when the port authority meets for its annual general meeting in September.

“The port connects Oshawa and Durham Region to the world, it’s an important part of our economy and I’m concerned whenever you see something that raises concerns and I think the auditor, he didn’t hold anything back and I’m looking forward to their public meeting,” Mayor Henry says. “I don’t know of the details of any relationship that they had, I’m sure that the issue will be brought up.”

The city vehemently opposed the construction of the ethanol plant at the Oshawa harbour, which was approved by the port authority in 2012.

The controversial approval was met with heavy skepticism from politicians, who claimed the project stunk of cronyism as Dan O’Connor, the president of FarmTech, was the brother of Tim O’Connor, a member of the Conservative riding association, along with port authority board member Chris Kluczewski and Valcour, who was previously the president of the Conservative Riding Association in Whitby-Oshawa.

A request for comment from FarmTech was not returned as of The Oshawa Express press deadline.

However, when the plant never materialized, the project stayed silent for years. In 2016, it was announced that the port was in arbitration with FarmTech over the project, and in November of that year it was made public that a deal had been reached and the ethanol plant was dead.

However, with the $4,189,965 arbitration settlement and $343,785 of associated legal fees, the fallout of the ethanol plant is far from over.

With that said, Valcour is certain that the future of the port authority is not in question, noting it is not all “gloom and doom.”

“I think overall we’re fairly confident that this is something that can be dealt with in a positive way going forward,” he says. “We’ve got good customers, our customers continue to be supportive and we continue to have the kind of growth we’ve been working towards.”

That growth has shown itself slightly in the increase in wharfage as the port increased its revenue from the movement of goods from $383,920 in 2015 to $444,235 last year, a result of sound investment, Valcour says.

“We have spent a lot of time and money in the last few years on things like the rail spur and trying to continue to expand the port,” he says. “I don’t think that people in Oshawa should despair, I think that the port is here, I think it’s going to stay. I think it’s going to continue to grow, but we just have to work hard to get this one particular item behind us.”

For Oshawa resident Larry Ladd, a longtime advocate for the waterfront, it’s going to take outside intervention to solve the problem, which he sees as running much deeper than this issue

“It leads me to believe the port is either in insolvency or bankruptcy,” he says, noting that it’s time the federal government stepped in to shed light on what really happened with the ethanol plant.

For that reason, he’s written to Prime Minister, Justin Trudeau,  Minister of Transport Marc Garneau and the leaders of Canada’s major political parties, calling on a federal or judicial inquiry.

“It’s widely believed that local federal Conservative politics played a partisan role in Farm-Tech Energy wanting to build a proposed ethanol refinery facility on Port Authority lands,” Ladd writes. “Residents of Oshawa deserve transparency and accountability on the Oshawa Port Authority’s operations and I firmly believe that the federal government needs to publicly expose all issues around the arbitration ethanol refinery…and dealings that may impact our community and Oshawa’s waterfront.”

Ladd is also calling on all Oshawa residents to come out to the port authority’s AGM on Sept. 14 and demand answers.

“It’s your waterfront, it’s your city and what goes on down there affects all of Oshawa and the region,” he says.

The port’s AGM is scheduled for 11 a.m. at the Jubilee Pavilion on Sept. 14.