A joint development agreement signed between the Cayman Islands government and a Texas-based energy company seeks to eventually shutter Cayman’s current bulk fuel storage facility in South Sound and construct a new one in East End, according to government records obtained under the Freedom of Information Law.
The three-page memorandum, signed in April, states Cayman and Navasota Clean Energy LLC intend to “establish a fully integrated development plan and structure such that they might attract one or more [fuel] terminal companies” that are interested in fuel supply and transshipment operations.
According to the agreement, the goals for the new storage facility include: Establishing a long-term fuel supply plan, providing revenue to government, creating jobs, reducing the “fuel factor” costs on Caribbean Utilities Company bills and “building infrastructure to support the current cruise ship initiative.”
Under the agreement, the Cayman Islands government undertakes to: “Work with Navasota on potential sites on the East End of Grand Cayman and provide preferred rights of way for [a] delivery pipeline from East End to [the] current pipeline system.”
The government would also create an “enterprise/duty free zone” for the operation of the fuel terminal and formulate an economic development package to include certain unidentified incentives.
In return, Navasota agreed to work with Cayman on evaluating potential fuel terminal sites in East End, screen potential candidates to operate the oil terminal, and conduct a bidding process that would involve both Navasota and the local government reviewing the proposals. Navasota also agreed to support a “cruise ship design terminal initiative” including specs on refueling. Proposals for a “home port” refueling and harboring facility for cruise ships and large yachts in East End was discussed under the previous United Democratic Party government, but the idea was abandoned following public protests staged by opponents of the project.
Planning Minister Kurt Tibbetts spoke to the Cayman Compass in general terms about the agreement with Navasota in June, stating that Navasota may be brought in as a consultant to negotiate with the oil companies regarding the new fuel terminal.
“The Cayman Islands location has geographical advantages for the supply of fuel to various other Caribbean jurisdictions,” Mr. Tibbetts said in June. “If [Navasota is] successful … then we will sit and talk to these interested parties to see whether it is something that is feasible or not.”
The proposal seeks to consider an onshore bulk storage facility that could initially fill fuel tankers heading to the central and eastern Caribbean Sea. If it goes forward, a storage location would need to be considered close to shore, but in a far more remote area than the current bulk storage facility in South Sound. Mr. Tibbetts said, in the long term, it could eventually be used to replace the current facility in South Sound.
“If something like this becomes feasible, it is very likely that Caribbean Utilities Company and other local entities could get their fuel much cheaper than they’re getting it now,” he said. “It could also be a means by which more competition is brought to bear in the retail fuel sector, but all of these things are what we are going to be examining.”
Mr. Tibbetts said Friday that nothing had been decided and that Navasota officials were expected to arrive in Cayman next month for further negotiations on the potential project.
What is being discussed as part of the joint development agreement with Navasota Energy bears some resemblance to a 2010 proposal by local businessman Joe Imparato that would have included a hydrocarbon [fuel] storage facility in East End as part of a larger seaport development.
At the time, Mr. Imparato said the idea would be to relocate the current fuel storage tanks at Jackson Point on South Church Street to a proposed East End seaport. Propane storage on Walkers Road would also be relocated there under the proposal. Public safety was cited as the major reason to move the fuel storage tanks.
Mr. Imparato said the fuel storage tanks would have never been put where they are if the government had realized George Town would grow the way it did. Any relocation of bulk fuel facilities could cause inconvenience for CUC, which now has a direct pipeline to Jackson Point.
In addition to safety problems with the South Sound location, the Cayman Islands government has known for a decade of another public safety danger posed by the underground fuel lines running from Jackson Point to CUC and the Owen Roberts International Airport.
The two underground petroleum pipelines, which posed a potential safety hazard to residents of a George Town apartment complex, were not dealt with for years, despite the problem being identified in 2004. According to a March 2004 risk management report done by the Advantage Risk Solutions consulting company, major concerns were identified about the fact that the two fuel lines – one 4 inches in diameter and the other 8 inches – run underneath a multi-unit apartment building that was apparently constructed over the fuel lines.
Advantage Risk Solutions President Phillip Myers wrote in a March 31, 2004 memo: “There are obvious risks with the potential for pipeline failures and releases of diesel fuel or aviation jet fuel under, into and around the apartment building and subsequent hydrocarbon contamination or fire. Further, the result of inspections of the diesel pipeline … indicated that a deformation in the pipeline exists at the location of the apartment building site.”
Mr. Myers recommended that both fuel lines be re-routed around the apartments – which were not named in the memo – within a year.
According to CUC officials, the company’s diesel fuel pipe was moved in late November or early December 2009. However, they believed the other pipeline, then operated by Chevron-Texaco, was still underneath the apartments in 2010.