Zenith Energy, Oregon’s largest facilitator of crude oil exports, last year defied its agreement with state regulators to show it could control and clean up a major crude spill at its Willamette River terminal in Portland.

Instead of drilling with the sludgy, toxics-emitting Canadian tar sands crude that travels by rail through the Columbia Gorge and North Portland neighborhoods to Zenith’s facility, the company used diesel for the mock cleanup. Diesel is easier to practice with because it is less toxic and easier to clean up than Zenith’s crude.

Zenith’s decision to conduct a drill without using tar sands crude came the same year it singlehandedly escalated Oregon crude exports to $71 million, up from the previous year’s total of $2,532.

Regulators at the Oregon Department of Environment Quality, who are empowered to regulate facilities that store and transfer petroleum products, did not invoke laws and rules allowing them to demand the company comply with the agreed-upon plan for the drill.

As a result, Zenith and others who would counter a dangerous toxic oil spill if one were to occur – first responders, regulators and employees of Chevron, which Zenith contracts with to unload oil over Chevron’s Willamette River dock – have not practiced for a tar sands disaster.

Oregon’s oil spills regulator, Scott Smith, says he was nonplussed by Zenith’s uncooperativeness. Smith, however, said he did not force Zenith to conduct the drill with tar sands oil because he felt pressure to go along with other agencies’ decision to allow the company to practice with diesel.

His counterpart in Washington said such a substitution would never be accepted there.

“That just wouldn’t happen in Washington,” said Linda Pilkey-Jarvis, manager of the oil spills program at the Washington Department of Ecology. “They’d be on the hook to do another drill,” she said. “There are consequences to that with us.”

The whole reason for drills is to “prove” a spill plan’s effectiveness and “look for failure points” before an actual spill occurs, Pilkey-Jarvis said. The exercises are an “extremely important” part of averting catastrophe, she said.

Zenith, a privately-owned company, bought the terminal in the heart of Northwest Portland’s industrial zone at the end of 2017. Regulators soon observed an uptick of crude oil “unit trains” – trains carrying a single commodity, sometimes a hundred cars long – in the Portland area.

Tar sands oil reaches the facility’s large above-ground tanks on railroad tracks that cross the Columbia River from Vancouver to Portland, then cut through the North Portland neighborhoods of St. Johns, Portsmouth and University Park before crossing the Willamette into Northwest Portland.

The site is Zenith’s only West Coast facility, giving it access to Asian oil markets and West Coast refineries.

Canadian tar sands oil poses risks to human health and the environment in the event of a spill. It contains the poisonous gasses hydrogen sulfide and benzene, chemicals that can make a spill dangerous and, in the worst cases, deadly. The crude is also extremely flammable.

When a tar sands pipeline burst into Michigan’s Kalamazoo River in 2010, more than 300 people fell ill with nausea, respiratory problems and headaches after being exposed to hydrogen sulfide.

Levels of benzene also spiked near the Michigan spill. The sweet-smelling gas can cause cancer.

The heavy oil sank to the river bottom, killed insects, frogs and turtles that are essential to the area’s ecosystem and caused a $1.2 billion cleanup that is ongoing.

In Oregon, regulation of facilities like Zenith’s falls under the purview of Smith, the Department of Environmental Quality official overseeing the state oil spills program. Companies must conduct annual oil spill drills under his watch to stay in compliance with Oregon law.

Smith said he asked Zenith to conduct its 2018 drill with tar sands crude after he learned from reports in Bloomberg News and Oregon Public Broadcasting – not the company itself – that the terminal had begun receiving that form of oil.

The drills should “closely mirror” a company’s current operations, Smith said, so he figured practicing with tar sands ought to be “a central part of the drill.” He also wanted to make sure Zenith could handle the environmental and inhalation hazards posed by its oil.

The company agreed to do the drill as asked, Smith said. But an unexpected change of plans was afoot.

Days before the drill, Smith attended a company planning meeting by teleconference, during which the terminal manager, Nathan Eggers, announced the exercise would not practice with tar sands, but with diesel.

Smith was taken aback. Such a switcheroo had never been presented to him before.

“I was disappointed,” he said. “It was a chance to drill with a product we hadn’t worked with in the past.”

Smith emailed his managers, telling them Eggers said the drill had to change because Zenith had closed a significant deal to transport diesel and did not expect to handle tar sands crude for some time.

Eggers had since been promoted to lead Zenith’s operations in Alabama and did not return a voicemail seeking comment. The company said he was unavailable.

Smith relayed his confusion over the change in another email, to Cori Mikkalo, a U.S. Coast Guard official.

“The Canadian stuff has really different properties from diesel, so I don’t really know why they are doing that,” he wrote.

The supposed grounds for change also did not add up, Smith said in emails to other regulators, because Zenith at the time had only three small tanks configured to hold diesel.

“To me it does not necessarily make sense that Zenith, who is known as one of the few terminals in Oregon to handle heavier oils, would switch their primary operations to diesel fuel, especially when their dedicated diesel tanks are some of their smallest,” Smith wrote.

The capacity of those tanks was 79,000 gallons, the equivalent of about four full rail cars. Zenith’s other tanks, many of which are configured to store crude oil, hold approximately 71 million gallons.

Grady Reamer, Zenith’s vice president for U.S. operations, said Thursday that the company is permitted to store diesel fuel in “many more tanks” than the three that Smith identified.

In facility plans dated March 4, Zenith noted it had diesel fuel residue only in the three small tanks Smith wrote about. It also indicated it plans to fill one other tank with a capacity of 204,000 gallons with bio-diesel. Meanwhile, the company intends to pump crude oil into three other empty tanks, which together hold 8.8 million gallons, company documents show.

A Zenith spokeswoman, Megan Mastal, said in an April 1 statement that Zenith did not mislead regulators in 2018 about what oils it was handling.

Mastal’s statement said the company practiced a spill with diesel during its annual drill, held in November 2018, because it planned to be storing more at its facility under a new contract. Reamer said diesel was the only fuel coming to the Portland facility at the time.

Records show Zenith transported and unloaded about 2,800 railcars full of crude oil in Portland during 2018. Mastal’s statement said Zenith never hid from regulators what products were at its facility.

Reamer noted the company has previously held preparedness drills at its Portland site with crude oil – though not with tar sands crude – and said there was nothing wrong with changing the agreed-upon plans for the 2018 drill.

“When it comes to who dictates the product for the drill, it’s the operator,” Reamer said.

State law, however, empowers officials such as Smith to “require additional drills” as needed to make certain the spill prep plans are effective. And administrative rules allow Smith to require Zenith to drill again if “not satisfied” with a company’s performance.

But Smith did not do that in Zenith’s case.

His agency’s team of oil spills regulators was fatigued from their busiest year of drills to date, he said. The drill was days away, and Coast Guard and Environmental Protection Agency officials had already signed off on Zenith’s change.

“I didn’t feel like it was appropriate for me to have them go back through the drill planning process all over again,” Smith said.

He instead consulted with his managers, Michael Zollitsch and Bruce Gilles, about what to do, and they decided to write a letter to Zenith. Its contents were reviewed by Richard Whitman, the Department of Environmental Quality director, before being sent to Zenith.

The letter, dated Oct. 31, 2018, lays out the department’s expectations of Zenith this year – namely that it should prepare to conduct a tar sands drill simulating a “worst case” failure of a 4.7-million-gallon storage tank and release of 335,000 gallons of tar sands oil into the Willamette River.

Zenith has not responded to the letter, Smith said, and has not scheduled its 2019 drill.

-- Gordon R. Friedman

GFriedman@Oregonian.com

Correction: An earlier version of this story misstated the Oregon Department of Environmental Quality’s regulatory authority. It regulates facilities that store and transfer petroleum products.