Thursday, 10 March 2016

Unseemly Haste: The Fuel Farm Lease Mystery

AFT Overseas Holdings Limited (“ATF”) is a company which specialises in the importation and distribution of petroleum products in the Island. It supplies fuel for use at the airport and wishes to increase local competition for the supply and distribution of petroleum products generally.

In an open letter to the public of Jersey they make some statements about the new lease at La Collette which are very disquieting.

"Most petroleum products are brought in to the Island via a site at La Collette Terminal (“LCT”). That site is owned by the public of Jersey. "

"However, the landing and storage of petroleum products for onwards distribution at LCT is operated by La Collette Terminal Limited, a wholly owned subsidiary of Rubis. Rubis operated LCT pursuant to a lease, granted on behalf of the public of Jersey, for ten years."

The details of that lease are as follows:

“That lease provided that the public of Jersey could purchase the plant and machinery belonging to Rubis, used to operate LCT, upon giving Rubis 18 months’ notice. Alternatively, the public of Jersey had the option, in effect, of giving Rubis 12 months’ notice to quit the site. This would leave it free for future occupation and use by the public of Jersey or by a different operator, chosen through a fair and transparent tender process.”

“For reasons which are not clear to ATF nor, probably, the public, it would appear that no one within with relevant department in government considered these options, or the situation generally, until very recently. As a result, the previous lease of LCT expired on the 31st of January 2016 with no certain plans in place.”

And they point out that there appears to have been a lack of an open tendering process by Deputy Noel, Minister for Infrastructure:

“The need to ensure a fuel supply to the Island, however, means that the incredibly valuable opportunity to acquire a new lease of LCT has been offered only to Rubis. There have been no, or no serious, attempts to engage with other potential operators.

And finally, they suggest that the result of what appears to be a monopoly situation by Rubis has impacted significantly on fuel prices within Jersey:

“Aside from the profit margin which Rubis, and other suppliers, apply to the sale of petroleum products, Rubis levies, what is known, as a “through-put” fee via its operation of LCT. Rubis charges this fee to other suppliers of petroleum products in the Island to land their products at LCT and store them prior to collection and onwards distribution.”

“It is understood that the present fee is in the region of 3.4p per litre of fuel. The comparative cost of through-putting at sea terminals in the British Isles is 1p.”

In answer to a question by Deputy Baudains on Tuesday, 5th March 2013, the Minister for Economic Development, Alan Maclean, set out the position on the lease:

“The Public entered into a 10-year ground lease on 22nd June 2007 with Shell (U.K.) Limited and Esso Petroleum Company Limited for the site known as ‘LC03 Fuel Storage Site’ at La Collette. On 26th July 2009, the Public agreed to an assignment of the lease from Shell (U.K.) Limited to La Collette Terminal Limited. Jersey Property Holdings, representing the Public, is in discussion to consider renewal of the current site lease that expires on 31st January 2016. The Public does not own any of the operational plant and equipment on the site.”

Treasury Minister Senator Ozouf also made this statement in March 2013:

“I can inform Members that with regard to new lease for the Fuel Farm - the original lease was signed in 2007. It expires at the end of 2016 - we had a discussion at the Treasury yesterday, at the extent to which we would be working with Economic Development, and other interested government departments, and the J.C.R.A., to see whether or not it is appropriate - and I cannot promise it - to put in place service level agreement in any discussions with a new Fuel Farm lease which is under discussion and would commence in 2016.”

There is no evidence of a service level agreement being made available for scrutiny with the new lease. Indeed it appears that the lease lapsed in January 2016, hence the manic haste with which Eddie Noel is frantically trying to pass a new one.

It should also be noted that Senator Ozouf was sloppy in his reply, stating that the lease “expires at the end of 2016” rather than as Senator Maclean had stated “expires on 31 January 2016”. It may well be that this has led to the hiatus during which the lease actually expired early this year. Doesn't anyone diarise these matters?

Back to March 2013, and Deputy Noel, replying to Deputy Baudains, states:

With regards to future leases, any lease that Property Holdings signs with any operator for land at La Collette is like any other lease in that it will be subject to Standing Order 168 and the 15-day rule.”

And now of course, Deputy Noel is prepared to disregard the conditions he laid out to the assembly in 2013. As Bailiwick Express reports:

“A deal to renew the lease with a company ultimately owned by Rubis has been agreed by Infrastructure Minister Eddie Noel, who emailed States Members on Friday to tell them that he was dropping the normal 15-day scrutiny period to get the lease agreed – contrary to a commitment he gave in 2013”

And this Tuesday St Helier Constable Simon Crowcroft tabled an emergency question about the deal – asking why the scrutiny period has been dropped, and why ministers waited eight days between signing off the contract and announcing it.

“For what reasons did the Minister not communicate to States Members that he intended to sign a Ministerial Decision in respect of the lease on the fuel farm at La Collette, St Helier, immediately following the approval of the matter by the Council of Ministers on 24 February; and, notwithstanding changes to Standing Orders in 2014, will he postpone the passing of the contract for the lease renewal in order to provide States Members with the customary 15-day period for scrutiny?”

Given the open letter by AFT Overseas Holdings Limited over what appears to be unseemly haste to get the lease officially passed in the Court, one has to ask why such a hurry, especially since the situation has been in limbo for over a month since the existing lease expired?.

ATF conclude by stating this:

“ATF has endeavoured to engage with States’ Members, including the Infrastructure Minister, Deputy Eddie Noel, but without any, or any constructive response. ATF is aware that a number of States’ Members are concerned that due process has not been followed in relation to the proposed passing of a new lease before the Royal Court on Friday the 11th of March 2016.”


James said...

With regards to future leases, any lease that Property Holdings signs with any operator for land at La Collette is like any other lease in that it will be subject to Standing Order 168 and the 15-day rule.”

And now of course, Deputy Noel is prepared to disregard the conditions he laid out to the assembly in 2013.

He has misled the Assembly. He has to resign.

Póló said...

Seems to be par for the course in Jersey for Ministers to treat the States with contempt, and, worse still, suffer no consequences for so doing.