The controversial fuel storage and transport company faces state fines and additional regulatory requirements. City officials will decide what happens next. by Taylor Griggs Until recently, it appeared all but certain that Zenith Energy would have the official green light from both the city of Portland and Oregon Department of Environmental Quality (DEQ) to continue its operations into the future.  The controversial oil transport and storage company, which operates a Portland site in the Northwest Industrial area, secured a Land Use Compatibility Statement (LUCS) from the city of Portland in 2022 after a protracted legal battle. A LUCS is a form developed by DEQ to verify whether a state license, like an air quality permit, aligns with local land use and zoning rules. Per the terms of the LUCS, Zenith needs a new air quality permit from the DEQ to remain in compliance with local agencies. But a recent decision from the DEQ puts Zenith’s land use and air quality permits both in limbo.  The DEQ will now require Zenith—which made unsanctioned expansions to its operations without alerting local agencies—to seek a new LUCS from the city before it will process its application for a new air quality permit.  Portland environmental advocates—who have long sounded the alarm about the risks of Zenith’s continued operations—hope the new mandate will bring changes to government oversight of the company. Critics say Zenith has a history of flouting local laws and regulations. They accuse the city of turning a blind eye to its infractions.  Advocates have had reason to believe the incoming Portland City Council and mayor, who will take their seats in just two weeks, may be more interested in cracking down on Zenith than the previous city administration. The DEQ’s decision could provide the new councilors and mayor an opportunity to act.  It’s also possible the decision to issue Zenith a new LUCS will be mostly administrative, which would limit the Council’s ability to get involved. This scenario is what advocates are keeping a watchful eye on.  The DEQ’s decision to send Zenith back to the city comes after the agency made an unannounced property inspection of the Zenith site in November, finding the company made unsanctioned expansions. Under the 2022 LUCS, Zenith is permitted to operate at its main terminal, but the company has expanded operations to three other nearby tax lots, including a dock owned by McCall Oil.  The DEQ fined Zenith $372,600 for operating at the McCall dock without authorization, noting the company didn’t seek DEQ authorization “until after the agency requested information and sent a warning letter.” Agency authorization came in June 2024, about three years after Zenith began using the dock for marine loading.  The state environmental agency says the penalty is intended to hold Zenith accountable. In a press release, DEQ’s Northwest Region Administrator, Christine Svetkovich, said “ensuring compliance with all environmental regulations and land use laws is critical to protecting public health and the environment and maintaining trust in the regulatory process.”  But at a December 16 DEQ information session about the future of Zenith’s air quality permit, many people were concerned about why the company is allowed to continue operating, despite its past disregard for regulations and government agreements. People also asked how DEQ didn’t catch Zenith’s unauthorized expansion earlier, and why the company is still able to use the unregulated docks even as it faces a financial penalty for doing so.  “Zenith has been profiting for years off the illegal marine loading of fossil fuels and has been out of compliance the entire time it’s been operating there,” Kate Murphy, senior community organizer at Columbia Riverkeeper, said at the December 16 meeting. Murphy asked when the city and DEQ would be able to act to revoke its permits, considering the company’s “willingness to disregard the regulatory limitations and laws.”  According to DEQ staff, further repercussions would fall on the city of Portland to authorize. The city’s Bureau of Development Services (BDS) is in charge of land use decisions, while DEQ regulates air quality.  The Zenith facilities. (Taylor Griggs) For environmental watchdogs, Zenith is among the most closely-watched industrial operations in Portland due to the volatile nature of its crude oil storage and transport. Zenith’s current LUCS requires the company to transition entirely to renewable diesel and eliminate all crude oil activity within five years. The LUCS also mandates Zenith acquire a new air quality permit from the state. Zenith’s current air quality permit is expired, but the company is able to operate under an “application shield,” issued by DEQ.  While the company currently operates under a Title V air quality permit—required for major sources of air pollution as defined by the Environmental Protection Agency—Zenith is nowseeking an Air Contaminant Discharge Permit (ACDP), used to regulate minor sources of air contaminant emissions. The ACDP will replace the Title V permit. According to the 2022 LUCS, the new permit will “reduce allowable emissions of volatile organic compounds by nearly 80 percent as compared to the current Title V permit.”  The DEQ is asking the city of Portland to provide a LUCS to Zenith by February 4, 2025. According to recent reporting in Street Roots, the company has already submitted its application to the city. But at a December 18 City Council meeting, in response to concerns the current Council would fast-track the LUCS approval before the new Council could be seated, outgoing Mayor Ted Wheeler promised the issue wouldn’t be taken up until January.  Four members of the future City Council—Tiffany Koyama Lane and Angelita Morillo from District 3, and Mitch Green and Olivia Clark in District 4—signed a letter earlier this fall expressing their concerns about Zenith. The letter indicated these future councilors would take a second look at Zenith’s land use permit once in office. But future Portland city councilors will have a different role than current city commissioners have had, without administrative responsibilities. It’s unclear what oversight they’ll be allowed over the LUCS process. In a December 17 letter signed by the chair of the Linnton Neighborhood Association and members of several other environmental organizations, advocates asked the city to open the process up to the public.  “We write to put you on notice that environmental and community groups will be watching closely to ensure that the City complies with state law and does not attempt another backroom deal with Zenith,” the letter states. “Not only should the City refuse to fast track new land use permissions for Zenith, the City should withdraw Zenith’s existing LUCS and land use permissions. This must be done to carefully consider Zenith’s operations as a whole with a deliberative, robust, and public process that Portland residents have been repeatedly denied.”  If the city were to reject Zenith’s LUCS application, it’s likely the company would appeal the decision as it did in the past. A statement from Zenith’s Chief Commercial Officer Grady Reamer, published in OPB, said the company is “extremely disappointed” by DEQ’s decision, having “worked closely with the agency for years, including conducting annual drills and numerous inspections providing full visibility into our operations.”  Environmental advocates say any appeals or legal action Zenith would mount in the face of permit denial would be less of a threat than the company’s potential for harm. Notably, Zenith and other oil storage companies located in Portland’s Critical Energy Infrastructure hub along the Willamette River have the potential to cause a catastrophic oil spill in the case of a major earthquake. The oil spill could cost $2.6 billion to clean up, leaving unquantifiable ecosystem damage and loss of life in its wake.  “It’s clear that Zenith’s operations present substantial seismic risks,” environmental advocate Lynn Handlin said at the December 18 City Council meeting. “Are you worried about Zenith suing? Imagine if you grant the LUCS and disaster hits, people die and families sue. Do not grant the LUCS.”  Going forward, Zenith may appeal the DEQ penalty and reach a settlement agreement with the state agency. The company will continue to urge the city and state to expedite permit approval, with promises of transitioning to renewable diesel in the near future. Regardless of what approach local governments take, it’s clear many in the public will be watching closely.  “The evidence shows that Zenith Energy remains a fossil fuel company and despite clever branding, it plans to continue to expand its fossil fuel operations in Portland,” Dineen Crowe, campaign manager with environmental group 350 PDX, said in a press release. “We are glad to see state regulators begin to hold Zenith accountable for some of its illegal behavior, but we need city leaders to remain firm and reject any new applications from the company to continue its unfettered expansion of fossil fuels.”