What's Happened to the Lummi Island Quarry?

Meredith Moench is president of the Lummi Island Conservancy. For updates and additional information go to www.lummiislandquarry.com

Part 13

It’s Complicated

The story goes back to 2005 when the newly re-branded owner of the Lummi Island quarry property, Lummi Rock LLC, borrowed $3.5 million from Frontier Bank. Rapid expansion of quarry production and infrastructure followed. When Union Bank took over failed Frontier Bank, it inherited the loan and lent additional funds to the company.

In November 2012, Lummi Rock LLC defaulted on the loans. Union Bank promptly sued in Kitsap County Superior Court. According to court documents, the company’s operating partner, Aggregates West, Inc., had guaranteed the loan. Bank of the Pacific responded by shutting down Aggregates West’s credit services. The company entered into receivership in March 2013 in Snohomish County Superior Court.

Lummi Rock LLC followed suit three months later, entering into receivership in Whatcom County Superior Court. The court appointed receiver for both companies is Resource Transition Consultants (RTC). Receivership is a legal alternative to bankruptcy. The receiver has a mandate to manage and liquidate assets for the purpose of paying off the creditors. At the top of the Lummi Rock LLC creditor list is Union Bank, owed nearly $4 million.

The property in question consists of approximately 105 acres on the east shore of Lummi Island and includes over 3,000 feet of conservancy shoreline. Quarry owners granted the first operating lease in 1964. By 1990 the operation consisted of approximately three acres and primarily served local needs. Some rock was removed during four months of activity in 1933-34, but the site had become overgrown with trees when operations started up in 1964.

Rock and gravel products were barged off the island from crushing and loading operations located adjacent to Smugglers Cove. A nearly 20-acre pit has been excavated and is now visible from Bellingham and points north to Gooseberry Point and south to Chuckanut Drive.

Operations Expand

Mining rights to the property were sold to Everett Rock in 1990. Company owners, James and Kyle Bride of Everett, Washington began expanding the three-acre pit. In 1996/97, The Quarry Committee of Lummi Island challenged the expanding scope of operations before the Whatcom County Hearing Examiner. The quarry was ultimately limited to a maximum 19.5 acres when a Mineral Resource Lands zone change was approved by the Whatcom County Council in 1997.

In 1997, Kyle Bride joined forces with Dick Christopherson of Bremerton, Washington and David Grainger of British Columbia to form a new company, Ace Rock LLC. Ace Rock conducted operations at the Lummi Island quarry until Aggregates West took over. Mr. Grainger is president of Aggregates West.

The local Lummi Island Niedhamer family sold the property itself to the Brides and Christophersons in 1999.Current owner Lummi Rock LLC was formed in 2005 when Mr. Grainger was added to the deed (under the corporate name Valley View Sand and Gravel, of which he is also president). Over the next six years, quarry operators blasted their way through nearly as much rock as had previous operators in 40 years.

Declining Output

By 2007, approximately 10 percent of the rock and gravel product was used on island with the remainder barged off, according to county permit documents. Marine Traffic shipping data for the first half of 2012 reveals that more than 80 percent of quarry shipments headed south to destinations in Everett, Anacortes, and Seattle. A small percentage was off-loaded at the end of “C” Street in Bellingham for county use.

Annual production at the quarry dropped from a peak in 2007 of 299,957 cubic yards to 136,271 cubic yards in 2011, according to Whatcom County Planning and Development Service excavation registration documents. These declines occurred before compliance problems led to penalties and stop work orders at the site. The decline also occurred despite increased shipping and production capacity. Operators constructed a new conveyor loading pier on the Smugglers Cove shoreline in 2006/07, creating two loading facilities when added to the existing ramp loading dock. A new crushing plant increased gravel production to 800 tons per hour.

Barging material off island initially appears to be more cost-effective but can actually be more expensive. It requires off-loading at a shoreline location, added storage and labor costs and requires trucking of material not used at the immediate shoreline destination. Regional competition of product barged from Canada and from inland sources also squeezes profits.

Compliance Problems

With millions of dollars of debt mounting in the background, quarry operators came under more intense scrutiny from county, state and federal agencies. Included among them were Whatcom County Planning and Development Services, Northwest Clean Air Agency, Washington State Department of Ecology, Washington State Department of Natural Resources (DNR), and the Army Corps of Engineers. All of these agencies initially tried to work with quarry operators before resorting to enforcement actions.

County Steps Up

Whatcom County issued the first $800 penalty in January 2012 following a year of appeals and unmet compliance assurances regarding a haul road, service and storage areas constructed outside mining boundaries. A stop work order was issued to “discontinue any and all use of the unpermitted road and service/storage areas… you shall physically restrict access to the road to make it impassable to vehicles.” Lummi Rock appealed and continued to use the road. On June 4, 2012 a minimum penalty of $1000 fine was imposed for the first failure to comply with the stop work order. Lummi Rock was given 14 days to comply or be subjected to a possible $1000/day in fines. On June 21, 2012, a second minimum penalty of $1000 was issued for failure to comply. Operators subsequently blocked off the road.

In November 2011, violations of the Whatcom County Shoreline Management Program were discovered at the quarry site, including construction of an unpermitted commercial pier loading facility, lack of proper stormwater controls and the presence of a sunken barge. Lummi Rock was given the opportunity to comply and apply for an after-the-fact permit for the pier. No penalties were issued. Delays and appeals followed. In June 2012, Whatcom County issued two stop work orders for the pier and an accessory moorage citing “an emergency situation where there is a significant threat to the environment.” A warning was included giving 14 days to comply or face possible fines of $1000/day. No monetary penalties were issued. Lummi Rock appealed. In July 2012, continued non-compliance led to a total of $7,000 in fines from Whatcom County for failure to comply with the stop work orders and lack of an engineered stormwater plan. Lummi Rock appealed and the fines remained unpaid. The after-the-fact permit application was shelved pending resolution of the receivership. In February 2013, Whatcom County issued a violation for after-hours operations conducted at night and on Sundays. This was also appealed. In all, Whatcom County has fined Lummi Rock a total of $9,800.

Water and Air Pollution

In August 2007 and March 2011, the state Department of Ecology issued “corrections required” for violations of Lummi Rock’s NPDES (National Pollutant Discharge Elimination System) permit regulating stormwater run-off. Meeting with partial compliance, the department chose not to impose monetary penalties. When questioned privately, the inspector said the department prefers to work with permitees cooperatively to achieve compliance rather than be punitive.

A $1,000 fine from the Northwest Clean Air Agency was reduced to $500 in return for submission of an after-the-fact application to permit the new, expanded crusher plant discovered during a routine inspection in 2010. This noisy, dusty processing operation crushes rock to create gravel and requires water to suppress the silica-laden dust generated. Dust and diesel emissions from generators pose a public health hazard regulated by the agency.

Water Diverted

During a 2007 site inspection, state Water Master Casey Ignak was told that water was being diverted from local streams for dust suppression. In a follow-up letter, she reminded operators, “Please note that if you are using water without a legal water right you are violating Washington Water Code … and will be notified to curtail this diversion of water. Failure to comply could result in possible fines of up to $5,000/day of illegal use.” Quarry operators responded that they had changed their water source and were in compliance. Three and a half years later during another site inspection, a supervisor admitted operators were still diverting water from local streams. Lummi Rock submitted an application for a water right permit. No fines were ever issued.

Lease Violations

In 2010, the Washington Department of Natural Resources (DNR) requested corrections and mitigation for excavation, blasting and road construction in rural forestry areas outside mining lease boundaries. In June 2011, DNR Aquatics Division determined that “trespass” of state aquatic lands had occurred due to construction of unauthorized shoreline improvements. An additional $496/month in fees was ordered until the area is either authorized or improvements removed.

Clean Water Act Violated

According to documents acquired through the Freedom of Information Act, the U. S. Army Corps of Engineers determined in November 2011 that construction of the new barge loading pier was in violation of federal law, allegedly sections of the Clean Water Act, the Rivers and Harbors Act, and the Ocean Dumping Act. The Corps decided not to prosecute and instead accepted the solution of applying for an after-the-fact permit. A Tolling Agreement signed by the parties states, “Whereas the purpose of any such complaint would be to obtain appropriate injunctive relief … and whereas the Corps accepted a restoration plan and an after-the-fact (ATF) permit application from the potential defendant…whereas both parties believe that their interests will best be served by continuing the restoration and ATF permit process….” The state Department of Fish and Wildlife came to the same conclusion and allowed an after-the-fact permit application to proceed for the pier.

Oil Spills

On June 20, 2013 the Department of Ecology issued a press release announcing nearly $17,000 in fines and clean-up reimbursement levied against Lummi Rock for oil spills occurring in Smuggler’s Cove during removal of two sunken barges in 2012. A 300-gallon tank containing diesel fuel was found onboard one of the barges when it was pulled out of the water. Ballard Diving and Salvage of Seattle billed Lummi Rock $275,000 for removal of the barges. The contractor was not paid, sued in Clark County Superior Court and was awarded nearly $322,000, including interest. Ballard Diving and Salvage now takes its place in line among Lummi Rock’s creditors.

The grand total amounts to $27,300 in fines and penalties actually imposed by regulating agencies. This relatively modest amount does not offer a reasonable explanation for Lummi Rock’s financial woes and default on millions of dollars in loans. Given the intertwined interests and overlapping entities between the two private companies, Lummi Rock and Aggregates West, it is difficult to sort out how much revenue was actually generated by the Lummi Island quarry. However, it is difficult to think the operation was not profitable after 2007 when they expanded into the last nine acres of their permit, operating at a maximum of six days a week, 10 hours per day, with a crushing capacity of 800 tons per hour and two loading docks from which to ship product.

Relationship to Aggregates West

Aggregates West owns/operates several pits and mines in Whatcom and Snohomish counties and serves clients in Whatcom, Skagit, Snohomish, King, Island, and San Juan counties. Canadian David Grainger, president of Aggregates West, is also a partner in Lummi Rock, LLC, and served as managing partner for Lummi Rock until the receivership. Both companies are registered in this state.

An average of three to four Aggregates West employees worked at the Lummi Island quarry. They were on Aggregates West’s payroll and, like the equipment, they were portable. All vehicles, mining, loading, servicing and processing equipment at the quarry were portable.

Shell Game

In May 2014, Aggregates West partner Barry McLean “and others” formed a new Washington registered company, Pacific Gravel Sales, Inc. According to court documents, “substantially all” of Aggregates West equipment and assets would be acquired by McLean upon approval of a purchase agreement. The Sale was authorized by the court in June 2014.

Obstacles to Continued Mining

Continued mining at the Lummi Island site faces numerous obstacles. The current 19.5 permitted acres of the quarry are nearly exhausted with less than an acre left to mine, according to a recent DNR report. In addition to the economic vagaries of a highly competitive business, there are additional costs associated with mining and operating on a shoreline. For example, an engineered stormwater plan with regular monitoring is required to prevent sediment-laden discharges into marine waters. Special covered conveyor equipment could be required to prevent product dropping into marine waters during loading. Additional protection from mining impacts could be ordered for possible wetlands observed by county staff during a site visit.

In a letter to Lummi Rock’s attorney dated Feb. 1, 2013, Whatcom County signaled its intention to require an Environmental Impact Statement (EIS) for all pending applications. County officials had determined that the close relationship between the proposals necessitated their consideration as a single course of action with “a probable significant adverse environmental impact.” Therefore, a SEPA (State Environmental Policy Act) determination of significance would be issued requiring an EIS. This intention was reiterated in a letter from Whatcom County to Lummi Rock in May 2013 requiring them to either commit to the EIS process or withdraw the applications. A month later Lummi Rock announced their receivership. Preparation of a full EIS could take at minimum one year and possibly three years to complete. According to the receiver’s estimate filed with the court, an EIS would cost between $125,000 and $250,000.

The applications involved are for the new barge loading pier, accessory moorage and revised operating permit for the haul road and service areas. Processing of the applications is on hold while the receivership is being resolved.

Mining Expansion

Also pending is a “non-project” application for a zone change to allow mining on an additional 27.5 acres of rural forestry land at the site. The zone change to a Mineral Resource Lands designation could encounter political overtones as it has to be approved by the Whatcom County Council. As elected officials, council members can be unpredictable in the way they interpret the county’s comprehensive plan requirements which govern zoning.

Without the expansion it seems questionable that the remaining resource can be profitable or whether it would be worth going through the expense and delays involved in getting pending permits in place.

Public Opposition

Considerable public opposition, both on and off the island, could mean additional legal challenges along the way, with the possibility that one or more of the permits might not be approved. Over the past four years, a local non-profit, The Lummi Island Conservancy, has waged a campaign to stop expansion of the quarry. This includes amassing a legal fund for future action should mining operations resume at the site. The Conservancy became a 501(c)3 non-profit in 1997 following nine years of environmental activity on the island. Another challenge could come from the Lummi Nation, which has repeatedly expressed concern regarding the quarry’s interference with treaty fishing rights.

The alternative use of the property for residential development faces different challenges, including building limitations in a forestry zone and finding an adequate source of water. As the DNR lease holder, Lummi Rock is responsible for reclamation of the pit.

Stop Work Orders

Following Lummi Rock’s appeal before the Whatcom County Hearing Examiner in November 2012, the three stop work orders remain in effect at the quarry. Limited operations are allowed to continue using the ramp loading dock and an old service road to the upper benches. Stockpiles of product are being sold, primarily to on-island clients.

Conservation Values

The entire 105-acre property is located within a state Department of Fish and Wildlife designated biodiversity corridor and is a biologically sensitive area. Whatcom County Critical Areas Ordinance maps and GIS (Geographical Information System) data define Habitat Conservation Areas for protected wildlife throughout the property, both marine and upland.

Although shoreline modifications made by quarry operators have eliminated significant portions of nearshore habitat, Smugglers Cove still nurtures GIS-mapped forage fish habitat with eelgrass beds. Opening onto Hale Passage and the greater Salish Sea, the cove is adjacent to the Pacific Flyway for migratory birds. Species listed under the Endangered Species Act (ESA) are found in the area. These include ESA-threatened Puget Sound Chinook (king) and steelhead salmon as well as the Steller sea lion. Also found in or around the property are local priority and sensitive species, such as Pacific herring, bald eagle, common loon, great blue heron, band-tailed pigeon, pileated woodpecker, turkey vulture, harbor seal, rockfish, Pacific sand lance, and surf smelt. The Whatcom County Marine Resources Committee has mapped sand lance larvae throughout Smugglers Cove and Hale Passage. Along with Pacific herring, sand lance are an important food source for salmon. A federally protected peregrine falcon refuge is located just over a mile away on the west side of Lummi Island. Protected orca whales seen on the island’s west shore may venture into Hale Passage.

Conservancy Shoreline

The property’s approximate 3,000 feet of shoreline has Whatcom County conservancy status and is subject to its Shoreline Management Program restrictions. All Lummi Island shoreline is classified as “of statewide significance.” NOAA (National Oceanic and Atmospheric Administration) has designated all Lummi Island shoreline as ESA Critical Habitat for threatened Puget Sound Chinook and is considering similar protection for Puget Sound steelhead.

Mining with its environmental, social and aesthetic impacts has continued on this scenic Lummi Island shoreline because it became established before shoreline protections were put into place in the 1970’s. Today, with state and federal resources being poured into recovery of the degraded salmon fishery, and greater Puget Sound in general, would surface mining be approved for this sensitive shoreline location?

Lummi Island Heritage Trust

In the fall of 2013, the Lummi Island Heritage Trust learned that RTC was planning to sell the 105-acre property to pay off creditors as part of a receivership settlement. This local land trust, established in 1998, has successfully conserved 859 acres of land on Lummi Island and owns and manages three nature preserves. The Heritage Trust appointed a task force to determine the conservation values of the property and whether the property fits the organization’s criteria for acquisition. A purchase offer was presented to RTC in January 2014.

Later that month, the Heritage Trust gave a presentation to the Whatcom County Council’s Natural Resources Committee. Six of the seven council members attended. Rebecca Rettmer, Lummi Island Heritage Trust executive director, outlined the trust’s conservation vision for the property, including acquisition and restoration of the shoreline and upland areas that have been damaged.

Whatcom County Parks

The Whatcom County Parks and Recreation Department has expressed interest in partnering with the Heritage Trust to help the trust purchase the land and create a saltwater access preserve for low impact public recreation. One of the county’s priorities is to acquire more public access to shoreline locations. Negotiations between the Heritage Trust and the receiver are ongoing with the hope that a deal can be made.

Conservancy Shoreline Designation

Whatcom County Code (23.30.09.2) states a conservancy shoreline designation is an area:

• Where development activities and uses are buffered from and do not substantially degrade ecological processes and functions.

• Of outstanding scenic quality or other aesthetic qualities of high value to the region, which would likely be diminished unless development is strictly controlled.

• Containing critical areas or other sensitive natural or cultural features that require more than normal restrictions on development and use.

• Having the potential to influence ecological processes in a manner that will produce ecosystem-wide benefits upon restoration.

• Having recreational value to the region that would likely be diminished unless development is strictly controlled.