The Sand Mining Promoters

Back in the early eighties, when The World still made sporadic efforts to find the truth in public affairs, that paper published an investigative article about Marvin Judd, who had just resigned as President of Canasia Coal. In his Presidential capacity Judd had promoted a plan to export coal through Coos Bay, but by that time its chances of success, deemed quite high at first, were evaporating for reasons I explained in a recent interview. To obtain more clarity about Canasia Coal, a reporter finally talked to officials of other coal mining firms, more experienced than Canasia. As I write in my book “The JOB Messiahs” (in Chapter 7, “The Coal Promoters”), the people at those other companies,
“. . . who asked not to be identified, called Canasia a ‘promotion company’, which puts together a project, does the ground work and then sells the idea to a larger firm with the financial capability to see it through.
Former Canasia President Marvin Judd told The World Canasia has no assets or sufficient capital to build the kinds of facilities it is talking about.
It has never mined any coal.”
When somebody is described as a promoter, that doesn’t mean he is a criminal. It’s true that many promoters have been exposed as crooks, but some have achieved great things on the strength of nothing but an idea and a lot of fast talk. Plus, of course, sheer dumb luck. On the other hand, promoters are speculators whose real plan is to make a fast buck, using other people’s money in a high-risk gamble. So be careful.
Columbus, by all accounts, was a promoter. In the first place, he didn’t know where he was going (he thought he was traveling to the Indies); number two, he traveled on someone else’s dime (having been financed by the Spanish King and Queen), and number three, he told a fair number of lies. It is known, for example, that he lied to his crew about the position of the Niña, the Pinta and the Santa Maria, because they were worried about falling off the edge of the earth if traveling too far west. But, even though Columbus was a typical promoter, he accomplished a great thing, which was the discovery of America. (Some of the people he discovered didn’t see it that way. But that need not concern us here.)
Telling a few lies may be necessary to pull off any promoter’s plan, and when the plan works out, few people remember. It’s hard to argue with success. Besides, Columbus’s lies about his fleet’s position in the Atlantic couldn’t have hurt anybody, because there is no way they could have fallen off the edge of the world. That’s because it’s located much farther west. The edge of the world is in Oregon, somewhere between Remote and Boring.
Still, there is one big problem with promoters. While promoters occur in great numbers, a Columbus comes along just once in a thousand years. The vast majority of promoters’ plans come to naught because they are risky, undercapitalized, insufficiently researched, sold with callous disregard for the truth – in short, most carry the seeds of their own destruction.”

Further details about that coal mania of the past, which recently was reborn only to die a predictable second death, can be found in that same chapter.

Lots of Promoters, big and small
But several other chapters also show that Marvin Judd of Canasia Coal was far from the only promoter who came to Coos Bay to make a fast buck from a lot of fast talk. Others included the fishy characters who convinced the Port of Coos Bay (and the State of Oregon) to finance a seafood processing plant for them in Charleston, along with those who got the port to build them a fish meal plant that became an appalling public nuisance. Both ventures went broke; both sets of promoters skipped town after they had skimmed all they could.
The 1980s were a busy time for scams, besides the fish plants and Canasia Coal. After subsidizing the fish plants, the Port had approved $150 million in tax-free bonds for Canasia to build its coal terminal, but luckily (no thanks to the Port) that never happened. Then in 1987 another promoter in a three-piece-suit arrived who called himself “an international leader in the metal-smelting business”. He was going to build a completely non-polluting chromium smelter on the North Spit. The Port moved heaven and earth to get him every imaginable subsidy, but he still chose to go elsewhere, which was a good thing for Coos Bay even if the Port Commission and its manager were blissfully unaware of it. The International Leader In The Metal-Smelting Business had told so many lies that we’re lucky his proposition never reached its poisonous fruition. Like many promoters, this man’s real agenda seems to have been making a killing on his company’s stock; and damn the consequences for Coos Bay. The gory details of that story are found in Chapter 11, “Pie in the Sky”, from pages 11-18 to 11-21.
While it’s true that most of the people who approached Coos Bay with industrial proposals in the past forty years had more behind them than these grifters, those people came with secret agendas too. They meant to use the naïve people of Coos Bay as pawns in a game of corporate welfare. Coos Bay was not really the place where their company wanted to build a new industrial plant; Coos Bay didn’t have the needed attributes, such as raw materials or proximity to markets or good inland connections. But Coos Bay’s “leaders” believed it was eminently suitable, so their offers of subsidies and concessions and tax exemptions would work nicely to loosen the strings of the corporate welfare purse in some other town, where the company really wanted to go. This was true of the pulp mill proposal that capped the ‘eighties, of the 1997/99 Nucor steel mill, and of the Maersk container import facility of 2007/08. Over and over again, big headlines blared news of hundreds or even thousands of new jobs, hopes were raised, large sums of public money spent on preparations by the Port and other government agencies that had swallowed the bait – but in the end it was all sound and fury, signifying nothing.
Ocean Grove arrives
It behooves us to remember this long line of schemers at times like last November, when The World announced that Ocean Grove Development Group LLC, founded two months earlier in Ashland, with its headquarters in a mailbox at that city’s UPS office, was going to develop a 69 acre piece of land west of Coos ay’s long-languishing K-Mart store. Ocean Grove would be “mining” sand on the site which, like much of the Coos Bay peninsula, is an old sand dune area covered with a thin layer of topsoil. When I drove into the northern half of the property the other day, it looked like a soil dealer or a gardening company had been stripping off the topsoil for some time; there were many mounds of it, with only plain sand left in-between. The vegetation in places that still had topsoil consisted of very young trees and brush, particularly Scotch broom. And the dirt they were growing in didn’t look exactly like a gardener’s dream.
After selling the sand, Ocean Grove’s plan called for building 500 homes on the leveled site. Those homes would be needed for “people employed in an industrial renaissance the company says it foresees in Coos Bay.” The article cited statements from the company’s website that sounded as if they could have been written by Frank Martin, who was Port Manager from 1983 to 1988. Martin was a devious blowhard from the Chicago political machine whom even the Port attorney of those days has described as a con man. While Martin loved using big words, he didn’t seem to care much what they meant. Or, just as likely, he had no idea what they meant. But he had a compulsion for throwing them around: parameters – deep-draft international port – our greatest natural resource –an austere budget – multi-billion-dollar-infrastructure – multi-billion-dollar asset – etcetera. This is Martin’s own comment about his being hired as Manager by the Port Commission:

“This was a positive step to develop the expertise needed to plan for commercial development and the creation of new jobs for the community through our greatest natural resource, the port.
The port commission has re-designated its image to the “Oregon International Port of Coos Bay” to effectuate a worldwide knowledge of our community. It is important that we tell the world that we are here and possess a great asset on the Pacific range.”

Frank Martin, who takes up a lot of space in my book, is long gone, so he couldn’t have written newly-arrived Ocean Grove’s development pitch for its Coos Bay housing tract, found on its website. But maybe they had attended the same school for promoters:

“Extensive investment from the Department of Homeland Security, multiple publicly traded corporations, private investors and speculators have come together to create a new infrastructure and increased output in several industry sectors over the next one to five years. Coos Bay’s location in tandem with the multi-billion dollar infrastructure upgrades will establish the Oregon International Port of Coos Bay as a strategic US energy transportation center. The City’s expansion plans are to transition into new marine and industrial activities with a goal of making Coos Bay a top 50 US port in total cargo volume. This is expected to attract a broad range of industries that benefit from proximity to a major logistics hub.”

By momentarily ignoring the froth and foam fostered by this verbal torrent, we may notice that Ocean Grove doesn’t seem to know the difference between the Port of Coos Bay and the City of Coos Bay. And it’s a bit overwhelming to think of Coos Bay as “a strategic US energy transportation center”, “a top 50 US port in total cargo volume”, and “a major logistics hub” all rolled into one, when this major transportation center has been receiving a mere three or four ocean vessels a month. To the Chamber of Commerce, to the SCDC and to Boosting Southwestern Oregon (B.S. Oregon), Ocean Grove’s expectations must sound irresistible. But how do we get there from here?
When Gail Elber of The World called Ocean Grove Development Group LLC, whose principal is a California developer by the name of Brian Barbuto, she was told that all the company’s officials were “vacationing this week and were unavailable for comment.”
At this point in the story I need to credit the work of a local resident who combines a substantial international business background with an eccentric compulsion to remain anonymous. So I will call this person Hush Confidential.
Hush found some reasons to doubt the qualifications of Ocean Grove’s officials, and to doubt their connection to Ocean Grove as well. So perhaps Gail should have waited to publish her article, instead of repeating statements from the company’s website. Among those were claims that sand was much in demand by “frackers” in the Midwest, who use it in the mix of water and chemicals they inject into their oil and gas wells. Other expected uses for Ocean Grove’s sand were the “proposed Columbia River Crossing in Portland and the proposed shipping terminal on Coos Bay . . . Sand also will be needed to replenish beaches destroyed in Hurricane Sandy.” To her credit Gail Elber did ask one local sand miner if he saw a market for sand outside Coos County. That would be nice, he told her, but there was no evidence of it.
As a prospect for in-county sand-sales, Ocean Grove identified the “proposed shipping terminal in Coos Bay,” which is far from certain to be built, but even if it is, a traditional local way of supplying sand for fill has been to use dredge spoils. Nearly all of Charleston was built on those, and some should be available from the access channel and moorage slip to be constructed, or from the channel modification project, or simply from the regular maintenance dredging that is still occurring. And while trucking sand all the way to Portland seems economically dubious, shipping sand to the frackers in the Midwest seems downright improbable. Sure, they may need sand. But wouldn’t it be available a little closer to their wells, and hence a little cheaper? But all these great expectations are dwarfed by the notion of shipping Coos Bay sand 3,000 miles to dump it on East Coast beaches.

Hush Confidential’s List
A couple of weeks after the first sand-mining article appeared in The World, a second one provided a few more details. Brian Barbuto’s company would be scooping up sand for three years, hauling out 90,000 truckloads, which would mean 230 truckloads a day in the wet season, since during the dry season there would be no trucking. Assuming an 8-hour day, 230 trucks a day would mean a full truck every two minutes, but if we count the empty ones returning, one truck every minute. Apparently the trucks would only run four months out of the year, since 230 full trucks daily divided into 90,000 comes to 391 days. Spread over three years, that comes to 130 trucking days a year.
Shortly after The World’s second revelation about Ocean Grove, Hush Confidential sent me an unsigned research memorandum that was obviously the fruit of considerable work and which, not to put too fine a point on it, let the air out of the tires of Ocean Grove. The sand trucks’ tires.
The table below lists Hush Confidential’s list of the new jobs that Ocean Grove expects to be created in Coos Bay in the near future, according to its website. (I should mention that the website has been changed since, but Hush has prints of how it was then). By the company’s reckoning there are a lot of new jobs coming to Coos Bay, and those workers’ families will need housing.

Looking this over makes clear that Barbuto’s company expects Coos Bay’s economy to make the kind of Great Leap Forward that would astound even Jon Barton. Coos Bay and North Bend are full of empty homes. Most are not even marked by For Sale signs, which has to be a symptom of a terrible residential real estate market. As a matter of fact, realtors will tell you that local residential property values are some 25% lower than in Bandon or Florence. A developer who expects to sell 500 new homes needs to have abundant faith in the future. He’s facing a big risk, so he needs to be enthusiastic. But, as a wiser man than I once sighed: It is unfortunate that so few enthusiasts can be trusted to speak the truth.

The Channel Modification’s Jobs
Let’s start with the Coos Bay channel modification. There’s no doubt that deepening the ship channel from the present 37 to 45 or 51 feet, depending on the kind of vessels expected, would be a large undertaking. But dredging, including the underwater blasting that may also be required, has never struck me as terribly labor-intensive. It’s mechanical, repetitive work by a few small vessels, depending on the method used. And even though this project would take considerable time, there’s no way the channel deepening (and widening) would employ 1,433 people. A couple of hundred could be an overstatement. If somebody wants to correct me I invite them to do so, but I suspect the 1,433 number was made up by including a lot of other jobs that might be created as a result of the project. If that’s so, the 1,433 may well duplicate some of the other numbers already on Hush Anonymous’s list. Finally, it’s not at all certain that the Channel Modification will occur. It will only happen if some large harbor development requires it. Candidates for such development are: (1) the coal export plan, which is clearly dead; (2) the 2007 Maersk container terminal, which is just as dead; or (3) the only remaining candidate, the LNG terminal. The Port talks, it is true, of its so-called Gateway Marine Terminal, a notch into the North Spit that could moor two vessels, one for the Jordan Cove terminal and the other for as yet unspecified cargo, but everything that’s been said about Gateway indicates that it would not happen without the Jordan Cove LNG terminal and its dock, which would yield the revenues the Port will need to subsidize its unprofitable Gateway terminal.

Jordan Cove’s new jobs
It is also beyond dispute that the Jordan Cove project is not a certainty either, or our “leaders” at B.S. Oregon and other agencies practicing fascist economics would not be conspiring behind our backs to push it through.
But let’s assume, for the sake of the argument, that it does happen. In that case the investment ($5 billion) and the job number (2,800) may be somewhere near reality, with the crucial qualification that almost all those jobs will also be in temporary construction, maybe one to three years in duration, and some no doubt shorter. Those workers wouldn’t buy homes unless they had other reasons to stay in Coos Bay. The rational thing would be to rent, which would be good for some local owners of unused residential property, although I can see why the contractors might also bring in temporary housing for single men, because workers at big, temporary construction projects typically commute weekly between the project and their homes, where their families stay behind. Anyway, once construction is done and the LNG terminal is operational, a few dozen employees can run it, and any temporary workers who’d been foolish enough to buy a home in Coos Bay would be in a bad spot. That’s because during (or even starting before) the construction period home prices might have risen, but as soon as completion was in sight they’d soften because the 2,800 people were about to leave. So the bubble would burst.
What about the thousands of additional industrial jobs created by the presence of the LNG plant, once it’s operating? There is no reason to take those breathtaking predictions seriously. The $51 million, 1-foot gas pipeline from the Roseburg area, built more than ten years ago, was sold to the taxpayers with the prediction of 2,900 new jobs. Our local gas distributor Northwest Natural Gas, which was going to finance the line at first but then bowed out of that part because it didn’t think it would pay, has said it is only using about 7% of its capacity. We’re still waiting for the 2,900 jobs, and it looks as if Northwest made up its mind to quit waiting last December, when it severely cut back its local staff.
Some readers may object that my criticism of the housing demand projections ignores the new jobs associated with bringing the LNG tankers in and out of port, including pilots, tugboat crews, Coasties and longshoremen. But more hours worked may not translate into a similar increase in demand for new housing because some of those people are underemployed right now. For example, it’s well known that for quite a few years, local longshoremen have been traveling to other ports to put in enough hours. If the LNG plant enabled some to work in Coos Bay full-time, I’d be glad for them, but that still would not cause them to go out and buy houses; they already have those.
On the other side of that coin, the LNG plant’s tiny positive effect on local employment, whatever it is, is a gross overstatement if its advocates ignore – as they most certainly do – the loss of other jobs caused by its presence. One cause of job losses will be fear. In my book I made the point that the endlessly recurring announcements of heavy industrial developments in Coos Bay (even if they never materialized) have scared off potential new residents who were worried about pollution and noise ruining their enjoyment of life on the coast. So they ended up settling in smaller coastal towns, those without aspirations to industrial greatness. Fear has the same effect as pollution, and there can be no doubt that fear is produced by LNG terminals. There ARE reasons why Jordan Cove came to Coos Bay, and why of all the failed industrial proposals during the last thirty years it has been the only serious one, whose promoters have spent real money. Those reasons are not charitable: in a few words, nobody else wanted Jordan Cove. Remember that at the time its LNG plant was first proposed, 2005, its purpose was to import gas, not export it. That imported gas was destined to go to California by pipeline. And yet California voters and politicians have blocked the building of LNG terminals in that state. Even Eureka, a northern California port very similar to Coos Bay, didn’t want an LNG terminal. One reason was that on a geologically hazardous coast, an LNG plant is a ticking time bomb, and that may apply even more to Coos Bay than to Eureka. Given the right combination of events – a massive offshore earthquake during the dry season, a tsunami at high tide, unpredictable ground subsidence, power loss, massive road and bridge destruction – the entire area would not only lose all utilities and road connections, but what’s left of it could go up in flames thanks to the disabled LNG plant. People considering moving to the Oregon coast will continue to move to Florence or Bandon or Brookings, but not to Coos Bay.
Moreover, – aside from the fear-induced economic losses – others will occur. Every LNG tanker moving in or out of the harbor will be traveling inside a “safety zone” enforced by the Coast Guard; and ship movements will not be announced, also for safety reasons. That means that commercial fishermen may unexpectedly be unable to leave port for a three-day salmon season or a one-day halibut season. Commercial fishermen will not put up with such uncertainties for long; they will leave for other ports. It also means tourists arriving to go sport fishing will be disappointed. And all this will hurt the tourism business as well as diminish revenues from the Port’s fishing boat moorage in Charleston, which are already below expectations.

The Other Projects’ New Jobs
I’ve already mentioned the Gateway Terminal, the realization of which is uncertain at best. The 1,000 jobs associated with that, if they are realistic at all, would be mostly temporary construction jobs too. There would be some labor involved in operating the Port’s part of that terminal, but more than one study commissioned by the Port has cautioned that not a lot of cargo might pass across it.
The $4 million spent for the chromite mining may be low, and the 75 jobs are close to reality, or rather they were, because the chromite company recently shut down and its earthmoving equipment is being auctioned off.
And finally, I have no quarrel with the numbers of jobs associated with the Coos Bay rail line, but 11 jobs are hardly going to justify building 500 new homes.
In summary, almost all of the 5,319 jobs that Ocean Grove expects to appear will be temporary if they appear at all, and the permanent ones generated by the projects on the list are unlikely to amount to more than a few hundred. Counteracting that increase, the effects of the LNG project on other local sources of employment may well make the employment gain a wash, or turn it into a net loss. Those developments won’t make much of a market for new houses.

You Still Got It!
Since these first news reports, Hush Anonymous also learned that Ocean Grove, instead of mining the sand itself, is looking for someone else to do the job. Perhaps, from the fog of rhetoric about thousands of jobs and multi-billion infrastructure a promotional scheme is now emerging. One sign may be sloppiness with details. Hush Anonymous has noticed that – at various locations in its prospectus – the company had estimated the amount of recoverable sand at the site at 1 million, 2.5 million, 4 million and 6 million tons. And the buyer of the sand would be obligated to remove 2.5 million even if it is not there; Ocean Grove won’t guarantee its presence. It won’t even guarantee that it has title to the sand, perhaps because the County Assessor’s report on one of the four parcels that make up the property states: EXC MINERAL RIGHTS.
Hush Anonymous also reveals some information that directly contradicts some of the company’s propaganda about its principals, but this article is already getting long. With regard to Brian Barbuto himself, Hush lists eight companies formed by Barbuto that are known to the California Secretary of State, all but two of which are suspended, closed or inactive. Four other Barbuto companies are unknown to the California Secretary of State. Then this gem: “Of the 15 housing developments . . . that are listed in the company web site, only three are known to the state of California as being affiliated in any way with operating Barbuto organizations – and then they are known under a different name; seven are unknown to the state; and five are known by the stated name but have no apparent affiliation with Barbuto.”
To top off the confusion, Barbuto’s Ocean Grove had set a deadline for the submission of bids for the sand removal of November 2, three weeks before the article in The World appeared; and there has been no news of buyers, who would have to pay $5 million for the privilege of removing the sand. That would leave Ocean Grove with a nice profit on its land acquisition cost of about $3.7 million, plus a nice piece of flat land to develop, although Lord knows for what. It reminds me of a Jewish joke I heard years ago. A couple of New Yorkers, on a business trip in New Orleans, decide to visit a House of Ill Repute. When they walk out the gaudy front door, Nathan is star struck by the concept: “Ari, what a business! You got it – you sell it – you still got it!”