Mobil’s 40-year lease of CPA property expiring next year

The Commonwealth Ports Authority is weighing whether to issue a request for proposals or to accept the request of Mobil Oil Mariana Islands Inc. to extend its expiring 40-year lease of CPA’s property at the Francisco C. Ada/Saipan International Airport.

Mobil’s 40-year lease will expire in September next year and is asking for an extension of its current lease, or a new lease. That doesn’t necessarily mean that Mobil is requesting for a new 40-year lease at once. Barrie C. Toves, the CPA board’s Airport Facilities Committee chairman, said that CPA normally signs a lease for 15 years, with options for five-year extensions that add up to 40 years.

“But no more than 40 years, capped by CPA’s enabling [law],” Toves said.

In an interview last week, Toves said they had indicated in their meeting agenda last Thursday to continue discussions about the lease because Mobil came with a representative to speak to the committee during last month’s committee meeting.

Toves said Mobil had a PowerPoint presentation explaining how they started out on Saipan and then building the infrastructure at the Saipan airport to provide aviation fuel to the airlines.

“They are getting close to closing out their 40-year limit on the term of the lease and they’re requesting for CPA’s consideration to extend the lease,” he said.

During that meeting, Toves said, they made it very clear that a law actually prohibits CPA from extending new leases when it expires after 40 years.

Toves said they asked the CPA management to go back to the drawing board and see how they can address this because Mobil has invested a lot of money and provided service to the aviation industry.

“They are planning to…make some more improvement on their…facilities,” Toves said.

He said Mobil could also responding if CPA decides to do an RFP.

Toves said his committee is cautious about entertaining requests for the renewal of the lease when they expire after 40 years.

“We don’t want to be in violation of our own statute,” he said, explaining that they asked their legal counsel and their executive director, Christopher S. Tenorio, to look into the issue and see how to entertain Mobil’s request.

“If not and if we are required to pursue an RFP, that would be the route that we would turn,” he said.

Toves said Mobil has told CPA of its plan to expand its facilities but, in order for them to do that, they want to secure an extension of their current lease, or acquire a new lease. He said Mobil has active contracts with the airline industry so they want to “put the [pieces of the] puzzle together.”

“The problem there is that our hands are tied when it comes to the prohibition clause of the enabling act for the 40-year limit,” Toves said.

He said they want to retain the issue at the committee level for further discussion and they want their legal counsel to discuss it with them during an executive session because there are also some sensitive matters that he cannot disclose at this moment.

Toves said CPA’s normal practice is, if they RFP out a certain lease, the first option would be for 15 years. After 15 years, there could be many increments of five-year extensions, or sometimes it could be 10-year extensions up to the maximum 40 years.

Toves said they will probably be entertaining Mobil’s request were it not for the Enabling Act that prohibit CPA from going past 40 years. “But we need to clarify this matter with our legal counsel during the board meeting and, from there, we will decide whether to entertain the request for a new lease, or we will go back to the drawing board and do an RFP,” he said.

When the lease expires, Mobil will have to pack up and remove those infrastructures in their facilities and that’s something that CPA is concerned about, Toves said.

“We don’t want to interrupt their supply of aviation fuel. So that could be something that we can continue to talk about,” he said.