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NW media mogul buys Everett paper and enters coastal oil debate

David Black.

David Black is new owner of the Everett Herald and Seattle Weekly.

Canadian newspaper mogul David Black today added the 111-year-old Everett Herald to his 39-newspaper Washington group, having recently also bought Seattle Weekly In an interesting twist, Black has also become a major player in one of the Northwest’s big energy stories. He’s the pitchman for building a $13 billion refinery in Kitimat, B.C., assuming that it's possible to build the Northern Gateway pipeline from the Alberta oil sands, across B.C. wilderness, to the small port up the B.C. coast.

More about the refinery proposal below. Today's big news is the purchase of the Herald, a 46,000-circulation daily that has been owned by the Washington Post Co. for the past 35 years. One big question is whether Black's Washington subsidiary, Sound Publishing, will turn the daily into weekly or biweekly publications, as happened with the former Eastside Journal after it was purchased by Black. Gloria Fletcher, president of the Sound subsidiary, was quoted as saying The Herald would continue publishing seven days a week, adding somewhat worryingly that daily frequency was her "intention right now." Printing will shift to a Black-owned facility and the Post Co. will put the Herald building on the market.

The Herald was long run by the Best family in Everett. When the Washington Post purchased the paper in 1978, it was part of a strategy of buying smaller dailies on the periphery of large cities, and then expanding into some of the big-city territory. The experiment largely failed, particularly in Trenton, N.J., outside Philadelphia, and so the Herald remained the awkward survivor of a discarded business strategy. Kay Graham, the legendary publisher of the Post, wrote in a 1997 book:  “We paid a monopoly price for a paper that was in a somewhat competitive situation with Seattle and then proceeded not to run it well until recently, when it has been vastly improved.” Like the Post, the Everett paper produced a quality editorial product, but recent years have seen a series of demoralizing layoffs. Allen Funk, an experienced publisher, departed his post in frustration in 2011.

The two recent acquisitions mean the Black group now owns 39 papers in Washington, with a combined circulation (most of it in the form of free household distribution) of 730,000. The papers are concentrated in Bellevue, Kent, and Renton; central Puget Sound and its islands; and the sole daily, the Peninsula Daily News in Port Angeles. Black papers blanket much of British Columbia and Alberta; he has a growing stake in the Bay Area; and he owns dailies in Honolulu and Akron, Ohio. All told, Black Press Ltd., based in Surrey and Victoria, B.C., owns 170 titles.

Now, about the controvedrsial refinery and pipeline proposal. Black's idea, first floated last summer, has roused lots of opposition and skepticism – in part because Black has no experience in the field. Enbridge, the Alberta company that wants to build the $6 billion Northern Gateway pipeline, doesn’t like Black's idea. First Nations oppose the pipeline, 25 percent of which would cross tribal lands. Black doesn’t have any investors, and he’s still trying to line up interested buyers of gasoline and diesel in Asia.

Reached by phone in Calgary this week, Black seemed his usual positive, low-key self, as he explained how he got into this project, as well as his plans for Seattle Weekly. At the time of the conversation there was no word about the Herald purchase, and efforts to reach Black for comments on the Everett deal have not yet yielded a response.

The story begins some years ago, according to Black, 66, when he was serving on the B.C. Progress Board, an entity trying to solve the province’s employment problems. Later, he began worrying about the environmental dangers of the Northern Gateway proposal, which would involve loading tankers with diluted raw bitumen, for shipment to California and Asia.

So he came up with a way to solve two problems. First, building a refinery at Kitimat, which would produce a lot of jobs — 3,000 permanent jobs by his estimate (10 times the pipeline employment). Second, transport refined instead of crude product, which would reduce environmental risk, since gas and diesel, if spilled, float on the surface and evaporate within two and 12 days respectively, by his account.

“Eight months ago, I took the idea to the pipeline folks in Alberta," explained Black. "They resisted it, since they just want to export crude. They wanted a feasibility study of the refinery idea, which I agreed to fund. They didn’t like that one so they suggested a new study, using a research firm they preferred, and we did another study. Still: no.”

At this point, Black recounts, one of the board members said, “You do it!” When he asked how, they said getting equity and debt financing for the $13 billion refinery would be relatively easy, assuming he could line up Asian contracts to buy the product. Off to China and Japan he went, meeting with 12 companies last November. Black is using his own funds for feasibility and environmental studies. His refinery venture is not related to his media company, Black Press Ltd., based in Victoria, B.C.

Skeptics say Asia only wants crude, and that there’s not much market for refined product in North America. There are also doubts that the pipeline will survive environmental review and ever be built; alternatively, other routes through America’s heartland or to the Vancouver area might obviate the need for the Kitimat route. The refinery business is volatile, costs in remote Canada are high, the North America market is saturated, and shipping costs to Asia may already be too high. Environmentalists point out that refineries cause problems from air pollution and waste water, and some of spilled diesel oils lingers on and washes up on shores.

Black’s company, called Kitimat Clean Ltd., makes the case that a Kitimat refinery would be the first on the West Coast exporting refined oils, and that Kitimat could be a low-cost provider of such oils to Asia. The cost savings come from the abundant natural gas used to power the refinery, and from the size of the facility (absorbing all 550,000 barrels a day on the Enbridge line), which provides efficiencies of scale. Black also thinks the only way British Columbians would accept the pipeline is with the environmental advantages of shipping refined oils. (Enbridge has been trying to sell the Northern Gateway idea for 10 years, with limited success.) Whether the idea would soften opposition from five First Nations alliances, who claim 25 percent of the pipeline would traverse their lands, seems unlikely.

In August, a poll conducted for Black found that 72 percent favored or somewhat supported the refinery idea. That support lines up with policies of B.C. Premier Christy Clark, head of the B.C. Liberal Party, who is pushing for more economic benefits from the oil sands pipelines, to offset the environmental risks. Black describes himself as a "quiet environmentalist," and his proposal has some environmental gains. On the other hand, his proposal may be the enabler for the Northern Gateway pipeline, which has serious environmental risks as it crosses the mid-B.C. wilderness.

Being a newspaper mogul causes some other problems. Black’s practice of buying up dozens of papers and converting them to lesser versions to save money has not endeared him to the public. He got in trouble in 1998 when he ordered all his B.C. newspapers not to carry editorials on a certain hot subject. Asked about the conflict of his refinery proposal and coverage, Black told me, “I told them they can write whatever they want.” Still, Black has near-monopoly control over scores of towns in B.C. (including Kitimat), and here he is playing a high-profile role in politics and economic development for the province.

As for Black’s many Puget Sound newspapers, now including Seattle Weekly, he declares, “I love Seattle, a fabulous place to be.” He wants Seattle Weekly to remain “a good alternative paper, with strength in club and restaurant news,” and he thinks alternative weeklies are “great long-term vehicles, for both print and digital.” (Full disclosure: I was the publisher and editor of Seattle Weekly from 1976-97.)

Black’s suburban strategy (as on the Eastside and Kitsap) is to provide TMC (total market coverage), free-delivery, low-cost, editorial-lite weekly papers that attract low-rate advertising inserts. A native of B.C., Black broke into the newspaper business working for Torstar in newspaper acquisitions, and he's a master at buying up papers in trouble. He doesn’t signal any interest in absorbing Seattle Weekly into the TMC formula, and has some experience in urban weeklies. He purchased Victoria's Monday years ago (a much diminished product), one neighborhood weekly in Vancouver (the former Westender), and now owns two former arch-enemies in San Francisco (Bay Guardian and SF Weekly).

His forays into bigger cities have been mixed, according to a Vancouver Sun account. What he calls one of “a few boneheaded deals” was his $165 million purchase of the Akron Beacon-Journal from McClatchy in 2006, just before the big newspaper bust. He slashed staff deeply and took a $100 million write-down. Afederal court ordered Black to restore retiree health care benefits, which Black had cut. In Honolulu, he bought and shut down the Honolulu Advertiser in 2010, making the Star-Bulletin, which he already owned, into the single surviving paper — at the cost of 430 jobs.

Maybe negotiating the turbulent waters of the foundering newspaper business is good preparation for the risky refinery business. But given all the political resistance to turning the West Coast into a series of ports for Alberta's vast oil sands, you might think a monopoly-style publisher would prefer a lower profile.

Click here for more on Northwest pipelines.

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