(Updated, 4:16 p.m.)
EAST PROVIDENCE – Sprague Operating Resources LLC, an energy company headquartered in Portsmouth, N.H., has agreed to pay $3.5 million in rent annually to Capital Properties Inc. in exchange for the use of Capital Properties’ million-barrel petroleum storage facility in East Providence.
From May 1998 through April 2013, Capital Properties operated the facility on behalf of Global Companies LLC, but the agreement came to an end at the end of April, leaving the 1.04 million shell barrels of capacity empty and contributing to a 64.7 percent decline in Capital Properties’ bottom line last year.
Beginning Sept. 1, 2013, the company entered an agreement with Atlantic Trading & Marketing Inc. to use roughly 44 percent of the storage capacity, but that agreement is slated to end April 30. Sprague’s tenancy will begin the next day, on May 1, and the company will occupy 100 percent of the facility’s storage capacity.
Under the terms of the agreement with Sprague, Capital Properties’ subsidiary Capital Terminal Co. will operate the facility on behalf of Sprague for an initial lease term of five years at a rate of $3.5 million annually, with the option for Sprague to extend the lease for two additional five-year terms. Either party may opt to terminate the lease on 12 months’ notice after April 2016.
Capital Properties’ wholly owned subsidiary Dunellen LLC, which owns the petroleum storage facility, will receive an additional 15 cents from Sprague for each barrel in excess of 3.5 million barrels per calendar year that is shipped through the company’s deep-water pier terminal. Each barrel represents 42 gallons of petroleum.
Todd D. Turcotte, vice president of Capital Properties, said the agreement with Sprague will have a definite positive impact on the company’s bottom line going forward.
The agreement includes the stipulation that Sprague may terminate the lease on six months’ notice if Rhode Island adopts restrictions on the storage of high sulfur content home heating oil. A draft regulation containing such a restriction is currently under review by the General Assembly, Capital Properties said, but the company has requested an exemption for storage facilities with a capacity of more than 100,000 barrels.
Sprague Operating Resources LLC is a a wholly owned subsidiary of Sprague Resources LP, which currently operates 15 heating oil and fuel terminals throughout the Northeast, including terminals in Providence and New Bedford.
