NORTH BEND — Less than two months ago, officials from the Coquille Economic Development Corp. celebrated the result of two years of hard work after completing a lease agreement with Home Depot Inc. for a planned development on CEDCO property.

On Thursday, those dreams of a Home Depot store in North Bend were shot down.

According to a CEDCO press release issued Thursday afternoon, the company announced it received a notice that Home Depot was terminating the lease with the tribally owned company.

“We are surprised and disappointed that Home Depot has chosen this course of action. Our surprise and disappointment are heightened by the fact that the cited reason for the termination is an issue that easily could be remedied,” CEDCO Chief Executive Officer Brady Scott stated in the press release.

CEDCO, the business arm of the Coquille Indian Tribe, had worked out the agreement in January with the home improvement retail chain to develop a 130,000- square-foot store on the Ko Kwel Wharf property, a 50.5-acre parcel located north of The Mill Casino-Hotel in North Bend. The Home Depot would have been the keystone of the Ko Kwel Wharf Project, a 35- to 38-acre mixed retail development. Construction was expected to begin as early as spring.

Commenting Thursday from his North Bend home, Scott said Home Depot’s decision to back out is based on a storm water permit issued by the U.S. Army Corps of Engineers.

“In their statement to us terminating their lease with us, they stated that the storm water permit issued by the Army Corps of Engineers did not meet their approval,” the CEO said.

 The stack of documents signed and dealt with during the negotiation process with the big box store did include language that gave its representatives sole discretion to back out of the lease agreement if they didn’t like the storm water permit, Scott said.

“We did float the idea to Home Depot as land owners that we would be willing to take on that issue ourselves,” Scott said.

Permit provisions required five years of monitoring and specifications regarding how storm water would be collected, processed and discharged on the site, Scott said. He added that Home Depot’s notification to CEDCO did not state exactly what its issue and concerns were regarding the permit.

“I think, obviously at this point, the attorneys are probably driving the process. That’s my speculation,” Scott said

CEDCO spokesman Ray Doering said CEDCO received the notice Feb. 29 from Lane Powell, Home Depot’s Portland law firm. He described the notice as “short and to the point,” and that it said storm water approvals didn’t meet Home Depot’s conditions.

“We honestly thought we had an agreement, and we were ready to announce when we would get started,” Doering said.

He said CEDCO officials did not announce the decision until this week because they didn’t want to “jump into reactions.”

The U.S. Army Corps of Engineers permit was issued on Feb. 24 or 25, Scott said. The project also got the go-ahead with two storm water permits issued on March 3 from the Oregon Department of Environmental Quality.

Storm water issues aren’t new for Home Depot. The company recently agreed to pay a $1.3 million penalty to resolve possible violations of the Clean Water Act.

According to a Feb. 26 press release from the U.S. Environmental Protection Agency, the U.S. Department of Justice and the EPA announced the settlement resolves possible violations discovered at more than 30 construction sites in 28 states where new Home Depot stores were being built. In addition to the fine, the company agreed to implement a comprehensive and corporatewide program to prevent storm water pollution at each new store it builds nationwide.

“We expect a large corporation like Home Depot to comply with the law and protect the waters in the communities it serves,” stated Granta Y. Nakayama, assistant administrator for the EPA’s Office of Enforcement and Compliance Assurance, in the EPA press release.

Ronald J. Tenpas, the assistant attorney general for the Justice Department’s Environment and Natural Resources Division, agreed.

“Storm water that runs off of large construction sites can carry sediment, debris, and other pollutants into surrounding waterways,” Tenpas stated in the EPA press release.

Scott said he felt the Ko Kwel Wharf project was unique to Home Depot’s other undertakings.

“This is an agreement between us and them and it’s unlike other places where they have purchased a piece of real estate and are in the process of building a store. This was something we both executed and agreed to, which makes it different,” Scott said.

While storm water is the cited reason for the pull out, it might not be the only issue driving Home Depot’s decision.

According to several news articles, Atlanta-based Home Depot is facing economic difficulties that have resulted in a 27-percent drop in profits in third-quarter earnings. The company plans to cut nearly 500 jobs at its Atlanta headquarters and has plans to cancel store openings. An interview with Home Depot Chairman and CEO Frank Blake with the Atlanta Business Chronicle in February revealed the company would downsize store openings in 2008 to 55 stores, only 35 in the United States.

Ron Opitz, the executive director of the South Coast Development Council, a business recruitment agency, said he believed Home Depot’s decision here may have been driven by the poor health of the economy.

“Most strategic economic decisions by corporations are driven by economies,” Opitz said.  That’s just business.”

Regardless of how Home Depot officials arrived at the decision to terminate the lease, Opitz said the situation is discouraging.

 “Certainly, we are all disappointed to lose a good potential employer,” Opitz said. “I know CEDCO continues to work tremendously hard on developing their property.” 

Scott said he and other CEDCO representatives were aware of some of the company’s troubles, especially in the current economic climate. They also had learned of the EPA fine a day after gaining the Army Corps of Engineers permit.

“I think that legally they can point to the storm water permits not meeting their requirements. I’m not going to speculate why they pulled out. But, I think that anybody who is paying attention can do the math,” Scott said. “The more recent financial news is that they are suffering worse than some of their competitors, and their outlook is more pessimistic than some of their competitors.”

Coos County Commissioner John Griffith said he was disappointed when he learned of Home Depot’s decision, describing it as awful.

“I know the folks at CEDCO put just a tremendous amount of work and dedicated effort into getting that job done,” Griffith said. “This is just terrible news for this area where people have been working so hard. It’s like pushing rocks uphill.”

North Bend Mayor Rick Wetherell echoed Griffith’s comments.

“It’s disappointing after the trials and tribulations CEDCO went through trying to secure Home Depot. It’s very disappointing,” Wetherell said. 

The two-year effort to bring Home Depot to North Bend included months of negotiations with company representatives, paperwork and overcoming numerous obstacles. It even required an act of Congress. The Coquille tribe  had to obtain an exemption from the Indian Non-intercourse Act, a nearly 200-year-old federal law that restricted the sale and lease of tribally owned land. Public Law 110-75, which was approved by President Bush in August, eliminated potential legal concerns over a long-term lease agreement between the tribe and Home Depot and was a key to finalizing the agreement.

Despite the setback to the Ko Kwel Wharf project, CEDCO’s efforts aren’t exactly for naught, Scott said, as it does hold a “shovel-ready” property available to the right company that comes along.

“We (have been) exploring options since the day we received notice,” Scott said. “We still have the best piece of real estate in town for development.”

He would not reveal if any other stores have shown interest in the property or if CEDCO has one in mind for the Ko Kwel Wharf project. 

“The project requires an anchor, and we are looking for an anchor,” Scott said.

Scott believes the Ko Kwel Wharf project will become a worthwhile development nonetheless.

“I think for CEDCO it just means we move on. It’s not the end of the world. I think that it just creates a new set of opportunities for us, that’s all,” Scott said.

Kathryn Gallagher, the senior manager of communications for the Western Division of Home Depot, said the termination of the lease agreement was driven by concerns about the permit.

“The permitting process backed us right up to a deadline on our lease agreement, and didn’t leave us any leeway in our discussions,” Gallagher wrote in an e-mail to The World. “We would be very interested in continuing our conversation with the Tribe about this site.”