LNG Canada says the Kitimat liquified natural gas project “has been delayed and not cancelled” with a Final Investment Decision possible in the next 18 to 24 months, Director of External Relations Susannah Pierce told a company sponsored community pizza party at Riverlodge on Tuesday October 18, 2016.
She paid tribute to the support for the project from Kitimat and the Haisla Nation, saying, “Thanks to you we were very close to have our shareholders take the Final Investment Decision in the New Year,” but she then added, “You also know there were some things we couldn’t control like the state of the marketplace.”
Pierce used the analogy of someone saving up to buy a car and believing that they have enough money in the bank and then the conditions change. “That is what happened to us,” she said. “You still want the car, but you just have to wait a little longer.”
Pierce said that the current program of site preparation will pause for the winter and holidays in mid-December. After that “work will begin to wind down over the next few months and then we will preserve the site until we are ready to make the Final Investment Decision.” She said LNG Canada is studying ways to make site preservation cost effective.
“We are doing everything we can to keep our pencils sharp and keep the community informed so that when the project is approved we are ready,” she added.
She pointed out that LNG Canada has already built a fisheries habitat offset in preparation for full development of the site.
LNG Canada and its partner shareholders are keeping a close eye on the developments of the natural gas market in Asia and Pierce said, “We do expect to be sending LNG to the Asian market in the next decade, so 2023 and beyond is what we’re talking about.”
She said that the Final Investment Decision when it comes will bring opportunities for Kitimat, the province and the whole country.
“Everyone in this room and everyone at LNG Canada is working to make this project real,” Pierce said.
“For those who are staying with us, we’re here, we’re not going anywhere and we’re going to be available to the community for an number of events. Let’s make it happen. We do have a shot at making it real but it may not happen as soon as you’d like it.”
Monday’s decision by LNG Canada to postpone the all-important Final Investment Decision for the Kitimat liguified natural gas project came as a momentary shock—but no real surprise. After the Brexit vote, you could see the hold button blinking from across the Atlantic.
Andy Calitz CEO of LNG Canada and a long time, experienced, executive with the lead partner, Royal Dutch Shell blamed the current market conditions for natural gas in both a news release and an investors’ conference call. However, the turmoil in the world economy brought about by Britain’s (largely unexpected) vote to leave the European Union made the postponement inevitable.
Immediately after the vote on June 23, when the now not so United Kingdom voted by 52 per cent to 48 per cent, to leave the European Union, financial analysts predicted that given the uncertainty, companies based in the United Kingdom would immediately begin to adjust their long term planning.
The stock market has stabilized and reached new highs, at least for now, but the British pound remains weak.
Most important, according to reports in the business press around the world, many long term projects by companies not only in the UK but everywhere are being re-examined, postponed or cancelled. All due to the long term uncertainty in world markets.
Even without Brexit, the situation with long term planning for the natural gas market is complicated, as LNG Canada’s External Affairs Director Susannah Pierce explained in this interview on CKNW ‘s Jon McComb show. ( It is an informative interview. Autoplays on opening the page)
“ Postpone investment decisions”
Royal Dutch Shell is one of the world’s largest corporations. It is based in the United Kingdom although its corporate headquarters are in the Netherlands (also a member of the European Union).
From June 24 to July 11 was just enough time for the bean counters and forecasters in London, Vancouver, Calgary, Tokyo and Beijing to crunch the numbers and decide that the prudent move would be to put the LNG Canada project on hold.
Rio Tinto is also a dual national company, listed on both the London and Australian stock exchanges and with its headquarters in London. (More about Rio Tinto later.)
Although both Shell and Rio Tinto are giant transnationals with operations worldwide, the turmoil in the United Kingdom, in the corridors and cubicles of the home offices, is having a psychological and personal, as well as professional, impact, meaning more of the work in those towers of London will be focused on Brexit.
The decision doesn’t mean that the LNG Canada Final Investment Decision will be on hold forever. Of all the world’s energy companies, Shell is one of the oldest and it has a solid reputation for better long term planning than some of its competitors.
In the news release, Calitz noted
I can’t say enough about how valuable this support has been and how important it will be as we look at a range of options to move the project forward towards a positive FID by the Joint Venture participants.
The news release goes on to say
However, in the context of global industry challenges, including capital constraints, the LNG Canada Joint Venture participants have determined they need more time prior to taking a final investment decision. decision.
How much time? Well, as Theresa May became the Prime Minister of Great Britain, the New York Times noted, like other media, that investment decisions are on hold:
Ms. May does not plan to depart the union quickly because it could put Britain’s negotiators under pressure, and at a disadvantage…
And the longer Britain drifts, the greater the uncertainty for businesses that could postpone investment decisions until things are clearer, potentially pushing the nation into a recession.
The extrication of Britain from Europe will likely be more in the character of the Greek financial collapse, a seemingly endless process where each event and each piece of news has the power to set off a new round of financial fears.
And like the Greek crisis, each piece of bad news will compound fears in markets that were nervous for other reasons.
So once (and when) Theresa May invokes Article 50 that opens a two year window for Britain to leave the European Union, starting negotiations for Brexit. Then it gets complicated, if Scotland votes to leave the United Kingdom or if Northern Ireland also demands a dual referendum in both the Republic and the North on a united Ireland (as permitted under the Good Friday Peace Agreement).
Although May says she will continue to the UK`s next fixed date election, what if May calls a snap general election, with an uncertain outcome, perhaps another minority government, with seats split among several parties, including those who advocate remaining in the EU?
The price of oil is still low compared to a few years ago. That price is expected to remain low with all that the Saudis are pumping to retain market share, the Iranians want to recover from sanctions, and according to Pittis in another column, that means everyone else is pumping as well
The main thrust for Canadian producers is to build more pipelines so they can expand capacity and push ever more of their relatively expensive oil into the world supply chain. If that’s the strategy for high-cost producers, how could anyone think the world’s lower-cost producers wouldn’t be doing the same thing?
There is the glut of natural gas currently in Asian markets and no one knows what Brexit will mean. Unless there’s a drastic change in the marketplace, energy project investment will remain on hold for years to come. (So forget any dreams of a refinery anywhere on the coast. )
Brexit is also going to be a problem for London based Rio Tinto—and for the current negotiations with the Unifor local in Kitimat. Rio Tinto’s bottom line is weak because the price of iron ore, its main source of income, has been dropping. After completing the $4.8 billion Kitimat Modernization Project, Rio Tinto is spending huge amounts of money on its Oyu Tolgoi copper and gold and other minerals mine in Mongolia, a project that many analysts believe could provide up to 60 per cent of Rio Tinto profits as commodity markets recover.
Add to that US presidential election. Donald Trump has threatened to halt imports of both steel and aluminum into the United States if he actually gets to sit in the White House.
Given the flood of steel and aluminum on the global markets, however, it points to the fact that free trade also has to be fair trade.
That means if Hilary Clinton becomes president, she will also be looking at the state of aluminum imports to the United States market.
World conditions are a warning for the Unifor negotiating team in Kitimat. One reason for last year’s prolonged municipal strike was that Unifor spent a good deal of time planning for negotiations with the District but failed to adjust its contract demands when the price of oil unexpectedly collapsed, which meant the District had less money and a lot less flexibility.
In its negotiations with Rio Tinto, Unifor cannot make the same mistake again. There were a handful of unexpected layoffs down at Smeltersite on June 30; there could be more layoffs in the future. Mandatory overtime is a major sticking point—but that overtime demand is coming from the bean counters in Montreal and London, calculating that the overtime costs are, in the long term, less expensive than a lot of new hires.
Media reports show that Rio Tinto is in tough negotiations with its employees around the world. With LNG on hold, disgruntled employees can’t just turn off Haisla Boulevard to the old Methanex site before reaching Rio Tinto’s property line. That means Unifor should be tough but very realistic in its talks with Rio Tinto, knowing that the powers that be that hold the strings in London are more worried about what Brexit will do to the company bottom line than any temporary shutdown of the smelter by a strike.
What does this mean for Kitimat?
So the boom and bust cycle once again moves to bust.
the Haisla nation has been working to get its people jobs in the construction of the facility and related infrastructure, as well as full-time jobs once the plant opens…This was our first chance as Haisla to be a part of the economy, to be part of the wealth distribution in our area. To witness the wealth generation in our territory for the last six years but to not be a part of it, and now to continue to not be a part of it, is really distressing to us, because we had built up our entire future around this.
Mayor Phil Germuth in the same interview said
There’s no doubt that there’s going to be a little bit of hurt for a while, but we still fully believe that Kitimat is by far the absolute best location anywhere on the West Coast [for] a major LNG export facility… We are absolutely confident that it will come.
There’s time in this bust for everyone in town to recover from the hangover of the past few years of the fight over Northern Gateway and the heady hopes of the LNG rush. Demand for natural gas is not going to go away, especially as climate change raises the pressure to eliminate coal, so it is likely that LNG Canada will be revived.
It’s time to seriously consider how to diversify the Valley’s economy, making it less dependent on the commodity cycle. It’s time to stop chasing industrial pipe dreams that promise a few jobs that never appear.
Like it or not, the valley is tied to globalization and decisions made half way around the world impact the Kitimat Valley.
Who knows what will happen in 2020 or 2025 when the next equivalent of a Brexit shocks the world economy?
Suppose, as some here would wish, that all the opposition to tankers and pipelines suddenly disappeared overnight. Does that mean that the projects would then go ahead?
The corporate planners would decide based on their projections for the world economy and the viability of the project for their profit picture. Enbridge was never really able to secure customers for its bitumen. Chevron had no customers for Kitimat LNG. LNG Canada is a partnership, and the partner customers in Asia decided that at this time, the investment is too risky, even if LNG Canada’s longer term prospects are good.
Promoting tourism should now be the priority for Council, for Economic Development, for the Haisla Nation Council, for the local business.
Beyond tourism, it’s time for some innovative thinking to come up with other ideas that would free Kitimat from the commodity cycle. At the moment there are no ideas on the horizon, but unless everyone starts looking for new ideas, practical ideas, the commodity cycle will rule.
The Shell-led LNG Canada project in Kitimat has received a facility permit from the B.C. Oil and Gas Commission (OGC), the company said Tuesday.
A news release from LNG Canada says the permit is one of the key permits required for the construction and operation of the proposed LNG Canada project.
LNG Canada is the first LNG project in British Columbia to receive this permit, which focuses on public and environmental safety, and specifies the requirements the project must comply with when designing, constructing and operating the proposed LNG export facility in Kitimat.
The news release warns “that while today’s announcement is an important step forward for LNG Canada, the project must ensure it is economically viable and meets several other significant milestones including finalizing engineering and cost estimates, supply of labour, and achieving other critical regulatory approvals before making a final investment decision.”
That means that Shell and its partners are still keeping a close eye on factors such as the continuing collapse of the price of oil on world markets, the volatile natural gas market in Asia and the slowdown in the economy in China.
The news release goes on to say:
“We have made excellent progress in the past two years, achieving a number of critical milestones,” said Andy Calitz, CEO of LNG Canada. “Receiving our LNG Facility Permit could not have been achieved without the important input we received from the Haisla Nation and the local community of Kitimat. We continue to progress our project and appreciate the ongoing support from First Nations, the local community and other stakeholders.”
“The OGC identified several conditions that must be met by LNG Canada to design, construct and operate the project,” says Calitz. “We have reviewed these conditions and are confident that we will meet these conditions as they are aligned with LNG Canada’s core safety values and commitment to protect the environment, the community and our workers.”
LNG Canada continues to develop a number of important plans to address public safety and minimize the effects on the environment and local community. For example, LNG Canada is working closely with local emergency response organizations, as well as leading safety experts, in the development of an emergency response framework for the proposed project.
“Safety is our first priority. Safety as it relates to people and the environment is embedded into the design and planning of our proposed facility, and will carry into the construction and operation phases of our project should the project go ahead,” said Andy Calitz.
Social and economic benefits from the LNG Canada project include local employment and procurement opportunities, federal, provincial and municipal government revenue and community investments. Since 2012, LNG Canada has distributed more than $1 million to community initiatives, such as emergency services, trades scholarships and community services. LNG Canada has also contributed more than $1.5 million in programs to build awareness and help provide training for trades careers in all industries, and particularly the emerging LNG industry.
LNG Canada is a joint venture company comprised of Shell Canada Energy (50%), an affiliate of Royal Dutch Shell plc, and affiliates of PetroChina (20%), Korea Gas Corporation (15%) and Mitsubishi Corporation (15%). The joint venture is proposing to build an LNG export facility in Kitimat that initially consists of two LNG processing units referred to as “trains,” each with the capacity to produce 6.5 million tonnes per annum of LNG annually, with an option to expand the project in the future to four trains.
The headline on Thursday’s CBC.ca coverage of the sudden controversy over a boycott in British Columbia of Tim Horton’s over the Enbridge ads sums up everything that’s wrong about media coverage not only of the boycotts, but of northwest energy and environment issues overall.
“Tim Hortons yanks Enbridge ads, sparks Alberta backlash.” The anger at Tim Hortons across northwest British Columbia over those Enbridge ads, the calls for a boycott have been building for more than two weeks but no one in the media noticed despite widespread posts on Facebook and other social media.
As usual, the concerns of the northwest didn’t really become a story until Alberta got involved and the story has become the “Alberta backlash.” Now, there’s a backlash on social media to the Alberta backlash, with northwestern British Columbians tweeting and posting their displeasure, angry at the usual blinkered views of Alberta-centric coverage of energy issues.
Let’s make one thing clear– despite the outraged cries of the usual suspects like Defence Minister Jason Kenney, Conservative MP Michelle Rempel, who represents Calgary Centre-North and Kyle Harrietha, the Liberal candidate for Fort McMurray-Cold Lake that the boycott was aimed at Alberta’s entire energy industry and the province’s views of a manifest destiny as an energy super power, the doughnut boycott was really aimed specifically at Enbridge, and the company’s arrogance and incompetence.
Of course Jean, like most Albertans, isn’t looking at the bigger picture. The question that Jean should really be asking, is the continuing unquestioning support for Enbridge actually harming the rest of the Alberta energy industry by increasing the resistance in northwestern BC to other energy projects? When are Alberta politicians, whether federal or provincial, ever actually going to show even a Timbit of respect for the issues in northwestern British Columbia?
Look at what Enbridge is doing
There is strong support (with some reservations) for the liquified natural gas projects. There is a level of support for pipelines that would carry refined hydrocarbons to the coast, something that the new premier of Alberta, Rachel Notley is seriously considering. But it is so typical of Alberta, the Alberta media and most of the Canadian media, to believe that the boycott was an attack on the entire energy industry.
Ask any executive of an energy company that wants to do business in northwestern British Columbia and they’ll come up with the a joke that is now so old and so often repeated that it’s become a cliché, “We look at what Enbridge is doing and then do the exact opposite.”
The fact is that Enbridge has been dealing with northwestern British Columbia for more than ten years and they still can’t do anything right. Shell, Chevron, Petronas (and before them Apache) and even TransCanada make more efforts to listen to the people, First Nations and non-Aboriginal residents alike, than Enbridge ever has or ever will (despite their claims in their PR campaigns).
While these energy giants may not agree with what they hear, they are respectful and depending on their corporate culture are making genuine efforts to come up with ways to make their projects work. After a decade of blunders, however, Enbridge still hasn’t shown that much respect for anyone here. Those touchy feely ads that appear on television and at Tim Horton’s are just another example of how not to run a public relations campaign.
There are those who oppose any bitumen sands extraction who signed the online petition, but the core of opposition, as always, comes from northwestern BC and the issue is an ill-conceived pipeline.
Enbridge has been successful in one area of its public relations strategy. They’ve convinced Albertans that Enbridge and the Northern Gateway pipeline is an essential part of not only the Alberta economy but Alberta culture. Any attack on Enbridge becomes an attack on Alberta. Hence the unreasoned anger when after Tim Hortons pulled the ads.
The big blame America lie
The other Big Lie we keep hearing from the Harper Government, is that this all orchestrated by American NGOs and activists. Again this shows Alberta-centric contempt for British Columbia. It’s very easy and convenient to keep believing that everyone in northern British Columbia are dumb and stupid and are being led by the ear by those nasty green Americans who have it in for the efforts to make Canada an energy superpower. That idea, promoted by the more conservative Canadian media has always been animal waste. The battle to protect the environment of northwestern British Columbia while at the same time attracting resource projects that have recognized and obtained social licence to operate has always and will always in BC on a case by case, community by community basis.
A morning shock with your morning coffee and Timbits
Social media across northwestern British Columbia, mostly Facebook, began spreading the news within hours of the ads appearing in the local Timmys. There were angry posts from individuals who had walked in Tim Hortons and saw the ads.
Why didn’t the media get the story?
So why wasn’t the story covered by the media at least ten days ago?
That’s because in this age of tight budgets, it’s considered easy and economical to try to all of northern BC cover from either Vancouver or Calgary; that means covering from far away both the coast where the pipelines and tankers may or may not operate to the east near the Rockies where the natural gas extraction is on going
If you look at map of northern BC, and the two federal ridings Skeena Bulkley Valley and Prince George–Peace River–Northern Rockies, the population is about 200,000 spread over an area about half the size of Europe. Both ridings in this region are supposedly vital to the future of the Canadian economy, but you wouldn’t know it from most of the media. (The Globe and Mail is an exception, with more ongoing coverage of northern BC than you will find in either The Vancouver Sun or The Province).
As for CBC, there are just eight radio staff, two in Prince Rupert and six in Prince George to cover all the apparently vital issues across half the province. ( Almost all the staff work mostly for the Daybreak North morning show which dominates the regional rates but it looks like with the latest CBC cutbacks that at least one of those positions will be eliminated). CBC TV and Global cover the region from Vancouver.
At least the Vancouver based media make efforts to cover the north from time to time. The Alberta media, however, especially the Calgary Herald, is hopeless, and so biased against British Columbia and so dismissive of the issues here, that the coverage across Alberta is completely unreliable about 90 per cent of the time—it’s no wonder that the majority of Albertans have no understanding of British Columbia culture and issues.
Then there are the punditi, pontificating from their cubicles in Ottawa and Toronto without a clue, without doing the basic journalism of picking up the phone (or writing an e-mail) to actually find out what’s going on.
Andrew Coyne, for example, made these rather silly two tongue-in-cheek tweets Thursday night. While Coyne’s tweets do often exhibit a sense of humour, his excellent coverage of the decline of our democratic parliament has to be compared with his blind, unchecked ideological assumptions about the issues of the northwest, which are simplistic, cubicle bound and far off the mark. The same can be said for Jeffrey Simpson in his occasional writing about this region. Neither the view from the Hill, where you can see as far as the Queensway, nor from Bloor Street, where you can see part of the Don Valley, are vantage points to understand what is going in northern British Columbia.
So let’s look at the specific errors in the media coverage of the Tim Horton’s story.
Both Shawn McCarthy in the Globe and Mail and Kyle Bakyx on CBC.ca seem to accept without question that SumofUs, was the instigator of the petition. Like many issues in northwestern BC, the Lower Mainland or US based activist groups follow the lead of northwestern BC and jump on the bandwagon, not the other way around. Jason Kirby in MacLean’s says the boycott movement began a week ago. Here in Kitimat, it began within hours of the ads appearing in the local Timmys and was picked up on activist social media groups before the SumofUs petition site.
McCarthy repeats the conventional wisdom: “The Conservatives and oil industry supporters have been waging a public relations war with the environmental groups that oppose expansion of the oil sands and construction of new pipelines.”
CBC.ca quotes Alan Middleton of York University “Enbridge, of course, is not just pipelines and oilsands; they are a whole range of products including heating people’s homes. Tims should have thought about that.” Again a mistake. I lived in Toronto for many years. A company called Consumers Gas supplied natural gas to homes until it was taken over by Enbridge, so Enbridge does heat the homes in Toronto. But what has that got to do with northwestern British Columbia? Why didn’t CBC.ca call the University of Northern British Columbia? Easier to call York (which by the way is where I got both my BA and MA)
McCarthy quotes Rempel as saying, “One has to wonder whether head office talked to their franchise owners in Alberta before making the decision. I imagine those calls are being made this afternoon – certainly there are a lot of people voicing their displeasure.”
The question that should have been asked whether or not Tim Hortons consulted their franchise owners in British Columbia before ordering them to play the ads. People here were “voicing their displeasure” from the moment the first Kitimatian walked into the local Timmys for an early morning coffee and had to stand in line while being told how wonderful Enbridge is.
Of course, if Albertans force Tim Hortons into reinstating the ads, that will only trigger a bigger boycott in British Columbia. As Maclean’s asks, “what were they thinking?”
Jason Kenney, flying in, flying out
As for Jason Kenney, who is quoted by the CBC as tweeting: “I’m proud to represent thousands of constituents who work for Enbridge & other CDN energy companies,” if Kenney aspires to be Prime Minister one day, he had better start thinking about representing more Canadians than just those employed by the energy industry—a mistake that his boss Stephen Harper keeps making.
Jason Kenney did visit Kitimat for a just a few hours in February 2014 for a tour of the Rio Tinto modernization project and an obligatory and brief meeting with the Haisla First Nation council. If Kenney had actually bothered to stick around a few more hours and talk to the community, everyone from the environmentalists to the industrial development advocates, he might not have been so quick on the trigger in the Twitter wars.
Not one of the major media who covered this story, not The Globe and Mail, not CBC.ca, not MacLean’s, no one else, once bothered to actually call or e-mail someone who lives along the Northern Gateway pipeline route in British Columbia, the area where the boycott movement actually began to ask about Enbridge’s track record in this region. The media still doesn’t get it. This morning’s stories are all about Alberta. As usual, my dear, the media doesn’t give a damn about northwestern British Columbia.
That is why the coverage of the Tim Hortons boycott is a double double failure of the Canadian media.
Where else the media is failing northwestern BC
Full disclosure. Since I took early retirement from CBC in 2010 and returned to Kitimat, I have worked as a freelancer for CBC radio and television, Global News, Canadian Press, The National Post, The Globe and Mail and other media.
However, largely due to budget cuts, freelance opportunities, not only for myself, but others across the region have dried up. The media seems to be concentrating more on the major urban areas where there is larger population base and at least more of the ever shrinking advertising dollar. I am now told more often than I was a couple of years ago that “we don’t have the budget.”
Now this isn’t just a freelancer who would like some more work (although it would be nice). If the media these days actually had environmental beats for reporters the boycott of Tim Hortons in northwest BC would have been flagged within a couple of days, not almost two and half weeks and later only when Alberta got hot under its oily collar.
So as well as the Tim Horton’s boycott here are two major ongoing stories from Kitimat that the media haven’t been covering.
100 day municipal strike
-Kitimat’s municipal workers, Unifor 2300, have been on strike since February 28. Three rounds of mediation have failed, the union has refused binding arbitration, the pool, gym and community meeting halls have been closed since February, the municipal parks and byways are now returning to the wilderness. Only essential services are being maintained (but residents still have to pay their property taxes by July 2, taxes that are skyrocketing due to increased assessments for home values based on LNG projects that haven’t started) By the time most people read this the strike will have been on for 100 days. There is no settlement in sight and both sides, despite a mediator ordered blackout, are fighting a press release war on social media. Can you imagine any other place that had a 100 day municipal workers strike with no coverage in the province’s main media outlets, whether newspaper or television? Local CBC radio has covered the strike, as has the local TV station CFTK. (Update: District of Kitimat says in a news release that the mediator has now approved the DoK news releases.)
Of course, in the bigger picture the media concentrates on business reporting. There haven’t been labour reporters for a generation.
So if most Canadians were surprised that there was a boycott of the unofficial national symbol, Tim Hortons, it’s because of that double double media fail and as the media continues to decline, as budgets are cut, as “commodity news” disappears, expect more surprises in the future. Oh by the way Kitimat is vital to the national economy but we can cover it from a cubicle in Toronto.
Final disclosure: I am not a coffee drinker. When I go to Timmy’s I prefer a large steeped tea and an apple fritter.
Enbridge Northern Gateway officials are loath (to put it mildly) to speak to the media but sometimes they let things slip. Earlier this summer, at a social event, I heard an Enbridge official (probably inadvertently) reveal that when the company’s engineers came before District of Kitimat Council earlier this year they were surprised and somewhat unprepared to fully answer the detailed technical questions from Councillor Phil Germuth on pipeline leak detection.
The results of the municipal election in Kitimat, and elsewhere across BC show one clear message; voters do want industrial development in their communities, but not at any price. Communities are no longer prepared to be drive by casualties for giant corporations on their road to shareholder value.
The federal Conservatives and the BC provincial Liberals have, up until now, successfully used the “all or nothing thinking” argument. That argument is: You either accept everything a project proponent wants, whether in the mining or energy sectors, or you are against all development. Psychologists will tell you that “all or nothing thinking” only leads to personal defeat and depression. In politics, especially in an age of attack ads and polarization, the all or nothing thinking strategy often works. Saturday’s results, however, show that at least at the municipal level, the all or nothing argument is a political loser. Where “all politics is local” the majority of people are aware of the details of the issues and reject black and white thinking.
The Enbridge official went on to say that for their company observers, Germuth’s questions were a “what the…..” moment. As in “what the …..” is this small town councillor doing challenging our expertise?
But then Enbridge (and the other pipeline companies) have always tended to under estimate the intelligence of people who live along the route of proposed projects whether in British Columbia or elsewhere in North America, preferring to either ignore or demonize opponents and to lump skeptics into the opponent camp. The Northern Gateway Joint Review Panel also lost credibility when it accepted most of Northern Gateway’s arguments at face value while saying “what the ……” do these amateurs living along the pipeline route know?
“I am pro-development,” Germuth proclaimed to reporters in Kitimat on Saturday night after his landslide victory in his campaign for mayor.
On the issue of leak detection, over a period of two years, Germuth did his homework, checked his facts and looked for the best technology on leak detection for pipelines. That’s a crucial issue here where pipelines cross hundreds of kilometres of wilderness and there just aren’t the people around to notice something is amiss (as the people of Marshall, Michigan wondered at the time of the Line 6B breach back in 2010). Enbridge should have been prepared; Germuth first raised public questions about leak detection at a public forum in August 2012. In February 2014, after another eighteen months of research, he was ready to cross-examine, as much as possible under council rules of procedure. Enbridge fumbled the answers.
So that’s the kind of politician that will be mayor of Kitimat for the next four years, technically astute, pro-development but skeptical of corporate promises and determined to protect the environment.
Across the province, despite obstacles to opposition set up by the federal and provincial governments, proponents are now in for a tougher time (something that some companies will actually welcome since it raises the standards for development).
We see similar results in key votes in British Columbia. In Vancouver, Gregor Roberston, despite some problems with policies in some neighborhoods, won re-election on his green and anti-tankers platform. In Burnaby, Derek Corrigan handily won re-election and has already repeated his determination to stop the twinning of the Kinder Morgan pipeline through his town. In Prince Rupert, Lee Brain defeated incumbent Jack Musselman. Brain, who has on the ground experience working at an oil refinery in India, supports LNG development but has also been vocal in his opposition to Northern Gateway.
The new mayor in Terrace Carol Leclerc is an unknown factor, a former candidate for the BC Liberal party, who campaigned mainly on local issues. In the Terrace debate she refused to be pinned down on whether or not she supported Northern Gateway, saying, “Do I see Enbridge going ahead? Not a hope,” but later adding, “I’d go with a pipeline before I’d go with a rail car.”
Kitimat’s mayor and council elections also confirm that Northern Gateway plebiscite vote last April. Kitimat wants industrial development but not at the price of the community and the environment. The unofficial pro-development slate lost. A last minute attempt to smear Germuth on social media was quickly shot down by people from all sides of the Kitimat debate. Smears don’t usually work in small towns where everyone knows everyone.
Larry Walker, an environmentalist with a track record in municipal politics as an alderman in Spruce Grove, Alberta, won a seat. Together with Rob Goffinet and Germuth, that is three solid votes for the environment. The other new councillor is Claire Rattee who will be one to watch. Will the rookie be the swing vote as Corinne Scott was?
Mario Feldhoff who came to third to Goffinet in the overall vote (Edwin Empinado was second) is a solid councillor with a strong reputation for doing his homework and attention to detail and the unofficial leader of the side more inclined to support development. Feldhoff got votes from all sides in the community.
During the debates, Feldhoff repeated his position that he supports David Black’s Kitimat Clean refinery. But as an accountant, Feldhoff will have to realize that Black’s plan, which many commentators say was economically doubtful with oil at $110 a barrel, is impractical with oil at $78 a barrel for Brent Crude and expected to fall farther. Any idea of a refinery bringing jobs to Kitimat will have to be put on hold for now.
LNG projects are also dependent on the volatility and uncertainty in the marketplace. The companies involved keep postponing the all important Final Investment Decisions.
There are also Kitimat specific issues to deal with. What happens to the airshed, now and in the future? Access to the ocean remains a big issue. RTA’s gift of land on Minette Bay is a step in the right direction, but while estuary land is great for camping, canoeing and nature lovers, it is not a beach. There is still the need for a well-managed marina and boat launch that will be open and available to everyone in the valley.
Germuth will have to unite a sometimes contentious council to ensure Kitimat’s future prosperity without giving up the skepticism necessary when corporations sit on a table facing council on a Monday night, trying to sell their latest projects. That all means that Germuth has his job cut out for him over the next four years.
The Shell-led LNG Canada project unveiled its commitments to Kitimat at a ceremony at the community information centre at the old Methanex site on October 7, 2014.
LNG Canada has forged the commitments in a sheet of aluminum that is bolted to the wall of the community information centre. Kitimat Mayor Joanne Monaghan unveiled the aluminum sheet, assisted by Kitimat Fire Chief Trent Bossence. Afterward, Susannah Pierce, Director, External Affairs, LNG Canada, signed the sheet, followed by Mayor Mongahan, Chief Bossence, other LNG Canada officials and members of the community.
LNG Canada’s Community Commitments
LNG Canada is proud to outline its commitments to the community, created through a collaborative effort with local residents. In April, June and September 2014, LNG Canada met with the Kitimat community to develop and refine the commitments our company will meet to ensure we are a valued member of the community throughout the lifetime of our project. We are grateful to the many individuals who took part and shared their wisdom and experience.
Our Commitments to the Community
1) LNG Canada respects the importance residents place on companies being trusted members of their community. We aspire to gain this trust by proactively engaging with the community in an honest, open and timely manner; by listening and being responsive and accessible; and by operating in a safe, ethical and trustworthy way.
2) LNG Canada understands that the ongoing well being of the community and the environment are of paramount importance. LNG Canada will consider the health and safety of local residents, employees, and contractors in every decision it makes.
3) LNG Canada recognizes that the environment and natural surroundings are vital to the community. We will be dedicated to working independently and with the community to identify and carry out ways to reduce and mitigate the impact of our facility footprint on the natural surroundings – in the Kitimat Valley, the Kitimat watershed and the Kitimat airshed.
4) LNG Canada is aware of the importance to the community of maintaining and improving access to outdoor recreational opportunities. We will work with the local community to facilitate the creation of new projects that protect or enhance the natural environment and that provide access to the outdoors and the water.
5) LNG Canada recognizes it will be one company among other industrial companies operating in the community. We will work with other local industry leaders to manage and mitigate cumulative social and environmental impacts, and create opportunities to enhance local benefits associated with industrial growth.
6) LNG Canada acknowledges that the commitments we make are for the long term. We will work with the community to develop an environmental, social and health monitoring and mitigation program that meets regulatory requirements and we will share information on the program with the public for the life of our project.
7) LNG Canada understands the need for the community to benefit from our project and values the contributions all members of the community make to the region. We will work with the community to ensure that social and economic benefits from our project are realized and shared locally.
8) LNG Canada acknowledges the importance the community places on our company being an excellent corporate citizen and neighbour that contributes to the community. In addition to providing training, jobs and economic benefits, we will make social investments important to the community to positively impact community needs and priorities.
The world’s business media are paying rapt attention to Glencore’s now stalled attempt to take over Rio Tinto.
Late Tuesday, the company issued a news release which says
Glencore announces that in July 2014 it made an informal enquiry by telephone call to Rio Tinto, seeking to gauge whether there might be any interest at Rio Tinto in investigating some form of merger between the two companies. Rio Tinto responded that it was not interested in pursuing these discussions.
Glencore confirms that it is no longer actively considering any possible merger transaction with, or offer for the shares of, Rio Tinto.
As a consequence of this announcement, the Panel Executive has determined that Glencore is for a period of 6 months from the date of this announcement subject to Rule 2.8 of the City Code on Takeovers and Mergers in relation to Rio Tinto. Glencore however reserves its rights to make an offer in the future with the consent of the Takeover Panel, either with the recommendation of the Board of Rio Tinto, in the event of a third party offer for Rio Tinto, or in the event of a material change in circumstances.
The board of Rio Tinto notes the recent press speculation regarding a possible combination of Rio Tinto and Glencore.
The Rio Tinto board confirms that no discussions are taking place with Glencore.
In July 2014, Glencore contacted Rio Tinto regarding a potential merger of Rio Tinto and Glencore.
The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto’s shareholders.
The board’s rejection was communicated to Glencore in early August and there has been no further contact between the companies on this matter.
According to Bloomberg, Glencore’s secretive CEO Ivan Glasenberg made a verbal stock offer to Rio Chairman Jan Du Plessis in July. The Rio Tinto board rejected the offer in August, which means under that UK law, Glencore must wait six months before making another bid.
Glasenberg’s informal July bid carried no significant premium, said the person, who asked not to be identified as the information is private.
Bloomberg’s television arm reports that the Glasenberg’s offer was in stock, an attempt, apparently, to get Rio Tinto “on the cheap.” Earlier Forbes reported that there were rumours of an offer from Glencore to Rio Tinto of a “share-swap merger”
Bloomberg goes on to report that.
After being rebuffed by the board, Glencore has reached out to Rio’s biggest investor, Aluminum Corp. of China, to gauge its interest in a potential deal in the next year, according to people familiar with the matter.
After the initial report on the takeover Monday, business writers used epic analogies.
Meanwhile, behind its premium paywall Lex, the Financial Times is comparing the Glencore bid for Rio Tinto to the Game of Thrones.
The analysts are saying there are two main factors, Rio Tinto’s balance sheet has been weakened by a downturn in the iron ore market while at the same time Glencore aims to overtake Rio Tinto rival BHP Billiton. If it acquires RT, then Glencore will become the world’s largest mining and resource company.
The business media all say Glencore is already the world’s biggest trader in commodities.
China is a major force behind this corporate Game of Thrones. China wants more access to world resources for its increasingly hungry industry and population,while at the same time it has apparently all the iron ore it needs and iron ore is Rio Tinto’s biggest asset. The key player is a giant Chinese aluminum company now under investigation as part of the country’s corruption crack down.
Glencore is already huge, listed as Number 10 on the Fortune Global 500 list . Rio Tinto is far down at number 201. (Walmart is number one. Companies involved with Kitimat are Shell in second place, Sinopec in third and the China National Petroleum Corporation in fourth. Chevron is in 12th spot.)
Glencore is a major player in the aluminum business with assets around the world, some in partnership with the Russian giant aluminum group Rusal . According to Wikipedia, Glencore owns 8.8 per cent of a joint venture with Rusal, and the Sual Group (Siberian-Urals Aluminium Company) . That joint venture, Wikipedia says, has created the “World’s largest aluminium and alumina producer with 110,000 employees in 17 countries.”
Glencore along with Rusal has an undisclosed interest in Rusal’s Windalco alumina operation in Jamaica. Glencore also has an undisclosed interest in the Alumina Partners of Jamaica. It owns 44 per cent of Century Aluminum in Monterey California. Glencore has also undisclosed interests in idle aluminum smelters in Washington State and Montana. It has an undisclosed interest in Kubikenborg Aluminium AB in Sweden, Aughinish Alumina in Ireland and Eurallumina in Sardinia.
In the northwest, Glencore, through its agricultural subsidiary Vittera, is a partner, along with Cargill Ltd. and Richardson International in the Prince Rupert Grain Terminal. In Vancouver, Glencore owns Vittera’s Cascadia grain terminal in Vancouver.
located on the south shore of Burrard Inlet. Vittera Inc. owns and operates Canada’s largest grain handling network. The terminal handles wheat, durum, feed barley, malting barley, canola seed and specialty products, with storage capacity of 282,830 tonnes of product, handling loading from its 244 metre berth with a depth of 14.6 metres. –
Glencore is also developing a metallurgical coal mine near Chetwynd.
Glencore, through the earlier 2013 take over the mining company Xstrata owns the famous Kidd copper and zinc mine near Timmins, Ontario. The operation has 1300 employees. (Xstrata earlier took over the well-known Canadian mining company Falconbridge). It also operates the Horne copper Smelter in Rouyn-Noranda, Québec, which employees 700 and the CCR copper Refinery in Montreal, Québec which employees 650.
In Sudbury, Glencore is reviving the Errington-Vermillion Project, two deposits were that were previously mined in the 1920s and 1950s. It says the project has potential for approximately nine million tonnes, polymetallic- zinc, lead,copper, silver, gold or a rate of 2,900 tonnes per day.
The other factor for Kitimat with Glencore is that, unlike Rio Tinto, which is mostly a mining and smelting company, Glencore has interests in natural gas, oil and shipping and it is reported that the company wants to expand its hydrocarbon business from extraction to shipping.
According to Forbes, many Rio Tinto shareholders are not happy about the costs of the takeover of Alcan
The chairman of Rio Tinto, Jan du Plessis said the board was happy with the leadership of managing director, Sam Walsh, and finance director, Chris Lynch.
Interestingly, that might not be a view shared by all Rio Tinto shareholders who are still smarting from the $40 billion written off after the ill-timed acquisition of the Alcan aluminium business, followed by a $3 billion write-off after an equally poorly executed coal asset deal in Africa.
(It should be noted that Walsh was not the CEO at the time of both acquisitions, but was brought in to put Rio Tinto back on track after those huge losses)
The Rio Tinto news release says it’s business as usual:
Rio Tinto remains focused on the successful execution of its strategy, which the board of Rio Tinto is confident will continue to deliver significant and sustainable value for shareholders….
The board believes that the continued successful execution of Rio Tinto’s strategy will allow Rio Tinto to increase free cash flow significantly in the near term and materially increase returns to shareholders. Rio Tinto’s shareholders stand to benefit from the very considerable value that this will generate.
RBC Capital Markets analyst Timothy Huff said: “A potential merger with Rio would enable Glencore to get hold of the lowest-cost iron ore business in Australia. This is likely just a shot across the bow from Glencore and we expect Glencore to play the long game with any highly desired acquisition target. While asset divestments may have to play a larger part in a Glencore/Rio tie-up, we think the broader strategy for an enlarged group makes sense.”
The Globe and Mail Report on Business says
It is an open secret that Mr. Glasenberg, a multibillionaire South African, has every intention of using mergers and takeovers to greatly extend Glencore’s reach along the commodities value chain. Glencore’s strategy is to control the mines, the warehouses, the ports, the ships and the trading networks that produce and distribute commodities.
The question is whether Rio’s management and shareholders would endorse a deal that could come with no takeover premium. Some analysts think not.
One problem with Glencore’s approach to Chinalco is that the company is part of the wider probe by the Chinese government of corruption. As Reuters reported
Aluminum Corp of China general manager Sun Zhaoxue is suspected of “serious violations” of the law, a euphemism for corruption, according to a notice published by China’s Central Commission for Discipline Inspection.
Sun is also the vice chairman of Chinalco’s listed subsidiary, Aluminum Corp Of China Ltd. He is the former president of China National Gold Group Corp, the country’s biggest gold producer.
Some business analysts say even if Rio Tinto shareholders are not happy with current management they may not want their holdings affected by a possibly corrupt Chinese company.
On the other hand, as the Telegraph points out, it is really the Chinese government that will make the decision, not the company itself.
China’s government holds the key to a deal despite Rio Tinto’s public rejection of Glencore’s interest. State-owned Aluminum Corporation of China is the largest shareholder with around 10 per cent and Glencore reportedly started talking to the Chinese in the summer to sound out their interest in an exit. Although China is the world’s largest consumer of iron ore and owning such a significant stake in one of the world’s biggest mining groups is strategic now could be a good time to exit. The world is flooded with iron ore and securing supplies for steel mills is no longer an issue for the Chinese government. Now is a good time to cash in.
The man behind the so-far failed deal, who is likely “patiently stalking” Rio Tinto is the highly secretive and private Ivan Glasenberg.
Pounce, leak and wait.
It is a classic strategy in the shadowy world of mergers and acquisitions and Ivan Glasenberg, the chief executive of Glencore, is a master of this dark art.
Although a potential $160 billion mega takeover of the world’s largest shipper of seaborne iron ore, Rio Tinto, was flatly rejected in August, don’t bet on Glasenberg walking away for good
Glasenberg was born in South Africa in 1957, and apparently now holds four passports, South Africa, Australia, Israel and as of 2011, Switzerland.
When Glencore went public on the London Exchange in 2011, which the Guardian called “the biggest stock exchange float in British history,” the British media received a letter from a London law firm warning the normally aggressive media not to probe into the private lives of the company executives.
Glencore executives, the letter said, “are extremely private individuals”, who expected scrutiny of their business activities, but not their personal lives. A warning followed about the “security risk” that could be posed by any reports about their homes or private lives.
It appears that for the British media the royal family and missing school girls are fair game but not Glencore’s executives.
Although he was referring mainly to the company’s main business, commodity trading, the interview is enlightening.
Asked in an interview with The Wall Street Journal if the company has a work-life balance, the 57-year-old billionaire, a former coal trader, says: “No. We work. You don’t come here to take life easy. And we all got rich from it, so, you know, there’s a benefit from it.”
This competitiveness, he says, is smart business. “If I’m not pulling my weight and setting an example” and “traveling 80% of the time”, his charges would complain to the board and try to get him fired….
Mr. Glasenberg says the phenomenon is still at play. “I see it happening. Some guy suddenly decides: ‘I want to take it easier, I want to spend more time with the family’… an attack will come.”
Mr. Glasenberg, who had been CEO of Glencore since 2002, says he is insistent on instilling this culture at Xstrata, a mining company. Glencore had amassed a portfolio of mines over the past decade. “I thought if we could put our hard-working culture as traders into the asset management it will be a great combination and we did do that,” he says.
One area where Glasenberg does get soft however is on worker mobility, noting that blue collar miners can work their way up to earning the eight-figure salaries enjoyed by his squadron of commodities traders. Just try him.
“You want to be a trader, come be a trader,” he told Wall Street Journal. “You want to travel six days a week, you want to travel the world, the door’s open. I earn more than you. Come be a trader. Please, the door’s open.”
If the Glencore news release is correct, that means in six months, on April 7, 2015, the next move in the future of Rio Tinto will come, unless, as the Glencore news release states “if there is a material change in circumstances”
One thing is clear, Kitimat can now add Rio Tinto and Rio Tinto Alcan to the mix of uncertainty along with Shell, Chevron, Enbridge, Apache and the rest of the corporate movers. In other words, we are all extras in the corporate Game of Thrones.
Chevron is sticking with the Kitimat LNG project but won’t make a Final Investment Decision until it has signed sales and purchase agreements for between 60 and 70 per cent of the natural gas, Chevron’s vice-chairman and executive vice-president of upstream operations, George Kirkland told investment analysts in a conference call Friday.
“We need to get partnership resolved and Apache has to move through the issues s and we need to get a new partner in. That needs to happen. That’s quite obvious,” Kirkland added.
Other factors, Kirkland told the call, are final test results from the Liard and Horn River natural gas play in northeast British Columbia and finalization of the “pipeline corridor.”
Although the residents of Kitimat are focused on the LNG terminal at Bish Cove, remarks both by Kirkland today and by Apache CEO Steve Farris Thursday, it appears that energy industry views Kitimat LNG as part of a “package” (a term used by both) that includes the Liard and Horn River gas fields and the connecting Pacific Trails Pipeline.
Kirkland also said Chevron has no interest in any further investment beyond the 50 per cent it already holds. “We have 50 per cent of the interest in Kitimat-Liard-Horn River assets. That’s right in the middle of the sweet spot where we like to be where we’re committing people to run the projects and operations. We don’t want more than 50 per cent but we do have available some small amount of working interest that we would provide to a LNG buyer.
“There’s always been a plan for us and Apache to have some working interest that could be sold down to buyers, so they would be part of the development and they would be in the value chain. That has not changed.”
Kitimat LNG’s rival project LNG Canada, run by Shell, has buyer partners in KoGas, Mitsubishi and PetroChina.
Final Investment Decision
One analyst asked Kirkland if the Final Investment Decision would come at the end of 2014, as previously announced, or in 2015. Instead, Kirkland said, “We will reach FID shortly after having 60 to 70 per cent gas committed to an SPA- a sales and purchase agreement. That is the critical decision maker and for both timing and the investment decision, irrespective of what happens with Apache. We’re driven, once again, by having a sales contract or sales contracts that gives us 60 to 70 per cent of the gas committed at an economic price.”
On the Kitimat terminal, Kirkland said, “We’ve got work going on, FEED [Front End Engineering and Design] work on the plant itself.
“We have to understand cost and schedule on that plant… We’re not spending huge money but it is a lot of money in terms of hundreds of millions of dollars. Now that is critical for us to have all that so we can deal knowledgeably with buyers. We have to understand cost. We have to understand resource, so we can deal with the particulars of pricing.
“We are not going to do a project unless it’s economic. We’ve always told you we’re not going to build that project unless we have 60 per cent of the gas sold. If you understand the project it makes sense.”
“I am not concerned if Apache leaves,” Kirkland said. “I think we could easily step in and be the operator of the upstream. I am confident there. Apache has been very good to work with in the early stages of the assessment of Liard.
“I think we’re in good shape but we need clarity, we need to get closure on the partnership and as I mentioned we have to do the work where we deal with buyers and understand costs and understand economics. We are very value driven, we are not going to go FID until we understand the economics of that sale.”
Confident on assets
Kirkland said that the company is confident about the assets in the Liard and Horn River regions but is waiting for final results from some test wells in the Liard.
“We can check off our confidence level on the Horn River. Resources are already high. We’ve already done that appraisal. So the focus on the resource sector is on the Liard, with some appraisal there and getting some production work. The wells where we need to get some production data will be complete by the end of the year. So that’s a really important step forward.”
Kirkland also hinted at the potential problems with the Pacific Trails Pipeline, where there is still a dispute with the Wet’suwet’en First Nation. “We’re going to focus on the pipeline and the end of the pipeline corridor. That’s important and we’re putting some money into that to finalize the pipeline routing, get all our clearances and then we’ve got work going on.”
Overall Kirkland was enthusiastic about other liquified natural gas projects in Australia and elsewhere in the world. Chevron Corporation reported earnings of $5.7 billion for the second quarter 2014, compared with $5.4 billion in the 2013 second quarter. Sales and other operating revenues in the second quarter 2014 were $56 billion, compared to $55 billion in the year-ago period.
Company CEO John Watson said a news release, “In Australia, our Gorgon and Wheatstone LNG projects continue to reach important interim milestones. Gorgon remains on track for expected start-up in mid-2015. We are also advancing the development of our liquids-rich, unconventional properties in the United States, Canada and Argentina.”
1. Why was the study suddenly released after the province said it was “privileged?”
2. Did the apparently rushed release mean that the study, as far as the public is concerned, is incomplete?
3. While most people in Kitimat believed that the study would be a wide ranging look at all parameters of industrial development in the valley, it was limited to just two factors, sulphur dioxide and nitrogen dioxide.
4. It appears that everyone involved were consulted prior to the release with one key execption, the District of Kitimat. Why?
5. The study appears to have changed in its criterion from the time of the request for proposal and the final release one issue—an oil export terminal, which went from “crude” in the request for proposal to refined in the final report.
While the study is spun has a showing that industrial development in the Kitimat Valley can proceed as long as the environment is properly managed, the gaps and the spin will likely bring doubt to the results. That means that a wider ranging and truly independent study of the air shed is needed so that both residents and industry can then make the proper decisions.
In October 2013, the Ministry of the Environment issues a “request for proposal” to “study potential cumulative effects to environment and human health from existing and proposed industrial facilities in the Kitimat airshed.” to be filed by March 31, 2014.
The Province will fund a $650,000 scientific study to help inform regulatory and policy development for future industrial activity in the Kitimat area. The goal is to ensure the potential impacts from industrial air emissions are clearly understood prior to new projects being approved and in operation.
The Kitimat Airshed Impact Assessment Project will look at the cumulative effects of existing and proposed industrial air emissions in the airshed. These include emissions from: an existing aluminium smelter, three proposed LNG terminals, a proposed oil refinery, a crude-oil export facility, and gas-turbine-powered electrical generation facilities. The study will focus on sulphur dioxide and nitrogen dioxide emissions from these facilities.
The study will assess the impact of emissions through a number of scenarios, including their potential effects on water and soil, as well as on vegetation and human health from direct exposure.
With that news release, it appears that many people assumed that “cumulative effects of existing and proposed industrial air emissions in the air shed,” would include all possible scenarios and contaminants.
The report, when it was released on Friday, covered just the “focus” sulphur dioxide and nitrogen dioxide and no other factors in air quality.
Crude or refined oil export?
As Northwest Coast Energy News noted that the report, as released, doesn’t include any references to the Enbridge Northern Gateway project, even though Northern Gateway is a source of “proposed industrial air emissions in the air shed.” The request for proposal also mentions “a crude-oil export facility” but the report as issued concerns a marine terminal for Black’s refinery
The products will be exported via a marine terminal on the Douglas Channel. Projected volumes include 320,000 barrels per day of diesel fuel, 110,000 barrels per day of gasoline and 60,000 barrels per day of jet fuel.
The map in the main report clearly shows that the study concerned the “Kitimat Clean Refinery Port” not a crude oil export facility—in other words likely Enbridge Northern Gateway.
On October 21, 2013, District of Kitimat Council endorsed a motion by former Councillor Corinne Scott:
“The BC Government has recently announced a budget of $650,000 to study the cumulative effects on the air quality due to the proposed industrial development in the District of Kitimat. It would be beneficial to have a representative from the District of Kitimat as an active participant on the committee to provide input and feedback as the study progresses.”
At the time Chief Adminstrative Officer Ron Poole told council that the minister’s office had called and promised to “involve the District.”
At that meeting, Councillor Mary Murphy reported that member were “vocal” at the Union of BC Municpalities that it was essential that Kitimat be involved. Councillors suggested that the study be wide ranging and include emissions already in the area and residual emissions left over from the closed Eurocan and Methaex operations.
The provincial final air shed report makes no mention at all of the District of Kitimat, Eurocan or Methanex.
In April, 2014, after the March 31, reporting deadine, the District and Council had heard nothing from the province. So in April, District Council passed a motion asking for a report on the status of the study.
In June, the province refused to release the report to lawyers involved in a suit against the Environmental Assessment Board which is challenging Rio Tinto Alcans’ permit to increase sulphur dixoide emission in the valley. According to the Globe and Mail, Dennis Doyle, a lawyer with the Ministry of the Attorney General, in the RTA suit, wrote to the Environmental Law Centre in Victoria
In a follow-up letter dated June 12, Mr. Doyle said, “On the matter of the Kitimat Airshed Study I am instructed that this report was prepared to guide development of government policy on industrial development in the Kitimat area and to assist the executive council in its ongoing deliberations. It is not a report that was prepared for the Respondent and played no part of the decision-making process for the permit amendment which is now under appeal.”
The EAB told the province to respond to that question by July 18. Instead there was a hastily called news conference and the report was released. However, a close look at the report shows that it was likely rushed to meet the EAB deadine and was incomplete—rather surprising for a report that was supposed to be complete by March 31.
What evidence is there that the report was rushed out by the Ministry of the Environment? The most compelling indication is that instead of a public-friendly Summary Report with an executive summary and clear conclusions, there was nothing more than a short Power Point presentation.
Most people in Kitimat who follow the energy debate are familiar with the approach of combining a readable summary with technical data. It is most evident in the report of the Enbridge Northern Gateway Joint Review, which issued a relative short summary, Connections along with the long technical report, Considerations.
Let’s take as a prime example, the original report on the Kitimat airshed commissioned by Rio Tinto Alcan. In that case, ESSA Technologies Ltd of Vancouver, the company hired by the RTA Kitimat Modernization Project to study the effects of increased sulphur dioxide emissions in the Kitimat Valley, issued three documents, an easy to understand 37-page summary report, a much longer 456 page Technical Assessment Report and a third 332 page volume of appendices, technical data and tables.
It was the same company, ESSA Technologies, that was retained by the province to do the much larger study of the airshed. However, the only public-friendly information was the 16 page highly simplified Power Point presentation.
The ESSA summary report for RTA shows in plain language, the reasons for its conclusions that the increased sulphur dioxide from KMP on human health “is characterized as moderate, an acceptable impact, but in need of closer scrutiny with moderate monitoring.” That report also outlines the limitations and uncertainties of the study.
There was no similar plain language summary released for the overall provincial air shed study, even though it was produced by the same company and came to similar conclusions. To find any limitations or uncertainties in the provincial air shed study you have to do a computer search for those key words.
So it is apparent that intended audience for the report is not really those who live in Kitimat, where over the past five years there is wide knowledge that a summary release along with a technical report is considered a standard procedure.
Kitimat not consulted
At the Friday news conference, reporters asked Environment Minister Mary Polak several times about the delay in releasing the report, and then why it was suddenly released.
In answer to the initial question, Polak said, “We had always intended to release it.” She refused to comment on the claim of cabinet privilege, saying that was the responsibility of government lawyers at the Ministry of the Attorney General. She said that the government had received the March 31 report “by the end of April and “it went through quite a rigorous and thorough review by different agencies… we are satisfied now that the findings have been given the kind of rigorous overview and we’re pleased with what has resulted from that.”
Polak said the Haisla Nation were consulted before the commissioning of the report.
Asked again about who the BC government consulted during the review period, she replied, “There were a number of other groups involved in technical review, so not just Ministry of Environment, you’ll be aware of Northern Health authority, but Ministry of Natural Gas Development, Health Canada, Environment Canada and also specialist reviewers from the Province of Quebec, the University of Helsinki, UBC, also private consultants. Then we spent some time going over and having a technical review with Gitga’at and Coastal Coastal First Nations. So it was a matter of ensuring that we had done the very best review of the work before the occasion on which we released it.”
Which leaves one big question, why was the Province of Quebec and the University of Helsinki consulted and Kitimat, despite requests, was not?
Not in the report, not my department
The provincial government called for a report on the “cumulative effects of existing and proposed industrial air emissions” and noted it would focus “ focus on sulphur dioxide and nitrogen dioxide emissions from these facilities.” It is clear that the report did not go beyond the narrow focus on those two substances.
At the Vancouver news conference, a reporter asked Polak why green house gases were not included.
She replied, “That’s not what this study was intended to look at. This department deals with pollutants and pollution and protecting our environment from it, whereas GHG [green house gas] emissions are dealt with in our department around climate change and climate action. These particular substances have an immediate impact on human health and vegetative health and the receiving environment generally unlike GHGs which are a more global impacted and of course have an impact on climate change. This study only looked at those pollutants sulphur doixide and nitrogen dioxide
Then a second reporter asked here about particulate matter, to which Polak replied, “Coming from the Fraser Valley I am very aware of the impact of particulate matter. Any industrial development that we permit in British Columbia or receives an environmental assessment certificate, particulate matter and the release of particulate matter is one of the things that gets evaluated as we determine whether or not to grant those permits. Or to put stipulations on those permits in order to ensure a reduction or management of particulate matter. That’s where that’s dealt with and we have some pretty good understanding of how that operates. We also have some modelling from this study.
“The reason this study didn’t report on that because we hadn’t asked them to. We specifically wanted to get at the issue of sulphur disoxide and nitrogen dioxide but please do not take frm that because it’s not in the study, it doesn’t get looked at. It simply gets looked at in a different process. In this case it was the understanding of the Kitimat air shed with respect to sulphur dixoide and nitrogen dioxide that we needed to have a better answers and better information.”
In other words, despite what the original proposal said: “The goal is to ensure the potential impacts from industrial air emissions are clearly understood prior to new projects being approved and in operation,” the provincial government is content to wait until the permit phase to consider particulate matter, rather than include particulate matter in the long term planning for the air shed.
And for green house gases, the same attitude seems to apply, either it’s not her department or it will be dealt with sometime in the future.
What’s going on in the air shed?
Although the provincial government has been able to spin that the air shed report clears the way for more industrial development in the region, the report isn’t much help for long term planning for those both for and against industrial development in the valley.
First one has to wonder just how comprehensive was the study, even when it comes to sulphur dioxide and nitrogen dioxide?
The report for Rio Tinto Alcan for just one substance—sulphur dixoide—from one industry—aluminum smelting–led to a 456 page technical report with 332 pages of appendices.
The provincial technical report adds one more substance, nitrogen dioxide, and adds four LNG facilities, an oil refinery, different export terminals for those industries, and two hydro generating stations plus related shipping, including a passing mention of vehicular and train traffic. The new report is 363 pages, including the appendices. (It should be noted that the air shed report does reference some of the information in the RTA report)
The various studies for the Enbridge Northern Gateway, which often contained material on air emissions, included a much longer list of what in industry jargon are called CPOC “chemicals of potential concern,” including chemicals that might be released in trace amounts from the Northern Gateway terminal, but may be of more concern from LNG projects. Who knows unless those substances are studied?
As was required by the Joint Review Panel, Enbridge also studied potential problems from accidental release of air-borne contaminants from the Northern Gateway project. There is no mention of accidental release in the current air shed study.
Although the increase in truck traffic in Kitimat is clearly visible to people who live in the town, the air shed report also speculates that with LNG and a possible refinery, there will also be a significant increase in rail traffic coming into Kitimat, hauled, of course, by diesel locomotives, which the report says is “expected to be conservatively captured within the background concentration adjustment.”
Can the Valley “handle industrial expansion”
Stakeholders in the region from the District of Kitimat to the Gitga’at First Nation to various environmental groups asked for a comprehensive review of what is going to happen in the Kitimat air shed with industrial expansion.
So the answer to the question can the valley “handle industrial expansion” after the flawed and limited report from the provincial government is not “yes,” but “we don’t know yet.”
It appears that the report is part of Christy Clark’s ongoing campaign that LNG will save the provincial economy.
There are two factors the report ignores.
First the energy companies are going to make their final investment decision on cold hard facts, including their own assessment of the potential problems from the air shed, not spin from the provincial government.
Second, until there is a proper air shed study, the First Nations, including the Haisla in Kitimat, the Gitga’at at Hartley Bay, the Kitselas in Terrace will not have solid evidence to make a decision on the details of the LNG or refinery development on their traditional territory and increased ship traffic along the coast and that will come into immediate conflict with the Supreme Court ruling on the Tsilhqot’in decision and the finding that “Whether a particular use is irreconcilable with the ability of succeeding generations to benefit from the land will be a matter to be determined when the issue arises.”
There is a new Orwellian phrase used by both the federal and provincial government. Every report is “independent” and “science-based,” although all they all tend to support the policy of the commissioning agency.
What the Kitimat Valley, Douglas Channel and the Terrace region need is a truly independent and truly science based and truly comprehensive evaluation of the air shed. At the moment, that doesn’t exist. It should whether it comes from industry or if the local governments can find the budget to fund a proper study or some combination of the two.
The long awaited Kitimat air shed study, released by the province Friday, July 17, 2014, says “that with proper management, Kitimat’s ai rshed can safely accommodate new industrial growth” without major affects on either human health or the environment. Link to news release :Study shows Kitimat airshed can handle new industrial development
The Kitimat Airshed Assessment looked at the cumulative effects of industrial air emissions, primarily sulphur and nitrogen oxides, and their potential impacts on both human health and the environment from
Rio Tinto Alcan’s existing aluminium smelter and its planned modernization
David Blacks proposed “Kitimat Clean” oil refinery at Onion flats
Four proposed LNG facilities; Shell-led LNG Canada, Chevron lead Kitimat LNG, the floating Douglas Channel LNG at the old log dump and a second floating LNG project called Triton.
BC Hydro gas turbine powered electrical generation facilities in Kitimat and near Terrace
Predicted increased to marine shipping in Douglas Channel.
The study was divided into two zones.
Health results were first examined for Kitimat townsite, the Kitimat Industrial Service Centre and Kitamaat Village.
The wider study included Gitga’at Old Town, Hartley Bay (Kulkayu), Kitimat-Stikine, Kitselas, Kitsumkaylum, Kshish, and Terrace.
There was one big factor missing from the study, it does not include the Enbridge Northern Gateway project, although the consultants who did the study do cite a couple of the air quality studies that Enbridge filed with the Northern Gateway Joint Review Panel. That despite the fact the Joint Review Panel under Condition 82 required that Enbridge file with the NEB for approval, at least four months prior to commencing construction, “an Air Quality Emissions Management and Soil Monitoring Plan for the Kitimat Terminal.”
The JRP report acknowledged that emissions from the Enbridge terminal would be minimal but would contribute to the cumulative effect of pollutant emissions from other industries and required Enbridge to consult with the District of Kitimat, the environment ministries and other industries in planning for emissions.
The map from the airshed study also shows that the possible marine terminal for David Black’s proposed Kitimat Clean refinery project is at or close to where the proposed Enbridge Northern Gateway terminal would be.
Health and environment
The study looked at proposed emission levels and the effect of emissions elsewhere in the world and then compared those studies with the Kitimat Valley. It found that the risk of sulphur dioxide was “directly related to proximity to industrial area”–largely the Kitimat Service Centre area–and that there would be a minor increase in respiratory incidents of 0.5 per cent to 2 per cent, with a slight increase of nitrogen dioxide but those were within existing guidelines.
As for environmental impact, the study says nitrogen dioxide impacts will be low. There wil be “some increased risk of soil impacts” from sulphur dioxide. The study says there will be “no negative impacts to vegetation across all scenarios” but did find “potential for acidification” of seven small lakes. Lakelese Lake is not one of those affected.
The study also doesn’t include particulate matter and although it does consider climate change, did not take into consideration possible increase of green house gases in the Kitimat Valley.
The consultants, Esssa Technologies of Vancouver, based its findings on an earlier study by Rio Tinto Alcan on emissions from the Kitimat Modernization Project and worked on those findings by adding new industries and a greater area to the models they used.
The province and industry says they will continue to monitor air, water, soil and vegetation “to ensure these values are protected.”
The higher levels of sulphur dioxide emissions from the Rio Tinto Alcan Kitimat Mondernization Project will be allowed to continue under the current permit. Environment Minister Mary Polack told reporters that will only change if the current court challenge to the sulphur dioxide levels are successful.
What Northern Gateway Joint Review said about emissions in the air shed
Among the 209 conditions imposed on the Enbridge Northern Gateway project is No. 82, an Air Quality Emissions Management and Soil Monitoring Plan.
Northern Gateway must file with the NEB for approval, at least 4 months prior to commencing construction, an Air Quality Emissions Management and Soil Monitoring Plan for the Kitimat Terminal…
This plan must include:
a) a description of the baseline, pre-construction conditions, informed by relevant modelling results and recent, existing monitor data;
b) locations of both air and soil monitoring sites on a map or diagram, including the rationale for the locations selected and the timing for installation;
c) methods and schedule of ambient monitoring for contaminants of potential concern in air (e.g., NO2, SO2, and H2S) and in soils (e.g., pH; major plant nutrients K, P, N, and S; and trace metals), and emissions source tracking;
d) data recording, assessment, and reporting details;
e) a description of the public communication and complaint response process;
f) additional measures that will be implemented as a result of monitoring data or ongoing concern;
g) the criteria or thresholds that will require implementing additional measures;
h) a description of the plan updating process;
i) a summary of Northern Gateway’s consultation with Environmental Canada and the British Columbia Ministry of Environment regarding the Air Quality Emissions Management and Soil Monitoring Plan. This summary must include any issues or concerns raised regarding the plan and how Northern Gateway has addressed or responded to them; and
j) a summary of discussions with the District of Kitimat and local or regional industrial emitters regarding collaborating on the plan’s design and implementation.
One of the things that the Joint Review Panel noted in requiring Enbridge Northern Gateway to have an updated plan and to collaborate with Kitimat and other industries is that levels of acceptable sulphur doixide in the atmosphere are changing and much of Northern Gateway’s modelling was based on standards that were becoming obsolete.
In the Joint Review Panel report, section 8.7, the JRP said:
Northern Gateway assessed changes in the atmospheric environment, including a modelled assessment of criteria air contaminant, hazardous air pollutant, and greenhouse gas emissions. Criteria air contaminants assessed by modelling included sulphur dioxides, nitrogen oxides, carbon monoxide, hydrogen sulphide, and particulate matter. Hazardous air pollutants were also modelled and included total volatile organic compounds (VOCs), benzene, toluene, ethylbenzene, and xylene (combined, BTEX), as well as hydrogen fluoride.
The provincial air shed report considered only two contaminants, sulphur dioxide and nitrogen dioxide.
Northern Gateway said there would be minimal atmospheric emissions from the construction and operation of the pipeline. The focus was on the Kitimat marine terminal.
The modelled assessment for the Kitimat Terminal included emissions associated with terminal operations, with the largest sources being vehicle traffic and
hydrocarbon storage tanks Northern Gateway used the conservative assumption of continuous ship berthing…emission rate) in order to capture the worst case scenario of concurrent adverse meteorology and maximum potential emissions. From the model results, Northern Gateway predicted that sulphur dioxide associated with operating the Kitimat Terminal would exceed the provincial air quality objectives (Level A) for all time periods. This after mitigation.
Environment Canada said that Northern Gateway took appropriate measures in designing and siting its proposed facilities to minimize adverse effects on air quality. It acknowledged Northern Gateway’s commitments to adopt best practices and to use economically-feasible best-available technologies in designing the Kitimat Terminal to minimize effects on air quality.
Northern Gateway ackknowledged that “due to the project interacting with nearby topographical features, where the largest sulphur dioxide emissions are from the
marine vessels, the highest concentrations were predicted to occur infrequently and immediately adjacent to the terminal fence line.
Northern Gateway, Transport Canada, the Heiltsuk First Nation and other stakeholders did acknowledge that eventually the vessels coming to Kitimat “would be subject to the reduced sulphur fuel requirements associated with the joint United States-Canada North American Emission Control Area.
Based on this, marine fuel sulphur requirements permitted in Canadian coastal waters (200-nautical-mile limit) would be 1.0 per cent in 2012, reducing further to 0.1 per cent by 2015. Northern Gateway predicted that sulphur dioxide emissions from marine vessels should be approximately 96 per cent lower than modelled once these new international fuel standards take effect. Northern Gateway also predicted exceedances of provincial air quality objectives in the area for carbon monoxide, particulate matter, hydrogen sulphide, and total reduced sulphur.
Northern Gateway said there “no exceedances of hazardous air pollutant guidelines were predicted as a result of the project itself” but there could be a cumulative effect with other industries in the Kitimat waterfront.
The Joint Review Panel ruled:
By the Kitimat Terminal’s proposed in-service date, there will have been significant changes to the number and magnitude of existing air emission sources since
the provincial emission inventory of 2000 was compiled, and since Northern Gateway completed its modelling assessment.
Regarding the sulphur emissions attributable to the terminal, marine vessel berthing would account for 97 per cent. Given that Northern Gateway used conservative assumptions regarding berthing in the modelling and that regulations coming into force regarding the sulphur content of marine fuels would further decrease predicted missions, the Panel finds that the modelling results presented in the application and subsequent filings are not predictive of the realistic potential effects on local air quality.
Based on the filed information about sulphur dioxide emissions, the Panel is satisfied that new modelling based on the updated information would indicate that sulphur dioxide associated with the Kitimat Terminal’s operations would not exceed provincial air quality objectives.
The Panel requires that further modelling, reflecting the current level of activity, equipment, and marine sources, must inform Northern Gateway’s design of the Air Quality Emissions Management and Soil Monitoring Plan for the Kitimat Terminal.
Updated modelling would be used to inform the monitoring program’s design, as well as to help ensure that the monitors are placed effectively to monitor both human and environmental health.
Cumulative effects on the atmospheric environment
Northern Gateway said that, during the Kitimat Terminal’s operations, tank maintenance and marine berthing would add a potential measureable contribution to regional cumulative environmental effects from air emissions. Northern Gateway incorporated the existing industrial sources in the Kitimat area in its modelling assessment, using the British Columbia Ministry of Environment’s emissions inventory. At the time the modelling was run, the available emission estimates from 2000 were used to characterize the existing sources in the airshed.
The Joint Review panel noted that over the time of the hearings”it heard of many changes to the industrial make-up of the Kitimat area since the 2000 emissions inventory was developed.”
Combining these with the predicted project emissions, the model results indicated predicted exceedances of regulatory thresholds for sulphur dioxide, carbon monoxide, particulate matter, hydrogen sulphide, and total reduced sulfur, though not at every averaging period.
Northern Gateway said that, due to the existing large emission sources and the region’s complex meteorology and topography, the exceedances are primarily attributable to the other industrial activities around Kitimat and not from the project itself.
Because there would be adverse project effects remaining after mitigation that could combine with the effects of other past, present, and future projects, and because cumulative effects are of primary concern, the Panel’s significance recommendation is given below in its analysis of cumulative effects.
The Panel finds that the emissions associated with the Kitimat Terminal’s operation would be minimal compared to the existing sources presented.
Although the modelled cumulative emissions exceeded many regulatory thresholds, the exceedances were predicted based on an out-of-date emissions inventory, and were predicted to occur prior to adding emissions from the project. Based on the information about sulphur dioxide emissions on the record, in addition to the modelling included in the application, the Panel is satisfied that new modelling based on updated information would indicate that sulphur dioxide associated with the Kitimat Terminal’s operations would not contribute to an increased exceedance of provincial air quality objectives, either through limited emissions or berthing management to limit emissions in particularly adverse conditions.