Numerous media sources are saying that Royal Dutch Shell is in talks to acquire the BG Group.
Shell is developing the LNG Canada project in Kitimat, while BG had been developing an LNG proposal for Prince Rupert. BG announced last fall it was delaying further development of the Prince Rupert project due to uncertainty in the liquified natural gas market.
Buying BG would be Shell’s largest acquisition since the $60.3-billion (U.S.) merger of its Dutch and U.K. parent companies in 2005, according to data compiled by Bloomberg. It would unite the U.K.’s first- and third-largest natural gas producers….BG posted a record $5-billion loss in the fourth quarter, mainly due to writing down the value of its Australian assets as commodity prices fell.
BBC News quotes the Wall Street Journal as matching the report.
A Shell spokesman told the BBC: “We’re not making any comment.”
No-one from BG Group was immediately available to confirm or deny the WSJ’s report.
Last fall, when BG put the Prince Rupert project on hold, with a financial investment decision postponed until 2019, theFinancial Post, quoted BG executive chairman Andrew Gould as saying, “We’re not abandoning Prince Rupert, we’re pausing on Prince Rupert to see how the market evolves particularly in function of total supply that will come out of the U.S.”
At the time, analysts noted that unlike Shell, Chevron and Petronas, BG had no gas extraction assets in Canada. BG is a privatized spinoff of the once nationalized British Gas company in the UK.
A “devastating megathrust earthquake” could hit Haida Gwaii sometime in the future, according to Canadian and US studies carried out after the magnitude 7.8 earthquake off Haida Gwaii on Oct. 27, 2012 and the 7.5 magnitude quake off Craig, Alaska, a few weeks later on Jan. 5, 2013.
The 2004 Indian Ocean earthquake and the 2011 Tōhoku earthquake in Japan, both accompanied by major tsunamis are recent examples of “great” (higher than magnitude 8.0) megathrust earthquakes. Most of the concern on the west coast has been the likelihood of a megathrust earthquake on the Cascadia Fault on the Juan de Fuca plate that stretches from northern California to the middle of Vancouver Island.
The 2012 Haida Gwaii main shock was the second largest seismic event in Canada since the establishment of a modern seismograph network. The first was the 1949 Haida Gwaii/Queen Charlotte earthquake with a magnitude of 8.1 That 1949 Haida Gwaii earthquake was a strike-slip event, where the plates move side-to-side, similar to the 1906 San Francisco earthquake and other quakes on the San Andreas Fault in California.
The 2012 Haida Gwaii earthquake is characterized in the studies as a “mini-megathrust” event, where part of the crust is pushed upward, meaning that a larger megathrust could have much more destructive consequences from both the earthquake and a possible tsunami.
A diagram of the situation off Haida Gwaii that triggered the October 2012 “mini megathrust” earthquake seen at the lower centre, while the 1949 slip strike earthquake is seen at the top. (Bulletin of the Seismological Society of America)
Complex system of faults
The new studies show that the Pacific and North America plate boundary off the coast of British Columbia and southeastern Alaska creates a system of faults capable of producing very large earthquakes. The scientists conclude that while the two earthquakes in 2012 and 2013 released strain built up over years on the tectonic plates, those events did not release strain along the Queen Charlotte Fault off the west coast of Haida Gwaii. That means the fault remains the likely source of a future large earthquake.
Map showing the pattern of earthquakes along the Queen Charlotte Fairweather Fault system and the location of the Queen Charlotte Terrace. (Bulletin of the Seismological Society of America)
A special issue of the Bulletin of the Seismological Society of America (BSSA), released Monday, April 6, 2015, contains 19 scientific and technical papers, outlining the results of the work carried out over the past two years.
The team estimated the rupture dimension of the 2012 Haida Gwaii earthquake to be about 120 kilometres long at a depth of about 30 kilometres.
The Craig earthquake ruptured the Queen Charlotte fault over a distance of more than 100 kilometres and at a depth of about 20 kilometres.
The two areas are joined in what is called the Queen Charlotte Fairweather Fault System. To the south the Queen Charlotte Fault also interacts with the Juan de Fuca plate that stretches from Vancouver Island to northern California.
“The study of these two quakes revealed rich details about the interaction between the Pacific and North America Plates, advancing our understanding of the seismic hazard for the region,” said Thomas James, research scientist at Geological Survey of Canada.
Two faults off Haida Gwaii
The studies conclude that the interaction between the plates off Haida Gwaii is much more complex than previously believed. Before the 2012 earthquake, the Queen Charlotte Fault, a strike-slip fault similar to the San Andreas Fault in California, was believed to be the dominating tectonic structure in the area. The 2012 tremor confirmed the existence of a previously suspected thrust fault beneath what is called the “Queen Charlotte Terrace,” to the west of the Queen Charlotte Fault, where the Pacific plate is sliding at a low angle below the North American plate.
The Queen Charlotte Terrace, which is about a kilometre below the surface of the ocean, is built up of layers of sediment, several kilometres thick, scraped off the oceanic plate as it subducts under the North American plate. It may also include some fragments of oceanic crust. For most of the terrace, it is “present as a clearly defined linear feature,” but the study adds: “north of about 53.5° N, a complex pattern of ridges and valleys appears.”
The earthquake was “essentially a mini-megathrust earthquake along the dipping plate interface of a subduction system,” one of the scientific papers says. The epicenter of the Haida Gwaii main shock was located about five kilometres landward (northeast) of the Queen Charlotte Fault. That probably means that the rupture was near the bottom of the locked plates, where the plate motion’s side to side movement is also thrusting downward. Significant aftershocks appeared to cluster on the periphery of the main rupture zone with most of the aftershocks occurring seaward to the west.
The scientists used GPS observations of crustal motion to locate the earthquake’s rupture offshore to the west of Haida Gwaii.
The situation off Haida Gwaii is complex because while the Pacific plate is converging with the North American plate at a rate of 15 to 20 millimetres a year, at the same time the two plates are slipping by each other toward the north northwest at angle of about 20 degrees at a rate of about 50 millimetres a year.
Honn Kao, a seismologist with the Geological Survey of Canada said, “This was an event the thrust interface of the plate boundary system, confirming that there is a subduction system in the Haida Gwaii area.
“The implication of a confirmed subduction zone is that in addition to the Queen Charlotte Fault, we now have another source which can produce devastating megathrust earthquakes in the area,” said Kao.
The study of the Haida Gwaii tremor looked at the causative faults, the rupture processes and depths of the main shock and sequence of strong aftershocks.
The Haida Gwaii earthquake generated a significant tsunami that left deposits indicating run-up exceeding 3 metres (maximum 13 metres) in a number of bays and inlets along about 230 kilometres along the west coast of Haida Gwaii. In Hawaii, a 0.8 metre wave was measured on a tide gauge.
In Queen Charlotte City perceptible shaking lasted for one and half to two minutes, with very strong shaking for about 30 seconds. The earthquake was felt as far away as Yukon Territory, Alberta, and Montana.
The study says “Damage was limited, in part owing to the sparse population, but also because of the seismic resistance of the generally low rise, wood-frame buildings on the islands. Felt intensities were at expected values close to the source zone, but regional intensities were smaller than predicted.”
The Haida Gwaii rupture also shook southeastern Alaska. The northwest direction of ground motion then may have influenced the timing of the Craig earthquake a few weeks later in January 2013. That earthquake occurred farther north in southeast Alaska, where relative plate motion is nearly parallel to the Queen Charlotte fault.
Aftershocks
.
Map showing the pattern of aftershocks following the October 2012 Haida Gwaii earthquake. (Bulletin of the Seismological Society of America)
The Haida Gwaii aftershocks clustered around the periphery of the rupture zone, both on the seaward and landward side of the plate boundary and reflected what the study calls “normal faulting behavior–caused by the bending, extending or stretching of rock– rather than the thrust faulting of the main shock.” The pattern of aftershocks is similar to those observed after the 2011 Japanese megathrust earthquake.
“Our observations of normal faulting imply that the main shock of the Haida Gwaii earthquake dramatically altered the stress field in the rupture zone, especially in a neighboring region,” Kao said.
The distribution of aftershocks occurred to the north of a previously identified seismic gap where large earthquakes have not occurred in historic times. The gap is located to the south of the where 1949 magnitude 8.1 Queen Charlotte earthquake ruptured.
Though the Haida Gwaii earthquake may have activated some part of the Queen Charlotte Fault, Kao said, it was limited and did not relieve stress along the seismic gap.
The study concludes:
The Haida Gwaii event confirmed substantial seismic and tsunami hazard from large thrust events on the plate margin along the southern Queen Charlotte fault. It occurred where relatively young oceanic lithosphere under thrusts North America and in some ways is an analog for the much larger megathrust earthquakes known to occur on the Cascadia subduction zone to the south, where the young Juan de Fuca plate and other small plates subduct beneath North America. The Haida Gwaii earthquake had a complex pattern of main shock rupture and aftershocks and a large tsunami.
Further study needed
The Geological Survey of Canada plans further studies to understand the formations off Haida Gwaii.
One question to ask is if there are any records of major earthquake events in the past history of Haida Gwaii. The study notes that the impact of the tsunami was relatively minor “in this region with steep rocky coastlines.” That means there are limited sources of coastal sediments that can be checked for past events. It adds: “Low-elevation lakes, ponds, and bogs may offer the best opportunities for paleotsunami studies” warning that large earthquakes in the past that produced tsunamis may have left little evidence in the “paleoseismic record of Haida Gwaii and similar settings worldwide.”
Megathrust earthquakes occur at subduction zones at destructive plate boundaries where one tectonic plate is subducted (forced underneath) by another. These interplate earthquakes are the planet’s most powerful, with moment magnitudes that can exceed 9.0. Since 1900, all earthquakes of magnitude 9.0 or greater have been megathrust earthquakes. During the rupture, one side of the fault is pushed upwards relative to the other, and it is this type of movement that is known as thrust. The displacement of the ocean in a thrust can trigger a tsunami.
Transform fault
A transform fault is one where the motion is predominantly horizontal. Those faults end abruptly and are connected on both ends to other faults, ridges, or subduction zones. The best-known (and most destructive) are those on land at the margins of tectonic plates. Transform faults are the only type of strike-slip faults at plate boundaries show strike-slip or side-to-side in movement.
Queen Charlotte Terrace
The Queen Charlotte Terrace is a 25 kilometre wide zone of built up marine sediment immediately west of the active Queen Charlotte fault. The crust is about 12 kilometres thick at the terrace. On Haida Gwaii, the earth’s crust is 18 kilometres thick at the eastern edge. On the BC mainland the crust is in excess of 30 kilometres thick.
Historic earthquakes.
The 1949 Haida Gwaii quake was one of the largest in the recorded history of North America.
The largest known earthquake along the coast was the megathrust event on the Cascadia fault on January 26, 1700 where the Juan de Fuca plate ruptured for about 1,000 kilometres along from what is now northern California to Vancouver Island, estimated at magnitude 9.0. The dating is based on a tsunami that hit Japan that had no associated local earthquake as well studies of tree rings from the remains of trees downed in the tsunami.
Three studies of the geology of Douglas Channel are near completion and publication, according to Natural Resources Canada. That news comes as studies, released today, warn of a major megathrust earthquake on the fault west of Haida Gwaii.
Northwest Coast Energy News asked the Geological Survey of Canada if there were any recent updates available after the agency said that a survey had located a “possible fault” on Hawkesbury Island during studies for the Enbridge Northern Gateway Joint Review Panel.
Natural Resources Canada responded with a statement: “NRCan continues to conduct research studies in the area, including study of possible faults. Three scientific expeditions have been completed on board Coast Guard research ships. The first two reports are in the final stages of editing, and will be published in the coming months. The third expedition was just completed; therefore the third report will be available later.”
More recently there were slope failures nearer to Kitimat. The first slope failure occurred on October 17, 1974, triggering a 2.4 metre tsunami at low tide. Then on April 27, 1975 there was a second slope failure near low tide on the northeast slope of the Kitimat Arm that generated an 8.2 metre tsunami. The 1975 tsunami destroyed the Northland Navigation dock near Kitimat and damaged the Haisla First Nation docks at Kitamaat Village.
Thomas James, of the Geological Survey told Northwest Coast Energy news about the team’s finding on the Haida Gwaii earthquake: “The studies focused on the Haida Gwaii and Craig earthquakes which happened at the Pacific and North American plate boundary, west of Haida Gwaii, so east of Haida Gwaii there’s no comparable plate boundaries that gives rise of historic sieismisticity.”
As well as the fact that recent studies say the mainland margin coastal zone has had very little historical seismicity, it adds no currently active faults have been identified. A study ten years ago identified some very ancient faults which have not been active since the Eocene, about 33 to 56 million years ago.
GPS studies show that in northwestern British Columbia coastal block is moving northeast at the rate of just 5 millimetres a year.
Kitimat Emergency Coordinator Bob McLeod at the earthquake postmortem Oct. 29, 2012 (Robin Rowland/Northwest Coast Energy News)
Studies of the October 2012 magnitude 7.8 Haida Gwaii earthquake show that the region is vulnerable to a “major megathrust” earthquake along a newly confirmed fault line west of the islands.
That earthquake was felt in Kitimat and Kitamaat Village and a tsunami warning was issued within a few minutes.
So have the District of Kitimat, the Haisla Nation Council or Rio Tinto Alcan changed or upgrading their earthquake and tsunami plans in the past couple of years?
Bob McLeod, who recently retired as the District of Kitimat’s emergency coordinator, told Northwest Coast Energy News: “I think we’ve done quite a bit. One of the biggest issues in the first one was trying to get information out. We’ve come a long way on that. Whether you reach everyone or not, that’s another thing, because you never reach everybody. One of the critical things to me is getting the information out so you avoid all this Facebook, Twitter speculating and rumour. The communications aspect has improved a hundred fold.
“We did more work on the mapping and planning. Over the course of the last year, there were a lot of meetings with industry and various stakeholders, discussing emergency preparedness in general but touching on some of these other things as well.
“One of the things we did was to try to set up some shelter points. We have an agreement with the Baptist Church, the Catholic Church and the Seventh Day Adventists. They’re strategically located and could be gathering points for the various neighborhoods if necessary.
“We’ve also done quite a lot of work on Riverlodge as a group lodging centre, thinking in terms of an earthquake where there may be damage and you have to move people.
“We did look at the evacuation planning and we’ve had a couple of exercises involving that, looking strategically about how can you move people from certain neighborhoods, asking which neighborhoods would be at the most risk if you ended up with a tsunami situation.
As for tsunamis, McLeod said, “From everything we’ve heard and been told, tsunamis in extremely deep water like that is not going to be as dangerous as one in shallower water, but the possibility is still there.
“The thrusts are the killers when it comes to tsunamis, but there is a very good warning system on the tsunamis. We do get very very rapid feedback on the earthquakes.
“The only danger in that regard is if you have a severe earthquake and you have part of a mountain drop into the salt chuck, you’re going to get a massive wave and you’re going to get no warning whatsoever, like the Moon Bay collapse in the seventies.
“The emergency plan is in good shape. We scheduled a number of exercises last year through training programs.
“One of the things I personally push is personal preparedness. I think as a community, we fail greatly at that. That was evident even during the snowstorm. People are not just prepared to look after themselves, it’s unfortunate. You just have to keep chipping away.”
Last week, Northwest Coast Energy News asked Rio Tinto Alcan and the Haisla Nation Council if either could comment on updated earthquake or tsunami response plans. So we have received no answers.
Court challenges and rising costs will stall the Northern Gateway project for most of 2015, Enbridge says in its Fourth Quarter (2014) Strategic Update, released Friday. That means if the Northern Gatway project actually goes ahead, the company now says it will not be completed until at least 2020 or 2021.
The strategic planning report also contains cryptic references that Enbridge may be planning a second pipeline project to the “west coast” possibly to carry LNG, that could also be completed by 2020 or 2021.
Editor’s Note: Some readers have pointed out that the obscure reference to the second pipeline to the west coast might also refer to the proposed twinning of the Kinder Morgan pipeline to the Lower Mainland.
Enbridge executives made no direct references to Northern Gateway during the conference call marking the release of the company’s 2014 results, nor did financial analysts nor media participants ask any questions about the Northern Gateway, an indication, that for now, the controversial project has dropped off the media and financial radar.
As for a possible new Enbridge pipeline to the British Columbia coast, the strategic planning report notes:
Based on the prospect for higher global LNG demand, the large resource base in western Canada and the changing North American natural gas flow patterns discussed above, there is an increasing probability that additional projects to export LNG from the continental United States or potentially off the west Coast of Canada will proceed. However, a sustained period of low crude oil prices or other changes in global supply and demand for natural gas could delay such opportunities.
Then in the conference call, Guy Jarvis, Enbridge president of Liquids Pipelines, made this reference to a slide that projected Enbridge’s future earnings.
In our base case, which is the green line and which we discussed at Enbridge Day, Keystone XL is in service in 2019 and Energy East plus one of the two West Coast projects is in service in 2020. In this scenario, we are currently chockablock full and we remain full as we bring on the two faces of Alberta Clipper expansion capacity and as we squeeze the last bit of capacity availability out of our system leaving about 200,000 barrels a day of capacity that we can’t get at due to upstream bottlenecks and crude slate versus line allocations.
So that means Enbridge expects one of two West Coast projects to be online by 2020. One, of course, is Nothern Gateway, the second, perhaps a LNG project now on the drawing boards in Edmonton. If, however, the reference is to Kinder Morgan, that too may be delayed by opposition to that project. Sources indicate that pipeline companies often have various scenarios and plans on backburners that may be activated if market conditions are favourable.
A slide from the Enbridge presentation speaks of “one” west coast pipeline coming into operation in 2020 or 2021 (Enbridge)
Northern Gateway
As for Northern Gateway itself, Enbridge’s report on the project is buried deep in the strategic review, after almost every other project and pipeline the company is working on.
Enbridge begins by noting the history of the twin 1,177-kilometre (731-mile) pipeline system from near Edmonton, Alberta to a new marine terminal in Kitimat, British Columbia. It then mentions the pipline would carry “crude oil for export” from the Edmonton area to Kitimat, fudging that the pipeline would actually carry diluted bitumen. The other pipeline would carry natural gas based condensate back to the oil sands. On June 17, 2014, the federal government approved the Northern Gateway project subject to the 209 conditions imposed by the Joint Review Panel six months earlier.
First Nations and enviromental groups then filed court challenges to the project.
The report notes that on December 17, 2014, the Federal Court of Canada consolidated all the challenges to Northern Gateway in a single proceeding.
Those challenging the Northern Gateway have until May 22, 2015 to file with the Federal Court the Appellants’ Memoranda of Fact and Law.
Northern Gateway must respond with a Respondents’ Memoranda by June 5, 2015.
The company says the Federal Court hearing will open sometime in the fall of 2015, with a decision possibly late in 2015. Enbridge expects either one side or the other to seek Leave to Appeal to the Supreme Court of Canada which could delay the project into 2016 or 2017.
Current proposed route for the Northern Gateway pipeline. (Enbridge)
Gateway costs
The report says that in October, 2014, Enbridge began reviewing its cost estimate for Northern Gateway, “based on full engineering analysis of the pipeline route and terminal location.” Now the companys says “the final cost of the project will be substantially higher than the preliminary cost figures included in the Northern Gateway filing with the JRP, which reflected a preliminary estimate prepared in 2004 and escalated to 2010.”
What is raising the cost of Northern Gateway include “significant costs associated with escalation of labour and construction costs” probably due to LNG other projects, as well as satisfying the JRP’s 209 conditions. It appears also that Enbridge is finally actually looking at the costs of building the pipeline over BC’s rugged terrain, “a larger portion of high cost pipeline terrain, more extensive terminal site rock excavations and a delayed anticipated in-service date.”
Enbridge adds: “The updated cost estimate is currently being assessed and refined by Northern Gateway and the potential shippers.”
It may be that Northern Gatway’s future is becoming more precarious, especially with the collapse in world oil prices.
Enbridge notes: “Subject to continued commercial support, receipt of regulatory and other approvals and adequately addressing landowner and local community concerns (including those of Aboriginal communities), the Company now estimates that Northern Gateway could be in service in 2019 at the earliest. The timing and outcome of judicial reviews could also impact the start of construction or other project activities, which may lead to a delay in the start of operations beyond the current forecast.” (The 2020 or 2021 figure came from the conference call and slide presentation, not the strategic report)
Enbridge concludes:
Given the many uncertainties surrounding Northern Gateway, including final ownership structure, the potential financial impact of the project cannot be determined at this time.
The Joint Review Panel certificate granting Enbridge permission to proceed expires, under Condition 2, on December 31, 2016. Under Condition 187, Northern Gateway must assure the JRP and National Energy Board that it has sufficient financial resources to both build the project and to implement all the safety and environmental conditions imposed by the JRP and accepted by Stephen Harper’s cabinet when it approved the project.
The bear totem at the University of Northern British Columbia, one of the backdrops considered by Natural Resources for an announcement by Joe Oliver. (UNBC)
If anyone wanted a snapshot (or for younger folks a selfie) of why the Harper government grounded out at home, never even getting to first base with northwestern British Columbia on Northern Gateway and other resource projects, it can be found in about sixty pages of documents, obtained by Northwest Coast Energy News under the Access to Information Act, documents that outline the planning for former Natural Resources Minister Joe Oliver’s first visit to Terrace in March 2013
The documents reveal the priority for Natural Resources communications staff was mainly finding an appropriate First Nations visual backdrop for Oliver’s speech announcing the appointment of Douglas Eyford as special representative to First Nations, the Harper government’s attempt to smooth relations as it dawned on the government that opposition to Northern Gateway wasn’t just going to disappear.
Despite years of media coverage from both those opposed to and even those who support the Northern Gateway project that highest priority issue was preventing oil spills whether from tankers or pipelines, the Ottawa-based communications planners in Natural Resources Canada were talking about how aboriginal and non-aboriginal communities could respond to oil spills.
For an event that was supposed to engage the First Nations of coastal British Columbia and gain their support for resource projects, all the economic examples are about Alberta First Nations who are working the extraction of bitumen in Alberta, there are no example of how BC First Nations might profit from Northern Gateway (that is if any BC First Nations actually wanted to do so)
When Natural Resources Canada started planning Joe Oliver’s announcement they created what was called a “Message Event Proposal” which even in its title shows how the government and the communications staff think. The message is more important than the event.
Finding a background with a First Nations focus was a high priority for Natural Resources Canada in choosing Northwest Community College in Terrace for an announcement by Minister Joe Oliver on March 19, 2013. (Robin Rowland/Northwest Coast Energy News)
The planning documents from Natural Resources, starting on March 5, 2013, indicate that from the beginning the announcement was being treated as a photo op. Invitations to or participation by “stakeholders” are listed as N/A “not applicable,” which meant that meetings, even private meetings, with representatives of northwestern First Nations and other communities either weren’t considered or the communications staff weren’t informed. (If there were such plans they were not part of the access documents released and as far as Northwest Coast Energy News can find out no meetings took place since Oliver left for Ottawa immediately after the announcement)
The documents show that there were no plans to involve “stakeholders” in Joe Oliver’s announcement.
The Natural Resources communications staff were working on multiple angles in March, as part of what the planning documents call “a suite of events in Vancouver on marine and pipeline safety.”
The first set of those events would eventually take place on March 18, 2013, in Vancouver, and included the announcement, without consulting either Rio Tinto Alcan or the District, that Kitimat’s private port run by Alcan since it was first built would be turned in a federal public port.
That location certainly wasn’t clear at first. The first documents suggested the announcement take place in Vancouver, and then a day later on March 6, the proposed venue, according to the staff, was in either Prince Rupert or Prince George.
According to the internal e-mails, sometime that week what Ottawa bureaucrats call MINO — the minister’s office– decided that the venue should be Terrace. On March 11, e-mails among Natural Resources staff show that the choice had changed to either Terrace or Prince George.
Since the “special representative” whom we now know would be Douglas Eyford, would report directly to Prime Minister Stephen Harper, the political level was involved. MINO took over writing Oliver’s speech and the arrangements were copied to the Privy Council Office, the civil service branch that has overall supervision of the federal bureaucrats and works directly with the Prime Minister. So the speech that the communications branch had drafted for Oliver became “can please turn the one we had done for him into the remarks for the new guy?”
Plan B in Prince George
The choice of Terrace left the Natural Resources Ottawa staff hedging their bets, looking for a “potential plan B” in Prince George. The e-mails indicate that Ottawa asked Natural Resources west coast communications officer for a list of suitable locations in Prince George.
The communications officer replied with three locations at the University of Northern British Columbia “a moving bear totem on campus” the main administration building which the e-mail said “ has a strong First Nations focus,” adding “Environment Canada has done…events there. Strong FN visuals.” The third choice was “a new bio energy facility that looks industrial.”
Backups were The College of New Caledonia trade centre and the Prince George industrial park.
Natural Resources Canada also considered the “strong First Nations visuals” at the University of Northern British Columbia administration building. (UNBC)
The University of Northern British Columbia’s bioenergy facility. (UNBC)
E-mails from the staff on Wednesday, March 14 and Thursday, March 15, showed while they were now aware the event would be in Terrace, and probably at Northwest Community College, there was still a lot of uncertainty. “We haven’t been able to contact them to confirm, but as soon as we do, we will let you know the exact details as well as what is required in terms of logistics.”
Remembering that Natural Resources and Transport Canada were also planning the Vancouver event on Monday, March 18, it appears that even as Oliver arrived on the morning of March 19, the minister’s staff both political and bureaucratic were still scrambling.
On March 19, the NWCC staff on site were complaining that as soon as the Ottawa delegation saw the standard arrangements for an event at the Waap Galts’ap community long house they ordered the NWCC staff to immediately rearrange the room, so that the podium was in front of one wall with what Oliver’s staff thought was a better First Nations painting. That rearranging was still going on when I arrived to cover the announcement.
Joe Oliver tries out a heavy equipment simulator at Northwest Community College on March 19, 2013, prior to his speech. (Robin Rowland/Northwest Coast Energy News)
Even after the furniture was rearranged, the start was delayed as Oliver and his staff disappeared into an upstairs room for a meeting before the news conference began, and Oliver announced Eyford’s appointment.
During the question and answer session with the media during the news conference, the students that had essentially been brought in as props for the photo op and to help promote Northwest Community College’s industrial training program, began to ask questions.
Joe Oliver listens to a question from a student at the Northwest Community College news conference. (Robin Rowland/Northwest Coast Energy News)
One student asked Oliver if Eyford’s appointment was going to replace “all talks” with First Nations about resource projects. The Natural Resources public relations staff tried to cut off one student, since the national media were waiting on a telephone conference call. To his credit, Oliver did answer the student’s question, saying Eyford’s appointment was not intended to “replace the independent, regulatory review.” He went on to explain the Northern Gateway Joint Review would continue its work and report at the end of 2013.
What was Ottawa thinking? You too, can respond to an oil spill.
If the aim was to engage the First Nations and other residents of northwestern BC, it is clear that the concerns of this region hadn’t reached out Ottawa.
It appears from the planning documents for Joe Oliver’s trip to Terrace, that a main concern of everyone in the northwest, aboriginal and non-aboriginal, opponents and supporters of the Northern Gateway pipeline, preventing oil spills also wasn’t on the government radar, rather it was preparing and responding to oil spills.
Guess who would respond?
As part of the measures to strengthen Canada’s Marine Oil Spill Preparedness and Response Regime, the Government of Canada will strengthen the engagement and involvement of Aboriginal and non-aboriginal communities in preparing for and responding to oil spills.
When it comes to a key section on benefits from the Northern Gateway and other resource projects, there is no mention of benefits to British Columbia; rather it appears all the examples of benefits for aboriginal communities come from Alberta, including $1.3 billion in contract work for oil sands companies not including construction, for the year 2010, and $5 billion since 2001. The Message Event Proposal also cites a joint venture between the Bigstone Cree and Bronco Energy, “the biggest oil sands project every undertaken on First Nations reserve lands.”
Overall the plan was to “Promote Canada’s commitment to achieving its goals under its plan for Responsible Resource Development, including increased consultations with Aboriginal peoples.”
The “media lines’ issued by Natural Resources also outlined the Harper government’s attitude to the Northern Gateway, noting that Eyford’s appointment was independent of the Northern Gateway Joint Review, and went to indicate that the JRP was “conducting a rigorous, extensive, open, science-based assessment.” It adds that “we will continue to rely on the integrity of this process,” again showing how out of touch Natural Resources was (at least in talking points) since by March 2013, there was growing consensus in the northwest that the JRP had lost its credibility.
The media lines also show that the Harper government believed that “Aboriginal consultations are fully integrated into the review process to ensure meaningful consultation occurs,” a position that most First Nations in British Columbia reject, insisting on meaningful consultations between the Crown and the First Nation.
When Eyford presented his report to the Prime Minister in December, 2013, Eyford called for stronger action to engage First Nations opposed to new oil and gas pipelines.
“It’s never too late to engage and do so in a process of good faith negotiations… “This won’t be an easy process. I hope my report is perceived as providing objective and blunt advice to all the parties engaged in this process.’’
The 53 page report contained dozens of recommendations mainly concerned with a more open and principled dialogue with First Nations.
“The development of West Coast energy infrastructure provides an opportunity to forge partnerships and build relationships. There is a strong interest and real opportunity for Canada and aboriginal Canadians to more effectively collaborate to address their respective interests.’’
Editor’s note: On the port issue, an RTA spokesperson noted that talks with the federal government are continuing. He noted that all the Kitimat port facilities are privately owned, by Rio Tinto Alcan or by LNG Canada and there are “multiple stakeholders” involved.
Apache Corporation today announced it has agreed to sell its interest in two LNG projects, Wheatstone LNG and Kitimat LNG, along with accompanying upstream oil and gas reserves, to Australila’s Woodside Petroleum Limited for a purchase price of $2.75 billion.
The news release says:
Apache will also be reimbursed for its net expenditure in the Wheatstone and Kitimat LNG projects between June 30, 2014, and closing which is estimated to be approximately $1 billion.
Under the terms of the agreement, Apache will sell its equity ownership in its Australian subsidiary, Apache Julimar Pty Ltd, which owns a 13-percent interest in the Wheatstone LNG project and a 65-percent interest in the WA-49-L block which includes the Julimar/Brunello offshore gas fields and the Balnaves oil development. The transaction, which has an effective date of June 30, 2014, will also include Apache’s 50-percent interest in the Kitimat LNG project and related upstream acreage in the Horn River and Liard natural gas basins in British Columbia, Canada.
Based on current estimates, Apache’s net proceeds upon closing are expected to be approximately $3.7 billion. Receipt of proceeds from this transaction will trigger an estimated $650 million cash tax liability, approximately $600 million of which is associated with the income tax due on Apache’s Overall Foreign Loss account balance. Upon incurring this income tax liability, Apache estimates that it will have the flexibility to repatriate cash generated from foreign operations and/or future international strategic transactions with minimal U.S. cash tax impact.
“Today’s announcement marks the successful completion of one of our primary strategic goals of exiting the Wheatstone and Kitimat LNG projects. Apache recognizes the contribution of our employees who have worked so diligently on these projects since their inception, and we sincerely thank them for their tremendous effort. I would also like to thank Woodside’s CEO and Managing Director, Peter Coleman, and his entire staff for their hard work and professionalism in bringing this transaction to a successful conclusion. I am proud of Apache’s legacy in advancing the Wheatstone and Kitimat LNG projects, and I am confident that Woodside’s participation will have a positive impact in seeing these world-class LNG facilities through to first production. We look forward to the redeployment of the proceeds from this sale, which may be used to reduce debt, repurchase shares and to pursue other opportunities that enhance our asset base and drive profitable production growth,” said G. Steven Farris, chairman, chief executive officer and president.
Upon completion of the transaction, Apache will continue to hold upstream acreage offshore Western Australia in the Carnarvon, Exmouth, and Canning basins along with related hydrocarbon reserves and production. Apache will also retain its 49-percent ownership interest in Yara Holdings Nitrates Pty Ltd and 10-percent interest in the related ammonium nitrate plant.
The transaction is expected to close in the first quarter of 2015 and is subject to necessary government and regulatory approvals and customary post-closing adjustments. The sale of the Kitimat LNG project is subject to certain operator consents.
On Monday, October 20, 2014, the Minister of Fisheries and Oceans, Gail Shea, stood in the House of Commons during Question Period and proved she is not up for the job.
Answering questions from Opposition MPs about the incident of the Russian container ship, Simushir, which drifted dangerously close to the coast of Haida Gwaii, Shea got up and read a prepared script, a script with answers which ignored centuries of the laws and custom of the sea, as well as Canada’s own laws and treaty obligations, answers probably written by what are now known as “the kids in short pants” in the Prime Minister’s Office.
There was a time in this country when some ministers of the Crown took their responsibilities seriously. That idea that has decayed over the years and now has been gutted by the adminstration of Stephen Harper. As Ottawa pundits have noted recently, only a small handful of cabinet ministers in the Harper government have any real responsibility and only those are permitted to answer questions by themselves in the Commons. According to most Ottawa insiders, the less important ministers, like Shea, are basically told what to do by the prime minister’s office.
Gail Shea, Minister of Fisheries and Oceans, visited the Canadian Coast Guard Ship Leonard J. Cowley on Friday, December 6, 2013, to examine the fast rescue craft launching mechanism for offshore fishery patrols with Regional Director, Fleet, Stephen Decker and Captain Kerry Evely, Commanding Officer. The Cowley conducts fisheries patrols and monitors fishing activities under Canada’s commitment to the Northwest Atlantic Fisheries Organization. (DFO)
If the House of Commons under Harper could fall any lower, Shea’s attitude (or more likely the PMO’s attitude) on ship and coastal safety takes the Commons and ministerial responsibility to a new low—the bottom of the sea.
Nathan Cullen, NDP MP for Skeena Bulkley Valley, who represents Haida Gwaii first asked. “Mr. Speaker, on Friday, a Russian ship carrying more than 500 million litres of bunker fuel lost all power just off the coast of Haida Gwaii.The Canadian Coast Guard vessel, the Gordon Reid, was hundreds of kilometres away, and it took almost 20 hours for it to reach the drifting ship. Thankfully, favourable winds helped keep the ship from running aground, and a private American tugboat eventually towed it to shore. Is the minister comfortable with a marine safety plan that is based on a U.S. tugboat and blind luck in order to keep B.C.’s coast safe?”
Shea responded.
“Mr. Speaker, luck had nothing to do with the situation. The Russian ship lost power outside Canadian waters in very rough weather. The private sector provides towing service to the marine industry. We are grateful that the Canadian Coast Guard was able to keep the situation under control in very difficult conditions until the tug arrived from Prince Rupert.”
Cullen tried again:
“Mr. Speaker, if the government really wanted to show its gratitude to the Canadian Coast Guard maybe it would not have cut $20 million and 300 personnel from its budget. Even after the Gordon Reid arrived, its tow cable snapped three times. The Russian ship was only about a third as big as the huge supertankers that northern gateway would bring to the very same waters off the west coast. How can Conservatives, especially B.C. Conservatives, back their government’s plan to put hundreds of oil supertankers off the B.C. coast when we do not even have the capacity to protect ourselves right now?”
Shea replied: “Mr. Speaker, this Russian ship lost power outside of Canadian waters. The Canadian Coast Guard responded and kept the situation under control, under very difficult conditions, until the tug arrived from Prince Rupert.
We as a government have committed $6.8 billion through the renewal of the Coast Guard fleet, which demonstrates our support for the safety and security of our marine industries and for our environment.”
Next to try was Liberal MP Lawrence MacAulay from Cardigan.
“Mr. Speaker, the Russian container ship that drifted off the west coast raises serious concerns about the response capability of the Canadian Coast Guard. This serious situation was only under control when a U.S. tugboat arrived.”
Again Shea read her script: “This Russian ship lost power outside Canadian waters. On the west coast, the private sector provides towing services to the marine industry.’
The final attempt by Liberal Joyce Murray, from Vancouver Quadra, also led to a scripted answer. “ this was a private towing vessel that came to tow the vessel that was in trouble.”
Shea’s answers, especially her repeated reference to “territorial waters” set off a series of “What the…?” posts on Twitter from west coast mariners and sailors, wondering if Shea knew anything about maritime law.
The first question one must ask was Shea actually not telling the whole truth to the House of Commons (which is forbidden by House rules) when she said the Simushir was outside Canadian waters? The Haida Nation, in a news release, (pdf) says the Simushir was “drifting about 12 Nautical Miles North West of Gowgaia Bay located off Moresby Island off Haida Gwaii.”
International law defines territorial waters as a belt of coastal waters extending at most 12 nautical miles (22.2 km; 13.8 mi) from the baseline (usually the mean low-water mark) of a coastal state.
As Shea’s own DFO website says Canada has exercised jurisdiction over the territorial sea on its east and west coasts out to 12 nautical miles since 1970, first under the Territorial Sea and Fishing Zones Act and now under the Oceans Act. The baselines for measuring the territorial sea were originally set in 1967. While the exact position can and should be confirmed by the ship’s navigation logs and GPS track, it is clear that the container vessel could have been at one point after it lost power within Canada’s territorial waters.
Even if the Simushir wasn’t exactly within territorial waters, the ship was in what again Shea’s own DFO website calls the “contiguous zone “an area of the sea adjacent to and beyond the territorial sea. Its outer limit measures 24 nautical miles from the normal baseline zone.” In any case, the Simushir was well within what Canada says is its “exclusive economic zone” which extends 200 nautical miles from the coastal baseline.
Law of the Sea
So here is the first question about Shea’s competence.
How could she not know that the Simushir was well within Canadian jurisdiction, as defined by her own department’s website? Even if the minister hadn’t read the departmental website, wasn’t she properly briefed by DFO officials?
The second point, is that whether or not the Simushir was in actually in Canada’s territorial waters is irrelevant. Custom going back centuries, and now the United Nations Convention on the Law of the Sea and even the Canada Shipping Act all require the master of a capable vessel to render assistance once that vessel receives a distress call or sees that another vessel is in distress.
… the master of a ship at sea which is in a position to be able to provide assistance, on receiving a signal from any source that persons are in distress at sea, is bound to proceed with all speed to their assistance, if possible informing them or the search and rescue service that the ship is doing so.
And the Canada Shipping Act requires
Every qualified person who is the master of a vessel in any waters, on receiving a signal from any source that a person, a vessel or an aircraft is in distress, shall proceed with all speed to render assistance and shall, if possible, inform the persons in distress or the sender of the signal.
The master of a vessel in Canadian waters and every qualified person who is the master of avessel in any waters shall render assistance to every person who is found at sea and in danger of being lost.
Note the phrase any waters. Not just in Canadian territorial waters as the Shea, the minister responsible for the ocean seemed to imply in her Commons answers.
That once again calls into question Shea’s fitness to be a minister of the Crown.
If she did not know about the UN conventions on the law of the sea, of which Canada is signatory, or the Canada Shipping Act, she is not up for the job as Minister of Fisheries and Oceans.
If, as the minister responsible for oceans, she knew the law and was told by the PMO to mislead the House of Commons, she is is irresponsible and MPs should ask the Speaker if she actually broke the rules of the House.
Regulation Seven of the Annex on Search and Rescue Services states
Each Contracting Government undertakes to ensure that necessary arrangements are made for distress communication and co-ordination in their area of responsibility and for the rescue of persons in distress at sea around its coasts. These arrangements shall include the establishment, operation and maintenance of such search and rescue facilities as are deemed practicable and necessary, having regard to the density of the seagoing traffic and the navigational dangers, and shall, so far as possible, provide adequate means of locating and rescuing such persons.
Note that the regulation does not say within territorial waters, but “around its coasts.”
Rendering assistance
Canada has always rendered assistance to distressed vessels not just up and down the coast but around the world. Take the case of HMCS Chartlottetown. On February 3, 2008, HMCS Chartlottetown on anti-piracy and anti-terrorist patrol in the North Arabian Sea, spotted a rusty barge with some men stranded on the deck. It turned out the men were from Pakistan and that the vessel towing the barge had sunk with all hands, leaving only the men on the barge alive. The North Arabian Sea is far out side Canadian territorial waters.
In February, 2008. the crew of HMCS Charlottetown rescued the crew of a Pakistani barge that was drifting in the North Arabian sea after the tug that was hauling the barge sank. (Cpl Robert LeBlanc,/Canadian Forces Combat Camera)
On must wonder then if the Harper Government, or at least Minister Shea is suggesting that this country ignore centuries of maritime law and custom and, in the future, pass that barge by because it was not in Canadian waters?
Perhaps buried in the next omnibus bill we will see the Harper Government restrict rescue at sea to Canadian territorial waters. Farfetched? Well that is what Minister Shea’s answer in the Commons seems to suggest.
Given the cutbacks to the Coast Guard services over the past few years, and if there are going to be large tankers, whether LNG or bitumen, on the west coast, it is an open question whether or not the Harper government has actually made those “arrangements shall include the establishment, operation and maintenance of such search and rescue facilities as are deemed practicable and necessary, having regard to the density of the seagoing traffic and the navigational dangers, and shall, so far as possible, provide adequate means of locating and rescuing such persons.”
Now comes the question of the use of the tug Barbara Foss and the two Smit tugs that later joined to tow the Simushir into Prince Rupert harbour.
It is the responibility of the owner or manager of a disabled vessel, large or small, to contract with a tug or towing service to safely take it back to port. But, and it’s a big but, the tow begins only when it is safe to do so, if there is a danger of the ship foundering, sinking or running aground, it is the obligation of all the responding vessels to render assistance, not just the tug contracted to do the job.
(There are reports that the Simushir owners chose to hire the Barbara Foss rather than the heavy duty Smit tugs available at Prince Rupert. Jonathan Whitworth, CEO of Seaspan told Gary Mason of The Globe and Mail that there are about 80 boats on the west coast, capable of heavy-duty towing, but noted that as in the case of the Simushir, those vessels may not be available when needed)
While around the Lower Mainland of BC, even a small boat that has run out of gas or has engine trouble can get commercial assistance from many service providers, the same is not true of the north coast, or at Haida Gwaii, where are no such regular services. Seapan’s Whitworth told The Globe and Mail there is often a 6,000 horsepower log hauling tug that works off Haida Gwaii. but he also noted that it would be too expensive to have a tug permanently moored on the archipelago.
That means mariners who run out of gas or have engine trouble, say on Douglas Channel, have to call Prince Rupert Coast Guard radio and request assistance either from nearby vessels or from the volunteer Royal Canadian Marine Search and Rescue service. RCMSAR policy says that a the rescue boat will not tow a vessel if “commercial assistance is reguarly available.” If commercial assistance is not available RCMSAR is only obligated to tow the boat as far as a “safe haven,” where the boat can tie up safely or contract for that “commercial assistance.”
Here on Douglas Channel the safe haven is usually Kitimat harbour and thus during the summer frequently either a good Samaritan vessel or RCMSAR take the disabled vessel all the way to MK Bay.
Shea’s pat answer to the Opposition questions only betrayed the fact that the east coast minister is woefully ignorant of conditions on the northern coast of British Columbia.
In the old days, a minister who screwed up so badly would be asked to resign. That never happens any more. Ministerial responsibility has sunk to the bottom of the sea.
The bigger picture question seems to be. Why, if the Harper government is so anxious to get hydrocarbons, whether bitumen or natural gas to “tide water” does it keep going out of its way to show its contempt for the people who live on Canada’s west coast?
A note for the voters of Prince Edward Island, where Shea is the member for Egmont. Consider this, if a ship gets into trouble outside the 12 mile limit, trouble that could threaten your beautiful red sandy beaches, you’re likely on your own.
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.
Guests at the unveiling of LNG Canada’s commitment to the Kitimat community watch a video prior to the unveiling ceremony. (Robin Rowland/Northwest Coast Energy News)
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.
Kitimat mayor Joanne Monaghan, Susannah Pierce, Director, External Affairs, LNG Canada and Fire Chief Trent Bossence after the ceremony unveiling the community commitment. (Robin Rowland/Northwest Coast Energy News)
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.
A Glencore stock photo of slag tapping at the Sudbury Smelter. (Glencore)
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.
Should Glencore ever takeover Rio Tinto, the Wall Street Journal says Glasenberg told the paper Glasenberg: We Don’t Do Work-Life Balance may be a indication of the future, especially for management.
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.
Numerous media sources are saying that Royal Dutch Shell is in talks to acquire the BG Group.
