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Kitimat: Do you know the way to Santa Fe? Time for some vision in development

St. Miquel Santa Fe — The San Miquel Mission in Santa Fe, New Mexico, was built between 1610 and 1619. Santa Fe mandates that building in the city continues to reflect its historic heritage. (Robin Rowland/Northwest Coast Energy News)

Updated with additional links

“Is there a longterm vision for Kitimat?” Spencer Edwards, one of the public delegates, asked District of Kitimat Council Monday night, August 18, as there was yet another public hearing on the highly controversial development on Kingfisher Avenue.

If there is a vision for the future of development in Kitimat, it appears, to say the least, that both Council and the overworked Community Planning and Development division are struggling to find something. It is more likely that with the sudden increase in development, that both Council and staff just don’t have time to “do the vision thing.”

Clarence Stein Kitimat — Clarence Stein’s Kitimat Townsite report

The growing objections to the Kingfisher development of either 40 or 53 townhouses and a second development Riverbrook Estates, that would be beside the Dyke Road off Kuldo near to the Riverlodge Tennis Courts, a mix of single family homes, townhouses and apartments, shows the vision gap.

Public delegations are demanding just that— a vision.

Download Clarence Stein’s Kitimat Townsite Report from the DoK website (large PDF file)

At council meetings over the past weeks, a number of delegates have referred to Clarence Stein’s original vision for Kitimat from the 1950s. A note to Council from the residents of Marquette Street presented in opposition to the Kingfisher development says:

This is not what the famous American Architect, Urban Planner and Founder of the Garden Cities movement, Clarence Stein had envisioned a modern town with a population of 50,000 resident when he designed Kitimat over 60 years ago. He would be turning inside his grave.

Stein asked the same question. In his plan for Kitimat (page 45) he said future councils, staff and developers must ask: “What do the people themselves want?”

It’s fairly obvious by now that what the people of Kitimat want is more housing—there is, after all, a housing shortage at the moment. It also crystal clear that the residents of Kitimat do not want cookie cutter town houses and apartments built, as the Marquette note says “as is happening in Surrey, Port Coquitlam and so many other places in the Lower Mainland.”

Spencer Edwards asked District of Kitimat Council on Monday, “Is there a strategic long term plan, long term vision for the development of Kitimat. Does it simply involve industry or a diverse range that’s in place, and if that plan is in place, is it possible to view it at some point.”
(Robin Rowland/Northwest Coast Energy News)

“Kitimat is full of hicks”

While developers (just like energy companies) come before Council and make presentations of their vision, with assurances of respect for this community, there is a dark side.

When the developer delegations left the Council Chambers Monday after their presentations, some of them were overheard by witnesses in the parking lot disparaging what had just gone on inside from both council members and citizen delegations, saying that “Kitimat is unsophisticated”….”doesn’t understand how things were done in the big city” and… “Can’t make up their minds.”

As one of my sources who overhead the conversation remarked, “They must think Kitimat is full of hicks.”

While it is uncertain which of the developer and real estate delegations made the remarks in the dark, it is clear if that is the real attitude toward development in Kitimat, then vision, not “let’s get on with it” must be the priority.

There must be strong development regulations to ensure that anyone building in the District must be held strictly to account to keep those assurances (and not be allowed to say market conditions have changed to get out of any commitments). More than that what Kitimat needs and needs now is an updated version of Stein’s vision, not the “motherhood” statements found in the current Official Community Plan.

So Kitimat, do you know the way to Santa Fe? (We’ll get there in bit).

Community Plan

Council and staff keep referring to the Official Community Plan (OCP) which some delegates complained was hard to find on the District website. (You can download it from the District website at http://www.kitimat.ca/assets/Business/PDFs/official-community-plan-2008.pdf )

Unfortunately the OCP is more of a motherhood document than a plan for the future of Kitimat. It’s also obsolete: a 2007-2008 rewrite of the original 1987 plan, updated with a few paragraphs in 2013 (as required by law, it is reconsidered every five years) There’s an already obsolete table predicting continuing decline of Kitimat’s population over the next quarter century (although a nearby graph does include possible population increases as well as declines).

On the future of Kitimat, the opening paragraphs read circa 2008

Kitimat’s population, after peaking in the mid-80s, has been in a general decline to fewer people than in 1956, primarily because of external factors beyond the control of the local municipality. Kitimat, like many other rural communities across Canada, is being affected by world markets and resultant demographic shifts as economic power and population is concentrated in major metropolitan centres. It is hoped that population will grow again and there are potential projects that would support this. New industry may locate here or existing businesses may expand based on the deep sea port, relatively low-priced land, and the proximity to natural resources. Kitimat’s future remains uncertain.

Even with the few updates in 2013, it seems no one expected the current building boom. That means the OCP can’t handle the boom, whether or not it continues or fades away.

The problem facing those who want development in Kitimat is that much of provincial law is pretty clear, a developer looks at the OCP, which has little specifics, then the zoning and then, if everything is in order, apply for a development permit, gets it and the goes ahead.

At Monday’s meeting, Edwards asked, “Is there any indication of what quality of development is being put in place?”

Deputy Administrative Officer, Warren Waycheshen, replied that the zoning plan for the Kingfisher development “allows what the setbacks are going to be, height, distances, it doesn’t set the building quality. That will come through the development permit stage.”

There have been the same arguments over and over in Kitimat in the past year, where a new developer or a developer doing renovations, often from out of town, were able to go ahead and do what they wanted, with little regard for the residents of Kitimat, its history and the vision of Clarence Stein.

This brings me to Santa Fe, how Kitimat can maintain Stein’s vision and how Kitimat can use the development permit process to ensure that happens. That means an urgent program of updating and strengthening the development permit system to reflect Stein’s vision across the district.

Santa Fe

Santa Fe, New Mexico, was a crossroads of the Old West, home of the Pueblo First Nation which for centuries before the coming of Europeans built pueblos out of adobe. Adobe (not the software) is an old Arabic word meaning “mud brick” adopted into Spanish during the time of the Moors, brought to the New World and used by the Spanish in New Mexico, and taken up by the Americans who came via the Santa Fe Trail and then the railhead for the Atchison, Topeka and Santa Fe Railway.

In 1912, New Mexico became the 47th US State; Santa Fe became the capital.

At the same time, the Santa Fe local government adopted the 1912 equivalent of a BC Official Community Plan,

Here from Wikipedia is a short explanation:

In 1912, when the town had only 5,000 people, the city’s civic leaders designed and enacted a sophisticated city plan that incorporated elements of the City Beautiful movement, the city planning movement, and the German historic preservation movement. It anticipated limited future growth, considered the scarcity of water, and recognized the future prospects of suburban development on the outskirts. The planners foresaw conflicts between preservationists and scientific planners. They set forth the principle that historic streets and structures be preserved and that new development must be harmonious with the city’s character.

As CBS News Sunday Morning reported earlier this year:

The end of the fabled trail of pioneer days, Santa Fe is today the oldest state capital city in our nation. And if its earth-tone structures hark back to the Pueblo originals, well, that’s by design….. Almost a century ago, city fathers mandated use of the style all over town, predicting — accurately, as it turned out — that it would be good for the tourist trade. Today, even fast food outlets and big box stores are clad in Santa Fe style.

That CBS report was right on. I visited Santa Fe a few years ago, and noted how much of the town, especially the famous art galleries reflected that adobe style. The big box stores and the fast food joints are the same—and who cares about corporate building branding; the familiar signs were all that was needed.

What struck me was a mall I saw on the outskirts of town while driving to the airport. It was a mall, in many ways no different from the boring cookie cutter malls you see in Surrey, Coquitlam or Nanaimo—with one exception. It was built in the Santa Fe Adobe Style and looked a whole lot better than the uniform malls you see from almost every highway in North America.

Editor’s Note: CBS News Sunday Morning is scheduled to repeat its special report on Santa Fe By Design, this Sunday, August 24. Due to sports programming Sunday Morning is usually pre-empted in the Pacific Time Zone. If you have cable or satellite and access to a CBS east coast station, watch or set your PVR from 0900 to 1030 ET (0600 to 0730 PT)

That is what “new development must be harmonious with the city’s character” means and that’s what Kitimat should do. Make sure all future development is truly harmonious with Kitimat’s character.

Not that there aren’t the usual tensions and disputes over what harmonious means. As the Wall Street Journal reported last year, there is now some resistance to the old style among residents, including those outside the municipality’s jurisdiction or away from the historic districts where the rules are the strictest.

As the Journal reports:

a new wave of contemporary homes is springing up around the city’s less regulated outer edges, transforming the once uniform landscape and pushing southwestern design in new directions. Glints of glass and steel are now dotting the city’s earth-toned desert surroundings

Some home owners want to be completely contemporary and get away from the adobe style. On the other hand, as the Journal reported, some architects are working on innovative designs that blend the adobe style with the ultra modern:

Some local architects aim to meld traditional and contemporary architecture in their designs. While traditional materials of adobe homes—stucco and plaster walls, for example—are still used in many contemporary homes, the lines on modern designs are crisp and clean instead of rounded. Many of the contemporary homes around Santa Fe are characterized by large expanses of glass, clerestory windows and skylights—sometimes in unexpected places, such as in laundry rooms and showers—and muted stucco exteriors accented with steel that blend into the landscape.

A vision for development permits

Note that these new buildings “blend into the landscape,” something that Clarence Stein emphasized for Kitimat.

Although Kitimat Community Planning and Development says on their website that Stein’s Townsite Report is a “must read,” it is doubtful that any of the developers have actually read it.

Note also that the Garden City concept that was the foundation of Kitimat was itself, in part, based on the now century-old City Beautiful movement that gave Santa Fe its character.

So there is a connection between the design of that desert city and this small town in the rainforest of the Northwest.

After Monday’s Council meeting, I asked Warren Waycheshen if there were any “heritage” or “look and feel” policies in British Columbia. Waycheshen told me that while it is difficult to mandate “harmonious character” and “blending into the landscape” at the zoning level, it can and has been done at the development permit stage in a few BC communities.

The closest example is Smithers which mandates downtown businesses be consistent with the town’s European alpine style. As well, both Whistler and Gibson’s have stringent development permit guidelines that do maintain the nature of both towns.

(And for those developers who think that wanting harmonious development is “unsophisticated,” well they can look at Santa Fe and Whistler)

Up until now in Kitimat, some in politics, some in the real estate and development communities have had an Oliver Twist approach, saying to every developer “Please, sir can we have some more?”

So far none of the designs presented before Council for any development have shown any innovation or imagination. None of them have any harmony with Kitimat’s character

. Even with the need for housing, there is time to slow things down and reconsider whether taking “off the shelf” projects originally designed for the land crowded Lower Mainland are right for Kitimat.

That’s because none of the Liquified Natural Gas projects are anywhere close to the Final Investment Decision Stage.

Many of the delegations to Council have warned about overbuilding and the possibility that slap dash, cookie cutter development could quickly deteriorate into slums if the boom doesn’t happen. There is some limited time to consider all the issues. Most residents who live around the Kingfisher development would prefer buildings with a higher quality that could be sold on the basis of its proximity to the golf course. There are fears that many developments, based on the Lower Mainland “build higher” philosophy would be inappropriate for seniors.

There is one consideration—that is the size of buildings. Both District Staff and developers cite changing demographics (average household size dropping from 3.2 to 2.4 persons) and the fact the large single family homes, such as the “berry” development by Oviatt Construction are too costly for young families who would prefer and could afford townhouses.

Dreary weather in Kitimat — Do Kitimat planners consider the sometimes gloomy weather as Clarence Stein proposed. (Robin Rowland/Northwest Coast Energy News)

Harmonious townhouses

We have to ask what kind of townhouses? The original Stein report, in a chapter written by planning subcontractors Mayer and Whittlesey noted on page 220,

Larger-than-normal houses, for people will stay much indoors; covered terraces and breezeways where children can play. A large number of houses should have a cellar or attic space for workbench and game table. Provision of wood burning fireplaces should have special consideration, as a focus of interest and cheer in a rainy climate.

So smaller houses for affordability or larger houses so people can get through the fall and winter without getting cabin fever? Just how much Seasonal Affective Disorder happens in Kitimat? And beside the weather, people are staying indoors a lot of these days watching satellite TV, playing video games and on the Internet. All factors the developers aren’t considering.

Have Kitimat’s planners and builders ever considered how home design might help alleviate SAD?

Let’s throw out the boxes and have the architects go back to the drawing board or AutoCAD and design a townhouse that is right for Kitimat.

There are a lot of worries about snow clearing and parking in the narrow streets of the proposed developments. While district staff say the Kingfisher development meets “municipal parking standards” perhaps all those concerns by experienced long-time residents mean that those standards should be reconsidered rather than used as a rubber stamp.

It’s amazing that in the late 1940s and 1950s a bunch of men in New York (yes men, Stein, the man of his age, calls for planning by men) who at first had never been here, could imagine and create the Kitimat that became “the town of the future,” while today developers from Vancouver, Calgary or wherever do nothing more than pull an AutoCAD file off a hard drive, make a few tweaks and cosmetic changes and then try to convince residents, staff and council that this will be great for Kitimat.

Yes many of the original houses in Kitimat were “off the shelf” at the time but they were also often new and innovative for the 1950s. This is a chance to create a new vision but practical vision for the 21st century. The provincial government has mandated all community planning must consider climate change. There is no indication at all that the current development designs take climate into consideration.

What must be done

It’s time for Kitimat to rewrite the development permit standards, so that the original Stein vision is incorporated into every future development, whether residential, commercial, industrial or institutional. Some of the ideas will have to be updated from the 1950s to reflect changes in demographics, economics and technology. If Santa Fe, a modern hub of artistic and high tech innovation can do it, Kitimat can do it on a smaller scale.

Immediately

Since time is somewhat tight, ask the current developers, on a voluntary basis, to submit new ideas that show their projects won’t be just another subdivision in Surrey, new designs compatible with Kitimat. If developers want to build here, now and in the future, they are going to have to use their imagination and skill to bring Stein’s vision into the 21st century. Tell the developers that now they have to prove to Kitimatians that they don’t really believe this is a hick town.

Short term

Update development rules and guidelines

District staff, Council members, the Housing Committee and other interested groups should take a crash look at development guidelines and development permit rules and as soon as possible update those that can act as a guideline for future changes that reflect the Stein vision.

Hire a District Solicitor

We recommended this during the Enbridge Northern Gateway Joint Review hearings and when the LNG companies began environmental review. All the problems with potential development again show the need for a full time District Solicitor who will be in the District offices working with staff and members of council and attending council meetings to understand the needs of the residents of Kitimat on all issues. Having a lawyer on retainer who is not involved with community is no longer an option.

Medium term

Overhaul development rules and guidelines

Continue the work recommended for the short term and have staff, locally based developers and locally based engineering companies familiar with Kitimat form a task force to overhaul the development rules and guidelines so that developments fit into both an updated Clarence Stein vision and the uncertain economics of this region

Longer term

A new Official Community Plan

The current “maybe this, may be that” Official Community Plan is completely inadequate for the needs of Kitimat. It is little more than a collection of database copy and paste, motherhood bureaucrat speak with no significant reference to Stein’s original vision.

The community needs an OCP that has a strong, well-defined two track approach, one that assumes the LNG boom will go ahead, that Kitimat will grow, and a second that assumes that the new industry might pass us by and Kitimat may have to revert to planning diversification with an emphasis on tourism.

That also means looking for and hiring the Clarence Stein of the 21st Century, whether that person is in New York, Vancouver, London or Singapore.

The current OCP was largely written by Stantec, which seems to be the go-to consulting firm for everyone. While the involvement of Stantec may not have been an issue in 2008, Stantec is the same company that is now working for Enbridge and most of the LNG projects. That is a clear conflict of interest.

Kitimat needs a visionary who can build on what Stein and his colleagues did 60 years ago. While Stein was working for Alcan, what is needed in 2014 and beyond is truly independent consultant, not one serving a dozen different masters.

That includes maintaining harmony with the forested nature of the region. Without going completely the same way as Santa Fe, perhaps future construction in Kitimat should conform, within market conditions, to a style that reflects the demands of building in the northwest, like heavy snow loads and long days of dreary rain while at the same time is more reflective of the northwest natural environment. That means including the brilliant idea of sidewalks and green spaces at the back of houses, not just boxes on standard suburban streets. That doesn’t have to mean duplicates of First Nations’ longhouses or settlers’ log cabins.

A Kitimat “look and feel” should challenge architects to create a style that says Kitimat and the northwest while at the same time drawing plans that are economic for both the developer and the buyer, just as architects in Santa Fe are bringing a century-old vision into the 21st century.

If the current crop of developers think that Kitimat is unsophisticated, doesn’t understand what goes on big cities, and takes too long to make its mind, well we live here and you don’t and you won’t. If Kitimat does have a rosy economic future, it is highly likely that the community and district can find developers who aren’t in-and-out carpet-baggers but who will build something that will make a profit, be affordable for the buyer and be harmonious with the community and Stein’s vision updated for the 21st century.

As Stein asked, “What do the people themselves want?”

Editor’s note: My late father, Frederic Rowland, was Alcan’s assistant property manager in Kitimat, involved in town planning from Vancouver in the mid-50s and in Kitimat from 1957 to 1965 and thus one of the Alcan staff charged with implementing Stein’s vision.

Additional links

Kitimat Daily
Kingfisher Housing Development to be continued in September

Massive Density Increase Gets Mixed Reviews

Santa Fe

Santa Fe Architecture

Santa Fe’s Historic Adobe Architecture

Los Angeles Times

Santa Fe proudly boasts its Pueblo-style architecture

Kitimat Modernization costs jump to $4.8 billion; dock deal dependent on LNG Canada FID

The cost of the Kitimat Modernization Project has jumped to $4.8 billion US, Sam Walsh CEO of Rio Tinto, the parent company of Rio Tinto Alcan said Thursday as the company released its results for the first six months of 2014.

In its report. Rio Tinto said.

In February 2014, the Group announced that a review of major capital projects had identified a project overrun in relation to the Kitimat Modernisation Project. The overrun evaluation is now complete and has identified the requirement for additional capital of $1.5 billion to complete the project. This was approved by the Board in August 2014, taking the total approved capital cost of the project to $4.8 billion. First production from the Kitimat Modernisation Project is expected during the first half of 2015.

The weakening Canadian dollar appears to have improved the overall bottom line for the RT aluminum division, with underlying earnings of $373 million 74 per cent higher than in the first half of 2013:

The main drivers were growing momentum from the cost reduction initiatives, a weaker Australian and Canadian dollar and a further rise in market and product premiums, with 61 per cent of the Group’s primary metal sales sold as value added product generating a superior price. This was achieved despite a nine per cent decline in LME prices over the period which lowered earnings by $265 million.

LNG deal

The report also contains details of the deal between Rio Tinto Alcan and LNG Canada for the old Eurocan dock, indicating that LNG Canada will not likely commit to a deal until the Final Investment Decision is made:

On 12 February 2014, Rio Tinto entered into an option agreement with LNG Canada, a joint venture comprising Shell Canada Energy, Phoenix Energy Holdings Limited (an affiliate of Petro-China Investment (Hong Kong) Limited), Kogas Canada LNG Ltd. (an affiliate of Korea Gas Corporation) and Diamond LNG Canada Ltd. (an affiliate of Mitsubishi Corporation) to acquire or lease a wharf and associated land at its port facility at Kitimat, British Columbia, Canada. LNG Canada is proposing to construct and operate a natural gas liquefaction plant and marine terminal export facility at Kitimat. The agreement provides LNG Canada with a staged series options payable against project milestones. The financial arrangements are commercially confidential.

Read the full Rio Tinto report:
Rio Tinto first half 2014 report (PDF)

“Good bits”

According to The Australian other aluminum operations aren’t doing so well, and the newspaper says that RT is starving under performing units in favour of the “good bits.”

The qualifier is that there is still much work to do on the aluminium front, Rio having splurged $US38bn on the acquiring Alcan in 2007.

Aluminium’s contribution to underlying earnings increased from the $US214m in the previous corresponding period to $US373m. But returns remain miserable, and that is from the good bits.

The underlying loss was $US182m, an increase from the $US158m loss previously. At least the bad bits of aluminium are being starved of capital expenditure, with Walsh putting them on the private equity-type approach to running a business.

But is has to be wondered how much longer the pain will be endured. And there is increasing chatter that closures are on the cards, with the long-term future of Rio’s Australian smelters the real concern.

Making money

Overall Rio Tinto is making money with earnings up 21 per cent, according to the report:

Sam Walsh said “Our outstanding half year performance reflects the quality of our world-class assets, our programme of operational excellence and our ability to drive performance during a period of weaker prices. These results show that our current strategic and management focus is making a meaningful contribution to cash flow generation.

“During the first half we have increased underlying earnings by 21 per cent to $5.1 billion and enhanced operating cash flow by eight per cent. We delivered what we said we would, exceeding our $3 billion operating cash cost reduction target six months ahead of schedule while producing record volumes and driving productivity improvements across all our businesses.

“We have decreased net debt by $6.0 billion compared with this time last year, through our stronger operating cash flows, sharply reduced capital spend and proceeds from divestments. We are confident Rio Tinto’s low cost, diversified portfolio will continue to generate strong and sustainable cash flows over the coming years. This solid foundation for growth will result in materially increased cash returns to shareholders, underscoring our commitment to deliver greater value.”

Net income increased 156 per cent to $4.4-billion while revenues were $24.3-billion. Rio Tinto said it reduced operating costs by $3.2-billion, exceeding its $3-billion target six months ahead of schedule.

New boss?

Despite the good news, the financial press is already speculating that Sam Walsh who is 64, may not last long as boss of Rio Tinto. His contract expires at the end of 2015. The Financial Times is quoting analysts as saying despite Walsh’s desire to stay on, the company is already looking for a successor.

According to the FT these include

Andrew Harding, head of iron ore, holds the job that was previously Mr Walsh’s, running Rio’s most important division, and for that reason is probably a front runner. Aged 47, he is a 21-year Rio veteran and previously ran its copper business. Chris Lynch, finance director since 2013, is the only executive on Rio’s board other than Mr Walsh and is another industry veteran, but at 60 is only a few years younger than Mr Walsh.

Alan Davies, head of diamonds and minerals, and Harry Kenyon-Slaney, head of energy, also have important operational experience across commodities and lengthy Rio careers but like Mr Harding are relatively new to their current roles. The heads of the other mining businesses are also relatively new to Rio. Jean-Sébastien Jacques, head of copper, joined Rio in 2011 from Tata Steel while Alfredo Barrios came to the group from BP only in June and is running aluminium.

Enbridge Kalamazoo cleanup now set at $1.157 billion and growing

The cost of Enbridge’s cleanup from the spill at Marshall, Michigan in 2010 is now $1.157 billion the company said Friday as it released its second quarter results. That is an increase of $35 million from the estimates Enbridge released at the end of 2013 and the first quarter of 2014.

As of June, 2014, Enbridge faces possibly $30 million in fines and penalties from the United States government.

In its quarterly report Enbridge said

EEP [Embridge Energy Partners] continues to perform necessary remediation, restoration and monitoring of the areas affected by the Line 6B crude oil release. All the initiatives EEP is undertaking in the monitoring and restoration phase are intended to restore the crude oil release area to the satisfaction of the appropriate regulatory authorities.

On March 14, 2013, as previously reported, the United States Environmental Protection Agency ordered in Enbridge to undertake “additional containment and active recovery of submerged oil relating to the Line 6B crude oil release.”

Enbridge says it has “completed substantially all of the EPA order, “with the exception of required dredging in and around Morrow Lake and its delta.”

“Approximately $30 million of the increase in the total cost estimate during the three months ended June 30, 2014 is primarily related to the finalization of the MDEQ approved Schedule of Work and other costs related to the on-going river restoration activities near Ceresco,” Enbridge reported.

Enbridge also said it is working with the Michigan Department of Environmental Quality “to transition submerged oil reassessment, sheen management and sediment trap monitoring and maintenance activities from the EPA to the MDEQ, through a Kalamazoo River Residual Oil Monitoring and Maintenance Work Plan.”

Enbridge also said that costs may still go up, saying there continues to be the potential for “additional costs in connection with this crude oil release due to variations in any or all of the cost categories, including modified or revised requirements from regulatory agencies, in addition to fines and penalties and expenditures associated with litigation and settlement of claims.”

Enbridge said that “a majority of the costs incurred in connection with the crude oil release for Line 6B are covered by Enbridge’s comprehensive insurance policy…. which had an aggregate limit of $650 million for pollution liability.” So far, Enbridge has recovered $547 million of the $650 million from its insurers. Enbridge is suing its insurers to recover the rest of the money.

That means that “Enbridge and its affiliates have exceeded the limits of their coverage under this insurance policy. Additionally, fines and penalties would not be covered under the existing insurance policy,” the company said.

Insurance renewed

Enbridge said it has “renewed its comprehensive property and liability insurance programs under which the Company is insured through April 30, 2015 with a liability aggregate limit of $700 million, including sudden and accidental pollution liability, with a deductible applicable to oil pollution events of $30 million per event, from the previous $10 million.”

It adds:

In the unlikely event multiple insurable incidents occur which exceed coverage limits within the same insurance period, the total insurance coverage will be allocated among Enbridge entities on an equitable basis based on an insurance allocation agreement among Enbridge and its subsidiaries.

All Enbridge figures are in US dollars

The Northern Gateway Joint Review Panel required Enbridge that “its Northern Gateway’s Financial Assurances Plan must provide a total coverage of $950 million for the costs of liabilities for, without limitation, cleanup, remediation, and other damages caused by the Project during the operations phase. The plan should include the following components and minimum coverage levels.” (That figure in Canadian dollars)

Chevron sticks with Kitimat but no final investment decision until customers sign

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.

Kirkland said that decision will happen “irrespective of what happens with Apache,” which has decided to completely exit the project.

“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.”

Kitimat-Liard-Horn package

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.

Kitimat LNG under construction at Bish Cove, September 2013. (Robin Rowland/Northwest Coast Energy News)

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.”

Chevron slide — Slide from the Chevron second quarter results presentation showing other LNG projects (Chevron)

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.”

Apache to “completely exit” from Kitimat LNG as company refocuses

Apache will “completely exit” the Kitimat LNG project, company CEO Steven Farris told investors Thursday as the company reported its second quarter results.

The pull out from Kitimat is part of a plan by Apache to spin off assets that are not part of its “base business” so it can concentrate on its “North American onshore assets.”

“We have said for some time that Canada is part of our North American onshore portfolio,” Farris told analysts in a conference call.

“Certainly we have two businesses up there. [in Canada] We have a business which is a base business with respect to the Duverney Shale and Monteny shale and some of the other things we working on there. We also have the Kitimat-Horn River- Liard. Kitimat -Horn River -Liard is part of our LNG project which we reindicated today that we intend to exit.”

Bish Cove Kitiamt — A long view of the Kitimat LNG project at Bish Cove, Sept. 14, 2013. (Robin Rowland/Northwest Coast Energy News)

The Horn River and Liard natural gas fields would have served the LNG project. The divesture could either be as a complete package or sold separately perhaps through the capital markets. The Duverney Shale and Monteny shale plays are considered North American assets, while the Horn RIver Liard plays are considered international because the product from there would be sold in Asia via an LNG terminal.

Chevron, the 50 per cent partner with Apache in Kitimat LNG, said it would have no comment on the Apache move until its own investor conference call Friday morning.

Apache also intends to divest its stake in the Australian Wheatstone LNG project, where Chevron is also a partner.

It was about 18 months ago, Farris said, that Apache changed its focus to “enhancing its North American onshore resource base… We’ve also made it clear that there are no sacred cows as our efforts continue.”

Change in company strategy

Farris and other executives repeatedly emphasized on the call that the Kitimat and Wheatstone sales were part of an overall change in company strategy.

“I have to honestly say that the complete exit by Apache will not have an impact on Kitimat going forward one way or another,” Farris said.

“Whether we’re in it or not, they will contact with world class reserves and frankly Chevron and Apache are way a head of anybody else in that arena. We’ve always been in a position that we felt we could not be in these LNG projects. I think it’s important that we state that.”

Apache has been under pressure from a giant New York based hedge fund called Jana to get out of the international market and concentrate on proven North American markets.

Some other financial analysts on the call seemed a little skeptical about the move, with a couple of questions focused on whether Apache was giving up long term investments.

“In terms of business and priority of capital and time frame of LNG specifically Kitimat it make sense for someone to own it who has a different timeline,” Farris said.

As for the timing of the sale, both Farris and Chief Financial Officer, Alfonso Leon, would not give specifics. “We haven’t decided on a specific timeline, we are working on a number of different opportunities,” Leon said. “Each of them has a different timeline associated with it. So we will make decisions as we reach decision points. Specificaly on the separation work flow…it is not something that will be executed on an imminent basis. Work has been underway but there is still significant work ahead of us.”

The executives would not say how much Apache has spent on Kitimat LNG so far, but it has been estimated at $2 billion just this year.Upgrading the old forest service road to a modern highway capable of supporting heavy truck traffic was estimated to cost $25 million Kitimat LNG officials said late last year.

Fair price

As for the selling price, Farris said that company will hold out for the best deal, saying that Apache has got a “fair price” for international assets that is has already sold, adding that when it comes to Kitimat and Wheatstone. “We won’t sell at prices that don’t make sense,” whether that comes from a package deal with the northeast BC shale assets or through the capital markets.

Overall, Apache Corporation is making money, announcing second-quarter 2014 earnings of $505 million Net cash provided by operating activities totaled approximately $2.3 billion in second-quarter 2014, compared with $2.8 billion in the prior year, with cash from operations before changes in operating assets and liabilities totaling $2.2 billion, compared with $2.6 billion in second-quarter 2013.

In the quarterly report news release, Farris said, “Record-setting performance by our Permian Region continues to drive strong results for the company… Apache’s onshore North American liquids production increased 18 percent on a pro forma basis in the second-quarter 2014 compared with the same period a year ago”

Although some enviromental groups and First Nations are claiming victory in the Apache divestiture, it is clear that those activities had negiligble impact on the decision, which was driven in part by the demands of a New York hedge fund and by the growing uncertainty in the LNG market as Asian countries seek natural gas at much lower North American prices. As the old Godfather movies often said, “It’s not personal, it’s business.”

Apache’s exit, however, does increase the uncertainty in both the short term and long term development of LNG export terminals in northwestern BC, and clearly shows that Premier Christy Clark made a mistake in promising that the provincial economy will boom thanks to LNG.

Both Premier Clark and LNG Minister Rich Coleman were unavailable to the media Thursday. Coleman’s office did send an e-mail tothe media saying, “With 16 LNG proposals involving over 30 partners, we recognize partnerships will change over time, as companies make decisions that make commercial sense for their business. It’s the nature of the business and the energy sector.”

Shell reports

Little noticed in the media attention over Apache, was the fact Royal Dutch Shell also issued its quarterly report early Thursday. Unlike Apache, Shell is still investing in LNG projects around the world, and getting returns from existing LNG projects, while divesting under performing natural gas assets both upstream and downstream. There is no mention of LNG Canada and Kitimat in the report. In a statement issued with the quarterly report Royal Dutch Shell Chief Executive Officer Ben van Beurden commented in part:

I am determined to get a tighter grip on business performance management in the company, and improve thebalance between growth and returns. Our financial performance for the second quarter of 2014 was more robust than year-ago levels but I want tosee stronger, more competitive results right across the company, particularly in Oil Products and NorthAmerica resources plays….

Sharper accountability in the company means that we are targeting our growth investment more effectively,focusing on areas of the business where performance improvement is most needed, and driving asset sales innon-strategic positions….

We see attractive growth opportunities there such as natural gas integration and liquids-rich shales. We are taking firm actions to improve Shell’s capital efficiency by selling selected assets and making tougher project decisions. We have completed some $8 billion of asset sales so far in 2014. This represents good progress towards our targets to focus the portfolio, and to maintain the financial framework in robust health.

Ocean acidification growing risk to west coast fishery, including crab and salmon, US studies show

The United States says acidification of the oceans means there is an already growing risk to the northwest coast fishery, including crab and salmon, according to studies released by the National Oceanic and Atmospheric Administration.

As more carbon dioxide is released into the atmosphere and absorbed by the oceans, the water is becoming more acidic and that affects many species, especially shellfish, dissolving the shells.

A NOAA study released today of environmental and economic risks to the Alaska fishery says:

Many of Alaska’s nutritionally and economically valuable marine fisheries are located in waters that are already experiencing ocean acidification, and will see more in the near future…. Communities in southeast and southwest Alaska face the highest risk from ocean acidification because they rely heavily on fisheries that are expected to be most affected by ocean acidification…

An earlier NOAA study, released in April, identified a long term threat to the salmon fishery as small ocean snails called pteropods which are a prime food source for pink salmon are already being affected by the acidification of the ocean.

NOAA says:

The term “ocean acidification” describes the process of ocean water becoming more acidic as a result of absorbing nearly a third of the carbon dioxide released into the atmosphere from human sources. This change in ocean chemistry is affecting marine life, particularly the ability of shellfish, corals and small creatures in the early stages of the food chain to build skeletons or shells.

Today’s NOAA study is the first published research by the Synthesis of Arctic Research (SOAR) program, which is supported by an US inter-agency agreement between NOAA’s Office of Oceanic and Atmospheric Research and the Bureau of Ocean Energy Management (BOEM) Alaska Region.

Canada’s Department of Fisheries and Oceans says it has ongoing studies on oceanic acidification including the role of petropods in the lifecycle of the salmon.

Des Nobles, President of Local #37 Fish [UFAWU-UNIFOR] told Northwest Coast Energy News that the fisheries union and other fisheries groups in Prince Rupert have asked both the Canadian federal and the BC provincial governments for action on ocean acidification. Nobles says so far those requests have been ignored,

Threat to crabs

The studies show that red king crab and tanner crab grow more slowly and don’t survive as well in more acidic waters. Alaska’s coastal waters are particularly vulnerable to ocean acidification because of cold water that can absorb more carbon dioxide and unique ocean circulation patterns which bring naturally acidic deep ocean waters to the surface.

“We went beyond the traditional approach of looking at dollars lost or species impacted; we know these fisheries are lifelines for native communities and what we’ve learned will help them adapt to a changing ocean environment,” said Jeremy Mathis, Ph.D., co-lead author of the study, an oceanographer at NOAA’s Pacific Marine Environmental Laboratory in Seattle, and the director of the University of Alaska Fairbanks School of Fisheries and Ocean Sciences Ocean Acidification Research Center.

As for Dungeness crab, Sarah Cooley, a co-author of the Alaska study, who was with the Woods Hole Oceanographic Institution at the time, told Northwest Coast Energy News, “The studies have not been done for Dungeness crab that have been done for king and tanner crab, that’s something we’re keenly aware of. There’s a big knowledge gap at this point.” She says NOAA may soon be looking at pilot study on Dungeness crab.

Healthy pteropod — A healthy pteropod collected during the U.S. West Coast survey cruise. (NOAA)

Risk to Salmon, Mackerel and Herring

In a 2011-2013 survey, a NOAA-led research team found the first evidence: “that acidity of continental shelf waters off the West Coast is dissolving the shells of tiny free-swimming marine snails, called pteropods, which provide food for pink salmon, mackerel and herring.”

The survey estimated that the percentage of pteropods along the west coast with dissolving shells due to ocean acidification had “doubled in the near shore habitat since the pre-industrial era and is on track to triple by 2050 when coastal waters become 70 percent more corrosive than in the pre-industrial era due to human-caused ocean acidification.”

That study documented the movement of corrosive waters onto the continental shelf from April to September during the upwelling season, when winds bring water rich in carbon dioxide up from depths of about 120 to 180 metres to the surface and onto the continental shelf.

“We haven’t done the extensive amount of studies yet on the young salmon fry,” Cooley said. “I would love to see those studies done. I think there is a real need for that information. Salmon are just so so important for the entire Pacific Northwest and up to Alaska.”

In Prince Rupert, Barb Faggetter, an independent oceanographer whose company Ocean Ecology has consulted for the fisherman’s union and NGOs, who was not part of the study, spoke generally about the threat of acidification to the region.

She is currently studying the impact of the proposed Liquified Natural Gas terminals that could be built at Prince Rupert near the Skeena River estuary. Faggetter said that acidification could affect the species eaten by juvenile salmon. “As young juveniles they eat a lot of zooplankton including crustaceans and shell fish larvae.”

She added, “Any of the shell fish in the fishery, including probably things like sea urchins are all organisms that are susceptible to ocean acidification because of the loss of their capacity to actually incorporate calcium carbonate into their shells.”

Faggetter said her studies have concentrated on potential habitat loss near Prince Rupert as a result of dredging and other activities for liquified natural gas development, She adds that ocean acidification “has been a consideration that climate change will further worsen any potential damage that we’re currently looking at.”

Her studies of the Skeena estuary are concentrating on “rating” areas based on the food supply available to juvenile salmon, as well as predation and what habitat is available and the quality of that habitat to identify areas that “are most important for the juvenile salmon coming out of the Skeena River estuary and which are less important.”

She said that climate change and ocean acidification could impact the Skeena estuary and “probably reduce some of the environments that are currently good because they have a good food supply. If ocean acidification reduces that food supply that will no longer be good habitat for them” [juvenile salmon].

NOAA expediton — Bongo nets are deployed up to 200 meters deep to catch marine snails (pteropods), which are indicators of the progress of ocean acidification. The pteropod samples were collected during the U.S. West Coast survey cruises in 2011 and 2013. Unlike the US, Canada’s DFO is using models to track what’s happening to pteropods. (NOAA)

The August 2011 NOAA survey of the pteropods was done at sea using “bongo nets” to retrieve the small snails at depths up to 200 metres. The research drew upon a West Coast survey by the NOAA Ocean Acidification Program in that was conducted on board the R/V Wecoma, owned by the National Science Foundation and operated by Oregon State University.

The DFO study, according to the agency website is “being examined in the context of model predictions.”

Nina Bednarsek, Ph.D., of NOAA’s Pacific Marine Environmental Laboratory in Seattle, the lead author of the April pteropod paper said, “Our findings are the first evidence that a large fraction of the West Coast pteropod population is being affected by ocean acidification.

“Dissolving coastal pteropod shells point to the need to study how acidification may be affecting the larger marine ecosystem. These near shore waters provide essential habitat to a great diversity of marine species, including many economically important fish that support coastal economies and provide us with food.”

Ecology and economy

Today’s study on the effects of acidification on the Alaska fishery study examined the potential effects on a state where the fishing industry supports over 100,000 jobs and generates more than $5 billion in annual revenue. Fishery-related tourism also brings in $300 million annually to the state.

Map of Alaska — A map of Alaska shows the economic and ecological risks to parts of the state from ocean acidification. (NOAA)

The study also shows that approximately 120,000 people or roughly 17 percent of Alaskans rely on subsistence fisheries for most, if not all of their dietary protein. The Alaska subsistence fishery is open to all residents of the state who need it, although a majority of those who participate in the subsistence fishery are Alaska’s First Nations. In that way it is somewhat parallel to Canada’s Food, Ceremonial and Social program for First Nations.

“Ocean acidification is not just an ecological problem—it’s an economic problem,” said Steve Colt, Ph.D., co-author of the study and an economist at the University of Alaska Anchorage. “The people of coastal Alaska, who have always looked to the sea for sustenance and prosperity, will be most affected. But all Alaskans need to understand how and where ocean acidification threatens our marine resources so that we can work together to address the challenges and maintain healthy and productive coastal communities.”

The Alaska study recommends that residents and stakeholders in vulnerable regions prepare for environmental challenge and develop response strategies that incorporate community values and needs.

“This research allows planners to think creatively about ways to help coastal communities withstand environmental change,” said Cooley, who is now science outreach manager at Ocean Conservancy, in Washington, D.C. “Adaptations can be tailored to address specific social and environmental weak points that exist in a community.

“This is really the first time that we’ve been able to go under the hood and really look at the factors that make a particular community in a borough or census are less or more vulnerable from changing conditions resulting from acidification. It gives us a lot of power so that we don’t just look at environmental issues but also look at the social story behind that risk.”

As for the southern part of the Alaska panhandle nearest British Columbia, Cooley said, “What we found is that there is a high relative risk compared to some of the other areas of Alaska and that is because the communities there undertake a lot of subsistence fishing, There tend not be a whole lot of commercial harvests in the fisheries there but they are very very important from a subsistence stand point… And they’re tied to species that we expect to be on the front line of acidification, many of the clam species that are harvested in that area and some of the crab species.”

Long term effects

Libby Jewett, Director of the NOAA Ocean Acidification Program and author of the pteropod study said, “Acidification of our oceans may impact marine ecosystems in a way that threatens the sustainability of the marine resources we depend on.

“Research on the progression and impacts of ocean acidification is vital to understanding the consequences of our burning of fossil fuels.”

“Acidification is happening now,” Cooley said. “We have not yet observed major declines in Alaskan harvested species. In Washington and Oregon they have seen widespread oyster mortality from acidification.

“We don’t have the documentation for what’s happening in Alaska right now but there are a lot of studies staring up right now that will just keep an eye out for that sort of thing, Acidification is going to be continuing progressively over the next decades into the future indefinitely until we really curb carbon dioxide emissions. There’s enough momentum in the system that is going to keep acidification advancing for quite some time.

“What we need to be doing as we cut the carbon dioxide, we need to find ways to strength communities that depend on resources and this study allows us to think differently about that and too really look at how we can strengthen those communities.

Faggetter said. “It’s one more blow to an already complex situation here, My study has been working particularly on eel grass on Flora Bank (pdf) which is a very critical habitat, which is going to be impacted by these potential industrial developments and that impact will affect our juvenile salmon and our salmon fishery very dramatically, that could be further worsened by ocean acidification.”

She said that acidification could also be a long term threat to plans in Prince Rupert to establish a geoduck fishery (pronounced gooey-duck).

The popular large 15 to 20 centimetre clam is harvested in Washington State and southern BC, but so far hasn’t been subject to commercial fishing in the north.

NOAA said today’s study shows that by examining all the factors that contribute to risk, more opportunities can be found to prevent harm to human communities at a local level. Decision-makers can address socioeconomic factors that lower the ability of people and communities to adapt to environmental change, such as low incomes, poor nutrition, lack of educational attainment and lack of diverse employment opportunities.

NOAA’s Ocean Acidification Program and the state of Alaska are also developing tools to help industry adapt to increasing acidity.

The new NOAA study is the first published research by the Synthesis of Arctic Research (SOAR) program. which is supported by an inter-agency agreement between NOAA’s Office of Oceanic and Atmospheric Research and the Bureau of Ocean Energy Management (BOEM) Alaska Region.

The pteropod study was published in April in Proceedings of the Royal Society B. The ecological and economic study is published in Progress in Oceanography.

Dump out of Kitimat, New York hedge fund tells Apache

A New York hedge fund, also known as an aggressive activist investor, which just bought a huge stake in Apache, is urging the company to get out of the Kitimat LNG project.

Numerous media reports say that Jana Partners recently bought a one billion dollar stake in the Houston and Calgary based oil and natural gas producer.

Bloomberg reports that Jana is a $10 billion hedge-fund firm run by Barry Rosenstein “known for pushing corporate managements to make changes”

According to both Bloomberg and the Wall Street Journal, Jana wants Apache to get out of LNG projects in both Canada and Australia and concentrate on the United States. Bloomberg says

Jana said it has “engaged in discussions with management” and urged Apache to sell its international businesses to focus on U.S. shale opportunities, exit its investment in liquefied natural gas, and be more forthcoming about how much oil and gas lie beneath its holdings in West Texas’s Permian basin, among other demands.

The Wall Street Journal says Jana believes that Apache should free up cash flow:

by exiting two major projects in Canada and Australia that aim to export natural gas, which will take years and billions of dollars to fully develop. If the company doesn’t take further steps to increase its value,

“Investors are unimpressed by [Apache]’s global diversification and have voted with their feet,” Jana wrote in a letter to investors on Monday that was reviewed by The Wall Street Journal.

Investors apparently consider the Kitimat project a drain on Apache’s capital, so far costing $2 billion in 2014. The hedge fund said the company had poor performance compared with rivals, several of which are pure-play companies that drill exclusively in U.S. shale formations such as the Permian Basin. Jana also wants Apache to consider selling itself.

According to the Wall Street Journal, Apache raised $10 billion from selling assets around the world. In both February and May Apache said it is looking for a buyer for some of its stake in Kitimat LNG.

In Australia,Bloomberg says Apache is in early discussions with potential buyers for its stake in the $27-billion Wheatstone LNG project in Western Australia, which like Kitimat LNG it operates in partnership with Chevron. First LNG deliveries from Wheatstone are expected in 2016.

Bloomberg quotes a Jana newsletter as saying that selling Wheatstone and its stake in Kitimat would free $3 billion to $4 billion cash to fund share buybacks and reduce future spending risks.

A Calgary-based spokesman for Apache told the Financial Post said joint marketing efforts for LNG by the company and Chevron on the project are progressing, but did not offer detail. It is well known that Kitimat LNG has had a problem finding customers for the project, due to the increasing volatility of the LNG marketplace.

The Shell-led LNG Canada project has customers in the partners, KoGas, Mitsubishi and PetroChina but is also under pressure due to growing costs.

Barron’s quoting a Deutschebank analyst says Apache stockholders will likely welcome Jana’s demands.

Apache management has been active over the past 12+ months managing the portfolio. Since the February 2014 analyst meeting where the baseline expectation was that the LNG business would be retained (selling down the 50% interest in Kitimat has been a consistent goal), there has been a change in Apache’s messaging on the topic. Recent investor presentations and press articles have suggested all or part of Wheatstone could be monetized (we remove LNG capex from our EV/DACF target multiple valuation as a result). From this perspective, Jana’s proposal is likely to reach more sympathetic ears at Apache (today relative to 6 months ago), in our view. The good news for current shareholders is that the substance of the activist proposal has likely already been substantially evaluated by management and a process to this end could already be underway, if not nearing completion.

According to the Hedge Fund Letters, Jana is a very aggressive investment company

Jana Partners’ core investment strategy is primarily based upon a value-oriented (interestingly towards both value and growth stocks) and event-driven investment methodology with the ever-present tagline being “ignore the crowd”. Mr. Rosenstein…is often an activist investor, using Jana Partner’s capital (sometimes combined with others’, most famously with Carl Icahn) infusion into a company to promote change against management directives that he perceives as detrimental to shareholders.

LINKS

Wall Street Journal
Jana Partners Wants Changes at Apache: Activist Investor Wants Oil Producer to Exit Some Projects to Free Up Cash Flow

Barron’s
July 22, 2014, 10:28 A.M. ET
Apache: Not a ‘Hard Conversation’ With Jana, Deutsche Bank Says

Calgary Herald
Hedge fund Jana invests $1 billion in Apache Corp. Bloomberg

Financial Post
Apache faces breakup in Jana’s US$1-billion activist stake

Bidness Etc
Jana Partners call for Change’s in Apache’s Strategy

Kitimat air shed study raises more questions than it actually answers

The sudden release early Friday, July 18, by the British Columbia Ministry of the Environment about the Kitimat Valley air shed study brings more questions than the answers it provides; some questions are political, some technical.

The questions include

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.

Clouds over Douglas Channel. (Robin Rowland/Northwest Coast Energy News)`

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.

Ironically, a proper study may actually come from industry, rather than government since LNG Canada has said that a full air shed study will be part of its environmental assessment filing expected in the fall.

The air shed proposal

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.

According to the government website,

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

David Black’s Kitimat Clean website says

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.

Kitimat excluded

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.

Crown Privilege

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.”

In mid-July, the lawyers then asked the Environment Assessment Board to either turn over the air shed report or explain why it was covered by Crown Privilege.

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.

Rushed report

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.

Links

Kitimat Airshed Assessment
RTA report Sulphur-dioxide-technical-assessment.html

(Scanned version of copy in Kitimat public library)

Related

Business in Vancouver

Kitimat airshed modelling has narrow focus

Vancouver Observer

Province’s air pollution study green lights LNG build-up, but ignores climate change

News release: Andrew Weaver MLA
New airshed study is a “nail in the coffin” for government LNG dreams in Kitimat

Kitimat can accommodate industrial growth, air shed study says. But where’s Northern Gateway?

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.

Enbridge missing

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.

Map of Kitiamt — A map by Essa Technologies and Environment BC of the Kitimat valley airshed study shows locations for existing and proposed industrial or infrastructure development. It does not include the proposed Enbridge Northern Gateway project.

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.

Tropical fish, climate change migration growing threat to seagrass, kelp beds, study says

Tropical fish are migrating into what were once temperate water as a result of ocean warming and that poses a serious threat to the areas they invade, because they overgraze on kelp forests and seagrass meadows, according to a new study from the University of New South Wales in Australia

The study says the harmful impact of tropical fish is most evident in southern Japanese waters and the eastern Mediterranean, where there have been dramatic declines in kelps.

There is also emerging evidence in Australia and the US that the spread of tropical fish towards the poles is causing damage in the areas they enter.

“The tropicalisation of temperate marine areas is a new phenomenon of global significance that has arisen because of climate change,” according to the study lead author, Dr. Adriana Verges, of the University of New South Wales.

“Increases in the number of plant-eating tropical fish can profoundly alter ecosystems and lead to barren reefs, affecting the biodiversity of these regions, with significant economic and management impacts.”

The study is published in the journal Proceedings of the Royal Society B.

As the oceans have warmed and the climate has changed, hotspots are developing in regions where the currents that transport warm tropical waters towards the poles are strengthening.

Increased flow of the East Australian Current, for example, has meant waters south-east of the continent are warming at two to three times the global average.
Tropical fish are now common in Sydney Harbour during the summer months.

Japan, the east coast of the US, northern Brazil and south eastern Africa are also strongly influenced by coastal currents that transport warm tropical waters.

“In tropical regions, a wide diversity of plant-eating fish perform the vital role of keeping reefs free of large seaweeds, allowing corals to flourish. But when they intrude into temperate waters they pose a significant threat to these habitats. They can directly overgraze algal forests as well as prevent the recovery of algae that have been damaged for other reasons,” Dr Verges said.

Tropical fish expanding their ranges into temperate areas include unicornfish, parrotfish, and rabbitfish.

The study authors include researchers from Australia, the US, Spain, Singapore, the UK and Japan.

Kelp disappears in southern Japan

The study reports that more than 40 per cent of the kelp and algal beds have disappeared since the 1990s, a phenomenon known in Japan as isoyake.

Tropical species including rabbitfish and parrotfish appear to be mainly responsible.

Although these fish have been present for a long time, their annual grazing rates have increased dramatically as ocean temperatures in winter have risen. Corals now dominate the ecosystem in many locations. The changes have led to the collapse of the abalone fishery.

Rabbit fish expand in eastern Mediterranean

Tropical fish moved into the eastern Mediterranean from the Red Sea after the opening of the Suez Canal. In recent decades, rabbitfish numbers have increased, resulting in hundreds of kilometres of deforested areas and a 40 per cent decrease in the variety of marine species.

As the Mediterranean warms the rabbitfish are expanding their range westward, putting other shallow ecosystems at risk.

Gulf of Mexico

There has been a more than 20-fold increase in the number of parrotfish in the Gulf of Mexico – a species which consumes seagrass at five times the rate of native grazers. The number of plant-eating green turtles and manatees has also increased.

Australia

In Western Australia, emerging evidence suggests that increases in the number of tropical fish are preventing the recovery of kelp forest damaged by a heat wave in 2011.

In eastern Australia, kelp has disappeared from numerous reefs in the past five years and Dr Verges’ research suggests intense grazing by tropical fish on the kelp preceded this.