Business | Northwest Coast Energy News

Pension funds pressure Rio Tinto to dump out of controversial Alaska Pebble Mine

Rio Tinto says “it intends to undertake a strategic review” of its stake in the highly controversial Pebble Mine project near Bristol Bay, Alaska.

In a news release, Rio Tinto says it is considering its future holdings in a Vancouver-based mining company named Northern Dynasty, which now is the main proponent of the copper and gold mine project. Rio Tinto “through QIT-Fer et Titane Inc., an indirect wholly-owned subsidiary of Rio Tinto plc, owns 18,145,845 common shares of Northern Dynasty, representing approximately 19.1 per cent of Northern Dynasty’s issued and outstanding shares.”

Rio Tinto says the review is part of the financially troubled conglomerate’s review of its mining holdings: “Rio Tinto will consider the Pebble Project’s fit with the Group’s strategy of investing in and operating long life and expandable assets, and with the strategy for its Copper business, which is focused on its four producing assets (Kennecott Utah Copper, Oyu Tolgoi and its interests in Escondida and Grasberg), and two development projects, La Granja in Peru and Resolution in Arizona.”

The Pebble Mine project is as controversial in Alaska and the western United States as the Northern Gateway pipeline project is in British Columbia. Critics say the proposed huge open pit copper and gold mine could endanger the Alaska headwaters of the Kvichak and Nushagak rivers, considered two of the world’s great salmon spawning grounds. Both flow into the “salmon nursery” in Bristol Bay, where young salmon go to feed, possibly also imperiling salmon stocks from both Alaska and British Columbia

On November 4, 2013, the City of New York and the State of California, whose pension funds have large holdings of Rio Tinto stock, wrote to CEO Sam Walsh, asking the company to reassess the project.

New York City controller John Liu and California state controller John Chiang said their letter was prompted when Rio Tinto rival Anglo-American sold its share of the controversial project in September.

Their letter cited environmental concerns, including the fact that the project would leave 10 billion tonnes of mining waste near the salmon spawning grounds, increased regulatory scrutiny from the US Environmental Protection Agency and what the two controllers called “reputational risks” including opposition from Alaska First Nations and even jewelry companies like Tiffany & Co and Zales and Jostens. The letter cited a poll which showed 73 per cent of Americans, 84 per cent of Alaskans and 98 per cent of Bristol Bay residents opposed the project.

Rio Tinto replied on November 14, in a letter not from CEO Walsh but from John-Sebastian Jacques, chief executive of the copper division, saying Rio Tinto would “encourage a responsible approach among all shareholders” and the company would continue to “review and analyze” the risks involved.

On December 19, the two controllers then called upon Rio Tinto to divest itself of the Northern Dynasty shares, calling, according to the Associated Press, Rio Tinto’s response “perfunctory.”

Rio Tinto spokesman David Outhwaite told AP the strategic review is not connected to that letter or a letter the financial officers sent Walsh.

Ango-American, one of Rio Tinto’s giant mining rivals, pulled out of the Pebble Mine project in September. Teck Cominco and Mitsubishi had pulled out earlier, leaving Rio Tinto as the only major company involved in the project.

When it decided to sell its share back to Northern Dynasty, Anglo-American also cited a “strategic review” of the company’s operations.

At the time, Rio Tinto’s Jennifer Ruso told the Alaska Dispatch, the company “will only participate in the project if it can be constructed, operated and closed in a manner that preserves the water, salmon, fisheries, wildlife and the environment. The project must also be developed in accordance with our strict standards for health, safety, environmental protection, cultural heritage, and community relations.”

Northern Dynasty and Rio Tinto then said they were considering an underground mine instead of an open pit operation, which did not satisfy environmental critics of the project.

On December 13, Northern Dynasty reported that it had re-acquired 100 per cent ownership of the Pebble Mine project after completing the pull out deal with Anglo-American.

The company, however, is looking for new partners. It says:

Our primary focus is to select the right partner for Northern Dynasty and the right investor for Alaska, a company with sufficient financial resources and technical capabilities, working experience in the United States and a shared commitment to environmentally sound and socially responsible development. We have little doubt that Pebble will attract major mining company interest in the months ahead.

The news release says that Northern Dynasty has spent US$556 million over the past few years and “substantial progress has been made toward our goal of permitting, constructing and operating a world-class, modern and environmentally responsible mine at Pebble that will co-exist with the fisheries resources of southwest Alaska.”

In the news release, Northern Dynasty President & CEO Ronald Thiessen said Pebble’s engineering design, environmental science and regulatory planning were advanced that the company would begin to ask for US and Alaska permitting under the National Environmental Policy Act (NEPA) sometime the first quarter of 2014.

It describes the project this way:

The Pebble Project is an initiative to responsibly develop a globally significant copper, gold and molybdenum deposit in southwest Alaska into a modern, long-life mine, which will benefit not only Northern Dynasty, but the people, culture and industries of the State of Alaska, as well as suppliers, consultants and industries in the Lower 48 United States of America.
A recent study authored by IHS Global Insight, entitled The Economic and Employment Contributions of a Conceptual Pebble Mine to the Alaska and United States Economies found the Pebble Project has the potential to support 15,000 American jobs and contribute more than $2.5 billion annually to US GDP over decades of production.

The Pebble Project is located 200 miles southwest of Anchorage on state land designated for mineral exploration and development. It is situated in a region of rolling tundra approximately 1,000 feet above sea-level, 65 miles from tidewater on Cook Inlet and presents favourable conditions for successful mine site and infrastructure development.

As the Alaska Dispatch reported when Anglo-American pulled out, the copper and gold deposits are so extensive and potentially valuable that pressure to develop the mine will continue despite the threat to salmon and the Alaska environment.

LNG Canada aims to be “first out of the gate” in the rush to develop in Kitimat

LNG Canada meeting — Residents of Kitimat discuss the proposed LNG Canada facility with company officials at the Rod and Gun, Nov. 27, 2013 (Robin Rowland/Northwest Coast Energy News)

LNG Canada says it wants to be “first out of the gate” in the competitive race to send BC’s liquified natural gas to Asian markets.

The company held a well attended open house at the Kitimat Rod and Gun on November 27, with the usual array of posters and experts, to mark the beginning of the environmental assessment process for what is formally called the “LNG Canada Export Terminal Project.:

The LNG Canada Export Project is a partnership of Shell,Canada Energy, Diamond LNG Canada, an (“affiliate” of Mitsubishi), Korea Gas Corporation and Phoenix Energy (an “affiliate” of PetroChina) filed a draft application for an Environmental Assessment Certificate with the BC Environmental Assessment Office and Canadian Environmental Assessment Agency on November 8. The 30-day public comment period on the draft Application Information Requirements started on November 13, 2013 and end on December 13, 2013.

The extensive documentation can be downloaded in PDF format from the BCEAO site. The documents can also be viewed at the Kitimat and Terrace Public Libraries and the LNG Canada office in Kitimat at the old Methanex site.

“What we want to be able to do is actually to provide information in a way that we can provide a lot of conversation with the community, so we can really have a dialogue, to give them a place where they know than go to get answers. We do believe that we can be the best project in British Columbia, the only way we can do that is if we have the support of the community,” LNG Canada’s Susannah Pierce told reporters.

“We would like to be first out of the gate. This is a competitive industry and we’re not just competing in terms of providing Canadian gas to the Asian markets, we’re competing with everyone else for the opportunity to deliver product to market.”

The application says that the all-important Financial Investment Decision will likely be “made mid-decade followed by 4-5 years of construction with commissioning of the first phase to follow.”

The first phase would have a first phase of about 12 million tonnes a year of LNG, with another MTPA (million tonnes per anum) in “one or two subsequent phases.”

Federal, provincial and municipal governments or agencies, First Nations and the general public have the ability to comment on the proposal.

An aerial photo map included in the application shows the footprint of the proposed LNG Canada operation. Although the LNG Canada project is based at the old Methanex plant, the map shows that the LNG plant will take up a much larger area than the original. The old Methanex access road would be widened parallel to the Rio Tinto Alcan smelter and a Cyrogenic Pipeline would cross the Kitimat River estuary to the marine terminal.

LNG Canada footprint map — A map provided by LNG Canada shows the potential footprint of the liquifaction facility and marine terminal next to the Rio Tinto Alcan aluminum smelter. (LNG Canada)

The scope of the project includes one possibly controversial item: “Onsite power generation,” where natural gas would be used to power the cooling equipment to turn the gas into LNG.

The assessment will also look the natural gas receiving and production facility; “a marine terminal able to accomodate two LNG carriers each with capacity up to 265,000 cubic metres (approximately 122,000 DWT) and a materials offloading area; supporting infrastructure and the construction facilities.

The environmental assessment will examine air quality, green house gas management, the acoustic environment (the noise created by the project), soil, vegetation, wildlife, freshwater, esturine fish and habitat, marine resources including fish and fish habitat and marine mammals, water and ground water quality.

The economic and social assessment includes infrastructure, land use, “visual quality,” odour, marine transportation and use, community health and well being, archaeological heritage and human health.

The assessment process will also “assess potential cumulative economic, health, social and heritage effects from the Project…interacting cumulatively with similar effects of past, present and future projects activities. The current table of projects to be considered for cumulative effects include the Rio Tinto Alcan Aluminum Smelter and Modernization Project, the Kitimat LNG and Douglas LNG terminals, the possible Enbridge Northern Gateway porject, the new use for the old Methanex and Cenovus operations, the operations at the Sand Hill, the former Moon Bay and current MK Bay Marinas.

Projects further away include LNG and other projects and associated pipelines at Prince Rupert, including expansion of the current ports and the redevelopment of Watson Island. Cruise ship and BC ferry operations will be only considered where they impact the shipping routes. Any forestry operations will also only be considered where they impact the project.

Updated to fix typos, including spelling of Feldhoff

While BC is told refining heavy crude is uneconomic, planning for US west coast refineries going ahead

Supporters of David Black’s Kitimat Clean project to build a refinery about 25 kilometres north of Kitimat have been met by skepticism by experts and economists from the Canadian oil patch who keep telling the people of northwestern British Columbia that to create jobs by adding value to Alberta crude is uneconomic.

The Americans, apparently, have a different view, with plans announced for shipping projects in Washington State that could handle not only oil shale crude from the Bakken Formation in the Dakotas but also Canadian “heavy crude” aimed at refineries in Californa, refineries that would require new or renovated facilities.

So let’s add another question to northwest BC’s skepticism about the Alberta oil patch. Why is uneconomic to refine in Alberta or BC, but apparently increasingly economic to refine in California given the cost of building or rebuilding facilites?

Opponents of the Northern Gateway pipeline have always speculated that any bitumen exported from Kitimat could end up in California rather than markets in Asia.

According to reports, the Vancouver, Washington, project plans to load the bitumen on barges for shipment to California, which is likely to cause a storm of controversy with environmental groups in both states, especially if a barge, which has almost no controls compared to a tanker, foundered and ended up on the coast. [adsanity id=5199 align=alignright /]

The New York Times, on Oct. 31, looked at the issue in a report Looking for a Way Around Keystone XL, Canadian Oil Hits the Rails. The issue of moving crude by rail has been gaining traction in recent months, with growing opposition to pipeline projects. But where do those long trains of tank cars full of crude go?

Times reporter Clifford Kraus says:

The developing rail links for oil sands range across Canada and over the border from the Gulf Coast to Washington and California. Railways can potentially give Canadian producers a major outlet to oil-hungry China, including from refineries in Washington and California.

According to the Times, the plans call for two Canadian export terminals.

“We want to diversify our markets beyond just moving our product south,” said Peter Symons, a spokesman for Statoil, a Norwegian oil giant that has signed contracts to lease two Canadian oil loading terminals. “We can get that product on a ship and get it to premium markets in Asia.”

The Americans, on the other hand, are looking toward refineries.

Again the Times report says:

Several Washington and Oregon refiners and ports are planning or building rail projects for Canadian heavy crude as well as light oil from North Dakota. The Texas refinery giant Tesoro and the oil services company Savage have announced a joint venture to build a $100 million, 42-acre oil-handling plant in the Port of Vancouver on the Columbia River that could handle 380,000 barrels of oil each day if permits are granted.

Not that everything is clear sailing. The Times says there is resistance to a plan to refine heavy crude in California.

The city of Benicia, Calif., last month delayed the granting of a permit for Valero Energy’s planned rail terminal at its refinery by deciding to require an environmental impact report after residents expressed concerns that Valero would use the terminal to import Canadian oil sands crude.

Tesoro and its partner Savage announced the Vancouver, Washington project in April.

With access to rail and existing marine infrastructure, the Port of Vancouver is uniquely positioned to serve as a hub for the distribution of North American crude oil to West Coast refining centers. Tesoro and Savage are ideal partners for this project, having already operated in close partnership for almost ten years on the West Coast. The Tesoro-Savage Joint Venture’s combined capabilities, experience and resources are expected to create substantial benefits for the Port and the Vancouver community in the form of sustainable revenue to the Port and local jobs associated with the facility’s construction and operation.

The Tesoro news release quotes Greg Goff, President and CEO of Tesoro.

Building upon the recent success of the rail unloading facility at our Anacortes, Wash., refinery, where we have been delivering Mid-Continent crude oil via unit train in an environmentally sound and cost-effective manner, this project is the ideal next step for Tesoro as we drive additional feedstock cost advantage to the remaining refineries in our West Coast system.

While the Tesoro April release doesn’t specifically mention heavy crude or bitumen from Alberta, in August, Reuters reporting on a Tesoro results conference call said, the project would “supply cheaper U.S. and Canadian crude to refineries all along the West Coast – both its own and those run by competitors.”

The project, which would initially have capacity of 120,000 barrels a day and could be expanded to 280,000 BPD, is the biggest so far proposed to help Pacific Coast refineries tap growing output of inland U.S. and Canadian heavy crudes.

The project, where North Dakota Bakken and Canadian crude would travel by rail to the marine facility in Vancouver, Washington and then barged to refining centers, is being planned with joint venture partner Savage Companies.

In September, Petroleum News reported

The Port of Vancouver facility will have “a lot of flexibility and capability to take different types of crudes, from heavy Canadian crudes to crudes from the Mid-Continent… So we will source crude from where the best place is,” Goff said on Aug. 2. “The facility also was designed to supply the entire West Coast… We can go from as far away as Alaska to Southern California, in those refineries, which we intend to do.”

Reuters also reported

Regulators also are considering Valero’s permit request for a 60,000 bpd rail facility at its 78,000 bpd Wilmington refinery near Los Angeles, but in June the area pollution regulator said it would take 18 months to finish an environmental review, permitting and construction.
Alon Energy USA also is seeking permits for a rail facility at its Southern California refining system, which shut down late last year as losses mounted on high imported crude costs and low asphalt demand. The company hopes to get those permits by year-end.
Valero spokesman Bill Day on Friday declined to say whether Valero would be interested in tapping inland and Canadian crude through the Tesoro project, but noted that the company values flexibility in getting cheaper crudes to its refineries.

Asked today about the New York Times report, (at the time of his regular news conference, he hadn’t read the story) Skeena Bulkley Valley MP Nathan Cullen said, “I mean there’s been so much uncertainty, in large part created by this government with respect to moving oil anywhere. This is another proposal, it seems every week you wake up, open the papers and there’s another proposal. Some of them are legitimate, some of them are snake oil.

“This one I’m not familiar with, so I can’t make specific comments on it, I will certainly look at it because I’m very interested in energy on the west coast. I’d have to see, given the government we have in Ottawa right now, they’re not friends to communities and First Nations and certainly not friends to the oil sector because they keep causing so much concern within the broader public and hurt the companies’ ability to gain social licence to get a project going.”

One of the Kitimat LNG projects plans to self-generate power for liquefaction plant

At least one of the two large liquified natural gas projects in Kitimat is, at least at this point, planning to self-generate the power required using a gas-fired, steam-driven electrical generation system.

A job ad posted this weekend by the headhunting firm Fircroft is seeking a Lead Project Engineer, Power Plant for “Our client, a major international owner/operating company, requires expertise for their LNG mega-project in Western Canada.”

The job, which requires 20 years and more experience, would be located in Calgary for eighteen months, then move to Kitimat for the remainder of a four year contract paying from $1650 to $1850 per day.

By Fircroft describing the job as a “mega-project” means that the client is either Shell’s LNG Canada project or the Chevron and Apache KM LNG project, since the much smaller BC LNG project could not be described as a “mega-project.”

As well as the standard qualifications for a senior engineer, the job posting lists:

• Power Plant design, operation and construction experience required.
• Boiler design, construction, operation, and commissioning experience required.
• Heat Recovery Steam Generation (HRSG) design, processes, construction, operation, and commissioning experience required.
• Integrates inherent safety in design and operability in concept selection and development for gas resource opportunities.

Providing the power for the Kitimat and other northwestern LNG projects is becoming controversial. The power is needed to cool the natural gas so it can be loaded onto tankers for shipment to customers.

The BC government recently announced a $650,000 study of the cumulative effect on air quality for the planned industrial expansion in the Kitimat area, including the Rio Tinto Alcan Kitimat modernization project, which would increase the amount of sulphur dioxide emissions, combined with as many as three LNG projects and the associated increase in tanker traffic, as well as the possible and even more controversial Enbridge Northern Gateway project.

At the time of the BC announcement, the Globe and Mail reported:

If natural gas is used either for direct-drive or combined-cycle electricity generation to produce the energy required for the proposed Shell LNG facility at Kitimat, approximately 300 million cubic feet of natural gas would be burned. The proposed Chevron Apache LNG facility could burn approximately 140 million cubic feet of natural gas.

The other alternative for powering the LNG plants is to use hydro-electricity, and BC Hydro at the moment doesn’t have the capacity to supply the LNG projects with power. One possibility is the controversial Site C dam project in the Peace River basin, which is also under review by the BC government.

Although the job is restricted to Canadian citizens or permanent residents, it is clear that the engineer will have to also answer to the project’s overseas partners since one requirement is to conduct: “Overseas VIP workshops, including Value Engineering, Process Simplification, Process Optimization and Design to Capacity.”

Seaspan keeping an eye open for opportunities in Kitimat, CEO says

Seaspan ULC, the large BC-based marine transportation and shipbuilding company is keeping its on eye on future opportunities in Kitimat and along Douglas Channel, chief executive officer Jonathan Whitworth said Tuesday.

Jonathan Whitworth, CEO of Seaspan ULC, at the RCM SAR 63 boathouse. (Robin Rowland)

Whitworth was in Kitimat to meet members of the Royal Canadian Marine Search and Rescue Unit 63, which operates from the Nechako Dock.

He also met with members of the Haisla Nation while he was in town.

Kitimat SAR 63 is one of six stations which will receive $8,500 a year for three years, to help cover operating expenses, from the Dennis and Phyllis Washington Foundation, based in Missoula, MT. Seaspan is part of the Washington group of companies, that has holdings on the west coast of Canada and the United States, owned principally by Dennis Washington.

At the moment, Whitworth said, Seaspan operates the HaiSea in partnership with the Haisla Nation. “It’s a boat that you will see up and down the Channel, she does a lot of work for RTA as well as some of the others, mainly from the construction and the up and coming constrution from the new projects. We take a lot of time and effor to make sure our equipment looks good as well as operates well. That’s the kind of pride our crew puts in the vessels and the company supports.” he said. Seaspan barges are also used for the construction projects currently under way in Kitimat.

Whitworth said that while Douglas Channel is not yet “packed on the water,” shipping will likely increase in the coming years. “There are two big dominoes to fall, the first one is any of these big projects being talked about that are going to increase shipping in the Douglas Channel, be
it Chevron or Shell or the BC LNG project. They need to get approval first, that hasn’t happened yet. We understand it may be within the next six to twelve months before we hear some announcements. When that goes ahead, we can start looking at building new boats, be it escort tugs, or docking vessels, or additional vessels… That will help up us to know the time for when we need to deliver new boats for the Douglas Channel.”

Seaspan has always had a close relationship with the Canadian Coast Guard, Whitworth said and that relationship is even closer now that the Seaspan’s Vancouver Shipyards, was chosen by the federal government for the National Shipbuilding Procurement Strategy for non combat vessels. In February, the federal government announced (pdf) a series of preliminary contracts valued at a total of $15.7 million for the joint support ships, the CCGS John G. Diefenbaker polar icebreaker and the offshore fisheries science vessels.

The Washington Foundation is giving a multi-year donation of $1.1 million to three British Columbia marine and port community charitable organizations. Partnering with Sail and Life Training Society (SALTS), Vancouver Maritime Museum (VMM) and Royal Canadian Marine Search & Rescue (RCM-SAR).

Royal Canadian Marine Search and Rescue received $300,000 over three years. “Half of it $150,000 when to Royal Canadian Marine Search and Rescue Sooke training facility on Vancouver Island, that benefits all of the different stations in BC, they all get a chance to go train and at that training centre,” Whitworth said. “The remaining funds, the $150,000 was spread between six stations that are closely associated with Seaspan, so two in Vancouver harbour, North Vancouver, West Vancouver, two on the Fraser River, one at Delta and one at Richmond, one at Victoria and one right here in Douglas Channel in Kitimat.” The $8,500 covers approximately 35 per cent of the operating costs for Kitimat’s SAR 63 station every year for three years.

A July 25 news release from the foundation (pdf) says:

The Dennis and Phyllis Washington Foundation’s charitable donations are the organization’s first direct donation of their kind in Canada. Since its inception, the Washington Foundation has donated more than $144 million in the United States to hundreds of organizations that focus on education, health and human services, arts and culture, and community service.

Mike Halligan, Executive Director of the Washington Foundation, says today’s announcementis the start of an exciting inaugural collaboration with Canadian charitable organizations in British Columbia.

RCM SAR 63 — Members of RCM SAR Unit 63, on board “Snowflake Responder” with Seaspan CEO Jonathan Whitworth. (Robin Rowland)

Kitimat’s SAR 63 operates along Douglas Channel and down the Inside Passage as far as Butedale. Training takes place every Wednesday evening at the SAR 63 boathouse at the Nechako Dock. The unit will be recruiting new members in September. Anyone interested can contact training officer Duncan Peacock.

Kinder Morgan files last minute objection to Joint Review’s proposed conditions for Northern Gateway

Kinder Morgan has filed a last minute objection to the Northern Gateway Joint Review Panel’s preliminary conditions for the Enbridge project.

One of the objections from Kinder Morgan is the provision in the JRP’s proposed Gateway conditions for “purpose built tugs” to escort tankers (a measure that Enbridge has proposed for the Gateway project). Another provision Kinder Morgan objects to is “secondary containment facilities at marine terminals” likely to become an issue if the Vancouver terminal is expanded by Kinder Morgan.

Overall, Kinder Morgan warns that if the JRP imposes some of the proposed conditions on the Northern Gateway, it could adversely affect future pipeline projects in British Columbia.

As well, Kinder Morgan, it appears, is already concerned that if the proposed oversight of Northern Gateway goes ahead, the Kinder Morgan plan to twin the pipeline from Alberta to Vancouver and expand terminal operations in Vancouver could face ongoing scrutiny and possible delays.

The Kinder Morgan document, from the company’s Calgary lawyer, Shawn Denstedt, of Osler, Hoskins and Harcourt, filed May 31, appeared among all the final arguments filed on Friday by intervenors and governments to the Joint Review Panel on Northern Gateway.

Kinder Morgan’s letter to the JRP comes long after the final deadline for such comments.

Kinder Morgan is a registered intervenor in the Northern Gateway hearings, but has only filed four previous documents during the entire multi-year process. The company does not appear on the list of intervenors scheduled to appear for oral final arguments in Terrace beginning on June 17.

On April 12, 2013, the JRP issued a preliminary list of 199 conditions for the planning, construction and operation of the Northern Gateway project.

Now Kinder Morgan is worried. Denstedt’s letter notes:

we believe a number of the proposed conditions may have a material impact on pipeline and infrastructure development in Canada and consideration should be given to the conditions from this perspective.

Diplomatically, Denstedt goes on to tell the panel:

Our comments are intended to assist the JRP in understanding the potential outcomes of the proposed conditions if they become generally applicable to industry.

Commercial considerations

Under what Detstadt calls “Commercial considerations”, Kinder Morgan says “we observe that several of the proposed conditions are likely to affect the manner and risks involved in procuring pipeline facilities and services.

The list points to

Three layer composite coating or high performance composite coating is required for the entire pipeline although other pipeline coatings are commonly used in the pipeline industry depending upon ground conditions encountered
.
Complementary leak detection systems must be identified that can be practically deployed over extended distances of pipeline.

The construction of purpose-built tugs involves significant cost and lead time

A volume is prescribed for the secondary containment facilities at the marine terminal without reference to existing codes.

The letter goes on to say that if the conditions proposed by the JRP for the Northern Gateway come into effect, in Kinder Morgan’s opinion, it could adversely affect other pipeline projects in the future.

If broadly applied to industry, such conditions may limit the ability of pipeline companies to obtain competitive quotes because there are few sources of the required materials or services. The effect of conditions that require the use of a particular material or service may be to grant commercial benefits to certain suppliers through the regulatory process beyond the requirements of existing codes. Since several export pipelines are currently proposed, there will be a heightened demand for labour and materials in the coming years. The commercial effect of conditions that may exacerbate shortages of labour and materials should be a relevant consideration for the JRP.

Timing

One of Kinder Morgan’s objections is to the timing the JRP proposes for the Northern Gateway project if it applies to other pipelines.

Several of the proposed conditions contain NEB approval requirements and filings deadlines several years prior to operations. For example, plans related to the marine terminal and research programs must be filed for NEB approval three years prior to operations.

We are concerned that requiring reports to be filed for approval several years before operations can create significant schedule risks for infrastructure development projects. For example, a project with a two year construction schedule could take three years to complete with such conditions. Any changes to the construction schedule and anticipated date of operations would affect the filing deadline. Project proponents need sufficient schedule certainty in order to plan major expenditures on labour and materials.

To mitigate such risks, it is relevant for regulators to consider whether the filing deadlines and approval requirements prescribed in conditions could materially alter a project’s schedule. Filing deadlines should be set at a reasonable time before operations in order to minimize the risk that such deadlines materially affect the critical path for a project.

Many of the conditions require NEB approval, and in some cases the participation of other parties in the approval process, in order to be satisfied. Fulfillment of those conditions will require additional time, a Board process and potentially litigation. For example, certain reports must be filed with the NEB for approval prior to commencing construction activities. Other conditions require reports to be filed for approval by the NEB prior to construction with a summary of how concerns from other government agencies and Aboriginal groups were addressed.

So Kinder Morgan says:

In our view, conditions that require subsequent board approvals and that attract the potential for additional regulatory processes should be the exception and not a new standard or norm. There must be clear, well understood rationales given as to why additional approvals are in the public interest.

And so Kinder Morgan asks:

As an alternative, the NEB may utilize its existing powers and processes to ensure that when filings are made to satisfy imposed conditions an additional approval process is not required.

Overall the company sees the rules for Northern Gateway as a step back to the days before deregulation.

A number of the conditions may be interpreted as reflecting a return to a prescriptive approach to regulation. These conditions prescribe detailed audit requirements instead of setting a goal oriented approach to allow the proponent flexibility in mitigating any adverse effects. Such conditions tend to focus on operational aspects that are covered by existing codes and regulations rather than setting goals for the proponent to mitigate any significant adverse effects.

Denstedt, again diplomatically, concludes by saying:

Kinder Morgan wishes to thank the JRP for the opportunity to present these high level perspectives regarding its proposed conditions. Our comments are intended to ensure that the wider implications of the proposed conditions on the pipeline industry and infrastructure development are given appropriate consideration in the deliberations and final recommendations of the JRP.

Kinder Morgan letter to JRP

From the Orange Coast: The pollsters lost big in the BC election–but not for the reason everyone is talking about

Updated with clarification

The pollsters were the biggest losers in the British Columbia provincial election on May 14—but not in the way everyone is talking about.

It’s clear to the Wednesday morning quarterbacks that the big issue in BC was the economy, and voters chose that economy over the environment.

That’s where the pollsters failed and have failed time and time again for the past decade. As long as the pollsters keep asking the stupid question “What’s more important the environment or the economy?” a majority of voters, especially in uncertain times, will choose the economy. Politicians will campaign, as Christy Clark did brilliantly, by promising that there are better economic days ahead, putting the environment far down the priority list.

By the time Canadians and all human beings realize that a viable economy is based on a sustainable environment it may be too late to save either.

The Liberal majority under Christy Clark was a big surprise; the polling data indicated, at first, that there would be a big NDP majority and in the final days that the Adrian Dix and the NDP would sneak into the Legislature still in majority territory.

Instead, Christy Clark, who until (if) she finds a seat, will be running the province as premier from the legislature galleries.

The BC free-enterprise coalition is satisfied, for the moment. The usual cabal of University of Calgary economic pundits are cheering for their sponsors in the oil patch, with the National Post, Globe and Mail and Sunmedia acting as their echo chamber. (Why the eastern media insist on always having Calgary academics write about BC is rather mind boggling. If they want ultra conservative BC point of view, there’s always the Fraser Institute, but even the Fraser Institute is junior to Alberta it seems)

The trouble is that the eastern establishment mainstream media are as out of touch as the pollsters. The Globe and Mail editorial, like most of the eastern media, once again sees British Columbia as nothing more than a junior partner in Confederation, existing to serve the interests of Alberta, with the concerns about our future secondary.

It now falls to Ms. Clark, who was cagey about her position on the Trans Mountain project, to take an objective look at the proposal, let go of her populist, B.C.-first rhetoric, and ensure that her government is an open-minded partner with Alberta in its bid to get its oil to tidewaters for export. Any reviews of the pipeline project must be done quickly and with a deadline.

It’s just plain unmitigated arrogance, but rather typical, to tell a premier who just won a majority in the legislature and the popular vote to “let go of her populist BC-first rhetoric.”

Christy Clark laughs at a joke at the Kitimat Valley Institute, April 4, 2013, where she announced her plan to eliminate the provincial debt in 15 years via taxes and other payments from LNG (Robin Rowland)

The liquifaction factor

There’s one big problem, a very big problem, with Clark’s promises. She opened her campaign in Kitimat by promising that the liquified natural gas developments will not only slay the deficit but pay down the BC provincial debt in 15 years.

I asked Clark in the media scrum after her announcement how she could make such a prediction when the LNG market is so volatile. She replied that her predictions were based on very conservative estimates. That was spin.

Clark based her election campaign on a promise that not only hopes to foretell the future for the next fifteen years but on liquifaction.

Now liquifaction has two meanings. First is the freezing of natural gas to LNG. Second is the problem that occurs during an earthquake when water saturated ground turns into a liquid, bringing about the collapse of countless buildings with the death and injury that follows.
Clark based her campaign on the hope that the LNG market will not liquify—as in the second meaning.

The LNG market looked so simple two years ago. Buy natural gas at low North American prices, pipeline it to the west coast, load it on tankers and sell it in Asia at the higher natural gas price there which is based on the price of oil. But, wait, the free market doesn’t work that way (sorry free enterprise coalition). Customers in Asia don’t want to pay the full oil-based price for natural gas if they can get it via the US Gulf ports at a cost plus North American price. If the export price of LNG falls, even if the BC projects proceed, the price will be a lot lower than Clark and the energy cheerleaders expect and there will be no new golden age for the BC economy.

Changes in the LNG market are happening at warp speed and it is hard to keep up (And many people in Kitimat are trying to keep up with the daily volatility since the future of the town may depend on LNG). Unfortunately, the dying mainstream media failed to explain, even in the simplest terms, that Christy Clark’s LNG promises might be as empty as a mothballed tanker. This is one case where concentrating on the horse race—and the grossly inaccurate polls—was a blunder, when there should have been reality checks on the LNG promise. The conservative cheerleaders in the media actually didn’t do their readers much good when they failed as reporters to check out the real state of the energy industry or predicted economic catastrophe if there was an NDP victory.

The NDP failure

The NDP campaign under Adrian Dix was not up to its appointed task of explaining the need for both a viable economy and a sustainable environment. Most pundits point to Dix’s mid-campaign switch to opposing the Kinder Morgan pipeline expansion as the beginning of the NDP decline.

More telling, for me, was Dix’s failure to explain the proposed two-year moratorium on fracking. There are lots of moratoriums and holds on fracking in North America and around the world. The Canadian media, however, failed miserably (if it even bothered to check) that fracking moratoriums are becoming a standard, although controversial, practice worldwide. A moratorium on fracking today is prudent given the uncertainty over current practices.

Yes, fracking has been used for 50 years but on a much smaller scale. There are two new factors. First is the sheer volume of operations, with no idea what the massive increase in fracking will do to the environment, especially the ground water. Second is the stubborn refusal of companies to release proprietary information on the chemicals they use—the same “public be damned” attitude toward environmental concerns that has got pipeline companies in trouble as well.

Christy Clark and the conservative commentators successfully painted the fracking moratorium as stopping all economic development in the province. Dix and the NDP completely failed to emphasize that their platform was that the party wanted industrial development in the province, but didn’t want to rush into development that will cost the province and its taxpayers down the road. (And taxpayers will eventually have to pay to clean up unfettered development long after the companies that profited have left town, something deficit and debt hawks always conveniently ignore.)

The Orange Coast

As Tyler Noble (formerly with CFTK News and now with the District of Kitimat) pointed out in a Facebook post, the electoral map shows perhaps the real story of the election. The British Columbia coast is entirely NDP orange. The Interior of BC went Liberal. The fight over tankers and pipelines is not going to go away with the result of this election, it’s going to get louder and a lot nastier.

So the University of Calgary pundits, the conservative columnists and editorialists from Calgary to Toronto and the Globe and Mail editorial board will soon have to forget their cheers and go back to complaining about the BC peasants who have to be “educated” about how good pipelines are for the economy.

The polls

The pollsters are now trying to find out what went wrong, and beginning to ask how to find out who will actually turn up at the voting booth?

Even with the problems pollsters face with call display refusals, fewer landlines and the possible unreliability of internet panel polling, even with the flawed polling data some things are clear.

The turnout, as currently reported, was 52 per cent. The student vote (an actual vote) went heavily to the NDP and the Greens. Part of the student vote result is traditionally, younger people generally tend to vote “progressive” parties. Young people, increasingly disillusioned by partisan politics, are not turning out to actually vote. With high unemployment among millennials and teenagers, these potential voters want jobs, but they’re also worried about the future of the planet. They’re not turning out to vote because many say they have no one to vote for (despite the appeals of the NDP and the Greens.)

Many older people, both on the left and the right are trapped in an obsolete world view of progressive views versus big business or the dreaded socialism versus free enterprise. Older people, worried about their economic future do vote and are often more small c conservative.

Clark campaigned on that paradigm and she won.

Be careful for what you wish for.

The failure of the economy vs environment question

It may be that by the next federal election in 2015 and by the next BC election in 2017, there might be, it is hoped, a profound change in the political narrative. If the pollsters hadn’t asked that obsolete and stupid question about the environment verus the economy, business versus socialism, they might actually have had some good data in this election.

The times, as Bob Dylan sang, they are a changing. The paradigm is shifting. In just the past few months there are hints of the rise of a growing “green conservative” movement.

Preston Manning, the founder and first leader of the Reform Party is now promoting the “green conservative”

In the United States, green conservatives are adding to the ruptures in the Republican Party. There is even a branch of the Christian Coalition, that is splintering because it too supports the idea of green values because it sees green as supporting family values, helping the poor and the idea of stewardship.

We see lots of green conservatives here in northwest BC among the hunters, fishers and fishing guides and those who work in the industrial sector who like hunting, fishing, hiking and boating. Did they vote for the NDP or the Liberals? Usually the sample size in northwest BC is too small, but drilling down might indicate that there were enough green conservatives who voted for what should now be called the Orange Coast.

If Adrian Dix and the NDP had campaigned effectively with an eye on the green conservatives, there might actually be an NDP majority. If Christy Clark actually keeps her hints of a possible tilt toward green conservatism and moves away from the free enterprise at any cost faction of the Liberals (including that 801 coalition that died at 802), she might actually be in for a long run as BC premier.

If, on the other hand, as the Globe and Mail advocates this morning, if Clark does move, bowing to Alberta’s demands, toward more unfettered development, as environmentalists fear and the aging free entrerprisers would love, the next provincial election will be one to watch, perhaps with the Greens filling a vacuum created by the Liberals and the NDP.

As for the pollsters, there have been two major failures in Canada, the BC and Alberta elections. The pollsters were wrong about the Israeli election as well, which means polling failure is not confined to Canadian politics. It’s time for the pollsters to stand down, go back to the beginning, and take a look at all their practices, including the basic questions they are asking and to wonder if the questions reflect an unconscious bias in favour of the party paying for the poll (good professional pollsters do usually try to avoid open bias question sequences).

If the polling companies don’t change, they too will soon follow the dying mainstream media into oblivion, so neither will be around to see a possible future where the concerns for the environment are a given and the debate is over the real solution to stave off catastrophe.

This post has been updated to clarify that those who I call Conservative cheerleaders failed to be clear about the energy industry, not the overall campaign.

Transport Canada promises consultation on Kitimat port five days after announcement it will become public

Five days after the announcement that the private port of Kitimat will become a public port under federal jurisdiction, Transport Canada is now promising to consult District of Kitimat officials as the Douglas Channel waterfront transitions to a public port.

Both Kitimat Mayor Joanne Monaghan and Economic Development Officer Rose Klukas, after numerous calls and attempts over the past few days, finally spoke to different Transport Canada officials Friday.

According to the mayor, both were told that Kitimat will not become a public port for at least one year because the change from a private port to a public port requires a change in legislation. (Something Transport Canada may only just be realizing since Bill C-57, introduced Monday to cover all the changes for what the Harper government calls a “world-class” tanker policy makes no mention of Kitimat).

Transport Canada is now promising “extensive public and stakeholder consultation will occur before the legislation is changed,” the mayor was told.

On this Mayor Monaghan commented, “It seems to me that now they want to do consultation….sort of like closing the barn door after all of the cows got out!”

Transport Canada says that beause there are no federal lands in the Kitimat harbour, the amending legislation will only cover navigable waters in Kitimat.

Transport Canada will appoint a harbour master and the cost of that office will be “paid by offsetting fees charged to ships coming into the harbour.”

But it looks like the fees charged to incoming ships by the federal government could be causing a headache for Rio Tinto Alcan. Claudine Gagnon, an RTA spokesperson based in Shawnigan, Quebec, told Radio Canada, the French language network of the CBC, that the company is trying to assess the impact of the announcement on its operations in Kitimat. Among other things, the change in the port’s status could result in higher transportation costs for the company.

Ottawa surprend Kitimat avec l’annonce de la nationalisation de son port

Google translate of Radio Canada story.

At this point, Transport Canada officials told the District is unlikely that there will be Port Authority in Kitimat like the one in Prince Rupert.

Cullen surprised

Asked about the port announcement during a post budget news conference on Thursday, Skeena Bulkley Valley MP and NDP House Leader Nathan Cullen said, “I’m as surprised as everybody in Kitimat is. I’ve been phoning around to local leaders to find out if anyone had been consulted or spoken to about this. And it’s a shock for everyone including people from Alcan.

“This doesn’t make any sense at all. The conversation around a public port is a good one and one we need to have and we’re open to the idea, but what a terrible start to the process, when a minister flies in from Ottawa, announces something, doesn’t tell any of the local government about it and then expects everyone to pop the champagne corks. You want to get this thing right. You want to make sure the public interests are met.

“There’s a real arrogant feeling, when a minister flies in from Toronto and says this is how it’s going to be and there’s no need to talk to anyone in the region about it.

Related
Mayor Joanne Monaghan interviewed by Andrew Kurjata on CBC Daybreak North (Friday morning before Transport Canada returned calls to Kitimat)

Cullen was also asked about the provisions in the safe tankers announcement on Monday by Transport Minister Denis Lebel and Natural Resources Minister Joe Oliver that the federal government appears to be taking over responsibility for navigation aids on the British Columbia coast, something that until now, Enbridge Northern Gateway has said they will pay for.

“Suddenly taking costs away from a multi-billion dollar oil company, seems to be what this Conservative Canadian government wants to do. It’s so wrong, I can’t describe it any better than that,”Cullen said, “that we’re supposed to be picking up the tab for Enbridge’s project, while all the while running huge deficits and not getting the training support and cuts to health care programs that continue.”

Previous stories

Kitimat port announcement surprise to Rio Tinto Alcan, District of Kitimat

Oliver confirms Kitimat to become a public port

Harper government outlines new tanker safety measures for west coast

How “On the Waterfront” could decide the fate of Enbridge’s Kitimat terminal

Water, not oil, is the hot issue this summer in Kitimat

Rio Tinto Alcan reopens access to Kitimat waterfront

Kitimat port announcement surprise to Rio Tinto Alcan, District of Kitimat

The announcement Monday that the federal government intends to turn the private port of Kitimat into a public port, an announcement confirmed by Natural Resources Minister Joe Oliver in Terrace, Tuesday, came as a surprise to Rio Tinto Alcan, which now operates the port.

This morning RTA issued a brief statement:

This announcement was not discussed with Rio Tinto Alcan in advance.
We are endeavoring to have meetings with the federal government to gain clarity on this announcement as it specifically relates to our operations in Kitimat.

On Wednesday, Kitmat Mayor Joanne Monaghan told CFTK news the community was never consulted.

Monaghan told CFTK she still hasn’t been able to get anyone with the federal government to tell her more about the plan.

Since today, Thursday, is budget day, it is likely that federal officials would be unavailable for further comment until next week.

Who pays for upgrades?

Another point that is unclear from Monday’s announcement is whether or not the federal government fully intends to take over the navigation aids and enhancements on Douglas Channel and the BC Coast. If so, that means that the Canadian taxpayer would become, at a time of budget cuts, responsible for millions of dollars that Enbridge Northern Gateway has consistently said that the company will pay for.

Water, not oil, is the hot issue this summer in Kitimat

Rio Tinto Alcan reopens access to Kitimat waterfront

Decision on Black’s Kitimat refinery in 60 days, Edmonton Journal reports

The Edmonton Journal is quoting David Black as saying in Fate of proposed Kitimat refinery to be determined within 60 days:

British Columbia newspaper magnate David Black says he’ll know in about 60 days whether his controversial idea for a new refinery on the West Coast will move forward or die a quiet death.

In a recent interview, Black said he has signed memorandums of agreement with parties interested in the idea of a $15-billion refinery at Kitimat, done some preliminary design work and talked to financial backers — though any deal has a long way to go.

“I’ve been pulling threads together — potential customers, financiers, government, First Nations — and they should all be saying ‘yes’ or ‘no’ within 60 days.”

If the parties say “yes,” there would be two years of regulatory approvals required before construction could begin, he said.