Kitimat | Northwest Coast Energy News

PART FOUR: State Department assessment of the railway to Rupert route for bitumen

Here are edited portions of the EIS assessment for a major oil terminal at Prince Rupert

Environmental Setting

The EIS says “the local surface geology at the Prince Rupert site consists of bedrock (granitic rocks) overlain by glacial outwash and a thin soil cover.” and goes on to note that “Prince Rupert is located along the coastal region of Canada, which is seismically active.”

Potential Impacts

At Prince Rupert, depth to bedrock is expected to be relatively shallow, so rock ripping and some blasting could be necessary. The impacts of rock ripping and blasting are limited to the immediate area and would not result in any significant impacts to the underlying or nearby geology. Excavation activities, erosion of fossil beds exposed due to grading, and unauthorized collection can damage or destroy paleontological resources during construction.

(The report notes that The potential for finding paleontological resources in the areas that would be disturbed is unknown. But the area of the coast has been heavily metamorphisized and most fossils, so far, have been found further inland, largely along the Copper River near Terrace)

In terms of geologic hazards, the Prince Rupert terminals would be located along the coastal region of Canada, which is seismically active. In addition, the presence of steep slopes increases the risk of landslides and the port’s coastal location increases the risk of flooding…. The Prince Rupert rail terminals and port facilities would be designed to withstand potential seismic hazards and flooding…

Construction of the proposed terminals and port expansion in Prince Rupert would result in the disturbance of approximately 3,500 acres (1,400 hectares) of land for the construction of the rail terminal complex and approximately 1,200 acres (487 hectares) for the expansion of the port. Potential impacts to the soils resources of the area could result from vegetation clearance, landscape grading, and recontouring to ensure proper drainage, the installation of storm water drainage systems, construction of the required infrastructure, and other construction activities.
One of the primary concerns during construction activities is soil erosion and sedimentation.
Potential impacts to soils from erosion are expected to occur in areas where the slopes are greater than 20 per cent and where the erosion potential due to their nature is high. Based on available landscape and soils information, the soils found in the area are not highly erodible and the required infrastructure would be located in areas that are relatively flat. Therefore, the impact of the proposed terminal complex and port construction activities on soil erosion would be minor.

Groundwater
Environmental Setting

The Prince Rupert Terminals and port expansion would occur in British Columbia on Kaien Island, which receives about 102 inches of rainfall per year. The terminals would be located on an inlet that is part of the eastern Pacific Ocean on the Venn Passage near the much larger Inland Passage, which extends from Washington State to Alaska along the islands and mainland of British Columbia, Canada. Venn and Inland Passages are marine (salt water) waterbodies. The islands consist of bedrock (granitic rocks) overlain by glacial outwash and a thin soil cover.
Groundwater is shallow, poor quality, and unused. Drinking water is derived from lakes on the mainland. Water quality in the terminal complex area is seawater and inland brackish.

Potential Impacts

During construction of the facilities at Prince Rupert, the primary potential impacts to groundwater would be spills or leaks from construction equipment. Mitigation for these impacts includes having in place appropriate plans in place and appropriate cleanup materials available.
During operations of the facilities at Prince Rupert, the primary potential impacts to groundwater would again most likely be spills or leaks from operation equipment or associated with crude oil unloading of railcars. Although the initial impacts of potential releases or spills may be contained or limited to soil, potential impacts to groundwater may occur depending on the depth to groundwater, soil characteristics (e.g., porosity, permeability), spill volume and extent, and whether the spill reaches surface water bodies, some of which are interconnected to groundwater.

Surface Water
Environmental Setting

The upland character surrounding the potential Prince Rupert terminal area is dominated by bog forest uplands and the flowing surface water bodies are predominantly precipitation- and shallow groundwater-fed intermittent streams. Some open waterbodies are present in the southeast portion of Kaien Island. Tidal shore zones are of a rugged and rocky nature and receive wave energy generated by naturally occurring fetch and large wakes from marine traffic. Winter winds are strong and from the southeast to southwest, with surface currents predominantly northward from the Hecate Strait. Lighter summer winds have less influence on currents and allow freshwater runoff from land and deep water tidal effects to exert more control and provide variation in summer current patterns. Significant wind and tidal mixing tend to occur where waters are shallow and around islands and rocky points of land. The coastal landscape is predominantly fjords carved into the granitic Coast Mountains, created by the last of several glacial periods approximately 12,000 years ago. Shores tend to be rocky and steep with beaches restricted to sheltered areas adjacent to estuaries and the navigable straits and channels provide a wide variety of exposures and habitats.

Potential Impacts

Construction of the facilities at Prince Rupert would disturb approximately 4,700 acres. The primary potential impacts to surface waters include erosion and sedimentation and spills/leaks of hazardous materials. Mitigation for these impacts includes having in place appropriate SPCC plans in place and appropriate cleanup materials available.
During operations, the primary potential impacts to surface waters include storm water runoff, spills, or leaks from operation equipment or associated with crude oil unloading of railcars.
Provision of storm water management measures would mitigate the impacts of stormwater runoff.

Terrestrial Vegetation
Environmental Setting

The Prince Rupert terminals and port facilities would be located in the Coastal Gap Level III Ecoregion. The vegetation immediately adjacent to the Pacific Ocean includes stunted, opengrowing western red cedar, yellow cedar, and western hemlock with some stunted shore pine and Sitka spruce . There are also open areas present within the affected areas. It is unclear if biologically unique landscapes or vegetation communities of concern exist within the proposed Prince Rupert terminal complex boundary.

Potential Impacts

The proposed rail terminal complex and port facilities at Prince Rupert would require the clearing of up to 4,700 acres of natural vegetation, most of which is forested based on aerial photo interpretation. There does not appear to be any biologically unique landscapes or communities of conservation concern within the terminal complex boundary. Nearly all of these impacts would be permanent as natural habitats are converted for use as rail terminals and port facilities.

Wildlife
Environmental Setting

Many wildlife species use this coastal area for hunting, foraging, roosting, breeding, and nesting (Tourism Prince Rupert 2012). Wildlife characteristic of this ecoregion include grizzly bear (Ursus arctos horribilis), black bear (Ursus americanus), mountain goat (Oreamnos americanus), black-tailed deer (Odocoileus hemionus
columbianus), wolf (Canis lupus), moose (Alces alces), mink (Mustela sp.), bald eagle
(Haliaeetus leucocephalus), seabirds, shorebirds, waterfowl, and grouse (Tetraoninae)
The Prince Rupert terminal complex would be located in the Northern Pacific Rainforest(Region 5) bird conservation region, which is an ecologically distinct region in North America…

The coast of the Northern Pacific Rainforest is characterized by river deltas
and pockets of estuarine and freshwater wetlands set within steep, rocky shorelines. These wetlands provide critical nesting, wintering, and migration habitat for internationally significant populations of waterfowl and other wetland-dependent species. The area includes major stopover sites for migrating shorebirds, especially western sandpipers (Calidris mauri) and dunlins (Calidris alpina). Black oystercatchers (Haematopus bachmani), rock sandpipers (Calidris
ptilocnemis), black turnstones (Arenaria melanocephala), and surfbirds (Aphriza virgata) are common wintering species. Nearshore marine areas support many nesting and wintering sea ducks. Many seabirds breed on offshore islands, including important populations of ancient murrelet (Synthliboramphus antiquus), rhinoceros auklet (Cerorhinca monocerata), tufted puffin (Fratercula cirrhata), common murre (Uria aalge), western gull (Larus occidentalis), glaucouswinged gull (Larus glaucescens), and Leach’s storm-petrel (Oceanodroma leucorhoa). Pelagic
waters provide habitat for large numbers of shearwaters (Calonectris spp. and Puffinus spp.), storm-petrels (Hydrobatidae), and black-footed albatross (Phoebastria nigripes)

Potential Impacts

Direct impacts could occur due to vegetation removal or conversion, obstructions to movement patterns, or the removal of native habitats that may be used for foraging, nesting, roosting, or other wildlife uses (Barber et al. 2010). Indirect impacts to wildlife are difficult to quantify and are dependent on the sensitivity of the species, individual, type and timing of activity, physical parameters (e.g., cover, climate, and topography), and seasonal use patterns of the species (Berger 2004). Most of these impacts would be essentially permanent.

Fisheries
Environmental Setting

Prince Rupert is an important deepwater port and transportation hub of the northern coast of British Columbia. It is located on the northwest shore of Kaien Island, which is connected to the mainland by a short bridge. The town of Prince Rupert is just north of the mouth of the Skeena River, a major salmon-producing river. Key commercial fisheries include Pacific salmon, halibut, herring, and groundfish, which are processed from Prince Rupert.

Prince Rupert area supports a high density of streams and rivers that host an array of valuable recreational fisheries for salmon, steelhead (anadromous rainbow trout), rainbow trout, lake trout, cutthroat trout, char, Arctic grayling, and northern pike .

Potential Impacts

New impacts to commercial and recreational fisheries’ habitats from the construction and operation of the facilities in Prince Rupert could include marine intertidal zones as well as fish spawning zones (e.g., herring), if present. There would likely be short-term impacts to the benthic (bottom dwelling) community during construction of the berths and mooring facilities. Bottom-dwelling
fish (i.e., halibut, flounder, and rockfish) and marine invertebrates (i.e., clams, mussels, crabs, and other bivalves and crustaceans) could potentially be impacted during construction as well, but these affects are expected to be minor and temporary or short-term in duration.

Additional shipping traffic would increase underwater sound because large vessels, including tankers, put out relatively high noise levels. Fish and other aquatic organisms (including invertebrates and marine mammals) use sound as a means of communication and detection within the marine acoustic environment. Increased shipping traffic could mask natural sounds by increasing the ambient noise environment from Prince Rupert Harbor and along the marine route to the Gulf Coast area. Long-lasting sounds, such as those caused by continuous ship operation, can cause a general increase in background noise and there is a risk that such sounds, while not causing immediate injury, could mask biologically important sounds, cause hearing loss in affected organisms, and/or have an impact on stress levels and on the immune systems of aquatic species.

Exotic and invasive species are sometimes transferred in the ballast water of tanker ships.
Monitoring and controls would need to be implemented to treat ballast water discharged into Prince Rupert Harbor such that invasive or exotic species would not be released into the marine environment.

Threatened and Endangered Species

This section focuses on animal and plant species present in the Prince Rupert area that are Canada SARA protected. As a coastal area along the Pacific Migratory Bird Route, and an area that receives a lot of precipitation and is heavily forested, many wildlife species inhabit the area, as discussed in Section 5.1.3.6, Wildlife. According to the British Columbia (B.C.) Conservation Data Centre (2012), only one SARA threatened/endangered species is known to occur in Prince Rupert—the green sturgeon (Acipenser medirostris), a Pacific Ocean inhabitant. In addition, several SARA special concern species occur in Prince Rupert, including western toad (Anaxyrus boreas), coastal tailed frog (Ascaphus truei), North American racer (Coluber constrictor), grey whale (Eschrichtius robustus), and Stellar sea lion (Eumetopias jubatus)

Potential Impacts

The green sturgeon is typically found along nearshore marine waters, but is also commonly observed in bays and estuaries. The expansion of the proposed port facility could have minor adverse effects on the green sturgeon, but the sturgeon could readily avoid the port area.
Increased shipping traffic at Prince Rupert and as the vessels transit to the Gulf Coast area refineries may affect the feeding success of marine mammals (including threatened and endangered species) through disturbance, because the noise generated by tankers could reduce the effectiveness of echolocation used by marine mammals to forage for food. Whales use underwater vocalizations to communicate between individuals while hunting and while engaged in other behaviors. Increased underwater noise from additional shipping traffic could disrupt these vocalizations and alter the behavior of pods of whales. Moreover, additional boat and
tanker traffic could also increase the potential for collisions between marine mammals and shipping vessels. These effects would be additive in nature and could potentially add to existing disturbance effects and collision risks caused by the current level of shipping traffic, commercial and recreational fishing, and cruise ship passage.

Land Use, Recreation, and Visual Resources
Environmental Setting

Land use, recreation, and visual resources for the Prince Rupert area where the new terminals and expanded port facilities would be built differ sharply from the other terminal sites. Prince Rupert is located on an inlet of the Pacific Ocean in a heavily forested area of British Columbia.
Urban land use is generally limited to the communities in and around the city of Prince Rupert, with some small outlying communities and villages in the area. Given Prince Rupert’s role as a terminus of the Alaska Ferry System, many people see the port and surrounding areas in a recreational context. The area is largely undeveloped and would be sensitive to changes in the visual landscape.

Potential Impacts

If constructed on previously undeveloped land, the new facilities would primarily impact mixed forest… The construction and operational impacts on land use, recreation, and visual resources at the Lloydminster, Epping, and Stroud terminal complex sites and along the Cushing pipeline route would be the same as for the Rail/Pipeline Scenario.

Socioeconomics
Environmental Setting

Population/Housing

Construction and operations activities are not expected to have a significant effect on population and housing for this scenario. Because construction and operations job estimates have not yet been determined for this scenario, worker requirements for Prince Rupert, Lloydminster, and Epping are assumed to be minor..additional temporary housing could be needed in Prince Rupert… Prince Rupert only has about 740 hotel/motel rooms

Local Economic Activity

Tanker infrastructure and operations would be affected as ships transport crude oil from Prince Rupert through the Panama Canal to Texas ports near Houston.

Direct construction expenditures for facilities at Prince Rupert would be approximately $700 million, with approximately 1,400 annual construction jobs, based on the cost estimates of the proposed Enbridge Northern Gateway marine terminal in Kitimat

Despite the large population of First Nations people in the Prince Rupert area, Canada does not have a similar definition to minorities as the Keystone report applied under US law and so it notes “Impacts to minority and low-income populations during construction and would be similar to those described for the proposed [Keystone] Project and could possibly result in increased competition for medical or health services in underserved populations. Canada does not define HPSA and MUA/P, so it is unknown whether or not the minority populations in Prince Rupert or Lloydminster exist in a medically underserved area.

Tax Revenues and Property Values

It says construction of a new terminal Prince Rupert would generate provincial sales taxes, goods and services taxes, and hotel taxes. Construction of the tank and marine terminals at Prince Rupert…would involve large numbers of road trips by heavy trucks to transport construction materials and equipment to and from the sites. Construction in Prince Rupert could also potentially involve vessel deliveries of material. This traffic could cause congestion on major roadways, and would likely require temporary traffic management solutions such as police escorts for oversize vehicles.

Cultural Resources

Despite the rich heritage of First Nations in the Prince Rupert area, the Keystone alternative study reported;

No cultural resources studies have been conducted for the Prince Rupert area. Review of aerial photographs shows that a small portion of the area that could potentially be developed has already been disturbed by development, including port facilities, structures, and roads. This preliminary review shows that most of the area appears undeveloped and would have the potential for intact buried cultural resources.

The report notes that “Any ground disturbance, especially of previously undisturbed ground, could potentially directly impact cultural resources.”

It goes on to note that the potential to

include intact buried cultural resources would require evaluation through research and cultural resources surveys. If cultural resources were identified, follow-up studies could be required. In general terms, the archaeological potential of heavily disturbed areas, such as might be found in active rail yards or within developed transportation corridors, is normally lower than in undisturbed areas.

Archaeological potential is also contingent upon factors such as access to water, soil type, and topography, and would have to be evaluated for each area to be disturbed. Aboveground facilities have the potential to indirectly impact cultural resources from which they may be visible or audible. The potential for increased rail traffic to contribute to indirect impacts would require consideration.

Air and Noise

The report also summarizes the possible green house gas emissions for the rail and tanker project as whole from Prince Rupert to the Gulf Coast refineres and notes that overall

On an aggregate basis, criteria pollutant emissions, direct and indirect GHG emissions, and noise levels during the operation phase for this scenario would be significantly higher than that of the proposed [Keystone XL] Project mainly due to the increased regular operation of railcars, tankers, and new rail and marine terminals.

Air Quality

The rail cars and tankers transporting the crudes would consume large amounts of diesel fuel and fuel oil each day….The criteria pollutant emissions would
vary by transportation segment, particularly during marine-based transit. Oil tankers traveling from the Prince Rupert marine terminal through the Panama Canal to Houston/Port Arthur pass through several different operational zones, including reduced speed zones leading into and out of the ports, North American Emission Control Areas where the use of low-sulfur marine fuel is mandated, and offshore areas where the tankers travel at cruise speeds.

During the return trip, tankers are filled with seawater (ballast) to achieve buoyancy necessary for proper operation, which affects the transit speeds of the vessel. Furthermore, the tankers spend several days loading or unloading cargo at each marine terminal with auxiliary engines running (an activity called hoteling). The tanker emissions accounted for return trips (i.e., both loaded cargo going south and unloaded cargo going north).

In aggregate, the total operational emissions (tons) estimated over the life of the project (50 years) are several times greater than those associated with the combined construction and operation of the proposed Keyston XL Project

Greenhouse Gases

Direct emissions of GHGs would occur during the construction and operation of the Rail/Tanker Scenario. GHGs would be emitted during the construction phase from several sources or activities, such as clearing and open burning of vegetation during site preparation, operation of on-road vehicles transporting construction materials, and operation of construction equipment for the new pipeline, rail segments, multiple rail and marine terminals, and fuel storage tanks.

Due to limited activity data, GHG emissions from construction of the Rail/Tanker Scenario were not quantified; however, these emissions would occur over a short-term and temporary period, so construction GHG impacts are expected to be comparable to the proposed [Keystone XL] Project.
During operation of the railcars and tankers that comprise this scenario, GHGs would be emitted directly from the combustion of diesel fuel in railcars traveling over 4,800 miles (7,725 km) and fuel oil in marine tankers traveling over 13,600 miles (21,887 km) round-trip.

The Rail/Tanker Scenario would also result in indirect emissions of GHGs due to the operation of 16 new rail terminals, an expanded port, and potential pumping stations. The new rail terminal in Prince Rupert would be projected to require 5 MW of electric power to operate, possibly bring indirect GHG emissions

Noise

Noise would be generated during the construction and operation of the Rail/Tanker Scenario. Noise would be generated during the construction phase from the use of heavy construction equipment and vehicles for the new pipeline, rail segments, and multiple rail and marine terminals, and fuel storage tanks. Due to limited activity/design data, noise levels from the construction of this scenario were not quantified; however, this noise would occur over a short term and temporary period, so construction noise impacts are expected to be comparable to those
of the proposed Project. During operation of the railcars and tanker ships that comprise this scenario, noise would be generated from the locomotives, movement of freight cars and wheels making contact with the rails as the train passes, train horns, warning bells (crossing signals) at street crossings, and tanker engines during hoteling and maneuverings at the new rail and marine terminals in Prince Rupert.

(Noise from ocean going vessels which is a concern for coastal First Nations and environmental groups is covered later on impact on wildlife)

Climate Change Effects on the Scenario
Environmental Setting

The Keystone study looks at the affects of climate change, but concentrates largely on the Gulf Coast beause the most of the Rail/Tanker Scenario was outside of the boundaries of the study, but it does note that the sea levels are projected to rise due to glacial melting and thermal expansion of the water. The rate, total increase, and likelihood of the rise is in part dependent on how rapid the ice sheets warm and is a source of ongoing scientific uncertainty.

The United States Global Change Research Program (USGCRP) estimates that sea level rise could be between 3 to 4 feet by the end of the century.

Increasing sea level projected due to climate changes as described above shifts the impact of mean high tide, storm surge, and saltwater intrusion to occur further inland and this would negatively affect reliable operation of the port infrastrucure for tanker traffic. Mitigation of these climate effects could be addressed by making engineering and operational changes at the port.

Potential Risk and Safety
Environmental Setting

The Rail/Tanker Option would combine the risk inherent in both pipeline and oil tanker
transport. However, the risks and consequences for using oil tankers to transport the hazardous materials are potentially greater than the proposed Project. Overall, crude oil transportation via oil tankers has historically had a higher safety incident rate than pipelines for fire/explosion, injuries, and deaths.

Spills have been reported while the vessel is loading, unloading, bunkering, or engaged in other operations

The main causes of oil tanker spills are the following:
• Collisions: impact of the vessel with objects at sea, including other vessels (allision);
• Equipment failure: vessel system component fault or malfunction that originated the release of crude oil;
• Fires and explosions: combustion of the flammable cargo transported onboard;
• Groundings: running ashore of the vessel; and
• Hull failures: loss of mechanical integrity of the external shell of the vessel.

From 1970 to 2011, historical data shows that collisions and groundings were the maincauses of oil tanker spills worldwide.

Potential Impacts

Loading and unloading of the railcars at tank farms near seaports could allow spills to migrate and impact seawaters and shorelines.

However, the loading and unloading are generally carried out under supervision and would be addressed promptly by the operators, limiting the potential migration and impacts of the spill to the immediate area.

Once the tanker is loaded and at sea, the propagation and impacts of a spill could become significant. Oil tankers may carry up to 2,000,000 bbl of oil

A release of oil at sea would be influenced by wind, waves, and current. Depending on the volume of the release, the spreading of oil on the surface could impact many square miles of ocean and oil birds, fish, whales, and other mammals and could eventually impact shorelines. Oil would also mix with particulates in sea water and degrade. As this occurs some oil will begin to sink and either be retained in the water column (pelagic) or settle to the ocean floor (sessile).

Pelagic oil could be consumed by fish or oil fauna passing though the submerged oil. Sessile oil could mix with bottom sediment and potentially consumed by bottom feeding fauna. Spills in ports-of-call could affect receptors similar to an open ocean release but also could temporarily affect vessel traffic and close ports for cleanup activities.

The identification of key receptors along the rail route alternative was not available for this evaluation. Therefore a comparison to the proposed project was not completed.

Surface Water

The Lloydminster to Prince Rupert portion of this route would begin in the western plains at the Saskatchewan/British Columbia border and travel west through an area of high-relief mountains with large valleys, referred to as the Cordillera region. From a water resource perspective, the plains region of Canada is characterized by relatively large rivers with low gradients. The plains rivers drain the Rocky Mountains to the Arctic Ocean. The Cordillera region is largely composed of northwest-southwest trending mountain ranges that intercept large volumes of Pacific
moisture traveling from the west towards the east. River systems in this region are supplied by a combination of seasonal rainfall, permanent snowfields, and glaciers.

The following are larger rivers crossed by the existing rail lines between Lloydminster and Prince Rupert:

• North Saskatchewan River, Alberta
• Pembina River, Alberta
• McLeod River, Alberta
• Fraser River, British Columbia
• Nechako River, British Columbia
• Skeena River, British Columbia

Wetlands

Spills within wetlands would most likely be localized, unless they were to occur in open, flowing water conditions such as a river or in the ocean. A crude oil spill in a wetland could affect vegetation, soils, and hydrology. The magnitude of impact would depend on numerous factors including but not limited to the volume of spill, location of spill, wetland type (i.e., tidal versus wet meadow wetland), time of year, and spill response effectiveness. The construction of additional passing lanes to accommodate increased train traffic resulting from this scenario could
result in permanent impacts to wetlands if passing lanes were constructed where wetlands occur.
However, as there is some leeway regarding the exact location of the passing lanes, it is expected that wetlands would be avoided by design.

Fisheries

The Rail/Tanker Scenario railroad route would cross numerous major streams and rivers in Canada, many of which support anadromous fish species such as salmon.

Anadromous species are those that spawn and rear in freshwater but migrate to the ocean at a certain size and age. Pacific salmon are large anadromous fish that support valuable commercial and recreational fisheries. Commercial fisheries for salmon occur in marine water and most recreational fishing for salmon occurs in freshwater. Salmon eggs are vulnerable to the effects of fine sediment deposition because female salmon deposit their eggs in stream bed gravels.

Despite this vulnerability, the overland railway route is not expected to present any new impacts to salmon unless there is a spill into its habitat, although the risk of spills does increase under this scenario due to the increase in the number of trains that would use the route.

Potential new impacts under the Rail/Tanker Scenario on commercially or recreationally significant fisheries along the route would be minor because the railroads that would be used are already built and in operation. However, the risk of an oil spill or release of oil or other materials still exists. The tanker portion of this route scenario is also subject to oil spill risk.

Threatened and Endangered Species

The rail route would cross over the Rocky Mountain region of western Alberta, which is inhabited by species such as the woodland caribou (Rangifer tarandus) (a SARA threatened species) and grizzly bear (a SARA special concern species). This region of British Columbia is home to a number of SARA threatened/endangered species, including the peregrine falcon (Falco peregrinus anatum) (SARA threatened), salish sucker (Catostomus sp.) (SARA endangered), white sturgeon (Acipenser transmontanus) (SARA endangered), caribou (southern mountain population) (SARA threatened), northern goshawk (Accipiter gentilis laingi) (SARA threatened), and Haller’s apple moss (Bartramia halleriana) (SARA threatened).

A number of additional SARA special concern species inhabit the regions of Canada that would be traversed by the Rail/Tanker Scenario, including but not limited to those special concern species expected to occur in the Prince Rupert region, and discussed above (B.C. Conservation Centre 2012).

Northwest Coast Energy News Special report links

What the Keystone Report says about Kitimat and Northern Gateway
What the Keystone Report says about the Kinder Morgan pipeline to Vancouver.
What the Keystone Report says about CN rail carrying crude and bitumen to Prince Rupert.
The State Department Environmental Impact Study of the railway to Prince Rupert scenario.

State Department news release

State Department Index to Supplemental Environmental Impact Study on the Keystone XL pipeline

Kitimat approves building permit for KM LNG construction camp

Ron Link of KM LNG addresses District of Kitimat Council on a building permit for the work camp. (Robin Rowland)

District of Kitimat Council tonight (March 4, 2013) approved building permits for the KMLNG work camp at the old West Fraser Eurocan paper mill site.

The first phase of the camp, called 1A will have 155 beds, followed by a second camp, called 1B with 145 beds. Council also approved a second phase, Camp 2, which will have an additional 300 beds. The camp will consist of single-storey, 44 bed dormitories, similar to those now being used at the Rio Tinto Alcan Kitimat Modernization project, a couple of kilometres away.

“This camp will support the construction of the LNG terminal,” KM LNG’s Ron Link told council, “the focus right now is a 600 man camp. Beyond that, if the final investment decision is approved, it will eventually grow to 2,800.

To build the camp KMLNG will have to demolish some of the remaining blow pipes and chip screening facilites that are there.

“Under the regulations it is a contaminated site and we have a company called Constega Rovers that are participating in sampling the site. It is certainly our attention to clean it up.

If the full 2,800 bed camp is built, the remaining part of the facility will be directly west of the current proposed campsite.

Later in the meeting council continued to debate the contenious issue of an over all camp policy for the District of Kitimat and voted to instruct district staff to “bring back a calendar with the process and dates for discussing camp policy.”

Staff would prepare a document indicating where camps are presently permitted within the District of Kitimat followd by a committee of the whole meeting dedicated to the pros and cons of camps within the district and perferred locations, services provided by the district and size limits.

There will likely be both a public town hall and a “public meeting” of council to discussion the issues later in the spring,

The debate was prompted bya proposal from the PTI Group to build a large “lodge style” work camp within the boundaries of the residential part of Kitimat, near the hospital and City Centre Mall. The PTI proposal would require amendments to both zoning and the Official City Plan. The KMLNG and RTA camps are in areas zoned for industrial use and would not be affected by a change to the official plan for the residential area.

Harper, Enbridge “poisoning the well” for northwest BC industrial development, Cullen says

Both the Conservative government of Stephen Harper and Enbridge Northern Gateway have “poisoned the well” against industrial developers in the northwest of BC and that is increasing resistance to all projects, Skeena Bulkley Valley MP and NDP House Leader told reporters Thursday, February 14.

Cullen was speaking during a regular conference call held with northwest BC media and was promoting his current Renewal Northwest tour of the riding.

“[There is a] huge amount of investment in the northwest,” Cullen said. The Renewal Northwest tour, he said, is intended to “bring the public into it, knowing good from bad, right from wrong.because some of these projects that will be excently suited for the northwest and others pose far too many risks. And how do you make that decision?”

“It’s a conversation a lot of people have been itching to get at.” Cullen said because in northern British Columbia a significant number of people have resisted development, whether it’s the proposed Northern Gateway pipline or fracking in the Sacred Headwaters of the Skeena, Stikine and Nass Rivers.

“Once you get past the conversation of what you don’t want, comes the conversation of what we do want.” Cullen said. “That means good jobs that fit in with our local ecology and our own values. It’s never been really been brought altogether.”

“To be honest most of the developers I talk to, most ofthe people looking to do mining or a gas pipeline or some other project are also looking for those same guidelines. What is it that the northwest wants? How is it that we can the social licences we call it to operate here?

“I’ve spoken to a number of these proponents and a lot of them realize that the well has been poisoned in part by the Harper government who has tried to bully people and call them names and shut down their voices. People get their backs up when they do that. It’s won them no friends.” Cullen said.

“In the case of Enbridge, a lot of those proponents will privately talk to you about how much harder it is to have a conversation in a community after Enbridge has been through town and offended people or just presented something in such a way that people get very resitant.

“I think that there has to be some repair work that has to be done. People do not have faith in the Harper government to protect some of these other values.

“Some of these companies have an up hill struggle based on recent community experience from which the likes of Enbridge has made them quite aware.

“A lot of them are picking up best practices.which is ‘don’t do what Enbridge did,’ do something smarter, more inclusive, and less abrasive. So people are learning there’s a path. We just have to describe what that path looks like.”

(An executive of one company planning an LNG development told Northwest Coast Energy News some months ago, “We’re looking at what Enbridge did and doing the opposite.”)

On the other hand, Cullen believes Enbridge is continuing to go in the opposite direction.

“Enbridge has been learning from the Harpter government doing these omnibus revisions to their pipeline and routing plans, dumpng huge amounts of paper, including increasng the amount of bitumen increasing the threat. All the time the federal government doesn’t seem to mind, Consistently British Columbia residents remain opposed and consistently opposed, with very at all supportive, I think the last poll had 11 per cent strongly support the project.”

Cullen was asked about reports, first from PostMedia News Scientist calls new confidentiality rules on Arctic project ‘chilling’ and later on CBC Canadian federal research deal ‘potentially muzzles’ U.S. scientists
that the Harper government is moving beyond trying to control information released by scientists who are government employees to any scientist who may work alongside those scientists or participate in a federally sponsored research project.

“This is a continuation of a pattern from this government, they are now trying to muzzle people , they don’t actually control and folks are resisting cause it goes against every princple of what good science is you put it out into the public sphere for debate and learning,” Cullen said. “It shows that the government isn’t interested in those facts.

“So it gets worse and worse. It goes back to an earlier question about what it’s like to work in the northwest , the well is poisoned by the Harper government when it comes to any of these questions because thy do things like this and people lose any confidence that the government’s impartial. Well, it’s obviously not, It’s only looking for one answer with anything to do with oil and gas in particular. Anyone who presents anything like science or evidence to the contrary is just shut down and muzzled and I am glad to see the scientific community shows backbone and resists.”

Two days left for public input on BC “heavy oil” spill response plans

Residents of British Columbia have just two days to file information and opinions on the province’s plans for “options for strengthening BC’s spill preparedness and response policies and capacity.”

A page on the BC Ministry of the Environment’s web site wants public input as part of “BC’s five conditions necessary for support of heavy oil projects.”

Premier Christy Clark announced her controversial five conditions for pipeline development in BC in July 2012. Clark’s announcement was aimed both at the Northern Gateway Pipeline which would have its terminal in Kitimat, and the proposed Kinder Morgan pipeline expansion which has its terminal in Vancouver.

It is not clear how long the web page has been up, but the call for input from the public has received little, if any, publicity. The deadline for public submissions is February 15, 2013.

(Northwest Coast Energy News was alerted to the story by a Kitimat-based hiking club)

A separate call for academic papers had a deadline of January 25. The province plans a conference on oil spill response in Vancouver from March 25 to March 27. The website says”

As part of British Columbia’s commitment to a world leading preparedness and response regime for land based spills, it is hosting a symposium March 25-27, 2013 in Vancouver, BC. Due to the anticipated high interest in the symposium, attendance is by invitation only.

One question would be if invitation only is designed to exclude activist groups who may wish to participate or demonstrate. The Northern Gateway Joint Review panel banned public input at hearings in Vancouver and Victoria earlier this year to try, not always successfully, to head off demonstrations. The webpage says:

In keeping with the established polluter-pay principle, and recognizing the increase in development activities across the province, the Ministry of Environment (the ministry) is reviewing industry funded options for strengthening BC’s spill preparedness and response policies and capacity. Land based spill refers to any spill impacting the terrestrial environment, including coastal shorelines, regardless of the source.

This review addresses three aspects of land based spill preparedness and response: World leading regime for land based spill preparedness and response

Effective and efficient rules for restoration of the environment following a spill

Effective government oversight and coordination of industry spill response The ministry has developed a policy intentions paper for consultation (intentions paper) on the three aspects of the province’s land based spill preparedness and response regime under consideration.

The purpose of this intentions paper is to describe the ministry’s proposed policy direction and seek input on enhancing spill preparedness and response in BC. The intentions paper is a discussion document and your feedback will influence the policy approach.

Although the call for input is on the ministry website, the contact is a management consulting firm C. Rankin & Associates.

Chevron advertises for Houston-based Kitimat plant logistics manager

Chevron, which recently took over management of the Kitimat LNG project is advertising for a Houston, Texas, based logistics manager for the project.

The ad gives (in part) this job description:

Chevron is accepting online applications for the position of Kitimat Plant Logistics Manager located in Houston, TX through February 19, 2013 at 11:59 p.m. (Eastern Standard Time).

The Kitimat LNG project is located in Western Canada and includes 1) construction of the 2 x 5.5 MTPA Kitimat LNG Plant and 2) the Pacific Trails Pipeline.

Responsibilities for this position may include but are not limited to:

Responsibility for overseeing and managing the entire plant logistics program including module, equipment and bulk cargo logistics throughout the overall supply chain. Development of the necessary organizational capability within the Kitimat team, Engineering, Procurement & Construction (EPC) Re / Engineering, Procurement and Construction (Management) (EPCM) Contractor organization, and selected logistics contractors’ organizations

Assist in the development of contract ITB templates and scopes of work for project logistics contracts for (a) Heavy module marine/road transport and (b) General cargo transport from worldwide locations to module yards and Kitimat, freight forwarding services, and in-country transport, including development of criteria to evaluate bids.

Oversee the selected logistics contractors’ performance of project logistics, focusing primarily on the movement of prefabricated modules from multiple locations to ports near Kitimat.

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.

Expansion of proposed Kitimat bitumen terminal urgent to get offshore markets, Enbridge tells JRP

Enbridge Northern Gateway has told the Joint Review Panel that expansion of the proposed bitumen and condensate terminal in Kitimat is urgent so the company can access offshore markets for Alberta bitumen sands crude.

Northern Gateway filed an update on its plans for the Kitimat in response to a ruling from the JRP, after Smithers-based activist Josette Weir questioned how Enbridge filed a route update with the panel which included the plans to expand the terminal.

The JRP ruled against two of Weir’s motions but upheld, in part, her objection that the terminal plans were not part of a route revision.

In the Motion, Ms. Wier argues that there are a number of completely unrelated documents embedded within the route revision changes including, for example, a “noticeable increase in the number of oil tanks at the Kitimat terminal” with “significant size increases included.” There is no discussion in the update documents on how these changes are related to the proposed routing change. Ms. Wier further notes that this evidence was submitted after the completion of questioning on engineering (including regarding the Kitimat tank farm) in Prince George last
November.

The Panel notes that it may be of use to parties for Northern Gateway to identify which of the exhibits submitted on 28 December, 2012, were: (i) directly related to Route Revision V; (ii)corollary to Route Revision V; or (iii) unrelated to Route Revision V. Accordingly, the Panelorders Northern Gateway to submit, on or before 1 February 2013, a chart setting out this information for each of the exhibits submitted in the 28 December 2012 update. Further, where the documents are listed as “unrelated to Route Revision V”, Northern Gateway is to provide a
brief description as to why this evidence is being filed at this time.

In response, Northern Gateway filed a spreadsheet with the JRP to clarify the reasons for including the expansion of the tank farm. As the JRP requested, the explanation is brief, but significant.

Northern Gateway stated that “the size and spacing of tanks will be optimized during detailed design.”

In recognition of the urgency of accessing offshore markets, Northern Gateway and its Funding Participants have recently agreed to proceed with engineering and design activities.

Brief description as to why this evidence is being filed at this time required:

…for preparation of a Class III Cost Estimate, at an expected cost of over $150 million. Discussions with the Funding Participants in late 2012 resulted in a more detailed analysis of the tankage required by shippers, with particular emphasis on ensuring an adequate degree of commodity segregation within the tank farm. That analysis, which concluded in December 2012, revealed that additional tankage would be required to satisfy commodity segregation requirements.

Northern Gateway included this information along with its Route V filing as a matter of convenience to all involved.

In respone to Weir’s objection that the Enbridge Northern Gateway filed a major change to the project and noted that most intervenors are limited to the deadlines set by the JRP, and that the engineering hearings in Prince George had already concluded.

In response, the panel ruled that Enbridge could present the evidence at the marine hearings in Prince Rupert that resumed today.

In its letter enclosing the 28 December 2012 update on Route Revision V, Northern Gateway noted that, “to the extent that there are questions regarding this filing that have not been previously addressed, members of the Northern Gateway Kitimat River Valley engineering design and emergency preparedness witness panel will be available to answer same when they appear in Prince Rupert.”

The Panel is of the view that any substantive questions on the updated evidence could best be
addressed through questioning in Prince Rupert, as suggested.

At the opening of the hearings in Prince Rupert, Coastal First Nations withdrew from the process, citing the cost and complexity of the hearings. Both events once again call into question the fairness of the Joint Review Process and whether or not there is a double standard, with one set of standards for Enbridge Northern Gateway and another for intervenors.

Northern Gateway Response to JRP Ruling 141 Route_Rev_V

Ruling No. 141 Notice of Motion by Josette Weir

Intervenor files challenge after Enbridge tells JRP it wants major expansion of Kitimat Gateway terminal

Revised Enbridge map of Kitimat harbour. — Enbridge filed a revised map of Kitimat harbour with the revised route for the Northern Gateway Pipeline and terminal in December 2012.

Enbridge Northern Gateway wants a much larger tank farm at its proposed Kitimat terminal, the company says in documents filed with the Joint Review Panel on December 28, 2012.

On that date, Enbridge filed its fifth revision of the Northern Gateway pipeline route and plans with the JRP. While for Enbridge engineers the filing may be a routine update, as surveys and planning continue, Smithers based enviromentalist Josette Weir has filed an objection with the JRP challenging the revised plans because, she says, the JRP has closed off any opportunity for intenvenors to make their own updates, calling into question once again the fairness of the JRP process.

From the documents filed with the JRP, it appears that Enbridge wants not only to expand the tank farm and adjacent areas but also to have a potentially much larger area on the shores of Douglas Channel for even more expansion in the future.

At the Kitimat terminal, Enbridge says there will now be 16 oil tanks, up from the original 11. The company also says: “The terminal site will also have some limited additional civil site development to allow for potential future site utilization.” While Enbridge proposes to keep the number of condensate tanks at three, their capacity would be increased.

In addition, Enbridge wants an enlarged “remote impoundment reservoir” to comply with the BC Fire Code, so that it would be:

• 100% of the volume of the largest tank in the tank farm, plus
• 10% of the aggregate volume of the 18 remaining tanks, plus
• an allowance for potential future tanks, plus
• 100% of the runoff from the catchment area for a 1 in 100 year, 24 hour storm event, plus
• the amount of fire water generated from potential firefighting activities at the tank farm.

Enbridge goes on to note:

An update to 16 oil tanks at the Kitimat Terminal is not expected to alter overall visibility of the marine terminal and therefore impact visual or aesthetic resources.

In her news release, Josette Wier, who describes herself as “an independent not funded intervenor in the hearing process,” says she filed a notice of motion on January 17, 2013, noting “there are numerous embedded proposed changes which have nothing to do with the route revision,” including the fact that “the tank farm in Kitimat is considerably increased from 11 to 16 tanks for the oil tanks with an almost doubled working capacity, while the condensate tanks capacity is increased by 29 per cent.”

“What does this have to do with a route revision?” she asks in the news release.

In the news release, Wier says: “that this is an abuse of process when engineering and design question period ended in Prince George last November. Not withstanding the underhanded way of presenting new evidence, re-questioning on those issues doubles the amount of work and expenses for intervenors.

“Abuse of process”

She asked the Joint Review Panel to order Northern Gateway to re-submit their proposed changes indicating clearly the ones unrelated to the route changes and describing them along with their rationale.

Wier goes on to say: “It is everyone’s guess why there is a doubling of the tank farm capacity, but certainly points out to the larger pipeline shipping volumes the company had indicated would be a possible Phase II of the project.” She says: “It looks like Northern Gateway is quietly moving into the 850,000 barrels a day proposal, twice the volume the application has been cross-examined about. It is clearly an abuse of process.”

In her actual notice of motion, Wier goes further by taking aim at the JRP itself by saying that “the Applicant [Enbridge] can make changes to the Application whenever they want. We have already seen in their July submissions inclusion of new evidence which conveniently escaped information requests. The added work and cost imposed on intervenors and the Panel seem irrelevant to the Applicant.” She complains that her requests for more information in an earlier notice of motion “was dismissed by the Panel on the grounds that my request ‘would require an unreasonable amount of effort (both by Northern Gateway and other parties reviewing the material’ …. If this argument applied to my Notice of Motion, I suggest it should apply to embedded changes buried in the Applicant’s filings of December 28, 2012.”

Rerouting at Burns Lake

A number of the other changes appear to show continued strained relations between Enbridge and First Nations, for example it says:

There is a possibility of relocating the pipeline route… further north of the Burns
Lake area to avoid proposed Indian Reserve lands that would overlap the pipeline route,.. This revision will be evaluated when further information on the proposed Indian Reserve lands is available and when further consultation with the relevant Aboriginal groups has taken place.

On the other hand the revisions also show that the pipeline will be now routed through an existing right of way through the Alexander First Nation, near Morinville, Alberta, as part of an agreement with the Alexander First Nation.

Another route change is near the Morice River, where Enbridge says

The Morice River Area alternate will generally have less effect on wildlife riparian habitat since it is located away from the Morice River and floodplain. This revision is also farther from the proposed Wildlife Habitat Area for the Telkwa caribou herd and no longer intersects any primary and secondary goat ungulate winter range polygons. However, this revision no longer parallels the Morice West Forestry Service Road (FSR) and Crystal Creek FSR and offers fewer opportunities to use existing rights-of-way. This may increase linkages between cutblock road networks and increase human access locally but does not preclude Northen Gateway from applying other methods to minimize linear feature density in this region.

Wier also complains that the Enbridge did not properly file its latest documents, asking the panel to rule that it order Northern Gateway to re-submit their last revisions submitted in December
using proper JRP evidence numbering system and “Adobe pages numbers.” The huge number of documents in the JRP system is confusing and improper filing makes it harder for intervenors and others to sort their way through new information.

Enbridge map of Kitimat harbour — A revised map of the Kitimat harbour as filed by Enbridge with the JRP in December 2012.

Revised Northern Gateway pipeline route map — Revised route map for the Northern Gateway pipeline as filed with Enbridge with the JRP on Dec. 28, 2012.

Northern Gateway NEB Application Update Dec. 2012

Chevron takes over Kitimat LNG operations from Apache, EOG and Encana

Apache has a new partner in the Kitimat LNG project, Chevron Canada Ltd and, in effect, Chevron is taking over the project from Apache who has been unable to find customers for the liquified natural gas project in Asia.

A news release from Apache announced “a broad agreement with Chevron Canada Limited to build and operate the Kitimat LNG project.”

Chevron Canada and Apache Canada each will become a 50 per cent owner of the Kitimat LNG plant, the Pacific Trail Pipeline and 644,000 gross undeveloped acres in the Horn River and Liard basins. Chevron Canada will operate the LNG plant, which will be located on the northern British Columbia coast, and the pipeline. Apache will continue to develop shale gas resources at the Liard and Horn River basins in north eastern BC.

Encana and EOG Resources — currently 30 percent non-operating partners in Kitimat LNG and Pacific Trail Pipeline — will sell their interests to Chevron and exit the venture. As part of the transaction with Chevron, Apache will increase its ownership of the plant and pipeline to 50 percent from 40 percent.

G. Steven Farris, Apache’s chairman and chief executive officer said in the company news release, “This agreement is a milestone for two principal reasons: Chevron is the premier LNG developer in the world today with longstanding relationships in key Asian markets, and the new structure will enable Apache to unlock the tremendous potential at Liard, one of the most prolific shale gas basins in North America.” “With experience developing LNG projects, marketing expertise and financial wherewithal, Chevron is the preferred coventurer to join Kitimat LNG,” Farris said. “Apache has a proven record in finding and developing shale gas resources in Canada and is the logical operator for the upstream elements of the joint venture.”

In its news release, Chevron quoted vice chairman George Kirkland as saying: “The Kitimat LNG development is an attractive opportunity that is aligned with existing strategies and will drive additional long-term production growth and shareholder returns.”

“This investment grows our global LNG portfolio and builds upon our LNG construction, operations and marketing capabilities. It is ideally situated to meet rapidly growing demand for reliable, secure, and cleaner-burning fuels in Asia, which are projected to approximately double from current levels by 2025.”

The two-train (stage) Kitimat LNG Project is still working through the Front-End Engineering and Design (FEED) phase. Construction has continued at the Bish Cove site throughout the summer but has slowed down to the uncertainty over the future of the project and some environmental problems.

Current plans call for two liquefaction trains, each with expected capacity of 5 million tons of LNG per annum (about 750 million cubic feet of gas per day). Kitimat has received all significant environmental approvals and a 20-year export license from the Canadian federal government.

The 290-mile (463-km) Pacific Trail Pipeline is planned to provide a direct connection between the Spectra Energy Transmission pipeline system and the Kitimat LNG terminal.

While the Apache release says: “The project has strong support from many of the First Nations along the route,” there is no support at this moment from the Wet’suwet’en, in the area from Burns Lake through Smithers to the mountains, because some houses are strongly opposed to the pipeline on their traditional territory.

In the Apache news release, Farris says: “”We want to thank and acknowledge EOG and Encana for their contribution to the development of the Kitimat project. We appreciate the hard work of many employees and contractors to advance the project to this stage and the strong support the plant and pipeline projects have received from local communities, provincial and federal officials and the Haisla and other First Nations.

“Construction of the plant and pipeline will have a significant economic impact, and the operational phase will provide opportunities for employment as well as royalties and tax revenues for the Federal, Provincial and local governments for many years,” he said. “Chevron and Apache will continue to develop this project in a safe and environmentally responsible manner.”

As the news releases point out Chevron is a major player in Australia’s LNG projects, considered by many to be Canada’s rival in finding market for natural gas in Asia. Chevron is the operator and led marketing efforts at Wheatstone, a two-train plant with capacity of 8.9 million tons of LNG a year that is expected to commence operations in 2016. Chevron also operates the Gorgon LNG project in Australia and LNG Angola.

Much of the media attention is also on the deal for the natural resources northeastern BC, with, Chevron Canada acquiring approximately 110,000 net acres in the established Horn River Basin from Encana, EOG and Apache, and approximately 212,000 net acres in the Liard Basin from Apache. Chevron Canada Limited and Apache will each hold a 50 percent interest and Apache will operate these two natural gas resource developments.

In its news release, Encana concentrates on the natural gas deal, quoting Randy Eresman, Encana’s President & CEO, “This investment by Chevron, a multinational LNG player, represents a key step in the development of LNG export from Western Canada. Our main goal since we first acquired an interest in Kitimat LNG almost two years ago was to help ensure the progression of this project towards its development. While we are no longer a direct participant in this project, we continue to support LNG export as vital to diversifying markets for North American natural gas.”

The company goes on to say that: “The sale of Encana’s interest in the proposed Kitimat LNG export facility is consistent with the company choosing to focus on its core business. In addition, this transaction reduces Encana’s future capital commitments. The proceeds from this transaction will help to strengthen the balance sheet and provide further financial flexibility to fund capital programs and develop key and emerging resource plays.”

The Financial Post points out that “the Chevron deal leaves most of the LNG projects in the hands of foreign companies, which have competing interests in LNG projects across the world.” That means that the Haisla Nation, with its partnership with the BC LNG project, is one of the few Canadian players left in the LNG scramble.

Kitimat council endorses tax breaks for LNG facilities

The District of Kitimat Council Monday, Dec. 17, 2012, endorsed a campaign by the Canadian Association of Petroleum Producers asking for tax breaks of Liquified Natural Gas liquefaction facilities in the 2013 federal budget.

A report to the Kitimat council said that on November 23, the mayors of Kitimat and Prince Rupert, sites for proposed LNG terminals, and the mayors of Dawson Creek, Fort St. John and Fort Nelson, where the shale gas deposits are found, held a video conference call with CAPP to discuss the new tax proposals.

CAPP is asking that the federal government to change the classification of LNG liquefaction facilities under tax law so that they are equivalent of manufacturing facilities. Currently LNG liquefaction are can claim depreciation at eight per cent, while manufacturing and processing facilities can claim depreciation at 30 per cent.

The report to Kitimat council from chief administrative officer, Ron Poole, said “This change will increase Canada’s competitiveness for global market access and support significant economic growth.”

A report written by the Canadian Association of Petroleum Producers attached for council argues that by turning natural gas into its cold, liquefaction form, it is actually being manufactured. CAPP quotes tax law as saying:

manufacture of goods normally involves creation of something…processing of goods usually refers to a technique of preparation, handling or other activity designed to effect a physical or change in an article or substance.

CAPP goes on to argue:

The chemical composition of the natural gas is changed through treatment process and physical change occurs through the liquefaction process. The treatment processes include removing impurities such as acid gases and mercury, as well as dehydration and the removal of heavier hydrocarbons in order to facilitate the manufacturing process and to meet end market specifications.

CAPP goes on to argue that the current taxation levels put Canadian LNG facilities at a competitive disadvantage with potential competitors in the United States and Australia. It says that under the current tax treatment in Canada, an LNG liquefaction facility would take 27 years to depreciate. In the United States and Australia, LNG facilities are depreciated over 10 years. Changing to the Canadian manufacturing level would depreciate over seven years.

CAPP notes that there are currently six liquefaction plants under consideration by their respective corporate boards. It says that the tax change could hasten a positive decision by those companies, ensuring the projects go ahead because “Canada is a natural fit with its open-for-business attitude, stable political environment and commitment to responsible development.”