Kitimat voters in the upcoming municipal election should carefully, very carefully, consider who are the best candidates that will, as much as humanly possible, produce a “world class” municipal mayor and council.
Northwest Coast Energy News will not endorse any individual for mayor or council in the 2014 municipal election.
However, this election is probably the most important in the District’s history and so this editorial will outline the issues facing the District of Kitimat.
When that council takes office in January 2015, it must have one item high on the agenda. Plan B. That’s B for Bust. In the past few days, just as the nomination process closed for municipal candidates, the world’s commodity markets began showing a sharp downturn and that commodity downturn will be a factor, like it or not, during the years that the new council will be in office.
So the District of Kitimat, elected officials and staff will have to consider both a possible boom if LNG goes ahead or a bust if the world’s commodity markets tank, as some are already predicting. (Although it should be noted that apocolyptic news is good “click bait” in part two we will discuss the consequences of the current commodity down turn)
Why a “world class” council?
The term “world class” has been bandied about a lot recently, especially by BC Premier Christy Clark and Prime Minister Stephen Harper. But that “world class” term has largely been political spin. For Clark it gives her government a hall pass if they decide, in the end, that Northern Gateway isn’t worth the trouble. For Stephen Harper, “world class” is nothing more than a propaganda term.
When it comes to Kitimat, however, it is wise to take the term “world class” seriously. How many small town councils have to deal with the world’s second largest corporation, Royal Dutch Shell, the twelth, Chevron and, if Glencore takes over Rio Tinto, the tenth? How many small town councils have to deal daily with federal and provincial governments, governments that while praising Kitimat for its potential really want to bury it by taking for themselves much of the advantages that industrial development could bring here?
There is already one world class local council in the region, just down the road in Kitamaat Village, the Haisla Nation Council, which shows that with strong, intelligent and determined leadership, a small group can come out ahead in tough negotiations with giant transnational corporations and the governments. Yes, rights and title do give the Haisla Nation a negotiating and legal advantage, but a paper advantage is useless without vision and as Chief Counsellor Ellis Ross has said in interviews, the abiity to learn from mistakes and apply those lessons. We’ve heard people say that if Ellis Ross ever chose to run for mayor of Kitimat (which he wouldn’t because he is focused on improving the lives of the Haisla) he would win in a landslide.
The present council has had a couple of major failures, both with the Northern Gateway project. The first was the failure to participate in any way with the Joint Review process. Council chose to be neutral, and stubbornly maintained that neutrality meant sitting out the entire Joint Review hearings rather than participating in such a way that the Kitimat was properly represented during the hearings without taking a stand one way or another. The Haisla intervenors ablely not only represented the interests of the Nation, by default the Haisla often represented the interests of the entire district before the JRP. The second was the plebisicite which had a convoluted question and protracted disageement on how the plebisicite should be managed.
The question for voters is have those candidates for mayor and council who are part of the present adminstration shown a willingness to learn from those mistakes and do better in the next four years?
Which candidates for mayor and council have the intelligence, determination and vision to quide Kitimat during the next four years. Which candidates have the negotiating saavy and yes (whether male or female) cojones to get the best deal for the District in the coming years?
Access to the ocean
The big issue in this election, whether or not we are in a boom or a bust, is action to ensure that the residents of Kitimat have unimpeded access to the ocean for both casual recreation and for boaters. That means Kitimat needs a tough, determined council that is willing to really represent the residents in in the water access issue.
When it comes to the Regional District’s actions on the sale of MK Marina, the District of Kitimat has acted like a wimp. The attitude seems to be well, Kitimat has only one vote on regional council and the rest of the region doesn’t really care, so there’s nothing we can do about it. True leadership would be finding an imaginative way to make sure the interests of the people of Kitimat in gaining access to the ocean are not lost in regional council indifference.
It also means that there must be better relations with the Haisla Nation and a way around the fact that Rio Tinto controls far too much of the waterfront.
There’s also the long term problem that the federal government decreed two years ago, without consulting either the District or Rio Tinto, that the private port would become a public port. We’ve heard nothing about that since but the Harper government’s potential interference with the port of Kitimat cannot be ignored.
That may mean hiring additional staff. This site has said time and time again the District needs its own in house staff city solicitor who can deal with all the issues that come up, rather than depending on occasional legal advice from a lawyer on retainer. If the district can hire smart planners and economic development officers, it should also bring back the position of “harbour master” which existed on paper some years ago and that way there would be one district staffer who could use that title (even if conflicts with the feds) to work full time on ocean access.
Experience counts
One thing is certain, all members of the current District Council have had a huge work burden during the past three years, a work burden far beyond anything that is normal for a small municipal council in a town of 8,000 people. That work burden will likely increase during the next four years.
Experience counts. Voters should ask which councillor and mayoral candidates have handled that work burden the best? Which of the candidates, new or old, are genuinely willing to take on that burden, which will range from negotiating (within the powers of a municipality) with some of the world’s giant corporations, many with a century of more of negotiating experience, while at the same time dealing with perennial issues like snow clearing in the winter, garbage collection during bear season and deciding which of Kitimat’s unique system of sidewalks need to be fixed this year?
New blood
There are at least two positions on council that are up for grabs by new comer candidates. Who ever wins those positions will change the makeup of council, may even change the voting pattern (which during the current situation was often four to three one way or another, with Corrine Scott who is not running again, often, but not always, casting the deciding vote). So the voters should listen carefully and decide no matter what their position on all issues, who are the candidates that will strengthen the overall council.
One issue candidates
While we won’t know for certain until the debates, there appear to be a number of one issue candidates running, candidates that, it seems, want to refight both sides of the Northern Gateway plebisicite.
Unless these candidates show a wider vision the voters should reject those candidates.
On the “pro development” side there is a strange notion that if Kitimat could only elect a council that welcomes any industry, any time, then the world will beat a path to our door. That’s not only a fantasy, it’s a bad negotiating tactic as Christy Clark has found out. Clark in her provincial election campaign put all her political eggs in the LNG basket and (to mix metaphors) now the LNG industry is calling her cards and Clark has very little in the pot and a very weak hand. The big corporations would love a council that comes begging, cap in hand and will take any handouts the company may offer. Just look at Petronas and what it is demanding (not asking) from British Columbia.
On the other hand, a candidate who is stubbornly on the environmental side is also a danger to the future of the district, since that candidate may also be an impedement to tough negotiations needed to protect the district’s environment including the Kitimat airshed, the Kitimat River and the Kitimat Arm.
Electing a council that is unbalanced either on the pro development side or the pro environment side will solve nothing and will only increase the polarization in the community.
Electing one issue candidates who care only about one side or the other energy debate while it may give some voters satisfaction, will likely mean that these candidates, if elected, will not be working hard on the day-to-day municipal issues like water, sewerage, snow clearing, how many books the library has or unraveling the recycling condundrum.
So cast your ballot for those candidates best suited to take on the world, while at the same time making sure the sidewalks are safe.
You might not be seeing it at the gas pumps at the moment, but you soon will, the price of gas has gone down by 30 per cent since June.
Prices of key commodities, oil, coal and iron ore are dropping. And the weakness in the market for two of those commodities oil and iron ore should be setting off the alarm bells in Kitimat and the northwest.
The declining price of oil will soon affect all those energy-related projects that are supposed to bring an economic renaissance to northwest British Columbia.
As for iron ore, people might ask, what does iron ore have to do with us, there are no iron mines or steel mills around here.? However, in the highly integrated world economy, Rio Tinto is one of the world’s largest producers of iron ore, the decline in iron ore prices is affecting Rio Tinto’s bottom line and that is why, analysts say, the company may be vulnerable to a take over by the little known commodities giant Glencore.
The oil industry has always experienced very long, slow and deep cycles in supply, demand and prices: the current downturn is no exception.
Kemp says the current up cycle began around 2002, with rising oil prices. The financial collapse in 2007 and 2008 briefly interrupted the cycle but now according to Kemp and other analysts there is a glut of oil on the market and prices are falling world wide.
High prices meant not only new plays, especially in the Alberta bitumen sands, but also stronger efforts to save money by increasing energy efficiency and, yes, turning to cheap natural gas.
There are also new factors at play. In the past when there was a downturn in oil prices, OPEC led by Saudi Arabia, would limit supply to keep the price at a profitable level. However, the flood of oil on to the market from shale oil plays, mainly in the United States but also in Canada, has meant that OPEC can’t do that anymore. Too much competition. So the analysts say, the Saudis and other OPEC members are actually starting a price war to retain market share.
When Kemp was writing last week, he said the key marker, North Sea Brent crude:
if prices are adjusted for inflation (using average U.S. hourly earnings), Brent prices are at the lowest level in real terms since October 2007, exactly seven years ago.
There has always been a lot of skepticism among long term residents of Kitimat who have seen boom and bust cycles before and so they, rightly as it turns out, have been wary of industrial promises. Then there’s the current housing debate which may soon see the out of region speculators and developers caught with their pants down in the midst of a Kitimat January blizzard.
The commodity downturn also shows the foolishness of the politicians, business people and commentators who kept saying that BC is a “natural resource economy” and restrictions on corporations and strong environmental requlations will only hurt that economy. Who needs diversification? Who needs a fishing guide anway? It is fairly clear already that Christy Clark’s promises of a debt free province have as much credibility as speculating in Dutch tulip bulbs.
As for the idea among some here that if Kitimat had only voted in favour of Enbridge Northern Gateway, the gates to ecomonic paradise would open, that is foolishness. You can be certain when the Saudi princes decided on a price war to keep themselves in the luxorious lifestyle which they believe they are entitled, they didn’t consider whether Kitimat voted for or against Northern Gateway.
Part of the impetus behind constructing new pipelines to carry bitumen from northern Alberta to the U.S. Gulf Coast, Kitimat on the Pacific, or even all the way across the country to Saint John, N.B., was to help close the substantial discount between Canadian oil and world prices. Well, crude’s recent drop into the $85‑a‑barrel range has basically collapsed the once wide‑open spread that had existed between West Texas Intermediate and Brent crude with hardly any new lengths of pipe being laid into the ground at all.
Rubin went on to note that the decision by the Saudis to launch the price war has changed everything.
For pipeline companies with major proposals on the table, such as TransCanada and Enbridge, falling oil prices are a game‑changer of the same magnitude that rising prices were a decade ago. Back then, soaring prices created an urgent need to build new pipelines to connect North America’s burgeoning supply to coastal refineries and world markets.
We’re now in a different world. At the root of today’s problem is global demand that is no longer growing quickly enough to support the prices necessary to keep expanding expensive unconventional sources of supply such as the oil sands. Lower prices will effectively strand those reserves regardless of the transportation options that may become available. Even if President Obama approved Keystone XL or the National Energy Board gave the green light to Energy East, falling commodity prices mean that soon there might not be enough oil flowing out of northern Alberta to fill those new pipelines.
This week’s near disaster with the Russian container ship Simushir, where the coast of Haida Gwaii was saved by a change in the wind direction, hasn’t helped either.
Will the refinery fade to black?
Economists have always been skeptical about David Black’s plan for the Kitimat Clean refinery and Black has admitted that he also had not much support for the refinery idea either from the hydrocarbon indusry or from government.
Most important, Black has said that he as a businessman intends to eventually make a profit by selling refined product. In fact on his website, Black said he expected the refinery to go into profit after just seven to ten years of operation.
But now comes the flaw in Black’s business plan. According to the website, the Kitimat Clean project is based on North Sea Brent Crude priced at $110 US a barrel. The refinery would take advantage of the “discount” on deliveries of Alberta bitumen crude which the site estimated at $35 a barrel. Black’s site says the refinery would be profitable if it could purchase bitumen at a $23 discount, making $12 a barrel over the world price.
Unfortunately, as of this writing, 11 am on October 20, the price of Brent Crude is now $85.79 and dropping slightly. West Texas Intermediate Crude, the other bench mark is even lower at $82.79 a barrel.
It looks like the drop in oil prices wipes out Black’s plan for profitability, since Brent Crude is already $25 a barrel cheaper than Black had projected.
What’s that got to do with the price of gas?
The falling price of crude oil is also going to have a major impact on the liquified natural gas projects in the northwest. The current economic situation will soon see the short term players and speculators cut and run, leaving, it is hoped, a couple of long term players in the west coast LNG terminal market. However the volatility in the dropping oil market may mean that the all important Final Investment Decisions are delayed yet again.
That’s because, at the moment, in Asia, the price of natural gas is calculated as a per centage of the price of crude oil, what is called the Japan Cleared Customs price. And as the LNG Journal has reported the price of LNG in Japan has dropped to the 2009 level.
East Asian Delivered LNG Indicator Price hit its lowest level since 2009 at $12.30 million British thermal units with European Brent crude oil prices collapsing to $82.85 per barrel. The East Asia LNG price is based on the Japanese Crude Cocktail method of assessing long-term contract cargo prices for Japan, based on oil which last hit current levels and then slipped below $80.00 per barrel during 2009.
The idea of LNG exports, especially since the Japanese earthquake in 2011, is that the companies can make a big profit by buying natural gas at low North American prices, exporting and then selling at the higher Asia price. In a free market world, however, the Asian countries and companies have, for the past few years been balking at buying at the higher JCC price and attempting to buy at the much lower North American Henry Hub price which at this writing was $3.72 MMBTu. Today’s JCC LNG price was $12.75, still higher than the North American price, but as LNG Journal notes, at a five year low.
Weaker oil prices may put proposed LNG projects “to sleep for a number of years,” Fereidun Fesharaki, chairman of Facts Global Energy, an industry consultant, said in a phone interview. “For the projects that are already under construction, it hits their pocketbooks seriously.”
Prices below $80 a barrel may be a “disaster” for some projects, said Fesharaki, who forecasts Brent may decline to $60 a barrel before the end of the year, then rebound to about $80 by the end of 2015.
and
“There’s no doubt if we were to see the type of crude oil prices we’re seeing now continue they would be looking at lower LNG prices,” Daniel Hynes, senior commodity strategist at Australia and New Zealand Banking Group Ltd., said by phone. “On face value, it would put pressure on margins.”
Long term LNG prospects
On the other hand, long term prospects for LNG exports are good. Demand in the Asian markets is still growing.
According to the Nikkei Asian Review, the Japanese Ministry of Economy, Trade and Industry projects that by 2020, 70 per cent of Japan’s LNG will come from Australia and North America. That doesn’t mean that Canada won’t have rivals, the projections say that the United States, which is just starting many of its LNG export projects could be Japan’s third largest customer with Canada in fourth place.
There are big benefits to getting LNG from North America and Australia. The unlikeliness of pirate attacks is one. There is also less political uncertainty. And then there is the price. U.S. shale gas, for example, costs about 20% less than what Japan currently pays for LNG.
Diversification
With the Rio Tinto Alcan Kitimat Modernization Project construction phase winding down, with some uncertainty about the future of Rio Tinto itself and with more possible delays in the Final Investment Decisions for LNG Canada and Kitimat LNG, Kitimat needs a Plan B (and a Plan C or D or E).
The idea of a retirement community is no longer viable, costs of housing, even if they drop, are just too great.
Kitimat’s second strength has always been tourism and fishing. In 2015, there must be stronger efforts of support both fishing and tourism, which, in the long term will support that regions economy through good times and bad.
That means the new council must be firm in demanding (yes demanding) full access to the Kitimat waterfront and that includes a well-managed marina or marinas that have the capacity for recreational, adventure and fishing guiding and industrial use.
The District of Kitimat must come up with a plan that will promote the advantages of the region as a tourist and fishing destination. While the Chamber of Commerce has being doing a good job, up to now as the main promoter of tourism, Kitimat’s public image across Canada and the world is soley industrial and the District should assume more responsiblity for changing that image. The economic development staff at the district have been working largely on large scale industry. It should devote more time and money to the natural wonders of the area.
The plan B should also mean balance. Balance between industry and environment. The sneering contempt for those who want to protect the environment of the northwest is short sighted thinking, because a large proportion of the economy will depend for decades to come on attracting visitors to the wild beauty of of this part of British Columbia. That means, as much as it can within municipal powers, the new council must strengthen environmental protection in Kitimat.
Back in the 50s, Kitimat was planned for a future, a future that didn’t exactly work out when the price of aluminum slumped in the early 60s. Now we’re facing a slump in energy prices, so those plans will change. The plan B must include, as much as possible, creating a mainstay base that will smooth out the boom and bust of the commodities cycle.
The motto on the Kitimat snowflake logo is “A marvel of nature and industry.” The new council should make sure that motto is applied during the coming years.
The Shell-led LNG Canada project unveiled its commitments to Kitimat at a ceremony at the community information centre at the old Methanex site on October 7, 2014.
LNG Canada has forged the commitments in a sheet of aluminum that is bolted to the wall of the community information centre. Kitimat Mayor Joanne Monaghan unveiled the aluminum sheet, assisted by Kitimat Fire Chief Trent Bossence. Afterward, Susannah Pierce, Director, External Affairs, LNG Canada, signed the sheet, followed by Mayor Mongahan, Chief Bossence, other LNG Canada officials and members of the community.
Guests at the unveiling of LNG Canada’s commitment to the Kitimat community watch a video prior to the unveiling ceremony. (Robin Rowland/Northwest Coast Energy News)
LNG Canada’s Community Commitments
LNG Canada is proud to outline its commitments to the community, created through a collaborative effort with local residents. In April, June and September 2014, LNG Canada met with the Kitimat community to develop and refine the commitments our company will meet to ensure we are a valued member of the community throughout the lifetime of our project. We are grateful to the many individuals who took part and shared their wisdom and experience.
Our Commitments to the Community
1) LNG Canada respects the importance residents place on companies being trusted members of their community. We aspire to gain this trust by proactively engaging with the community in an honest, open and timely manner; by listening and being responsive and accessible; and by operating in a safe, ethical and trustworthy way.
2) LNG Canada understands that the ongoing well being of the community and the environment are of paramount importance. LNG Canada will consider the health and safety of local residents, employees, and contractors in every decision it makes.
3) LNG Canada recognizes that the environment and natural surroundings are vital to the community. We will be dedicated to working independently and with the community to identify and carry out ways to reduce and mitigate the impact of our facility footprint on the natural surroundings – in the Kitimat Valley, the Kitimat watershed and the Kitimat airshed.
4) LNG Canada is aware of the importance to the community of maintaining and improving access to outdoor recreational opportunities. We will work with the local community to facilitate the creation of new projects that protect or enhance the natural environment and that provide access to the outdoors and the water.
5) LNG Canada recognizes it will be one company among other industrial companies operating in the community. We will work with other local industry leaders to manage and mitigate cumulative social and environmental impacts, and create opportunities to enhance local benefits associated with industrial growth.
6) LNG Canada acknowledges that the commitments we make are for the long term. We will work with the community to develop an environmental, social and health monitoring and mitigation program that meets regulatory requirements and we will share information on the program with the public for the life of our project.
7) LNG Canada understands the need for the community to benefit from our project and values the contributions all members of the community make to the region. We will work with the community to ensure that social and economic benefits from our project are realized and shared locally.
8) LNG Canada acknowledges the importance the community places on our company being an excellent corporate citizen and neighbour that contributes to the community. In addition to providing training, jobs and economic benefits, we will make social investments important to the community to positively impact community needs and priorities.
Kitimat mayor Joanne Monaghan, Susannah Pierce, Director, External Affairs, LNG Canada and Fire Chief Trent Bossence after the ceremony unveiling the community commitment. (Robin Rowland/Northwest Coast Energy News)
The world’s business media are paying rapt attention to Glencore’s now stalled attempt to take over Rio Tinto.
Late Tuesday, the company issued a news release which says
Glencore announces that in July 2014 it made an informal enquiry by telephone call to Rio Tinto, seeking to gauge whether there might be any interest at Rio Tinto in investigating some form of merger between the two companies. Rio Tinto responded that it was not interested in pursuing these discussions.
Glencore confirms that it is no longer actively considering any possible merger transaction with, or offer for the shares of, Rio Tinto.
As a consequence of this announcement, the Panel Executive has determined that Glencore is for a period of 6 months from the date of this announcement subject to Rule 2.8 of the City Code on Takeovers and Mergers in relation to Rio Tinto. Glencore however reserves its rights to make an offer in the future with the consent of the Takeover Panel, either with the recommendation of the Board of Rio Tinto, in the event of a third party offer for Rio Tinto, or in the event of a material change in circumstances.
The board of Rio Tinto notes the recent press speculation regarding a possible combination of Rio Tinto and Glencore.
The Rio Tinto board confirms that no discussions are taking place with Glencore.
In July 2014, Glencore contacted Rio Tinto regarding a potential merger of Rio Tinto and Glencore.
The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto’s shareholders.
The board’s rejection was communicated to Glencore in early August and there has been no further contact between the companies on this matter.
According to Bloomberg, Glencore’s secretive CEO Ivan Glasenberg made a verbal stock offer to Rio Chairman Jan Du Plessis in July. The Rio Tinto board rejected the offer in August, which means under that UK law, Glencore must wait six months before making another bid.
Glasenberg’s informal July bid carried no significant premium, said the person, who asked not to be identified as the information is private.
Bloomberg’s television arm reports that the Glasenberg’s offer was in stock, an attempt, apparently, to get Rio Tinto “on the cheap.” Earlier Forbes reported that there were rumours of an offer from Glencore to Rio Tinto of a “share-swap merger”
Bloomberg goes on to report that.
After being rebuffed by the board, Glencore has reached out to Rio’s biggest investor, Aluminum Corp. of China, to gauge its interest in a potential deal in the next year, according to people familiar with the matter.
After the initial report on the takeover Monday, business writers used epic analogies.
Meanwhile, behind its premium paywall Lex, the Financial Times is comparing the Glencore bid for Rio Tinto to the Game of Thrones.
The analysts are saying there are two main factors, Rio Tinto’s balance sheet has been weakened by a downturn in the iron ore market while at the same time Glencore aims to overtake Rio Tinto rival BHP Billiton. If it acquires RT, then Glencore will become the world’s largest mining and resource company.
The business media all say Glencore is already the world’s biggest trader in commodities.
China is a major force behind this corporate Game of Thrones. China wants more access to world resources for its increasingly hungry industry and population,while at the same time it has apparently all the iron ore it needs and iron ore is Rio Tinto’s biggest asset. The key player is a giant Chinese aluminum company now under investigation as part of the country’s corruption crack down.
Glencore is already huge, listed as Number 10 on the Fortune Global 500 list . Rio Tinto is far down at number 201. (Walmart is number one. Companies involved with Kitimat are Shell in second place, Sinopec in third and the China National Petroleum Corporation in fourth. Chevron is in 12th spot.)
Glencore is a major player in the aluminum business with assets around the world, some in partnership with the Russian giant aluminum group Rusal . According to Wikipedia, Glencore owns 8.8 per cent of a joint venture with Rusal, and the Sual Group (Siberian-Urals Aluminium Company) . That joint venture, Wikipedia says, has created the “World’s largest aluminium and alumina producer with 110,000 employees in 17 countries.”
Glencore along with Rusal has an undisclosed interest in Rusal’s Windalco alumina operation in Jamaica. Glencore also has an undisclosed interest in the Alumina Partners of Jamaica. It owns 44 per cent of Century Aluminum in Monterey California. Glencore has also undisclosed interests in idle aluminum smelters in Washington State and Montana. It has an undisclosed interest in Kubikenborg Aluminium AB in Sweden, Aughinish Alumina in Ireland and Eurallumina in Sardinia.
In the northwest, Glencore, through its agricultural subsidiary Vittera, is a partner, along with Cargill Ltd. and Richardson International in the Prince Rupert Grain Terminal. In Vancouver, Glencore owns Vittera’s Cascadia grain terminal in Vancouver.
located on the south shore of Burrard Inlet. Vittera Inc. owns and operates Canada’s largest grain handling network. The terminal handles wheat, durum, feed barley, malting barley, canola seed and specialty products, with storage capacity of 282,830 tonnes of product, handling loading from its 244 metre berth with a depth of 14.6 metres. –
Glencore is also developing a metallurgical coal mine near Chetwynd.
A Glencore stock photo of slag tapping at the Sudbury Smelter. (Glencore)
Glencore, through the earlier 2013 take over the mining company Xstrata owns the famous Kidd copper and zinc mine near Timmins, Ontario. The operation has 1300 employees. (Xstrata earlier took over the well-known Canadian mining company Falconbridge). It also operates the Horne copper Smelter in Rouyn-Noranda, Québec, which employees 700 and the CCR copper Refinery in Montreal, Québec which employees 650.
In Sudbury, Glencore is reviving the Errington-Vermillion Project, two deposits were that were previously mined in the 1920s and 1950s. It says the project has potential for approximately nine million tonnes, polymetallic- zinc, lead,copper, silver, gold or a rate of 2,900 tonnes per day.
The other factor for Kitimat with Glencore is that, unlike Rio Tinto, which is mostly a mining and smelting company, Glencore has interests in natural gas, oil and shipping and it is reported that the company wants to expand its hydrocarbon business from extraction to shipping.
According to Forbes, many Rio Tinto shareholders are not happy about the costs of the takeover of Alcan
The chairman of Rio Tinto, Jan du Plessis said the board was happy with the leadership of managing director, Sam Walsh, and finance director, Chris Lynch.
Interestingly, that might not be a view shared by all Rio Tinto shareholders who are still smarting from the $40 billion written off after the ill-timed acquisition of the Alcan aluminium business, followed by a $3 billion write-off after an equally poorly executed coal asset deal in Africa.
(It should be noted that Walsh was not the CEO at the time of both acquisitions, but was brought in to put Rio Tinto back on track after those huge losses)
The Rio Tinto news release says it’s business as usual:
Rio Tinto remains focused on the successful execution of its strategy, which the board of Rio Tinto is confident will continue to deliver significant and sustainable value for shareholders….
The board believes that the continued successful execution of Rio Tinto’s strategy will allow Rio Tinto to increase free cash flow significantly in the near term and materially increase returns to shareholders. Rio Tinto’s shareholders stand to benefit from the very considerable value that this will generate.
RBC Capital Markets analyst Timothy Huff said: “A potential merger with Rio would enable Glencore to get hold of the lowest-cost iron ore business in Australia. This is likely just a shot across the bow from Glencore and we expect Glencore to play the long game with any highly desired acquisition target. While asset divestments may have to play a larger part in a Glencore/Rio tie-up, we think the broader strategy for an enlarged group makes sense.”
The Globe and Mail Report on Business says
It is an open secret that Mr. Glasenberg, a multibillionaire South African, has every intention of using mergers and takeovers to greatly extend Glencore’s reach along the commodities value chain. Glencore’s strategy is to control the mines, the warehouses, the ports, the ships and the trading networks that produce and distribute commodities.
The question is whether Rio’s management and shareholders would endorse a deal that could come with no takeover premium. Some analysts think not.
One problem with Glencore’s approach to Chinalco is that the company is part of the wider probe by the Chinese government of corruption. As Reuters reported
Aluminum Corp of China general manager Sun Zhaoxue is suspected of “serious violations” of the law, a euphemism for corruption, according to a notice published by China’s Central Commission for Discipline Inspection.
Sun is also the vice chairman of Chinalco’s listed subsidiary, Aluminum Corp Of China Ltd. He is the former president of China National Gold Group Corp, the country’s biggest gold producer.
Some business analysts say even if Rio Tinto shareholders are not happy with current management they may not want their holdings affected by a possibly corrupt Chinese company.
On the other hand, as the Telegraph points out, it is really the Chinese government that will make the decision, not the company itself.
China’s government holds the key to a deal despite Rio Tinto’s public rejection of Glencore’s interest. State-owned Aluminum Corporation of China is the largest shareholder with around 10 per cent and Glencore reportedly started talking to the Chinese in the summer to sound out their interest in an exit. Although China is the world’s largest consumer of iron ore and owning such a significant stake in one of the world’s biggest mining groups is strategic now could be a good time to exit. The world is flooded with iron ore and securing supplies for steel mills is no longer an issue for the Chinese government. Now is a good time to cash in.
The man behind the so-far failed deal, who is likely “patiently stalking” Rio Tinto is the highly secretive and private Ivan Glasenberg.
Pounce, leak and wait.
It is a classic strategy in the shadowy world of mergers and acquisitions and Ivan Glasenberg, the chief executive of Glencore, is a master of this dark art.
Although a potential $160 billion mega takeover of the world’s largest shipper of seaborne iron ore, Rio Tinto, was flatly rejected in August, don’t bet on Glasenberg walking away for good
Glasenberg was born in South Africa in 1957, and apparently now holds four passports, South Africa, Australia, Israel and as of 2011, Switzerland.
When Glencore went public on the London Exchange in 2011, which the Guardian called “the biggest stock exchange float in British history,” the British media received a letter from a London law firm warning the normally aggressive media not to probe into the private lives of the company executives.
Glencore executives, the letter said, “are extremely private individuals”, who expected scrutiny of their business activities, but not their personal lives. A warning followed about the “security risk” that could be posed by any reports about their homes or private lives.
It appears that for the British media the royal family and missing school girls are fair game but not Glencore’s executives.
Should Glencore ever takeover Rio Tinto, the Wall Street Journal says Glasenberg told the paper Glasenberg: We Don’t Do Work-Life Balance may be a indication of the future, especially for management.
Although he was referring mainly to the company’s main business, commodity trading, the interview is enlightening.
Asked in an interview with The Wall Street Journal if the company has a work-life balance, the 57-year-old billionaire, a former coal trader, says: “No. We work. You don’t come here to take life easy. And we all got rich from it, so, you know, there’s a benefit from it.”
This competitiveness, he says, is smart business. “If I’m not pulling my weight and setting an example” and “traveling 80% of the time”, his charges would complain to the board and try to get him fired….
Mr. Glasenberg says the phenomenon is still at play. “I see it happening. Some guy suddenly decides: ‘I want to take it easier, I want to spend more time with the family’… an attack will come.”
Mr. Glasenberg, who had been CEO of Glencore since 2002, says he is insistent on instilling this culture at Xstrata, a mining company. Glencore had amassed a portfolio of mines over the past decade. “I thought if we could put our hard-working culture as traders into the asset management it will be a great combination and we did do that,” he says.
One area where Glasenberg does get soft however is on worker mobility, noting that blue collar miners can work their way up to earning the eight-figure salaries enjoyed by his squadron of commodities traders. Just try him.
“You want to be a trader, come be a trader,” he told Wall Street Journal. “You want to travel six days a week, you want to travel the world, the door’s open. I earn more than you. Come be a trader. Please, the door’s open.”
If the Glencore news release is correct, that means in six months, on April 7, 2015, the next move in the future of Rio Tinto will come, unless, as the Glencore news release states “if there is a material change in circumstances”
One thing is clear, Kitimat can now add Rio Tinto and Rio Tinto Alcan to the mix of uncertainty along with Shell, Chevron, Enbridge, Apache and the rest of the corporate movers. In other words, we are all extras in the corporate Game of Thrones.
Chevron Corporation says its wholly-owned subsidiary, Chevron Canada Limited, has reached agreement to sell a 30 per cent interest in its Duvernay shale gas play to Kuwait Foreign Petroleum Exploration Company’s wholly-owned subsidiary, KUFPEC Canada Inc., for $1.5 billion.
The total purchase price includes cash paid at closing as well as a carry of a portion of Chevron Canada’s share of the joint venture’s future capital costs. The Duvernay is located in west-central Alberta, and is believed to be among the most promising shale opportunities in North America.
The agreement creates a partnership for appraisal and development of liquids-rich shale resources in approximately 330,000 net acres in the Kaybob area of the Duvernay.
“This sale demonstrates our focus on strategically managing our portfolio to maximize the value of our global upstream businesses and is consistent with our partnership strategy,” said Jay Johnson, senior vice president, Upstream, Chevron Corporation. “The transaction provides us an expanded relationship with a valued partner. It also recognizes the outstanding asset base we have assembled.”
Following the closing of the transaction, Chevron Canada will hold a 70 percent interest in the joint venture Duvernay acreage and will remain the operator. The transaction is expected to close in November 2014.
“We remain encouraged by the early results of our exploration program and view the Kaybob Duvernay as an exciting growth opportunity for the company,” said Jeff Shellebarger, president of Chevron North America Exploration and Production Company.
Chevron Canada has drilled 16 wells since beginning its exploration program, with initial well production rates of up to 7.5 million cubic feet of natural gas and 1,300 barrels of condensate per day. A pad drilling program recently commenced which is intended to further evaluate and optimize reservoir performance as well as reduce execution costs and cycle time.
There’s a dumb, dumb, really dumb idea that just won’t go away—that Enbridge could solve all its problems if only, if only, it would send the Northern Gateway Pipeline to Prince Rupert.
Enbridge long ago rejected the idea. Before Enbridge updated its website to make Gateway Facts, to make it slick and more attractive, the old website had an FAQ where Enbridge explained why it wasn’t going to Prince Rupert.
Did you consider running the pipeline to Prince Rupert where a major port already exists?
We considered Prince Rupert and Kitimat as possible locations. We carried out a feasibility study that took into account a number of considerations. The study found that the routes to Prince Rupert were too steep to safely run the pipeline, and that Kitimat was the best and safest option available.
Current proposed route for the Northern Gateway pipeline. (Enbridge)
Here in the northwest even the supporters of the Northern Gateway roll their eyes when they hear the old Prince Rupert story come up again and again – and it’s not just because these people support the Kitimat plans for Northern Gateway, it’s because those supporters (not to mention the opponents) have driven along the Skeena from Terrace to Prince Rupert.
There just isn’t any room for a pipeline. It’s a game of centimetres.
A rainbow hugs the mountains near the Telegraph Point rest area on the Skeena River between Terrace and Prince Rupert, Sept. 29, 2014. Traffic is seen on the narrow corridor between the mountains and the river (Robin Rowland/Northwest Coast Energy News)
Alternatives to Kitimat?
Now the new premier of Alberta, Jim Prentice, who should know better if he’s going to lead that province, is hinting that Kitimat isn’t the only possible solution for the Northern Gateway.
Without specifying Prince Rupert, according to Gary Mason reporting in The Globe and Mail, Prentice was speculating about an alternative to Kitimat.
Asked whether he believes the Gateway terminus should be relocated to Prince Rupert or another destination, Mr. Prentice said, “Everything I’ve heard from the Haisla who live there is they don’t agree with the terminal being in Kitimat.” Is it possible to get First Nations approval if there is no support at the planned terminus site? “It’s pretty tough,” the Premier said.
Prince Rupert has a thriving local fishing industry that employs hundreds of people and is critically important to the local First Nations. He is convinced the community would not be willing to put that at risk.
“Overwhelmingly people in my community are much more comfortable with liquefied natural gas, with wood pellets, with coal, than any oil product,” he said.
The Prince Rupert Port Authority also rejected the idea
A spokesman for the Prince Rupert Port Authority said Wednesday there is currently no room for Enbridge to build at the port even if it wanted to. “We are fully subscribed,” Michael Gurney said. There are two large vacant lots within the port authority’s jurisdiction, but both are locked by other energy companies, earmarked for LNG projects.
So not only is there no room on the road to Prince Rupert, there is no room in Prince Rupert.
Shovel-ready?
Let’s just consider for a moment that if Prince Rupert was the ideal location for the Northern Gateway terminal (which it is not), what would be needed to get the project going today.
The Northern Gateway Joint Review Panel would have be reconstituted or a new JRP created by the National Energy Board. That’s because the bitumen comes from Bruderheim, Alberta, crossing provincial boundaries and thus it’s in federal jurisdiction.
Even under the fast track rules imposed on the NEB by Stephen Harper’s Conservative government, new environmental and social impact studies would be required, starting from scratch. So add another five years of paperwork before a single shovel goes into the ground.
The pipeline would have to cross the traditional territory of First Nations that, so far, have not been part of the negotiations, mostly the Tsimshian First Nation as well as the Nisga’a First Nation which has a treaty establishing local rule over their territory.
Traditional leaders of the Gitga’at First Nation lead a protest march through the streets of Prince Rupert, February 4, 2012. (Robin Rowland/Northwest Coast Energy News)
In February 2012, the largest anti-Enbridge demonstration outside of the Lower Mainland took place in Prince Rupert, with the elders of the Tsimshian First Nation welcoming the elders and members of the Gitga’at First Nation, at Hartley Bay, which had organized the protest.
When I say there isn’t room for a pipeline along the Skeena, it also means that there isn’t any room for the pipeline corridor right-of-way. Enbridge, in its submissions to the Joint Review Panel, said it requires a 25 metre wide right of way for the pipeline corridor. (For the record that’s just over 82 feet).
Along that highway, as you will see, there’s barely enough room for the CN mainline and Highway 16 (also known as the Yellowhead Highway) and on a lot of places both the highway and the railway roadbed are built on fill along the side of a cliff.
Albertans’ desperate desire to see the Northern Gateway go to anywhere to what they call “tide water” keeps coming up like the proverbial bad penny. The latest came when Jim Prentice speculated about a new route for the Northern Gateway.
I knew I had an appointment coming up in Prince Rupert on Monday, September 29. So I decided that only way to prove to people sitting in Calgary, Edmonton and Fort McMurray playing with Google Maps that the pipeline to Prince Rupert was a really dumb idea was to shoot photographs to show just why the Northern Gateway will never go to Prince Rupert—at least along the Skeena.
As you drive out of Terrace, you pass two large swing gates (also called by some “Checkpoint Charlie” gates after the Cold War era crossing in Berlin.) At the first rest stop west of Terrace, there are another set of gates at the Exstew. There’s a third set of gates just outside Prince Rupert.
A logging truck passes the avalanche gates at Exstew on Highway 16, Sept. 29, 2014. (Robin Rowland)
The swing gates are avalanche gates and, in the winter, Highway 16 can be shut down if an avalanche closes the highway or the danger from avalanche is too great to allow motorists to proceed. When you drive the highway from Terrace to Prince Rupert in the winter (the signs were covered up when I drove Monday) you are warned “Avalanche danger Next 13 kilometres. No stopping.”
The Exstew avalanche gates, (Robin Rowland/Northwest Coast Energy News)
The drive along the Skeena from just west of Exchamsiks River Provincial Park all the way to Tyee where the highway turns inland to reach northwest to Prince Rupert on Kaien Island is one of the most spectacular drives on this planet. The highway snakes along a narrow strip of land with steep mountain cliffs on one side and the vast river on the other.
The problem is that apart from locals and tourists, none of the “experts” whether journalist, think tanker, bureaucrat or politician have, apparently ever driven from Prince Rupert to Terrace.
When both Opposition Leader Tom Mulcair and Liberal Leader Justin Trudeau were in the northwest earlier this summer to “engage” with the local people, apart from short boat trips down Douglas Channel, they flew everywhere. Scheduling you know. Stephen Harper has never visited northwest BC and probably never intends to. His cabinet members fly in for photo ops and then are on the next plane out of town.
Of all the visiting journalists who have come to the northwest only a couple have bothered to drive around the region. Most fly-in fly-out. These days, most often budget-strapped reporters never leave their offices, interviewing the same usual suspects by phone on every story.
On Monday, I took most of the photographs on my way back from Prince Rupert to Terrace after my appointment, so the sequence is from west to east. There are also very few places along the river where you can safely stop. There are concrete barricades on both sides of the highway to prevent vehicles either going into the river or onto the narrow CN right-of-way.
There are, however, two rest stops and a number of small turnoffs on the highway, the turnoffs mainly intended for use by BC Highways, but which are also used by tourists, fishers and photographers.
The first image was taken at one of those highway turnoffs just east of Aberdeen Creek. This is what the highway and rail corridor are like all along the Skeena, the highway, bounded by concrete barricades, the CN rail line and then the towering mountains. Note where the telegraph and telephone lines are—further up the cliffside.
A closer view of the highway and rail corridor just east of Aberdeen Creek.
Here is the view of the Skeena River from the Aberdeen Creek turnoff. You can see to the east, a mountain and the narrow strip of fill land that supports the highway and the rail line.
You see the broad width of the mighty Skeena, the Misty River, as it is called by the Tsimshian First Nation and by everyone else who lives in the northwest and on the right side of the image, the highway and rail corridor built on fill.
Any room for a pipeline?
There’s another turnoff on the other side of the headland east of Aberdeen Creek, looking back the way we came.
The final small turnoff is just by the Kylex River. Again you can see how narrow the highway and rail corridor are.
A few kilometres further along—as I said the highway snakes and curves its way along the riverbank– you come to the Basalt Creek rest area. So this telephoto image shows a logging truck heading west, taken from Basalt Creek, looking back at the highway.
Again you can see both the highway and CN line are built on fill. Is there any room for a pipeline?
Any room for a 25 metre pipeline right-of-way?
Between Basalt Creek and Telegraph Point, a few kilometres to the east, again the highway and rail line hug the narrow strip between the river and mountains.
This shot, taken from Telegraph Point, in October 2013, shows a CN intermodal container train heading to Prince Rupert. The container trains and the coal trains usually have between 150 and 180 cars. If a winter avalanche took out a train, there would be environmental damage, but that damage would be insignificant from coal or containers compared to a train of railbit tankers carrying diluted bitumen.
At Telegraph Point, the second of the three rest stops between Prince Rupert and Terrace, again there is just a narrow strip between the mountain, the highway and the river.
Across the highway from the rest stop, you can again see the narrow corridor, the first shot looking west the rail line close to the cliff face, the second, east, with the waterfall, which you don’t see during the rest of the year, fed by the fall monsoon.
Two shots from the same location, Telegraph Point, taken in March, 2013, of a CN locomotive hauling empty coal cars back to the fields around Tumbler Ridge. (No waterfall in March)
Alternative routes
Everyone has assumed that if Northern Gateway changed its route, the most likely choice given the configuration of the pipeline at the moment is to follow the Skeena.
There are alternatives. The Petronas LNG project and its partner TransCanada Pipelines have proposed a more northern cross-country route, which would go north from the Hazeltons, avoiding the Skeena
If Enbridge wanted to try a northern route, similar to the one TransCanada contemplates for Petronas, Northern Gateway would again run into trouble.
It would require reopening or creating a new Joint Review Panel, many more years of environmental and social impact studies of the route, even under Stephen Harper’s fast track system. The TransCanada/Petronas pipeline would also cross the traditional territory of the Gitxsan First Nation and if Enbridge tried that the company would have to deal with the fact that it signed a controversial agreement with Elmer Derrick that was immediately repudiated by most members of the Gitxsan First Nation and eventually dropped by Enbridge.
So why does this idea of a pipeline to Prince Rupert keep coming up?
In most cases, the idea of the pipeline to Prince Rupert is always proposed by Albertans, not from any credible source in British Columbia, or the suggestions come from desk bound analysts in Toronto and Ottawa both in think tanks and in the newsrooms of dying newspapers who have never seen the Skeena River apart from a tiny handful who have looked at Google Street View
(Yes you can Google Street View Highway 16 along the Skeena, I recommend it if you can’t do the drive)
Perhaps the worst example of this failure of both analysis and journalism came in the Edmonton Journal on July 7,2014, when it published a piece by Bob Russell, entitled Opinion: Make Prince Rupert the terminus, which went over the same old inaccurate arguments.
The overland route currently proposed by Enbridge is fraught with environmental issues because it goes over coastal mountains and streams before entering Kitimat’s port. This port will also be the base of perhaps as many as four liquefied natural gas terminals, which will result in the channel always busy with LNG ships outbound and returning from many Asian ports.
There are existing rights of way for the major highway, the Yellowhead, and CN Rail line from Edmonton to the Port of Prince Rupert, so this eliminates the issue of transgressing First Nations lands. The technical issues of narrow passages can be overcome with engineering. In fact, the pipeline can be buried in the roadway at some restricted locations if absolutely necessary, but two different engineers have assured me that for the most part, the right of way should be able to handle the pipeline. A vital factor, of course, is to reduce the impact by eliminating the need for two pipelines.
The clue is how the Edmonton Journal describes Russell;
Bob Russell has an extensive background in planning and was a member of the Edmonton Metro Regional Planning Commission. He has flown the Douglas Channel, visited Kitimat and toured the Port of Prince Rupert.
This is so typical of the Albertan attitude toward northwest British Columbia, people fly in for a couple of days, make a quick observation, and fly out again and present themselves as experts on the region. (Some “experts” on Kitimat, very active on Twitter have apparently never left Calgary).
It obvious that the “two engineers” who assured him “the right-of-way could handle of pipeline” have no idea what they’re talking about. As the photos show there is barely enough room for a highway and a rail line much less a 25 metre wide pipeline corridor.
If the pipeline was to be built as Russell proposed, the only highway between Prince Rupert and the rest of Canada would have to be closed for years, there are no detours. All so a pipeline can be buried under the asphalt not in solid ground, but in the fill on the side of a riverbank in an avalanche zone?
Of course, closing a highway up here won’t inconvenience anyone in Edmonton or Calgary, will it?
Would CN be happy with years of disruption of their lucrative traffic to Prince Rupert with grain and coal outbound to Asia and all those containers coming in to feed Chinese products to the North American market? (you can be sure Walmart wouldn’t be happy about that, not to mention prairie farmers including those from Alberta)
Russell’s statement
There are existing rights of way for the major highway, the Yellowhead, and CN Rail line from Edmonton to the Port of Prince Rupert, so this eliminates the issue of transgressing First Nations lands.
Is also inaccurate.
I was told by First Nations leaders during the Idle No More demonstrations in the winter of 2013, that, a century ago, when the Grand Trunk built the railway along the Skeena , they did just that, built it without consulting the First Nations along the route, sometime digging up native cemeteries and sacred spots.
While apparently CN has worked in recent years to improve relations with the First Nations along the rail line, according to those leaders some issues of right-of-way remain to be resolved.
If there were any plans to build a diluted bitumen pipeline along that route, that would likely mean another court battle adding to those already before the Federal Court, a court battle that would cost Enbridge, CN, the federal government, environmental NGOs and the First Nations more millions in lawyers’ fees.
It’s doubtful if in the long gone (and perhaps mythical) days of “get it right” journalism that the Russell opinion piece would have passed the scrutiny of an old fashioned copy editor and fact checker.
In 2012, the Edmonton Journal (in a story no longer available on their website) also cited former Alberta Premier Peter Lougheed and former Bank of Canada governor David Dodge, as also favouring Prince Rupert.
Dodge, who was in Edmonton Tuesday to deliver a speech on the global economic outlook at MacEwan University, said Enbridge’s proposed Northern Gateway pipeline to Kitimat looks like even more of a long shot.
“I think the project to Kitimat looks, objectively, more risky. So why hasn’t much greater effort gone into looking at Prince Rupert and taking (bitumen) out that way? My guess is, the easiest place to get B.C. to buy into the project would be to go to Rupert.”
Dodge’s views echo those of former Alberta Premier Peter Lougheed, who also favours looking at an alternate pipeline route to Prince Rupert, where ocean-going supertankers can navigate more easily.
Back in 2012, I finished my piece for the Huffington Post by saying:
So why do people insist, despite the evidence, that the Northern Gateway go to Prince Rupert? It’s no longer an pipeline; it’s emotion and ideology. Ideology in that opposition to the Northern Gateway is seen by conservatives as heretical opposition to free enterprise itself. Emotion among those who see promoting the oil patch as an issue of “Alberta pride” and even Canadian patriotism.
For the promoters of the pipeline to Prince Rupert, ignoring the science of geology and the study of geography across all of northwestern B.C. is no different than repeatedly knocking your head against the Paleozoic metamorphic greenstone of the mountain cliffs along the Skeena. It only gives you a headache.
Things haven’t gotten much better in the past two years. In fact they’re getting worse as opposition to pipelines mounts.
It seems that in 2014 the Alberta and the federal government policy in promoting pipelines Northern Gateway, KinderMorgan’s TransMountain, Keystone XL, Line 9 Reversal and Energy East (slick PR and smiling representatives at open houses, politicians at strictly controlled photo ops) is to ignore facts on the ground and to refuse to deal with the concerns of local people from coast to coast.
There could, perhaps, be a more inclusive and truly science-based pipeline planning process that could see pipelines go on optimum routes but that isn’t happening.
The policy for the oil patch and its politician supporters when it comes to pipelines is facts and geology don’t really matter. So they put on ruby slippers, knock their heels together three times and send pipelines down a yellow brick road to an Emerald City (while telling the locals to ignore the man behind the curtain)
The Haisla Nation’s plan for entering the LNG business is based on the idea that “it is anticipated that the Haisla Projects will be developed using a business model based on controlling two components of the value chain: land and pipeline capacity” according to its application to the National Energy Board for a natural gas export licence.
Cedar LNG Development Ltd., owned by the Haisla Nation, filed three requests for export licences with the NEB on August 28, under the names Cedar 1 LNG, Cedar 2 LNG and Cedar 3 LNG. Another name used in the application is the “Haisla Projects.”
The 25-year export licence request is standard in the LNG business; it allows export of natural gas in excess of projected North American requirements. Thus like the NEB hearings for the Kitimat LNG and LNG Canada projects it is not what is called a “facility” licence which is what Enbridge Northern Gateway requested.
The project anticipates six “jetties” that would load LNG into either barges or ships at three points along Douglas Channel, one where the present and financially troubled BC LNG/Douglas Channel Partners project would be.
A second would be beside the BC LNG project, which may refer to the Triton project proposed by Pacific Northern Gas parent company Altagas.
Both are on land now owned by the Haisla Nation in “fee simple” land ownership under Canadian law.
Map from the Haisla application to the NEB showing that the Haisla Projects Region will allow for a total of six LNG jetty sites. One of these, on DL99, is currently ear-marked to be used for a project involving a consortium (BCLNG) One will be situated on the DL309 Haisla fee simple land and the other four jetties are to be situated on the Haisla leased lands that surround the Chevron-led LNG development at Bish Cove. The map also shows that the Haisla own land at Minette Bay.
The other four would be on land surrounding the current Chevron-led Kitimat LNG project along Douglas Channel and in the mountains overlooking Bish Cove which the Haisla have leased.
Haisla Nation Chief Counsellor Ellis Ross at Bish Cove, June 19, 2013. (Robin Rowland/Northwest Coast Energy News)
The move last week and the revelation of the Haisla’s plans for the land are a cumulation of Haisla Nation Chief Counsellor Ellis Ross’s idea of restoring more of the First Nation’s traditional territory by buying or leasing the land using standard Canadian land law and at the same time getting around some of the more restrictive provisions of the Indian Act that apply to reserve land.
Just how the Haisla will go into the pipeline business is not as clear as the First Nation’s acquisition of the land. The application says:
The pipeline capacity required to transport sourced LNG to the Haisla Projects will include a mix of new and existing pipeline and infrastructure. The Haisla are in the advanced stages of negotiating and drafting definitive agreements with the major gas producers and pipeline transmission companies located in the vicinity with respect to securing pipeline capacity. It is expected that the Haisla Projects will rely on the Haisla’s business partners or customers to source gas from their own reserves and the market.
With the Haisla basing their business strategy on land and pipelines, the First Nation’s strategy is looking for flexibility in what is a volatile and uncertain market for LNG.
The application says the Haisla “are currently in advanced stage discussions and negotiations with a number of investors, gas producers, LNG purchasers, pipeline transmission companies, technology providers and shippers. As such, the particular business models have yet to be finalized. However, it is anticipated that between the various Haisla Projects, multiple export arrangements may be utilized.”
As part of the idea of flexibility, the actual LNG infrastructure will be constructed and operated with potential partners. That is why there are three separate applications so that each “application will represent a separate project with independent commercial dealings with investors, gas producers, LNG purchasers, pipeline transmission companies, technology providers and shippers.”
The Haisla say that they are “working with a number of entities to develop business structures and partnerships to provide transaction flexibility, adequate financing, modern technology, local knowledge, and marketing expertise specific to Asian targets. The separate projects will accommodate expected production and demand and will also allow for a number of midlevel organizations to be involved with the various projects as well as traditional major gas producers and LNG purchasers.”
The Haisla are working with the Norwegian Golar LNG which had been involved in the stalled BC LNG project, using a Golar LNG’s vessels and technology, using a new design that is now being built in Singapore by Keppel Shipyard.
Golar LNG uses PRICO LNG process technology developed by Black & Veatch, (Wikipedia entry) “which is reliable, flexible and offers simplified operation and reduced equipment count.”
The filing says the project will “be developed using either barge-based or converted Moss-style FLNG vessels. The terminals will consist of vessel-based liquefaction and processing facilities, vessel-based storage tanks, and facilities to support ship berthing and cargo loading”
The jetties to be used for the Haisla Projects may be either individual FLNG vessels or “double stacked”, meaning that the FLNG vessels are moored side-by-side at a single jetty. The Haisla have conducted various jetty design work and site /evaluation studies with Moffat and Nichol.
The Haisla Projects anticipate that the construction will be in 2017 to 2020, “subject to receiving all necessary permits and approvals” and is expected to continue for a term of up to twenty five years. There is one warning, “The timelines of the Haisla Projects will also depend on the contracts and relationships between the Applicant and its partners.”
The filing goes on to say:
Haisla Nation Council and its Economic Development Committee are committed to furthering economic development for the Haisla. The Haisla’s business philosophy is to advance commercially successful initiatives and to promote environmentally responsible and sustainable development, while minimizing impacts on land and water resources, partnering with First Nations and non-First Nations persons, working with joint venture business partners, and promoting and facilitating long-term development opportunities.
The Haisla Applications will allow the Haisla to be directly involved as participants in Canada’s LNG industry, rather than having only royalty or indirect interests. The Kitimat LNG and LNG Canada projects, and the associated Pacific Trails Pipeline and Coastal Gas Link Pipeline, have increased economic opportunities in the region and the Haisla are very supportive of these projects locating within the traditional territory of the Haisla. The support of the Haisla for these two projects reflects a critical evolution of the Haisla’s economic and social objectives.
Map from the Haisla Nation application to the NEB showing the proposed LNG developments in relation to Douglas Channel.Map from the Enbridge filing with the Joint Review Panel showing the same area with the proposed Northern Gateway bitumen terminal.
Chevron has applied to the BC Ministry of the Environment for a permit to discharge storm water from the liquified natural gas construction site at Bish Cove and along the shore of Douglas Channel.
The construction site is currently operating on a Waste Water Discharge Approval that expires on Oct. 31.
Map showing construction areas at the Kitimat LNG site at Bish Cove likely to discharge storm water into the Douglas Channel. (Chevron/ McElhanney Consulting)
The application sets new objectives that “will be protective of the receiving environment.” Various construction areas will discharge storm water (likely due to clearing of the bush cover) from areas at Bish Cove itself and the Bish Creek watershed “including the following watercourses and associated tributaries: Bish Creek, West Creek, Skoda Creek and Renegade Creek.”
The application says that the “maximum rate of effluent discharged from this project and support areas will vary based upon seasons and weather.” Areas and amounts of water may change as the construction proceeds. “The characteristics of the stormwater runoff will be water produced from precipitation, including snowmelt that contains suspended sediment from earthworks and construction.” The application adds, “The types of treatment to be applied to the discharges are: erosion prevention and sedimentation control management practices and devices which may include sedimentation ponds, oil water separators, pH adjustment, flocculent addition and sand filtration.
The public and concerned individuals or groups can provide “relevant information” to the Regional Manager, Environmental Protection, #325-1011 Fourth Ave, Prince George BC V2L 3H9 until September 20, 2014 or call Marc Douglas at 844-800-0900.
The San Miquel Mission in Santa Fe, New Mexico, was built between 1610 and 1619. Santa Fe mandates that building in the city continues to reflect its historic heritage. (Robin Rowland/Northwest Coast Energy News)
Updated with additional links
“Is there a longterm vision for Kitimat?” Spencer Edwards, one of the public delegates, asked District of Kitimat Council Monday night, August 18, as there was yet another public hearing on the highly controversial development on Kingfisher Avenue.
If there is a vision for the future of development in Kitimat, it appears, to say the least, that both Council and the overworked Community Planning and Development division are struggling to find something. It is more likely that with the sudden increase in development, that both Council and staff just don’t have time to “do the vision thing.”
Clarence Stein’s Kitimat Townsite report
The growing objections to the Kingfisher development of either 40 or 53 townhouses and a second development Riverbrook Estates, that would be beside the Dyke Road off Kuldo near to the Riverlodge Tennis Courts, a mix of single family homes, townhouses and apartments, shows the vision gap.
Public delegations are demanding just that— a vision.
At council meetings over the past weeks, a number of delegates have referred to Clarence Stein’s original vision for Kitimat from the 1950s. A note to Council from the residents of Marquette Street presented in opposition to the Kingfisher development says:
This is not what the famous American Architect, Urban Planner and Founder of the Garden Cities movement, Clarence Stein had envisioned a modern town with a population of 50,000 resident when he designed Kitimat over 60 years ago. He would be turning inside his grave.
Stein asked the same question. In his plan for Kitimat (page 45) he said future councils, staff and developers must ask: “What do the people themselves want?”
It’s fairly obvious by now that what the people of Kitimat want is more housing—there is, after all, a housing shortage at the moment. It also crystal clear that the residents of Kitimat do not want cookie cutter town houses and apartments built, as the Marquette note says “as is happening in Surrey, Port Coquitlam and so many other places in the Lower Mainland.”
Spencer Edwards asked District of Kitimat Council on Monday, “Is there a strategic long term plan, long term vision for the development of Kitimat. Does it simply involve industry or a diverse range that’s in place, and if that plan is in place, is it possible to view it at some point.” (Robin Rowland/Northwest Coast Energy News)
“Kitimat is full of hicks”
While developers (just like energy companies) come before Council and make presentations of their vision, with assurances of respect for this community, there is a dark side.
When the developer delegations left the Council Chambers Monday after their presentations, some of them were overheard by witnesses in the parking lot disparaging what had just gone on inside from both council members and citizen delegations, saying that “Kitimat is unsophisticated”….”doesn’t understand how things were done in the big city” and… “Can’t make up their minds.”
As one of my sources who overhead the conversation remarked, “They must think Kitimat is full of hicks.”
While it is uncertain which of the developer and real estate delegations made the remarks in the dark, it is clear if that is the real attitude toward development in Kitimat, then vision, not “let’s get on with it” must be the priority.
There must be strong development regulations to ensure that anyone building in the District must be held strictly to account to keep those assurances (and not be allowed to say market conditions have changed to get out of any commitments). More than that what Kitimat needs and needs now is an updated version of Stein’s vision, not the “motherhood” statements found in the current Official Community Plan.
So Kitimat, do you know the way to Santa Fe? (We’ll get there in bit).
Unfortunately the OCP is more of a motherhood document than a plan for the future of Kitimat. It’s also obsolete: a 2007-2008 rewrite of the original 1987 plan, updated with a few paragraphs in 2013 (as required by law, it is reconsidered every five years) There’s an already obsolete table predicting continuing decline of Kitimat’s population over the next quarter century (although a nearby graph does include possible population increases as well as declines).
On the future of Kitimat, the opening paragraphs read circa 2008
Kitimat’s population, after peaking in the mid-80s, has been in a general decline to fewer people than in 1956, primarily because of external factors beyond the control of the local municipality. Kitimat, like many other rural communities across Canada, is being affected by world markets and resultant demographic shifts as economic power and population is concentrated in major metropolitan centres. It is hoped that population will grow again and there are potential projects that would support this. New industry may locate here or existing businesses may expand based on the deep sea port, relatively low-priced land, and the proximity to natural resources. Kitimat’s future remains uncertain.
Even with the few updates in 2013, it seems no one expected the current building boom. That means the OCP can’t handle the boom, whether or not it continues or fades away.
The problem facing those who want development in Kitimat is that much of provincial law is pretty clear, a developer looks at the OCP, which has little specifics, then the zoning and then, if everything is in order, apply for a development permit, gets it and the goes ahead.
At Monday’s meeting, Edwards asked, “Is there any indication of what quality of development is being put in place?”
Deputy Administrative Officer, Warren Waycheshen, replied that the zoning plan for the Kingfisher development “allows what the setbacks are going to be, height, distances, it doesn’t set the building quality. That will come through the development permit stage.”
There have been the same arguments over and over in Kitimat in the past year, where a new developer or a developer doing renovations, often from out of town, were able to go ahead and do what they wanted, with little regard for the residents of Kitimat, its history and the vision of Clarence Stein.
This brings me to Santa Fe, how Kitimat can maintain Stein’s vision and how Kitimat can use the development permit process to ensure that happens. That means an urgent program of updating and strengthening the development permit system to reflect Stein’s vision across the district.
Santa Fe
Santa Fe, New Mexico, was a crossroads of the Old West, home of the Pueblo First Nation which for centuries before the coming of Europeans built pueblos out of adobe. Adobe (not the software) is an old Arabic word meaning “mud brick” adopted into Spanish during the time of the Moors, brought to the New World and used by the Spanish in New Mexico, and taken up by the Americans who came via the Santa Fe Trail and then the railhead for the Atchison, Topeka and Santa Fe Railway.
In 1912, New Mexico became the 47th US State; Santa Fe became the capital.
At the same time, the Santa Fe local government adopted the 1912 equivalent of a BC Official Community Plan,
In 1912, when the town had only 5,000 people, the city’s civic leaders designed and enacted a sophisticated city plan that incorporated elements of the City Beautiful movement, the city planning movement, and the German historic preservation movement. It anticipated limited future growth, considered the scarcity of water, and recognized the future prospects of suburban development on the outskirts. The planners foresaw conflicts between preservationists and scientific planners. They set forth the principle that historic streets and structures be preserved and that new development must be harmonious with the city’s character.
The end of the fabled trail of pioneer days, Santa Fe is today the oldest state capital city in our nation. And if its earth-tone structures hark back to the Pueblo originals, well, that’s by design….. Almost a century ago, city fathers mandated use of the style all over town, predicting — accurately, as it turned out — that it would be good for the tourist trade. Today, even fast food outlets and big box stores are clad in Santa Fe style.
That CBS report was right on. I visited Santa Fe a few years ago, and noted how much of the town, especially the famous art galleries reflected that adobe style. The big box stores and the fast food joints are the same—and who cares about corporate building branding; the familiar signs were all that was needed.
What struck me was a mall I saw on the outskirts of town while driving to the airport. It was a mall, in many ways no different from the boring cookie cutter malls you see in Surrey, Coquitlam or Nanaimo—with one exception. It was built in the Santa Fe Adobe Style and looked a whole lot better than the uniform malls you see from almost every highway in North America.
Editor’s Note: CBS News Sunday Morning is scheduled to repeat its special report on Santa Fe By Design, this Sunday, August 24. Due to sports programming Sunday Morning is usually pre-empted in the Pacific Time Zone. If you have cable or satellite and access to a CBS east coast station, watch or set your PVR from 0900 to 1030 ET (0600 to 0730 PT)
That is what “new development must be harmonious with the city’s character” means and that’s what Kitimat should do. Make sure all future development is truly harmonious with Kitimat’s character.
Not that there aren’t the usual tensions and disputes over what harmonious means. As the Wall Street Journalreported last year, there is now some resistance to the old style among residents, including those outside the municipality’s jurisdiction or away from the historic districts where the rules are the strictest.
As the Journal reports:
a new wave of contemporary homes is springing up around the city’s less regulated outer edges, transforming the once uniform landscape and pushing southwestern design in new directions. Glints of glass and steel are now dotting the city’s earth-toned desert surroundings
Some home owners want to be completely contemporary and get away from the adobe style. On the other hand, as the Journal reported, some architects are working on innovative designs that blend the adobe style with the ultra modern:
Some local architects aim to meld traditional and contemporary architecture in their designs. While traditional materials of adobe homes—stucco and plaster walls, for example—are still used in many contemporary homes, the lines on modern designs are crisp and clean instead of rounded. Many of the contemporary homes around Santa Fe are characterized by large expanses of glass, clerestory windows and skylights—sometimes in unexpected places, such as in laundry rooms and showers—and muted stucco exteriors accented with steel that blend into the landscape.
Although Kitimat Community Planning and Development says on their website that Stein’s Townsite Report is a “must read,” it is doubtful that any of the developers have actually read it.
Note also that the Garden City concept that was the foundation of Kitimat was itself, in part, based on the now century-old City Beautiful movement that gave Santa Fe its character.
So there is a connection between the design of that desert city and this small town in the rainforest of the Northwest.
After Monday’s Council meeting, I asked Warren Waycheshen if there were any “heritage” or “look and feel” policies in British Columbia. Waycheshen told me that while it is difficult to mandate “harmonious character” and “blending into the landscape” at the zoning level, it can and has been done at the development permit stage in a few BC communities.
(And for those developers who think that wanting harmonious development is “unsophisticated,” well they can look at Santa Fe and Whistler)
Up until now in Kitimat, some in politics, some in the real estate and development communities have had an Oliver Twist approach, saying to every developer “Please, sir can we have some more?”
So far none of the designs presented before Council for any development have shown any innovation or imagination. None of them have any harmony with Kitimat’s character
. Even with the need for housing, there is time to slow things down and reconsider whether taking “off the shelf” projects originally designed for the land crowded Lower Mainland are right for Kitimat.
That’s because none of the Liquified Natural Gas projects are anywhere close to the Final Investment Decision Stage.
Many of the delegations to Council have warned about overbuilding and the possibility that slap dash, cookie cutter development could quickly deteriorate into slums if the boom doesn’t happen. There is some limited time to consider all the issues. Most residents who live around the Kingfisher development would prefer buildings with a higher quality that could be sold on the basis of its proximity to the golf course. There are fears that many developments, based on the Lower Mainland “build higher” philosophy would be inappropriate for seniors.
There is one consideration—that is the size of buildings. Both District Staff and developers cite changing demographics (average household size dropping from 3.2 to 2.4 persons) and the fact the large single family homes, such as the “berry” development by Oviatt Construction are too costly for young families who would prefer and could afford townhouses.
Do Kitimat planners consider the sometimes gloomy weather as Clarence Stein proposed. (Robin Rowland/Northwest Coast Energy News)
Harmonious townhouses
We have to ask what kind of townhouses? The original Stein report, in a chapter written by planning subcontractors Mayer and Whittlesey noted on page 220,
Larger-than-normal houses, for people will stay much indoors; covered terraces and breezeways where children can play. A large number of houses should have a cellar or attic space for workbench and game table. Provision of wood burning fireplaces should have special consideration, as a focus of interest and cheer in a rainy climate.
So smaller houses for affordability or larger houses so people can get through the fall and winter without getting cabin fever? Just how much Seasonal Affective Disorder happens in Kitimat? And beside the weather, people are staying indoors a lot of these days watching satellite TV, playing video games and on the Internet. All factors the developers aren’t considering.
Have Kitimat’s planners and builders ever considered how home design might help alleviate SAD?
Let’s throw out the boxes and have the architects go back to the drawing board or AutoCAD and design a townhouse that is right for Kitimat.
There are a lot of worries about snow clearing and parking in the narrow streets of the proposed developments. While district staff say the Kingfisher development meets “municipal parking standards” perhaps all those concerns by experienced long-time residents mean that those standards should be reconsidered rather than used as a rubber stamp.
It’s amazing that in the late 1940s and 1950s a bunch of men in New York (yes men, Stein, the man of his age, calls for planning by men) who at first had never been here, could imagine and create the Kitimat that became “the town of the future,” while today developers from Vancouver, Calgary or wherever do nothing more than pull an AutoCAD file off a hard drive, make a few tweaks and cosmetic changes and then try to convince residents, staff and council that this will be great for Kitimat.
Yes many of the original houses in Kitimat were “off the shelf” at the time but they were also often new and innovative for the 1950s. This is a chance to create a new vision but practical vision for the 21st century. The provincial government has mandated all community planning must consider climate change. There is no indication at all that the current development designs take climate into consideration.
What must be done
It’s time for Kitimat to rewrite the development permit standards, so that the original Stein vision is incorporated into every future development, whether residential, commercial, industrial or institutional. Some of the ideas will have to be updated from the 1950s to reflect changes in demographics, economics and technology. If Santa Fe, a modern hub of artistic and high tech innovation can do it, Kitimat can do it on a smaller scale.
Immediately
Since time is somewhat tight, ask the current developers, on a voluntary basis, to submit new ideas that show their projects won’t be just another subdivision in Surrey, new designs compatible with Kitimat. If developers want to build here, now and in the future, they are going to have to use their imagination and skill to bring Stein’s vision into the 21st century. Tell the developers that now they have to prove to Kitimatians that they don’t really believe this is a hick town.
Short term
Update development rules and guidelines
District staff, Council members, the Housing Committee and other interested groups should take a crash look at development guidelines and development permit rules and as soon as possible update those that can act as a guideline for future changes that reflect the Stein vision.
Hire a District Solicitor
We recommended this during the Enbridge Northern Gateway Joint Review hearings and when the LNG companies began environmental review. All the problems with potential development again show the need for a full time District Solicitor who will be in the District offices working with staff and members of council and attending council meetings to understand the needs of the residents of Kitimat on all issues. Having a lawyer on retainer who is not involved with community is no longer an option.
Medium term
Overhaul development rules and guidelines
Continue the work recommended for the short term and have staff, locally based developers and locally based engineering companies familiar with Kitimat form a task force to overhaul the development rules and guidelines so that developments fit into both an updated Clarence Stein vision and the uncertain economics of this region
Longer term
A new Official Community Plan
The current “maybe this, may be that” Official Community Plan is completely inadequate for the needs of Kitimat. It is little more than a collection of database copy and paste, motherhood bureaucrat speak with no significant reference to Stein’s original vision.
The community needs an OCP that has a strong, well-defined two track approach, one that assumes the LNG boom will go ahead, that Kitimat will grow, and a second that assumes that the new industry might pass us by and Kitimat may have to revert to planning diversification with an emphasis on tourism.
That also means looking for and hiring the Clarence Stein of the 21st Century, whether that person is in New York, Vancouver, London or Singapore.
The current OCP was largely written by Stantec, which seems to be the go-to consulting firm for everyone. While the involvement of Stantec may not have been an issue in 2008, Stantec is the same company that is now working for Enbridge and most of the LNG projects. That is a clear conflict of interest.
Kitimat needs a visionary who can build on what Stein and his colleagues did 60 years ago. While Stein was working for Alcan, what is needed in 2014 and beyond is truly independent consultant, not one serving a dozen different masters.
That includes maintaining harmony with the forested nature of the region. Without going completely the same way as Santa Fe, perhaps future construction in Kitimat should conform, within market conditions, to a style that reflects the demands of building in the northwest, like heavy snow loads and long days of dreary rain while at the same time is more reflective of the northwest natural environment. That means including the brilliant idea of sidewalks and green spaces at the back of houses, not just boxes on standard suburban streets. That doesn’t have to mean duplicates of First Nations’ longhouses or settlers’ log cabins.
A Kitimat “look and feel” should challenge architects to create a style that says Kitimat and the northwest while at the same time drawing plans that are economic for both the developer and the buyer, just as architects in Santa Fe are bringing a century-old vision into the 21st century.
If the current crop of developers think that Kitimat is unsophisticated, doesn’t understand what goes on big cities, and takes too long to make its mind, well we live here and you don’t and you won’t. If Kitimat does have a rosy economic future, it is highly likely that the community and district can find developers who aren’t in-and-out carpet-baggers but who will build something that will make a profit, be affordable for the buyer and be harmonious with the community and Stein’s vision updated for the 21st century.
As Stein asked, “What do the people themselves want?”
Editor’s note: My late father, Frederic Rowland, was Alcan’s assistant property manager in Kitimat, involved in town planning from Vancouver in the mid-50s and in Kitimat from 1957 to 1965 and thus one of the Alcan staff charged with implementing Stein’s vision.
The cost of the Kitimat Modernization Project has jumped to $4.8 billion US, Sam Walsh CEO of Rio Tinto, the parent company of Rio Tinto Alcan said Thursday as the company released its results for the first six months of 2014.
In its report. Rio Tinto said.
In February 2014, the Group announced that a review of major capital projects had identified a project overrun in relation to the Kitimat Modernisation Project. The overrun evaluation is now complete and has identified the requirement for additional capital of $1.5 billion to complete the project. This was approved by the Board in August 2014, taking the total approved capital cost of the project to $4.8 billion. First production from the Kitimat Modernisation Project is expected during the first half of 2015.
The weakening Canadian dollar appears to have improved the overall bottom line for the RT aluminum division, with underlying earnings of $373 million 74 per cent higher than in the first half of 2013:
The main drivers were growing momentum from the cost reduction initiatives, a weaker Australian and Canadian dollar and a further rise in market and product premiums, with 61 per cent of the Group’s primary metal sales sold as value added product generating a superior price. This was achieved despite a nine per cent decline in LME prices over the period which lowered earnings by $265 million.
LNG deal
The report also contains details of the deal between Rio Tinto Alcan and LNG Canada for the old Eurocan dock, indicating that LNG Canada will not likely commit to a deal until the Final Investment Decision is made:
On 12 February 2014, Rio Tinto entered into an option agreement with LNG Canada, a joint venture comprising Shell Canada Energy, Phoenix Energy Holdings Limited (an affiliate of Petro-China Investment (Hong Kong) Limited), Kogas Canada LNG Ltd. (an affiliate of Korea Gas Corporation) and Diamond LNG Canada Ltd. (an affiliate of Mitsubishi Corporation) to acquire or lease a wharf and associated land at its port facility at Kitimat, British Columbia, Canada. LNG Canada is proposing to construct and operate a natural gas liquefaction plant and marine terminal export facility at Kitimat. The agreement provides LNG Canada with a staged series options payable against project milestones. The financial arrangements are commercially confidential.
According to The Australian other aluminum operations aren’t doing so well, and the newspaper says that RT is starving under performing units in favour of the “good bits.”
The qualifier is that there is still much work to do on the aluminium front, Rio having splurged $US38bn on the acquiring Alcan in 2007.
Aluminium’s contribution to underlying earnings increased from the $US214m in the previous corresponding period to $US373m. But returns remain miserable, and that is from the good bits.
The underlying loss was $US182m, an increase from the $US158m loss previously. At least the bad bits of aluminium are being starved of capital expenditure, with Walsh putting them on the private equity-type approach to running a business.
But is has to be wondered how much longer the pain will be endured. And there is increasing chatter that closures are on the cards, with the long-term future of Rio’s Australian smelters the real concern.
Making money
Overall Rio Tinto is making money with earnings up 21 per cent, according to the report:
Sam Walsh said “Our outstanding half year performance reflects the quality of our world-class assets, our programme of operational excellence and our ability to drive performance during a period of weaker prices. These results show that our current strategic and management focus is making a meaningful contribution to cash flow generation.
“During the first half we have increased underlying earnings by 21 per cent to $5.1 billion and enhanced operating cash flow by eight per cent. We delivered what we said we would, exceeding our $3 billion operating cash cost reduction target six months ahead of schedule while producing record volumes and driving productivity improvements across all our businesses.
“We have decreased net debt by $6.0 billion compared with this time last year, through our stronger operating cash flows, sharply reduced capital spend and proceeds from divestments. We are confident Rio Tinto’s low cost, diversified portfolio will continue to generate strong and sustainable cash flows over the coming years. This solid foundation for growth will result in materially increased cash returns to shareholders, underscoring our commitment to deliver greater value.”
Net income increased 156 per cent to $4.4-billion while revenues were $24.3-billion. Rio Tinto said it reduced operating costs by $3.2-billion, exceeding its $3-billion target six months ahead of schedule.
New boss?
Despite the good news, the financial press is already speculating that Sam Walsh who is 64, may not last long as boss of Rio Tinto. His contract expires at the end of 2015. The Financial Times is quoting analysts as saying despite Walsh’s desire to stay on, the company is already looking for a successor.
According to the FT these include
Andrew Harding, head of iron ore, holds the job that was previously Mr Walsh’s, running Rio’s most important division, and for that reason is probably a front runner. Aged 47, he is a 21-year Rio veteran and previously ran its copper business. Chris Lynch, finance director since 2013, is the only executive on Rio’s board other than Mr Walsh and is another industry veteran, but at 60 is only a few years younger than Mr Walsh.
Alan Davies, head of diamonds and minerals, and Harry Kenyon-Slaney, head of energy, also have important operational experience across commodities and lengthy Rio careers but like Mr Harding are relatively new to their current roles. The heads of the other mining businesses are also relatively new to Rio. Jean-Sébastien Jacques, head of copper, joined Rio in 2011 from Tata Steel while Alfredo Barrios came to the group from BP only in June and is running aluminium.
Kitimat voters in the upcoming municipal election should carefully, very carefully, consider who are the best candidates that will, as much as humanly possible, produce a “world class” municipal mayor and council.
