By R. Bruce Striegler
Prince Rupert; the vision of a former American railroader
Prince Rupert, arguably Canada’s most-talked about Pacific coast seaport, is situated on British Columbia’s remote northwest coast. The rugged wilderness shoreline is marked by forested islands, and here, north of the mouth of the Skeena River, is the City of Prince Rupert. The city of 15,000 and its growing seaport are 18 hours by highway from Vancouver or two hours by air. Situated roughly 80 kilometres from the Alaskan border, Prince Rupert is a six-hour ferry ride from Ketchikan. Early in the 20th century, in this rough and undeveloped region a small town emerged, and became incorporated in 1910.
A port consisting largely of commercial fishing docks appeared as time went on, but it wasn’t until 1972 that Prince Rupert received designation as a national port, becoming a locally controlled Port Corporation in 1984. Prince Rupert has a long history in fishing and seafood with deep historical ties to First Nations. The pristine area has been a trading place for the Tsimshian First Nation for over 10,000 years. Several small First Nations communities are also the town’s neighbours. Port Edward, located about 10 minutes away, is the nearest village and the only one that can be reached by vehicle. Other communities, including Port Simpson and Metlakatla, are either a ferry, boat or plane ride away.
The port of Prince Rupert was built following completion of the Grand Trunk Pacific Railway (GTPR) in 1914. Its development was promoted by Grand Trunk Railway President Charles Melville Hays who saw the northern location as an alternative to the port of Vancouver, which was serviced by the Canadian Pacific and Canadian Northern Railway. Born in Illinois, Hays was General Manager of the Wabash, St. Louis and Pacific Railway and for a short time, President of the Southern Pacific Railway Company. He had impressive ideas for Prince Rupert including constructing docking facilities for passenger ships and developing a significant tourism industry. All these big ideas vanished when Charles Hays perished April 15, 1912 on the RMS Titanic. In 1919, Grand Trunk Pacific declared bankruptcy, was nationalized by the federal government and merged into Canadian National Railways (CNR).
The port was expanded during World War II to support Canadian and United States military action in the Pacific, and construction of defensive installations in the Alaska Territory. Today, in addition to growth due to port development, expansion of cruise ship traffic enroute to Alaska, and local tourism with an emphasis on sport fishing, are also contributing to growth at the port. The Kwinitsa Railway Station Museum, located in one of the last remaining stations of the GTPR, built circa 1912, depicts Prince Rupert’s development and the exceptional Museum of Northern British Columbia has been constructed in the award-winning Chatham Village Longhouse. A popular attraction for visitors is Pike Island, which provides exceptional insights into First Nations culture and history.
A region of islands, Prince Rupert and some of its port facilities extend along a portion of the western shore of Kaien Island, just north of the mouth of the Skeena River. The port’s grain and coal facilities are on nearby Ridley Island. The airport is an hour’s bus and ferry ride away on Digby Island. Prince Rupert is often called the rainiest city in Canada with average annual precipitation of 2,590 millimetres (102 in). Since temperatures range between 4˚C and 17˚C there is little snow, but there will be some precipitation on at least 240 days per year, and only 1230 hours of sunshine per year. Over 1,200 First Nations people reside on the Tsimshian Peninsula. The Lax Kw’alaams First Nation is located 20 kilometres north of Prince Rupert and the Metlakatla First Nation is located on the Peninsula near Venn Passage. Both of these communities are isolated from the city, having access only to intermittent ferry or water taxi service.
Prince Rupert prepares to include LNG exports as well as grain, coal and forest products
Prince Rupert has long been a port town. For decades, producers have shipped their commodities overseas; coal from Ridley Terminals, grain from Prince Rupert Grain Ltd. But things changed at the port in 2007. That was the year the Fairview Container Terminal, historically a breakbulk depot, re-opened as a container terminal. Today, things are again changing as Prince Rupert and its neighbour, the District of Kitimat, have caught the eye of multi-national corporations such as Malaysian energy giant Petronas and British natural gas titan BG Group, which are among the companies vying to build liquefied natural gas export facilities on the coast. Shaun Stevenson, Vice-President of Trade Development and Public Affairs with Prince Rupert Port Authority says, “We’re very much a development company. And from a build-out perspective, we’re young. There is phenomenal opportunity for growth, huge construction opportunities. There is a generational opportunity playing out in northwestern B.C.”
Four years ago, 80 longshoremen worked the docks; today, there are more than 350. “We’ve had 13 businesses open in the past 20 months,” says mayor Jack Mussallem, listing a new Walmart, coal and grain analysis lab, meat supplier and restaurant. He expects the town to maintain its rapid growth until at least 2020, and sees particular opportunity in retail, such as men’s and children’s clothing, sporting goods and auto dealerships. There’s also a need for marine services, including a marina to welcome and repair boats as they cruise B.C.’s waters heading for Alaska.
Among the natural gas developments proposed for Prince Rupert are Pacific NorthWest LNG, a liquefied natural gas (LNG) liquefaction and export facility on Lelu Island within the District of Port Edward, on land administered by Port of Prince Rupert. The facility would liquefy and export natural gas produced by Progress Energy Canada Ltd. in northeastern B.C. It would be a $9 billion to $11 billion investment. Recently, Progress Energy’s parent, Malaysia-based Petronas, pledged $36 billion over the next 30 years to its Pacific NorthWest LNG project. Of the $36 billion, $11 billion is budgeted for the export facility, $5 billion for the pipeline and $5 billion has already been spent through the takeover of Progress Energy Canada last year. The remaining funds will likely go to upstream assets such as natural gas wells in northeast B.C. Feeding the plant will be the Prince Rupert Gas Transmission Project, a 750-kilometre long pipeline to be built by TransCanada Pipelines.
Another entry in the energy sweepstakes is Prince Rupert LNG, a $10 billion liquefied natural gas export facility proposed for Ridley Island. The sole proponent of Prince Rupert LNG is BG Group. In mid-July, Prince Rupert LNG applied to the National Energy Board for a licence to annually export up to 21.6 million tonnes of LNG for 25 years. While an export licence has not yet been granted, there is an environmental assessment underway. BG Group has partnered with Spectra Energy Corp. to construct the $6 billion, 850-kilometre pipeline to serve Prince Rupert LNG.
In October, a new energy company with partial aboriginal ownership (Eagle Spirit Energy Holdings Ltd.) floated the idea of an oil refinery at Grassy Point, near Prince Rupert. The Grassy point location is also the proposed site of one or more LNG terminals. Four companies, China-owned energy giant Nexen Inc., Woodside Petroleum of Australia, SK E&S of Korea and Canada’s Imperial Oil, have all submitted proposals to develop the site following a request from the provincial government in April. In September, B.C. Minister of Gas Development Rich Coleman told a Prince Rupert Chamber of Commerce luncheon that work taking place at the site to determine how it can be developed is nearing completion.
Kitimat, the town next door to Prince Rupert readies for LNG boom
One hundred twenty nautical miles southeast of Prince Rupert (210 kilometres by road) sits the community of Kitimat, planned and built by Aluminum Company of Canada (Alcan) during the 1950s. Alcan was acquired by Australia’s Rio Tinto in 2007. Situated at the head of the approximately 140 kilometre-long Douglas Channel, one of B.C.’s many fjords, the Kitimat smelter is now being upgraded by Rio Tinto at a cost of $3.3 billion. The Kitimat modernization project will increase the smelter’s current production capacity by more than 48 per cent to approximately 420,000 tonnes per year. First metal is expected to come on-stream in the first half of 2014.
Kitimat, like Prince Rupert and nearby landlocked Terrace (62 kilometres from Kitimat) are bracing for massive economic development, but all are wary. Following construction of the Kitimat smelter, the region grew as lumber mills and methanol plants were built. But all that crumbled. After 25 years, global methanol producer Methanex closed its plant in 2005, eliminating 100 jobs. In 2011wood products company West Fraser Timber closed its Eurocan Pulp & Paper mill, and 535 jobs were lost. The 1990’s closure of coal mines in B.C.’s northeast impacted Prince Rupert, as coal shipments dwindled.
But that all seems to be changing. The number of passengers through Kitimat’s Northwest Regional Airport in 2010 was 106,000, and rose to 139,000 in 2012. Airport officials project 165,000 this year, a jump of 31 per cent in three years. To handle passenger growth, Central Mountain Air and Hawkair partnered in June to offer a new daily route from Terrace to Prince George and to Calgary. Hawkair’s service has gone to three flights daily; Air Canada’s has increased to five. In November, WestJet Encore, a regional WestJet subsidiary, will begin offering two flights a day to Vancouver. This means a total of 11 flights each day will leave the Kitimat airport beginning in November. Reports from the area’s realtors also indicate the frenzy of activity as commercial investors mostly from Calgary and Asia are buying apartment blocks and hotels. A 48-room motel downtown recently sold for $1.96 million to a construction company.
Kitimat officials are concerned that hotels and newly renovated apartment blocks won’t be able to accommodate all of the workers moving to Kitimat, and suggest camps will be needed. To-date, Kitimat LNG is the only company to designate a specific location for a camp, which will take over the Eurocan Pulp & Paper site. In its project description (LNG Canada – see below), Shell Canada says it hopes to use Rio Tinto Alcan’s camp, currently housing those working on the smelter modernization project. Rio Tinto Alcan’s camp, however, has approximately 1,800 beds; Shell needs 5,400. If Shell’s project goes ahead, the company will have to add significant space to the camp. The need for camp space is so great that PTI Group, an Edmonton-based company that specializes in building work camps, has bought a plot of land close to downtown where it plans to build a camp of 2,154 beds. The company doesn’t yet have a contract with anyone to fill the beds; it’s building it solely to handle an expected overflow of workers.
Kitimat’s prospects for a stable economic future ride on LNG and oil pipeline
The list of proposed projects in the Kitimat area is remarkable. A $4.5 billion LNG export facility proposal, Kitimat LNG, co-owned by Apache Corp. and Chevron Canada has received an export licence for up to 10 million tonnes of LNG for twenty years. Supplying Kitimat LNG would be the Pacific Trails Pipeline, a 463-kilometre line, estimated to cost $1.3 billion running from Summit Lake B.C. to Kitimat and to be operated by Chevron. There is BC LNG Export Co-Operative (Douglas Channel Energy Partnership), a small, barge-based LNG facility co-owned by the Haisla First Nation, London-based natural gas shipping company Golar LNG, American energy magnates, the Tatham family and an “unnamed Asian company.” The National Energy Board has granted BC LNG an export licence for 1.8 million tonnes of LNG per year, for 20 years. Because BC LNG is considered a small facility, it does not require an environmental assessment. The project will also not require new pipeline construction to operate; it will use the existing Pacific Northern Gas pipeline. BC LNG is expected to be the first project in Kitimat, and potentially the province, to start exports.
LNG Canada was announced in May 2012. It is a $12 billion joint-venture between Shell Canada, Korea Gas Corp., Mitsubishi Corp. and PetroChina Company Ltd. The National Energy Board has granted LNG Canada an export licence to export 24 million tonnes of LNG per year for 25 years. It is to be supplied by Coastal GasLink Pipeline, a $4 billion, 700-kilometre pipeline running from Dawson Creek, and will be operated by TransCanada Pipelines.
And then of course, there’s the much-publicized Enbridge Northern Gateway oil pipeline proposal. The controversial $6 billion pipeline ends on Douglas Channel, on a plot of land just north of the Kitimat LNG site. If built, the Northern Gateway project will consist of two 1,177-kilometre pipelines running from Alberta to Kitimat. A further proposal ties to the Northern Gateway project. Although not part of Enbridge’s pipeline plans, if it is built, B.C. newspaper publisher David Black hopes his Kitimat Clean, a proposed $25 billion oil refinery, will use Northern Gateway-delivered feedstock to refine oil sand crude into refined products for export to Asia, in competition with current plans to export more environmentally harmful crude oil.
The B.C. Government shows no sign of letting up when it comes to pitching LNG and B.C.’s transportation network, including safe, technologically advanced ports for shipment to Asia. The Province’s Minister of Natural Gas Development left for Asia on October 11th to promote the burgeoning natural gas industry. He has travelled to Korea, China and Malaysia, meeting with energy company officials as well as government representatives where he has “highlighted the province’s competitive advantages to new investors, reinforce its commitment to deliver energy solutions to customers in Asia and ensure these investors have an opportunity to clearly understand how investing in B.C. will deliver tangible benefits to their customers and the province.”