By Keith Norbury
It’s going to take a massive amount of project cargo and breakbulk — heavy machinery, steel, modular housing, etc. — to build the $40 billion LNG Canada project in Kitimat, B.C. Kitimat Mayor Phil Germuth is already seeing plenty of activity in and around the LNG Canada construction site. Camp modules, such as ATCO trailers, are still arriving daily by truck along the southern stretch of Highway 37, formerly known as the Terrace-Kitimat Highway. The mayor has also noticed the arrival of brand new equipment such as bulldozers and earth movers. “There’s a lot of new equipment coming in for both the LNG site, of course, and also working on the pipeline route,” Mr. Germuth said.
On the water, most of the activity is dredging around the wharf that will become LNG Canada’s ocean terminal. Known as the old Eurocan wharf, for the now defunct pulp mill it used to serve, it was acquired by LNG Canada from Rio Tinto, which operates the nearby aluminum smelter that has been the community’s economic engine since Kitimat was founded in the 1950s. In exchange for the old Eurocan wharf, which will become terminal B, LNG Canada has agreed to build a new terminal A for the smelter.
Established in the 1950s as an “instant town,” Kitimat was chosen as the site for Aluminum Company of Canada’s west coast smelter because of the nearby potential for cheap hydroelectricity. That power plant was developed at Kemano, about 100 kilometres away, where in a feat of mid 21st century engineering, the course of the Nechako River was reversed to enable water to cascade through a tunnel carved out a mountain to the generating station below.
With a current population of about 8,000 compared with 11,000 in the 1990s, Kitimat has historically relied on the aluminum smelter, now owned by Rio Tinto, as its major employer. For decades, the pulp mill and a methanol plant provided additional employment in Kitimat. But the methanol plant closed in 2005 and the pulp mill in 2010. So LNG Canada’s announcement last October of a final investment decision on the project has received a positive reception, the major said.
“The decision by LNG Canada was widely welcomed,” Mr. Germuth said. “They’ve been an outstanding corporate citizen to work with. They have put so much effort into being part of the community, trying to do everything possible because this is a massive project.” A joint venture of Shell, Petronas, PetroChina, Mitsubishi, and Kogas, and led by Shell, LNG Canada intends to export natural gas to Asian markets. But first it needs to compress the gas, reducing its volume by a factor of 600, so that it can be transported on specially designed ships, notes the LNG Canada website. Creating the “world-class” infrastructure to do that will cost $40 billion, which makes it Canada’s largest ever industrial project.
Kitimat is at the north end of Douglas Channel, a 100-kilometre fjord that connects with Hecate Strait on the B.C. coast. It is about 750 kilometres northwest of Vancouver by air, and about 1,400 kilometres by car. In a post on LNG Canada’s website, Corporate Affairs Director Susannah Pierce wrote, “In the first few months of construction, LNG Canada had already awarded close to $1 billion in contracts to Canadian companies.” She added that the project is expected to create 10,000 new jobs during construction. However, the project’s contractor — a joint venture between JGC Corporation and Fluor Corporation — forecasts on its website that about 7,000 people will be needed for construction at the project’s peak, “with approximately 4,500 people working at site on any given day.”
Roger Harris, former Executive Director of the now defunct Kitimat Port Development Society, lives in Terrace and still gets over to Kitimat occasionally. “Every now and then I sort of nose around to see what’s going on,” said Mr. Harris, “but a lot of this stuff is now behind gates so you can’t really get down to the foreshore anymore.”
Nevertheless, he said the project has already generated a lot of activity. For example, clearing has begun on the 670-kilometre pipeline route to the natural gas fields near Dawson Creek. So has construction of the camp that will provide workforce housing. He estimated that about 200 workers are in camp at present. “They may not be working on the actual terminal, but they’ll be working on aspects of it that will eventually support the terminal,” Mr. Harris said.
In May 2016, LNG Canada announced that it had chosen a joint venture of Bird Construction Inc. and Civeo Corporation to design and build a 4,500-person workforce accommodation centre called Cedar Valley Lodge. In April, 2018, LNG Canada announced it had chosen JGC Fluor BC LNG Joint Venture, known as JFJV, as its engineering, procurement and construction contractor. The joint venture between Texas-based Fluor Corporation and Japan-based JGC Corporation, “is committed to providing local businesses with information about potential contracts and employment opportunities, and to connect local individuals and businesses to larger contractors that may be seeking additional resources to complete their work,” according to the LNG Canada website.
“Some of these contracts are too big for a local contractor to handle, “ Mayor Germuth said. “So we want to make sure that when these big contractors are bidding on them, JGC Fluor is letting them know who the local contractors are.”
According to its website, LNG Canada has awarded contracts to such companies as ATCO Structures and Logistics Ltd. for trailers, Bear Creek Contracting for civil works, Leavitt Machinery for equipment rental, Haisla Brinkman Forestry Joint Venture for forestry works, and Ledcor Haisla Limited Partnership for site preparation. Other contracts noted on the JFJV website include Bollore Logistics Canada Inc. for freight forwarding, Entrepose Vinci Canada for LNG storage tanks, and Horizon North Camps & Catering Partnership for supply and installation of temporary trailers.
Jill Barrowman, Executive Director of the Kitimat Chamber of Commerce, confirmed that “there has been a boost to our economy for those local businesses who’ve received contracts or sub-contracts.” She noted that hotels are busy, with Kitimat’s visitor centre receiving more than 400 additional visits in the first seven months of 2019 compared with that period last year. “Currently the municipality is seeing an increase in taxation, especially with taxes received from workforce accommodation,” Ms. Barrowman said.
Most of the large shipments to the project site have been for workforce accommodations and for pilings, she said. The really big stuff is still to come. That will include the massive plants, known as trains, which will compress the natural gas. Those trains will come by water from Asia. The facility will begin operation with two trains, with a combined capability of 14 millions tonnes of LNG annually, with a possibility to expand to four trains in the future, according to Shell. The facility is expected to start shipping LNG in 2025.
“Once the large trains start being shipped and travel up the Douglas Channel by ship/barge, the site of these huge trains will draw a lot of attention to see history in the making,” Ms. Barrowman said. “The same happened when LNG Canada was dredging at the port. It drew a lot of interested people to go and watch.”
About a decade ago, Mr. Harris oversaw a venture that attempted to develop a private breakbulk port at Kitimat. Despite about $1 million going into the effort — including from the governments of B.C. and Canada, and Alcan — and a trip to China to explore potential connections, the project never launched. One barrier was the smelter owned the wharf and foreshore. And while there was local support from Alcan at the time, the corporate head office was concerned that it might need that property for future operations. “That became a significant barrier because, at the end of the day, Alcan’s primary role is to take care of Alcan and its interests,” said Mr. Harris. “I think LNG Canada would even tell you today that probably some of their toughest negotiations to get where they are now, probably were the negotiations with Alcan around accessing the docks and the wharf.”
The breakbulk project went as far as it could without significant investments, he said. However, the studies conducted at the time showed that it was feasible. “Maybe the fact that LNG Canada is going in there is proof of that,” Mr. Harris said. Mayor Germuth still sees the potential for a separate breakbulk port for Kitimat — particularly if the rival Kitimat LNG proposal, which would be built about 10 kilometres to the south on the west shore of the Douglas Channel, also goes ahead. “We absolutely think there’s a possibility,” said the mayor, who envisions Kitimat as “the LNG capital of Canada.”
One possibility would be on the site of Rio Tinto’s former smelter lines, which have been decommissioned and will be demolished, now that a new smelter has been completed to the west. Another possibility is to locate a breakbulk terminal further south on the west side of the channel. “We’re definitely on the map now. And there’s lots of opportunities here,” Mr. Germuth said.
Ms. Barrowman said, “Kitimat LNG is not dependent on LNG Canada as they are redesigning their project to run on electricity. We anticipate Kitimat LNG will make a final investment decision once the LNG Canada project starts slowing down and construction coming to an end. I doubt there would be enough labour to work on both projects at the same time.”
Not everyone is pleased with the LNG Canada project. Environmental groups, like the Wilderness Committee, oppose natural gas development for reasons that include worries about fugitive methane emissions and pollution from fracking operations to extract the gas. However, the Haisla First Nation, on whose traditional territory Kitimat and LNG Canada are situated, supports natural gas development — although the Haisla opposed the Enbridge Northern Gateway oil pipeline. “This has been supported by a majority of the membership through community meetings, elections and votes,” a posting on the Haisla website says of LNG Canada. “Despite the majority voting in favour, it is understandable that not everyone agrees on why or how these projects will be done.” The post also notes that all 20 first nations along the route have signed agreements approving the pipeline. They include Wet’suwet’en Nation, “but a select few have opposed the project with a blockade,” the post notes. “This division within their nation is up to them to resolve, and we hope they are able to do this in a peaceful, respectful manner.”
On Aug. 27, LNG Canada announced it had awarded a contract to HaiSea Marine — a joint venture of the Haisla Nation and Seaspan ULC — to design, build and operate escort tugs for the Kitimat facility. “Our agreement with Seaspan ensures our members will have access to employment, training and procurement opportunities on the contract with LNG Canada,” Haisla Chief Councillor Crystal Smith said in a news release posted on the LNG Canada and Haisla Nation websites. “The opportunity to work locally in the marine industry is of great significance to the Haisla people.”
Opponents have also raised concerns that B.C.’s burgeoning LNG industry will be a bust because of too much competition from other regions like Australia, which have a huge head start. But Mr. Harris, who is now a partner in a consultancy that does a lot of work for First Nations, is confident any glut of LNG will dissolve because world demand is moving away from the dirtier fossil fuels such as oil, which produces about double the carbon emissions as LNG when burned. Canada is also a very stable country, meaning its supply isn’t like to be cut off, he said. “Maybe my last point would be this: If you’re a buyer of LNG you’re not going to buy all your product from one place,” Mr. Harris said. “Now that a final investment decision has been made”, Mr. Harris said, “construction of the modular units for the LNG Canada project should begin in Asia.” He described what’s underway now as “pre-work” in advance of construction of the terminal itself, which he expects will begin in late 2020 or early 2021. Pipeline crews, meanwhile, should begin showing up next summer. Most of the material for the pipeline will be transported by rail to laydown yards and then moved quickly by truck to the pipeline route, he said. “The schedule is so important to these projects, because there’ll be modular units that will be in Kitimat, ready to be put somewhere,” Mr. Harris said. “There’ll be some on a dock, some on a boat, some in China, some on an assembly line. And if that process gets delayed or interrupted, the dollars that get backed up are rapid and fat.”
The project will create activity that will reverberate throughout the province as it draws in workers from Vancouver and Victoria, Mr. Harris predicts. Once the project is complete and the LNG plant is in operation, he expects it to make life much more stable in a region that went through hard economic times a decade ago. “It is an exciting time and it’s busy,” Mayor Germuth said. “There are white pickup trucks everywhere.”