By R. Bruce Striegler
Volumes of containers handled at the port of Vancouver’s terminals have grown substantially through past decades, increasing at an average rate of ten percent annually since 1995. Projections of growth up to the year 2040 are now predicted at about 8.0 million TEUs (or 20-foot-equivalent units), and to give some perspective, in 2018 Vancouver handled 3.4 million TEU’s. The port is deeply engaged in capacity expansion, either directly or in cooperation with private terminal operators, and it points to projects already approved or somewhere in the approval pipeline, designed to reduce the potential capacity jams. Capacity improvements are at the heart of an unpleasant row which has developed between the Port Authority and one of its larger tenants, GCT Terminals Canada.
Given the concerns around lack of future capacity and coupled with a severe shortage of industrial land in the Vancouver area, planners have turned their attention south of the city centre. Deltaport, about 38 kilometres from Vancouver’s downtown, built in 1970, is an integral part of Vancouver Fraser Port Authority’s operations. The site was constructed at the end of a long causeway constructed over a shallow bank in the Strait of Georgia. Originally created as a 20-hectare (49-acre) pod of reclaimed land for a major coal terminal, it is now four times that size. The site holds Westshore Terminals, Canada’s largest coal terminal and the container terminal GCT Deltaport. Considered Canada’s flagship container terminal, a third berth was added in 2010, doubling its capacity and making it the first semi-automated facility in the country with a state-of-the-art terminal and 1,100 metre contiguous berth. Also located on this man-made incursion into the strait is the site Vancouver Fraser Port Authority has selected for its proposed Roberts Bank Terminal 2. (RB2)
Duncan Wilson, the Port Authority’s Vice-President Environment, Community and Government Affairs says, “We’ve been working on the Terminal 2 project since 2003, and this version of the project, for the last six or seven years. We’re already well into the environmental assessment process and we’re just about to start panel hearings.” He adds that Terminal 2 is the only west coast container capacity project of this magnitude that can be completed in time for when the anticipated demand in capacity will present itself. With containerships becoming increasingly larger, the Port Authority anticipates that a new terminal will not increase ship calls, but that cargo will increase by approximately 33 per cent. The Port Authority argues that with Terminal 2, the number of container ships docking in Vancouver’s inner harbour or other Fraser River terminals will actually be reduced.
Roberts Bank Terminal 2 now subject to additional scrutiny
Last August’s Federal Court of Appeal judgement halting construction on the Trans Mountain Pipeline expansion had consequences that rippled through to other projects, including Port of Vancouver’s RB2 Terminal. That judgement was based partly on what was deemed a failure by the national energy regulator to include the environmental impacts of marine vessels in its study of the project. The court also ruled that Ottawa had failed in its duty to consult adequately with local Aboriginal communities. The ramifications of those decisions are now beginning to be felt on other marine transportation projects. The impact on the Roberts Bank Terminal 2 project arrived through a March 8 letter from Federal Environment Minister McKenna, directing the Chair of the panel reviewing the Roberts Bank project to update the terms of reference to include impacts from marine shipping. These orders caused several First Nation communities and one private-sector firm to call on regulators to delay those hearings.
The problem and the dispute
The dispute between the port and GCT centers around GCT’s application to construct an expansion to its existing Deltaport terminal at Roberts Bank, which would see 138 acres added to Deltaport’s existing footprint. It is noteworthy that The Port Authority acts as both regulator and landlord to GCT at its Deltaport terminal, but has also invested heavily in years of pre-project work on its own proposal for the Roberts Bank site, Terminal 2.
The Port’s position is that in view of the negative disposition by environmental authorities of a 2005 application by GCT to build a much smaller expansion, “on the very same intertidal habitat which was specifically protected”, there is little likelihood that the much larger recently proposed project would eventually be approved. Although it left the door open to a future review of its decision, the Port made it clear that its distinct preference is to proceed with its ongoing activities surrounding RB2, and that it will not consider incremental capacity additions until after completion of RB2.
The alternative to Roberts Bank Terminal 2 that was pitched to the Port Authority by GCT outlined how it would meet future capacity needs. “Given its track record of viable and responsible expansion, GCT proposes to further expand capacity at GCT Deltaport through an additional two million TEUs. We’ll do this by moving forward with the GCT Deltaport Expansion, Fourth Berth Project (DP4).”
In rejecting the GCT proposal, Vancouver Fraser Port Authority said its Terminal 2 project was more likely to meet the deadlines of a still significant environmental approval process. As well, Terminal 2 is scheduled to come online somewhere between 2025 and 2028, precisely as the demand is expected to be needed. The rejection triggered GCT to file for a judicial review of the decision in federal court, saying regulators should be compelled to consider both proposed projects. GCT’s CEO Doren Grossman pointed out that GCT has been a tenant of the port for many decades.
Grossman also warns the move could stifle investment from other private sector players, pointing out that GCT is backed by three national institutional investors. “We’re a Canadian company, primarily owned by Canadian investors, investing Canadian pension money. We’ve spoken with all relevant federal Ministers directly and indirectly with respect to our concerns.”
Environmental concerns and market competition offered as reasons for rejection
When Grossman was asked why he thought the Port Authority had taken the actions it did, he replied, “They say quite clearly in their letter that it’s being rejected because Fisheries and Oceans Canada are prohibiting further land reclamation inland from Deltaport, due to environmental sensitivity.” Mr. Grossman said that with that action, GCT was left with no option but to file for the judicial review. Apparently, the Port Authority’s letter references the original plans GCT presented in 2003, and Grossman notes, “that letter is based on information that is 16 years old, and is based on a project that is completely different from the project we’re talking about here.”
The rejection letter from the Port Authority continues, noting that expanding the existing Deltaport would mean one terminal operator would control a significant majority of the market for container terminal services. “Healthy competition is necessary to ensure users continue to pay reasonable rates for reliable service. For this reason, Vancouver Fraser Port Authority is committed to fostering an appropriate level of competition within the Port of Vancouver.” Mr. Grossman’s rejoinder to that, was to comment, “Firstly, it’s not in their jurisdiction to opine on competition, that’s completely outside their authority. If they were opining and they didn’t have a competing project, that would one thing, but the fact they have a competing project, they’re essentially saying, we don’t support competition, we have a project, we deny you the right to have a project, and we’re the regulator, so that’s it.”
Environmental concerns higher than usual at Roberts Bank location
GCT also notes the proposal responds to the change in type and volume of trade of containerized goods shipped through Canada’s west coast. The project would be constructed in an intertidal and subtidal marine water area on the south side of the existing facility, contiguous to the current operations. “In comparison to other potential development options at Roberts Bank, the location of the proposed Project, according to preliminary reviews and engagement with local stakeholders, contributes to a smaller adverse environmental affect,” the company stated. The submission goes on to raise several questions including the cumulative impacts resulting in the construction and operation of T2, as well as the enforceability of the proponent’s environmental mitigations.
Some of the environmental concerns have already made their way to the top of the pile, such as the exchange from Environment and Climate Change Canada to the Canadian Environment Assessment Agency, describing the predicted impact of Roberts Bank Terminal 2 on hundreds of thousands of sandpipers as “potentially high in magnitude, permanent, irreversible, and, continuous.” The concerns centre on the biofilm that the sandpipers consume on the tidal flats at Roberts Bank during their spring migration. The biofilm is a thin, sticky coating secreted predominantly by diatoms to prevent them from being swept away with the tides. A total of 23 species of wildlife listed under the federal Species at Risk Act, or by the Committee on the Status of Endangered Wildlife in Canada, are known to exist within the project area and related marine-shipping area.
The Port Authority’s Duncan Wilson responds, “From our perspective, our science and research on this topic says that the project will not adversely impact biofilm. In fact, we think it may increase it. There is approximately seven times as much biofilm at Roberts Bank as there are sandpipers who need it.” He adds that the challenge they are dealing with is that Canadian Wildlife Service has not provided any science to back up it allegations, “We want to understand the science behind its allegations.”
Looking for resolution to the dilemma of Terminal 2 or Deltaport 4?
Vancouver has now moved into the top-50 global container port list and has ambitions of moving further up that list. The management at Vancouver Fraser Port Authority understands that a capacity crunch is looming. Competition for Transpacific goods movement is increasing from ports like Seattle-Tacoma, Los Angeles-Long Beach, as well as ports along the Continent’s Gulf Coast and the eastern seaboard. Vancouver’s multibillion-dollar bet on how best to provide that capacity is riding on Terminal 2, with a price tag between $2 billion and $3 billion. It’s a bit of a roll of the dice for the Port Authority, but it would fund the land reclamation required to build the new terminal.
The Port’s sales pitch projects robust transpacific container cargo growth for B.C. ports over the next 20 years. Its low-end forecast has 6.7 million TEUs being handled annually; the high end would raise that total to 9.7 million.
GCT, the major container terminal tenant at Roberts Bank, is pushing its own DP4 Terminal as an alternative to Terminal 2. Deltaport Berth 4 would add roughly two million TEUs to the annual capacity of 2.4 million TEUs at GCT’s Roberts Bank terminal. Its price tag, according to GCT President and CEO Doron Grossman, is around $1 billion. Grossman said the terminal’s capacity increase would be added incrementally to meet market demand rather than in Terminal 2’s single large capacity expansion. He added that it would dovetail with other container cargo capacity expansion projects underway or planned for B.C. ports, including GCT’s $160 million upgrade of its Vanterm Terminal in Vancouver, its recently completed $300 million rail densification project at GCT Deltaport and DP World Ltd.’s $350 million expansion of the Port of Vancouver’s Centerm container terminal, which is scheduled to begin in the summer.
Both proposals would go through same lengthy environmental processes
Deltaport Berth 4 faces the same environmental and infrastructure scrutiny that Terminal 2 has been navigating for the past six years, and the port has said that any Deltaport expansion would require years of planning and environmental work to get to the federal review stage. That, the port says, would “make it very difficult for GCT to meet demand that is just a few years away.” GCT maintains that Terminal 2, originally proposed in 2003, is “now outmoded” and “no longer viable given changes in a number of market factors.” GCT’s Berth 4 expansion pitch maintains that increased consolidation in the ocean carrier sector and larger ships are making intraport terminal competition less relevant. It argues that Deltaport 4 is therefore the most competitive and economically viable near-term option for the Port to increase its container-handling capability.
Mr. Grossman notes, “At the end of the day, what we are saying is that we have a staged capacity investment in Deltaport that is funded by private capital, with an operator that is well respected and compliant with environmental stewardship and all of that stuff, and it is a project that is of meaningful importance, and somebody needs to decide whether this project has a greater urgency to get done than the Terminal 2 project.” He added that Deltaport Berth 4 would not preclude the eventual addition of Terminal 2.
Quoted in a recent interview with Business In Vancouver, Mr. Grossman says, “The way we think about this is pretty simple. Centerm is going forward with its expansion. We are thrilled with that. It will be a beautiful thing. We have a new 25-year lease with the Port of Vancouver for Vanterm. We are going ahead with our Phase 1 expansion over there. Prince Rupert has the opportunity to expand again. We have another Phase 2 expansion here at Vanterm. Deltaport Berth 4 expansion comes after that. You then have no opportunity to expand further – there is no more land at Deltaport. That’s a perfect time for Terminal 2.”
In March 2018, Transport Canada launched a review of the country’s Port Authority system. The review could change Canada’s port landlord-tenant relationships and how they are managed. In the meantime, the competing goals for the two projects have set up what could become a major landlord-tenant dispute, against a background of the negative effects of an continuing Canada-U.S. trade frictions, the unresolved China-U.S. trade dispute, increasing China-Canada disputes resulting in significant losses of agricultural export volumes, a slowing global economy, regionalization of manufacturing and other factors which could significantly reroute goods movement on major shipping trade loops. In the meantime, the Port is proceeding with the scheduled environmental review panel meeting for the Terminal 2 project on May 14 in spite of protests and requests from some stakeholders for a delay. GCT Terminals Canada continues to prepare for a Judicial Review, date yet unspecified.