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The footprint Pacific NorthWest LNG left behind

Opportunity gained and lost
Pacific Northwest LNG’s parent company Petronas has decided not to move forward with its $36 billion Lelu Island project.

For five years, the prospect of a $36-billion liquefied natural gas project – Pacific NorthWest LNG – burrowed into the very foundations of B.C.’s North Coast communities.

Open houses, project advertising, sponsored community events, sports teams and training programs all tapped into the $1.2 million Pacific NorthWest LNG invested in North Coast communities over the five-year timespan.

There were also promises and benefits agreements for First Nation communities and Port Edward — the district where the project would have been located — where district council clung to a game-changing potential future of job growth, tax revenue and a population boost.

After the bust of the Skeena Cellulose pulp mill just prior to the turn of the century and the decline in Rupert’s longstanding fishing industry, the potential introduction of the LNG industry to the region forced the City of Prince Rupert re-examine its own community landscape to prepare for accommodating a future boom if one or more projects came online.

While there have been six other LNG projects proposed for Prince Rupert, Petronas, the Malaysian state-controlled energy giant, and its partners had almost made it to the finish line only to take a knee in the last stretch citing unfavourable market conditions.

Petronas submitted its project description to the Canadian Environmental Assessment Agency (CEAA) in February 2013, and in September 2016 the federal government approved the project with 190 conditions.

While industry and business waited with great anticipation to hear of a final investment decision by the company, others including the Gitwilgyoots Tribe and SkeenaWild Conservation Trust, launched legal challenges against the project.

Not everyone agreed with the project’s site location on Lelu Island, with some scientists, First Nations and North Coast politicians arguing that the project would have had an adverse affect on juvenile salmon habitat.

But despite sometimes bitter arguments for or against the project and after five years of Pacific NorthWest LNG courting B.C.’s North Coast, Petronas did leave a few footprints after walking away with the imagined pot of gold.

Port Edward

Disappointment may be felt the strongest in the District of Port Edward, where mayor and council had high hopes for what could have been for their small community.

In December 2014, the district signed a 25-year tax agreement for approximately $150 million with Pacific NorthWest LNG that would have supported infrastructure and services in the area. On top of that, the district would have collected $3.25 million per year.

Although the district would have been happy with that much money in its coffers, it was the people that Mayor Dave MacDonald was hoping the project would bring.

“I was hoping to help young people and people who would come back to work, so it’s very disappointing in that respect,” he said.

The district’s population shrunk by 14 per cent from 2011 to 2016, with only 467 residents according to Statistics Canada’s most recent data. Port Edward is in debt $1.2 million for its new school built in 2012 to accommodate 60 students — there were only 14 students enrolled in the last school year.

“Overall, until the plant was built that was when we’d start getting the tax revenue so it’s not going to hurt anything in the bottom line in today’s taxes. There wasn’t really money coming in anyway. There was a lot of money in the work people were doing and they have to be people who are disappointed too. There were a lot of jobs on the line here,” MacDonald said.

When Pacific NorthWest LNG chose Lelu Island for the facility, Port Edward began preparing for the necessary upgrades in infrastructure to support the project and possible increase in population. The district is getting upgrades in the sewer and water lines and an eight-unit seniors centre is going to be built.

Plans for Wampler Way Bypass, the access road that would have been used for the project, will be put on hold for the time being but the mayor said they will work on making it a reality in the future.

“All the hard work and planning that has been put into place will continue to be available and useful for future development,” he said.

Training and Education

In an effort to prepare and train the resident workforce for a project that could have produced 4,500 during the peak of construction, Petronas invested approximately $1 million in training and education.

In 2013, Pacific NorthWest LNG contributed $75,000 to join the trades training initiative partnership with Ridley Terminals Inc., Northwest Community College and School District 52.

The Coastal Pathways Partnership was introduced to address the need for skilled trades people required for a wide range of sectors. In 2013, Charles Hays Secondary School offered a Millwright Foundations Program and the Prince Rupert Middle School offered a Industrial Electrical Foundations program.

“They were the funding piece to help start the mill wright program,” said Sandy Jones, superintendent for School District 52.

Coastal Pathways Partnership will continue, Jones said, and they hope to continue forward with other partners and the college.

The school district received other contributions from the company. This summer, Pacific NorthWest LNG gave $71,000 for summer school camps. Camp Jupiter, a specialized program for students with physical, cognitive or other disabilities, was able to run for a third year, and the Summer Read program, which hasn’t been available since 2012.

“We were in discussions with them about funding for the next three years for careers and literacy programming and we came really close to getting that, but they backed away,” Jones said.

Through Hecate Strait Employment Development Society, a grant program was made available for residents looking to pursue education and training that would be relevant in the LNG industry.

The pilot program, the Individual Training Sponsorship Program, began in 2014 and trained 171 individuals. The company states on its website that 78 per cent of the participants in the program were then either employed or continued their education.

The second grant program was launched in March this year. The Individual Training Grant Program offered support for tuition, registration fees, textbooks and course equipment. But by September, this program will likely end when Pacific NorthWest LNG said it would sign off on its final business commitments.

Community investments

The courting continued with sponsorships for events such as Winterfest, Cow Bay Days, the All Native Basketball Tournament and support for the Rupert Rampage CIHL hockey team.

Port Edward’s North Pacific Cannery received $100,000 toward restoring the working dock, and more recently Oldfield Creek Hatchery was given $75,000 to upgrade the facility and purchase an operations vehicle.

Last September, the Tall Trees Recreation Trail was reopened after the company spent $125,000 to clear and replace sections of the 4.6-kilometre trail, adding signs, parking and benches were installed at the stunning lookout.

The investments spread into coastal First Nations communities, where Pacific NorthWest LNG also joined with the Breakfast Club of Canada for two years to serve kids and teens healthy morning meals in Hartley Bay schools.

First Nations

Attempts to court the First Nation communities on the North Coast and along the Skeena were met with a mixture of resistance and acceptance.

The Salmon Summit in January 2016 wrapped up with a declaration to protect Lelu Island and wild salmon signed by hereditary leaders of some of the Nine Allied Tribes of the Tsimshian Nation, as well as Wet’suwet’en, Gitxsan, Lake Babine and Haisla First Nation.

But a little more than a year later, Metlaktla, Lax Kw’alaams, Gitga’at and Kitselas signed an impact benefits agreement with Pacific NorthWest LNG and the province.

“The project provided significant opportunity to improve the quality of life in our community,” said Metlakatla Chief Harold Leighton in a statement on July 26. “In addition to career and training opportunities for our members, the advancement of this project would have brought additional financial and land resources to further ensure stability growth and economic development for Metlakatla.”

If the project had moved forward, Metlkatla would have received $20 million, an annual benefit of $500,000 and once the LNG was being shipped the community would have received $0.02 per tonne — if the project was shipping 12 million tonnes as proposed that would have totalled $240,000 a year.

Similarly, Lax Kw’alaams would have received $98.5 million for community projects, and $.024 per tonne or $288,000 for 12 million tonnes of exported LNG — and the province committed $50 million in transportation infrastructure once construction began. Kitselas was also to receive $13.35 million with construction. Annual benefits were also promised once LNG was being shipped.

Although the project has been cancelled, Metlakatla and Lax Kw’alaams still benefitted from the agreements with the province and company.

“These beneftis include the transfer of some lands and monies for training, member development and cultural and environmental protection,” Leighton said.

Business impact

Along with the sudden spike in LNG industrial interests to the area came more businesses and people searching out the next potential gold rush.

There were the prospects of 4,500 construction jobs at the peak, then 330 long-term jobs and 300 spin-off jobs with just this one LNG project that edged closer to government approval.

The Port of Prince Rupert was also continuing to grow with the Phase 2 expansion of Fairview Terminal and looking to diversify its portfolio beyond coal, raw lumber and grain.

The proposed facility would have had two liquefaction plants capable of producing six million tonnes per year, and the federal government had approved of a licence to export 19 million tonnes of LNG a year beginning in 2019 — this meant a lot of cargo for the port.

“When you consider 12 million tonnes, it’s similar to what RTI [Ridley Terminal Inc.] working at full capacity three years ago was delivering to the port. If you consider what it would look like for PRG [Prince Rupert Grain] or RTI to close its doors, this would be the reverse impact to what the positive impact would be, it’s what it would have meant to our trading portfolio,” said Ken Veldman, director of public affairs for the Port of Prince Rupert.

The loss of opportunity has also affected other construction and contracting businesses.

“We were literally three days away from hiring a permanent staff, and the cancellation of the project has removed the viability or the economics to do so,” said Steve Williams, business development lead of Voice Construction.

Voice has been in Prince Rupert for the past three years, and Williams said they have invested more than $1 million waiting for a final investment decision to be announced. In that time, Voice has made $0 in Prince Rupert. There are a couple dozen other businesses in a similar situation.

Williams is moving to follow the opportunity in Kitimat where there are two LNG facilities in the running, but he says Voice will stay in Prince Rupert where there are still industrial projects in the works.

While the port bids farewell to a significant investment project, Veldman pointed out the silver lining in terms of the legacy of Pacific NorthWest LNG.

“From a port perspective we’ve got a broadly improved base of environmental knowledge with regard to that site both from a land and marine perspective and that kind of knowledge is going to be applied to future trade projects that should be able to facilitate their development,” Veldman said, adding that from a community perspective the project instigated a mindset for future planning and growth management.

City of Prince Rupert

Although Pacific NorthWest LNG was proposed for Lelu Island in Port Edward, many of the regional facilities, hospital, police force, recreation centre to name a few, are based in Prince Rupert.

In 2014, as residents became more familiar with the term LNG, the city invested in a “Planning for Major Projects” study to investigate the potential impact of having one or more projects in the area, and how the city will have prepare its infrastructure for growth.

In response to the dissolution of the project, Mayor Lee Brian remained positive. “The economy of Prince Rupert and the region is continuing to grow and diversify. We are encouraged about a number of other industrial projects that are ongoing or proposed,” he said.

Housing pressures

One of the most obvious effects of a potential LNG industry boom in Prince Rupert was a rise in housing prices. In January 2012, the average sales price of a home was $173,422 — by January 2017 the average price was $265,106.

In the 2014 year-end news release, BC Northern Real Estate Board president Ken Laursen noted that Terrace, Kitimat and Prince Rupert had shifted to a more steady market after experiencing one of the highest climbs in average home prices in the province.

“This recent shift may be due to saturation of the speculative demand initially experienced after the proposed LNG projects,” Laursen said in the release.

By the second quarter of 2017, new president John Evans commented on a dip in prices. “Communities dependent on oil, gas, or potential LNG projects continue to show sales numbers below previous years,” and that “LNG speculation has cooled and the market is reacting accordingly.”

Although the market cooled, prices are still nowhere near what they were in 2012 before the speculation.

Provincial and National

But from a wider perspective beyond the North Coast, the Conference Board of Canada said if the $36-billion terminal near Prince Rupert was built, the B.C. government could rake in $85-million a year from an LNG tax and $294-million in annual royalty revenue from natural gas drilling in a 30-year period.

The project would have injected another $79-million a year in corporate income taxes into the provincial government’s treasury and $204-million annually into federal tax coffers, the conference board said in a confidential appendix.

“The construction of the Pacific NorthWest LNG facility would allow Canada’s natural gas to reach markets characterized by growing demand, which would generate revenues and employment opportunities that would not otherwise exist,” said the study’s co-authors, who estimate the creation of 18,500 jobs from the terminal and related activities.

Is LNG dead?

Pacifc NorthWest LNG may have seemed at one point the most likely project to proceed, but after cancelling its proposal citing changing market conditions, the remaining LNG projects on the North Coast seem less likely to move forward.

Shell’s Prince Rupert LNG project was also shelved this year, but WCC LNG Ltd. for Prince Rupert, Aurora LNG for Digby Island, Grassy Point LNG in Tuck Inlet, and Orca LNG in the Prince Rupert area are still up in the air.

Much of the focus from politicians and business leaders seems to be on the industries that are actually happening – the Port of Prince Rupert’s Phase 2 container terminal expansion, Ray-Mont Logistics container loading operation and AltaGas propane export facility.