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Boomtown, B.C.: The planned growth of the liquefied natural gas industry is turning Kitimat into the next energy centre

Financial Post logo Financial Post 2022-12-09 Meghan Potkins
Cranes work in the water at the Kitimat LNG site in northwestern British Columbia. © Provided by Financial Post Cranes work in the water at the Kitimat LNG site in northwestern British Columbia.
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Marilyn Furlan is older than the town of Kitimat. At 74, the Haisla Nation elder has lived at the headwaters of the Douglas Channel in northern British Columbia for longer than the municipality has officially existed, observing the rise and collapse of successive industries that have brought thousands of workers to the remote deepwater port since the early 1950s.

An aluminum smelting plant arrived first, and the Aluminum Co. of Canada, or Alcan, built a town for its workers just 10 kilometres from the Haisla’s home community of Kitamaat Village. Afterwards came the Eurocan Pulp and Paper Co. Ltd. mill in the 1960s, and then the Methanex Corp. petrochemical plant in 1982, all drawn by the area’s powerful hydroelectric capacity and shipping access to international markets and all largely indifferent to the Indigenous people who had lived there for thousands of years.

Furlan and her family acquired a skepticism of the vaunted benefits of industrial development. “In those days, we weren’t included in any plans at all,” she recalls. “Where Rio Tinto Alcan sits now, our people used to go fishing in the little creeks.” Wastewater from these industrial projects polluted the Kitimat River, Furlan says, decimating the stocks of oolichan fish that her community relied on as a source of food and grease. “So, yeah, there’s a lot of history of mistrust with Alcan in those days,” she says.

Fearful of what further damage a potential spill of diluted bitumen would do to coastal waters, Furlan spoke out against Enbridge Inc.’s Northern Gateway pipeline project at public hearings held in 2011. But she was surprised by what she saw when LNG Canada came knocking, seeking her community’s approval to build the country’s first export terminal for liquefied natural gas (LNG) on Haisla territory. “LNG Canada is the first company that has asked our elders what we would like to see,” she says. “LNG is the first company to invite elders to view the plant. LNG is the first company that has shown us respect, treated our land with respect.”

Megaproject in a small town

Construction is now underway on LNG Canada’s massive $17-billion export terminal and more than 5,000 construction workers and contractors have descended on Kitimat and the surrounding areas. Thousands more are expected in the coming months as the megaproject approaches peak construction.

Two planes a day arrive at the Northwest Terrace Regional Airport loaded with workers arriving from other parts of British Columbia and other parts of Canada. Rental and home prices in Kitimat have skyrocketed; restaurants and stores are struggling to hire and retain staff; and there’s a severe shortage of affordable homes and daycare spaces. A rental unit that cost less than $500 or $600 a month a few years ago now goes for $1,700 to $1,800.

LNG Canada has tried to minimize its disruption to the community with varying degrees of success, constructing worker accommodations adjacent to the job site and implementing a zero-tolerance policy for workers caught breaking the law, but locals acknowledge it’s impossible to mitigate all the strains that come from a project of this size.

 Construction activities at the LNG Canada site in Kitimat. © LNG Canada Construction activities at the LNG Canada site in Kitimat.

“LNG Canada has seen what happened up in other places like Fort McMurray and did everything they could to make sure we didn’t see that happen here,” Kitimat Mayor Phil Germuth says. “There was no living out allowance (paid to employees). If you were here, you were staying at the camp. Or if you want to stay in the community, fine, you’re doing it at your own cost. You don’t have this massive amount of people coming into the community, building things that aren’t going to be needed in the future.”

There has been some grumbling from local contractors, too, about all the out-of-province subcontractors, from Alberta and elsewhere, frustrated that larger companies won many of the contracts. Across the channel from the town of Kitimat, the Haisla are in desperate need of teachers and the band has been unable to hire an addictions counsellor since the last one left earlier in the pandemic.

Still, most locals say these are good problems to have; the problems of a community with an economic future. LNG Canada and the modernization of the aluminum smelter under Rio Tinto Ltd. have caused investment in the community to explode, Germuth says. At one point, he says, almost every single vacant property in town was attracting interest from developers.

‘Now what do we do?’

All this activity is a far cry from Kitimat’s problems a little more than a decade ago, when two big employers shuttered operations — Methanex’s methanol plant and Eurocan’s pulp and paper mill — putting more than 650 people out of work. In the wake of those closings, Kitimat’s population contracted by 19% between 2001 and 2011.

“We went through a period of time when the housing market hit rock bottom. It was very poor,” Louise Avery, long-time director of the Kitimat Museum & Archives, says. “I think the community said, ‘Now what do we do?’ Because this community is an industry community.”

That’s why it came as a huge relief for many when energy producers began to seriously explore the possibility of constructing LNG export facilities in Kitimat. Three major LNG export projects slowly emerged from a list of more than a dozen proposals, two — LNG Canada and Kitimat LNG — located in Kitimat and one, Woodfibre LNG, in Squamish.

Germuth was leaving a Def Leppard concert at Rogers Arena in Vancouver in October 2018 when he learned that a final investment decision had been made to proceed with LNG Canada by the consortium of companies backing the project. “It was raining like you wouldn’t believe and I’m in the middle of the sidewalk and I see our fire chief, of all people,” he says. The chief told an incredulous Germuth to check his phone, that LNG Canada had just given the green light after more than seven years of consultations and regulatory applications.

 Haisla Chief Councillor Crystal Smith and Kitimat Mayor Phil Germuth speak during a press conference announcing the signing of a Declaration of Final Investment Decision for a LNG project in Kitimat in 2018. © Richard Lam/Postmedia files Haisla Chief Councillor Crystal Smith and Kitimat Mayor Phil Germuth speak during a press conference announcing the signing of a Declaration of Final Investment Decision for a LNG project in Kitimat in 2018.

Germuth immediately messaged Susannah Pierce, the project’s former director of corporate affairs, who confirmed the news. “It was elation, for sure,” he says. “There’s no doubt the community was thrilled that they gave their FID to build their project here with us.”

Chevron Corp. eventually pulled the plug on its joint-venture Kitimat LNG project in 2021, followed swiftly by its partner, Australian-based Woodside Energy Group Ltd. This disappointed locals who had hoped to see a decade or more of sustained construction activity, with Kitimat LNG ramping up just as work began winding down on LNG Canada.

Still, there is cautious optimism in Kitimat as the locals brace for LNG Canada’s workforce to swell to around 7,500 strong next year during peak construction. And they’re hopeful the LNG Canada consortium, led by Shell Canada Ltd., could soon approve a second phase of the project, doubling its export capacity to 28 million tonnes of LNG per year from 14 million tonnes.

First in the world

LNG Canada has provided the Haisla revenue and resulted in more than 20 joint-venture partnerships with businesses servicing the plant, including a $500-million joint agreement with Seaspan ULC for the construction and operation of tugboat services to shepherd the massive LNG vessels that will soon ply the waters of the Douglas Channel.

The tugboat deal is important to the nation. Chief Councillor Crystal Smith says she’s focused on creating long-term prosperity and ensuring her members will be able to find jobs long after construction of the megaproject is complete. The Haisla leader has encouraged members to take advantage of training opportunities and to obtain credentials transferable to jobs in operations or at another worksite. “We don’t want our people only to have these opportunities here in our territory, but to have those skill sets so that (they) can utilize them on other projects anywhere in the world,” she says.

But the linchpin of the Haisla’s economic strategy is far more ambitious and unlike anything attempted by an Indigenous group in Canada before. In 2021, the Haisla Nation announced a partnership with Pembina Pipeline Corp. for the construction and operation of Cedar LNG, a $3-billion LNG export facility proposed for a site not far from LNG Canada and the Rio Tinto Alcan smelter in Kitimat. If it receives regulatory approval, the facility would be the first Indigenous majority-owned LNG project anywhere in the world.

Haisla’s leaders have talked about the project as a powerful example of economic reconciliation, from consultations on major projects to partnerships and, finally, to Indigenous ownership. Cedar LNG has also become meaningful for individual members of the nation as well.

Furlan says Cedar LNG representatives have welcomed Haisla community members to tour around the project site and they held meetings in Kitamaat Village with chiefs and elders. “I am proud,” she says. “This is nothing like what Alcan did in the years (before). They just did it. Now, our people are more aware of what our leaders can do and what we ask our leaders to do, because they have to come to the public. They have to come to the public to get the OK and that is good. I like that part of it. I go to every meeting.”

Despite the progress she’s seen, Furlan says the arrival of the LNG industry in Kitimat has not been without some painful moments for the Haisla and neighbouring Indigenous communities. Indigenous workers are the frequent targets of racist remarks on worksites, and she says she has seen people quit in frustration. A relative of Furlan’s, while working on the Kitimat LNG site in Bish Cove, confessed to her that he would never tell anyone at work that he was Haisla because he knew he would be treated differently. “He said the remark that they make is, ‘You got the job because you’re Haisla.’ Comments like that, even written on the walls,” she says. “That was the one thing that really, really got to me.”

But Germuth says one powerful change for the better can’t be overlooked. LNG Canada executives brought representatives from the District of Kitimat and the Haisla Nation together for meetings with the project’s investors when they first began visiting the town in 2014. Despite the proximity of the two communities, “our relationship before LNG Canada was basically non-existent,” he says. Comments echoed by the Haisla. “They brought us both together in the same room, really in neutral territory, not in one of our council chambers where you feel the pressure,” he says. “We got to get to know each other very well and the relationship between us and the Haisla has been going very, very well since. LNG Canada was really the catalyst behind that and we’re very thankful to them for that.”

In a town where it’s easy to find boosters for industry, some residents still admit to harbouring doubts about the long-term future of the LNG industry on Canada’s West Coast. Concerns about the risk of global demand slowing for the commodity have been temporarily dispelled by an energy crisis that has sent gas prices skyrocketing in Europe following Russia’s invasion of Ukraine in February. But there are still apprehensions about the possibility of new federal environmental policies or a change in the provincial B.C. government derailing local ambitions for more LNG development.

There is one kernel of hope, however, for Haisla who long for the return of oolichan stocks in the Kitimat and Kildala Rivers. New graduate positions in conservation and recovery research have been funded for five years by LNG Canada, a collaboration between the Haisla, DFO Science and Fisheries Management, and B.C. universities and environmental authorities. Many Haisla believe the band’s elected leadership about the long-term benefits of LNG development for the community, Furlan says, before adding, “Our people aren’t afraid to ask questions anymore.” FPM

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