Transportation and its Role in B.C.'s Export Economy

Year: 
2016

Port facilities throughout British Columbia are in need of expansion to facilitate a diversified number of commodities – many of which support the economic growth of Canada as a nation dependent upon international trade. As one example, the Vancouver Fraser Port Authority (doing business as the Port of Vancouver) is the largest port by export tonnage in North America and is the country’s principal ocean gateway to the Pacific.

The Port of Vancouver is Canada’s largest port with a full range of facilities for the international shipping community, including Class 1 railroads.  The Port of Vancouver offers 28 major marine terminals and extensive on-dock rail facilities.  Almost 95 % of the port’s total volume serves Canadian import and export markets.  In 2014, the Port of Vancouver handled 140 million tonnes of bulk and container cargoes valued at $187 billion.[1] 

As B.C. looks to expand its export capacity, we face increasing opposition to a range of export projects.  This opposition is based on fear, misinformation and a lack of a factual base.  The primary focus of this opposition has been on carbon-based exports.

Coal has been mined in B.C. since the 19th century.  As of 2012, coal was produced from ten mines in three regions of B.C.  The five mines in southeast B.C. and four in northeast B.C. produce mainly steelmaking coal, while a single mine on Vancouver Island has produced thermal coal for the past 20 years. Coal production for British Columbia is forecast to be about 29 million tonnes for 2014, down from 31 million tonnes in 2013.[2]

The Coal Association of Canada reports that Canadian coal production has been around 60 million tonnes over the last decade, however, in 2012 coal production increased to 67 million tonnes.  Of this 38 million tonnes (56%) was thermal coal produced mainly in the prairies and 29 million tonnes was steelmaking (metallurgical) coal, produced in Alberta and B.C.  There is a strong case for the Chamber to support continued production and export of both thermal and metallurgical coal.

B.C. exports of thermal coal originate from mines on Vancouver Island, and mines in Alberta and the United States.  The thermal coal, in variable quantities is exported from Ridley Terminals in Prince Rupert, Westshore Terminals in Delta and from Texada Island in the Georgia Strait near Powell River.

Due to a prolonged and steep decline in thermal coal prices, changes in market demand and policy disincentives, Quinsam coal mine on Vancouver Island suspended coal production indefinitely in January 2016.  Mine operations were placed into care and maintenance and all contractual supply commitments are being met from existing inventories.[3] 

Pricing has been steadily dropping as a direct result of continued economic underperformance of major Asian countries such as China, and over-supply of coal on the market currently.  However, the long term prospects for the coal industry remain positive.  Global metallurgical demand is projected to increase 50% (from 290 Mt to over 450 Mt) in the next 20 years and the global thermal export market is expected to double from 963 Mt to 2000 Mt.[4]

Markets for B.C. coal include Asian countries, especially Japan, China, South Korea and India, as well as countries in Europe and South and North America.  Most of the coal produced in southeast B.C. is transported by rail to the Westshore Terminals export facility south of Vancouver.  Coal from northeast B.C. mines is transported by rail to Ridley Terminals Inc. export facility at Prince Rupert.  Approximately two-thirds of the 2011 production on Vancouver Island was destined for international markets and was shipped from Texada Island in the Georgia Strait.[5]

Coal is the predominant export commodity from B.C. ports and currently represents 22% of B.C.’s exports destined primarily overseas where it is used for steelmaking and energy production. 

Metallurgical coal is used in steelmaking and thermal coal is used for energy production.  Lower Mainland terminals have been safely transporting and handling coals for decades and will continue to uphold the highest environmental and community standards.

It is sometimes argued that our coal production and utilization contribute to the total world carbon emissions and, therefore, we should not be exploiting the resource.  This is naïve as rapidly developing countries (such as China and India), continue to develop a growing demand for steel and energy.  Worldwide, the use of coal as an energy source remains crucial to the economies of many developed and developing countries.  40% of the world’s population still relies on coal for energy, including the United States and Canada.  It is predicted that around 1 billion people will still be living without electricity by 2035.  Without coal as a part of the energy mix, millions of people will needlessly remain in poverty.  The marketplace for these commodities will simply purchase their requirements from other sources.  Far better that coal be produced here where we have rigorous environmental regulation and oversight.

British Columbians benefit greatly through our coal production.  In 2011, net revenues from coal mining totaled $5.186 billion.  Mining shipments totaled 36.014 million tonnes of which coal shipments are the major component (24.488 million tonnes of metallurgical and 471 million tonnes of thermal).[6] 

Moreover, these shipments make up the major component of rail shipments in the provinces; whether B.C.’s rail (and port) systems could be sustained without these shipments is questionable.

B.C. coal export facilities currently consist of Ridley Terminals in Prince Rupert, Westshore and Neptune terminals within the Port of Vancouver and a proposed direct transfer facility at Fraser Surrey Docks. Similarly, to Westshore Terminals, metallurgical and thermal coal are also moving at capacity through the Prince Rupert northern gateway at Ridley Terminals.  To meet increasing demand, Prince Rupert undertook a major expansion and upgrade to double their capacity output to 25 million tonnes.  In 2014, the Prince Rupert Port Authority handled over 20 million tonnes of grain, coal, chemicals, forest products, and containers, surpassing previous records.[7]

While their mine sources are primarily northern British Columbia, like Westshore, they also handle coal from Alberta and the United States.  All of these terminals with the exception of Fraser Surrey Docks, have historically handled the export of both metallurgical and thermal coal.  Thermal coal is also routed in transit through B.C. from Alberta and the United States sources creating further revenue and job opportunities for British Columbians in our rail and port facilities.  The current coal handling terminals with rail access have largely reached expansion capacity and thus the demand for additional export capacity must be addressed.

The proposed Fraser Surrey Docks LP (FSD) will see an investment of $45 million to construct a new coal handling facility to its terminal operations within its existing footprint.  Initial projections are for the handling of up to four million metric tonnes within a 14 to 60-month construction window with plans of increasing in the future if required. This additional traffic will supplement the excess coal handling capacity at Westshore Terminals – on the same inbound rail lines – where 27.3 million tonnes have been reported as exported in 2011.  Of this amount, 8.2 million tonnes of thermal coal are included which originated from the same mine source along with some additional tonnage from other mines. The economic impact of increased coal tonnage via the proposed Fraser Surrey Docks routing is estimated to increase the workforce of Fraser Surrey Docks with 50 high-paid jobs.

FSD is the largest employer on the Fraser River waterfront, with more than 300 full-time employees.  FSD has been a major employer and contributor to local communities for over 50 years, handling over $3 billion dollars-worth of goods annually.  FSD has directly contributed over $280 million dollars to BC communities over the last 5 years through wages, taxes and buying of local goods and services.[8]

On August 21, 2014, FSD was granted a permit by the Port of Vancouver that gives it conditional approval to build and operate a Direct Transfer Coal Facility within its existing lease area[9].  The Port of Vancouver is the permitting authority for the proposed amendment.  The permitting process considers environmental and technical information, as well as First Nations, municipal, agency and community input.  In completing its federal environmental review and as per section 67 of the Canadian Environmental Assessment Act 2012, the Port of Vancouver considered the information and the proposed mitigation measures provided by FSD, along with other relevant information.  The Port of Vancouver concluded that, with the implementation of proposed mitigation measures and subject to the conditions of the permit, the project is not likely to cause significant adverse environmental effects.[10]

On June 19, 2015, FSD applied to amend its existing project permit following consideration of feedback received during the first round public consultation.  A second round of public consultations were undertaken by FSD after submission of the project amendment July 17 – August 21, 2015.  The proposed amendment had no impact on the volume of coal permitted to be shipped through FSD (4 million metric tonnes per year).[11]

On November 30, 2015 the Port of Vancouver issued an amendment to FSD’s existing Direct Transfer Coal facility project permit.  The amendment permits FSD to use ocean going vessels (OGV’s) which eliminates or reduces the use of barges.[12]

Energy and mining exports in 2011 accounted for more than 30% of B.C.’s international exports.  Coal alone accounts for more than half of the $14 billion total of that sector.  The movement of coal from remote mines to tide-water export terminals – like other commodities – ideally requires variable and multi-routing models to ensure reliability within the supply chain.  The utilization of multiple inland transportation modes serves to circumvent potential disruption in service and is an important element in logistical planning.  Availability of inland transport equipment and export terminal capacity are other important considerations in formulating appropriate export logistics.

Canada’s major ports have a legal designation under the Canada Marine Act as Canada Port Authorities (CPA) and consist of 18 Port Authorities known as the National Port System.  These Port Authorities were designated as being ‘critical to domestic and international trade.  These 18 ports handle approximately 310 million tonnes annually, valued at more than $400 billion.[13]

A recent review of the Canada Marine Act made strong recommendations for changes to enhance the overall competitiveness of Canada’s port system.  With international trade expected to double or triple by 2020, there are many things that must be done to ensure Canada’s ports remain ‘ports of call’ for shippers around the world.[14]  The trade volume through Canadian ports is expected to double over the next 15 to 20 years.  Canada’s major ports continue to make large capital investments in infrastructure to meet growing needs of port users as trade continues to grow.  This is an essential service as ports are in the middle of an important transportation logistics supply chain and must work diligently to ensure the secure flow of goods to people.  OGV’s are getting larger and have more and varying infrastructure requirements.  These vessels can only be effectively serviced with the proper infrastructure all along the trade corridor from the dock, to the landside links, to its final destination, that is the receiver and ultimately the consumer.[15]

Canada’s seaports are key to moving goods and people via complex logistical supply chains extending to seaports in more than 160 countries throughout the world. 

Every year Canada’s Port Authorities contribute much to Canada’s economy:[16]

  • 311.5 million tonnes of cargo handled;
  • 495.9 in aggregate revenue in the 2013 fiscal year;
  • 182.4 million in operating income in 2013;
  • 250,000 direct and indirect jobs;
  • $10.2 billion in salaries;
  • $25 billion added to Canada’s Gross Domestic Product;
  • $2.2 billion in federal and provincial income taxes and; and
  • $2 billion in consumption tax.

Marine terminals serve as the intermodal connector where foreign trade changes transportation modes between land and water transit.  Ships carry over 90 percent of world trade.  Cargo may be stored in warehouses, in grain elevators, in petroleum and chemical tanks, or in open storage areas such as those used for automobiles, steel structures and containers.  Some perishable cargos such as frozen meats and poultry and fruits and vegetables, require temperature-controlled warehouses.  The ports system is the only economically feasible method for handling the export of raw materials, grains, most manufactured products and perishable goods.  In addition, without an efficient port system and accompanying inland delivery system, imported consumer goods such as clothing, electronic goods, and seasonal fruit would not reach store shelves.[17]

The preamble contained herein serves to illustrate the importance of developing and maintaining multiple gateways for the export of coal and other bulk commodities.

THE CHAMBER RECOMMENDS:

That the Provincial and Federal Governments:

  1. Work with the appropriate transportation authorities to assist and expedite B.C. port expansion approval to meet with surging demand for increased export capacity for coal (both thermal and metallurgical) and other commodities to accommodate global market requirements; and

  2. Work with industry to develop and promote public and economic policies that: create and encourage a better understanding of the importance of our export economy to the provincial and national interests, and address environmental concerns by committing to education and mitigation of environmental impacts.

Footnotes

[1] Association of Canadian Port Authorities website www.acpa-ports.net/industry/cpafacts.html

[2] BC Coal Industry Overview 2014, Ministry of Energy and Mines, Information Circular 2015-03

[3] Nanaimo Daily News, Quinsam Coal Mine Operation Shuttered January 9, 2016

[4] Coal Association of Canada Fact Sheet 2016 www.coal.ca

[5] BC Coal Industry Overview 2011, Ministry of Energy and Mines, Information Circular 2012-2

[6] PricewaterhouseCoopers (PwC) LLP Forging Ahead: The Mining Industry in BC 2011

[7] Association of Canadian Port Authorities website www.acpa-ports.net/industry/cpafacts.html

[8] Fraser Surrey Docks LP Discussion Guide, Consideration to Amend Permit No. 2012-072 Direct Transfer Coal Facility

[9] Fraser Surrey Docks LP Discussion Guide, Consideration to Amend Permit No. 2012-072 Direct Transfer Coal Facility

[10] Fraser Surrey Docks LP Discussion Guide, Consideration to Amend Permit No. 2012-072 Direct Transfer Coal Facility

[11] Fraser Surrey Docks LP Discussion Guide, Consideration to Amend Permit No. 2012-072 Direct Transfer Coal Facility

[13] Association of Canadian Port Authorities website www.acpa-ports.net/industry/industry.html

[14] Association of Canadian Port Authorities website www.acpa-ports.net/industry/index.html

[15] Association of Canadian Port Authorities website www.acpa-ports.net/industry/index.html

[16] Association of Canadian Port Authorities website www.acpa-ports.net/industry/index.html

[17] Association of Canadian Port Authorities website www.acpa-ports.net/industry/cpafacts.html

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