Kitimat booming as LNG plant is under construction

November 19, 2019, 9:12 am

ATCO and Bird Construction are building a work camp at Kitimat for workers on an LNG export terminal.

If you ever wonder what Energy East could have meant from communities along the route-- from Hardisty, Alberta where the pipeline would start, to Moosomin, Saskatchewan, where a 1,050,000 barrel tank farm was planned, and where feeder pipelines would have brought oil from Cromer, Manitoba and Williston North Dakota to Moosomin to be fed into Energy East, to Saint John, New Brunswick, where an export terminal was planned to be built-- look no further than Kitimat, BC.

At a construction site larger than 600 city blocks, more than 1,000 workers have started building a massive liquefied natural gas plant and export terminal that is the only energy megaproject in Canada firing on all cylinders.

On one chilly day recently, nearly 90 graders, dump trucks and other pieces of heavy equipment were buzzing around, clearing and preparing a flat stretch of waterfront land in the community of Kitimat, on the Haisla Nation’s traditional territory.

Scheduled to open in 2025, the $18-billion project is being built by LNG Canada, and it has emerged as a beacon of hope for Canada’s beleaguered energy sector.

The giant facility will convert natural gas transported from the province’s northeast on the new 670-kilometre, $6.6-billion Coastal GasLink pipeline, being built by TC Energy Corp., the only pipeline in the country that looks like it will be completed any time soon.

At the peak of construction, from 2021 through 2024, the LNG Canada project will require up to 7,500 workers – double Kitimat’s population of 8,000 last year.

Once the sprawling plant is completed, it will chill natural gas to -162 C to liquefy it. The LNG will then be loaded onto 290-metre-long tankers at the terminal (one every two days to start) and piloted about 300 kilometres out of Douglas Channel to ocean water by tug boats.

Rivals such as Australia and the United States are at least a decade ahead of Canada in the global LNG race.

That LNG Canada is underway at all marks a huge breakthrough for Canada’s energy industry after years of failed or stalled oil pipeline proposals, from Energy East to the Trans Mountain expansion.

The Trans Mountain expansion ran into so much resistance from environmentalists, First Nations and B.C. politicians that Ottawa, desperate to keep the project alive, spent $4.5-billion last year to take over both the existing pipeline and the expansion from Kinder Morgan Canada Ltd.

“We’re definitely in a boom," said Phil Germuth, Kitimat’s goateed 52-year-old mayor. “But don’t just show up and think a construction job is going to happen,” he cautions.

The District of Kitimat’s municipal offices are located in the well-worn City Centre Mall, which sits between neighbourhoods of suburban houses that date back to the 1950s. The town was basically carved out of the wilderness by Alcan when it built a huge aluminum smelter 10 km south and a hydroelectric dam to power it.

But LNG Canada, which is co-owned by Royal Dutch Shell and four Asian companies, is pursuing a different megaproject strategy for a different generation.

TC Energy Corp.’s Coastal GasLink natural gas pipeline project has the support of
all 20 elected Indigenous band councils along the 670-kilometre route from
northeast B.C. to Kitimat.

Most of the first wave of workers at the LNG site are now building a huge work camp called Cedar Valley Lodge, which will have space for 4,500 single-occupancy rooms, each with its own TV and bathroom.

ATCO and Bird Construction Inc. are assembling the camp from long, trailer-like modules of rooms and other building components that have been arriving by truck.

The goal is to create a self-contained community, including a health clinic, movie theatre, WiFi access, dining areas, a basketball court and separate gyms for men and women. The rooms will be free for employees of LNG Canada and its prime building contractor, JGC Fluor BC LNG JV, an engineering joint venture between JGC Corp. and Fluor Corp.

To further encourage workers to stay onsite and minimize the pressure on Kitimat’s housing supply, the companies will not pay “living-out allowances," which would subsidize employees living in town.

Even so, after decades of ups and downs in Kitimat’s economy, local businesses are bracing for both the rewards and challenges of a boom. About 520 of the 1,000 people employed in the project so far are from the Kitimat region, and restaurants, in particular, are scrambling to replace employees lured away by higher wages offered by LNG Canada.

Christine Drabik, co-owner of Rosario’s restaurant, already closed the eatery on Mondays in recent years. Despite a recent upswing in customers, including LNG Canada subcontractors enjoying a change of pace from their regular meals at work camps, she now closes on Tuesdays as well.

“We lost three people in the kitchen, and that’s hard to replace,” said Ms. Drabik, who has been putting in long hours to help staff with cooking. “I’m now paying $19 to $21 an hour in the kitchen, well above the minimum wage of $13.85. And we have waitresses at $15 an hour.”

At the local Tim Hortons, next to City Centre Mall, manager Corey Cotter worries that lineups at his drive-through are getting longer. “I’m losing workers to those LNG jobs and so I’m short-staffed much of the time,” he said. To stay open 24 hours, Mr. Cotter said he will soon hire two temporary foreign workers.

House prices in Kitimat have also jumped already. The average price of detached houses sold in the district in the first half of the year hit $392,128, up 53 per cent from the same period in 2018.

Around town, new houses and apartments are under construction. Mr. Germuth is hoping to build a new fire hall and move to better offices with new funds from an expanded industrial tax base.

At the LNG Canada site, once the work-camp housing is complete, focus will shift to building the huge plant and terminal.

On a recent afternoon, Trevor Feduniak, area construction manager at LNG Canada, stood on the shore of Douglas Channel and pointed across the water to an area where enormous modules, including some 10 storeys tall, will start arriving in 2021 by vessels from China for final assembly in Kitimat.

“The modules will roll in right there and be off-loaded,” he said. The gigantic pieces are being built at a fabrication yard in Zhuhai, China, by a joint venture between Fluor and Beijing-based China National Offshore Oil Corp.

Sourcing those components abroad is controversial. Ottawa cleared the path last year by agreeing with LNG Canada that modules imported from China should not be hit with Canadian tariffs on fabricated industrial steel components.

Consortium executives also point out that they are spending huge sums in Canada – more than 60 per cent of the total budget of $40-billion for the plant, export terminal, Coastal GasLink, various infrastructure and also drilling in the years ahead in northeastern B.C.

To forestall delay or failure, LNG Canada executives went to great lengths to address concerns of environmentalists and First Nations.

“I have been learning at a rate unprecedented in my professional career. There are lots of dimensions in this project, lots of relationships,” said Peter Zebedee, the veteran Canadian oil executive who took over as LNG Canada’s chief executive in July.

Zebedee said the LNG Canada plant will operate at 0.15 carbon-dioxide equivalent tonnes for each tonne of LNG produced, a level below B.C.’s limit of 0.16 for emissions intensity. “Climate change is a global issue,” Zebedee said. “LNG plays a role in this energy transition, and in the case of LNG Canada, that’s off-setting more carbon-intensive fuels in Asia."

The Coastal GasLink pipeline from the North Montney region of B.C., which will employ about 2,500 construction workers, has the support of all 20 elected First Nation councils along the route.

The Office of the Wet’suwet’en, governed by hereditary chiefs, opposes the pipeline, saying Indigenous authority rests with hereditary and not elected leaders over a large segment of the route.

As for the LNG plant and export terminal, the Haisla’s main reserve, Kitamaat Village, is a 20-km drive south of town, across Douglas Channel from the site.

For Crystal Smith, the Haisla’s elected chief councillor, the crux of the matter is the commodity to be exported. She said Haisla members feel at ease dealing with plans for exporting B.C. natural gas in liquid form, instead of being fearful of environmental risks, as they were when the now-defunct Northern Gateway oil pipeline project pitched its concept to transport bitumen to Kitimat from Alberta.

Ms. Smith is also proud of the Haisla’s partnership with Seaspan ULC on a $500-million, 12-year contract to build and operate the tug boats to escort LNG carriers in and out of Douglas Channel. “It’s a huge contract,” she said. “We also have the Gitxaala Nation and Gitga’at Nation as partners within the contract as well.”

David Amos, a 53-year-old Haisla member who grew up in Kitamaat Village, moved away in 1987 for a job in Vancouver, where he cooked at restaurants for nearly three decades. In late 2016, he returned to live in the village.

Amos converted a trailer into a seasonal food hut, serving seafood items such as salmon burgers for the past three summers. He hopes to land a steady kitchen job next year in Kitimat.

But what began as a trickle with dozens of out-of-town workers arriving in Kitimat a year ago will likely turn into a torrent, with hundreds of people arriving in the weeks and months ahead.

Even with two work force accommodation sites up and running, beds have been in tight supply in town. In early November, the Chalet Motel and MStar Hotel were both sold out.

Germuth cautions that while skilled trades are in demand, everyone from labourers to electricians should still apply in advance through JGC Fluor.

Long term, the boom times likely won’t last, either. LNG Canada is creating thousands of construction jobs, but fewer than 400 permanent workers will operate the Kitimat terminal when its first LNG shipment leaves for Asia in early 2025.

But that is still almost six years away, and in the meantime, there is still an awful lot of money to be made.