Canada’s coal producers are fuming over a federal move to award a chunk of coveted port capacity in northern British Columbia to American companies, arguing the decision will choke off Canadian mining investment just as demand for the resource is soaring from countries such as China.
Miners such as Teck Resources Ltd., Western Coal Corp. and Grande Cache Coal Corp. say Crown corporation Ridley Terminals Inc.’s recent decision to award long-term contracts to three U.S. companies will clog the already busy port, and jeopardize their plans for expansion.
They warn the result could be heavy losses of investment in Canada, and lost employment.
“A federal Crown corporation just chose American jobs over Canadian jobs,” Teck chief executive officer Don Lindsay told a Vancouver mining conference on Monday. “Hundreds of B.C. jobs are on the line.”
The provincial government, Teck and other Canadian coal miners represented by the Ridley Terminals Users Group (RTUG) are calling on Ottawa fix the decision by pushing forward with much-needed plans to expand the terminal’s capacity near Prince Rupert, B.C. to about 24 million tonnes a year from less than 12 million tonnes today
The terminal is not only the closest and most cost-effective site for miners to ship their product from coal-rich properties in northern B.C., but it’s also the nearest port to the crucial Asian market. China, in particular, is driving demand for coal used in both steel making and power generation as it rapidly industrializes.
It’s that demand that saw Ridley handle a record 8.3 million tonnes of cargo last year, its highest since opening in 1984. More than 80 per cent of its volume is coal, with Asia its primary destination. Ridley is expected to reach its capacity for the first time this year.
Volume is expected to grow further after Ridley signed a deal last week with St. Louis-based Arch Coal Inc. to handle up to two million tonnes of coal in 2011, and up to 2.5 million tonnes a year between 2012 through 2015. Arch is the second-largest U.S. coal producer with mines in the Powder River Basin in Montana and Wyoming. Ridley also signed smaller contracts with U.S. producers Cloud Peak and Enserco. All three U.S. companies produce low-sulphur coal used in power generation.
The three American contracts represent about 40 per cent of capacity at Ridley, according to Mining Association of British Columbia chief executive officer Pierre Gratton.
“What this effectively means is that a Canadian Crown corporation is putting the interest of U.S. production and U.S. jobs ahead of Canadian jobs, and that is a real concern for us and it should be for all Canadians,” Mr. Gratton said.
Canadian miners also argue the U.S. contracts clash with Ridley’s founding mandate to support the development of coal mines in northeast B.C.
“We have a strong question about the rationale of the terminal displacing Canadian capacity in favour of U.S. product,” said RTUG chairman Doug Smith, who is also CEO of First Coal Corp., which has plans to start a coal mine in B.C. by 2014.
The mining group has also written to Rob Merrifield, federal Minister of State for Transport, condemning Ridley’s decision. It wants a meeting with officials in Ottawa to address what it calls “a complete lack of faith in addressing the requirements of Canadian commodity producers,” according to a draft copy of the letter obtained by The Globe and Mail.
A spokesman for Mr. Merrifield said in an e-mail that the government has “set the expectation” that Ridley operate in a commercial manner, “charging market rates and operating with efficiency.” Fees charged have been an issue in the past at the terminal. Ottawa says it’s working to try to ensure Ridley’s capacity can increase to meet future demand.
When contacted on Monday about the U.S. contract concerns, Ridley president George Dorsey cited the North American free-trade agreement.
“We have a close country-to-country relationship,” said Mr. Dorsey, who is also CEO of Vermont-based private equity firm Edgewood Holdings LLC.