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Auditor-General finds ‘significant deficiencies’ at Ridley Terminals Inc.

Prince Rupert Grain terminal and Ridley Terminals, a bulk handing facility for coal, photographed on Ridley Island in Prince Rupert, B.C. on June 24, 2008.

JOHN LEHMANN/The Globe and Mail

The federal Auditor-General’s office says it has uncovered major shortcomings at Ridley Terminals Inc., a Crown corporation that owns a coal export facility in northern British Columbia.

“Overall, we found significant deficiencies in Ridley Terminals Inc.’s governance, strategic planning, performance management and reporting, risk management, and human resource systems and practices,” according to the 26-page study titled Independent Auditor’s Report, Special Examination.

The previous Conservative government under Stephen Harper announced in late 2012 that it planned to sell the coal terminal located on Ridley Island in the Port of Prince Rupert, aiming to fetch up to $1.3-billion. But uncertainty has lingered over the sale process for the federal Crown corporation since Prime Minister Justin Trudeau’s Liberals took office in November, 2015.

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“In our view, until the corporation has full knowledge as to whether it is going to be sold, it cannot set its long-term strategic direction with any certainty,” said the report by the Office of the Auditor-General of Canada.

The report said that during the special review, auditors learned from Transport Canada that Ridley “was no longer for sale,” but the current status is unclear.

The wide-ranging audit included looking into hiring practices, notably the appointment of Marc Dulude as Ridley’s president and chief operating officer, effective December, 2016. Ridley’s board at the time changed the title to chief operating officer instead of sticking with chief executive officer because directors wanted to approve compensation substantially higher than what Mr. Dulude would have otherwise received if proper procedures had been followed for what amounts to filling the CEO’s role, said the report.

Transport Canada “did not ensure that the corporation followed the governor-in-council appointment process,” the Auditor-General’s office said in its findings.

The special review also said it exposed a separate decision to hire a senior executive whose “job description for this position was written only after the candidate had been hired” and there wasn’t an internal posting, nor a full external search, for potential candidates. In another example, the Auditor-General’s office raised concerns about the lack of accountability in contracting out services to a firm affiliated with a senior executive.

From January, 2015, through October, 2017, Ridley operated without an approved corporate plan from Ottawa. In the spring of 2017, Calgary-based AltaGas Ltd. began construction on its $500-million propane export terminal on Ridley Island. AltaGas expects to start operations next year.

The Auditor-General office’s report contains a response from Ridley to criticisms over the lack of advance approval from the federal government for diversifying commodities for export. Ridley said it has “already taken steps to improve this and is seeking out new communications channels.”

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The auditors said the special examination’s findings are pertinent, noting “improper human resources practices” and “lack of board oversight.”

The report is dated Feb. 21, but wasn’t made public until Ridley board chairman Michael McPhie wrote a letter to stakeholders this week to emphasize that the Crown corporation has been working with Transport Canada to make improvements.

The Auditor-General’s office sent its findings on Feb. 21 to Ridley’s board, which now has seven members. Transport Minister Marc Garneau announced the appointment of three new Ridley directors on Feb. 15, helping to “ensure the board can function far more effectively,” Mr. McPhie said in his letter dated April 24.

Mr. McPhie welcomed the report’s recommendations to improve governance and increase accountability, pointing out that he joined the board as chairman in September, 2017. He replaced Byng Giraud, an executive at Woodfibre LNG, who served as Ridley’s interim chairman.

“In the past year, Ridley Terminals and Transport Canada have worked closely together in a more collaborative way than in previous years,” Mr. McPhie said. He asserted that Ridley Terminals Inc., also known as RTI, has many positive aspects, despite the report’s criticisms about dysfunctional business practices. Directors and management have “ensured the long-term viability of the facility during difficult financial times. RTI is pleased to be able to provide high-quality customer service in a safe and efficient manner,” he said.

Ridley handles Alberta thermal coal, which is used by power plants in Asia to generate electricity. The terminal also exports B.C. metallurgical coal, a major steel-making ingredient for mills in Asia.

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Last year, Ridley exported nearly 7.6 million tonnes of coal and petroleum coke, up 90 per cent from 2016 but down sharply from a record 12.1 million tonnes in 2013.

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