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The state of Alaska is pushing ahead with a project to rebuild a B.C. ferry terminal with U.S. steel, undaunted by Ottawa’s vow to punish companies that bend to Buy America rules.

The state of Alaska is pushing ahead with a project to rebuild a B.C. ferry terminal with U.S. steel, undaunted by Ottawa's vow to punish companies that bend to Buy America rules.

A senior Alaska government official vigorously defended Governor Bill Walker's refusal to seek a waiver from the protectionist purchasing rules that apply to all U.S. government-funded transportation projects.

"Alaskans and Americans benefit from the Buy America requirement," Patricia Eckert, associate director of international trade, said in an interview Tuesday.

"We're going to let this unfold and we'll respond to that action if and when it occurs."

The ferry terminal sits on Crown land in Prince Rupert's federally run port, but is leased to the Alaska Marine Highway System under a 50-year lease that expires in 2063.

The project could also benefit Canada, she added, pointing out that "it's likely that Canadian firms would be highly competitive in the process."

Buy America rules apply only to the steel used, not the labour, services and other building components to be used in the project.

Ms. Eckert said it's irrelevant that the terminal is on Canadian soil because the U.S. government is footing the bill for 91 per cent of the project, worth an estimated $10-million to $20-million (U.S). The Alaska government is paying the rest.

On Monday, the Canadian government signed an order under the Foreign Extraterritorial Measures Act, a federal anti-sanctions law that has been used only once, in 1992, to counter the U.S. trade embargo on Cuba.

Federal International Trade Minister Ed Fast called the project's Buy America provisions "an affront to Canadian sovereignty."

The Canadian order means companies or individuals seeking to work on the ferry terminal will immediately run afoul of Canadian law by simply agreeing to the Buy America provisions of the contract. That will expose them to fines of up to $1.5-million (Canadian). The situation appears to put any company agreeing to supply steel for the ferry-terminal overhaul in contravention of either U.S. or Canadian law, possibly creating a stalemate on the project.

Alaskan officials said they were surprised by the angry Canadian reaction.

The Prince Rupert Port Authority, a Canadian government agency, "understood the details of the bid offering, and there was no objection raised at that point," Ms. Eckert said.

"The project has been out for quite a while and it wasn't until very recently there was any objection raised," she said.

Alaska will begin evaluating bids for the project Wednesday.

If the Canadian move causes a stalemate, Alaskan officials said the Alaska Marine Highway will continue operating the old terminal, a key way station for ferries plying routes between Alaska and Washington State.

"If there is an inordinate delay, either because there are no bidders or there are other problems, we can maintain that Alaska Marine Highway Prince Rupert operations at normal standard for several years, until this gets sorted out," Ms. Eckert said.