1,000 kilometres from nowhere and waiting to die?

The National Post wades into the great Alcan debate with a rather dire article about the future of Kitimat should Mayor Rick Wozney stay his course of late. In the article, titled Death Wish at Kitimat, Terence Corcoran one of the senior Financial writers at the paper takes issue with approach that Wozney and his followers have taken regarding the Alcan/BC Hydro deal recently overturned by the BCUC.

It’s an article that will prove to be ammunition for those on the Alcan side of the debate, with Corcoran’s observations that Alcan very well may just shut down the existing smelter, relocate its business plan to an offshore location and leave Kitimat to its own plans.

One thing is certain it will add some heat to the currently rising temperatures in Kitimat, a situation that has nothing to do with the weather and more to do with the emotions.

Death wish at Kitimat
Terence Corcoran
The Financial Post
Thursday, January 04, 2007

It's hard to figure out exactly what the good political operators of Kitimat, B.C., are trying to accomplish. One hopes that they are not in the grip of what they seem to be in the grip of, namely some kind of industrial death wish. This would be nothing new. The politics of Kitimat over most of the last 20 years looks like a great provincial crusade to wipe Kitimat off the industrial map.

Located on the north coast of British Columbia, about 1,000 kilometres from nowhere, the town has been home to a big Alcan aluminum smelter for about 50 years. The company, after false starts in the past, seems finally set to upgrade the ageing operation with a $1.8-billion expansion that could set Kitimat up for another 50 years of relative prosperity.

But the mayor of Kitimat, something of an industrial planner and grand economic theorist, doesn't like the expansion plan. Not enough jobs will be created, he says. The new plant, if built, would increase annual aluminum output by about 30% to 400,000 tonnes, but new technology will mean a 30% decline in jobs to about 1,000. "This new deal means another 550 jobs will be lost," the mayor, Richard Wozney, said last August. "Alcan knows it can make much more money from exploiting this resource for power sales than using it to smelt aluminum."

It is the mayor's view, adopted by a surprising range of people, that Alcan doesn't really want to expand aluminum smelting in Kitimat. Alcan's real objective, he says, is to cash in on the electricity produced by the company-owned Kemano generating station, a private property right enjoyed by Alcan since the 1950s. Kemano produces enough electricity to operate the smelter plus surplus capacity of about 210 megawatt hours, enough to service 200,000 homes. Kitimat's population is about 11,000.

One of Mr. Wozney's fellow-travellers in this campaign against Alcan is James Quail, counsel for the B.C. Public Interest Advocacy Centre. He paints Alcan as a company that is "turning water into gold" at the expense of British Columbians and residents of Kitimat.

Now, if it were literally true that Alcan stands to make more money from electricity production at Kitimat than from aluminum smelting, it follows that Alcan would be better off shutting the smelter down completely and selling the entire power production from Kemano--all 890 megawatts --and use the money to build a smelter in China.

Mr. Wozney seems particularly blind to this possibility, even if it does follow logically from his own official view of Alcan's motivation. Instead, Mr. Wozney, joined by Mr. Quail, a Vancouver-based professional activist, have taken their anti-Alcan campaigns to the highest court in the province, the B.C. Supreme Court, and to the biggest regulator in the province, the British Columbia Utilities Commission. Their objective is to stop Alcan from selling 200 megawatts of surplus power to B.C. Hydro, the government- owned electricity monopoly.

In a deal filed last November, described as a "sweetheart deal" by opponents, B.C. Hydro agreed to buy power from Alcan at a rate of 7.1? per kilowatt hour. The value of sales over 20 years would exceed $2-billion. To stop the deal, the opponents have asked the B.C. Supreme Court to rule that Alcan has no right to sell electricity. Based in their reading of 50-year-old agreements, Alcan must use power from Kemano to build and fund industrial development in Kitimat.

Alcan, the B.C. government, and B.C. Hydro all claim that Alcan owns all the electric power produced by the giant Kemano station. In the words of the B.C. government filing, "Electricity is property. It is a fundamental attribute of property that its owner [Alcan] can sell or dispose of property in any way he/she wishes. Hence, Alcan needs no authorization from the province in order to be able to sell electricity it produces."

The idea that Alcan owns the power rights from waters flowing through Kemano is alien to people who have come to think that water is a public resource that must at all times be subject to major political involvement. If Alcan does indeed own the rights, then the case should not go far. A court decision is expected soon. A ruling against Alcan could kill Kitimat expansion.

In the meantime, the B.C. Utilities Commission was asked to rule on a different matter. Mr. Quail, the advocacy activist, was one of the intervenors before the commission, ostensibly on behalf of the BCOAPO (B.C. Old Age Pensioners Organization). He said the deal struck between Alcan and B.C. Hydro is a sweetheart deal orchestrated by the government "in furtherance of the government's socio-economic policy."

B.C. Hydro presented evidence showing that the government did not influence the contract deal with Alcan. The price for power, averaging 7.1? per kilowatt hour, appears to be within reason for the type of power Alcan can deliver: steady, on-demand, no-risk power for decades to come. No other suppliers could provide the same guarantees. New power in Ontario is coming in at 8? a kilowatt hour, much of it backed by government funding.

But the B.C. Utilities commission ruled last week that the Alcan-B.C. Hydro deal was not in the public interest. Reasons for the decision will be published shortly. But the decision puts Kitimat development at risk.

Alcan, it must be said, is no stranger to government subsidies. As a world class consumer of energy, it scours the world in search of government-backed energy deals and industrial aid. In Kitimat, however, the company appears to have received more than its fair share of political wrangling. In 1995, Premier Mike Harcourt arbitrarily killed an earlier attempt by the company to expand in the area, after the company had spent $500-million.

In the new Kitimat case, Alcan appears as a private-sector company with property rights mired in a province-wide system of government-owned utilities, regulators, politicians and others who have no great interest in rights and an overwhelming wish to play politics with economic development.

It's probably not quite a death wish. If Alcan leaves Kitimat, shuts down the smelter and sells the power, the Kitimat area appears to be a great tourist destination. If that's what they want, that is what they might get.

© National Post 2007