Canada's energy superpower ambitions hit the first hurdle

Company's $750M plan to export propane from Prince Rupert is being blocked by....the Port of Prince Rupert.

Port of Prince Rupert: PRPA

In these days of national-building projects and export diversification, the news that Trigon Pacific Terminals has committed to build a $750 million liquified petroleum gas export facility at the port of Prince Rupert in British Columbia is good news.

Isn’t it?

Well yes, but the company’s “final investment decision” is less final that it first appears.

As the company acknowledges, the deal is “subject to securing all necessary legal and regulatory approvals” and that is not going to be a mere rubber-stamping procedure.

The release purports to be a firm plan that will lead to the export of propane to world markets from Trigon’s new facility by late 2029. But the final investment decision is really a negotiating tactic aimed at putting pressure on the federal government to overturn an export agreement the port entered into with Dutch company, Royal Vopak in 2015, that gives the Dutch exclusivity off Canada’s West Coast when it comes to sending propane overseas.

The Prince Rupert Port Authority is the body that issues the development permit Trigon needs and it has refused to do so because of the monopoly agreement it entered into with Vopak.

Trigon CEO Rob Booker argues that the times demand a new approach.

“It is clear that this project aligns with federal priorities and our focus is to keep the project moving along. There are several paths the federal government can take to make this a win for everyone and we welcome the opportunity to work with them on this,” he said.

Booker said Trigon has come to the table with investment dollars and now needs the federal government “to expedite this shovel-ready project that is clearly in the national interest.”

In a release, Trigon said the project meets the federal government's recently identified criteria for projects of national interest, which include: strengthening Canada's autonomy, resilience and security; providing economic or other benefits to Canada; having a high likelihood of successful execution; advancing the interests of Indigenous Peoples; and contributing to clean growth.

It remains unclear what the paths Booker mentioned might be, given Ottawa’s insistence that Prince Rupert makes its own business decisions. But the government has given itself much more discretion in Bill C5 - the One Canadian Economy Act - to intervene in energy projects deemed to be in the national interest. It may be particularly tempted to do so in this case, since C5 has been criticized for its weak consultation with First Nations, while Trigon has a number of coastal First Nations on board as equity partners. The bottom line is that it would be carelessness, bordering on negligence, if this opportunity was spurned.

The background to the story is that the Prince Rupert Port Authority (PRPA) is in the process of developing a $1.35 billion project called the Ridley Island Energy Export Facility (REEF) that is expected to be completed next year.

Its partners, who have won “time-limited exclusive rights” for the export of LPG (including propane and butane), are Vopak and Calgary-based AltaGas. At current prices, the project could generate sales of nearly $6 billion a year from customers in South Korea and Japan.

However, REEF faces opposition from the Metlakatla and Lax Kw’alaams First Nations - collectively the Coast Tsimshian - not because they oppose development, but because they say they were misled about the nature of Vopak’s exclusivity deal.

Metlakatla chief Robert Nelson has written to the federal government claiming that the port infringed on the Crown’s obligations to First Nations by striking a “secret monopoly agreement” with Vopak. The chief asserts that the terms of the deal were kept secret, even from the federal transport minister, until 2023.

The Coast Tsimshian signed mutual benefit agreements with REEF but say the exclusivity provision was not revealed at that time.

The First Nations went from supporters to potential competitors when Trigon Pacific Terminals bought the old Ridley coal terminals at the port in 2019, and the Coast Tsimshian were granted a 10 percent equity stake.

Trigon subsequently submitted a proposal to the port to build a second propane export terminal and it was only when this proposal was refused by the port that the outline of the deal with Vopal was revealed, according to the Coast Tsimshian. They say they would never have given approval for the REEF project, had they known it was going to backfire on their own commercial interests.

This is the project to which Trigon has now given the green-light. The company has the full support of the Alberta government, which is concerned that producers will receive lower prices, and a cap on volumes they can ship, if there is only one buyer.

Brian Jean, Alberta’s energy minister, said that the project will help promote Indigenous reconciliation and help meet demand for natural gas liquids in Asia. "This is great news for Canada and Alberta,” he said.

All sides are now looking to the federal government to intervene but have so far been met with silence.

When I spoke to Transport Canada three months ago, I was told the port authority operates independently from the government of Canada, as per its incorporation under the Canada Marine Act. “The PRPA sets its own business direction and makes its own commercial decisions,” a spokeswoman said.

But the accusation that a foreign company was able to lock up the whole Pacific Gateway without anyone telling the minister suggests this was hardly business as usual.

The port refused to answer the direct question: Did it disclose its agreement with Royal Vopak to the Coast Tsimshian when the proponent was consulting on the REEF project? It is pretty clear it did not.

The Coast Tsimshian have now commenced an action at the Supreme Court of British Columbia. That is not going to get a new facility built by 2029 but it could send the REEF project back to the consultation stage, with no prospect of winning approval from the Coast Tsimshian. That would leave Canada with no propane export facilities on the West Coast, instead of two.

For a presumptive energy superpower, that would be a major admission that “build, baby, build” is just empty rhetoric. It is time for Ottawa to broker a deal that allows both terminals to flourish.

UPDATE: After chatting with people far closer to the action than I am, it appears the federal government has a range of options that would allow the Trigon project to proceed. They range from designating LPG products as a priority for export; carving the Trigon terminal lands out of the Prince Rupert Port Authority; or even abolishing the PRPA entirely. All would have the potential effect of invalidating the monopoly agreement.