SAINT JOHN -- When Halifax-based Floating Pipeline Co. Inc., which makes modules for transporting compressed natural gas, began operations in the summer of 2006, it decided to establish its plant in Saint John, largely because it was able to secure a manufacturing plant in the city's port.
"The port played a big role," said president Len Thompson in an interview. "It's ice-free and it has capacity. That port is underutilized, but I don't see it being that way for long." What Mr. Thompson and his colleagues did not envisage 18 months ago was that their new base of operation was at the cusp of declaring itself the energy hub of the Maritimes. The title might seem meaningless, were it not backed up with major energy projects worth about $2.4-billion now under development, and proposals potentially costing a further $11-billion to $14-billion. That investment in hard assets is being reinforced by the development of institutions focused on the energy industry.
The effect has been that Saint John, a blue-collar city long known for its refinery and pulp and paper mill, is now regaining a swagger unknown since the end of the frigate construction project at Saint John Shipbuilding in the 1990s. Community leaders are focused on maintaining the growth of energy industries. Other segments of the economy such as housing, construction and hotels are thriving.
Though the energy plays in Saint John are varied - from liquefied natural gas to nuclear power - there is one main reason why all this development is happening in this particular city. It is the powerful Irving family. Irving Oil Ltd., wholly owned by the descendants of K.C. Irving, set everything in motion three years ago when it proposed converting a brownfield site into a liquefied natural gas regasification plant. Competing against two other proposals in Nova Scotia, the Irving project was the first - and so far only - project under construction with a named supplier of natural gas.
The prospects for Canaport LNG are so strong that the partnership announced in September it will build a third 160,000-cubic-metre LNG storage container adjacent to the two originally planned. The terminal is due to begin operations this year and is designed for a peak capacity of 1.2 billion cubic feet of liquefied natural gas a day.
In the eyes of Saint John Mayor Norm McFarlane, the development of the LNG terminal was the event that ignited the frenzy of energy developments. It led directly to the development of the $350-million Brunswick Pipeline, which is now being built by Halifax-based Emera Inc., the parent company of Nova Scotia Power Inc. Due for completion in 2008, the pipeline will carry deliquefied natural gas from Canaport to the Maine border.
In an interview in his office overlooking the port, Mr. McFarlane noted the benefits of the Canaport project include the fact that it has brought Repsol, one of the 10 largest oil and gas companies in the world, to Saint John, increasing its international exposure, but also that a local company is investing in the city's development.
"It's a good sign that people in our community own assets in our community," Mr. McFarlane said.
"Irving Oil is big for us. They (the Irving family) have lived here for years and they'll always live here."
The Irving legacy may create another project that dwarfs Canaport, for Irving Oil is working on a proposal to build a second refinery in the city, a 300,000-barrels-per-day facility that would produce gasoline, diesel and possibly jet fuel. Irving is now carrying out the environmental impact studies and is in discussions with international oil companies, seeking a partner with which to develop the refinery.
"We will need to attract a partner to do this," said Kevin Scott, the director of refining growth with Irving Oil, in an interview. Given the size of the project, with a $7-billion to $10-billion construction cost, any partner would have to bring deep pockets, experience in the oil business and a vision of working with the community to build a long-term project, Mr. Scott said.
"What we have right now is a location that is well-positioned with an ice-free, deep-water port, and project execution experience," he said. "You have to have all those ingredients." The preliminary timetable now calls for the project to begin construction in 2010 with most building to take place in 2011-2014, and commissioning of the plant due for 2014.
The Globe and Mail reported recently that the Irving family is negotiating a breakup of its diversified holdings, in part because of a clash of ambitions between cousins Kenneth and Jim Irving Jr. Though Mr. Scott would not comment on the reports, he said any talks are unlikely to jeopardize the second refinery. "Our company is always evolving and we don't foresee problems," he said.
It's worth noting Irving is not the only New Brunswick company investing heavily in energy plays in the city. New Brunswick Power, the provincial government-owned electric utility, is now refurbishing its 635-megawatt Point Lepreau nuclear power plant to the tune of $1.4-billion, which is due to be complete in 2009.
What's more, a group of companies, including Atomic Energy of Canada Ltd., is studying the feasibility of a second nuclear reactor at the site with a capacity of 1,085 megawatts and a price tag of about $4-billion. If it goes ahead, it could be producing electricity for the New England market by 2016.
Tim Curry, the president of the Atlantica Centre for Energy, said that if the project proceeds, New Brunswick could be producing a total of 4,400 megawatts of electricity within a decade. That is almost double the current electrical production of Nova Scotia, even though that province has about 25 per cent more people than New Brunswick. (Nova Scotia will add electrical capacity in the next nine years, largely through wind power.) Like the natural gas and oil refinery projects, the new electricity projects target the U.S. Northeast, which has huge demand for energy, with New England alone forecasting a 6,400-megawatt shortage between 2015 and 2018.
The Atlantica Centre itself is a sign of the changing energy landscape in Saint John. It began as an umbrella group for the energy industry and has evolved into a group promoting the energy industry in Atlantica - the region encompassing the U.S. north of Boston and Canada east of the St. Lawrence River. The development of energy institutions in Saint John got a further boost when the government of Premier Shawn Graham moved the provincial energy department from Fredericton to Saint John.
The effects of Saint John's energy boom are apparent. The city's economy has added 7,300 jobs in the 12 months to November, an increase of 10 per cent in the labour force, though the unemployment rate has remained largely unchanged due to an increase in the participation rate. And energy projects in southern New Brunswick are the main reason the Atlantic Provinces Economic Council is projecting the province's GDP will increase 2.7 per cent in 2008, up from an estimated 2.2 per cent growth in 2007. Such proposed mega-projects as the second refinery and nuclear generator could further accelerate growth in the coming years.
Mayor McFarlane said a great deal of poverty exists in his city, and city council wants to ensure the energy boom allows poorer people to get the training they need to land better-paying jobs.
