Northern communities scramble to upgrade roads, bridges for LNG

With LNG plant decisions expected within weeks, infrastructure could trigger the next northern B.C. construction boom

A loaded truck crosses a 60-year-old Bailey bridge on Highway 77, the only southern route to the Horn River natural gas fields in northeast B.C. Photo: Northern Rockies Region Municipality

One hundred and thirty-five kilometres north of Fort Nelson, a beat-up, one-lane, 70-year-old Bailey bridge could be among the bottlenecks when the world’s biggest drilling rigs roll in to feed a giant liquefied natural gas (LNG) plant, which could be announced within weeks.

The bridge, thrown across the Nelson River during the Second World War, is part of the only southern access road for the Horn River natural gas fields in northeast B.C. It represents just one project in what could be northern B.C.’s next biggest and most urgent construction agenda: get-ready infrastructure.

“We need at least $100 million in highway upgrades in the northeast and we need to get started right now,” said Bill Streeper, mayor of the Northern Rockies Regional Municipality, which is anchored by the town of Fort Nelson.

Streeper believes the recent provincial ruling on LNG taxes provides the confidence that industry needs to pull the trigger on major facilities. Earlier this month, B.C. Finance Minister Mike de Jong said the tax rate would start at 1.5% and remain at that level while LNG plants are starting up. The rate will rise to 3.5% after four years, where it will remain for another 20 years.

“I think Petronas will make a decision in November for the first LNG plant,” Streeper said in late October. He is referring to the plan by the Malaysia-based gas giant and its subsidiary Pacific NorthWest LNG to build a $36 billion LNG export terminal at Prince Rupert. Petronas had earlier said it wants it in operation by 2019. The proposal would be the first of an expected four LNG export facilities in northwest B.C.

But LNG plants need gas – Petronas is projecting 2 billion cubic feet per day to start – and that means a huge increase in drilling in the Horn River and Montney gas fields, among the largest gas reserves on the planet.

Streeper, first elected mayor in 1999 after decades of working in the heavy transport industry, said many local roads aren’t ready, especially Highway 77 that arcs 238 kilometres north from Fort Nelson to the Northwest Territories and is the only highway into the Horn River gas basin.

The massive gas drills needed for LNG exports – bigger than anything currently in use in Canada – involve prefabricated components weighing more than 100 tonnes that must be trucked to drill sites. Unable to cross the old wooden bridges, such wide transport loads would be forced to detour about 1,500 kilometres north to access the dirt-road end of Highway 77 at Fort Simpson, N.W.T.

“We have been asking for this bridge to be replaced for five years,” Streeper said. Complicating the issue is that much of northern Highway 77 is under federal government jurisdiction, while the south is a provincial highway.

“If there is an LNG plant to be shipping in 2019, the rigs have to be drilling by 2015,” Streeper said. That means that tonnes of equipment, fuel and work camps will have to be hauled in this winter, making highway upgrades a fast-track priority, the mayor argued.

“Let’s get at it,” Streeper said.

Confidence that the provincial tax structure will trigger LNG plants appears to have traction. Just days after the tax was detailed, Calgary-based AltaGas Ltd. said it would go ahead with three small LNG plants: the Triton and Douglas Channel export terminals at Prince Rupert and a domestic plant at Dawson Creek, worth a total of $250 million.

“We are still looking at the details; this is tax legislation and so it’s complicated, but at first glance, it’s going to be enough for us to go ahead,” said John Lowe, executive vice-president of business development for AltaGas.

Its first LNG plant will be built in Dawson Creek, at a cost of $20 million to $30 million, AltaGas CEO David Cornhill told Business in Vancouver.

Power and pipelines

The other big infrastructure demands are for power and pipelines. Of the 176 major projects planned or under construction in northern B.C., a third are utilities and nearly all of that is for hydroelectricity, according to the Northern Initiative Development Trust.

“[Growth in demand] is far greater here than anywhere else in the province,” Lesley Wood, a BC Hydro spokeswoman told a recent Dawson Creek Chamber of Commerce event. “We haven’t seen anything like this for decades.”

Hydro is developing two major upgrades to its transmission system in the South Peace to supply power to oil and gas customers. Work started last fall on the Dawson Creek/Chetwynd area transmission project, a nearly $300 million network of high-voltage power lines from the W.A.C. Bennett Dam’s generating station to industrial customers. Crews are currently installing transmission towers along Highway 97. The second piece, the Peace Region Electricity Supply project, will replace existing lines from the generating station to Dawson Creek with a higher-capacity system.

These follow the completion of BC Hydro’s Northwest Transmission Line, a $746 million high-power corridor that runs 287 kilometres north from Terrace to Bob Quinn Lake and was switched on this year. They potentially preface the biggest hydro power play in the north: the $7.9 billion Site C dam, a BC Hydro project on the Peace River just outside of Fort St. John, A provincial cabinet decision on Site C is also expected shortly.

Meanwhile, AltaGas, which owns the Pacific Northern Gas pipeline, the only existing natural gas line serving the ports of Kitimat and Prince Rupert, has a National Energy Board permit to export up to 2.3 million tonnes per year through its planned Triton LNG facility at Prince Rupert. Combined with its Douglas Channel LNG exports, AltaGas said it would need to boost its pipeline capacity from 110 to 650 million cubic feet per day of LNG from the northeastern gas fields.

In June, Houston, Texas-based Spectra Energy received approval from the B.C. Environmental Assessment Office for a twin 850-kilometre pipeline running northeast gas to Prince Rupert. That pipeline would likely start in about three years.

TransCanada and partner Progress Energy Canada Ltd. plan to build a 900-kilometre natural gas pipe from Hudson’s Hope in the northeast to Port Edward to feed Petronas’ Pacific NorthWest LNG plant, aiming to have it in service by 2018, with a potential daily capacity of 3.6 billion cubic feet.

All fine and good, says Streeper, but roads and bridges have to be beefed up to handle the big-rig traffic that could be coming sooner than many expected.

“The first phase was getting the tax done,” Streeper said. “Now we have to get ready for the next phase: building an LNG industry.”