Delta Force - The Orca
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Delta Force

Frank Peebles
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The Orca’s series on BC ports breaks new ground in Delta.

You know Lower Mainland real estate is expensive when it’s cheaper to build your own island than buy existing waterfront.

That’s what the Vancouver-Fraser Port Authority (VFPA) is proposing to do in Tsawwassen, at the end of the existing DeltaPort shipping facility. You can easily see this long spit of industrial land (actually a peninsula, not an island) from next door at the BC Ferries docks. The bulb where ships come and go would about double in size if the proposed Roberts Bank Terminal II (RB2) project is built.

Specifically, it would get 1,300 metres longer, which would accommodate parallel parking for three container vessels. Also included would be a spacious container storage yard, with the other side of the island occupied by roads, rail lines, and cranes to sort the containers and move them efficiently.

The new landmass would also house a new tugboat marina.

Altogether it would be an add-on of about 850,000 square metres, or the equivalent of 210 acres (85 hectares).

There is already a container operation at Roberts Bank about the same size, so this would become its attached neighbour.

RB2 is an efficient design, in that sense. The five kilometre causeway out to deep sea is already there, with roads and rails in place.

The original peninsula was opened in 1970 initially as a coal export operation by Westshore Terminals. Today it operates 24 hours a day, is the busiest coal port in North America, and has shipped more than 625-million tonnes since it opened.

In the mid ‘70s, Roberts Bank was determined to be the best place in BC for adding new cargo facilities. After struggling to meet environmental standards, that dream got deferred by decades. The coal terminal expanded in the early ‘80s, but despite growing congestion and the less efficient transportation interfaces, bulk cargo and the growing container sector were still centred in Burrard Inlet, the latter at Vanterm and Centerm terminals, which are still busy today.

By the early 1990s, container flow was so great, expansion was imperative. Adding a terminal to the existing site was deemed cheaper than renovating the Burrard Inlet sites, and would also save four hours in transportation time.

Construction started in 1994. It opened in 1997 under the name DeltaPort, and has expanded twice since then.

DeltaPort is operated by Global Container Terminals Ltd. (GCT), a Canadian company doing some of the biggest container business in North America. They recently applied to the Vancouver-Fraser Port Authority to expand yet again, offering to pay the bill and undergo the rigorous environmental assessment process themselves.

The VFPA had, for decades, been broadcasting the container sector was growing exponentially and all ports on North America’s western seaboard would likely see substantial growth. But the VFPA told Global Container Terminals – a company started in Vancouver in 1907 – they could not expand.

Furthermore, said the VFPA, the port authority was going to build RB2, and GCT could not be its operator.

Furthermore, said the port authority, RB2 would be a $3.5-billion megaproject that would be paid for by the port authority, via its tenants.

Marko Dekovic is GCT’s vice-president of public affairs. He explained that the port system was like a shopping mall.

“The port authority is the mall administration and we are a store in the mall,” he said. “We’re responsible for equipping our store, getting the customers in through the doors of our store, we have to order the stuff to be in our store, and it is up to us to do well and grow the store.”

“When things are growing we turn to mall administration and say hey, we would like to lease the floor space next door to our store so we can expand. In our situation the mall administration has essentially told us you can no longer grow your customers, we are limiting the amount of customers who can come into your store and if you ever think of leasing that space next door, you’re never going to get it. In fact, we’re going to stick another store that does exactly what you do right next to you and we’re going to give them a sweet deal and subsidize them. Our rent goes to build the store that will now be our competitor.”

In the protest that ensued, VFPA relented on one key point. They gave in to GCT’s desire to expand their own DeltaPort footprint – but all on GCT’s own financial shoulders.

GCT launched court action over VFPA’s original refusal and that judicial review is still underway.

RB2 is still under federal environmental assessment. GCT, meanwhile, passed the latest hurdle in their process. In October the BC Environmental Assessment Agency permitted them to progress to the public comment phase. It is simultaneously under review from the federal Impact Assessment Agency for its $1.6-billion expansion plan that would add 133 acres (54 hectares) to the Roberts Bank peninsula. The proposed expansion would give GCT the ability to handle 2-million new TEUs per year. (The standard unit of measure for the container shipping industry is a 20-foot Equivalent Unit or TEU equal to 20 feet long by eight feet wide by 8-foot-six tall.) The entire Port of Vancouver complex handled about 3.4-million TEUs in 2018, the last “normal” year unaffected by the massive shipping fluxes of COVID-19.

( Volodymyr Kyrylyuk / Shutterstock.com)

Duncan Wilson, vice-president of environment and external affairs for the VFPA, said there is plenty of room in the market for GCT’s expansion, DP World’s plans to expand, and the addition of RB2.

“It’s complicated and I have to be careful what I say because we are in court with Global Container Terminals,” said Wilson.

“As a port authority, as part of our mandate, we have to do the best we can to protect the environment while facilitating trade, and ensuring a high level of competition and reasonable rates for users. And our view is that Terminal II will do exactly that. It is also the only project that is far enough along in the environmental assessment process to deliver the capacity that Canada needs, anywhere near when it needs to be delivered. So Terminal II, all going well when we get a decision, would open in 2031. We will be several years out of capacity by the time we get to 2031.

“We are expanding Centerm right now with DP World Canada,” Wilson added. “That project is creating 600,000 TEUs of capacity, and originally we thought that would be eaten up at previous growth rates in three years. It’s gone. It’s not even finished and it’s gone.”

“So Canada has a real problem. We do not have enough container capacity to head into the mid ‘20s. That means we’re going to lose business and jobs to the U.S. and that’s really sad.”

Expanding Centerm will expand DP World’s landmass by about 15 per cent, plus transportation upgrades. Fraser Surrey Docks also received transportation upgrades. Much of it was paid for by the port authority.

Yet GCT’s improvements were either opposed by the VFPA or left up to GCT to pay for themselves.

“DeltaPort was built exactly the same way we’re building T2,” clarified Wilson. “It was built by the port authority, using port funds and borrowing, covering the investment through the long-term lease of the terminal operator. That is what we are doing with the Centerm expansion. There is no difference whatsoever between what we are doing for this and how DeltaPort was built, all phases of DeltaPort.”

Except, GCT would point out, the current phase of DeltaPort.

The DeltaPort facility was also built when there was little or no market competition for shipping containers. Now there are two container companies already competing with each other, along with a third if RB2 is built. The port authority has said adding another player would help ensure a competitive environment, but Marko Dekovic said it was setting up to have the opposite effect.

“To the consumer, that sounds great, more competition, that’ll mean your goods at the retail store will be cheaper, right? Except that new island is going to cost $3.7-billion with a B, making it the most expensive container capacity ever built in the world.

“So how much do you think the terminal operator will have to charge a ship to cover the cost of the debt to build it? Twice what we’re charging right now, which will allow the rest of us to increase our rates.”

It might force other tenants within the Vancouver port complex to charge more as well. Wade Sobkowich, executive director of the Western Grain Elevator Association, said it isn’t just DP World and GCT subsidizing their own competitor. All tenants are paying for RB2 out of their rents. In the grain sector, that’s built into the price paid by farmers when they are facing critical financial problems.

The very existence of West Coast Reductions (WCR) – an agricultural recycling company (their specialty is biofuels) and canola oil exporter – is in jeopardy due to RB2.

“The port authority has flat-out told us they are unwilling to renew our lease securely past 2026,” said WCR spokesperson Jared Girman. “We are a contingency. If they don’t get Roberts Bank Terminal II, they will need our site. They are handcuffing a Canadian business that has 13,000-or-so customers across Western Canada over a contingency.”

WCR signed a conditional lease in 2016 under advice from the port authority that the RB2 fate would soon be clear. That was incorrect.

“Unfortunately for us, our customers are really demanding we increase our output,” said Girman. “BP and Parkland (fuel companies buying WCR’s biofuel) are both looking to double their output within a year. Our agricultural customers, like canola oil producers, look like they are going to have huge increases this coming year.”

So how fast does WCR realistically need an answer, to not damage their viability?

“Well, tomorrow,” said Girman. “We need an answer now, and they have told us on multiple occasions they are unwilling to discuss a lease extension until 2023.”

“Terminal II is going to have an unbunching effect,” said Wilson. “The port operates in constant tension with our commercial tenants because obviously they want the best deal that they possibly can, and we want to make sure we’re getting value for Canada and managing this very limited land-base in the best interest of all of Canadian trade. So there would be terminal operators who would want a lease extension and we may not be able to grant that because we are preserving an option for something else we need in the future.”

“To be candid, if Terminal II is approved, that unlocks a domino effect of freeing our flexibility in a number of other areas where our tenants are advocating. A lot of these pieces are connected.”

The federal government’s involvement in the planning and execution of the shipping industry, in Vancouver and elsewhere in B.C. will be the topic of the next article in this series.

Frank Peebles is a veteran magazine and newspaper journalist based in Prince George. He has won numerous awards for his work, including Canadian Community Newspaper Association and BC-Yukon Community Newspaper Association citations.

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