The federal government is considering privatizing Canada’s port authorities, a move that could further hinder public oversight and control over the export of commodities such as coal and crude oil.

On Nov. 14, the federal government announced the hiring of Morgan Stanley Canada to "provide financial advice to the Government related to the recommendations [contained in the Canada Transportation Act Review] concerning ports, including receiving proposals from institutional investors or private equity investors."

(Until 2015, an investment unit of Morgan Stanley was the owner of the largest terminal at the Port of Montreal.)

The recommendations contained in the review included "examining the feasibility and viability of adopting a share-capital structure for Canada Port Authorities.”

The review also stated that Canada “must make some hard choices and inject private sector discipline into the process” in order to “go to the next level and position itself for the lon­ger term.”

It’s no coincidence the entity responsible for hiring Morgan Stanley was the Canada Development Investment Corporation, which specializes in the “divestiture of assets of the Government of Canada.”

This possibility is concerning on both the climate change front — with terminal owners already able to export fossil fuels effectively unchallenged to other jurisdictions — and for public health reasons, given the potential for increased diesel particulate matter, spills, coal dust and noise exposure.

“I don’t know what they’re thinking,” says Peter Hall, director and professor of urban studies at Simon Fraser University and expert on port institutions. “Privatizing them would go against everything that we know about the way ports operate in such a huge country.”

Privatization of Ports Would Further Hinder Transparent Decisionmaking

Since the introduction of the 1998 Canada Marine Act, the country’s 18 Canada Port Authorities (CPAs) been have run as “non-share capital corporations,” with board appointments finalized by the federal transport minister.

There are already many criticisms of the entities, mostly related to mixed mandates — they serve as both promoters and regulators of trade — and a board nomination process that grants considerable power to port users (for instance, only one of 11 board members represent the 16 municipalities within the Port of Vancouver’s jurisdiction while port users have seven seats).

Kevin Washbrook, director of Voters Taking Action on Climate Change, says it’s currently a challenge to ensure the public interest is met by port authorities. But he says it currently remains somewhat possible due to being able to acquire port documents with access to information requests; there are also changes underway, he says, to require lobbyists to log communications with senior employees of port authorities in the federal lobbying registry.

Those would no longer be options if port authorities are privatized. All decision-making about the permitting of terminals like Port of Vancouver’s Roberts Bank Terminal 2 Project, a proposed container terminal feared to have potential species-level impacts of migratory bird populations, would be even further in the shadows.

“Ports are the vehicle for delivering the federal trade agenda,” he says. “We are already struggling with that trade agenda here on the West Coast, whether it’s fossil fuel terminals or massive expansion of container ports. It’s hard enough as it is to have public input into those decisions. How is that possibly going to happen if ports are privatized?”

Current System of Port Authorities Ensures Competition Between Major Terminals

Hall says there’s been an ongoing move towards the “corporatization” of ports since the 1970s, echoing port reform that has represented a “definitive shift to the economic right” in other countries like Australia, New Zealand and Britain.  

Canada’s port authorities retain considerable independence as the government can’t “direct or influence” their day-to-day actions. However, the government can amend the Canada Marine Act. The 2014 budget implementation omnibus bill, for instance, amended the legislation to permit the destruction of documents by ports and exempted federal land bought by port authorities from species protections and federal environmental assessments.

Hall says while imperfect, the current port authority system assures that competition between major terminals is “mostly fair,” ensuring the otherwise competing supply chain actors have a place where they have to collaborate.

“Why would we want to give up on that?” he asks. “And if all they mean by privatization is that they’re going to take these long-term leases and let Morgan Stanley turn them into tradable financial instruments in order to make the books look good in the short-term, well then shame on them. This has been tried around the world and it hasn’t been very helpful.”

Privatizing Canada’s Ports An ‘Invitation for More Conflict’ on #FossilFuel Exports https://t.co/75NoOyxW5J #bcpoli #coal #cdnpoli

— DeSmog Canada (@DeSmogCanada) December 2, 2016

Privatizing Would Mostly Benefit Major Terminals and National Railways, Not Public

Liquidating ownership would indeed generate short-term cash flow for the government.

But Hall says this move would mostly end up benefitting large terminal operators and the two national rail companies, CN and CP, which service the terminals: “They will look at that and say: ‘How fantastic is that? I’ve now got an opportunity to be if not the monopolist, one of the very small number of service providers without this very powerful authority agency looking over my shoulder.’”

Port authorities already have strained relationships with local hosting communities. Major conflicts have emerged over permitting authority in recent years; the Vancouver Fraser Port Authority is currently being sued by two organizations and two municipalities for allegedly approving a thermal coal export terminal without proper consultation.

The Canada Transportation Act Review noted that a move towards privatization would be "accompanied by legislation to protect the public and national interests." But according to Transport Canada, CPAs already “operate in the public interest.”

It’s a notion that people like Washbrook disagrees with given that he doesn’t see the export of polluting commodities as automatically more in the “public interest” than species protection or clean air.

“The notion that ‘well, we’re a trading country so it’s all good’ is wrong,” he says. “Canada’s interests are much broader. For this government to say ‘we’ve chosen trade over protecting the environment’ can’t be justified.”

Liberals Pursuing Privatization Agenda in Other Sectors

Washbrook suggests the federal government shouldn’t proceed with a very narrowly focused review by Morgan Stanley. Instead, it should opt for a broad-based consultation process that attempts to find out public opinion on the roles and governance of port authorities, and how local and regional interests should be balanced with national interests.

Hall echoes this sentiment, suggesting the government must ensure the inclusion of a wider range of actors, including local authorities and governments.

But it doesn’t look like the Liberals are interested in such discussions.

What was once heralded in the Liberal Party’s platform as an “largest new infrastructure investment in Canadian history” has turned out to be an attempt to attract billions in private investment from international firms, which Martin Luckas of the The Guardian dubbed a “giant corporate giveaway” and Tom Parkin of the Toronto Sun called a “bait-and-switch on infrastructure.”

In September, the government also hired the services of Credit Suisse Canada to examine the potential privatization of the country’s eight largest airports, which the CEO of the Vancouver Airport Authority predicted would lead to cutbacks in maintenance and cleaning, as well as increased crowding in airports. There are ongoing calls for the Liberals to consider privatizing Canada Post.

Yet Hall suggests that privatizing ports will only make that relationship more tense: “Think of the conflicts we’re about to have here over the pipelines,” he says. “You remove public oversight, you further push this in a private direction: it’s an invitation for more conflict.”

Washbrook agree: “People are frustrated. And I don’t think they’re going to be less frustrated if the government privatizes their ports.”

Image: Robert Banks Terminal via Port Vancouver

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With news of the Port of Vancouver ruffling the feathers of the federal government by issuing a permit for a jet fuel pipeline without so much as a heads up, the port authority’s integrity has been thrust into the spotlight yet again.

While the port has apologized to Transport Minister Marc Garneau, the thorny issue of the port conducting environmental reviews of projects, while profiting from the same projects, remains.

Complicating matters, the Vancouver Fraser Port Authority (which regulates the Port of Vancouver) is a member of the Coal Association of Canada — a lobby group that glosses over the impacts of burning coal on climate change and that has gained notoriety in recent weeks for spreading misinformation about the phase-out of coal-fired electricity in Alberta.

The port authority has also been outed in the past for a covert and intimate relationship with the Vancouver-based Coal Alliance, an aggressive lobby group with a membership that includes rail companies, export terminals and other lobby groups.

Meantime, the port authority was responsible for reviewing the $50-million Fraser Surrey Docks coal-transfer terminal that would export more than four million tonnes of thermal coal to Asian markets — which it approved in December 2015.

“If you’re going to be a member of some other organization or alliance and you approve the projects that are related to that membership, it puts into question the fairness of the decision-making process and leads one to question whether or not they’re biased — whether or not things are predetermined,” says Paula Williams, who co-founded Communities and Coal, a Vancouver-based organization that opposes the export of thermal coal from the port.

Port Authority Part of Coal Lobby, Also Responsible for Regulating

The transportation of coal has been critical to the port’s recent financial successes. In 2015, the port sent out 35 million tonnes of the stuff, compared to 25 million tonnes of grain, speciality crops and feed and 23 million tonnes of forest products — and that was a slow year on the coal front.

If the port authority was just serving as landlord, it would make sense for it to collaborate with coal lobby groups to push for increased exports and generate as much profit as possible for its owners.

But the port authority’s mandate also requires it to fulfill duties such as the “safety and security of all land and waters” and the “permitting of all projects proposed for the use of federal port land.” In a single word: regulating.

“They shouldn’t be doing both,” says Voters Taking Action Against Climate Change (VTACC) director Kevin Washbrook, who notes the port authority has approved every coal export project that’s come before it in recent years.

VTACC is one of four plaintiffs that have taken the port authority to court on allegations of bias and failing to consider climate change impacts when approving the permit for the Fraser Surrey Docks coal terminal.

A federal court is currently evaluating a request by Vancouver Fraser Port Authority and Fraser Surrey Docks to toss out the lawsuit filed against them.

“That’s really why we’re taking them to court: we think the public interest isn’t being met by this dual mandate,” Washbrook told DeSmog Canada.

Port Authority Covertly Sponsored Coal Conference in 2013

A series of disturbing revelations about the port authority’s intimate relationship with the coal industry came out in late 2013, courtesy of digging by Voters Taking Action Against Climate Change.

First came the news the port authority had been swapping e-mails with National Public Relations (a firm connected with the Coal Alliance that has lobbied the federal government on behalf of Fraser Surrey Docks). The Vancouver Sun described the exchange as seeming “as if they were allies, rather than as a public regulator and private proponent.”

In one instance, the two entities traded information on a VTACC protest, with the port authority directing media inquiries to Alan Fryer, a senior consultant for National Public Relations and lobbyist for the Coal Alliance.

A month later, it was revealed the port authority covered up its sponsorship of the 2013 Coal Association of Canada conference, including a $5,000 contribution and golf swag, because it was concerned about “press and public backlash.” The Vancouver Sun noted the Vancouver Fraser Port Authority had publicly sponsored the conference in 2012.

“They get it in the sense that it doesn’t look good,” Washbrook says. “Whether they think that it’s actually a bad thing: I’m not sure.”

Washbrook notes the port authority’s response to pressure for more regional involvement and transparency has been to launch a Twitter feed, YouTube channel and run some TV commercials. None of those PR products mention coal at all, he says.

Tangled Web of Business Relationships 

Williams of Communities and Coal suggests it may also be worth paying attention to some other business relationships that encircle Vancouver Fraser Port Authority and Fraser Surrey Docks.

In 2011, SNC-Lavalin, the embattled Montreal-based engineering services firm, bought a 23 per cent share in AltaLink (an electricity transmission company) from Macquarie Essential Assets Partnership .

The partnership is owned by a subsidiary of the Macquarie Group, a member of which owns Fraser Surrey Docks.

In 2013, Fraser Surrey Docks contracted SNC-Lavalin to prepare the environmental impact assessment, which was described by Vancity credit union as “entirely inadequate” and criticized by activists as being limited in scope.

Then, in 2014, SNC-Lavalin sold AltaLink to Warren Buffett’s Berkshire Hathaway, which owns BNSF Railway, the company transporting the coal to the Port of Vancouver. Both BNSF Railway and Fraser Surrey Docks are members of the Coal Alliance.

Williams emphasizes that a trail of prior business isn’t necessarily a problem. But given the port authority’s habit of getting a bit too cozy with private industry, it’s a trend that might be worth paying attention to in the future.

“[Vancouver Fraser Port Authority] should not have a say in the decision of whether or not to approve a project at the port,” she reiterates. “This should not happen. They should be removed from that. They can have an opinion and give their input, but they shouldn’t be part of the decision-making process.”

Citizens Push for More Input

Opposition to the way the port is doing business continues to build.

Washbrook notes that people in North Vancouver are fighting the proposed G3 grain terminal, while folks in Delta are concerned about the Roberts Bank Terminal 2 project. Meanwhile, people in Richmond worry about Agricultural Land Reserve property being bought up and the small leaseholders the port is “shaking down” for exorbitant increases in water lot lease rates.

All have common interests, he says: more regional inputs, more representation, a more transparent and open processes.

If the VTACC lawsuit doesn’t get derailed by the port authority and Fraser Surrey Docks, the verdict could help shape the future conversation. But ultimately, solving the issue seems to come back to the federal government and its power to amend the Canada Marine Act to redefine the mandate of port authorities.

“I think there are discussions happening in Ottawa right now about how to reform the ports,” Washbrook says. “The question will be about how much of that is an inside discussion that tweaks things, and how much of it brings about meaningful reform.”

Image: Jason Mrachina/Flickr.

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Isn’t it ironic? A little too ironic?

On the very same day the UN climate summit kicked off in Paris, Vancouver’s port authority approved a cost-saving amendment allowing for the proposed Fraser Surrey Docks terminal to export massive amounts of thermal coal to Southeast Asia on ships rather than barges. The irony hasn’t been lost on environmental activists.

“It was just such a stark contradiction in the timing around this most recent approval where the port authority is improving a new thermal coal port on day one of global climate talks,” says Laura Benson, Dogwood Initiative’s Beyond Coal campaign director. “One foot’s going backwards into the 19th century and one foot’s trying to move ahead into a brighter future where we can fight climate change.”

Fraser Surrey Docks, owned by a Macquarie Group-managed investment company, currently exports lumber, steel and containers. Since 2012, the company has pushed for permission to construct a new $50-million coal-loading terminal to export up to eight million tonnes of thermal coal — which is burned to generate electricity, unlike metallurgical coal which is required to smelt steel — to Asia from mines in Montana and Wyoming’s Powder River Basin.

A company update from late 2012 anticipated shipping would start in 2013. It hasn’t exactly turned out that way. The Vancouver Port Authority is now facing lawsuits from Voters Taking Action on Climate Change (VTACC) and the Musqueam Indian Band over an alleged failure to adequately consult.

“The port is both the landlord and the regulator,” says Kevin Washbrook, the director of VTACC. “They have an interest in seeing these projects go ahead. So there’s no public assurance this process isn’t biased in favour of the industry. Rather than going through the show of attending the open houses, we’ve been saying from the start the port needs to sit down with the public and talk about these concerns and engage local governments from the start.”

Coal prices have cratered in recent years, stymieing Fraser Surrey Docks' efforts to find a customer to buy into the barging scheme. The company's amended proposal allows it to also load coal directly onto ocean-going vessels, which doesn’t resolve concerns about climate change, traffic in the Fraser River or ramifications for air quality. “We can’t build these coal ports and avoid runaway climate change: it’s contrary to what we need to do," Washbrook says.

In late 2013, Port Metro Vancouver hired Edelman — a public relations firm that previously represented other pro-coal organizations — to help boost its image. Unfortunately, as Chinese coal imports declined and a global coal glut emerged, such appeals to economic arguments largely flopped. Benson notes the thermal coal market in the Pacific Rim is oversupplied and that companies are scaling back exports despite giant penalties. Potential environmental impacts such as increased air pollution, noise and greenhouse gas emissions have only added to concerns. The hiring of the hellishly controversial SNC Lavalin by the docks to conduct environmental assessments and Port Metro Vancouver’s decision to ignore calls for a full health impact assessment kind of capped it all off.

With all that said, Alan Fryer — spokesperson for the Coal Alliance, a lobbyist organization that petitions for British Columbia coal businesses, including the Fraser Surrey Docks — maintains optimism the industry will rebound given global demands for coal. He argues the Fraser Surrey Docks are a “flashpoint” triggered by an upswing in anti-coal activism in the United States’ Pacific Northwest, and that the industry provides tens of thousands of jobs and hundreds of millions in tax revenue.

“We’re a trading nation,” he says. “We are a port city. I don’t think we get to pick and choose, necessarily, the products that we export. It’s a tough time in the resource sector generally. I know a lot of people are hurting and have lost their jobs. I think anytime you have the opportunity to create even a few well-paid unionized jobs, that’s a good thing.”

Coal mining in the Powder River Basin.

In late November, Fryer sent congratulatory emails to 33 British Columbia-based MPs (including three cabinet ministers), providing background on the province’s coal industry and an invitation to get in touch if they wanted more information. The communications report in the federal lobbyist register initially appears startling given most lobbying efforts tend to include a half-dozen or so MPs at the most. Fryer notes the Coal Alliance “registered it out of an abundance of caution” even though it wasn’t sit-down House of Cards-esque lobbying. Kudos on that front. But Benson suggests the Coal Alliance has a “heavy influence” on decisions made by the port authority, so perhaps the communication wasn’t so innocuous (in September, Freyer also lobbied a dozen MPs on behalf of the Coal Alliance).

It’s as a result of such pressures that Washbrook calls for a fundamental reformation of how port authorities are governed. He suggests local communities — such as Surrey and New Westminster, which have both joined the lawsuit against the port authority as interveners — need to have a more significant voice in the consultation process and that ports should take into consideration a wider range of concerns, including climate impacts of the commodities they export. In mid-2013, University of British Columbia political science professor Kathryn Harrison noted that seven of the 11 members on the Port Metro Vancouver’s board of directors were appointed by the federal government based on suggestions from “Port User Group,” which includes coal organizations.

Fraser Surrey Docks still has to jump through a number of “permitting hoops,” in the words of Washbrook, most notably the acquisition of Metro Vancouver’s air quality permit. He suggests the project shouldn’t go ahead with construction until it receives such a permit given the impacts it could have on design, and that coal is “already dead and everyone knows it.”

Fryer acknowledges the world will eventually have to transition away from thermal coal to renewable forms of energy “but the reality is we’re not there yet and fossil fuels, including coal, are going to be a very important part of the energy mix for sometime.” The recent amendment won’t affect the court cases as it’s the original permit that’s being challenged.

While Benson suggests the port authority has clearly signalled it’s not going to address the concerns voiced by groups like Dogwood and VTACC, she expresses optimism: “We have more avenues now given the new federal government to have the voices of citizens heard. In terms of a citizens’ movement, we’re stronger than ever. So I’m very optimistic we’ll eventually find a way to either get the answers we deserve or just block this project from ever moving forward.”

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Coal, the fossil fuel that largely sparked the industrial revolution, may be facing the beginning of the end — at least in terms of generating electricity.

There are increasing signs of the demise of the world’s dirtiest fossil fuel, from a global oversupply to plummeting prices to China starting to clean up its polluted air.

Last week, the Carbon Tracker Initiative published an analysis — Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures — identifying major financial risks for investors in coal producers around the world.

Saying the demand for thermal coal in China, the world’s largest emitter of toxic greenhouse gases, could peak as early as 2016, the analysis also highlights $112 billion of future coal mine expansion and development that is excess to requirements under lower demand forecasts.

“In particular it shows that high cost new mines are not economic at today’s prices and are unlikely to generate returns for investors in the future,” said an accompanying media release.

“Companies most exposed to low coal demand are those developing new projects, focused on the export market . . . With new measures to cap coal use and restrict imports of low quality coal in China, it appears the tide is turning against the coal exporters.”

The analysis added that China’s desire to reduce imports will impact prices and asset values for export mines in the U.S., Australia, Indonesia and South Africa.

“King Coal is becoming King Canute, as the industry struggles to turn back the tide of reducing demand, falling prices and lower earnings,” Anthony Hobley, CEO of Carbon Tracker Initiative, said.

A recent article in Mining Weekly also says the coal industry is indeed facing tough times.

The article noted Coal Association of Canada president Ann Marie Hann agreed that about half of the global coal output at current pricing was being produced at a loss.

“Until a global rebalance between demand and supply takes place and the global economy rebounds, the coal industry will unfortunately probably see some more bad news over the coming months,” Hann said.

The story added that the prices for thermal coal, which is used to generate electricity, had fallen in recent years from about $190 per tonne in mid-2008 to $75 per tonne this year, while metallurgical coal (used to make steel) had dropped from a high of more than $300 per tonne in late 2011 to less than $120 per tonne.

To perhaps make matters worse for the coal industry, it is being publicly attacked by the oil and gas sectors, which are trying to position themselves as cleaner fossil fuels.

According to the Responding to Climate Change website, a number of the world’s leading oil and gas companies voiced their concerns about climate change at last week’s UN Climate Summit, arguing they can offer a future coal cannot.

“One of our most important contributions is producing natural gas and replacing coal in electricity production,” Helge Lund, Statoil’s chief executive, was quoted as saying.

Kevin Washbrook, a director for Voters Taking Action on Climate Change, a Vancouver organization that has fought against a proposed new coal export facility at Fraser Surrey Docks, agrees the thermal coal sector is in decline.

“I think coal is in everyone’s sights these days because coal is climate change,” Washbrook told DeSmogBlog. “Coal has to be on the chopping block for sure.”

Washbrook added the UN, the International Energy Agency, big banks and insurance companies are acknowledging that the vast majority of coal must stay in the ground if humankind is to avoid catastrophic, runaway climate change.

“We need to see this current downturn [in the thermal coal sector] for what it really is — our last good opportunity to leave coal behind and start the transition to emission-free energy sources.”

Photo Credit: Arnold Paul, Wikimedia Commons

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