Canada'scoal producers are fuming over a federal move to award a chunk ofcoveted port capacity in northern British Columbia to Americancompanies, arguing the decision will choke off Canadian mininginvestment just as demand for the resource is soaring from countriessuch as China.
Miners such as Teck Resources Ltd., TCK.B-T Western Coal Corp. WTN-T and Grande Cache Coal Corp. GCE-Tsay Crown corporation Ridley Terminals Inc.'s recent decision to awardlong-term contracts to three U.S. companies will clog the already busyport, and jeopardize their plans for expansion.
They warn the result could be heavy losses of investment in Canada, and lost employment.
"Afederal Crown corporation just chose American jobs over Canadian jobs,"Teck chief executive officer Don Lindsay told a Vancouver miningconference on Monday. "Hundreds of B.C. jobs are on the line."
Theprovincial government, Teck and other Canadian coal miners representedby the Ridley Terminals Users Group (RTUG) are calling on Ottawa fix thedecision by pushing forward with much-needed plans to expand theterminal's capacity near Prince Rupert, B.C. to about 24 million tonnes ayear from less than 12 million tonnes today
The terminal is notonly the closest and most cost-effective site for miners to ship theirproduct from coal-rich properties in northern B.C., but it's also thenearest port to the crucial Asian market. China, in particular, isdriving demand for coal used in both steel making and power generationas it rapidly industrializes.
It's that demand that saw Ridleyhandle a record 8.3 million tonnes of cargo last year, its highest sinceopening in 1984. More than 80 per cent of its volume is coal, with Asiaits primary destination. Ridley is expected to reach its capacity forthe first time this year.
Volume is expected to grow further afterRidley signed a deal last week with St. Louis-based Arch Coal Inc. tohandle up to two million tonnes of coal in 2011, and up to 2.5 milliontonnes a year between 2012 through 2015. Arch is the second-largest U.S.coal producer with mines in the Powder River Basin in Montana andWyoming. Ridley also signed smaller contracts with U.S. producers CloudPeak and Enserco. All three U.S. companies produce low-sulphur coal usedin power generation.
The three American contracts represent about40 per cent of capacity at Ridley, according to Mining Association ofBritish Columbia chief executive officer Pierre Gratton.
"Whatthis effectively means is that a Canadian Crown corporation is puttingthe interest of U.S. production and U.S. jobs ahead of Canadian jobs,and that is a real concern for us and it should be for all Canadians,"Mr. Gratton said.
Canadian miners also argue the U.S. contractsclash with Ridley's founding mandate to support the development of coalmines in northeast B.C.
"We have a strong question about therationale of the terminal displacing Canadian capacity in favour of U.S.product," said RTUG chairman Doug Smith, who is also CEO of First CoalCorp., which has plans to start a coal mine in B.C. by 2014.
Themining group has also written to Rob Merrifield, federal Minister ofState for Transport, condemning Ridley's decision. It wants a meetingwith officials in Ottawa to address what it calls "a complete lack offaith in addressing the requirements of Canadian commodity producers,"according to a draft copy of the letter obtained by The Globe and Mail.
Aspokesman for Mr. Merrifield said in an e-mail that the government has"set the expectation" that Ridley operate in a commercial manner,"charging market rates and operating with efficiency." Fees charged havebeen an issue in the past at the terminal. Ottawa says it's working totry to ensure Ridley's capacity can increase to meet future demand.
Whencontacted on Monday about the U.S. contract concerns, Ridley presidentGeorge Dorsey cited the North American free-trade agreement.
"Wehave a close country-to-country relationship," said Mr. Dorsey, who isalso CEO of Vermont-based private equity firm Edgewood Holdings LLC.