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Kitimat’s Comeback

Kitimat mayor Joanne Monaghan | BCBusiness
“When I became mayor in 2008, it was pretty bad. It was a really doom situation here,” says Kitimat mayor Joanne Monaghan.

With two major employers having left town and Alcan, the biggest of all, in a pitched battle with municipal leaders, Kitimat was at death’s door in 2008. Today, thanks to a revitalized Alcan, plans for LNG terminals and talk of pipelines and refineries, a happier story is being written

Kitimat mayor Joanne Monaghan’s office is on the third floor of the aged City Centre Mall—above Big Jim’s Spirits Store, and down the hall from Your Dollar Store With More. Things are quiet this Tuesday afternoon in March, with no staff in sight save for a receptionist talking on the phone about last Saturday’s hockey game against Prince Rupert.

“Her Honour is running late from another appointment,” the receptionist informs us, interrupting her call. “But she should be here shortly.”

Before long, in strides the mayor—tall and spry at 75, in a fringed red wool jacket and black slacks. “Follow me,” she says, heading for her office, which overlooks the mall parking lot.

A heavy engraved crucifix hangs around Joanne Monaghan’s neck. She is a woman of faith. A Minnesota native, she arrived in B.C. in the late-’50s with her husband at the time, a seminarian with the Conservative Baptist Church. “We spent summers up here on the coast, in Bella Bella, on a marine medical mission. On the coastal villages, the pastors usually leave for the summer, and we would fill in: marry, bury, do bible schools—things like that. I really liked being up here on the coast, because it was a lot different from what the prairie was like back in Minnesota.”

The couple eventually settled in El Paso, Texas, but then Monaghan’s husband was sent to Vietnam as an army chaplain. He never returned, killed in service. When the U.S. Army called and asked where she wanted to go for her final move, Monaghan, remembering fondly her time up north, said, “Smithers, British Columbia, Canada.” The year was 1965.

She had studied communications in El Paso and got work at a radio station in Smithers. She remarried, to an RCMP officer, and within two years the couple relocated to Kitimat to open a series of tire shops. “The forest industry was going crazy,” she recalls, “and they needed a lot of tires for their trucks.” She also opened a gift shop, as well as a helicopter adventure-tour company that she has to this day.

Her second husband, Paul Monaghan, went into politics, becoming mayor of Kitimat in 1975. The move sparked the political fire in Monaghan—“I went to every council meeting and I decided I really like it.” Her husband’s political career ended two years later, as did their relationship, but Monaghan’s career was just taking off: she ran for council in 1980 and won, and has been there ever since.

“When I became mayor, in 2008, it was pretty bad,” she says, in an accent that still hints at her Midwestern upbringing. “It was a really doom situation here. Everybody had left. People were abandoning their homes, there were more U-Hauls going out than you could shake a stick at, schools were closing—it was dismal.”

A devout Baptist, she gathered all the local ministerial associations, along with a handful of town councillors, to seek divine intervention. “We’d get together one Saturday a month and have a prayer meeting and pray for the re-establishment of Kitimat,” says Monaghan. “Then the Prayer Canada group, which met once a week, started praying for us, too.”


Image: Paul Joseph
The promise of LNG is helping bolster
Kitimat’s economy.

For most of Kitimat’s history, the success of the town has been inexorably linked to the success of its dominant employer. The Aluminum Company of Canada, renamed Alcan in 2001, built a townsite at the head of Kitimat Arm for their new smelter in 1953, with the residential area, anchored by a town centre, built on the eastern shores of the Kitimat River and the smelter and associated industrial businesses on its western shores. The location was highly strategic for industry: flat land, significant sand and gravel resources, a sheltered deepwater harbour and secure hydropower (Alcan gets its power from the company-owned Kemano Hydro power station, 75 kilometres southeast of Kitimat).

The original projections were for a town of 35,000 to 50,000 people, and in those early days, planners predicted that Kitimat might become B.C.’s third-largest city. But changing circumstances—technological (increased automation) and economic (rationalization within a global industry; Alcan was bought by London-based Rio Tinto Group in 2007)—dramatically reduced that target. After a peak of 14,500 residents in 1981, the town had been in gradual decline for almost three decades when Joanne Monaghan took office.

At its lowest ebb, Kitimat had a population of under 9,000 people (and falling), a vacancy rate of over 45 per cent (and rising) and two major employers (Methanex and Eurocan) having recently left Dodge. Divine intervention or not, the town has since seen a surge of economic activity: a $3.3-billion revitalization project at the Alcan smelter, three proposed LNG terminals including projects backed by global energy giants Chevron and Shell, a potential pipeline from Enbridge in the controversial Northern Gateway project and an oil refinery proposal from Victoria businessman David Black.

As a result, Kitimat is experiencing the kind of growth it hasn’t seen since its inception. The permanent population is over 10,000 for the first time in a decade, with vacancy rates below one per cent on rental accommodations and the fastest-rising property values in the province: up almost 26 per cent over last year, from $180,000 to $228,000 for the average single-family home. The biggest challenge these days is affordable rental housing for the influx of workers. Apartment buildings that fell into disrepair over the previous four decades are now being bought up by outside interests and renovated, with rents doubling or tripling.

Gaby Poirier, 36, is the general manager for Rio Tinto Alcan’s B.C. operations. A chemical engineer from Princeville, Quebec, he moved to Kitimat last June with his wife and two young daughters (“I’m coming from a small town. The skiing, fishing—I love it here,” he says). Poirier, a 12-year veteran of the company who has managed Alcan operations in Alma, Quebec, and Sebree, Kentucky, explains that the Kitimat smelter remains an important strategic asset. That’s why, in 2011, Alcan made the pivotal decision for a multibillion-dollar modernization, which ensures a future for the company in Kitimat but leaves it with just 1,000 permanent employees, half the number from the 1970s and 500 fewer than in 2008.


Image: Paul Joseph
With a shortage of accommodation, employers
brought in a cruise ship.

“Location is very important. We’ve got a wharf with an open window on the Asian market. We’ve got the Kemano Hydro power station. And the technology in this new smelter will allow us to produce one of the greenest aluminums on earth,” says Poirier. “The people in Kitimat have been in the aluminum industry for 60 years. We have people on site who are second-, third- and fourth-generation employees. We have people who know the business, who know how to run a smelter, and I think this is a big asset for us.”

An economic boom brings its own challenges, however, and Poirier’s concerned about Kitimat’s ability to cope with growth—not just in Alcan’s construction phase, which is expected to wrap up in 2015, but in years to come as LNG and other new industries arrive in town. In the immediate term, Alcan has tried to address the housing crunch in novel ways, including bringing in a former Baltic cruise ship this March, dubbed the Delta Spirit Lodge, to house 450 temporary workers (Alcan’s temporary workforce is expected to peak at 3,000 this summer, up from 2,000 in early 2014). The company is also in discussions with Joanne Monaghan and her council, as well as the Haisla First Nation, to sell non-strategic land assets to help the community grow for the future.

Monaghan has tried to get subsidies from both industry and the province for rental units (mostly for seniors and those with disabilities), so far with limited success. “I work on it every day. I lose sleep over it. I’m trying to put together developers, BC Housing and the province,” says Monaghan. “Getting land is the biggest challenge, because we don’t have that much.”

Perhaps a bigger question for Alcan is what impact the arrival of LNG export terminals, and an estimated five- to 10-year buildout of that industry locally, will have on their workforce. “The main thing is with people,” says Poirier. “To have more projects coming in, it would be more challenging for the labour.” However, he expects the LNG rush to be only a temporary draw on local labour pools: “The construction is a boom. We’re going to be here for another 60 years.”

Steven Forrest’s livelihood has ebbed and flowed with the fortunes of Kitimat’s big employers. A lifelong resident, Forrest, 49, owns TL&T Electric Ltd., a business formed 40 years ago by his Irish-immigrant father and three other partners (but now solely under his control). It’s located on the town’s western shore, among autobody shops and other industrial contractors.

Forrest is a harried-looking man who, asked what keeps him up at night, responds, “I never sleep.” He’s busy these days with the Alcan modernization project, which represents 40 per cent of his current business, but he also has more and more work from the LNG operators that are setting up camps in anticipation of a final investment decision to build, expected this fall.

The father of four teenagers, Forrest has seen the boom-and-bust cycle before. “Historically Kitimat was a three-company town: Methanex, Eurocan and Alcan,” he explains, gazing out his cluttered office window at his boat Cougane Barra, up on wheels in the parking lot. “There was no other industry, so people came to work and did their thing. But in the past seven years, when Methanex closed and Eurocan closed—that’s when a shudder was sent through the community. After the pulp mill closed at Eurocan, which was our bread and butter, we had to ask ourselves: What are we going to do to hang on?”


Image: Paul Joseph
Kitimat was at death’s door in 2008. But
the promise of pipelines and LNG have
helped rewrite its future.

Forrest’s answer was two-part: diversify (the company, with 12 full-time and between 20 and 50 part-time workers, now owns property around town, which it leases to other businesses; it has also taken on contracts in Alberta and Taiwan) and develop competencies in other areas (including getting accredited for electrical work in the oil and gas sector). His business is growing 20 per cent a year—a figure he expects to rise to 40 per cent annually in 2015 and 2016, when and if the LNG projects get the green light.

“The key for a smaller contractor is to live within your means,” says Forrest. “The massive construction companies will come in and bring three, four, five thousand men—but ourselves, being here for 40 years now, we have to bite off what we can chew. After construction is finished—when Alcan is finished and they need a transformer changed—they’re not going to call back 3,000 people. They’re going to rely on the local resource to still be here.”

In the town centre, another small business is feeling the impact of the boom. Vitality Spa and Clinic opened nine years ago in the mall, before moving next door into an expanded 4,000-square-foot stand-alone location. The launch came literally on the eve of Eurocan’s mill closure, which threw 535 people out of work.

“That was our biggest moment of hesitation,” says Andrea de Sousa, the petite 32-year-old owner of Vitality, her four-year-old daughter, Evelyn, in her arms. “We had already made the investment and were ready to open this place.”

Business at first was slow and steady, but since the Alcan modernization was announced—and with the arrival of advance teams for LNG—things are taking off, with growth in the past three years of 35 per cent.

While the clientele still skews female, because of Alcan’s generous benefits plan there are a lot more men coming in from the camps for therapeutic massages. The demand for registered massage therapists exceeds supply. “We’d love to bring on another RMT,” she says. “Including myself, we only have two full-time and one part-time.”

In the past couple of years the spa has added a naturopath, acupuncturist, four estheticians and, as of this spring, a chiropractor shared with nearby Terrace. The Vitality gift shop opened in the fall. The spa is now open on Sundays as well, to accommodate workers with only that day off. There is also talk of launching men’s-only events at the spa, including one timed to the next Super Bowl.

Kitimat’s growing pains are being felt well beyond the district’s boundaries. In Terrace, 60 kilometres to the north, Mayor Dave Pernarowski, a former banker, explains how his community of 12,000 is coping with the change.

“When I moved here, it was at the absolute lowest possible moment for this community in terms of loss of mills and people moving out of town,” says the 54-year-old native of Rivers, Manitoba, who came to Terrace nine years ago to manage the local Scotiabank and entered politics a year-and-a-half later. “Our school system went to a four-day school cycle, because there weren’t enough students and teachers to accommodate anything more than that. It was a depressed community—not only economically but also in spirit.”


We’re meeting in Zander’s Coffee Shop in downtown Terrace, amid Lululemon-wearing moms and hirsute hipsters on their laptops: the scene might be straight from a Yaletown café. Terrace is the regional service centre for northwestern B.C.—where people from Kitimat and Prince Rupert come to shop and, increasingly, where people squeezed out of Kitimat real estate live. It too is buzzing, thanks to Alcan and the LNG projects.

“Kitimat and Terrace are so closely linked. We have families who work at Alcan living in Terrace—I think it’s 400 families,” says Pernarowski. “So we recognize the role Terrace has played over the years as a fairly significant service hub. We have the big-box stores here, we have the hospital and college and university campus here, that continue to draw people throughout the region.”

The trickle-down effect from Kitimat has been both good and bad. On the one hand, international focus on the region has brought a raft of inquiries about doing business in Terrace (“I can just sit in my office now and wait for the phone calls,” Pernarowski says), with Chinese investors talking about setting up manufacturing operations and a Vancouver developer spending $12 million to redo the downtown mall and bring in new tenants.

On the downside, the town’s infrastructure is stretched: the Terrace-Kitimat airport, which sits within Terrace municipal boundaries, saw a 28 per cent increase in passenger traffic in 2013 and expects another 40 per cent bump in the next five years; increased rail traffic is causing traffic jams in town, since Terrace only has one overpass; and roads that need to be rebuilt are simply being patched.

“It’s a combination of no budget to do it—and really, if we did have the budget, where would we find the guys to come and build the road?” says the mayor. “There’s no equipment, no people around, to do it.”

Pernarowski likes the idea of “revenue sharing”—getting a cash advance from the provincial government to help pay for regional infrastructure to support a growing LNG-fuelled economy. “We can’t wait until a liquefied natural gas plant is up and operating and there’s some taxes being generated for the province,” he says. “It’s too late. We need to have that financial assistance to build the infrastructure now so that the LNG projects are going to be successful. That’s absolutely key, and that’s the messaging we’re giving to the government.”

Joanne Monaghan is sending the same message to the province: we need financial help now. In her efforts to ensure Alcan stays in town and that prospective LNG operators choose Kitimat over Prince Rupert or even Oregon, she has struck a decidedly conciliatory tone with industry and both higher levels of government.

Relations between Alcan and the former municipal administration used to be so strained that the District of Kitimat actually sued Alcan (along with the provincial government) in 2005, trying to stop the industrial giant from selling surplus power from Kemano to BC Hydro. The town argued that power from Kemano should be used only to build and fund industrial development in Kitimat, not to pad Alcan’s bottom line. The BC Utilities Commission ultimately ruled in Kitimat’s favour, but the action soured relations to the point where the question of whether the 2011 modernization of the smelter was a go—indeed, whether Alcan would stay in Kitimat—was up in the air.

Monaghan doesn’t want to see something similar happen now, with LNG, which is why she’s pressing hard for the province to help with infrastructure (including replacing and/or twinning the Haisla bridge, the ancient two-lane link between Kitimat’s eastern and western shores) and ensuring that when a tax regime is finalized for LNG producers this fall, it reflects the global competitive reality.

“We’ve heard up as high as a seven per cent tax,” says Monaghan. “That’s way too high for them, so they’re going to have to be negotiating.” Once the tax is passed into law, the major players—LNG Canada (part-owned by Shell) and Kitimat LNG (part-owned by Chevron)—will go back to their board to either proceed or not proceed with full-on development. “They’ve walked away before from places.”

Monaghan and her council also, controversially, held a non-binding plebiscite on Enbridge’s Northern Gateway project on April 12. Most northern communities along the proposed pipeline route, including Terrace, have come out against the project, but Kitimat decided to stay neutral and survey its citizens instead. Residents ultimately rejected the project by a vote of 58 per cent to 42 per cent.

Many opponents, including the neighbouring Haisla First Nation, feel the Kitimat plebiscite—especially its timing—has given Enbridge free publicity in the runup to the federal government’s final decision on Northern Gateway, expected this month. “I don’t know what they’re trying to do, if they’re trying to form a mandate, but if they’re trying to possibly give momentum to Enbridge, you’re basically insulting everything the Haisla have done since 2009,” says Ellis Ross, the 49-year-old Chief Councillor for the 1,800-member band, which is challenging the project in court. “I don’t appreciate that at all.”

The Haisla, while opposed to Northern Gateway, have otherwise found common cause with Kitimat. They’ve partnered with Alcan in bringing the cruise-ship-cum-working-housing to town, acting as operators with Bridgeman Services of the Delta Spirit Lodge. The Haisla are also 50 per cent owners in one of the smaller LNG projects, BCLNG, and landlords and rent collectors on the Kitimat LNG project.

Still, Ross—who’s seen unemployment on the reserve drop from 60 per cent to almost zero—has concerns about what the future holds for LNG and his community.

“It’s a great situation to be in, but how long is it going to last? I need to see somebody talk about final investment decisions. They’re doing all the permitting work, and hiring some of our people. We’re seeing progress, but some of these major corporations are willing to spend a billion dollars and if they don’t see light at the end of the tunnel, they’ll walk away.

“The aboriginal community is not the uncertain component anymore,” he says. “That uncertainty is now coming from the provincial tax scheme and these corporations that are not making their final investment decisions.”

Emboldened by Kitimat’s recent good news, Joanne Monaghan intends to seek re-election in November, promising to turn the town into a “tax-free zone” by the end of her next term and before her 80th birthday. “So many of these industries, they won’t be coming to fruition before my term has ended in November,” says Monaghan. “I worked with them for so long, and so many things are coming—I just want to be there.”

And what about after she’s gone? What will Kitimat look like in 10 or 20 years? Like many northern B.C. towns, Kitimat has always been defined by the boom-and-bust cycles of the commodities it trades in. Many people compare the present Kitimat to Fort McMurray, Alberta, five years ago—where the oil sands boom brought about traffic jams in mid-afternoon, soaring house prices and some of the best-paid Tim Hortons workers in the country.

That analogy assumes that LNG delivers on its promise and creates sustainable jobs in Kitimat for years to come. Local residents worry about managing rapid growth, and—scarred by past booms gone bust—they wonder whether the good times will last after the cranes and construction workers have left town.

Monaghan acknowledges that things can change, and change rather dramatically, in a town like Kitimat. “I don’t know how long this boom will last. Yes, in the future, I can see perhaps having another bust—but that may be 20, 25 years from now. You have to build your community so that it can take the boom and bust. The citizens of Kitimat are resilient.”

The mayor vividly remembers calling on her faith when she took office in 2008—“I don’t know if the prayers helped or not, but something sure happened”—and she continues to believe that faith, along with smart planning and a business-friendly environment, will help keep Kitimat strong for years to come. Her prayer group still meets every Saturday, she says, now asking God “for the continuation of this—that people can continue to get good jobs, that they can have a good family life, that their kids can stay here and work. That it continues to be a successful and prosperous community.”