Saint John rides the energy wave into the future
“Now, over there,” he says, gesturing to a cavernous room dotted with make-shift work stations, “used to be the gymnasium. Today, it’s where we house most of our technical staff. And out there, in front, used to be where all the big receptions were held. That’s where we’ve put all our fancy meeting rooms, and such. . .I love the way things have changed, even dramatically, over the years, but in a way they’ve stayed the same.”
The statement is as good a description as any for what’s been happening, recently, in the economy of New Brunswick’s largest urban center. In 2004, alone, Saint John created 2,000 jobs, and experienced an unprecedented building boom. Over the past decade, retail sales have risen 38 per cent to $1.5 billion in 2005. Unemployment levels now hover at historic lows; and business start-ups, expansions and modernizations are running at an all-time high.
Still, the source of this apparent prosperity is neither new, nor unfamiliar to those who have watched the city steadily take its place as one of the region’s sturdiest economic dynamos. “There is nothing ‘overnight’ about Saint John’s current success,” Mouland says. “If anything, it has to do with long-term, strategic planning and wise investments in key infrastructure. It has to do with a tremendous degree of interconnectivity within and without the local economy. In short, it has to do with our energy industry.”
Indeed, according to Tim Curry, President of the newly constituted Atlantica Centre for Energy – whose offices are located on the third floor of Mouland’s Fundy Engineering Group – the Saint John area’s mature and sophisticated energy assets are driving both an unprecedented expansion of the industry, itself, and the collateral growth of other key sectors.
“Over the next three or five years, energy projects in this area will generate $3 billion in economic benefits,” he says. “By 2009, the Greater Saint John area will have significant assets in petroleum, natural gas, nuclear, hydro and traditional thermal power. The potential of the so-called ‘multiplier’ effect is enormous, as the area becomes a true energy hub for the 21st Century. And we’re already seeing the effects.”
The list of major projects, either planned or underway, tells the tale.
The refurbishment of the Point Lepreau nuclear generating station, with a planned project cost of $1.4 billion, will extend the life of the facility for another 25 years. During normal operations, the plant employs 700 people and generates $70 million a year for the local economy.
Most significantly, perhaps, is Irving Oil’s contract with Repsol YPF, the largest oil exploration company in Spain, to construct a Liquefied Natural Gas terminal and regassification facility at Canaport. The project is expected to generate up to 700 construction jobs at its peak, resulting in direct labour expenditures of $26 million and indirect benefits of close to $14 million. Roughly 40 full-time employees will be required to operate the facility once it’s operational in 2008. The project will also generate more than $3 million in port and related fees.
Beyond this, Maritimes & Northeast Pipeline will build a 30-inch-diamter underground natural gas pipeline running approximately 145 kilometers from the Canaport LNG facility to join its principal trunk in Baileyville, Maine. At a total cost of some $300 million, construction is expected to begin in 2007 and end the following year.
“Clearly,” Curry says, “the LNG terminal is a foundational investment that will lead to other major investments in Saint John. Power generation and plastics are natural offshoots of having a liquefied natural gas terminal next to a high performing refinery. This would attract further investments from companies further down the supply chain, such as injection moulding plastics and fabrication companies. These types of energy related investments would then create additional jobs in many different sectors of the economy, such as construction, transportation, hospitality, services and restaurants, to name a few.”
Kenneth Irving, the youthful and energetic president of Irving Oil Ltd., tends to agree. “We very much believe in the concept of an energy hub,” he says. “And, when I say ‘hub’ I am talking about something that extends well beyond immediate advantages and attributes. I am talking about the ability to take raw materials and move them through the various stages to produce a variety of finished products, which can then be exported.
“The LNG terminal’s proximity to our refinery – in fact, to all sorts of key infrastructure – is important to the whole energy hub concept. It allows for sharing of resources, and that’s important when we are looking to develop new business opportunities down the road.”
Given the fact that Irving Oil already accounts for 20 per cent of New Brunswick’s GDP, and 44 per cent of the value of annual exports from the province, the prospect of intensive, energy-related, value-added manufacturing in the near future is, indeed, tantalizing. Still, Irving cautions, the real pay off for the region is long term growth, not short-term boom.
“To be truly competitive, energy investments on a scale such as these require a lot of lead time,” he says. “For example, most of the economic benefits we are now experiencing were conceptualized in the mid-1990s, and even before. We’ve gone through several generations of retooling and preparing ourselves for the next generation of business opportunity.
“We spent upwards of $1 billion upgrading the refinery between 1998 and 2000. This, of course, included the installation of our catalytic reactor, which basically lets us take raw crude oil and turn it into a variety of high-value products, including light, engine-ready gasoline. Essentially, it gives us more bang for our buck from every gallon of oil we refine. Since then, we’ve been investing $100 million a year in various refinery projects. And just this past year, we had 1,500 extra trades people working at the refinery. So, you can see how capital intensive all of this really is.”
Ultimately, Irving says, it comes down to installing a more complex development model than the more ruggedly resource-based practice of ‘digging’ for oil and shipping the crude: “Why supply your raw materials across the border, when you can transform them into other more diverse, exportable products? That, I think, is the right model for an emerging energy hub such as ours in this part of the Atlantic region. And that goes for oil and natural gas.
“I keep thinking about Fort McMurray, Alberta. I mean, there you have all these people feverishly working to ship out the raw materials. But, when that so-called boom ends, what do you have? A lot of people standing around wondering what they’re going to do next.”
In reality, nurturing the growth of a diverse, sustainable energy cluster – one that will spur long-term economic development in the Greater Saint John area and among existing and potential trading partners in the northeast United States – is essentially the mandate of the Atlantica Centre for Energy, which was formally incorporated in December of last year.
“We really are a creature of the Greater Saint John Growth Strategy Initiative, led by Enterprise Saint John,” Curry says. “The whole process to get up and running has taken about two years, and has involved a wide variety of public stakeholders.
“We take our marching orders, as it were, from a strategy development report that was rolled out, identifying key initiatives that have to be undertaken before the Greater Saint John area will achieve its full economic. In order to drive development in the region, we have to emphasize those sectors with the most potential for long-term commercial and industrial success. Those sectors are: information and communications technology, health and medical, life sciences, tourism and, of course, energy.”
According to Curry, the Centre supports the development of “sustainable, environmentally responsible business activities based on the energy sector resources and expertise in the region; the development and application of world-class, innovative energy and environmental technologies; and a culture and climate of efficient and responsible energy use.”
To this end, the Centre is currently working on a comprehensive plan for the Greater Saint John-northeast industrial corridor. The analysis will attempt to identify energy assets, costs, and the impact on broad economic development; understand the Kyoto protocols and their effects on the ‘Atlantica’ region; and locate key industry players, investment strategies and challenges.
“We’re also looking more closely at the potential spin-offs from the new LNG investment, and at the regional impact of the Point Lepreau refurbishment project,” Curry says. “Other areas of interest include evaluating the potential of a more extensive nuclear energy cluster in the area, and ways to identify and communicate human resource issues in the energy sector.”
Where all of this will eventually lead remains an open question, but Curry insists that the time is right to get a firm handle on the future of an industry that’s taken years, if not decades, to mature into a robust generator of long-term jobs, earned incomes, and economic progress along the northeast coasts of Canada and the U.S.
“Much of what we’ve observed over the past few years has been piecemeal and anecdotal evidence of the energy sector’s affect on the region,” he explains. “The Irving organization has been very helpful and forthcoming in helping us frame the bigger picture. But, until recently, we’ve really only had the odd story about the local pizza joint having to hire extra staff to fill the late-night orders of growing numbers of refinery workers. . .You know, that sort of thing. We really have to be able to quantify the impacts, so we can understand the true dimension of the potential we are facing. That’s why I perceive the Centre to be a true industry association.”
So, in fact, does Gordon Mouland, who is one of the Centre’s unofficial founding fathers. “I was a member of the team that got things cooking,” he says. “I’ve lived and worked in Saint John all my life, and I believe that we’re just beginning to see a real, sustainable growth curve in the economy of the area – not just locally, but internationally as we forge closer commercial ties across the border. The burgeoning energy sector is, perhaps, the biggest catalyst of this activity. I’ve seen the results in my own business.”
Established in 1989, Fundy Engineering has blossomed from a handful of professionals into a staff of more than 30 scientists and engineers, technologists and support personnel. Much of this growth, Mouland says, can be attributed directly to commercial expansion within the energy cluster and to its multiplier effect on other, unrelated industries.
Today, the firm provides environmental permitting and project management; phase I and II environmental site assessments; site-based professional services; clean water initiatives; mechanical design and inspection services; electrical design and inspection services; geotechnical design and inspection services; biological engineering; and a wide variety of miscellaneous tasks for clients in both private and public sectors.
Says Mouland: “There’s no doubt in my mind that much of our company’s growth and diversity has been directly or indirectly linked to the substantial amount of energy development in this area over the years. And it’s continuing.
“Home Depot has begun construction of its newest big-box store in the city’s East Side, and CentreBeam has announced a new expansion at its North American Solution Centre on King Street. I don’t believe that this sort of construction activity is accidental, and neither do most of my colleagues in the engineering consulting industry who are also benefiting.”
All of which is to say that for Mouland, Curry and Kenneth Irving, “interconnectivity” is more than a word; it’s a state of mind peculiar to doing business in a part of Atlantic Canada where rational, long-term investments in energy development are proving to be crucial drivers of sustainable prosperity and economic progress now and in the future.
In Saint John, it seems, if you build it, they will surely come. And, quite possibly, they always will.
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