New Brunswick

Rates would have soared if NB Power hadn't abandoned iron plant project, utility says

NB Power says it pulled out of a proposal for an iron processing plant in northern New Brunswick because it would have been forced to pass on costs to ratepayers in the hundreds of millions of dollars. 

Maritime Iron says it's considering other avenues to go ahead with project

NB Power CEO Keith Cronkhite said high operational costs, which would have been transferred to ratepayers, was a key reason why the utility decided to pull out of the Maritime Iron project in Belledune. (Roger Cosman/CBC News)

NB Power says it pulled out of a proposal for an iron processing plant in northern New Brunswick because it would have been forced to pass on costs to ratepayers in the hundreds of millions of dollars. 

The potentially higher operating costs for the utility's Belledune generating station, which would have burned gas byproduct from the Maritime Iron plant, were unacceptable, NB Power CEO Keith Cronkhite said in an interview.

"The gap in the cost structure that was needed to be placed on the power plant and through to our customers was too significant," he said.

"A lot of effort was put into it, but the cost structure was just not there. We were not prepared to pass that on to our customers. We didn't feel it was the right thing to do." 

The utility told Maritime Iron last week it would no longer be part of the $1.5-billion proposal, which would have seen the iron plant linked to the coal-powered Belledune plant.

The Belledune Iron Processing Facility, highlighted in yellow, would have been located next to the NB Power Belledune Generating Facility.

The gas from the iron plant would have allowed Belledune to reduce its consumption of coal by 50 per cent, Maritime Iron claimed.

But Maritime Iron itself plans to use coal as part of its processing system as well. 

Cronkhite said that presented "challenges."

He said it was "up for interpretation" whether the gas coming from Maritime Iron to the NB Power plant would be subject to federal coal regulations.

"If it's treated like coal, that could be a challenge," he said.

Emissions problem

Another issue was whether its emissions would be attributed to NB Power or Maritime Iron alone.

Louise Comeau of the Conservation Council of New Brunswick said that was a key distinction, because if Ottawa considered the emissions to be coming from NB Power, it would be on the hook for the resulting carbon taxes.

"It would have been a huge liability for NB Power to take on Maritime Iron," she said.

Another element of uncertainty for the utility is that the federal government has yet to approve New Brunswick's proposed carbon pricing system for heavy industry, a system that would see NB Power pay a carbon price on a much smaller share of its emissions. 

New Brunswick hopes to sign a so-called equivalency agreement with Ottawa that would see Belledune, its last coal-powered plant, reduce emissions ahead of the 2030 federal phaseout so that it can operate past that date.

In effect, it would spread out the same amount of emissions over a longer period, until the end of the plant's design life in 2040.  

NB Power's coal-fired generating plant in Belledune is one of the province's major sources of carbon emissions. (CBC)

That's the way other provinces, including Nova Scotia, were able to sign equivalency agreements.

But if Ottawa were to decide to treat emissions from burning of Maritime Iron's gas byproduct at NB Power as coming from coal, Comeau said, the utility would not be able to claim less intensive pre-2030 emissions, and that would jeopardize the hoped-for exemption.

"It's a good decision by NB Power," Comeau said.

Cronkhite said he's hopeful the province can strike an equivalency agreement with Ottawa in the next 12 to 18 months. He said the potential for a deal is not affected by the withdrawal from the Maritime Iron plan.

Given Saskatchewan and Nova Scotia reached such deals despite being more dependent on coal as a power source, "we have every expectation that we can get there," he said.

'Surprised and disappointed'

Maritime Iron said in a written statement Friday that it was "surprised and disappointed" that the utility had withdrawn from talks on the proposal "despite continued positive progress that has already resolved most challenges to date."

The company had been hoping to start building the iron processing facility this year. It said it would create 1,300 direct jobs during construction and 200 permanent jobs during the plant's operations.

Maritime Iron's own environmental impact assessment document, submitted to the province in January, said the business case for the project was stronger with NB Power involved.

"A standalone operating scenario configuration was investigated but determined to be less favourable than the integrated scenario configuration," it said.

The document says putting the iron plant next to the generating station would "result in fewer overall greenhouse gas emissions, and … in significant savings in capital expenditures."

Even so, the company's vice-president of communications and public affairs, Elena Mantagaris, said the company was still "certain that there are multiple ways to advance this project in New Brunswick."

Maritime Iron was the second major proposal considered by NB Power as a way of reducing the use of coal at Belledune.

The first, an unproven hydrogen technology by Florida-based Joi Scientific, has so far not proven viable.

Cronkhite said the company is "continuing to do testing. … The pandemic has delayed some of that, as we might expect. But they're still pursuing options with respect to their technology and testing in other locations, and we wait to hear back on their results."

ABOUT THE AUTHOR

Jacques Poitras

Provincial Affairs reporter

Jacques Poitras has been CBC's provincial affairs reporter in New Brunswick since 2000. Raised in Moncton, he also produces the CBC political podcast Spin Reduxit.

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