A Trans-Canada Highway for giant industrial equipment? It could help Ontario manufacturers
|National Post 11 Jul 2018 at 04:04|
Alliance Fabricating Ltd. understood the long journey its products would need to take when it started shipping massive, over-dimension steel equipment from Sarnia, Ont., to customers in Alberta’s oilsands, but it may not have realized just how much faster its competitors in South Korea and China could get their products there despite the much longer journey.
That’s because Ontario — unlike Alberta and, to a lesser extent, British Columbia and Saskatchewan — lacks a permanent highway network that is big enough to transport large pieces of equipment and fabricated components without lifting power lines or making detours to avoid standard-sized bridges.
Without such a network, companies have to pay hundreds of thousands of dollars to move oversized products across the country, hurting their ability to compete with international companies.
But given the recent tariffs on steel and an escalating trade war with the United States, many industry analysts, insiders and economic development officers are advocating for an oversized load corridor to connect manufacturing hubs in Ontario with resource projects in the West.
“If we don’t have infrastructure to compete on a world scale, then we’re at a disadvantage,” said John McInnis, Alliance engineering manager and vice-president. “Once the equipment gets out of Ontario, it’s a straight shot.”
In Ontario, it takes a minimum of nine weeks to get a permit to move an oversized load across the province. Once the permits are in place, trucking companies must pay to raise power lines (in most cases, Ontario Hydro lowers them as soon as the trucks pass through) and rotate street lights out of the way to move those loads to deep-water ports.
Lifting hydro lines in Ontario to allow the passage of an oversized load.
Once there, they are put onto specialized barges to sail across the Great Lakes before being trucked, once again, out of Ontario and across the Prairies. The journey from Sarnia to Fort McMurray, Alta., can be done in eight to 10 days once the permits are in place, for a total shipping time of about 70 days.
By comparison, it takes 30 days to move such loads from ports in South Korea through Houston to Fort McMurray, Alta., on a permanent over-dimension corridor, which means that overseas manufacturers have an easier time supplying the Canadian energy industry than a company near Toronto, according to a 2015 study by the Van Horne Institute, a Calgary-based think tank, and consultancy Prolog Canada Inc.
“It’s easier in the sense that it’s faster,” said Don Dean, principal at Prolog, adding that many companies will use the port at Duluth, Minn., rather than Thunder Bay, Ont., to ship large equipment from the Great Lakes to Alberta.
However, improvements to the system could be on the way. The Alberta government, which has developed one of the world’s best oversized load corridors, has been talking with the federal government about how provincial networks could fit within a national framework, said Scott Beeby, an executive director at Alberta Transportation.
But that doesn’t help Ontario since it doesn’t have an oversized highway corridor, and an Ontario Ministry of Transportation spokesperson said no decisions have been made on whether to establish one.
Traffic lights must be turned out of the way to allow oversized loads to pass on Ontario roads.
“Generally speaking, Ontario’s economy benefits when our companies have new opportunities,” Ontario Economic Development and Growth spokesperson Brigitte Marleau said in an email, declining to address whether an over-dimension highway could be one of those opportunities.
Industry analysts, consultants, economic development officers and heavy haulers say the development of such a network through Ontario would allow companies such as Alliance to compete for more work at remote natural gas processing facilities in the oilsands or at potential LNG projects in B.C.
McInnis said Alliance would potentially look at expanding if there was better infrastructure available. He added that some of his competitors that specialize in massive steel modules would certainly benefit and expand.
The problem is that these over-dimension loads are too tall to fit under most highway bridges or power lines. They’re so wide that they dominate normal highways and, as result, require specialized — and massive — trucks.
“It’s very costly to temporarily lift utility lines or temporarily disconnect them and manoeuvre the equipment around tight corners,” said David Moody, project leader at Sarnia-Lambton Economic Partnership, adding that without a permanent corridor, those costs are incurred over and over again.
Moody has been a proponent of such a corridor through Ontario for years, and was especially active before oil prices collapsed in 2014 since oil and gas companies were spending billions on oversized equipment each year.
An oversized load is moved onto a specialized barge to cross the Great Lakes.
“At the time, we had a number of industrial fabrication firms that were looking for work,” he said, noting that fabrication shops in Alberta back then were at capacity. “The firms that are here, in the Sarnia-Lambton area, have been building equipment for the oil and petrochemical industry for generations, so it was an exact match.”
Moody continues his push despite the fall in oil prices and capital spending by energy companies, noting there are still compelling opportunities for Ontario manufacturers and fabrication shops to supply Canada’s energy sector, especially in light of trade tensions with the U.S.
Industry data indicates the size of the market for oversized equipment in the Canadian energy sector continues to exceed $1 billion annually; a sizeable amount even if it’s a fraction of what was spent before 2014.
“Even if Ontario captured 10 per cent of what is spent on big machinery, the market potential there is $1 billion for them,” said Peter Tertzakian, executive director of ARC Energy Research Institute, a division of private-equity giant ARC Financial Corp.
Tertzakian said Canadian governments should treat Donald Trump’s tariffs as “a wake-up call” and work to connect the supply of iron ore in Newfoundland and Labrador with manufacturing hubs in Central Canada and then connect those hubs to the energy sector in Western Canada.
“In none of this stuff are we promoting inter-provincial trade. I think there’s a big opportunity for our country,” he said. “If lifting a few bridges and red-light signals is a problem, then it seems pretty silly that we’re not (investing in a cross-country corridor).”
Despite the absence of a national strategy, the Alberta and Saskatchewan governments are both investing in their networks. In May, Alberta announced $90 million for bridge upgrades north of Edmonton so that over-dimension transporters could reduce travel distances by 200 kilometres.
Alberta’s corridor system, which has become the model for the rest of the country, was first proposed in the 1980s, when the province made a long-term decision to dedicate secondary highways for connecting fabrication shops in Edmonton with resource projects in the oilsands, Alberta Transportation’s Beeby said.
In addition, he said, the government eventually identified a need for the oversized load corridor to extend into southern Alberta to accommodate the large wind turbines set up in that part of the province.
Alberta’s oversized corridor has grown over time to become the best in North America and one of the best outside the Middle East, said Keith Guiochet, vice-president, equipment and procurement at Mammoet Americas, which is contracted to move over-dimension loads across Canada.
Netherlands-based Mammoet’s website brags the company once relocated every building in a village in Sweden, and that it also moved apartment-building-sized structures for an LNG facility in Russia.
However, since the network in Alberta is a bit of an outlier in North America, energy companies have difficulty sourcing the equipment they need.
For example, when Canadian Natural Resources Ltd. and North West Refining Inc. were building their $9.8-billion refinery near Edmonton, massive steel modules were shipped from South Korea, through the Panama Canal and all the way around the continent to the Duluth port, before finally moving over land.
“It would have been much better, but it’s just not possible, to move things in from the West Coast,” said Ian MacGregor, North West Refining’s chief executive. “Better transportation is good for this industry, but the real constraint is the West Coast. You can’t bring anything big in from there; you have to go through the Panama Canal.”
A over-sized load narrowly slips under the hydro wires.
In another situation, Imperial Oil Ltd. incurred $100 million in additional costs when — after shipping 205 oversized modules from South Korea to the inland port of Lewiston, Idaho — it couldn’t secure the permits needed to move the big pieces of equipment through Idaho and Montana.
As delays piled up, Imperial made the necessary, but difficult decision to disassemble the units in the U.S. and then re-assemble them in Alberta.
Both B.C. and Saskatchewan have take steps to expand their oversized corridors in recent years, and Mammoet’s Guiochet said infrastructure in both provinces is improving.
The real pinch point in the country, however, is still Ontario. Guiochet said it is difficult to build an over-dimension highway network in a heavily populated area such as Southern Ontario, but he would anticipate more shipments out of the province if one were built to access shipping on the Great Lakes.
Ontario would also need to raise power lines from Thunder Bay to the Manitoba border, which is another pinch point. A few years ago, Thunder Bay made significant upgrades so that its port could handle over-dimension cargo, but the highways in and out of the city did not receive similar upgrades.
“There really has to be an overall plan in place in order to develop it,” Guiochet said. So far, there hasn’t been one.
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