Election issue: Skeena Industrial Development Park sale

City of Terrace promotes Chinese land deal as economic saviour

  • Wed Nov 12th, 2014 3:00pm
  • News

if housing has turned out to be a critical issue facing city council since the last election in 2011, then what city councillor Lynne Christiansen called “the big fish,” has to stand as an equal.

And that’s the sale this year of 1,186 acres of the Skeena Industrial Development Park, jointly owned by the city and the Kitselas First Nation, to the Qinhuangdao Economic and Technological Development Zone, an agency based in Qinhuangdao, China, which acts as the host there to a multitude of industries.

At close to $12 million, the deal is one of the largest real estate transactions in the region in years, marking the start of what the city – and the Chinese – hope will become a satellite industrial zone to the main one in China.

While there’s much speculation about what could happen, one industry has already been identified – the construction of an alfalfa protein extraction plant with the finished product to be shipped overseas.

Briefing papers prepared this month for some of the city’s top business agencies, including the Terrace and District Chamber of Commerce, the Terrace Economic Development Authority and the Northwest Regional Airport Society, indicate that 170 jobs will be created on a complex taking up 33 acres.

And speaking late last month, city development services director David Block sketched out some of the details which have been worked out and some which still need to be worked out as the Chinese continue to develop their concept.

The first is the actual closing of the deal which is to take place this month.

A $200,000 deposit has been made with the bulk of the money expected upon closing of the sale.

One development issue still to be decided is supplying water either by wells on site or by hooking into the Kitimat-Stikine regional district’s water supply.

About half of the purchase price, $6-7 million, is earmarked to build the tie-in infrastructure, a line from the Thornhill water works to the industrial park and a reservoir, says Block.

But should the Chinese find sufficient water of their own by drilling wells at the park, the city will then repay to the Chinese what it would have spent on the Thornhill water option.

The Chinese have already had some success in exploratory work, said Block.

“The indication they have from the one well [that has been drilled] is that they are anticipating at least for the start of the first phase they will be able to do water through a system that is well-sourced,” he said.

“If they can put three of four wells and get enough water to do a system and never have to connect to the regional district system, then it might be far cheaper without having to spend that $6 or 7 million to pump water up the hill,” said Block.

The key word here is  “if”, as the amount of water supply needed for multiple heavy industrial sites would be significant.

But if multiple wells are found, “they might get back some of it [the sale money],” said Block.

And depending upon the amount of water found, a deal could very well be made to supply the airport.

Already officials from the Chinese development zone have visited the location and have been using engineering firm All North to do some geotechnical work at the location.

And the Chinese have narrowed their choice down to two companies for more detailed geotechnical and planning work.

Although the city estimates half of the sale revenue could be used for a water supply, the remainder will be used on other services, said Block.

He noted that the city’s intent on developing land that’s in the industrial park boundaries but located on the other side of Hwy37 north from the main park lands and adjacent to the motocross park there.

A number of smaller lots could eventually contain spin off businesses related to the larger industrial concerns across the highway, said Block.

But two larger parcels, both nearly 50 acres in size, might be used for something else altogether with Block saying the city is negotiating with several forest products companies.

Block also emphasized the city’s philosophy behind the Chinese land sale.

“The sale price is low because it wasn’t city council’s intent to make money off of the land sale,” said Block.

“This is for jobs and for the benefits downstream,” he said.

Still there is some protection for the city contained within the sales agreement.

The city will have the capability to purchase land back at the original sale price should the Chinese not follow through on their commitments.

“There are also timelines in there for them to reach certain steps along their industrial park and manufacturing investments,” said Block.

“And if they don’t hit certain time lines there are options to buy that land back at the cost of sale, $10,000 an acre.”

Block said one critical milestone where such provisions could occur comes 10 years after the sale is concluded.

It means it is in the Chinese development zone’s best interests to find clients for the land.

And, Block continued, the development zone will not be able to sell off portions of its location to another party.

The Kitselas First Nation is a joint venture partner with the city to the extent that any tax revenues generated by industries at the park will be shared on a per capita population basis.

Block did say the city will be reimbursed through land sales for any monies it has spent already on development of the park.

That includes legal costs, road construction and construction of highway access.

How it happened

  • In the mid-1990s the federal government decides to get out of the small airport business, putting into play several thousand acres of provincial crown land just south of the airport that had been associated with the airport.
  • Then-mayor Jack Talstra and then-chief administrator Ron Poole craft a plan for the city to acquire the provincial land for an industrial park.
  • Years of negotiations with first an NDP provincial government and then with a provincial Liberal government follow.
  • The province fails to market the land by itself.
  • In 2005, Talstra announces a framework involving a free Crown land grant and an option for the city to buy additional Crown land, more than 2,000 acres in all, as needed for resale to industrial interests.
  • Talstra cites closeness to roads, power, rail line and gas line as desirable factors.
  • The city then tries to find customers; a memorandum of understanding with a Calgary bio-energy company was allowed to relapse.
  • Seeking help to provide access to the location from Hwy37 South the city receives $668,000 each from the federal and provincial governments, provided the city chips in a like amount, in 2009 for an intersection.
  • The city adds more than originally intended to fully finish off the intersection  and expects to recoup its expenditures through land sales.
  • It also dips into its reserves, beginning to exercise its purchase option with the province.
  • The first sales success comes when a company called Global Dewater buys nearly 10 acres for $250,000.
  • In 2011 the city and the Kitselas First Nation sign a joint partnership agreement for both to share in revenues and eventual taxation from eventual park development.
  • In Feb. 2014  the city and the Kitselas announce the sale of 66.7 hectares or just under 165 acres to the Kitselas First Nation-owned Kitselas Development Corporation for $1.647 million.
  • The Kitselas Development Corporation in turn leases some of what it bought to a company that would erect a work camp for LNG pipeline workers.
  • The city makes official in July 2014 a deal it has been working on for some time with a Chinese economic development zone. Thanks to a connection made through the provincial government, the city sells 1,188 acres, or half of the industrial park, for $11.8 million to the Chinese.
  • It also unveils the first proposed development on the Chinese property – an alfalfa processing plant.