Labrador firm gets GN fuel deal

The Nunavut government is negotiating a deal with the Woodward Group of Companies, a non-Inuit firm based in Labrador, to ship fuel to Kivalliq and Baffin communities. The move would save the GN more than $19 million over the next three years — and has left the Inuit-owned Northern Transportation Company Ltd. in a state of shock.

Peter Woodward, the Woodward Group’s vice-president of operations, said from Happy Valley-Goose Bay this week that the GN selected his firm because it had the best price.

“The name of the game is that northern communities are looking for the best way to get their goods and services for the best price — best value for best price,” Woodward said.

Ross Mrazek, the deputy minister of public works, told MLAs in committee of the whole this past Tuesday that the price gap between the Woodward Group and NTCL is “significant and humungous.”

Public Works Minister Peter Kattuk had said earlier that the Woodward contract, which has yet to be signed, would save the GN $19 million over the next three years.

Woodward’s tankers would start delivering petroleum products in the summer of 2003. The Mokami, a Woodward tanker, already ships fuel for the Nunavut Power Corporation.

Stunned NTCL officials responded to the GN’s decision with an angry press release last week saying they’re taking a second look at their position in the Kivalliq region. As a last resort, NTCL may even pull out of the dry cargo shipping business there.

“We have to understand the full impact of this decision on our business so that we can assess our ability to offer a standalone dry cargo service. The system in the Kivalliq is directly linked to dry cargo and bulk fuel moving together,” Kirk Vander Ploeg, NTCL’s marketing manager, said last week.

Right now, it’s unclear what that might mean for Kivalliq sealift customers. But Kattuk and Mrazek told MLAs the GN will issue a request for proposals in January seeking a firm to provide a dry cargo service in Kivalliq and Baffin.

For the past 27 years, NTCL shipped fuel and dry cargo together using a barge service operating out of Churchill, Manitoba. NTCL officials say this combination allowed them to offer Kivalliq residents lower prices for both types of freight.

But the loss of the Kivalliq portion of the fuel delivery contract means they can no longer take advantage of those economies of scale, NTCL officials say.

Fuel exempted from NNI

NTCL is owned by Norterra, which in turn is owned on a 50-50 basis by two Inuit birthright development corporations: Nunavut’s Nunasi Corp., and the western Arctic’s Inuvialuit Development Corp.

However, the Nunavut government’s Nunavummi Nangminiqaqtunik Ikajuuti, or “NNI policy,” which provides a competitive advantage to Nunavut- and Inuit-owned firms, does not apply to fuel supply or delivery contracts.

NTCL doesn’t qualify for NNI consideration anyway — because its parent, Norterra, is one per cent short of qualifying for Inuit-owned status under the NNI — and it will soon lose its “grandfathered” status.

Ownership status aside, Vander Ploeg said he can’t understand how a competitor can offer a better price than NTCL. “It’s really a struggle for me to understand how the government is realizing a substantial saving,” he said.

For his part, Woodward said he can’t understand NTCL’s complaint.

“If the economies of scale were there with the bulk and the fuel together, then you would think it would be difficult for somebody else to compete,” Woodward said.

The Woodward Group has many years of Arctic experience. “We’ve been operating shallow-draft tankers since 1973 in the Arctic and along the Labrador Coast in places that don’t have wharves. It’s not something new to us. We’ve been doing it for 30 years,” Woodward said.

A year of hell for NTCL

NTCL’s single contract goes back to 1996, first awarded by the Government of the Northwest Territories.

But this year, the government split the old contract into two parts: one for the supply of fuel, and the other for the shipping of fuel. Two months ago, the GN awarded the supply portions of that contract — choosing Shell Canada to supply fuel for the Kivalliq and Baffin, and Imperial for the Kitikmeot.

NTCL officials believe that’s a mistake, saying their old contract allowed them to buy fuel at the lowest possible prices on the world market.

“There’s no way that Shell in Montreal can provide the same fuel price that Texas can,” Vander Ploeg said. “That tells you that you’re definitely not going to get the best price.”

But in committee of the whole this week, Mrazek estimated that in 2002, the GN will pay between $57 million and $60 million to NTCL for supplying and shipping fuel. In 1996, NTCL’s original Kivalliq-Baffin supply-ship contract with the Government of the Northwest Territories was valued at only $30 million a year.