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British Columbia moves to populate its nearly empty northeast

For decades Canada has had a dream: a vision of its immense northern areas populated with thriving communities. To a large extent the vision has gone unfulfilled. Most of Canada's population remains in cities in the south, strung along the border within 100 miles or so of the United States.

Now British Columbia government officials hope to make a change in that pattern with a new "megabuck" project -- a $2.88 billion development of metallurgical coalfields in the northeast region of the province. (This figure is in as-spent dollars, reflecting interest charges and inflation during its construction period. In 1980 dollars, the total capital cost is expected to be

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The project will result in a new town of 10,000, to be named Tumbler Ridge. Provincial officials also expect that it will give economic impetus to the northeast region by its provision of new paved roads, power lines, and improved port and rail service, as well as a new market of consumers.

"You sort of hit a critical mass," a top civil servant said.

At present, most of British Columbia's 2.6 million people live in the southwest corner of this province in Victoria, its capital, or Vancouver, the major west coast Canadian port.

Large sections of the mountainous province -- about twice the size of California -- are practically empty of people. In the northeast region, there is wheat farming in the Peace River Valley, considerable oil and natural gas development, and some logging -- all activities involving relatively few people.

The coal project is expected to provide direct jobs for more than 9,000 people and indirect work in that region or elsewhere for 20,000 more.

Work has already begun on the project. It was launched Feb. 10 with the signing here of an agreement between the federal and provincial governments, two Canadian coal companies, and a consortium representing Japanese steel companies. The consortium will buy some 7.7 million metric tons a year starting in 1983.

The various elements of the project, in 1980 dollars, include:

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* Quintette Coal Ltd., a subsidiary of Denison Mines, will spend $568 million and Teck Corporation, $119 million, on open-pit mines and related facilities. That will be more than twice the total capital expenditures of the mining industry in the province in 1979.

The Quintette mine will be one of the largest coking coal mines in the world. It will produce some 6 million tons annually, of which some 1 million tons will be thermal coal. Teck's Bullmoose Mine will produce 1.7 million tons.

* Canadian National Railway will spend $122 million for upgrading its line from Prince George in the inland to the port of Prince Rupert and $65 million for rolling stock.

British Columbia Railway will spend $312 million on a 130-kilometer (80-mile) spur into the coalfields, $32 million on upgrading and new plant, and $31 million on new rolling stock.

* Port development costs at Ridley Island, near Prince Rupert, are expected to total $139 million.

* Some $260 million will be spent for the townsite, roads, a power line into the region, and other infrastructure.

A study by Price Waterhouse Associates for the two coal companies, released last week, indicates that the federal government will spend $304 million on the project and receive in revenues some $1.6 billion, for a net $1.3 billion surplus during the 1983-2003 period of the coal contract. The provincial government is expected to make an outlay of $701 million and to receive more than $1 billion (in special surcharges and royalties, plus tax revenues), for a surplus of $350 million.

The study also shows, however, that the British Columbia Railway's coal operations from the northeast will run a deficit.

These figures are relevant to a political dispute in the province as to the economic viability of the massive coal project. The New Democratic Party, the opposition party in the provincial government, charges that it will be a burden to the provincial taxpayer.

The Social Credit government admits that the special surcharges of $2.50 to $ 3 per ton, plus a 3.5 percent royalty on coal production for the two new coal mines, will not cover all the costs of development. But it expects additional tonnage to be contracted from these mines or further new mines during this decade. Surcharges on this tonnage, plus possible metals mining or forest developments in the area, should produce sufficient revenues to cover costs, provincial officials reckon. He also hoped that the new roads would open the area to tourism.

"We see this project as only the cornerstone to the northeast," said Graham Kedgley, British Columbia coal coordinator.

A number of other companies are considering mining coal in the area. These include BP Canada, Petro-Canada, Ranger Oil, Utah Mines, Cinnibar, Pan Ocean, and Gulf Canada. If all of them went ahead and found adequate markets, some 25 million tons of metallurgical coal and 3 million tons of thermal coal would be produced in the northeast.

To expedite the project, the government has set up an Office of Northeast Coal Development, under Ronald Basford. Roads and the power line are to be built this summer to allow the mines to start removing overburden from the coal seams soon thereafter. Digging of tunnels for the British Columbia Railway spur line, starting at Anzac on the main line, must be launched quickly if the new track is to be ready to deliver coal at the end of 1983. Ridley Island is already being cleared for the coal port.

Mr. Kedgley, who is under contract to the government, termed the coal agreement "a great deal . . . . There are so many opportunities in the area. I think things will build on things."

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