ERCO and Long Harbour
One of the industries which the Smallwood government managed to lure to the province with the promise of cheap power was the Electric Reduction Company of Canada Industries Limited (ERCO). The company was formed in Buckingham, Québec, in 1897 to manufacture elemental phosphorus for the North American match industry. Phosphorus is commonly found in inorganic phosphate rocks and in all living cells, and is used in many common products such as foods, cleaners, animal feeds, and fertilizers.
In 1901, the company became a subsidiary of the English multinational chemical company Albright and Wilson Ltd., which was in turn purchased in 1978 by a Houston-based company named Tenneco. ERCO was the only Canadian producer of elemental phosphorus and industrial phosphates.
ERCO and Newfoundland
In 1965 the provincial government launched a campaign to promote international business. Newspaper advertisements were run in seven countries, extolling the virtues of Newfoundland: its prime location on shipping lanes between North America and Europe, its ice-free ports, and especially, its cheap hydro-electric power. One of these advertisements interested Albright and Wilson, which was looking for a place to produce phosphorus more cheaply than it could in England or Québec, the site of its North American phosphorus plant.
The deciding factor was cheap power. Phosphorus production is an energy intensive process, and electric power accounts for one third of the cost. At one time, 14% of the electricity used on the island was consumed by ERCO, equaling the annual power consumption in St. John's. Elemental phosphorus is produced industrially in electric furnaces by heating phosphate rock, sand and coke at temperatures of 1450 °C. The carbon monoxide can be used as a fuel. In England, electricity prices were tied to volatile and inflationary coal, oil, and atomic energy prices. Hydro power was the preferred choice and happened to be exactly what the Smallwood government had to offer: low, fixed prices on long term hydro-electricity contracts. By July 1965, Smallwood was personally in contact with Albright and Wilson. A power contract between the company and the Newfoundland Power Commission was in place by May of the following year: ERCO would pay 2.5 mills per kilowatt hour for 25 years, half of the actual cost.
Other factors also influenced ERCO’s decision to locate in Newfoundland. The location was ideal for shipping phosphorus to England, and Long Harbour was an ice-free, deep-water port. Also, Long Harbour was near a supply of silica, one of the raw materials of phosphorus production, from the community of Dunville. However, cheap power was not the only subsidy that ERCO received from the government. In addition to the low fixed rate for electricity, ERCO received over $10 million in electrical subsidies from 1968-1972. The Newfoundland government provided ERCO a $15 million bond issue and promised assistance in building infrastructure (roads, water, housing). The federal government provided the company with a $5 million grant, built a wharf, and paid $2 million for a road between Long Harbour and the mill. The silica, supplied by Dunville Mining Company, was also highly subsidized, at 10 cents per ton. By comparison, silica was sold for $4.30 per ton in the United States at the same time.
Construction of the plant began on August 1, 1966, with Smallwood presiding at the official sod-turning ceremony. At its peak, the construction phase employed 1,300 people. Smallwood himself stipulated that 90 percent of the workers had to be Newfoundlanders. Engineers and managers were hired internationally. The plant was completed in 1968 at a total cost of $40 million.
Included in the cost were two ships built at a cost of $4 million each to transport liquid phosphorus, the Albright Explorer and the Albright Pioneer. They were designed and launched in England. These specialized vessels were the first of their kind. They carried 5,000 tons of phosphorus in four 1,250 ton tanks equipped with electrically-heated water jackets that kept the phosphorus liquid for pumping. The phosphorus was also kept in inert gas and under water, as it is highly flammable in the presence of air.
In December 1968 the plant went into production, powered by electricity from Bay d’Espoir. It was equipped with two 60-megawatt furnaces, among the biggest in the world at the time. The plant’s output was rated at 180 tons of phosphorus a day. The process used phosphate rock from Florida, coke from the United States and Canada, and silica from Dunville. The product, liquid phosphorus, was then pumped into the two vessels and transported across the Atlantic to Portishead, near Bristol. The first load was shipped March 1969. Albright and Wilson’s phosphorus furnaces in England were shut down after the opening of the Newfoundland plant, and its British factories were used strictly for the discharge and storage of phosphorus shipped from North America.
Red Herring Scare
From its opening, the ERCO plant at Long Harbour experienced difficulties. Environmental and health-related problems appeared months after it went into production. In early 1969, fishers in Placentia Bay reported finding dead fish in the area, especially herring, but also cod and lobster. In what became known as the “red herring scare”, the Placentia Bay fishery and the ERCO plant were both closed. The plant closed voluntarily on May 2, 1969, and the fishery was ordered closed on May 4 by Jack Davis, federal Minister of Fisheries. During this period of closure and government investigations, ERCO lost $52,000 a day. The investigations revealed that untreated effluent or wastage from the plant was to blame for the damage. In herring the exposure caused internal bleeding, accounting for the discolouration. Cod were afflicted with a form of meningitis, causing erratic behaviour and death.
ERCO suction-dredged the ocean bottom of Long Harbour and installed pollution-prevention equipment at a cost of $1 million in an attempt to address the problem. The plant remained closed for six months while the anti-pollution water purifiers were installed. The plant now operated on a virtually closed system, with no noxious discharge to the sea. On June 16, 1969, fishing was once again permitted in Placentia Bay. Four hundred fishers were affected by the month-and-a-half closure. During this period they received 80 percent of their typical income from the federal government, and eventually ERCO paid out $300,000 in compensation.
Other Environmental and Health Concerns
The “red herring scare” was only the beginning of ERCO and Long Harbour’s pollution problems. Despite ERCO’s claims that it adhered to the most stringent guidelines in Canada, air pollution was also an issue. Fluoride emissions from the plant’s smokestacks severely damaged nearby vegetation. It did not recover until after 1976, when ERCO installed additional scrubbers. A source of continual annoyance for local people was a very fine coke dust, and ERCO was blamed for the growth of moss on roofs, windows, and siding. A graduate student in lichenology hired by ERCO concluded that the moss was a common local variety, not attributable to the plant. However, smoke from the plant did cause other environmental damage. Deformed moose and rabbits were found near the plant. Snowshoe hares were dissected and tested, and high levels of fluoride were found in their bones.
Human health was also at risk. Prior to 1978, ERCO sold some of its slag (a by-product of the phosphorus production process) locally as building material, to be used as flooring in basements. However, the slag contained uranium and thorium, which was found to emit radon gas, a carcinogen. It is especially poisonous when contained in enclosed spaces. ERCO had to pay for the removal of all the material. A provincial health study conducted by the province’s chief medical officer examined the effects of phosphorus on plant workers. It was estimated that 15 percent of workers on disability were suffering from a condition called fluoricosis, which causes muscle problems, joint pain, and stomach ailments. It was later concluded that there was no cause for concern over cancer rates in the Placentia Bay area, which were in line with the rest of the province.
One of the chief reasons ERCO established a plant in Newfoundland was cheap power. The Newfoundland government had a long-term fixed-rate power contract with ERCO, which also meant the province would continue to absorb costs as the price of electricity rose. By 1980, this was too much for Newfoundland’s finance minister, who complained that electrical subsidies paid out to ERCO, as well as to the two pulp and paper companies, were too high, totaling $18 million annually. He stressed that ERCO should share costs more reasonably with the province, or pay more for its electricity. ERCO agreed, and in the fall of 1980, the power contract was renegotiated to 8 mills per kilowatt hour, with an annual increase to 32 mills by 1993.
At its peak in 1981, the Long Harbour plant employed almost 500 people. In May 1986, ERCO laid off 80 permanent employees to cut operating expenses. These layoffs were attributed to a reduced international market and lower prices. Despite this, in 1987 ERCO announced that it intended to spend $34 million on a four-year modernization and expansion of the Long Harbour plant. This would boost production by a third, increase the value of its exports from $55 to $73 million, and employ 240 people in construction for several years. It would also increase Canada’s presence on the international market, as phosphorus was the country’s largest chemical export at the time.
Two years later, in early 1989, ERCO announced that it would close its Long Harbour operation. The company claimed it was no longer economically viable to operate the facility. A new method of manufacturing phosphoric acid and other phosphorus chemicals had been invented, which cost 20 to 30 percent less than the Long Harbour process. The United Steelworkers Union, representing 240 production workers at the plant, was not satisfied with the official explanation from ERCO. Long Harbour was filling near-capacity orders; the union wanted to know why the smaller and less efficient plant near Montreal was not closed instead. It was speculated that political interests were involved, with the federal government being heavily dependent on support from Québec. Whatever the motivation for the closure, the effect on the Placentia Bay area economy was significant: the loss of 290 jobs and $4 million a year that the plant brought to the area.
Residents expressed concern about the environmental damage done to the area long after the plant's closure. In 1993 the company claimed it spent $29 million cleaning up the site, but that figure included severance packages, shut-down costs, pensions as well as legal and consulting fees.