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Gas City ascends as economy diversifies

Medicine Hat was built on cheap natural gas, and it’s leveraged that strength

Jul 6, 2015

by Michael Ganley

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Photograh Bryce Meyer

Medicine Hat’s tagline is “The Gas City.” Ironically, it hasn’t earned this moniker because high natural gas prices have driven investment in exploration and development. No, Medicine Hat has taken advantage of low gas prices, developing industries that thrive on cheap energy.

The story begins in 1883, when the Canadian Pacific Railway was building a bridge across the South Saskatchewan River. While searching for water, their drills hit gas, discovering what turned out to be one of North America’s largest natural gas fields. In the early days, that resource attracted woolen mills, foundries, glass ­manufacturers, breweries, flour mills, a crayon manufacturing company and the clay works for which the city is still known.

And cheap gas still drives the economy. The largest industries in the area all rely on natural gas as a feedstock. Canada’s largest fertilizer plant – CF Industries’ Medicine Hat Nitrogen Complex – is within city limits, producing two of the world’s most-used nitrogen fertilizer products: anhydrous ammonia and granular urea. Methanex’s 470,000-tonne-per-year methanol plant is nearby. Cancarb is a leader in the manufacture of carbon black, a material used to make high-grade rubber, insulation and ceramics. There’s also a Goodyear tire plant that relies on cheap energy.

The city has taken advantage of the gas too, building its own energy infrastructure, including a natural gas company, an oil-production company, and gas and electricity distributors. “In some ways, Medicine Hat is similar to the province in that it depends on oil and gas revenue to subsidize property taxes,” Mayor Ted Clugston says. “That has been a struggle with the low price of oil and gas but historically our acquisition costs have been remarkably low.”

But it’s possible that the city could change the tagline to “The Energy City.” Medicine Hat has used its unique situation to diversify out of gas and into wind and solar. The city partnered with Wind River Power Corporation to build three wind turbines within city limits. They provide about three per cent of the city’s electricity needs. The city also built Canada’s first concentrated solar thermal plant (pictured above). The $9 million project is in the commissioning phase and has not been without its challenges. “When you’re doing something that’s never been done you’re going to run into some trouble,” Clugston says. “But it’s turned into a huge tourist attraction. We’ve used it for physician recruitment to show that we’re a unique place. All the municipal planners from around the province were just down to look at that project.”

And solar power is being used in other ways, too. With 2,500 hours of sunlight a year, Cypress County is one of the sunniest places in Canada. It has made the county a centre for agriculture, an industry that has had a few very good years in a row. It has also developed into a juggernaut in the production of dill, mint, spearmint, and catnip.

But there’s no doubt that the foundation of Medicine Hat’s economy will continue to be natural gas for the foreseeable future. And Clugston hopes to harness even more of that energy. “My biggest hope is that the low price of gas will attract the value-added manufacturing – expansions at existing plants or anybody that is energy intensive and needs a stable source of gas,” he says.

But the low price of natural gas is a double-edged sword. A number of large service companies like Haliburton shut down their headquarters because of inactivity in the exploration and production side. Dan Kitching, the assistant vice-president and branch manager at Canadian Western Bank in Medicine Hat, says the city has had to take a new approach. “We have to be promoted as an inexpensive city to operate in,” he says. “Companies can come in and operate a commercial building at a low cost compared to what you’ll pay in Calgary or even Saskatoon.”

Donovan Bellamy, the CEO of Dynamic Industrial Solutions, agrees. He bought the company in 2009 and has built it from eight to 65 employees by shipping around the province and beyond. “When I bought it, it was 90 per cent local,” he says. “I would say now it’s 20 per cent local. We ship a lot of product up north. The reason is we have a good labour pool we can draw from at a decent rate.”

But there’s no doubt that for the forseeable future, the foundation of Medicine Hat’s economy will be cheap natural gas. “My hope is that the low price of gas will attract value-added manufacturing,” Clugston says. “Anybody that needs a stable source of gas.”

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