LNG: Facts and Comments
Fact 1: According to the Honorable Richard Coleman, Minister of Natural Gas Development, revenue projections from LNG are based on B.C. supplying 84 million tonnes of natural gas to the Asia-Pacific market. According to Minister Coleman, this is the projected amount that could be supplied by B.C., but it does not take into consideration competitive supply from other countries, which he describes as “staggering”.
Fact 2: British Columbia is not the only jurisdiction vying to sell its natural gas to Asian markets. Here are some basic facts:
First Comment: There are many other countries with much larger natural gas reserves than Canada–let alone BC–that will be vying to sell to the Asia-Pacific markets. Many of these countries are well-positioned to do so. If Minister Coleman’s statement is in fact true—that the supply projections for B.C. do not take into consideration competition from other suppliers—then we are headed for a rude awakening. Russia, Australia, Qatar, the US, to name a few—none of these countries will simply stand by and allow BC to sell as much LNG to Asia as it needs—they will fight as hard as they can to beat out LNG from B.C. and control the market. To base promises of wealth on airy-fairy scenarios is disrespectful to taxpayers.
In either case, what we know from economics is that as supply increases, price usually decreases. In the context of a drastic increase in the global supply of natural gas, the Liberal government has yet to provide adequate evidence to show that the demand for, and therefore price of, LNG will remain high enough, for long enough, to justify spending hundreds of millions of taxpayer dollars to develop this industry.
Fact 3: The Liberal government has claimed that LNG export could add up to $1 trillion to the provincial GDP over 3 decades and could finance a $100 billion prosperity fund that, in addition to benefiting local communities and First Nations groups, could be used to eliminate the provincial sales tax and pay off the provincial debt (currently approximated at more than $55 billion and predicted to rise to $69 billion by 2015).
Second Comment: When I asked the Minister for Natural Gas Development how he arrived at the $100 billion estimate for the prosperity fund, he was unable to provide a clear answer.
Obviously, the prosperity fund statements are based on an assumed average global pricing for LNG. However, like all fossil fuels, natural gas tends towards boom and bust cycles. In the past 6 years, natural gas prices have fluctuated from a high of $9.34 in June 2008 and to a low of $0.76 in April 2012. That’s a factor of 12.3. Even assuming that B.C. can achieve its supply goals (First Comment) there is no guarantee the assumed price of gas will stay constant enough to realize these revenue projections, in the context of intense price competition.
That said, even if B.C. is able to raise $100 billion prosperity fund, it is unclear how that fund alone could do everything the Liberal government has suggested.
Fact 4: Since 2008 British Columbia has led the continent with its visionary climate policy. Part of this policy requires the government to keep provincial carbon emissions below a certain level. The fact is we will not be able to meet our carbon targets if we develop the liquefied natural gas industry as the Liberal government has currently proposed.
Third Comment: Here’s why: Liquefying natural gas requires enormous amounts of energy. This energy cannot come from renewable energy alone—even with the development of the Site-C dam there simply is not enough. Most likely, the power will come from burning natural gas to then liquefy natural gas. Even though natural gas is a relatively clean energy, so much of it will have to be burned that we will exceed our carbon targets. Knowing this, the Liberal government made changes to the Clean Energy Act last year to allow the use of natural gas to power LNG facilities. These changes were contrary to the very purpose of the Clean Energy Act.
The fact is Clean Energy Act was not created based on politics and convenience. It was created based on science. And the science is clear: Natural gas is not a clean energy. It is a cleaner energy, but not a clean energy. The effects of climate change will cost our province billions if we do not make smart investments today to shift to a low-carbon economy.
That said, I do believe there is a role for LNG to play in transitioning to a low carbon economy. For instance, I have proposed transitioning the BC Ferries fleet to LNG. Such a transition could make BC Ferries significantly less expensive to operate while also decreasing their carbon footprint.