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What is John Horgan thinking on LNG?!

Posted March 22, 2018 by Damien Gillis in Energy and Resources
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John Horgan announcing a new framework for LNG (Province of BC / Flickr)

In his desperate bid to keep Christy Clark’s LNG pipe dream alive, John Horgan has become completely untethered from reality.

Today, he announced further tax incentives for the industry – as if the sweetheart deal the Liberals gave them wasn’t bad enough for BC taxpayers already. Now, the industry won’t pay PST on construction costs for their plants and it will receive hugely-subsidized electricity from BC Hydro. Prior to the NDP taking over, the industry already secured big federal tax breaks and such a huge discount to the export tax that was supposed to fill our “Prosperity Fund” coffers as to render it meaningless. What was supposed to be a 7% tax got slashed to 1.5% and the industry could deduct its capital costs, so that it would pay no export tax until those were recouped (a.k.a. never). Apparently that wasn’t enough. The NDP is also repealing the LNG income tax.

This all makes for some real head scratching when one reads the technical briefing on the NDP government’s new LNG framework, compiled by Deputy Minister Don Wright. For instance, it boasts that Kitimat LNG – a joint project of Shell, PetroChina, KOGAS, and Mitsubishi – would bring a windfall of public monies:

The Ministries of Finance and Energy have estimated that the project will generate $22 billion in direct government revenue over the next 40 years…Significantly more if “multiplier” effects are taken into account 

Really? Even if that whopper of a figure encompasses upstream royalties, surely these ministries are aware that royalties have plummeted in recent years – from an annual high of $2 Billion in 2005/06 to a record low of $139 million in 2015/16, according to this useful report by Marc Lee at the BC Centre for Policy Alternatives (which Mr. Wright apparently hasn’t read).

It gets worse. “In addition to royalties paid on gas production, companies bid at auction for the rights to explore and drill on public land, known as leases of Crown land tenure,” Lee explains. “These revenues hit a record $2.4 billion in 2008/2009 and have now almost completely dried up: $16 million in 2015/2016 and a projected $15 million in 2016/2017. “

Granted, these numbers have increased under the NDP, as Norm Farrell has documented – but with virtually no other tax revenues from the industry and a massive loss to Hydro ratepayers on steeply discounted electricity, it’s impossible to conceive of the $22 Billion-plus in government revenues Mr. Wright is promising.

On those Hydro rates, the NDP wants to extend to the LNG industry the old sweetheart deal we’ve given sawmills, pulp mills and mines, which used to be around half of what you and I pay for power but would now amount to less than a third of the cost of Site C’s new electricity. So you will get the privilege of paying $15 Billion-plus for a dam you didn’t need – which wipes away First Nations’ rights and vital farmland – all to give the power away for pennies on the dollar to Shell and PetroChina! Doesn’t that make you feel so much better about the NDP’s decision to forge ahead with Site C?

Compounding the confusion generated by Mr. Wright’s report are the sections on climate action and reconciliation with First Nations (it claims Kitimat LNG “has received the support of most – but not all – area First Nations”). By cooling its gas into liquid using power from Site C  – which has definitely not received the support of most area First Nations – Kitimat LNG would reduce its plant emissions nominally, making it “the least GHG-intensive large LNG facility in the world”, says Wright’s briefing, which is like being the skinniest obese person at KFC.

This does nothing to address the massive upstream GHG’s that come from fracking and processing this gas, which the David Suzuki Foundation’s John Werring has documented in horrifying detail. His peer-reviewed research, published in the journal Atmospheric Chemistry and Physics Discussions in 2017, revealed the staggering degree to which BC is underestimating the climate impacts of fracking.

This lines up with the leading research on the US industry, coming out places like Cornell University, which suggests that up to 8% of gas that is fracked leaks into the atmosphere by way of “fugitive methane emissions” – some 86 times worse for the climate than CO2 over a 20-year time scale. This explains why Dr. Robert Howarth from Cornell laughed when I put to him Premier Clark’s labelling of BC LNG – almost all of which would come from fracked shale gas – as the “cleanest fossil fuel on the planet”. “Your premier has her facts wrong,” he told me.

Methane is such a powerful greenhouse gas that when you look at the cumulative impact of these greenhouse gas emissions, natural gas – and particularly shale gas – is the worst of the fossil fuels.

The NDP government, in Wright’s presentation, acknowledges “leakage” associated with the gas industry. Only it’s a completely different type. “Government is committed to implementing a comprehensive Climate Action Plan that will meet B.C.’s carbon goals without disadvantaging our large industries,” it notes, adding, “Losing market share to companies who pay little or no carbon tax – known as carbon leakage – harms B.C.’s economy while causing higher global carbon emissions.”

So the “carbon leakage” they’re concerned about is the lack of competitive advantage inherent in our carbon tax being applied to the LNG industry. And they provide no answers to this problem other than vague statements about somehow making BC’s LNG “the cleanest in the world”. Clearly, highly-subsidized electricity is one piece of the puzzle, then there’s “Implementing strategies that enable industries to be the least GHG-intensive per unit of output in the world”. Thank you for clearing that up. Let’s get right on with implementing those unnamed strategies – that ought to magically take care of it.

It’s no wonder environmental groups are panning Horgan’s have-your-cake-and-it-too LNG framework. Says Jens Wieting of Sierra Club BC, “Pretending that LNG is part of a climate friendly future is as ludicrous as Prime Minister Trudeau saying we need tar sands pipelines to fight climate change.” Touché.

Even with all theses goodies the NDP is dangling, it’s doubtful Shell and PetroChina will take the bait and reach a Final Investment Decision. The Asian LNG market has picked up in recent months, but that’s likely temporary, with three large Australian plants coming online in 2018, Qatar lifting a moratorium on its massive North gas field, and a number of other key developments among the world’s major LNG players, including the US, which has entered the fray.

Most analysts forecast a global glut in LNG, but there is a little room for new projects to help meet peak winter demand. Canada, however, isn’t cost-competitive enough, and even these gifts from the NDP won’t substantially change that.

Getting fracked shale gas from northeast BC to market is an expensive proposition – on the order of $10-12/MMbtu. Asian prices have come up to that range recently, but over the past several years, they’ve typically been half that, meaning companies exporting it would do so at a substantial loss. Increased supply coming online will put further pressure on prices and send them back down from whence they came, leaving only the most competitive jurisdictions in the game. According to energy analysts Sanford C. Bernstein & Co., “Projects in Qatar, Papua New Guinea, Russia and the U.S. are most economically appealing, followed by Mozambique, Australian expansion projects and an Alaskan mega-project.” Notice which country is not on that list.

So even with all these contortions – the untenable doublespeak on climate action and LNG, the irreconcilable implications for First Nations, and giving away the farm to industry – the Horgan NDP will likely get no further with this pipe dream than its predecessors did.

What they might just succeed in doing is provoking the BC Greens to bring down their government, which leader Andrew Weaver has threatened to do over LNG.

Thus, LNG remains what it has always been: an albatross around the neck of whatever BC leader is foolish enough to take it on.

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About the Author

Damien Gillis

Damien Gillis is a Vancouver-based documentary filmmaker with a focus on environmental and social justice issues - especially relating to water, energy, and saving Canada's wild salmon - working with many environmental organizations in BC and around the world. He is the co-founder, along with Rafe Mair, of The Common Sense Canadian, and a board member of both the BC Environmental Network and the Haig-Brown Institute.

20 Comments


  1.  
    Len

    Once Horgan caves on kinder morgan,imagine how much lng they are going to need to get all the extra tar pit sludge to flow through the pipeline. .then think of how much extra water they’re going to need to poison and jam into the ground to get the gas out…think site-c




  2.  
    Jim

    I have voted NDP al my life, 60 years, but no more. These shenanigans are bankrupting BC and WILL destroy our environment. I don’t agree with a lot of Green policy but they are the only ones who will put a stop to the madness. Voting Green in the next election whether it be sooner or later. Already told the NDP they lost me over site C.




  3.  
    Phil Le Good

    “Significantly more if “multiplier” effects are taken into account.”

    These are the same dubious “economic impact studies” that were used to trump up the “benefits” of the 2010 Olympics to a whopping $20+ billion. In fact, the Olympics were a loser. Most telling was the Federal Government Hosting Policy that stated in bold “economic impacts are not benefits”. This was the only statement in the Policy that was in bold letters!

    Multiplier effects is another name for “juicing the numbers”. The Hoodwink potential is great!




  4.  
    Phil Le Good

    “The Ministries of Finance and Energy have estimated that the project will generate $22 billion in direct government revenue over the next 40 years…Significantly more if “multiplier” effects are taken into account.”

    These are the same dubious “economic impact studies” that were used to trump up the “benefits” of the 2010 Olympics to a whopping $20+ billion. In fact, the Olympics were a loser. Most telling was the Federal Government Hosting Policy that stated in bold “economic impacts are not benefits”. This was the only statement in the Policy that was in bold letters!

    Multiplier effects is another name for “juicing the numbers”. The Hoodwink potential is great!




    •  
      John's Aghast

      Wow! $22 Billion OVER 40 YEARS!!! That’s $550 Million per year! About what Horgan gave away when he took the bridge tolls off! I wonder what $550 million will purchase 40 years from now.
      I bought a house on 5 acres for $20,000 forty years ago! Forty years FROM now? Maybe it’d be worth $550 million?
      Sorry, I forgot about the “multiplier” effects.




  5.  
    Phil Le Good

    The LNG industry Australian style:

    https://www.bloomberg.com/gadfly/articles/2017-03-26/everyone-s-a-loser-in-australia-s-lng-boom

    “The LNG debacle provides a good test case of what’s gone wrong. Australia is on track to overtake Qatar as the world’s biggest exporter of shipped gas by 2019 — but getting there hasn’t been a success for the government or petroleum companies.

    Canberra’s revenues from its Petroleum Resource Rent Tax fell 60 percent to their lowest level since 1999 in the year through June 2016, despite a 50 percent increase in gas export volumes. Petroleum tax and royalty revenues per oil-equivalent barrel came to about 4.2 percent of the local price of crude — the lowest share since 1990, and well below the 25-year average of 10.4 percent.

    The dip is unlikely to be a blip. Thanks to the way the government allows expenses to be deducted before a project makes a taxable profit, it could be decades before the country starts to receive a better return on its mineral wealth.”




  6.  
    Phil Le Good

    As always a well thought out opinion on Horgan’s sugar plum fantasy, or should I say Dan Miller’s.

    Gillis wrote, “…(LNG industry) will receive hugely-subsidized electricity from BC Hydro”

    The subsidy will come from BC Hydro’s other customers.

    Will other industries in BC receive the same benefits? Will small business owners, who employ vastly larger workers than these industries, also receive the same benefits as LNG Canada? LNG Canada is one of the those corporate misnomers (falsehoods, hoodwinks). None of the partners in LNG Canada are from Canada: Japan (Mitsubishi), China (PetroChina), Korea (Kogas), and the Netherlands (Royal Dutch Shell).




    •  
      John's Aghast

      I was wondering if a block of neighbours got together and bought their power as a “corporation”, could they qualify for the special industry rate. Might be worth pursuing?




  7.  
    Peter

    Perhaps, as he seems to have so much extra money for the multi-billion companies, he could pay off the small, by comparison, loss for I.C.B.C, and save the taxpayer the extra insurance costs for their vehicles. This guy is worse that the last criminal that ran the province into the ground.




  8.  
    John Fromoutwest

    How do we subscribe to your Blog?
    Thanks
    John




  9.  

    Don Wright did the very flawed technical briefing on Site C too.Maybe they need some new staff!




  10.  
    Gina Petrakos

    It is my understanding that Horgan is scrapping the Clark incentives and have come forward with the current announced policies. The NDP incentives are not on top of they are instead of.




  11.  

    Premier John Horgan has supported the BC Liberal narrative including the Site C Dam project to serve the LNG industry. BC Green leader Andrew Weaver has been strong on opposition with words, but will he follow up now with serious pushback including bringing the government down over this latest embrace of fracking and LNG?




    •  
      Phil Le Good

      Shane Simpson, a member of Horgan’s Heroes, stated back in 2016 that the NDP wasn’t against LNG. Horgan was very clear when he delivered his message to the folks in NE BC’s gas fields…John Horgan, June 2017, just after the provincial election: “I’ve been the Energy spokesperson for the Opposition for over a decade before I became leader. I understand the sector very well. I support oil and gas development. I worked on the creation of the Oil and Gas Commission. I support LNG…” The NDP started the generous subsidies to the gas industry under the Glen Clark government. We pay for the roads into the gas fields and the tie-ins to the main pipeline through tax and royalty credits. For every $2 million worth of gas extracted the industry receives $1 million in credits, however, there are other “incentives” that the CCPA indicate BC receives nothing in terms of direct revenue from the gas extracted.




  12.  
    Ryan

    So now Horgan is yes to everything Christy Clark. Welcome to the dark side. At least when you fall you will have a very generous pension to live on for the rest of your life.




  13.  
    Ron Wilton

    I suppose their ‘review’ of LNG effects on the environment (but not including human health) are now moot.

    Aside:
    On my gas bill I pay a delivery charge for the gas from my supplier to my house based on the amount of gas I use and I also pay a delivery charge on the gas my supplier gets from his supplier. In addition to that I pay a $25 monthly ‘customer charge’ whether or not I use any gas at all. Every month this winter I paid more in delivery and customer charges than I did for the actual gas that I burned.
    I phoned the company about the charges and the lady on the phone told me they have to charge delivery because they are restricted to a NEB limit on what they can charge for gas.
    So much for competition.
    Is everybody as dumb as I am?




  14.  
    Martin

    It frustrates me how absolutely stupid and clueless John Horgan has become since being elected Premier.

    Yes to Site C, yes to LNG…if I wanted this, I would have voted for Christy Clark…she has a way better smile!!!




    •  
      Woodstover

      I agree Martin, I am now having HORGAN remorse. This guy and his lackeys are as you said, dumber than the Christy bunch. Unfortunately, Weaver is just as crazy pushing the 3P power generation, that’s costing us a bundle too.





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