The Clark government’s rosy projections of a $100 Billion “Prosperity Fund” from its proposed liquefied natural gas (LNG) industry will never materialize, says a new report from the Canadian Centre for Policy Alternatives.
The big idea is to export BC’s natural gas to new markets in Asia, taking advantage of the much higher price they’re currently paying for the resource. But that’s easier said than done, as the process of cooling and liquefying gas – in order to load it on tankers – is enormously expensive. Moreover, that higher price, a historical anomaly, is predicated on a number of factors that will likely change by the time exporters invest the tens of billions of dollars in capital and years of construction time into the pipelines and terminals required to make it all happen.
Asian LNG price not a sure bet
The CCPA report takes a closer look at a number of key factors and market indicators in order to paint a more accurate picture of the touted benefits and real financial risks to the nascent industry – everything from the future Asian price for LNG, to infrastructure costs, to the government’s tax and revenue structure, outlined in the 2014 Budget.
Key findings include:
[quote]
Asian demand for LNG will be undercut as Japan and Korea reopen nuclear facilities, while China has many domestic and international options for new energy supplies in addition to BC-based LNG. And five countries that account for 70% of LNG imports (India, Japan, Korea, China and Taiwan) are forming a common front on price through a “buyer’s club”, making it far less likely that they’ll continue to pay top-dollar for imported LNG.
The start-up costs for BC’s LNG industry are massive, greatly eating into the gap between Asian and North American gas prices. Meanwhile, many competitors are simply adding capacity to existing facilities, increasing supply and driving prices down.
[/quote]
Falling prices, shrinking revenues
Last year, one of the world’s leading business publications, Bloomberg, predicted a 60% drop in the Asian LNG price by 2020, the first year BC exporters could realistically begin shipping their product. Because LNG is currently 2 and a half times more expensive to produce than typical gas, that figure would fall below the break-even point, adding up to a 6 million dollar loss per tanker. These sort of cold, hard realities have been sorely absent from the BC Liberal government’s rhetoric on LNG, the CCPA report argues.
Meanwhile, the long-awaited export tax regime at the root of projected BC LNG revenues, announced in last month’s Budget, doesn’t suggest the windfall profits the government has been promising. The CCPA report predicts just $0.2 to $0.6 billion per year for a fully mature industry, far short of the $5 Billion a year that would be required to achieve a $100 Billion “Prosperity Fund” by 2040.
As Kevin Logan has detailed in The Common Sense Canadian, the BC LNG tax structure enables companies to deduct their enormous capital costs from their 7% export tax payments (phase 2 rate, which only kicks in 3-5 years after the paltry 1.5% in phase 1). With an industry notorious for huge cost-overruns – like Chevron’s staggering $54 Billion Gorgon plant in Australia, still unfinished – taxpayers could be waiting a long time to see a single penny out of the industry.
All the risk, very little reward
To the CCPA’s chief economist Marc Lee, BC is taking enormous environmental and economic risks with very little promise of reward. “The danger is that BC ramps up production at a large cost—including costs of regulatory oversight, infrastructure, and additional public services, for example, as well as environmental costs—but doesn’t receive much benefit in terms of revenue,” says Lee.
[quote]Rather than rely on fantasy projections of LNG investment, BC should go back to the drawing board to develop a regime for LNG development that ensures public benefits.[/quote]
As the CCPA report underscores, it’s high time the Liberal government’s rhetoric be held up to proper scrutiny. And the potential environmental, health, and socio-economic impacts of the industry demand more sober reflection before racing headlong into what could very well become a major boondoggle.
“BC has been rushing to get resources out of the ground regardless of the returns. Without a well thought out plan, the proposed LNG industry is likely to do more of the same,” it notes.
[quote]With market prices expected to drop and a poorly thought-out plan for public benefits, it’s time for the government to take a step back and ask themselves if we can do better.[/quote]
TOMIOKA, Japan – Whenever Kazuhiro Onuki goes home, to his real home that is, the 66-year-old former librarian dons protective gear from head to toe and hangs a dosimeter around his neck.
Grass grows wild in the backyard. The ceiling leaks. Thieves have ransacked the shelves, leaving papers and clothing all over the floor so there is barely room to walk. Mouse dung is scattered like raisins. There is no running water or electricity.
Above all, radiation is everywhere.
It’s difficult to imagine ever living again in Tomioka, a ghost town about 10 kilometres (6 miles) from the former Fukushima Dai-chi nuclear plant. And yet more than three years after meltdowns at the plant forced this community of 16,000 people to flee, Onuki can’t quite make the psychological break to start anew.
His family lived here for four generations. Every time he goes back, he is overcome by emotion. Especially during that brief time in the spring when the cherry blossoms bloom.
“They flower as though nothing has happened,” he said. “They are weeping because all the people have left.”
The Japanese government is pushing ahead with efforts to decontaminate and reopen as much of a 20-kilometre (12-mile) no-go zone around the plant as it can. Authorities declared a tiny corner of the zone safe for living as of April 1, and hope to lift evacuation orders in more areas in the coming months and years.
Former residents have mixed feelings. In their hearts, many want their old lives back. But distrust about the decontamination program runs deep. Will it really be safe? Others among the more than 100,000 displaced have established new lives elsewhere, in the years since the 2011 earthquake and tsunami sent three of Fukushima’s reactors into meltdown.
If the evacuation order is lifted for their area, they will lose a monthly stipend of 100,000 yen ($1,000) they receive from Tokyo Electric Power Co., the owner of the Fukushima plant.
A survey last year found that 16 per cent of Tomioka residents wanted to return, 40 per cent had decided never to return, and 43 per cent were undecided. Two-thirds said they were working before the disaster, but only one-third had jobs at the time of the survey, underlining the challenges to starting over.
Former resident Shigetoshi Suzuki, a friend of Onuki, is outraged the government would even ask such a question: Do you want to go back?
Of course, we all want to return, he said. People like him were effectively forced into retirement, the 65-year-old land surveyor said. If he hadn’t evacuated to a Tokyo suburb with his wife, he would have continued working for his longtime clients.
“It is a ridiculous question,” Suzuki said. “We could have led normal lives. What we have lost can’t be measured in money.”
In protest, he has refused to sign the forms that would allow his property to undergo decontamination.
The government has divided the no-go zone into three areas by radiation level.
The worst areas are marked in pink on official maps and classified as “difficult to return.” They are still enclosed by a barricade.
Yellow designates a “restricted” area, limiting visits to a few hours. No overnight stays are allowed.
The green zones are “in preparations to lift evacuation orders.” They must be decontaminated, which includes scrubbing building surfaces and scraping off the top layer of soil and is being carried out throughout the zones.
Tomioka has all three zones within its boundaries.
The green zones are those where authorities have confirmed radiation exposure can be brought below 20 millisieverts a year.
The long-term goal is to bring annual exposure down to 1 millisievert, or the equivalent of 10 chest X-rays, which was considered the safe level before the disaster, but the government is lifting evacuation orders at higher levels. It says it will monitor the health and exposure of people who move back to such areas.
In the yellow restricted zone, where Sukuki’s and Onuki’s homes lie, a visitor exceeds 1 millisievert in a matter of a few hours.
During a recent visit, Onuki and his wife Michiko walked beneath the pink petals floating from a tunnel of cherry trees, previously a local tourist attraction.
The streets were abandoned, except for a car passing through now and then. The neighbourhood was eerily quiet except for the chirping of the nightingales.
“The prime minister says the accident is under control, but we feel the thing could explode the next minute,” said Michiko Onuki, who ran a ceramic and craft shop out of their Tomioka home. “We would have to live in fear of radiation. This town is dead.”
Both wore oversized white astronaut-like gear, which doesn’t keep out radioactive rays out but helps prevent radioactive material from being brought back, outside the no-go zone. Filtered masks covered half their faces. They discarded the gear when they left, so they wouldn’t bring any radiation back to their Tokyo apartment, which they share with an adult son and daughter.
Junji Oshida, 43, whose family ran an upscale restaurant in Tomioka that specialized in eel, was at first devastated that he lost the traditional sauce for the eel that had been passed down over generations.
He has since opened a new restaurant just outside the zone that caters to nuclear cleanup workers. He recreated the sauce and serves pork, which is cheaper than eel. He lives apart from his wife and sons, who are in a Tokyo suburb.
“There is no sense in looking back,” Oshida said, still wearing the eel restaurant’s emblem on his shirt.
Older residents can’t give up so easily, even those who will never be able to return — like Tomioka city assemblyman Seijun Ando, whose home lies in the most irradiated, pink zone.
Ando, 59, said that dividing Tomioka by radiation levels has pitted one group of residents against another, feeding resentment among some. One idea he has is to bring residents from various towns in the no-go zone together to start a new community in another, less radiated part of Fukushima — a place he described as “for our grandchildren and great-grandchildren.”
“I can survive anywhere, although I had a plan for my life that was destroyed from its very roots,” said Ando, tears welling up in his eyes. “Don’t get me wrong. I’m not suffering. I’m just worried for Tomioka.”
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Follow Yuri Kageyama on Twitter at twitter.com/yurikageyama
There are those like Stephen Harper who repeatedly say we must choose between economic development and sustainable development.
And there are those who, concerned about the environment and the latest reports from the International Panel on Climate Change, suggest that economic development and sustainable development should be reconciled. Countries such as Germany are often cited as cases in point. Most environmental organizations fall into this latter reconciliation category.
Sustainability and economic development go hand in hand
That said, the term reconciliation seems totally out of place when one considers that the green sectors are among the fastest growing and highest job creation sectors of our times and that this growth can only get better as nations adopt more aggressive approaches to fully participate in the new economy. Moreover, what especially makes this growth attractive is that the green economy is every bit as diversified, if not more so, as Canada’s traditional natural resource-based economy.
Accordingly, rather than the reconciliation of opposing forces, we should be talking about the green economy as the prime focus of Finance, Economic Development and Treasury ministers, supported by a minister responsible for the green economy. If this “attitude” was to be adopted in Canada, we would be assured of significant progress towards synergistic economic and sustainable development objectives.
Green sectors deliver big job creation, economic development
Meanwhile, China added a whopping 16.1 gigawatts (GW) of new wind capacity just in 2013, bringing total domestic wind capacity to 91.4 GW. (To put this in relative terms, Québec’s current entire electricity production capacity is 43 GW). By 2020, China may reach 200 GW of installed wind capacity along with 500,000 jobs in China’s wind sector.
China also added 12 GW of solar capacity in 2013. Currently, there are 300,000 jobs in China’s solar photovoltaic domain and another 800,000 in Chinese solar heating and cooling.
Of course, there is much more to the green economy than just clean energy. The green economy is also about technologies to reduce waste and therefore improve business profits over the long run. This includes technologies aimed at reducing pollution, toxic by-products, and above all, those technologies which reduce the production of waste at the source, in the manufacturing process.
Then there are the exceptional opportunities pertaining to the transportation sector. Being nearly entirely dependent on fossil fuels, transport must be seriously revamped. The right legislative and fiscal frameworks for the auto sector would spur both innovation and new supply chain products and industries.
What is stopping us from working on these high job creation sustainable development solutions?
Time to stop subsidizing fossil fuels
One of the greatest impediments to migrating away from the traditional economy rests with the fact that we continue subsidizing the problem, big time. Indeed the fossil sectors are the world’s most subsidized.
Particularly telling is the data churned out by the International Monetary Fund (IMF) on 2011 fossil fuels direct subsidies, plus the costs of externalities – such as the impacts of climate change on infrastructure and pollution on health. The IMF came up with a global total of $1.9 Trillion/year in subsidies and government costs associated with fossil fuels. Among nations evaluated by the IMF, Canada shamefully ranked 14th in public subsidies for fossils at $26.4B/year.
Consequently, ending these subsidies would not only level the playing field for more equitable competition from clean technologies, but would also free up financial resources to support the shift to a green economy.
And the payoff is green jobs – lots of them. That is, a green shift offers 6 to 8 times more jobs for a given unit of investment when compared with government investments in the fossil fuel economy. To this effect, the BlueGreen Alliance published a report indicating that $1.3 billion in subsidies for the oil and gas sector supports just 2,300 Canadian jobs, while the same amount invested in the green economy would support 18,000 to 20,000 jobs.
Not only does the green economy give a better bang for government bucks, but a green economy is also very unlike a resource-based economy, which concentrates the wealth in the specific geographic areas where the fossil and natural resources are found. This is to say that a green economy spreads the wealth opportunities all over the country and planet.
The production of clean energy, the manufacturing of clean technologies and the maintenance of clean tech systems can occur in most parts of Canada and around the globe.
Finally, with respect to funding to support the transition to a green economy, it is important to note that both Harper and Trudeau support an exceptionally low corporate tax rate of 15%, a policy that has resulted in $575 billion lying dormant in corporate liquidity – a formula for austerity budgets.
In other words, with a higher corporate tax rate, there would be plenty of money around to support a fast-forward catch-up to other nations regarding the green economy as well as improvements in job creation, health, child care, innovation and so on.
Removing the roadblocks
The main obstacles in the way to moving to a diversified, high-growth, high-job creation, green economy are our governments and political leaders – incapable of thinking outside of the box.
To a lesser extent, the US has embarked on a similar path.
Both Trudeau and Harper also seem oblivious to the UN Conference on Trade and Development (UNCTAD) conclusion that, “apart from short-term price booms, the ‘terms of trade’ – the price of resource exports relative to manufactured goods – have been falling for more than a century.” Suffice it to say, neither Harper or Trudeau is prepared for the emerging global green economy – the economy of tomorrow.
Finally, green advocates have got to get out of the paradigm of economic and sustainable development reconciliation and start talking about attractive, green economic development strategies.
By Kevin Begos And Matthew Daly, The Associated Press
PITTSBURGH – The U.S. Department of Energy said Friday that it welcomes the decision by oil and gas industry supplier Baker Hughes to disclose all chemicals in hydraulic fracturing fluid. But Halliburton, a major competitor in the field, isn’t committing to such disclosure.
Deputy Assistant Energy Secretary Paula Gant said that Baker Hughes’ move “is an important step in building public confidence” and the department “hopes others will follow their lead.”
Disclosure loophole allows for secrecy
The oil and gas industry has said the fracking chemicals are disclosed at tens of thousands of wells, but environmental and health groups and government regulators decry a loophole that allows companies to hide chemical “trade secrets.”
Houston-based Halliburton said Friday that it’s studying the move by Baker Hughes, which is also based in that city. Halliburton said it had an interest in protecting “our intellectual property and the substantial investment it represents” and will examine the new Baker Hughes format for its ability to protect such investments.
Baker Hughes ready for 100% disclosure
Baker Hughes said it now believes it’s possible to disclose 100 per cent “of the chemical ingredients we use in hydraulic fracturing fluids without compromising our formulations,” to increase public trust.
Baker Hughes spokeswoman Melanie Kania wrote in an email that it will take “several months” for the new policy to take effect. She said the end result will be a “single list” that provides “all the chemical constituents” for frack fluids, with no trade secrets.
Frack fluids can contaminate groundwater
A boom in drilling has led to tens of thousands of new wells being drilled in recent years using the fracking process. A mix of water, sand and chemicals is forced into deep underground formations to break rock apart and free oil and gas. That’s led to major economic benefits but also fears that the chemicals could spread to water supplies.
The mix of chemicals varies by company and region — and some of the chemicals are toxic and could cause health problems in significant doses — so the lack of full transparency has worried landowners and public health experts.
Many companies voluntarily disclose the contents of their fracking fluids through FracFocus.org, a website partially funded by the oil and gas industry that tracks fracking operations nationwide. But critics say the website has loose reporting standards and allows companies to avoid disclosure by declaring certain chemicals as trade secrets.
Northern Rockies Regional Municipality Mayor Bill Streeper has publicly called out the local Fort Nelson First Nation (FNFN) over its repudiation of government officials at a summit on liquefied natural gas (LNG) it held last week.
[quote]No shale gas development will proceed in FNFN territory until our Nation and our Treaty are respected and our concerns about our land and our waters are addressed.[/quote]
The chief’s decisive actions made headlines across the country, generated a wave of accolades in these pages and other social media, and yielded an uncharacteristically speedy and deferential response from government. Within hours, Environment Minister Mary Polak issued a mea culpa, recanting the proposed regulatory changes. “Our government apologizes for failing to discuss the amendment with First Nations prior to its approval,” stated Polak.
“That is why we will rescind the amendment…until we have undertaken discussions with First Nations.”
Yet Mayor Streeper, who has long ties to the shale gas industry, doesn’t share the government’s contrition and agreement with FNFN’s position. In an open letter castigating his aboriginal neighbours in Fort Nelson, Streeper called the expulsion a “knee-jerk” reaction that constituted “discriminatory exploitation”.
“We’re a one-industry town,” noted Streeper, who apologized to the provincial government on behalf of his community. Underscoring his perceived urgency of developing the industry at all costs, the exasperated mayor stated:
[quote]If LNG fails, this town will fail.
[/quote]
Yet, at no point did Chief Gale reject the industry outright; rather she highlighted her community’s concern with the government’s secretive legislative changes and emphasized that in order for the industry to proceed, it must address a number of key environmental concerns:
[quote]The FNFN is not against development but these projects must be consistent with our values and have respect for the land…First Nation people are the governments of their territories and will make decisions going forward on these projects.[/quote]
VANCOUVER – British Columbia Environment Ministry staff have warned their minister that the province’s dreamed-of liquefied natural gas industry poses some big challenges with greenhouse gas emissions.
Internal briefing notes prepared for Environment Minister Mary Polak since she took office last year and obtained by The Canadian Press, single out methane emissions for concern.
On top of emissions from combustion and flaring of natural gas, methane and carbon dioxide escape during hydraulic fracturing process, or fracking, the documents said. One July briefing note warned:
[quote]Methane emissions are a particular concern since they have a global warming impact 21 times higher than carbon dioxide. A small increase in the percentage of natural gas that escapes can have a significant impact on overall emissions.[/quote]
At a meeting last November, staff warned Polak that the federal government has updated its formula for calculating greenhouse gas emissions and that alone will increase methane values by 20 per cent. The province will need to follow suit, members of the Climate Action Secretariat told Polak.
Premier Christy Clark says B.C. is poised to develop a trillion-dollar LNG industry.
But emissions remain a hurdle for the provinces, which has legislated targets for reductions. Legislation dictates that emissions are to be reduced by at least a third below 2007 levels by 2020.
Polak has also been told that while B.C. estimates that between 0.3 and three per cent of natural gas extracted is lost as fugitive methane emissions, other North American jurisdictions and scientific literature estimate that rate is between seven and eight per cent.
The U.S. National Oceanic and Atmospheric Administration estimates between four and nine per cent is lost.
However, in B.C. regulations are significantly different, the briefing notes pointed out. Because B.C. gas contains toxic hydrogen sulfide, leaks are more tightly regulated.
The province’s Climate Action Secretariat and Natural Gas Development Ministry are working with the Canadian Association of Petroleum Producers to test technology to curb emissions, said the internal documents.
“Though significant, this work does not address concerns about potential fracking-related emissions from geological formations, poor cement casing or produced water storage tanks,” said the briefing prepared last July.
Polak declined a request for an interview. In an emailed statement to The Canadian Press, the ministry said:
[quote]Based on academic research and work in the United States, there is concern that fugitive or unplanned emissions from oil and gas facilities are higher than currently reported in B.C.[/quote]
The federal government has updated its greenhouse gas emissions formula and the province “is examining” when to update its own regulations, it said.
The Climate Action Secretariat is working with the association and industry to find ways to reduce emissions and “ensure emissions levels are properly understood,” it said.
They’ve initiated a joint study of emissions levels and, as a result of updated information, the province has removed an outdated metering requirement, the statement said.
“International greenhouse gas (GHG) accounting and measurement practices are changing as research and the understanding of science evolves,” the ministry said.
B.C. has been underestimating the impact of methane, said Tom Pedersen, executive director of the Pacific Institute for Climate Solutions, a collaboration between the University of Victoria, Simon Fraser University, the University of British Columbia and the University of Northern British Columbia.
But provincial officials are very aware of the challenges, he said.
[quote]This is not something that they are trying to sweep under the rug. They are concerned about it and they are trying to put in place appropriate regulations to deal with it.[/quote]
That will require intensive monitoring and enforcement of regulations, he said.
“At the same time, one does have to be realistic about this, there is pushback from industry. They would prefer not to have regulations of course.”
Despite admitting there is an increasing trend of inactive well sites awaiting reclamation, the BC Oil and Gas Commission has slashed its budget for its orphan site reclamation fund from $4.83 million in 2013 to just $1 million in 2014.
According to the Orphan Well Association, “an orphan is a well, pipeline, facility or associated site which has been investigated and confirmed as not having any legally responsible or financially able party to deal with its abandonment and reclamation.”
Earlier this year, the BC Ministry of Finance announced the 2014 Budget, focused on LNG development. According to the budget, the Liberals plan to spend $29 million over the next three years on LNG development alone. The National Energy Board also approved seven LNG export applications for BC, touted as the basis for a $100 billion Prosperity Fund that will wipe out the province’s debt by 2028.
In order to increase LNG development, the oil and gas industry will have to ramp up drilling, fracking and the number of LNG plants along the coast.
This push to expand LNG resources will create more orphan sites, but the government does not have the funds for reclamation because the Commission has scheduled to cut its cleanup expenditures. According to the BC Oil and Gas Commission’s 2014 Service Plan.
[quote]There is a trend of increasing inactive well sites awaiting reclamation as the industry matures. Delays in the implementation of restoration activities may increase the number of inactive sites and associated liabilities.[/quote]
Gas production in the province
In the northern BC regions of the Liard and Horn River Basins, and Montney shale field, the production from a natural gas well typically declines by 61 to 80-percent in just three years, according to geoscientist, David Hughes’ research. By that point, the well is all but played out, requiring far more drilling to keep up with production demands.
With the limited lifespan of these wells and the demand the LNG industry will place on fracking in BC, Hughes estimates industry will need to drill a staggering 50,000 new wells by 2040 – twice the total number in the 60 year history of the province’s natural gas industry.
That means the number of wells left behind will sharply increase. For example, the Horn River Basin gas well has a depletion rate of 80-percent in the first three years.
With a budget of $1 million until 2017, the BC Oil and Gas Commission will be unable to keep up with the demand for new sites as industry continues drilling, unable to account for the vast number of well pads reaching orphan stage, leaving more orphan well sites than they are able to responsibly reclaim.
Government and industry are driving a massive experiment in fracking and LNG development without being sure of the consequences for this scale of development.
For instance, in October the BC Ministry of Environment funded the $650,000 Kitimat Airshed Impact Assessment Project to measure the cumulative effects of existing and proposed industrial air emissions in the Kitimat Valley airshed. The SkeenaWild Conservation Trust accessed this research in their November 2013 “Air Advisory” report, concluding, “this research is being carried out under tight timelines and with a limited budget… raises concerns about whether current research can provide a comprehensive understanding of potential impacts on which to base sound decisions.”
The Kitimat airshed blockage from the current Rio Tinto Alcan aluminum smelter plant’s carbon dioxide emissions has demonstrated the link between human health problems and industrial air emissions in the area.
“It’s a new era and it needs to be spoken about differently than any other time you’ve done gas before,” says Eoin Madden, climate campaigner with the Wilderness Committee.
[quote] I had one call from Fort Nelson First Nation which described it as carpet-bombing. It’s taking wilderness and carpet-bombing it like you would have seen back in Vietnam. It’s that destructive.[/quote]
The concern is that shale gas and LNG are a very different animal from the historical conventional industry with which the province is so familiar.
“When folks hear LNG they don’t realize the danger and that we’re talking about a completely different product from what we’ve traditionally had in BC,” says Madden. “It’s the product that forces us to swap our fresh water for gas and it’s the product that forces us to industrialize enormous amounts of wilderness.”
The unknown consequences of orphan sites
Hydrologist, Dr. Gilles Wendling, presented the unknowns about groundwater in the Yukon in January to the Yukon legislative committee.
“We are extremely ignorant about groundwater,” said Wendling.
[quote]We don’t know where our aquifers are. Even shallow aquifers, we don’t know where they are, we don’t know how big they are, we don’t know how deep they are. We don’t know the water table elevation, we don’t even know in which direction the groundwater moves, we don’t know, we haven’t collected the information.[/quote]
The unknown dangers with old well sites come from the toxic water reserves created during hydraulic fracturing. Not all old well sites become orphan wells. The majority of them are injected with fracking fluid flowback that’s been mixed with toxic additives, such as ethylene glycol, methanol, hydrochloric acid, formaldehyde, mercury, uranium, and lead. The toxic flowback is then injected deep underground into old oil wells that haven’t become orphan sites. These types of wells that use this technique of deep oilfield injection are known as disposal wells. Disposal wells are old wells which use the drilling hole to dispose the leftover fluid from hydraulic fracking. These disposal wells are then sealed with concrete to prevent open exposure.
But wastewater-injected wells contain structural risks says Wendling. Active wells, disposal wells and orphan wells are all subject to native conditions, such as mini earthquakes, that create micro-fractures in the cement seals and corrosion in the casing of the well hole where leaks can happen a year to a decade as the structural integrity of the well degrades.
Well integrity is how wells are sealed and how a well’s sealing capacity will be modified with time.
“Once a hole is drilled in the ground, this hole is drilled forever,” says Wendling.
[quote]This hole goes through various zones which are under different pressures and which contain different types of fluids like gases, or liquids or a mix of the two. Once you have a hole that reaches through various zones and it’s properly sealed then it doesn’t act as a pathway, but with time and depending on induced anomalies, like mini-earthquakes, that cause fracturation – how is this going to effect the integrity of the well, how is it going to create micro-fractures along the well, how is it going to crack the cement seal along the well after one year, five years, ten years, 100 years, how is this going to change with time?[/quote]
If these disposal wells leak after deep oilfield injection, there is potential for our groundwater sources, that feed lakes and rivers, to become contaminated by these hydraulic fracturing chemicals because they can undergo pressure changes in the injection site that acts like a pathway for the mixing of deep and shallow water systems once the well’s integrity is jeopardized. There is a lot of research being conducted right now to grasp the risks associated with creating and connecting non-native pathways underground through drilling, but there are still a lot of unanswered questions about the dangers of disposal wells and orphan well sites, says Wendling.
Boom and bust economy
Hardy Friedrich, manager of communications for the Oil and Gas Commission in Fort St. John was given the opportunity to comment on the Commission’s plan for orphan well site reclamation but declined to comment in a phone interview.
“We shouldn’t get dragged into conversations about how much money should be spent reclaiming well sites,” says Madden. “Should the BC government spend money on that, or should Encana, or Talisman, or Apache, whoever made the mess? The way we’re thinking about it is endemic of how much ownership over our politics the oil and gas industry has.”
According to Madden, the dependence on the public to clean up after the energy industry reflects a fundamental problem in Canada’s fossil fuel economy.
[quote]The rules should state if you open a gas well, you’re responsible for remediation.[/quote]
However, that is not the case in BC. Taxpayer money is budgeted by the BC Oil and Gas Commission to reclaim orphan well sites so oil companies can move onto the next drilling project, but this allotted budget for environmental remediation is not enough to keep up with the demand for oil and gas.
In June 2013, Natural Resources Canada mandated that pipeline companies have at least $1 billion of cleanup funds available to deal with incidents. If the government of Canada is willing to make the polluter pay in the event of a pipeline spill, why doesn’t the government hold oil companies accountable for reclaiming their old well sites as well?
Alternative forms of energy for a sustainable economy and jobs
“The infrastructure I would advocate for right now is an infrastructure that shifts how we think about energy and how we create energy jobs,” says Madden.
[quote]You’ve got geothermal potential, wind, solar power, different ways you can make energy. The question mark is over whether we should even have an export energy market?[/quote]
With the current plan for LNG development there is not enough money in the budget to responsibly account for the necessary cleanup associated with LNG and shale gas development. Without this in place, the BC government risks running their fresh water supplies into the ground, along with their ability to deal with climate change.
“If you’re responsible on the environment, you’re going to create more jobs, that’s the truth,” says Madden.
According to Madden and other critics of LNG development, the government risks alienating public support for its LNG vision if it passes the buck for industry cleanup to taxpayers.
UPDATE: Fort Nelson First Nation drums government, industry reps out of LNG conference, outraged over lack of consultation on surprise gutting of environmental reviews for gas plants. Government issues swift apology and cancels changes (more below).
One of the biggest myths pervading BC’s energy dialogue goes something like this: While First Nations stand united against the proposed Enbridge pipeline, they overwhelmingly embrace Liquefied Natural Gas (LNG).
Sure, Premier Christy Clark can tick off a list of aboriginal allies in her effort to build at least five among a dozen terminals proposed for Kitimat and Prince Rupert. Just last week, she announced with great fanfare LNG revenue sharing agreements with two coastal nations – Metlakatla and Lax Kw’alaams.
But a growing group of hereditary leaders, grassroots members and their allies, even some elected governments, are rising up in opposition – from the fracking fields of northeast BC that would supply the industry, to the various proposed pipeline routes across the province, to the coastal communities that would house the hulking terminals.
LNG is designed to achieve higher prices for BC’s gas in Asia, by cooling it to -160 degrees celsius, thus liquefying it so it can be loaded onto tankers bound for China, Japan, Korea, Malaysia, and India. But it may be investors who are getting cold feet amid the myriad challenges facing the industry.
In a little-reported but highly significant development a few weeks ago, a group of Gitxsan hereditary chiefs in the Kispiox Valley, near Hazelton, ordered TransCanada to cease and desist test drilling relating to the pipeline it plans to construct to Prince Rupert on behalf of Malaysian, Japanese and Indian LNG partners.
The issue adds more uncertainty to the province’s nascent LNG industry, on top of the unified opposition of all five clans of the Wet’suwet’en Nation to the south; mounting concerns from Treaty 8 and Fort Nelson First Nation in the heart of northeast BC’s fracking country; and increasing scrutiny of the proposed Woodfibre LNG Plant in Squamish territory, near Vancouver.
A brief survey of the geography and indigenous territorial boundaries of BC, juxtaposed with these respective challenges, reveals a far more perilous landscape for this industry to traverse than the rosy picture being painted in Victoria and on press junkets to Asia.
Whether you’re a BC taxpayer about to commit massive public subsidies to this industry, or a board member or shareholder of a company contemplating investing the tens of billions of dollars required to build LNG infrastructure, it may be useful to know the real odds before laying a bet on BC LNG.
A tale of two nations: Hereditary vs. Elected
Understanding the discrepancy between the official story on First Nations’ support for LNG and the emerging, contrary reality requires some sense of the different – often competing – systems of governance amongst BC’s aboriginal communities.
Broadly speaking, there are two main forms of aboriginal government: elected and hereditary. The former is a product of the Indian Act – elected band councils which govern reserves created by the Crown. The latter is an ancestral system of leadership made up of houses and clans – the specific makeup varying from nation to nation. Hereditary governments may also incorporate democratic elements – i.e. not strictly “hereditary” per our western concept of the term – whereby chiefs’ names are passed on through decisions reached in the feast hall or by presiding chiefs or house groups.
Where these systems still exist, hereditary chiefs may hold jurisdiction over their nations’ often vast, resource-rich traditional territories. The Canadian case law on this subject is relatively new and not well defined, but individual nations often have their own laws or internal protocol agreements on the subject of jurisdiction. Elected band councils, meanwhile, are responsible for the much smaller reserves which many First Nations inhabit today. Jurisdiction remains a contentious legal issue, specific to individual nations. That said, a number of deals involving pipelines and energy terminals have been signed by elected councils, which is sewing conflict in some communities.
Gitxsan: Home of Delgamuukw
In Gitxsan territory – which covers some 53,000 square kilometers surrounding the mighty Skeena River in northwest BC – a rogue chief and head of the nation’s treaty society (another entity which can hold considerable sway in aboriginal communities), Elmer Derrick, stoked a firestorm when he signed an unauthorized deal with Enbridge in 2011. Derrick and his cohorts were promptly evicted from the treaty office and the deal was torn up – by the very hereditary chiefs whose support he had erroneously claimed.
The hereditary system is deeply rooted in Gitxsan culture, as it is with their neighbours to the south, the Wet’suwet’en. These two nations together won the landmark Delgamuukw v. British Columbia case at the Supreme Court of Canada. Some of the same 48 hereditary chiefs who initiated the case in 1984 are still alive today, standing in the path of myriad proposed pipelines.
As this federal government summary of the case explains, Delgamuukw legally entrenched the existence of aboriginal title and rights contained in the country’s constitution:
“Delgamuukw confirmed that common law Aboriginal title, recognized as a common law Aboriginal right prior to 1982, was “constitutionalized … in its full form” by section 35 of the Constitution Act, 1982 (par. 133)”
The ruling itself noted: “[A]boriginal title confers more than the right to engage in site-specific activities which are aspects of the practices, customs and traditions of distinctive aboriginal cultures…What aboriginal title confers is the right to the land itself.” However, the court stopped short of confirming Gitxsan and Wet’suwet’en title, requiring a new case be brought to address that matter specifically.
The ripple effects of this decision continue to be felt today and weigh heavily upon the LNG issue.
Gixtsan chiefs evict TransCanada
Take a look at the BC Government’s map of First Nations territories. Now, draw a line around the neighbouring Gitxsan and Wet’suwet’en nations (pictured to the right). Note how they form a 500 km-long vertical wall, smack in the middle of every major pipeline route proposed across northern BC. Now you have a glimpse of the trouble awaiting these projects, were both nations to block their path.
And that is precisely what’s taking root on the ground right now, though you wouldn’t know it from Christy Clark’s endless stream of LNG photo-ops touting First Nations’ embrace of the industry.
In late March, Gitxsan Hereditary Chief Wa’a (Samson Muldoe) delivered a letter to TransCanada workers conducting test drilling in the Kispiox Valley, related to one of the two major pipelines being eyed to take fracked natural gas from northeast BC to Prince Rupert (see video below).
The letter, signed by a number of high-ranking hereditary chiefs, stated, “As rightful guardians of the territory on which this work is being carried out, this is to instruct TransCanada Pipelines and its contractors and representatives to cease and desist from this work immediately and to remove all their equipment, vehicles and personnel by the end of Tuesday, March 25th, 2014, and to not return thereafter.”
To the point of governance and jurisdiction, the letter continued:
“We assert that the persons representing the Gitxsan Nation, with whom TransCanada Pipelines has been dealing to this point, do not have legitimate right to make decisions with regards to [the territory] where the work mentioned is now taking place – and that TransCanada Pipelines has thus failed to properly consult, as required pursuant to the Delgamuukw Supreme Court of Canada 1997 ruling.”
The chiefs identified impacts on Skeena River salmon from pipelines, LNG terminals and potential fracking in the region as the prime motives for their action.
Petronas’ magic trick
The issue is of particular sensitivity given pipeline owner Petronas/Progress Energy’s attempt to erase the Skeena River and estuary from its project description maps (a story broken by The Common Sense Canadian last year). The uproar over the issue, combined with concern about the impacts of the proposed LNG plant on vital estuary habitat during the worst year on record for Skeena sockeye, forced a significant extension to the initial public comment period on the project.
The eviction order is a wake-up call for TransCanada and it should come as no surprise if Spectra Energy, the proponent of the other major pipeline to Prince Rupert, met with a similar notice from the chiefs.
Wet’suwet’en chiefs ban all pipelines
Meanhwhile, several hundred kilometers to the south, Wet’suwet’en hereditary chiefs banned all pipelines – including the proposed Enbridge pipeline and two major gas conduits – through their territory last summer.
Hereditary Chief Na’moks, leader of the Tsayu Clan, explained to me on camera last October that the heads of all five Wet’suwet’en clans had voted to ban all pipelines through their 22,000 square kilometer territory – with unmistakable resolve.
Like the Gitxsan chiefs, Na’moks raised fracking – the ultimate source of this gas – as a key concern in reaching their decision:
“When you’re talking about fracking and the dangers that come with it – the waste of water, the poisoning of water, the waste of land…when we allow pipelines, we have to take that responsibility that we’re supporting this industry to continue that. As Wet’suwet’en, we can’t do that.”
LNG means 50,000 new holes in the ground: geoscientist
So these chiefs are right to be concerned about the implications of LNG plans in terms of increased fracking and environmental impacts.
Unist’ot’en Clan holds the line
At the end of a series of forest service roads west of the sawmill town of Houston, BC, lies a solar-powered cabin on the banks of the Morice River. It may soon become ground zero in the battle over BC’s proposed pipelines.
There, members of one of the five Wet’suwet’en clans, the Unist’ot’en, have been strategically occupying their land – directly in the path of two gas pipelines and the Enbridge pipeline – for several years now. Their position is simple: No pipelines will cross their territory, period. They’ve already evicted contractors doing survey work for one of the proposed pipelines, Chevron and Apache’s Pacific Trails project.
I’ve visited the camp on two occasions – this past winter and in its early days in the summer of 2012 – for my forthcoming film Fractured Land. It’s a beehive of activity, with supporters regularly joining the camp for weeks to assist with various chores, the construction of new facilities, and gathering and preparing food.
They work to feed themselves in a traditional manner from hunting, trapping and fishing, though one of the camp’s leaders, who goes by the traditional name of Toghestiy, acknowledged to me on a tour of their trapline this winter that with diminished wildlife following years of logging in the region, they are forced to supplement their traditional diet with other food sources.
Though the group runs the risk of being characterized as militant radicals, that would appear, on closer inspection, to be a gross misunderstanding of their motives and philosophy. “We’re not about a fight,” camp regular Mel Bazil explained on our last trip. “I don’t wake up thinking, ‘Is the fight coming on today?’…We’re prepared to protect ourselves, but we’re more prepared to build with people a shared responsibility that we can really believe in – that will not occur from a board room or a government level.”
Many of the camp’s members are are schooled in both western universities and the traditional ways of their people, having left high-ranking jobs in aboriginal governance, social work and other fields to embrace a different way of life, in reaction to serious challenges facing their land and people.
“This planet is in trouble. If we can all agree upon that and not worry about how media and governments are spinning it, we really must all, as a people, take control of ourselves.”
Injunction being sought?
Born into another Wet’suwet’en clan, Toghestiy is married to Freda Huson of the Unist’ot’en, the camp’s frequent spokesperson. The pair were in Vancouver last week for an emergency press conference, after they caught wind of an alleged plan by government and industry officials to obtain an injunction against their camp.
When pressed by the Globe and Mail’s Mark Hume, Chevron representative Gillian Robinson-Riddell denied seeking an injunction. She did, however, seem to acknowledge that the company has yet to secure the social licence it requires from First Nations to commit fully to the project financially:
“We’re working toward a final investment decision but there are a few factors [that have to be confirmed] yet…We are looking for further First Nation support.
Video by Eric Doherty
Camp building broad support
The Unist’ot’en are currently running a crowd funding campaign to further build up their camp. With several weeks to go, they’ve nearly met their goal of $20,000 – evidence of the broad support their cause is attracting. From the looks of it, the group isn’t going anywhere – certainly not without a Herculean effort on behalf of government, industry and law enforcement that could well backfire under public scrutiny.
Canada: The world is watching you
When I asked Ms. Huson what would happen if authorities tried to serve an injunction, she replied:
“Supporters would walk off their jobs and come join us. People from all over have said busloads would come to our camp.” Others as far away as Ontario “would close highways” in sympathy.
“My message is: “Canada, the world is watching you.”
I asked Ms. Huson what she would say to the elected chiefs who have signed LNG deals. “I would ask them, ‘Have you done your homework?'” she replied. “Have you investigated how LNG plants affect the air and water; how you will affect not just your communities, but people upstream and downstream?…And what would your ancestors do?
More First Nations opposition brewing
In northeast BC, First Nations leaders have long worked to balance the natural gas industry’s job benefits to their members with its environmental impacts. But with the shift from conventional gas to riskier fracking, change is in the wind.
Now, as they peer over the horizon at a massive build-up of fracking to feed these proposed LNG terminals, they are increasingly expressing concern for the future. The Fort Nelson First Nation came out swinging in 2012 against 20 proposed long-term water licences for fracking in their territory, forcing the government to pull them off the table – with the exception of one, which is currently being litigated by the band.
In 2013, Chief Sharleen Gale and Lands Manager Lana Lowe co-penned an op-ed in The Globe and Mail, which stopped short of opposing the industry, but raised alarm bells over the implications of LNG for their territory – calling for increased environmental standards and royalty sharing to compensate their community. If anything, their estimate of future impacts was highly conservative, in light geoscientist David Hughes’ figures and the Clark government’s bullish outlook for building LNG plants:
“Should a modest number of LNG plants be built we anticipate at least 3,000 new wells will be drilled and fracked over the next decade. This will remove millions of tonnes of frack sand from our land, and trillions of litres of water from our rivers, unleashing a race for large-scale industrial frack sand mining and freshwater withdrawals…Industry has already proven unable or unwilling to stay within the generous water allocations provided to them for fracking.”
Finally, in a surprise turn of events this week, Fort Nelson First Nation members, led by the strong words of Chief Gale, literally drummed out government and industry representatives from a conference the band was hosting on liquefied natural gas (LNG).
The 3-day conference, titled “Striking the Balance”, was designed to discuss both the economic opportunities and potential environmental impacts of increased fracking in the nation’s territory. But things got off on the wrong foot when the BC Liberal government made a surprise announcement on Tuesday that new sweet gas processing plants would be exempted from environmental assessment.
Chief Gale alluded to the betrayal in her comments from the podium at the event today:
“The word from my elders is you treat people kind. You treat them with respect even when they’re stabbing you in the back…so I respectfully ask government to remove themselves from the room.”
Several dozen government officials promptly arose and left, to the beating of Dene drummers. LNG and shale gas industry representatives were asked to stay behind for a few minutes to hear about the nation’s concerns in greater detail, after which they too were dismissed. (see video here).
The message was received loud and clear by the Liberal government, as Energy Minister Mary Polak issued a swift, statement repealing the planned change to the province’s environmental assessment laws.
“I would like to acknowledge First Nations concerns about amendments to the Reviewable Projects Regulation under the Environmental Assessment Act,” stated Polak. “Our government apologizes for failing to discuss the amendment with First Nations prior to its approval.”
Non-BC First Nations take hard line against fracking
As Common Sense Canadian contributor Kevin Logan asked last year, is Elsipogtog the spark that will light the fire of fracking protest amongst other First Nations in places like BC and Alberta? Fort Nelson Chief Gale and Lands Manager Lowe suggested as much in their Globe editorial at the time:
[quote]Sadly it has taken the images from New Brunswick over the past two weeks to raise the debate around “shale gas” to the national stage. It has taken Elsipogtog people being arrested, and images of burning vehicles to illuminate how raw the tension is between the indigenous peoples, and the federal and provincial governments around unchecked resource extraction…We feel particularly close to our relatives in New Brunswick. We share a connection through our treaties and our concern for the land, water and air and the future generations in the face of shale gas.[/quote]
BC LNG a risky bet
The BC Liberal government is banking on support for LNG from First Nations based on the jobs it is dangling before them – as bloated and unrealistic as these claims clearly are. Now-Minister of Natural Gas Development Rich Coleman told political pundit Vaughn Palmer in 2012, “One of the greatest outcomes for this would be that every First Nation young person coming through in the next ten years can get a trade or a job…in the LNG business.”
But in order for BC LNG’s ship to set sail, it will require hundreds of billions of dollars in private capital – not to mention huge taxpayer subsidies. And there are already myriad signs that this boat won’t float – from the government’s difficulty in developing a long-delayed export tax regime, to the lack of a single major investment commitment from any proponent in the 8 or so years the industry has been brewing.
At some point, investors will be confronted with the fact that, on top of all the other risks associated with this incredibly costly and volatile industry, they face growing opposition from First Nations.
Even in the best of circumstances, LNG is a gamble. Given the odds facing BC’s attempts to build an industry, I’d think long and hard before laying my chips on the table.
EDITOR’S NOTE: The passage on hereditary vs. elected governments has been updated since original publication to better reflect the nuances of this subject.
You may have heard about controversial amendments to the Park Act by way of Bill 4, the Park Amendment Act, which critics say are to allow industrial “research,” or even industrial activity, in B.C. parks.
Over 160,000 people have signed a petition opposing Bill 4. However, B.C. Environment Minister Mary Polak insists that the types of research to be allowed are minor, and that the amendments have nothing whatsoever to do with allowing pipelines in B.C. parks.
Kinder Morgan was illegally researching pipeline
Before Bill 4, any research done in a park had to be “necessary for the preservation or maintenance of the recreational values of the park involved.” But as we’ve recently learned, pipeline giant Kinder Morgan has, with a permit from the B.C. government, been conducting research in B.C. parks for their pipeline expansion project since November 2013, four months before Bill 4 was introduced.
As you read this, researchers hired by Trans Mountain L.P., a subsidiary of Kinder Morgan, are already at work evaluating the feasibility of building its controversial pipeline expansion through five B.C. parks and protected areas, taking soil samples and electro-shocking fish.
The eventual aim is to have these lands taken out of the parks. In some cases the new pipeline will widen the right of way through the park alongside the existing Kinder Morgan oil pipeline, but in other cases entirely new pipeline routes through parks are being considered.
Government admits permits were illegal
This work was authorized by the Ministry of Environment in November 2013, through a park use permit allowing Trans Mountain to conduct “research” related to pipeline construction in Finn Creek Provincial Park, North Thompson River Provincial Park, Lac Du Bois Grasslands Protected Area, Coquihalla Summit Recreation Area and Bridal Veil Falls Provincial Park.
The B.C. government has recently admitted that this industrial park use permit was likely illegal under the Park Act. That’s because the legislation gives B.C. parks a high level of legal protection (who knew?), requiring (as mentioned above) that activities provide a benefit to the park.
[quote]The reason we brought forward the amendment — and I would say one of the reasons that the consultation has not been aggressive or thorough on this — is that we are seeking to ensure that we have the statutory authority for things that up until now we took for granted that we did….
We’ve been advised that the granting of the permits as we have done likely would not stand the test of a [court] review, and therefore, we need to amend the Park Act to ensure that we can continue on with what we have been doing but with the statutory authority so that we would not be in a case where either the granting of or the denial of the application for a permit could be successfully challenged and overturned based on our lack of authority. [Emphasis added][/quote]
Bill 4 paves path for large-scale industrial activity in parks
Bill 4 explicitly allows the environment minister to authorize research into the “the feasibility of the location, design, construction, use, maintenance … of a pipeline,” and research intended to “inform a [government] decision … in relation to the boundaries of the protected area.” The government has suggested that the Bill 4 amendments were mostly for the film industry or low impact academic research. But Bill 4 is clearly equally about large-scale industrial development, such as the pipeline development being investigated by Kinder Morgan.
Surprisingly, while the government acknowledges that Bill 4 is about authorizing permits like the Kinder Morgan park use permit in future, it does not correct the legal error for a permit issued in November. So in our view, Kinder Morgan continues to be acting under an illegal permit.
Agricultural land to be plowed under for industry too
Meanwhile, following on the heels of Bill 4, the B.C. government has introduced legislation (Bill 24, the Agricultural Land Commission Amendment Act) to make industrial activity and urban development on most lands in B.C.’s agricultural land reserve (ALR) easier, threatening B.C.’s food security.
We hope that these two bills are not part of a broader trend towards weakening laws intended to protect the environment and public values in order to give industry more “flexibility.”
Minister Polak and B.C. Premier Christy Clark need to stand up for our parks. They can start by revoking the illegal Kinder Morgan permit, and by committing not to change B.C.’s laws to accommodate industrial development.
Andrew Gage is an environmental lawyer at West Coast Environmental Law. Follow West Coast Environmental Law on Twitter @WCELaw
VANCOUVER – A plebiscite defeat for the company proposing a $6-billion oil pipeline across northern British Columbia may have opened the door for another mega-project.
Supporters of a First Nation-backed alternative to the Enbridge (TSX:ENB) Northern Gateway Pipeline are expected to make an announcement today in Vancouver.
Chiefs from two northern B.C. First Nations will join officials from aboriginal-owned and controlled Eagle Spirit Energy Holdings to announce the plans.
Eagle Spirit formed in late 2012 to promote its vision of a First Nations-managed energy corridor across northern B.C., carrying everything from fibre optic, electrical and water lines to pipelines moving liquefied natural gas and Alberta oil.
David Negrin, president of the privately held B.C.-based Aquilini Group, and a former chief operating officer with Alaska’s Alyeska Pipeline Service, will attend the announcement.
Northern Gateway officials say they have some work to do after a non-binding weekend plebiscite suggested about 60 per cent of Kitimat residents disapprove of plans to make their community the west coast terminus of Enbridge’s pipeline.