Your tax dollars at work: LNG Canada is creating much-needed employment in Zhuhai, China.
AN OFT-TOUTED HIGHLIGHT of the liquefied natural gas (LNG) cult is the vast number of jobs it will bring to BC Liberal-voting regions in northern British Columbia. As recently as June 9, 2019, LNG Canada said in a statement that its Kitimat project “will bring 10,000 jobs during construction.” In case any doubting Thomases were still unclear, the federal government enhanced the number in a June 25, 2019 news release, claiming that the LNG Canada facility “will ultimately create over 10,000 jobs.”
Alas, it is not to be. According to the latest company overview on the LNG Canada website, the number working at the Kitimat site will peak at “4,500 people.” So where are the other 5,500?
The Texas company leading the construction offers a clue as to where at least some of the 5,500 are hiding. Fluor Corporation—which holds the construction contract in a joint venture with Japan-based JGC Corporation—boasted to investors on August 2, 2018 that it had cut on-site jobs by “over 35 percent,” in part due to its use of “fabrication capabilities” to perform much of the LNG Canada work. So where are these wonderful fabrication capabilities? In Prince Rupert? Terrace? Burns Lake? Smithers? Surely in BC?
Well, er, not as such. Not even in North America.
The site is in Zhuhai, China. The “fabrication yard,” in Guangdong province, not far from Hong Kong, is huge: more than 200 hectares—roughly three times the size of Beacon Hill Park. It’s another Fluor joint venture, this time with the Offshore Oil Engineering Company—controlled by the Beijing-based China National Offshore Oil Corporation. That’s where the LNG “modules” that form the guts of the facility are being built. Well done, BC and federal governments: The $7.3 billion-and-counting handouts to LNG Canada are boosting employment in the world’s second-largest economy—in a country that is not exactly on Canada’s Christmas list these days.
Artist rendering of the LNG Canada project at Kitimat
Meanwhile, on August 1, 2019, Fluor revealed what executive chairman Alan Boeckmann called “serious” issues with the company’s performance, saying he was “extremely disappointed” in its results. In the three months ending June 30, the company lost $555 million US. It canned both its chief executive officer and its chief financial officer, and to bring in cash, it is selling off real estate and cashing in some insurance policies.
Among Fluor’s worries are fixed-price contracts; it will no longer bid on some of them. In a fixed-price contract signed last year, Fluor and JGC agreed to build the Kitimat plant for $14 billion US, even though Fluor has never before constructed an LNG export facility.
Fluor’s shares have continued to fall—plummeting from $58.61 when LNG Canada gave the final go-ahead on October 1, 2018 to $17.38 on August 16, 2019—a 70 percent drop in less than 11 months. Newly hired chief financial officer Carlos Hernandez told investors in a conference call August 1 that although the LNG Canada project is in its early stages, it was “on schedule and on budget.” However, Fluor plainly had some concerns about the Kitimat contract. “We brought up a number of expats to augment our critical activity there,” Hernandez said in the call.
Apart from all the jobs that the LNG fustercluck is not creating in Canada, what about a much larger worry: How much damage will the LNG facility do to the planet?
In June 2019, the San Francisco-based Global Energy Monitor published The New Gas Boom, a report on the 166 LNG export plants now being developed worldwide. The report includes detailed estimates of emissions from LNG production, transport and combustion—and they are a lot higher than what the BC government and LNG Canada would have us believe. For instance, the BC government claims that the LNG facility itself will produce 4.2 million tonnes (Mt) of GHGs per year once the plant is operating at its full capacity, 28 million tonnes of LNG annually. (GHGs are measured in carbon dioxide equivalents, or CO2e.) That’s just the plant itself, not counting the emissions from fracking the gas out of the ground, from sending it through the 670 km Coastal GasLink pipeline to Kitimat, from transporting the LNG to Asia, and from burning it.
Using data from the Global Energy Monitor report, LNG Canada’s Kitimat facility alone will, in fact, produce 8.7 Mt of GHGs annually—more than twice the BC government’s claim. And including emissions from all the other parts of the chain, LNG Canada will be adding no less than 124.9 Mt annually to the world’s planet-wrecking emissions. That is roughly one-sixth of Canada’s total GHG emissions (716 Mt) in 2017.
Ted Nace is the executive director of Global Energy Monitor, and a co-author of the report. In an interview, Nace pointed to the quickly-dropping total costs of renewable energy, taking into account capital costs, estimated lifetime, the discount rate, and maintenance costs, among other factors. A November 2018 Lazard Bank report found that wind power is now cheaper or comparable in cost to the most efficient gas turbines in all six economies studied. As well, solar electricity and other renewable energy sources are cheaper than many other fossil fuel types. Said Nace: “In terms of displacing coal, economically LNG is not competitive with renewable power in Asian markets.”
As for the purported high-efficiency gas turbines that LNG Canada says it will use to compress natural gas into liquid form, GHG emissions from the actual turbines are negligible, resulting in only around seven percent of LNG’s life-cycle emissions. “It’s not going to change much,” Nace said. “It’s shocking that the Canadian and British Columbia governments would shell out billions of dollars for this—it’s crazy.”
Not content in doling out $1 billion in tariff waivers for the imported modules, on June 24, 2019, federal Minister of Finance Bill Morneau hiked it up to Kitimat to re-announce Prime Minister Justin Trudeau’s October 2, 2018 $220 million gift to the foreign consortium, purportedly to “help fund highly energy-efficient gas turbines minimizing both greenhouse gases and fuel use.”
Reduce GHGs? By how much? The announcement didn’t say, and when I asked Innovation, Science and Economic Development Canada, a spokesman referred me to LNG Canada. Did the feds have no idea of the impact on GHG emissions before doling out their $220 million gift to Royal Dutch Shell and its four equally foreign partners? Still interested in learning by how much the $220 million would cut emissions, I dutifully asked LNG Canada. In response, I received a statement attributed to Susannah Pierce, LNG Canada’s director of external relations. After insisting that the facility is expected to have a GHG intensity 30 percent lower than the best currently operating LNG plants, the statement included this gem: “The grant will not be used for further GHG reductions.”
The feds turned over $220 million to LNG Canada to help it buy turbines they were going to buy anyway? It sounds an awful lot like the old “get the money out the door” syndrome that afflicts governments worldwide. Despite all the babble about minding the public purse, etc, etc, in practice, the worst possible outcome for a government agency is to underspend its budget. Why? Because then looms the mortal terror that the agency would get that much less in next year’s budget.
The increasing corporate welfare payments that support boosting GHG emissions might be less worrisome if we had another decade or two to start cutting emissions. We do not. According to last year’s Intergovernmental Panel on Climate Change report, if we want to keep the global temperature rise to 1.5 degrees Celsius, we have until the end of 2020 to start cutting GHG emissions. If the Earth is to remain habitable, GHG emissions must peak in a little over one year from now.
Here’s a much more effective and much cheaper suggestion to reduce GHGs resulting from the plant: Stop building it—now. With most of the fabrication jobs going to China, the rest of the LNG plant-building ones are a short-term prospect, comparable to hula hoop manufacturing. Still, jobs are needed in those northern BC communities.
Federal Green Party leader Elizabeth May has worked out a potential solution: On August 7, she proposed a plan to help workers transfer from fossil fuels to renewable energy, to retrofit buildings for higher energy standards, and to clean up the environmental mess left at wells abandoned by oil and gas companies.
Supposing that it finally sees the light, can the BC government get out of the horrendous LNG Canada mess? Of course. In case any carbon-head isn’t convinced, paragraph 15.12 in the March 2019 Operating Performance Payments Agreement between BC and LNG Canada spells it out:
“Proponent [LNG Canada] expressly acknowledges and agrees that nothing in this Agreement will be construed as an agreement by the Province to restrict, limit or otherwise fetter in any manner the Province’s ability to introduce, pass, amend, modify, replace, revoke or otherwise exercise any rights or authority regarding legislation, regulations, policies or any other authority of the Province.”
Or, as former NDP forests minister David Zirnhelt put it more succinctly in September, 1996: “Don’t forget that government can do anything.”
Of course, should BC shut down LNG Canada, corporate lawyers would promptly roll up their sleeves, put down payments on luxury yachts, and see how much more they could extract from the Province for interfering with their natural-born right to help make Earth unlivable. It is entirely possible that they might settle for a lot less than $6 billion. After all, even the most fossilized litigants might come to realize that there are no corporate lawyers on a dead planet.
Russ Francis, a former BC government analyst, now wonders whether the climate crisis may soon necessitate a modification of Heraclitus’s maxim: Before long, we may not be able to step into the same river once.