Will methane asphyxiate Green support for the minority NDP government?
THERE IS AN ALICE IN WONDERLAND QUALITY surrounding BC’s prickly debate over liquefied natural gas (LNG) development. The story starts with a fantasy, characters shift roles, and the outcome is based on unknowns. However, decisions made on the future of the LNG industry are likely to profoundly affect the province.
The former Liberal government’s rose-coloured vision of a prosperous LNG-fuelled future, with 20 terminals and 10,000 jobs, faltered and died as the reality of LNG economics, with low prices and oversupply, sent investors running for the hills.
It was a rout applauded by the NDP, who had doggedly criticized the Liberals’ generous giveaways to the industry, and by the BC Greens, who warned that one major LNG terminal and the associated increase in fracking would send the province’s greenhouse gas emissions soaring to levels that would require all other sectors of the economy to cut emissions by 95 percent by 2050.
Fast-forward to March, when Premier John Horgan announced financial incentives for LNG investors, including temporary relief from provincial sales taxes and rebates for carbon tax increases if the facility meets “best-in-the-world” standards.
In the words of Lewis Carroll in Alice in Wonderland, “curiouser and curiouser.”
Green leader Andrew Weaver and BC Premier John Horgan
Under the New Democrats, LNG projects that meet the standards will pay a carbon tax of $30 per tonne in 2021, instead of $50 per tonne. And, instead of plants paying a higher rate for electricity, as was set under the Liberal legislation, LNG producers will pay the standard industrial rate.
The concessions are aimed at persuading the multi-national consortium LNG Canada to proceed with a planned $40-billion project, with a natural gas export terminal in Kitimat linked to massive natural gas reserves in northeast BC by a 670-kilometre pipeline.
The incentives offer a framework for the industry and are substantially different from the package offered by the Liberals, Horgan insisted at a news conference. “What I believe is different from the approach of the previous government and the approach we are taking is that, if there is a benefit to British Columbians, we want to make it transparent and obvious to everyone and we are not going to sign a blank cheque for LNG Canada or any other proponent that may come forward,” he said.
Concessions would not click in until a company makes a final investment decision, said Horgan. “The previous Liberal government brought forward a whole host of legislation that locked the Province in without ever getting a final investment decision to take place,” he said.
It will not be an easy decision, the premier admitted. “Potential opportunity is extraordinary. Potential risks are significant,” said Horgan, who is also acutely aware of the political risks to his government, which is supported by the three-member Green Party caucus.
The exemptions will cost about $6 billion over 40 years, but government is hoping the LNG Canada project will generate $22 billion over 40 years from natural gas royalties and income tax, plus 10,000 construction jobs and 950 permanent jobs once construction is completed.
The prospect of encouraging an LNG export industry sent BC Green leader Andrew Weaver, a climate scientist, into tirades as he threatened to bring down the government, claiming the NDP had sweetened the pot beyond the industry’s wildest dreams.
“We will not support legislative changes that literally continue a generational sell-off of a resource to offshore interests,” Weaver said. LNG Canada would blow the Province’s climate targets right out of the water, he said, noting, “You cannot add ten megatonnes of emissions and somehow think we are going to reduce by 80 percent by 2050. There is simply no possible path to do that. It’s impossible.”
Calculations of carbon dioxide emissions from the LNG Canada plant range from government estimates of four megatonnes annually to Pembina Institute’s estimate of 8.6 megatonnes annually in 2030, if all phases of the project are built out, and 9.6 megatonnes in 2050.
The core of the controversy is that although Horgan says any LNG development must fit within the Province’s climate targets, Weaver believes that is impossible.
But Weaver stopped short of immediately withdrawing support for the NDP, saying he will wait and see what the climate action plan sets out. “We are giving them a chance to develop that plan and show us they can do it,” Weaver said. “If we don’t see a climate plan that meets the targets, our support for the NDP will vapourize.”
Environmental groups were also taken aback by Horgan’s announcement, even though the NDP election platform had made it clear that LNG development would be considered, provided it offered a fair return for the resource, guaranteed jobs for British Columbians, included partnerships with First Nations that helped lead to true reconciliation, and met the Province’s climate commitments.
Jens Wieting, Sierra Club BC forest and climate campaigner, said the concessions are a form of climate change denial that would spell disaster. “By sweetening the pot for fracked gas export, the government is laying out a red carpet for investors to help destroy our climate,” he said.
Similar messages came from the David Suzuki Foundation, which criticized the government for ignoring the industry’s carbon footprint and pointed out that underreported fugitive methane emissions produced by fracking are among Canada’s most serious greenhouse gas problems.
Fracking involves pumping large amounts of mud, water and chemicals into the ground, creating enough pressure to crack open rocks and release the natural gas. The gas is turned into a liquid by cooling it to -160 degrees C.
Now, all sides are looking warily towards the next steps.
The deciding factors will be the shape of the government’s climate action plan and final investment decisions later this year by LNG Canada and the much smaller, $1.4-billion Woodfibre LNG project in Squamish.
Those investment decisions will be influenced by a federal government ruling on whether to exempt large LNG modules from a 45.8 percent anti-dumping duty, placed last year on fabricated steel products from China and South Korea. LNG Canada is planning to import modules from China.
Much will also depend on market conditions, but, after years of over-supply and slumping prices for natural gas, analysts are cautiously optimistic. Dulles Wang, Wood Mackenzie analyst, speaking at a webinar in April, said the oversupply situation is unlikely to continue and the global market could be looking for a new supply as early as 2022. “The challenge, though, is that there are just a lot of projects out there targeting the window of opportunity…So there’s a sense of urgency for the Canadian projects if they want to be into that timeframe,” he said.
But, with no final investment decisions, no climate action plan, and no legislation setting out Provincial concessions to the industry, there are few definitive answers.
“Right now we are in the hypothetical stage,” said Weaver.
Legislation is likely to be introduced this fall, and one of many unanswered questions is—even if the Greens withdraw support—where the votes would fall. Some New Democrats remain upset with the LNG plan, and some Liberals could vote in favour of what is seen as a business-friendly move.
Sonia Furstenau, Green Party MLA for Cowichan Valley, said the Greens have been hearing from disaffected New Democrats. “We have seen quite a significant number reach out to us about that disappointment. Lots of emails and phone calls and contacts. I think [the NDP] have to think very hard about what they want their legacy to be and who they are representing. I would expect that, within their own caucus, there is division and disappointment over this,” Furstenau said.
Weaver has come in for criticism for not immediately withdrawing his support for the NDP, but Furstenau said most Green party members want to see a thoughtful and measured response, and the three Green MLAs are aware of their responsibility to work for all British Columbians.
One certainty is that, for the Greens, any vote will be rooted firmly in the contents of the climate action plan. “It comes down to a responsibility to future generations,” said Furstenau.
Judith Lavoie is an award-winning journalist specializing in the environment, First Nations, and social issues. Twitter @LavoieJudith.