Liberals’ LNG fixation shortchanged other sectors: critics

Since the 2013 election, Christy Clark’s government failed to deliver on LNG promises and presided over a major mining disaster, but the province still prospered
Slated to go into operation this year, the new Brucejack gold mine will be the third new mine in B.C. since the last election. | Pretium Reources

It was the cornerstone of Premier Christy Clark’s BC Jobs Plan in the lead-up to the 2013 election.

A new liquefied natural gas (LNG) industry would create 39,000 construction jobs and  $1 trillion in GDP growth over 30 years, and would generate enough tax and royalty revenue to build up a $100 billion prosperity fund.

The Liberal government did end up seeding the prosperity fund with $100 million in 2016. Billions of dollars in new investment have also flowed into northeastern B.C.’s natural gas fields, and B.C. leads the country in growth.

But none of that is directly attributable to a nascent LNG industry, not even the investment boom in northeastern B.C., which is being driven by the Montney formation’s liquids (oil, condensate, propane).

A number of LNG projects have either stalled or been abandoned. One of the few signs of progress on the LNG front is a small project in Squamish – the $1.6 billion Woodfibre LNG plant. It’s the only project to date to get a final investment decision.

“On LNG, it is clear the government over-promised when it talked about five LNG plants by 2020 and a vast new prosperity fund largely financed with LNG-related revenue streams,” said Jock Finlayson, executive vice-president and chief policy officer for the Business Council of BC.

“That said, continued upstream gas investment in northeastern B.C. suggests that the prospect of LNG remains alive and that we may well see a couple of significant projects advance in the next few years.”

Finlayson said it’s odd that the Liberal government has focused exclusively on exporting B.C.’s abundant natural gas and not promoted its use as an energy source domestically “even though it’s the cheapest option.”

Werner Antweiler, an associate professor at the University of British Columbia’s Sauder School of Business, said the BC Liberal government can’t really be faulted for companies like Shell and Petronas postponing final investment decisions that were expected in 2015 or 2016.

“They did everything they could, but it’s not enough if the world prices for natural gas are collapsing and the markets are disappearing.”

However, Stewart Muir, executive director for the natural resources sector lobby group Resource Works, said the long view on B.C.’s LNG sector is more positive. “There will be a temptation to regard LNG as a failure. However, if you look at the foundational pieces that have been laid down to facilitate this longer-than-expected pursuit, and the new activity in liquids [in northeastern B.C.], one could equally say that the oil and gas sector has been building the right pieces all along.”

NDP Leader John Horgan is less forgiving.

He said the Liberals fixated on one industry to the exclusion of B.C.’s other natural resource sectors.

“The problem here is that this government has pursued LNG at the expense of our foundational industry: forestry. The government’s been chasing its tail in a market that we knew three years ago was saturated.”

Forestry: Investment heads south

Finlayson agreed that the Liberal government appears to have neglected B.C.’s forestry sector. Sawmills and pulp mills have closed, and B.C.’s three biggest forestry companies have invested so heavily in the U.S. that they now own more mills there than in Canada. Only in the most recent budget did the Liberal government finally give the pulp and paper sector a break in the form of a 3.5% cut to the PST on power sales.

Despite those challenges, exports of lumber and other wood products hit $10 billion in 2016 – a $2.3 billion increase over 2013 – thanks to a recovery in the U.S. housing market and new markets in Asia.

(See related election issue story on raw log exports.)

Mining: Three new mines, one black eye

An oversupply of metallurgical coal and copper – key commodities for B.C. – resulted in five coal mines and one copper mine (Huckleberry) shutting down in B.C. since the last election, although two coal mines restarted under new owners in 2016.

On the other hand, in 2013, the first new greenfield mine project to be built in B.C. in more than a decade – the $1.5 billion Mount Milligan copper-gold mine – went into operation, followed by the new $500 million Red Chris copper mine in 2015.

Red Chris, built by Imperial Metals (TSX:III), was made possible thanks to the completion of the $746 million Northwest Transmission Line and associated $700 million Forrest Kerr run-of-river power project built by AltaGas (TSX:ALA). It has opened the Golden Triangle in northwest B.C. to mining.

The Pretium Resources Inc. (TSX:PVG) Brucejack mine, which is expected to be in production in April, will be the third mine to open in the Liberal government's current term.

But the opening of Red Chris was overshadowed by another mine owned by Imperial Metals: Mount Polley. A tailings pond collapse in 2014 ended up giving the mining industry in B.C. a black eye.

Horgan lays the blame for that disaster at the feet of the Liberal government.

He said a decade of neglect on enforcement and compliance, and a professional reliance model that allows for too much self-regulation by resource sectors like mining have undermined public confidence.

Green Party Leader Andrew Weaver agrees.

“While we have great projects out there, the public trust is not supporting them to the scale that they could because of the mismanagement and the professional reliance model and the lack of regulatory oversight,” he said.

Power: Site C kills private power sector

B.C. industries – particularly pulp mills and mines – have struggled under rising electricity costs and carbon taxes. B.C.’s one competitive advantage – cheap power – has eroded in recent years.

The government’s decision to focus on one large mega-power project – the $9 billion Site C dam project – not only threatens to continue pushing energy costs up,but also has virtually killed a relatively new industry: the independent power producer.

More than a decade of building new wind farms and run-of-river hydro projects has come to a halt. That has been welcomed in some quarters, because critics believe renewable energy projects have been subsidized at above-market rates, driving up electricity prices for all.

Antweiler said B.C. has ignored one potentially valuable energy source: geothermal power.

“British Columbia has a lot of geothermal resources,” he said, “and we have done zilch about it.”

Pipelines: B.C.’s fair share looks like extortion

The one resource sector that prompted more controversy in B.C. than any other issue was something that doesn’t belong to B.C.: Alberta oil.

The Liberal government stated it would support the Northern Gateway or Trans Mountain pipeline expansion projects only if five conditions were met. One of those conditions was that B.C. get its fair share of royalties – to which Kinder Morgan eventually capitulated.

The company agreed to a revenue-sharing agreement under which B.C. will receive $1 billion over 20 years.

But the oil is produced in Alberta; B.C. is only a transit point. Charging a toll for moving a product from one province through another sets a bad precedent, Antweiler said.

“That’s just not a way provinces should act. If they just had given the green light without trying to extract money in that way, I think it would have been better.”

Agri-food: It’s growing

B.C. farmers, food processors, seafood businesses and wineries set a record in 2015, selling  $3.8 billion worth of exports outside of Canada. That’s nearly $1 billion in growth since 2014. Thanks in part to both provincial and federal government marketing efforts, new markets have opened up in Asia for B.C. food products.

“I think the province does deserve some credit for promoting and encouraging the growth of the agri-food sector,” Finlayson said, “although, again, markets and currencies and all those things are more important at the end of the day.”

Editor's note: This story was changed March 15 to correct an error, in which the earlier version stated Brucejack mine was made possible by the new Northwest Transmission Line. In fact, the mine is getting its power from the Aiyansh-Stewart Transmission Line.

nbennett@biv.com

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