I bet Premier Christy Clark would love for Christmas nothing more than a time machine that could blast her into the future to see whether her government's LNG play will pay off.
I'm happy to tell the premier, however, that time travel won't be necessary – she, and everyone else in this province, need only bone up on the development of B.C.'s pulp and paper industry to learn what's in store for LNG.
A recap for those who've been under a rock the last two years: the world's largest energy companies have made landfall on B.C.'s northwest coast and proposed tens of billions of dollars in investment to build a liquefied natural gas export industry.
At the Union of BC Municipalities (UBCM) in September, Premier Clark touted the nascent industry as a "generational opportunity" for our province.
The last time our province had an industrial development opportunity of this magnitude, W.A.C. Bennett was premier, the Canadian Red Ensign fluttered above Parliament Hill and there were more than 600 sawmills operating in the Prince George forest district.
I am not a historian, but it doesn't take a scholar to draw the conclusion that the current government's northern development plans reflect shades of what Bennett's administration pulled together in the 1960s.
Consider the similarities:
- The current government's focus on power development to support industrial expansion (Site C), which is nearly identical to the Bennett government's belief that an abundant supply of relatively cheap power would promote industrialization (the Peace system); and
- The province's development of a tax regime that will keep B.C. competitive with other LNG-producing jurisdictions, which is not unlike Social Credit Forests Minister Ray Williston's creation of the province's Pulpwood Harvesting Areas.
The context of the developments is also similar.
Both the LNG and pulp and paper sectors in B.C. were proposed amid an enormous increase in global demand for their respective commodities, and both industries are capital intensive and were slated for development within a short span of years.
In 1960, there were no pulp mills in B.C.'s Interior.
By 1970, three had been built in Prince George, a second added in Prince Rupert and nearly half a dozen more were built, planned or proposed in Kitimat, Mackenzie, Quesnel and Houston.
Sound familiar?
In short, the pulp and paper playbook of that era has been dusted off and is being referred to for the LNG wave to come.
In many ways, Rich Coleman, minister for natural gas development and deputy premier, is in the same seat occupied by Williston half a century ago.
There are obvious differences – in Williston's day, flooding an entire valley to make way for a dam was a slam-dunk, and acknowledgment of aboriginal rights and title and environmental issues were hardly a blip on the government's radar.
At the time, forestry companies were reluctant to dive headfirst into an industry that had yet to be proven in B.C.'s Interior.
But the Bennett administration had a vision for northern development that would reap huge rewards for the entire province, and so Williston plunged knee-deep in negotiations with industry, which eventually led to the creation of the Pulpwood Harvesting agreements that gave forestry companies the security of supply they needed to invest capital in pulp mills.
If the pulp and paper industry is proof of anything, it's that the role of government in industrial development is crucial.
In that regard, kudos to the Clark government and Minister Coleman for stepping up to the plate. But what happens when one of these energy giants finally makes a decision to build an LNG terminal?
Well, Prince George's population soared 39.4% between 1961 and 1966 amid the development of the pulp and paper sector, which spurred housing and retail booms and further industrial development.
In tandem with that boom came housing shortages, and a massive wave of transient male workers with money to spend and time to spend it.
Social challenges ensued.
To give a sense of what's in store for our communities today, the Shell, Chevron and Petronas LNG projects would bring a combined 12,000 construction workers to the North, which is approximately the population of Prince Rupert.
It's also likely the case that the initial capital costs associated with these LNG terminals are on the low end – Prince George Pulp and Paper was 68% over its original $84 million budget when it was built in 1966.
LNG projects are experiencing the same cost overruns in Australia today.
An LNG report this month from Platts estimated that most of Australia's LNG projects in the last few years have been anywhere between 15% and 50% over budget, leading some of the projects to be delayed or even shelved.
But the real wild card in B.C.'s LNG race won't be capital costs and tax regimes; after all, the Bennett pulp and paper playbook has answers that can be adapted to today's challenges.
The real challenge for our current leadership will be opposition from environmental groups and possibly First Nations – the piece of the puzzle Williston never really had to deal with.
As it stands, oil pipeline proposals have distracted environmental groups away from B.C.'s LNG industry.
But once the bitumen issue has been dealt with, government and industry best prepare themselves for an onslaught against fracking, pipelines, gas tankers and the like.
On the good news front, the relationship between government, industry and First Nations looks solid and genuine: the $200 million gas development agreement inked earlier this year between 15 First Nations and Pacific Trails Pipelines is a perfect example of that.
It's not inconceivable that the model created in B.C. for LNG development today will be a global standard in the years ahead.
Yet despite these successes, there remains a cohort of individuals in this province who believe LNG is a pipe dream.
I would remind the naysayers that prior to the pulp and paper boom in the 1960s, MacMillan Bloedel, once B.C.'s premier forestry company, conducted a study that concluded that a pulp mill would never be feasible in the North.
MacBlo refused to invest in Prince George, paving the way for companies such as Canfor, West Fraser and others to take the initiative and build a value-added economy in the North that used what was essentially sawmill waste to manufacture a product in demand the world over.
Half a century later, I'm happy to report that I live within 10 kilometres of Prince George's three operating pulp mills, which still employ hundreds of workers and generate millions of dollars in value for my city and every British Columbian.
The same could be said for the pulp mills in Mackenzie, Quesnel, Taylor, Kamloops, Castlegar, Crofton, Port Alberni, Powell River, Nanaimo and New Westminster.
Like pulp and paper, LNG is here, and I suspect it's here to stay. •
