Will 2018 be the year that British Columbia’s second environmental intifada erupts?
The biggest story in 2018 for the resource and energy sectors in B.C. will likely be the $7.4 billion Trans Mountain pipeline twinning project, which could be eclipsed only by liquefied natural gas (LNG) – the latter being either a total non-story or the biggest resources story of the year, depending on whether LNG Canada pulls the trigger on a final investment decision.
It’s anyone’s guess whether LNG Canada will announce a final investment decision on its $40 billion project in Kitimat in 2018 or if construction will start on the smaller Woodfibre LNG plant in Squamish. Construction on the latter was supposed to have started by now, but the construction schedule has been delayed.
As for other resource industries, like forestry and mining, they appear to be well on track for continued growth.
The Trans Mountain expansion project might have been underway by now, but its schedule has been pushed back nine months due to delays in permitting, with the City of Burnaby being the biggest obstacle.
In mid-December, the National Energy Board (NEB) ruled that Kinder Morgan Canada (TSX:KML) can bypass Burnaby’s bylaws and proceed with the expansion of its Westridge Marine Terminal.
Up to 4,500 workers are expected to be employed on the project (in B.C. and Alberta) at peak construction.
According to the STEM Spotlight Awards, which promote careers in science, technology, engineering and mathematics, the Trans Mountain twinning project will generate 450 skilled trades jobs each year during the construction period for each of five “spreads” of the project. Those jobs include 105 heavy equipment operators, 170 labourers and welder helpers, 44 welders and 50 contract managers (foremen) for each spread.
But First Nations and environmental activists have threatened civil disobedience against the pipeline project on a scale not seen in B.C. since the 1990s War in the Woods over clear-cutting in Clayoquot Sound.
There could also be increased civil disobedience over fish farms and the Site C dam.
“I think we’re going to find out in 2018 whether Canada’s a land with the rule of law or whether Canada is on a track to being a Venezuela – a country with no law, lots of resources and inability to produce the things that it uses every day by everybody,” said Stewart Muir, executive director for Resource Works.
From forestry to mining and oil and gas, B.C.’s resource sectors have been benefiting from commodity price lifts.
Despite American softwood lumber duties, B.C. forestry companies are seeing strong profits, and mines that had been shut down have either already restarted or are expected to restart in 2018.
The one uncertainty for resource-sector companies is BC NDP government policy. From fish farms to fracking, all are up for some form of review by the new government.
A moratorium on new fish farm licence applications has been in place since 2015, and a special advisory panel on aquaculture, struck by the previous BC Liberal government, has been reviewing the aquaculture industry. It will provide the new government with a report early in the new year.
But the NDP already has some strong negative opinions about the industry. In October, B.C. Agriculture Minister Lana Popham threatened not to renew a tenure for Marine Harvest’s Port Elizabeth fish farm, which is up for renewal in 2018, due to opposition from First Nations and anti-fish-farm activists.
Premier John Horgan offered little reassurance to the industry when he seemed to suggest closed-containment systems – which have yet to turn a profit, despite millions in government subsidies – as the way forward for salmon aquaculture in B.C.
Ultimately, Muir thinks the NDP government will recognize the value salmon farming provides to the B.C. economy.
“The premier is going to have to consider the number of jobs, the export value, what that means for the health of the economy in B.C. as to how this fits in,” he said.“I think it’s too valuable of an industry to just let go.”
The most significant development for mining might not be the approval or construction of new mines so much as the restarting of idled ones.
One of B.C.’s more controversial mining projects is the Ajax copper mine just outside of Kamloops. In 2018, a decision from the federal Ministry of Environment could decide the proposed mine’s fate.
A prolonged decline in commodity prices resulted in several metallurgical coal and mineral mines shutting down in B.C. in recent years. Two of the met coal mines have since restarted under new owner Conuma Coal Resources Ltd., and Bryan Cox, CEO of the Mining Association of BC, said a number of idled mineral mines are expected to restart in 2018.
One of them is Vancouver Island’s Myra Falls mine. In November, Swiss mining company Nyrstar raised US$118.5 million through a private placement to restart the lead-zinc mine.
Cox also said Conuma is planning to restart the Willow Creek met coal mine in 2018, which would be the third former Walter Energy mine in B.C. to restart.
As for oil and gas, energy companies have been investing billions in the liquids-rich Montney formation in northeastern B.C., despite uncertainty over an LNG industry ever taking off. Whether that level of investment will continue in 2018 under the new BC NDP government is open to debate.
At the end of November, the Fraser Institute published an industry survey that found falling investor confidence in both B.C and Alberta.
“British Columbia’s score dropped significantly this year,” the survey stated, “and investors now view this province as Canada’s least attractive jurisdiction for investment.”
There is a perception that the NDP government is hostile toward oil and gas – a perception B.C. Energy, Mines and Petroleum Resources Minister Michelle Mungall has strived, both in the legislature and in public, to change.
In question period, Mungall has asserted her government’s support for the natural gas and LNG industries. She also appeared in November at a Greater Vancouver Board of Trade discussion with LNG Canada’s CEO, where she confirmed her government is giving serious consideration to the concerns LNG Canada has expressed over issues like tax competitiveness.
But the industry in B.C. is facing rising carbon taxes, and the NDP government plans to initiate a scientific review of hydraulic fracturing in B.C.
But Muir doesn’t think that will be a major obstacle.
“I don’t think there’s any reason to think the gas industry in B.C. has got a target on its back,” he said. “It’s got the right culture of continuous improvement to survive what it’s required to do.”
As for B.C.’s forestry sector, it is enjoying a period of prosperity, despite new duties of approximately 20% slapped on softwood lumber exports to the U.S.
According to Wood Resources International, softwood lumber prices hit an all-time high in the U.S. in 2017’s third quarter, driven by new housing starts and a strong renovation and remodelling market.
That demand is expected to continue, especially given an anticipated spike in demand for lumber for rebuilding in the wake of hurricanes that pounded the southern U.S. in 2017.
“Fortunately, prices have been fairly robust and markets have been pretty good for the lumber in the U.S.,” said Susan Yurkovich, CEO of the Council of Forest Industries. “So that has really insulated us a bit from these additional duties.”
