Oil pipelines approved
The biggest energy story for 2016 came at the tail end of the year. On November 29, Prime Minister Justin Trudeau announced his government’s rejection of the $7.9 billion Northern Gateway pipeline and approval of the $6.8 billion Trans Mountain expansion between Alberta and Burnaby and the $7.5 billion Line 3 refurbishment from Alberta to Wisconsin. Combined, the Line 3 and Trans Mountain projects represent more than $14 billion in investment and would add roughly 960,000 barrels per day of additional pipeline capacity for Alberta oil, most of it destined for the U.S. market. “It will create 15,000 new middle-class jobs, the majority of them in the trades,” Trudeau said of the two projects.
FIDs on LNG were MIA
The year just ended was the year final investment decisions on two large liquefied natural gas (LNG) projects, worth an estimated $80 billion, were expected. Those decisions never came. Petronas and Shell announced they were deferring financial commitments to their respective projects – the Pacific NorthWest LNG project in Prince Rupert and LNG Canada project in Kitimat. A sustained plunge in oil prices, delays in getting regulatory approvals and a sudden glut of LNG on the market from Australia forced both companies to hit the pause button. However, one smaller project, the $1.7 billion Woodfibre LNG project in Squamish, received a final investment decision in November.
Site C
Site preparation work for the $9 billion Site C hydroelectric dam on the Peace River began in earnest in 2016. BC Hydro reported that in May 2016, 1,547 people were employed at the site – 1,223 of them B.C. workers. For Peace region communities such as Fort St. John, the project has cushioned the blow of a dramatic downturn in natural gas drilling. Despite the job creation, the project continued to generate controversy. Dam opponents occupied the site, and concerns continued to be raised that the dam is unnecessary and will produce a vast surplus of power when completed.
Dry gas investment dries up
Northeastern B.C.’s Peace region had the province’s highest unemployment numbers in B.C. in 2016, and new housing starts in communities like Fort St. John and Dawson Creek took serious dips, thanks to a dramatic slowdown in natural gas well drilling, due to the uncertainty around a nascent LNG industry. In June 2014, an average of 27 oil and gas rigs were at work in B.C., according to the Canadian Association of Oilwell Drilling Contractors. In June 2016, there were just seven. The number of workers in the field dropped from an estimated 3,600 in June 2014 to under 1,000 in June 2016.
Wet gas investments soar
While some energy companies were quitting the Peace, bringing drilling for dry gas to a near standstill in the region, others were announcing hundreds of millions of dollars of investment in processing plants and pipelines for “wet” gas: light oil, butane, propane and condensate. Investments announced in 2016 included a $930 million gas processing plant planned by Veresen (TSX:VSN) and the Cutbank Ridge Partnership (Mitsubishi Corp. and Encana), a $360 million pipeline network announced by Westcoast Energy (TSX:W-H) and a $200 millionto $300 million commitment by Encana (TSX:ECA). In July 2016, AltaGas (TSX:ALA) announced the commissioning of its new $350 million Townsend gas processing plant.
Carbon taxes
A long-awaited update to B.C.’s climate action plan in August was panned by the Pembina Institute as a disappointment, when the province announced it would continue to keep the carbon tax frozen at $30 per tonne for the foreseeable future. The updated plan included the goal of reducing methane leaks from the natural gas industry by 45% by 2025 and a commitment to building transmission lines to electrify the natural gas sector. In October, the Trudeau government announced a national carbon pricing scheme that starts at $10 per tonne and rises to $50 per tonne by 2022.
Endurance Wind Power goes bankrupt
In early November, Endurance Wind Power, which had employed 160 people at its manufacturing plant in Surrey, filed for bankruptcy. The company, which made wind turbines for the distributed power sector, primarily in the U.K., was forced into bankruptcy when its bank called in its loan. The company was facing a serious downturn in business after the U.K. government slashed its feed-in tariffs for renewable energy. The action also resulted in its U.K. divisions filing for bankruptcy.
– Nelson Bennett
