Provincial energy critic, John Horgan was in Prince Rupert on Wednesday and Thursday to meet with local industry leaders, as well as the mayor and city councilors to hear what their priorities are and how the liquefied natural gas (LNG) industry might fit into them.
“What I wanted to hear from council was what their infrastructure priorities are; roadways and so on. But also where LNG fits into the local perspective. We ended up talking about salmon, which is what you do when you’re in Prince Rupert,” says Horgan.
With poll-after-poll being released with the NDP having substantial lead over the ruling Liberals, it seems increasingly likely that Horgan might be BC’s energy minister after the election next year. With that in mind, he has begun talking to industry and communities about what they could expect from an NDP government in Victoria.
In Prince Rupert and Kitimat, he is focusing on the expansion of BC’s exports of LNG to Asia, which is something the NDP is coming out strongly in support of.
“I would like to see at least one terminal in Prince Rupert and one in Kitimat. But whether there will be any at all isn’t up to me, that will be up to the markets,” says Horgan.
At the moment, there are no LNG terminals on the North Coast capable of transporting BC natural gas to markets in Asia. But there are five projects to build one in the works. Three of these are in Kitimat and two are planning to be located in Prince Rupert.
The potential LNG terminals in Prince Rupert are considered by two companies: BG Group, which is the second largest LNG company in the world next to Shell; and Petronas, a state-owned company from Malaysia. Both of these projects are still in their earliest stages though.
The three projects in Kitimat are much farther along, one even has even been granted an export license from the National Energy Board.
Horgan says he doubts all five will get off the ground though since the electricity required to liquefy natural gas is ”immense.” But this is an issue he says an NDP government would look into addressing. But as long as at least one terminal becomes operational the benefit to the BC would be substantial.
The per-unit price for natural gas in Asia is about $12, which is six-times what it is in North American markets. So, even with the cost of liquefying it for transport, it remains a highly profitable product. And since it is extracted here in BC, the provincial government would receive royalties like the Alberta government does from the oil sands, not to mention the tax and lease payments from the gas companies.
All this extra money could be put to use helping Prince Rupert (and other communities) with the biggest issue it faces: infrastructure.
The City of Prince Rupert is currently staring down the barrel of an $80-million infrastructure deficit with no real way to pay for any of it that doesn’t involve borrowing millions of dollars and raising property taxes even further.
There are grants that the City can apply for, but they often have conditions of matching the funding in order to get any, and only being able to be used for specific kinds of projects.
“So what I heard from Jack [Mussallem] and the councilors is that there needs to be some flexibility from the bottom-up. Usually they’re from the top-down. . . communities want that flexibility. They’re happy to access the grants, they’re happy to contribute their share, but they’d prefer to be able to pick the projects that are important to them. I think that’s a reasonable expectation.”
Horgan says that an NDP government could consider using the province’s LNG money for unconditional grants where communities can apply and use the money on their own priorities as long as they contributed their share too.
While the NDP is pushing for an expansion of BC’s LNG exports to Asia, they do so despite the environmental concerns associated with the extraction process known as “fracking,” while they simultaneously oppose letting Alberta export it’s own energy resources to Asia via the Northern Gateway pipeline based entirely on environmental considerations.
Horgan argues promoting tankers full natural gas, while promising to fight tooth-and-nail to prevent tankers full of Albertan bitumen doesn’t represent an unfair double standard.
Besides LNG exports providing a more substantial economic benefit because BC owns the resource, Horgan says that bitumen is simply too dangerous to the environment, while a spill of natural gas at sea wouldn’t be nearly as bad.
“The reason we’re prepared to ship natural gas is that it doesn’t stick to things. If you have a catastrophic oil spill on the North Coast, then we have an environmental disaster. If we have an accident involving natural gas, then it would just vent into the atmosphere. Which is not a good outcome, but not a disaster,” says Horgan.
The means by which natural gas is extracted from the ground, fracking, is known to have substantial environmental risks. The process works by pumping water underground to cause fractures in the rock to let the gas escape. Chemicals and other substances are often added to the water to make this more effective, which can be toxic and even carcinogenic.
As a result fracking can run the risk of contaminating the groundwater supply if something goes wrong. Horgan doesn’t deny that this is a risk, but says the natural gas operations in places like Fort St. James are deep enough to prevent this, and that the risk can be managed with strict regulations and harsh penalties for any rule breakers.