B.C. Green party leader Andrew Weaver and B.C. NDP leader John Horgan speak to media after announcing they’ll be working together to help form a minority government during a press conference at Legislature in Victoria, B.C., on Monday, May 29.
Here we go again. A new government is elected with unrealistic promises to restructure the energy system and new uncertainty is created for all those whose livelihood depended on the old one.
The next jurisdiction in line for an energy shock is British Columbia, where an NDP-Green coalition is poised to form government and planning energy reforms that make those of the Alberta NDP and the Federal Liberals look like a warm up.
The reforms are expected to scuttle all types of energy projects that aren’t in the right shade of green. The Trans Mountain pipeline expansion (oil), the Site C dam (hydro), liquefied natural gas (natural gas), shale plays like the Montney (natural gas) are now at the mercy of the new rulers.
Projects that are too far down the road will do whatever it takes to stay the course, as Kinder Morgan has said about its $7.4 billion Trans Mountain project; those that are mid-way through construction like the $8.8 billion Site C dam are in for a rough ride to justify their existence; those that are still in the planning stages, such as LNG export projects and production of gas and oil from the Montney, will be careful about investing at all.
Indeed, Gary Leach, president of the Calgary-based president of the Explorers and Producers Association of Canada, said “a pause button has been hit” by producers active in the Montney, one of the world’s largest shale plays and B.C.’s most promising wealth generators.
“There are definitely some companies that if they have a moment in their budgetary cycle where they don’t have to spend money now, they would wisely be sitting back and saying: ‘Let’s hold on a minute … and make sure it’s still a stable picture’.”
B.C. Liberal Premier Christy Clark is expected to lose a confidence vote when the B.C. legislature is recalled June 22. No party won a majority of seats in the May 9 election, but the NDP and the Greens signed a 10-page agreement that will allow them to form a minority government.
The agreement calls for increasing the carbon tax by $5 a tonne a year beginning April 1, 2018, and expanding the tax to fugitive (or methane) emissions; immediately referring the Site C dam project for a review by the B.C. Utilities Commission; immediately employing every tool available to stop the expansion of the Kinder Morgan pipeline, and to “revitalize” the environmental assessment process in B.C.
But it doesn’t end there. The Green and NDP platforms were either against LNG or had additional conditions for development, and the NDP wants a review of fracking by a scientific panel to ensure natural gas is produced safely. The implied message: kill, obstruct, delay everything that has to do with the existing energy economy.
“The Trans Mountain is the focus, but the BC NDP deal means there will be many impacts on oil and gas,” Dan Tsubouchi, chief market strategist at Stream Asset Financial Management in Calgary, writes in a report to clients where he lists increasing challenges with First Nations, higher carbon taxes, a tougher climate change strategy, a new environmental assessment process as the new negatives in the province.
Leach said slapping a carbon tax on methane emissions piles onto provincial and federal efforts already underway to reduce them through the regulatory system that involve big investments in technology. The review of fracking and the uncertainty over the Site C dam that was intended to provide green power to the LNG sector also send disturbing signals, he said.
“The B.C. energy complex … may not move forward at the pace we think it could,” Leach said.
Meanwhile, those caught in the middle — businesses big and small, workers, investors – are left holding the bag, made redundant by the new priorities and shamed for picking the wrong side.
They include the 2,000 members and clients of the Burnaby-based Independent Contractors and Businesses Association.
“More than 200,000 people in B.C. make a living in construction,” president Chris Gardner said in a statement Thursday. “Another 65,000 people work in forestry and tens of thousands more on pipelines, in the mines, on the water, and in the oil and gas sector – responsibly developing B.C.’s abundant natural resources.
“These are real projects, real jobs and real families. They are not ‘a myth,’ or ‘unicorns,’ as (Green leader Andrew) Weaver so arrogantly dismissed them last week with Horgan standing by his side. When (NDP leader John) Horgan and Weaver talk about ‘yesterday’s economy,’ they demean the work of hundreds of thousands of British Columbians who put on a tool belt every morning and go about building our province.”
They also include people in Fort St. John in Northeast B.C., one of the big hubs of energy-related activity. Many businesses have been working on the Site C project while waiting for LNG investment decisions to go forward and for gas drilling to ramp up.
“I am hearing a lot of concern,” said Fort St. John mayor Lori Ackerman. “We have to ensure that we can have an informed conversation with the government. They need to see the significant advances in technology and safety in the industry. I am a firm believer that we can be a leader in the extraction industries and leaving a lighter footprint.”
Eventually, reality prevails. The B.C. government collects about a billion dollars a year in natural resource revenue, a significant portion from natural gas royalties and land sales, according to the latest budget. Delaying construction of the Site C dam by BC Hydro, a provincial crown corporation, would cost $630 million.
And then there are the opportunity costs of discouraging investment in shale plays, which were expected to be the new investment magnets in Canada as oilsands investment slows down, and in the massive LNG sector, at a time the B.C. economy is slowing. There are also the limitations of building a new energy system based on renewables.
“There is always the potential for a government to shift its stance when it understands better the economic consequences of failing to put in place and encourage resource development,” said Leach, noting Alberta’s NDP softened its policies after winning power and realizing the full extent of its dependency on the existing energy system.