BC's premier unshaken by grim trends for liquefied natural gas. A Tyee interview.
Premier Christy Clark's big LNG promises are running up against falling prices and a glut of global competition, say analysts. The Tyee peppered her with questions about whether her dream for the province still holds. Photo by David P. Ball.
British Columbia Premier Christy Clark won election in 2013 making big promises about the prospects of a liquefied natural gas industry that she said could make the province debt free.
But well into that mandate, with just 17 months until Clark faces voters in 2017, no LNG proponent has made a final investment decision. Reports of a global supply glut and plunging natural gas prices have many observers wondering if any of the 20 plants proposed for B.C. will ever be built.
As Moody's Investors Service Inc., for example, said in April, the "vast majority" of North American LNG proposals will likely be cancelled. "Many sponsors -- including those in the U.S., Canada and Mozambique that have missed that window of opportunity as oil prices have declined -- will face a harder time inking the final contracts, most likely resulting in a delay or a cancellation of their projects," the consulting firm said.
Adding to the challenge for LNG in B.C. is the fight against global warming. The Pembina Institute environmental group estimates operating five LNG plants would double B.C.'s carbon emissions. Could a renewed push to limit carbon emissions, as new Canadian Prime Minister Justin Trudeau has signalled, further derail B.C.'s plans?
In the 2017 B.C. election Clark will face a new NDP leader in John Horgan who is determined to hold her to account on her record. Horgan supports building an LNG industry in the province, but noted in a recent interview with The Tyee that Clark has fuelled unrealistic expectations.
"I've said for years that the market will decide whether this is a good investment or not," Horgan said. "The government of Christy Clark dialed up the hysteria around this resource to a point of disbelief.... The premier dialed it up because she saw political advantage."
Having exploited that political advantage, Clark also risks taking the blame if LNG fails to live up to the promise.
In an interview in Clark's Victoria office, The Tyee spoke with Clark about LNG, the shifting global market, climate change and whether the Site C hydro project will be needed in an LNG-free B.C.
The Tyee: Canadian Prime Minister Justin Trudeau's new government has a goal of limiting global warming to 1.5 degrees Celsius he said at COP 21 in Paris, which is more ambitious than the global consensus of two degrees. How does that affect B.C., particularly the plans for LNG?
Christy Clark: I think the plan for LNG is going to help the world reach that goal. There are 150 coal plants on the books to be built in China. They're not going to stop building those coal plants if they don't have an alternative to provide the energy. We can provide them with that energy, much cleaner energy, to stop those plants from being built.
Are they showing interest in that? I understand imports of gas to China have been flat this year and analysts are saying they may even decline. Do we know China wants our gas?
They are long-term thinkers in China. Their three big oil companies are all investing in British Columbia, have all invested in the LNG business in B.C., so yes, the answer is that's confirmation they're interested in what we're doing.... There isn't any other credible plan for countries like China to be able to get off coal in the near term. In the long term 100 percent renewables is where we all want the world to get to, but that's not going to happen in the near term. LNG is the near-term solution.
According to Bloomberg the price in Asia for LNG was down 45 percent last year, 27 percent this year and is expected to go down another 23 percent next year. There's also a reported glut of projects globally. Has B.C. already missed the window of opportunity?
I don't think so. Companies are continuing to invest. We've got about $20 billion invested on the ground now and I think in a world where over a billion people are looking for energy security, natural gas is going to play a really crucial role. I think at issue today is where will they get that energy? Two hundred million people lifted out of poverty in the last three years. They're using a lot more energy today and a lot of it is coal because they don't have access to natural gas.
In October, the consulting firm IHS Inc. came out with a report saying 19 out of 20 planned gas export projects in the world won't be needed by 2025. Most won't happen. Do you disagree with that?
I don't know. I don't know what the answer is to that. But I do know that in British Columbia we've got one of the most politically, economically stable jurisdictions in the world. That is a huge asset for us... I can't speak to the report. I haven't seen it and I don't know if it's credible, the people who did it. But I would say there are a lot of very unstable jurisdictions with poorly developed proposals that are on the books. But the ones that are being developed in British Columbia have attracted $20 billion in investment for a reason.
From what I've read, Australia's ahead of us, the U.S. has a bunch of projects in the mix, then there's B.C. and Mozambique. I'm not sure Australia and the U.S. could be categorized as unstable.
I can't speak to it. I haven't seen the report, but there a lot of countries that are proposing natural gas export. Russia, all those little former Russian republics, a lot of places around the world. And a lot of places the natural gas is hard to access, expensive to access, it's a low quality product. Those are also assets that British Columbia bring to it. But we have to be competitive, there's no question about it. And our competitors are looking at us and asking the same question of themselves.
Jeffrey Currie, the head of commodities research at Goldman Sachs in New York said in September about the 20 plants planned in Canada, the Canadian plants, "The higher costs associated with projects there, in part because of environmental opposition, makes it even less likely that they'll be built." I take it from what you've said so far you disagree and I'm wondering why?
We've settled many of the environmental questions with it. I think that would have been a very relative concern to pose three years ago, but we've brought in this very strong environmental legislation, we've got pretty broad agreement from First Nations and communities along the way, we have the highest standards for extraction of the gas anywhere in the world. I think the Alberta bitumen debate has alerted people to the risks of moving oil, and I think the risk of moving natural gas are pretty small compared to that. There are risks we need to be aware of and we need to protect against, but the risk of a spill of natural gas outside Kitimat to the ocean is small compared to the risk of bitumen spilling.
One project that's been at the forefront is the one involving Petronas, which is owned by the Malaysian government. Prime Minister Najib Razak was found to have $700 million U.S. in a personal account that he said came from a donor. He was quoted this week saying his conscience is clear, but the scandal has dragged on for months. How big a factor are Malaysian politics on what happens with that project?
From what I understand is it isn't. Petronas is independent. It's a government-owned company but it hasn't been a part of this scandal in any way, so it hasn't affected Petronas. They seem to be steady as she goes.
Ever had a political donation go through a personal bank account?
[Shakes head no, smiling.] But here that's not legal, right? I don't know what's legal there.
But $700 million?
That seems like a lot of money. Makes me feel like I went into business in the wrong country. It's crazy. But you know, it's just a different way of doing business, I guess.... But as far as I know Petronas is completely untouched by it and they are pretty independent of the government. There doesn't seem to be any hiccups in their project here as a result of it.
You made a lot of promises related to LNG. Details from your 2013 throne speech before the election included three LNG facilities operational by 2020, 39,000 construction jobs, 75,000 ongoing jobs, $100 billion in revenue and $1 trillion in "cumulative GDP benefit" over 30 years. Is B.C. on track for any of that?
Yeah. Yeah. We can't control the global market conditions, but given the amount of money that's already been invested and the amount of interest that's still being shown in this, there's every reason to think that we will meet those goals. As I've said before, the time lines are probably going to be different, but there's every reason to think these LNG plants will produce the kinds of numbers you've just talked about.
And the same goes for the promised Prosperity Fund and "debt free B.C." that you campaigned on?
Yep. You know we're taking our first step to debt-free B.C. We're going to wipe out our operating debt for the first time in 40 years.... The first step to getting to a debt free B.C. is to eliminate your deficits, which we've done. The next one is to eliminate your operating debt, which we are doing. And then the next is to eliminate the rest of your debt, which will come next with the Prosperity Fund.
So on the relationship between LNG and Site C, say the market for LNG stayed depressed and people didn't end up building plants here, would we still need Site C?
Yes. We need to endow our children with low cost, clean energy, and we need to do that now more than ever before. When we're confronted with climate change and the potential of a two or in Canada four degree increase in temperature, we have to be even more focused on producing clean energy and hydro power is as clean as it gets.
You linked them in 2013 on Global TV when you said, "You can't power up these huge [LNG] facilities without more power, so BC Hydro's going to have to build Site C -- we're in favour of making that happen." Why the change?
It's not a change. Site C is required for economic growth. With inexpensive clean power it's a lot easier to build an economy, so ensuring that will help us grow. LNG is part of that, but think about technology. The tech business is a huge power user. It's the biggest business on Vancouver Island now. We're investing $100 million in trying to kick start that industry. They're going to need more power and we want it to be clean power. It's all integrated. The economy's integrated. We want growth to happen across all sectors, whether that's forestry, whether it's technology, whether it's natural gas. They're all going to need clean energy in the future. If you assume as I do that the economy will grow and it's the government's job to help the economy grow, then you have to accept we're going to have to create more power. The choice is do you create clean power or do you find other sources of power that are not so clean.
Your answer anticipates another question I had. Critics have been saying the government is overly focused on LNG. How do you respond to that?
We just put $100 million into tech. That's a pretty big investment. LNG attracts a lot of public attention from the media because it's new. We've had to devote legislative time to building a tax framework for it that didn't exist before, an environmental framework that didn't exist before, agreements with First Nations that we hadn't contemplated before, so it's attracted a lot of attention for that reason. But we've also been very focused on the tech business, very focused on forestry, agriculture's been a central focus for us as well, and tourism. All of those things matter and some of them have seen huge growth in the last few years. Tourism and technology in particular, agriculture as well.
You say there was public interest in LNG, but I think it seemed to most people you were driving it.
It's a new idea, right? How often does a province create a brand new industry? When did that last happen in B.C.? It doesn't happen very often. Alberta created the oilsands. That was a big change for them. But sadly in their case it was the only thing they did. We had the jobs plan, it had eight sectors in it, we've paid attention to all eight. But one of them has created more heavy lifting because it's new and we've had to create a framework for it.