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Opinion: LNG bonanza hopes fractured by reality

If you were among the Vancouverites who heard muffled explosions one evening two weeks ago, you weren’t imagining things. You just weren’t alerted or invited to the party.

If you were among the Vancouverites who heard muffled explosions one evening two weeks ago, you weren’t imagining things.

You just weren’t alerted or invited to the party.

The May 13 show of fireworks above Coal Harbour was a private display for the Canadian Institute of Mining, Metallurgy and Petroleum at the close of a conference  at the Vancouver Convention Centre.

It seems the traditional energy sector is in a celebratory mood these days. But this outburst of petro-pyrotechnics was just before a $400 billion, Russian-Chinese gas deal, which threw another monkey wrench into rosy projections for B.C. exports of liquified natural gas to Asia.

In the LNG sweepstakes, British Columbia is way behind Qatar, Australia, and Malaysia. Bloomberg News reports that  Australia is constructing liquefaction plants that will more than triple its annual LNG-manufacturing capacity to 85 million tons by 2018.

Global competition means free-falling prices. “LNG spot prices in northeast Asia, where Qatar shipped 63 per cent of its LNG in 2012, could fall as low as $12 per million British thermal units by 2016 as new supply enters the market,” according to Bloomberg.

That would be down to 60 percent of the record $19.70 per million BTUs posted this February.

Our province  doesn’t even have any LNG plant deals inked yet, and we won’t have any online until 2020 at the earliest.

Geoscientist J. David Hughes has studied the energy resources of Canada for nearly four decades, including 32 years with the Geological Survey of Canada. He insists the B.C. government’s numbers don’t add up.

For the province to meet the National Energy Board export approvals, it would require drilling nearly 50,000 new wells in the next 27 years, he writes in “BC LNG: A Reality Check”.  And we’re mostly talking hydraulic fracturing, with it’s dine-and-dash model of extraction.

“Given the steep production declines associated with shale- and tight-gas, drilling rates of more than 3,000 new wells per year would be required to ramp up production to required export levels, followed by nearly 2,000 wells per year to maintain production,” observes the geoscientist. (This is what energy security expert Thomas Homer-Dixon calls “fracking to stand still.”)

“It is uncertain how much of the approved export capacity will be built, but the public would be well advised not to count on an LNG bonanza,” Hughes urges.

Yet Premier Christy Clark gushes about a $100 billion dollar “prosperity fund” from LNG royalties, insisting the fund will eliminate the provincial debt by 2028.

Damien Gillis, an activist journalist  and co-producer of the upcoming film Fractured Land, adds a few more cracks to Christy’s crystal ball.

At a recent talk before the Canadian Association of Journalists, he noted how B.C. made $144 million in royalties from gas from 2012-2013.

But to get $100 billion over twenty years of prosperity fund you’ve got to make $5 billion a year of additional profit, Gillis observes.

The first three to five years of export tax is only 1.5 per cent. But the LNG firms don’t pay any of the subsequent Phase 2 rate of seven per cent “until their multibillion dollar pipelines and LNG terminals projects are paid off,” in a global industry notorious for capital cost overruns.

“So we won’t probably see a penny of this for 15 years, and we’re supposed to make $100 billion in 20 years,” he adds.

In any case, the LNG cheerleaders aren’t about to let the reality principle get in the way of their gravy-train narrative. In a May 18 Province opinion piece titled, “Want health care? Better get behind B.C.’s LNG plans,” Stewart Muir insists that “by reaching customers in Asia, where growing economies require new energy sources, B.C. gas will continue to pay for the things we need.” (Muir is  executive director of the Resource Works Society, a PR outfit connected with the Mining Association of British Columbia.)

So now the security of your health care is being linked to a prophesied provincial LNG bonanza. If old-fashioned boosterism isn’t doing the trick, it’s time to play the fear card.

There’s one prediction we can reasonably make about the LNG debate in B.C. More fireworks are in the works — but probably not the kind that played over Coal Harbour this month for industrialists, investors, and insiders.