Oil and Gas Development. Farmington Area.

6 awkward realities behind B.C.’s big LNG giveaway

With sprawling LNG tax breaks, the province just took its most significant environmental step yet but the details reveal a murkier reality than government talking points let on

It may sound yawn-worthy but B.C.’s new “fiscal setting” to increase profits for LNG Canada is the single most significant environmental move this government has made since taking office.

The development of a liquified natural gas (LNG) empire in B.C. has been plagued with fits and starts.

Stalled by squeamish investors — undoubtedly worried about opposition to fracking, legal challenges, resistance to pipelines on Indigenous land and global efforts to reduce emissions — it seemed for a while as if B.C.’s grandiose vision for LNG might fall apart altogether.

But that all changed as the B.C. government began proposing major tax incentives to entice a wayward LNG industry.

On March 25 those proposals were transmitted into new legislation that bundles tax exemptions and cheap electricity rates into an incentive package worth an estimated $5.35 billion to LNG Canada, a consortium of some of the most profitable multinationals in the world.

This seemingly innocuous sounding new “fiscal framework” is being sold to British Columbians as a way to protect the province’s air, land and water all while creating 10,000 jobs and $40 billion in investment.

Those government talking points have received a lot of hype and ample play across headlines.

But there are uncomfortable realities afoot that cast these aspirational promises in a very different light.

1. LNG and B.C.’s climate targets don’t mix well

On Monday we learned the stupefying news that Canada is warming at twice the global rate. Northern B.C., where the LNG Canada project is to be located in Kitimat, is warming at nearly three times that rate. On the heels of this distressing news was federal environment commissioner Julie Gelfand’s admonition Tuesday that Canada is not doing enough to limit greenhouse gas emissions.

Just two days later, B.C. celebrated its new LNG tax breaks, claiming the LNG Canada project — set to become the single largest source point of emissions in the province — will be the cleanest in the world and will fit within B.C.’s CleanBC climate action plan.

But the province has yet to demonstrate how this will be done.

LNG is notoriously carbon-intensive. LNG is liquid natural gas that has to be super-cooled to -161 degrees Celsius in huge compressor stations. The vast majority of natural gas in B.C. is extracted via hydraulic fracturing, or fracking, which itself is a process associated with massive greenhouse gas emissions (likely much more than are formally accounted for).

According to the provincial government, phase one of the LNG Canada project is expected to emit about four megatonnes of greenhouse gas emissions annually, the equivalent of adding 856,531 cars to the road.

That will account for 10 per cent of B.C.’s entire carbon budget by 2050, putting massive pressure on other sectors such as transportation, building and industry to undergo a rapid decarbonization. In February the provincial government released its long-awaited climate plan, CleanBC, which reasserts its intention to lower emissions to 40 per cent below 2007 levels by 2030.

However, the document admits the province was only able to chart a path for about three-quarters of those reductions. The province wasn’t able to identify a specific plan or timelines to actually reach its target.

LNG Canada Emissions BC Climate Target

A slide from a government technical presentation shows LNG Canada emissions in the context of B.C.’s climate targets.

It’s worth noting that all of B.C.’s combined 103 industrial facilities emitted a combined 18.6 megatonnes in 2016, the last year for which data is available under the provincial inventory.

To meet B.C.’s target for 2050, the entire province’s emissions need to come down to a collective 12.6 megatonnes. In recent years B.C.’s overall emissions have increased, not decreased.

Despite this, the province and Premier John Horgan regularly insist the LNG Canada project will fit within the climate plan.

A spokesperson with the B.C. Ministry of Energy, Mines and Petroleum Resources told The Narwhal that B.C. is on track to meet targets. “Our government has been clear that LNG development must meet our climate targets, and LNG Canada’s facility aligns with our CleanBC plan.”

He added that the final LNG Canada “investment decision” is only for phase one of the project.

B.C. Green Party leader and MLA Andrew Weaver, who is also a climate scientist, said he is worried a second phase of the project will become a reality. The Pembina Institute estimates the second phase of LNG Canada will more than double the project’s emissions to between 8.6 and 9.6 megatonnes. If that happens, Weaver says 98 per cent of all emissions from every other aspect of B.C.’s economy would have to be eliminated to meet our 2030 and 2050 targets.

“And that’s just not possible,” Weaver told The Narwhal.

2. About that ‘$40 billion’ in investment

Government press materials continuously refer to the LNG Canada project as a $40 billion project, “the largest private-sector investment in B.C.’s history.”

But LNG Canada’s own estimates say $25 to $40 billion for a two-phase project. Only phase one of the project has received approval.

Concerning phase one, LNG Canada has only committed to spending between $2.5 and $4.1 billion in British Columbia.

Meanwhile, between $7 and $11.1 billion for phase one will be spent on foreign soil. This will include the construction of the Kitimat facility, which will be manufactured abroad, then shipped in pieces to B.C.

“It pisses me off to no end that the media have just basically taken this [$40 billion] number and kept repeating it ad nauseum,” Marc Lee, senior economist with the Canadian Centre for Policy Alternatives, told The Narwhal.

“No one has actually checked to see if that number is accurate.”

(The Narwhal busted this myth in its reporting last year.)

3. The unresolved issue of the Coastal Gaslink pipeline on Indigenous territory

The $4.7-billion Coastal GasLink Project, a 675-kilometre pipeline running from Dawson Creek to Kitimat, is an essential part of the LNG Canada project.

It’s also the gas pipeline at the centre of one of Canada’s most distressing clashes between the energy industry and Indigenous rights.

Most Canadians will recall the violent takedown of a Unist’ot’en blockade established by members of the Wet’suwet’en First Nation to prevent the construction of the pipeline through unceded territory.

Clans of the Wet’suwet’en Nation have built dwellings, a healing centre and a cultural camp in the proposed pathway of the pipeline and have blocked industry access on their lands for almost a decade.

In January the RCMP enforced a court injunction to remove one of the clan’s blockades. Since then, clearing work for the pipeline has been put on hold as the significance of Indigenous archaeological findings are assessed. The pipeline is owned by TC Energy, formerly TransCanada.

At a press briefing last March, when the province first announced tax breaks for LNG Canada, Premier John Horgan said B.C.’s support of LNG hinged on the condition of respecting Indigenous rights.

“It’s not going to be easy,” Horgan told reporters at that briefing. “Industrial activity and reconciliation with Indigenous peoples are difficult issues. Meeting our climate change objectives are primary and fundamental to the new government’s approach.”

“Rather than skirt those issues, like the previous government did — rather than ignore those issues of reconciliation and climate action — we want to marry industrial activity with those two key government objectives.”

How the issue of the Coastal Gaslink pipeline on Wet’suwet’en territory will be addressed is completely unknown, as are the outcomes of other legal challenges facing the gas pipeline.

4. Many B.C. LNG jobs already allocated to foreign and out-of-province workers

There was a particularly painful exchange recently in the Legislature, during which Andrew Weaver repeatedly asks the same question to an evasive B.C. NDP Finance Minister Carol James: is there any mechanism that requires LNG Canada to hire British Columbian workers?  

“It’s very clear there is nothing, [James] has essentially admitted that,” said Weaver later. “There is no [B.C. jobs] requirement.”

So where does that 10,000 figure come from?

On LNG Canada’s website, the company estimates that 10,000 people will be employed during construction, between the plant and the connecting pipeline.

“LNG Canada is committed to hiring local, within B.C. and across Canada, and does not foresee requiring a large number of workers from outside the country,” the company states.

But this assurance has no teeth. That was clear April 2, when BC Liberals embarrassed the government by leaking an NDP internal document estimating that just 35 to 55 per cent of the construction workforce will be from British Columbia.

Up to 65 per cent of the workers could be from outside the province, with an unknown influx of foreign temporary workers, the use of which the B.C. NDP apparently supports.

The punch line to all of this: when the LNG plant is up and running, the amount of jobs set aside for British Columbians is more likely to be in the 3,500 to 5,500 range, not 10,000.

5. Major taxpayer subsidies for LNG

Another government talking point is that the economic benefits of the LNG Canada project include “$23 billion in new government revenues over the life of the project, creating new resources for health care, schools, child care and services for British Columbians.”

But to move the project forward, British Columbians will now provide rich subsidies, valued at $5.35 billion, to the LNG Canada consortium, made up of some of the most profitable multinationals in the world: Royal Dutch Shell, Mitsubishi Corp., Malaysian-owned Petronas, PetroChina Co. and Korean Gas Corp.

Those subsidies will provide LNG Canada with cheap electricity, lower corporate income tax rates, deferrals on provincial sales tax and — even though this will dramatically increase B.C. emissions — an exemption from carbon tax increases.

The subsidies go far beyond the LNG plant. BC Hydro is spending $600 million for two transmission lines to serve the natural gas industry in the Peace region to support what the premier has called the “radical electrification” necessary to support the gas boom.

The subsidies go deeper too: in 2003 a “deep-well royalty credit” was introduced to incentivize fracking, but now that roughly 95 per cent of wells are fracked, the subsidy applies to virtually every well at a price tag Weaver estimates to be around $3.2 billion.

Against all of this, B.C.’s health care and education systems won’t get much of a boost.

That $23 billion in annual “new government revenues” from LNG Canada will be spread out over 40 years. That breaks down to roughly $500 million per year.

The B.C. budget this year was about $50 billion, meaning the increase in revenues will be equivalent to about one per cent of the B.C. budget each year.

Encana gas well pad

A new natural gas well pad with numerous wells is readied for fracking north of Farmington, B.C. Photo: Garth Lenz / The Narwhal

6. The high costs of fracking for natural gas

When the B.C. government first announced its plans for massive LNG subsidies, it cautioned that it would only pursue the creation of this industry if it could be done while protecting air, land, water and climate commitments.

Yet fracking for natural gas comes with high environmental costs and, according to the findings of a recent scientific panel, much of the impact is not well understood or regularly monitored.

The panel’s report, which identified massive gaps in B.C.’s knowledge, specified that threats to water, land and human health from fracking were all but impossible to quantify.

“The very rapid development of shale gas in [northeastern B.C.] has made it difficult to assure that risks are being adequately managed at every step. Furthermore, the panel could not quantify risk because there are too few data to assess risk,” the panel wrote.

This is a major concern given fracking is associated with massive water use (the average frack uses between five million and 100 million litres of water), radioactive waste, earthquakes, dangerous air pollution and greenhouse gas emissions.

A recent peer-reviewed study by the David Suzuki Foundation and St. Francis Xavier University found methane emissions from B.C.’s oil and gas industry are two-and-a-half times higher than reported. A followup study found wells in the Montney region, which would supply gas to LNG Canada, release more than 11,800 tonnes of methane into the air annually — the equivalent of burning 4.5 million tonnes of coal or putting two million cars on the road. B.C. has a plan to reduce methane emissions 45 per cent by 2025, but experts worry robust baseline emissions data isn’t being collected.

An uptick in fracking in B.C. has led to a wave of industrialization that has transformed prized agricultural land into a network of drill rigs, pipelines and waste pits.

Fracking wells in the Farmington area of northeastern B.C. Photo: Garth Lenz / The Narwhal

Oil and Gas Development. Near the Pine River. Farmington Area.

A total of 92 unauthorized dams used to impound water for fracking operations have been identified in B.C. All have been built on private lands within the Agricultural Land Reserve. This photo shows a dam near the Pine River in Farmington, B.C. Photo: Garth Lenz / The Narwhal

And recently, physicians in northeast B.C. spoke up about a wave of health impacts they’re seeing alongside a substantial increase in fracking near Dawson Creek. Despite these concerns, the province excluded human health impacts from the purview of the scientific panel tasked with reviewing fracking.

An investigation by The Narwhal also revealed that the province is having difficulty managing the increase of inactive natural gas wells and contaminated sites left behind by companies claiming bankruptcy. Alongside contaminated soil and unplugged wells, companies are leaving behind massive waste pits full of contaminated sludge left over from the fracking process.

Given all these risks, uncertainties and gaps in data, it seems the province isn’t in a position to guarantee LNG Canada can go ahead while air, land, water, climate and human health are all protected.

— With files from Christopher Pollon

Carol Linnitt is a journalist, editor, illustrator and co-founder of The Narwhal. Carol has been reporting on energy and environmental…

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