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Posted: March 26, 2017

We are not in the LNG picture

Letter to the Editor

In a recent story out of the Financial Post, energy reporter, Claudia Cattaneo has made some interesting and compelling points on the direction that the B.C. LNG industry could be taking… or not. For instance, in December the U.S. for the first time in its history has become a net EXPORTER of natural gas due to the shale gas boom south of the border. Here is what Cattaneo had to say: “U.S. imports of natural gas from Canada, primarily from the West where most of Canada’s natural gas is produced, continue to decline, while US exports to Canada-primarily to the East-continue to increase because of Eastern Canada’s proximity to abundant natural gas resources in the Marcellus basin.”

You may recall that these “Two Old Guys” pointed out this problem a few letters ago. We stated that the B.C. government does not have a Plan B in place to deal with the losses of dropping commodity demand and prices for LNG (natural gas) worldwide. As a result, we may have lost the biggest potential domestic customer for our natural gas: Ontario. It appears the Americans got that one right however, and are vigorously pursuing Ontario as a natural gas customer. So where is B.C. in the bigger natural gas picture? Apparently, we are not in the picture.

Madam Clark continues to put all the eggs into the “export LNG basket.” In fact the Premier made a brash comment not long ago, stating that domestic gas prices were “too low” for her liking and that overseas values were much more accommodating. Well, five per cent of something is better than 100 % of nothing. Isn’t it odd that at the moment, four years after the projected $1 trillion dollar windfall, we still have “nothing”? In fact…we have less than nothing. Here’s the explanation.

Cattaneo states that US gas exports are ready to explode by 2020. She states that “natural gas prices are expected to remain relatively low as well, flattening out… to 2030 to 2040 period.”

Energy companies pay for the rights to extract natural gas. These are called “Royalties.” One can compare them with charging rental payments on an apartment for instance.

At the same time, the B.C. government subsidizes the extraction and sale of B.C. natural gas. This is done through a variety of “royalty deduction/ credits.” This is money returned to the industry. Likewise, LNG companies have been promised a BC Hydro subsidy (eDrive rate) for their electricity, half the Tier 2 rate for the average family. Other energy industries have received provincial “credits” as well for drilling deep wells, or summer drilling incentives. By all accounts, in the 2016 year, natural gas will have ultimately cost the province (taxpayers) over $399 million dollars in losses: From $1 trillion to a negative (-) $399 million. Not exactly something the BC Liberals would advertise on a TV commercial.

Clearly, this cannot continue on without dire consequences both for the industry or the provincial coffer. Yet, the numbers do not lie. Adding to the problem is BC Hydro, which is awash in excess electricity with no buyers in sight. More and more American utilities are building and using cheaper natural gas to produce their electricity and do not need to buy ours. Site C has no buyers in sight for its electricity, and no requirement to have done so. Site C electricity will be three times more expensive to produce than a natural gas powered system. Will the ratepayers of B.C. be on the hook to subsidize this loss as well?

With President Trump now in office, and surplus natural gas and low prices in the US market, nothing is stopping Trump’s administration from blocking (or taxing) future gas exports from Canada. Trump often complains of these benefits or subsidies that other countries give their industries to the detriment of US companies. Do you think that this B.C. trend has gone unnoticed by the new U.S. administration?

Premier Christy Clark and Energy and Mines Minister Bill Bennett may well have provided the Americans with the perfect “tools” to do British Columbians some serious damage… Sad.

Rick Koechl,

Mike Kroecher,

Charlie Lake


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