Pacific NorthWest LNG is proposing to build an LNG export terminal on Lelu Island.www.lonniewishart.com
British Columbia energy projects are in danger of missing out on billions of dollars in annual revenue owing to delays in launching exports of liquefied natural gas, a new study warns.
The Fraser Institute, an economic think tank, forecasts that B.C. LNG proponents stand to reap revenue totalling $22.5-billion in 2020, if the fledgling industry were to start construction of export terminals in the province within a year or two.
Getting even one project to the construction stage is proving to be difficult because of regulatory delays and a range of other factors such as protracted consultations with First Nations and project changes to address environmental concerns, said Kenneth Green, co-author of the report.
"We're hoping this study helps focus the mind on what's at stake. The B.C. government can think of what it means for royalties and First Nations can think in terms of compensation for projects passing over their lands," Mr. Green said in an interview.
The B.C. Liberal government used its majority in July to push through a bill allowing the province to sign LNG agreements. The bill's passage also resulted in the ratification of a project development agreement between the government and Pacific NorthWest LNG, which is led by Malaysia's state-owned Petronas.
Pacific NorthWest LNG received clearance from the B.C. Environmental Assessment Office in November, 2014, subject to certain conditions. The Canadian Environmental Assessment Agency's review of the project has been marked by delays. The federal regulator is expected to issue its final decision by early 2016.
The Fraser Institute's study said that annual export revenue for LNG companies could rise to $24.8-billion in 2025, so the opportunity cost is huge. "The magnitudes of these prospective losses are substantial, a reality that should encourage policy makers to streamline the regulatory process," according to the report co-written by economist Benjamin Zycher and Mr. Green, who is the think tank's senior director of natural resources studies.
Fierce global competition and weak LNG prices in Asia are other factors that could result in B.C. projects being squeezed out of starting production by 2020, Mr. Green said.
The study assumes steady LNG production in the province over the long term, but it does not predict which of the 20 B.C. proposals might be the first to swing into operation. Industry analysts caution that four projects at most might come to fruition, though the province is at risk of missing the window of opportunity to enter the LNG game.
Pacific NorthWest LNG, considered by analysts to be the B.C. front-runner, faces opposition from the Lax Kw'alaams, one of five Tsimshian First Nations consulted during a provincial environmental review last year. The export terminal is to be located on Lelu Island, which is next to the ecologically sensitive Flora Bank.
Lax Kw'alaams Mayor Garry Reece said his members are adamant that Flora Bank is off-limits for development because the sandy area contains juvenile salmon habitat.
Two Tsimshian groups, the Metlakatla and the Kitselas, signed term sheets that precede impact benefit agreements with Pacific NorthWest LNG in December. Metlakatla chief councillor Harold Leighton said his First Nation has concerns about the project, but the relationship with the Petronas-led group remains constructive. "We're trying to work with Petronas," he said. "There are a number of outstanding studies about the impact on fish that need to be completed."
The Metlakatla invited the Lax Kw'alaams to join the newly created Tsimshian Environmental Stewardship Authority to work co-operatively on issues of concern in northwest British Columbia, but so far, the Lax Kw'alaams have declined, Mr. Leighton said. "I hope they will join," he said.
Brent Jang