Fluid Situation: Liquid Natural Gas in British Columbia

Fluid Situation: Liquid Natural Gas in British Columbia

By Tom Malcolm

November 30, 2012

To the delight of some and the chagrin of others, BC is moving forward with plans to boost production and distribution of its massive natural gas resources. This decision lies at the intersection of global economics, environmental stewardship, and public relations and will affect BC’s future as a leader on environment and resource management.

Some are in favor of exploiting our abundance of energy resources by ramping up natural gas extraction, increasingly being accomplished through the technological process of hydraulic fracturing, or fracking. Fracking is a controversial practice that though extremely effective, raises significant environmental concerns. Despite a glut of natural gas in North America that has pushed the domestic price to record lows, across the Pacific Ocean the commodity is fetching much higher prices.

With an eye on tapping into potentially lucrative Asian markets (Japan and China as the primary buyers), oil and gas giants are seeking to extract natural gas, distribute it via a yet-to-be-built pipeline to ports on the coast, liquefy the gas for shipping purposes, then send it abroad for considerable profits. With estimates on BC’s reserves ranging from 30-100 trillion cubic feet of natural gas, proponents argue that the province is sitting on a massive supply in a seller’s market. Given favorable market conditions, some estimates see this resource adding up to $1 trillion to the BC economy over the next 30 years.

Not everyone agrees with this assessment. Opponents claim the plan to ship LNG abroad is a hypocritical venture for a province so staunchly in support of reducing GHG emissions. To turn a blind eye to the exploitation of this fossil fuel to line the pockets of certain shareholders raises questions on equity and global environmental responsibility.

The plan is also deemed to counter BC’s energy plan that clearly states that 93% of its energy must be derived from ‘clean’ sources; the BC government has adjusted its definition of ‘clean’ to include natural gas. Despite its status as the “cleanest-burning fossil fuel”, natural gas remains a fossil fuel that emits carbon into the atmosphere when burned. The government is tinkering with its own legislation in order to participate in this energy rush.

Finally, some believe the expansion is bad economics because of the enormous capital investment in infrastructure (both to ship gas to coastal ports as well as liquefying it once there) and the uncertainty of the LNG market. In addition, the distribution of potential profits would be limited to a few concerned groups, including government through tax revenues, but mainly oil and gas companies and residents of proposed shipping ports. Opponents believe the environmental risks considerably outweigh any economic profits that stand to be made.

If developers move forward and are given free reign to exploit natural gas reserves and ship LNG to Asian markets, it could also have an effect on the overall price of energy in British Columbia.  Currently, BC has some of the cheapest electricity rates in the world due to the abundance of already built hydro-electric power plants. However, as BC energy demands outgrow its current capacity, it is building new capacity that is more expensive to produce than its existing supply. The process of liquefying natural gas will consume massive quantities of energy, which could result in effectively raising rates for the rest of BC.

The BC government can’t have it both ways. It either needs to leave these fossil fuels in the ground and double down on renewables, or extract every last cubic foot of gas and make as much money as possible. The latter option is not climate friendly policy and presumably given those two options, a vast majority of British Columbians would prefer the former. Time will tell if BC can extract and export its massive supply of fossil fuels, and still be seen a progressive climate change leader.

(Photo and graphic courtesy of Government of BC/Flickr)

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