Vaughn Palmer: Blaming marketplace for LNG retreat convenient for political critics
When news broke Tuesday that Malaysia’s Petronas was walking away from the proposed Pacific NorthWest LNG project here in B.C., the New Democrats were quick to absolve themselves of any part in the demise of the $36 billion project.
“The company was very clear — this was a decision they are making because of the economic challenges in the global energy marketplace,” said newly appointed Energy Minister Michelle Mungall, reading from a prepared statement.
“This isn’t about anything else other than Petronas looking at that long-term reality in the international market,” she told reporters in her office in Victoria. “The Pacific NorthWest LNG project as proposed in its current state was uneconomical to move forward.”
Low commodity prices. Rival jurisdictions beating B.C. to the punch in developing liquefied natural gas for export. The glacial pace of project approvals here in Canada. All were factors in the decision.
Still, it was difficult to reconcile the energy minister’s response with what New Democrats had been saying in opposing the Pacific NorthWest LNG project every way they could.
Here’s Mungall herself, speaking against the B.C. Liberal-negotiated development agreement with Petronas, on the floor of the legislature in July 2015:
“The B.C. Liberals put themselves in such a desperate position when it comes to negotiating for LNG that they had to say yes to any single thing that walked through the door. That’s exactly what they have done. This is the big sellout of British Columbia.”
She then joined her colleagues in voting against what they denounced as a giveaway of the province’s natural gas resource to the Malaysians for insufficient returns in jobs and revenues.
NDP Leader John Horgan later urged federal environmental regulators to reject the project because of an unacceptable increase in greenhouse gas emissions.
Two other NDP MLAs — now forests minister Doug Donaldson and parliamentary secretary Jennifer Rice — signed a petition to deny access to the preferred Lelu Island site for the terminal.
Even after the major First Nations groups in the area endorsed the project as part of a $200 million benefit-sharing agreement, the New Democrats continued to align themselves with a smaller group of holdouts.
The NDP view that the Malaysians had taken B.C. to the cleaners on this project — and trampled the environment and Indigenous rights in the process — raised a couple of questions in light of the latest decision from Petronas.
First, if the project was as much of a steal for the Malaysians as the NDP claimed, why didn’t Petronas go ahead and cash in? Second, if the project was as bad for British Columbians as the New Democrats maintained, why weren’t they celebrating its demise?
But Mungall stuck to her script, insisting that “our government is committed to working with the LNG industry to ensure we are competitive.”
Far from it.
The energy minister’s mandate from the premier directs her to drive a harder bargain with LNG producers than the terms that the NDP opposed two years ago and the Malaysians just abandoned.
Here’s the relevant passage in the mandate letter from Horgan: “Ensure British Columbians benefit from liquefied natural gas projects by requiring proposals to meet the following four conditions: express guarantees of jobs and training opportunities for British Columbians; a fair return for our resource; respect and make partners of First Nations; and protect our air, land and water, including living up to our climate commitments.”
Then there’s the mandate letter for her cabinet colleague Environment Minister George Heyman: “Work with the minister of finance to implement an increase of the carbon tax by $5 per tonne per year, beginning April 1, 2018. Take measures to expand the carbon tax to fugitive emissions.”
So Petronas balked at the current carbon tax and regulatory regime. But the New Democrats reckon that other companies would proceed to build multibillion-dollar LNG terminals under a higher tax applied more broadly to the fugitive emissions from pipelines and production at the well head?
Then there’s the reaction from the NDP’s partner in power-sharing, the Green party.
“B.C.’s future does not lie in chasing yesterday’s fossil fuel economy,” declared Green Leader Andrew Weaver on Tuesday, all but gloating over the news from Petronas.
“Since the beginning it has been clear that the global marketplace does not support the LNG industry that the B.C. Liberals promised in their 2013 election campaign.”
No, it doesn’t. But while the Greens celebrate B.C. remaining ideologically pure in not touching the stuff, other jurisdictions have gone ahead and developed LNG and will continue to do so when markets recover, as expected, in the next decade.
The real impact of Tuesday’s decision is not to reduce natural gas production in B.C., but rather to reduce the potential returns to the province from developing overseas markets.
Even as Petronas abandoned its big-ticket investment in B.C. LNG, a company representative announced that “we actually look forward to working with John Horgan and his government as we develop our vast assets in the Montney joint venture area.”
Those and other natural gas deposits here will remain captive of the glutted North American market and reliant on sales to the Americans who — ironically — have developed LNG for export while B.C. dawdled.
Nor is the situation likely to change, given one partner in the NDP-Green government bent on driving a harder bargain with investors and the other hostile to LNG development on any terms.