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Peril or Promise of LNG

Get ready to be showered with untold riches.

That’s the message contained in the Christy Clark throne speech that more than lives up to the definition of a pipe dream – a vain but fervent hope for an impossible or unlikely situation.

The technicolour dream extols the virtue of liquefied natural gas exports as if the billions-of-dollars-process is as easy as a walk in the park and just as benign.

LNG development will be a trillion dollar phenomenon, said the government’s throne speech, that is expected to generate between $130 billion and $260 billion from liquid natural gas revenues and a new liquid natural gas tax over the next 30 years.

The government estimates the creation of 39,000 jobs over the nine-year construction period and 75,000 new full-time jobs if the five proposed LNG facilities reach full production.

LNG largesse will be accumulated in a Prosperity Fund similar to Alberta’s Heritage Fund that could pay off the province’s $56 billion debt (interest payments alone are $2.4 billion a year) within a decade and possibly eliminate the need for the sales tax.

When Clark announced her government’s Natural Gas Strategy in February 2012, the expected benefits were much more modest: $20 billion in new private sector investment, creating 800 new long-term jobs in LNG facilities and up to 9,000 more jobs during construction.

Amazing what changes can occur in a year leading up to an election.

Nightmare or dream

Labelled a “generational opportunity,” this commercialization is more nightmare than dream.

While economic opportunities at the end of an LNG rainbow are easy to calculate, it doesn’t take much scrutiny to reveal a host of concerns.

Much of the natural gas destined for export will be accessed by fracking – slang for hydraulic fracturing – a process in which an average of 2.8 million gallons of frac fluid is pumped into each well in a shale formation at pressures up to 9,000 pounds per square inch and literally cracks the shale or breaks open existing cracks and allows the trapped natural gas to flow.

The fracture fluid consists of water, with sand as a proppant to keep fractures open, and various toxic chemicals added to reduce friction and corrosion, clean the downhole entry points, and control bacteria.

Fracking has side effects

The process can impact the environment in a number of ways. Installing shale gas wells requires clearing forests and building roads, which can impact bird and fish habitat and increase the erosion of sediment into local rivers and streams.

Withdrawing water from area sources – an essential part of gas extraction, unless water is brought in from off-site – can alter aquatic habitat and river flow. And the drilling process may result in the accumulation of trace metals in stream sediment.

Fracking – like a bad drug – has other side effects: polluted drinking water aquifers, small earthquakes, methane contamination, increased greenhouse gas emissions, impacts on wildlife, and air pollution.

“Some of the chemicals used in hydraulic fracturing – or liberated by it – are carcinogens,” Dr. Sandra Steingraber told members of the Environmental Conservation and Health committee of the New York State Assembly.

Dr. Steingraber, a biologist, author, and scholar in residence at Ithaca College, pointed out that some of the chemicals “are neurological poisons with suspected links to learning deficits in children,” while others “are asthma triggers. Some, especially the radioactive ones, are known to bioaccumulate in milk. Others are reproductive toxicants that can contribute to pregnancy loss.”

The presence of methane in drinking water in Dimock, Pa., was a focal point for Josh Fox’s investigative documentary, Gasland, which received an Academy Award nomination in 2011 for Outstanding Documentary; Fox also received an Emmy for non-fiction directing. Fox’s interest in fracking was piqued when a natural gas company offered $100,000 for mineral rights on property his family owned in Milanville, in the extreme northeast part of Pennsylvania, about 60 miles east of Dimock.

Among the environmental protection laws Stephen Harper cut in Bill C-45, he eliminated the Hazardous Materials Information Review Commission, an independent body in charge of making science-based decisions to protect Canadians from toxic chemicals and hazardous materials.

The BC government says it was the first province in Canada to regulate the mandatory disclosure of ingredients used in the natural gas hydraulic fracturing process. The online registry, found at FracFocus.ca, provides a transparent accounting of each well drilled.

I used the registry to trace two chemicals used by Talisman Energy in 2011 at its Altares well number 26949 (see http://fracfocus.ca/find_well/download/BC/8979589): 2,2-dibromo-3-nitrilopropionamide or DBNPA is corrosive to the eyes, can kill skin tissue exposed to the chemical at high levels for a prolonged period of time, and is a developmental toxicant in rabbits; 1,3,5-Trimethylbenzene (commonly called Mesitylene) can irritate the eyes, skin and respiratory tract and may cause effects on the central nervous system and blood.

Development of LNG plants is going ahead oblivious to the greenhouse gas implications. Despite Christy Clark labelling natural gas as a clean energy source if it is used to power liquefied natural gas extraction plants, it is still a fossil fuel and as such produces greenhouse gases that contribute to climate change.

Both the Canadian Centre for Policy Alternatives and the BC Sierra Club have issued reports indicating the province will not be able to meet its GGH reduction targets if the LNG export plans proceed. The U.S. Air & Waste Management Association has serious reservations about the air pollution effects of natural gas production.

A recent The Nature of Things episode aired Shattered Ground, which highlighted the large and vociferous anti-fracking backlash. 

Fugitive emissions from natural gas wells are often flared and have been tracked by NASA which has produced a composite night time image clearing showing the Bakken shale in North Dakota and Montana and the Eagle Ford shale in Texas. (View at http://randompolicy.blogspot.ca/2013/01/waste-not-want-not_2.html) It is estimated that the cluster of gas flares from the Bakken shale is the size of Pittsburgh and would supply 70 percent of the homes in North Dakota.

Northeast BC is the Promised Land

Northeastern BC (north of Dawson Creek to Fort Nelson and east to the Laird River) is the main source of this new found wealth buried in the Montney, Horn River, Cordova, Duvernay, and Liard basins. The Horn River play alone contains between 61 and 96 trillion cubic feet of gas, with 78 Tcf the expected recoverable scenario. The Liard basin is estimated to contain 48 Tcf of sellable gas.

One gigajoule (GJ)is equalto0.95 thousand cubic feetof natural gas and FortisBC estimates the average household in BC uses 95 GJ of gas per year.

While almost 30 Canadian gas companies including giants like EnCana, Nexen, and Talisman are drilling here, the increasingly high costs are forcing these companies to form partnerships with foreign firms like the China National Petroleum Corporation (CNPC), Petro China, Malaysian government owned PETRONAS, and Japan’s Mitsubishi Corporation.

The proposed Pacific Trail Pipeline Project is a 463-kilometre pipeline that will carry natural gas from Summit Lake, 55 kilometres north of Prince George, to the proposed Kitimat LNG Facility on B.C.’s north coast.

The project is being developed by the Pacific Trail Pipelines Limited Partnership (Apache Corporation, Encana and EOG Resources – formerly known as Enron) – which acquired the project in February 2011 from PacificNorthern Gas.

A large portion of this pipeline right of way follows the same route Enbridge plans for the Northern Gateway pipeline. Survey crews were blockaded in November and theirequipment seized by the one First Nation opposed to the pipeline which is scheduled to be operational in 2015.

More power needed

In order to load LNG on ships, it needs to be frozen to minus 162 degrees Centigrade, a process requiring between 3,000 and 5,000 gigawatt hours of electricity annually. (One gigawatt hour is equivalent 1,000,000 kilowatt hours – the electricity used by 100 average BC homes in one year.)

One year ago, when Christy Clark announced the BC Natural Gas Strategy, she said Shell Canada’s Kitimat LNG facility will need the entire output from the proposed Site C dam which would provide 5,100 gigawatt hours of energy per year. I

f the four other facilities are built, she said “we're going to need the power from Site C and we're also going to need the power from lots of independent power producers from across the province: wind energy, run of river, you name it.”

A major problem seems likely, however, as Kitimat LNG production is scheduled to start around the end of 2016 while the $7.9 billion Site C dam is currently in the environmental and regulatory review stage and wouldn’t be operational for seven years if construction started today.

All of this happens in the absence of any sustainable and sensible energy policy to guide our obsession with and addiction to export dollars.

Norway $599 billion, Alberta $15.9 billion

The extraction and sale of Norway's North Sea petroleum resources generates large revenues to the state on an ongoing basis. Norway established a government pension fund in 1967 and by the end of 2011 it had an asset value of $599 billion.

By contrast, Alberta set up its Heritage Fund to salt away oil royalties in 1976 and as of June 30, 2012 it had a value of $15.9 billion and had contributed a paltry $34 billion to Albertan health care and education priorities.

Our governments – in collusion with the fossil fuel industry – operate on the Drill Baby Drill dictum. No thought is given as to what to do when the last drop has been drilled; there is no exit strategy.

Then there’s the fact we’re not the only horse in the race. A number of other countries are thinking just like we are with Australia – which already has secured contracts to sell LNG to China – as our chief competitor.

Twenty companies have been approved by the U.S. Department of Energy to export LNG and three more approvals are pending. 

In 2006 only 13 countries exported LNG; by 2010 five more had joined the pack. China – the country everyone wants to export to – has its own shale gas plays and is starting to develop them.

The BC ministries of Finance and Energy, Mines and Natural Gas have reviewed the tax and royalty regimes of key jurisdictions with the capability to support LNG production.

It concluded that B.C.’s main competitor is Australia, which has an LNG tax and royalty regime that is up to one-third higher than BC’s. By introducing an additional tax applicable to LNG in BC, the government thinks it can maximize the benefits to British Columbians while still remaining competitive.

Based on assumptions and a study undertaken by independent consultants, if British Columbia adopts a new LNG tax regime, five LNG plants (two larger- and three smaller-sized) could potentially produce between $130 billion and $260 billion in revenues to the Province over 30 years.

BC at the crossroads

We are subjected to marketing, advertising and brain-washing with the inherent message: It’s All Good. Powerful and vested interests frame the narrative as one about economic development, energy independence, or jobs, making it difficult to reframe as a human rights issue.

But as acclaimed ecologist and author Sandra Steingraber says, “Anytime there’s a disconnect between those who benefit and those who pay a price, we have a human rights issue.”

Steingraber says we need to become fossil fuel abolitionists. We need to begin phasing out virtually all of the policies and practices that encourage the use of coal, oil, and natural gas.

Obviously, Christy Clark disagrees.

“We are at a crossroads now – this is when the decisions will be made about whether or not we seize this incredible opportunity for our province, or whether we turn away from it,” Clark told reporters after the throne speech.

Is LNG a Faustian bargain or the path to untold economic wealth? Even the May 14th provincial election probably won’t provide a definitive answer to that question; both the opposition NDP and the Conservatives support fracking and LNG exports.

Only the Green Party advocates an alternative economic vision for the province.

Peter Bakker, president of the World Business Council for Sustainable Development (WBCSD), recently said that if you add up every business initiative on sustainability, it would not even start to reverse the terrible destruction we are wreaking on the planet.

The WBCSD's recent report Changing Pace argues that our current unsustainable economic system is based only on a set of thoughts, and that it is within our power to change them.

The WBCSD report warns that “the relentless pressure of our economy is exceeding the resilience of the biosphere. Unless we radically adapt the way we use our natural capital, the very basis of our wellbeing will break down.”

It remains to be seen who the citizens of British Columbia will listen to.

Michael Jessen is a Nelson-based energy specialist and owner of the consultancy Zero Waste Solutions. He is also the energy critic for the Green Party of BC and can be reached by email at zerowaste@shaw.ca

RESOURCES:

The BC Ministry of Energy, Mines and Natural Gas is at http://www.gov.bc.ca/ener/

The BC Oil and Gas Commission is at http://www.bcogc.ca/

BC’s 2012 Natural Gas Strategy is at http://www.gov.bc.ca/ener/popt/down/natural_gas_strategy.pdf

A graphic of fracking can be viewed at http://www.propublica.org/special/hydraulic-fracturing-national

Liquefied natural gas tax revenue fact sheet http://www2.news.gov.bc.ca/news_releases_2009-2013/2013FIN0011-000232.htm

BC natural gas development regulations fact sheet http://www2.news.gov.bc.ca/news_releases_2009-2013/2013EMNG0029-000235.htm

Natural gas foreign investment news release http://www2.news.gov.bc.ca/news_releases_2009-2013/2013EMNG0028-000234.htm

The hydraulic fracturing chemical disclosure registry is at http://fracfocus.ca/

US Environmental Protection Agency fact sheet on DBNPA is at http://www.epa.gov/oppsrrd1/REDs/factsheets/3056fact.pdf

The National Institute for Occupational Safety and Health safety card on Mesitylene is at http://www.cdc.gov/niosh/ipcsneng/neng1155.html

A May 2011 report by the National energy Board and the BC Ministry of Energy and Mines entitled Ultimate Potential for Unconventional Natural Gas In Northeastern British Columbia’s Horn River Basin can be found at http://www.neb.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/ntrlgs/hrnrvr/hrnrvrm-eng.pdf

The Pacific Trail Pipeline Partnership has a website at http://www.pacifictrailpipelines.com/

The Kitimat LNG facility has a website at http://www.kitimatlngfacility.com/index.aspx

An inventory of world LNG export facilities is at http://www.zeusintel.com/LNG/WorldLNGExportTerminalListing.aspx

U.S. companies vying to export LNG can be found at http://www.fossil.energy.gov/programs/gasregulation/reports/summary_lng_applications.pdf

The International Gas Union’s 2011 LNG Report is at http://www.igu.org/igu-publications/LNG%20Report%202011.pdf

The IGU’s Global Vision for Gas is at http://www.igu.org/gas-advocacy/GLOBAL%20VISION%20FOR%20GAS.pdf

CBC aired Shattered Ground on February 7 on David Suzuki’s Nature of Things program. The episode can be viewed at http://www.cbc.ca/natureofthings/episode/shattered-ground.html

Read about Gasland at http://gaslandthemovie.com/

A Sage Magazine interview with Sandra Steingraber can be found at http://sagemagazine.org/powerful-interests-a-conversation-with-sandra-steingraber/

Find out more about Norway’s oil and gas fund at http://www.regjeringen.no/en/dep/fin/Selected-topics/the-government-pension-fund.html?id=1441

Read about Alberta’s Heritage Fund at http://www.finance.alberta.ca/business/ahstf/index.html

Marc Lee’s report BC’s Legislated Greenhouse Gas Targets vs Natural Gas Development can be downloaded at http://www.policyalternatives.ca/natural-gas-ghgs

The BC Sierra Club study Emissions Impossible? can be downloaded from http://www.sierraclub.bc.ca/publications/scbc-reports/emissions-impossible

The Air & Waste Management Association’s paper Air Pollution Issues Associated With Natural Gas and Oil Operations is at http://www.edf.org/sites/default/files/AWMA-EM-airPollutionFromOilAndGas.pdf

The WBCSD report Changing Pace can be downloaded from http://www.wbcsd.org/changingpace.aspx