Just when I was beginning to believe that the BC Liberals have no policy objectives beyond winning the election next year, they seem to have found one after all: to increase provincial debt by a massive amount rather than abandon failed policies.
Remember their election promise of three years ago, when they said the development of an LNG industry would provide hundreds, if not thousands, of jobs and a torrent of royalties that would quickly eliminate the provincial debt.
But, other nations in the Middle East, Australia and even the U.S. had already started supplying the market. World supply quickly outran demand and the price of LNG plummeted, putting the kibosh on the industry in B.C.
Even when the Liberals, in a desperate move and knowing this would create massive pollution, said that the industry could burn natural gas to power both the pipeline to the coast and to chill the gas into a liquid state, little happened — and may not for many years.
To provide some source of “jobs, jobs, jobs,” the building of the Site C dam is forging ahead — even though it appears to conflict with aboriginal land claims and the projected cost of $8-plus billion was never submitted to the BC Utilities Commission for verification.
Premier Christy Clark and her cabinet push valiantly ahead, vowing that by the time the election is called in 2017, it will be impossible to stop it.
There are three problems with this massive project. First, most people in the know believe the true cost will be closer to $12 billion and will likely push BC Hydro’s debt to a record level. Second, the cost of the generated power will be far in excess of the cost of generating power by other means, including gas-powered generators. Third, the projected demand for electricity at the time the project is completed, around 2023, will be far less than the supply generated.
Without another market, the excess power will have to be dumped below cost on the spot market south of the border. That means the losses — as well as the debt service — will be paid by consumers in B.C.
Clark pushed hard for the federal Liberal government’s infrastructure program to help finance a heavy-duty transmission line to a new market in Alberta. But Ottawa ignored that idea, concentrating instead on urban projects (where there are more votes).
The gang in Victoria then looked for alternatives. First was a proposal for an alliance with western states and private companies to increase the capacity of the power grid into the U.S. Of course, this has a price-tag, probably in the billions of dollars. Given the Liberals’ aversion to any increase in taxes (other than the mark-up on booze) and their desire to tout a “balanced budget” during the campaign, this can only mean further cuts to everything else.
Another alternative is the recently announced environmental policy. It focuses on significantly reducing greenhouse gases (GHG) at gas wellheads and in housing, transportation and related consumption. Moreover, it contemplates requiring the projected gas pipeline to the coast being powered by electricity, not gas.
The government estimates this will reduce GHG production from an estimated 11.8 million tons per year down to 3.7 million. However, this would require massive investment in converting production from using gas to electricity, plus building power transmission lines to the northeast and out to the coast.
B.C. is hoping the feds will contribute to these costs. But still, pollution from the liquefaction process would exceed targets. Getting the LNG exporters to use electricity would be a tough sell, given its high cost. Moreover, that would require redesign of the liquefaction plants, creating a delay of probably four years. There could be a similar delay in approval of the transmission lines. Start-up could be around 2028.
A lot of debt payments will fall due before then.
David Bond is an author and retired bank economist. Email: firstname.lastname@example.org.