Why is a clean energy solution that promises to dramatically reduce carbon emissions being met with vigorous opposition from some environmentalists?
By Wu Xu
In most of the world, natural gas is encountering rising demand as a transitional fuel that can cost-effectively deliver large-scale carbon emissions reductions over coming decades.
Meanwhile, in British Columbia, a small number of environmental voices seem to have dedicated themselves to tearing down natural gas and seeking to discredit the benefits it provides. This is puzzling and it is tempting to suspect that political motives are in play. Why else would a clean energy solution that is as effective as natural gas meet with such vigorous opposition?
A recent blog post by a long-time opponent of Canadian natural gas posed nine questions that citizens should ask politicians. Since the starting premise of the post is that “natural gas must be stopped”, we didn’t have to read far before the biases started appearing. The post neatly summarizes many of the dominant themes that have created genuine doubts on the part of the public about relying on our responsible resource economy now and in the future.
Part of our job at Resource Works is to challenge misinformation, and the post by Andrew Nikiforuk provided a worthwhile case study. (To get a sense of where Mr. Nikiforuk is coming from, we are talking about someone who views the energy-driven growth of the Alberta workforce as "almost like the invasion of Iraq".)
It’s important to acknowledge that a culture of asking tough questions and relentlessly demanding the answers has made Canada’s extractive resource industries the world leaders that they are today. As the public has become more familiar with liquefied natural gas, skeptics have become believers and investments have continued to be made. This post looks at the nine questions raised by Mr. Nikiforuk and comes out with some surprising and informative conclusions.
1. Have LNG projects become uneconomic?
While Mr. Nikiforuk is decidedly bearish on the prospects of LNG investment, citing price volatility and unprofitable "high-cost" projects, his analysis failed to give any mention to the "elephant in the room" for any natural gas discussion: increase in Asian demand for the entire next decade. Considering factors including China and India's clean-energy drive and Japan's power-generation needs since 2011's Fukushima nuclear disaster, it is very clear that these buyers want the natural gas products to be shipped right now.
Also, the generous demand gap and geopolitical factors together makes it not just another Russian or U.S. job, but a Canadian one as well.
It is up to investors and business decision makers to determine whether a project is economic. If individual investors, or the market in a general sense, decide that LNG is not a viable opportunity, we will learn that quickly from the sound of silence as investors go elsewhere. At the moment, there is no mistaking that business appraisal and pre-investments are taking place for the 23 LNG projects in BC, which vary widely in investment scale and conditions of profitability.
In addition, we are only now beginning to understand how profoundly our Canadian economy has benefited from the development of unconventional natural gas using hydraulic fracturing. More study is needed in this country, but a recent report covering the United States traced manufacturing renewal and rising prosperity to cheap natural gas.
2. Are Petronas and its LNG partners transparent companies?
In the article, Mr. Nikiforuk protested against the "uniquely un-Canadian" management structure of Petronas, the Malaysian national oil & gas corporation.
This line of thinking is ill-advised. We have also seen it in the case of the Woodfibre LNG proposal in Howe Sound, where anti-LNG campaigners have attempted to vilify the foreign resource company, owned by a distinguished Nanyang Chinese family from Southeast Asia, that is mounting the venture.
British Columbia's LNG play has attracted companies from around the world yet Mr. Nikiforuk singles out an Asian one for special treatment. In fact, Canadians have much to learn about tolerance, and business practices, from countries like Malaysia, Singapore and Indonesia that have been sources of innovation in business and society. It is appalling if writers like Mr Nikiforuk think they can move the public-opinion needle by seeking to stir xenophobic feelings. Let's hope this is not the intention, yet that is the impression many foreign readers will be apt to draw from such statements. If we tolerate such views, and do not call for a higher standard of conduct, the assumption will be that Mr. Nikiforuk is merely stating the accepted norm for Canadians generally, and this is definitely not the case.
This issue aside, should Petronas or Sinopec be allowed to operate in Canada after they become more "Canadian" in structure? What about American or European companies that have different structures – and who gets to decide on how to apply this judgment? Excluding companies from Canadian soil for their foreign structure would guarantee that Canadian companies would be excluded from foreign countries unless they mimicked the local structures. The damage to trade relations in such a scenario would be incalculable.
Operations of foreign corporations in Canada are unambiguously regulated by Canadian law and standards, which certainly apply to the LNG industry as well. It is beside the point to attack the companies' domestic records in this case.
3. Does LNG mean more land fragmentation?
While it is true that traditional single-well pads require large amounts of gathering line that could cause land fragmentation and endanger species, the natural gas industry is actively researching and adopting new drilling technology that objectively helps to alleviate the issue.
Multi-pad drilling has been implemented in BC since 2012 and serves as a good example of the continuous innovation by the natural gas industry to benefit both the bottom line and environmental performance.
It makes a lot of sense to drill multiple horizontal natural gas wells from a single pad, in place of the old one vertical well per pad approach. This method will "dramatically influence the ecological footprint of natural gas operations" while increasing the scale of production by reducing the number of gathering lines required and centralize operations (and thus environmental impact) at one location.
4. Will LNG spell the extinction of woodland caribou?
The declining population of woodland caribou is a real issue and we agree that any economic development must be balanced with environmental preservation, of which biodiversity is a key component. The original article listed a range of human economic activities including "forestry, agriculture, as well as oil & gas exploration and coal mining" as potential factors contributing to the decline in caribou population.
Given the number of variants related to the issue, the impact of human activities on caribou population needs to be researched and addressed. However, reducing the problem to simplistic cause-and-effect in respect to LNG trade alone offers little help.
New production methods like horizontal drilling also have a bearing on wildlife issues where they result in smaller surface footprints and less land disturbance, and thus improved potential for biodiversity preservation and enhancement.
5. Does LNG mean the diminishment of First Nations treaty rights?
Upholding treaty rights for First Nations does not automatically equate to rejecting LNG or any natural resources projects. Treaty rights recognition is a complex developing issue, and resource companies with an interest in the resource wealth beneath First Nation lands are as important as any other actors in the shaping of treaty negotiation process.
For companies, certainty is gold. Settling treaty rights helps to improve certainty by reducing risks to businesses and will eventually stabilize First Nations' relationship with business entities. The worldview that pitches resource companies against aboriginal treaty rights is outdated and highly misleading in today's context.
The recent launch of the BC First Nations LNG Alliance is evidence that indigenous interests are being more fully recognized and that the opportunities are being embraced by First Nations.
6. Will LNG accelerate ocean acidification and climate instability?
Evidence is mounting that only natural gas is capable of replacing thermal coal as a fuel source over the next few decades. Other alternatives, such as wind and solar, are desirable and will develop in time, but the simple fact is the world cannot afford to reject an abundant, cheap, and available fuel source that reduces GHGs.
Studies have shown that if the thermal coal burned today was replaced by natural gas, that would mean half the GHG emissions.
In his article, Mr. Nikiforuk argues that the impact of methane leakage would outweigh reduction in GHG emissions. That is putting the cart before the horse.
First of all, what is methane escape? Put another way, what are "fugitive emissions"?
The answer is very simple.
In both cases, we are talking about natural gas that has managed to leak out of the various stages involved in the journey from the ground to the end user.
Gas producers have plenty of incentive to capture gas because, quite simply, lost gas equals lost revenue. Leaking gas equals leaking revenues.
As equipment improves (because human technologies do improve over time), the amount of natural gas that escapes has been falling.
The most authoritative source of GHG information is the Intergovernmental Panel on Climate Change (IPCC). In a recent report, the IPCC had this to say about methane: “Fugitive emissions depend to a significant degree on whether low-emission practices, such as the separation and capture of hydrocarbons during well completion and the detection and repair of leaks throughout gas extraction and transport, are mandated and how they are implemented in the field.”
The IPCC itself places high confidence in a scenario where between 1 and 5 per cent of natural gas escape.
Instead of accepting this range, we have seen anti-fossil-fuels lobbyists cherrypick data that supports their doomsday predictions. Nor do these calculations admit that humans are capable of bettering their equipment and practices.
In contrast to the pessimistic scenario drawn by Mr. Nikiforuk, in fact there is a clear pathway to improvement.
As the IPCC makes clear, it is in large part because of hydraulic fracturing and natural gas that the U.S. has been able to reduce its GHG emissions dramatically in recent years: “A key development since AR4 is the rapid deployment of hydraulic fracturing and horizontal drilling technologies, which has increased and diversified the gas supply… this is an important reason for a reduction of GHG emissions in the United States.”
While methane is a more potent GHG substance than CO2 when leaked into the air, it is clear that: 1. natural gas burns much cleaner than coal, and 2. methane leaks "can be detected, measured and reduced".
Natural gas opponents continue to put too much stock in studies authored by lobbyists for competing fuel types that, no surprise, view methane escape as a problem that can never be solved. We should embrace improvements in solar and wind technology – but we should not promote or endorse the falsehood that innovation is somehow restricted to those emerging energy sources and is beyond the reach of the vast knowledge-technology capacity that has been created by the fossil fuel industries over the past 150 years. That is a preposterous argument, yet it is offered to us daily and it is easy to unthinkingly process it as fact.
Methane leakage is a production issue to be understood and fixed, rather than proof that the idea of replacing coal with natural gas should be thrown out the window.
7. Does LNG mean more jobs for British Columbians?
The answer to this question is a sure yes – not just more jobs, but better jobs as well. Natural gas extraction, processing and transportation create many jobs, and so does the supply chain of goods and services that stretches right into urban areas including Vancouver.
What’s really interesting, however, is the astonishingly powerful impact of gas and other resource jobs in export value terms. A single worker from a region like the gas-producing Peace producing approximately six times the export value of the average worker, which means that the average resource worker in Canada creates value of $233 per hour. That is far ahead of the average worker, at $48 per hour (p13). The added value will be amplified down the chain and impact sectors other than natural resources.
As to foreign worker policy, BC LNG companies have made a clear commitment to prioritize local hiring over importing labours.
8. Will LNG consume vast amounts of fresh water in northeastern BC?
While water consumption in natural gas production sounds like an enormous number at first glance, it needs to be put into perspective. Projections show that when gas extraction operations peak in 2019 in northeastern BC, water consumed in production would still be less than half of 1 per cent of today's water runoff. In short, as much as natural gas activity increases, it will be extremely unlikely for the industry ever to pump more water than the volume BC residents flush down the pipe from their homes every day. The picture below tells the story.
Here we could also look at the issue from a continuous improvement perspective. Water usage in hydraulic fracturing falls as the industry improves its practice through research and adoption of new technology. In 2013, British Columbia saw $210 million worth of research and development in the area of gas, oil and mining (report here, see tab B-8), which is more than twice as big as R&D in the pharmaceutical & medicine sector, and shoulder to shoulder with that of aerospace products, parts and information, and cultural industries sectors.
Thanks to the fact that shale gas is now being developed in arid parts of the world, this new technology is a necessity, and one that will ultimately lead to the reduction or elimination of water in fracking. We have the example of GE, which is investing $10 billion toward this goal.
9. Does LNG mean more earthquakes in northeastern BC?
Earthquakes caused by hydraulic fracturing in natural gas production have become a major issue for concern after the US Geological Survey study linking earthquakes in a number of states with seismic activities. There is a local BC version of the study as well suggesting some causality. However, it is important to note from the original studies the regionality of the issue. According to the U.S. study, "not every well causes earthquakes, but a few wells cause most of the quakes". Therefore, it is partial to assume that more gas extraction activities would necessarily lead to more earthquakes in BC.
Again, natural gas companies are keen to understand and tame the issue, and new technologies have been deployed in response to the issue. For example, the oil & gas industry has recently made it a common practice to monitor hydraulic fracturing process remotely by graphing out rock structure in 3D in real time, which helps to understand fault activities and make better risk assessments. During the fracking process as it is practiced in 2015, teams of engineers monitor the frack in real time from high-tech stations off-site. The geodata they receive allows them to see cracks, fissures and faults in the rock so that they can avoid pressuring unstable areas. This is how localized seismicity is managed today.
Managing and mitigating risk is the result of significant R&D investments that have pushed the barriers of knowledge and practice far beyond where they were even a few years ago.
Conclusion
LNG exports from British Columbia are only possible because of long-term investments in technology that continue to develop. Natural gas will be a transition fuel for decades to come, and it is a desirable one. There is no "magic switch" that will allow the world to go from nearly 80 per cent dependence on fossil fuels to none overnight. That does not mean we should not be trying to innovate in the energy space overall, by making every gallon of gas work as hard as possible and exploring ways to help tomorrow's energy sources achieve the maturity they require to be cheap, abundant and reliable just like fossil fuels are today.
The middle ground in Canada is one where natural gas has a legitimate and realistic place. Our cities are consistently rated the best places in the world to live because they have been developed on a foundation of responsible resource development. Our society is the most tolerant in the world because of the prosperity that comes from our responsible use of resources.
The average person, equipped with the facts, can be confident that it is a worthwhile goal to expand the global supply of natural gas. In this way, more harmful sources of energy can be curtailed over time. We can and will develop the realistic mix of future fuels – a basket of expertly managed fossil, nuclear, solar, wind, tide, and geothermal sources – that will satisfy our need for cheap, abundant and reliable energy to serve a growing global population.
What can YOU do to ensure Canadians have access to clean, cheap, abundant and reliable energy in future?
It's true that some activist groups want to take away Canada's energy independence by shutting down our clean, reliable energy supplies like natural gas. This is a radical, extremist position not supported by any major political party. For the vast majority of Canadians, it is safe to say that they can feel comfortable embracing the common-sense scenario that we have shown here. Clean energy from natural gas truly is a goal worth fighting for.
Sharing this article with as many people as possible is one way that you can help to get the word out about the whole story. Another way is to add your name to our list of supporters. If common-sense views like ours are not supported, extreme positions could easily come to the forefront.
Wu Xu is a Vancouver writer who holds an MBA from Simon Fraser University and has a bachelor's degree in political science and economics. At present he is blogging about Sino-Canadian relations and Canadian politics.
