From subsidies to the energy transformation and beyond, Josiah Haynes debunks tall tales on BC natural gas.
BC Premier John Horgan. Photo from the BC Government.
With the government of BC announcing a sweeping overhaul of its natural gas royalty framework, supposed experts have emerged from their wintering caves to lecture British Columbians on the errors of their fuel-intensive ways.
Far from delivering a balanced new framework, the government persists in shelling out egregious subsidies for a sunset fossil fuel industry, says the chorus of anti-development activists. If only the province could retain the expert opinion of a highly educated civil service to provide an accurate assessment of provincial books. Alas, we poor British Columbians are dependent on the generosity and goodwill of climate heroes and their preferred media chroniclers.
Surely, they are the people, and wisdom will die with them.
But other, less generously funded voices offer an alternative opinion. Not long ago, I provided my assessment of the overhauled framework. Since then, inspired by an interest in fiction, I stumbled across three pervasive myths which I hope to share in the spirit of entertainment: the subsidy myth, the energy transition myth, and the myth of monolithic Indigenous opinion.
Natural gas subsidies?
LNG Canada's Cedar Valley Lodge, housing project workers. Photo from LNG Canada.
Myth: “BC’s natural gas industry is heavily subsidized.”
To hear it from environmental groups, you would assume that other industries create real value for BC residents while natural gas producers are milking the cash cow of government handouts.
One pressure group wrote a report saying the federal government provides the natural gas industry with $18 billion worth of subsidies. Meanwhile, Stand.earth says: “In 2019/20, provincial fossil fuel subsidies were four times higher than the revenue from oil and gas royalties. Coming to just under $1 billion, which represents a 79% increase since the NDP took office.”
But to many casual observers, perhaps puzzled by the relatively slow expansion of the supposedly cash-strapped industry, something about those numbers may sound off.
Reality: Most of the ‘subsidies’ activists identify are temporary tax deductions soon paid back.
There are two main kinds of subsidies: consumption and production subsidies. According to the Montreal Economic Institute (MEI), Canada doesn’t have consumption subsidies for fossil fuels. Anyone filling up at the pump already knows the government isn’t encouraging the purchase of gas. Even before Canada introduced its carbon price, taxes represented around 31% of the price paid at the gas station.
As for production subsidies to the fossil fuel industry, the MEI writes that many of the programs pressure groups call ‘subsidies’ are actually “just a particular tax treatment that is common to the natural resources sector as a whole, which is faced with a specific economic reality.”
Industries like mining and energy require massive amounts of start-up capital, not just for exploring resources but also for construction costs. Sometimes years go by between that initial investment and the profits that follow. So, as MEI writes:
“Certain government programs allow companies that develop natural resources to reduce the taxes they have to pay in the short term and defer them until later in the production cycle. But to call this a subsidy is to be disingenuous. This is just a common-sense measure whose purpose is to ensure the neutrality of the tax system between different industries.”
To be fair, some subsidies do exist. One new support from the federal government, worth $1.7 billion, is for environmental clean-ups of “orphaned and inactive wells.” Not counting that subsidy, which is not intended to help the industry grow, the Canadian Energy Centre shows that between 2010-2016, all subsidies to the Canadian oil and gas sector, including federal, provincial, and local subsidies, came to $1.9 billion.
That sounds like a lot, and arguably it’s too much. But it’s critical to compare that number with the $131.8 billion Canadian governments spent on other industries. When all is said and done, oil and gas represented only 1.4% of all subsidies to Canadian enterprises, well below urban transit and film subsidies.
Source data from the Canadian Energy Centre and Statistics Canada.
Regardless of the small number of subsidies that energy receives, oil and gas contribute a mind-boggling sum paid each year in taxes: to the tune of $26 billion annually, according to MEI.
But, even if Canadian energy contributes to government revenues in provinces like Alberta, you might assume that’s not the case in a province like BC, supposedly built on tourism and film.
You might be used to hearing pressure groups repeat a talking point sometimes heard online that “the oil and gas industry is a marginal play in BC’s overall economy.”
According to this reasoning, industries like natural gas should simply be shut down if they contribute to greenhouse gas emissions more than, say, Vancouver’s tech industry. But are natural resource industries like natural gas the marginal players you might have been led to believe?
Somehow, the myth that BC is purely a film, tech, and tourism province has become widespread. While these are valuable industries, they by no means represent the bulk of the economy.
Meanwhile, you might be surprised to find that natural resource industries make up half of BC’s base economy. The province often fails to tell its resource story. And even then, natural gas is often ignored. Yet, BC contributed 32% of all of the natural gas produced in Canada in 2018. That’s expected to grow over the next decade to the point where BC produces even more liquefied natural gas (LNG) than Alberta by 2028.
The fact is, natural resources, including natural gas, provide thousands of jobs and billions in government revenue.
The natural gas industry in BC provides about 56,649 jobs and will contribute $5.1 billion in government tax revenue and $122 million in economic activity over the next ten years. Oil and gas represent 19% of BC’s exports and contribute about five times as much to the economy as the average sector. In just the 2019-2020 year, BC received about $575 million from oil and natural gas land sales and royalties.
Far from a marginal or declining sector, natural gas is one of BC’s keystone industries. It’s only expected to grow over the following decades.
And as it grows, it remains one of the critical pillars of the services Canadians have come to expect from their government.
The Canadian Energy Centre data shows that Canada’s energy sector’s direct contributions to federal and provincial revenues between 2000-2018 were at least $359 billion. That’s roads, hospitals, schools, public transportation, social programs, and more. That $359 billion is $36 billion more than the $322.9 billion in total federal program expenses in 2018-2019, nearly the same amount as the $366.2 billion in Employment Insurance benefits paid out between 1996 and 2019 in total.
Far from being a drain on the economy, Canadian energy keeps it afloat. It also makes our enviable quality of life possible, from incomes to public investment.
Natural gas & the energy transformation
A Greek LNG carrier. Photo from Marangas.
Myth: “Natural gas and LNG are sunset industries that shouldn’t be encouraged.”
Despite the industry's outstanding size and economic contribution, some continue to suggest that natural gas, including LNG, is a “sunset industry.” The world is racing to decarbonize the international economy, so why continue developing products that emit GHGs?
Clean Energy Canada’s executive director suggests that net-zero pledges from countries including South Korea, Japan, China, and India make investing in BC’s LNG export infrastructure moot.
“It really brings into question whether they will actually want LNG,” she says. “I think that we are going to see a global demand for gas continually decline because renewables are so much cheaper and cost-effective for some of the emerging economies like India.”
But do the numbers really suggest natural gas is on the way out?
Reality: The world will need natural gas and LNG for a long time.
Worldwide, the energy demand is only growing.
No one source of energy can meet the demand. The growing share of solar and wind energy is a positive development. Still, it cannot replace hydrocarbons in the near or medium-term, especially given the unresolved challenges with intermittency.
When the wind is blowing and the sun is shining, wind turbines and solar panels send electricity straight into the electrical grid where it keeps your lights on and your phone charged. But what happens on a cloudy or windless day? That’s what Europe discovered earlier this year when unusual weather patterns made the continent’s renewable energy system effectively useless, driving electricity prices to unheard of rates. Desperation forced freezing populations and industrial facilities, verging on bankruptcy, to turn on old coal plants – at COP26 no less.
And then there’s the whole issue of the unique use-cases for fossil fuels. Take fertilizer, for example. Natural gas is one of the primary ingredients in the most popular and effective fertilizers worldwide. With the continued worldwide energy crisis, the high price of natural gas is driving up the cost of fertilizer production, causing some plants to shut down. It’s also having an impact on farmers and could lead to worsening food shortages at a time when Russia’s war on Ukraine is set to have a dramatic impact on international food security.
Whether for baseload power or food security, the world needs natural gas. And despite the protestations of North America’s urban town criers, that’s not about to change anytime soon.
And there’s another elephant in the room: coal.
Take a look at the energy mix of the world’s two most populous countries.
Much of India is in such energy poverty that in 2020, more people burned wood and dung than natural gas and renewables put together. Given the significant percentage of energy derived from coal and traditional biomass, replacing these fuels with affordable, readily available, and far cleaner energy like natural gas should be the first priority of an international energy transition – not sacrificing the dreams and wellbeing of millions in developing countries on the altar of western energy mythologies.
In fact, one study forecasted that global demand for natural gas will grow 3.4% annually until 2035 to meet growing demand. According to the study, demand for LNG will continue to grow until 2050. Net-zero goals, far from threatening the growth of LNG, will make it all the more attractive to developing countries like India. And keep in mind that developing countries have, if they are indeed committing to net-zero, a longer runway to get there: India was pledged net-zero by 2070, a full two decades later than most Western countries.
Even if Canada’s domestic use of natural gas declines, a Canada Energy Regulator study projected that production would continue apace, driven by exports to countries like India and China.
That study found that even if Canada creates an environment more unfriendly to natural consumption, production will continue more or less as it is now, relying on increasing exports over domestic use. But under current policies, natural gas production is expected to continue to grow until 2050, climbing 43% from 15.5 Bcf/d to 22.2 Bcf/d.
Natural gas and LNG have a large role to play in a decarbonizing international energy mix, all the while bolstering economic opportunities not only for the developing world but also for British Columbians and the Indigenous communities at the forefront of emerging LNG projects.
Haisla Chief Councillor Crystal Smith. Photo from The Globe and Mail.
Myth: “First Nations are against natural gas development.”
It’s not uncommon to hear that BC natural gas development “undermines First Nations’ rights and title.”
That’s an idea which, for many, has become synonymous with protests against Coastal GasLink’s (CGL’s) natural gas pipeline in northern BC. Wherever local First Nations fail to join an outsider’s blockade, breathless urban saviours lead from the front — a noble stand for the sovereignty of Indigenous peoples, seemingly entirely vested in rejecting a pipeline. They rail against the perceived injustice of “forcing through” an unwanted project, regardless of local opinion.
But are First Nations truly united behind their alleged spokespeople?
Reality: Many First Nations champion natural gas development as the key to their economic future.
First Nations are not monolithic. Some support development, and some do not. But, by and large, a majority support resource industries like natural gas.
A poll commissioned by the Indigenous Resource Network found that 65% of Indigenous respondents support natural resource development, while 23% are opposed. Support for projects proposed near their community is favoured by a factor of 2 to 1. That support extended to 53% of respondents supporting oil and gas development and 41% opposing it.
In fact, some First Nations are leading figures behind BC’s growing natural gas and liquefied natural gas opportunity.
Near the town of Kitimat, BC, the Haisla Nation and Pembina Pipeline Corporation have proposed a new LNG export facility, Cedar LNG. The project, located beside where LNG Canada is being built, will also source its natural gas from CGL’s pipeline. Cedar LNG’s own pipeline will take the gas from CGL’s line and extend another eight kilometres to the Cedar LNG facility. There, the gas will be chilled, liquefied, and shipped via LNG carrier to Asian markets on a roughly weekly basis.
“This is the next step in terms of our true, true independence as a nation,” said recently re-elected Haisla Chief Councillor Crystal Smith.
“This is where every First Nation in the country would love to be.”
Under the Haisla Nation, Cedar LNG will be the first Indigenous-majority-owned LNG export facility in Canada.
The Nisga’a Nation, famous for its fight for self-determination and the first modern land claims agreement in BC, recently announced its plan to build, own, and operate a floating natural gas liquefaction facility and marine export terminal on its western territorial shores.
Eva Clayton, president of the Nisga'a Nation. Photo from the Nisga’a Lisims Government.
The project, Ksi Lisims LNG, is a partnership between Nisga’a Nation, Rockies LNG Partners, and Western LNG to produce and export 12 million tonnes of LNG annually, creating $50 billion of economic activity and thousands of jobs across BC and Alberta.
Finally, of course, there is also the CGL natural gas pipeline. All 20 elected band and band councils along the route have signed benefit agreements, and the project has additional support from some hereditary chiefs and leaders.
March 9, 2022, TC Energy announced the potential sale of a 10% equity interest in the pipeline. It has agreed with two Indigenous groups representing 16 communities along the pipeline route on options to take an equity share.
“The finalization of the Option Agreement represents a historic milestone in our desire to participate as equity owners in the Coastal GasLink,” said Chief Corrina Leween of the Cheslatta Carrier Nation. “For many of us, this marks the first time that our Nations have been included as owners in a major natural resource project that is crossing our territories.”
Chief Justin Napoleon of Saulteau First Nation and Chief Corrina Leween of Cheslatta Carrier Nation ad their signature to the CGL equity options agreement. Photo from CGL.
Some First Nations are not supportive of natural gas development in or through their territory. Many are. 90% of the 32 First Nations in BC on whose traditional territory pipelines have been proposed have indicated their support through pipeline benefit agreements. That support, and the opportunities in the industry, are also evident in the fact that there are three times more Indigenous entrepreneurs in Canada’s oil and gas industry than in other industries, on average.
While much of British Columbia goes about business as usual, a “quiet revolution” is underfoot across much of Indigenous Canada.
Nations like the Haisla and the Nisga’a are at the forefront of the Indigenization of Canadian energy. Meanwhile, Indigenous entrepreneurs are organizing to bid for ownership of the Trans Mountain Pipeline. Many First Nations have shifted from opposing the development of hydrocarbons on or through their territory to seeking benefit agreements, including jobs, grants, and royalties. Now, the Haisla and Nisga’a pursue equity and joint ownership. That’s an exciting prospect. It means greater self-sufficiency, economic self-determination, and a new avenue toward reconciliation.
BC is on the cusp of realizing a visionary future. But only if it lays aside the best intentions of modern myths and the chorus of nihilism and no.
Natural gas is the wheel on which the future of a more affordable BC will turn. Will the province jettison its base economy and the promise of Indigenous prosperity? Or will it chase an underdog’s dream of becoming — emerging a coastal energy superpower and the provider of cleaner, greener, imminent opportunity to the reaching hands of the working world?
Josiah Haynes is the communications manager at Resource Works and the Indigenous Partnerships Success Showcase, and a passionate advocate of the power of resources to reduce poverty everywhere.