British Columbia (B.C.) is missing lucrative trade opportunities because of overlapping and outdated legislation affecting the export of liquefied natural gas (LNG) to Asia, a new study from the Fraser Institute concludes.
The October 16, 2012 report, Laying the Groundwork for BC LNG Exports to Asia, says legislative obstacles —and opposition from special interest groups— are inhibiting the development of pipelines and marine terminal facilities required to ship LNG from shale gas-rich northeast B.C. to eager Asia-Pacific markets where LNG prices are through the roof compared to U.S. trade.
During this time of transition to alternative energy, the Fraser Institute —a Canadian Conservative public policy and research think tank— examining the potential economic impact of B.C. missing the boat.
“Unfortunately, the government agencies responsible appear oblivious to the commercial and economic costs of protracted regulatory procedures and the fact that potential investors may look elsewhere if the project review process is dragged out and unnecessarily duplicated,” announced Gerry Angevine, Fraser Institute senior economist and co-author of the report, in a public statement after the release of the report.
The report is co-authored by Vanadis Oviedo.
According to the Asian LNG export scenario outlined by the Fraser Institute, west coast profits could exceed $134 billion over the period from 2014 to 2035. The profits would contribute $4 billion to Canada’s gross domestic product and generate more than 50,000 person-years of employment. In addition, considerable full-time employment would be generated by the operation of the facilities and the expansion of production.
Demand for LNG, specifically in Japan, is likely to increase as the country begins the process of moving away from its reliance on nuclear energy.
“Removing obstacles also means considering the benefits from updating essential regulatory processes, including those required under the National Energy Board Act, to meet the needs of the twenty-first century,” the report states.
B.C. accounts for about 20 per cent of Canada’s marketable natural gas production, according to the National Energy Board.
The Fraser Institute developed a 14-step plan for federal and provincial governments to expedite an export system to Asian countries like China, Japan, Korea and India. It explores areas such as the time and cost of the National Energy Board’s (NEB’s) regulatory process.
The report suggests that applications to the NEB are not processed and evaluated in a timely manner. It says the federal government is “oblivious” to the fact that its delays mean competitor markets with more efficient regulatory systems can snap up Canada’s business opportunities.
"With the necessary infrastructure and a sensible policy framework, exporting liquefied natural gas from BC to Asia would bring staggering economic benefits to all Canadians," Angevine said.
The report recognizes that the federal government revamped the National Energy Board Act and the Canadian Environmental Assessment Act, 2012 in the spring 2012 budget. Through the Jobs, Growth and Long-term Prosperity Act passed in Parliament in June of 2012, the government appeared to recognize the burdensome application process to the NEB and made a number of changes to streamline the process. (See the September 2012 edition of EcoLog’s EHScompliance).
The report, however, questions these changes.
The new processes are rife with opportunities for the government to permit delays and extensions under a number of circumstances, the Fraser Institute’s authors say in their report. For example, while NEB reviews of project applications under sections 52 and 58 of the National Energy Board Act are to be completed within 15 months, the Board may require the applicant to provide information or to conduct a study without regard to that time limit. The report suggests these situations could be avoided with more pre-report discussions about what is required.
The report also says discretion is needed when considering applications that cover similar project material in the same geographical area. Also, there is duplication in having to provide the same material to numerous regulators, such as the B.C. Oil and Gas Commission.
“Although the duplication of the regulatory process in relation to related projects may be lucrative for lawyers and consultants, the unnecessary repetition inevitably adds to the time and costs required to secure project approval,” Angevine said.
Further complicating the potential export of LNG to Asia are the conflicting toll-setting methodologies on federally regulated pipelines, the role of First Nations’ lands, and public opposition to fracking and pipelines.
“Unfortunately, cumbersome regulatory processes and procedures, opposition by some First Nations and special-interest groups, conflicting toll-setting methodologies, and often unwarranted environmental concerns and review processes are inhibiting the development of the transportation infrastructure needed to ship natural gas to the west coast,” the Fraser Institute’s report states.
In terms of First Nations involvement, the report appears to favour the use of Impact Benefit Agreements (IBAs) between industry and Aboriginal Peoples.
The report also addresses the issues of natural gas pipelines being perceived as dangerous, or at least a safety hazard. It refers to a study by the Interstate Natural Gas Association of America (INGAA), which indicates that the U.S. risk of failures in long-haul natural gas transportation by pipeline is very low. The study uses data from the U.S. Department of Transportation, to show that operators of natural gas transmission pipelines averaged five serious accidents per year between 2000 and 2010 along the approximately 300,000-mile natural gas transmission network in the U.S.