CLEAN ENERGY BC

November 8, 2016

Thank you to Clean Energy BC for inviting me to be the luncheon speaker this afternoon.

Before I begin, I would also like to thank the Coast Salish people for allowing me to enter their traditional territory.

Today, I’d like to give you some fresh insight on the present state of the liquefied natural gas or LNG industry in British Columbia, particularly against the backdrop of current oil and energy prices.

So, I am going to address:

  1. Who the BC LNG Alliance is,
  2. The status of the LNG industry,
  3. The role natural gas can play in mitigating climate change,
  4. The workforce challenges we face, and
  5. The opportunities for all of us – if we get it right!

LNG is truly a rare opportunity, and from my perspective, LNG is not an, “if,” but a, “when.”

As I am sure many of you know, the BC LNG Alliance came together to serve as the common voice for British Columbia’s leading LNG project proponents.

Our mandate is clear and simple: foster the growth of a safe, environmentally and socially responsible LNG industry in BC …

… An industry that will provide thousands of jobs to British Columbians and Canadians for generations to come.

For this to happen, however, we must develop an industry that is globally competitive; if we are not competitive on a global basis then we won’t be successful.

The members of the Alliance include:

  • Kitimat LNG (Chevron and Woodside Energy),
  • LNG Canada (Shell, PetroChina, KOGAS and Mitsubishi Corporation),
  • Pacific Northwest LNG (Petronas, JAPEX, Indian Oil Corporation, Sinopec and PetroleumBrunei),
  • Triton LNG (AltaGas and Idemitsu Canada),
  • Woodfibre LNG (Pacific Oil and Gas),
  • WCC LNG (ExxonMobil), and
  • Fortis BC.

The fact that we have members who are leading players in the energy industry is a strong vote of confidence in the Alliance.

More importantly, it is a vote of confidence in Canada and British Columbia and the fundamentals that are at the core of the province’s LNG sector.

All told, these LNG industry leaders bring decades of experience, insight and best practices to British Columbia.

Part of our role at the Alliance is to provide British Columbians and Canadians with reliable information on LNG, our operations and best practices, and the challenges and opportunities we face as a new industry.

In that regard, we are working on various initiatives, including:

  • Consulting with the Province on the implementation of the LNG tax regulations,
  • As a member of the Premier’s LNG Working Group we are working collaboratively with government, labour and First Nations to ensure that we live up to our commitment to hire British Columbians first, Canadians second and then looking abroad to fill any remaining gaps.
  • Working with the BC Ministry of Environment, as well as others, on developing BC’s Climate Action plan.

In this particular area I want to be clear, the LNG industry is not opposed to BC’s current carbon tax of $30/tonne.

  • It is also worth pointing out that as a result of BC’s Greenhouse Gas Industrial Reporting and Control Act, our LNG facilities will face the most stringent greenhouse gas intensity benchmark anywhere in the world.

The Alliance also engages with, listens to and addresses the concerns of First Nations, communities and stakeholders.

And we are actively engaged with all levels of government: First Nations, local, provincial and federal.

Our mandate is clear, comprehensive and important, especially when one considers that the projects proposed by our members would be the largest investments ever made in BC …

and among the largest ever made in Canada.

However, it won’t surprise you when I say there are a few naysayers in the province who say this industry will not happen.

As President of the Alliance, I can tell you, without hesitation, that these critics rush to judgement too quickly, based on false assumptions and a lack of knowledge about BC’s LNG industry.

While we are concerned and cautious by the present volatility in the energy market, we have not given up on the enormous opportunity for LNG development in British Columbia – a large natural gas resource base, highly educated population, close proximity to the large Asian markets, etc.

Therefore, the Alliance and our members are focusing more on capital discipline and looking for ways to reduce costs to be competitive with alternative sources of natural gas .

Nevertheless, volatility in the energy markets does in fact mask a tremendous opportunity for LNG in British Columbia.

This is due to the fact that the fundamentals in British Columbia are solid and the province is well-positioned for LNG growth.

That’s why companies have already made considerable investments as part of their pre-final investment decision work.

Residents of northern BC, Squamish, and Vancouver, have already witnessed a significant amount of that investment.

. . . Investment valued in the billions of dollars.

These investments have created jobs and spinoffs in BC for First Nations and for the communities of Prince Rupert, Terrace, Kitimat, Port Edward, Squamish, and Vancouver.

Even with all these positive developments, we do acknowledge that the impact of low energy prices has been significant and far-reaching.

It has prompted tighter capital discipline within companies, and re-affirms the need for certainty with respects to the fiscal, legal, and regulatory framework in British Columbia and in Canada.

Reducing costs will ensure our industry is able to compete globally and attract the necessary capital to build these multi-billion dollar projects.

It’s also important to recognize that given the size and scope of the proposed projects, LNG proponents will make investment decisions on a longer-term pricing horizon.

A pricing horizon that goes well beyond any impact that the spot price of crude oil may have.

LNG projects are large, complex undertakings that require tens of billions of dollars of capital investment.

Projects therefore, must have a strong business case, meet stringent economic tests, have regulatory certainty and stakeholder support before they proceed.

Our members are working toward that goal through conscientious management that ensures projects are properly sited, designed, and constructed.

From financing, to engineering, to skills training, there are a lot of moving parts when it comes to building a new LNG industry.

It’s a multifaceted endeavour requiring cooperation on many fronts among federal, provincial, First Nations, and municipal governments, as well as labour and educational institutions.

We know that our competitors know this, and that’s why we’re working to get it right because our competition is global.

From Australia, to the U.S. gulf coast, to East Africa, to Iran and to Russia … the race is on to serve the growing Asian markets.

We are in the race, but we also know that in the short-term LNG supply has out-paced demand.

In BC, we are not looking at LNG as a short-term 100-metre sprint, but as a long-term race; a marathon of sorts, where we are strongly positioned to cross the finish line, and win.

Keep in mind that over the longer-term Asia’s economies will grow, despite the gloom in today’s markets, over the next half century and our members are well aware of that.

In fact, when comparing supply to demand – I expect that demand will be greater than supply by the early part of the next decade.

This means that over the longer-term, the industry is well positioned for growth in British Columbia.

Of course, the conversation surrounding the export of Canadian energy can’t occur in a vacuum. The long-term challenges surrounding climate change must also be addressed.

As the Governor of the Bank of England said, “research tells us with a high degree of confidence that atmospheric conditions of greenhouse gases are at levels not seen in 800,000 years, and since the 1980’s the number of registered weather related loss events has tripled.”

Therefore, the global community will have to work to limit global warming to two degrees Celsius. The international cooperation we are now seeing to combat climate change is a positive step.

However, the conversation surrounding global energy supply must also acknowledge another fundamental reality.

Demand for energy will continue to grow. The International Energy Agency predicts that even under the most stringent of climate scenarios, limiting the temperature increase to 2 degrees, that natural gas will still make up 64% of the world’s primary energy supply in 2040.

The reason for this is because the world’s population is growing and that by 2050 we expect there to be about 2 billion more people on the planet.

Furthermore, it’s estimated that another 2.2 billion people will enter the global middle class by 2030.

Increased affluence will mean a greater demand for energy, whether it’s to power a car, a laptop, a microwave, a TV set, or a refrigerator. The demand for energy will grow.

I believe a realistic approach to meaningful reductions in global greenhouse gas emissions is to shift the energy mix in countries that emit a large part of the world’s carbon emissions to cleaner burning fuels, such as natural gas.

Critics say the dropping cost of renewables will make wind and solar competitive with conventional fuels in the near future, hence Canada should drop its LNG aspirations.

The US Energy Information Administration estimates that currently 11% of global energy comes from renewables, and by 2040 that number will increase to 15%.

Even if you believe it could reach 25%, that still means that 75% of global energy demand must be met by traditional sources like oil, natural gas, and nuclear.

As everyone in this room knows, the cost and scale of changing energy infrastructure quickly is difficult because it’s vast and expensive.

As we deal with climate change and the rising demand for energy, greater use of renewables and new technology are always welcome, but we mustn’t forget traditional energy sources still have a significant role to play, and with natural gas being the cleanest hydrocarbon fuel source it will play a lead role in the transition.

Thanks to our vast hydro-electric system, British Columbia represents a mere 0.02% of global greenhouse gas emissions.

And Canada, represents only about 1.7% of global GHG’s.

We have to remind ourselves that the predominant future source of greenhouse emissions isn’t BC or Canada, but Asia – home to nearly 60 percent of the world’s population – a population that’s growing.

Asia’s economies are taking tens of millions of people out of poverty and with this growth comes a huge demand for energy.

Already China is producing twice the GHG’s of the United States, and that number is expected to rise by 7% per year for the foreseeable future.

Today in China there are 4,000 deaths every day attributed to air pollution. In fact, breathing the air in some parts of China is now equivalent to smoking 40 cigarettes a day.

If China and India increase the use of natural gas for their growing energy needs they can cut carbon dioxide emissions significantly, just like our US neighbours have done over the last few years.

Per a recent study by Pace Global, replacing coal-fired power generation with natural gas can reduce emissions by as much as 50%.

And this is where BC has a role to play by producing LNG under the strictest environmental rules and regulations in the world.

BC’s strong environmental laws, it’s globally leading carbon tax, combined with the world’s only LNG emissions intensity benchmark are unprecedented, guaranteeing that British Columbia and Canada will develop an LNG industry to the highest environmental standards.

As we develop BC’s LNG industry, we must also acknowledge that British Columbia is a policy leader on climate action.

As a member of the Climate Leadership Team, selected by the BC government, the LNG industry was one of the key stakeholders involved in producing a report prior to the COP 21 international conference.

With a carbon tax set at $30 per tonne British Columbia is truly a global leader in implementing, managing, and mitigating the impacts of climate change.

When it comes to the carbon tax BC has led, yet few jurisdictions have followed…so far.

Most jurisdictions are hoping to make climate gains by fuel switching, from coal to natural gas.

In British Columbia, the “low hanging fruit” has already been picked, since about 94% of electricity produced comes from carbon-free sources – one of the highest shares among all OECD jurisdictions.

I want to again state the BC LNG Alliance is not opposed to the carbon tax, but we must remain globally competitive!

Protecting emissions intensive and trade exposed industries will allow the province and Canada to sustain GDP growth, job growth, and protect the economy, while at the same time reducing global greenhouse gas emissions!

The LNG industry operates in a world where capital is mobile, and government influenced costs can impact investment decisions – positively or negatively.

If we can be competitive the opportunities and benefits the LNG industry offers the BC and Canadian economies will be tremendous?

Last February the Conference Board of Canada released a report examining the potential economic impact of a 30 million tonne per annum LNG industry in BC.

Essentially, that would mean the construction of two large facilities and one small one.

The report estimated that developing BC’s LNG industry would grow Canada’s economy by an average of $7.4 billion/year over the next thirty years.

Increased economic activity would raise national employment by an annual average of 65,000 jobs.

The fiscal impacts of a BC LNG industry would be tremendous.

Annual government revenues, including corporate, personal, and indirect taxes and royalty revenues, would increase by approximately $6 billion annually, of which $3 billion would accrue to the provincial government.

With one positive investment decision, the impact of the industry will be immediate and long term – especially for working people.

To build one large-scale liquefaction plant requires up to 7,500 construction workers.

That number doesn’t include the thousands of new long-term jobs required to operate the plants and support the industry.

…AND THAT’S WHY SKILLS TRAINING IS A MAJOR FOCUS FOR OUR INDUSTRY, FOR OUR PROVINCIAL GOVERNMENT, AND FOR LABOUR.

Therefore, I want to recognize the work that Premier Christy Clark and her government, have done to advance LNG in BC.

They have done an exceptional job in bringing industry, labour, First Nations and the Province’s post-secondary institutions together under the Premier’s LNG Working Group.

The LNG Working Group has set out a number of recommendations to follow to ensure British Columbia has the skilled labour force it needs to seize this opportunity.

As Vice-Chair of the Executive Committee of the Working Group, I can tell you we are working diligently to create skills and trades training spaces so British Columbians will be first in line for new LNG related job opportunities.

We will hire British Columbians first and then look to other Canadians. If there is genuine need, we will then look outside Canada for workers.

Our “local first” policy is good news, but we must not be complacent. We have to prepare now, so we are ready for tomorrow!!

We believe British Columbia and Canada can meet the challenge, because of the great advantages relative to that of our competitors.

For example, BC’s natural gas is a world-class resource that is easily accessible.

Our natural gas pipelines are built to the highest standards and have been safely transporting natural gas for over 60 years.

There is a track record of safety and success that few can match.

Another advantage relates to the ambient air temperature at an LNG plant, which has a significant impact on the efficiency of the plant. This translates into an increase in production capacity of about 25%.

Communities in BC, where many of the proposed LNG plants would be built, are a long way from the equator.

This means that it requires much less energy to produce the same quantity of LNG in BC than it does in locations that are close to the equator.

At the same time, British Columbia is strategically located with convenient access to the markets of the Asia Pacific region.

This ensures that we can get our product to markets quicker, which gives us an advantage relative to that of our competitors in areas like the U.S. gulf coast.

On top of that, British Columbia like all Canadian provinces, has robust environmental standards.

It’s also important to note that individual LNG proponents continue to make progress towards agreements with First Nations.

…All of which is being done with a view to shepherding projects towards Final Investment Decisions.

And, contrary to what you may hear, the BC government has signed 62 pipeline benefits agreements with 29 of 32 eligible First Nations that are located along four proposed natural gas pipeline routes.

So, despite the noise from a vocal minority of naysayers, more than 90% of First Nations along these pipeline routes have already shown strong support for LNG.

The agreements will not only provide direct financial benefits during construction, but will also provide further benefits in annual payments through the operational life of the projects.

The agreements also provide increased access to skills training and environmental stewardship projects.

As an example, last year, Chevron Canada reached an agreement with a First Nation band in northwest BC.

This agreement ensures that all 16 First Nations whose traditional territory is located along the proposed route of the Pacific Trails Pipeline in northern BC are now part of a commercial partnership — a partnership that will provide lasting benefits to the member First Nations.

In this case, the 16 First Nations will share $32 million in direct benefits during the construction phase and $10 million in annual payments during the operational life of the project.

Recently the BC LNG Alliance launched a province wide television campaign, where everyday British Columbians spoke about the economic opportunity provided by LNG.

We had small business owners, representatives from the trades, and First Nations leaders participate. Including Joe Bevan, Chief Councillor of the Kitselas Nation, located near Terrace, BC.

A community that does not have a proposed LNG facility, but has benefited from preparation work for the natural gas pipelines that will feed the Kitimat projects.

Working with First Nations is a priority for our members. Several of our other members, including Prince Rupert LNG, LNG Canada, and Pacific Northwest LNG, have been working with their First Nations partners to create employment opportunities for unemployed Aboriginal people.

This project, called Pathways to Success has been a triumph having found jobs for 167 chronically unemployed First Nations people since its inception last spring.   The estimated annual salary of those individuals who completed the program is over $36,000 per year.

These partnerships will help provide significant economic and social benefits to First Nations.

As I stated at the outset, with the planning work underway and the companies moving towards FID, many communities, First Nations, and contractors are seeing the benefits associated with LNG investment.

Once companies reach FID, those benefits will be felt across many industry sectors in Canada.

Support for the industry will come from across the country from various manufacturers to service providers, all of whom could benefit from the development of BC’s LNG industry.

And on top of that are the jobs created to build and operate the natural gas production facilities in northeast BC and the pipelines to get the gas to the coast.

Against this background, there are many reasons for getting LNG right and we are well on our way.

By getting it right, we can ensure we remain competitive.

By getting it right, we can successfully compete over the longer term for a piece of the LNG market along with the US, Australia, East Africa, Iran and Russia.

By getting it right, we can ensure Canada’s LNG industry will have a bright future.

In closing, I’ve touched upon various issues this afternoon in order to provide you with a more realistic assessment of British Columbia’s LNG sector.

Based on my knowledge and involvement with the sector, I believe we have a promising long-term future.

As I said at the outset, we have a rare opportunity to build a new industry that will benefit First Nations, British Columbians and all Canadians.

Thank you.