Independent Contractors AGM Speech

November 25, 2014

By David Keane

Introduction

Phil, thank you for your kind words.  It’s a privilege to be here this evening, and I am delighted to address members of the Independent Contractors and Business Association.

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

Prior to dinner, we heard from Premier Christy Clark, our keynote speaker.

I want to acknowledge the tremendous leadership and perseverance she and her government have shown in tackling this complex file.   

I was part of several trade missions she lead to Asia and saw first-hand how hard she’s working to make LNG a reality in British Columbia.

As many of you know, it was just last month when we officially launched the LNG Alliance in Terrace.   Since then there has been a flurry of news and commentary surrounding LNG.

It’s a reminder of how important the development of this industry is to British Columbians.

In the next few minutes I want to tell you why we, the BC LNG Alliance, see LNG as a rare opportunity that presents all British Columbians with a tremendous upside, if we get it right.

So, tonight I am going to address:

  1. 1. The BC LNG Alliance
  2. 2. The future that BC’s natural gas can provide to Asia
  3. 3. The challenges we face in developing the industry and
  4. 4. The opportunities for all of us – if we get it right!

The Alliance

The BC LNG Alliance came together to serve as the common voice for the province’s leading LNG project proponents.

Our mandate is simple, it is to foster the growth of a safe, environmentally and socially responsible LNG industry in BC – an industry that is globally competitive.

And, an industry, that British Columbians can be proud of.

When we introduced the Alliance last month we had six members. They included:

  • Kitimat LNG,

Which is a partnership between Chevron Canada and Apache Canada

  • LNG Canada,

Whose partners are Shell Canada, PetroChina, KOGAS and Mitsubishi

  • Pacific Northwest LNG,

Which is PETRONAS, JAPEX, Indian Oil Corporation, Sinopec and PetroleumBRUNEI

  • Prince Rupert LNG, which is being proposed by BG Group,
  • Triton LNG – a partnership between AltaGas and Idemitsu Canada, and
  • British Columbia based Woodfibre LNG.

And last week the Alliance added a seventh member:

  • ExxonMobil – who is one of the world’s leading corporations.  ExxonMobil has been granted an export license by the National Energy Board and has an option to lease a site on Tuck Inlet, near Prince Rupert.

As you can see from this impressive list of companies, the Alliance is made up of LNG industry leaders who bring decades of experience, insight and best practices to British Columbia.

They also bring to BC an abiding commitment to safety, environmental stewardship, community engagement and investment.

The projects proposed by our members will constitute the largest investment ever seen in this province.

For example, if just one of the larger LNG projects goes forward it will create more investment in BC than the combined investment of the new Port Mann Bridge, the Canada Skytrain line, the new Vancouver convention center and the upgrade of BC Place.

And importantly, investments made by our members, and the jobs and spin offs they will create, will have a very positive and beneficial effect on communities throughout northern BC and indeed throughout the entire province and Canada.

So what does BC’s natural gas offer Asia?

It is safe to say we would not be having a conversation about a possible LNG industry if we didn’t acknowledge some basic truths.   

Energy powers our lives.  It shapes how we work and how we communicate.

One of the key forces in the 21st century, is rising energy demand.   By the middle of the century it’s estimated the world population will grow from 7 billion to 9 billion people – with roughly three out of 4 people living in cities.

As living standards rise, people will demand microwaves, TV sets, and fridges – especially in Asia, and particularly in countries like China and India.

Access to energy though isn’t just about watching your favourite show on your big screen TV. It’s actually the difference between prosperity and poverty.

What critics rarely mention, however, is that access to energy for people in Asia is access to opportunity.  Today, 1.3 billion people in the world do not have access to electricity.

Without electricity schools go dark, homes lack clean cooking facilities, and factories cannot provide jobs.

When countries are able to reliably power their homes, vehicles, schools, and businesses the impact is dramatic.

In the past three decades, China has pulled 680 million people out of extreme poverty.

This means that the most successful poverty reduction program in the history of the world is called, “China.”

This could not have been done without energy – which powers the fight against poverty.

BC’s significant natural gas reserves and our proximity to Asian markets, gives our province an unparalleled opportunity to grow a vibrant new industry, while serving the growing demand for natural gas and a better quality of life in Asia.

To get BC’s LNG’s industry up and running means we must collectively work together to overcome some key challenges.

Challenges

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

It’s a complex endeavour requiring cooperation on many fronts, including the federal, provincial, First Nations, and municipal governments, along with labour and educational institutions.

Since our launch, we have seen the introduction of the LNG tax and GHG legislation.

And, while our members appreciate the government re-visiting its original tax structure we still need certainty and clarity on how these two critical pieces of legislation will be implemented.

For our LNG projects to be viable, we need to strike the right balance that enables British Columbians to receive fair value for the sale of their natural resources, while at the same time recognizing the enormous technical and financial challenges of very large and complex projects with significant risks.

Our members will not only be paying the LNG and carbon tax, but will also have to purchase carbon offsets, as well as paying royalties, PST, GST, payroll, municipal taxes and corporate income taxes.

However, as I have said before, if we strike the right balance, we CAN be economical and build a safe, sustainable and globally competitive industry right here in BC.

Opportunities

So what are the opportunities and benefits this new industry offers our province and you the members of the ICBA?

LNG holds the potential to create tens of thousands of new construction jobs and thousands of new permanent jobs for British Columbians.

For example, on average there will be 3,000 to 7,000 construction workers required for each of the large-scale liquefaction plants.

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

And it doesn’t include the jobs created to build and operate the natural gas production facilities in the northeast or the pipelines to get the gas from the production fields to the coast.

Together the seven projects that make up the Alliance represent a total potential investment that will run in the tens of billions of dollars, just for the plants.

That doesn’t include investments in pipelines or upstream production facilities, which will add billions more to the total.

Finally, when the plants are operational they could provide new revenues to all levels of government that may well run into the billions of dollars, each and every year.

Another important feature of the LNG industry, is the very real opportunities it will provide First Nations.  Opportunities that provide long-term, sustainable benefits.

Pit Crew study

As I mentioned, what is also promising is the opportunity LNG development offers labour.

A recent study looking at Canada’s LNG preparedness, conducted by Pit Crew Management Consulting, shows the challenges we as a province face.

In one scenario, the study assumed four large and two small LNG projects were to move ahead in BC.

At peak construction, we would require an additional 30,000 construction workers for upstream and downstream site works, an additional 6,000 engineers, and 100,000 plus off-site jobs over the next five years.

To put that in perspective, imagine if every unemployed British Columbian today had the required qualifications to work in LNG, there still would not be enough people to deliver the projects.   

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

Additionally, we must also be concerned with what Peter Dyball of Pit Crew terms “Skills Dilution”.

For instance, from 2010 to 2013, construction workforce numbers on Australian major projects increased significantly over a relatively short period of time.

Taking into account outcomes of the critical factors regarding qualifications and experience, training, availability, mobility and temporary foreign labour, the sector saw the average level of experience and skill of the collective workforce decline significantly.

This as you can imagine, impacted job-face productivity.

Observation of the labour market for the delivery and operations of major projects over the past decade led Peter to conclude that the direct and indirect effects of skills dilution had a far greater influence on project costs and delivery than any increase in labour rates.

In Australia, the major project market saw a significant increase in both labour and costs.

For example, a package of work that took 10 million man-hours in 2004, at a direct labour cost of around $440 million, in 2013 a similar package of work would take almost 20 million man-hours and with a cost of just under $1.5 billion.

The reduction in job-face productivity meant projects needed more people or more time, or both and certainly more money!

Importantly, Peter was not criticizing the workforce, the increase was the effect of massive growth, and the flood of workers from other sectors and newly trained workers.

The fact is that qualifications, skills and the sector-specific experience were spread thin, and continued to be spread ever more thinly as demand increased.

While skills dilution significantly impacted productivity at a blue-collar workforce level, the most negative impact was felt at the supervision, engineering and management level.

However, all is not lost!  I would like to recognize Premier Clark and her government.

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.

I’m now Vice-Chair of the Executive Committee of the Premier’s LNG Working Group … and rest assured … 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.

I also would like to note that the Pit Crew study I mentioned earlier, acknowledged British Columbia appears to be 2 to 3 years ahead of where our Australian counterparts were at the same stage of project development.

That is good news, but we must not be complacent.  We have to prepare now.

The mix of a skills shortage and fast growth in LNG related construction, had a dramatic impact in Australia.   And we cannot allow that to happen in BC!

BC History

No matter how daunting the challenge, we must confidently seize the opportunity before us.  History has taught us that British Columbians have built large infrastructure projects – and done them well.

Over fifty years ago, W-A-C Bennett was told he was crazy to spend so much energy and tax dollars building dams, highways, transmission lines, and laying rail tracks.

That vision transformed the economic, social, and cultural face of British Columbia.   In many ways, it’s back to the future.  LNG has the same potential today.

The impact of striking the right balance will provide British Columbians with opportunities and benefits for decades to come.

Conclusion

So as I conclude, we know that British Columbians not only want to see their environment protected, we also know that they want jobs and a strong economy.   

And, yes while there are challenges these challenges are not insurmountable.   But, if we are to seize this once in a life time opportunity, we must all work together.

By finding the right balance, we can take advantage of a rare opportunity and build a new industry that will benefit all British Columbians for generations to come.

Thank you.