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LNG Export Dream is a Nightmare

by on Jul.08, 2014, under Events

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Orvis_State_natural_gas_flare_01_-_Arnegard_North_Dakota_-_2013-07-04BC Path to Prosperity touted by Premier Christy Clark is an unrealistic dream that is not based on facts. It is in fact, a nightmare that will extract our non-renewable resources without adequate compensation.

In addition, the industry will destroy our groundwater, increase the risk of earthquakes, and damage human health.

At a time when many leading institutions and organizations are divesting from any investment in oil and gas, Premiere Christy Clark is committing increasing amounts of taxpayer funds to supporting, or even, subsidizing the oil and gas industry.

My conclusion from reviewing the facts and published studies is that the export of LNG will cost the province more than it will ever receive in royalties. In addition, groundwater contamination and methane leakage will continue from abandoned wells that will not be cleaned up by industry. Some of the damage may be permanent and no amount of money will be able to restore our pristine water. In addition, increased risk of earthquakes, health problems in our population and contribution to climate change all are strong signals to stop fracking. We must put a moratorium on fracking until we know more about this risky process.

LNG Development Facts

Because companies can fully deduct all capital costs before paying the full 7 per cent  LNG income tax, any cost overruns will be paid for by reduced taxes.

This means that all investment, processing and exporting expenses are paid before any tax is paid on the profit from sales. Historically, corporations find many ways to avoid showing a profit that can be taxed. Why can’t we charge a royalty on the amount of gas extracted?  The gas belongs to the citizens of this province and they should be paid for taking it. When I pay for natural gas on my home heating bill, I pay for the amount used.

Based on a more realistic expectation of LNG export volumes and prices, this analysis estimates the fully-implemented LNG income tax is likely to raise between $0.2 and $0.6 billion per year. For comparison, consider that the total annual BC Budget is $45 billion per year.

BC’s current royalty regime has not achieved a good return for the development of this finite public resource, and places more emphasis on encouraging high levels of production:

  •  Natural gas production in BC has increased by one-third over the past five years, even in the face of extremely low North American prices.
  • Yet royalty revenues have dropped significantly during this time due to low market  prices and large credits for deep drilling and gas infrastructure.

This report, by the Canadian Centre for Policy Alternatives, makes a well supported case that the revenue projections from fracking projects are greatly exaggerated. Now that China has made a deal with Russia to provide natural gas for the next 30 years, the price of BC natural gas will have to be subsidized to compete. Even though the industry is producing more gas, provincial income is dropping because the royalties are a percentage paid on profits. The report concludes:

BC should not proceed full-speed ahead to sign away non-renewable and public gas resources at any price.

Export Costs

Processing and exporting natural gas requires a great deal of investment and much of the cost will not be borne by industry. A recent article explains in the challenges faced by the LNG export industry in detail.

In a special report on global energy prospects, the Paris-based International Energy Agency (IEA) warns that expectations for a robust liquefied natural gas industry may fall apart due to bad economics and high transportation costs.

– See more at: http://thetyee.ca/Blogs/TheHook/2014/06/23/Nat-Gas-Transport-Costs/#sthash.fzPJMbJ6.dpuf

Why should BC taxpayers subsidize wealthy multinational corporations to extract our resources? The cost of transportation reduces profits and the estimates that have been used to paint a positive picture are based on highly optimistic scenarios. Why should we give up existing jobs in farms, tourism and other industries, as the land supporting these jobs is destroyed, for mythical jobs in the oil and gas business?

Taxpayer Investment

The Site C Dam will flood precious farmland and displace many people and animals to supply electricity to the oil and gas industry. It is opposed by First Nations and local residents and even BC Hydro has “not fully demonstrated the need for the Site C on the timetable it proposed” according to Canadian Environmental Assessment Agency Joint Review Panel (JRP). This dam will cost billions in taxpayer money (estimates range from 8 – 16 billion) and raise all of our rates for electricity to subsidize oil and gas extraction. However, there is some confusion, because Premiere Clark has made a statement that natural gas will be burned to create electricity to process and compress the gas. This will make the resource processing produce much more pollution, but should negate the costs of building the Site C Dam. However, BC taxpayers will have to pay for this electrical generation facility instead.

Premier Clark said B.C. will use natural gas to generate electricity needed to produce Asia-bound liquefied natural gas. The process will demand as much as four times the electricity consumed by the province’s largest city, Vancouver. – See more at – http://thetyee.ca/Blogs/TheHook/Environment/2012/06/25/shale-gas-coal-premier-bc/#sthash.j8YB0mSh.dpuf

Taxpayers will be covering the bill for port expansions, road and highway construction, upgrades and maintenance as well as inspection and regulation costs. The large equipment that must be transported to complete the fracking process is very heavy and requires road and bridge upgrades and maintenance. In the end, our biggest investment will be in clean up costs, as abandoned wells spew methane and leech toxins into the environment. Reports of approximately 1 million abandoned wells in Pennsylvania leaking methane in a study by a Princeton PhD Candidate discussed in this article,

Natural gas is mostly methane, (CH4), a super-potent greenhouse gas, which traps 86 times as much heat as CO2 over a 20-year period. So even small leaks in the natural gas production and delivery system can have a large climate impact — enough to gut the entire benefit of switching from coal-fired power to gas. Study after study, however, finds that the leaks are anything but small.  Read more at -http://thinkprogress.org/climate/2014/06/20/3451380/abandoned-pennsylvania-wells-spew-methane/

How many abandoned wells will we have to clean up in BC?

BC’s Climate Action Plan

How does exporting LNG fit in with BC’s Climate Action Plan? We are exporting a greenhouse gas producing fossil fuel and the amount of methane that is expelled into the atmosphere during the extraction and delivery process is a serious concern. Here are three articles that discuss the effects of methane release, a serious pollution threat. Scientific American, The Energy Collective and NY Times all have published articles critical of industry practices that allow the escape of methane into the atmosphere. This problem is not limited to fracked gas, but is widespread over the entire industry.

No one can accurately say how much methane is leaking from wellheads, processing plants, pipelines and other natural gas facilities, but there is a growing body of evidence that the amount is significant. 

This is important because methane is a much more potent greenhouse gas than carbon dioxide and a study from Stanford shows that the amount of methane in the atmosphere is much higher than estimated in the US. No similar studies have been completed in Canada, but industry’s own studies show that fracked wells leak more than conventional wells.

 . . .industry studies clearly show that five to seven per cent of all new oil and gas wells leak. As wells age, the percentage of leakers can increase to a startling 30 or 50 per cent. But the worst leakers remain “deviated” or horizontal wells commonly used for hydraulic fracturing.

Estimates show that BC natural gas can be dirtier than coal and create more climate impact, some deposits contain high proportions of CO2 in addition to methane that is released into the atmosphere..

“A 2010 study by Mark Jaccard and Brad Griffin for the Pacific Institute for Climate Solutions concluded that adding 4 million tonnes (MT) a year to the province’s GHG inventory, at time when the province needs to subtract millions of tonnes, means ‘that the B.C. government will sustain a 20-year Canadian climate policy tradition — failure to meet its GHG emission targets.'”- See more at: http://thetyee.ca/Blogs/TheHook/Environment/2012/06/25/shale-gas-coal-premier-bc/#sthash.j8YB0mSh.dpuf

Why do we have a Climate Action Plan if there is no attempt made to meet the targets?

Other Negative Effects

British Columbia is an earthquake zone. There is strong evidence linking earthquakes in Oklahoma to fracking, because they are not in an earthquake prone area. The government of BC  is taking on a very high risk in encouraging fracking in our province. Who will pay for earthquake damage?

Then there are health risks. There is well documented evidence that fracking contaminates groundwater and releases airborne toxins that cause serious health problems including birth defects, infertility and cancer. Who will pay for these extra health costs?

We must stop fracking in order to save our groundwater for future use. With global climate change shrinking glaciers, we will become more dependent n groundwater to irrigate crops and to sustain life. Who will pay for the de-salination plants to make ocean water useable?

Report from Montana listing Dangers from fracking including:

  • Contamination of groundwater
  • Methane pollution and its impact on climate change
  • Air pollution impacts
  • Exposure to toxic chemicals
  • Blowouts due to gas explosion
  • Waste disposal
  • Large volume water use in water-deficient regions
  • Fracking-induced earthquakes
  • Workplace safety
  • Infrastructure degradation

It is up to the citizens of BC to know the facts and work to ban fracking in BC.

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