The British Columbia government got a jump on Valentine’s Day on Feb. 12 by expressing their love for the burgeoning liquefied natural gas (LNG) industry and the associated economic benefits it is expected to bring to the province.
Premier Christy Clark and her crew also sent a love letter to the people of B.C. in the form of a Prosperity Fund that will use LNG revenues to eliminate the provincial debt, as well as allow the government to cut personal income taxes and invest in health care, education and infrastructure improvements.
"The safe recovery and export of our abundant supply of natural gas presents an opportunity for prosperity unlike anything we have ever seen before," said Clark.
Anticipating $1 trillion in cumulative GDP stemming from LNG projects over the next 30 years, the government is expecting the Prosperity Fund to top $100 billion after it starts accruing revenue in 2017.
It is thought the fund could erase the provincial $56 billion debt by about 2027.
"British Columbians can secure tens of thousands of new jobs for decades to come by developing this clean energy resource, and protect this new wealth for the benefit of all of us today, as well as our children and their families, tomorrow,” Clark added.
"Our LNG industry is quickly developing,” said Rich Coleman, minister of energy, mines and natural gas.
“Large industry players are investing millions of dollars now to prepare for the opportunity ahead. We owe it to British Columbians to create the greatest economic return possible, so we can ensure this opportunity delivers benefits to our citizens for generations."
“I look at something like the Prosperity Fund as a great idea when we look forward to the growth of LNG,” said Mike Bernier, mayor of Dawson Creek – a community that is central to the LNG industry as a hub for oil and gas activity in the Montney shale gas play surrounding the city.
“Instead of just having that money just roll over into general revenues, to be able to put it into a specific fund to look at paying down the debt or lowering the taxes in the province,” he continued, “I think that’s a great approach.”
It will be interesting to see how cities such as Dawson Creek and their Alaska Highway neighbours Fort St. John and Fort Nelson are able to share in the Prosperity Fund dollars.
All three communities are home to service sector outfits and branch offices of oil companies working in the Montney, the Horn River Basin, the Liard Basin and the Cordova Embayment, the primary sources of natural gas for the LNG industry. Consequently, all three communities could experience an influx of new people and an additional strain on their local health care, education and recreation systems, not to mention their road, water and sewer infrastructure, as exploration and production activity ramps up along with the LNG business.
“One of the big things for me is, as the industry grows and as the area grows, so does our percentage that we receive through Fair Share funding,” said Bernier, suggesting that financial support from the government for local infrastructure could exist regardless of how the Prosperity Fund is spent, depending on the fate of the Fair Share program.
“One of my big pushes,” Bernier continued, speaking as Liberal candidate for the Peace River South riding in the upcoming spring election, “is to make sure that, as a government, we recognize the importance of that Fair Share continuing on and try to either put it in legislation or get rid of the 2020 deadline date.
“Because if we’re going to continue growing with the LNG, we need to have the spin-offs coming back into our area where the bulk of that strain is going to be felt.”
Sean Thomas agrees.
As president of the Fort St. John Petroleum Association and HSE coordinator for local service provider Trans Carrier Ltd. (TCL), Thomas has a good view of the local impacts of the natural gas industry in B.C. and what could be coming down the pipe with LNG.
One of his concerns is how the region benefits from the work being done when not all of the workers actually live in the area.
“We’ve got people working here that aren’t from here. They’re sending their paychecks down to Kelowna, Williams Lake, Vancouver Island,” he said.
“They’re taking that money and those tax dollars down south with them.”
Thomas suggests that has to be taken into account when the government decides how they will use those Prosperity Fund dollars because those individuals could be using local infrastructure without contributing to maintenance and improvement.
“If it got to the point where people couldn’t work out of here or couldn’t be here, they won’t work out of here,” he said.
The story is similar in the Northern Rockies Regional Municipality (NRRM), the jurisdiction that includes Fort Nelson, apart from the fact that the community has never received Fair Share grants.
Mayor and council is currently negotiating with the Province to find a way to fund a community development plan that will allow Fort Nelson to meet the needs of the oil and gas industry and its workers now and in the future.
Laurie Dolan is a member of that council.
Also, as a former executive director of Energy Services BC (ESBC) and a current employee of Northern Lights College (NLC), not to mention a lifetime northerner, she has a unique perspective on the issues surrounding LNG.
“Anything that happens in the province, I like to see the whole province win,” said Dolan, discussing the Prosperity Fund, which is designed to allow the entire province to benefit from the work that will largely be done in the northeast and the northwest.
“But at the same time, the infrastructure that’s needed to produce all this at the LNG facility starts long before [that],” she continued.
That has been something of a mantra in Fort Nelson.
“The work that’s being done takes thousands of people, lots of flights landing on our tarmac and [lots of trucks on] our roads,” said Dolan. “And a lot of people still don’t understand that the LNG can’t happen without the development up here. … It still has to be respected that these things are happening in our small community. And it’s left to our taxpayers to build infrastructure. And so that’s always a concern to us. Always.”
Lori Ackerman, mayor of Fort St. John, is uncertain what the Prosperity Fund could bring to her community simply because it is still unclear what the program will actually be when it is up and running.
It has been reported that the fund will consist of royalties, corporate taxes and a new LNG tax that is still under construction, but Ackerman said that hasn’t been made clear at this point.
“To be fair, I would like a lot more detail on this,” she said.
“All things being equal and the Fair Share agreement continues, there are needs within this province that need to be addressed,” she added, noting that the drop in natural gas prices has considerably reduced provincial revenues and the ability of the government to implement new programs.
One potential benefit of the emerging LNG industry that is fairly easy to quantify is the impact on employment.
While Clark was announcing the Prosperity Fund plan, her government was also releasing a fact sheet stating that the construction of two large LNG plants, three small LNG plants and associated pipelines would create 39,000 annual jobs over a nine-year construction period, plus an additional 75,000 jobs when the facilities are finally operational.
Employment due to construction is expected to include 11,400 direct jobs, 22,1000 indirect jobs and 5,900 induced jobs, mostly in communities where construction staff will be enjoying local hotels, restaurants and entertainment.
Residential home construction and renovation in those communities is also expected to translate into new employment as people gravitate toward job opportunities related to LNG.
It is expected that LNG will account for 2,400 direct jobs, 61,700 indirect jobs and 11,100 induced jobs when the plants are up and running.
“The service sector around here should see an increase in their business to try to get more wells drilled, get facilities built, to be able to fill that line,” said Thomas, discussing the employment benefits for the Fort St. John area.
That opportunity is coupled with the labour shortage that is confronting the oil and gas industry across western Canada.
Thomas admits that the local service sector is stretched thin.
“But, at the same time, when you look around town, there are a lot of companies that aren’t working to full capacity right now either. So, kind of spreading the workload is a good idea,” he said.
“I know a lot of business owners don’t want to hear that. But there’s no reason that we’re run off our feet here and the next guy’s sitting with [idle] trucks. And so that’s usually our first option, is to explore and partner up with other companies and local companies, make sure that we’re all running on the same program and confident and familiar with their equipment and their staff. Use their staff. And then, if we do come up with a labour shortage, that’s something that we’ve talked about in the past.”
Thomas noted that some companies are tackling the problem by renting or buying “crew houses” that can accommodate workers from other communities who come to Fort St. John for two weeks stays before returning home for a week.
“We’ve already exhausted our local work pool,” he said.
“The only downside to that is people that make that money, they take that money and those tax dollars down to where they live. So, the city itself doesn’t get the benefit.”
“Why people live where they live is a personal decision,” said Ackerman.
The upshot is that many British Columbians – or Canadians overall – may not choose to move to northern B.C. where employment opportunities are plentiful, although they may not have those opportunities in their hometowns. A perfect example is the fact that northeast B.C. has a shortage of welders, but there is an unemployment rate of about 30 per cent among welders in the Lower Mainland.
“Where the jobs are is well known,” said Ackerman.
“Government can create policies and programs that be the incentives for those people to move. As our community grows and the knowledge of the lifestyle opportunities that go along with the career opportunities become better known, we will continue to see growth.”
Training local talent is the other part of satisfying the labour demand.
“The biggest part of that is trying to anticipate the need for more skilled workers,” said Bernier. “As we go forward, the government needs to continue investing in the local trades, the local education system, to make sure that we’re building people for tomorrow’s jobs.
“If the LNG systems are going to go through, we have to anticipate what the demands on the workforce are going to be. And we can’t wait until those jobs are being offered and people aren’t trained for them. We have to start training now. And to do that we need investment to take place.”
Bernier remarked that some of that investment should go toward trades program at NLC, which has campuses in Dawson Creek, Fort St. John and Fort Nelson.
“I think everybody’s talking about it,” Dolan said of the labour issue.
“It affects everybody. It’s not only the service sector. It’s the support sector,” she continued, adding that bringing workers to Fort Nelson also means building new houses and recruiting new doctors.
“They’re going to need grocery stores,” she added.
That is also true if local youth choose to stay and raise families in Fort Nelson, which is obviously something Dolan would like to see.
“Being a northern girl, we need to start in the North,” she said, noting that there are initiatives such as funding for trades training through the BC Jobs Plan that can help born and bred northerners live and work in the North.
“We want accessible training,” Dolan continued. “We want training to happen here. It’s a long ways south. And if people in the south don’t understand that, then they need to take a drive up here just to find out how that happens.”
Accessible training could even mean a University of Northern British Columbia (UNBC) presence in the Northern Rockies.
“Anything’s possible,” said Dolan.
“When the activity starts back up here, players and partners come from everywhere. And for the good of it.”
Increasingly, those players and partners include Asian-based companies that are investing heavily in B.C.’s natural gas industry.
Another fact sheet released by the government on Feb. 12 noted that over the past year Mitsubishi Corporation has invested $2.9 billion for a 40 per cent stake in Encana’s Cutbank Ridge assets, Nexen has signed a joint venture deal with Inpex Corporation worth $700 million, China National Petroleum Corporation (CNPC) has invested about $1 billion in Shell Canada’s Groundbirch operation and Petronas put over $1 billion into Progress Energy’s Montney assets.
Petronas has since acquired Progress, after announcing plans for their Pacific Northwest LNG facility.
The Nexen-Inpex deal also includes an LNG component, as the two companies are working together in the Horn River Basin, Liard Basin and Cordova Embayment with the possibility of exporting that resource in liquid form.
Additionally, Shell is working with Canadian subsidiaries of Mitsubishi, PetroChina Company and Korea Gas Corporation (KOGAS) on the LNG Canada project.
Encana is no longer involved in LNG export projects since selling their share of Kitimat LNG to Chevron Canada at the end of December, but their partnership with Mitsubishi still offers economic and social benefits to the province and the Peace Region specifically.
“We estimate that investments over the first 20 years of the partnership will create about 14,000 ongoing jobs across Canada,” said Doug McIntyre, Encana spokesperson, adding that 10,000 of those jobs would exist in B.C.
“With the amount of jobs created in some of these communities,” he continued, “it certainly gives folks living there the option to stay in the communities that they grew up in and raise their families.
“So, there’s that social benefit as well.”
“What it’s showing us is that we really need to start turning our heads to the fact that this is a world economy, this is a world issue,” Bernier said of the level of foreign investment.
“That’s pretty obvious when you have hundreds of millions of dollars being spent here in the area by these overseas companies.”
“Investment, wherever it comes from, shows confidence in the business environment,” said Ackerman.
“Our job as a community will be to stay focused on our official community plan and continue to build an attractive community within a financially sustainable framework,” she added.
“As local government, that is a fine line we must walk.”