Don’t believe the hype about LNG development in B.C.
Rabble.ca | Marc Lee | April 30 2014
This week we released a new report, Path to Prosperity? A Closer Look at British Columbia's Natural Gas Royalties and Proposed LNG Income Tax, about liquefied natural gas (LNG ) development in B.C., and the public revenues that might be expected. So far, LNG has lacked a real public debate. On one side, we have the drumbeat of the business press with coverage of the deals in the works (which, after a couple years, have yet to come to a final investment decision by any interested party). On the other, we have what can only be called propaganda coming from the B.C. government: 100,000 jobs! $100 billion in revenues! Cleanest LNG in the world! We'll reduce emissions in China!
These claims have been repeated ad nauseum, without anything a researcher might call evidence. The rush is on, we are told, and we have to cash in or lose our opportunity forever -- sounds a lot like the Nigerian email scam. There is good reason to believe that we may be witnessing a phenomenal giveaway of a finite public resource to global corporations, and with very little coming back to us, the collective owners of that resource.
The report looks at the case for a massive revenue windfall -- a $100-billion Prosperity Fund claimed in the 2013 pre-election Throne Speech. That claim got turned into a banner wrap on Premier Clark's election tour bus for a "debt-free B.C." and also hints at tax cuts and increase public services to boot. None of which is consistent with the idea of a true Norway-style "prosperity fund," which would set aside public revenues and then use the annual interest revenue to pay for good things. No matter, this is more about politics than good economics.
The case for any revenue windfall hinges on high Asian prices for gas in recent years vs. low prices in North America due to the shale gas revolution. But this is not likely to last. Japan and Korea, together more than half the world market for LNG, have had nuclear downtime and are both likely to get those reactors up and running soon, which will undercut Asian demand. And lots of new LNG supply is in the works, and Asian importers are banding together to press for lower prices.
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