While controversy and First Nations resistance have held up Enbridge's plans for an oil pipeline across northern B.C. for export via tanker through Kitimat, there is another massive pipeline-for-export project following much the same track which is forging ahead, with relatively little notice or notoriety.
Encana, Apache Canada and EOG Resources are partners in a project to construct a natural gas pipeline to feed a huge liquefaction plant near Kitimat, to load liquefied natural gas (LNG) onto tankers for export. It is slated for opening in 2015.
An LNG spill is a nasty thing, to be sure, but not as nasty as an oil spill. That's because natural gas is lighter than air. As the released LNG warms up, it returns to its normal state as a vapour and floats up into the atmosphere -- killing anything it contacts, and potentially igniting in the process (it is not inflammable in its liquid state), but at least not leaving behind a residue in the water and on the shore for years to come.
Initially, the operation will reach a capacity to liquefy and ship 5 million metric tons of LNG per year. That's the equivalent to 255 billion cubic feet of natural gas. Supercooling the gas turns it into a super-condense liquid. This makes it possible to liberate gas companies from the continental constraints of pipelines, and ship it via tanker anywhere in the world.
Nowadays, natural gas sells for around $4.00 per million BTUs. A barrel of oil sells for about $100, depending on the day of the week. For an apples-to-apples comparison, $4 gas is roughly equivalent to $24-per-barrel oil. Natural gas is dirt cheap because of the development of new techniques for shale gas extraction. That and the dampening of demand due to the Great Recession have produced a glut of natural gas in North America.
All that cheap gas is longing for a route to overseas markets, where gas prices compete with oil and are much, much higher. Thus there is a stupendous profit margin in exporting LNG.
It takes a lot of energy to liquefy natural gas. Almost universally, around the world, LNG plants use a portion of their own natural gas supply to provide that energy. It appears, however, that BC Hydro is prepared to supply electricity, at B.C.'s below-cost industrial bulk energy rates, to the Kitimat LNG consortium, for their liquefaction operations.
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So what's the big deal, you ask?
The Kitimat LNG plant would use about 1,600 megawatts of power to liquefy its billions of cubic feet of gas for export.
How much power is 1,600 megawatts?
About one and a half Site C dams is how much power.
Hydro would sell that much power to one corporate mega-customer, at industrial tariff rates of around $35 per megawatt hour. That same power would cost Hydro at least $80 per MWh, assuming they built one-and-a-half Site C dams for that purpose, or around $129 per MWh if they bought it from Independent Power Producers. So we'd pay for Site C, through our Hydro bills, to sell the electricity it produces for less than half what it cost us.
And who would pick up that loss?
You and I would directly subsidize the massive export of B.C. shale gas, for the purpose of generating colossal profits for Encana, Apache and EOG.
And you want to know why BC Hydro rates for household electricity are on a course to double in about 9 years... It's because your Hydro bill has become an instrument of wealth redistribution -- upward wealth redistribution -- on a massive scale.
Welcome to Premier Clark's economic policy for B.C. families.
But, you ask, isn't it better for the environment to use electricity instead of gas to liquefy the gas? Not at all. Every molecule of gas they suck out of the shale beds is destined to burn and heat the earth's climate. What they don't use for liquefaction will get burned in China or Singapore or Japan. All the scheme achieves is to make the LNG export business even more profitable, all at your expense and mine.
Meanwhile, there was a preliminary foray into the issue this autumn. BC Hydro applied to the BC Utilities Commission to approve several hundreds of millions of dollars of investment in beefing up the electrical transmission capacity in the Dawson Creek-Chetwynd area. Part of this was to meet normal load growth, but the main driver was to provide electricity to the shale gas frackers, as an alternative to using some of the gas for pipeline compression. Hydro was met with an intense pushback, even from other large industrial interests with no real appetite to subsidize the gas extraction corporations, so they asked the Commission to suspend the application, to buy time for Hydro and the government to figure out what to do.
The logic of subsidized electricity for shale gas compression in the Dawson Creek transmission project leads ineluctably to the one-and-a-half Site C gift to the LNG terminal. The government is already in serious political trouble over skyrocketing electricity rates.
This gift to their pals in the natural gas patch may be just a bit too expensive, at least until after the next election. Let's make sure the government knows that they proceed with this one at their peril.
