Monday, November 17, 2014

LNG export policy will damage BC businesses and consumers

A large organization of employers in Australia wants governments to subsidize businesses crippled by large price increases for natural gas. Ai Group says governments have to moderate the consequences of decisions to approve export facilities that connect Australia to global gas markets. When LNG plants start to function, wholesale gas prices are set to more than double, even quadruple, by 2016, depending on the volume of gas diverted to feed the export plants.

Gas prices will explode due to Queensland exports, Sydney Morning Herald, October 2014
"Cassandra Goldie, chief executive of the Australian Council of Social Service, said the smallest of price rises would disproportionately hit the most vulnerable groups…

"A BIS Shrapnel report showed rising gas prices would lead to one in five heavy manufacturers shutting down within five years and total manufacturing production being reduced by 15.4 per cent by 2023, cutting 91,300 industry jobs…"
Through higher consumer prices and by massive taxpayer contributions to energy companies, Australian citizens are pummelled by the fossil fuel industry. It receives $10 billion a year in subsidies and seems exempt from Prime Minister Tony Abbott's proclamation that corporate subsidies were ending.

If BC Liberal plans proceed, the same results are inevitable in British Columbia. Being 4,000 km further from Chinese markets than Australia and totally dependent on new relationships with foreign intermediaries and marketers, a western Canadian LNG industry has inherent disadvantages.

The already subsidized industry in BC wants near cost-free access to gas stocks consumed to power liquefaction and for gas destined for export. Industry also wants accelerated write-offs so that taxpayers absorb capital costs of plant and equipment. The BC government has already offered electricity at cost well below the price paid by BC Hydro to private suppliers feeding power to the provincial grid. LNG players expect the public to pay for transportation and utility infrastructure and they demand relief from local and provincial taxes and for governments to shortcut or eliminate review processes, environmental regulations and barriers to importing labour and materials from overseas.

It is fairly simple to understand potential costs of establishing and maintaining an LNG industry. It is more difficult to identify and quantify the benefits.

In a tax regime that aims to realize a share of facility profits, there is great flexibility in defining those, particularly when transportation, re-conversion and marketing costs - most of it spent in foreign lands and virtually unverifiable - will absorb a major portion of end-market gas prices. British Columbia taxpayers will inevitably experience "Hollywood accounting" that enabled ten blockbuster movies to take in more than $6½ billion collectively while declaring nothing in profits.

Clearly, jobs will be created if LNG plants proceed. Construction will result in temporary employment for both Canadians and foreign workers but the numbers are not dependably calculated and probably cannot be because each facility will utilize offshore manufacturing and final assembly in British Columbia. It is certain that the ratio of permanent jobs for each billion dollars of capital investment will be uniquely low, when compared to alternative sectors. LNG liquefaction is highly automated as well as capital and power intensive. Positive social and economic returns to British Columbia are likely to be meagre.
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Addendum:

Fossil fuel follies: Massive subsidies underpin oil, coal exploration, RenewEconomy, November 2014
A new study [The Fossil Fuel Bailout] has found that G20 nations, including Australia, are providing $US88 billion ($A102 billion) a year in subsidies just for fossil fuel exploration, despite vowing five years ago to phase out such support.

Australia features prominently in the report, accounting for $US3.5 billion ($A4.05 billion) of the subsidies. These are for fossil fuel exploration in increasingly remote areas (offshore and inland) for projects that depend significantly on the provision of public infrastructure.

The report “The fossil fuel bailout: G20 subsidies for oil, gas and coal exploration” was prepared ahead of next week’s G20 meting in Brisbane, where climate change has been relegated to a “discussion point” and is not on the official agenda, and where major fossil fuel companies are expected to argue the case for yet more subsidies.

Tony Abbott agrees with them, saying coal is the “energy of the future.”

But the report by the London-based Overseas Development Institute and the Oil Change Institute slams this investment as a “double folly” – saying that the investment in new fossil fuel exploration is both uneconomic and unsustainable.

“Despite the widespread perception that renewables are costly, our research reveals that finding new fossil fuel reserves at home and abroad is costing Australian tax-payers $A4 billion a year,” Oil Change International’s Director Stephen Kretzmann said.

“Scrapping these fossil fuel exploration subsidies would begin to create a level playing field between renewables and fossil fuel energy.

“Five years ago, Australia and other G20 governments pledged to both phase out fossil fuel subsidies and take action to limit climate change. Immediately ending exploration subsidies is the clearest next step on both fronts…”

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9 comments:

  1. There's a sucker born every minute
    Watch out for the sucker punch
    Under new management - underwater management run by B Dover LNG
    Is this how things are run in Nigeria?

    ReplyDelete
  2. http://www.zerohedge.com/news/2014-11-14/depression-level-collapse-demand-historic-first-glencore-shuts-coal-mines-3-weeks

    ReplyDelete
  3. Ah yes the fog of economic warfare/lawfare..
    Mushroom management?

    ReplyDelete
  4. Wouldn't it make sense then to use the gas domestically, rather than run the risk of "..one in five heavy manufacturers shutting down within five years and total manufacturing production being reduced by 15.4% by 2023...."?
    Not only could you save the manufacturing industries, but you could avoid the costly liquification process, the shipping costs and save the environment from devastating spills.
    And since the Lieberals are proposing to give it away, why not give it away at home, where we could realize some benefits, such as reduced transportation and manufacturing costs?

    Wait a minute! I said "wouldn't it make sense....?". Therein lies the problem. There isn't an abundance of 'sense' used with this crowd.

    ReplyDelete
    Replies
    1. I agree. Natural gas can be used as a transport fuel. Converting vehicles to run on nat gas would create new businesses and new jobs. By using natural gas we avoid using gasoline made from Alberta oil sands. Or we could use natural gas to heat greenhouses in BC, when food from USA rises in price due to drought in California. Win-win-win-win.

      Delete
  5. Norm maybe you could decipher this. I tried and my eyes glazed over.If it's true then it needs some sunshine.

    http://desmog.ca/2014/11/18/how-trans-mountain-pipeline-delivers-max-profits-u-s-investors-avoiding-paying-canadian-taxes

    ReplyDelete
  6. well it would appear Australia is going to have a lot of unemployment if those industries close. On the other hand I'm sure old Tony will arrange for china to import goods. unemployment will not be Tony's problem. he will just tell Australians they do not work hard enough and the
    Australians will have no one to blame but themselves. they voted Tony into office. when they hurt enough, they will change their votes. you get what you vote for.

    As to BC and the impending bankruptcy of this province, well again, people voted Christy into office and you reap what you sow. The B.C. Liberals will not leave their path of "opportunity". Until the voters of this province "get it" nothing will happen. Of course between now and then there will be many in this province who will be negatively impacted. Nothing can be done about that. Not until people truly understand how deeply BC is in debt will things change and that debt position further impacts how people live i.e health care rates double, electrical rates double, and ferry rates triple.
    The province simply does not take in the revenue required and the tax breaks corporations receive will eventually require all fees in this province to go up, along with tolls, to such an extent people will simply not be able to survive in their present manner.

    What I wonder is, are the leaders in Australia and B.C. so stupid they do not see it or are there spin off benefits for them, that has them turning a blind eye to it all. Some thing must be motivating them, or is it simply they can not turn down all the publicity.


    Australian business could do one thing, and that is convert to solar power. they certainly get enough sun.

    ReplyDelete
  7. Just put BC in where Malaysia is.?

    http://www.nytimes.com/2014/11/20/business/international/chinese-interests-look-to-malaysia-for-cheap-iron-ore-and-profits.html?_r=0

    ReplyDelete
  8. And environment

    http://www.nature.com/news/methane-leaks-erode-green-credentials-of-natural-gas-1.12123

    ReplyDelete

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