Some years ago, Premier Gordon Campbell announced the Gateway Program for improvement of roads and bridges throughout Greater Vancouver. It included a new Fraser River crossing and reconstruction of Highway 1 from Vancouver to Langley. Also in the plan was the South Fraser Perimeter Road for port, industrial and regional users along the south side of the Fraser River.
The budgeted cost for the Port Mann / Highway 1 Corridor was $1.5 billion and for the South Fraser Perimeter Road, $800 million. Actual costs were at least $3.32 billion and $1.24 billion respectively. Despite each of the projects opening a year late, with a combined cost overrun of 98%, BC Liberals announced the projects as on-time, on-budget.
Other major projects - notably BC Place, Northwest Transmission Line and Sea to Sky Highway - experienced similar budget blunders. Lately, the least competent managers in BC history have been aiming to make the province a major exporter of natural gas. This is a costly and risky proposition. Actual and forecast cash and tax expenditures for natural gas currently amount to more than a billion dollars a year and the $8.8 billion Site C dam, not needed for domestic consumption, is intended to provide power to LNG facilities. Beyond subsidized power, taxpayers are likely on the hook for material amounts for infrastructure to support gas transport and processing.
Liberals are betting with taxpayers money, the stakes are high and the bet is not safe. From Asian LNG prices seen falling by up to 30 pct in 2015, a recent report by Reuters:
Lower prices would be an insurmountable barrier to development of a gas liquefaction industry in BC if the investment decisions were left to the private sector. However, the BC Liberal government has demonstrated willingness to take on massive debt and contractual commitments to further its primary agenda, which is political, not economic.
Oil price crash claims first U.S. LNG project casualty, Reuters, December 30, 2014
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The budgeted cost for the Port Mann / Highway 1 Corridor was $1.5 billion and for the South Fraser Perimeter Road, $800 million. Actual costs were at least $3.32 billion and $1.24 billion respectively. Despite each of the projects opening a year late, with a combined cost overrun of 98%, BC Liberals announced the projects as on-time, on-budget.
Other major projects - notably BC Place, Northwest Transmission Line and Sea to Sky Highway - experienced similar budget blunders. Lately, the least competent managers in BC history have been aiming to make the province a major exporter of natural gas. This is a costly and risky proposition. Actual and forecast cash and tax expenditures for natural gas currently amount to more than a billion dollars a year and the $8.8 billion Site C dam, not needed for domestic consumption, is intended to provide power to LNG facilities. Beyond subsidized power, taxpayers are likely on the hook for material amounts for infrastructure to support gas transport and processing.
Liberals are betting with taxpayers money, the stakes are high and the bet is not safe. From Asian LNG prices seen falling by up to 30 pct in 2015, a recent report by Reuters:
Asian liquefied natural gas (LNG) prices are expected to fall by up to 30 percent in 2015, according to a survey of analysts and consultants, as the market enters a period of oversupply and the impact of lower oil prices kicks in.A December 30 report by The Telegraph newspaper stated that Brent crude plunged below $57 per barrel as traders bet that the global oversupply of oil will continue. According to the paper, oil traded in North America is poised to crash through the $50 per barrel level. Those levels indicate a greater decrease is likely for Asian LNG.
The explosive growth in LNG consumption seen in recent years has stalled on cooling Asian economies and with a resumption of nuclear energy and a greater use of coal in some markets.
At the same time new LNG production has been coming on stream, meaning tight supply conditions that had been expected to last until the end of the decade are ending more quickly.
"Demand is a lot weaker than we anticipated just six months ago," said Gavin Thompson, head of Asia-Pacific gas and power at consultancy Wood Mackenzie.
Asian spot LNG prices LNG-AS have more than halved since the start of the year to below $10 per million British thermal units (mmBtu).
Average import prices into Japan, the world's top buyer, are forecast to fall to about $11 per mmBtu next year, down from an estimated $15.50 this year and $16.45 in 2013, if Brent crude averages around $75 a barrel, according to David Hewitt, co-head of global oil and gas equity research at Credit Suisse...
Lower prices would be an insurmountable barrier to development of a gas liquefaction industry in BC if the investment decisions were left to the private sector. However, the BC Liberal government has demonstrated willingness to take on massive debt and contractual commitments to further its primary agenda, which is political, not economic.
Oil price crash claims first U.S. LNG project casualty, Reuters, December 30, 2014
Excelerate Energy's Texan liquefied natural gas terminal plan has become the first victim of an oil price slump threatening the economics of U.S. LNG export projects.
A halving in the oil price since June has upended assumptions by developers that cheap U.S. LNG would muscle into high-value Asian energy markets, which relied on oil prices staying high to make the U.S. supply affordable.
...Excelerate's move bodes ill for thirteen other U.S. LNG projects, which have also not signed up enough international buyers, to reach a final investment decision (FID).
...Stiff economic headwinds are making new developments tough going.
Prices that LNG projects can charge for long-term supply are falling from historic highs as new producers crowd the market, which is already oversupplied due to slowing demand and rising output that has seen spot Asian LNG prices halve this year...
I think someone should make a New Years Resolution to 1) Find out where Chrispy Clark is and 2) read the foregoing article to her OUT LOUD.
ReplyDeleteMy New Years Resolution is to live within my budget this year. This government's actions are making that possibility increasingly difficult.
Norm, you are doing a stellar job of providing the path to redemption: cut bloated management compensation and GET OUT OF LNG! In spite of your repeated warnings this bunch of dunderheads barrels down the road to bankruptcy!
What's to be done? Who can get the message across? I'm ready to forget the Resolutions and concentrate on a Revolution. Any takers?
I have commented on this to many friends as well as pointing out that the price of crude will remain weak for a few years. This will be due to a few factors. In the US, the current demand will be satisfied initially by their own sources (and that of Canada and Mexico), but as the prices stay down they will want to use mid-east oil as the US supply can be saved for future development. I believe the price for crude will be kept low as it helps the US undermine Russia. One of the direct causes of the Soviet Union's collapse was the price of oil which by 1989 was sitting at $9 a barrel. Access to cheap fuel helps the US economy (with the exception of the oil companies) as it lowers the cost of transportation. It will help our export economy as well, but because Western Canada is resource driven, it certainly won't help us. I saw this coming, most economists saw this happening but the BC Libs didn't? Anyways, the upshot of this is the sacred altar of the BC Governments fiscal plan has been torpedoed. They will then "reluctantly" place the burden on the BC taxpayer. Just like we (the vocal opposition) predicted.
ReplyDeleteThanks, Blake Newton.
What a "predictable" mess. The BC liebrals, simply don't get basic economic theory or market fundamentals. Essentially, the whole LNG con was about the election, a smoke screen to hide the real issues of an incredible debt mess, and the parties inability to plan, budget and follow through, "responsibly, with the taxpayer in mind", on large projects.
ReplyDeleteIf this was a corporation, and the shareholder meeting were held, the lot of them would be terminated. As a voter, I am disgusted at the fiscal and economic mismanagement in this province.
Politics in this province is a bad joke, and increasingly becoming a grave concern to anyone who believes in the democratic process. It is pure farce.Anyone know how to initiate a corruption enquiry in a hurry? This province desperately needs just such an enquiry, outside the realm of any political interference.
A recipe for financial disaster:
ReplyDelete1. Spending of taxpayers' money with no personal accountability;
2. Secrecy without accountability and transparency;
3. Lack of expertise among decision makers;
4. Unlimited dollars to manage public opinion;
5. Captured media dependent on government & industry advertising;
6. Unethical media "stars" paid by the subjects of their reporting;
7. Secret foreign bank accounts.
When Christy Clark next appears in public, she will claim to wear the best suit of clothes from a fabric invisible to anyone who is unfit for her position or "hopelessly stupid" and unable to understand Liberal economics.
There should be a child shouting, "But she isn't wearing anything at all!"
Norm, you won’t be able to say the BC Liberals exceeded their estimates on Site C, no matter what it costs. Bill Bennett, the financially astute minister (sort of) in charge told Vaughn Palmer on December 10, 2014 that regarding Site C, “We don’t have a top estimate.”
ReplyDeleteDoesn’t that make you feel better?
And when Site C ends up costing $15 billion after being delayed two years by court actions, Palmer will report the government warned us about the known knowns, the known unknowns and the unknown unknowns and therefore we cannot complain.
DeleteI joke of course. By then, Palmer will be working for Hill & Knowlton, although it may then be known as Hill & Unknowlton.
What a great comment Norm...... and it is very likely for not only Palmer but his Liberal friends like Leyne & Baldrey.
DeleteHappy New Year Norm & thanks for some great reading in 2014.
Guy in Victoria
During the years of Liberal rule - BC Rail was the opening fraud - hundreds of millions, adding to billions, of dollars, spilled into the troughs, to be moved to who knows where. Every aspect of government has been seen as ripe for personal enrichment.
ReplyDeleteIt might be within big untraceable investments from the more than $100 billion provincial pension fund (explaining why BCIMC executives are allowed unconstrained 7-figure salaries AND they can draw fees and salaries from a host of outside sources). It might within contract kickbacks that cause projects in BC to cost far more than what they cost elsewhere. It might be from quiet sales of provincial land so others can profit from upzoning. It might explain why police turn blind eyes to casino money laundering and favoured pals can add hotel rooms and gambling areas to BC Place without having to compete for the privilege.
Knowing human nature, we know that when the big fish are grabbing big prizes, the little fish in government are raking smaller amounts. This is done through commissions on untendered contracts, transfers of government assets to private hands and lucrative patronage positions throughout the quasi-public service.
We know that Press Gallery reporters and commentators are rewarded indirectly for their partisan contributions. Their employers receive millions in advertising and content handouts, not just from government but from the industries who sponsor the politicians.
Norm, you've shown plenty of evidence that can easily be confirmed. Companies exploiting BC's natural resources once paid significant royalties and taxes and employed residents of the province at good wages. Today, they aim to pay nothing to government, to undermine unions, import foreign workers and control public opinion through comprehensive astroturfing and mass media advertising.
Against the paid and propagandized shills and the army of corporate servants are a few citizen journalists and an underfunded alternative press. The only hope for change depends on individual citizens opening their cheque books to support contrarian voices. Maybe it's The Tyee, Georgia Straight, Vancouver Observer or maybe the important blogs can join together for a single site that speaks for ordinary citizens. If we open our wallets just a little, maybe we can make the existing corporate media irrelevant.
I second the proposals here. I will take money I once spent on newspaper and magazine subscriptions and give it to organizations and people doing out of fashion journalism, educating voters about regional and national politics. Norm is near the top of my list.
DeleteAnd speaking of what was once our BC Rail, Gordo sold it because of what? Money loser? We all know it was a lie. Corruption at its finest sitting in Victoria and elsewhere since 2001 imo.
ReplyDeleteBut that old saying you know, what goes around comes around, it's just a matter of time. Well it is just a matter of time, sometimes longer than we want, but it is a matter of time - the truth will come out.
http://www.msn.com/en-ca/money/topstories/railways-search-for-a-means-to-meet-rising-demands/ar-BBhoN0G?ocid=iehp
Another confirmation of our crooked provincial government comprised of idiot, fools and criminal elements. Had you or I tried to operate in a similar fashion, we would be incarcerated post haste. Maybe they should send some of the politicians inside prison to learn a little respect for the laws that they seem to break, without any consequences.
ReplyDeleteThank you for your candid and extremely informative reporting Norman. If it wasn't for the likes of you, Harvey O., Laila Yuile, Gary G., and many others, the public would be clueless as to what is happening. The MSM have been bought out by the government and publishes BC Liberal lies.
Thanks again Norman and a very Happy and Prosperous New Year to you and your family.
Thanks
Wholesale gW in northwest 20 hydro
ReplyDeleteSite c 125 a gw
Nat gas turbine 58-62 gw
Ipp 140 gw
Does ipp power get priority and bc hydro get shut down and or water bypassed to make bc hydro no 2 for bc power supply Norm?
Is ipp power 140 a gw Norm.?
http://www.lawyersweekly.ca/index.php?section=article&articleid=1033
ReplyDeleteYour point is? Can you provide a brief translation for those of us who don't understand 'Lawyer'?
DeleteThe point may be that even though someone in a trusted position holds real advantages over weaker parties, the stronger may have no legal liability for financial harms suffered by the weaker.
DeleteThe BC Court of Appeal said, in the context of power-dependency relationships, ad hoc fiduciary obligations may arise if the weaker party reasonably expects that the stronger party will act solely in the former’s best interests."
Canada's top court struck that principle down and we can suppose that, if it had remained a valid precedent, politicians and senior public servants would have been at risk for their massive blunders.
For example, BC electricity ratepayers might have had a cause to sue government ministers and BC Hydro for contracting for $50 billion of private power at 2 to 3 times the 10-year average market price of electricity in the Pacific Northwest. With that important ruling of the SCOC, we poor schmucks who suffer the losses can't hold decision makers responsible. All we can do is continue paying for their rewards.
thanks Norm for that pithy and insightful summary.
DeleteAnd for all your great work. Best wishes for 2015.
---otr