Vaughn Palmer: American shale gas boom a major threat to B.C. exports

VICTORIA — While speeches from the throne are usually marked by vague generalities and hopeful platitudes, this week’s offering from the B.C. Liberals contained one straight-to-the-point giveaway.

There it was at the seven-minute mark of the speech, as drafted in the premier’s office and delivered from the throne in the legislature Monday afternoon by the lieutenant-governor:

“B.C.’s natural gas industry has relied on exports to the United States, but the American shale gas revolution has meant the export market south has dried up and is never coming back.”

Dried up and never coming back? It sounded far-fetched. But when I put the question (“really?”) to the government this week, I was told that the throne speech had laid out an entirely realistic scenario.

The note from the Ministry of Natural Gas Development explained how the revolution in shale gas production has delivered a double whammy to B.C.’s market position, reducing demand for imported natural gas in the U.S. and reducing prices to where the Americans can undercut the B.C. product in Eastern Canada.

The ministry passed along a survey by the U.S. Energy Information Administration, forecasting that American imports of natural gas from Canada will net out at zero (imports equalling exports) as early as 2020.

Such a scenario would be disastrous for British Columbia. Only about 15 per cent of provincial natural gas production is consumed domestically, according to the ministry. The rest is exported, almost all of it to the U.S.

On the strength of those mostly export sales, the province realizes hundreds of millions of dollars in royalties in a good year, plus it can count on hundreds of millions more in the sale of leases for future exploration and development.

All that at risk by the end of the decade, the equivalent of a blink of an eye in the long-term horizons of the energy sector? Mostly, yes, I was told.

When I ran the gone-and-never-coming-back scenario past Minister for Natural Gas Development Rich Coleman Wednesday, he noted only one caveat: B.C. can count on some protection for its U.S. market share thanks to long-term supply contracts extending beyond 2020.

But he didn’t dispute that sales to the Americans are on a permanent downward slide. Indeed, he’d expanded on the point in his reply to the speech from the throne in the legislature Tuesday, where he described the provincial response to concerns about a resource with nowhere else to go.

“You have a resource that is so large that you could supply the North American market for 200-plus years, all your customers, and still have gas left. While you’re doing that, your very customers south of you are finding more of the same product you want to ship … Where do you send the gas?”

The answer resides in those multiple west coast terminals that the Liberals are hoping to develop for exporting natural gas in liquefied form to the Asian market. But as Coleman noted, the drive has a particular urgency for communities that are most vulnerable to the glut, being most distant from eastern Canadian and U.S. markets.

via Vaughn Palmer: American shale gas boom a major threat to B.C. exports.