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British Columbia aims for C$24 billion in new energy investment
Gary Park
With its traditional economic underpinnings weakened and crumbling, British Columbia is turning to oil and gas for salvation — aiming for C$24 billion in new investment over the next five years, a doubling of producing wells and 8,000 additional jobs.
Current revenues of C$4.6 billion a year represent 8 percent of government revenues while activity generates 32,000 direct jobs.
Premier Gordon Campbell, in his first major speech on energy since sweeping to power last spring, set ambitious goals for the energy sector and hinted that there may even be ways to open up the offshore.
The message was also taken to Houston and Dallas by British Columbia Energy Minister Richard Neufeld, who met with executives from many leading American energy companies to impress on them that British Columbia has a new government that “believes free enterprise creates the jobs and the wealth.”
“We want an energized economy, we want an economy that works for everyone here,” Campbell told oil and gas executives the British Columbia Oil and Gas Conference in Vancouver conference Dec. 7.
Tax incentives in the works “We need to encourage oil and gas sector growth and I want the industry to double the number of wells.”
Campbell said a new draft energy policy will be released in January that will coordinate regulation and development of all forms of energy, from hydroelectric power to oil and gas, and alternative sources such as wind and solar power generation.
As well, corporate tax incentives will help strengthen investment, including a phase-out of corporate capital taxes.
His declaration came amidst mounting economic woes, with the fisheries and mining sector in the doldrums, the forestry struggling under the weight of U.S. imposed duties on softwood experts and tourism reeling from the aftermath of Sept. 11.
Elected on promises to improve British Columbia’s business environment, Campbell has been sideswiped by a recession that is expected to result in the layoff of one-third of all government employees as part of a massive reorganization.
Viewing the oil and gas industry as one of the few bright spots, Campbell told the company executives he is even ready to grapple with the contentious issue of opening up the offshore by seeking answers to environmental and aboriginal opposition.
Queen Charlotte Basin report due in January He said a scientific report, due to be released by Jan. 15, may suggest that development of the Queen Charlotte Basin can occur without excessive ecological risk.
If that is the case, Campbell said, the province will quickly begin the process of negotiation with industry, local government and Native groups to open the region, even though leaseholders Shell Canada Ltd., Petro-Canada and Chevron Canada Resources Ltd. have said they are in no hurry to start exploration.
Lifting the government moratorium on exploration of the basin would allow access to reserves tentatively estimated by the Geological Survey of Canada at 9.8 billion barrels of oil and 43 trillion cubic feet of gas.
Neufeld said he heard a lot of interest in the offshore from the executives of El Paso Corp., Anadarko Petroleum Corp., Burlington Resources Inc., Apache Corp. Marathon Oil Co., Conoco Inc. and Duke Energy Corp.
He said the companies indicated they are ready to explore the offshore “as long as the price is competitive and there is the need for the product.”
Neufeld also said the federal government, realizing it allows exploration of Canada’s East Coast, is no longer as opposed to opening up British Columbia’s coast.
“We know we’ll have to work with them on royalties, who owns the seabed, who owns the resources ... so we have a regulatory system in place before industry goes out there,” he said.
More Ladyferns out there Campbell said the Ladyfern region of northeastern British Columbia, which he rated as the “largest single natural gas discovery in Canada in the last 15 years,” is further proof of the province’s potential.
“There are more Ladyferns out there and what we have to do is to create an environment that encourages exploration,” he said.
Alberta Energy Co. alone estimates its Ladyfern production will eventually produce C$1 billion a year in royalties.
To speed approvals, Campbell promised a single authority permitting agency that will allow the industry to fast-track development.
But he cautioned that development must be environmentally sustainable and that aboriginal communities must have a chance to share in the wealth.
He said a five-year draft agreement to improve communications with Native groups has been signed with three First Nations in the Ladyfern area, where blockades have stalled exploration and pipeline construction. The government’s objective is to involve other First Nations in that agreement.
Opposition strong to offshore drilling The depth of opposition to removing the offshore ban was captured in a report released Dec. 4 by the left-wing Canadian Center for Policy Alternatives, which said British Columbia could fall into the same trap as Newfoundland, 5,000 miles to the east.
It said billions of dollars of public money could be invested to develop offshore oil and natural gas without generating hoped-for wealth or equivalent value in jobs.
“Even if you look at this strictly from an economic point of view, offshore oil does not make sense for B.C.,” said Dale Marshall, a resource policy analyst with the center and author of the report.
The report tabulates the billions of dollars the federal and Newfoundland government poured into the offshore Hibernia field, which came on stream four years ago and has been producing about 140,000 barrels per day, although it has permission to pump up to 180,000 barrels per day.
The trouble-plagued project was made possible with about C$3.4 billion in federal money and more than C$1 billion from the Newfoundland government.
“Those governments spent billions in grants and a billion in investment capital, on top of billions in tax exemptions, interest-free loans and loan guarantees,” said Marshall.
“Based on the royalties agreement struck (with the operating company) there is no guarantee the governments will recuperate all their money through royalties and tax revenues.”
Marshall estimated Hibernia has created only 7.5 jobs for every C$1 million invested, even when including multiplier efforts.
Legislature looks for feedback The center’s study comes just as British Columbia members of the legislature are visiting northern communities to get feedback on offshore development while the government ponders whether to lift a 1981 provincial moratorium on exploration and development. The federal government has had its own freeze on development since 1971.
Marshall said “going with offshore oil is a lost opportunity. Investments in renewable energy create 60 percent more jobs than offshore oil and conservation projects create five times more jobs. We should be shifting our attention to these technologies.
“They are not part of sunset industries. They promise tremendous growth in the future and they provide a greater number of more stable jobs.”
“The reason for the large job creation potential of conservation is two-fold: Retrofitting buildings so that they need less energy is highly labor-intensive; and decreased energy use means people have more money to spend in the local economy, which creates jobs.”
It estimated the North American market for wind, solar, tidal, biomass and geothermal technologies is projected to grow from US$7 billion this year to US$82 billion in 2010.
The study noted that because Atlantic Canada is a less developed region, the Canadian government granted both Newfoundland and Nova Scotia some regulatory authority and, more importantly, allowed those two provinces to collect some of the royalties from offshore development.
Given the fact that British Columbia is seen as a more economically prosperous region “the odds of Canada extending the same courtesy to B.C. seems less promising.”
First Nations claim title offshore In addition, the study noted, there is the obstacle posed by unresolved aboriginal land claims, with at least four First Nations claiming rights and title over marine resources in Hecate Strait or Queen Charlotte Sound, where the oil and gas reserves lie.
Thus the province must resolve who owns the offshore resources, which means complicated multilateral negotiations between the federal and British Columbia governments and First Nations.
On Dec. 5, the Tsimishian First Nation and the Haida announced they had joined to oppose any lifting of the moratorium.
Tsimishian leader Deborah Jeffrey said Natives have complete jurisdiction over Hecate Strait and insist that any exploration must be blocked until an independent environmental assessment is completed.
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