Stakes go up in B.C. gas gamble

Liberals have a lot riding on liquid natural gas plan.

VICTORIA – Mike de Jong’s debut as B.C. finance minister was a grim one. The first financial update for this election year projects a $1.4 billion decline in natural resource revenues from Kevin Falcon’s one and only budget in February.

Most of that is from declining natural gas revenues in the next three years. And it’s not just the price of gas that’s lower than the finance ministry’s array of private sector experts had forecast.

The volume of B.C. gas sold is down as well, as abundant new sources of shale gas come on-stream in the U.S. As with oil, that’s currently the only market Canada has.

And it wasn’t long ago that the energy ministry was trumpeting its monthly totals for “bonus bids” paid by gas companies for drilling rights in northeastern B.C. That gold rush has wound down as shale deposits are staked and the price falls.

De Jong’s response shows how serious this problem is for any B.C. government. He inherits Falcon’s political commitment to present a balanced budget next spring. How he will do that, and be believed in a heated post-HST election campaign, remains a mystery.

De Jong announced a hiring freeze for government staff, and a management salary freeze across health care, universities and Crown corporations as well as government operations. He hinted at an even harder line with unions, as the government’s largest employee group continued selective strike action.

This, and the familiar vow to rein in travel and other discretionary spending, won’t come close to replacing the lost gas revenues. Asset sales, which Falcon came up with in a desperate effort to dig the government out of its huge sales tax hole, won’t show up on the books until next year, if they go ahead at all. Raising taxes or fees? Forget it. It’s either cut programs or run another deficit.

The one glimmer of hope in what de Jong called the “ugly” resource revenue picture is that natural gas revenues don’t have much farther to fall. And then there is the light at the far end of the tunnel, exports to Asia where the price remains much higher.

That project took two important steps forward last week. Spectra Energy and British multinational BG Group unveiled plans for a third major pipeline to bring northeast gas to the coast, this one to a site near Prince Rupert proposed for a liquefied natural gas facility.

And on Friday, the Haisla Nation and the B.C. government announced a land use agreement to develop another LNG export facility on the Douglas Channel near Kitimat. Two proposals in that area have already received federal export permits and financing from global energy players, including Chinese, Japanese and Korean companies.

One of the bills jammed through by the B.C. Liberals in the hectic legislative session this spring was to do away with another of those federal-provincial overlaps that make industrial development so slow and difficult. Ottawa has sole authority to regulate reserve lands, but agreed to delegate that to B.C. and the Haisla, allowing them to pioneer the latest agreement.

This is a major breakthrough, not just in the industrial development of northern B.C. but in dismantling the century-old logjam of aboriginal resource claims.

At the centre of Premier Christy Clark’s much-promoted jobs plan is the target of having three LNG export terminals and associated pipelines in production by 2020.

That now looks like a more realistic target. But the jobs and revenues won’t arrive in time to save the B.C. Liberals from their current predicament.

Tom Fletcher is legislative reporter for Black Press. tfletcher@blackpress.ca

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