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Liquefied Natural Gas Project Agreements Act

This week I joined the debate on the government's LNG project-agreement bill. You can read my speech below.

V. Huntington: We are called to session this summer to pass Bill 30, the Liquefied Natural Gas Project Agreements Act, on behalf of the Pacific NorthWest LNG project.

The government hope is that we’ll have some photo ops with shovels in the ground before the year is out or, perhaps, since the long stop date is two years from now, at least before the next election.

I supported the LNG Income Tax Act last year. I have indicated a number of times that I support an LNG industry that is built upon environmentally responsible extraction and transport with a more than fair return to British Columbia and its citizens.

When the LNG Income Tax Act was passed, it was already becoming clear that B.C. was not going to get what the Premier had originally declared, given the ultimate tax rate was half of what had been touted. But still, I supported that tax act, because the extraction infrastructure exists in B.C., because the revenues would benefit the province and because I do think there is the potential to assist with the worldwide transition to a cleaner fuel.

Of course, that transition comes with consequences, huge consequences, in terms of the emissions associated with the extraction and processing of natural gas. Our government has, as it develops this new industry, a moral responsibility to protect the people and the environment of this province to the greatest degree possible. Thus, I did not support the government’s LNG emissions legislation or the spring amendments that set the stage for long-term royalty agreements.

At the time, I said that British Columbians don’t want this industry at any cost. They don’t want to support LNG at an embarrassing loss. I still believe that’s true. They don’t want LNG at any environmental cost. They don’t want to support LNG without guarantees that the jobs really are for our own citizens — or wondering whether training can happen quickly enough at this point to ensure British Columbians can be expert enough to qualify for the latter stages of construction.

I’m forced to say that I believe the PDA before us and the future project agreements that are supported by this legislation represent a potential loss to the people of B.C. that will be unacceptable as time goes by.

The government mantra is certainty and fairness. Certainty for business I can understand. Stability for international investors I can understand. But a 25-year agreement that is limited solely to a financial guarantee for business and a much reduced financial benefit to British Columbia is difficult to swallow. That is nothing but a certain giveaway. That is not fairness for our province.

Is Bill 30 ensuring, guaranteeing any of the value-add we have a right to expect from such a massive project, a project that the government loves to say stands alone in its investment magnitude? I don’t think it does. In fact, I think it may be a future liability of crippling proportion.

The PDA is a 25-year agreement. This bill says these LNG development agreements can’t be longer than 25 years. I expect that’s going to be the standard our government has now set for the development of this new industry.

If circumstances changed, just as they have changed in the world market for oil, if prices rise and Pacific NorthWest LNG sees profits beyond their wildest dreams, there is no meaningful chance that our government can ensure that British Columbians also reap those rewards.

This agreement prevents government from re-examining the fiscal environment, even in a windfall circumstance. How can that be “ensuring British Columbians get their fair share of the resources that belong to them”? That is a quote from the Premier herself, as she outlined one of her three expectations yesterday.

Another expectation the Premier has is: “Fairness. Ensuring business has certainty.” But where is the fairness to British Columbians? Lower returns than originally promised. No guarantees for a transition to domestic labour. No ability to react to fiscal environments. A loss of sovereignty in the very area that makes government, government: the ability to tax.

Yes, we will have a new tax that will contribute, over 25 years, a purported $9 billion to the provincial budget. Of course, the tax regime is so complicated that it needs a chart to understand the expected annual revenues, and it may be some time before we pass the period of capital cost allowance and actually see the revenues anticipated. Ten years perhaps?

Of course, B.C. could alter the LNG taxes at the cost of millions of dollars in compensation should the financial consequences to the companies exceed a certain threshold. It’s nice to see that the compensation thresholds, at least, aren’t set in stone in this bill, although they are in the Pacific NorthWest LNG agreement. Perhaps one could be led to believe the government might raise the threshold for future project agreements and give itself more flexibility. That, I suspect, would not be agreeable to any new proponent, who certainly won’t want less favourable terms than Pacific NorthWest LNG.

The PDA is an agreement that locks in our climate policy by limiting the ability of future governments to bring in additional specific controls on LNG GHG emissions. This is particularly troubling because it involves an industry that has the potential to make our climate targets effectively meaningless. To prevent a response to the demands of climate change over a 25-year period in an industry that will make our provincial targets meaningless is simply and utterly not in the public interest.

Government has to be able to respond to a specific industry. How can it tie its own hands behind its back in the face of pending global unrest? Does it really believe that extraordinary change in our environmental circumstance is a long way off? What if we need the Peace to grow our food, to feed the country or the continent? How do we stop the impact this industry has and will continue to have on our land? What if we need the water more than the power? How will we stop the impact this industry has and will continue to exact on our northern water supplies?

How can we turn our backs on a global demand for carbon emissions control? Yes, LNG is better than burning coal or burning oil. Yes, it is a cleaner fuel. That doesn’t mean the government should just lie back and think of England.

Our government has a sworn obligation to maintain its ability to govern in a sovereign manner, independently and always in the best interests of the province. That is its sworn duty. That is the expectation that people have when they go to the polls, yet Bill 30 also ensures that future agreements include protections from changes to the government’s own LNG environmental incentive program. That’s the program where proponents are subsidized to meet the government’s bare minimum emission standards. Why are we subsidizing proponents if they try to meet our minimum emissions requirements? Why are we protecting them in law from changes to those standards?

If the government wants to say it has the cleanest LNG in the world, then it should legislate tough standards, tough fines and tough enforcement — not set unrealistic, uncompetitive standards that we end up paying a proponent to meet. The standards set by the government do nothing more than let it say over and over that we “will have the cleanest industry in the world.”

It is a fraud. Petronas has obviously convinced the government that the industry couldn’t be competitive with the cleanest standards, so the pretence was created. British Columbia will pay industry to use new technology that will lead us to the promised land of cleanest. How utterly irresponsible is that?

Best practice should be standard practice — period. It should be the cost of doing business in an industry that has such significant impact on our environment. The subsidy is bass-ackwards. We should be subsidizing producers who want to drop below the minimum standard, not subsidizing them to reach the minimum standard.

A lot of the government support for this bill is around the word “certainty.” Do the bill and the PDA provide certainty? I suppose so. Certainty for the proponent and certainty for the price it exacts from British Columbia — unless the proponent decides it wants out and gives the province 90 days’ notice.

This spring, while debating the Miscellaneous Statutes Amendment Act, I lamented the secrecy around these agreements. It is still unfortunate that according to this bill, the substance of the negotiations will not be known until after the project agreements are ratified. They’ll eventually be public via order-in-council, but if the government negotiates a bad deal for B.C., we won’t know about it until it’s too late — public after the fact.

That’s what’s so laughable about the statements from the Minister of Finance about openness and how responsive the government is being to accusations of secrecy. “Here, in this most public of places,” he said, “is the agreement for all to see and for all to comment, debate and criticize.” But we all know that the reality of Parliament in this province is an autocratic approach to decision-making. It doesn’t matter what we say. It’s all after the fact.

We are not influencing the form and content of this agreement. There is no committee examining this generational opportunity. We are called to session in order to watch government use its majority to undermine the sovereignty of this province. It isn’t democracy at work. It is arrogance at its worst.

This project comes with a significant amount of baggage. On that note, I would like to speak, as many of my colleagues have in this House, to the issue of the “Other Matters” contained in the project development agreement and the absence of anything addressing the other matters in this bill.

When I was briefed on the PDA last week by Ministry of Finance staff — and as most of us have said, I am grateful to those officials for taking such a significant amount of time to brief us on the bill — I had a number of questions about labour, the environment and aboriginal relations, all questions that existed outside the Finance Ministry’s responsibility. I continue to have a number of outstanding questions about how the other matters — big pieces like air quality and GHGs, First Nation interests and property tax regimes — will be addressed.

In the PDA link to this bill neither party has liability for these other matters. I think it an embarrassing abrogation of responsibility when we know it is absolutely possible to include firm requirements for jobs and the environment within a PDA. There is even an “other matters” clause in this bill. Section 2(4) allows the minister to include “any other terms, conditions or limitations that the minister considers necessary or advisable.”

He can even limit the indemnities under that clause if he sees fit. And, of course, if he wanted to, he could negotiate binding requirements for B.C. jobs and the environment — if he wanted to — but they would likely bring costs to the proponent and thus compensation from the province.

If the government does get around to including real job requirements in its future PDAs, wouldn’t it be nice if it could come back around to fix its earlier agreements? Unfortunately, it won’t be able to, since the revisitation clause only opens up when an early proponent wants in on a sweeter deal that a later proponent is able to squeeze out of government.

Future companies will look to this PDA and say: “Why should we have to guarantee jobs for British Columbians when Pacific NorthWest LNG didn’t?” And the government will say they’re right, of course, and we’ll be saddled with equally vague PDAs.

Actually, the Pacific NorthWest PDA does have a little to say about skills training — five paragraphs that talk about a working group and activities the province has been doing to update our labour force. My goodness, there’s even a reference, however vague, to jobs for British Columbians: “The province has signed the Canada-B.C. MOU on a strong resource economy, an agreement to work jointly on labour market information and programming to ensure British Columbians are first in line for jobs in resource industries.”

It’s a B.C.-Canada MOU, not an MOU with the proponent, for heaven’s sake, and the MOU is over a year old. It talks about a lot of monitoring and work that needs to be done. While it’s mostly generalities, it does get a little more specific than the PDA, even. For example, the MOU says: “Canadians and permanent residents should always have the first chance at available jobs. However, in cases where employers can clearly demonstrate that domestic workers are unavailable” — it sounds like Australia — “employers may seek to hire temporary foreign workers but will need to have a plan in place to transition to a domestic workforce.”

Where is that transition plan? Why isn’t it part of the PDA, part of Bill 30? There hasn’t been any talk of trying to transition to a domestic workforce. In fact, they made it sound like their intention was the exact opposite when it came to hiring specialists in the latter stage of construction. They are already demonstrating that they believe domestic workers are unavailable, and certainly the president of Petronas made it quite clear that construction costs — read labour costs — are a problem. Those statements were released months after the Canada-B.C. MOU came out last year.

Pacific NorthWest LNG has said that Canadians would make up 70 percent of the construction workforce for the first three years before transitioning to only 30 percent of the construction workforce for the final two years of construction. That is some transition plan to a domestic workforce.

When our government refers back to the MOU and makes sweeping statements about jobs, why didn’t it ensure that the PDA contains a guarantee from the proponent for a plan to transition to a domestic workforce? I think the answer is that the government hasn’t done the early legwork and planning to ensure that the domestic workforce is there, which is too bad, because it’s what the MOU said was required. Proponents “will need to have a plan” to transition to a domestic workforce, but there’s nothing in the PDA, not a thing, and nothing in the bill. Another disappointment and another missed opportunity.

Other issues that have not been answered for me include the work and agreements being undertaken with First Nations groups, particularly the Lax Kw’alaams First Nation. I was so proud of that nation when it chose the environment over money. Now the ministers and the Premier are referring to work that has been done since the Lax Kw’alaams rejected the $1.15 billion agreement.

We have no idea what’s being discussed, no idea whether the discussions are independent of the environmental assessment office, as one would hope, no idea if the Lax continue to object. Obviously, government is confident it can overcome any objection of the Lax. And if it can’t, what then? Is Canada going to overrule the objection on the basis that consultation and accommodation were unsuccessful?

There are so many interesting provisions in this bill. For example, there can be no new LNG project agreements made ten years from the date Bill 30 comes into force. Now, why is that? Could it be that the government recognizes that the weak provisions in this bill, those that indemnify the proponents from future tax changes, will undoubtedly need to be rewritten? Is this the government fail-safe that can stop the bargain basement sale after ten years?

The bill before us undoubtedly represents a lot of hard work by this government and its officials to get to where we are today, and I suspect a lot of people within the system may not be terribly happy with this agreement. There are so many questions that the government has no intention of answering or admitting to.

While our first major LNG project is closer to reality, the windfall that was lauded a scant few years ago has dwindled significantly from its original promise. B.C. resources are finite. If the benefits are not real, perhaps we should go slow and protect that resource for our own use in future. Husband it with the respect it deserves instead of hauling it out of the ground as fast as we possibly can.

I hope the government is right and that we are on the cusp of a great economic revolution. LNG, after all, is a new industry, with new revenues and a risky economic environment that’s worldwide. But my problem is that I don’t think the long-term benefits to British Columbia are what they ought to be. I think the government has failed us in its haste to save face.

I would be more positive about this first agreement if we had our promised LNG tax rate of 7 percent. I would be more supportive if the emissions of LNG were taken seriously and our climate policy and climate leadership were not placed in jeopardy by these agreements and if these agreements weren’t for 25 years with no real exit clause.

My position would have been different if there was binding language guaranteeing B.C. jobs and skills training and if the province had used this bill to give itself a meaningful way to renegotiate both its project agreements and LNG-specific legislation without having to compensate proponents.

The minister’s current mandate letter includes a requirement that he work with the Minister of Natural Gas to present options to cabinet on the creation of the prosperity fund by the 2017 spring legislative session.

The minister will, no doubt, introduce that bill before the 2017 election with a smile on his face, and both he and the Premier will say: “Promise made, promise kept.” I wonder if, when he is interviewed in 25 years about the LNG legacy and the prosperity fund, he will be able to say the same about the decisions he and his colleagues have made with Bill 30 on behalf of British Columbians.

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