What if investors say no to B.C.'s dream of a lucrative liquefied natural gas industry?
Residents of B.C. are very familiar with the term LNG. It has been a buzzword of the provincial government since before its re-election in May of 2013.
The plan is to build a liquefied natural gas industry, employ lots of British Columbians, and also tax the industry, leading to increased revenues for the province.
But there's a problem. While many companies are on the ground preparing to develop projects, none of them have fully committed. And now, some are making noise about pulling out of--or at least putting off--various projects if they don't get the support they're looking for from government.
This month, B.C. will announce its plan for taxing and regulating the industry, and it is information industry has been anxiously awaiting. For its part, the provincial government says the fall session of the Legislature will be devoted to developing its LNG policies.
This framework will be fair for the owners of this resource - the people of B.C. This framework will create certainty for business and investment. This framework will define how we will develop this resource responsibly, in a way that protects our environment, and continues to lead the global fight against climate change.B.C. Throne Speech, October 6, 2014
It's that framework that investors want-- plus favourable tax rates, of course. They say it's hard to commit money when they still don't know how the industry will be run.
Massive Malaysian company Petronas, a partner in one of the proposed LNG projects, led the charge by publicly expressing concerns last month. But after meetings with the B.C. government, the company says it is "encouraged," although company president and CEO Shamsul Azhar Abbas isn't ready to commit yet.
"In order to remain competitive, Petronas needs to secure consensus on key principles vital to the success of this project by the end of October. Missing this date will have the impact of having to defer our investments until the next LNG marketing window, anticipated in 10-15 years," he said.
"At this juncture, Petronas firmly believes on the urgent need for stakeholders to collaborate and come to an agreement, rather than act as opposing parties at the negotiation table."
Now, another group is going public with its concerns. The BC LNG Alliance represents six potential projects (including Petronas's). This week, President David Keane told the Vancouver Board of Trade's Energy Forum that, despite the 18 proposed projects in the works, there is no guarantee for LNG in BC.
A new LNG industry in British Columbia is not a foregone conclusion. If LNG is to be a viable industry in British Columbia, some difficult decisions need to be made.David Keane, President, BC LNG Alliance
We wanted to know what exactly David Keane meant, so we asked him to sit down with Jim Brown. When he did, he sounded decidedly more optimistic than he did in that speech.
"I ultimately believe that we will end up with a viable LNG industry in British Columbia."
But, he says, it will take work on both sides.
"We have to come together in terms of having clarity and certainty in terms of the fiscal regime. When you're looking at a brand new industry, it's very difficult to get approval from boards and from senior management at these companies when they're uncertain as to what's the tax, what's the tax rate, what's going to be included in the tax."Still, Keane says he is confident that industry and government can find a way to both be happy. The B.C. government is expected to table details this month, so stay tuned to see just how viable the province's LNG future really is.