There were lots of things wrong with former Premier Christy Clark’s plan to produce liquefied natural gas but let me start with the good.
At least it was a plan that labour and business could agree to. It was a provincial strategy that had workers and industry pulling together in the same direction.
It was an ambitious plan but unrealistic from the start. Markets for were weak and no one wanted to develop the plants. Now one of the last players, Petronas, has pulled the plug.
I can only speculate why they bailed out only one week after the BC Liberals were defeated. Was there some deal with the Clark government to provide concessions such that the LNG plant would be built regardless of whether it was viable? It’s not inconceivable considering how much political capital Clark had invested in the project.
Or was it because of Canada’s so-called anti-business climate, including high taxes, environmental reviews, and Indigenous land claims? Instead of recriminations, let’s celebrate the passage of Petronas says economist Jim Stanford.
Stanford has a unique perspective of LNG projects in B.C. and Australia. He’s a professor at McMaster University in Hamilton, Ontario, and lives in Sydney, Australia.
“In fact,” says Stanford, “far from blaming government red tape for the collapse of this misguided project, we should be collectively grateful. Those rules likely saved us from wasting tens of billions of dollars on the biggest white elephant in Canadian history.”
Stanford’s analysis shoots down an impression I had. I wrote that Australia was a LNG success story and that Australia’s early entry into the market was why B.C.’s plants were doomed. I now realize that Australia’s experience was not as rosy as I thought.
When Asian gas prices started to surge in 2009, Australia decided to chase after those markets. Unlike Canada, Australian developers faced few environmental hurdles and Australia’s Indigenous people had little negotiating power.
What followed was a spectacular construction boom in which $200 billion Australian was spent on LNG plants.
The boom had a dramatic effect on Australia’s economy. Their dollar, now at par with Canada, spiked up to $1.30, resulting in what economists call the “Dutch disease.” When Australia’s currency rose dramatically, the price other countries paid for Australia’s products rose. As well, imports were cheaper. Exports fell, imports rose and Australian factories could no longer compete. Australia became deindustrialized including the shutdown of their auto industry.
With the drop in gas prices, Australia’s LNG online plants are marginal. Boom towns that sprung up during the construction years are becoming ghost towns. Housing prices have collapsed.
Gas plants are selling into markets at discounted prices. Unlike Canada, Australian plants don’t have to supply the country first and so, ironically, there is a shortage of gas in Australia and a glut of gas on world markets. Domestic prices have doubled because of diversion to export markets.
B.C. has no economic strategy. Only one per cent of our GDP comes from mining, oil and gas and most from finance and real estate.
Our new NDP government faces a challenge. In our polarized political climate, unifying strategies are rare. Just ask former Premier Clark.