Excerpt from the Official Report of
DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)


July 13, 2015

Debate on Bill 30 — Liquefied Natural Gas Project Agreements Act

S. Simpson: I’m pleased to take my place to join the debate around Bill 30, the Liquefied Natural Gas Project Agreements Act. This is a piece of legislation that essentially enables the project development agreements that the government intends to put in place for any prospective developers of liquid natural gas. The first one we’ve seen, with Pacific NorthWest, is the agreement that we will talk about in some detail.

Of course, this is an agreement that we all know is now the floor for any future agreements that Shell or anybody else might bring forward. It’s the floor, because the government has essentially agreed to a whole range of indemnifications for this company, this consortium, and have said that they will certainly sign this same agreement with anybody else.

The minister responsible for LNG has called it the template. Not only that. It also has the clause in there, the me-too clause, that has been talked about by others that says: “Should somebody else come along and negotiate another benefit for the investment interest, everybody will achieve that as well.” That’s the agreement that we’re looking at and talking about today — an agreement that offers very little to British Columbians but provides a whole series of protections and indemnifications for the companies who are participating here.

This debate — and we’re going to see this as it plays out — is going to be a rhetorical debate, particularly from folks on the other side who will wag their fingers about who does and who doesn’t support LNG.

We have been very clear about our position on LNG, and we have said that we expect that there may be a plant or two that will get developed in this province. Nothing like what the Premier had claimed in 2012 and moving forward from there, but there may well be a plant or two. Whether it’s Pacific NorthWest, whether it’s Shell or whether it’s Woodfibre, we’ll see as this unfolds.

There are a whole lot of reasons why there’s not a rush to that right now, why nobody has signed an investment agreement. A final investment decision has not been made. Even though the Premier told us that we’d be pumping LNG by 2015, we haven’t even signed an agreement yet.

What we have said on this side, in terms of what those deals have to look like, is what deals in the resource industries need to look like moving forward. What we have said is that B.C. resources need to deliver B.C. jobs. First and foremost, it needs to be British Columbians who get the work. It needs to be Canadians who get the work.

We have said that an LNG industry needs to have a fair return to the B.C. treasury, and that return has to be evident. We have said that an LNG industry needs to provide effective protections for air, land and water in our province. And we have said that there needs to be a partnership with the First Nations where everybody benefits. Those are the conditions that we have put on our support, and the project development agreement does not deliver on those conditions.

How do we get to this place? Well, we got to this place because of the Premier’s claims, claims made prior to the last election and claims that she campaigned on — $1 trillion of economic development, 100,000 jobs in British Columbia and a $100 billion prosperity fund that would make us a debt-free province, that would potentially end the sales tax and that would be manna from heaven for decades and generations to come.

A debt-free province — splashed across the side of the campaign bus. We know that we’re not a debt-free province, and we’re not going to get there any time soon. We know that we’re heading for $70 billion very quickly — record levels of debt exacerbated by this Premier in terms of her investment decisions and her management decisions for this province.

What we know is that for this to happen, of course, we need to have six, seven, eight, nine LNG plants. Well, we don’t have one LNG plant at this point, and the challenge is: will we get to one? Will we get to two? What will we see in LNG plants? Well, the first one was supposed to be operating in 2015. Now, based on this particular decision, clearly the hope is that maybe somebody will sign an investment decision before we get to the election in 2017. That seems to be the new target: get an investment decision signed before the campaign starts.

This project development agreement is framed exactly for that purpose. It is one very large carrot to hang in front of these companies, with the deal being: “Give us a signature before the 2017 election so we can go and campaign on that.”

There are a number of reasons why life is as challenging as it is for LNG. We know that. We know that the global markets are shifting. We know that key potential buyers like China are being more challenged. We know that the price has dropped dramatically — less than half what it was when the Premier was making these claims. We now are looking at $7 or $8 instead of $16 or $18 — a significant issue.

We also know that the competition is significant. Australia will open a couple more plants in the next year. The Gulf Coast in the United States will be operating and selling product in the next year or two. We will be hoping to get a final investment decision signed, and they’ll be moving product. We know there are changing global conditions.

We also know there has been mismanagement on the other side. That has been mismanagement around how we got to the place we are today and how it is that we got to being in this place with this document in front of us. What we see here is a result that isn’t about the best interests of the province. When you talk to people in the industry and you talk about prices, they will tell you that it’s the long game and that everybody plays the long game. That’s fair comment. Everybody is playing the long game, and they’re making decisions based on the long game. I accept that.

The only person and the only people not playing the long game here are the B.C. Liberals. This is political desperation to get a deal done for a Premier who put all of her political chips on the side of LNG heading through the last election and knows that for her to have any credibility on this economic development question heading into the next election, she needs some action here. As many have said, she’s prepared to pay these proponents to take this out of the ground and sell it if that’s what it takes to get a signature before 2017.

As a consequence, we have a government that is not doing this with the best interests of British Columbians right in front of them. They’re doing it with a political interest in front of them to be able to deal with the political catastrophe of the claims the Premier made — $1 trillion of economic development, $100 billion prosperity fund, 100,000 jobs, a debt-free B.C. Those are the claims. None of it’s real. So now it’s: “Can we cobble something together by 2017 to get us through this?” And these project development agreements are, in fact, what they hope will do that. We have this situation, and that’s the reason that we’re in this place today, doing what we’re doing.

Now, we know that there have been two pieces of legislation already passed, the first one around royalties. We passed that earlier this year. You will recall that the minister responsible was up months and months before that talking about a royalty regime of 7 percent, talking about our ability to make wonderful returns here.

Of course, once we got to the actual table, once that legislation was put on the table, 7 percent had become 3½. We cut the royalty regime in half. Now, this side reluctantly supported that. We supported that because we understood that the royalty number had to be in play, that it was fair game to say companies needed to know what the royalty number was if anybody was going to move forward. So we supported that.

At the same time, the government brought forward legislation to deal with climate-related initiatives and the impacts of LNG on climate. But what we know, of course, is that that legislation, essentially, left 70 percent of emissions off the table. So 70 percent of emissions were left off the table, and we opposed that legislation because it was not legislation that would provide and deliver the kind of protection that we say in our four conditions, for land, air and water. Rather, the vast majority of those emissions got a pass. And when this government talks about the cleanest LNG anywhere, it’s just simply not true. It’s just simply not true, and this legislation that we passed earlier kind of opens the door for that to be the case.

Today we’re dealing with this agreement. What this agreement does is it indemnifies Pacific NorthWest and anybody else who will sign this deal moving forward, and I’m sure there’ll be lots of encouragement. It indemnifies them on the tax side around LNG-related taxation, around any LNG-related costs around climate impacts and protecting against climate impacts and costs.

What it does not do: it does nothing to provide any guarantees for jobs for British Columbians. It does nothing to guarantee any kind of local purchase. It does nothing in terms of looking at how the public interest is protected, moving forward on some of those critical issues around air, land and water. No guarantees in these areas, yet significant guarantees for the company — indemnification, I think, is the term that’s being used — around their costs.

If we’re going to provide certainty, the question has to be: how come the certainty is not provided for British Columbians? How come British Columbians aren’t realizing any of that certainty?

Now, I think part of the challenge here is…. We go back to the Premier’s claims, when she claimed the $1 trillion and the 100,000 jobs and the $100 billion prosperity fund. We have moved from that position to a very different position, one that may arguably be a more real position. We’ve had the minister for LNG — and I believe I heard the Minister of Finance saying the same thing — on television the other day, saying: “It’s better than nothing.” That’s a pretty outstanding position. It’s better than nothing.

It’s better than nothing because you have a government that can’t negotiate a deal that works for British Columbia, because every one of those companies and those investment groups that you’re dealing with knows the political box that you’re in, knows the political desperation to get a deal done before 2017, and they are free to play their cards in any way they want. They know that you have no choice but to find a way to put a deal on the table. The result is this agreement, this piece of legislation.

Now, it’s pretty clear that the companies aren’t entirely trustworthy of the government, because you’ve signed a deal here. I mean, this is like a ratification vote. It’s not like we’re talking about content here. This is an agreement that was negotiated in private. This is an agreement that we’re now looking at to ratify. But the interesting thing is that the company, Pacific NorthWest, had no interest in just a signed deal and taking your word for it. They said: “No. If we’re going to trust you on this one, you better legislate it, where you can’t back away.” So we have legislation.

This is what’s happening now. Other people are coming to the table. I’ve heard lots of the talk about the interests of the workers in this. Well, I believe you’re going to hear from workers over the next while who are going to say: “We want LNG to go forward, but we want some guarantees for jobs. We want some guarantees on the training. We want some guarantees at the local level for our communities about local sourcing of product.” There’s a whole array of things. But none of these were important enough for this government to guarantee any one of them. Not a single one of them was enough. That’s the reality.

We have a document…. The Premier’s working group on LNG, a group made up of labour, First Nations, industry interests and government, put 15 recommendations forward to the Premier around skills training, around job opportunities, around apprenticeship levels, around a process for temporary foreign workers — 15 recommendations. Apparently, though it’s not in writing, sometime in February or March of last year the Premier said that she accepted all of those recommendations and they were great.

Well, if those recommendations were good enough to be accepted, why aren’t they good enough to be part of this deal? Nobody is guaranteeing one of those recommendations. Not one of them is guaranteed. Nobody’s even talking about those recommendations at this point. You had the Premier’s working group, and now you have this situation here.

The government also talks about — and we heard the minister of LNG talk about this — how it’s important to look at other models. He pointed to Australia and said: “They do project development agreements there, and that’s the model that we’re adopting.” So we went and looked at those project development agreements and looked at the one on Barrow Island, the Gorgon project. That’s one we talk about.

Well, let’s be clear about that agreement. That agreement has specific requirements about jobs for Western Australians. It’s very clear. It has specific requirements about the use of products of local purchase. It has specific requirements about the protection of Barrow Island and what can and cannot be done on the island in terms of environmental impacts. It has a range of items around taxation and other matters, but there is no 25-year deal on those, not at all. There are arbitration processes in place to resolve issues. There isn’t just a carte blanche that says you can’t make a change.

If Australia really is the model, let’s be clear: the project development agreements that we’re looking at in Australia offer a very, very different story than the one that we’re seeing here. That’s a story about the government of Australia standing up for the people of Australia, negotiating an agreement for them and understanding they are there to look after the interest of Australians, not the interest of Petronas and the Malaysian government. That’s whose interest is largely being looked after in this agreement.

That’s occurring because this government is in a politically desperate place to get a deal done before the election in 2017. It is the only thing that matters. It is the priority — as a consequence, a very bad place to negotiate from, a very difficult place to negotiate from, for sure. The result is an agreement that speaks to the company but doesn’t speak to the people of British Columbia.

We know that there are other issues here and issues for workers. One of my biggest concerns is that we see the workers be the real beneficiaries here. If we can create the jobs, it will be a big positive. So what are we looking at? Well, maybe up to 4,500 jobs in this project around the construction period at the peak period. But let’s be clear. If you look at when the environmental assessment process went on and you look at what Pacific NorthWest said in their submissions around the environmental assessment, they said they expected to use 30 percent temporary foreign workers at the outset and at the peak period possibly as much as 70 percent. That’s their document.

There is nothing in this project development agreement that addresses that in any way, shape or form, that talks about how you get the temporary foreign workers, about when you have shortages and how you deal with it.

Right now in this province we have about 80,000 people who work in the construction industry, skilled tradespeople, and about 20 percent unemployment — about 20 percent of them not working today, about 8,000 union and about 8,000 non-union, more or less. So you’ve got 15,000 or 16,000 people who could go to work. That is more than enough people certainly to guarantee that first project could be built by British Columbians. Yet there is nothing in here that provides any assurance that that will happen. In fact, the silence on it suggests it will not happen.

I’ve got to believe that if the government had any intention of having that be the case, the Premier would be standing on the top of the building yelling that British Columbian LNG is going to be built by British Columbians. She isn’t saying that because she knows full well it will not occur. She’s prepared and has done that deal, and it won’t just be a deal with Petronas. That’s the floor. That’s the deal that gets done with everybody now.

There are companies like Shell that are not as enthusiastic about temporary foreign workers as some others, but don’t guess for a minute that they are not coming to the table saying: “If that’s the deal they’ve got, then I’m taking the same deal, and maybe we’ll sweeten it a little bit along the way.” That’s the reality that we’re facing.

We don’t have those assurances on jobs. We don’t have the assurances. If we’re not creating the jobs…. We know we have cut the royalty regime in half. We know that we have a preferential tax rate for gas. There will be questions about how much revenue we’re actually going to see out of these plants, and that’s a challenge for the treasury. But on the jobs, if we could create the jobs….

For all this talk about construction, everybody knows…. The building trades know. They’ll tell you. The government knows. We know that much of this plant is going to be modulized. You’re going to build this plant significantly in China and elsewhere, put it on a barge and bring it to British Columbia and put the pieces together here, whether it’s in Kitimat or it’s in Prince Rupert. You’ll bolt them together here, but they will essentially be built somewhere else.

Not only that, we see that Pacific NorthWest in their environmental assessment submission were pretty clear when they said for the technical services, engineering and other professional technical services, they’re going offshore for that. They’re going to go offshore and get that work done someplace else. So we’re not going to realize a benefit out of that. The benefits to British Columbians just aren’t there around that.

And we talk about those jobs. You might have 4,500 construction jobs at the peak period. That’s quite possible. But as was spoken by one of the other members on the other side, when it gets to the operation of this, it’s not a particularly labour-intensive operation. You’ve got 300 jobs in the province — 300 jobs, 350 indirect jobs. They’ll be good jobs, but they are not the 100,000 jobs the Premier promised. Remember that, the 100,000 jobs the Premier promised? Let’s see, 100,000 jobs the Premier promised. So far nothing. Amazing.

What do we have here? We have a situation where the government has essentially taken a pass on the interests of British Columbians to meet a political obligation that they know they have in 2017 — a political obligation. The only job that side is concerned about is the Premier’s job and their jobs and trying to hang on to government. That’s the priority of that side — is hang on to the Premier’s job and a few ministers’ jobs, pretty good-paying jobs. Those are the only good-paying jobs this side is concerned about.

That’s the reality we have here. It doesn’t matter as long as they think they can survive this political mess that has been created by a series of promises that were just untrue. They were untrue the day that they were announced. They are untrue today, and now how do you try to fix that? That’s what they’re dealing with, and they’re dealing with it to try to hang on to those jobs.

We have opportunity here. There’s no doubt. But in order to do that, there have to be some kinds of principles that you build that strategy on, and those principles have to be about B.C. jobs for British Columbians. They have to be about using our resources, our wealth. When people talk about billions here and billions there, be clear. We are giving a lot of wealth away in the resources we have. In the natural gas we have, we are giving…. We’re putting a lot on the table here when they take that and sell it. So it’s got to be B.C. jobs and B.C. resources. There has to be a return to the treasury that makes sense.

We hear every day about services that are being stretched, whether it’s health care, whether it’s education. We heard from a Premier who said that we’re going to be debt-free, and we’re going to be able to underwrite all of those things in ways that we’ve never done before. “Generational change,” I think, is the term. Well, you know what the reality is? We’re not going to see that unless we have a good deal, so there’s got to be a deal here. And we have to protect our air, our land and our water. We have to deal with it in the most responsible way. And we have to have that partnership with First Nations that makes sense for everybody.

Those are the principles and values that we need to move forward with. Not a long list. Not a complicated list. But we need to do that. This project development agreement does not deliver the jobs. It does not deliver the resources. You know, just to highlight that. We’re at a time when the market is at a low end, where there is a glut of product, where there’s more competition than ever in the LNG field. And now is the time that we’re trying to make this work. We have the political clock ticking on the promises that the Premier made — promises that nobody believes and that she needs to find some way to at least be able to defend come 2017.

That’s the reality of the situation we face. So we will move forward. This legislation will pass over the next couple of weeks or so, whatever time it takes for us to get there. And we will see the deal. But what we know is that, for British Columbians, the statement of the minister for LNG that “It’s better than nothing” has now become the mantra for the government.

“It’s better than nothing.” Now, that’s a government of vision. “It’s better than nothing.” That’s the vision. That’s pretty spectacular vision. Maybe instead of “Debt-free B.C.,” it should be: “It’s better than nothing.” That can be on the side of the bus. That’s the situation we’re in.

I was talking to some people, some of those people in those building trades that they were spouting off about on the other side. They’ve looked at the PDA, and a number of those, including some of those leaders, are starting to say to themselves: “Is it really better than nothing?” We’ll see. We’re going to have that conversation, and you’re going to see.

That’s the challenge we face. We’re going to pass this, we’re going to have the debate about the environmental side of this, but we’re also not even going to have a decent deal, potentially, for British Columbians.

We’re going to have a deal that future governments, for the next three decades or so — probably from now to the next three decades — will have their hands tied to do what’s in British Columbia’s interest — for three decades. That’s not how this should work.

I was thinking about mortgages and things, and we’ve talked, I know members have talked, about that. Lots of people sign a 20- or 25-year mortgage, but every three or five years they like to come back and have a conversation about the terms of that. They don’t change the fundamentals, but you come back and talk a little bit about the terms. Maybe we should be doing that here.

That doesn’t work for Petronas. That doesn’t make this quite as sweet a deal for Petronas, so that isn’t going to happen, because they’re holding that stick over the Premier’s head about whether they might sign a final investment decision in the next couple of months if you do this, and if they can figure out how to get past their environmental concerns about Lelu Island. So we’ll see.

But this isn’t a deal. For all of the talk about the billions that we’ll hear on that side for the next few days, once British Columbians really look at this, once people who have an interest really look at this — whether it’s from economic opportunity, return to the province, jobs, environmental considerations — they’re going to say that this is not a good deal for British Columbians and that we have time to get a good deal, and to get to a good deal, and that’s where people want to go.

If this government put British Columbians first instead of their own political interests, we would get a good deal, I’m sure. But that’s not going to happen, because that’s not the values, the principles or the integrity of the people on the other side.

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