British Columbia Announces new Natural Gas and LNG Strategies

Environmental, Energy and Resources Law

February 03, 2012

The British Columbia government announced two new strategies today:  the Natural Gas strategy, which has the stated goal of helping British Columbia become a world leader in secure and stable natural gas investment, and the LNG Strategy, which is sets out British Columbia's goal of becoming a world leader in LNG exports.

Both strategies are reasonably straighforward and contain a number of high-level policy statements about British Columbia's strategies for natural gas and LNG.  Neither strategy contains significant detail about how those plans are to be achieved.

The Natural Gas strategy contains significant detail about the current state of natural gas reserves and production in B.C.  The strategy notes that B.C. is Canada's second-largest producer of natural gas (after Alberta), producing approximately 1.1 TCF of gas annually.  41% of this gas is exported to the United States, 43% is transported to the remainder of Canada, and 16% is consumed within British Columbia.  Total recoverable reserves are currently estimated at 100 TCF (which compares with a cumulative 22.5 TCF produced in the province over the last 55 years).

The strategy sets out the 13 key actions that the government intends to undertake in regards to natural gas.  These include:

  • The government will work to develop new export markets for natural gas and LNG, primarily in China and Japan
  • The government will coordinate permitting and approvals to ensure competitiveness in the global LNG market.  The strategy envisions three LNG facilities, representing a total investment of $18 billion, in place by 2020.
  • The government will promote natural gas as a transportation fuel
  • The government will continue to identify and complete resource assessments in key production areas, inclduing identifying subsurface water resources
  • The government will monitor its royalty system to ensure the province remains competitive.  The strategy notes that in the last fiscal year, natural gas royalty revenue totalled $1.35 billion, approximately 4% of provincial revenue.
  • The government will encourage infrastructure (roads and pipeline) development to support extraction and LNG development
  • The government will amend the Petroleum and Natural Gas Act to improve administration for Crown natural gas and petroleum leases and licenses
  • The government will ensure engagement with communities and First Nations
  • The government will continue to promote natural gas as part of the solution to climate change, including promotion of the use of carbon capture and storage and promotion of the reduction of flaring
  • The government will continue to promote the B.C. Jobs Pna.
  • The government will invest in critical infrastructure ensure the availability of clean and renewable electricity to power future LNG facilities (having regard to the need to keep electricity rates affordable). 

The LNG strategy goes into significant detail on the final point – the availability of electricity.  This is the element of the two strategies that is the most significant departure from existing government policy, and it is discussed in more detail here.

So far, reaction to the two new strategies has been very positive. The provincial NDP has expressed support for the strategies in principle, though it has some questions about the effect of the change to electricity policy on Hydro's ratepayers.