But while the Enbridge pipeline has huge swaths of BC up in arms, particularly First Nations and “radical environmentalists”, the LNG plans, which already have been approved and have an export permit, have not. Bitumen from the tar sands has a bad name, but natural gas does not. Perhaps because we call it “natural” gas not methane; perhaps because of its familiarity from being piped into many BC homes. Natural gas has long been touted as the cleanest of the fossil fuels – about half the greenhouse gas (GHG) emissions on a lifecycle basis as coal. The advent of hydraulic fracking in deep shale gas deposits closes that GHG gap considerably (according to one study, there is no difference), but it also raises huge local environmental justice issues in the form of contaminated aquifers (water supplies), tailings ponds and even earthquakes (see a great report by my colleague Ben Parfitt).

A review of the numbers, though, shows that the LNG plants will be even worse than the Enbridge pipeline in terms of GHG emissions. Last summer, I crunched the numbers on carbon content of the fuel that will go through the LNG plants — just the emissions from combusting the fuel, whether that is in China or BC, NOT including the extraction, processing and transport emissions — and found that when all of the plants are up and running by 2020, emissions between 81 and 112 million tonnes (Mt) of CO2 per year. The uncertainty relates to the throughput of the pipes; if anything, the true figure by 2020 will be closer to the latter.

I did a similar calculation for the Enbridge Northern Gateway pipeline, and came up with 70 Mt of CO2. So just in terms of carbon content the LNG plants are actually a bigger carbon bomb than the Enbridge pipeline. Those emissions will happen in China, so they won’t count in BC’s or Canada’s GHG inventory, but the atmosphere cares not what land mass emissions come from. In both cases, I’m assuming this is incremental activity relative to a status quo of leaving the fuel in the ground.

We also have to count extraction and processing emissions – the energy and emissions it takes to get the fuel out of the ground and to market. In the case of Enbridge, adding in those emissions will make the total impact on the order to 90-100 Mt per year. For the LNG plant we get into controversies about just how much process (or fugitive) emissions will be (see debate here). Our friends at the BC Sustainable Energy Association have taken a crack at estimating those fugitive emissions, and they come up with a range of 54 to 370 Mt per year. The reason for the wide range is that annual emissions are lower if you take a 100-year timeframe than if you take a 20-year timeframe. This is because methane breaks down in the atmosphere into carbon dioxide and water over time, but while it is up there it has a much higher warming potential. The shorter time frame is arguably more relevant because we don’t have the luxury of waiting 100 years, and that shorter-term additional warming will have impacts on ecosystems, glaciers, permafrost, forests, sea ice and so forth that would launch us into a catastrophic feedback loop or rising temperature.

In any event, those production emissions DO COUNT in BC’s GHG inventory (which totaled 66.9 Mt in 2009), so even if we take the lowest amount, the LNG plants make it impossible for BC to meet its 2020 legislated GHG target of 33% below 2007 levels. In fact, it probably makes it impossible for BC to fall below 2007 levels, period. And the counting is not even done yet, as we still need to factor in the energy used for fracking the ground, processing facilities; transporting gas by pipeline; compressing it; and then transporting it again by tanker. It is hard to say how much annual GHG impacts will be for all of this activity, and some if it will be powered by electricity, but conservatively figure another 5-10 Mt per year (please jump in with your own math!).

Putting all the LNG pieces together, we are looking at a minimum of 140 Mt and possibly up to 492 Mt per year (by comparison, Canada’s emissions were 734 Mt in 2008). Someone recently questioned my claim that this represents a carbon bomb because we are just so small relative to total global emissions, but clearly these numbers are sobering if you care at all about climate change. (These days it feels like I’m the one in denial that humanity can pull itself out of its fossil fuel addiction, since we seem to be upping the dose.)

All of which drives home some truly deceptive spin on the part of the BC government that their natural gas ambitions are somehow good for the planet and in sync with climate action. Here is Environment Minister Terry Lake (I picture him trying to prevent himself from breaking out laughing) in the BC government news release:

Again, B.C. is demonstrating climate leadership with the world’s first clean-energy-fuelled liquid natural gas plants. These two LNG plants will provide Asia with a cleaner alternative for its immediate energy needs as B.C. natural gas displaces more carbon-intensive fuels like coal and diesel. Our abundant natural gas is a bridging fuel that will contribute to global reductions in greenhouse gas emissions, as we move into the future of clean, greener energy alternatives.

Two things to note here. It is proposed that clean electricity power two of three LNG plants, which met praise from the likes of the Pembina Institute. But this is but one very small piece of the lifecycle emissions from the wellhead to the Chinese market that would displace burning gas in favour of renewable energy. Second, this electricity will be massively subsidized by regular BC households. This is because all of the new demand in the province is coming from industry, most notably mining and oil and gas (the two most GHG-intensive industries), who pay a super-low “transmission” rate of about $40 per MWh. But this new renewable energy supply on the margin costs about $124 per MWh, meaning the Crown corp will lose $84 for every MWh it sells. That means residential and commercial ratepayers must make up the difference in higher rates. Far from climate leadership, the BC government’s plans subsidize the very industries causing the climate problem.

[Aside: The release of the Natural Gas strategy provided some political cover for a decision to abandon a policy of electricity self-sufficiency for BC Hydro. This is a flip-flop and policy failure on the part of the Liberals, but it is, in fact, the right call. The self-sufficiency mandate, while sounding good, meant BC would have had to run huge electricity surpluses every year to guard against shortfalls – again buying expensive renewable power from private corporations that for the most part would have had to be dumped at a loss on the North American market. I should say that the complicity of renewable energy industry in all of this is apalling, and that includes a former climate team member of the David Suzuki Foundation who is now the BC director of the Canadian Wind Power Association.]

Back to Lake, the other notable is that there is only one way his statement could be true. If BC’s shale gas is indeed less GHG-intensive than coal, and if it was to displace China from burning coal (i.e. that coal stayed in the ground) then there would be a modest improvement in GHG terms. But that is not the planet we are living on, and the status quo energy pathway for China suggests nothing of the sort. BC’s LNG exports will be used as additional fuel on top of growing coal burning for power.

There is no way of getting around the fact that the LNG plants are a nightmare in climate terms. They will be extremely profitable to industry (which includes the Chinese state oil company as a partner) and governments will benefit from royalties and taxing those profits (though the trend is continually to lower corporate income taxes). It is increasingly a problem that governments who hate taxes rely on resource revenues to fund public services. There will even be some jobs though not many. According to the strategy document about 1,500 construction jobs and 125 permanent ones. And though the document claims “B.C.’s natural gas sector employs tens of thousands” the BC government’s own statistics state otherwise: 3,200 jobs in oil and gas in 2011, plus a perhaps a couple thousand more in “support activities for mining and oil and gas”.

Forget the rhetoric about competitiveness and market diversification. This is about a short-sighted push for big profits that come at the expense of people in vulnerable parts of the world and in the future. They are externalized costs that lead to odious profits. In that, and in the China connection, there is little difference between the Enbridge pipeline and the LNG plants. For the BC government to state that this is “a climate solution” is beyond belief; the federal Conservatives, at least, are more honest about not caring for the future. The true tragedy in all of this is that we need not go this route at all – the solutions to the climate problem already exist; the barrier is politics-as-usual. If we want a jobs strategy there is a great alternative available in the shift to a green economy. That means BC’s shale gas reserves need to stay in the ground.

Of course, the only condition that had changed is that it was increasingly obvious to everyone except the IPP lobby (and the Globe’s Justine Hunter) that that  these government-imposed requirements were unnecessarily costly, and without question a major contributor to the politically intolerable upward pressure on BC Hydro rates.

The fundamental problem with self-sufficiency and insurance is that it was forcing BC Hydro to buy new sources of electricity supply at prices well in excess of their market value — electricity that BC Hydro did not in fact need to ensure a reliable, environmentally responsible, cost-effective supply. It was a gift to the nascent private IPP industry, and an extraordinarily lucrative one at that.

The question now, however, is what comes next. Will more responsible policies be put in place? Or will the gifting to private interests at the expense of the general public interest continue in a different form. The worry is that the gifting will continue, this time under the cover of a jobs strategy.

The government recognizes that BC Hydro’s standard industrial rates will not recover the cost of supplying the new LNG plants’ demands for power. And it has indicated that the LNG plants will have to pay higher rates. The issue is how much higher. Will the new plants be required to pay for the costs they impose on BC Hydro or will substantial subsidies remain.

A simple policy declaration could clarify the government’s intention. When it amends the Clean Energy Act to eliminate the self-sufficiency and insurance provisions, the government could  require that all new major users of power, including not only the LNG plants but also the new electric-intensive mines proposed for B.C., will have to pay all of the costs that BC Hydro has to incur to meet their requirements. The government could ensure that BC Hydro and its customers will not have to subsidize any of these new developments.

There are creative ways industry could minimize the costs of the power it needs. In the case of the LNG plants, they could combine the development of their own gas-fired generating capacity with purchases of non-firm electricity supply that BC Hydro and others often have available for sale at relatively low cost. The gas-fired capacity would ensure the plants have a reliable source of supply. And the purchases of the non-firm supply when available would reduce the need to burn gas — minimizing the LNG plants’ impact on GHG emissions in the province. Or, they could combine their own gas-fired capacitiy with new wind power development, using the wind power to displace gas whenever available.

What responsible energy policy would not allow, however, is the option of new industry forcing BC Hydro to acquire the electricity they need  and not paying the full cost –for example, forcing BC Hydro to buy and back up wind power at its own expense. The gifting to private interests at the expense of the general public interest would not be allowed to continue.

The two, climate and profit, are very much related. The gains from doing this are “odious profits” that exist only because of massive costs externalized onto third parties (I’m riffing off the term “odious debt” — that incurred by dictators, usually for military hardware, for which the people are forced to pay even after the dictator has been deposed). Anyone who advocates well-functioning markets, as opposed to unbridled capitalism, should see the logic of ensuring that all costs of production are captured in the market price. The huge negative externality associated with fossil fuels is what prompted Nicholas Stern to call climate change the biggest market failure in history.

How much are we talking here? The pipeline itself is a $5 billion investment so it will have to make back a decent annual return. Enbridge’s estimates for toll structure and throughput imply revenues of just under $900 million per year. Based on financial statements in Enbridge’s 2010 Annual Report, profits from pipeline operations (after-tax earnings plus dividends) averaged 34% of revenues over the past three years. At this rate, profits from NGP would be over $300 million per year. These are not trivial amounts, and they do not include “costs” such as lucrative executive compensation – for example, Patrick Daniel, the CEO of Enbridge, made more than $6 million in 2009, and several other executives had more than $1 million in compensation.

Beyond the pipeline itself, we can also include the gain in profits to oil sands producers from higher market prices in Asia, estimated to average $3.6 billion per year by Wright Mansell, a consulting firm whose report is included in the application. So call it $4 billion in annual profits and you can see why a government with no morals would want to cozy up to the pipeline and start calling it ethical oil.

But at what environmental cost? There is a certainty of oil spills from the pipeline itself and tankers on the BC coast. Enbridge pipelines had 800+ oil spills on its pipelines over the past decade and a bit, and the record of other pipeline companies is no better with 5,600 incidencts in the US alone gong back to 1990.

But I’m more interested in the climate impacts. The Northern Gateway Pipeline would transport 525,000 barrels of diluted bitumen per day. The carbon content of this fuel is translates into annual global emissions of approximately 70 Mt CO2e. In addition, there are emissions associated with extraction of the resource (6.5 Mt CO2e, according to Pembina) and emissions associated with the energy needed to run the pipeline and ship bitumen to Asia. Finally, there are emissions from upgrading and refining bitumen into oil and other petroleum products (8-9 Mt CO2e per year, although this emissions-intensive process would happen in the importing country). All in, annual emissions associated with the pipeline could be in the range of 90-100 Mt CO2 per year, and this is not counting emissions associated with construction (manufacturing and transport of steel pipe, and machinery and equipment on-site).

So what is the damage — the negative externality — from all of that carbon? The most credible recent study estimating a range of values for the “social cost of carbon”, with most estimates in the range of $150-500 per tonne of CO2, but possibly as much as $893 per tonne. To put this in more recognizable terms, BC’s $25 per tonne carbon tax translates into less that six cents per litre. Internalizing the external costs of the pipeline into market prices would require a mix of regulation, carbon pricing and removal of any caps on liability in relation to spills. Indeed, the corporate form in practice limits liability to the initial investments made by owners of stock, which could be exceeded in the form of massive clean-up costs for a catastrophic spill.

Based on the numbers above, a low estimate of 80 Mt of CO2 into the atmosphere per year with external costs of $50 per tonne would imply $4 billion per year in externalized costs. Using a higher estimate of 100 Mt at $200 per tonne, external costs reach $20 billion per year. These numbers assume that bitumen would stay in the ground in the absence of the NGP, which may not be realistic given other options, but the point is that the NGP would facilitate the combustion of large volumes of fossil fuel, and doing so imposes very large costs on third parties from future climate impacts.

Bottom line: the Enbridge pipeline makes odious profits and they must be weighed against the costs of GHG emissions and oil spills. Privatize gains, socialize losses. Which is why the industry and their government make no reference to either the profits to be gained or climate change. While there will be some jobs created along the way, they are very small in number. Governments get a cut, too, through royalties and taxes (though the latter are being phased out for people fortunate enough to be corporations), but these are like the royalties on export of blood diamonds.

So thanks to Natural Resources Minister Joe Oliver, who unintentionally shone a massive spotlight on this project. The Conservatives would have been better off had he just shut up (though I’m figuring his letter came from central command and he was forced to sign his name to it). Let’s follow the money and have a real debate about the impacts of this pipeline from Alberta to China.

• Who are the real ‘radicals’ – those working for a sustainable climate and environment – or those who promote carbon-bombing the atmosphere, making us all guinea pigs in one of history’s most reckless experiments?
• Who are the real hypocrites – those who drive to public meetings because we have not sufficiently invested in realistic lower carbon alternatives, or fossil fuel industry executives who enjoy mild summer days, fresh drinking water, vacations on low-lying ocean islands, or food grown next to expanding deserts – all things that will become scarcer if they continue having their way?
• Who is undermining Canada’s national interests – advocates of responsible inter-generational stewardship and careful development of our resources, or a government turning Canada into an international environmental pariah?
• What’s the more short-sighted job creation strategy – investment in labour-intensive lower-carbon infrastructure, or short-term construction projects to export unprocessed raw materials to foreign economies?

Like the Orwellian oxymoron “ethical oil,” the double standards in political and media discourse constitute a temporary triumph of greed over reason, of vested interest over collective well-being.  A decently human future requires a reversal.

I’ve been trying to make sense of Canada’s utter intransigence on climate. After all, our Prime Minister has children, too, so what could possibly be going through his head when the science is so clear about our need to act. Perhaps Stephen Harper and the Conservative party are simply climate deniers, who frown on any evidence, no matter what the scientific consensus, that contradicts their worldview of small government and unbridled capitalism. One can also point to the 2011 Crime Bill as another case in point of ideology trumping evidence.

Another factor is that the politics of opposing climate action is just too compelling for a conservative to resist: the oil and gas industry is a fundamental part of Harper’s base, and therefore a key source of political power; plus it is easy to demonize people who want to challenge the status quo in tough economic times, no matter how unsustainable the present course may be.

It is not just about the tar sands of Alberta, either. In BC, the provincial government is narrowly focused on new coal mines and shale gas fracking as the centrepiece of a provincial economic strategy. Since coming to power earlier this year, Premier Christy Clark, also a mother, has shown little interest in pursuing further climate action, leaving BC set to follow in the unfortunate Canadian tradition of reneging on climate commitments. BC cannot meet its legislated targets for GHG reductions by 2020 while pursuing a fossil fuel export strategy.

Coming back to the kids, I think Harper and Clark know very well that climate change is upon us. Reports from the federal government itself, via Environment Canada, pin the blame for freak weather on climate change. The mountain pine beetle infestation has devastated BC’s interior forests, and extreme weather incidents have been widespread. We know climate impacts will continue to get worse, leaving a terrible legacy for our children.

But rather than act, perhaps the Conservatives are making a leap of faith that wealth and technology will spare Canada from the ravages of extreme weather and altered climate patterns. Or at more personal level, wealth and technology will enable their children to maintain a high standard of living.

This is, of course, nonsense. It is like being unconcerned about a plane crash because you are sitting at the back of the plane. And this callous disregard guarantees a massive injustice perpetrated across generations. Failure to act is already condemning millions of people around the world to suffering and death.

But we are rich, so why should we care? Such is the fundamental injustice of climate change: those who have done the most to cause the problem – rich people in rich countries – are not the ones to pay the price. Executives in the oil industry who have gotten rich by externalizing their costs of production are thus in terrific position to seek shelter in fortified compounds, while the poor and innocent, who have not benefitted from fossil fuels, who must live with the consequences.

Climate change embodies injustice: the rich screwing the poor; the old dumping on the young; humans robbing other species. To make it right we need climate justice, and our work at the CCPA has been to develop a vision of what a post-carbon society could look like, and how we get there. But we have to collectively choose that future.

Two other big stories of 2011 may show a glimmer of hope that we have hit bottom, and change is coming. The Occupy movement came out of nowhere to oppose the inequality of savage capitalism. And Big Oil’s push for pipelines to get tar sands crude to market has run into massive opposition in the US, led by red meat states like Nebraska, and in BC, led by a unified wall of First Nations.

We will need new governments, federally and provincially, to spearhead the collective action required for a climate just world, and that will address our ecological deficits with the zeal we have for budget deficits. The wall of denial will come tumbling down in short order, and our Climate Justice Project is preparing us for a rapid transition that is smooth and fair. In the meantime, as our governments have been occupied by fossil fuel industries, take heart in the fact that people can still say no, leaving the carbon bombs held by Alberta and BC trapped underground.

And with good reason.

Earlier today, I outlined why in a new report for the CCPA which looks at the rapidly expanding usage of fracking in two regions of the province where the gas industry is steadily increasing its efforts to extract natural gas from deeply buried shale rock formations.

The report – Fracking Up Our Water, Hydro Power and Climate: BC’s Reckless Pursuit of Shale Gas – concludes that when all is said and done the gas produced from such operations is the natural gas equivalent of the oil produced from Alberta’s tar sands. The parallels between the two are downright spooky, and even spookier when you consider that a goodly amount of natural gas currently produced in BC is headed to Alberta to . . . facilitate the extraction of raw bitumen from the tar sands.

Both the shale gas fracking indusry and the tar sands oil industry are big consumers of water, big consumers of energy and big emitters of greenhouse gases. And they will be even more so in the years ahead. I was lucky to gain an inkling for what that may mean during a field-trip last year, which took me into the heart of one of the emerging fracking zones in BC’s south Peace region. Fortunately, I had award-winning photographer, Garth Lenz along for the ride. He captured some amazing images of all the ways our public water and hydro resources are being placed at risk as the fracking industry expands. Later, the CCPA’s Terra Poirier worked with the images to create a nifty slideshow which you can access on-line here. You can also check out more of Garth’s images on his website – which also includes portfolios of his photographs in Alberta’s tar sands and over the Athabasca river delta.

Like I said earlier, and as Garth’s work vividly portrays, the parallels between BC’s shale gas industry and Alberta’s tar sands oil industry are many. But the big three of water use, energy demand and greenhouse gas emissions clearly stick out. When you look at those three, the need to enact tough new policies and regulations to deal with BC’s natural gas sector is obvious.

In fracking, immense amounts of water – up to 600 Olympic swimming pools’ worth at some BC fracking operations – are pumped underground along with unknown chemicals and sand to break open cracks or fractures in the shale rock, fractures which allow the trapped gas to be released. That water use is very loosely regulated in BC, leading to all kinds of potential environmental abuses.

The power that the rapidly expanding shale gas industry in BC is projected to need, could, according to BC Hydro, amount to the equivalent of 2 and possibly 3 times the power that would be produced at the proposed Site C dam, on the Peace River, not far from where the pictures in the above-mentioned slideshow were taken.

Lastly, there’s all the additional greenhouse gases associated with shale gas production in BC – emission increases that will undercut any ability for BC to meet its legislatively mandated greenhouse gas emissions reduction targets.

That’s why I argue in today’s Province newspaper that it’s time to put a cap on annual gas production in the province before our shared water and hydro resources and our climate are totally fracked.

While the effectiveness of smart metering in BC is yet to be seen, the upfront capital investment for the utility is unquestionably significant. Initial estimates report costs of $660 million for the meters and $270 million for the grid, for a total price tag of just under $1 billion. That does not include a box in your home to give you access to your data — a couple hundred dollars that will come out of your pocket, though BC hydro says it will provide some rebates.

BC Hydro’s “business case” argues that after considering implementation costs, smart meters will provide a net benefit of $3 billion over a two-decade period through to 2033, with 80% of the benefits internally to the utility, and the remainder dependent on uptake of additional in-home tools. The analysis assumes that smart meters will not need to be replaced during this period, and that no other unintended consequences are manifest. The benefits are based on: improvements in safety and reliability, such as real-time information about power outages; enhanced customer service; reductions in electricity theft; and improved operational efficiencies.

About 17% of the “benefit” to BC Hydro of smart meters arises from eliminating jobs for meter readers across the province due to automation. File those 1,200 lost jobs under “BC Jobs Plan”. [Update: COPE 378 informs me that 398 of their members will lose their jobs as meter readers. Another 400 or so are being lost on the admin side via Accenture. And BC Hydro has been ordered to shed another thousand or so.]

The largest source of benefit to BC Hydro (56% of estimated benefits) is reducing the theft of electricity for marijuana grow-ops and other illegal activity. BC Hydro claims theft costs the utility $100 million per year in lost revenue, although it is not obvious that smart meters would convert every kWh of stolen electricity to legitimate revenues. Smart meters may make it easier for criminals to steal electricity by hacking into the smart metering system (Jim Quail makes this case here). This could, in effect, increase the prevalence of power theft as well as give rise to a range of other security concerns.

Beyond eliminating jobs and reducing theft, other gains are small amounts that are difficult to verify, particularly when spread over a two-decade time frame. While I’m inclined to think that there will be some gains, it is not clear whether we can bank on them. I’m betting that there are also costs that are not fully understood right now, and unintended consequences of the move. And some of those benefits hinge on customers buying additional equipment to avail themselves of new information. This will be challenging for many low income households or the 30% of households that are renters.

The other wild card in this has to do with implementing time-of-use (TOU) pricing. While BC Hydro and the government deny that they want to bring in TOU pricing, most experts seem to agree that the whole point of smart meters is to have TOU pricing. So once they are implemented, I’m betting we see TOU within a few years. At any rate, TOU pricing is more of benefit to smoothing and shifting peak load, a benefit in coal or nuclear systems that are hard to ramp up and down; this is less of an issue in BC where we have huge hydro reservoirs that act as batteries for electricity storage.

Overall, smart meters will do little to reduce household energy consumption. So, could almost $1 billion have been better spent to conserve existing power resources? BC Hydro’s 2007 Conservation Potential Review (CPR) was commissioned to identify potential for electricity conservation through demand side measures (DSM) in the residential, commercial and industrial sectors. Over a 20-year study period, the study estimates the total potential electricity savings and peak load reduction from new and emerging energy efficiency technologies, customer-supplied small-scale renewable energy and behavioral change.

The CPR’s estimates of potential savings from conservation are substantial, ranging up to 40% of business-as-usual consumption by 2026. The cost of achieving these reductions is way cheaper than acquiring new expensive electricity, as BC Hydro has been mandated to do by the government. In addition, investment in DSM is more likely to be distributed within the local economy while smart meter installation will likely be contracted out to a single firm. And to add some crony capitalism to the story of smart meters, the announcement the smart meter contract was met with some controversy, as it went to a firm with ties to the BC Liberal party.

Note: This piece was developed as part of our recent Energy Poverty publication, but did not make the final cut. So special thanks to my co-authors Eugene Kung and Jason Owen, whose insights are reflected in the post.

This has been one of the more challenging research projects I’ve engaged in to date. It is the first attempt I have seen anywhere to bring together research in different fields – home energy efficiency, climate change and energy poverty – towards a coherent action plan. In particular, we look at BC Hydro’s pricing policies and model distributional impacts, and we take a closer look at energy efficiency retrofit programs. We then outline a series of next steps for BC that strive for win-win outcomes that reduce energy poverty and create green jobs (about 12,000 direct jobs per year) in the context of aggressive climate action.

I have an oped in today’s Vancouver Sun:

Power policy should protect low-income households

By Marc Lee

If BC is going to meet its climate action targets, the province needs to shift away from natural gas and rely instead on clean electricity. Coupled with aggressive conservation and energy efficiency investments, this transition could be the source of new green jobs, particularly in the residential housing sector.

The challenge is this: while upper-income households tend to consume (and waste) more energy, it is low-income households who spend a larger share of their incomes on energy, and are the most constrained in terms of changing their behaviour.

This means that across-the-board price increases can worsen energy poverty, a condition where a household spends a disproportionate share of their income on energy. Living in energy poverty poses a range of health risks, including respiratory, cardiovascular, and other health problems, as well as preventable winter deaths.

BC Hydro’s proposal earlier this year to dramatically increase electricity rates is a case in point. While a recent review of BC Hydro led to compromise that would slow rate increases for the next couple of years, higher prices are to some extent inevitable due to the higher costs of new electricity supplies, the installation of smart meters, and new capital projects.

More than three-quarters of energy in the home is used for temperature control and hot water. For low-income households – especially ones with electric baseboard heaters – the real issue is keeping the heat on.

Lower-income households already spend a greater share of their income on energy. The bottom 20% of households spent 5% of their total income on energy in 2009, and 3% of income just on electricity. Households in the top 20% spent only 1.5% of their total income on energy, and less than 1% on electricity.

But BC Hydro also shows us what a fairer path could look like. The shift to two-tier pricing in 2008 has moved modestly in this direction, with modest savings for low-income households and increases for higher-income households. The greediest 20% of electricity consumers use up 44% of the residential power, and they should indeed pay more.

If electricity price increases are needed, they should be concentrated on the second tier of rates. Increasing refundable tax credits for low- to middle-income households could also offset price increases. Assessing the impacts of pricing policies across income levels needs to be part of the BC Utilities Commission’s rate approval process.

The BC government can also help by delivering targeted energy efficiency programs for low-income households and multi-unit buildings, including rental units. Low-income households are typically renters. This means they are less likely to have capacity to invest in energy efficiency upgrades.

Currently, the vast majority of public subsidies for retofits (for example, BC’s LiveSmart program) goes to affluent homeowners in single-family dwellings. Existing programs have been criticized for two common problems: free rider effects (public subsidies going to households who would have made investments anyway) and rebound effects (where savings are offset by increased energy use).

In contrast, well-designed programs for energy efficiency for low-income households are “low-hanging fruit” that would dramatically reduce these effects, target some of the province’s least efficient housing stock, and make better use of public dollars.

A danger is that electricity price hikes will create a perverse incentive for people to switch to natural gas for their home heating. In the Lower Mainland, the delivered cost of natural gas is about half the cost of the lower tier electricity rate and 39% of the tier two rate.

But this would add to BC’s greenhouse gas inventory at a time when the province needs to reduce and eventually eliminate those emissions. This should be a key component of a next generation LiveSmart program for BC, and it should also be linked to green job creation and skills development.

We estimate a budget of $220 million per year in support of a decade-long retrofit of BC’s housing stock would lead to substantial reductions in GHG emissions and energy poverty in BC homes. Carbon tax revenues are an ideal source of public subsidies for such a program.

This investment would lead to 12,000 direct green jobs per year (and a total increase in employment of 20,000 jobs if we include indirect and induced job creation).

The challenge of the next generation is to enable a smooth transition to zero-emissions housing, while paying attention to impacts on low-income households and other vulnerable populations, as well as the housing stock where they live.

Rather than trying to sell more polluting fossil fuels to Asia, the BC government should be leading the charge on climate action. A coherent housing strategy could provide win-win opportunities for the province, and is the type of jobs program BC needs.

The plan for new jobs is concentrated on the development of very electric intensive projects that will impose major financial losses on BC Hydro — losses that existing ratepayers will have to make up.

The proposed LNG plant in Kitimat provides a good example. The first phase of that project reportedly needs 1.5 million megawatt hours of electricity per year, and apparently the developer hopes to buy that power from BC Hydro instead of producing it itself (which LNG plants in the rest of the world commonly do). With that additional demand for power, BC Hydro will sooner or later have to acquire or develop 1.5 million megawatt hours of additional supply. And the cost of that will greatly exceed what the LNG plant will pay under BC Hydro’s current rate policy.

The average cost of new sources of electricity supply in BC Hydro’s last call was over $125 per megawatt hour. The revenues BC Hydro receives from industrial customers averages less than $40. Based on those new supply costs, the loss to BC Hydro would be over $85 per megawatt hour, or over $125 million per year.

BC Hydro should be able to acquire or develop new supply at a lower cost than what it did in its last call — an expensive vestige from former Premier Campbell’s Energy Plan. But new electricity supply is still expensive and the loss will be substantial, at least $60 million, likely closer to $100 million per year. That is the amount that the rest of us will have to make up just for the first phase of the LNG plant to proceed. Then there are the next phases, and the next plants, each adding to the losses BC Hydro incurs and we have to pay.

Though not to the same extent as LNG, metal mines, another major component of the government’s jobs strategy,  are also very electric intensive. Each one of those that go ahead will be purchasing power from BC Hydro at far less than the cost they impose on BC Hydro, contributing tens of millions of additional losses per year.

The problem is that we have a jobs strategy premised on the offer of cheap power that BC Hydro does not have. The cheap power that was developed years ago is fully committed. New demands for power  require new supply, and new supply even without the nastier provisions of the Clean Energy Act is costly, both in economic and environmental terms.

And here is the ultimate irony. The answer to the upward pressure on rates, at least in the government pronouncements to date — is to lay off more BC Hydro workers. Beyond that, rates will simply go up whatever adverse disposable income and jobs impact that may have. It isn’t a jobs strategy. It’s a jobs for jobs strategy.

Creating a new industry with the capacity to export B.C.’s natural gas to overseas markets for the very first time will instantly increase economic prosperity and create jobs. By adopting a more aggressive approach to the development of the natural gas sector, I am confident British Columbia can create a prosperous LNG industry that will bring local jobs to our communities and deliver important dollars into our economy.

A couple months ago I did the math on the greenhouse gas emissions associated with these LNG facilities. Basically, GHG emissions represent a massive carbon bomb:

If we take the 5.5 billion cubic feet per day production number that “could ultimately be much higher”, that adds up to 112 Mt, almost double all of the emissions in BC’s total inventory of GHGs (burning fossil fuels in province and all other sources).

Because the gas will be exported, most of these emissions will count in the GHG inventories of other countries rather than BC. Still, it is our crack they are smoking.

What is the payoff in term of jobs. The press release goes on: ”projects are each expected to create approximately 1,500 person-years of work during construction. The export terminal will create 120-140 permanent positions once it is in operation.” There will be additional jobs from fracking all that land to get at the sweet gas.

But overall, our green jobs and sustainable production paper estimated that mining and oil and gas extraction created 523 tonnes of CO2 per worker per year. That is just emissions in BC from extraction and processing. If we were to count emissions elsewhere due to the carbon content of the fuel that is combusted, that figure would be eight times higher.

If the objective of public policy was to put as much carbon in the atmosphere, as quickly as possible, Day One of the BC Jobs tour would have to be counted as a stunning success. For those of us who want a viable future for our kids, it is a tragedy.

The purported policy change seemed scary — the government might roll back the requirement for BC Hydro to be able to meet domestic electricity requirements in drought conditions. And the scientist’s description of the consequences is also quite a fright– BC Hydro will be forced to rely on coal-fired electricity if the policy change goes through.

It is quite a story and would be of concern if true. But there is no basis for the story that was told and little need to be concerned. There was no science in the scientist’s reported remarks. It was sadly just another effort, sponsored by the IPP lobby, to  encourage the government to retain the now widely discredited ‘self-sufficiency’ policy that is forcing BC Hydro to buy more power than it needs to ensure reliable supply.

The policy issue is not, as characterized by Justine Hunter in the Globe, whether BC Hydro should be able to meet its requirements in drought conditions. Of course it must be able to do that. BC Hydro must ensure reliable supply under all water conditions. The issue is how that can best be done.

The government’s self-sufficiency policy requires BC Hydro to guard against the risk of drought by entering into long term firm power purchase contracts with British Columbia IPPs — power that in many years it will not need and be forced to sell at a loss. It precludes BC Hydro from even considering more cost-effective and in many ways less environmentally damaging options — in particular relying on the spot market for electricity in those years that its own hydro production is limited by drought.

Would relying on the spot market in low water years increase GHG emissions in British Columbia? No . There would only be an increase in provincial emissions to the extent BC Hydro were to use the Burrard natural gas thermal plant more than otherwise, and BC Hydro simulations and spot market price forecasts suggest that would not occur to any great extent. There almost certainly would be no significant impact on B.C.’s ability to meet its GHG reduction goals.

Would BC Hydro’s relying on the spot market in drought years mean more coal-fired power generation in Alberta or the U.S.? There is no evidence or reason to think so.  The coal plants in those jurisdictions do not ramp up and down to supply spot market demands by BC Hydro or anyone else. They will continue to produce as much power as they can as long as the governments in those jurisdictions allow it.

In any event, a large proportion of the spot market power that BC Hydro could buy would be as green and clean as any B.C. supply. There generally are opportunities to buy very low cost surplus hydro power during the spring freshet period, even in low water years. Increasingly, there is low cost surplus wind  production  that BC Hydro could purchase when high wind conditions occur during light load hour periods. And at least until 2024, there is the Columbia River Treaty power that BC Hydro could use if no less costly sources of electricity were available. That power is owned by the province and managed by BC Hydro’s own power trading subsidiary Powerex.

Too much of the debate (and headlines) about the government’s self-sufficiency policy has been cast in slogans and fears. The good scientist speaking at the IPP press conference would do a service by presenting some analysis of impacts, benefits and costs — not just spectres of self-serving concerns.

But of course, there is no recommendation to investigate any failure of management and oversight responsibilities. And that is just as well, since there is no reason to believe that BC Hydro could effectively operate with 20% fewer workers. The anecdotal evidence laid out in the report (my favourite being the comparison to the number of engineers employed by the Ministry of Transportation, as if that had some relevance to a complicated electrical system) does not support the slashing of over 1000 full time jobs. Nor could BC Hydro easily reduce overtime costs, as the review panel called for, at least not  until Mother Nature and aging infrastructure agree not to wreak havoc at night and on weekends.

In any event, the real story in the review panel report, although gingerly and cautiously stated, is that it is government itself which bears major responsibility for driving up BC Hydro costs and rates. It was the government that directed BC Hydro to acquire all new sources of energy from Independent Power Producers (IPPs) except in the refurbishment of existing projects or developments like Site C on existing BC Hydro-controlled river systems. It was the government that legislated self-sufficiency requirements that have forced BC Hydro to buy more power than it needs to ensure reliable supply. It was the government that imposed debt/equity provisions that exaggerate the cost of BC Hydro financed investments. And it was this government that raised water rentals in a way that directly affected BC Hydro and its customers, but that would not impact private power producers , including Alcan and Teck.

In its report, the panel points out the problems with these government actions. It reports, for example, that BC Hydro expenditures on IPPs have increased 64% over the last 3 years, to $568 million in 2010 (more than BC Hydro’s entire labour force costs).  The panel concludes that BC Hydro needs to be able to acquire its energy needs more flexibly and cost-effectively than what government policy allows.

Sadly, only 4 of the over 50 recommendations in the government review panel report address government policy. And even those are very soft, unlike the recommended BC Hydro labour force and other management measures the government is least competent to judge and effect.

What the government review panel could and should have provided, and what we still need, are specific recommendations and actions to reverse the full range of policies that government has imposed on BC Hydro in recent years — the ones touched on in this report and the other major ones the panel failed to address.

Yet in the intervening months – months in which local residents watched as an unprecedented rush on water resources got underway – there was virtually no word from the provincial government about what its intentions were with regards to Talisman or a number of other energy companies with similar plans to divert large quantities of water from the region’s rivers, lakes and streams.

Late last week Hudson’s Hope’s residents got their answer. The provincial government had granted Talisman the rights to pull up to 10,000 cubic metres of water per day from the reservoir, each and every day for the next 20 years. It is widely expected that in days or weeks the province will issue a similar approval to a second Calgary-based company, Canbriam Energy Inc., effectively doubling the water to be piped below farmer’s fields at a rate of eight Olympic swimming pools per day.

All of which was approved in the absence of any meaningful public consultation – something that local residents and the general public alike were promised two months ago when Energy and Mines Minister, Rich Coleman, rose during Question Period to say that there would be “an extensive process of public consultation, discussion and negotiations with First Nations before anything would go ahead.”

This does not bode well as far as responsible management of public water resources in the public’s interest is concerned. Especially when the government knows just how great and growing the demand for water is in the province’s booming unconventional gas industry. Currently, half or more of all gas wells drilled in British Columbia are hydraulically fractured or fracked, a process in which water is pressure-pumped deep underground (along with undisclosed chemicals and copious quantities of sand) to crack tightly-bound shale rock, which allows the gas trapped in the rock to be released.

At some well pads in northern BC, as much as 600 Olympic swimming pool’s worth of water is used in fracking operations. As of now, there are 17 long-term water licence applications submitted by natural gas companies to the provincial government in just the Horn River Basin alone, the northernmost of BC’s two shale gas zones currently in development. The applications, within the traditional territory of the Fort Nelson First Nation, would result in gas companies gaining access to nearly 20 million cubic metres of freshwater per year in a region of the province where knowledge of water resources is limited and where industry and government are scrambling to get baseline information in place.

Coleman’s promise, in response to a question from Independent MLA Bob Simpson, seemed to indicate that the government understood that how water licences were reviewed and issued was an important public policy issue. But the government’s subsequent actions suggest otherwise.

Simpson, representing Cariboo North, and fellow Independent Vicki Huntington representing Delta South, had days earlier called on the government to appoint a special committee of the legislature to examine all aspects of BC’s emerging unconventional gas industry, in large measure because of the industry’s escalating water demands.

During the same Question Period in which Coleman promised fulsome consultation, Simpson called Talisman’s and Canbriam’s proposed water withdrawals at Williston Reservoir “the worst-kept secret” in BC’s South Peace region. “The question from that region is: what is the public consultation process for a water withdrawal of that magnitude? Both First Nations and the general public would like to know, from whatever minister that’s appropriate for this: what is the process that the public can be engaged in, in the diversion and pipeline withdrawal of 7.3 billion litres per annum from the Williston reservoir behind the W.A.C. Bennett dam?”

Despite Coleman’s subsequent promise that the public would be provided ample opportunity to scrutinize and comment on the proposed water withdrawals, nothing in the intervening eight weeks suggests anything close to that happened; in fact, quite the opposite. The government kept a tight lid on its review of the Talisman application and did its best to avoid exposing public servants involved in the licensing decision itself or the politicians to whom they reported to media scrutiny.

In response to questions about Talisman’s application, communications staff with the Ministry of Forests, Lands and Natural Resource Operations (FLNRO), told CBC Radio reporter Betsy Trumpener two weeks ago that a decision on the licence would be made by the end of July.

A few days later, on Monday July 25, the decision to grant the licence was apparently made by Robert Piccini, section head of water authorizations for FLNRO in Prince George. However, subsequent calls to Piccini’s office indicate that he was out of the office that week. No statement announcing the licensing decision was released.

On Wednesday The Province newspaper published an op-ed I wrote noting that the decision was imminent and questioning what had become of Coleman’s promise for a robust consultative process. Later that day, I checked a “water licence query” database maintained by FLNRO that indicated that Talisman’s licence had indeed been granted two days earlier. (The database lists only rudimentary information such as licence numbers, licence holders and issuance dates, but no concrete details on the licences themselves.) Subsequent calls to water stewardship officials in the Prince George office were not returned.

The following day a water stewardship official at Victoria headquarters provided me an electronic copy of the full, conditional Talisman water licence. the ministry has yet to post the document on line at a registry where members of the public can view the actual licence documents.

Meanwhile, throughout the last week of July Trumpener and the CBC tried repeatedly to reach Coleman or Steve Thomson, Minister of Forests, Lands and Natural Resource Operations. Emails sent simultaneously to both Trumpener and Coleman’s office by communications staff with FLNRO indicated that Thomson’s office would be the one to respond to media questions. In other words, the minister who had promised public consultation would not be available, but the minister in charge of water licensing decisions apparently would be.

Except even that proved not to be the case. Late on the afternoon of July 28, Trumpener received an email from Lisa Barrett, communications officer in Thomson’s ministry. The email’s first sentence was not encouraging. “Minister Thomson is unavailable for comment.”

The email – also sent to The Tyee, but not issued as a news release – went on to say that in Thomson’s absence the following could be “attributed” to Thomson’s ministry. The email noted that Talisman had been granted a licence allowing it to draw “a maximum of 10,000 cubic metres of water per day, to a maximum of 3,650,000 cubic metres of water per year until December 31, 2031.”

Because Talisman’s application fell below 10 million cubic metres per year, its application had not been subject to a formal environmental assessment, the statement further said. One reading of this particular detail was that in the view of Thomson’s ministry public consultation is really only required for those projects reviewed under a formal environmental assessment process, which of course is not true, the government’s extensive public meetings to assess public input on the proposed modernization of BC’s Water Act being being but one example.

Another point raised in Barrett’s email was that prior to Talisman’s licence being approved “a technical assessment of water availability was done, as well as several meetings with First Nations in March and April and correspondence with stakeholders and local and federal governments.”

In the absence of any mention in the email of Coleman’s promise, the inference is that in the opinion of Thomson’s ministry “correspondence with stakeholders” – whatever form such correspondence took – is adequate to fulfill the government’s commitment to extensive public consultation.

All of which does not sit well with Simpson, who remains concerned that nobody is taking responsibility for the bigger picture issues. By any measure the water coming into play in BC’s unconventional gas industry is considerable and will only climb as natural gas prices recover. Prices are currently low due to a glut of available gas in North America and no outlet, at present, for domestic producers to ship to overseas markets where prices are higher (ergo the push by BC natural gas producers to build a liquid natural gas processing facility and terminal near Kitimat, which would allow them to ship gas which has been super-cooled to liquid form on tankers bound for China and elsewhere).

“This water is a public resource that has economic, social and ecological values beyond using it for the controversial ‘fracking’ process,” Simpson said in a statement late last week after word of the government’s approval of Talisman’s water licence application came to light. “The government had an obligation to fulfill the Minister’s promise to conduct “extensive” consultation before allowing this significant amount of water to be mixed with unknown toxins and then permanently removed from the Earth’s water cycle.”

Simpson went on to say that the Minister of Environment should halt the issuance of new water permits and licenses in much of northeastern BC where fracking operations are concentrated until baseline data is collected and the public and First Nations are extensively consulted.  Simpson also suggested it is time for BC to consider putting a price on water for use in fracking operations in order to motivate the industry to reduce its demand on BC’s fresh water ecosystems.

But Simpson and Huntington, who have both elicited strong support for their calls for reforms from numerous enironmental organizations, First Nations and landowner groups, appear to be facing an uphill battle. When it comes to managing public water resources in the public interest, the government’s actions to date deal the public out, not in.

In the Lower Mainland, the delivered cost of natural gas is approximately 3.28 cents per kWh, plus 0.45 cents per kWh in carbon tax.  This compares to BC Hydro residential rates of 6.67 cents (tier one) and 9.62 (tier two) per kWh for electricity.  Thus, gas prices are 56% the cost of the tier one electricity rate and 39% of the tier two rate, creating a perverse incentive to use gas as a fuel source instead of electricity.

Unfortunately, prices do not tell the truth. In terms of climate action and economics, there is an externality, or a cost borne by third parties to the market transaction, associated with burning fossil fuels. A recent study put the value of these external costs at up to $900 per tonne of CO2.  While this is the top of the range, it would translate into about 16 cents per kWh, and implies that the price of natural gas is as much as five times lower than it would be if all costs were included in the market price.

Decarbonizing homes requires, minimally, that the gap between current natural gas and electricity prices be eliminated over time through effective carbon pricing. And this must also take into consideration looming increases in electricity prices. The cost of natural gas may rise on its own account, but additional carbon pricing measures may be required to avert a widening gap. Longer-term, making prices tell the truth is needed if BC is to reduce and eventually eliminate fossil fuels like natural gas over the course of the next few decades.

A deeper problem is that the BC government puzzlingly considers natural gas to be a source of clean energy, and often talks about GHG reductions and increased gas production in the same breath. At best, it is merely the cleanest of fossil fuels. In regions where electricity is produced by coal, a switch to natural gas can lower GHG emissions per unit of energy, although in the case of shale gas fracking, natural gas emissions may actually be on par with coal.

From a consumption perspective, space and water heating are the two sources of GHG emissions in homes: space and water heating together comprise 99% of residential emissions (the remaining 1% is from appliances).  Electricity and natural gas are  competing energy technologies for providing these services. Existing homes using natural gas heating/cooling and hot water systems (typically hydronic systems) could be converted to renewable fuel sources such as waste heat, biomass, geo-exchange, and solar thermal. Heap pumps of various types (including ductless models that can replace electric baseboard heaters) are also a very efficient way of providing space heating. Neighbourhood-level or district energy systems (including waste heat recapture) could also play a major role in the transition away from fossil fuels.

BC’s population is expected to increase from about 4.6 million residents to over 6 million by 2036.  New housing and redevelopments should not be adding to BC’s appetite for natural gas, nor should energy efficiency programs subsidize conversion to natural gas. Instead, a slow-and-steady transition off of natural gas toward clean electricity from the grid and other on-site and neighbourhood-scale alternatives is needed, synchronized with energy efficiency gains to avert a major increase in electricity demand that could drive up prices.

The biggest overarching concern is that any such moves would massively increase poverty, or specifically energy poverty, where households spend a disproportionate share of their income on energy. A major plan for retrofit programs aimed at low-income households, and the older housing stock, multi-unit buildings and rental stock where low-income households are more likely to live is needed. Current energy efficiency grant programs are aimed at owners of typical single-family homes, which pretty much makes the irrelevant for low-income households. In addition to this, some form of income transfer (ideally, funded out of growing carbon tax revenues) would likely be needed.

These contracts don’t go on the books as debt, but just like debt we will be responsible for it for the next 30 or 40 years.

The lions share of these payments will go to independent power producers.  Last year the future cost of these payments jumped from $23.8 billion to $45.3 billion. This is the cost of privatizing BC’s power system. Marvin Shaffer writes about this process here and here.

Future costs for hopsital public private partnerships jumped more than $2 billion to $9.1 billion.

The government reports on these “Contingencies and Contractual Obligations” in the Public Accounts in limited detail. Fortunately, they now also make more detailed information available on a website here.