Today’s report from the Fraser Institute, LNG Exports from British Columbia: The Cost of Regulatory Delay, states that “revenue losses from regulatory delays imposed upon the BC LNG export market would be on the order of $17–23 billion (US) per year.” This, they say, is equivalent to 9.5% of 2014 BC GDP.
A closer examination of the report reveals that in fact, if all costs are accounted for, the so-called revenue losses are minimal, and that delays in constructing BC LNG terminals are primarily a result of the lack of financial viability of these projects given gas price differentials between North America and Asia and the cost of moving the gas between continents.
The cost to liquefy, transport and regasify LNG moved from BC to Asia is estimated by the Canadian Energy Research Institute at between $4.50 and $7.00 USD/million BTU.
The Fraser Institute ignores these costs, and assumes that at a North American price in 2020 of $5.00 and an Asia-Pacific price of $10.00, the BC LNG export market is losing $17.6 billion USD of revenue per year (see Table 5 in their report, which is based on exports of 50 billion cubic meters per year or the equivalent of three LNG export terminals.)
In fact, assuming an average cost of $5.75 to liquefy, transport and regasify the gas, companies would lose 75 cents for every million BTUs shipped. Corporations understand this lack of financial viability, and therefore have not made final investment decisions, despite the BC government’s bending over backwards to get a commitment. (The revenue to BC taxpayers if corporations exported under the Fraser Institute’s price assumptions for 2020 would, of course, be minimal, despite the liquidation of BC’s non-renewable natural gas assets.)
The Fraser Institute’s report that regulatory delays are causing tens of billions of revenue losses each year to the BC export market has no credibility when assessed in the light of the facts. Delays are primarily a result of due diligence by the proponents and the revenue losses to BC are minimal.
The Fraser Institute’s report is available here.