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Report: BC Should Cap Natural Gas Production, End Subsidies

A progressive political advocacy group said the government of British Columbia (BC) should cap annual natural gas production and end subsidies to the industry over fears that it is expanding too rapidly at the expense of air, water and power resources.

The Canadian Centre for Policy Alternatives (CCPA) -- which is "concerned with issues of social, economic and environmental justice" -- also warned that unchecked shale gas development could double the province's emission of greenhouse gases (GHG) by 2020. CCPA noted in particular development in the Montney Shale and Horn River Basin, but also potentially development in the Cordova Embayment and the Liard Basin

"BC's shale gas production is the natural gas equivalent of Alberta's tar sands oil," the CCPA said at the beginning of its 53-page report, "Fracking Up Our Water, Hydro Power and Climate: BC's Reckless Pursuit of Shale Gas," released Wednesday. "But while the tar sands have been a flashpoint for heated public debate, BC's shale gas developments have flown largely under the radar screen, due to a persistent lack of information sharing and public consultation by the provincial government."

Within the province, the production of natural gas has been rapidly expanding. According to National Energy Board (NEB) data and NGI's Shale Daily calculations, after staying near flat between 2005 and 2009 by producing between 26.9 billion cubic meters and 27.7 billion cubic meters of natural gas, production in BC jumped to 29.9 billion cubic meters in 2010. With production ramping up in the Horn River Shale, the province's production is expected to jump to 35.4 billion cubic meters in 2011, if NEB estimates hold up.

The CCPA report cites separate studies that estimate shale gas companies could annually produce 4.3 million tons of carbon dioxide (CO2) and use nearly 4,600 GWh of electricity by 2020. The CCPA added that some operators are currently permitted to withdraw nearly 2 million cubic meters of water per year from the province's waterways.

"The government's reluctance to discuss the potential for massive increases in water and hydro power usage by the shale gas industry is troubling to say the least, as is the enormous potential for increases in greenhouse gas emissions as the shale gas industry expands its operations," the CCPA said.

The CCPA did not specify how high a cap on annual shale gas production should be, but it argued that eliminating subsidies would drive industry innovation and generate revenue that it said could be used to develop renewable energy resources. The group also recommended:

Tom Huffaker, vice president of policy and environment for the Canadian Association of Petroleum Producers (CAPP), told NGI's Shale Daily on Wednesday that the organization "fundamentally disagrees with [CCPA's] interpretation of the role of natural gas and [its] environmental attributes.

"Natural gas is the lowest GHG hydrocarbon fuel, and Canada has it in abundant supply," Huffaker said. "The industry in BC has been, and is currently, well regulated. We would argue that a rapidly growing oil and natural gas industry in BC is not only good for the province, but is also good for Canada. And the [CCPA] report gives no treatment whatsoever to the economic benefits to the province -- to the tens of thousands of jobs and revenue flows to government that are coming. That's something that is missing from [CCPA's] perspective."

Huffaker said CAPP also took issue with the CCPA's assertion that the natural gas industry is subsidized by the provincial government. He cited as evidence a 26-page report from a study conducted by Kenneth McKenzie and Jack Mintz of the University of Calgary's School of Public Policy and released in October.

"[McKenzie and Mintz] actually concluded that, on balance, the oil and gas industry is probably taxed slightly more heavily than the average industry in Canada," Huffaker said. "It is in fact simply not subsidized. [CCPA] is wrong on that."

Last September another nonprofit group, the Pembina Institute, also warned BC officials that the province would have problems meeting its stated goals of reducing GHG emissions and would risk putting water resources under stress if the shale gas industry were allowed to expand unabated (see Shale Daily, Sept. 19).

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