Economy
The Cost to Western Canada if Steven Guilbeault Copies Biden’s Assault on LNG
From EnergyNow.ca
By Jim Warren
” if all of the gas exported by Canada to the US from 2014 to 2021, the years encompassing the price depression, had instead been exported to Europe at average European prices, Canadian natural gas revenues would have been US $100.7 billion higher “
What would it cost western Canada’s natural gas producers if the federal government does to them what it did to tidewater export opportunities for petroleum?
This question became topical last week when the Biden Democrats announced they would block construction of new LNG export facilities in the US. It makes sense to get a handle on the size of revenues at stake if future development of LNG export capacity in Canada is similarly at risk. Indeed, it seems quite reasonable to worry that Steven Guilbeault will take inspiration from the Biden decision and try to do something similarly silly in Canada.
Getting pipelines to tidewater is something Canada’s petroleum industry has been counting on to improve export revenues. This was a particularly urgent hope during the eight-year oil price depression that lasted from Fall 2014 until early Winter 2022. It was, and still is, assumed exporting Canadian diluted bitumen (dilbit) into new non-US markets will allow producers to avoid the costly differential charges assessed by American buyers and refiners.
What if scenarios floated during the eight-year price slump showed that had the Northern Gateway and Trans Mountain pipelines been completed, Canadian producers could have earned billions in additional revenues. Estimates of lost revenues ranged from a Fraser Institute estimate of $15.8 billion for 2018 alone to my own low-ball estimate for losses of $7 billion to $9 billion for that same year. Numerous back of the napkin “what if” calculations for lost revenues produced in coffee shops across the prairies helped fuel frustration and anger at federal government environmental policies intended to limit global warming by cancelling pipelines.
Fast forward to 2024 and we can see that similar conditions apply to western Canada’s natural gas sector. The US is virtually the sole export market for Canadian natural gas. Looking back at the period from 2010-2019 we find that the prices paid by US importers for Canadian natural gas were less than half what Europeans were paying. The price spread became exponentially wider beginning in 2016. It peaked in 2022 when the European price was six times higher than the US price. The European gas price will be five times higher than US prices for 2024.
All else being equal, if all of the gas exported by Canada to the US from 2014 to 2021, the years encompassing the price depression, had instead been exported to Europe at average European prices, Canadian natural gas revenues would have been US $100.7 billion higher than what they actually were.
Of course “all else” is far from being equal. The $100.7 billion figure does not account for the cost of converting natural gas to LNG or the added costs of ocean transportation. In addition, the estimate assumes enough Canadian pipelines and tidewater terminals could be built to accommodate all of the gas currently flowing to the US.
The yawning chasm between US and EU prices today is of course largely the result of Russia’s invasion of Ukraine in late February 2022. EU sanctions aimed at Russian energy exports and the destruction of the Nord Stream pipelines has put Europe firmly on track for developing new sources of natural gas.
Notwithstanding the bland platitudes and unreachable targets emanating from the most recent COP conference in the UAE, there are policy makers in many countries who recognize the important role natural gas can play in reducing global GHG emissions. For example, in December 2021 the European Commission made changes to its GHG emissions law. It now allows both nuclear energy and natural gas to be considered suitable transition fuels during the period while renewable options become more viable.
Lately, there has been a popular backlash in Europe and the UK over excessively zealous green transition initiatives. It turns out a lot of people are unwilling to accept additional increases to their cost of living even when told it is necessary to “save the planet.” People won’t stand for a prohibitively expensive green transition. And they never will be willing to freeze in the dark; especially when an acceptable option like natural gas is available.
Biden’s bizarre decision to block the expansion of US LNG export facilities was probably not motivated by a desperate desire or useful effort to curb GHG emissions. It is more likely a ham-handed attempt to staunch the Democrats’ loss of support among the young and the woke. Regardless of Biden’s motivation, we might reasonably worry that Canada’s environment minister will want to copy him. You might think the collapse in support for Canada’s Liberals and common sense would militate against the imposition of any additional half-baked environmental policy. But when has common sense ever intervened in the creation of environmentally virtuous policy on the part of the Liberals in Ottawa?
I have provided my data sources and relevant tables below
Hypothetical question: What if the exports to the US had been exported to Europe?
Source: derived by the author from the sources and data provided below
Natural gas prices for the US and Europe 2022 to 2024 in US$ per million British thermal units (BTUs) 2023 and 2024 figures are forecasts.*
Source: derived from Statist: Natual gas commodity prices in Europe and the United States from 1980 to 2022 with forecasts for 2023 and 2024.
https://www-statista-com.libproxy.uregina.ca/statistics/252791/natural-gas-prices/
Canadian natural gas exports in billion cubic metres (all to US)
Source: Statista. Natural gas exports by pipeline from Canada from 2010 to 2021 (in billion cubic metres).
https://www-statista-com.libproxy.uregina.ca/statistics/567703/natural-gas-exports-from-canada/
Natural gas prices for the US and Europe 2010 to 2024 in US$ per million British thermal units (BTUs) 2023 and 2024 figures are forecasts.*
Source: Statista: Natural gas commodity prices in Europe and the United States from 1980 to 2022 with forecasts for 2023 and 2024.
https://www-statista-com.libproxy.uregina.ca/statistics/252791/natural-gas-prices/
Once upon a time, Canadians were known for our prudence and good sense to such an extent that even our Liberal Party wore the mantle of fiscal responsibility.
Whatever else you might want to say about the party in the era of Jean Chrétien and Paul Martin, it recognized the country’s dire financial situation — back when The Wall Street Journal was referring to Canada as “an honorary member of the Third World” — as a national crisis.
And we (remember, I proudly served as Member of Parliament in that party for 18 years) made many hard decisions with an eye towards cutting spending, paying down the debt, and getting the country back on its feet.
Thankfully we succeeded.
Unfortunately, since then the party has been hijacked by a group of reckless leftwing fanatics — Justin Trudeau and his lackeys — who have spent the past several years feeding what we built into the woodchipper.
Mark Carney’s finally released budget is the perfect illustration of that.
The budget is a 400 page monument to deficit delusion that raises spending to $644.4 billion over five years — including $141.4 billion in new spending — while revenues limp to $583.3 billion, yielding a record (non-pandemic) $78.3 billion shortfall, an increase of 116% from last year.
This isn’t policy; it’s plunder. Interest payments alone devour $55.6 billion this year, projected to hit $76.1 billion by 2029-30 — more than the entire defence budget and rising faster than healthcare transfers.
We can’t discount the possibility that this will lead to a downgrade of our credit rating, which will significantly increase the cost of borrowing and of doing business more generally.
Numbers this big start to feel very abstract. But think of it this way: that is your money they’re spending. Ottawa’s wealth is made up entirely of our tax dollars. We’ve entrusted that money to them with the understanding that they will use it responsibly. In the decade these Liberals have been in power, they have betrayed that trust.
They’ve pursued policies which have made life in Canada increasingly unaffordable. For example, at the time of writing it takes 141 Canadian pennies (up from 139 a few days ago) to buy one U.S. dollar, in which all of our commodities are priced. Well, that’s .25 cents per litre of gasoline. Imagine what that’s going to do to the price of heating, of groceries, of the various other commodities which we consume.
And this budget demonstrates that the Carney era will be more of the same.
Of course, the Elbows Up crowd are saying the opposite — that this shows how fiscally responsible Mark Carney is, unlike his predecessor. (Never mind that they also publicly supported everything that Trudeau did when he was in government.) They claim that Carney shows that he’s more open to oil and gas than Trudeau was.
Don’t believe it.
The oil and gas sector does get a half-hearted nod in the budget with, for instance, a conditional pathway to repeal the emissions cap. But those conditions are important. Repeal is tied to the effectiveness of Carney’s beloved industrial carbon tax. If that newly super-charged carbon tax, which continues to make our lives more expensive, leads to government-set emissions reductions benchmarks being met, then Ottawa might — might — scrap the emissions.
Meanwhile, the budget doubles down on the Trudeau government’s methane emissions regulations. It merely loosens the provisions of the outrageous Bill C-59, an act which should have been scrapped in its entirety. And it leaves in place the Trudeaupian “green” super structure, which has resource sector investment, and any business that can manage it, fleeing to the U.S.
In these perilous times, with Canada teetering on the brink of recession, a responsible government would be cutting spending and getting out of the way of our most productive sectors, especially oil and gas — the backbone of our economy.
It would be repealing the BC tanker ban and Bill C-69, the “no more pipelines act,” so that our natural resources could better generate revenue on the international market and bring down energy rates at home.
It would quit wasting millions on Electric Vehicle charging stations; mandating that all Canadians buy EVs, even with their elevated cost; and pressuring automakers to manufacture Electric Vehicles, regardless of demand, and even as they keep closing up shop and heading south.
But in this budget the Liberals are going the opposite direction. Spend more. Tax more. Leave the basic Net-Zero framework in place. Rearrange the deck chairs on the Titanic.
They’re gambling tomorrow’s prosperity on yesterday’s green dogma, And every grocery run, every gas fill-up, every mortgage payment will serve as a daily reminder that we are the ones footing the bill.
Once upon a time, the Liberals knew better. We made the hard decisions and got the country back on its feet. Nowadays, not so much.
If you only listened to the mainstream media, you would think Justin Trudeau’s carbon tax is long gone. But the Liberal government’s latest budget actually doubled down on the industrial carbon tax.
While the consumer carbon tax may be paused, the industrial carbon tax punishes industry for “emitting” pollution. It’s only a matter of time before companies either pass the cost of the carbon tax to consumers or move to a country without a carbon tax.
Dan McTeague explains how Prime Minister Carney is doubling down on net zero scams.
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