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YUKONOMIST: Fracking along the Alaska Highway

You can expect a surge in demand for skilled trades and other workers across Western Canada

Fracked gas from just south of the Yukon may soon be on giant LNG tankers to Asia, with the support of British Columbia’s NDP government and First Nations along the route.

For any Yukoner who’s just thawed out after being in cryogenic storage since the fierce fracking debates here a few years ago, this is probably a shock.

The positive “final investment decision” for the massive $40 billion pipeline and LNG port in Kitimat means that by the early 2020s around 1.8 billion cubic feet a day of gas will head from northeastern B.C. to Kitimat for shipment to power-hungry Asian markets.

The pipeline taps into a string of massive oil and gas formations stretching along the Alaska Highway from the Liard basin straddling the Yukon-B.C. border through the Montney and Duvernay plays. These underlie the whole region stretching under Fort Nelson and Fort St. John, continuing through Grande Prairie.

A few years ago, I attended several Whitehorse public information sessions on fracking, complete with Outside experts, hosted by environmental groups. I don’t think anyone present would have believed you if you got on stage then and announced that in 2018 a B.C. NDP government would be repealing the previous B.C. Liberal government’s natural gas tax policy and offering extra support worth $6 billion to the project.

B.C.’s assistance includes relief from the provincial sales tax for the multi-billion dollar construction project. It also offers an upper cap on the carbon tax at $30 per tonne, which is $20 per tonne less than what most residents and businesses are expected to be paying by 2021. The extra LNG income tax passed by the previous government will be repealed. Government-owned B.C. Hydro will provide 100 megawatts of power, so the liquefaction plant can use electricity instead of exportable natural gas for its own power.

The project also has support from the federal government and First Nations governments. According to our friends at the Alaska Highway News, the pipeline has signed project agreements with all 20 First Nations along the route. Over $620 million of contracts have already been signed with First Nations governments and businesses. Further contracts to round this number up to around $1 billion are planned.

The project’s boosters point out many other benefits. Relatively clean Canadian gas will meet Asia’s power and heating needs rather than coal. Despite major efforts in many Western countries to phase out coal, the International Energy Agency forecasts that these reductions will be offset by surging coal use in India and Southeast Asia. Much also depends on how China balances its air-quality and climate-change objectives with the coal jobs at state-owned mines and generation plants.

Cheap Canadian gas will help keep coal in the ground. The US Union of Concerned Scientists estimates that a modern gas-fired electricity plant will produce half the carbon emissions as a modern coal plant generating the same amount of electricity (although emissions during drilling and transport eat away at this advantage). While that means gas is better emission-wise than coal, climate-change scientists would point out that half is still more than zero-emission energy sources such as solar, wind or nuclear.

The project is expected to create thousands of jobs. Workers at the Kitimat site will peak at 4,500 during construction. In addition, there will be jobs building the 670-kilometre pipeline from northeastern BC. There will be long-term jobs along the pipeline as well as serving the 200 to 400 LNG tankers which will fill up at the port each year.

It will take just 12 days for gas molecules to make it from the frackers in Fort St. John to the power plants of Asia, resulting in less energy used in shipment compared to gas from the Middle East or elsewhere.

Tax revenues from royalties as well as income tax from gas companies and well-paid energy workers will boost the bottom lines of the BC, Alberta and federal governments. If the increased demand also leads to more drilling and higher gas prices in Western Canada, that will further boost tax revenues. The Montney and Duvernay plays have potentially enormous amounts of oil and gas which fracking techniques are opening up.

Many continue to be seriously concerned about the environmental impacts of fracking, pipelines and LNG tankers. Nonetheless, governments along the route have decided the benefits are worth the risks.

What does all of this mean for the Yukon?

It probably has limited implications for the Yukon oil and gas industry. There is not much happening as we wait for the outcome of Northern Cross’s lawsuit against the Yukon government and its fracking moratorium. On top of that, we are even more distant from markets than the big Montney and Duvernay fields and lack pipeline infrastructure.

However, the fracking boom means that our electricity plants and future Yukon mines will have access to plentiful gas from a well-established gas industry in Northeastern B.C. You should expect to see more LNG trucks on the highway.

The project is so large that you can expect a surge in demand for skilled trades and other workers across Western Canada. This creates opportunities for Yukon businesses and workers, either fly-in/fly-out or to relocate. It also means that construction projects in the Yukon will need to pay more to compete for labour and equipment. If you’re planning to renovate the kitchen or build an infrastructure project, you might want to get it done before everyone starts working on the Kitimat project.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist.