The regulatory and tax landscape in B.C. could change significantly under a BC Conservative government, and resource industries would be among the biggest beneficiaries.
Recent polling shows the Conservative Party of BC virtually tied with the BC NDP ahead of the official start to the election campaign.
While the BC Conservatives had not released their full platform as of last week by press deadline, party leader John Rustad has been teasing it with major policy pledges made over the past few weeks.
He has promised to scrap B.C.’s carbon tax, streamline resource project permitting, open the door in B.C. to nuclear power, introduce reforms in forestry and repeal the Declaration on the Rights of Indigenous Peoples Act (DRIPA).
Rustad has also pledged to immediately extend the environmental certificates of three natural gas pipelines to the West Coast that were permitted a decade ago and are set to expire in November.
He would also scrap emissions-intensity caps for liquefied natural gas (LNG) projects to allow LNG plants to use natural gas drive instead of electricity for their energy-intensive chilling processes.
The Independent Contractors and Businesses Association (ICBA) has formally endorsed the BC Conservatives and supports his pledge to streamline permitting with a “one-project, one-permit” model that Rustad has touted.
“I think there’s been a great deal of frustration with the regulatory framework in Canada that has been implemented by both the government in Ottawa … and the NDP government in Victoria,” said ICBA president and CEO Chris Gardner. “It’s extremely challenging to get major projects and major infrastructure projects approved in British Columbia.”
What is lacking at both the provincial and federal levels is an industrial strategy, Gardner said.
At one point, more than a dozen LNG plants were proposed for B.C., but most proposals were abandoned, leaving three permitted natural gas pipelines languishing on drawing boards, with certificates set to expire.
One of them—the Prince Rupert Gas Transmission line—has been acquired by the Nisga’a First Nation and their partners in the Ksi Lisims LNG project.
The Pacific Trails pipeline to Kitimat and the Westcoast Connector Gas Transmission line to Prince Rupert remain in regulatory purgatory because there are no LNG projects for them to serve. The pipelines received environmental certificates 10 years ago that have already been extended once.
“If they expire, it would mean these projects would have to go back into the environmental assessment, which would cost, probably, in the vicinity of $300 million to $1 billion dollars per project, and likely take a decade to get done again,” Rustad told BIV.
Rustad said a BC Conservative government would also make regulatory changes that would allow LNG producers to use natural gas drive rather than electric drive for the chilling process in LNG production. LNG producers in B.C. are not technically required to use electric drive, but it is one way of meeting B.C.’s strict emissions-intensity limits for LNG plants.
The first phase of the LNG Canada plant nearing completion in Kitimat will use natural gas for its liquefaction process, which involves chilling natural gas to -162 Celsius to turn it into a liquid—a very energy-intensive process. The developers of all other LNG projects moving ahead in B.C. plan to use electric drive, and LNG Canada is under pressure to also go with e-drive for a second phase expansion.
Rustad said electrifying LNG plants not only increases projects’ capital costs, but strains B.C.’s power generating capacity.
He cited the Kitimat LNG project as an example of a project that was abandoned due to the high cost of electrification. According to some estimates, it would have taken roughly two-thirds of the generating capacity of B.C.’s Site C dam to turn the plant fully electric.
“The bottom line is we do not have the electricity, and the cost of using e-drive is unrealistic for there to be major investment in a large-scale LNG project,” Rustad said.
Arresting forestry’s decline
Since 2017, 30 sawmills in B.C. have shut down or taken curtailments, according to the Spar Tree Group, with eight permanent sawmill closures just in the last year and a half. Companies that have permanently shuttered sawmills and pulp and paper mills in B.C. have cited the high cost of doing business here and a fundamental lack of affordable timber as reasons for the closures.
Due to a Mountain pine beetle epidemic that started in the late 1990s, the province’s long-term annual allowable cut has drastically declined, which has led to a rationalization of sawmills and pulp and paper mills in B.C.
The current NDP government has implemented a number of reforms for the forestry sector, some of which may be making it even tougher for forestry companies to operate in B.C. These include a harvesting moratorium on old growth forests, which has “temporarily” made 2.44 million hectares of mature forests off-limits for logging, and a new ecosystem-based land management model—forest landscape planning—that forest industry analysts warn adds red tape to harvesting plans and may shrink even further the available timber supply.
The NDP government has been promoting a policy of doing more with less, with a particular emphasis on promoting the use of engineered wood products such as mass timber in construction.
Last week, the BC Conservatives released a forestry platform that includes the following reforms:
Replacing the current stumpage system with a value-added tax on end products;
Switching from a sawlog annual allowable cut (AAC) to a fibre-based AAC;
Clearly defining timberlands to be prioritized for harvest;
Conducting a core review for forestry; and
Simplifying cutting permits with a one-permit, one-process model.
One complaint against the stumpage system in B.C. is that the rates change too slowly to reflect actual market conditions, such as lumber prices. The BC Conservatives have committed to replacing the stumpage system with a tax on end products that would adjust according to market conditions.
“Input credits will be created for higher-value products and better utilization of fibre: Meaning the more a producer can do with the fibre, the more credits will be created,” the platform states.
Shane Brienen, mayor of Houston, which has been devasted by sawmill closures by both West Fraser Timber (TSX:WFG) and Canfor Corp. (TSX:CFP), spoke at last week’s Union of BC Municipalities (UBCM) convention about the need for reforms to B.C.’s forestry policy.
Brienen, who was the BC United candidate for Rustad’s riding of Nechako Lakes before the party suspended its campaign, said he doesn’t see much in the BC Conservative platform that will help forest-dependent communities like his. What he and Mackenzie Mayor Joan Atkinson want to see from politicians is some commitment to tenure reform and redistribution.
“We’d like to see the government, whichever government it is, commence a structured tenure redistribution that aligns with First Nations and municipalities,” Brienen said.
Atkinson said large companies that shut down sawmills should have their tenure taken away and given to small, local companies or communities that will use the timber locally.
“Give tenure to small, local companies,” she said. “The big corporations have too much control.”
Land use and Indigenous consent
Associations representing resource companies—notably mineral exploration and mining—have become increasingly concerned over access to land and resources in B.C. in the context of First Nations rights and title. DRIPA, which passed in 2019, essentially invests First Nations with a greater say over land use in their traditional territories and requires the amendment of several B.C. laws to harmonize them with the act.
When the NDP government announced consultations in January on amending the Land Act, reaction was so strong that the minister of water, land and resource stewardship backed off and cancelled the discussions.
Rustad has vowed to repeal DRIPA.
“We’re committed to removing the DRIPA legislation,” he told BIV. “It’s creating friction between peoples, and any sort of act that creates friction from a people to a people will not end well, and we need to bring that to an end. We’ll continue to use UNDRIP [the United Nations Declaration on the Rights of Indigenous Peoples] as a guiding principle, as we work with First Nations, and we’re going to move towards what we call economic reconciliation with First Nations.”
Nuclear power potential
One of the more radical changes Rustad has proposed is on the energy front. He is proposing that B.C. be open to nuclear power, which would require amending the Clean Energy Act.
In a Conversations Live with Stuart McNish interview last week, Rustad said it’s unlikely that another major hydro-electric dam will ever be built in B.C. and that wind and solar power simply can’t provide baseload power.
“If every household and business in the province were to use a heat pump, you would need to build the equivalent of six or seven more Site C dams, and we’re likely not going to build another major dam in B.C.,” he said. “We’re actually going to have a serious conversation about nuclear power.”
In contrast to the BC Conservative Party’s support for resource industries, the BC Green Party has some very different attitudes towards resource development. While the party has little hope of ever forming government in B.C., it could conceivably find itself in a position of some power, should it ever enter another confidence and supply agreement with the NDP, as it did in 2017.
Asked what the BC Greens might demand in such a position with respect to industries such as forestry and LNG, leader Sonia Furstenau said her party would soon be releasing its platform. Asked specifically about LNG, Furstenau said no new LNG projects should be built in B.C., citing concerns about their use of both electricity and water.
“We are heavily subsidizing a polluting industry during a climate crisis and adding methane emissions to an industry that has a very uncertain and pretty unfortunate economic outlook,” she told BIV.
“There should be no more LNG infrastructure built or pipelines built in this province. We should be investing in the energy of the present and future.”
When asked about the BC Greens’ position on the crisis facing B.C. forestry, Furstenau suggested it was a crisis of B.C.’s own making.
“I think we often talk about a mill shutting down as though it just happens and who knows how we got here,” she said. “The reality is logging practices for the last 150 years, certainly for the last many decades—I’ll quote Eby—have ‘exhausted the forests,’” she said, adding that logging has not been conducted sustainably over that time.
“We have to stop thinking of the wealth of resources as something that we let large industries and companies come in, exploit and then leave,” she said.
