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CALGARY — The decision by Chevron Corp. to try to sell its 50 per cent stake in the Kitimat LNG project on the B.C. coast throws a symbolic dash of “long-dated cold water” on growth in the Canadian natural gas industry, an analysis says.
The California-based company announced the potential sale in its 2020 budget, adding it would also cut funding to gas-related ventures including Kitimat LNG and its shale gas fields in the northeastern United States.
It also announced a charge of at least US$10 billion against its assets because of expected lower long-term prices for oil and gas.
“With (Tuesday’s) budget, Chevron threw some long-dated cold water on the Canadian gas macro, as the company announced they are reducing funding for the Kitimat LNG project,” said analysts at Tudor Pickering Holt & Co. in a report Wednesday.
“While we don’t think investors were baking in any long-term gas demand related to the project, any advancements likely would have been well received.”
The analysts pointed out Chevron has access to about 100 million cubic feet per day of gas production to supply the proposed project to super-cool and ship out as much as 2.3 billion cubic feet of gas per day.
Chevron’s move is the latest in a string of setbacks for B.C.’s nascent liquefied natural gas industry which once boasted nearly 20 proposed projects with the implied promise of a new higher-priced export market in Asia for Western Canada’s abundant natural gas resources.
Chevron is not the first company to want out of Kitimat LNG; it bought its 50 per cent stake from Calgary-based Encana Corp. and Houston-based EOG Resources, Inc., in December 2012.
In the same transaction, Houston-based producer Apache Corp. raised its stake in Kitimat LNG from 40 per cent to 50 per cent. But two years later, under pressure from activist investors, it sold that stake to Australian Woodside Petroleum Ltd., which remains Chevron’s partner.
Malaysian energy giant Petronas cancelled its Pacific NorthWest LNG project in 2017 and later joined the Royal Dutch Shell-led $40-billion LNG Canada project, which remains the only project under construction after being green-lighted in 2018.
Finance Minister Bill Morneau said Wednesday the federal government still sees a “very positive opportunity” for LNG in Canada, suggesting Chevron remains committed to seeing the project move forward despite its efforts to rebalance its asset portfolio.
Earlier this month, the Canada Energy Regulator approved a 40-year licence to export natural gas for Kitimat LNG, doubling its previous licence duration and nearly doubling the potential output of the facility to 18 million tonnes of liquefied natural gas per year, a substantial increase over the previous 10-million-tonne licence which was set to expire at the end of this year.
Chevron said its decisions are part of its global portfolio optimization effort focused on improving returns and driving value.
“Although Kitimat LNG is a globally competitive LNG project, the strength of Chevron Corp.’s global portfolio of investment opportunities is such that the Kitimat LNG Project will not be funded by Chevron and may be of higher value to another company,” Chevron said in a statement.
“Chevron intends to commence soliciting expressions of interest for its interests in the Kitimat LNG Project. No timeline has been set to conclude this process.”
The company said it would continue to work with Woodside and government and First Nations partners during the process.
The Kitimat LNG project includes upstream natural gas lands in the Liard and Horn River Basins in northeastern B.C., the 471-kilometre Pacific Trail Pipeline and the gas liquefaction facility at Bish Cove near Kitimat.
VANCOUVER — Metro Vancouver’s transit system dodged a major disruption for the second time in less than two weeks on Tuesday as a tentative agreement was reached to keep SkyTrains running.
The Canadian Union of Public Employees had threatened to shut down the Expo and Millennium lines before the morning commute if a deal wasn’t reached.
Translink spokesman Ben Murphy warned commuters to expect some delays Tuesday morning as the system was powered back up after the deal was reached shortly before 5 a.m.
In anticipation of a three-day shutdown of the two lines, the system was powered down overnight, he said.
Both sides said details of the tentative agreement will not be released until it is ratified.
Thousands of residents use the two train lines and previous disruptions for mechanical or other reasons have left long lines of people waiting for so-called bus bridges.
CUPE 7000 represents about 900 SkyTrain attendants, control operators, administration, maintenance workers and technical staff. Their contract expired Aug. 31.
A last-minute deal was also reached Nov. 27 averting a strike by bus drivers and Seabus operators in Metro Vancouver. Unifor members agreed to a three-year collective agreement with Coast Mountain Bus Company that will see wage increases of up to three per cent.
Those who provide support and services to adults with developmental disabilities have achieved contract peace for the next two years and four months.
Nearly 600 members of the BC Government and Service Employees Union (BCGEU) recently ratified a new collective agreement with Community Living BC.
The group had been without a contract since April 1, but it voted 89 per cent in favour of ratification late last month. The new deal, which includes a two per cent wage increase per year for the term of the agreement, will expire on March 31, 2022.
“This was a challenging round of negotiations, but we’ve achieved progress on key issues identified by our members,” BCGEU social, information and health vice-president Judy Fox-McGuire said in a press release.
Besides getting a pay increase, workers also received concessions concerning workload issues, and recruitment and retention challenges for specific roles.
“As the demand for CLBC’s services has increased, so have the demands on our members who work frontline supporting clients,” BCGEU president Stephanie Smith said. “I’m glad we’ve found common ground with the employer and achieved an agreement that balances the clients’ need for access to care and our members’ need for fair workload and compensation.”
VANCOUVER — Metro Vancouver transit users are facing another possible strike.
The union representing 900 SkyTrain workers in the region has issued 72-hour strike notice to its employer, the BC Rapid Transit Company.
CUPE 7000 says in a statement that no significant progress has been made on key issues, after four full days of mediation and more than 40 days of direct bargaining.
Michel Ladrak, president of the BC Rapid Transit Company, says in a statement that the union has not informed the company what form the job action might take, nor when it would occur.
The union says bargaining is ongoing and it will release an update Saturday on possible job action.
The notice comes the day after members of another union representing transit workers voted to ratify a tentative agreement, averting full-scale strike action.
Unifor members, including bus drivers and Seabus operators, agreed to a three-year collective agreement with Coast Mountain Bus Company that will see wage increases of up to three per cent.
CUPE 7000 represents SkyTrain attendants, control operators, administrators, maintenance and technical staff.
Tony Rebelo, president of the union, says in a statement that it’s committed to reaching a fair deal without any interruption of service.
“We will need to work very hard to reach a deal that addresses our concerns about wages, forced overtime, staffing levels and trades adjustment language, among other issues,” Rebelo says.
Ladrak says the company is disappointed by the strike notice but will continue bargaining through the weekend.
“We are hopeful and committed to reaching a fair deal without disrupting the valuable service we provide to the residents of this region,” he says.
Members of the union on Nov. 21 voted 96.8 per cent in favour of striking if a contract can’t be reached.
Canada Line and West Coast Express are not affected by these negotiations.
The last contract expired on Aug. 31.
VANCOUVER — The owners of two derelict hotels on Vancouver’s Downtown Eastside have launched a legal challenge against the city’s plan to expropriate the buildings for $1.
The Balmoral and Regent hotels, which have been operated as single-room occupancy buildings, were home to more than 300 of the city’s most vulnerable residents before the city ordered them shut down over safety concerns.
Council voted to expropriate the properties for $1 each last month, more than a year after failing to compel the owners to bring the decaying buildings up to code.
In a petition for judicial review filed in B.C. Supreme Court, Balmoral Hotel Ltd. and Triville Enterprises, allege the terms of the expropriation were “patently unreasonable, or made in bad faith,” and the city breached its duty to procedural fairness.
The documents say the owners have pleaded guilty to failing to maintain the buildings but allege they have suffered “irreparable harm” because they did not have the opportunity to sell them for the multimillion-dollar market value.
The city says in a statement that it’s aware of the petition and will file a legal response “in due course.”
The owners allege in the court documents that they received 10 open-market offers for purchase, ranging from $7 million to $12.5 million per hotel, since the buildings were shut down.
The petition says the city made two offers to purchase the buildings, first at $6 million and then at $4 million, before the expropriation vote was cast.
But it says council’s vote to spend $1 each on the expropriations “was grounded upon the incorrect assumption that the city had tried to negotiate in good faith with the petitioners and that the petitioners had refused to engage in good faith negotiations with the city.”
The hotels were separately ordered shut down in 2017 and 2018 by the chief building officer after they were deemed unsafe.
When the notice of expropriation was filed in July 2018, deputy city manager Paul Mochrie said it was the first time the city had pursued expropriation with the purpose of providing public housing.
Atira Women’s Resource Society, a local non-profit group, took over management of the Regent Hotel in 2018 before its closure. CEO Janice Abbott said at the time that she found mould in the rooms, ceilings that collapsed under the weight of water ingress and people living on urine-soaked mattresses.
The owners’ petition identifies the shareholders and principals of the companies that own the hotels as siblings Parkash Kaur Sahota, 89, and Pal Singh Sahota, 80.
In November 2018, it says they pleaded guilty to violating maintenance law for their buildings.
But it says the decision to expropriate the hotels was “unreasonable.”
“If the expropriation approval decision is allowed to stand, the petitioners will suffer irreparable harm that cannot be compensated sufficiently within the available compensation scheme,” it says.
“Even if successful in securing $20 million in compensation through the expropriation compensation claim that will follow expropriation, the Expropriation Act only awards interest to a successful claimant at the annual rate that is equal to the prime lending rate of the banker to the government … which is far below standard investment rates of return,” it says.
CALGARY — The Canada Energy Regulator says it has approved an application from Chevron Canada for a 40-year licence to export natural gas from the proposed Kitimat LNG project despite environmental opposition.
The application filed last spring to the National Energy Board, the CER’s predecessor, aimed to double the previously approved export licence duration and nearly double the potential output of the facility to 997 billion cubic feet of natural gas per year.
That’s the equivalent of about 18 million tonnes of liquefied natural gas, a substantial increase over the previous 10-million-tonne, 20-year licence which is set to expire at the end of this year.
In its decision letter, the CER notes that it rejected an application from B.C. environmentalist Michael Sawyer to restart the regulatory process and hold a public hearing.
It also rejected his argument an adequate natural gas supply hadn’t been proven, despite a Chevron expert’s estimate of Canadian and North American natural gas resources of 1,000 trillion cubic feet and 4,000 Tcf, respectively.
Chevron has previously stated the increase in scope is designed to improve the project’s “cost of supply competitiveness” compared with other LNG projects around the world. It has not said when a final investment decision will be made, although its application envisions commissioning of the facility by 2029.
In the fall of 2018, the Shell Canada-led LNG Canada consortium announced it would proceed with its $40-billion, 14-million-tonne-per-year project, also to be built near Kitimat. It’s expected to be in service by 2024.
Natural gas bills will actually be going down for most of the province in 2020.
FortisBC has received regulatory approval from the British Columbia Utilities Commission to decrease natural gas bills for the majority of its customers. The BCUC is the regulating body responsible for reviewing and approving rates.
“Natural gas continues to be an affordable option to heat a customer’s home and water when compared to other energy choices in British Columbia,” FortisBC energy supply and resource development vice-president Dennis Swanson said in a press release. “And since we don’t mark up the cost of natural gas, our customers pay what we pay.”
The reason for the decrease is because it doesn’t cost as much to store and transport natural gas as it did last year.
Fort Nelson and Revelstoke are two areas that are facing natural gas cost increases in 2020.
VANCOUVER — The Real Estate Board of Greater Vancouver says home sales returned to around historically typical levels in November after a quieter first half of the year.
The board says 2,498 homes sold in the month for a 55.3 per cent increase from the same month a year earlier and four per cent above the 10-year average for the month.
Home sales in the region have shown a strong rebound through much of the second half of the year, with several months of near 50 per cent gains, though the November increase was the biggest jump for the year.
The rise in home sales came after a price pullback in the market, with the November benchmark price down 4.6 per cent from a year ago to $993,700.
The benchmark price for detached homes was down 5.8 per cent from a year ago at $1.415 million, while the condo benchmark price was down 3.8 per cent at $651,500.
The board says the sharp increase in home sales came as listings were down 12.5 per cent from last year at 10,770.
100 MILE HOUSE — The B.C. government will contribute $50 million to an ongoing internet connectivity program to bring high-speed services to rural, remote and Indigenous communities.
Ravi Kahlon, the parliamentary secretary for rural development, said Monday the grant funding is expected to benefit people living in up to 200 rural and Indigenous communities.
The funding can be used to help bring high-speed internet to entire regions or to make final connections to homes and businesses, he said.
“Bringing connectivity to communities takes timing, collaboration and hard work to design local solutions and develop infrastructure that meets the needs of its residents, and to ensure the network is one that people and businesses can depend on,” he said at a news conference.
The $50 million is the largest single investment in the province’s Connecting British Columbia program since its creation in 2015, Kahlon said.
The program has started or completed projects in 479 communities since July 2017, of which 83 are Indigenous communities, says the Ministry of Citizens’ Services in a statement.
Rural internet provider Falko Kadenbach said it is challenging to build fast, reliable and affordable networks into more remote areas, but the benefits improve services, lives and communities. Kadenbach said his networks cover vast areas of B.C. from Terrace to Mackenzie to Osoyoos.
Rural and remote communities are also eligible to access the federal government’s recently released $750-million broadband fund to provide investments in local infrastructure to deliver high-speed internet, Kahlon said.
VANCOUVER — A report reviewing responses by the B.C. government and WorkSafeBC after two fatal sawmill explosions is calling for a more streamlined investigative process and news ways for workers to report safety concerns.
Two people died and 19 were injured in an explosion at Babine Forest Products in Burns Lake in January 2012.
Three months later, two people died and 44 were injured in a similar explosion at Lakeland Mills in Prince George.
Vancouver lawyer Lisa Helps was asked to assess how worker safety recommendations were implemented in the aftermath of the explosions.
In her 54-page report, Helps says all the recommendations made in three reports stemming from the incidents have been implemented or partially implemented, and the changes have been largely effective and positive.
However, she recommends restructuring investigative teams to join compliance and quasi-criminal investigators and empowering them to make independent decisions about charge approval submissions.
“The change would make investigations faster, comprehensive and more likely to proceed to prosecution,” she says in the report.
The United Steelworkers has previously accused WorkSafeBC, previously known as the Workers Compensation Board, of mishandling its part of the investigation in a way that prevented criminal charges from being laid in either case.
Helps recommends amending the Workers Compensation Act to remove oversight and approval for charges from WorkSafeBC’s purview and to allow victim impact statements.
“When a prosecution results in a conviction, victim impact statements will give a voice to the affected worker, and publication will allow for all employers to learn about the hazards of ignoring workplace safety,” the report says.
Affirming the independence of the investigative unit would ensure they are not subject to an appearance of bias. New search and seizure powers would ensure judicially obtained warrants preserve the integrity of exhibits and investigations, the report says.
Helps also recommends establishing a confidential database where workers can report safety infractions and designating a worker ombudsperson at WorkSafeBC.
The ombudsperson could assist workers, explain procedures and processes, and be able to provide a bridge to WorkSafeBC for workers ongoing input into safety processes, she says.