Like the hushed promises in The Graduate, the one word that caught the ear of the Canadian government in the late 1970s was coal.
According to a story by The Canadian Press, spikes in energy prices and supply worries saw Japanese steelmakers willing to pay a hefty premium for a fresh, dependable source of metallurgical coal. Then Social Credit premier Bill Bennett had both the coal and a region starving for economic development - northeastern B.C.
B.C. built a $400 million rail line as well as access roads, hydro connections and services to a brand-new town - Tumbler Ridge. The feds chipped in with a coal-handling terminal at Ridley Island in Prince Rupert and when the final tab rolled in, taxpayers had forked over $1.6 billion.
The energy firm Teck spearheaded the creation of two mines in the region - Quintette and Bullmoose - at the cost of $1.5 billion more. It was all backstopped by 15-year contracts setting the coal price at $98 a tonne, 40 per cent above the prevailing cost at the time.
To be fair, northeastern coal didn't turn into a complete disaster - its backers in 2000 say it may have directly created $8 billion in revenues with $13.6 billion in spinoffs. But the ships never quite came into Rupert - when Ridley Terminals opened in January 1984, Japanese steelmakers balked at the high price of the coal and buckled under pressure from lower-cost producers in India and South Korea. The mines, Ridley, the rail line, Tumbler Ridge all struggled the moment they came on line until the Japanese economy tanked, mines were mothballed, Tumbler Ridge nearly disappeared and what was supposed to be a flood of coal to Rupert turned into a trickle by early 2000.
The blighted affair has experienced something of a renaissance on the back of strong demand for coal from Chinese steelmakers. But as Robert Redford once quoted Jonathan Swift, "Promises and pie crust are made to be broken"; the northeastern coal experiment turned out to be concocted of flakier stuff that was less well-baked.
Things don`t change, they just get more grandiose. The word is now the abbreviation of a phrase - liquefied natural gas (LNG). Neither the province nor the feds are directly investing into the LNG industry but the premise is the same: let`s bet B.C.`s economic future on a volatile market with powerful, unpredictable players.
How can anyone lose?
Clark's dream got a rude awakening last month when Russia and China signed a 30-year, $400 billion natural gas deal just as the premier was holding an LNG love-in/conference in Vancouver. The government and pundits quickly mollified all concerned by saying China and the Asian market for energy is big enough that there's room for everyone.
But it doesn't take a Warren Buffett-like brain to see how LNG could turn into another lump of B.C. coal. As Gwynne Dyer pointed out, the to-do in the Ukraine has lessened Russian boss Vladimir Putin's ability to play his European customers off against his Chinese buyers. According to Andrew Nikiforuk, the price differential in natural gas between North America - $4 per million Btu - and Asia - as high as $14 per mmBtu - is one of the main reasons why B.C. LNG exports make sense; China could soon be buying at $9-$10 a mmBtu and that could sink further if Asian buyers team up to purchase gas.
The Ukraine crisis has also unleashed the world's largest producer of natural gas into the market - the United States. According to the New York Times, the U.S., in an effort to reduce Europe's reliance on Russian gas, has approved six out of 21 applications to build port facilities to ship LNG by tanker. Worse still, according to Australian professor Barry Naughten, Russia's Gazprom enjoys an advantage in Europe in terms of infrastructure as well as the inherent edge of pipelines over the chilling and shipping of LNG; if matters shift again and Gazprom returns to favour, it won't take much for those U.S. LNG tankers to make their way to Asia instead.
China also has large, but undeveloped, natural gas reserves while Nikiforuk points out competitors are developing LNG in Australia, East Africa, the Mediterranean and Middle East. It's no wonder LNG proponents and B.C. feel a harsh sense of urgency in bringing the province onto the field quickly.
This pell-mell rush to market is where the biggest dangers and biggest cost to the province lie. According to Vaughn Palmer, the government is already rushing to figure out how to tax the LNG industry - with natural pushback from firms hoping for breaks - with an eye to get a so-called final investment decision by the end of the year. There are also grave concerns over the province's ability, saddled with its naked desire to promote LNG to regulate the industry and protect the environment, especially considering the ongoing controversy over fracking, the method in which natural gas is produced.
Also blighting matters is the nightmare scenario of an Australian experience.
As Nikiforuk partly describes it, foreign demand for natural gas drives up prices for domestic consumers even as the price of LNG falls on outside markets, leaving B.C. with bigger bills at home and less revenue from overseas.
The problem is too many people - the premier, her government and many voters - were so desperate to find a reason not to vote for the NDP that few people stopped to wonder whether a wild rush for LNG was a good idea. Now it forms the bulk of Clark's mandate and the centrepiece of B.C. economic policy.
The folly of northeastern coal was supposed to be the last of the megaprojects. LNG however could prove to be a mistake that burns far hotter and far more intensely.
