Break In Case of Emergency

The costs of LNG (w/ Kiki Wood and Clark Williams-Derry)

• Climate Emergency Unit

Share episode

On June 30, Canada officially became an exporter of LNG. Emiko Newman (Coordinator of the BC Climate Emergency Campaign) uses this inauspicious occasion as a jumping off point to tally up the costs of LNG on our environment, climate, health and finances with Kiki Wood (Senior Oil and Gas Campaigner at Stand.earth) and Clark Williams-Derry from the Institute for Energy Economics and Financial Analysis. 

Tune in for a deep dive into fracking, how exporting LNG will drive up the domestic price of energy and gas as well as some serious mythbusting of the LNG greenwashing machine, including the myth that LNG is a necessary transition fuel that's cleaner than coal (it's really not).

This episode aired on July 24, 2025.

Learn more and get involved at:

Credits: Produced by Emiko Newman and Doug Hamilton-Evans. Hosted by Emiko Newman. Featuring Clark Williams-Derry and Kiki Wood. Music by Anjali Appadurai. Audio editing by Blue Light Studios. Artwork by Geoff Smith.

Emiko Newman (00:01)
Hello and welcome back to Break in Case of Emergency, a podcast from the Climate Emergency Unit about mobilizing Canada for the climate crisis with audacious solutions rooted in justice and workers' rights. My name is Emiko Newman. the coordinator of the BC Climate Emergency Campaign and I will be your host for today. Something momentous happened in BC a few weeks ago, but not a lot of people are aware of it. On June 30th, a tanker pulled up to the shores of Kitimat, a small town of just over 8,000 people on the north coast of BC, on the traditional territory of the Haisla Nation. It loaded itself up with LNG from a new terminal called LNG Canada, the single largest private sector investment in the history of this country, costing $40 billion from start to finish. And then the tanker sailed away, bound for Korea. And with that, Canada officially became an exporter of natural gas. This episode is dedicated to talking through the implications of this news and providing a general overview about LNG. In particular, we're going to be doing a lot of myth busting. We'll start off by covering some of the basics, such as what is LNG's impact on the environment? Is it cleaner than coal, as people claim? How does it impact our health?

And to discuss all of this and more, we've brought on Kiki Wood, Senior Oil and Gas Campaigner with Stand.Earth. We'll also be hearing from Clark Williams-Derry, who is an Energy Finance Analyst with the Institute for Energy Economics and Financial Analysis. Clark is an expert in all things North American LNG exports and global LNG market trends. And we've done things a little bit differently for this episode.

We've recorded these two conversations with Kiki and Clark separately, and we'll be hearing from each of them one at a time, starting with Kiki. Let's dive in.

Kiki Wood (02:05)
Hi, thanks for having me.

Emiko Newman (02:07)
Hey Kiki, how's it going?

Kiki Wood (02:09)
going well, as well as can be in these turbulent times.

Emiko Newman (02:13)
Indeed. Well, we're super happy to have you on Breaking Case of Emergency. And you you have a lot of expertise around this topic and so you felt like a great person to bring onto the podcast. ⁓ I just want to make sure that all of our listeners are on the same page before we get too much into it. So I want to start off at the really basic level and just make sure that everybody knows that LNG stands for liquified natural gas. But there's nothing clean about natural gas. I think that LNG is the perfect example of greenwashing, where something sounds much better from the environment than it actually is, because you hear natural and you think, ⁓ that must be good, it must be clean. But natural gas is actually a fossil fuel. ⁓ It's primarily methane, which is a much more potent greenhouse gas than carbon dioxide. In fact, over a 20-year time period, it's over 80 times more potent than CO2. So Kiki, I want to start off by talking to you about fracking because natural gas is obtained through that process. And you're somewhat of an expert on fracking.

⁓ So can you talk to us about what fracking is and why it's so environmentally destructive?

Kiki Wood (03:43)
Yeah, absolutely. Yeah, so natural gas, what I'm going to call fracked gas, because I think you're right that natural gas is one of the most successful branding exercises that the industry has done in quite some time. Yes. So we prefer to call it fracked gas, primarily also because in British Columbia, almost all of our gases is extracted through fracking. It's not the only method by which you can extract fracked gas, or extract gas, but it is the primary way that we do it in British Columbia, mostly because it was heavily subsidized by the government. So there was actually financial incentive programs for companies to frack, which has led to a huge boom in that method of extraction in this province. So it's a, a very high level, I'm not going to get super technical about this. So readers who are like super nerdy technical, I welcome you to do your own research.

But it's a process by which you sort of like you drill down quite deep and then you like send sand, silica, chemicals to sort of like crack open and like explode rock bases underneath the ground that expose gas trapped within them. And then you capture that gas as it comes back up in the backflow. And then you extract that gas from those other compounds that are coming up with it and other extra gases that are coming up with it that are not methane or less desirable. And ⁓ in British Columbia, we are also using an additional method called horizontal drilling, which is like not only where you go down, but it's where you go down and then you go across. And so this allows companies to access gas in like a one to two kilometer radius of where their well pads are. So where they're drilling down from and then drilling down along. So this is hugely impactful on the land base because when you see like this tiny little well head sticking up above the ground, what it actually represents in a network of underground pipes and tunnels is pretty massive. and in British Columbia specifically and in other places it's led to a huge increase in earthquakes because we are literally causing a ton of new fractures in the ground when we do this. That's why it's called fracking.

Emiko Newman (06:06)
Yeah, I have this one statistic that says that last year, 2024 alone, the Montney Formation, this particular area, Northeastern BC and bordering Northwestern Alberta recorded 34 earthquakes which were specifically fracking related, which is pretty crazy.

Kiki Wood (06:27)
Yeah, absolutely. And the Northeast is also home to what's called earthquake amplification zones, which are naturally occurring geological formations. So just the way that the Earth is shaped, like a canyon or maybe there's valley with a river at the bottom. And this particular shape actually amplifies the size of an earthquake if it happens there. So what would normally rank as a level two somewhere else would rank as like a level three there. So not only are we seeing more earthquakes, but we're seeing more powerful earthquakes there in those areas than we might see in other places.

Emiko Newman (07:04)
Interesting, I had no idea.

Kiki Wood (07:05)
Totally wild, yeah. And it's become very normalized. There's a lot of things about fracking that have become very normalized, earthquakes being one of them, and then water and nuclear waste being the other two, I would say. Fracking is hugely, hugely water intensive. So it requires huge amounts of water, huge amounts of silica sand, and huge amounts of chemicals in that slurry that they send down.

and to capture gas and everything that comes back up is fully polluted. So this is one of the only industries in the province and frankly in the world that is able to take huge amounts of water out of our waterways, permanently pollute it and permanently remove it from the water cycle.

Emiko Newman (07:51)
Yeah, and ⁓ I think it's important to also note that many parts of BC have been in a drought and are currently experiencing drought. And yet these fracking companies are able to take billions and billions of liters of fresh water from local streams and rivers basically with impunity, right? Like they are allowed to take that when people, ordinary citizens, are being told to take shorter showers. And yet the fracking industry is using up these billions of liters per year.

And then as you said, that water is then kept separate for the rest of time in these like ponds, right? If a bird lands on that water and drinks from the water, it's dead.

Kiki Wood (08:30)
Yeah.

Yeah, and these two things are really linked to each other because for the short term they're kept in ponds or sea rings, which are basically these huge like above ground swimming pools. But long term they're actually disposed of in old wells. So they take this fracking wastewater and they actually put it back down wells that are not producing anymore. And it's actually that waste disposal down the wells that is a primary cause of these earthquakes. of causing this cycle. Yeah, it's, and I think the, I mean, the other thing to note also is that like these wells are encased in concrete to try and protect like different levels of water at each sort of like layer of the geological frame as you go down, but concrete doesn't last forever. It does have cracks. And so as you have these...like this wastewater and these volatile organic compounds that come back up with it and they go back down into the wells, they actually like, yeah, cause more, what is the word that I'm looking for? Cause more like instability. Yeah, in those well structures. The volatile organic compounds is something that I feel like doesn't get talked about so much. A lot of what comes back up in this wastewater is radioactive.

because when you go that far down and you bring up all the stuff that's meant to just stay in the ground, frankly, you get what are called norms, naturally occurring radioactive materials. And so it actually creates new radioactive material in the wastewater, which then needs to be disposed of in an entirely separate way. And so these things get tested for radioactivity, and if they meet under a threshold of radioactivity, they just get disposed of in the normal way.

And if they go above that, then they have to be a truck to Saskatchewan and disposed of in like an old uranium mine for like how we deal with nuclear waste. It's a relatively small part of the sort of like the whole life cycle. But I think the point that I'm trying to make is that there's a huge amount of waste that is created by this industry.

Emiko Newman (10:33)
That's not great.

Kiki Wood (10:48)
it's not fully captured and it's not keeping pace with the cost that the industry pays, right? So like this waste is at a cost to, you know, British Columbians and the amount of water that we take out is like, it's pennies what the industry pays for it. And they're only able to reuse, because with the industry and even government will say is, well, they reuse a lot of that fracking wastewater in the next rack when it's actually more like two to 5 % of what can actually be reused and the rest is just disposed of.

Emiko Newman (11:17)
Right. conclusion here is fracking equals bad.

Kiki Wood (11:22)
Yes, fracking is stupid, think is the way that I like to it is literally the definition of like scraping the bottom of the barrel. It's like, let's break open some rocks deep underground and capture a bit of gas from them. is. And poison our water and poison our people, too. You know, I'm sure that, yeah, we're going to get to this bit fracking and other industrial, you know.

Emiko Newman (11:38)
and cause earthquakes.

Kiki Wood (11:51)
processes related to it do have been shown to have quite adverse health outcomes for communities that live nearby and there's growing bodies of research that are really trying to document that right now.

Emiko Newman (12:03)
Yeah, we can talk about that now. Let's get into that a little more. ⁓ I have been reading studies that show that fracking exposure leads to really extreme rates of ⁓ respiratory illness, asthma, cardiovascular illness, even childhood leukemia. ⁓ So this is pretty problematic. Do you want to speak to that a little bit more, Kiki?

Kiki Wood (12:30)
Yeah, totally. If you want someone to get really nerdy with it, I would totally recommend that you have someone from the Canadian Association of Physicians for the Environment to come on. But from the body of research that they've been doing in partnership with Dr. Elise Caron Boudreau at the University of Toronto, I believe it is, or maybe at Scarborough.

And they have found a number of things. First, they have a whole study on adverse birth outcomes related to industrial activity. So showing the way that people living nearby highly industrialized areas, such as in the Northeast, around fracking wells are showing like higher rates of birth defects. And they're finding, you know, compounds like benzene and a number of other things in people's hair, in their nails, in their physical samples that they're taking that have no business being in those things. These are chemicals that are meant to be rock bound. And so they're only getting into the air, the water, the soil through fracking because there's so much disturbance of those geological formations. And so these are threats and issues that communities wouldn't be facing if it weren't for the fracking industry.

And this is for people who aren't even working in the industry, right? So these are people who just are living here and then fucking started happening around them. I don't blame them for wanting to live there. It is a beautiful, beautiful area of the province, like home to like so many farmers, like, you know, this like incredible, gorgeous area that's just been taken over by industry. And now people are getting higher rates of cancer. They're finding higher rates of these rare brain tumors called gliobastomas. higher rates of asthma, then higher rates of all these adverse birth outcomes, which are found to be disproportionately higher in the indigenous communities in that area than even in the towns themselves. So there's a lot to be concerned about when it comes to fracking, whether you're working in the industry or whether you're just living near the industry, you're sort of not immune.

Emiko Newman (14:37)
Yeah. Would you say that this is an example of environmental racism? Because these fracking sites are particularly located in and around Indigenous communities. And I think that if you were seeing such adverse health outcomes ⁓ in, you know, urban centers, let's say in Vancouver, there would be massive public outcries and people would be rallying and protesting. And yet the majority of British Columbians probably aren't aware of the fracking activities that are happening in the northern parts of the province and the health outcomes associated with that.

Kiki Wood (15:16)
Right. ⁓ I mean, I think it's important to know that I don't speak for any indigenous communities. And so when I say it looks like environmental racism, I'm not speaking for them or their experience about what they would call it. I do think that the initial pushes of fracking into that area disproportionately impacted indigenous communities in terms of the land that was chosen to frack. And I think that indigenous communities in the North are consistently not given a range of economic options that have a higher chance of reflecting their values. And so you see higher support for fracking when I have a curiosity about whether or not communities would choose that industry in their backyard if they had other choices. And I think to bring it back to LNG a little bit, Cedar LNG is a perfect example of this where, you know, I think more than a decade ago there was a proposal for an offshore wind project in that community that couldn't get government support, couldn't get government funding, and was eventually never billed. And then the community was offered an LNG terminal and I'm not surprised and I don't begrudge one bit that they're excited about the economic prosperity that it represents. But it's just a shame they missed opportunities for know, different types of economic development that don't have such a high environmental footprint and cause a legacy of harm that we're talking about, right, in both like the land base and in the health of their community members, Indigenous and non-Indigenous.

Emiko Newman (17:00)
Yes. ⁓ Well, thanks for that, Kiki. And I want to bring up ⁓ a particular message that we are hearing all over the place, which is that LNG is important because it's a transition fuel. need to go from coal, from coal to fracked gas, to then renewables after that. Right? Like there's these steps. ⁓ And LNG is cleaner than coal is the messaging that we're hearing.

Let's debunk this. Want to give it a go?

Kiki Wood (17:34)
Yeah, absolutely. So let's be really, really clear that LNG and fructic gas is not cleaner than coal. It never has been, and it probably never will be. What people are looking at when they say that and the data that they're basing on is taking a slice of data out of a whole big picture. And so what we have here in Canada is that we only consider certain types of missions to be in the scope of what Canada and British Columbia accounts, right? Because we only really care about our own accounting. We're not concerned about other people unless we're supposedly displacing their emissions, right? And so what people look at is ⁓ either the emissions that it takes to extract it and transport it but not burn it, or the emissions that it takes to transport it and liquefy it but not extract it.

And so when they're saying it's cleaner than coal, they're looking at this really specific picture of like this one gas plant and only the things related to this gas plant and nothing related to how it's extracted or how it's burned. But when you look at life cycle emissions, so how it's taken out of the ground, how it's transported, how it's liquefied, how it's transported, how it's regasified, and then how it's burned is worse than coal. And frankly, coal and

Emiko Newman (18:50)
it

Kiki Wood (18:55)
Liquefied gas are not solutions to anything. In fact, what we've seen in a lot of the specifically East Asian markets that British Columbia is really eyeing with our fracked gas industry is that supplying gas is actually displacing renewables or it's actually delaying them because countries that would go right from coal power electricity directly to renewable electricity are now getting caught in this place of considering gas. And so people are saying like, it's helping to displace coal. And it's like, it might be a transition away from coal, but if it weren't available, people would actually transition directly to renewables. So it is actually delaying that transition and causing a delay in climate action.

Emiko Newman (19:46)
Not to mention that LNG infrastructure takes years and years, not decades, to build. Yeah, you don't just say, hey, you know what, we need to be displacing coal in X country. Let's build a pipeline and a terminal and get them natural gas next year.

Kiki Wood (19:53)
hugely expensive.

Yeah,

it'll be operational in 10 years and it'll cost you $60 billion. And the world is just moving so much faster than that, right? It's really such short-term thinking. And I think that's really the point is like some people will make a lot of money from these projects and that's what they're concerned about. They're not thinking about the long-term plan. They're not thinking about how it affects people long-term, about how it affects the climate long-term and about how it affects our economy long-term. They're thinking about how they can make money.

off of the resources that this province has and at our expense.

Emiko Newman (20:40)
Yeah, it's certainly very short-term thinking with the focus on profits and not much else, to be frank. And also, I think we should talk about the methane leakages, right? Because do you want to speak to the way that this methane gas is leaking at all points along that life cycle?

Kiki Wood (21:01)
Totally. So I think we talked about at the beginning that when we talk about fracked gas or liquefied gas, mostly what we're talking about is methane. And methane is a really tiny molecule that's really prone to leaking. And so what we found is that it actually leaks at every stage throughout the process. So it leaks while it's being extracted. It leaks while it's being transported. It leaks while it's being liquefied. It leaks while it's being regasified.

And what we've found here, there was a study two years ago that was actually co-sponsored by the BC Energy Regulator that showed that the rates of methane emissions are actually 1.8 to 2.2 times higher than previously thought because of all this leakage. And if you've ever heard of someone talk about fugitive emissions, that's what they're talking about. So fugitive emissions are emissions that were not planned, not intended, because there are other ways that we actually emit methane on purpose, which is through venting and flaring. So this is when facilities actually will vent methane directly into the atmosphere on purpose to either clean out a pipe or reduce pressure or flare it, which is where methane gets leaked when...they choose to burn off less desirable gases or compounds from the gas and that's when you get like those huge flare stacks coming up. Some places like LNG Canada will have an all the time flare stack so processing plants will always have a flare stack burning. They're always releasing as they process these less desirable gases that they're burning off. But you'll have in specific flaring events where they like do a mass burning of a whole bunch of them and you can see these like huge huge flames from kilometers around.

Emiko Newman (22:49)
Well, that actually brings us really nicely back to LNG Canada, which I just mentioned at the very beginning of this episode, because I have started seeing articles popping up and people posting, I think I saw somebody post on LinkedIn the other day ⁓ about the flaring happening in Kittumat and how terrifying that is for residents in that area to now see this black smoke, ⁓ you know, all times of day and night ⁓ going into the air. you know, it's hard to say what health impacts it's going to have on you. it's also, I think it contributes to this feeling of powerlessness where you're watching this, maybe it's just a few kilometers from your home and you can't do anything about it.

Kiki Wood (23:39)
Yeah, totally. And as long as that plant is operational, you're going to see that flare stack. So those are always there. In the Northeast, it's really easy to identify where the processing plants are because you just look for the fire in the sky. And the black smoke. But I've been on site for flaring events where they're specifically burning off gas. And it is pretty terrifying. It is huge. It is

Emiko Newman (23:52)
And the black smoke.

Kiki Wood (24:08)
like thick black smoke coming off of it. It's very loud, which I think people don't really think about. And it is 100 % like releasing dangerous pollution into the air for this community, right? And it's one of the things that I think communities are not that aware of what the health impacts on them might be, but we are actually like aware of what the health impacts of living near industrial facilities are. And there is actually research on like the higher.

sort of rates of like PM2.5 and other like really toxic chemicals that become part of the air system and require monitoring. And I think it's quite frankly shameful that the province and that LNG Canada was not forced to do a comprehensive health assessment at the community prior to it coming online because we don't have that baseline information.

When we start seeing health problems crop up in the next 10 years, because we absolutely will, there's no chance that they won't see that, it's going to be a lot harder to pin that directly on the industry and to hold them accountable for the impacts that they're having to that community when that is the big change there, right? It's like the level of air pollution that will be permanently present as a result of those operations.

Emiko Newman (25:23)
And my guess is that those communities were probably not warned in advance, right?

Kiki Wood (25:28)
They were definitely not warned and they were definitely not given an opportunity to say anything about it. People were not asked, like, do you want to opt into living in a toxic industrial zone? They were just told, like, jobs, jobs, jobs, but only for a couple years and then bye. Right. Right.

Emiko Newman (25:47)
And let's also talk about the amount of carbon pollution that LNG Canada in particular is going to cause. Because when it comes to mainstream media and announcements related to this new project coming online, I feel like the tone has been largely celebratory. It's like, look, this largest private sector investment in our country's history is now operating. How amazing. economy, jobs.

Those same articles don't tend to include anything around the environmental impacts and the pollution that is going to be caused and the emissions. ⁓ Do you want to speak to that a little?

Kiki Wood (26:28)
Yeah, so LNG Canada is, now that it is online, it will be the single largest emitter in the province. ⁓ prior to this year's climate accountability report, in the modeling, you could actually pinpoint it as on track, on track, on track to meet our 2025 targets. And then LNG Canada comes online and it just bumps right up across the line. It was going to be the single largest reason why BC was not able to meet its emission reduction goals and because of its operations and so and It's expected to export about 14 million tons per annum, which I don't know if that really means anything to anyone But it's a lot it is like an extremely large project, right? Let's say that if it's a size. It's an XXL

Emiko Newman (27:19)
I did some calculations for this very reason. was like, no one's going to know what 14 million tons means. I can't picture it. So ⁓ when you're burning that 14 million tons, it will release 36 million tons of carbon dioxide into the atmosphere. So that's equivalent to nine and a half coal-fired power plants running for one year. Or if you want to picture it a different way,

Kiki Wood (27:27)
Totally.

Emiko Newman (27:48)
the emissions released ⁓ is also equivalent to eight million gas-powered vehicles in a year. So that puts it into perspective a little bit.

Kiki Wood (28:01)
Yeah, it's like one and a half drivers, like British Columbia drivers, again.

Emiko Newman (28:08)
Exactly. Which is terrifying. We are in the midst of a climate crisis. I would assume that all of our listeners are aware of that. And we are going backwards. We are not doing well on the path to bringing our emissions down. We are ⁓ increasing them in this frenzy of LNG expansion. ⁓ So maybe as we're bringing this conversation to a close soon, let's just talk about some of the other projects that are either under construction or awaiting approval because LNG Canada is the first one to get going, but there are a lot more.

Kiki Wood (28:48)
I'm waiting in the wings. sure. ⁓ Yeah, did you have one that you want to start with?

Emiko Newman (28:56)
I think just like let's do an overview of what's coming. Okay. What's being constructed right now. What's awaiting approval.

Kiki Wood (29:03)
Totally, yeah. So let's start about the ones that are under construction. So the other two that are not yet operational but have sort of like gotten all the way through their assessments have like financial backers and are now under construction are Cedar LNG, which is yeah, sort of also based in Kitimat. It's gonna be a floating facility, which is going to be sort of like one of the newer styles. ⁓

And ⁓ it is smaller than LNG Canada Phase 1, but still quite concerning. And wood fiber LNG is the other one. So that's located in Squamish, which I think, back to your point about, you know, what if these projects were located in urban centers? So I think that one really hits the mark for that.

Wood fiber is considered to be a relatively small project in terms of emissions, but it and cedar are both home, you know, make their homes in very sensitive ecological zones. So the reason why people have not necessarily wanted to, you know, run pipelines to Kittumat in the past is because of the channel that...boats have to go through and the number of fully right turns that have to be made to go in and out of that. And Squamish sort of shares, Woodpepper sort of shares that where it's transiting, boats will be transiting in and out of Howe Sound, which is a UNESCO ⁓ protected area. Heritage site, protected area. And home to a lot of iconic marine mammals that are very important to British Columbians. So those two are of real concern.

The other one that is approved but not under construction is LNG Canada phase two. So it's basically phase one over again. Another 14 million tonnes has gone through all its assessment. Doesn't have full financial backing yet and isn't under construction. They haven't made a final decision on whether that project will go through.

The others sort of waiting in the wings are the Slyzm's terminal in Prince Rupert, which is connected to the Prince Rupert gas transmission line, which transmission line sounds like a power line, but it's a pipeline. Greenwashing there, yeah, I love that.

Emiko Newman (31:26)
bit more greenwashing

Kiki Wood (31:29)
and Tilbury LNG. So Tilbury LNG has a phase one, which is very small, mostly meant for bunkering, which is when LNG is used as a marine fuel for ships. And it has a phase two expansion that it has proposed that is sort of under assessment right now and looking to be built. And that one is just riddled with problems at times. It has proposed that it's entirely for bunkering. At times it has proposed that it's entirely for a domestic backup for if we have those flash freeze weeks that we did kind of two years back. ⁓ But also they applied for an export license. So they can and are planning to export it, but not being very open about that. And it's located in Delta, BC. So like right on the mouth of the Fraser, right in Vancouver's backyard. Nowhere else in the world would you be allowed to build a facility like that so close to people's homes.

Emiko Newman (32:25)
Yeah, it's honestly unbelievable and there has been a lot of pushback and protests. I'm particularly thinking of that project Wood Fiber you mentioned, the one ⁓ being constructed in Squamish. And we work with an organization called My Sea to Sky that has been doing amazing advocacy work and protesting around this project. ⁓ They've gone to court, like it's been a whole thing. They're really facing an uphill battle over there. ⁓

And I also just wanted to point out for our listeners, I would be remiss if I did not mention that our last episode of this podcast was focused particularly on that Prince Rupert gas transmission pipeline. So if you're listening and you want to get a bit more information about that particular project, which was just approved a few weeks ago, ⁓ give that one a listen. And I think that brings us to a close here, Kiki. Thank you so much for joining us. It was such a pleasure having you on the

Kiki Wood (33:23)
No problem, thanks for having me.

Emiko Newman (33:25)
Welcome, Clark. We're so excited to have you on this podcast because you bring so much expertise around energy exports and global market trends. We're really happy to have you.

Clark Williams-Derry (33:38)
well thanks for inviting me

Emiko Newman (33:40)
Clark, you are an energy finance analyst at the Institute for Energy, Economics and Financial Analysis. mouthful. It's a mouthful. That's why you use the acronym IEEFA, correct?

Clark Williams-Derry (33:53)
That's right. I don't know if people know much about IEEFA. We are a global analytical shop. We've got staff in North America, in the US and Canada, but also in Europe, in South Asia, in Australia, in East Asia. So a lot of our analysis is based not only on what we're seeing here in say, in North America and Canada and the US, is based on on the ground knowledge about what is happening in some of the developing countries and some of the target markets for LNG.

And that includes India, Pakistan, Bangladesh, Japan, South Korea, China, and of course, some Southeast Asian nations as well. So, this one thing sort of sets IEFA apart from a lot of other sort of analytical shops is that we really do have that on the ground presence around.

Emiko Newman (34:40)
Fantastic. Okay, thanks, Clark. So I'm going to jump into our first question, and I'm super curious to hear your answer. We've heard a lot of financial analysts describing LNG as risky. And we know that LNG is risky for the climate, of course. We discussed this. It's a fossil fuel. It produces carbon dioxide when it's burned. It leaks methane.

parts of its life cycle. ⁓ What kind of risks is the financial world talking about and risky for whom?

Clark Williams-Derry (35:19)
Yeah, that's a good question because, ⁓ you know, the kind of risks a lot of people focus on, the climate risks, aren't always that salient to sort of the accountants and people wearing green eye shades in the boardrooms. They're focused more on dollars and cents. And I think there's a sort of a widespread belief that, LNG's a sure bet, you know, this makes a lot of money, but that may not be the case. There are actually a lot of financial risks.

there are risks that are felt by many different actors throughout this sort of value chain of LNG. So the first, one of the first big risks is just the risk of a project cost overrun. So we've already seen this in LNG Canada, not so much with the liquefaction facility itself, but the pipeline, the big coastal gas pipeline that links the Montney Basin in Northeast BC to the coast.

That went way over budget and it was slower than expected. The company that built that pipeline, TC Energy, in 2022, they had to take a $3 billion write-down or impairment. And what that means in sort of simple terms is basically $3 billion that the company spent that it doesn't expect to get back from selling transportation services for gas on that pipeline. But in the next year, they took a second write-down, a $2 billion.

right down on the same project. So all told, basically a little over $5 billion in pre-techs impairments. That's basically money that the company spent that it doesn't expect to get back. So that's just emblematic of the kinds of cost overrun risks that you would face in some of these remote, very expensive, very large scale infrastructure projects. When I say remote, mean this is Northern British Columbia is pretty, you know, there's not a lot of people there. It's pretty rugged terrain. It can be hard to build.

You have to import a lot of ⁓ labor, there's labor costs inflation, there's potential for inflation in steel costs and equipment. And there's so much LNG being built around the world that these projects can get out ahead. And that poses a real financial risk to the companies that are building the projects. try to sort of cabin off these risks, curtail them a little bit, keep them under control. But fundamentally, even a well-planned project can come up against these unpertinent circumstances and go for budget. So that's one of the risks, the construction cost risk. But there's also a risk that over the long haul that the projects themselves may wind up facing market conditions that are a lot less favorable than they were expecting. that, we'll talk about this later, I'm sure, but there's this risk that there's going to be an oversupplied LNG market, that there's going to be too much LNG in the market.

And that the prices for LNG are gonna fall and may fall to the point where the companies aren't making the profits they're expecting to or aren't making profits at all. And that's really just a matter of sort of global supply and demand. We've got a very volatile LNG market. A lot of the things can happen and have happened over the past decade, but we have, you we've already seen a period of in 2018, 2019, even before COVID and certainly during the early parts of COVID when the LNG market was, know, prices were low.

Prices were cheap and companies that had invested in lots of big new LNG projects weren't making a lot of money. Some of them were losing money. And so they run this risk that they are building for a market that may not show up. And of course, you know, on the buyer buy side, I the companies, the utilities and ⁓ the middlemen, the brokers and the traders who are buying LNG.

They may be buying LNG that ultimately they don't actually need. They may lock themselves into long-term contracts and then discover the demand's not there or that they themselves don't need it and they have a hard time reselling it. there's the producer side risks, there's the consumer side risk, and of course then there's also the risk for the public. The public at large may be facing higher costs because of these LNG projects particularly costs that are felt in their energy bills. I this is one of the sort of the dirty secrets of LNG is that one of the main reasons that gas companies are so excited about it is not so much they're making profit by selling LNG overseas, they're also making profit by raising the cost of gas locally in North America, in British Columbia, in the US. When we export more LNG, we create tighter markets and that can raise the price of LNG. We're basically exporting LNG and we're importing higher prices. We're importing volatility from the global market. And from the point of view of the gas industry, this is a feature, not a bug. I this is part of the point. And you can see all sorts of analysts who are sort of adjacent to the gas industry. You rarely hear gas companies talk about this directly, but you see analysts adjacent to the gas industry saying,

Isn't this great? LNG exports are starting to raise prices. We just saw this from you recently in the trade press ⁓ a couple of days ago.

Emiko Newman (40:32)
I'm guessing the gas industry does not want consumers to be aware of this.

Clark Williams-Derry (40:36)
Of course not. Of course not. course they will tell, I'm more familiar, I'm based in the US and I'm more familiar with the debate in the US. And you had this sort of up is downism in the of the political debate here where you'll have members of Congress, of the US Congress saying, we need more LNG exports to keep our gas prices low. Even though that's the exact opposite of what happens is every analyst who says the more we export, the faster prices rise. And there's

debate about how much they rise, but we certainly saw during the Ukraine crisis that in the US, natural gas prices hit their highest level in well over a decade. And that's because every LNG plant that had any spare capacity was bidding on the same gas that US consumers were bidding on. It bid up the price to the highest level in decades. It was essentially a hundred billion dollar transfer of wealth from consumers to the gas industry. Wow. And that is the

That is kind of the point. mean, like really the gas industry for the most part doesn't sell gas overseas at any higher price than they sell to domestic consumers. What they're looking for is higher domestic prices, higher prices, some of the major pricing hubs in the US that would might be Henry hub in Western Canada, that's Echo hub. You want to see those prices at those hubs rise so that all of the consumers, whether they're export consumers or whether the domestic consumers are paying more for gas. That is the

point of exports.

Emiko Newman (42:05)
Well, quick question. how typically, maybe there's no ⁓ short answer on this, but typically how long after a country begins exporting LNG will consumers start to feel those impacts?

Clark Williams-Derry (42:19)
It's hard to say. It depends on the situation. So in Australia, where most of the gas that is produced in Australia is exported, right? It's mostly an export-oriented gas industry. But the domestic consumers are paying vastly more for their gas because so much gas is now being exported. It's basically the majority of gas is exported. They're already starting to talk about importing LNG because there are these contracts to export LNG.

They're having gas shortfalls and there's an after that, you know, export LNG and then important additional LNG to backfill the missing supplies for the domestic market. It's a mess, but that's Australia. That's not the North America, it's not the U.S. And the thing is, it's sort of different from place to place and circumstance to circumstance. You can't really generalize. So, area where there's a lot of nuance, you know, in fact, if you actually look at the history of prices in the U.S., we really saw

prices spike during the early stages of the Ukraine crisis. That was when we saw the clearest examples of global prices and global market chaos seeping into the US and into North American gas markets. This is true for Mexico and for Canada. You saw higher prices because the global market was going crazy. So of course there are other risks as well. One of the big risks is

Well, eventually these projects are going to need to be cleaned up, know, whether it's in two decades or four decades, sooner or later, somebody is going to have to foot the bill for cleanup. And often what we see in the fossil fuel industry is they're not very good at setting aside money for cleanup. And often projects get sold from a solvent buyer or solvent, you know, project owner like, you know, like Shell. ⁓ They'll sell it to a smaller company who's selling it to sell it on to a smaller company still.

and eventually you wind up with significant cleanup liabilities in the hands of a company that doesn't have the financial resources, doesn't have the money to pay for cleanup. And what happens then? Well, sometimes, know, products, you know, things just don't get cleaned up or they stay, you know, they stay messy, they stay, you know, like, you know, the equipment just sort of rusts in place, more or less. Other times, those costs get passed on to

provincial government or to local governments or to First Nations governments. So ultimately those cleanup costs, it's one of those ways that the oil and gas industry tends to privatize the profits, know, skim off whatever money it can while it can, and then socialize the losses where, you know, somebody else is paying for the cost.

Emiko Newman (45:03)
Thank you.

Okay, so ⁓ risks for ⁓ developers, for ⁓ LNG sellers, for buyers, and ⁓ domestic consumers.

Clark Williams-Derry (45:14)
Yeah, yep, that's right.

Emiko Newman (45:17)
Now, Clark, in BC, a huge part of the marketing strategy for new LNG projects is that Asia needs RLNG to replace coal. You see ads saying that on buses and all over the place. ⁓ And basically, the idea is that LNG is a cleaner alternative than coal for producing electricity in Asia. But what does the research say about this?

Clark Williams-Derry (45:45)
I think it's funny. It's a cleaner alternative to coal. It doesn't mean that it's clean, right? It's sort of like saying like pneumonia is preferable to cholera. mean like you don't It's kind of a weird comparison is first and people see that they should be thinking You know cleaner does not mean clean, you know, first of all, so that's just like let's get that aside but the You know, the second part of all this is that a lot of the talk a lot of the hype but a lot of this with the whole

sort of a greenwashing rationale for LNG is that it is in fact replacing coal in China or in the developing Asia. In particular, these are places that are fairly heavily reliant on coal for electricity. And the idea is that somehow by providing them with LNG, they'll switch away from coal and over to gas. This is not happening in China or in India. I can't say this

You know more emphatically there is no evidence That lng is replacing coal in china or in india. We've done studies on this What is happening is that lng is going into other parts of the economy It is not replacing coal in the electricity system. So as an example like you know, like a decade ago china's Electricity system got about three percent of its output

3 % of its power from gas. That's a decade ago. Last year, 3%, right? So there's been no appreciable way in which gas has replaced coal in China's electricity mix. Gas is used for other things. used for, it's maybe used for home heating, it may be used for industrial purposes. And the same is actually even more pronounced, same trend is more pronounced in India, where in 2010, fiscal year 2010 in India,

the India's power system got about 13 % of its power from gas. Last year, again, it was like two to 3%. So it's actually a decline in the share of gas in the power mix. Even as these countries have used more gas, it is not going to replace coal in their power mix. So just the whole idea that coal is somehow getting

pushed to the margins by LNG, it's not happening. And when you look at the economics, it makes sense that it's not happening because LNG isn't just gas. It's the most expensive form of gas you can get pretty much. So when we saw, we actually have seen gas push coal out of the generation mix to a large extent in the US. It's happening in Canada.

Where coal is becoming, it used to be sort of the dominant source of electricity in North America and it's gotten smaller and smaller over time. Specifically as the share of gas in the US gas mix has gone up and in the North American gas mix has gone, sorry, power mix has gone up. But that trend has coincided with very low gas prices. mean this really takes gas prices in the, what's it called, $3 to $5 per MMBTU.

price range, $3 to $5 is like that's kind of like where you start seeing a gas push coal out of the mix. In Asia, LNG over the past few years has been well, often has been up in the 30s, but per MMBTU, but certainly north of $12 per MMBTU. It may come down a little bit, but it's never going to hit that $3 to $5 per MMBTU range.

where we saw gas replacing coal in North America. And the structural reason why that can't happen because, you know, just the process of liquefying the gas, the capital cost for transportation, for fuel consumption, for liquefaction, for getting things into a boat, for regasification, that whole process just by itself costs $3 to $5 per MBTU.

So if you're going to get gas below, if you need gas in the three to five MMBVT range, that basically means at least no margin for the cost of gas itself, no margin for profits. Ultimately, what I'm trying to say here is that gas is not a, especially LNG, is not a viable economic replacement for coal in developing nations that are price sensitive, that have domestic sources of coal.

that have currency problems and balance of trade problems that they're trying to solve by not importing expensive fossil fuels. We're not seeing this big switch from coal to gas. It's just not happening. so what this leads us to believe is that all this talk about coal being replaced by LNG is just a marketing point. It's a mix of marketing and wishful thinking.

is kind of the, if we build it, they will come mentality. we hope, like in there we're we're building and we're hoping the market's gonna develop. The problem is for LNG developers in Canada and in the US and frankly all around the world is that everybody has the same idea at the same time. I there's an enormous amount of new LNG that is being built right now and that is coming online by 2030.

It's going to be the largest, it's a tidal wave of new LNG supply, the largest supply addition in history, both in terms of absolute terms and relative terms, no matter how you slice it, except for when the first LNG plant was turned on, it's never grown quite this fast. So this is, in my mind, it's a real problem for the companies because, you know, like,

LNG Canada and the Canadian LNG companies are saying, look, we're going to take advantage of this great opportunity. But we have the same thing happening in the US, in Mexico, in Qatar, in Australia, in Russia, in UAE, in Oman, in Indonesia, in Malaysia, in Argentina, in Gabon, in Congo, in Nigeria, in Mozambique, all at the same time. They're all thinking the same thing. We can capture a piece of this market. They're overbuilding.

As a result, they're running a very real risk that they're gonna create a glut that is gonna bring prices way down way down by 2027 or sooner That and that you know, there are different analysts who have different opinions about this means some people think well It's gonna there will be a glut but it's gonna clear eventually or they'll clear soon enough You know the shell is going on record is saying well if there's a glut that'll be good because it'll allow

Demand to grow and that we will actually see demand develop in some of these countries where we're hoping to sell more LNG over time. If LNG is cheap, they'll jump in and they'll buy more and they might, but there's a question about how much profit is going to be lost in the meantime. But you know, it's not just Aifa saying this. I you can sort of track many independent analysts who are pointing to the same conclusions that we've reached.

that there's going to be a lot of LNG and that demand is not developing as quickly as they hoped. I've got this great quote from the Oxford Institute for Energy Studies saying, we have for a long time now been projecting a glut of LNG in the late 2020s. This is consistent with our view that LNG demand is likely to peak around 2030 or shortly thereafter. that's.

Oxford Institute and they obviously have the independent commodity intelligence services saying you know from 2026 to 2036 the global LNG market will be oversupplied in the range of 11 million tons who is about just 69 million tons annually with peak oversupply in 2029. So again when a lot of these projects are scheduled to come online that is going to be a time when there's going to be way too much LNG in the market. Now on the demand side there's a lot of people who hope well

Yeah, there's gonna be a lot of supply, but there are also a lot of people in the world who are gonna want gas, they're gonna want cheaper gas, they're gonna want LNG. Remember, LNG, again, it's not cheap gas, it's sort of the most expensive form of gas. Pipeline gas is almost always cheaper than LNG because it doesn't have to have the additional chilling and transportation that you have with a pipeline. So, the thing is that demand in much of the developing world for gas is actually

not as robust as the industry hopes for. when I say, let's start with the developed world. Let's start with Europe. Europe's consumption of gas has fallen by about 20 % since the start of the Ukraine crisis. And it does not look like that's turning around. looks like there's been ups and downs in LNG demand, but overall gas demand is still ticking downward, is being driven downward by

Expensive gas prices in Europe is being driven downward by policy, this climate policy, but also energy security policy and renewable energy development and other forces that are gradually reducing demand for gas. And over time, if gas demand is going down, it's hard to see that Europe would be a major source of new LNG demand. Japan's LNG consumption, Japan's been sort of the rock of the global LNG.

It has been the the country essentially the LNG was designed for they wanted gas they have none of their own They have no ability to get a pipeline into to Japan. So they developed the LNG industry specifically to service Japan their LNG consumption peaked in 2014 is down by about 20 to 20 20 to 25 percent since then and the projection is for continued declines as Their nuclear fleet comes online. Now, this is something, you know, there was a spike in LNG demand after the Fukushima disaster as that is sort of gradually resolved and new nuclear plants are coming online. Basically the ones that were shut down for safety reasons, they're gradually coming back online. That is pushing LNG demand down because it's basically nuclear is replacing LNG. Seeing similar trends in South Korea.

Emiko Newman (56:14)
It's interesting that you name Japan because ⁓ from my understanding, Japan is one of the countries that we hear about the most in BC in terms of needing our LNG. Japan is asking for our LNG and so we're delivering.

Clark Williams-Derry (56:30)
Yeah, I mean, so what Japan is actually doing with LNG is it's trying to resell it. I mean, so it's Japanese companies that buy LNG and then try to work as traders and brokers to resell LNG into Southeast Asia and to Bangladesh and to other countries around in their sphere of influence. A big part of that strategy is to basically supply not just the LNG, but the engineering and manufacturing of LNG import terminals, pipelines, power plants, the entire LNG to power train, sort of like the value chain, if you will, if that basically benefits Japanese companies, but doesn't necessarily mean that Japan itself needs that energy for its domestic use. I like it's sort of basically fueling Japan's industry and its industrial strategy rather than.

of supplying a need of Japanese consumers. Of course, Japan always, all else being equal, would probably want more access to fuel, but it doesn't necessarily mean that they themselves need that fuel for their domestic consumption. There will be some incremental demand for LNG from South Asia, Southeast Asia, as prices fall, but it may be...not at the price level that the North American gas industry is hoping for. It may be at a place where they're really scraping by, scraping to get profits or even losing money. And somewhere along the value chain. could be the project proponents at LNG Canada or some of these other projects, or it could be some of their buyers who've committed to buying the LNG. Somebody, if prices are low enough, somebody along that value chain is going to be losing money.

Emiko Newman (58:21)
Well, Clark, thank you so much for painting such a clear picture for us about the LNG export landscape. ⁓ I hope that our listeners feel a lot more informed now. I certainly feel more educated on LNG, I mean, first from our conversation with Kiki and now this conversation with you. So thank you so much for coming on. We really appreciate it.

Clark Williams-Derry (58:49)
My pleasure.

Emiko Newman (58:50)
We hope you enjoyed listening to these conversations about liquefied natural gas and that you now feel more equipped to get out there and talk to the people in your life about this issue that really goes a long way. We would appreciate if you share this episode with somebody who needs to hear it. And in fact, the number one thing we would love you to do would be to contact your local MLA. Let them know you don't support LNG expansion, that it's destroying the

It's destroying our health and putting everything we love at risk. The BC Climate Emergency Campaign has a number of resources available to help you set up an MLA meeting if you're interested in doing so. We would be super happy to help you and support you with that process. So do get in touch with us if you need some support. And as always, we encourage you to give us a review, check out our other episodes, and stay tuned for future ones.

Thank you and until next time.