05/06/2013 07:25 EDT | Updated 07/06/2013 05:12 EDT

Site C Dam, BC LNG Connection Disputed, Hydro Defends Project

BC Hydro

VANCOUVER - The B.C. Liberals have been using the liquefied natural gas industry to justify the construction of the Site C hydroelectric dam — an $8-billion BC Hydro project perpetually on the development horizon.

The government says without it, the LNG dream is at risk. But industry watchers say not really and BC Hydro says the province needs the power anyway.

The massive mega project in northeastern British Columbia will flood more than 5,000 hectares of land, swamp some First Nations heritage sites and force up to 20 families — many life-long ranchers — to move.

The dam is expected to be on line by 2020 and would generate enough electricity for 450,000 homes on the provincial grid, power necessary to help fuel the energy-hungry LNG export terminals on the northern coast, the Liberals say.

"Without Site C, long term, it would put LNG at risk," said Energy Minister Rich Coleman, adding that other components of the industry will require electricity.

"Even electrification of the gas fields themselves will take more electricity."

Liberal Leader Christy Clark was quizzed hard on the subject during the televised leaders' debate by Green Party Leader Jane Sterk, who accused her of selling out farmers in favour of the LNG industry.

Clark responded: "If we want to open up our province, if we want to continue to grow our economy in British Columbia, so that we can put people to work, so we can freeze income tax, we can freeze the carbon tax, then we have to make sure that we are continuing to invest in growing the economy. Site C is part of that. Site C is making sure that we can bring this generational opportunity of liquefied natural gas home for our kids. It's part of the clean energy plan to make sure that we can export that natural gas to Asia and put that money aside in a prosperity fund for our kids so that our province could be debt free in 15 years."

Energy analysts say companies planning to build LNG terminals are unlikely to connect their facilities to the provincial grid, choosing instead to generate their own power by burning the natural gas already flowing through their pipes, calling into question the justification for building the dam.

But Hydro says in its online documents that the need to provide power for LNG plants was never part of its decision on whether to build Site C.

The NDP platform does not mention Site C specifically, although it pledges to "renew BC Hydro's mandate to meet B.C.'s electricity requirements."

NDP energy critic John Horgan was unavailable for comment. The NDP has questioned the need for Site C.

A spokesman for the party speaking on background said if elected, the party will allow the current environmental review process to continue. But the party will also ensure the B.C. Utilities Commission, the independent regulatory body, comes back into the Site C review process. The Liberals exempted major projects like Site C from commission reviews, but the NDP says the commission will provide an evaluation of the province's energy needs.

Since the government amended the Clean Energy Act to permit onsite power generation — once thought to be too carbon-intensive — LNG companies are now free to decide how they power their facilities.

LNG terminals require huge amounts of energy to cool natural gas so it can be compressed and shipped across the ocean in special containers.

Matt Horne, a climate analyst with the Pembina Institute, said the Site C dam would be necessary if the province was planning to link LNG facilities with the provincial power grid, but many LNG proponents have told him they don't plan to.

"If you're going to have all that energy demand for liquefaction and its going to be from the grid, there would be a big, big pressure to build Site C," Horne said.

"When the province first came out with its LNG strategy, it was really clear it would be the world's cleanest LNG, powered by renewable energy," Horne said. "Site C was definitely going to be a part of that."

But, said Horne, "the Site C connection to LNG is not as strong as it was six months ago or even a year ago."

Zoher Meratla, an energy consultant with 35 years of experience in the LNG industry, said the most efficient way is for terminals to produce their own electricity by burning natural gas.

"The reason is simple," said Meratla, whose company helped build the world's first electrically driven LNG terminal. "You need a very high reliability and by having your own power plant you have control of your own fate. You're not worried about a tree falling on the power lines, you're not worried about the ice affecting the lines."

Of the proposed LNG facilities — numbering close to 20 according to some analysts — Meratla said only a fraction will likely be built and even fewer will draw power from the provincial grid.

For BC Hydro, that's fine. The utility says it never took the power needs of potential LNG plants into account when it was calculating future demand.

“Over the next 20 years, electricity demand will continue to grow. BC Hydro’s current forecast shows demand increasing by approximately 40 per cent, driven by a projected population increase of more than one million residents and continued economic expansion," the utility says it its Site C business case documents.

"The potential for load from B.C.’s emerging LNG industry could further increase demand. As extensive as BC Hydro’s electricity supply is, it will not be enough to meet the needs of BC Hydro customers.”

The documents go on to say the forecast does not include electricity demand from potential LNG projects because "the requirements of the facilities have not yet been confirmed by proponents."

But even if the projects don't use grid power for the electricity-intensive process of compressing the gas, the plants will still require electricity for the mundane needs of powering offices and plants.

"Should LNG non-compression load be added to BC Hydro’s electricity demand forecast, total electricity demand over the next 20 years could increase by up to 50 per cent."

Geoff Hill, an oil and gas analyst with the financial advisory firm Deloitte, said the development of B.C.'s LNG industry will be highly dependent on power generation, but the main demand would come from the LNG terminals themselves.

"There are always power requirements for compressor stations at a pipeline," Hill said, "but those things are small compared to the ultimate consumer which is the compression of the gas."

Coleman said when his government amended the Clean Energy Act, the move drew praise from the LNG industry.

"I heard from three of the major proponents within 24 hours of the announcement," he said. "All three were the major companies and their people said this is a game changer and it changes how we look at British Columbia."

But, said Coleman, despite the change, "a couple of the major ones (LNG terminal proponents) have told me they are still going to connect to the grid," but wouldn't say which ones.