Saturday, October 4, 2014

Current Stage of LNG Projects in BC

The timelines for LNG in BC have been slipping and the government is going out of their way to try and show a huge interest in BC by listing every flight of fancy project out there.   Somehow by giving equal weight to serious projects and total pie in the sky projects the government thinks the public will be more sold on the LNG idea.

Here is my take on the 17 LNG projects in BC

Projects in operation 


Projects Under Construction - this means any approved project with an investment decision made
None

Probable Projects - These projects are far enough along that they likely will go ahead

  • WesPac - This is a small project next to an existing LNG plant owned by FortisBC.  3 mmtpa
  • Woodfibre LNG - a small project located in Woodfibre near Squamish.   The final investment decision was supposed to be before July 1st this year but we are now just over three months after that date with no decision.  Opposition is rising to this project.  2.1 mmtpa
Not only do I think there are only two probable projects, they also happen to be among the smallest ones proposed,   These two projects total 5.1 mmtpa, less than one feed train for a large LNG project.


Possible projects - the projects seem to be actively being worked on but by no means close to a final investment decision

  • Aurora LNG - It is still some years before a final investment is made but this projects has some Asian partners with markets and with deep pockets.  24 mmpta
  • LNG Canada - The project has four large companies are partners so the capital is not an issue.   Originally 2015 was stated as the date for a final investment decision, but the dates for everything to do with the project beyond the end of the environmental assessment process have been dropped   24 mmpta 
  • Pacific Northwest LNG - A final investment decision is supposed to come before the end of 2014 but with the noises from Petronas I have to wonder if the decision date will be significantly delayer - 19.2 mmpta
  • Prince Rupert LNG - British Gas is the propoent of this project but I suspect that without a partner they will not move forward.   21 mmtpa
These four possible projects are all large ones.  They are big enough that the partners could spend $200,000,000 on their project and easily walk away because this is only 1% of the project cost. These projects will be entirely tied to long term prices for LNG in Asia.   Everything depends on the price differential between BC and Asia being large enough in 2025.   If one of these four is built this is 20 mmtpa of LNG.
 

Speculative Projects - they have at least something done but not much

  • Kitimat LNG - A project partnership between Chevron and Apache.   The project has gone rather quiet.   I suspect that the partners need more partners with a lot of capital
  • WCC LNG Ltd - this project is very early days with the most optimistic final investment decision date still four years away.  They do have an export permit.  20 mmtpa 

Very Speculative Projects - I do not believe these projects will happen

  • Discovery LNG - The project is proposed by Quicksilver Resources.  As a project it makes no sense to me because it is not near any natural gas.   The cost of going to the island makes this unrealistic.
  • Grassy Point LNG - this is a project by Woodside Energy of Australia.    There are no dates for when they might make an investment decision or when it might be built.  Without some partners with deep pockets I can not see how this goes forward given the large cost overruns and delays of the Pluto LNG project.
  • Kitsault Energy - The owners of Kitsault are looking for another use for their town site and I think are trying to interest one of the LNG projects to locate there.   This in my opinion is not a serious LNG proposal
  • Steelhead LNG Corp - A partnership with one of the local First Nations.   It is very early stage for this project and there is no money to build anything.  No timelines exist for this project.  The capital costs of a pipeline to Vancouver Island makes it an uncompetitive location.
  • Canada Stewart Energy Project - This is one of the newer projects and seems to be primarily connected to Chinese State enterprises.   The project timelines are fantasies.  They are suggesting building the pipeline and facility starting in 2015


Unknown - I can not find out enough about these projects to understand where they are at

  • Douglas Channel Energy - This project is one of the smallest ones and one of the few that I thought was realistically going to be in operation.   It ran into major financial problems October 2013.  AltaGas was supposed to be stepping in but as of August this had not happened.  I do not know the current state of the project
  • Triton LNG - This is a project between AltaGas and Idemitsu to build a floating LNG facility.   It would be a small plant but no site has been chosen
  • Watson Island LNG - this is a small proposed to redevelop Watson Island as a LNG export terminal in Prince Rupert, but beyond that I know nothing about it

Thursday, October 2, 2014

What the Canadian Military's Next Mission Should Be

Canada does not have the armed forces needed to make a difference in the Middle East.   It is too late to intervene in Ukraine.   But there is something our military could do.

Canada could open bases in Lativia, Lithuania and Estonia.    All three of these countries are small democracies neighbouring Russia.   They are very much under a potential threat from Russia.

The Russian government still does not seem to really respect them as being independent.  A good example of this is that Russia forced Estonia to surrender Ivangorod and Petseri even the two countries had an existing treaty recognizing both areas as being part of Estonia.   The Russian government treats the ethnic Russians in the three countries as their people to defend.  

Canada could permanently base 15 CF18s in the Baltics and a small army presence.  Maybe even a frigate.  These are not large enough numbers to stop a Russian invasion like in Crimea, Georgia or Ukraine but they serve different purpose, they are an effective shield for the countries.

Russia gets away with invading and occupying places like Ukranie and Georgia because the west sees the people in those countries as a bunch of poor foreigners.  If there are Canadian troops in the line of fire the Russians are going to think twice before trying to annex them.   One dead Canadian soldier would be a global PR disaster for the Russians.  Everyone in the world thinks Canadians are nice people, killing nice people is a media disaster.

Another important factor why this would work now and not have worked as well 20 years ago is because the reputation of the Canadian military had changed.   Back during the Bosnian civil war the Canadian military was seen as a body that would not intervene to save anyone ever.  After Afghanistan it is clear that the Canadian military knows how to defend civilians and will shoot and kill the bad guys.  

The Russians know Afghanistan and know how tough the territory the Canadian military was in.  They also know that the Canadians were popular with the population and suffered many times fewer causalities than the Soviets had because of that.

The Russians know the Canadian troops would shoot back and are the best snipers in the world.   With Canadians in the Baltics a Russian invasion would have to kill them to advance and this would destroy Putin's standing in all of the world.

The Canadian military can be an effective shield for the Baltics.  The mission is also one Canada could do without any other country.  Canada would not be a minor US partner in their latest adventure but setting our independent course in the defense of democracy and freedom.


If you are young and do not vote, this is for you

This is from Rock the Vote in the US, but the message applies here just as well.



Those that show up get to make the decisions, if you do not vote you give more voting power to those that do vote.   Politicians will do what the people that voted for them want.   It that means it is older home owners do not be surprised if that is what your town is governed in a way to benefit that.

Tuesday, September 30, 2014

Another funding problem arising from the Teachers' strike

The government has already said they want the money back from the school districts for the first three weeks of the school year but I suspect that will rivaled in impact on finances from another factor, the loss of students to independent schools.   It seems a lot of parents chose to take their kids out of the public system and enrolled them in independent schools this year.  My best guess is that this will result in a loss of $30,000,000 to $60,000,000 in funding for public schools this year.

All school districts are funded based on total enrollment in the schools, if that number is down the funding for the school district will be down.   For many years now the enrollment in public schools has been falling while at the same time rising for independent schools.   Total enrollment in all schools should be about 635,000 this year of which I would have expected about 87.7% to be in public schools but I suspect the strike has impacted this.

I suspect that the move to independent schools will have been done by parents who have already been considering and the strike just pushed them over the edge.   So how many will that likely have been?My best guess is that 1-2% of public school students are likely to have shifted to independent schools.   This is about 5,000 to 10,000 and would be the biggest increase in enrollment for independent schools in any one year.  It will be hard to accurately quantify the drop in students because there are many factors and trends in school enrollment that impact the numbers.

 I think the 10,000 number is likely too high and something around 6,000 is the ballpark we are talking about.   The amount of money a district gets for each student is different because is based on many factors so we have use a provincial estimate and $7,000 per student is a good starting point.  Using these numbers gives us a value of $42,000,000 - which is only a ballpark to understand the possible impact.

Adding this on top of the other costs and lost funding for the school districts will cause more pain for the public education system.

Wednesday, September 17, 2014

The Problems with BC's Local Elections

In BC the way we elected the councilors for our local governments is called plurality at large.   It is in my opinion the worst method for electing representatives that reflect the will of the public because its nature is to dramatically favour one set of people over another.

In the system you are allowed to vote for up X number of candidates, X being the number of council positions.   The top X candidates then get elected.   It works sort of OK in a small town like Lillooet where almost everyone knows each other but even there the results can be screwy because of how the general public feels they should vote.

For larger municipalities like Saanich, Burnaby and Surrey people can vote up to eight people.    There are a couple of major ways this voting system becomes unfair for the people running and does not reflect the will of the public especially in the larger municipalities

When you can cast up to eight votes most people feel they really do need to vote all eight.  The politically astute will choose to plump their ballot to help their preferred candidate but most of the public thinks this is either unfair or they are not fully exercising their democratic responsibility.

The fact that most people do feel they need vote a full ballot leads to the first problem with the system.  Most of the voters do not know eight candidates they really like.  The voter is then stuck with how to fill out the rest of their ballot and they rely on anything they know at all.   This means voters very often go for any names they recognize on the ballot and in most cases this means the current incumbents.  

A candidate running for council that campaigns hard is effectively campaigning for the incumbents as well.   Based on the average number of ballots cast by the public, for every two voters a new candidate gets to vote the incumbents will each get one vote as well.  Because of this it is very, very hard to defeat incumbents in this electoral system.  There is one change on the ballot that make a huge difference and break this easy hold on office incumbents

The one factor that will change how the election turns out is if there are strong competing municipal political parties.  Once the party name is on the ballot each voter is given a clear indication of who is who and a lot of people vote for all the candidates of one slate or the other.   What happens from there is that either one party is utterly dominant, such as the Burnaby Citizens Association, or the council composition dramatically changes from election to election, which is what Vancouver often sees.

While the municipal political party direction creates very dramatic changes with lopsided councils it does make it easier for incumbents to be defeated.   Incumbents have to first get their party nomination and then the party has to win the election.   Without the party on the ballot it becomes really, really hard to defeat incumbents.  But with the party names on the ballot the election becomes a winner takes all affair.

Here are examples illustrating the problem

Victoria has never really moved into having strong municipal political parties.  In this table you can see how safe the incumbents have been over the last six elections:
Year   Incumbents 
    running defeated
2011   8       3
2008   5       0
2005   6       0 
2002   6       1
1999   6       1
1996   6       0
total 37       5

86.5% of the incumbents were re-elected.  This sort of record is not something you would see in provincial or federal elections

In Burnaby the BCA has been very dominant, in fact in the last two elections the mayor, all eight councilors and all seven school board trustees elected were from the BCA.
Year     BCA elected 
     council  school board
2011   8/8         7/7
2008   8/8         7/7
2005   6/6         5/7
2002   7/8         6/7
1999   5/8

To get elected in Burnaby you have to be part of the BCA.

We need to change the municipal voting system so that it much more accurately reflects the public will.  It harms the quality of local government if the elections results are so skewed in the favour of one group over another.

Monday, September 15, 2014

Since 1867 Canada has had more Scottish Prime Ministers than the UK

Ultimately one of the problems of the UK is that the Scottish people are not a major political power in the country.   One way to clearly see this is to look at how many UK Prime Ministers have had any Scottish Ancestry since 1867 and compare that to Canada.

UK Prime Ministers since 1867 with Scottish Ancestry

  • David Cameron - was born in England
  • Gordon Brown
  • Harold Macmillan - Scottish ancestry on his father's side only
  • Ramsay MacDonald 
  • Bonar Law  -  he was born in Canada
  • Henry Campbell-Bannerman
  • Archibald Philip Primrose -was born in England
  • William Ewart Gladstone

Canadian Prime Ministers with Scottish Ancestry

  • Stephen Harper
  • Kim Campbell
  • Joe Clark
  • Pierre Elliot Trudeau - Scottish on his mother's side
  • Mackenzie Lyon King
  • Arthur Meighen - Ulster Scot
  • Charles Tupper
  • Alexander Mackenzie
  • John A Macdonald
Canada has managed this many Prime Ministers of Scottish ancestry even with so many Francophone Prime Ministers.  

The reality is that no matter how you slice it, Scotland with 5.3 million people is only 10% of the England's population of 53 million.   The United Kingdom will always be dominated by the interests of the population of England and rightly so.  

The status quo is not good for anyone in the UK.   Either Scotland needs to become independent or the UK has to become a proper federation.  The current halfway house is of no benefit to anyone

Wednesday, September 10, 2014

UBCM Ferry Report - I hate flawed economic analysis

The UBCM released a report on the socio-economic impact of ferry fare increases in BC.  It looks all nice and fancy and has some provocative numbers but overall it is not a well done report at all.

I am starting this posting again because the first one was 3000 words long with details of the flaws in the report and I was only part way through.  Overall the report seems to been written to be misleading as to the impact of the increase in ferry fares.   The one aspect that looks to be done well is the calculation of the lost passenger numbers due to the fare increases but I admit I have not done the math independently to test if it all works.

The core of what is misleading about the report relates to the economic loss due to the fare increases, here are my main issues with that

  • The GDP value should have been expressed as an annual value and not a ten year value.  It is very rare to speak of the dollar GDP values on any term longer than a year.  Using ten years inflates the value in the mind of the public.   The headline number should have been $230 million, though that would not be accurate because of my following issues
  • The GDP loss calculation makes some assumptions that are not true which means the numbers that arise from those assumptions are wrong.   
  • The report leaves the impression that all the potential passenger spending is lost to the BC economy when very clearly this is not the case.   Most of the people travelling on BC Ferries are from BC and will have spent their money somewhere else in BC.   Spending money on ferry fares adds less value to the BC economy than most other discretionary spending.   The spending they would have done at their ferry destination will all have been done somewhere else.   If I do not go to Vancouver I still spend money on food and entertainment.  Take this away and the annual economic loss to the province is much smaller than $230 million 
  • The data used to try and show a general economic downturn on the Island and coast does not show that at all.  The report does not use  a consistent set of dates for comparison of data even the relevant data is available online.  It looks like data cherry picking to try and prove an economic downturn
  • Many numbers are presented without any backing as to how they were arrived at.  As an example, on page 45 the have a table showing loss in taxes to governments including $53 million in local government taxes.  I have no idea how they could have come up with that number since local governments simply set the property taxes each year at the level they need to fund their programs, where the does the loss come from?   I could list a dozen more examples.
  • The data is often too specifically accurate.  When you are working with estimates and models you can not have a long string of significant digits.   You have to stop after the margin of error is reached.   In table 34 on page 45 they have values calculated down to the last dollar for a nine digit value, that is misleading and less accurate than properly rounding the numbers.  People think $13,982,756 must be more correct than $14 million even when the first figure is a fantasy.  It is very misleading.   First year economics students using basic mathematics would understand doing this is wrong.
  • The report does little to account for a number of specific economic impacts between 2003 and 2014 in different communities around BC.  These events are so much larger than any possible BC Ferry fare increase impact that the impact of a ferry fare increase could not be seen in the data.

I could go on for page after page on the flaws of the report, trust me, it is fundamentally flawed.

What can I take away from this report?

  • The increase in ferry fares has reduced BC Ferries traffic
  • BC Ferries is much more cost efficient than similar services elsewhere especially Washington State Ferries.   
  • Some of the most ferry dependent communities have suffered economically though the report does a bad job of showing this and my own work on the issue shows it much better
  • Overall the possible negative economic impact on BC of the higher ferry fares is so small as to not realistically be measurable if it is there at all.   

The final kicker, the data from this report could be just as easily be used to show that for the vast majority of people in BC the current government's approach to BC Ferries is beneficial.   BC Ferries is still subsidized and this comes from fuel taxes from all of BC, a more cost effective BC Ferries is good a thing.

Bad research and analysis is a pet peeve of mine.