Tribunal’s steel decision could seal LNG’s fate

Canada can’t seem to get out of our own way when it comes to responsible resource development.

Canada just can’t seem to get out of our own way when it comes to major infrastructure projects and responsible resource development. Political leaders and bureaucrats keep tripping us up with red tape, questionable decisions, higher taxes and costly self-inflicted mistakes. One could be forgiven for thinking that we have set about to sabotage our economic future.

Earlier this year, a little-known federal body, the Canadian International Trade Tribunal (CITT), issued a decision that, if left to stand, could kill British Columbia’s emerging LNG industry and cost us thousands of high-paid jobs and billions in new investment.

LNG Canada is close to a final investment decision on a major LNG plant in Kitimat — the $40-billion project would represent the largest private sector investment ever anywhere in Canada. To do it, the company would need large complex steel modular components built abroad and transported to B.C. where they will be installed.

But the trade tribunal has issued a ruling that certain fabricated industrial steel components exported from China, South Korea and Spain, are being “dumped” into the Canadian market and causing “injury” to the Canadian domestic steel industry.

This has created a major problem for the emerging LNG industry in B.C. A key component of LNG facilities — large, complex, steel modular components — can only be built at a few shipyards around the world. No company in Canada can build these things here. The components cannot, and will not, be produced in Canada.

Astoundingly, CITT chose not to decide on the critical issue of these large complex steel modules, simply lumping them in with all the other steel imports. We’re baffled. How on Earth is the Canadian steel industry harmed if it is incapable of producing these large complex steel modules in the first place?

The Independent Contractors and Businesses Association has repeatedly expressed concern about the ruling’s impacts on the broader competitiveness of B.C.’s construction industry. There is simply no domestic supplier network — including fabricated steel — that warrants protection from international competition.

And as bad as the ruling is for the construction industry generally, it could be fatal for B.C.’s potential LNG industry, and it simply couldn’t have come at a worse time. LNG Canada and Woodfibre LNG are both hard at work “sharpening their pencils” as they drive toward final investment decisions. If this CITT decision stands, it will inflate costs and could very well make these projects uncompetitive.

The trade tribunal risks smothering billions of dollars in investment and killing thousands of jobs. LNG Canada alone would need 4,000 workers to build a facility in Kitimat. In addition, 3,000 more workers would be required to build the pipeline that will move natural gas from B.C.’s northeast to the west coast.

The Conference Board of Canada has estimated that the LNG industry could deliver $7.4 billion annually to Canada’s GDP and generate about 65,000 jobs per year over 30 years. An all-hands-on-deck approach — including the federal government acting in the national interest — is required as the LNG industry drives hard toward the final investment decision goal line in 2018.

B.C. and Canada do not have a great record of approving and building large infrastructure projects — witness the cancellation of PNW LNG, Energy East, and Northern Gateway while Site C, Keystone XL and the TransMountain Pipeline expansion projects are all facing legal challenges and protests. No wonder B.C. has sunk to the bottom 25 per cent, worldwide, of places where oil and gas executives feel comfortable investing billions of dollars.

If there was an international “get-to-yes” challenge on major infrastructure projects, B.C. and Canada would fail.

The stakes are high. We need to find a way to build these projects or risk being forever labelled a country where new capital, new talent and new ideas are not welcome. All Canadians will benefit through increased tax revenue, job creation, and the purchase of goods and services throughout the energy value chain. Further, Indigenous communities are important partners and significant beneficiaries from these projects.

The CITT’s recent ruling is short-sighted and potentially fatal for the LNG industry. Time is of the essence, and the federal government should overturn this ill-advised, ill-considered and ill-timed trade ruling.

And if the federal government fails this test, British Columbians and all Canadians will be the losers — our competitiveness and our long-term prosperity will suffer while our global competitors will benefit.

Chris Gardner, President, Independent Contractors and Businesses Association.

LNG

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