Yukonomist: The unexpected renaissance of natural gas in the Yukon’s neighbourhood

Love it or hate it, natural gas’s momentum is surging all around the Yukon’s neighbourhood.

The Yukon News recently reported that, just across the NWT border in Inuvik, the climate-forward Canadian government announced a $100-million loan from its infrastructure bank to the M-18 natural gas development. The Inuvialuit Regional Corporation, established under the 1984 Inuvialuit Final Agreement, will drive the project on behalf of its people.

The project is expected to provide natural gas and synthetic diesel for the region for the next fifty years.

In B.C., the Haisla First Nation’s Cedar Liquefied Natural Gas (LNG) export project announced a positive final investment decision last June. The Nisga’a First Nation’s Ksi Lisims LNG export project is proceeding through the BC environmental assessment process with hopes to begin construction as early as this year. Some of the gas for these projects will come from the extensive fracking operations around Fort St. John and Fort Nelson, where the Fort Nelson First Nation and energy giant Chevron signed a new natural gas agreement last month.

Meanwhile, Alaska hopes to compete with the Haisla and Nisga’a and their gas company partners in serving Asian LNG customers. President Trump recently discussed the proposed Alaska pipeline, from the North Slope to a new LNG terminal near Anchorage, with Japanese Prime Minister Shigeru Ishiba.

Alaskan leaders also support the project. Before she lost in November even the Democratic Representative Mary Peltola — a member of the Yup’ik people and former executive director of the Kuskowim River Inter-Tribal Fish Commission — supported it.

This wasn’t the view people were expecting a few years ago, at least as seen from government meeting rooms in Whitehorse.

Back then, Inuvik’s previous natural gas well was going dry years ahead of schedule. The small gas fields serving Anchorage were also in decline. The proposals of various Alaskan governors to get their massive, but stranded, natural gas reserves on the North Slope market seemed to have their runners frozen to the trail. Canadian pipelines were unpopular, as was fracking.

The Yukon Party brought in the Yukon’s ban on fracking in most of the territory, a policy continued by the Yukon Liberals and then the Liberal-NDP alliance. Northern Cross, the company with the most active exploration program around Eagle Plans, sued. Investors shelved any plans to produce Yukon oil or gas, either for export or to serve local users like the Inuvik project.

What is going on here, you might ask? Despite recent geopolitical earthquakes, the climate change problem has not gone away. If anything, the science gets more convincing every year.

It’s more complicated than just one presidential election across the border. Canadian allies such as Japan and Korea need to diversify their energy supplies away from Russia. Other Asian countries, alarmed by natural gas shortages after Russia’s full-scale invasion of Ukraine, doubled down on coal. This reinforced those arguing that more Canadian and Alaskan natural gas would enable Asia to transition faster from even dirtier coal.

There has also been an evolution in thinking about the climate transition. A few years ago, the focus was on what wonks call “supply-led” strategies. For example, get Canadian oil and gas producers to produce less. This turns out not to work so well when you, I and billions of others continue to drive fossil vehicles while foreign competitors in Russia and the Middle East keep pumping.

Now, people are talking more about “demand-led” transition, where the focus is getting heavy industry and consumers to consume less. As the pandemic showed, if users demand less oil and gas then production slumps pretty quickly. This, however, has the problem that voters seem reluctant to elect governments who like carbon taxes and electric vehicle mandates.

There are also some awkward truths about jobs in remote northern regions. There are not a lot of other options in Alaska’s North Slope, the Mackenzie Delta or Northern B.C. Mining has its own challenges. Forestry, eco-tourism and remote tech jobs exist, but not yet at the scale needed by the communities.

The ongoing struggles of local renewable energy projects reinforce the trend. Most of the Yukon’s big proposed renewable power projects are frozen in one complicated legal or political process or another. As residents of Riverdale within earshot of our growing diesel park near the Millennium Trail will tell you, this means our rental diesels seem to be running louder and longer each week. 

On February 12, when the low wasn’t even -30°C, a startling 46 percent of our electricity came from imported fossil fuels.

There is a Yukon election coming up this year. The status quo is quite comfortable, so I will be surprised to see any candidates make meaningful proposals to defrost our frozen renewable projects or unblock local gas production. In the meantime, the importation and distribution of fossil fuels will be one of the few sizable Yukon private sector growth opportunities.

Keith Halliday is a Yukon economist and the winner of the Canadian Community Newspaper Award for Outstanding Columnist. His most recent book Moonshadows, a Yukon-noir thriller, is available in Yukon bookstores.