The Canadian government’s decision to buy a majority stake in the British coal mining giant Blue Ridge, which is valued at $1 billion, could have a ripple effect on the country’s carbon-emitting energy sector.
But a number of factors have made the deal a smart one.
The government of British Columbia announced that it had entered into a deal to purchase a 49 per cent stake in Blue Ridge from the company in 2019, but a source close to the deal said the purchase will have no immediate impact on the Canadian market, which has already seen significant gains in renewables and carbon-free energy.
Blue Ridge, a subsidiary of Imperial Oil, is the world’s largest private coal company and the world market leader in producing coal.
Brent crude oil prices have been on a tear in recent months, up nearly 200 per cent this year.
In October, British Columbia Premier Christy Clark said the province would be spending $1 trillion on clean energy by 2030.
“We have seen that this is not a fad, that we can do this,” Clark said.
Clark’s predecessor, Jim Prentice, also made the bold statement, adding that the province was investing $1,000 billion in clean energy in a bid to “win the climate war”.
In December, the company announced plans to add 3,000 jobs in its UK operations and a further 700 jobs in Canada.
On Monday, the province announced a second round of job cuts, as well as a $1-billion investment in clean-tech initiatives.
This week, the BC Liberals announced a new energy plan that includes funding for the development of new solar power plants, renewable energy projects and an expansion of the BC Hydro power grid.
Under the new plan, the government plans to double the rate of new power-generation projects to 40 per cent, up from the current 20 per cent.
At a news conference Monday, B.C.’s Premier Christy Thompson said the company will “be the beneficiary of our investment”.
“It will help us provide jobs and it will help provide energy security,” Thompson said.
“It’s going to give us a massive boost in terms of our economy, and in terms the amount of clean energy that we are going to be able to produce.”
The British Columbia Liberals have been in power for nine years, but they are not the first to buy stakes in British mining companies.
More than a decade ago, then-Premier Peter Lougheed bought a stake of Imperial Resources and was credited with the success of the mining boom.
British Columbia has a $2.5-trillion-a-year energy sector, which accounts for more than half of the province’s gross domestic product.
As of last year, the sector generated more than $7 billion in revenue for the province.
Since buying Blue Ridge in 2019 the province has added 1,300 jobs in the energy sector and invested more than two billion dollars in clean technology and infrastructure.
While the province hopes to be competitive in a global market, its investments have come at a significant cost, with the average Canadian household paying $1 more per month than they did a decade earlier, according to a report released by the B.c. government.
There are also some risks involved with the purchase.
Many analysts have questioned the value of the deal, pointing out that Blue Ridge has been plagued by corruption scandals and mismanagement.
Last year, it was revealed that Blue Rose, an oil exploration company, paid $6 million to settle allegations that it manipulated the price of a gas that it was drilling in northern British Columbia.
Also, the price Blue Ridge paid for a 20-year supply contract in 2015, which the company says it brokered, was significantly more than the price the province expected it to pay.
According to the BCTF, the buy of Blue Ridge by the government will have a “material impact” on the British Columbia coal industry, and it could affect jobs, climate and clean energy investment.
It could also be a financial hit for Blue Ridge shareholders.
Even though the company has a market value of more than a billion dollars, it has been struggling to compete with the booming global coal market, and analysts say a large portion of the company’s future revenue will come from the UK.
Read more: British Columbians are still struggling to get on the same page on climate change