B.C. First Nation upset at being cut out of LNG decision process

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The Gitga'at First Nation in northwestern British Columbia says it is upset that backers of a proposed liquefied natural gas project neglected to keep native leaders informed on a decision to award an engineering contract to a joint venture from the United States and Japan.

Kitimat LNG – owned by the Canadian units of Chevron Corp. of San Ramon, Calif., and Houston-based Apache Corp. – is considered by industry experts to be one of the front-runners in the race to build B.C. export terminals to ship LNG to energy-thirsty customers in Asia.

Last week, Irving, Tex.-based Fluor Corp. and JGC Corp. of Yokohama, Japan, announced that they won the engineering, procurement and construction contract for the planned Kitimat LNG project at Bish Cove, 650 kilometres north of Vancouver.

Arnold Clifton, chief councillor of the Gitga'at First Nation, said consultation is a legal requirement and not merely a courtesy to recognize traditional fishing grounds and other issues.

"We are disappointed that Chevron feels it can move forward with engineering, procurement and construction at a time when it has failed to consult meaningfully with our First Nation," Mr. Clifton said in a statement Tuesday. "Chevron says that this is the most advanced of the proposed LNG projects in British Columbia but that is simply not the case when it comes to consulting with Gitga'at."

Gitga'at leaders point out that their territory covers nearly 7,500 square kilometres of land and water, notably Douglas Channel, where ships would need to traverse in order to sail to and from the Chevron-Apache terminal planned near Kitimat.

In a statement issued from its Vancouver office, Chevron said that while the Fluor-JGC selection "represents our continuing commitment to the proposed Kitimat LNG project, it does not represent a final investment decision."

Awarding the contract allows the project to "finalize front-end engineering and design, which includes design plans, establishing more precise cost and schedule estimates and execution plans," Chevron said. "Chevron and Apache are committed to maintaining an ongoing and open dialogue with First Nations and responding to their concerns throughout the lifetime of the project. We value the strong relationships we have formed with First Nations in the Kitimat LNG project, including those First Nations with whom we have executed benefits agreements. Chevron and Apache believe the proposed Kitimat LNG project can be developed in a manner that protects people and the environment, respects First Nations rights and title and provides important benefits to First Nations."

In an interview, Gitga'at councillor Marven Robinson said aboriginal leaders are open-minded when it comes to LNG.

"We're not against economic development, but we're going to watch for things that can cause harm to our territory in the long term," he said. "We need to be heard."

The National Energy Board has already granted export licences for Kitimat LNG and six other B.C. LNG plans, but none of the approved projects are in the terminal construction stage. LNG proponents say they first need to learn details of the B.C. government's plans for taxation of the fledgling LNG industry and internal assessments still must be conducted on the economics of proceeding.

There are another five B.C. LNG projects in the planning stages and at least two other proposals that might emerge. The B.C. government believes five LNG projects could come to fruition in the long term.

Martin King, energy commodities analyst at Calgary-based FirstEnergy Capital Corp., said he expects two or three LNG plants could be built by 2022.

"The reserves are not there yet and the costs – the kind of labour you need out there, the pipes – you can't build all these things at once," Mr. King said.

With a dozen B.C. LNG projects in play, there will be competition for skilled labour.

"There has to be more consolidation out there, and I think it's going to come down to some of the big, deep-pocketed international players – Chevron, Exxon, Petronas – that are going to make these things happen," Mr. King said. "They've got the money. They've got the experience. So I think it's going to be two or three at the most."

Malaysia's state-owned Petronas is targeting making its final investment decision by the end of 2014, while the Royal Dutch Shell PLC-led LNG Canada project is aiming for "mid-decade" for its decision.

The B.C. government is expected to release its LNG tax regime in the province's budget on Feb. 18.

"If they do get this tax regime in place, say, in the first half of this year, then my impression is somebody's going to pull the trigger on one of these plants this year," Mr. King said.

Chevron noted that in order to reach a final investment decision, "Kitimat LNG needs a clear, competitive and stable fiscal framework, firm LNG sales agreements and further First Nations support in order to move forward."