After a lengthy regulatory process, a final decision on Pacific NorthWest LNG’s proposed liquefied natural gas export terminal on British Columbia’s coast looks set to be referred to the federal cabinet because of its impact on Canada’s greenhouse gas emissions.
A February draft report from the Canadian Environmental Assessment Agency (CEAA) found that the project – led by Malaysia’s state-owned oil-and-gas giant Petronas – is “likely to cause significant adverse environmental effects” to harbour porpoises in the area and to greenhouse gas emissions. If the final report came to a similar conclusion, federal Environment and Climate Change Minister Catherine McKenna would have to refer the matter to cabinet – which has made climate change a central focus of the government.
Late on Tuesday, Bloomberg News reported Ms. McKenna was preparing to make that cabinet referral – a move that comes ahead of a March 22 deadline for the government review, and would cause another delay in a lengthy and contentious approval process for the high-profile $11.4-billion terminal, which is proposed for Lelu Island near Prince Rupert. On Wednesday, however, a spokesperson said the minister “has not yet made her determination of whether the project would likely cause significant adverse environmental effects.”
Pacific NorthWest LNG’s huge facility, which would superchill and liquify natural gas piped to the coast for export to Asia, has been closely watched for several reasons. Among the 20 LNG proposals in B.C., the Petronas-led project – which is estimated to cost $36-billion once pipelines, drilling and other investments are factored in – is the most likely to be built. Analysts suggest only two or three LNG projects are likely to go forward.
“[Pacific NorthWest LNG] has conducted significant engineering efforts over the past three years to drive down potential [greenhouse gas] emissions, making it one of the cleanest proposed or operational LNG facilities in the world,” says Spencer Sproule, Pacific NorthWest LNG’s senior adviser for corporate affairs, adding: “We have submitted our latest GHG estimates for the federal government’s consideration, and look forward to a decision in due course.”
Because B.C. Premier Christy Clark previously promised a “bonanza” of new revenues, the LNG approval process has also been viewed as a bellwether for her government’s efforts to boost natural resource development in the face of intense opposition from environmentalists and First Nations. In 2013, Ms. Clark said the government by 2020 could be seeing nearly $9-billion in extra government revenues from a roaring LNG sector, but it now appears that the most likely project may not even get built until at least 2020, if ever.
As delays and obstacles have mounted, oil and gas prices have plummeted, and many observers forecast that the current supply glut of natural gas is set to continue for years. – a situation that is particularly challenging for higher-cost projects, such as those in Canada and coal-seam gas projects in eastern Australia
“Even if the minister said, ‘Great, no problem,’ and the government said, ‘Great, go ahead,’ there’s no market for this at the moment,” says Ken Courtis, a former vice-chair of Goldman Sachs Asia who advised China National Offshore Oil Corp. on an LNG project in Australia. “By 2020, we’re going to have natural gas coming out our ears.”
The CEAA restarted its review of the Pacific NorthWest LNG project in late December after a delay of more than six months. The agency began its original review of the project in April, 2013.
Local First Nations and fishing lodge owners are concerned that the LNG facility will harm juvenile salmon habitat on nearby Flora Bank, a sandy area near Lelu Island. Last week, a group of more than 130 scientists signed a letter to Ms. McKenna calling for her to reject the CEAA’s “scientifically flawed” report – saying that “a worse location is unlikely to be found for PNW LNG with regards to potential risks to fish and fisheries.”
After the numerous delays, some industry observers say they are getting frustrated by a process that appears to be increasingly politicized – and removes the fate of resource projects from the hands of the premiers.
“It’s gone through many different levels, and now it has to go to cabinet, which I find interesting, in that we had regulatory bodies that looked at this, and the rules and regulations were fairly clear,” says Dirk Lever, who heads energy infrastructure research at AltaCorp Capital Inc. “Now the federal government needs to come in and rule on this. It’s incredibly subjective. It does not bode well for Canada … This has got to be frustrating for the premiers.”Report Typo/Error