Horgan sees no conflict in B.C. government’s position on LNG

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British Columbia Premier John Horgan says there's no contradiction between his government's plans to impose stricter environmental conditions on the liquefied natural gas sector while at the same courting the industry to set up in the province.

This week's announcement by Malaysian energy giant Petronas that it had cancelled an $11.4-billion LNG terminal proposed for the Northern B.C. coast has focused attention on the NDP government's ambivalence toward the industry.

While the province's new Energy Minister responded by saying the government would continue to pursue LNG projects and the jobs they would bring, Mr. Horgan's Environment Minister said such developments would face tougher conditions to gain approval.

"I don't see any conflict at all. I think they are both doing their jobs," Mr. Horgan said on Thursday from Washington, where he was meeting U.S. industry and political leaders to push for a softwood deal between Canada and the United States.

Petronas linked the decision to scrap the Pacific NorthWest LNG project to the depressed global market for liquefied natural gas, but critics of the NDP government are blaming its reservations about the environmental impact as well as the economic potential of liquefied natural gas.

Mr. Horgan said he remains interested in LNG development, but only in sync with four conditions the NDP set out for such projects, and that Energy Minister Michelle Mungall and Environment Minister George Heyman are working in that direction.

"I want to see our natural resources getting to market provided they ensure a return to taxpayers, the owners of the resource, and that First Nations partnerships are fully canvassed, that we are creating jobs for British Columbians, and we are meeting our obligations with respect to air, water and land," he said.

"George's responsibility is the latter, to ensure we are meeting our responsibilities, and Michelle's responsibility is the other three, to get a return, to create jobs and to make sure First Nations are dialled in."

Mr. Horgan said it has been clear the market conditions could not now sustain the Petronas project, but he is hopeful for change.

"Any reasonable read of the market would tell you the conditions aren't there for a market of this kind, and I am hoping those conditions turn around as quickly as possible, but that's not in the hands of provincial politicians."

While the NDP – and Petronas – have played down the impact of politics on the company's decision, one analyst said politics is often relevant to investment decisions on such projects.

In an e-mail response, Divya Reddy of the Eurasia Group consultancy – a political-risk firm in New York – said politics do factor into these kinds of decisions, especially with large, capital-intensive LNG projects under current weak market conditions.

"It basically means that projects have to be ultracompetitive for companies to sanction them, and politics can play a significant role in either making or breaking that competitiveness. Though other factors, such as the market outlook, were clearly in play for the decision on PNW, the challenging and frequently delayed regulatory process certainly did not help. And the recent election in B.C. introduced still more political risk given more tepid reception for LNG by the NDP-led government compared with the Liberals."

Ms. Reddy said she thinks the window of opportunity for LNG in British Columbia has been closed for several years. "It's possible that some smaller-scale projects do advance, and if the LNG market tightens significantly over the coming decade, then B.C. could come back into play. But we saw PNW as the sole megaproject that was most likely to proceed, so its shelving is definitely a huge blow to B.C.'s LNG hopes."

On another issue, Mr. Horgan said he continues to look for options for enacting the NDP's commitment to stop the $7.4-billion expansion of the Trans Mountain pipeline between the Alberta oil sands and the Lower Mainland. "On the permitting, there are options available to us," he said. "George [Heyman] is exhausting his search of those with ministry officials right now. We're going to do everything we can to protect our coast."

Earlier this week, Mr. Heyman said it would be illegal for the province to delay permits needed by pipeline-expansion proponent Kinder Morgan Canada Ltd. to start the expansion in September.

Still, Mr. Horgan said he was wary about taking steps that would lead to expensive lawsuits against the province.

In particular, Mr. Horgan referenced the Boss Power situation of 2011 in which the B.C. Liberal government agreed to pay a mining company, Boss Power Corp., about $30-million after halting a 2008 uranium-mining project near Kelowna, B.C. The company sued the government over the ban.

"That's one example of how governments need to be cautious about how they manage issues like this," Mr. Horgan said.