Skip to main content

B.C. LNG projects big and small are worried that a new anti-dumping tariff of up to 45.8 per cent against fabricated industrial steel components will wipe out efforts to control costs.Rafal Gerszak/The Globe and Mail

Backers of B.C. liquefied natural gas projects say they will fight Ottawa's anti-dumping duty imposed on imported modules, warning that Canada is at risk of being shut out of the global LNG industry.

B.C. projects big and small are worried that a new anti-dumping tariff of up to 45.8 per cent against fabricated industrial steel components (FISC) will wipe out efforts to control costs, effectively forcing the outright cancellation of multibillion-dollar plans.

After importing modules, workers in Canada would handle the task of connecting the massive structures. But amid low prices for the fuel in Asia, no export terminal is under construction in the province.

David Keane, president of the seven-member B.C. LNG Alliance, issued a statement on Tuesday to caution that the province's fledgling LNG industry can't afford to pay the punitive tariffs that will primarily affect FISC imports from China and South Korea.

"Canada competes globally for infrastructure projects of the magnitude of the proposed LNG projects in British Columbia. In order to proceed, LNG projects in B.C. cannot face additional costs that our competitors do not," Mr. Keane said.

"If B.C. LNG is not globally competitive, we risk seeing the jobs and benefits of this value-added industry being lost to other jurisdictions."

LNG Canada, led by Royal Dutch Shell PLC, is one of the alliance's members striving to have its proposed B.C. terminal exempted from the anti-dumping duty. LNG Canada has filed an application in the Federal Court of Appeal to seek a judicial review of the Canadian Industrial Trade Tribunal's decision to deny the Shell-led group's exemption request.

LNG Canada, which hopes to assemble an export terminal in Kitimat in northwest British Columbia, is also requesting tariff relief from the federal Finance Department. The Canada Border Services Agency duty affects imports from China, South Korea and Spain.

"There are no Canadian manufacturers able to manufacture the large complex modules required by Canada's LNG sector," Mr. Keane said. "These modules can be massive in size, with some weighing in excess of 7,000 tonnes and requiring specialized transportation vessels. The dimension of the largest module is equivalent to the height of a 12-storey building and longer than an Olympic-size swimming pool."

Woodfibre LNG, an alliance member with a small-scale proposal near Squamish, held a meeting on Tuesday to discuss combatting the tariff and finding ways to start construction in 2018.

Another alliance member raising objections to the anti-dumping duty is Kitimat LNG, a joint venture by Australia's Woodside Petroleum Ltd. and Chevron Corp, which is based in San Ramon, Calif. "Kitimat LNG has tabled its concerns regarding the competitive impact of FISC on our project during ongoing discussions with the federal government," a Chevron spokesman said.

Steelhead LNG, whose co-owners include Calgary-based natural gas producer Seven Generations Energy Ltd., said the import tariff looms large over the venture's plans to develop an export terminal at Sarita Bay on Vancouver Island.

"We share the concerns raised about the potential negative impacts on LNG investments, which will create much-needed access to critical global markets for Canadian natural gas producers in British Columbia and Alberta," said Trevor Boudreau, a spokesman for Steelhead LNG, which isn't part of the alliance.

There have been more than 20 LNG ventures pitched in recent years in British Columbia.

LNG Canada, Steelhead LNG and Kitimat LNG are among the largest proposals to export the fuel from Canada's West Coast to Asia.

Pacific NorthWest LNG, led by Malaysia's state-owned Petronas, said in July that unfavourable market conditions such as an oversupply of LNG worldwide prompted it to cancel its plans to build a B.C. export terminal. An estimated 60 per cent of the $11.4-billion construction cost for the terminal in the Port of Prince Rupert would have been from imported modules, an industry source said.

While poor economics and other obstacles already rendered the project nonviable, the punitive tariff added insult to injury, the source said.

The Petronas-led proposal relied heavily on help from skilled workers overseas, especially to assemble modules imported from Asia. Pacific NorthWest LNG forecast that at the peak of construction, it would have required 2,460 Canadians and 1,540 foreigners at the planned site on Lelu Island.

The technology at an Alberta oil sands mine near Fort McMurray has evolved since it opened almost 50 years ago. Gary Bunio of Suncor Energy explains how 850-tonne bucketwheel trucks were once used to extract crude oil.

The Canadian Press