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Pressure builds on LNG in B.C. 1st Nations threaten legal action
Bit by bit, British Columbia’s grand dream of using LNG exports to create 100,000 jobs and generate a windfall of C$1 trillion to make the province debt free by 2028 is losing its shine.
In the latest round of reversals, First Nations are threatening legal action unless they are fully consulted about the LNG plans and are joining forces to bargain for a share of project benefits, while a former Canadian government scientist has raised questions about the prospects of an economic boom.
In two separate cases, First Nations have taken initial steps to establish their right, under a Supreme Court of Canada precedent ruling in 1997, to be involved in plans for three pipelines to terminals at Kitimat and Prince Rupert where gas would be liquefied for export to Asia.
The Wet’suwet’un First Nation delivered a warning to British Columbia Premier Christy Clark that consultations must begin immediately or it will “pursue the steps necessary to ensure that the province fulfills its constitutional obligations.”
Chief Karen Ogen said that taking First Nations’ support “for granted and treating consultation as an inconvenient after-thought is not consultation in good faith.”
She said British Columbia’s emerging LNG industry and the pipelines by TransCanada and Spectra Energy could have a major impact on aboriginal title lands for at least 30 years.
Aboriginal Relations Minister John Rustad replied that the province takes the Supreme Court directive “very seriously. ... We recognize it’s not just a legal obligation, it’s also good governance”
Accusation against Kitimat Meantime, the Gitga’at First Nation has accused Kitimat LNG operator Chevron and partner Apache of failing to keep Native leaders updated on their plans to award engineering, procurement and construction contracts to Fluor and Japan’s JGC Corp.
Chief Councillor Arnold Clifton said the Gitga’at territory covers 7,500 square kilometers of land and water in the Douglas Channel which would affect plans for terminals and the movement of LNG tankers.
“We are disappointed that Chevron feels it can move forward ... when it has failed to consult meaningfully with our First Nation,” he said. “Chevron said 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.”
Gillian Robinson Riddell, a spokeswoman for Chevron, said that Fluor-JGC contracts do not represent a final investment decision for Kitimat and are intended only to complete front-end engineering and design and “more precise cost and schedule estimates and execution plans.”
She said Chevron and Apache are committed to “ongoing and open dialogue with First Nations and responding to their concerns throughout the lifetime of the project,” noting they have already signed off on benefits agreements with the First Nations that respect aboriginal “rights and title.”
To reach a final investment decision, the Kitimat partnership “needs a clear, competitive and stable fiscal framework, firm LNG sales agreements and further First Nations support in order to move forward,” she said.
Scientist questions benefits Meanwhile, David Hughes, a scientist with the Geological Survey of Canada for 30 years and now a private consultant, issued a personal report that Clark’s estimates of LNG benefits do not add up.
He said the government’s targets “are unlikely to be realized at the scale envisioned and must be seriously questioned.”
Hughes also cautioned that if LNG exports reach projected volumes, Canada will face an energy deficit, based on seven export permits already awarded by Canada’s National Energy Board.
He said an analysis of gas production in British Columbia and the characteristics of the shale- and tight-gas reservoirs being targeted, plus the environmental issues related to the production levels envisioned, “suggests these lofty plans bear closer scrutiny.”
Hughes said that because there are no guarantees about the number of projects that will be built “the public would be well advised not to count on an LNG bonanza.”
A spokeswoman for the British Columbia Natural Gas Development Ministry insisted the province has a large surplus of gas available for export, leaving ample long-term supplies for domestic use, while the National Energy Board, reiterating its conclusions in awarding export permits, said it is “satisfied that the gas resource base in Canada, as well as North America, is large and can accommodate reasonably foreseeable Canadian demand and a plausible potential increase in demand.”
The Canadian Association of Petroleum Producers estimates Western Canada’s marketable gas resources are more than 900 trillion cubic feet, enough to match current production rates for 180 years.
However, Hughes argued that the NEB has been issuing permits at an unsustainable rate and, in the process, violating its mandate to protect Canadian energy security.
Might Shell delay? Another smudge on the horizon comes from Royal Dutch Shell, operator of the proposed LNG Canada consortium which has approval to export up to 24 million metric tons a year,
According to industry insiders, the company’s new Chief Executive Officer Ben van Beurden is trying to unload some of its British Columbia gas assets and is on the verge of delaying the LNG project.
A further hint of Shell’s possible LNG pullback occurred Jan. 20 when it sold stakes in a Western Australia project to Kuwait Foreign Petroleum Exploration Co. for $1.14 billion, raising the Kuwait company’s stake in the Chevron-led project to 13.4 percent.
Van Beurden said that decision allows Shell to shift its investments “to where we can add the most value to Shell’s capital and technology.”
Although Shell would not comment on its Canadian plans or potential sales, Robert Mark, an analyst with MacDougall, MacDougall & MacTier in Toronto, said Shell is likely under pressure to stretch the LNG Canada investment decision beyond 2015.
He estimated LNG Canada is third in line among Canada’s LNG ventures, trailing Chevron’s Kitimat LNG project and the Pacific Northwest LNG project operated by Malaysia’s Petronas.
—Gary Park
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