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Providing coverage of Alaska and northern Canada's oil and gas industry
February 2016

Vol. 21, No. 6 Week of February 07, 2016

LNG faces more rules

BC industry faces new federal order for climate tests of pipeline, terminal applications; some First Nations demand protection zone

GARY PARK

For Petroleum News

The Canadian government has tossed another wrench into the approval procedures for its already shaky LNG outlook.

Under pressure to placate those calling for an end to the development and export of fossil fuels, the administration of Prime Minister Justin Trudeau has introduced the first stage of changes to regulatory reviews of oil and natural gas pipeline applications and LNG export terminals.

That coincides with a declaration issued by a coalition of First Nations, environmentalists and the federal New Democratic Party, who have demanded a protection zone around the planned Pacific NorthWest LNG terminal near Prince Rupert.

The so-called Lelu Declaration has infuriated British Columbia Premier Christy Clark who said the resistance to LNG is being led by the “forces of No” who want to stop government economic initiatives purely out of a fear of change.

Canada’s Natural Resources Minister Jim Carr and Environment Minister Catherine McKenna have moved with haste to introduce transitional measures that meet an election promise by Trudeau and require a broader, more robust environmental examination of resource projects to determine the impact on national greenhouse gas emissions.

In an immediate response, interim Conservative Party leader Rona Ambrose attacked the Liberal government for failing to defend the resource industry from critics who want to prevent landlocked producers from accessing new markets in North America and offshore.

Trudeau replied that his government endorses the notion that Canadian resources need overseas outlets, while the public needs to be assured that projects are being done in an environmentally sustainable manner.

NEB role

Former National Energy Board Chairman Gaetan Caron said the regulator has long refused to assess the impact of pipelines on GHG emissions in the producing or refining sectors because there are too many uncertain variables.

“The NEB has determined in the past that the upstream and downstream climate-change effects of a pipeline are not relevant because the pipeline in and of itself has no bearing on the rate of production of hydrocarbons in Alberta or the rate of consumption at the other end of the pipeline,” he told the Globe and Mail.

The Lelu Declaration by chiefs from the headwaters to the mouth of the Skeena River was described by the aboriginal leaders as a “powerful message” to Trudeau and Clark. It makes an “overwhelming” call for a halt to Pacific Northwest, noting “we will fight this to the end.”

Clark fired back that “there are people who just say ‘no’ to everything ... but just because it’s hard doesn’t mean you give up. It doesn’t mean you should be a quitter.”

“I’m not sure what science the forces of No bring together ... except that it’s not really about science. It’s not really about fish.”

First Nations leaders said Clark’s comments were “paternalistic and mindless,” while Friends of Wild Salmon spokesman Gerald Amos said the government and Pacific NorthWest “know they’ve made a mistake in siting this particular project.”

However, Gitga’at First National Chief Arnold Clifton said the signatories of the Lelu Declaration and opposition New Democratic Party members of the provincial legislature and the Canadian parliament may have acted prematurely.





How high is up?

A tidal wave has been turned into a tsunami of regulatory approvals for exports of LNG from the British Columbia coast, as the National Energy Board has raised the bar to even greater heights with its most recent decision.

To date, the federal government agency has issued an estimated 18 licenses (including one that involves five phases), totaling about 400 trillion cubic feet of gas for the permit terms.

However, no experts seriously expect more than five projects will go ahead, with hopes for even one or two major ventures currently at a delicate tipping point that covers the ability of proponents to find markets in Asia, raise capital and resolve differences with First Nations and environmentalists before the disputes find their way to court.

But the NEB, whose primary job is to determine whether applications cover natural gas volumes that would be surplus to Canada’s foreseeable needs, has expanded the permit horizon by issuing its first 40-year export license to the Shell-led LNG Canada consortium that includes Petro-China, Korea Gas and Mitsubishi.

The green light is for 3.23 billion cubic feet per day of feedstock gas, translating into almost 33 trillion cubic feet for the 40-year license term, 15 years greater than any previous approval.

For the license to remain valid, LNG Canada must start shipments by the end of 2022.

LNG Canada Chief Executive Officer Andy Caditz said the license is a significant milestone for the project.

“An extended term provides regulatory certainty beyond 25 years and allows us to better anticipate the economics of the project over a longer time horizon,” he said.

Ministry approves

British Columbia’s Ministry of Natural Gas Development said in a statement the province endorses the 40-year term.

“It improves long-term certainty for the industry and strengthens British Columbia’s competitive positioning in the global market,” the ministry said.

Not for the first time in the application process concerns were raised about the quantity of gas available in the Western Canada Sedimentary basin, the sole planned source of the gas.

Navigant Consulting, hired by LNG Canada, said there is enough supply in the basin for about 100 years, even if all of the other proposed long-term gas exports proceed.

The NEB said it is “satisfied that the natural gas resource base in Canada, as well as North America overall, is large and can accommodate reasonably foreseeable Canadian demand, including the natural gas exports proposed (by LNG Canada) and a plausible potential increase in demand.”

The export license came just days after the British Columbia Oil and Gas Commission approved an LNG Canada facility permit, which outlined design, construction and operation requirements.

It is expected that up to 7,500 workers would be employed during the construction period.

Caditz said that if a corporate sanctioning decision is made the venture “will be one of the largest energy infrastructure projects ever built in Canada and will make an important and lasting contribution to the local, provincial and national economy.”

—GARY PARK


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