Vol. 25, No.02 Week of January 12, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

Lift for BC LNG line

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Entities acquire 2/3; BC Supreme Court issues new injunction against protesters

Gary Park

for Petroleum News

Having taken a seemingly endless buffeting since it was announced a decade ago, British Columbia’s LNG related Coastal Gas Link pipeline has picked up some solid tailwinds.

Rated as a key element of the largest capital construction venture in Canadian history, the pipeline ended 2019 with two strong votes of confidence.

First, a partnership of investors acquired a 65% stake in the C$6.6 billion pipeline that will underpin the C$40 billion LNG Canada.

Then less than a week later the British Columbia Supreme Court extended an injunction against Indigenous protesters who have blocked pipeline workers from reaching sections of the route from Dawson Creek to the LNG liquefaction facility and tanker terminal near Kitimat on the northern British Columbia coast.

In the process, Justice Marguerite Church delivered a stern rebuke, ruling that the pipeline had suffered irreparable harm from the protesters, granting an injunction that workers should have safe access to the construction sites.

She said her injunction order provides “a mandate to the RCMP (Royal Canadian Mounted Police) to enforce the terms of the order.”

Indigenous laws issue

In her 51-page decision, Church took issue with First Nations and some hereditary chiefs who claimed that Indigenous laws gave them legal rights to blockade crews trying to access the area.

She said that Indigenous laws are not part of Canadian common or domestic law until they are enshrined through treaties, court declarations, statutory provisions or other means.

“There has been no process by which (the customary law of Wet’suwet’en chiefs) have been recognized in this manner,” Church said.

The hereditary leaders issued a statement to denounce the court decision, accusing Coastal GasLink of “bulldozing through our territories and destroying our archaeological sites” while the RCMP and private security firms have interfered with hunting, fishing and ceremonial activities.

A spokesman for the leaders said, “ultimately we are our own government and we decide who comes on our territory” and have “never ceded our land to Canada or British Columbia.”

To no one’s surprise, a hereditary chief of the Wet’suwet’en who answers to the name of Na’moks said he expects the RCMP, who arrested 14 protesters a year ago, will raise their involvement “to another level. They did it last year. They’ll do it again this year.”

The RCMP said it respects the ruling and the judicial process but would not say if or when it will enforce the new injunction.

Coastal GasLink said in a news release that all 20 elected First Nations along the pipeline route have signed agreements with the project in support of the pipeline.

The transmission system is designed to ship 2.1 billion cubic feet per day of feedstock gas from the Montney region of northeastern British Columbia when it comes into service in 2023.

Initial LNG exports are scheduled to begin in 2025 at 14 million metric tons a year from the initial two trains. So far, two Japanese utilities have signed agreements for LNG purchasing contracts for 15 and 13 years.

Over the 40-year lifespan of LNG Canada the British Columbia government is expected to collect C$25 billion in new revenues.

New equity holders

The new pipeline equity holders in the 280-mile system are the Alberta Investment Management Corp. (AIM), Alberta’s public pension manager which oversees C$115 billion in assets, and KKR & Co., a New York-based buyout manager. Prior to the transaction, the sole owner was TC Energy (formerly TransCanada).

Although the terms of the deal have not been disclosed, TC Energy said it will receive upfront proceeds that include the reimbursement of KKR and AIM’s proportionate share of the project costs.

LNG Canada has Royal Dutch Shell as the 40% operator, with companies from Malaysia, China, Japan and Korea as minority partners.

TC Energy said a syndicate of banks is now expected to set up a secured construction-debt facility to cover 80% of Coastal GasLink’s costs.

TC Energy Chief Executive Officer Russ Girling said the “partial monetization of Coastal GasLink advances our ongoing efforts to prudently fund our C$30 billion secured capital program while maximizing value for our shareholders.”

He said TC Energy looks forward to establishing a long-term relationship with KKR and AIM as “we advance this critical energy infrastructure project. We will continue ... to construct, deliver and operate the pipeline on behalf of the partnership.”

KKR said the deal is its third investment in the Canadian natural gas industry through a partnership with the National Pension Service of Korea, while the transaction is AIM’s second big pipeline deal in the past year with TC Energy after paying C$1.15 billion for an 85% stake in the Northern Courier oil sands pipeline in Alberta.

From the outset, LNG Canada has been sold as a positive contributor to lowering greenhouse gas emissions by displacing the use of coal in China and reducing carbon dioxide volumes by 60 million to 90 million metric tons a year, or the equivalent of 100% of the CO2 produced annually in British Columbia.

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