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LNG tensions build Canadian government faces early test of its ambitions to reduce GHG emissions when it makes final decision on Pacific NorthWest GARY PARK For Petroleum News
It is shaping up as the ultimate test of wills between rival factions in the debate over whether Canada should become a leading exporter of LNG.
For the Canadian government, it represents a decisive test of Prime Minister Justin Trudeau’s desire to become a global leader in curbing greenhouse gas emissions and weaning his country off fossil fuels.
For LNG, the outcome will likely determine the fate of 20 project proposals on the British Columbia coast and four in Atlantic Canada.
The government has promised to deliver its benchmark ruling by late June on the Pacific NorthWest LNG project, an Asian consortium led by Malaysia’s Petronas.
If there has been any doubt concerning the crucial verdict, it was erased recently by Japan’s ambassador to Canada Kenjiro Monji, who said in a letter to the Canadian Environmental Assessment Agency “it is critically important (for the regulator) to advocate the early realization of LNG exports projects in Canada.”
“If the approval of the environment assessment is delayed further, Canada may run the risk of missing the chance to export LNG to the growing Asian market for a long time,” he said.
Monji wrote that LNG exports are usually based on long-term contracts and if Canada misses this opportunity it might not come around again for 10 or 20 years.
Japan Petroleum Exploration Co, originally state-owned, is one of the equity partners in the C$36 billion venture along with China’s Sinopec, Indian Oil Co. and PetroleumBrunei.
Tension within government The level of tension within the Canadian government was underscored in late March by Environment Minister Catherine McKenna, who said the federal environmental review agency needs more time to clarify plans for reducing carbon emissions.
But she is expected to refer the issue to the Trudeau cabinet, rather than making the decision within her own office, after a draft environmental assessment released in February concluded the project would have a significant adverse impact due to its greenhouse gas emissions as well as its effect on marine life at the liquefaction and tanker terminal near Prince Rupert.
British Columbia Environment Minister Mary Polak did little to help her government’s case by acknowledging it would be a challenge to restrict GHG emissions if the LNG export sector was to expand beyond Pacific NorthWest.
But she insisted that British Columbia legislation would require any LNG facilities in the province to be the least GHG-intensive of any plants in the world.
In addition, Polak said British Columbia is working with Alberta and the Canadian government to reduce methane emissions from fields producing gas as LNG feedstock.
Projected emissions However, the numbers related to Pacific NorthWest do little to tip the balance towards the project.
Estimates by the Canadian Environmental Assessment Agency would place the operation as the third-largest GHG-emitter in Canada’s oil and gas industry, with the Prince Rupert plant generating 5.8 million metric tons a year, while upstream emissions associated with the exploration for, production of and transportation of natural gas would add another 6.5 million-8.7 million metric tons a year, or a combined 20 percent of British Columbia’s total GHG emissions in 2013.
To clarify its upstream emissions rules, the federal government has issued a list of what should be covered during environmental assessments of large energy projects, explaining that the extraction, processing, handling and transportation of petroleum could all be factored into the equation.
It follows a promise made in January by McKenna and Natural Resources Minister Jim Carr to overhaul how major energy projects would be evaluated and put more focus on GHG emissions.
Upstream consideration The upstream sector will now consist of two parts - first, a quantitative estimation of GHG emissions released as a result of upstream production associated with projects, including the production of steam or hydrogen, and, secondly, a discussion of the project’s potential impact on Canadian and global GHG emissions.
Erin Flanagan, director of federal policy at the Pembina Institute environmental think tank, said the government is asking the right questions, adding she is pleased to see emissions from gas venting and flaring taken into account.
But she would like more information on how the new rules would fit into Canada’s current goal of reducing emissions by 30 percent below 2005 levels by 2030.
Matt Horne, a Pembina associate director, said that if Pacific NorthWest is approved as proposed “it would really undermine the credibility of (Trudeau government) claims and ambitions” to meet the 2030 targets agreed to by the federal, provincial and territorial governments earlier this year.
Despite the concerns, the Eurasia Group, a New York-based consulting firm, said Pacific NorthWest is likely to get a federal green light.
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