B.C. set to discuss LNG industry with federal government

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B.C. Premier Christy Clark and her Minister of Natural Gas Development, Rich Coleman, are heading to Ottawa next week in advance of a federal decision on climate-change measures that could create a new hurdle for the liquefied natural gas industry the B.C. government is hoping to secure.

The federal Liberal government has promised to unveil in February a separate climate test for proposed pipelines and for British Columbia's most advanced proposal for an LNG export facility, the Pacific NorthWest project near Prince Rupert.

Mr. Coleman said in an interview he is confident the new measures will not create further delays for Pacific NorthWest LNG, which has been in a review process by the Canadian Environmental Assessment Agency (CEAA) for close to three years already.

"We will be there to sit down and talk to them about this stuff, to work with them to make sure it works in British Columbia," Mr. Coleman said. "I'm pretty confident we can deal with this. It's certainly my understanding it won't affect the timeline of the environmental assessment that Pacific NorthWest is under right now."

The B.C. Liberal government campaigned in the last provincial election on the promise of creating an LNG industry that would generate enough revenue to eliminate the province's debt. With the next election a little more than one year away, the government has yet to secure a single final investment decision, and the Pacific NorthWest project, led by Petronas of Malaysia, remains its brightest prospect for a ribbon-cutting before the 2017 election.

Mr. Coleman said he expects a draft report on the project from CEAA very soon.

However, Judith Dwarkin, chief economist at RS Energy Group in Calgary, said a separate regulatory process for greenhouse gas emissions will inevitably create more delay for a fledgling industry that is racing against the clock to get into the global LNG market.

"Obviously it is going to lengthen the review period," she said. "That will put an added straw on industry's back."

Ms. Dwarkin said the new climate test could be particularly complex if it aims to measure upstream emissions related to energy projects.

"That could open up a can of worms – how do you track a particular gas molecule from the wellhead to the plant?"

Mr. Coleman said the federal government likely will consider those emissions in its evaluation of energy projects: "I think we may see some look at the upstream, where the drilling takes place, but we are doing some pretty innovative things in that area, which of course we haven't had time to sit down and explain to the federal government."

In 2014, the B.C. government set a benchmark for allowable GHG emissions from LNG facilities that was lower than any other LNG facility in the world – but it did not include the significant upstream emissions that come from getting natural gas out of the ground and transporting it to those facilities for processing.

Since then, the province has worked to get gas plants in the northeast to reduce emissions with new transmission lines that allow producers to use hydroelectricity instead of burning natural gas to power their operations.

Mr. Coleman said he has been expecting new environmental regulation for energy projects since the Liberals came to power in November of last year.

During the election campaign, Prime Minister Justin Trudeau promised more robust environmental review of resource projects, including assessing their impacts on the country's greenhouse gas emissions.

Vancouver energy lawyer David Austin, of Clark Wilson LLP, said it is not clear what the federal government wants to achieve by counting GHGs, since that data is already tracked by the provinces.

"Pacific Northwest LNG can readily provide information on its greenhouse gas emissions. The question is, what is the federal government going to do with the information?

"Because it has said that the provinces will be the ones that are responsible for controlling GHG emissions within their borders."