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Energy and Resources Trudeau Liberals, B.C. set to face off over Pacific NorthWest LNG

An artistic rendering of Pacific NorthWest LNG proposed liquefied natural gas export terminal on Lelu Island, near Prince Rupert, B.C.

Pacific NorthWest LNG

The federal government and British Columbia are headed for a showdown over a massive liquefied natural gas project approved by Ottawa.

A deal between the BC NDP and BC Greens to topple the reigning Liberals in favour of an NDP minority government clears the way for the left-of-centre alliance to push for significant changes to Pacific NorthWest LNG's terminal designs.

The BC NDP and BC Green Party are expected to place pressure in the coming months on Pacific NorthWest LNG, which holds development rights on property in northern British Columbia under federal jurisdiction.

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Read more: Malaysia's Petronas scraps $11.4-billion LNG project in B.C.

But federal Environment Minister Catherine McKenna announced Ottawa's approval in September of the controversial project, subject to more than 190 conditions. Ms. McKenna insists Pacific NorthWest LNG would not jeopardize Canada's international commitments to reduce greenhouse gas emissions.

The BC Liberals under Premier Christy Clark touted LNG as the province's economic salvation during the 2013 election campaign, though she has vastly scaled back economic expectations since then.

By contrast, BC NDP Leader John Horgan and BC Green Party Leader Andrew Weaver don't share Ms. Clark's cheerleading attitude toward proposed LNG exports.

On Tuesday, a four-year pact signed by the BC NDP and Greens called for a $5-a-year increase to the province's carbon tax starting in April, 2018, up from the current $30 a tonne.

While the pact didn't single out any LNG project, it outlined a goal to "implement a climate action strategy to meet our targets."

The BC NDP and Greens are concerned about plans to construct the liquefaction plant on Lelu Island near Prince Rupert, which is located next to a sandbar called Flora Bank that is crucial for nurturing juvenile salmon. Some Indigenous leaders are opposed to the Lelu Island site, though Pacific NorthWest LNG reached impact-benefits agreements in February with two key aboriginal groups – the Lax Kw'alaams Band and Metlakatla First Nation.

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The tax regime and various rules governing the planned $11.4-billion export terminal on Lelu Island are contained in a provincial agreement signed in 2015 between the consortium and the BC Liberal government led by Ms. Clark. "Should the government fail the test of confidence in the House, as seems likely, I would be given the job of Leader of the Opposition. And I'm more than willing and ready to take that job on," she said Tuesday during a news conference in Vancouver.

For nearly five years, Ms. Clark has been touting the economic potential of the LNG industry, but no projects have been built in the province yet.

Pacific NorthWest LNG, led by Malaysia's state-owned Petronas, is seen by industry analysts as the best bet among major proposals to export the fuel from the West Coast to Asia. But with the world awash in LNG supplies, low prices in Asia for the fuel have rendered most of the 19 B.C. LNG proposals uneconomic, experts say.

A small-scale project 65 kilometres north of Vancouver, Woodfibre LNG, is scheduled to begin construction later this year – the lone B.C. LNG proponent so far to decide that it is worthwhile to build.

The BC Liberals won 43 seats in the May 9 provincial election, outpacing the NDP's 41 seats, while leaving the Greens holding the balance of power with victories in three ridings.

The BC Liberals are highlighting the potential for job creation while meeting environmental standards, hoping that the Petronas-led consortium will make its final investment decision by the end of this year. Industry observers believe the project could be stalled until at least mid-2018, even before factoring in the uncertainty from the NDP-Greens pact.

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Mr. Weaver has been critical of Ottawa's decision to approve Pacific NorthWest LNG in the Port of Prince Rupert.

Pacific NorthWest LNG has said it is exploring ways to build docking facilities off Ridley Island, thereby eliminating the need to construct a costly suspension bridge over ecologically sensitive Flora Bank.

It is unclear whether that change to the dock design would be enough to satisfy the BC NDP. Bruce Ralston, the NDP's LNG critic, didn't respond to requests for comment.

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