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Liberals approve Pacific NorthWest LNG project with environmental conditions

Pacific NorthWest LNG is proposing to build an LNG export terminal on Lelu Island. Northwest LNG

The federal Liberal cabinet has approved construction of an $11.4-billion terminal to export liquefied natural gas from northern British Columbia, subject to the project's owners meeting an array of conditions designed to reduce the proposal's environmental footprint.

Federal Environment Minister Catherine McKenna, who made the announcement late Tuesday in the Vancouver suburb of Richmond, outlined 190 conditions that Pacific NorthWest LNG must meet before building an export terminal on B.C.'s northern coast, including a cap on greenhouse gas emissions that would cut them nearly 20 per cent below what was first proposed.

Environmentalists have argued the project, and the increased greenhouse gas emissions that come with it, would be inconsistent with Canada's climate commitments, while the B.C government says the exported fuel would reduce emissions from coal-fired plants in Asia. Some First Nations have warned the terminal would harm the local salmon population.

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"The only way to get resources to market in the 21st century is if they can be done in a responsible and sustainable manner. This decision reflects this objective," Ms. McKenna said Tuesday.

For nearly four years, B.C. Premier Christy Clark has been touting the economic potential of the fledgling LNG industry, but no projects have been built in the province yet. "It has been a lot of very, very hard work," Ms. Clark said. "This is a project that will benefit all Canadians."

The energy venture is led by Malaysia's state-owned Petronas, which must now reach a decision with its partners to proceed with Pacific NorthWest LNG, though global LNG markets are experiencing a surplus of supply.

Ms. McKenna, Natural Resources Minister Jim Carr and Fisheries Minister Dominic LeBlanc announced the approval in Richmond.

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In a statement, the federal government said the decision imposes "a maximum cap on annual project greenhouse gas emissions. This cap means direct greenhouse gas emissions from the project will be capped at a maximum of 4.3 million tonnes of equivalent carbon dioxide per year, 900,000 tonnes less than what had initially been proposed by the proponent."

The Canadian Environmental Assessment Agency concluded the project near Prince Rupert would result in a significant increase in greenhouse gas emissions, even as federal and provincial governments aim to conclude a national deal this fall to dramatically reduce emissions. Environmentalists, some First Nations and a group of scientists also argue that Pacific NorthWest LNG's choice to build the export terminal on Lelu Island would threaten juvenile salmon habitat in the Skeena River estuary.

The regulator, however, said the terminal and related infrastructure such as a suspension bridge would not cause major ecological damage to a sandbar called Flora Bank. The Allied Tsimshian Tribes of Lax Kw'alaams say Flora Bank and Lelu Island are part of their traditional territory.

Constructing Pacific NorthWest LNG would be a massive shot in the arm for the B.C. economy. The consortium estimates the total cost at $36-billion by its completion in 2021, including the construction of the liquefaction terminal and pipelines that would connect with natural gas supplies; Petronas's $5.2-billion acquisition of Progress Energy Canada in 2012; and $12-billion in drilling and natural gas production in northeastern B.C. needed to feed the plant. The overall price also includes TransCanada Corp.'s commitment to build two related pipelines at a cost of $6.7-billion.

In its draft report in February, the Canadian Environmental Assessment Agency said Pacific NorthWest LNG's proposal to build the export terminal would likely harm harbour porpoises and contribute to climate change.

Prime Minister Justin Trudeau and his cabinet, which met on Tuesday morning in Ottawa, had until Oct. 3 to render a decision in what has been a lengthy regulatory process dating back to 2013.

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Pacific NorthWest LNG is considered the front-runner among 20 B.C. LNG proposals. But with the world awash in LNG supplies, low prices in Asia for the fuel have rendered most B.C. proposals uneconomic, industry experts say.

"After a rigorous and comprehensive regulatory process, Pacific NorthWest LNG is pleased that the government of Canada has issued an environmental decision statement to our project," the consortium's president, Adnan Zainal Abidin, said in a release. "Moving forward, Pacific NorthWest LNG and our shareholders will conduct a total project review over the coming months prior to announcing next steps for the project."

In anticipating the approval Tuesday, Conservative interim leader Rona Ambrose said the Liberal government must now work to ensure the LNG terminal gets built.

"We believe strongly that now that it's approved, the Prime Minister needs to champion the project," Ms. Ambrose said. "He needs to make this project important, not only for British Columbians, but for all Canadians. This is a project that will create thousands of jobs, create billions of dollars in investments and it is a project that's absolutely necessary for the prosperity of this country."

Aboriginal leaders from the Wet'suwet'en, Gitanyow, Lake Babine and Gitxsan say Pacific NorthWest LNG's proposed site is the wrong place to locate an LNG export terminal because of the risks to salmon habitat in the estuary of the Skeena River, near Lelu Island. They say their views have been largely ignored because their land is farther away from Lelu Island than other First Nations.

But Pacific NorthWest LNG has pointed out that it has consulted with five Tsimshian First Nations – the Metlakatla, Kitselas, Gitxaala, Kitsumkalum and Lax Kw'alaams. While four of those groups have signed term sheets that are intended to lead to impact benefit agreements, the Lax Kw'alaams First Nation is the holdout.

The Gitga'at First Nation remains upset at the B.C. government's previous consultation process, which excluded the aboriginal group from being fully recognized in a provincial environmental assessment of Pacific NorthWest LNG.

"Lelu Island will still be a hard sell. Pacific NorthWest LNG doesn't have a clear path, and First Nations along the Skeena River aren't not going to roll over on this," said Art Sterritt, a spokesman for the Gitga'at.

He said Gitga'at leaders are open to LNG development as long as there are safeguards to protect the environment, and the Gitga'at will first need to study the conditions placed on the Lelu Island terminal before deciding whether to support or oppose construction.

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About the Authors

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More

Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More


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