Malaysia’s Petronas has cancelled plans to build the Pacific NorthWest LNG plant on Lelu Island near Prince Rupert, B.C., in a move seen as a major setback for B.C.’s LNG dreams and as a major win for those concerned about climate change and salmon habitat.
The project would have involved increased natural gas production in B.C.’s Montney Basin, a new 900-kilometre pipeline and the export terminal itself.
Here’s what you need to know about Tuesday’s announcement.
1) Why did Petronas decide to cancel the project?
In a press statement about the investment decision, Petronas cited “changes in market conditions.”
“We are disappointed that the extremely challenging environment brought about by the prolonged depressed prices and shifts in the energy industry have led us to this decision,” said Anuar Taib, chairman of the Pacific NorthWest LNG board.
Just a few years ago, B.C. was banking its future on the fate of about 20 proposed LNG facilities — based on the idea that our natural gas would be super-cooled into liquid and exported by ship to lucrative Asian markets. But it’s widely acknowledged that B.C. came late to the party, with the U.S. and Australia beating Canada to the punch.
The B.C. projects were predicated on exporting low-cost gas to Asia where prices were as much as five times higher than in North America in 2013. But by 2016, prices had plunged and have shown little sign of increasing.
Former premier Christy Clark had promised three LNG plants by 2020, 100,000 jobs in the LNG industry and a $100 billion Prosperity Fund. As it stands, it looks like only one small plant, Woodfibre LNG in Squamish, may go ahead.
2) Why is exporting liquefied natural gas bad for the environment?
The key concerns about Pacific NorthWest LNG have been salmon and climate change.
On the salmon front, the project was sited in a location the federal government had studied decades ago and found to be unsuitable for industrial development due to its importance to juvenile salmon.
“Out of all the places that you could imagine in the area, it is the worst possible place in terms of risks to fish,” Jonathan Moore, Liber Ero chair of Coastal Science and Management at Simon Fraser University, told DeSmog Canada last year.
About 300 million juvenile salmon rear in the Skeena estuary every year at the critical moment when they graduate from fresh to salt water. The Skeena salmon run is worth more than $110 million annually.
On the climate change front, the Pacific NorthWest LNG plant would have been the single largest source of emissions in the country, emitting as much carbon dioxide equivalent as 1.9 million cars? How on earth would it have been that belchy?
Well, turning natural gas into a liquid is a hugely energy intensive process that consumes the equivalent of about 20 per cent of the gas along the way. To turn gas into a liquid it must be cooled to -160°C, which involves running giant compressor stations 24/7. That reduces the volume of the gas by more than 600 times. It then gets “regasified” (that’s really a word in the LNG world) on the other end.
Pacific NorthWest LNG was going to use natural gas to power that whole crazy process, making it a particularly egregious polluter. If built, Pacific Northwest would have accounted for between 75 and 80 per cent of total allowable emissions under B.C.’s 2050 climate target.
Despite all this pesky science, it has been a favourite BC Liberal talking point that exporting LNG will reduce emissions in other parts of the world — an argument that has been thoroughly debunked.
3) What does this all have to do with the Site C hydro dam?
Nothing. And everything.
Let us explain. It was the subject of much debate, but Pacific NorthWest LNG ultimately was going to rely on its own gas, not electricity, to run its compressors, so it wasn’t going to be a huge electricity consumer.
But at least three new transmission lines have been built in B.C.’s northeast to service the natural gas industry.
“In the name of making ‘dirty’ natural gas companies marginally less so, BC Hydro at the behest of the provincial government is aggressively pursuing a policy of providing ‘clean’ hydroelectricity to the gas industry so that its greenhouse gas emissions are lowered here in B.C.,” wrote Ben Parfitt of the Canadian Centre for Policy Alternatives last year.
“It is this policy that provides the only credible explanation for why the Crown corporation is rushing to build the controversial dam at this time.”
Which is all to say: the entire narrative around the need for the Site C dam has relied heavily on the development of B.C.’s natural gas industry. Now the future for an LNG industry in B.C. looks bleaker than ever, it further calls into question the demand for the $8.8 billion publicly funded dam.
4) What does this announcement mean for B.C.’s natural gas industry?
That’s unclear right now, but the Petronas press release stated that the company and its North Montney Joint Venture partners “remain committed to developing their significant natural gas assets in Canada and will continue to explore all options as part of its long-term investment strategy moving forward.”
But how without a West Coast export facility? Well, TransCanada announced in June that the company would spend $2 billion to expand its NOVA Gas (NGTL) system to connect northern B.C. and Alberta natural gas producers to “premium intra-basin and export markets.”
That’s code for: our gas is going to go east, not west.
The North Montney Joint Venture is operated by Progress Energy Canada Ltd (a wholly owned subsidiary of Petronas) — the company responsible for building at least 16 unauthorized dams in northern B.C. to trap hundreds of millions of gallons of water used in its controversial fracking operations.
Other partners in the joint venture? Japan Petroleum Export Corporation (JAPEX), PetroleumBRUNEI, IndianOil Corporation (IOC) and Sinopec-China Huadian.
Their goal? To develop the resources in the North Montney formation located along the foothills of the Rocky Mountains in northeast British Columbia.
They own approximately 800,000 acres mineral rights in the North Montney with more than 52 trillion cubic feet of reserves and contingent resources, and more than 15,000 identified drilling locations. This is all “unconventional” gas, which means it’ll be accessed via fracking.
5) Wasn’t the project already approved?
Pacific NorthWest LNG was approved by the federal government in a controversial decision last September.
The company — wholly owned by the Malaysian government and boasting a questionable human rights record — had lobbied the federal government 22 times between February 1 and April 21, 2016, including meetings with Environment Minister Catherine McKenna and her chief of staff Marlo Raynolds.
It recently came to light in court documents that the feds hadn’t even considered the cumulative climate impacts of the project while approving it and had actively decided not to impose conditions on the project to limit carbon pollution.
The approval was condemned by environmentalists as a licence for Canada to break its climate commitments. It was also broadly regarded as a horse trade, wherein the provincial government got the approval it wanted in return for the federal government getting the approval it wanted (B.C.’s approval of the Kinder Morgan Trans Mountain pipeline — which the new NDP government says it will fight with “every tool available.”).
Pacific Northwest LNG donated more than $18,000 to the BC Liberals between 2014 and 2017, while negotiating a reduced tax rate and reduced hydro fees.
Indigenous nations had wrestled with internal divisions over whether or not to support the project, but Lax Kw’alaams had rejected a $1 billion pay-off from Petronas. In Gitxsan territory, the Madii Lii protest camp had strategically blocked the path of the proposed pipeline, the Prince Rupert Gas Transmission (PRGT) pipeline
The pipeline had received provincial approval, but hit a roadblock last week when a federal court ruled the National Energy Board had made a legal mistake in not considering whether the pipeline was under federal jurisdiction since it was explicitly for an export project.
— With files from Christopher Pollon and James Wilt