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.

The B.C. NDP, now in power, has opposed the Pacific NorthWest LNG proposal but supports the LNG industry generally speaking, provided it meets certain conditions.

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

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On January 20, BC Hydro issued a press release singing the praises of a new hydro transmission line not far from where preliminary work has begun to build the $9-billion Site C dam.

The release, headlined “New transmission line to power development in the south Peace,” featured boosterish quotes from Premier Christy Clark, Energy and Mines Minister Bill Bennett and BC Hydro CEO and president Jessica MacDonald, but made no mention of the dam.

Yet it highlighted for many one of the most vexing questions about why the dam, which is the single-most expensive megaproject in the province’s history, is being built at all: Why this project at this time?

“This line doubles the amount of power we can provide to the region,” enthused MacDonald. “We know it’s a growing region and BC Hydro needs to be one step ahead and ensure we can get power to where it is needed most. We want industry in B.C. to use clean power that comes from BC Hydro’s hydroelectric facilities.”

What MacDonald didn’t say, and Clark and Bennett did nothing to elaborate on either, is that the $300-million and counting transmission line is but the first of at least three in the region. Another two lines, which the provincial government wants exempt from review by the provincial electrical utilities regulator the BC Utilities Commission (the province also exempted the Site C dam project from similar review), will add hundreds of millions of dollars more to the tally for taxpayers.

Also not explained anywhere by MacDonald, Clark, Bennett and company is that virtually all of this new transmission infrastructure is being built at public expense to provide power to one entity and one entity alone — the natural gas industry. An industry, ironically, which has used and continues to use small portions of the gas that it drills to fire turbines that provide the power to move the gas through pipelines to processing plants and then on to consumers.

The Only Credible Explanation for Building the Site C Dam

Now, 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. 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.

Indeed, BC Hydro’s own records show that in the absence of a vastly expanded natural gas sector in the province there is simply no need for the dam now or in the foreseeable future. It has told the B.C. Utilities Commission that it will be 2028 before domestic electricity consumption actually exceeds domestic production. And even then, according to BC Hydro, there is good reason to believe that that critical point may be even further down the road.

After filing its most recent load forecasts with the utilities commission, BC Hydro produced a quarterly report noting that its earlier forecasts for large industrial and commercial users were overstated. New information suggested that those consumers will likely use even less electricity in future years and that such declines could be most pronounced in key industries like the pulp and paper industry that directly and indirectly employ thousands of people.

Ironically, one of the main reasons why B.C.’s pulp and paper industry is in trouble is the rising cost of electricity. In 2014, hydro rates increased by 9 per cent, the first in a planned five years of increases totalling at least 28 per cent. The increases mark just the beginning of what could be years of steadily higher bills as customers repay the billions of dollars that BC Hydro must borrow to pay for Site C and the new transmission lines.

For certain pulp mills that rely more on power than chemicals to break down wood fibre, just the most recent increases in hydro rates threaten to put some of them out of business. Provincial Finance Minister Mike de Jong was told as much in June in a letter signed by the CEOs of four major forest companies including Canfor, West Fraser, Catalyst and Paper Excellence.

“While our industry prides itself on cost-cutting through constant innovation and improvements in efficiency, the magnitude and timing of the increase in B.C. Hydro rates combined with the increase in [provincial sales] tax, may result in many of the mills shutting down,” the letter reads in part.

No wonder, then, that BC Hydro believes that there could be possible declines in hydro usage among some industrial users. If just one mechanical pulp mill in the province shuts down, enough power to supply 70, 000 homes is freed up.

LNG Industry Could Spike Electricity Demand

The only scenario in which BC Hydro envisions hydro usage in the province exceeding available supply is in the event that one or more Liquefied Natural Gas or LNG plants are built on our coast. Such plants require enormous amounts of power to super-cool natural gas to the point where it turns to liquid form and can be loaded onto tankers for shipment overseas.

According to BC Hydro filings with the utilities commission it is only with the arrival of an LNG industry in the province that hydro consumption begins to outstrip domestic supply, and only then in about eight years.

Despite the fact that fossil fuel giants such as Shell and Petronas have yet to commit a dime to building LNG plants, the rush is on to supply them with hydroelectric power to offset some of the emissions associated with producing and potentially one day liquefying natural gas: a gas that no matter how you slice it is a climate-unfriendly fossil fuel that contributes significantly to global greenhouse gas emissions.

New Transmission Lines Encourage Gas Production

Whether or not an LNG industry emerges, however, the provincial government and BC Hydro are forging ahead with plans to supply hydroelectricity to companies drilling for natural gas in the Montney Basin. The basin, which extends out a considerable distance from the Peace River, contains B.C.’s largest remaining reserves of natural gas.

The basin has considerable “wet” natural gas deposits, which in the current environment of generally depressed natural gas prices is a good thing for the companies involved. Dry gas is generally made up of methane whereas wet gas may contain ethane, butane and pentane, or natural gasoline — all valuable hydrocarbons.

By extending transmission lines into the Montney Basin, the province and BC Hydro are encouraging increased gas industry activity. None of the gas that the companies drill for and produce will have to be used to fire turbines that move the gas through pipelines. Instead, all of the gas saved through electrification can be sold, especially the wet gas with its higher market value.

“Before, industrial customers had to burn gas to power their facilities. The new transmission line not only makes more projects possible, it means they’ll be even cleaner,” Premier Clark said in BC Hydro’s January 20 press release.

Greenwashing A Climate Unfriendly Industry

Of course, what neither Clark, Bennett or MacDonald say in the release is that there is actually no net benefit to the earth’s overheating atmosphere in making the gas industry here at home somewhat cleaner. While the gas industry’s greenhouse gas emissions in B.C. may be less bad than they would otherwise be, all of the gas saved through electrifying gas company field operations is simply sent down pipelines to the financial benefit of the sellers. The gas is then burned somewhere else at a collective loss to the planet.

For people who have been hunkering down at a protest camp near the Site C dam construction zone where temperatures have sometimes dipped down to a bone-chilling -25 C, every new announcement extolling the virtues of a new hydroelectric transmission line reinforces the notion that BC Hydro and the provincial government have a build-it-and-they-will-come attitude with what is the single-most expensive megaproject in the province’s history.

The more transmission lines erected to allegedly “green up” the field operations of fossil fuel companies, the more fossil fuel industry activity. The more such activity, the more the government and BC Hydro can justify Site C.

The transmission line that Clark and company enthusiastically praised in the BC Hydro press release of January 20 is known as the Dawson Creek-Chetwynd Area line or DCAT. The project consisted of building two new lines of 12 kilometres and 60 kilometres in length, construction of a new substation and upgrades to two other facilities.

Transmission Lines Exempted from BCUC Review

BC Hydro’s press release states that DCAT’s cost is $296 million. But a document that the Crown corporation filed last fall with the B.C. Utilities Commission tells a different story. In that document, the actual cost of the project as of September was just under $302 million or nearly $6 million higher than that stated in BC Hydro’s press release. And the document, which is signed by BC Hydro’s chief regulatory officer, Tom Loski, notes that the project is not yet completed. So there will be further costs, including those associated with taking down all of the lower kilovolt lines that the new transmission infrastructure replaced.

BC Hydro is required by law to file information on DCAT because that project was subject to B.C. Utilities Commmission review. The public therefore has access to details on the $302 million and counting transmission line. But the provincial government has indicated that two other proposals to build massive new hydroelectric transmission line infrastructure in the Peace region — infrastructure explicitly intended to foster more natural gas industry developments — will not be subject to such reviews and therefore the public may learn next to nothing about them.

Last November, Energy Minister Bennett explained why the government did not want the projects brought before the BCUC. In a Business Vancouver story, Bennett said: “My understanding right now is that if I do not direct the BCUC to allow these projects to go ahead, that we may lose some interest on the part of the gas companies . . . They just don’t feel that they can wait for a long BCUC process.”

Bennett’s position leaves Karen Goodings, Area B director for the Peace River Regional District, decidedly uncomfortable.

“Our concern, of course, is once again the avoidance of going through the process that is in place to examine these things,” Goodings told Business Vancouver. “It’s almost as though this is another excuse for building Site C.”

An unusual wrinkle of one of the proposed transmission lines known as the North Montney Power Supply Project is that the 140 kilometre-long line will be built and operated by a private company. ATCO Power will build the transmission infrastructure to deliver electricity to the remote Pink Mountain area well to the north of Fort St. John. The area is the site of major gas-drilling and fracking operations by Progress Energy, owned by the Malaysian state-owned corporation, Petronas.

‘Ministerial Exemption’ Sought to Speed Transmission Line

In a letter last March to Les MacLaren, an assistant deputy minister in Bennett’s ministry, ATCO vice-president Dale Friesen explained why neither ATCO nor Petronas want the project subject to BCUC review.

Friesen said a “ministerial exemption” exempting the project from BCUC review was being sought because of the “aggressive schedule” required to build the project.

“Progress Energy is developing gas production capacity in the North Montney Basin in support of the Pacific Northwest LNG project proposed by Petronas, Progress’ parent company.”

“ . . . By utilizing BC Hydro supplied power instead of burning natural gas, Progress expects to decrease emissions in the region by approximately a third. Progress further expects to realize improved equipment performance, decreasing the risk associated with gas delivery to LNG facilities.”

“The project is being developed on an aggressive schedule to meet with Progress timelines. Failure to meet these timelines reduces the feasibility of electrification and poses a substantial threat to the project proceeding.”

Nothing in the information obtained by the Regional District indicates what the projected costs to build the line and related infrastructure are. But given that the line is twice the length of the DCAT line and goes through rugged and remote terrain, it seems reasonable to conclude that it will be a vastly more ambitious and expensive project.

And somehow, despite all of the costs associated with building the line and all of the ongoing costs of purchasing electricity carried by the line, Goodings believes that Petronas will be financially ahead of where it would be if it produced its own power with natural gas.

“They are extremely aware that they can produce their own power. There has to be a benefit there,” Goodings says. “If they can produce their own power cheaper than hydro, they will do it.”

Unfortunately, nothing by way of information supplied to the Peace River Regional District by ATCO sheds light on relative energy costs or on what, if any subsidies, ATCO and Petronas may benefit from in the event the line is built.

Given that three separate transmission lines are either built or about to be built to supply electricity to an industry that has for decades produced its own power from the gas it draws from the ground, Goodings thinks the need for an independent review of all new transmission line projects in the Peace region and the Site C dam is obvious. Especially when the government’s long-touted promise of an LNG industry appears more remote with each passing day.

“Are these transmission lines the reason for Site C? If that’s the reason we’re spending $9 billion then yes, there’s an impact on the taxpayer, and they should not be exempt from review,” Goodings says.

No amount of boasting about all the clean energy supplied by Site C and an emerging network of new transmission lines gets around the fact that an awful lot of public money is about to be dropped in the Peace Region.

Goodings, like others who have called on the government to subject the Site C project to B.C. Utilities Commission review, believes it’s in our collective interest to know if we are about to spend billions of dollars on a new dam and hydro lines that, at the end of the day, may benefit the public very little while benefitting one industry very much.

Ben Parfitt is a resource policy analyst with the Canadian Centre for Policy Alternatives.

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Although city officials from Dawson’s Creek won’t disclose the names of the companies involved, they are confirming that fracking waste has been illegally dumped into the city’s water treatment system on at least two occasions.

Jim Chute, administrative officer for the city, told DeSmog Canada, that illegal dumping has occurred at least three times, but twice the waste was “clearly” related to fracking.

“It has actually been on three occasions in the last 18 months where we’ve caught inappropriate materials being dumped,” he said. “One of those was a load of contaminated diesel. It’s not clear to us exactly how that diesel got contaminated so we don’t know if that was frack-related or not.”

“The other two were a mix of compounds that were clearly flowback waste from a frack operation.”

Chute said the chemicals used in the fracking process can damage the city’s water and sewage treatment facilities which are unable to handle industrial waste. Chute told the Alaska Highway News the waste could cause irreversible damage to living organisms that play a crucial role in the city’s water reclamation system.

Fracking in northeastern B.C.

Fracking, otherwise known as high-volume slickwater hydraulic fracturing, is a controversial extraction process used to free oil and gas from tight rock formations using extremely high pressures and large amounts of toxic chemicals.

The incidents in Dawson Creek involved subcontractors of the gas companies, Chute told DeSmog Canada, saying “virtually all jobs are outsourced to subtrades.”

“If you’re Encana Corporation, you probably don’t drill that well yourself, it’s probably contracted out to a subcontractor like Precision Drilling. And then Precision Drilling themselves don’t build the lease roads, they contract that out to a subcontractor…and they don’t do their own waste disposal, they contract that out.”

“It’s so busy up here,” Chute said.

“The situations we’ve encountered in every case has been an independent contractor to a company who signs on to a company [saying] they will dispose of the waste in an appropriate manner…and then behave badly, try to save themselves some money by coming to our dump instead of going to the proper spot.”

Chute told the Alaska Highway News the contractors were fined and responsible for cleaning the contaminated holding tanks.

Toxic wastewater a problem for industry

The B.C. Oil and Gas Commission, the provincial oil and gas regulator, is responsible for monitoring the activity of fracking companies, including the disposal of wastewater. B.C. has several private wastewater facilities where recyclable water is separated from toxic waste, which is then disposed of in underground injection wells.

In an emailed statement, B.C. Oil and Gas Commission communications coordinator Hardy Friedrich said, “B.C. has strict regulations related to the disposal of oil and gas waste in the Oil and Gas Waste Regulation and the Hazardous Waste Regulation.”

He added: “Fluids used in hydraulic fracturing must be disposed in a deep underground formation via a service well. Most other waste must be disposed at an approved disposal facility. There are currently 106 operating deep well disposal sites in northeast B.C.”

The difficulty of disposing of wastewater from fracking operations is a problem that has plagued the industry across North America. Flowback fluid from a fracking well includes toxic chemicals and oftentimes radioactive elements from extremely deep wells.

Most municipal wastewater systems are not equipped with the technology to handle such toxic waste in such high volumes.

Dawson Creek, located in the shale gas-rich Montney Basin, has seen a major increase in gas companies in recent years. The Montney Basin, along with the Horn River Basin also in northeastern B.C., could potentially account for 22 per cent of all North American shale gas production by 2020 according to the Canadian Association of Petroleum Producers.

In the early years of B.C.'s shale gas boom, Grant Shomody, president of Grantech Engineering International, warned of the potential problems producers would face when it comes to wastewater disposal in the Montney:

“If this play develops as producers hope, the number of wells being drilled would severely tax local water resources. In that case, we can expect a lot of ecologically related criticism. There’s also the problem of disposing of the frac water or treating it for reuse. It’s expensive, and Montney producers have not installed water treatment capabilities at their plants.”

A challenge and liability for Dawson Creek

Chute expressed concern with illegal dumping of fracking wastewater, especially in light of new Environment Canada rules, which could hold city officials accountable for negligence.

“Previously there had been less onerous regulations, around how anyone who is a sewage treatment operator or handler of sewage…in order to prevent unauthorized discharge into watercourses,” Chute explained.

These new federal regulations are more strenuous and more robust than any that had been in place in the past, Chute said.

“The onus was put on us to ensure we had the safeguards in place that nothing escaped into the environment. Part and parcel because of that, and [how] thinking changed around Enron and evidence of bad corporate behaviour, part of the regulations imposed personal liability on the people responsible.”

“In Dawson Creek, that would be me,” he said.

Dawson Creek is moving to a new system, said Chute, where a failsafe dump station will monitor regularly for harmful compounds. If those compounds are found, the waste will be prevented from entering the regular treatment system.

Chute says the new facility, which will cost nearly $4 million to build, will be continuously monitored during open hours, 12 hours a day, six days a week.

“All of this is to make sure unauthorized industrial waste doesn’t go into our system.”

“We are going to make sure that we catch anybody that tries to circumvent the system by coming to us because we’re a shorter haul than they’d have to go to the proper spot.”

Image Credit: Fracking water storage near Hudson's Hope in B.C. Image from the CCPA report: Fracking Up B.C.

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