Petronas' LNG project gets green light but with a catch

New LNG project will have a hard cap placed on its CO2 emissions

Federal Natural Resources Minister Jim Carr, Environment Minister Cathernine McKenna, and Premier Christy Clark.| Nelson Bennett

The federal government has approved Petronas' $11 billion Pacific NorthWest LNG project in Prince Rupert, but there's a catch.

Petronas will need to shave 900,000 million tonnes of CO2 from the project's emissions, and all other major industrial projects from now on will also have hard caps placed on them for greenhouse gases.

Federal Environment Minister Catherine McKenna, Natural Resources Minister Jim Carr and Fisheries and Oceans Minister Dominic LeBlanc announced at a press conference at the Sea Island Coast Guard station in Richmond Tuesday, September 27, that the PNW LNG was approved for an environmental certificate.

But in approving the project, McKenna also announced a hard cap on that will require the project to reduce emissions by 20%.

“I've always said this: when you have major projects, they have to fit in with our national climate plan and part of that is addressing emissions through a price on carbon,” McKenna said.

She added that the B.C. government's commitment to eventually start raising its carbon tax in sync with whatever price the federal government eventually sets factored into her decision.

The project's carbon emissions will be capped at 4.3 million tonnes of CO2. That's 900,000 lower than what the project, as initially proposed, would produce.

It's not clear if that means Petronas will have to scale the project back, although Premier Christy Clark, who was on hand for Tuesday's announcement, reiterated her province's hope of extending hydro electricity upstream to the natural gas fields – a measure that would help reduce LNG's carbon profile.

The environmental review process for the PNW LNG project has been protracted . The proposed site for the LNG plant on Lelu Island has proven problematic, due to concerns over its potential negative impact on salmon habitat and opposition from area First Nations, notably the Lax Kw'alaams, three members of whom crashed the press conference to voice opposition to the project.

Christine Smith-Martin of the Gitwilgyoots tribe said a number of hereditary chiefs had flown to Ottawa and were scheduled to meet with federal ministers Tuesday. She said they were left stranded there when the meetings were cancelled so McKenna and her federal counterparts could fly to Richmond to announce the project's approval.

While the Lax Kw'alaams are divided on the PNW LNG project, some First Nations support it. The The First Nations LNG Alliance applauded the project's green light.

"These projects can only move forward with effective and meaningful First Nations consultation and involvement, and we are pleased to see the progress Petronas, the government and the affected First Nations have achieved in this case," Dan George, chief of Burns Lake Band and chairman of the alliance said in a press release.

McKenna said Fisheries and Oceans is satisfied the plant can be built with minimal impact on fish.

“I am confident, with the 190 legally binding, scientifically determined conditions, that we will address the most important environmental impacts to enure that this project proceeds in the most sustainable manner possible,” McKenna said.

“This is an important part of a new industry for British Columbia and for Canada,” Carr said. “The Pacific NorthWest LNG project represents one of Canada's largest resource development initiatives, with a total capital investment of up to $36 billion when related upstream natural gas developments are included.

“Today, with this project, we move a step closer to moving Canadian natural gas to world markets.”

He said the project will create 330 direct long-term jobs, 300 local spinoff jobs, more than 4,500 construction jobs and add $2.4 billion per year to Canada's GDP and $1.3 million annually in royalties and taxes to various levels of government.

“We heard from union leaders and members who have told me personally how important natural resource jobs are to them and to their families.”

Carr added LNG is not just good for the Canadian economy, but would “contribute to the fight against climate change” by displacing fuels that have higher carbon emissions in Asia.

Clark said the federal environmental certificate is the “last major requirement for this project” but pointed out that it's still up to Petronas to decide if will make a final investment, something that has been in some doubt, thanks to low oil and gas prices and a glut on LNG now on the market from Australia.

“That final decision will be up to market conditions and will be up to the company and that will need to take time,” Clark said. “And it will certainly take time for them to do their review.”

Predictably, environmental groups like the Pembina Institute and Clean Energy Canada criticized McKenna's decision, while business groups like the BC Chamber of Commerce and Canadian Association of Petroleum Producers (CAPP) praise the decision.

The Pembina Institute said the decision will make it that more difficult for Canada to meet its climate change targets. CAPP, meanwhile, said exported Canadian LNG will help facilitate renewable energy in other countries, since wind and solar power are intermittent and need firm power – natural gas being a much lower carbon alternative to coal power.

“LNG could support the expansion of renewable energy such as solar and wind by complementing their intermittent output," said CAPP president Tim McMillan.

For more coverage on this story, see the next print edition of Business in Vancouver.