Now that U.S. President Donald Trump is throwing the full weight of the White House behind a $63 billion pipeline and LNG project in Alaska—which would compete for market share in Asia—Canada must confront a challenge of its own making.
If the country can’t address a “complex web” of climate and energy policies that could make Canadian LNG projects uneconomic, it will forgo billions in energy sector investments, according to industry analysts and insiders.
In particular, the B.C. government may need to rethink its policy that requires new liquefied natural gas projects to be net-zero by 2030—a restriction that puts billions in potential investments at risk.
In a March 11 interview with Mark Fitzgerald, CEO of Petronas Canada—a 25-per-cent owner in LNG Canada—Peter Tertzakian, deputy director of the ARC Energy Research Institute, warned: “The path we’re on is not net-zero by 2030—it’s zero by 2030, because we’re not going to get anything built.”
Ian Archer, an expert in the North American natural gas market for S&P Global, doesn’t think the Alaskan LNG project Trump is now pushing poses the biggest competitive risk to B.C. LNG projects. The risks, he says, are home-grown.
“Canadian regulatory and environmental complexities are greater than nearly every other LNG producing region, and they have been the main reasons for the slow pace of LNG development in Canada,” Archer said. “So yes, the threats to LNG development are almost entirely a made-in-Canada problem.”
Of the $50 billion in shovel-ready energy projects in Canada, half—or $26 billion—are LNG projects, according to the Canadian Association of Petroleum Producers (CAPP).
Phase 1 of LNG Canada, the country’s first large LNG project, is now in the early stages of commissioning, and early work is underway on the smaller Cedar LNG and Woodfibre LNG projects.
Final investment decisions are expected this year on LNG Canada Phase 2, and the Ksi Lisims LNG project near Prince Rupert is currently under environmental review.
With Canada now in a trade war with the U.S., there is a growing urgency to attract investment and to grow new markets for Canadian commodities such as natural gas—most of which is currently exported to the U.S. and which may now face a 10-per-cent tariff.
The biggest barrier to investment in Canada is a costly and sclerotic regulatory environment.
When it comes to LNG exports, Western Canada has two significant advantages: The Montney formation—the second-largest natural gas basin in North America in terms of proven reserves, according to Shell’s 2025 LNG Outlook—and proximity to Asia, which lowers shipping costs.
But Alaska has the same proximity advantage, and the proposed Alaska LNG project has full U.S. federal and state government support.
The Alaska LNG project is being advanced by the state-owned Alaska Gasline Development Corp. (AGDC), and is backed with US$31 billion in federal loan guarantees, and annual 45Q tax credits of US$600 million per year (US$6 billion in total).
Alaska has been trying to advance the project for a decade now, but its enormous costs have been the barrier to its development.
“Alaska LNG faces several hurdles, the largest being cost,” Archer said. “Although the $31 billion loan guarantee is a huge number, the estimated cost of the project … is probably closer to $50 billion. That’s an enormous amount for nearly any oil major, so it would have to be built with a combination of federal money and a corporate consortium.”
On January 20, Trump signed an executive order to “prioritize the development of Alaska’s liquified natural gas potential,” and has been pressing Japan and South Korea into becoming customers for Alaskan gas.
Also in January, AGDC signed an agreement with the Glenfarne Group to lead and fund the US$44 billion ($63 billion) project, according to Reuters.
“AGDC and Glenfarne appreciate President Trump’s vocal advocacy for Alaska LNG, which will enhance the world’s energy security and narrow our trade deficit,” AGDC spokesman Tim Fitzpatrick said in an email to BIV. “There is tremendous momentum behind Alaska LNG from potential offtakers, financiers, and other partners eager to participate in this national energy infrastructure priority.”
Should the project ever get financed, it would produce 20 million tonnes per annum of LNG. LNG Canada Phase 1 will produce 14 million tonnes per annum, and 26 million if Phase 2 is sanctioned.
In total, if all LNG projects under construction or in development in B.C. are built, B.C.’s total LNG export capacity would reach 47.5 million tonnes per annum, according to the Canadian Energy Regulator.
There are concerns that Alaskan LNG could eat into B.C.’s potential market share in Asia, although recent outlooks suggest there will be plenty of demand there.
In its 2025 outlook, Shell forecasts global demand for LNG could grow by about 60 per cent by 2040, with the growth driven largely by coal-to-gas switching in China and South Asia. That’s a 10-per-cent increase over Shell’s 2024 outlook.
But there are growing concerns that, despite its advantages, B.C. could cede Asian market share to the U.S., Australia and Qatar if building new LNG export terminals in B.C. simply becomes too risky and costly.
B.C.’s big advantage as a potential major LNG player is the Montney formation straddling B.C. and Alberta. It has an abundance of gas and liquids, and production costs are low.
“It is, without question, competitive against any of the shale or resource development plays in the United States, in terms of cost of supply,” Fitzgerald said. “The cost of supply for us in the Montey is very, very low.”
But federal and provincial energy and climate policies, like industrial carbon pricing and oil and gas emissions caps, could erode that cost advantage.
“The carbon tax is a material component of our cost structure in Canada,” Fitzpatrick said. “We don’t have that anywhere else in the world. And so it creates economic challenges for us. I understand and appreciate basis behind it, but it does not help investment in Canada.”
Federal Conservative leader Pierre Poilievre last week said a Conservative government would eliminate federal industrial carbon pricing, and leave industrial carbon pricing up to the provinces.
Another concern for the industry is the federal government’s proposed new greenhouse gas emissions cap for oil and gas. The Conference Board of Canada has warned the caps will squelch production, and Canada’s Parliamentary Budget Officer appears to agree.
“To achieve the legal upper bound, we estimate that production in the upstream oil and gas sector will need to be reduced by 4.9 per cent over 2030 to 2032 relative to projected levels in our baseline scenario,” PBO Yves Giroux said in a recent assessment.
B.C. has its own emissions cap, as well as new restrictions specific to LNG projects that will require them to be net zero by 2030. Projects like LNG Canada, Cedar LNG and Woodfibre LNG are exempt from that requirement, as they were approved prior to the adoption of B.C.’s “new energy action framework.”
But all projects “in or entering” the BC Environmental Assessment process, including Ksi Lisims LNG, will need to “pass an emissions test with a credible plan to be net-zero by 2030.”
For projects that cannot physically achieve net-zero emissions by 2030, there are offset options, which would increase costs for developers—costs they would not face in competing jurisdictions like the U.S.
In response to tariff threats from the U.S., Premier David Eby recently pledged to fast-track energy projects in B.C. Asked if that was a strong enough signal for investors contemplating investments in B.C. LNG projects, Fitzgerald suggested the industry may need something a little stronger.
“We haven’t seen anything, as of yet, that would indicate to us that there’s a change in policy or carbon tax environment or royalties or anything that would incentivize us to do the project on the West Coast,” Fitzgerald said.
“LNG [Canada Phase] 2 is a project that all of us want to do—there is no question. I think there’s various discussions and conversations that will continue to go on in terms of feasibility of design, emissions intensity, how do we meet the province of British Columbia’s requirement for net-zero 2030.”
