BC government cagey on LNG expansion, Eby cites climate targets

Written By Rob Shaw

Premier David Eby offered tepid support, at best, when asked if he had a preference on whether phase two of LNG Canada proceeds, says Rob Shaw.

When news broke recently that LNG Canada was considering expanding its Kitimat facility to a second phase of production, it wasn’t so much the response from the BC NDP government that was interesting, as it was the total lack of enthusiasm to the idea at all.

Not that long ago, under John Horgan, the mere mention of the $40-billion LNG Canada project would have snapped the provincial government to attention. Horgan offered a $6 billion tax break to the company to ensure it made a positive final investment decision in 2018.

But Premier David Eby appears far, far less enthused.

He failed to mention the LNG industry once during a recent speech in front of major oil and gas companies at the Natural Resources Forum in Prince George. And he offered only tepid support, at best, when I asked him Wednesday if he even had a preference on whether phase two of LNG Canada proceeds.

“For our province and for our economic future, ensuring that we have foreign direct investment across an array of industries, including LNG, is an important part of how we’re going to have a strong economy going forward,” he said, sidestepping even the name of the project in question.

“But another piece of that, obviously, is our climate targets.”

Climate targets appear to be a major reason why the NDP has soured on LNG. 

“But another piece of that, obviously, is our climate targets.”

David Eby

The Eby administration knows it will be extremely difficult, if not impossible, to fit the doubling of pollution caused by the second phase of LNG Canada into his government’s climate plan, without some major fudging of the numbers. 

Emission targets don’t consider phase two

B.C. has legislated a reduction of greenhouse gas emissions to 40 per cent below 2007 levels by 2030, 60 per cent by 2040 and 80 per cent by 2050. The NDP has said the targets are achievable — but they only accounted for the first phase of LNG Canada, not the second.

Clean Energy Canada estimates phase two of the project could add between 3.7 and 6.7 megatonnes of GHG emissions, roughly the equivalent of as many as 1.5 million new cars on the road in B.C. and a major step backwards in pollution reductions.

“Governments are in a challenging place trying to figure out how to deal with approvals made almost a decade ago,” said Merran Smith, Clean Energy Canada’s founder and chief innovation officer.

“Tough decisions need to be made – are we going to break our own law and miss our legislated climate target? Or are we going to require highly polluting companies to reduce their emissions.”

“Governments are in a challenging place … [dealing] with approvals made almost a decade ago.”

Merran Smith

LNG Canada — a partnership between Shell, Petronas, PetroChina, Mitsubishi and KOGAS — appears sensitive to the issue. 

CEO Jason Klein told Reuters recently that it plans to build phase two using natural gas-powered turbines, which will result in initially high emissions, before transitioning to renewable electricity power in the future, which would then lower emissions by 60 per cent. 

Klein said the major reason it isn’t going straight to electrification is BC Hydro hasn’t built high-capacity transmission lines to Kitimat yet to even make it an option.

“If the power was there today it would be a pretty straightforward decision,” he told Reuters.

“Electrifying Phase 2 … will require significant capital investment.”

Teresa Waddington

The first phase of the massive project in Kitimat is 75 per cent complete.

“Electrifying Phase 2 and having the transmission infrastructure to do that will require significant capital investment,” said Teresa Waddington, LNG Canada’s vice-president of corporate relations, in a statement.

“We’re working collaboratively with governments, BC Hydro and others to assess the cost and the investments required for putting that infrastructure in place. This approach also needs to be integrated with broader challenges such as our overall cost competitiveness.”

Thorny political issues

LNG Canada’s potential expansion raises thorny issues for the NDP government. Does it direct BC Hydro to spend hundreds of millions of dollars, if not billions, to build out 600 kilometres of power lines from Prince George to Terrace for the sole purpose of making a private project shrink its pollution footprint? 

Then again, it is the largest private-sector project in the history of Canada, set to bring in $20 billion in royalties to the provincial treasury over its lifetime — perhaps it is worth the extra investment to provide access to clean, renewable energy from BC Hydro’s grid?

Energy Minister Josie Osborne declined an interview to talk about how she’s grappling with those questions.

That’s opened up space for Opposition BC Liberal leader Kevin Falcon to stake a clear position.

“Where’s the government on this?” said Falcon.

“I can tell you where Kevin Falcon and the BC Liberals would be: Absolutely let’s make sure we make the investment with BC Hydro to provide the power needed, so that they don’t have to run it on natural gas turbines, which would deal with the emissions concern that some folks legitimately have.

“Let’s make sure we make the investment with BC Hydro to provide the power needed.”

Kevin Falcon

“But that should have been happening years ago. I would still say let’s get it done now. Let’s give them a hard yes.”

In the absence of clear political direction, BC Hydro is also dancing around the issue.

It has put out an “expression of interest” call to B.C.’s north coast operators, to ask the growing sectors of mining, ports and LNG to forecast their future power needs.

‘More than enough’ hydro capacity to meet LNG needs

“We’ve been working with LNG Canada for many years, discussing their needs and how we can support them with clean electricity if they choose to use it to power their operations,” Hydro said in a statement.

“We have more than enough generating capacity to meet LNG Canada’s needs. However, to deliver clean electricity to their operations, we would need to build new infrastructure to support the delivery of the power. This would require a commitment from LNG Canada.”

Ongoing construction at the LNG Canada project in Kitimat, B.C. [Image LNG Canada]

Smith said simply electrifying LNG Canada’s second phase wouldn’t solve the problem of meeting the NDP’s climate targets.

“Even if you fully electrified all those three phases, the plant, the upstream and midstream, you’d still have about 3 megatonnes of emissions,” she said.

“So it cannot fit within B.C.’s climate targets.”

The New Democrat government knows this full well. Which is perhaps why it is being so cagey in its position.

“B.C. is only going to have strong and clean economic growth if we have meaningful targets around climate change as a priority for many British Columbians,” said Eby.

“For major project proponents, we’re working with them to ensure that they can come within our climate commitments. And LNG is no exception. But it’s certainly one of the most visible ones, and certainly when people are looking at the targets are the ones that they’re concerned about.”

New Democrats ‘doubled down’ on LNG approvals in 2018

The other complicating factor in LNG Canada’s position is that it doesn’t even need government approval to expand to phase two. It already received the necessary permits in 2014, under the then BC Liberal government.

It’s a fact Eby stresses in his public comments, though it only serves to highlight how much his government wants to now distance itself from the fact it also doubled down on those approvals to secure the project in 2018.

“LNG Canada already was permitted by the previous government,” said Eby. “They are going to make their final investment decision going forward. And we’ll watch for that.”

Still, it’s unlikely the major partners behind LNG Canada would want to force a multi-billion expansion if the provincial government actively opposed it.

Climate advocates say the government should use the legal framework of its climate plan to require LNG Canada to be net-zero, and perhaps go so far as to retrofit the first phase to use electricity as well. Though, that does leave the question about how BC Hydro would accommodate so much new electricity demand from LNG Canada — an entirely different conundrum about sourcing B.C.’s future energy needs.

“We are in a climate emergency,” said BC Green Leader Sonia Furstenau.

“We cannot afford to expand fossil fuel infrastructure and miss key emissions targets. LNG phase one already made it practically impossible to meet our CleanBC goals. LNG phase two makes it a pipedream – electrified or not.

“We shouldn’t be talking about electrifying expanded fossil fuel projects; we should be focusing on electrifying existing industries to lower our emissions.”