On September 27th, 2016, the Federal Ministers of Environment and Climate Change, Fisheries and Oceans, and Natural Resources announced the Federal Government’s decision to approve the Pacific NorthWest (PNW) LNG project, more than three years after the federal environmental assessment process began. This is a milestone decision for LNG development in British Columbia, as it comes notwithstanding predicted significant adverse environmental effects under the federal environmental assessment regime. The federal Cabinet deemed those effects “justified in the circumstances”, signalling that, like the BC government, it supports sustainable LNG development.
The Minister of Environment and Climate Change, as part of the approval, released a decision statement that imposes 190 conditions on PNW LNG, primarily relating to environmental protection and Aboriginal consultation. Of note, the Lax Kw’alaams and Metlakatla First Nations will be involved in setting up the monitoring plan required by the conditions.
PNW LNG is a proposed natural gas liquefaction and export facility located on Lelu Island on the northwest coast of British Columbia. The facility, owned by PETRONAS, Sinopec, JAPEX, Indian Oil Corporation and PetroleumBRUNEI, will liquefy and export natural gas produced by Progress Energy in northeast British Columbia. PNW LNG represents a major potential resource investment in both British Columbia and Canada that is expected to lead to an overall investment of up to $36 billion dollars after accounting for upstream natural gas developments. During construction, the project will create an estimated 4,500 jobs, with an additional 630 direct and indirect jobs during the operation of the facility.
Unlike some other proposed LNG projects that relied on a “substituted” environmental assessment process, whereby the provincial process satisfies both provincial and federal standards, PNW LNG completed “coordinated” and “parallel” provincial and federal environmental assessment processes. The British Columbia Environmental Assessment Office approved the project in November 2014. The Federal review process took significantly longer due to:
- Changes in project design to respond to both scientific and First Nations concerns about salmon habitat, and associated requests for additional scientific studies.
- The Federal Government modifying its approval procedures through the process, most notably by extending the legislated timeline and adding an ad-hoc ministerial panel consultation process to assess First Nation and climate change concerns in relation to the draft environmental assessment report.
The PNW LNG project has drawn considerable opposition from environmental organizations. Of particular concern is the facility’s carbon dioxide emissions, anticipated to be over five million tonnes per year, which would make it one of the largest point sources for greenhouse gas emissions in Canada.
In response, as part of its approval, the Federal Government imposed a 4.3 million tonne per year cap on the annual greenhouse gas emissions the facility is allowed to emit, around 20% less than originally anticipated. It not fully clear how the cap will ultimately work with British Columbia's LNG greenhouse gas regime, which includes a country-leading carbon tax, greenhouse gas emissions intensity standards designed to ensure the new LNG industry is the "cleanest in the world", and project-specific development agreements. Of note, the Federal Minister justified the significant adverse environmental effect represented by this project's greenhouse gas emissions, in part, with references to BC's carbon tax increasing in the future as part of a pan-Canadian carbon price. More details will be announced by the federal government on this initiative next week.
PNW LNG now has its last major regulatory approval in hand, although ongoing permitting processes and consultation and accommodation obligations to First Nations remain. The environmental assessment process it faced included layered regulation, long timelines, and evolving processes, but led to major project design changes and significant stakeholder involvement. Whether the project proceeds now largely depends upon whether the PNW LNG consortium makes a positive final investment decision, based on its assessment of the long-term LNG market and its evaluation of the impact of the 190 project conditions.