Sunset on a tanker on the Strait of Georgia Vancouver British Columbia Canada. Photo credit: Shutterstock.
British Columbia’s (BC) once high-flying liquefied natural gas (LNG) ambitions are taking yet another hit. The one-time goal of the Canadian province to have several LNG projects exporting gas to the Asia-Pacific market has already stalled amid plunging global oil and natural gas prices. Now, the Petronas–led C$36 billion (US$32 billion) Pacific Northwest LNG Project to be built in BC may soon be dead in the water, just days after it seemed like things would finally work out.
Late last week, the project offered more than $1 billion in annual payments spread over 40 years to obtain the consent of a First Nations community to built the project near aboriginal lands. The Toronto-based Globe and Mail said in a report at the time that “in a province where resource projects have stalled and sometimes foundered over aboriginal opposition, the tentative deal between the Prince Rupert-based Lax Kw’alaams band and the Petronas-led venture sets a new benchmark for sharing the wealth from energy extraction.” The report called the disclosure a groundbreaking proposal that could establish the new price for natural resource development in traditional aboriginal territories.
Before the $1 billion offer, industry officials said that planned LNG projects in BC could face delays and major cost overruns unless a concerted effort was made by developers to win over support of aboriginal groups in the province – something Petronas was obviously trying to do. Likely, Petronas and its project partners thought by offering $1 billion, the matter would be settled and they could move forward on the project. However, what a difference a few days can make.
On May 6, the first volleys of resistance were felt. Lax Kw’alaams members said that the promise of LNG prosperity would not be enough to offset what they called “the perils of losing a traditional way of life that relies heavily on salmon and other marine food and resources.”
Media said that in early voting, members of the band overwhelmingly failed to give consent for exporting LNG. The band is concerned that the LNG project will harm salmon habitat in an estuary at the proposed export terminal site on Lelu Island, near Prince Rupert, BC. Additional meetings have been held since Wednesday, while Lax Kw’alaams Mayor Garry Reece and twelve elected councilors will make the final decision on Tuesday, May 12.
The obvious question being asked is: will a final “no vote” from the Lax Kw’alaams band mean that the Petronas-led project is over? On Thursday, Robin Junger, an attorney that specializes in aboriginal and environmental law with McMillan LLP, said that governments have a duty to consult First Nations and, if necessary, mitigate impacts on aboriginal rights. But that doesn’t give First Nations a veto over projects like pipelines, he said. He also said that companies are not obligated to strike revenue sharing agreements like the one Petronas offered the Lax Kw’alaams band.
Totem Poles in Stanley Park, the recurring symbols of the area’s indigenous population, are popular Vancouver attractions. May 22, 2007 in Vancouver, British Columbia. Josef Hanus / Shutterstock.com
“There’s no legal requirement for such deals,” Junger said, adding that the aboriginal group could file for a judicial review if the project is approved without their consent, but they would have to demonstrate how the government failed in its duty to consult and accommodate.
Others have a different take. Josha MacNab, BC-director of Pembina Institute, which provides analysis, research and advice to inform policies related to energy issues in Canada, told Breaking Energy on Friday that from a social license perspective, a “no vote” would make this project very difficult to build. When asked what kind of precedent this will set for the other dozen or more BC-based LNG project proposals, he said that “in terms of precedent, each project is different and will be negotiated differently with different groups. However, both the offer from Petronas and the response from the Lax Kw’alaams will certainly change the frame of these kinds of negotiations going forward.”
Another pressing matter is how this will affect BC’s stated goal of becoming a major LNG exporter to markets in Asia-Pacific. With completion from newly developed projects and soon to come on-stream projects in the US, Australia and Papua New Guinea unfolding, more delays for BC would place it last in this heated and tightening hydrocarbon race.
MacNab said given that there is a limited market for LNG exports, clearly more delays in final investment decisions make the business case for LNG development in BC less robust.
