FEDERAL OK CREATES HOPE FOR PIPELINES

Finally, some progress.

After more than three years of environmental review, detailed discussions and consultations, the massive Pacific NorthWest LNG project was approved by the federal government late Tuesday, with a battery of conditions.

If the proponents, led by Malaysia’s Petronas, make a final investment decision to proceed — no slam dunk given weak commodity prices and other projects also at this stage — British Columbia’s hopes for developing a liquefied natural gas industry would take a quantum step forward. Finally. After much hype, dwindling hope and countless delays, this is progress.

Just as significant, Canada’s oil and gas sector saw a sliver of light emerge from a canopy of grey skies, a positive sign Ottawa will let large-scale energy developments proceed under the right circumstances. Finally. For many in the oilpatch and inside Alberta’s government, there’s a belief this could pave the way for other energy projects, such as new oil pipelines, to be approved.

Fittingly, the announcement itself in Richmond, B.C., was delayed for an hour until late Tuesday evening as politicians gathered at the Sea Island Coast Guard Base to reveal the news.

As the sun set on the West Coast, Natural Resources Minister Jim Carr listed off the project’s benefits, such as 330 direct jobs, 4,500 construction positions and $2.4 billion in additional GDP generated annually for the country.

Total investment for the project, located south of Prince Rupert, is pegged at $36 billion, including upstream natural gas developments and a pipeline that will feed the terminal to export LNG into Asia.

Environment Minister Catherine McKenna spoke of 190 conditions imposed on the project and a hard cap on greenhouse gas emissions, topping out at 4.3 million tonnes of carbon dioxide (CO2) per year, about 20 per cent below initial proposals.

B.C. Premier Christy Clark noted the difficulty gaining consensus for such large developments, but touted the economic benefits and employment agreements in place with First Nations.

“It is impossible to move ahead with a major economic project that has 100 per cent support,” the premier said. “At some time, governments need to lead.”

(As an aside, Clark tossed another jab at her eastern neighbours, pointing out how, “Alberta is struggling mightily right now, huge unemployment,” while B.C. has the country’s strongest economy, even without LNG.)

Regardless of the political show, it’s too soon for anyone to take this project to the bank.

There are more obstacles to clear, more critics to face, more lawsuits to defend.

Within minutes, statements of condemnation against the decision were flying.

Environmentalist targeted the greenhouse gases that will come from the project and how the government’s decision is inconsistent with Canada’s commitments under the Paris climate change accord to lower emissions.

The 190 federal conditions on the project relate to protecting fish, migratory birds, the environment and lowering emissions, but there’s no clear indication how much this will cost the developers to meet.

There’s also the messy question of the project’s economics, due to an oversupply of LNG globally that’s seen prices drop by twothirds and proposals put on hold.

The Shell-led LNG Canada project and Woodfibre LNG Ltd. also have the federal government’s approval, yet are awaiting final investment decisions.

Analyst Dirk Lever, managing director at AltaCorp Capital, noted Pacific NorthWest will need to lock in its expenses and be satisfied long-term LNG prices will improve before moving ahead.

It must also factor in the cost of capital on such a large undertaking and weigh that against other investments.

There’s potentially more delays with the fresh threat of lawsuits hanging over the development as well.

“I don’t think any project of this kind of magnitude is ever a slam dunk,” Lever said.

If Pacific NorthWest proceeds, he believes it could kick-start natural gas activity in B.C. and Alberta, creating work for construction, oilfield services and midstream companies. It will need about two billion cubic feet of gas, fed by an associated pipeline built by TransCanada Corp.

Industry groups such as the Canadian Association of Petroleum Producers and the Petroleum Services Association of Canada welcomed Ottawa’s approval as a positive signal.

"This news offers a glimmer of hope that more investment in the development of our natural gas lies ahead,” PSAC president Mark Salkeld said Wednesday.

But federal cabinet minister Kent Hehr wasn’t prepared to say this week’s LNG decision foreshadows future pipeline approvals.

The Energy East oil project is now before the federal regulator, while the expansion of the Trans Mountain line is awaiting a cabinet decision by Dec. 19.

“We look at each project as it comes and balance out the economy and environmental factors,” Hehr, the Calgary Centre MP, said in an interview.

“The hard work of government is knowing that when decisions are made, not everyone is going to be happy.”

But after waiting years for a positive signal that natural resource projects are valued, essential and can proceed in Canada today, Pacific NorthWest’s federal approval was a much-needed shot in the arm for an ailing oil and gas sector.

After hearing a chorus of “no, no, no’, they now have a ‘yes.’

Finally.