LNG APPROVAL MIXED VICTORY

The following editorial is adapted from the Vancouver Sun:

Now that the federal government has approved the $36-billion Pacific Northwest liquefied natural gas project proposed by Malaysia’s state-owned energy company, Petronas, the ball is in the company’s court. It will decide whether this ambitious project will proceed.

Petronas and its partners had hoped to be ready to export LNG by late 2020 or in 2021. But construction would take at least four years, meaning it would have to make a decision by the end of this year or early next year to meet that timetable. Instead, it seems more likely that a final decision will be delayed.

First, there is a worldwide surplus of gas as producers pump out far more than their domestic markets can absorb. Meanwhile, Asian demand has been waning as the pace of economic growth slows and natural gas and LNG prices have been in a slump for several years.

Against this backdrop, Petronas must contend with 190 “legally binding” conditions appended to the federal government’s approval. One of those is a cap on emissions, which effectively restricts the amount of LNG Petronas can produce. That, in turn, limits the amount of revenue it can earn. Then there’s the matter of opposition to the project. Environmental groups and some First Nations leaders were quick to condemn the federal government for approving it and vowed to fight the project in court, where it could be tied up for months, if not years.

In any case, with economic viability of the project still in doubt, it would not be surprising for Petronas to delay a decision well into 2017 or beyond. British Columbia Premier Christy Clark and her Liberal Party might hope for a green light from the company before the next election in order to deliver on a campaign promise made during the last one. But it may not come to pass.

The clear winner in this week’s announcement was Prime Minister Justin Trudeau, who can claim he understands Canada needs to export energy, that economic growth and jobs depend on it. Applause from the resource sector gives him credibility to impose a moratorium on oil tankers on B.C.’s north coast, effectively killing Enbridge’s Northern Gateway pipeline, thereby winning the admiration of the environmental movement. Having earned his green spurs, he can then approve Kinder Morgan’s Trans Mountain twinning of its oil pipeline to Burnaby, or Trans Canada’s Energy East Pipeline to the Atlantic coast, or both, having deftly played both sides of street.

Call it a win for the federal Liberals, but an uncertain outcome for environmentalists, business and the rest of us.