Reelected BC NDP faces declining case for LNG

Liquefied natural gas projects in British Columbia are facing renewed criticism after a market forecast study released Thursday found every proposed project is at risk in any energy transition scenario. 

According to the researchers from U.K.-based Carbon Tracker, global markets for LNG are likely to be oversupplied by the end of the decade, creating a glut. Because B.C. LNG production is expected to ramp up at precisely the same time global production plateaus, the province “will not have a first mover advantage, and its output will be competing in a highly competitive global market.” On top of that, B.C. LNG is expected to be more expensive compared to many other jurisdictions, further undermining its business case. 

“Policymakers in B.C. should be aware that long term fiscal revenue streams from LNG are far from guaranteed,” the report found. “Large-scale investment in LNG carries an opportunity cost versus investing in a clean energy system which would generate long-economic growth as the energy transition accelerates.”

The findings are expected to increase pressure on the provincial government, which kickstarted its LNG industry in 2017 when then-premier John Horgan persuaded LNG Canada to build a $40-billion export terminal in Kitimat (that price tag includes both Phase 1 and 2 of the project). To convince the project's owners (Shell, Petronas, PetroChina, the Korean Gas Corporation and Mitsubishi Corporation) to proceed, the provincial government offered $6 billion over 40 years in tax and regulatory relief, with the expectation it would receive $22 billion in revenue over the same period. 

But for the climate wing of the party, LNG dreams have always been viewed as wrongheaded due to the intense greenhouse gas pollution, and recent investigations have found LNG is even worse than anyone knew. When in operation, LNG Canada will become the province’s single largest emitter. 

Fresh off a close election that restored the NDP to power, B.C. Premier David Eby told reporters this week his government remains committed to fighting climate change and understands his narrow victory was a message from voters they expect better across a number of key files. 

It remains unclear if Eby would entertain pivoting away from LNG in light of fresh evidence that it’s a risky bet with public dollars. In response to questions, Eby’s office did not directly answer whether it was committed to LNG as evidence increasingly undermines the business case, but in a statement, reiterated Eby’s comments from earlier this month that any new LNG projects “need to be net-zero by 2030.”

The province’s only operating LNG terminal currently is Tilbury LNG, though several more are close to operational or are expected to be approved soon. LNG Canada Phase 1, Cedar LNG and Woodfibre LNG are all either under construction or have been sanctioned, while two others, Ksi Lisims and LNG Canada Phase 2, are looking to be sanctioned in the next few years. 

What’s driving the LNG export ambitions is a massive deposit of natural gas in British Columbia and Alberta called the Montney Formation. In 2022, that deposit was responsible for nearly half of Canada’s gas production, according to Energy and Natural Resources Canada. 

The Montney Formation is recognized by scientists as the world’s sixth largest “carbon bomb” — a term referring to projects that would release a billion tonnes or more of CO2 pollution, severely threatening global efforts to slash planet-warming emissions. But as Canadians take steps to cut natural gas use, by switching from gas furnaces to heat pumps for example, gas producers want to find new customers to drive their economic growth. 

Asian countries looking to get off coal are the target customers for B.C. LNG exports. But a growing body of evidence indicates that the methane and transportation emissions also produced by the Canadian LNG industry may actually cause higher emissions than burning coal. Similarly, pro-LNG advocates often claim LNG would displace coal, while critics say it could just as easily displace clean alternatives by locking customers into long-term LNG contracts. 

Previously, Eby has said new LNG projects would have to fit within the province’s emission reduction targets, and it would comply with the federal government’s forthcoming oil and gas emissions cap. To do this, the province is focused on decarbonizing upstream and midstream activities (extracting and transporting the LNG) by using clean electricity to power the operations. Burning the fuel, which produces the majority of fossil fuel emissions, would happen in other countries, and technically not count toward Canada’s emissions. This rationale is how LNG advocates square increasing fossil fuel production while reducing overall emissions. 

“If all six proposed LNG projects were to be built, their operational and upstream emissions alone would make up 40 per cent of the province’s 2030 emissions target (that is even assuming most facilities are electrified),” reads a report from Clean Energy Canada published in March. “And that’s just B.C.’s emissions. The emissions from combusting the exported fuel at its destination — which is accounted for in the importing countries’ greenhouse gas inventories — would be 10 times greater.”