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Whatever happened to B.C.'s $100 billion LNG industry?

Former B.C. premier Christy Clark addresses Canada Gas and LNG conference
Former B.C. premier Christy Clark in panel discussion with Kelly Ogle, centre, and Jacob Irving. | Nelson Bennett

Nearly a decade ago, at B.C.’s first LNG conference in 2013, which was then hosted by the provincial government, then-premier Christy Clark said a nascent LNG industry could be worth $100 billion.

At one point, there were some 18 LNG projects proposed for B.C., including very large ones like the $36 billion Pacific NorthWest LNG project in Prince Rupert (Petronas), the Apache-led Kitimat LNG project and the Shell-backed LNG Canada project.

“What happened to these 18 LNG proposals?”

That question was put to Clark, who was special guest panelist Thursday at the final day of the three-day Canada Gas and LNG Conference.

Clark said she had made developing an LNG industry “a central economic project” for her Liberal government.

She pointed out that one large project, the $18 billion LNG Canada project ($40 billion, when you include all the upstream gas assets and the Coastal GasLink pipeline) did in fact go ahead. It is now well past the halfway mark for construction.

As for the 18 projects that were once in the queue, Clark said: “They weren’t all projected to get through. The airsheds wouldn’t be able to handle some of the emissions that would necessarily be produced in the communities.

"But we thought we could have five.”

The other large project that held the greatest promise of being sanctioned – PNW LNG – was cancelled by Petronas just one week after a provincial election that saw the NDP strike an agreement with the Green Party to form the government.

Petronas said the reasons for pulling the plug on the project, after spending $900 million to move it forward, were market conditions. But there’s no question that the NDP, while in opposition, sent some very negative signals to the industry.

John Horgan and then environment critic George Heyman wrote the Canadian Environmental Assessment Agency in 2016 urging it to reject the PNW LNG project.

“On the eve of the election, the government that is now in power in British Columbia sent a letter to the approving authority saying ‘we don’t want LNG in British Columbia,’” Clark said.

“So then the day after the election, when they formed a coalition, we lost that LNG project and all of the rest of the LNG projects, most of them walked as well.”

It bears recalling, however, that Clark’s government had also sent some negative signals in the form of a suite of new special LNG taxes that no other LNG producing region had -- taxes which Petronas appeared to balk at.

The taxes were to start at 1.5% on net profits and rise to a maximum of 7%, after the initial capital investments were paid for, and LNG projects would have to pay a special rate for electricity -- a rate that was above what other heavy industries paid.

At the 2014 LNG conference, Petronas’ then-CEO, Tan Sri Dato Shamsul Azhard Abbas, seemed to warn Clark about over-taxing an LNG industry before it was even established.

“Let’s not slaughter the goose before it even has a chance to hatch the golden egg,” he said. “This is a once in a lifetime opportunity for B.C. We must be careful to not squander it away by making unrealistic expectations.”

Despite its opposition to LNG while in opposition, John Horgan’s NDP government, once in power, scrapped the Clark government’s special taxes and power rates, putting LNG on the same footing as any other industry, and in 2018 the LNG Canada partners  --which by then included Petronas – announced a final investment decision.

One interesting topic at the 2014 LNG conference was the news that Russia had just announced a $400 billion agreement to supply China with Russian pipeline gas, raising questions about market opportunities in China for B.C. LNG exports. Clark's response to questions about Russia eating B.C.’s LNG lunch now seem prescient.

“We’ve certainly seen the way that Russia likes to do business these days, and we certainly know that the Chinese want a dependability of supply,” Clark said in a scrum with reporters at the 2014 conference.

“Our reliability as a partner is an advantage. I don’t think there is a country in the world today that wants to depend on Russia as their sole supplier of natural gas.”

Russia’s recent invasion of Ukraine has roiled energy markets in a profound way, renewing interest in Canada as a potential reliable supplier of natural gas that is, by many accounts, “cleaner” in terms of its greenhouse gas emissions intensity than natural gas or LNG produced anywhere in the world.

Russia recently cut off Poland and Bulgaria from Russian natural gas because of their support for Ukraine, and the rest of Western Europe, notably Germany, is still held hostage to Russian gas and is now scrambling to find alternate long-term sources of natural gas and LNG.

“You want to know the big difference between Canada and Russia?” asked Jacob Irving, CEO of the Energy Council of Canada. “We don’t threaten our customers. This past week, Russia shut down two pipelines to Europe. Who does that?”

Whether Canada responds to the new market realities by fast-tracking those LNG projects that are still on the books remains to be seen.

Clark said she thinks LNG Canada “are going to prove the point that Canada can produce LNG in a way that advances reconciliation with First Nations in a very meaningful way and that is the cleanest in the world.”

But if Canada is to capitalize on its abundance of what Europe and Asia desperately need– natural gas – the industry needs more regulatory certainty, Clark said.

“The first thing that we need in Canada, and around the world, is we need certainty in the regulatory environment,” she said. “The second thing is we need simplicity in the regulatory environment, because it can’t take forever to get something approved when we are competing with people all around the world.”

She added the industry also needs First Nations “engaged and on board,” and a well-trained workforce.

One area in which Clark’s government showed some foresight in was anticipating the skills and trades training that would be needed to build LNG projects. The Clark government invested in new skills and trades training well in advance of projects moving forward to prepare a domestic workforce for an anticipated LNG and pipeline construction boom.

“We wanted to produce a workforce that was ready,” Clark said.

As a result, it appears the LNG Canada and Coastal GasLink projects have not suffered the kind of skilled worker challenges that Australia faced when its large LNG projects were being built.

Despite its workforce challenges, however, and despite not having anything close to Western Canada’s vast natural gas reserves, Australia beat Canada in the race to get the first new large LNG projects built, securing important long-term contracts with Asian customers.

Kelly Ogle, president of the Canadian Global Affairs Institute, asked why that was.

“We can’t play a role in trading our resources in the Indo-Pacific if we don’t have pipelines to the Indo-Pacific,” Clark answered. “It’s a simple as that. And, of course, our dear friends and neighbours in the United States would like to make sure that that disadvantage remains for Canada as long as possible.

“We can’t play a role in assisting Europe and India and other countries in finding their way from Russian natural gas and oil if we don’t have pipelines to fill the world’s need.”

Of two major natural gas pipelines that had been permitted for LNG projects, only one is being built -- Coastal GasLink. The Prince Rupert Gas Transmission is permitted, but was put on hold when Petronas cancelled the PNW LNG project.

Another impediment to moving energy projects forward in Canada is “jurisdictional overreach from various federal governments that has accelerated in the last 10 years,” Clark said.

The Appeal Court of Alberta just this week also underlined this “overreach” in a decision that found the federal Impact Assessment Act to be unconstitutional and an “intrusion” into the jurisdiction of provinces over natural resources.

“Fundamentally, that’s why there is so much friction between the provincial and federal governments around resource development," Clark said. "Because provinces believe -- and know -- that our constitution grants that jurisdiction to the sub-national level of government, and the federal government is always trying to find a way in to monkey with it.”

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