Minister Said To Refer PETRONAS Gas Project To Trudeau Cabinet

(Bloomberg) -- Petroliam Nasional Bhd.’s proposal to build a liquefied natural gas terminal on Canada’s Pacific Coast faces further delay as the minister responsible prepares to declare it will likely have a significant environmental impact, according to people familiar with the matter.

Environment and Climate Change Minister Catherine McKenna will refer a verdict to Prime Minister Justin Trudeau’s cabinet rather than approving the C$36 billion ($27 billion) project with conditions, said to two officials who spoke on condition of anonymity because the decision isn’t yet public. The government’s review period ends March 22 but the cabinet has no deadline for its deliberations.

The Pacific NorthWest LNG decision is among the first tests of the Trudeau government’s handling of energy and climate issues. Earlier this year, it overhauled the environmental-review process to consider greenhouse-gas emissions from proposals and boost the role of cabinet in approvals. Liquefied natural gas proponents in Canada were already playing catch-up with global competitors before the oil-market collapse brought down LNG prices and caused companies to crimp spending on megaprojects.

“This is going to be widely watched as a barometer on the government’s interest in supporting what is the driver of the Canadian economy, which is energy,” said John Stephenson, chief executive officer and founder of investment firm Stephenson & Co. in Toronto. Petronas could abandon the project if the government imposes costly conditions on development, he said. “Any hiccup from the government’s side, I could see these guys walking.”

'Last' on LNG

None of the almost two dozen Canadian LNG proposals designed to ship fuel to Asia have been given a green light by backers including Royal Dutch Shell Plc and Chevron Corp. Shell said in February that it’s putting off a decision on construction of its project until the end of the year, citing reduced spending in the market slump. A smaller C$600 million project led by AltaGas Ltd. was also put on ice last month after proponents failed to line up customers.

Analysts are doubting how competitive Canada can be on LNG, as a supply glut forms and demand slows in Asia. Canada, with East Africa, is “last to the LNG party” behind the U.S. and Australia, CIBC World Markets commodities strategist Katherine Spector said in an October report.

On the Pacific NorthWest LNG proposal, McKenna is essentially following the advice of the Canadian Environmental Assessment Agency, which said in a report last month that the project would have a significant environmental impact because of its carbon emissions. In an e-mailed statement, McKenna’s press secretary Caitlin Workman said it’s “premature” to comment on the minister’s decision about the project, which will consider significant new information filed by the proponent.

Balancing Act

The Canadian government “recognizes the importance of new infrastructure development but has also been clear that any development must occur in an environmentally sustainable manner,” Workman said.

Trudeau faces political pressure from the government of British Columbia, Canada’s westernmost province. Premier Christy Clark is in favor of LNG development and backs the Pacific NorthWest proposal. One provincial government official, speaking on condition of anonymity, said the government expects McKenna to refer the case to cabinet and to then receive a decision within a few weeks.

The added delay is the latest setback for the project, which has been held up by opposition from an aboriginal group near the site of its proposed shipping terminal. While the proponents have changed the project design to address concerns that it would harm salmon habitat, a legal claim asserting title to the land by the Lax Kw’alaams Band continues to wind its way through the courts.

No Ultimatum

The Pacific NorthWest LNG partners, which also include Indian Oil Corp., Japan Petroleum Exploration Co., China Petroleum & Chemical Corp. and Brunei National Petroleum Co., are prepared to wait for Canada’s ruling to make a final investment decision and the expectation is that the government will act quickly, said Michael Culbert, president of both the project and Petronas’s Canadian subsidiary, gas producer Progress Energy Canada Ltd.

Sending the final decision to cabinet would allow the government to consider the development’s impact on the economy and job creation, as well as support from some aboriginal groups, in addition to its climate impact, Culbert said. While increasing emissions in Canada, the project will displace higher-carbon fuels such as coal in Asia, he said.

“We are encouraging a timely decision but have not given the government any kind of ultimatum,” Culbert said by phone Tuesday. Gas drilling tied to the project has slowed and pipeline construction plans are on hold as the proponents await a ruling, he said. “We’re shovel-ready.”

To contact the reporters on this story: Josh Wingrove in Ottawa at ;Rebecca Penty in Calgary at To contact the editors responsible for this story: David Scanlan at Stephen Wicary, David Marino

Copyright 2017 Bloomberg News.


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Jamie Sturm | Mar. 18, 2016
This is absolutely unacceptable, we are 10yrs behind the rest of the world in our shipping of LNG, and the BEST thing we can do for the environment is to get clean burning LNG to the biggest polluters like China and India and hurry up about it. Our environment and energy industry depend on it, these petty politics are going to get us in serious trouble. These energy companies will pull out of Canada all together if this continues- and there we will be another 10-15yrs of uncertainty. Please understand that we cannot have a positive effect on climate change here in Canada alone, we need to help the big polluters change.

Jurg Burg | Mar. 17, 2016
I dont understand why the Trudeau government wants to harm the environment by not allowing LNG exports. The biggest consumers of this LNG will be China and India, which means they will reduce their dependence on coal. Wouldnt that be a good thing? Besides, I thought natural gas was supposed to be the transition fuel to renewables, so why deprive Canada the opportunity to be a world leader in this?

Dan | Mar. 16, 2016
The Canadian government “recognizes the importance of new infrastructure development but has also been clear that any development must occur in an environmentally sustainable manner,” Workman said. Nobody disagrees with development in a sustainable manner. What industry has an issue with is the governments ever-changing definition of what sustainable manner actually means. We cant operate in a regulatory environment if the regulations are constantly changing!

Glenn | Mar. 16, 2016
Inexplicably the Trudeau government wants to commit economic suicide all under the guise of environmental responsibility. The world will not stop using fossil fuels in our lifetime, and our environmental and safety record and technologies are as good or better than anyone on the planet. Their feet dragging is insanity.

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