Tue, Apr 23 2024 23 April, 2024

British Columbia LNG drive may wreck climate targets: report

The Canadian province has a target to cut emissions by 40 percent by 2030. But the scramble to export British Columbia’s LNG to Asia could make that impossible.

Downtown Vancouver, British Columbia, Canada (Photo credit: Adobe Stock/CK)

The push to build multiple British Columbia LNG projects risks locking in emissions and puts the province on track to blow past its climate targets, according to a new report.

British Columbia’s climate laws require a 40 percent cut to greenhouse gas emissions by 2030, from a 2007 baseline. It has also laid out a target for reductions specifically from the oil and gas sector — emissions cuts of 33 to 38 percent by the end of the decade.

However, reaching climate goals while also building up a large British Columbia LNG industry cannot be reconciled, according to a report from the Vancouver-based David Suzuki Foundation.

Two projects alone could push emissions far beyond BC’s goals. For instance, the first phase of LNG Canada, a massive project backed by Shell, Petronas and other partners, is the largest private sector investment in Canada’s history. When it comes online, the 14 million-tonne-per-annum LNG project will release the equivalent of one-fifth of all of BC’s 2020 emissions.

That project, along with the smaller Woodfibre LNG that is currently under development, would push oil and gas sector emissions to nearly twice as high as the 2030 target. There are as many as 17 more British Columbia LNG terminals that are in various stages of development — although only a handful have decent odds of moving forward.

“If all LNG projects were approved and deployed, sectoral emissions would grow to almost three times the 2030 target,” wrote Daniel Horen Greenford, a postdoctoral fellow in climate policy at Concordia University, and the author of the report.

“Each of these projects adds on to the burden when already, the province is having a hard time meeting its targets,” Tom Green, senior climate policy advisor at the David Suzuki Foundation, told Gas Outlook.

Many LNG developers in British Columbia have claimed that exporting gas can be a climate solution because it can displace higher-polluting coal overseas. They also argue that LNG from Canada is cleaner than anywhere else.

For instance, LNG Canada states that the project is delivering the “lower-carbon energy that the world needs.” Woodfibre LNG says it will be the “lowest-emission LNG” project in the world. Further north, Ksi Lisims LNG, says it will have a “pathway to net zero emissions.”

Canadian bank RBC issued a report in April that made a similar case. Because Canada has stronger environmental regulations than other countries around the world, and because much of the electricity supplied to the liquefaction facilities on the Pacific Coast will come from hydropower, Canadian LNG could offer lower-emissions gas than many other countries.

But the David Suzuki Foundation report disputes many of these industry claims. Methane that leaks up and down the supply chain raises doubts about any supposed climate benefit that gas has over coal. Indeed, there is growing evidence that methane emissions from oil and gas operations are vastly undercounted in the U.S.

The same is likely true in Canada as well. One study using aerial surveys found that oil and gas operators in the Red Deer region of Alberta emitted 17 times more methane than industry inventories suggested. Another study across Canada found that methane emissions could be 50 percent higher than what is recorded in official estimates.

On top of that, there are methane leaks at many other stages of the supply chain, including at LNG sites, during transit, and in distribution networks overseas. As Gas Outlook previously reported, experts wielding optical gas imaging cameras have demonstrated widespread methane leaks at several U.S. LNG sites operating along the Gulf Coast.

Taken together, it is not at all clear that LNG offers a climate benefit over coal.

Complicating matters further, China is rapidly building out wind and solar energy, so new sources of LNG may not be competing with coal. LNG cargoes shipped across the Pacific could be boxing out clean energy in China and elsewhere in Asia.

Another argument crucial to the sales pitch from Canadian LNG developers is that the facilities themselves will run on hydropower or other forms of clean energy instead of gas, offering a comparatively cleaner form of LNG.

The problem, however, is that using low-carbon energy for LNG sites cannibalizes energy that could otherwise go towards cleaning up Canada’s own electricity grid. For example, the two projects under development — LNG Canada and Woodfibre LNG — would use as much as 2.5 times of the total electricity generated by the Site C dam, a large and highly controversial project in its own right.

“Basically, it means you would have built a huge dam. You would have lost some prime agricultural lands and biodiversity. And all of that is just to export LNG,” Green said. “That isn’t a climate solution. It doesn’t make sense.”

More exports would then stimulate more drilling in the province. There is little chance the province can meet its own climate targets in such a scenario.

“What’s the point of having legislated targets to reduce emissions if the BC government is going to ignore them, and increase fracked gas production to support LNG exports?” Tracey Saxby, marine scientist and Executive Director of My Sea to Sky, a BC-based NGO, told Gas Outlook. “The easiest way for BC to hit its climate projects is to stop new fossil fuel infrastructure like Woodfibre LNG from being built. Stop the project. Cancel the permits. This isn’t rocket science.”

British Columbia LNG: shrinking “window” of opportunity

British Columbia is home to the Montney Shale formation, an enormous source of gas production. For years, much of that gas has been consumed locally or otherwise exported south to the United States. But a lot of it is still in the ground. The much larger prize of Asian markets has proven to be elusive, with high costs and extremely challenging terrain bedeviling pipeline companies and LNG developers.

Despite its reputation for being at the vanguard of environmental protection and climate action, successive governments in British Columbia have aggressively supported the buildout of major LNG projects on the Pacific Coast to ship gas abroad. Billions of dollars’ worth of investment and the hope of new jobs have attracted political support.

But Canada’s window of opportunity could be short-lived. RBC says that Canada has the chance to build up an LNG industry on the Pacific Coast and play a modest role in global markets, but that the clock is ticking as the global energy transition picks up pace. Long-term demand for gas remains highly uncertain.

“Global LNG markets are restructuring, opening fresh opportunities for West Coast projects. But that window won’t be open for long,” the report said. RBC itself has come under fire from Indigenous groups in British Columbia for its financial ties to the Coastal GasLink pipeline, which will feed gas to LNG Canada.

RBC says that Canada has advantages in the global market for LNG. Many LNG projects on the U.S. Pacific Coast were blocked by local opposition and high costs, meaning B.C. offers one of the few Pacific routes to Asia for North American gas (Mexico has several proposed projects to export gas from the U.S.). Shipping times are shorter, saving on costs. And the Montney Shale holds enormous volumes of gas, much of it at low cost.

But those advantages are at least partially offset by high construction costs. Much of B.C. is remote and densely forested, and pipelines need to traverse big mountain ranges. All of that means that capital costs are very high, and budgets tend to balloon far beyond initial estimates.

“Canada’s capital costs for greenfield projects are relatively high and it’s unclear whether foreign consumers are willing to pay added costs for diversified energy supplies,” RBC said.

Against that backdrop, even as there are 19 LNG projects hoping to go forward, only two are in active development. A few more are on the drawing board, but have yet to be finalized.

Green said there is a significant risk that LNG projects will go forward, but then become stranded assets in the years ahead as global demand for gas begins to plateau and then decline.

“Rather than economic development, you’re going to go through a severe case of boom and bust. The time for this has passed,” he said. “We don’t think the province should be supporting this industry anymore. It doesn’t make sense. And we see some promising signs that the province is starting to recognize that.”

Pressure from the public is also ratcheting up. British Columbia has suffered from a litany of historic climate crises in recent years, from wildfires, atmospheric rivers, and the 2021 heat dome that saw temperatures hit nearly 50 degrees Celsius, killing hundreds of people.

But the opportunity to shift towards a cleaner energy economy is also gaining traction with the province, Green said. He pointed to the sectoral cap on oil and gas emissions, which still needs to be fleshed out and finalized.

Gas Outlook posed questions to provincial government, which did not respond in time for publication.

Beyond that, Green said that British Columbia could become a place for other lower-carbon industries to set up and run their operations on relatively low-emissions electricity. B.C. could pitch itself as a clean and green place for other non-fossil-fuel-based industry.

“That’s an economic opportunity this province is now recognizing, and it may be a better bet than LNG. We’re starting to see some of those shifts,” he said.

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