The British Columbia government is considering a requirement to force liquefied natural gas terminals to have a carbon footprint at least one-third below global standards, said two people familiar with the talks.
The government of Canada’s Pacific Coast province is discussing the proposal with energy companies as it seeks to fulfill its pledge to make the nascent industry the cleanest in the world, said the people, who asked not to be identified because the talks aren’t public.
“If they do follow through with this, it would be a main plank or potentially the only plank on which they could claim they have satisfied that promise,” Matt Horne, a Vancouver-based director at the Pembina Institute, an environmental research group, said in a May 22 phone interview.
Premier Christy Clark forecasts a C$1 trillion ($920 billion) economic boost from the LNG industry by 2046 and plans to wipe out government debt with royalties and taxes. The lower carbon stipulation for plants would add to an existing levy on greenhouse gases in British Columbia, which has a target to reduce emissions a third below 2007 levels by 2020, and an LNG-specific tax being advanced.
With at least 13 LNG proposals, including from Petroliam Nasional Bhd., Royal Dutch Shell Plc and Chevron Corp., British Columbia is competing with projects in Mozambique, Australia and the U.S. to meet soaring Asian gas demand. There have been no decisions to proceed yet in the Canadian province, where the government wants three terminals built by the end of the decade.
The British Columbia government is discussing ways for the industry to reduce greenhouse gases, Environment Minister Mary Polak said in a May 23 interview in Vancouver. In theory, companies could lower the so-called emissions intensity of facilities by paying into a fund, offsetting the impact, or by using technology to reduce carbon output, she said.
Polak declined to confirm precise figures being discussed and said they won’t be finalized until they’re ready to be announced, noting the government has given the industry “early thinking” on carbon intensity targets.
“You would set a benchmark and anything above that the companies would have to address,” Polak said.
The current industry standard for output of greenhouse gases is 0.25 metric tons per ton of LNG, Polak said. While technology to run plants with electricity instead of gas yields the lowest emissions, at 0.13 metric tons per ton of LNG, the government won’t force companies to build so-called electric-drive plants, she said.
The government appears to have clarified its 2012 pledge to create the world’s cleanest LNG industry, made by Clark at a World Economic Forum in China. Rich Coleman, the minister of natural gas development, said the promise means “we will beat any other gas-fired plant in the world,” according to an interview this month with the Globe and Mail.
“This is clearly one of the conversations that will continue over the coming months and maybe even a year and more,” Marvin Odum, head of Shell’s upstream business in the Americas, told reporters May 22 in Vancouver.
“My expectation is that it will meet the requirements,” Odum said, referring to Shell’s Canadian LNG project.
Shell hasn’t publicly disclosed details of its proposal’s expected emissions.
Requiring that facilities are one-third less carbon intensive than the industry standard would add to a new LNG tax in the province, said Cameron Gingrich, a Calgary-based director at Ziff Energy, a unit of Solomon Associates. Canadian plants will already use 10 percent to 15 percent less energy to chill gas into a liquid because of cooler temperatures, he said.
“By making these projects more onerous in terms of costs, it makes them less competitive when compared with other places in the world,” Gingrich said.
British Columbia’s existing C$30 per metric ton carbon tax, applied to a hypothetical Canadian LNG project with four liquefaction units, would result in annual payments of at least C$82 million a year, according to Ziff estimates.
The province is on track to miss its carbon reduction target by 2020, according to an October report by the Canadian environment ministry. The report considers 2 million equivalent metric tons of carbon dioxide from LNG projects in Canada in 2020, based on a National Energy Board outlook that assumes just 1 billion cubic feet a day of LNG exports by 2019. That level of LNG production is less than each of the Petroliam Nasional, Shell and Chevron projects.
“The scale of the LNG opportunity is such that it’s going to have a material impact on GHG emissions in the province which will put us way off side on the legislative targets that were set way back in 2007,” Jock Finlayson, chief policy officer of the Business Council of British Columbia, said in an interview on May 21.
Assuming five or more LNG terminals are built in British Columbia by 2020, emissions associated with drilling for gas, developing the facilities and tankers entering and leaving coastal waters would rise to 73 million metric tons a year, three-quarters of the projected carbon impact of the oil sands, according to the Pembina Institute.
Speaking at an industry conference in Vancouver last week, Clark said LNG plants along Canada’s Pacific Coast will lower global carbon emissions by weaning Asian economies off “dirtier” fossil fuels.
“This is about our opportunity to make the biggest change and the biggest contribution we ever have as a province to reducing greenhouse-gas emissions around the globe,” Clark said, reiterating a promise to make British Columbia “the most competitive jurisdiction of our kind in the LNG business.”