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Energy transition and security not an either-or proposition

Canadian LNG projects taking shape, overshadowed by the U.S.
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GVBOT CEO Bridgitte Anderson, left, discusses First Nation involvement in energy with Haisla Chief Crystal Smith.

The $40-billion LNG Canada project in Kitimat is past the 70% completion mark, site preparation work has started on the $5.1-billion Woodfibre LNG project in Squamish, and the Cedar LNG proposal in Kitimat just last week made it through the BC Environmental Assessment process.

Whether or not Cedar LNG – the first LNG project to have a First Nation as a majority owner – gets the green light is now in the hands of provincial environment and energy ministers and a former member of Greenpeace – federal Environment Minister Steven Guilbeault.

Their decisions on Cedar LNG are expected by the end of December. 

“I hope, when I return to next year's energy forum, we are sharing the news that we have achieved a favourable financial investment decision on one of the world's first indigenous majority owned LNG infrastructure," Haisla First Nation Chief Crystal Smith said Wednesday at an energy forum hosted by the Greater Vancouver Board of Trade and Bennett Jones. 

The Haisla are majority owners of the Cedar LNG project, some salient features of which is that it will be entirely electrified and is majority owned by the Haisla. 

While it may seem like progress to have two LNG projects underway and a third potentially getting the government green light, the reality is that Canada ceded field to the U.S. in the race to capture market share in the growing global LNG market.

And concerns were raised Wednesday that Canada might likewise cede the field to the U.S. on other new decarbonization fuels and technology, such as hydrogen and carbon capture and storage (CCUS).

How Canada can participate in the energy transition while also maintaining energy security, both domestically and globally, was one of the topics at a panel discussion Wednesday.

A simplistic view of the energy transition is just to turn off the oil well taps and switch to renewable energy. Despite Europe’s best efforts to transition from fossil fuels to renewable energy, the war in Ukraine and the energy crisis now gripping Europe underscores the hazards of not securing enough traditional energy in that transition.

“You can’t stop servicing the customers who need the energy today,” said Susannah Pierce, president and country chair of Shell Canada. “Because we see what’s going on in the world when you don’t have energy. So we need to make sure there’s redundancy. We need to make sure there’s reliability. Because we can’t stop producing energy that people need today.”

Europe is in the grips of a major energy crisis – one that Canada, despite abundant natural resources, is powerless to help with. It had failed to seize earlier opportunities to build pipelines for the export of both oil and natural gas.

When German Chancellor Olaf Scholtz came to Canada in August to see if Canada might have some fossil fuels to spare, notably natural gas, the Canadian government offered him hydrogen – the production of which is even further off in the future than LNG.

Peter Tertzakian, deputy director of ARC Energy Institute, threw a bit of cold water on Canada’s aspirations of one day becoming a major exporter of hydrogen. While he said there will be a role for hydrogen domestically for certain sectors, he expressed doubts about exports.

“I’m less optimistic, candidly, about Canada being a hydrogen exporter,” he said.

He said the “chemical gymnastics” required to transport hydrogen make it challenging. Hydrogen is challenging to transport, so it might first have to be made into ammonia, transported, and then converted back into hydrogen at the receiving end.

Tertzakian added that hydrogen could end up competing with other “green” energy sources.

“It’s not clear to me that hydrogen will be the winner,” he said.

“There’s a lot of exuberance around hydrogen right now, but I would say we have to be careful not to put all the proverbial eggs in one basket, because there are a lot of other very interesting technologies that carry energy in different ways, convert energy in different ways, that can be competitive.

“We have to start thinking about green-on-green competition into the 2030s today, otherwise we will potentially misplace or misallocate billions of dollars.”

Roger Dall’Antonio, CEO of FortisBC, pointed out that in 2017, FortisBC was the only LNG producer in Canada. At that time, the U.S. had no LNG export projects. It now has several, producing 90 million tonnes per annum of LNG, while the first major LNG exports from Canada are not expected until mid-decade.

Lisa Baiton, new CEO for the Canadian Petroleum Producers (CAPP), is a former managing director for Canada Pension Plan Investments. Ten years ago, she said many investors considered Canada a potential leader in LNG exports.

“For a lot of different reasons, that capital went elsewhere," she said. "The U.S., which was nowhere on LNG seven years ago, is now the world’s largest exporter of LNG. And that could have been Canada’s opportunity.

“We are facing that same opportunity -- or evaporation of the opportunity -- now on a lot of the CCUS and other GHG reducing innovations.”

Tertzakian added that, not only did the U.S. beat Canada at LNG, it is now using Western Canadian natural gas to do it.

“We have two of the largest natural gas producers in Canada that have signed deals with Gulf Coast LNG exporters,” Tertzakian said. “The United States is only (too) happy to act as our agent, take a cut of the value of natural gas, and transit it through the U.S. to global markets.”

Baiton said the oil and gas industry understands it has a role to play in decarbonization. But investment is increasingly constrained by what she called regulatory and policy “pancaking.”

“We have not been investing enough to keep the existing system functioning as it should,” she said.

She said Canada’s decarbonization policies lack the kinds of incentives that the U.S. provides, including for decarbonization technologies like CCUS, under the new Inflation Reduction Act (IRA).

That act, Dall’Antonio noted, subsidizes half the cost of developing green hydrogen production.

“Look at the U.S. IRA and compare it to the federal and provincial policy pancake,” Baiton said. “The U.S. is really an all-you-can eat buffet of carrots – incentives. They want to own this space. And I would say Canada is still more of an all-you-can-eat buffet of sticks.”

First Nations in Canada are playing an increasingly important role in advancing both traditional and new energy development. While the Haisla are developing the Cedar LNG project, with Pembina Pipeline Corp. (TSX:PPL) as an industry partner, the Fort Nelson First Nation are involved in a number of other clean energy projects, including geothermal energy and biomass.

The Fort Nelson First Nation have a partnership with Peak Renewables, which plans to build a new wood pellet plant. Wood pellets, made from wood waste, have a market in Asia and Europe, where they are burned as a carbon neutral alternative to coal to produce power.

Fort Nelson Chief Sharleen Gale, who is chairperson of the First Nations Major Projects Coalition, said all "net zero" projects, including transmission lines, will necessarily run through First Nations territories, who will necessarily need to be active partners.

"So we really need to be at the forefront of this transition," she said. "We don't want to be just coming along with the transition -- we actually want to lead it."

nbennett@biv.com 

@nbennett_biv 

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