Although work on the Kitimat LNG Canada facilities and related infrastructure is nearing completion, there are concerns about the economic viability of Canadian LNG on the global market. While the Asia-Pacific region is expected to move away from coal, there is no guarantee that it will be replaced by LNG. High capital costs and the fact that prices in destination countries are linked to oil are significant challenges for Canadian competitiveness. An existing supply glut has been worsened by a slump in energy demand following the COVID-19 pandemic, driving prices well below an economic break-even point. Nevertheless, the provincial government has pushed on and provided significant support in the form of subsidies for electricity prices, tax deferrals, and royalty credits. Despite the high cost of these measures to British Columbians, the impact of these measures on production costs is expected to be small, leaving the industry and province relying on an eventual increase in prices for LNG to become competitive.
Environmental, health, and safety concerns, too, may outweigh the advantages of an uncertain displacement of coal. The extraction, processing, transport by pipeline, liquefaction, and shipping of NG, and subsequent shipping are energy intensive activities that add to the “carbon cost” of LNG. NG itself is mostly methane, a potent greenhouse gas, and leakages throughout the system could potentially offset the benefits of displacing coal. In the context of Canada’s commitments to the Paris agreement and its updated climate policy, the cost of addressing these concerns may prove prohibitive to further development of the industry in BC. As such, it may be premature to draw conclusions on the potential of NG for global reduction in GHG emissions.
The construction of the LNG Canada project, and more specifically the Coastal Gaslink pipeline, has also had significant social impacts, most notably the existing conflict with the Wet’suwet’en, one of the First Nations whose land is crossed by the project. At the core of these issues are disputes over jurisdictional authority within the affected Indigenous communities, as well as legal conflicts with the Crown regarding Indigenous rights, title, and law. Disagreement exists between proponents of the project who seek opportunities for critical economic development, and opponents who advocate for the legal recognition of pre-colonial Indigenous stewardship of unceded Wet’suwet’en land. The conflict eventually led to a series of protests against the project and railway blockades. An injunction from the BC Supreme Court, enforced by the Royal Canadian Mounted Police, finally allowed the project to move forward, damaging perception of Canada’s commitment to reconciliation and climate justice. For many, the Coastal GasLink pipeline has come to represent Canada’s fraught relationship with First Nations and the failures of reconciliation.
Yet the government’s support for the industry remains strong, as demonstrated by a renewed commitment to LNG in the platforms of all main political parties in the 2020 provincial elections. This support is based on continued optimism that demand for Canadian LNG will continue to grow to displace coal, and that the economic opportunity given the country’s vast reserves is too good to pass. The government seems to have gradually introduced policy measures and related infrastructure projects, creating an environment friendly to the gas industry, incentivising future investments. Notably, the global context related to supply, demand, and technological alternatives has changed over the years since the government started to set the stage for LNG development, and it will likely continue to do so in the coming decades during which the projects are expected to operate.
