Posted - By Keith Schaefer | Sun, 18 August 2013 - OilPrice.com
According to a new Financial Post story, the number of countries
exporting Liquefied Natural Gas (LNG) is expected to double – to 50 – by
the year 2020.
So what's holding up export proposals for Canada’s west coast?
These 3 factors, mainly...??
1. Permits
2. Taxes
3. Offtake deals??
Today's
story focuses on permitting—but you'll first want to recall that the
first LNG proposal that will export BC and Alberta gas—the Douglas
Channel project with Golar (GLNG-NASD) – is so small at 0.2 bcf/d that
it doesn’t need all this permitting.??Very small projects like that
don't need the big permits, just some small ones.
This article
is about the big LNG proposals, like Shell and Chevron and Petronas.??So
with that in mind…what is the permitting process for a proposed
liquefied natural gas export facility? What are the biggest
challenges???
Step 1: The National Energy Board (NEB)??
The
first hurdle – an export license from the federal National Energy Board
– tests whether the project is in Canada's economic best
interests.??LNG proponents apply to the NEB to ship certain volumes of
LNG annually for a set number of years. To grant an export license the
board must find that the proposal is in the public interest and that the
energy commodity to be exported is surplus to Canada's energy needs.??
Here
the "best interest" question is only economic – the NEB is not charged
with considering environmental impacts. Since the province – nay, the
continent – is overflowing with natural gas and its export should
generate all kinds of jobs and tax revenues, it's little surprise that
the board has approved every single LNG export license so far.??Three
projects – Douglas Channel, Kitimat LNG, and LNG Canada – have already
obtained NEB authorization. Three other applications are under review.
Related article: Canada's Offshore Versus Shale Gas
Step 2: Environmental Approval??
The
environmental assessment (EA) process is the longest and most
complicated permitting step – and it carries the least certainty. To
earn a green light projects have to meet the goals of environmental,
economic, and social sustainability.?
To that end, the EA process
examines each project for anything that could be environmentally,
economically or socially bad, and what heritage and health effects that
may occur over the project's entire life cycle.??That means talking to A
LOT of people...??
1. Consulting with First Nations,
2. Completing in-depth technical studies on potential significant adverse effects,??
3.
Designing strategies to prevent or reduce those adverse effects, and
then putting all the input and findings into a huge report that carries a
recommendation to the Minister of the Environment and the Minister of
Natural Gas on whether the project should be allowed – or not.??
There’s
a “Pre-Application Phase," where the Environmental Assessment Office
(EAO) decides if the project does indeed need EA approval and, if it
does, how the approval process should work.??There is a lot of
back-and-forth between the government and the company submitting the
proposal—more technical data, engineering, proof of consultation, etc.??
Once
the full “Application Review Phase” starts, the EAO has 180 days to
complete its review. That period includes a 45- to 60-day public comment
period that includes open houses.??The EAO writes up a draft report
that it shares with the proponent, the working group, and with First
Nations, adding in any input. The final report includes a recommendation
from the executive director of the EAO on whether an EA certificate
should be issued and a draft EA certificate.?
The draft
certificate lists commitments the proponent made during the EA process
to address concerns. It is not uncommon for an EA certificate to have
more than 100 commitments – which are all legally binding if the
certificate is signed.??It then goes to the government and the ministers
have 45 days to make a decision. They can issue the EA certificate with
the commitments listed, refuse to issue a certificate, or require
further study.??Things have gotten easier on the EA front in recent
years. In its recent budget the federal government handed almost all
control of the EA process for energy projects to the provinces—before,
they both did one. Sigh.??
Related article: Terrorism: The Latest Salvo on LNG Exports
It's
a good move, but pipelines are still considered separate projects from
the LNG facilities themselves, so that’s another entire EA approval
process.??
The First Nations Issue
First
Nations support is vital. Earning support for a LNG facility might not
be too hard. Pipelines are a different story – and every facility needs
one.??Anyone who wants to build a pipeline across northern BC likely has
to consult with at least half a dozen First Nations, each with a
different set of expectations and demands.??If you can find common
ground, deals between project proponents and affected First Nations take
the form of Impacts and Benefit Agreements.
There are lots of
examples – but the biggest challenge is that there still is no clear
definition of what constitutes sufficient consultation, mitigation, and
benefits. A poorly defined end game, to say the least. Sometimes the
road is smoother. The Haisla First Nation that occupies territory near
Kitimat and at the head of the Douglas Channel is involved in three LNG
proposals.?
The Haisla are viewing this as an opportunity: they
believe the deals that will flow from these LNG projects could give
their people the ability to simply buy the lands they believe are
theirs, without a treaty (and negotiations have been going on for years,
if not decades).??
More Permits
After
this, work cannot start on the liquefaction plant until the project
earns a facility permit from the BC Oil and Gas Commission. Then there
are five different Acts that a facility must comply with—after the big
EA approval has been won.??The process isn't any more arduous than in
other places, though it is a new ballgame with rules being made up on
the fly. But BC offers advantages to would-be LNG exporters over other
locales.
1. The transport route from BC to Asia is only 9-10 days vs. 20-plus days for LNG ships out of the Gulf of Mexico.??
2. LNG is 30% more efficient in the cold weather of northwest BC vs. tropical areas.??
3.
Canadian gas fields have liquids like ethane and butane, which add
value by increasing the fuel's energy density. A lot of US LNG has to
add this in.??That's great for would-be exporters...but on the flip
side, the flood of interest raises some big picture questions for
British Columbians and for the regulators charged with developing this
brand new industry.??How many natural gas pipelines should be built
across northern BC??
Is a fleet of independent facilities the best
approach, or should proponents be required to rationalize some of their
infrastructure?
How should the operations be powered? How much should they be taxed???The next two years we'll see those questions answered.
Post to be found at:
http://oilprice.com/Energy/Natural-Gas/Canadas-LNG-Dream-Racing-Aheadat-a-Snails-Pace.html
No comments:
Post a Comment