Agreements reached between the government of British Columbia and Pacific NorthWest LNG establish the path to a final investment decision on the project and set the stage for a potential US$36 billion investment in Northern B.C.
B.C. Premier Christy Clark and Michael Culbert, president of Pacific NorthWest LNG, on May 20 signed a memorandum of understanding that sets out the steps leading toward ratification of a project development agreement between government and the company. Michael de Jong, Minister of Finance, signed the project development agreement on behalf of the government, which initiates a ratification process by both the company and the British Columbia Legislature. Rich Coleman, Deputy Premier and Minister of Natural Gas Development, signed the Province’s long-term royalty agreement with the company.
“Today reflects the beginning of the company’s final decision path toward an investment decision,” said B.C. Premier Christy Clark. “Today’s agreement is the product of tremendous effort right across government and among many partners to recognize a generational opportunity and ensure that we are ready to seize it, for the benefit of British Columbians today and those who are to come.”
Pacific NorthWest LNG plans to build a liquefied natural gas (LNG) facility on Lelu Island, located in the District of Port Edward on land administered by the Prince Rupert Port Authority. The first phase of the project would consist of two liquefaction trains, two LNG storage tanks, marine infrastructure with two berths for LNG carriers, a material offloading facility, as well as administration and auxiliary buildings. The facility would liquefy and export natural gas produced by Progress Energy Canada Ltd. in Northeast B.C. for transport to Lelu Island by the Prince Rupert Gas Transmission project.
“The substantial progress experienced by Pacific NorthWest LNG over the past two years is a product of hard work, compromise and co-operation,” said Culbert. “Today’s commitment by the government of B.C. to legislate our Project Development Agreement provides the certainty that our investors need as we approach a decision whether to proceed with the project.”
“The benefits from LNG activity will be significant for British Columbia’s economy, and we want to help companies and communities make that happen,” said de Jong. “These agreements will help provide LNG companies with the kind of certainty they need to make long-term plans to do business in communities across B.C.”
Another way the province is paving the way for LNG investment is through changes to the Petroleum and Natural Gas Act under Bill 23, the Miscellaneous Statutes Amendment Act, 2015. A new section in the act will allow the Province to enter into long-term royalty agreements with natural gas producers specifying the royalty rates owed to the Province by a producer. With this certainty, industry can plan their operations over a longer period of time and commit capital to jobs and production needs, while the Province has a guaranteed royalty revenue each year.
“We are starting a new chapter in British Columbia’s long history as a resource economy,” said Coleman. “Today’s agreement provides Pacific NorthWest LNG with certainty and the potential to become the first export facility in our province.”
The province continues to consult with the Tsimshian Nations – Lax Kw’alaams, Metlakatla, Gitxaala, Kitsumkalum, Kitselas and Gitga’at First Nations – regarding the Pacific Northwest LNG project. B.C. has also engaged with 19 First Nations along the proposed Prince Rupert Gas Transmission Pipeline route. Fourteen agreements related to the facility and pipeline have been achieved to date.
Over the coming weeks, the agreement will be subject to internal approvals by Pacific NorthWest LNG and partners. If approved by the proponent and its partners, the government of B.C. intends to recall the legislature as soon as practicable to introduce legislation that enables the agreement, where it will be debated publicly and be subject to approval.
Between 2015 and 2020, Asian economic growth and the switch to a cleaner fuel will almost double the demand for liquefied natural gas. British Columbia has a natural gas supply estimated at 2,933 trillion cubic feet. This could support domestic and export markets for the next 150 years.