Comply, Offset or Pay: BC To Regulate LNG Export Facilities on CO2 Emissions

Today, the BC Government introduced new legislation aimed to help BC meet its greenhouse gas emission targets by imposing environmental standards on liquefied natural gas (LNG) export facilities operating within the province.

Under the Greenhouse Gas Industrial Reporting and Control Act, natural gas cooling facilities must meet a benchmark of 0.16 carbon dioxide equivalent (CO2e) tonnes per tonne of LNG produced. Per the BC Government background statement,  leading global LNG facilities have emissions intensities between 0.18 and .027 tonnes of CO2e per tonne of LNG produced.

The new legislation is aimed to encourage LNG proponents to design their facilities by improving efficiency or using clean electricity. However, if facility design improvements or use of clean electricity do not meet the 0.16 benchmark, proponents will have to option to either purchase BC-based carbon offsets at market prices, or contribute to a technology fund at a rate of $25/tonne of CO2e.

As a point of reference, in 2011 British Columbia's carbon offset inventory was approximately 1,600,000 tonnes. In 2013, the BC public sector purchased 696,295 offset tonnes at $25/tonne in support of the carbon neutral BC public sector. The current BC offset inventory is unknown.

The BC Government's plans for the LNG technology fund include investments into strategies or technologies which include low-or-no venting equipment, electrification, cogeneration and waste heat recovery, natural gas vehicles, and exploring carbon capture and storage or reuse.

The new emissions standards for LNG export facilities follow the BC Government's promise of "Cleanest LNG in the World". However, cooling the natural gas for export is only part of the nascent LNG sector.  Much of the life-cycle emissions from the LNG industry is in the gas fields, the "upstream".  To date, BC has not tabled emissions reductions regulations for any upstream or midstream natural gas operations.

Of course, purchasing offsets or paying into a technology fund will not reduce CO2 emissions from the LNG industry. But hopefully the new legislation will sufficiently incentivize LNG proponents to use the latest technology available and wherever possible, plug-in to the nearby BC Hydro transmission grid, where 93% of the electrons come from CO2 emissions free clean or renewable resources.

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BC Mega Dam Granted Environmental Approvals

Today, the proposed Site C 1,100 MW hydroelectric dam in northern British Columbia received environmental assessment (EA) approvals from both the Provincial [pdf] and Federal [pdf] Governments.

In issuing its EA certificate, two provincial ministers decided that that the mega-dam project is "in the public interest and that the benefits provided by the project outweigh the risks of significant adverse environmental, social and heritage effects."  The provincial EA certificate sets out  77 legally-binding conditions.

For its part, the federal minister of environment issued an EA Decision Statement [pdf] setting out 80 conditions the project proponent must meet.

Certainly, obtaining environmental approval is major milestones for the project, but it must still receive a final investment decision (FID) from the BC Government, which according to media reports is expected before the end of 2014.

The decision for Government will not be an easy one. In face of viable cost-effective alternatives, the massive Site C construction project is directly competing for labour and materials with the nascent liquefied natural gas (LNG) projects whose proponents are preparing to make their own FIDs in the coming months. Timing is crucial and margins are thin. In addition, the $7.9B cost estimate of the project is over four years old and must properly be brought current, especially given today's market realities.

For the BC renewable energy industry, major project development opportunities remain, including working with First Nations and supplying remote communities, electrifying the LNG industry and the numerous proposed mines around BC. The province has a tremendous bounty of clean and renewable energy resources and a history of developing them. At present, the private clean energy sector is ready, willing and able to invest in British Columbia, but for how long?

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Canada High Court Decision Impacts Energy Project Development

The Supreme Court of Canada (SCC) by unanimous decision on June 26, 2014 in the case of Tsilhqot’ in Nation v. British Columbia declared for the first time “Aboriginal title” in Canada for the Tsilhqot’in Nation over tract of land in the interior of British Columbia. This case furthers a long line of decisions on Aboriginal rights and title.

In Tsilhqot’in, the SCC prescribes the meaning of Aboriginal title and articulates new tests for establishing it. The decision lacks clarity on the practical application of its ruling. The result, at least in the short run, is uncertainty, and additional clarity from the courts will be required. In the meantime, if major projects are to proceed, a much higher level of cooperation among First Nations, government and project proponents will be required.

In brief, Aboriginal title confers on the group that holds it the exclusive right to decide how the land is used and the right to benefit from those uses, subject to the restriction that the uses must be consistent with communal ownership of the interest and must assume the continued enjoyment of the land by future generations. Government infringement of Aboriginal title is theoretically possible in certain circumstances, but court challenges on this aspect are likely to abound.

The implications of the case are significant and the impacts cannot yet be determined. It seems clear however, that in addition to observing established duties of consultation and accommodation, it will be prudent for governments, going forward, to obtain consent of each First Nation which has a potential Aboriginal title claim in respect of Crown lands which are proposed for development or in respect of a disposition of any interest is proposed in British Columbia.

Further analysis of the decision and its impact on the BC energy sector to follow.

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CEAA JRP Issues Report and Recommendations on BC Mega Dam

Yesterday, the Canadian Environmental Assessment Agency Joint Review Panel (JRP) issued its comprehensive Report on BC Hydro’s proposed 1,100 MW large hydroelectric dam, Site C Clean Energy Project.

Here is the final JRP Report summary and the Report in full (all 457 pages).

After a lengthy public hearing, the JRP examined the mega dam Project and the evidence presented by a wide range of participants. The Report addresses among other things the environmental, social and economic impacts of the dam.

The JRP’s Report and its recommendations leave more uncertainty in the British Columbia electricity sector, especially in the face of growing domestic demand and the expected development of a liquefied natural gas export industry in the province. But the Report cannot be ignored. There are some serious questions about the impacts, need and costs associated with the Site C Project.

The Panel identified 3 major hurdles that the Project must overcome if it is ever going to move ahead:

1.    First Nations: The JRP concluded that Site C would likely cause:

  • for First Nations represented by Treaty 8 Tribal Association, Saulteau First Nations, and Blueberry River First Nations,
    • significant adverse effect on fishing opportunities practices” and that “these effects cannot be mitigated”;
    • significant adverse effect on hunting and non-tenured trapping” and that “these effects cannot be mitigated”;
    • significant adverse effect on other traditional uses of the land” and that “some of these effects cannot be mitigated” and
  • significant adverse cumulative effects on current use of lands and resources for traditional purposes”.

2.    Project Costs: The JRP could not conclude “on the likely accuracy of the Project cost estimates because it does not have the information, time or resources. This affects all further calculations of unit costs, revenue requirements, and rates.” BC Hydro’s current $7.9 billion estimate for the Project is based on 2010 numbers. Four years is a long time, even more so, in the context of expected LNG major project construction at the exact same time as Site C. If the JRP does not believe BC Hydro's own cost-estimates for Site C, then how can any conslusions be made about the Project's cost-effectiveness versus alternatives? 

3.    Need: The JRP concluded that BC Hydro has "not fully demonstrated the need for the Site C on the timetable it proposed". Long term forecasts are very difficult, especially in the context of the evolving BC and  western states electricity marketplace. There is little doubt that electricity demand is growing in the province. The JRP Report suggests that updated forecasts for future load growth and timing thereof are needed.  Here LNG and achievement of conservation targets are the big unknowns.

The JRP Report is waiving a large yellow caution flag over Site C. There is still much consultation, pricing and regulatory work to be done, with the JRP’s recommendations presumably guiding the path forward. The biggest challenge of course is overcoming the mega Project’s mega First Nations impacts which in the opinion of the JRP “cannot be mitigated”. Given the constitutional protection of First Nations rights, this as one would expect, will be a very tall order for BC Hydro.

Provided this can be done, to move the Project forward, prudence would suggest that the province obtain an updated and accurate cost estimate for Site C which contemplates major civil project construction competition from the LNG industry. Then armed with this critical information, the province along with the entire BC energy industry (First Nations, major users & generators alike) should properly examine long term demand scenarios and the viability of cost-effective alternatives against the revised estimated costs of the Project and its significant impacts to First Nations and the environment. 

With the prospectiv e development of the LNG industry and advances in cost-effective renewable energy technology, the entire energy landscape in the province is changing. Maybe a mega dam like Site C is needed. But perhaps, it is not. The JRP Report makes it abundantly clear however: the proposed Site C Project in its current form needs further examination

The ultimate decision to proceed is now left with both the provincial and federal governments. A final investment decision is expected within the next six months (before November, 2014)

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BC Hydro's Integrated Resource Plan Released

Today, at long last, BC Hydro released its intergrated resource plan. 

BC Hydro advises on its website that it has been accepted by Government.

Click here for a link to the full IRP.

Notable is the inclusion of a Clean Energy Strategy [pdf] which outline's BC Hydro's strategy to support the province's clean energy sector and promote clean energy opportunities for First Nations communities.

More analysis to come....

The Case For Electrifying BC's Natural Gas Fields

It is no secret that beneath the surface of the northeast section of the province of British Columbia lies very large natural gas reserves. Last week, the Provincial Government announced that it believes the province has an astounding 3.93 quadrillion cubic feet of natural gas potential, of which 449 trillion cubic feet are estimated in the Montney gas field alone, roughly a 150 year supply (presumably based on current Canadian use).

Energy intensive natural gas processing and piping from the wellhead to the processing plants can be done using natural gas or electricity. In B.C., electricity from the BC Hydro grid is about 93% renewable. Given the expected long life span of the drilling activity in the Montney, it makes economic sense to electrify operations in this region. Any fear of stranded investment in electricity infrastructure is virtually eliminated.

The business case for electrifying the Montney gas fields including processing in B.C. is compelling. That it can be paid for is of course critical, but there are many more reasons:

  1. The Montney is located relatively close to the B.C. Hydro transmission grid and much of the new generation that would be required (wind and small hydro projects with thermal back-up);
  2. B.C.’s predominantly clean electricity makes for low emission gas extraction (attention: “Cleanest LNG in the World”);
  3.  A significant opportunity for the B.C. renewable energy industry, including First Nations (see Premier’s mandate letter to Minister Bennett);
  4.  First Nations participation in natural gas industry (see Premier’s mandate letter to Minister Rustad);
  5. Private sector investment, jobs and economic development in remote B.C. communities; and
  6. Royalty capture (less gas burned to produce gas, so more Provincial natural gas royalties).

Electrification of the fields and processing is not a novel concept. Just look at some current examples:

  1. The Bakken oil fields in North Dakota where the local utility, Basin Electric, is building a new 200 mile $347 million transmission line and two power plants;
  2. The Permian Basin oil fields in Texas will be serviced by the new $7 billion CREZ wind power supported transmission line; and
  3.  In eastern Ohio, electricity is being used for natural gas processing.

Here in B.C., the Northwest Transmission Line is being built to support future mining development in the northwest sector of the province. The electrification opportunity in the natural gas fields and processing plants is greater and even more certain that the mining potential.

The time for expansion of the B.C. transmission grid to support electrification is now. British Columbia has no shortage of renewable energy resources and developers keen to supply the electricity requirements of the natural gas industry.  Using clean renewable electricity to support large scale industrial development is a hallmark of this province. There are many good reasons to support electrification including reductions in greenhouse gas emissions. It is time to get on with it.

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Wind Energy Development in British Columbia Lags Rest of Canada

The Canadian Wind Energy Association (CanWEA) released a map showing 7,051 MW of installed wind energy capacity across Canada. According to CanWEA, the top three wind generating provinces are: Ontario (2,366 MW), Quebec (1,866 MW) and Alberta (1,117 MW).

British Columbia lags the rest of Canada with only 3 operating wind projects (Bear Mountain, Dokie Ridge, and Quality) comprising a paltry 390 MW.  More are on the way however. Cape Scott (100 MW) is expected to come online soon and Tumbler Ridge and Meikle were awarded EPA's with BC Hydro under the 2008 clean power call.

Recently, some new major wind projects in British Columbia were announced. EDP Renewables, TimberWest and T'Sou-ke First Nation have plans to develop a 300 MW wind projects on southern Vancouver Island. This single project would almost double existing wind capacity in the province. An editorial from the Victoria Times-Colonist considers the project worth a closer look.

In addition, EDF EN Canada and West Moberly First Nation  announced three proposed wind projects in the Peace River area totalling more than 500 MW of capacity. None of the recently announced wind projects have EPA's however.

Electricity wise, British Columbia is much like the Province of Quebec, with large-hydro supplying most of the power. Quebec has embraced wind energy finding its large-hydro system complimentary to electricity generated from wind.

Advances in technology have made the cost of wind energy lower than ever.  Demand for modern emission free electricity is growing. In British Columbia, experienced global wind developers have partnered with local First Nations with expectations of seeing the province soon catch up to the rest of Canada.  

With British Columbia on the brink of unprecedented industrial growth to be led by the natural gas sector, adding more low cost wind energy to the province's clean energy mix will provide not only long term value to BC Hydro ratepayers but also a low carbon hedge against the high carbon emissions of the natural gas sector. The time is right. Wind energy makes sense for British Columbia.

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Updated BC IPP Supply Map

Earlier this week, BC Hydro released an update in respect of the independent power producers(IPPs) currently supplying electricity to BC Hydro and those projects with EPAs but still under development. 

Keep in mind that the projects BC Hydro lists as IPPs include: Rio Tinto Alcan's hydro project, various forestry company biomass projects and the Waneta Expansion (not your garden variety IPPs, but certainly, "independent" of BC Hydro).

For your information: 

1. BC Hydro IPP supply map;

2. List of IPPs currently supplying electricity to BC Hydro; and

3. List of IPPs with projects in development,

(each current to October, 2013).

Renewable Energy To Meet BC Premier's Objectives

The prospect of new mines, natural gas drilling and the export of liquefied natural gas (LNG) has the Province of British Columbia on the brink of a period of unprecedented growth in the energy and natural resources sector.

In May, the BC Liberal Party under the leadership of Premier Christy Clark was elected on a platform of jobs and the economy. But what might have been missed in all of the hoopla is the Premier's subtle yet impressive desire to achieve her objectives with the help of the Province's clean and renewable energy sector, as evidenced by her letters to her cabinet ministers.

Shortly after the Premier appointed the new cabinet in June, she sent out distinct mandate letters to each of her ministers which set out her priorities for government and listed specific initiatives for each Ministry.

In reading the mandate letters, it is clear what the Premier had in mind for several of her energy sector Ministers. She sees the renewable energy sector playing an important role in the growth of the Province. And why not. For years, the industry has a proven track record for delivering cost-effective clean electricity in all areas of the Province with support from First Nations. For the British Columbia renewable energy industry and First Nations alike, this is most welcome support from the Premier.

Below are some of the key excerpts from the Premier's ministerial mandate letters:

Natural Gas Development (Minister Coleman)

Ministerial Initiative No. 3 - "Maximize the use of clean power in LNG projects while preserving provincial revenue generation opportunities."  Perhaps a nod to electric drive compression for LNG plants.

Energy (Minister Bennett)

Ministerial Initiative No. 8 - "Work with the Clean Energy sector to ensure that there remains significant opportunities for renewable energy companies to provide power to British Columbia."  No need to look too far, providing electricity to new mines, natural gas extraction in the northeast and the LNG industry would definitely count as a "significant opportunity" for the clean energy sector.

Environment (Minister Polak)

Ministerial Initiative No. 5 - "Working with the Minister of Natural Gas Development, ensure that LNG operations in British Columbia are the cleanest in the world."  Another not so subtle hint at electric drive compression for LNG plants powered by renewable energy.

Aboriginal (Minister Rustad )

Ministerial Initiative No. 3 - "Work with BC First Nations that are impacted by natural gas extraction, pipelines or LNG facilities to ensure they are provided with the ability to participate in this generational opportunity."  All renewable energy projects in the Province involve First Nations, so building more wind, small hydro, solar or even geothermal projects, would naturally allow First Nations to participate in the opportunity.

If you connect the dots it is not hard to conclude that clean and renewable (greenhouse gas free) energy, a natural resource of which British Columbia has an abundance, is the means for the various Ministers to meet many of the Premier's objectives.  

Now, if planners can stay away from falling victim to short-termism, today's opportunity, like the large hydro-electric dam system and transmission network built decades ago, will provide a lasting legacy for generations to come.  I am certain it was not easy back then and it certainly will not be straightforward today. But building the mining and LNG industry while maximizing the Province's renewable energy resources can certainly be accomplished with strong leadership. The Ministers are charged, and as the mandate letters say: "now it's time to deliver."

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BC Government Delays BC Hydro's Long Term Forecast

Today, the BC Government announced that it has once again delayed the delivery of BC Hydro's Integrated Resource Plan to Cabinet until August 3, 2013 due to uncertainty of the electricity requirements for the prospective liquefied natural gas (LNG) export projects to be located in northern British Columbia. The announcement stated that Government, BC Hydro and LNG proponents are currently negotiating electricity-supply agreements. The good news for the IPP sector is that the use of electricity is under serious consideration.

The potential size of the LNG load is extraordinarily large.  Yet the current electricity service to the region is insufficient to meet the potential demand. From what we know, energy/electricity supply decisions at Kitimat and Prince Rupert have not been made. There are options here; some low-carbon, some not so much. But because of the long lead time needed to meet the electricity supply requirements, careful planning must take place before the big decisions are made. But at this point in time, no prospective LNG proponent has the necessary agreements in place to start construction of the LNG facilities. The great BC LNG infrastructure build-out won't get started until the planning is done and big decisions are made.

With this new industry, the BC Government has the opportunity and is truly in a unique position to create a lasting legacy for the North, for the regional First Nations and the entire Province of British Columbia.  But leadership here is critical. And, most importantly, the Province must have a development plan that addresses GHG emissions, environmental stewardship and development of legacy infrastructure.  Giving BC Hydro some additional time to submit its 20 year supply/demand forecast is a good decision given the current uncertainty of the potential massive load in the North and the general enthusiasm for realistic load forecasts.

The big question is: whether the outcome of the discussions between Government, BC Hydro, and LNG proponents for the supply of electricity pre-determines the contents of the ultimate IRP?

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