U.S. pause on LNG exports raises pressure on Canada, BC to do same

(Reuters) - U.S. President Joe Biden's decision to pause expansion of American LNG exports has raised pressure from environmental groups on the British Columbia and Canadian governments to do the same, although following suit may be politically difficult.

British Columbia will hold an election in October, and its left-leaning New Democrat government is expected to decide late this year whether to approve Ksi Lisims' 12 million-metric ton export facility. It would become Canada's second-largest LNG terminal and also requires federal approval.

Canada's first significant LNG exports may begin this year with the Shell-led SHEL.L LNG Canada facility more than 90% built. A second phase under consideration by LNG Canada that already has government approval, and several other projects, may follow, allowing Canadian gas to reach lucrative Asian markets.

Both the provincial government in B.C., where the projects are located, and Prime Minister Justin Trudeau's federal government have set targets to cut greenhouse gas emissions by 2030, and the LNG facilities could complicate those goals.

Biden on Friday said the U.S. Department of Energy will review whether LNG exports are undermining domestic energy security, raising consumer costs and damaging the environment.

A coalition of environmental groups urged B.C. to do the same.

"This is certainly going to be an issue in an election year," said Julia Levin, associate director of national climate at Environmental Defense. "While it's true that most of the big LNG projects have been approved, there are lots of ways to still get projects killed even after they've been approved."

B.C.'s three leading provincial parties support LNG development, making environmentalists' call for a moratorium "an uphill battle," said Kathryn Harrison, a political science professor at University of British Columbia.

Like the U.S., Canada produces more gas than it needs domestically.

B.C.'s newest LNG proposals call for the facilities to run on hydropower, not natural gas, reducing their environmental footprint compared with most in the U.S. Hydropower, however, is in short supply.

Asked whether B.C. may pause LNG development, the province's Environment Minister George Heyman said its assessment process includes examination of climate impacts and the provincial Clean BC plan requires new LNG proposals to be net-zero emissions by 2030.

B.C.'s net-zero requirement, however, does not account for downstream emissions, Harrison said.

Ksi Lisims' floating LNG facility north of Prince Rupert, B.C., proposed by the Nisga'a Nation, Western LNG and a gas producers consortium, has its export license in hand and is seeking a B.C. environment certificate. It expects a B.C. decision around November and a decision from the federal government around the same time.

The project plans to run on hydropower from the start in late 2028, said Western CEO Davis Thames. He added that Canada already has a strong system to regulate methane emissions, one of environmentalists' main LNG concerns.

"It's just a totally different set of circumstances," Thames said in an interview.

But Levin said methane leaks in LNG's supply chain are poorly accounted for and she rejects industry's argument that LNG will reduce global emissions by displacing higher-emitting coal in Asian electricity plants.

The International Energy Agency warned in October that increasing global LNG production capacity risks creating a glut after 2025, but a U.S. pause that reduces competition would be bullish for Ksi Lisims, Thames said.

FortisBC's FTS.TO smaller Tilbury LNG expansion project is also seeking an environment certificate.

A spokesperson for federal Natural Resources Minister Jonathan Wilkinson said all LNG projects will be required to comply with a planned oil and gas emissions cap.

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