Petronas and Lelu Island: The cutting edge of LNG in BC? (Commentary/Op Ed)

Photo Credit: Ken Rabnett

Petronas and Lelu Island: The cutting edge of LNG in BC? (Commentary/Op Ed)

👤Greg Horne 🕔Nov 24, 2015

Wrapped in north coast fog, a small island in the Skeena River estuary 15 km south of Prince Rupert has become a lightning rod for Christy Clark’s strained liquefied natural gas (LNG) ambitions.

“I’m really at the boiling point already,” says Yahaan (Donnie Wesley), Lax Kw’alaams hereditary chief of the Gitwilgyoots tribe, standing on the edge of Lelu Island, his traditional territory. “I am willing to take on that drilling boat and get arrested or whatever it is going to take to make the world know that this is going on. The salmon and seafood of the entire Skeena River are in jeopardy.”

Salmon central   

The focus of Yahaan’s concern is the shallow Flora Bank next to Lelu Island, a sandy eelgrass bed that is one of the most vital habitats for juvenile salmon, steelhead and shellfish in the entire Skeena system.

Smolts exiting the river in spring migration instinctively turn north into Flora Bank for shelter, feeding ,and protection from predators for weeks at a time while they adapt from fresh to salt water. Research reveals that 88 percent of Skeena salmon, or 330 million smolts per year, rely on Flora Bank. The majority of eelgrass in the estuary is on Flora Bank and 20 times more salmon use Flora Bank than other estuary eelgrass. Genetics show smolts from the entire watershed—the traditional territories of 10 First Nations—use Flora Bank.

This is of weighty importance, especially considering the Skeena supports the second largest salmon run in Canada, bringing in $100 million from commercial and sport fishing every year, not to mention being the cultural backbone of a dozen First Nations. Unfortunately, Flora Bank is also ground zero for the front-running LNG proposal in BC.

LNG on Lelu Island

An international consortium led by Malaysian oil giant Petronas is proposing to build the $11 billion Pacific Northwest (PNW) liquefied natural gas (LNG) plant on Lelu Island.

Responding to community feedback, PNW LNG revised its design in October 2014 to include less dredging, a 1.6-km bridge straddling the edge of Flora Bank and 1.3-km trestle to berth. The plant would fill a supertanker per day.

Significant concerns remain. A study commissioned by Lax Kw’alaams Band shows the sediments of Flora Bank are held in place by an equilibrium of complex river and tidal currents and that proposed bridge supports, trestle pilings and tanker traffic could disrupt this balance, eventually degrading and destroying the habitat by erosion or deposition.

The new bridge and jetty are wider (now 27 m, previously 15 m) and 300 m longer. Research shows that young salmon avoid swimming under bridges in estuaries. The planned PNW bridge lies directly across the young salmon migration path.

There was no public comment period for the revision, nor federal funds for independent review of it, as available in the first application.

A scathing report released in October by the Skeena Fisheries Commission and Simon Fraser University concludes that the updated PNW proposal “disregards science” and “poses significant and unacceptable risks to Skeena salmon and their fisheries.”

This is not the first time LNG has been proposed for Lelu. In 1977, Dome Petroleum’s plan for an LNG plant there was rejected based partly on 1973 DFO science that deemed development on Lelu Island an unacceptable risk to fish habitat.

“If you had to pick one place on the whole north coast that is more perilous to wild salmon, I’m not sure you could find one,” Skeena-Bulkley Valley MP Nathan Cullen says.

Who is Petronas?

If we believe Clark’s vision for the “world’s cleanest and safest LNG,” Petronas is an eyebrow-raising partner.

In July, Andrew Nikiforuk reported in The Tyee that “BC’s gas export hopes face ‘scandal that ate Malaysia.’”

According to the article, Petronas president Najib Razak, who is also Malaysia’s prime minister, was accused of stealing $700 million and covering up $11 billion in debt.

According to DeSmog Canada (“B.C. ought to consider Petronas’ human rights record before bowing to Malaysian company’s LNG demands”), the company also has a dubious human rights record: in Borneo, gas pipeline route details were withheld from indigenous populations until construction.

In September, the Vancouver Sun ran the article “Energy giant Petronas faced ‘catastrophic’ safety issues,” which reported that a leaked safety audit revealed offshore oilrigs in catastrophic states of disrepair up to 2013, routine inspections overdue 20 years and problems with the potential to cause human death. The same article reported that, last year, the above-mentioned Borneo gas pipeline exploded because it was built on unstable soil.

Lax Kw’alaams rejects $1.15 billion

In early May, Petronas made an unprecedented offer to the small community of Lax Kw’alaams of just over $1 billion for permission to build on Lelu Island.

Given only a week to decide, community members rose from their chairs to unanimously reject the offer in each of three community votes. The Lax Kw’alaams Band named salmon protection as their motivation.   

The bluntness of the company shocked Yahaan most: “We asked the representative, ‘Why are you building in the Skeena estuary? Why not in some little cove where it’s not going to harm anything?’ He didn’t care. He said, ‘It’s the cheapest location to put an LNG plant.’”

A red carpet for Petronas

On June 11, Petronas announced a conditional final investment decision in the project. Following its attempt to buy First Nations’ consent, Petronas acted as if consent was irrelevant, as did the BC government, who on July 13 held a rare summer session to approve the project.

Designed as attractive amidst a depressed global gas market, the LNG Projects Agreements Act locked in an LNG tax rate of 3.5 percent, half that originally desired by Clark, with no taxes until after capital cost recovery—a process that could take some time. Australia’s Gorgon LNG plant has run $17 billion over budget, making critics worry it will never return profits. Further, should any future government change this agreement within 25 years, Petronas could collect damages. Former Liberal politician Martyn Brown trashed the plan as “environmentally reckless, fiscally foolhardy and socially irresponsible.”

BC has also agreed to allow foreign workers to build LNG plants. Petronas will use 40 percent foreign workers to build its $11 billion plant and $8 billion of this will be spent overseas.

It is hard to imagine a better deal for Petronas. For Clark, it’s a desperate plea to uphold a flagging election promise.

Perhaps most disturbing is that, of the 20 LNG proposals in BC, this is the only one with both a conditional final investment decision and legislative approval. Construction on this project could begin first.

Tsimshian re-occupy Lelu Island

On Aug. 25, Yahaan and Tsimshian supporters moved onto Lax U’u’la to stop the rejected proposal from progressing. The camp has received overwhelming regional support.

Drilling boats have been turned away. The Prince Rupert Port Authority, a federal agency without local or provincial oversight, gave permission to Petronas to conduct geotechnical work for the Canadian environmental assessment process, the final regulatory hurdle facing Petronas.

Significantly, the Lax Kw’alaams Band announced a legal title action regarding Lelu on Sept. 16. If successful, this court case could trump Petronas’ proposal.

Madii Lii

Luutkudziiwus, a Gitxsan hereditary house group, is fighting in court the Prince Rupert Gas Transmission (PRGT) pipeline, which would supply gas from northeast BC to the plant on Lelu. Thirty-two km of the pipeline is proposed for Madii Lii territory, near Hazelton.

“We were not consulted on the project, nor was adequate data collected on cumulative impacts. We were given no acceptable means, funds or time to assess it,” Madii Lii spokesperson Richard Wright says.

If successful, the judicial review could cancel the Environmental Assessment Certificate and BC Oil and Gas Commission permit granted for the pipeline.

The Petronas mega-project

The PNW plant would be supplied with gas from Petronas-owned fracking operations in northeastern BC via two pipelines Petronas contracted TransCanada to build—the 300 km North Montney Mainline pipeline feeding the 900 km PRGT pipeline. Total investment is $40 billion.

According to an article by Andrew Nikiforuk in The Tyee, the Harper government balked in 2012 when Petronas proposed to buy Calgary-based fracking company Progress Energy on the grounds that it is not in Canada’s “net interest” to have a single foreign company frack, pipe, liquefy and ship gas to Asia. In the end, the purchase was allowed.

Whether Petronas will move its terminal away from Flora Bank is unknown at this point.

What is clear is that the cutting edge of Christy Clark’s vision of clean, safe and prosperous LNG is a plan that puts the second largest wild salmon run in Canada at risk by a company with a spurious safety and corruption record, governed by a rock-bottom tax regime and blocked by two First Nations. This isn’t a great start to the LNG dream in BC. It sounds more like a nightmare.

Based on a piece published in the Watershed Sentinel, November-December 2015.