Here Come BC’s First LNG Shipments. Cause to Celebrate?

For the past 15 years, the development of a liquefied natural gas or LNG industry has been a dream of B.C. politicians. Those dreams are about to become a reality when LNG Canada opens in Kitimat next month, ready to ship out its first cargo overseas.

The timing of LNG Canada’s opening is fortuitous in light of the Donald Trump-led tariff war. LNG Canada connects gas from Western Canada — where prices are low and dependence on the United States high — to world market prices, largely in Asia. The U.S. LNG industry, meanwhile, has been slapped with tariffs by China, a key export destination for LNG Canada, as part of the broader trade war.

Both the B.C. and federal governments are courting additional LNG development, but these multibillion-dollar investments must grapple with the challenging economics of the industry, Indigenous opposition and significant environmental and climate impacts.

The day it opens, LNG Canada will become B.C.’s largest point-source emitter of greenhouse gases, or GHGs, while increased gas production across the entire supply chain — including fracking, processing and pipeline transport — will also add to B.C.’s GHG emission totals.

This and other LNG projects essentially guarantee that B.C. will fail to meet its legislated GHG emission targets. Moreover, this is not counting emissions from the exported LNG itself, which is burned elsewhere.

To reduce domestic GHG emissions, the B.C. government has looked to new clean electricity generation from BC Hydro to power new LNG facilities. Unfortunately, this is competing with the clean electricity needed to decarbonize B.C.’s economy, including transportation, buildings and other industries.

New electricity supply is expensive to bring online. In order to be competitive with burning gas to power LNG plants, substantial subsidies in the form of low electricity prices would need to be implemented. This would raise costs for all other residential and commercial ratepayers, as new generation and transmission capacity must eventually be covered by electricity sales.

These challenges point to a weakening of climate policy measures. Already, the B.C. government is relaxing its previous requirement that LNG facilities have a plan to be net-zero emissions by 2030. LNG facilities will also receive a two-year break on B.C.’s industrial carbon tax, and it is possible LNG will be fully exempted from carbon tax, a measure that would save companies tens of millions of dollars per year.

Weaker climate and energy policies would improve the problematic economics of LNG arising from vagaries of global markets and the high cost of liquefaction and gas pipelines. Some key observers anticipate that global gas demand is close to its peak, after which there will be a steady decline due to transitions away from fossil fuels to other cheaper and cleaner sources of energy.

That combo means a greater risk of LNG facilities becoming a stranded asset and minimal revenues back to the B.C. government. These dynamics add substantial uncertainty when making tens of billions of dollars in investment.

LNG production will also boost B.C. gas prices. The experience in Australia shows that after LNG plants opened in 2015, gas prices doubled and, recently, have been three times higher than before LNG. The 2025 B.C. budget anticipates a 25 per cent increase in market gas prices for 2025, rising to 49 per cent higher by 2026.

While these increased costs will be passed forward to consumers, the recent elimination of the consumer carbon tax will swamp those price increases, at least in the short run.

However, B.C. consumers will be exposed to higher prices when there is, for example, a cold snap in Asia.

These problems get worse the more LNG production comes on stream. LNG is largely to the benefit of foreign companies, with little long-term benefit to ordinary British Columbians, including only a couple hundred permanent jobs once construction is completed.

B.C.’s good intentions on climate action are being sacrificed to double down on big fossil fuel projects, a decision that will not age well.