On March 13, 2023, British Columbia’s Minister of Environment and Climate Change Strategy and Minister of Energy, Mines and Low Carbon Innovation issued an Environmental Assessment Certificate (EA Certificate) under the Environmental Assessment Act (2002) (British Columbia) for the Cedar LNG Project, which proposes to produce about three million tonnes of liquefied natural gas (LNG) per year. This was promptly followed by a concurring Decision Statement (IAA Decision) under the Impact Assessment Act (Canada) from the Federal Minister of the Environment on March 15, 2023. 

Then on the heels of this Cedar LNG Project announcement, the Government of British Columbia (Province) announced on March 14, 2023 a new energy action framework (Framework). There have been ongoing questions and concerns as to whether the approval of any new LNG projects in the Province, including the Cedar LNG Project, can be compatible with the Province’s climate goals and targets to reduce greenhouse gas emissions. The Framework would attempts to address these concerns by proposing new requirements for future LNG facilities and British Columbia’s oil and gas industry participants to align with the Province’s emissions reductions goals. 

By implementing the Framework, the Province intends to:

• require all proposed LNG facilities in or entering the environmental assessment (EA) process to pass an emissions test with a credible plan to be net zero by 2030;

• put in place a regulatory emissions cap for the oil and gas industry to ensure British Columbia meets its 2030 emissions-reduction target for the sector;

• establish a clean-energy and major projects office to fast track investment in clean energy and technology and create good, sustainable jobs in the transition to a cleaner economy; and

• create a BC Hydro task force to accelerate the electrification of British Columbia’s economy by powering more homes, businesses and industries with renewable electricity.

The Province indicated that it will begin engagement on the design of the oil and gas emissions cap with the intention of completing consultations before year end.  Such engagement is expected to involve a wide range of stakeholders including Indigenous groups, industry, labour, environmental organizations and local governments. Consultations are expected to address how the cap will be allocated and issues of credit trading and verifiable offsets. 

In order to proceed though the EA process, future LNG projects will need to develop plans to achieve net-zero emissions by 2030, which may include a combination of technology to reduce emissions and the use of carbon offsets to address remaining emissions. Notably, the Framework was announced after the approval of the Cedar LNG Project, such that it will not be subject to the more onerous emissions and net zero requirements that will apply to those LNG facilities that are currently in the EA process, or undergo the EA process in the future, although the Cedar LNG Project will still be subject to certain ongoing terms, conditions and requirements set out in the EA Certificate and the IAA Decision.

There are a number of questions about the Framework within the energy industry and from other stakeholders such as First Nations, the business community and other provincial governments about what this will mean for British Columbia’s and Canada’s energy sectors, including its competitiveness in the face of the United States’ recent Inflation Reduction Act. Key questions for the Province’s engagement could include: 

• How will the Province’s emissions cap for the oil and gas industry be operationalized?  What is the starting point for the cap and how will it be allocated?  How will the cap be harmonized with the intentions of the federal emissions cap in the same space? And most importantly, how will it be enforced?

• Many of the LNG projects either already in the Province’s EA process (eg. Ksi Lisims), or pending entering the process, are First Nations led. How does the Province intend to reconcile its broad Indigenous reconciliation agenda, and its new Declaration on the Rights of Indigenous Peoples Act, with this new Framework?  Will the growth in electricity infrastructure necessary to make LNG net-zero be seen as an opportunity for Indigenous involvement?

• For projects in the EA process or considering entering the BC EA process, net-zero by 2030 for all intents and purposes means engineering for net-zero now and starting operations as a net-zero facility. Will the Province undertake parallel activities in the same timeframe to ensure BC Hydro builds the necessary electricity  transmission and generation infrastructure, such that the LNG projects can assume that infrastructure exists?  Will this be the work of the new “BC Hydro task force to accelerate the electrification of B.C.’s economy”? 

• Does the term “LNG facilities” include upstream and midstream emissions?  Will a new gas plant in British Columbia, that requires an EA Certificate also be required to be net-zero if the gas produced at that facility is going to an LNG facility?  Are all scope 1 and scope 2 emissions included in the carbon accounting?  Are scope 3 emissions specifically excluded?

• An important element of the new Framework is the specific inclusion of offsetting as a tool to help LNG projects achieve net-zero by 2030. Specifically, the Framework notes, “this may involve adopting best-in-class technology to reduce emissions as much as possible and offsetting their remaining emissions through high-quality, verified carbon offset projects.”  This opens up the potential for involvement and joint planning with Indigenous groups who would like to implement Nature-based solutions, and with other provinces and the Federal Government on carbon markets. 

• How will the Province’s move from their current British Columbia specific Carbon Tax system, to a new output-based pricing system for large emitters factor into the carbon accounting related to the new emissions caps?

The positive news within the announced Framework is that the Province is still open to creating pathways for more LNG development. The bar has been set much higher as local emissions tracking to the Clean BC Roadmap to 2030 plan is paramount.  That said, projects may still proceed in British Columbia if:

• the Province is serious about bringing 100% clean electricity to potential projects; 

• potential projects are willing to use that electricity at commercial rates; and 

• potential projects are willing and able to offset their remaining emissions with verifiable offsets, 

We will continue to monitor developments in British Columbia in respect of the Framework and its impact on the energy industry.  If you have any questions regarding the Framework, please reach out to any member of our Energy Group.