Varcoe: Smith to talk ‘energy, energy and energy’ with Trudeau this week — including the future of LNG

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Premier Danielle Smith expects to meet face-to-face with Justin Trudeau on Friday when the prime minister travels to Calgary for Stampede, and energy issues will be high on the agenda.

While the province has been girding for a showdown with Ottawa over a net-zero power grid and an oilpatch emissions cap, the premier is pointing to an area where they can find common ground: LNG.

And she may have an ally in the debate — other premiers from Western Canada.

“I have a sit-down with (the prime minister). His people said I can have three topics. I said, ‘OK — energy, energy and energy,” Smith told a Calgary Chamber of Commerce luncheon last week.

Smith said there was a “very constructive conversation” on energy at the recent western premiers meeting in B.C. “B.C. Premier David Eby is very keen to work with us to see if there’s a way that we can get global credit for reducing emissions in Japan, South Korea or India or China.”

Last week at the meeting in Whistler, B.C., the provincial and territorial leaders issued a joint statement, which stressed Canada has an important role to play in global energy security, such as supplying oil and gas to other countries.

Exporting low or zero-emitting LNG — along with hydrogen and hydro — can help reduce global greenhouse gas emissions, the communique states.

“Premiers renew their call on the federal government to support emission credit trading across international borders and work with provinces and territories to finalize the rules under Article 6 (of the Paris agreement) to ensure they receive credit for reductions resulting from actions in their jurisdictions.”

Article 6 has become a key issue for Alberta and LNG proponents, as it could see western Canadian natural gas exported to other countries and, if the product supplants higher-emitting sources such as coal, receive credit for it.

The Trudeau government has set out an ambitious target to reduce oilpatch emissions by 42 per cent by 2030, while the B.C. government’s own climate plan aims to curb its emissions by 40 per cent by the end of this decade.

The trading mechanism could provide Canada — and B.C. — with a tangible way to reach those goals while also increasing gas output and bringing new LNG projects online.

“They (Ottawa) now understand that in talking about carbon capture utilization and storage, and hydrogen, and exporting LNG and getting credit for it through the Paris accord, those are the things where I think that we will find a lot of common cause,” Smith told the chamber.

Stewart Muir of the Resource Works Society, a Vancouver-based group that advocates for natural resource development, said he was “floored” by the unified statement from the western premiers on LNG and Article 6, saying it represents a step forward.

In March, the B.C. government unveiled a new energy framework that mandates all proposed LNG developments must pass an emissions test and have a credible net-zero plan by 2030. Muir said it appears B.C.’s premier is continuing to soften his stance on LNG.

“It almost feels like there’s a subtext to this . . . All of the (premiers) from the West are saying the same thing — ‘We are unified on it. Hey, prime minister, if you want to join us in this, be our guest.’”

The future of LNG has been a focal point for Alberta as the province hopes to see more projects built to ship super-chilled liquefied natural gas from West Coast facilities to customers in Asia.

However, environmental groups oppose a major expansion, with Clean Energy Canada saying last month that continued growth of LNG “is a bet that the world won’t achieve net zero.”

The prolific Montney formation, in Alberta and northeast British Columbia, produced just under half of all Canadian gas last year and it could significantly increase output.

Canada has two liquefied natural gas projects moving ahead, the Shell-backed LNG Canada development at Kitimat and the Woodfibre LNG initiative near Squamish, B.C. A final investment decision is also expected later this year on the proposed Cedar LNG project.

Investment decisions by LNG project proponents will be made “based on their ability to comply with federal and provincial regulatory standards and be competitive within the global market,” Keean Nembhard, press secretary for federal Natural Resources Minister Jonathan Wilkinson, said in a statement.

New LNG projects would need to demonstrate they are displacing higher-emitting energy sources, he said.

If all of the LNG projects now on the table go ahead, it could represent a reduction in global emissions of 89 megatonnes by displacing the use of coal and diesel, Smith said.

And what effect will Canada’s commitment to reach net-zero emissions have on provincial aspirations?

A report issued by the Canada Energy Regulator last month projected that under a global net-zero scenario, LNG exports from the country would ramp up to two billion cubic feet per day per day by the end of this decade — from the LNG Canada and Woodfibre facilities — but not increase beyond that, before beginning to decline in 2045.

In a mid-range scenario where Canada reached net zero by 2050 but other countries lag behind, a second phase of the LNG Canada project would proceed and total exports would increase to 3.8 bcf a day in 2030 and stay there through 2050.

Under existing policies, Canadian LNG exports would rise to 4.6 bcf in 2034 and remain at that level through 2050.

Any plan to increase LNG will require the provincial and federal governments to see eye to eye on the future benefits of such exports, and work together to make it happen expeditiously.

A Stampede gathering seems like a good place to start.

Chris Varcoe is a Calgary Herald columnist.

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