The following is a response from the First Nation LNG Alliance to the federal discussion paper “Options to Cap and Cut Oil and Gas Sector Greenhouse Gas Emissions to Achieve 2030 Goals and Net-Zero by 2050.” Ottawa invited “input on the design and implementation of an approach to cap and cut emissions from the sector.” (You can read Ottawa’s discussion paper here: http://ow.ly/QOHp50KW4jI)
The First Nations LNG Alliance (“the Alliance”) is a collective of First Nations who are participating in, and supportive of, sustainable and responsible LNG development, primarily in BC.
The Alliance accepts the Discussion Paper’s recognition that “Indigenous participation in planning and policy development is also important given the impacts of oil and gas development. Indigenous communities, workers, and businesses are also key partners on oil and gas projects and decarbonization initiatives, through ownership and benefit sharing agreements. Canada’s clean energy transition and the design and implementation of the oil and gas emissions cap will benefit from Indigenous perspectives.” (p. 15)
Regrettably Canada’s invitation reflects an archaic consultation model that presents a unilaterally predetermined goal with opportunity only to influence how that goal might be achieved. That approach does not accord with contemporary policy and judicial directions for high-level policy goals.
In this instance, the goal is the 2030 and 2050 climate targets which by any reasonable assessment, are unachievable. In particular, the immediate social and economic shock of achieving a 40-45% economy-wide reduction in GHG emissions below 2005 levels by 2030 – a mere seven years – would be devastating.
Beyond that, achieving “net zero” by 2050 would require a level of planning, investment and disruption that is out all proportion to the climate impact. By all accepted estimates, Canada’s total Green House Gas emissions account for less than 2% of total global emissions. A 27% contribution to national emissions from the oil and gas sector is essentially meaningless at a global level, suggesting that the statutory caps represent political goals rather than meaningful environmental protection measures.
The Alliance therefore shares the assessment that either of the proposed options could add considerable cost and administrative burden for the oil and gas sector and would impact investment attraction for future projects. The threshold question for First Nations is therefore not how to achieve Canada’s climate targets using carbon pricing or cap-and-trade; the question is how achieving 2030 and 2050 predetermined outcomes by any means would affect First Nations.
From that perspective, the Alliance’s response to those discussion questions which it considers relevant are as follows:
1. How do you envision the future of the oil and gas sector in the Canadian economy or your community?
The future of the sector in the national and local economies depends entirely on whether federal climate policy continues to undermine the sector’s potential, versus whether those policies are reassessed with an intention that encourages the industry to continue contributing to national well-being and international climate aspirations.
1a. The Future in the Canadian Economy
With respect to the overall Canadian economy, the Alliance endorses the Canadian Association of Petroleum Producers’ (CAPP) statement that:
“CAPP’s initial assessment of the oil and gas emissions cap discussion paper is it includes proposals that could work against the progress Canada has made to achieve our climate goals while contributing to energy security globally. As presented, both emissions cap options have the potential to limit oil and natural gas production in Canada by adding regulatory burden and eliminating options for economy-wide cooperation on emissions reductions. Imposing an emissions cap solely on Canada’s oil and natural gas sector, as the paper proposes, will likely drive energy investment into other countries who may not share our high environmental and human rights standards. As our allies and trading partners are grappling with an energy crisis, now more than ever Canada needs to strive to create the right environment to attract investment, so we become a preferred supplier of the most responsibly produced oil and natural gas in the world. CAPP and our members will continue to work in earnest with the federal government to help them reach their climate ambitions while ensuring a strong and successful future for Canada’s oil and natural gas industry.” (Lisa Baiton, President and CEO)
For the purposes of this response, the Alliance also accepts the Discussion Paper’s estimates of the national economic significance of the oil and gas industry (p. 7), which according to the Canadian Energy Centre, accounts for 5.6% of Canada’s Gross Domestic Product.
This macro-economic value in the Canadian economy is indisputable. By way of illustration, the September 3, 2022 First Nations LNG Alliance newsletter included a scan of recent data and analysis highlighting the impact of these policies on the Canadian economy, as well as some of the potential returns if Canada resets its policy objectives and pursues a more responsible national interest:
- The editorial board of The Toronto Sun is quoted as saying that selling our gas to the US instead of exporting it as LNG “costs the Canadian economy an estimated $9 billion annually.”
- Stewart Muir of Resource Works on Twitter: “The scale of this lost opportunity is simply staggering. At today’s high LNG prices, 1 large LNG plant on the east coast of Canada, of the size of Kitimat’s LNG Canada project being built now, would add $250,000,000 a day to the country’s GDP.”
- Tristin Hopper: “Canada could have been using its LNG to save an embattled Europe . . . and make billions in the process.” http://ow.ly/1lUg50KrIEC
- Derek H. Burney: ‘Canada has chosen deliberately and impractically to hobble the infrastructure needed to get our #LNG to the world market.’ http://ow.ly/sah450KvJBV
- Alberta’s Canadian Energy Centre: “Prime Minister Justin Trudeau is skeptical that there’s a business case for Canada to accelerate LNG exports to Europe. The reality is, the case has never been stronger.” http://ow.ly/u7qF50KsBeB
- Troy Media: Trudeau is wrong about the viability of LNG; Growing LNG exports is in Canada’s and our allies’ best interest: http://ow.ly/58pM50Ku08t
- OilPrice Magazine: Canada is set to miss out on a massive LNG opportunity: http://ow.ly/Vn5I50Kt4jX
- Canada’s Energy Citizens: “All over the world countries are finding a business case for investing in LNG. ‘Investments in new liquefied natural gas infrastructure are set to surge, reaching $42 billion annually in 2024.’” http://ow.ly/VEOv50KrIv3
- And RBN Energy noted: “The US is racing toward 30 billion cubic feet a day of LNG exports: http://ow.ly/I2PQ50KrJ8J”
In summary, if Canada continues to pursue policies that discourage investment, development, distribution and operation of the oil and gas sector, the Alliance envisions a bleak future for the industry and those that depend on it. This represents a local, regional, national and international failure.
In addition to the economic impact, Canada’s recent failure to respond positively to German interests in natural gas supplies as an alternative to reliance on Russian exports was an international embarrassment and betrayal of commitments to support Ukrainian resistance to Russian aggression. Blocking opportunities for mutual benefit in the current European crisis continues the policy of heavy-handed suppression of oil exports with dangerous implications for international and domestic energy security.
1b. The Future in First Nations Communities
With respect to First Nations communities, the Alliance accepts as a starting point the Discussion Paper’s evaluation of economic benefits to First Nations (p. 8) and adds that a recent Macdonald-Laurier Institute study found that 65% of Indigenous people support resource development.
Historically, Indigenous people have not been party to, or benefitted from, major pipeline projects in their territories. Now, for the first time since confederation, Western Canadian First Nations have a genuine opportunity to achieve a measure of economic self-sufficiency through participation in the energy sector. However, having finally achieved “a place at the table” with demonstrable majority community support, Canada’s ill-considered climate initiatives are poised to snatch potential opportunities away from Indigenous people while providing no meaningful alternatives. Undermining of economic reconciliation in this way would be a tragedy equivalent to the original dispossession and marginalization of First Nation peoples in Canada.
Details of future impacts are set out further in response to Question 6 below.
2. What do you see as the role of your organization or community in contributing to reducing oil and gas sector emissions in Canada?
The First Nations LNG Alliance is a collective of First Nations who are participating in, and supportive of, sustainable and responsible LNG development in BC. The Alliance was formed to provide education and information to, and for, First Nations interested in LNG and natural gas projects, and their benefits.
We seek to advance the prosperity of Indigenous peoples and to find ways to move First Nations forward that are meaningful, balanced, respectful and responsible. To accomplish this, we work to change the eco-colonizing narrative that claims First Nations are against development when it is in fact the environmental movement that is anti-development, regardless of its impact on people. Instead, FNLNGA members promote development in a sustainable, responsible way where they have a voice and can participate economically in it.
Part of the Alliance’s mandate recognizes the importance of a healthy environment to First Nations and all life on earth, and includes as an express purpose to “discuss environmental issues and priorities”. These are values that are fundamental to the cultures and world views of all First Nations and include recognition of the effects of climate change and human impacts.
For example, three members of the Alliance have collaborated on a First Nations Climate Initiative and called upon the provincial, federal and other First Nations governments, as well as the private sector and civil society organizations, to join them in “bold new action to mitigate climate change, alleviate poverty, and set the path to a low carbon economy in British Columbia.” These Nations believe that “coordinated policy development and public and private sector investment are needed now to build electrical generation and transmission infrastructure in northern BC, to restore damaged ecosystems to be carbon sinks, and to support net zero natural gas export projects on the North Coast.” The Alliance has formalized its relationship with the Initiative.
This recognizes that turning to mass electrification is not currently possible in British Columbia due to system capacity constraints. Building more generating projects would take years due to regulatory hurdles, investment hesitancy, supply chain issues and the usual host of other developmental challenges.
The Alliance’s approach to reducing emissions can best be summed up by quoting Stephen Buffalo of the Indian Resource Council of Canada. “Net zero is a worthy goal, but so is Indigenous reconciliation”. Although he was speaking to the investment community, his message is equally applicable to government.
3. What are the benefits or drawbacks of the options outlined in the discussion document?
See question 6.
4. Of the two approaches outlined, is there an approach your organization or community would prefer?
No, they are equally damaging and ignore the foundation question of capping production.
5. Do you have suggestions on how to improve the options outlined?
No. A global energy crisis is more imminent than a worst-case modelled climate crisis. Canada must learn from the evolving energy disruption in Europe and Great Britain. Whether the shortages result from supply, as in those countries, or from cost, as in Canada, the impact on ordinary people, particularly those who are already disadvantaged, is unacceptable. Many Indigenous communities in Canada have mirrored third world conditions for decades. It is inconceivable that shortages in other countries will not be mirrored in Canadian Indigenous communities. It is troubling that the federal government appears indifferent to these realities while it fosters similar crises in Canada.
6. What potential short or long-term socio-economic impacts do you foresee or anticipate for particular regions or population groups resulting from an oil and gas emissions cap in general, and more specifically, the two proposed regulatory options?
There are two spheres of impact from the oil and gas emissions cap on First Nations. The first affects the economic impacts on direct participation in the oil and gas sector through employment, contracting, procurement, impact benefits and revenue sharing agreements. The second is the domestic impact of relentless cost of living increases for energy and other household necessities, particularly but not exclusively in rural, remote and northern communities.
6a. Economic Participation Impacts on First Nations
By way of illustration on economic impacts, BC’s Coastal GasLink natural gas pipeline has already provided $825 million worth of Indigenous and local contracting in the region, with up to $1 billion expected by the time the project is completed. Revenue-sharing agreements will provide additional benefits to twenty First Nations at various stages of development. Longer term opportunities are being pursued through equity investment in various pipeline and processing projects, with the biggest barrier being access to Indigenous investment capital.
Similar benefits would flow from other major projects, particularly in the BC natural gas sector, for example, Woodfibre LNG, the Haisla-led Cedar LNG Project and the Nisga’a-led Ksi Lisims LNG Natural Gas Liquefaction and Marine Terminal Project on Nisga’a treaty lands. Cedar LNG hopes for a start on construction in 2023, so could be in production by 2027 or 2028. Ksi Lisims LNG aims for construction to begin in 2024, with the site operational in late 2027 or 2028. Both are currently working through the approval process.
On the east coast, the Miawpukek First Nation is interested in an equity position in a $10-billion LNG Newfoundland and Labrador Ltd. project which is supported by Premier Andrew Furey. The project would tap natural gas in the offshore Jeanne d’ Arc Basin and hopes to produce natural gas using clean hydro power in 2030.
Also on the east coast, Pieridae Energy is working toward a floating LNG-for-export plant in Nova Scotia. It has support from the Mi’kmaw communities of Nova Scotia where Regional Chief P.J. Prosper stated: “Our agreement with Pieridae is an example of how companies can respect our Mi’kmaw Rights and Title, and also provide an opportunity for Mi’kmaq participation in development on our lands.”
The collective right to benefit from territorial resources and to achieve economic security is thoroughly recognized in the Universal Declaration on the Rights of Indigenous Peoples, which both Canada and British Columbia have committed to implement through respective domestic legislation and policy. However, there is a clear conflict between climate goals and UNDRIP commitments that needs to be addressed in a way that respects First Nation interests. Such balancing must also consider recent judicial recognition of First Nations economic interests as matters of constitutionally affirmed and recognized Aboriginal rights, as for example the “Ermineskin Cree Nation” and “Altalink” decisions.
6b. Domestic Impacts on First Nations
The Discussion Paper acknowledges the growing importance of the energy sector to First Nation economic reconciliation initiatives; however, it fails to consider the domestic impact of climate policy.
The second level of negative impact from emissions cap policies falls on First Nations members who are overall already more vulnerable than other Canadians. Just as many of the projected impacts of climate change would fall on disadvantaged persons and communities, even more so will ill-considered measures intended to limit climate change.
According to Indigenous Services Canada, in December 2017, there were almost one million individuals registered under the Indian Act, slightly more than half of whom live on reserve or Crown land. When Inuit and Metis are added to the total Indigenous population according to the 2016 Census and 2017 “Aboriginal Peoples Survey”, approximately 970,000 Indigenous people live in urban areas (off reserve).
The Auditor General of Canada similarly concluded in its 2018 Spring Report “Socio-economic Gaps on First Nations Reserves” that “First Nations people tend to have significantly lower socio-economic well-being than other Canadians. . . . Closing socio-economic gaps means improving the social wellbeing and economic prosperity of First Nations people living on reserves.”
The situation is equally unstable for people living in urban areas. Key indicators of economic well-being reviewed during 2020 Covid-19 research provided insight into vulnerabilities existing in these areas before entering into the current economic maelstrom. In short, approximately one-quarter (24%) of Indigenous people living in urban areas in the provinces were in poverty. By comparison, 13% of the non-Indigenous population in these areas were in poverty.
A 2020 Statistics Canada study on “vulnerabilities to the socioeconomic impacts of COVID-19” using data from 2017 found that among Indigenous people aged 18 and older living in urban areas, 38% lived in a food insecure household. Women were more likely to experience food insecurity, with 41% of Indigenous women aged 18 and older living in a food insecure household compared with 34% of Indigenous men.
The stated purpose of the emissions cap and the options is to curtail production and create scarcity. Scarcity in turn increases costs. Supply-based increases will be compounded by carbon taxes that will rise to $170.00 per tonne under both federal and British Columbia regimes, as well as by clean energy regulation and inflation. First Nations people are heavily exposed to the impact of these cost increases.
Further, it is likely that these pressures will be most stressful in rural and remote areas, where accessing goods and services is more complex. For example, there is greater necessity to travel for basic services but less access to public transportation. There is greater susceptibility to extreme weather events and shortages resulting from more complex supply chains and higher transportation costs.
From another perspective, the environmental impacts of poverty seldom enter the discussion of climate action, but a matter as fundamental as home heating can illustrate those impacts. As heating with natural gas, oil or electricity becomes increasingly unaffordable due to climate action costs, households in rural and remote areas will inevitably revert to heating with wood. With that comes a return to the historical impacts of degraded interior and exterior air quality, structural fire risk and deforestation. There is obviously no climate gain in that tradeoff!
There are other indirect impacts that have largely been ignored in the rush to show action on climate change before costs, consequences, and meaningful alternative energy sources and systems have been considered. One is the question of how Canada is to finance the social programs which First Nations and others rely upon without the taxes, rents and royalties that flow from a robust energy sector. Despite an emerging Indigenous middle class there is still frequent reliance on income assistance and transfer funding that flows from public revenues.
Finally, the rush to electrification is starting to show trends and impacts on rights, title, capacity and environmental values in First Nations’ territories. On one hand, electrification as an alternative to fossil fuels is driving escalated mineral exploration activities in First Nation territories. At the same time, reticent investment capital and regulatory uncertainty is hampering corporate decision making and the ability to reach impact benefit agreements with First Nations. This uncertainty and inconsistency benefits no one.
7. Should consideration be given to facility emission thresholds to set different approaches and requirements for small versus large emitters?
8. Should the cap include petroleum refineries and natural gas transmission pipelines?
Other than generally supporting value-added industry and domestic self-sufficiency, the Alliance would require further information to make a recommendation on petroleum refineries.
However, with respect to natural gas transmission pipelines, the Alliance understands that the cap would not apply to natural gas transmission and agrees that it should not. The immense contribution and potential of this industry for First Nations is detailed throughout this paper. Given that the contribution to global GHG emissions is insignificant and industry is making its own efforts to secure pipeline transmission, further government regulation would be unnecessary and harmful.
9. Are there other considerations relevant to determining the scope of the cap?
The cap itself is the issue, so only considerations related to rationalizing or eliminating the cap are relevant. At the present time, the climate goals are unrealistic ‘pie in the sky’ unless they can be defended in a way that is more than a hypothesis supported by worst case scenario computer modelling. Unless people can be convinced that their energy needs will be met in the gaps following 2030 and 2050, it is difficult to support reducing emissions to meet those targets.
Other factors such as transition fuels like LNG, carbon sinking, carbon capture, and storage and sequestration will be important to reduce targets.
Therefore, at the very least, Canada must conduct a comprehensive analysis of the economic and social impact of the caps. In other words, both emission reductions and energy security need to be realistically addressed in proportion and simultaneously.
10. What are the relevant considerations for determining a GHG emissions trajectory, particularly over the first 10 to 15 years?
A rational balance between social, economic and environmental cost-benefit.
11. How should the trajectory of the oil and gas emissions cap be designed to support Canada’s 2030 targets and achieve net-zero by 2050? Should the cap set annual or multi-year emission levels?
12. Should the trajectory be fixed out to 2050, or should the approach include steps to ratchet up the trajectory at one or more fixed intervals?
13. What design features should be considered to maintain Canadian competitiveness and minimize the risk of carbon leakage?
Notwithstanding recent Prime Ministerial pronouncements to the contrary, the investment community recognizes there is a strong business case for LNG. Writing in the Financial Post, independent researcher and investment analyst David Rosenberg summarizes the potential as follows:
“LNG produces 40 per cent less carbon dioxide than coal and 30 per cent less than oil, making it among the cleanest fossil fuels. In addition, it drastically reduces emissions of nitrogen oxide, and it emits almost zero sulphur and particulate matter. As a result, due to its relatively favourable emissions profile — and, critically, its reliability as a fuel source — we see LNG as a great complement to renewable energy as governments work towards a reduction in greenhouse gas emissions.”
Projects in British Columbia have a significant advantage over U.S. projects because it takes an LNG carrier only 10-12 days to reach Asian markets, while U.S. shippers need 22-24 days. As well, BC shipments do not face US$980,000 transit fees through the Panama Canal.
However, timing matters. The U.S. now has seven LNG export terminals in operation plus three more being built, three starting work on expansion, plus nine approved but not yet under construction, and another five going through federal reviews. The U.S. is considering Mexican LNG terminals, and potentially one in Alaska that would compete with BC LNG producers. Meantime, China is building ten new LNG import facilities and although it is buying more LNG from Russia today, the situation with Russian gas in Europe shows the risk of relying on a sole supplier.
A major step to retain investment in Canada would involve regulatory reform, including deregulating the extraordinarily complex web of climate action legislation identified in the Discussion Paper. Project approval time is an even more significant barrier. At this point, it takes Ottawa as much as three years to approve a project before construction can begin whereas the United States can approve a project in less than fifteen months. Then comes plant construction time of four-to-five years. This gives European and Asian buyers seven or eight years in which to secure other sources of supply.
Another source of efficiencies would be to follow the advice of the Indian Resource Council and make equity funding capital available to First Nations for investment in energy projects in their territories. At the present time, equity participation is being considered both in Newfoundland and Labrador and in BC where TC Energy is offering 20 First Nations 10% equity in the Coastal GasLink pipeline. In-territory ownership will encourage domestic investment and Indigenous support.
The bottom line is that unless Canada’s bearish investment climate can be reversed, all of these opportunities to benefit environmentally and economically will be lost.
14. What compliance flexibilities should be allowed, and what conditions should determine eligibility?
15. Should the use of compliance flexibilities decline over time? If so, to what extent?
16. Under a potential cap-and-trade option, should distribution of allowances be done through auction, free allocation, or a combination of the two?
17. Would there be merit in excluding or taking an approach that results in lower compliance costs for emissions generated from the production and processing of fuels used to support the development of clean fuels (e.g., natural gas required for low carbon hydrogen production)?
18. How should the Government of Canada ensure that the cap incents investments in diversification and other preparations for a clean energy transition?
19. How would each potential cap approach interact with other climate measures?
20. What opportunities exist for coordination among federal and provincial and territorial measures?
21. How should a cap on GHG emissions be implemented to maximize emission reductions while avoiding potential challenges related to layering of multiple policies and regulations?
22. What other factors related to implementation should be considered in developing an approach to cap and cut GHG emissions from the oil and gas sector?
No further comments. Thank you.
(Posted here 28 September 2022)