The British Columbia government’s liquefied natural gas (LNG) agreement with Malaysian state gas giant Petronas could result in the province subsidizing the company to flout its greenhouse gas emission regulations.
“I’m highly skeptical about subsidizing private companies so that it can be said they comply with government’s environmental targets,” said lawyer Chris Tollefson of the Victoria Environmental Law Centre.
With the B.C. legislature holding a rare summer session to debate the LNG agreement, most attention has focused on the C$25 million per year in compensation Petronas could receive if a future government raises income tax rates for LNG production, adds a carbon tax that targets the industry, or shifts its greenhouse gas regulations. But “DeSmog Canada has learned that the B.C. government has quietly excluded two sources of Petronas’ carbon emissions from compliance standards, which will result in the province paying out millions of dollars in subsidies,” Linnitt writes.
The exclusion applies to treatment of “entrained emissions,” the carbon dioxide that LNG producers must remove from their product before shipping it, and emergency emissions that are vented or flared in an accident, or to avoid one.
Under the agreement, LNG companies must pay compliance penalties if they fail to meet B.C.’s greenhouse gas benchmarks. But in the Petronas agreement, in what the province calls an incentive program, B.C. “promises to pay a significant portion—between 50 and 100%—of those compliance fees if companies come close to meeting the benchmark,” she reports.
“Under this subsidy regime, if you are an LNG operator, why bother investing in state-of-the-art GHG reductions technology to meet the LNG benchmark target when government must reimburse you each year for up to 100% of the cost of buying ‘compliance units’ that bring you into deemed compliance with the target?” Tollefson asked.
The Pembina Institute’s Matt Horne said the revised environmental incentive agreement with Petronas “flew totally under the radar.”