Fate of Quebec LNG Project Now in Government Hands

The fate of GNL Quebec’s 11mn mt/yr Energie Saguenay LNG project is now in the hands of Quebec environment minister Benoit Charette, following the public release March 24 of the regulatory report into the project.

The report, by Quebec’s Bureau d'audiences publiques sur l’environnement (BAPE), makes no overt recommendations to the Quebec government, but comments extensively on the environmental and economic impacts of the C$9bn (US$7.2bn) project, which has yet to take a final investment decision (FID).

The BAPE report was filed with Charette on March 10 after a series of live and virtual public hearings in September and October of last year in which more than 2,500 submissions were made to the hearing commission. 

In the report, the BAPE notes GNL Quebec’s assertions that Energie Saguenay, which would rely entirely on hydro power from the Quebec provincial grid, is “exemplary” when compared to its peers in terms of its carbon footprint, would displace dirtier energy sources in Asia and Europe, and would provide an important economic development opportunity in the Saguenay – Lac-Saint-Jean region, in Quebec and in Canada.

Many residents in the Saguenay region, the BAPE says, see Energie Saguenay as an opportunity to diversify economic development in the area. Others, however, questioned the environmental attributes of the project and charge it goes against the environmental and biodiversity commitments of Quebec and Canada.

“This project would indeed produce, during the four years of construction, significant economic benefits for the host region and for Quebec,” the report notes in its concluding section. “However, during the operation phase, the most significant economic spinoffs would appear especially in western Canada, in the natural gas production industry.”

The report also notes that global LNG demand growth anticipated by GNL Quebec (which the BAPE refers to as the “initiator”) remains uncertain at best, given the repercussions of the Covid-19 pandemic, the evolving commitments of many governments in the energy transition and the “growing skepticism of investors with regard to projects based on fossil fuels.”

At the same time, the BAPE notes, several competing LNG projects have already reached the FID stage and are now or will soon be under construction. In that environment, it says, the LNG capacity that Energie Saguenay will bring to the market may not be needed prior to 2030.

“In this context, the committee considers that the competition in which the initiator has entered to secure long-term LNG sales contracts appears difficult and that the window of opportunity for the Energie Saguenay project seems to have been considerably reduced since the initial announcement of the project in 2014.”

The report notes that the International Energy Agency (IEA) has reservations about the role of natural gas in the energy transition, largely because the sector “is itself a major source of GHG emissions.”

And it also notes that IEA scenarios that align with Paris Agreement goals suggest that existing LNG terminals now under construction would be sufficient to meet demand until 2030 “and risk being redundant beyond 2040.”

The BAPE committee also expressed concerns that adding LNG trading infrastructure could act as a brake on the energy transition in Energie Saguenay’s target markets of Europe and Asia and lock in emissions associated with natural gas combustion.

It admitted that using renewable electricity to power Energie Saguenay would reduce the carbon footprint of the facility, but also warned that emissions associated with the supply of natural gas upstream of the terminal and the “uncertain substitution” of more polluting energies downstream “do not allow the commission to confirm the positive results of the project put forward by the initiator.”

Of particular concern to opponents is emissions that would be generated by the C$5bn Gazoduq pipeline, a 780-km conduit connecting Energie Saguenay to natural gas from Western Canada. That pipeline does not fall within the jurisdiction of BAPE, although it is being reviewed by a joint panel of the Impact Assessment Agency of Canada and BAPE.

After conducting a public hearing process that attracted a record level of citizen participation, the BAPE committee noted that it was no closer to understanding the level of social acceptance Energie Saguenay might receive than it did before the project was announced.

The public hearings brought out considerable support for, and opposition to, the project, and the committee noted the “lack of convergence” between the two sides and the difficulty associated with finding common ground.

“The committee is…of the opinion that the observed societal divide is likely to persist regardless of the government’s decision regarding this project,” the report noted, and suggested that follow-up consultation should be considered, especially in the Saguenay region.

Charette now has five months to review the BAPE report before making his recommendations to the Quebec cabinet, which will make the final decision on the project.