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The German hunt for LNG has sparked a debate in Canada about whether to build new facilities


Concerned Canadians gather outside the German Embassy in Ottawa to urge German Chancellor Olaf Scholz to reject LNG export terminals on Canada’s East Coast that would carry fracked gas, 22 August 2022. Photo: IMAGO / ZUMA Press

Fossil fuel extraction is an important sector of the Canadian economy. While Justin Trudeau’s liberal government has decided to phase out coal by 2030 at the latest, the future of oil and gas remains unclear. The new market for liquefied natural gas (LNG) in Europe since the Russian invasion of Ukraine has added further insecurity to the debate.

Hadrian Mertins-Kirkwood is a senior researcher at the International Office of the Canadian Centre for Policy Alternatives, in Ottawa, Canada. Working on climate issues, he focuses on just transitions for workers and communities across Canada, and increasingly on oil and gas transitions.

Environmentalists and Indigenous people oppose these plans — and it remains debated if the long-term investments in the necessary infrastructure would even be feasible. Juliane Schumacher spoke with Hadrian Mertins-Kirkwood from the Canadian Centre for Policy Alternatives about the LNG debate in Canada and the country’s unclear energy future.

Hadrian, Canada is one of the biggest gas producers in the world. Last August, German Chancellor Olaf Scholz and economy and energy minister Robert Habeck also visited Canada in their search for sources of liquefied natural gas that could replace Russian gas over the next few years. Is Canada a big producer of LNG?

LNG is not a big part of the Canadian oil and gas industry now. But if some people get their way, some parts of the industry and some of the government, LNG will become a much larger part of the Canadian economy. A lot of people in the fossil fuel camp see LNG as kind of a future for their industry, and the new German market is used as a justification for their LNG projects.

Who is pushing for the creation of an LNG industry?

First off, parts of the fossil fuel industry. Canada has a lot of big oil and gas companies. Enbridge is our biggest gas company, and Enbridge is pushing a lot for new pipelines to get more gas shipped out of Western Canada, where most of the gas resources are.

The federal government is divided, both politically and geographically, between the different states. On one side, we have Environment and Climate Change Canada (ECCC), the ministry of environment, that is actively trying to regulate oil and gas production — or rather, oil and gas emissions. They don’t talk about production, they just say that we need to reduce emissions while producing oil and gas, but we don’t account for the emissions from where the oil and gas we export are burned when we export it.

This is an important discussion in Canada: how we can produce low-emission oil and gas for export?

So, Canada wants to lower its own emissions but continue to export fossil fuels?

Exactly. This is a big issue in the oil sector, and in the gas sector as well: how do we use carbon capture and storage, the technologies to capture CO2 emissions during the production and store it? How do we stop methane leaks, so that we can have “carbon neutral oil and gas”?

One of the biggest problems for Canada is that oil and gas companies, and also some politicians, expect that we will be “the last oil producer standing”. They say, “Yes, the world is moving away from oil and gas, we know this, but we are still going to need oil and gas for the next 30 years, and Canada will be the last country producing it.”

So, we have the ECCC who is trying to regulate emissions from the production of oil and gas. But on the other side, we have Natural Resources Canada (NRCan), the ministry of natural resources, actively promoting and developing fossil fuel extraction — including funding and supporting liquefied natural gas facilities. There is one of these being built at the moment, called LNG Canada, a huge facility on the West Coast of British Columbia. But of course, this one will not be useful when you want to export to Europe, because it’s on the wrong side of country.

So where do they want to export their LNG to?

To China, India, and other parts of East Asia. This is the intended market. The climate justification is that it’s going to replace coal power there. Evidence for this is very weak, it is more likely that it will just add LNG to the mix, and even LNG is still a fossil fuel causing pollution.

Every few weeks there is a new story about a pipeline spill. How does this still happen? Why can’t they build pipelines that don’t leak everywhere?

Are fossil fuels an important part of the Canadian economy?

They are a large part but it is not as big as people say. Depending on how you measure it, Canadian fossil fuels make up between three and six percent of the Gross Domestic Product (GDP). It’s not like the whole country depends on oil and gas extraction. But almost all oil and gas production happens in a few provinces, so in the province of Alberta which is always at the heart of this debate, oil and gas are about 30 percent of the GDP. They are highly dependent on that industry. In terms of our exports, it’s much greater — close to 20 percent of our exports.

So, there is an economic issue here, and there’s the workers issue — we estimate there are about 200,000 workers in the fossil fuel industry in Canada, mainly in oil, secondly in gas, and very few in coal. Again, highly concentrated by region: Alberta has about 100,000 of these workers. So, it’s politically very challenging to speak about oil and gas.

Then, of course, there is the political power of the oil and gas companies. The oil industry is the most powerful lobby in Ottawa, far bigger than any other sector. We have entire political parties, like the Conservative Party who are very pro-oil, more pro-oil even than the workers or the industry.

What’s the general opinion about oil and gas extraction in Canada?

Well, it’s getting increasingly polarized, like so many political issues. The conservative political parties are very pro-oil and gas, they wear the “I heart oil and gas” T-shirts and argue that Canada will always produce oil. This is funny, because the oil and gas companies themselves, they don’t talk in these terms anymore. They say, “We are also going to be net-zero by 2030”

I know from working with workers and labour unions that workers are also on board with this transition. They say, “Yes, we depend on gas, but help us retrain to something else.” It’s actually the political parties, the Conservative politicians, who are the biggest supporters of oil and gas.

The LNG issue is interesting because it is very different from the oil and gas conversation. It is more forward-looking.  On the oil front the debate is mainly about how fast we stop producing oil, and there is no talking anymore about big new oil projects. There are not going to be any new major oil sands projects. The companies know those are going to be stranded assets, they will not make big investments in oil anymore.

But gas is different — it is about expansion, and not about how we scale down the gas sector, but about how big we make it. Do we build these huge LNG terminals in Eastern Canada to export to Europe? That’s on the table now and that’s quite a different discussion. Even among the more climate-minded governments, federal or regional, there is this appeal: Germany is a good trading partner for us, we would rather export to Germany than to China, gas is not as bad for the climate.

It’s better than coal.

Yes, “clean-burning natural gas”, as they often frame it here in Canada — a very successful marketing phrase created by the oil companies. But more importantly, there would be big economic benefits for Eastern Canada. Economically speaking, Eastern Canada struggles a lot more than the rest of the country and really needs investment. So, there’s this appeal: let’s build these big LNG terminals in Halifax, and that will be that industry for that province.

When did the debate about LNG start? Was it a response to the Russian war against Ukraine?

Canada has been talking about the potential market for LNG in Asia for a few years. That’s why we have the LNG Canada project being built in BC. But the possibility of a large European market is a relatively new focus, since 2022. It began when European countries stopped getting gas from Russia and were looking for other sources. In that moment, the oil and gas companies in Canada realized: oh, we have this new market.

We really struggle in Canada to have a clear vision for the future of energy.

To me, this is the latest example in a long string of examples of the oil industry and its supporters in government trying to find ways to keep this industry going. There has been wide recognition over the last ten years that oil sands are the most polluting source of oil, and therefore no one wants our oil. So, the question for the industry is: what do we do to keep this industry alive? Carbon capture is one answer, and the other big one is LNG.

Where is the gas for LNG production in Canada coming from? Also from the oil sands?

There are different ways of extracting gas. Some are locked in the tar sands. Then there is the fracking boom that is happening mainly in the American Northwest but partly also in Alberta, Canada. And then there’s conventional gas production, just finding it in the ground.

So, we get gas from different places, and then, mostly, it is transported the direct way, through a pipeline. This is how most Canadian homes are heated, with gas that is just piped around. Or you build these huge expensive LNG facilities to turn it into another format and be able to export it.

But transporting the gas from the West to the East would require new pipelines?

Well, some pipelines already exist. Enbridge has been trying for a long time to build a big pipeline from Alberta to the East Coast, the Energy East Pipeline, specifically to ship oil and gas in greater volumes across the country. We do have some pipelines doing that, but not in that volume. So, we end up shipping a lot of oil and gas to the US and buying a lot of US oil and gas to supply Eastern Canada.

There is also a lot of resistance, both against more pipelines and against new LNG facilities.

There is a lot of opposition from a lot of different groups. Even within the current liberal government, there is opposition from more progressive politicians and from the government’s coalition partners in the New Democratic Party (NDP).on environmental grounds. All of the environmental movement is up in arms. Even if there would be probably a lot of good, unionized jobs, the labour movement is pretty progressive on these issues in Canada and is not supporting oil and gas development in general, although I’m sure there are individual unions that do.

But what is really important in Canada are Indigenous groups. Most of this development happens on Indigenous lands, and it has been Indigenous people who blocked most of the pipeline development in Canada. The reason why some of these protests have been successful, is because the Indigenous people on the ground were fighting against it. That doesn’t only apply to pipelines, but also to facilities like LNG Canada, which is also build on Indigenous land and will also affect Indigenous people.

So, they are afraid that these projects could pollute their land?

There are different grounds. The pipeline issue is a lot about pollution and health impacts, because pipelines in Canada spill all the time, it’s awful. Every few weeks there is a new story about a pipeline spill. How does this still happen? Why can’t they build pipelines that don’t leak everywhere?

So, pollution and health are definitely important. But a big focus of the last years, since the 2007 UN Declaration on the Rights of Indigenous Peoples (UNDRIP), is this issue of free, prior, and informed consent (FPIC). This is a central element of the declaration, and it has become a big part of Canadian discourse around pipelines. Are we getting FPIC from the Indigenous people to build infrastructure on their land? The answer in most cases is no. But there are different interpretations of what FPIC means.

Canada interprets “consent” in a different way than the UN?

We did include the UN declaration in domestic law, so the concept of FPIC does exist in Canadian law, but the government interprets it as kind of an expanded duty to consult. In their words, it doesn’t mean Indigenous people have a veto, they cannot stop a project just by claiming they don’t consent to it. Of course, that is the real definition of consent.

We don’t have any clarity at all concerning oil and gas, and that’s why these debates continue to happen.

Then, there is a lot of debate about which lands are Indigenous. It is a complicated network of history in Canada: some lands are ceded lands where Indigenous people historically have signed their right to the land over to the state, but some of those treaties are also disputed. Then there is unceded land. I live in Ottawa on unceded Algonquin territory. The Algonquin people never consented to this city being built. It depends on where you are in the country, and that makes it a complicated legal question — whose consent is necessary?

It is also important to mention that there are Indigenous groups that are very pro-resource extraction and pro-development, especially in Alberta. There are some Indigenous groups that have benefitted enormously from oil development, and many workers in the oil sector are Indigenous. We have to be careful not to group all Indigenous people together, as there are lots of different Indigenous nations in Canada.

What do you expect? Will an LNG terminal be built in East Canada? Or will this “window of opportunity” that some see just pass without anything happening?

That is what I think. My assessment, and not just my hope, is that it is already too late to build the infrastructure to export LNG from Canada to Europe. The timeline just doesn’t make any sense.

The construction work on LNG Canada, the huge facility in British Columbia, was started in 2018, and it’s not done yet, it takes about seven years. So, if we just do the maths, they have to come up with a plan, design a facility, and get the plan ready for approval, so even if they’d started the process last year, it would probably not be ready until 2030. That’s the earliest that Canada could be shipping LNG from Eastern Canada in any serious volume. But Germany and other European countries — do they need LNG in 2030? Probably, they still do need some. But are they going to need it in 2040? 2050? Definitely not.

Most of these infrastructure projects need to operate for 30 or 40 years to break even because they are so expensive to build. The LNG Canada facility in British Columbia costs 40 billion dollars. It seems completely irrational to build such a facility in the East under these conditions.

It is different with hydrogen, so I think they will not build LNG facilities but facilities for hydrogen export at a certain time. Hydrogen will get more viable in the future, because you can produce green hydrogen, with zero emissions, especially in Québec. Québec is a major producer of green electricity because of hydropower, and it currently exports tons of green electricity to other provinces and the US. There’s huge amount of electricity that can be used to produce green hydrogen.

Hydrogen has its uses — it’s not my first choice for climate solutions, but green hydrogen is actually viable. So, there is a potential future for that kind of infrastructure.

Is this discussed in Canada? Is there a clear plan on how to transition away from fossil fuels and where this transition will go?

No, there is no clear plan, and that is a huge problem. We really struggle in Canada to have a clear vision for the future of energy.

This is also visible in the tensions between the ECCC and the NRCan. It’s not clear to anyone in the private sector right now, or for kids in high school deciding on their careers, whether Canada will be a big oil producer in 30 years or if there will be no oil at all in 30 years. That lack of clarity is a real problem for us, at the policy level, the economic level, and on the workforce level. We have a government that is committed to net-zero but afraid to say what that means.

It would be easier to have a clear timeline.

Yes, definitely. We did this for coal power and it worked well. Canada decided that by 2030, there will be no coal power anymore in the country, and they made this decision back in 2018. It was a nice long timeline, more than ten years, but everyone knows it and every sector can make its decisions around it. The private sector can start making plans to shut down the coal power plants, unions and workers can start making plans on how to transition, those municipalities affected can start to make plans on how to adapt because there is clarity.

We don’t have any clarity at all concerning oil and gas, and that’s why these debates continue to happen.

The LNG debate brought further insecurity to that debate?

Yes, because now, all of a sudden, people say. “Wait, maybe the fossil fuel industry doesn’t need to be wound down.” It’s just a huge distraction from our climate efforts. With every new fossil fuel project, you are just denying the inevitable. You are not solving structural economic problems, and you make it even harder to transition.