Cedar LNG, Haisla Nation, and Pembina Pipeline: Canada’s First Indigenous-Led LNG Project
On June 25th, 2024, Cedar LNG announced a positive final investment decision (FID) for a floating liquefied natural gas (FLNG) facility with a nameplate capacity of 3.3 million tonnes per annum (~0.4 Bcf/d) located in the traditional territory of the Haisla Nation, near Kitimat, British Columbia, on Canada’s west coast. Commercial operation is expected by 2028, and the project will use the existing Coastal GasLink pipeline (also serving LNG Canada) to deliver natural gas from the production fields in British Columbia and Alberta. The project has an estimated cost of US$4 billion and will be majority-owned by the Haisla Nation. Their partner is Pembina Pipeline Corporation.
This week, our guests are Crystal Smith, Chief Councillor of the Haisla Nation, and Scott Burrows, President and Chief Executive Officer of Pembina Pipeline Corporation. They explain the project, the community support, the financing, the environmental review process, and, importantly, what this project means for the Haisla Nation’s economic future.
Other content referenced in this podcast:
- Cedar LNG Announces Positive Final Investment Decision (June 25, 2024), scroll down to play the video
- See all videos about the project, including hearing from members of the Haisla Nation: Media Kit – Cedar LNG
- National Bank paper making a case for a global GHG reduction from growing Canadian LNG Exports: “Canada Has a Vital Role in Deleveraging the Global Environmental Balance Sheet,” February 2024
Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/
Check us out on social media:
X (Twitter): @arcenergyinst
LinkedIn: @ARC Energy Research Institute
Subscribe to ARC Energy Ideas Podcast
Apple Podcasts
Amazon Music
Spotify
Episode 257 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. Welcome back. Well, Jackie, I’ve said this I think on a couple of podcasts. We’re in the midst of election fever. We’ve got the US elections coming up within a month. On the other side of the border, we’ve got all sorts of articles in our national and local newspapers talking about federal politics and federal election, but the one that is just around the corner is the BC election. So as we record this podcast, we don’t know who is the victor in the BC election, but as you, our audience, listen, you will know because we posted it the weekend immediately after the election. Nevertheless, as you ponder the victor of that election, today we are recording a special BC edition, right Jackie?
Jackie Forrest:
That’s right. We’re talking about a project that I’m really excited to learn more about. We had Ellis Ross on earlier this year talking a bit about the Cedar LNG project, but just at a high level, and since that time, the project has a final investment decision. So we’re very excited to have our two guests here to tell us more. We have Crystal Smith, Chief Councillor of the Haisla Nation. Welcome.
Crystal Smith:
Thank you for having me.
Jackie Forrest:
And her partner, Scott Burrows, Pembina Pipeline Corporation President and Chief Executive Officer.
Scott Burrows:
Thank you. Great to be here today.
Peter Tertzakian:
Well, great. Thanks both of you for joining. Crystal, maybe just introduce us to the Haisla Nation and talk about when you became Chief Councillor.
Crystal Smith:
So we’re a proud nation on the BC coast of 2000 members that reside locally and other areas in BC and around the world. I was elected officially in 2017. However, I had about a six to eight month interim position when Ellis Ross actually decided to take the plunge into provincial politics. So I’ve been elected since 2017, so I’m serving my second term. I think I’m going on to my almost eighth year now.
Peter Tertzakian:
Yeah, right. And so geographically, tell our audience where the Haisla Nation is. It’s right by Kitimat in BC halfway up the coast?
Crystal Smith:
Yes, it is. So it’s at the end of the Douglas Channel. So we’re very fortunate to be located at the head of the Douglas Channel.
Peter Tertzakian:
And the village is on the one side of the channel, as I recall. Because I have visited it, it was probably been 10 years ago. And the LNG Canada facility is sort of at the mouth and on the other side. Is that not right?
Crystal Smith:
Yes, that is absolutely correct. So from our community, we can see all of the industrial area, which includes LNG Canada and also Rio Tinto, and where we are going to be able to see directly across the west side of the channel, Cedar LNG.
Jackie Forrest:
Okay. We’re going to ask you a bit about the project. So just for background for our listeners though, on June 25th, 2024, the project had its final investment decision. It will be a floating liquefied natural gas facility that will have 3.3 million tons per year of capacity. And I know in the LNG world those are common terms, but in Western Canada, a lot of people like BCF per day. So it’s about 0.4 BCF per day to give people a view of the size. Of course, it’s located in your traditional territory, the Haisla Nation, and commercial operation is expected by 2028, and it will use the existing Coastal Link Pipeline. We’re going to get into all the details and questions on that, but a question for you, your nation is the majority owner of the project. How long has the nation been advancing it? How did it feel when you reached that final investment decision? I do want to tell our listeners, we’re going to put some videos in the show notes, but there is a great video about the day that you had the final investment decision that I just thought was so inspirational.
Crystal Smith:
Our nation has been working on the project for approximately a decade, so a little over 10 years it’s been in our site and in our vision. We were very fortunate enough to negotiate 400 MMCF of capacity off the Coastal GasLink Pipeline. In our agreements, it had to be majority owned by our nation. And I still can’t put into words in terms of what it felt like that day. I had shared in a great deal in LNG Canada’s success when they announced their positive final investment decision and had been in Vancouver essentially alone in a hotel room when I had heard about the positive FID. This one because it’s majority owned, and it was in front of my girls and my two grandsons and my entire family just, I can’t put it into words in terms of how proud I was of our nation and just facing all that adversity at the time when people were thinking this isn’t going to happen.
And at times doubting ourselves. And to get to that point where I’m looking back at our hereditary chiefs and my family with a positive FID standing beside Pembina, I don’t know if I’ll ever have a feeling that compares to that moment in my career again.
Jackie Forrest:
Well, maybe when it starts up and that’ll be close to it.
Peter Tertzakian:
Yeah. So Scott, tell us about yourself and how Pembina got to be an equity partner in this project.
Scott Burrows:
Sure. So my name’s Scott Burrows. I’m currently the president and chief executive officer of Pembina coming up on three years. I’ve been with the company for 13. So been part of the growth from what was just a conventional pipeline company in Western Canada to the platform that we have today. And when I think about our strategy, one of the four pillars has been accessing world markets. For some time now, we’ve been believers that Western Canadian hydrocarbons are discounted because of a lack of egress. So we’ve been really focused on multiple projects, whether it’s propane export or other projects to get hydrocarbons off the west coast of Canada. And so LNG clearly has been in strategy for some time.
For those that know Pembina, we were pursuing a project out of Oregon called Jordan Cove. And so we learned a lot about the LNG market. With that, we were always looking for opportunities and had been aware of the Cedar LNG opportunity and were quite inspired by what the Haisla were trying to do with their project and what they had accomplished with their capacity to Coastal GasLink. So for us, with it being in strategy with bringing what we thought we could bring to the party combined with the Haisla, we thought it made for a very powerful partnership and we were lucky enough in 2021 to reach agreement with the Haisla to pursue the project and try to get it to FID and then into service.
Jackie Forrest:
All right. Scott, you did touch on the broader Pembina, because it’s true, a lot of people think of you, as at least I do, as the conventional pipeline business kind of in the Grand Prairie area and extending into BC. So maybe just quickly tell us about your broader portfolio. You mentioned the exports of LPGs off the west coast, but what are other parts of your business?
Scott Burrows:
Yeah, so Pembina has been around for 70 years and I’d say for the first 60 years it was generally conventional pipeline gathering, crude oil, condensate natural gas, liquids to export from the field and into Edmonton. And really starting in about 2010, we really accelerated the platform and we saw what was going on with the drilling technology and the resource that our pipelines sat over. We really started to expand the footprint. And so when you think about that footprint of just conventional gathering systems to where we are today, now we move over 3 million barrels a day of hydrocarbons, and that spans all products. That’s crude, condensate, natural gas, liquids, and natural gas.
We have 10 million barrels a day of above ground storage in the Edmonton area. That’s our pipeline system. And then on the facility side, we have 6.7 BCF a day of gas processing, which makes us the largest third party gas processor in Western Canada. We have 115,000 barrels a day at condensate stabilization, 21 million barrels a day of below ground storage. We have our 20,000 barrel a day propane export facility. And in the not too distant future here, we’re going to have 400 million cubic feet a day of LNG off the west coast. So we’ve expanded the platform quite a bit over the last 13 years.
Peter Tertzakian:
Yeah, that’s really significant. And for over a century, we’ve had only one customer that’s the United States and all our hydrocarbons float south. And now with the expansion of the Trans Mountain Pipeline, the imminent opening of the LNG Canada facility, and then now we’ve got the Cedar we’re talking about, I mean, we’re going to start making the foray into international and get hopefully much better pricing. Now along the way from the heart of the Western Canadian sedimentary basin in Alberta through BC, there’s a lot of indigenous ownership that has increased over the course of the last certainly decade. And maybe, Crystal, talk about why this project is unique relative to other indigenous partnerships along the infrastructure routes and the involvement of indigenous communities in the service business all the way from Alberta through BC into the coast.
Crystal Smith:
I think the uniqueness of Cedar is that it was indigenous-owned from the beginning, the onset of Cedar, the first decisions were made by members of the Haisla Nation as the makeup of the first Cedar LNG board members and making the decisions around the impact on the environment and essentially what was going to make Cedar different and unique from other projects. And I think it states it in the name of the project, and if you take a look at the art that signifies the indigenous ownership of it, I think around that aspect, that’s what sets us apart. We were the majority owner inviting a proponent to come and partner with us as opposed to the reverse where we find a lot of existing projects, existing proponents coming into different indigenous communities and then offering up that ownership piece.
Jackie Forrest:
So Crystal, I can appreciate what you’re saying in terms of being asked to come in. It gives you a much different sort of leverage in terms of the negotiation and getting what’s right for your community and your project. So Scott, tell us about your partnership. What is Pembina’s role in the construction and operation and even getting to the FID?
Scott Burrows:
Sure. So first of all, as Crystal mentioned, the Haisla invited people into the project. So obviously as Pembina we were very honored to be selected as that partner to work with the Haisla to advance this project towards FID. And so Pembina’s main role as it stands right now is really on the construction and the operations of the facility up until FID. And then we’ll talk about post-FID. From a construction perspective, it is a collaborative effort between Pembina and the Haisla. So it’s not solely Pembina involved, it is obviously members of the Haisla as well.
But in terms of construction, we kind of think about it in two pieces. There’s the offshore, which is really the floating LNG facility. And to advance this project to FID, we entered into a lump sum arrangement with Samsung, Black & Veatch. So the vast majority of the capital in the project will actually be constructed in a controlled shipyard in South Korea. And then the onshore piece is really the pipeline that connects Coastal GasLink into our facility, a relatively short transmission line to bring power into the facility and in the onshore mooring system. And that’s all being overseen by Pembina. And then on the operation side, as we advance towards FID, we’re putting together the operations plans, the safety plan, and then once in service we will be working, we are the big O operator, but the plan is to employ as many Haisla Nation members as possible.
Jackie Forrest:
All right, so you’ll be involved in the training and that sort of thing as well?
Scott Burrows:
Training, development. Absolutely, yeah.
Peter Tertzakian:
So let’s go a little deeper into this floating LNG modality versus the onshore. So the Coastal GasLink Pipeline comes to the head of the Douglas Channel. A large part of that flow is going into LNG Canada’s LNG terminal. You tap into that and just go around the corner. And then from there the pipe goes into more of a flexible pipe that goes into the Douglas Channel and up onto a floating platform where the liquefaction and the preparation for the ships to come in and out work from there. Is that how it works?
Scott Burrows:
Well, it’s not underwater. It goes around the LNG site, around the Rio Tinto site, and then on the land kind of beside Rio Tinto all along, I guess that’s the North Shore towards the actual site. So it’s about nine kilometers, Peter, but it’s all onshore.
Peter Tertzakian:
Right, but the actual liquefaction occurs offshore.
Scott Burrows:
It occurs on top of the ship, correct.
Jackie Forrest:
So do you have a kind of pipe that goes then from the shore to the [inaudible 00:13:18]?
Scott Burrows:
To the ship, correct, yeah.
Jackie Forrest:
And that would also have, I guess the electricity, which is a pretty significant amount of electricity going and an underwater as well?
Scott Burrows:
Correct. Yeah.
Peter Tertzakian:
So for those that are familiar with that site, I mean that was the old Chevron site, wasn’t it?
Crystal Smith:
No, actually it wasn’t. Chevron’s about another, I’d say, 8 to 10 kilometers further down on the west side of the channel. Our site is actually directly located right across from our community, so it’s a lot closer to Rio Tinto. We actually have owned the two parcels of district lots since 2009. So we actually agreed that these sites would be industrial development, particularly one site was proposed as a propane facility, and the other one was for LNG. I just wanted to take it back a little bit to the floating facility decision. When I talked about the indigenous ownership piece and around the environmental impacts, our community has been dealing with LNG for well over 10, 15 years. The site that you referred to as Bish where Chevron was located, was actually proposed for an import facility in the ’80s. And unfortunately, that project ended up walking away because of the costs and the economics.
So our community has been actually dealing with LNG for many years. Throughout the time that I’ve been a part of our leadership, we’ve had many, many projects that were proposed for our territory, the Chevron being one of about three. And so when we were able to negotiate this portion of gas and we were making the decisions because of our prior knowledge in terms of technologies and the impacts, because we had LNG Canada advancing, and we were able to see the impacts of what LNG Canada was making at that time, we made the decision prior to having a partner come on that it would be a floating facility so that it had minimal impacts on our territory.
And ultimately the thought process around all of those decisions were we were going to be able to stand in front of our community to ensure that our project was going to be the best in our territory. We were going to minimize impacts as much as we possibly can. We were going to choose technology regardless of the economies coming back to our nation. And that was simply because it’s a legacy. We’re going to have seven generations that are going to benefit from this project and to ensure that our decisions aren’t fully impacting our future generations was of the utmost importance to us.
Jackie Forrest:
Well, and you also chose a technology that was very low emitting because you’re going to be the first electrified LNG export facility in Canada. So talk about that. Talk about your LNG emissions compared to some of the other projects and just a bit about the electricity supply because you need a lot of electricity to go all electric too, I think.
Scott Burrows:
In terms of the emissions, we believe that this will be one of the lowest emitting LNG facilities in the world. And that’s backed up by multiple studies that we’ve done. And that’s, as you pointed out, mainly driven by the fact that it will be electric driven by BC Hydro. In terms of size, this will be close to 200 megawatt of demand. It’s a very significant load in the province. And another complication with getting this project across the line was the reliance on BC Hydro to deliver that power to the area. And so early on, again, with a lot of foresight, we were in the BC Hydro queue in order it to secure that power. And so once we made the FID decision, we secured our spot for BC Hydro to continue to develop their capacitor upgrades towards the area. And then Cedar is responsible for a relatively modest 14 kilometer transmission line to tie into to the upgraded system.
Jackie Forrest:
And how long does it take to ask BC Hydro for that type of load and get it? Is that a multi-year process, I imagine?
Scott Burrows:
Yeah, it’s like many things on this project, there needed to be a lot of foresight and planning. And so the work with BC Hydro has been ongoing for many, many years to get in the queue, advance the project, and then on a positive FID, they FID’d their project and they’re well underway as well.
Peter Tertzakian:
Just for a sense of scale, I mean 200 megawatts. Jackie, on our recent podcast, we’ve been talking about data centers, some of which are conjectured to be five times that at a gigawatt. So 200 megawatts, it doesn’t sound like all that much in contrast to some of these data projects that I’ve been talking about.
Jackie Forrest:
But those are on the come. Maybe Scott, how does this compare to other industrial users in BC?
Scott Burrows:
As of right now, it’ll be one of the largest demand centers in British Columbia once it’s up and running.
Jackie Forrest:
So that maybe more is coming as they add more data centers, although I think everyone’s short power.
Peter Tertzakian:
Yeah. Scott, do you want to talk about the relative cost of offshore versus onshore? Because the last time I looked, which is quite a while ago, one of the issues of offshore was that it was on a per unit of LNG more costly to liquefy offshore than on these floating units than onshore. Is that true or false? And largely due to the smaller scale of these operations?
Scott Burrows:
That plus, depending on where they’re being built. Gulf Coast tends to have a bit of a labor advantage. I would say, depending on which facility you’re talking to, we’re generally in line. With some of the larger scale facilities, we might be slightly higher, but some of the smaller ones, we’d be slightly better. But from our perspective, what we had to look at it was the all-in landed cost in Asia, and obviously the facilities a major piece of that, but we also had to take into consideration pipeline tools, BC Hydro charges, and then of course the feed gas. And with AECO being relatively discounted to NYMEX, it gives us a structural advantage from a feed gas perspective.
So we believe on an all in cost we can compete with the Gulf Coast to land in Asia. And, sorry, another major piece of that of course is the shipping costs and our shipping advantage is huge before you take into consideration issues with the Panama Canal and then of course weather events in the US as well, whereas we tend to not have those on the west coast of Canada. So the all-in cost piece is where we tend to focus in terms of our project being competitive.
Peter Tertzakian:
Yeah, yeah. Actually, one of the things I touched on scale and scale relates to cost, but one of the things we didn’t put the Cedar LNG project in the context of LNG Canada. Can you give us a sense of the relative size?
Scott Burrows:
So roughly LNG phase one will be, call it 1.6, 1.8 BCF a day, and ours would be 0.4 BCF a day.
Jackie Forrest:
And then what about labor force, like their construction labor force was over 10,000 people, I think at peak. How would that compare to what you would expect?
Scott Burrows:
Yeah, again, because this is being built offshore, the vast majority of the labor for the ship and the top sides and the LNG facilities at sea in South Korea in the controlled shipyard. When you think about what Pembina and Cedar will be responsible for on the onshore piece being the call it nine kilometer pipeline, the transmission line, the mooring system, at peak will be 500 people. So still a lot, but relatively modest compared to what we saw for LNG phase one.
Jackie Forrest:
Okay. So you’ve done a lot to reduce the environmental footprint. I want to talk to you Crystal about is everyone supportive of the project, not only within your nation, but there’s other indigenous groups and communities maybe in the broader region that are impacted and are they supportive? And did you have to do a lot to build support? And what did you do? Because I think we’re going to get to the environmental review process, but getting support from local stakeholders is really critical in that.
Crystal Smith:
Oh, absolutely. And again, going back to the first conversation of the first Cedar board members was that we were going to do this in better scale, especially when it came to our indigenous communities that were located around us. In and throughout this process, we’ve had to take on a number of initiatives and one of the key initiatives in order to get our portion, our side to NFID, when it came to putting forward our piece of the equity, we had to go through a community referendum process, which was a very lengthy and intense communications piece with our membership. And we took that in a scope of doing many sessions in community and elsewhere, like in Vancouver, where majority of our members would reside, and ultimately gave them all the information that we could when it came to not only the financing portion of it, but what Cedar meant for our nation.
And the results of that referendum process was 97% in favor. So I think that spoke huge volumes to our leadership in terms of where our community members wanted our nation to go. So when we have the community support, yes, we do. For other stakeholders and how we were able to essentially build that relationship, it started many years ago with our neighboring nations. And like I stated earlier, our community isn’t new to industrial development. We were fortunate enough to see the modernization of Rio Tinto and experience that prior to LNG Canada. And we witnessed all the fly in and fly out employment opportunities and contracts that were awarded and saw essentially a missed opportunity through that process. And when it came to LNG Canada, one of our hereditary chiefs gave a mandate to our leadership that in our culture, you share the opportunity.
So through LNG Canada’s contracts and employment opportunities, we started going to our neighboring nations asking how we would work together to ensure that our people within the region were able to share any opportunity of careers and contracts. So when you walked onto LNG Canada’s site, you’d be able to see Gitga’at, which is a community that’s down the coast, you’d be able to see their joint ventures and their members working in our community. So we started building those relationships well prior to Cedar. And then as we’ve introduced Cedar to them, that relationship had already existed and they got to witness what LNG Canada was, so we were able to establish it through their support through that.
Jackie Forrest:
Right, and build some of those relationships through those previous business ventures.
Peter Tertzakian:
Well, it was great to get such tremendous social buy-in from the indigenous community. Can you talk about the federal and provincial environmental processes? Because those have historically been difficult to get through in this area, particularly C-69, the impact assessment process. How did your project fit in with all that?
Scott Burrows:
Well, I guess it starts with an extremely collaborative effort between Pembina and Haisla and able to leverage the strength that both sides brought to the party. And it was the first project approved over the Federal Impact Assessment Act, and it was a detailed and complex process that took over three years from planning to approval. BC actually led the assessment as part of a substituted process, which was intended to avoid the duplication of processes when a project is required to go through both a federal and provincial environmental review. So for Cedar LNG, BC’s Environmental Assessment Office conducted the assessment under the Environmental Assessment Act on behalf of the federal government. And so after that detailed review, BC did issue the environmental assessment Certificate on March 14th, 2023. And then the next day Ottawa endorsed the approval, which when we look back in terms of milestones for the project, that was one of the better days for the project and a great celebration of Vancouver, and we were very pleased to get that.
Jackie Forrest:
And when you say Ottawa endorsed it, that’s when the environmental minister approves the project? Is that kind of the step, the final step?
Scott Burrows:
Yeah, we got a positive decision statement from the Federal Minister of Environment and Climate Change the next day.
Jackie Forrest:
And a lot of people are concerned by how much money project proponents have to put in before they know that the project will forward. Can you share about how much cost you to get through that whole process?
Scott Burrows:
When we initially entered into our arrangement with the Haisla, Pembina was on the hook for about 90 million US to advance the project to FID. And then because of, I would say all the related efforts, whether it was the regulatory approval, the commercialization, the contracting of the LNG facility, reliance on agreements with Coastal GasLink and BC Hydro, that date slipped. And of course, with any project, time is money. And so from what we originally thought it would cost till we entered into FID, it was several hundred millions of dollars, both money out the door. But also we needed work advanced on Coastal GasLink because we needed a new compressor station built. As we talked about previously, we needed BC Hydro to advance their project. So not only was it cash out the door, but there was also fairly significant letters of credit that needed to be posted with third parties continue to advance the project. So there was fairly material dollars that we continued to advance in order to get the project to FID.
Jackie Forrest:
So you needed those long lead items and those things to move forward even before you had the approval?
Scott Burrows:
That’s correct, yeah.
Peter Tertzakian:
And those long lead items were followed or presumably in parallel negotiated with the off-take agreements and the supply side agreements. Can you comment on how all that came together?
Scott Burrows:
Yeah, the other big piece of this was the global shipping industry is quite busy, and so the ability to get a space and a ship slot to build it was also another timeline that we needed to meet. And so we needed to issue a limited notice to proceed with our engineering companies. And that was right at the end of December, early January, and that was in order to keep our slot to build the ship. And so we knew that from the limited Notice to Proceed to the Notice to Proceed was about 90 days. And we were having fairly advanced discussions with several counterparties. But what became clear was in the time that we had to go from limited notice to proceed to notice to proceed, we probably could only get one of those across the line. And we needed a hundred percent of the capacity essentially contracted in order to project finance it.
And so we focused on ARC resources at the time and were able to enter into an agreement with them for half of the capacity. And then at the same time, Pembina entered into an identical contract for the other half of the capacity such that we could keep all these interrelated timelines as well as launch the project finance in order to FID the project. And then for Pembina’s 50%, we will continue to market that. And what’s been really interesting is there was fairly significant interest in the project to begin with. Like I said, just due to competing timelines, we really had to focus on one party. What I would say, and what we’ve been pleasantly surprised with is post FID, now that you’re real, and not that we weren’t real before, but now that the customers see you as real and you’ve FID’d, there is continued increased interest in the project and we’re very confident in our ability to assign our 50% interest in due course.
Jackie Forrest:
So you’ve contracted, but you’re looking to get contracts with buyers presumably in Asia. Can you tell us a little bit about how do you expect some of it to be spot and some of it to be with long-term clients and how are Asian buyers looking at this project?
Scott Burrows:
So for ARC’s 50%, they’re responsible for their off take. So we don’t know where that LNG will end up, but logic would lead you to likely be Asia. From our perspective, we’re in discussions with numerous counter parties, whether it’s Asian buyers, whether it’s, I’ll call it international LNG marketers or continued interest from Western Canadian producers who are also looking for incremental egress and to get their gas off of the west coast of Canada. So we’re in the early days of, I’ll call it the remarketing efforts, but we do have a variety of potential off-takers that we’re talking to.
Jackie Forrest:
Okay. Well, you talked about the financing. This is important for the financing to show the banks that you have customers. Can you talk a little bit, and maybe Crystal, this is a question for you because in the past, these indigenous partnerships, one of the barriers has been getting the equity financing and the project was announced to be about 4 billion in total cost. And in your FID announcement it talked about 60% debt and 40% equity, which is actually maybe a bit more equity than sometimes we think that are in these projects. How are you going to finance your portion? And did any of these indigenous loan programs that the provinces and federal government have put out, were they helpful for financing that?
Crystal Smith:
For our portion, I talked about it earlier in regards to getting our portion ready for the community referendum, we actually borrowed our portion of the equity from the First Nations Finance Authority, which is the largest in their history and probably the largest for an indigenous community to go out and borrow. In terms of the question around the loan guarantee programs from both the province of BC and from the feds, unfortunately, they had been announced, however, the program wasn’t up and running in time for Cedar and for the nation to be able to access.
Jackie Forrest:
So those would’ve been helpful for you though, and for your next project, you’ll be looking forward to using the federal government’s loan program.
Scott Burrows:
It is an interesting question because I think the one thing that Chief Crystal and I spent a lot of time on was on the finance side, obviously getting in and I think a key learning out of this project, not for us, but on a go-forward as we think about incremental investment from indigenous communities is a lot of the programs are set up once an asset’s in service or cash flowing. There’s not really a good program yet to advance, I’ll call it pre-FID funding, which for other nations that I think are trying to replica what Crystal and her community have done, it’s a real challenge. People are often willing to lend against cash flowing assets, but when there’s at-risk dollars, there’s not a great program set up yet. And I think that’s something that could really change the pace of some of these developments in the future.
Jackie Forrest:
These new programs like the federal one, do you think that it will be more open to funding pre-FID? Sorry, I guess so you don’t know yet, right?
Scott Burrows:
I don’t know yet, but I think or I hope they’ll look at our project and see some of the challenges we face and make some of those changes because that’s how you’re going to advance it and that’s how you’re going to be able to be a majority partner as Crystal is because as she said previously, a lot of times communities have been invited in and into getting a minority piece and a cash flowing asset, which of course is relatively easy to lend against, but it’s that at-risk dollars and driving these projects forward where we need to see some leadership.
Peter Tertzakian:
Some people and environmental groups, politicians, even entire political parties don’t want to see these sorts of facilities built because as they say, lock in natural gas infrastructure and perpetuate emissions and so on. What do you say to those who oppose these sorts of projects?
Scott Burrows:
Well, my personal belief and I’ve written about this, is that emissions are a global phenomenon. They’re not isolated to Canada or to a region. And so I am a firm believer that with this project being as low emissions as it is will either offset existing coal in Asia or as populations grow in Asia, it will avoid incremental investment in, I’ll call it coal or other facilities. I believe that it won’t lower emissions, but it will offset the growth by being a cleaner fuel being burnt. And so I think about it as a global phenomenon, Peter, not necessarily a Canada one, and often the rhetoric is very specific to a project or to a region, and I just think we need to think bigger than that.
Peter Tertzakian:
Yeah, I tend to agree. Crystal, I mean, how do you deal with it from the… I mean, I think there are indigenous groups that are opposed to fossil fuel infrastructure development. How do you talk to them about what you’re doing?
Crystal Smith:
Throughout LNG Canada’s history and in our territory and if you guys are aware and listeners are aware of, Coastal GasLink and the sensationalism that was provided all around the blockades in 2019, I think that was probably one of the most interesting times of my time as the Chief Councillor in terms of being referred to as a sellout for supporting LNG industry. But I take it from much of the perspective that Scott does. However, growing up as an indigenous Haisla, we are taught what is called our Nui’am, which is our Haisla law. And within those teachings, you are taught to care for your territory, you’re taught to care for your environment.
And when you think about it from an indigenous perspective, each of us are taught to do that. And to think in the context of a global issue, we’re not protected from what is happening in Asia or India in regards to what they are burning and providing their countries with energy. So I like to think that we’re contributing to a slowdown of those emitters and we are doing our due diligence by supporting these projects to ensure that there’s a cleaner, more affordable energy being brought to other areas of the world.
Jackie Forrest:
I just want to, obviously, I agree with you. Peter and I’ve had this discussion before, but I’m going to put this link to a little paper that National Bank did in the show notes because India talked about that they’re going to double their coal production and therefore their power generation associated with coal, which is twice as many emissions approximately as using gas. And they had done this just sort of thought piece saying, “Well, what happens if we replaced that with Canadian gas and they didn’t use the coal?” And it resulted in almost the same emissions as Canada, 700 million tons annually being saved. So all of Canadian emissions got saved by us just replacing our gas. Now, that’s a lot of gas, but it just shows you that there is a global impact and it’s not being recognized in this country. We’re very focused on our domestic emissions and our borders and not thinking kind of big picture.
Peter Tertzakian:
Yeah, it’ll be great to post that. Actually, Crystal, back to you, so this is not your first business partnership in the Haisla Nation. You’ve also been part of a venture called High Sea Marine. I guess many of us in our audience, they’re like me. They’re wondering, based on the success of this partnership with Scott, what’s your next investment and project?
Crystal Smith:
Like I said in the beginning, we’re very fortunate of where we reside. It’s a deep seaport that doesn’t freeze throughout the year. Our nation has continued to receive speculative projects, we refer to them as coming into our territory and proposing different exports. What’s next? I’m answerable to 2000 Haisla members, and ultimately the way we’ve been able to manage these projects was to get the mandate from our people. And I think what is next is going to be determined by them. I think if you look back at our history in regards to economic development, you’ll be able to see that our nation doesn’t sit still. In fact, I think we’re absolutely horrible in celebrating our successes and taking a moment to realize what we’ve done.
But that’s also a fortunate place to be in that we have a great team behind us on behalf of us that always look forward to being visionary in terms of creating generational wealth and more importantly generational opportunity in our territory. So I would say keep a close eye on what is next for us. I think, not that this hasn’t been exciting, we’re always evolving, we’re always changing our focus and our strategy, and I think the next thing that does come along is going to be just as exciting and different.
Jackie Forrest:
Okay, well, that’s very inspirational. I look forward to hearing more. Now, our listeners may not know, there’s still a lot of LNG potential on our west coast as well. So the projects that are moving forward, the Cedar LNG, LNG Canada, and we haven’t talked about wood fiber, those all have final investment decision, would export about 2.5 BCF per day of LNG from Canada’s West Coast. To put that in perspective, we produce around 17 BCF per day. So significant, but there’s much more potential. But people may not know that there’s 4 BCF per day of projects that are advancing. We had 10 plus projects advancing 10, 15 years ago, but there’s still actually four. One is actually I think just north of you, and it’s also indigenous group. It’s called the Ksi Lums? I think that’s how you-
Crystal Smith:
Ksi Lisims.
Jackie Forrest:
Ksi Lus?
Crystal Smith:
Ksi Lisims.
Jackie Forrest:
Ksi Lisims LNG project. And then we have LNG Canada phase two. I think everyone knows about that and is hoping that that goes forward. And there’s a couple of smaller one, Tilbury LNG and Summit Lake, so we could have another four BCF per day of projects coming off our west coast. So just some thoughts from both of you. What do you think these projects mean for Canada? We have this election coming. Do we expect that these projects could move forward and what will they do for the BC and actually the region around where you live?
Crystal Smith:
You talked about certain projects there, and I would say a lot of them have, if not all of them, have indigenous participation, whether it be at the regulatory with wood fiber, Nisga’a are owners of Ksi Lisims, and what it means for BC and for Canada is the indigenous communities participating in all of these projects from an indigenous perspective means improved quality of life for our people. We’ve supported these projects because of having no other avenue of managing prosperity. We’ve managed poverty in indigenous communities for far too long, and these projects mean a change in history for a lot of these communities in terms of providing revenues back to their community to be able to provide programs and services on a completely different level than we’ve ever been used to. A lot of our revenues that do come in currently from federal levels are very scripted with policy and are very restrictive in terms of how we utilize certain funding and that doesn’t meet the needs of our people today. I’ve grown up in Kitimat my entire life. I’ve witnessed…
Sorry, I’ve witnessed what managing poverty does. You think about the statistics that go along with poverty, I’ve experienced them. Suicide, alcoholism, and we’ve never had any other solution. And through these projects it means hope, it means a different outlook in terms of what you’re providing your generations of today and for future generations.
Peter Tertzakian:
Yeah, I think this is really an amazing story and I really hope that this serves as a model for future indigenous entrepreneurship of not just small projects. I mean, these are mega projects and congratulations to both of you on accomplishing something really, really, I think, which is a turning point for our country. Can you, before we let you go here, the time’s almost up, give us a sense of the target date for startup when we can expect to see the first shipment, or are you prepared to do that?
Scott Burrows:
Later, 2028.
Peter Tertzakian:
Okay. Well, for a mega project, that’s not far away. So thank you Scott Burrows, CEO of Pembina Pipeline Corporation, and you, Crystal Smith, Chief Councillor of the Haisla Nation. Delighted to have you to share your story, and I’m sure we’ll be talking about Cedar more as we go forward.
Crystal Smith:
Thank you.
Scott Burrows:
Thank you for having us. It was our pleasure.
Jackie Forrest:
Thank you. And thanks for this inspirational story, and we look forward to celebrating sometime in 2028 when that first LNG Cargo leaves the Cedar LNG terminal. We hope you’ll have a video for that one too that we can share. Thank you so much for joining us, and thank you to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
Announcer:
For more ideas and insights, visit arcenergyinstitute.com.