Malaysian Energy Giant Inks Lucrative Deal in Canada Despite Opposition From Indigenous Group

British Columbia's leaders signed new agreements with a Malaysian-owned gas company Wednesday in an effort to secure a $36-billion liquefied natural gas pipeline and export facility on Canada's northwest coast.

If approved, the project will be the largest capital investment in BC history.

But the Pacific NorthWest LNG deal — touted by the BC premier as the start of a new economic era in the province — remains far from finalized, and it's coming up against stiff opposition from a handful of indigenous groups.

Members of a key First Nation band rejected a $1 billion benefit package earlier this month, citing risks to Skeena River salmon habitat. The cash offer would amount to $320,000 per person over 40 years.

"This is not a money issue: this is environmental and cultural," Lax Kw'alaams mayor Garry Reece said in a recent statement following a third round of community voting. "Lax Kw'alaams is open to business, to development, and to LNG (including Pacific NorthWest). It is not open to development proximate to Flora Bank."

Pacific NorthWest LNG, led by the Malaysian state-owned energy company Petronas, has proposed an export terminal on Lelu Island near Prince Rupert, BC. The facility would liquefy and export natural gas produced in northeastern BC and be transported west via a proposed 900-kilometre pipeline.

The Skeena is the second-largest salmon-producing river in the country, and the estuary along Flora Bank hosts an estimated 80 percent of the river's young salmon during springtime migration. "It's some of the most sensitive salmon habitat in Canada," Skeena Wild Conservation Trust executive director Greg Knox told VICE News. He pegs the local salmon fishing industry at around $100 million a year.

Knox said the Pacific NorthWest project would build a suspension bridge through the estuary, dredge up toxic sediments left decades ago by a shuttered pulp and paper mill, and potentially destabilize the banks of the Skeena. All of which could damage the river's juvenile fish during an especially vulnerable phase. "To summarize, it's just the worst possible place to put one of these facilities," he says.

At a Wednesday press conference in Vancouver, Premier Christy Clark said her government will continue to consult First Nations as "full partners" in the project. The government says it has reached agreements with 14 of 19 indigenous groups along the pipeline route.

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The Pacific NorthWest development is one of 19 yet-to-be finalized LNG proposals in British Columbia. "All of us know that not all of them will go ahead," Clark said Wednesday, "but we hope this will be one of them." Many of the projects face market setbacks and public opposition due to fracking concerns.

Clark, along with her finance minister Mike de Jong and deputy premier Rich Coleman, signed three documents on Wednesday: a memorandum of understanding, a project development agreement and a long-term royalty agreement. The premier said these agreements "set the stage" for a new economic era, and a new industry in BC.

Clark's government first promised a debt-free province boosted by natural gas exports during the 2013 provincial election, but has since dramatically altered its LNG forecast. In response to crashing oil prices, Clark halved the tax rate on LNG from 7 to 3.5 percent in October 2014 — abandoning hopes for a $100-billion "prosperity fund" or zero-percent provincial sales tax.

Now the government has proposed new legislation to facilitate long-term royalty agreements with LNG proponents, guaranteeing "competitive" tax rates over time. Under the proposed project development agreement, Pacific NorthWest LNG will have a right to compensation if new taxes are introduced in the future. Based on current forecasts, the province now expects to collect $7.7 billion in revenue over 23 years.

BC's memorandum of understanding with Pacific NorthWest echoed a letter of intent already signed in May 2014. But the other two agreements make new economic commitments critics say will "hamstring" future governments' budgets for decades to come.

BC Green Party leader Andrew Weaver called the deal and the new royalty legislation shocking and irresponsible. He says the move will make it costly for future governments to change royalty and tax rates. "Rather than acknowledging the folly of their pre-election promises, they take the reckless and desperate approach of essentially giving away a resource," Weaver said in a statement.

The province hopes to debate the LNG deal in the legislature this summer before it's up for ratification. The project is also subject to a federal environmental review, which is expected to wrap up later this year.

Follow Sarah Berman on Twitter: @sarahberms