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Canada Permits Quicksilver’s Discovery LNG Project

British Columbia's aspiring liquefied natural gas (LNG) industry spread into prime eco-tourism territory, when a tanker terminal scheme on Vancouver Island obtained a 25-year federal license to export up to 2.6 Bcf/d.

The National Energy Board (NEB) granted the permit to Quicksilver Resources Canada for its Discovery LNG project at scenic Campbell River, 265 kilometers (160 miles) north of the provincial capital of Victoria.

The town of 32,000 calls itself the salmon capital of the world, where vast schools of the fish breed in streams that flow out of the west coast rain forest into an arm of the Pacific between the island and the BC mainland known as the Inland Passage.

Eco-tourism flourishes in the area on an array of attractions such as fishing, diving, hiking, camping, boating, kayaking and viewing wildlife from aquatic otters and killer whales to bears in the woods and eagles and ravens in the sky.

The Canadian firm is wholly owned by Fort Worth-based Quicksilver Resources but was not included in its Texas parent's March voluntary bankruptcy filing in the United States to seek a financial restructuring arrangement with creditors.

The company's export license application told the NEB that overseas shipments could begin as early as 2021 then ramp up to maximum volume as of 2024 by building the proposed Discovery LNG terminal in four production trains.

Quicksilver bought a 1,200-acre former pulp and paper mill site for its LNG project two years ago, for C$8.6 million (US$6.9 million). But the plans remain sketchy.

Costs have yet to be determined by feasibility studies currently under way, leaving the proposal described only as a multibillion-dollar project. Talks are being held with potential industry partners.

How the high volumes of export gas would reach the terminal is also unsettled, with Quicksilver saying only that a "yet to be determined" transmission system would be developed. Work is also under way on satisfying environmental requirements.

Gas has reached Vancouver Island since 1990 via a seabed pipeline. But the conduit was built as a modest regional utility service, not for bulk commodity exports. A proposal for a second gas line to the island was scrapped in 2004 after a four-year regulatory ordeal.

Regulatory efficiency reforms, enacted under the pro-industry Conservative regime in Ottawa, abolished public hearings and environmental assessments for gas export licenses on grounds that production and production facilities will be reviewed separately.

In granting Quicksilver's export license, the NEB observed that the document is just one step for LNG schemes that go through an exceptionally long and complicated process even by gas industry standards.

The ruling said, "All of these LNG ventures are faced with a robust, but limited, global market and face numerous development and construction challenges. Factors such as the size, remoteness, complexity, lack of large buyers coming forward, and the Canadian cost structure are among the issues that Canadian LNG ventures are facing.

"Not all LNG export licenses issued by the board will be used or used to the full allowance. The board will not predict which licenses will be used or used to the full allowance."

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