The Canadian federal government has given the green light to the $8-billion Pacific NorthWest LNG project, proposed by Malaysia’s Petronas three years ago. The decision is highly controversial because it follows an assessment that found the project will produce significant amounts of CO2, which would go against PM Trudeau’s stated commitment to take climate change seriously and work to slow it down.

The Pacific NorthWest LNG plant is designed to produce over 20.5 million tons of liquefied natural gas a year, in the process generating some 4.3 million tons of carbon dioxide, according to the assessment by the Canadian Environmental Assessment Agency (CEAA).

The assessment also noted that the project was “likely to cause significant adverse environmental effects”, which is what reinforced the vigorous opposition of environmentalists and First Nations, even though Environment Minister Catherine McKenna, who authored the final version of the report, released on Monday, added that these effects appeared to be justified, as decided by the Governor in Council.

An earlier version of the report, which was released in February, had estimated the annual CO2 emissions from the Pacific NorthWest LNG plant at 5.3 million tons, plus another 6.5 million to 8.7 million tons from gas collection and transportation.

In the final decision, which was approved by the federal government, there are 190 conditions that Petronas, the author of the project, needs to meet. These include putting in place adequate mitigation measures for the expected “adverse environmental effects”, consultations with First Nations on any steps that may concern them, and regular reporting to the CEAA.

The First Nations in British Columbia are not happy with this decision and neither are environmentalists. But here’s the ironic twist: Malaysia’s Petronas may eventually decide to shelve the project.

The company has waited three years for this approval. It tabled the project when LNG prices were going up and the future looked bright for this (relatively) new celebrity fuel. This celebrity status spurred a rush of LNG projects, many of them focused on the Asian market, which was developing much more quickly than the European one. Related: BP Faces Another Setback In Plans To Drill Pristine Australian Coast

Now, Asia is drowning in cheap LNG. While Petronas last year made a preliminary final investment decision on the Pacific NorthWest project, it probably didn’t expect that the government’s approval of the environmental implications of the project would be delayed for a year.

That’s why Petronas’ reaction to the news about the approval was somewhat guarded. "The announcement was just made ... We need time to look at the conditions and then we will have a review of the project," said CEO Wan Zulkiflee Wan Ariffin, as quoted by Reuters.

It’s not unthinkable that Trudeau just scored an auto-goal with this approval, antagonizing environmentalist groups that he courted before the elections, not to mention First Nations. Truth be told, a different decision would have antagonized a different set of groups; not just businesses, but regular voters in British Columbia. The Pacific NorthWest LNG saga has turned into a textbook demonstration of the impossibility of having your cake and eating it.

By Irina Slav for Oilprice.com

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