Tariffs and gas glut could sink LNG, but B.C. bets big

This year’s B.C. government budget was a “missed opportunity” to ensure the economy is more resilient to Trump tariffs by driving job growth and energy security with more support for a clean economy, say climate experts.

The budget didn’t claw back prior climate initiatives or undermine the CleanBC plan, but lacked ambition to decarbonize the economy or put B.C. at the forefront of the global clean energy transition, said Chris Severson-Baker, executive director of the Pembina Institute. 

“We were hoping to see more aggressive investments in growing the clean economy in B.C., like increasing the supply of renewable electricity that would create jobs and attract net-zero aligned investments in the province,” he said. 

However, betting B.C.’s economic future on LNG is risky long-term, Severson-Baker said, stressing the province needs to capitalize instead on its clean energy advantages and the fact Trump is abandoning climate and renewable energy sectors.

The provincial budget was unveiled hours after U.S. President Donald Trump made good on his threat to impose sweeping 25 per cent tariffs on most Canadian goods and a 10 per cent levy on oil and gas imports. In response, Premier David Eby reiterated his plans to boost trade domestically and leverage the province’s resources and role as the gateway to the Pacific. Eby aims to pivot trade from the U.S. to focus on global and domestic markets. 

Budget forecasts suggest B.C. revenues could decline by $3.4 billion annually, while a prolonged trade war could cost the province $43 billion in GDP losses and 45,000 jobs by 2029. 

Last month, to reduce reliance on the U.S., Eby announced a mix of energy, fossil fuel and mining projects that would be fast-tracked. B.C. will also exempt the province’s first 10 Indigenous-led renewable projects from environmental assessments along with any future renewable projects. 

The province is also banking on a suite of LNG export projects on the coast, which feature short shipping times to Asian markets, to divert natural gas exports away from the U.S., currently its sole market.

The budget is forecasting doubling natural gas royalties due to significant price increases over the next two years and increased production, as the first export project, LNG Canada, starts up this year, said Nancy Olewiler, an economist and public policy professor at Simon Fraser University. 

“On the revenue side, they’re forecasting natural gas royalties going from just over half a billion up to 1.1 billion over the next three years,” she said.

The budget assumes natural gas prices will more than double this year after prices hit a historical bottom of the basement last year. 

“That could change in a heartbeat. You know these are fiscal plans [forecasting] out three years,” Olewiler said. “Right now, we don't even know what's going to happen next week, let alone in three years.”  

However, LNG Canada, a joint venture company headed by gas giant Shell, Malaysia’s PETRONAS, PetroChina, Mitsubishi Corporation and Korea’s KOGAS, expects to make its first shipment in mid-2025 with access to Asian markets. 

“That gas will be produced and sold within Canada so U.S. tariffs will be immaterial,” said Olewiler. “The contracts are with Asia, so, unless there's abrogation of those contracts, that gas will be produced.” 

B.C. LNG arrives late to a crowded party

B.C. is late to the game trying to supply a global market getting close to saturation at a time when renewables are the cheapest energy option and many countries are keen to reduce dependence on foreign sources of energy, said Severson-Baker, pointing to Europe’s shifts to clean energy to wean itself off Russian gas. 

The International Energy Agency is predicting a coming surge in LNG supply, particularly as Trump promises to reopen the floodgates by lifting the Biden administration’s moratorium on new LNG export facilities, creating a glut likely to persist into the 2030s, dropping prices and increasing financial risks for the industry, particularly new projects.  

Some analysts predict a glut as early as 2026, as a new cohort of LNG projects is expected to increase export capacity by 50 per cent led primarily by the U.S. and Qatar. The U.S. expects North American LNG export capacity alone to double by 2028

Three U.S. East Coast LNG projects, all slated to come online this year, have the potential to pump five times more LNG into the export market than the three approved projects underway in B.C. 

The province’s largest project, LNG Canada based in Kitimat, will export its first shipment in the middle of this year, while the smaller Woodfibre and Cedar LNG projects are expected to be finished in 2027 and 2028, respectively. 

Other proposed B.C. export initiatives, Ksi Lisims LNG and phase 2 of the Tilbury and LNG Canada, are still in the regulatory process, with none under construction or guaranteed a final investment decision. Both investment and construction may be more unlikely with more competition and as tariffs inevitably increase project costs. 

Budget falls short on climate action

Overall, the B.C. budget’s commitment to climate is ambiguous, Olewiler said. 

“The glass-half-empty is they didn’t do anything new, the glass-half-full is they didn’t take away anything [big].” 

The budget did include $100 million for heat pump subsidies for moderate income households over two years as promised in the political agreement forged with the B.C. Green Party, Severson-Baker noted. 

However, an item that’s been axed is the sales tax exemption for used electric vehicles, Olewiler said. The measure was supposed to run until 2027 but now will end May 1 of this year. 

A concerning aspect of the budget is an apparent lack of climate change adaptation funding and a cut to the Ministry of Emergency Management and Climate Resilience's budget, she added. The ministry’s budget is being reduced to $125 million from $467 million. 

“I’d like to have seen a little bit more appreciation of the risks of climate change and acknowledging that we have to be better prepared for it,” Olewiler said, noting the province has spent many billions of dollars in the aftermath of climate disasters like floods and fires in recent years.

If B.C. prioritizes renewables and decarbonizing critical minerals, it could grow jobs, the future economy, and reduce carbon pollution at the same time, Severson-Baker said. 

Additionally, Trump’s hostility to renewables and advancing climate technology isn’t going to stop the decarbonization of the global economy, but B.C. can stay competitive by becoming a hub for innovation and a home for capital investments spooked about investing in the U.S., he said. 

At the very least, if LNG projects continue, they shouldn’t be offered public subsidies or exempted from stringent emissions requirements, he added. 

It was curious that Eby’s tariff speech highlighting the advantages and resources that B.C. had to offer the world failed to mention of LNG, Severson-Baker said. 

“It was notable that LNG wasn't mentioned, but when you start to look at how bleak the prospects are looking for LNG, maybe it’s not surprising that they weren't highlighting that.” 

Rochelle Baker / Local Journalism Initiative / Canada's National Observer