Cedar LNG is a proposed export facility in Kitimat, British Columbia. It is a small-scale, electrified LNG operation comprising a floating liquefied natural gas (LNG) facility and marine export terminal that has an estimated construction cost of more than $3 billion.
This week, Export Development Canada (EDC) made a controversial decision to provide $500 million in financing for the Cedar LNG project. The move has sparked criticism and raised questions about Canada’s commitment to phasing out fossil fuel investments.
Cedar LNG’s financing plan involves asset-level debt covering 60% of project costs, secured through a construction term loan syndicated by banks. The remaining 40% will come from equity contributions, with the Haisla Nation securing funds through the First Nations Finance Authority for their 20% share. Pembina Pipeline Corp expects to fund its portion of operating cash flow without additional contributions in 2024. Before the final investment decision, Pembina provided financial assurances for upstream infrastructure, which will now transfer to Cedar LNG post-FID, backed by a letter of credit facility.
This decision comes despite the federal government’s pledge to halt public funding for new fossil fuel projects, a commitment reiterated as recently as Budget 2024. Environmental advocates and concerned citizens have voiced strong opposition, arguing that such investments contradict efforts to combat the escalating climate crisis.
“The science is clear,” stated a coalition of environmental organizations in a recent letter to Minister Chrystia Freeland and EDC’s CEO, Mairead Lavery. “We need to stop expanding fossil fuels if we are serious about addressing climate change. Public funds should be directed towards renewable energy initiatives, not projects that perpetuate our reliance on fossil fuels.”
The Cedar LNG project, set to produce over 9 million tonnes of climate pollution annually, has faced intense scrutiny for its environmental impact. Despite claims of employing advanced ecological practices and being powered primarily by clean hydroelectricity, critics argue that these assurances do not mitigate the project’s overall contribution to greenhouse gas emissions.
In a letter dated June 11, 2024, the Environmental Defence Canada, David Suzuki Foundation, Climate Action Network Canada, and Oil Change International expressed their disapproval and objection to the financing, stating, “The Government of Canada, including crown corporations, have a responsibility to make investments in line with its commitments and legal obligations. LNG expansion is not in line with commitments, and unlikely to be economical over the span of the project. The adverse environmental effects of this project are too significant and funding this project cannot be justified. Approval would be contrary to the legislation, policies, and Canada’s international obligations.”
In response to mounting pressure, EDC defended its decision, emphasizing its mandate to support Canadian exports and Indigenous economic development. Touted as the first Indigenous-majority-owned natural gas initiative globally, the project is expected to provide significant economic benefits to the Haisla Nation and local communities through job creation and corporate economic growth.
“This remarkable achievement results from years of hard work, careful planning, and innovative thinking from the Haisla Nation and its members, Pembina Pipeline, and adjacent and local communities. On behalf of LNG Canada, we offer Cedar LNG our heartfelt congratulations on the occasion of reaching its final investment decision and wish them every success as they prepare to deliver made-in-B.C. LNG to the world,” said Jason Klein, President and CEO of LNG Canada.
The Honorable David Eby, Premier of British Columbia, said, “This decision shows not only the perseverance of the Haisla Nation in achieving this historic milestone, but also confidence of investors in B.C.’s economy, and how the future for the natural resources sector is bright and will continue to support B.C.’s strong economic performance, which has led Canada’s large provinces in GDP growth since 2017.”
However, environmental groups remain unconvinced, pointing to projections indicating a potential oversupply in LNG markets and the long-term economic viability of such projects. They argue that investing in renewable energy technologies would offer a more sustainable path forward, aligning with global trends towards cleaner energy solutions.
While the debate intensifies, the fate of the Cedar LNG project underscores broader tensions between economic development, environmental sustainability, and Canada’s climate policy objectives. As stakeholders await further developments, EDC's decision to finance Cedar LNG is a critical test of Canada’s commitment to transitioning towards a greener, more resilient future.
