The Goldboro Gamble

In Part 2 of this two-part series about the Goldboro LNG project, the Halifax Examiner delves into some of the opposition to the proposal, where it is coming from, and what the project means for Nova Scotia. 

When Pieridae Energy announced in 2018 that it had received “written confirmation of eligibility in principle” for “prospective” loan guarantees for up to US $4.5 billion from the German government for its liquefied natural gas (LNG) project in Goldboro, Nova Scotia, Pieridae CEO Alfred Sorensen said that they were “extremely pleased” by the “additional support” for the project. 

Others were not at all pleased by the news of the German involvement in the project. 

An article in the German weekly magazine, WirtsschaftsWoche (Business Week), suggested the German support for Goldboro had to do with pressure from US President Donald Trump on Germany to buy more American natural gas, arguing that it was one of three LNG terminals in Germany that “nobody needs,” the construction of which would be “completely economically insane.”

The prospect of German loan guarantees to Pieridae for the Goldboro project raised the ire of environmentalists on both sides of the ocean. 

Shortly after the announcement, the Nova Scotia Fracking Resource and Action Coalition (NOFRAC) and Guysborough Communities Coalition wrote to two German ministers asking that the German government not award Pieridae the financial guarantee.

Then 26 more groups opposed to the project — both German and Canadian — wrote an open letter to German ministers repeating the concerns about the project, and calling the government’s untied finance credit guarantees (UFC, or UFK in German) of US$ 4.5 billion a “gross financial mistake.”

Two years later, at the end of September 2020, a letter signed by the heads of four Canadian environmental groups — including Ken Summers of NOFRAC — and supported by more than 100 environmental and Indigenous groups from North America, Europe ,and the UK, was sent to the German ambassador to Canada, copied to 13 German politicians.  

It informs the ambassador that Pieridae may not have shared all the “economic, regulatory, financial, supply, climate and environmental, and human rights risks” associated with its project. 

The signatories of the letter, published here by the NS Advocate, request, in so many words, that the German government decide against guaranteeing the loan, and warn that the project is “extremely risky with a high probability of failure.” 

A huge boon for Pieridae

Whether that’s true or not, the potential loan guarantee has been an enormous boon for Pieridae. 

Media reports often credulously quote Sorensen’s claims about the project’s outlook, or imply that the loan guarantees have already been granted, or blithely state — as the National Post’s Geoffrey Morgan did in August 2018 — that Pieridae “has loan guarantees from Germany and Italy and the project may also secure loan guarantees from other European countries.” 

In 2019, the Oil and Gas Investments Bulletin showcased Pieridae as the “tiny Canadian company” that “will replace Russian NatGas [natural gas] in Germany — really!” It also portrayed the potential loan guarantees as a fait accompli: 

With Goldboro being a large natural gas importer, it qualifies for Germany’s “Untied Finance Credit” (UFC) program, where the German government guarantees loans for a very big part of the project cost. The first train [the plant that transforms the gas to LNG] of the facility would qualify for a US$3 billion loan guarantee under the program. That’s HUGE! In addition, Pieridae will qualify for another US $1.5 billion of loan of guarantees for upstream development of natural gas assets. All told US $4.5 billion of the US $6 billion expected costs will be guaranteed.

As reported by the Halifax Examiner in its Morning File of August 31, 2018, media reports have attached great importance to the potential funding and the appointment of the German development bank — KfW IPEX — as an advisor to finalizing the loan guarantee. 

Take, for example, this editorial in the weekly Guysborough Journal, which says German financial involvement gives the project “profound momentum” that “has caught the eye of more industry observers.”

If the Guysborough Journal has an affinity with the oil and gas industry, it wouldn’t be all that surprising given that its publisher, Allan Murphy, is vice president government relations at Canadian Propane. 

In the August 29, 2018 edition of the same paper, managing editor (and spouse of the publisher) Helen Murphy once again gave top billing to the Pieridae story, at least the version told by its CEO, Alfred Sorensen, who said the company was “on the cusp” of making its final investment decision for the US$10 billion Goldboro LNG project.

That “cusp” is now more than two years old, and the final investment has still not been made. 

As reported in Part 1 of this series, Pieridae has not yet submitted its application to the German government for the project, and no decision has been made on whether the loan guarantee will be granted.

Trans-Atlantic opponents link up online

On October 8, 2020 German and Canadian critics of fracking, LNG, and the Goldboro project linked up online for a webinar called “Fueling with fire: Global / Transatlantic Connection.” 

During the webinar, Regine Richter of the German environmental and human rights NGO Urgewald, said that the German loan guarantee is not yet a done deal.  However, added Richter: 

Pieridae acts in Canada as if they already have received the funding, and they tend to point to the fact that they’ve got a letter of interest for such a Uniper guarantee [to purchase the LNG], and they do have this since 2013. However on this side of the Atlantic, it sounds a little bit different. There have been some questions in the German parliament. “Is it [the loan guarantee] already implemented, is it being supported?” And the answer of the federal government is quite clear.  “There is a letter of interest, but there is no guarantee yet.”

And, Richter concluded, “the sheer possibility” that the loan guarantee — which she said could be granted to the German bank, KfW IPEX — could come through “has played an important role in keeping an otherwise struggling project alive.” 

Ken Summers of NOFRAC told the Halifax Examiner: 

The whole house of cards comes down if Germany won’t do the loan guarantees, because not only do they need those loan guarantees of US$ 4.5 billion, [but] the only shred of credibility they get is because they, quote, “have those.”

Executive Director the Citizen’s Oil and Gas Council and activist, Mike Sawyer, had this to say during the webinar about Pieridae’s Goldboro project: 

So a lot of people would look at this as just a stock promotion play. If we really look at all the facts, it’s highly unlikely this will really come to fruition. But along the way, if a lot of people can make a lot of money and just put that money in their pockets, then they’ve succeeded. 

Sawyer then explained why, if he is doubtful that the project will ever succeed, he is so concerned about trying to stop it:

This is sort of like a beachhead for LNG imports into Germany. And if we just let this slide, and we don’t pay attention to it, and [if] they are successful — because Sorensen’s very skilled — I think we need to get out in front and stop it. 

Sawyer described Sorensen as a “self-admitted salesman.”

A “bloody scandal”

Andy Gheorghiu is a policy advisor with Food and Water Action Europe, an NGO based in Brussels, who campaigns extensively against fracking and for climate and environmental protection in his native Germany. In an interview with the Examiner, he said that an LNG facility like Goldboro is energy infrastructure that would operate for decades, and “lock in” the use of fossil fuel in Germany. 

Gheorghiu added:

This is an aspect that everyone should be aware of, no matter if private or public entities where they invest right now in a new fossil fuel infrastructure, including this one, will either face a high financial risk or they are there clearly and willingly betting on the failing health of the climate movement. 

We already have three to four times the import and storage capacity for natural gas compared to what we consume in Germany. So we really don’t need more gas infrastructure. 

I personally think this is a bloody scandal. How can you use a state-owned bank or the private arm of a state-owned bank to co-finance this fossil fuel project that is on very shaky financial ground and so on and so forth?

It’s insane to invest in such a project no matter from which perspective you look at it. Either you have highly incompetent but well-paid people within these ministries that don’t do their homework, or you have behind the scenes very successful lobbyists that have more resources and can do a better job that I can do to convince people. 

However, Gheorgiu said he is “quite confident” that the opponents of the project will “kill” it “because it has no economic future.”

“Trump frack off”

Speaking to fellow activists during the October 8 webinar, with a “Trump Frack Off” sign just behind him, Constantin Zerger of the German environmental NGO Umwelthilfe, echoed media reports that Trump has been pushing Germany to open its doors to fracked gas. He said this means that three LNG terminals are under consideration in that country, which would hamper Germany’s climate goals and hinder its energy transformation away from fossil fuels. 

Zerger said Uniper is the sole investor to date for those three terminals, and also the sole purchaser for LNG from the proposed Goldboro facility. 

He called Goldboro a “crazy project” and expressed concern that to meet its obligations to Uniper, it will have to source fracked gas, despite the fact that the German loan guarantee would preclude its use. 

Numerous peer-reviewed scientific reports, such as this one, show that fracking “contributes both directly and indirectly to greenhouse gas emissions, further driving anthropogenic climate change.” 

As reported in Part 1 of this series, Peiridae CEO Alfred Sorensen said that while the German loan guarantee could not be used “to drill wells requiring multistage fracking,” Pieridae could “source its gas from wherever we want.” 

But where will that be?

Getting the gas out of the ground – but what ground?

Larry Hughes is a professor at Dalhousie University and founding fellow of the MacEachen Institute for Public Policy and Governance. He told the Examiner that with the Shell gas fields in Alberta that Pieridae purchased in 2019, Pieridae has: 

… a capacity of about 750 mmcf/d [million cubic feet per day], which will go a long way to meeting the 800 mmcf/d Train 1 requires. I believe they also have other assets they can draw on.  If not they can always contract other suppliers in western North America or further east.

But according to Mike Sawyer, the Shell deal that gives Pieridae that source of gas is “indefinitely stalled” and as of October, neither Shell nor Pieridae had re-applied to the AER.

Pieridae’s director of external relations, James Millar, told the Halifax Examiner in an email that, “Shell is likely to apply to the AER for the asset licence transfer next month,” meaning November.

However, during the webinar, Sawyer said that Pieridae does not have enough conventional — that is, non-fracked — natural gas to meet its commitment to Uniper, and that without the Shell assets, it would probably have to seek up to half of its gas from fracked sources. 

Ken Summers of the NOFRAC shares Sawyer’s scepticism about Peridae’s gas supplies and its claims about gas production. In an interview, he told the Examiner: 

Being generous to Pieridae, they own 30% — maybe 40% at most — of the gas production capacity they need to feed Train 1 of Goldboro LNG. Pieridae makes the wild claim that they will expand that production to provide everything they need to produce LNG. Financially, this is sheer nonsense. Trying to do it would be far more expensive, per cubic foot of gas produced, than buying it on the open market. And Pieridae needs to absolutely minimize costs of LNG production, for this project to have any chance whatsoever. 

So if Goldboro LNG happens they will be purchasing over half of their gas supply. And most of the gas available is hydraulically fractured. 

Summers continued:

The gas fields Pieridae owns are conventional gas production — not currently using hydraulic fracturing. The reason Pieridae peddles this preposterous myth of developing their own gas fields is because fracking is banned in Germany, and without German government support this project will die immediately. Those (supposed) German loan guarantees are the only credibility Pieridae has. 

Getting the gas to Goldboro

Even if Pieridae has the gas it needs for the proposed LNG facility in Goldboro, the other question is how it will get that gas to Nova Scotia.

Larry Hughes told that Examiner that in March 2019, he was told by one of Pieridae’s vice presidents that they have the contracts in place to ship the natural gas from western Canada to Nova Scotia through the Maritimes and Northeast Pipeline that runs between Goldboro and Massachusetts, via New Brunswick.

“Based on that, I assume that they have the capacity,” said Hughes.

In its January 2019 corporate presentation, Pieridae says it has “agreements in place” to access existing pipelines between western Canada and Goldboro. 

But Ken Summers says there is still much to be sorted out for the transport of gas to Goldboro:

The one complete fiction that Pieridae still boasts about is pipeline capacity. They play truthy words games about all the existing pipelines they will use. Strictly speaking, it is true, but it is wildly misleading. 

They can’t even get anywhere near the pipeline capacity they need for just the first phase of the project… There are a number of substantial pipeline capacity “squeezes” Pieridae would have to clear in Ontario. But their really big problem is getting so much gas from Montreal to Portland, Maine, where they can meet up with the Maritime and Northeast pipeline going north. They will have to twin that pipeline and Pieridae will never, never admit that. They still dance around that, because everyone knows putting new pipe in the ground means years of regulatory delays. In this case, the regulatory jurisdictions are one state, one province, and two national governments. Pipeline construction applications in Quebec always face HEAVY scrutiny. Not to mention this pipeline expansion has to clear new (and unclear) Indigenous consultation requirements.

What’s in the project for Nova Scotia?

In a recent opinion piece in the Chronicle Herald, Larry Hughes wrote that Nova Scotia’s Sustainable Development Goals Act, passed a year ago, set targets for future greenhouse gas emissions in the province:

1. by 2020, at least 10 per cent below the levels that were emitted in 1990;
2. by 2030, at least 53 per cent below the levels that were emitted in 2005;
3. by 2050, at net zero, by balancing greenhouse gas emissions with greenhouse gas removals and other offsetting measures.

He included the following chart, which shows the greenhouse gas emissions levels for Nova Scotia’s major emitters from Environment and Climate Change Canada’s 2020 National Inventory Report, with 2020 and 2030 bars representing the 10% and 53% emissions limit specified in the Sustainable Development Goals Act.

Hughes wrote:

The Sustainable Development Goals Act also states that for Nova Scotia to achieve sustainable prosperity, it must include Netukulimk, which, according to the Act, “means, as defined by the Mi’kmaq, the use of the natural bounty provided by the Creator for the self-support and well-being of the individual and the community by achieving adequate standards of community nutrition and economic well-being without jeopardizing the integrity, diversity or productivity of the environment.”

He observed that:

The challenge facing the government is how to permit the construction of an emissions-intensive LNG export terminal but still ensure that the province can achieve sustainable prosperity as defined by Netukulimk.

The Examiner asked Hughes whether he viewed the project as positive for Nova Scotia, and if not, what the disadvantages were. He replied: 

First, the project is for the export of natgas [natural gas], so Nova Scotians will not benefit from the natgas.

There will undoubtedly be short-term (~5 year) employment benefits during the construction phase. Once the plant is operating, the numbers will fall sharply. The promise of jobs in a depressed economy is music to any politician’s ear …

However, both the construction and operating phases of the project are emissions intensive. This will affect Nova Scotia’s attempt to reduce its emissions by 53% from 2005 levels by 2030. The 2030 target is about 11 megatonnes and once operating, Pieridae will be emitting 3.7 megatonnes. Without some form of carbon offsetting, the province will exceed its 2030 target.

Positive in the short-term, negative in the long-term. The province needs to ask itself, what is more important?

Hughes told the Examiner that the future of the project depends a great deal on what happens in the European Union (EU) in the next five years.  

He said that the EU wants to diversify its supply of natural gas away from the Russian firm Gazprom, which in 2019 accounted for about 53% of its natural gas supply. 

“So there is clearly an interest in other suppliers and apparently the German government believes that Pieridae is one of them,” Hughes said. “If natgas remains part of the EU’s plan to reduce its emissions, I assume some investors will be found.”

Asked if he believes the project will ever go ahead, Ken Summers laughed wryly, and replied: 

Do I think it’s going to go ahead? I said it was impossible in 2014. And here we are in 2020. You know, they’re a hell of a lot closer than I would have guessed … I would have laughed if somebody said they could get this close. It’s not going to be easily done. But anybody would be a fool to rule out Sorenson. He just plugs and plugs and plugs away.