Liquid Natural Gas Export – Sunset Clause Extension
In this letter decision, the NEB considered an application from LNG Canada Development Inc. (“LNG Canada”) for an extension of the expiration date of 40-year export Licence GL-330 (the “Licence”). The sunset clause expiration date was included as Condition 3 to the Licence and stated as follows:
This Licence shall expire on 31 December 2022, unless exports have commenced on or before that date, or the Board otherwise directs.
LNG Canada requested a 5-year extension to the sunset clause expiration date for commencement of export from December 31, 2022 to December 31, 2027.
Specifically, LNG Canada requested that:
(a) the NEB exercise its discretion to extend the export commencement expiry date pursuant to the authority retained by the Board in Condition 3 to “otherwise direct” an alternative expiry date; or
(b) in the alternative, that the Licence be varied by extending the expiry date pursuant to section 21 of the National Energy Board Act (the “NEB Act”).
LNG Canada submitted that:
(a) it was requesting the extension due to market uncertainty affecting the timing of a final investment decision and the required timeframe for construction; and
(b) based on its assessment of the expected natural gas supplies and Canadian requirements during the period from 2063 through 2067 (the “Extension Period”), the quantity of proposed exported gas in the Extension Period was surplus to Canadian needs.
For the reasons summarized below, the NEB approved, pursuant to subsection 21(2) of the NEB Act and subject to Governor in Council (“GIC”) approval, the variance of Condition 3 of the Licence to reflect the change in expiry date for the commencement of exports from December 31, 2022 to December 31, 2027.
NEB Findings
The NEB’s findings included the following:
(a) LNG Canada was not requesting any changes to the maximum annual export quantity, the maximum term quantity, or the licence term (40 years);
(b) not all LNG export licences issued by the NEB would be used or used to the full allowance;
(c) acknowledging the difficulties associated with forecasting many years into the future, particularly given the uncertainty in the export market, applications for export must take into account the overall dynamics of the market and be grounded in evidence;
(d) LNG Canada had done so in this instance, but “perhaps only just”;
(e) the length of the requested extension was significant, and should be affected by way of a variance to the Licence pursuant to section 21 of the NEB Act; and
(f) variations to licences, other than name changes, require approval by the GIC.
Decision
The NEB approved, pursuant to subsection 21(2) of the NEB Act and subject to GIC approval, the variance of Condition 3 of the Licence to reflect the 5-year extension to the expiry date for the commencement of exports.
