May 13, 2015 / 7:49 AM / 3 years ago

Canadian aboriginal group rejects deal to back Petronas LNG project

VANCOUVER (Reuters) - A Canadian aboriginal group has rejected an offer of about C$1 billion ($836 million) in return for supporting a liquefied natural gas export terminal led by Malaysian national oil company Petronas [PETR.UL], community leaders said on Wednesday.

Members of the Lax Kw‘alaams First Nation band, which has traditional territories around the proposed site of the Pacific NorthWest LNG export terminal in northern British Columbia, rejected the 40-year benefit deal in a series of three votes held over the past week.

The rejection does not mean the project cannot go ahead, but it could pose a challenge for Petronas, which is looking to smooth relations with aboriginal groups as it moves toward a final investment decision on the $11 billion project.

It would be “unfortunate” if Petronas tried to proceed without the consent of the Lax Kw‘alaams, Garry Reece, mayor of Lax Kw‘alaams First Nation, said in a statement.

First Nations is a term used to describe aboriginal people in Canada who are not Inuit or Metis

Petronas, in response, pledged to continue to work “co-operatively with the area First Nations to identify concerns and find innovative solutions as we move forward.”

Opponents of the project, including the Lax Kw‘alaams, say it poses a threat to a salmon habitat in the Flora Bank, which is next to the terminal site on Lelu Island.

“Lax Kw‘alaams is open to business ... It is not open to development proximate to Flora Bank,” said Reece.

The company, which has already made design changes to address local concerns, said its studies show the fish and fish habitat “will not be significantly affected” by the construction and operation of the LNG plant.

A federal environmental review is underway and, if approved, an investment decision is expected to follow.

The Lax Kw‘alaams among several aboriginal groups in talks with Petronas and its partners on the project, part of a broader $35 billion investment in Canadian gas.

While benefit deals are not required for a project to go ahead and First Nations don’t have veto rights in Canada, aboriginals communities can challenge a regulator decision if they believe the “duty to consult and accommodate” was not met.

The offer, as outlined by the Lax Kw‘alaams council, includes roughly C$1 billion in cash from Petronas over a 40-year period, along with a land package deal from the provincial government worth about C$108 million.

Additional reporting by Amrutha Gayathri in Bengaluru and Anuradha Raghu in Kuala Lumpur; Editing by Jason Neely and W Simon

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