Open letter to Prime Minister Justin Trudeau and Nova Scotia Premier Iain Rankin re $925 million funding request for Goldboro LNG

Dear Prime Minister Trudeau; Finance Minister Freeland; Minister of Crown-Indigenous Relations Bennett; Honourable Jean-Yves Duclos; Minister of Infrastructure and Communities McKenna; Minister of Natural Resources O’Regan; Environment and Climate Change Minister Wilkinson; Heritage Minister Guilbeault; Premier Rankin; and Nova Scotia Climate Change Minster Irving, 

The groups writing this letter have been opposed to Pieridae Energy’s plans for a Goldboro LNG export terminal for many years and have carefully tracked its progress. Now we are bringing facts and arguments to your attention concerning an appeal from Pieridae Energy to Canada for nearly a billion dollars to underwrite the initial financing of the proposed Goldboro LNG project in Nova Scotia. 

Pieridae made its presentation to the Governments of Canada and Nova Scotia on December 16, 2020. [1] Links to the presentation and other numbered references can be found at the conclusion of the letter. Premier Rankin and Minister Irving were not present for the presentation, and were not then members of the Nova Scotia Executive Council. But provincial responsibility is in their hands now. 

We would like to call your attention in particular to a number of questionable claims made by Pieridae Energy in the December 16 presentation. 

Foremost is that Pieridae speaks of their $925 million request as “bridge” financing. It is anything but that. To consider Pieridae’s desperate need for initial funding as a bridge, one would have to assume that there is funding in place at the other end of the bridge. 

For eight long years Pieridae has built its pitch around the availability of US $4.5 billion in loan guarantees from the German government. Until recently the company has claimed they ‘HAVE’ the loan guarantees, only gradually backtracking on that claim when challenged over the last two years. 

In June, (and affirmed on Oct 13, 2020) the German Ministry of Economics and Energy replied to our inquiries [2] on this matter by stating that Pieridae has only a legally non-binding ‘Letter of Interest’. A final and binding decision on whether a UFK (“untied loan guarantee”) will be issued can happen only after an application has been made and a full assessment of the project is completed. 

The German government’s letter noted that, “An application has not been filed so far and thus the respective due diligence of the respective project has not been initiated and no approval or binding decision on granting a UFK-guarantee has been made”. “We have asked Pieridae Energy to avoid ambiguous wordings in this context.” 

Pieridae has not given either a direct or indirect indication that it has secured even tentative commitments for any other project investment funds. 

Canada is actually being asked to furnish the initial investment in Goldboro, a function that is usually performed by private equity. With the risks of the Goldboro project being so great, any private investor would typically have the leverage to demand over 50% ownership of Pieridae Energy 

If the Government of Canada is the de facto first investor, and the over $10 billion in necessary additional investment does not follow, Canada would lose all the funds it advanced, perhaps becoming the new owners of a massive denuded site in Goldboro, Nova Scotia. Truly a bridge to nowhere. 

A review of Pieridae Financial Statements clearly demonstrates that the company is barely solvent. It loses money every financial quarter. Their cash position is steadily eroding, though obscured by their use of non-standard financial reporting metrics. In their most recent audited Annual Report of 2019 they reveal an effective interest rate of 22.73% on their term loan of $206 million. 

That, plus a $50 million “fee,” is due in full October 2023, and Pieridae has not repaid this debt or set aside funds to do so. It has remained technically compliant with the loan terms only because the lender has, so far, waived multiple covenants. 

That extra high interest term loan allowed Pieridae to purchase Shell Canada’s legacy sour gas Alberta Foothill production assets, which Shell had tried unsuccessfully to sell for two years. The application to transfer the operating licenses to Pieridae was rejected by the Alberta Energy Regulator (AER), officially on narrow technical grounds. 

But these aging assets come with multi billion dollar environmental and decommissioning liabilities. A new application for license transfers was finally made, but faces an uphill battle, because of Pieridae’s obvious and profound financial weakness. Cenovus and Canadian Natural Resources both strongly oppose transfer of the licenses from Shell Canada in Statements of Concern filed with the AER. [3] They fear that Pieridae’s profound financial weakness made it inevitable that environmental and decommissioning costs for the Foothill Assets would be borne by their companies, as well as Alberta taxpayers. 

Pieridae CEO Alfred Sorensen suggests to you that Pieridae’s credibility with pipeline companies requires it to show at least some concrete financial support. This is another example of his glibly minimizing major obstacles. 

Pieridae touts that it will use “existing pipelines” and speaks only of “some pipeline capacity expansions being required.” They have never publicly acknowledged the need for substantial new construction and pipeline twinning. In Quebec and the state of Maine, just supplying enough gas for Train 1 of the Goldboro LNG plant will require the laying of hundreds of kilometres of new pipe. Furthermore, it is unclear how much of that twinning can be achieved within the existing pipeline right of ways. The Goldboro project will face years of obstacles while navigating newly tightened pipeline approval processes in Canada, the United States, and Quebec, as well as with multiple First Nations. 

If Canada is a partner in this project it will also bear the substantial task (and political risk) of convincing Quebec to build a gas pipeline in southern Quebec that provides no economic benefit for Quebec. 

Sorensen also spoke to you of Final Investment Decision deadlines for the first half of 2021. Those deadlines are a contractual component of their Sales Agreement with German energy company Uniper SE, which will purchase the entire production of Train 1. For several years those deadlines have simply been rolled forward annually on a pro forma basis. If Pieridae is facing truly hard, compelling and imminent deadlines, it is not disclosing what those are. 

Pieridae Claims a Partnership with Nova Scotia Mi’kmaq 

To support this assertion the presentation references an agreement, announced in press releases in October 2020 by Pieridae and its partner Black Diamond. These releases are the only publicly available information. The press releases describe the terms as an agreement that all thirteen Nova Scotia Mi’kmaq bands would share a 51% ownership of a prospective “workforce lodge” (man-camp), and have a role in building and running it. 

Pieridae cited two Mi’kmaq Chiefs as having made this arrangement. We are not aware, and have not been able to find, any statement about an agreement from any Mi’kmaq First Nations organization or official. Pieridae and Black Diamond press releases in January 2021, merely state that: “Black Diamond was directed to conduct meaningful engagement with the Nova Scotia Mi’kmaq First Nations, which would result in Mi’kmaq companies being hired to provide catering and cleaning services at the camp.” 

We point out to the governments of Canada and Nova Scotia that this ambiguous language and lack of information provides little transparency. 

While we do not claim to speak for the Mi’kmaq people, our contacts with them indicate that many Indigenous rights holders in communities did not hear about this agreement prior to the October Pieridae and Black Diamond press releases. 

No Band Council and no Chief is known to have said publicly that they signed on to this man-camp project. Some Chiefs have said privately that their Band has not signed on. In the early days following the media reports, individual Band Councilors said they knew nothing about this arrangement. This would seem to indicate that no substantive consultation took place. 

The National Inquiry Into Missing and Murdered Indigenous Women and Girls established the strong links between isolated man-camps and violence against women. Mi’kmaq women have indicated that they were astonished and horrified to learn that their communities would own a 5,000-bed man-camp. 

Pieridae escaped scrutiny of this “partnership”, because the announcement arrived simultaneously with an existential and violent crisis over Mi’kmaq treaty rights to earn a moderate livelihood through fishing. That issue rightfully monopolized media headlines and the focus of all Mi’kmaq. Now that the still mysterious man-camp deal is being forced into the daylight, we are hearing the voices of Mi’kmaq women. 

Pieridae has clearly not discharged its duty to consult. There has not been any actual free and informed consent. Just as in the rest of its presentation, Pieridae uses a bullet point or a quote containing a kernel of truth to obscure all the negative details. 

Canada also has its own duty to consult. 

Pieridae needs to soon make a substantial down payment before preparations can begin for constructing the proposed man-camp. We remind ministers of the honour of the crown duty to consult about the man-camps; a duty triggered as soon as Canada considers financial support earmarked for Pieridae’s required down payment. 

“A path to net zero by 2050 is achievable;” 

This statement from the presentation is remarkable in that the actual greenhouse gas emissions of the Goldboro LNG project would negate the successful reductions of Nova Scotia to date, and would be an obstacle to reaching net zero climate targets by 2050. 

Premier Iian Rankin brought into legislation Nova Scotia’s cap and trade emissions trading system when he was the Minister of the Environment. If constructed, the Goldboro LNG plant will be Nova Scotia’s largest emitter of greenhouse gases. Rankin’s successor as Minister of Environment last year made the understated observation that meeting the provinces reduction targets with the entry of such a large new emitter would be “challenging.” It is extremely unlikely that the Goldboro LNG project could play any positive role in meeting the climate change commitments of Nova Scotia and Canada. 

The Pieridae presentation offers a vague reference to carbon sequestration possibilities in Alberta. This red herring is belied by the track record of commercial sequestration failures in Alberta, even with well-capitalized operations. 

We assume that you are aware that the jobs and benefits figures included in a presentation such as this are simply numbers plucked out of thin air. Given the questionable content and flimsy spin in the rest of Pieridae’s presentation, we did not deem it necessary to address these figures in making our case. 

There is widespread and growing opposition to Goldboro LNG in Canada, as evidenced by the groups from 4 provinces who have signed this correspondence and the others who endorse it. We also work closely with European organizations opposing this trans-Atlantic, climate change defying LNG project. The lynchpin for the Goldboro project lies in Europe in the aforementioned Sales Agreement with the German energy company Uniper SE. 

Due to the combined effects of German public opposition and lack of firm commercial interest, Uniper recently shelved its proposed LNG import terminal at Wilhelmshaven, Germany. The European Union has strongly urged member states to refrain from building new gas infrastructure, and decreed there will be no EU funding for that purpose. The issue of gas as a transition fuel in Germany continues to be controversial and undecided. 

Pieridae has asked the Government of Canada to make a substantial and very high-risk financial contribution based on a presentation that glossed over or ignored weaknesses and obstacles of all kinds in finance, regulatory processes, politics, Indigenous rights and consultations, and climate change. 

What we hope we have shown you is that any one of these obstacles has the potential to sink this project, leaving Canada on the hook. Pieridae has neither the financial resources nor credible business plan to achieve its goal. It is a far cry from “shovel-ready.” It is a house of cards. 

For these reasons, and for the simple reason of climate policy, Canada should refuse to become involved with this project. Thank you for considering our arguments, and we would be glad to furnish any additional information you require. We would be pleased to open a dialogue with you on this issue. 

We would like for you to tell us the current status of Canada’s consideration of this loan to Pieridae, including any investigation and verification of Pieridae’s claims; what, if any, deadlines are involved; and what, if any, conditions are being required by Canada. 

For a dispassionate view and a look into additional details and the history of this issue, which will also illustrate the size and activities of Canadian and European opposition, we urge you to read the 2-part article, “The Goldboro Gamble”, by award-winning Nova Scotia Journalist, Joan Baxter, referenced below. [4] 

Sincerely, 

Ken Summers, NOFRAC, Nova Scotia

Micheal Sawyer, Executive Director, Citizens Oil and Gas Council, Alberta 

Pascal Bergeron, Spokesperson, Environnement Vert Plus, Québec 

Jim Emberger, Spokesperson New-Brunswick Anti-Shale Gas Alliance, New Brunswick  

Andy Gheorghiu, Consulting, Campaigner & Consultant for climate/environmental protection, Germany

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References : 

[1] Goldboro LNG : A priority COVID 19 Relief Project 

December 16, 2020, By Pieridae Energy 

https://environnementvertplus.org/Pieridae-925M

[2] Letter to German Government with List of Supporting Organizations and Briefing Paper https://drive.google.com/file/d/12UAYENzvBF-Nc4f5GcEUQb6xqDmmWyWx/view 

[3] Shell game (Cenovus and Canadian Natural Resources both strongly oppose transfer ) The Tyee, May 20, 2020 By Andrew Nikiforuk 

https://thetyee.ca/News/2020/05/20/Shell-Game-Sour-Gas-Wells/

[4] The Goldboro Gamble

Halifax Examiner, October 19, 2020 By Joan Baxter

Halifax Examiner, October 20, 2020, by Joan Baxter 

cc:. 

Parliamentary Secretary to the Minister of Finance Sean Fraser 

Parliamentary Secretary to the Minister of Environment and Climate Change Peter Schiefke Parliamentary Secretary to the Minister of Natural Resources Paul Lefebvre 

Parliamentary Secretary for Infrastructure & Communities Andy Fillmore 

Parliamentary Secretary for Crown Indigenous Relations Gary Anandasangaree 

New Democratic Party Leader and Critic for Crown – Indigenous Relations Jagmeet Singh Leader of Bloc Quebecois Yves-François Blanchet 

Green Party Critic for Climate Change Richard Zurawski 

Nova Scotia Member of the Legislative Assembly Lisa Roberts