Steelhead LNG will get a second chance to amend its claims in a lawsuit alleging corporate espionage in connection with a major B.C. gas-processing facility.
A B.C. judge has struck out claims made by a company that develops a floating gas-processing facility in a case that alleged a major pipeline corporation had financially benefited from an act of corporate espionage in connection with the Cedar LNG project.
Cedar LNG is a $5.5-billion floating liquefied natural gas project being built in Kitimat in partnership between the Haisla First Nation and Pembina Pipeline Corporation (NYSE:PBA), with ARC Resources (TSX:ARX) supplying the natural gas for the project.
In a ruling released Friday, B.C. Supreme Court Justice John Bilawich found Steelhead LNG and an associated limited partnership had made “blanket allegations” against Pembina, lumping the oil and gas infrastructure company together with a number of other defendants involved in the gas export terminal.
Steelhead LNG’s allegations are part of a series of intellectual property infringement claims made against Cedar LNG in Canada and Samsung Heavy Industries in South Korea.
In July 2022, the Federal Court of Canada ruled against Steelhead LNG’s patent infringement claim. The court ruled that the defendants, which included ARC Resources, had not infringed on Steelhead’s patent for its floating LNG design.
The latest decision centres on Steelhead LNG’s claims that Seven Generations Energy — bought by ARC Resources in 2021 — acquired valuable research and other intellectual property when it worked with Steelhead on previous LNG proposals. ARC later unlawfully used that information in its partnership with Cedar LNG without compensating Steelhead, the company claims.
“Despite spending over 140 million dollars and many years developing its proprietary assets and solutions for Canadian LNG export, Steelhead’s efforts were undermined by ARC’s conduct in systematically taking and using Steelhead’s confidential information for its own benefit,” Steelhead said in its initial statement of claim.
“Its actions over the course of years amounted to corporate espionage of Steelhead’s valuable assets—particularly its confidential information, trade secrets and intellectual property.”
Steelhead LNG was the first to propose a floating LNG design for a B.C. project, but despite attempts to advance LNG projects on Vancouver Island, the company was unsuccessful.
Steelhead had worked with First Nations on a number of proposals on Vancouver Island, including the Malahat and Huy-Ay-Aht First Nations. The latest project, Kwispaa LNG, was shelved in 2019.
The Haisla First Nation succeeded in getting approval and financing for its floating LNG project in Kitimat, with Samsung Heavy Industries and Black and Veatch providing the engineering, procurement and construction.
Steelhead argued, among other things, that Cedar LNG has only succeeded in advancing as quickly as it has by “unlawfully leveraging, exploiting and using its confidential information.”
The alleged theft of proprietary intellectual property included research on markets and LNG facility design that Steelhead claimed were carried over by Seven Generations to the Cedar LNG project.
In the B.C. Supreme Court’s latest ruling, Bilawich found Steelhead’s notice of civil claim contained blanket allegations lumping Pembina and Cedar together without adequately detailing material facts to support independent causes of action against Pembina.
The judge noted that Steelhead’s claims against Pembina largely relied on its status as a shareholder and limited partner, which generally does not lead to liability for a corporation’s actions unless the corporate veil is pierced or an independent wrong is committed.
“Pembina wears several distinct legal ‘hats,’ so to speak,” as the judge put it.
In striking out the claims, Bilawich granted Steelhead 45 days to file an amended notice of civil claim to address the deficiencies. He acknowledged other potential bases for claims against Pembina might exist. Pembina was awarded costs for the application.
Cedar LNG one of several gas-processing plants set to come online
The Canadian government approved the Cedar LNG gas-processing plant — as well as LNG Canada Phase 1 and Woodfibre LNG — as a path to divert some U.S.-bound gas to places like Japan, South Korea and other Asian countries, former energy minister Jonathan Wilkinson told BIV earlier this year.
Under construction since July 2024, the floating facility will be fed by the Coastal GasLink pipeline. Once the gas reaches the facility, it will be cooled to minus 162 degrees Celsius, transforming three million tonnes into liquid every day. From there, it will be loaded onto ships and exported to Asia starting in 2028.
Cedar LNG is expected to generate $275 million in gross domestic product (GDP) through the construction phase and $85 million in annual GDP contributions during its operations phase, according to Innovation, Science and Economic Development Canada.
Earlier this month, LNG Canada sent its first shipment of gas to Asia in what the company described as a “historic moment” in Canada’s push to diversity its export markets.
Not everyone agrees exporting more gas to Asia is in the best interests of Canadians. Opponents of expanding oil and gas projects point to studies showing demand for gas peaking before many facilities could recoup their expense.
The International Energy Agency (IEA) has found a glut in LNG supply by mid-decade will likely drive down prices. At the same time, gas demand in Asia is expected to level off.
An October 2024 report produced by the U.K. firm Carbon Tracker, on commission from the David Suzuki Foundation and the Pembina Institute, found all of B.C.’s proposed LNG projects are at risk of generating lower than expected returns as they arrive as a “late entrant” in markets already dominated by lower-cost, more established producers.
The Carbon Tracker report found Cedar LNG would not be viable under any plan to keep warming below 2.2 C.
Thomas Green, the senior climate and policy advisor for the David Suzuki Foundation, said the Carbon Tracker report is one of many studies showing the international gas market will face oversupply by the end of this decade.
“It really is a risky time to double down on further LNG expansion,” Green said at the time. “The revenue streams that government has been counting on will likely not materialize and the projects may not end up in the black.”
Proponents of LNG say it will displace dirtier coal-burning power plants in Asian markets. But critics have raised concerns over forecasts suggesting gas isn’t as green as some proponents suggest.
They note the main ingredient in gas is methane. When it leaks into the air, it acts as a greenhouse gas 80 times more powerful than carbon dioxide over the first 20 years in the atmosphere.
With files from Nelson Bennett
