Canada review says Petronas plant would hit environment: sources

OTTAWA (Reuters) - A Canadian review of a proposed Petronas-led liquefied natural gas plant has found the project would have a significant environmental impact that requires major remedial measures, two sources briefed on the report said.

Canada's Prime Minister Justin Trudeau takes part in a news conference in Ottawa, Ontario, Canada, September 21, 2016. REUTERS/Chris Wattie

The Liberal government of Prime Minister Justin Trudeau has until Oct. 2 to decide whether to approve the Pacific NorthWest LNG export terminal in northern British Columbia.

Malaysian oil and gas company Petronas [PETR.UL] and its partners have been waiting about three years for a permit for the C$11 billion ($8.35 billion), which depends on the review by the Canadian Environmental Assessment Agency (CEAA), an independent body.

The CEAA has no veto rights. Instead, it decides whether a project would have minor or significant adverse environmental impact, and what measures must be taken to allow it to go ahead.

The agency has concluded the project - opposed by local environmental and aboriginal groups - needs significant remedial work to counter the environmental impact before it can be built, said the sources.

Environment Minister Catherine McKenna must now present the report to the full cabinet with her recommendation as to whether it should go ahead.

Caitlin Workman, a spokeswoman for McKenna, said the cabinet would make a final decision. She declined to comment further.

Spencer Sproule, a spokesman for the Petronas-led project, declined to comment. The CEAA said it was not in a position to comment immediately.

The decision is a potentially fraught one for the Liberals, who must balance the needs of an energy industry suffering from job losses as well as the concerns of environmentalists, who Trudeau courted in his successful 2015 election campaign.

Even if Petronas is granted permission for the plant, it may decide not to proceed. The firm has seen a global slump in crude prices squeeze finances, which make up a third of Malaysia’s oil and gas revenue.

In August, the firm said it would conduct a total review of the project in Canada before committing to a final investment decision.

Reporting by David Ljunggren; editing by Diane Craft