Canadian Manufacturing

B.C. to pass 25-year LNG law, but industry wants more

Tax concerns and worker availability top concerns for LNG companies



VICTORIA—A liquefied natural gas industry: the British Columbia government fought an election on it, launched an extraordinary summer legislative session and made financial concessions, but it still isn’t enough for the companies that want even lower taxes and have expressed concerns over the availability of workers.

The Liberal government’s LNG dream is expected to move towards reality this week when a bill is adopted for a 25-year agreement on what could be B.C.’s first LNG plant.

B.C.’s politicians were recalled this month to debate and pass a single piece of legislation that aims to provide certainty to LNG investors and revenues to the province.

“I think there’s more work to do in terms of making sure we are in fact globally competitive,” said B.C. LNG Alliance president David Keane. “I think the government has more to do.”

Pacific NorthWest LNG, a joint venture backed by Malaysian state-owned energy giant Petronas, plans to build a US$36-billion LNG plant at Lelu Island near Prince Rupert. It will be the largest private investment in B.C. history and the LNG Project Agreements Act seeks to provide a 25-year buffer against LNG-targeted tax increases but allows increases in corporate and sales taxes.

“There are things that can be done in terms of some of these taxes, like the (provincial sales tax) PST,” said Keane. “These projects will pay hundreds of millions of dollars in PST taxes, which typically, if you are classified as a manufacturing facility, you are not subject to.”

B.C. is the only jurisdiction where LNG companies must pay LNG income tax and a carbon tax, he said, adding they will also pay PST, GST, payroll, provincial and federal corporate taxes and municipal taxes.

Finance Minister Mike de Jong firmly rejected Keane’s suggestion that the LNG industry should be considered for PST relief.

“There are other proponents and there are other groups out there who will, I suppose, continue to advocate for shifts in policy,” he said. “I expect that will continue long into the future. We believe we have settled upon a taxation and a public policy and an environmental regulatory framework that strikes the right balance.”

Just before the provincial election in 2013, Premier Christy Clark promised the LNG industry would be running full steam by 2020 and would supply billions in added government revenues each year.

Keane said the LNG industry will be seeking thousands of skilled workers within the next five years and the goal is to hire B.C. workers first, Canadians second and out-of-country workers third.

“Will there be a requirement for temporary foreign workers: probably,” he said. “I think everybody who wants a job in British Columbia, certainly early in the next decade will be in a position to get a job.”

Keane said the industry alliance provided the government with data earlier this year on how many workers they would need to build a large LNG plant.

“We’re waiting now on the government to come back to us with data that shows how many skills actually are available in B.C.,” he said.

Keane said a large LNG project will require between 3,500 and 7,500 construction workers.

“If you get two or three of these going at roughly the same time, plus there’ll be another 3,000 or so construction workers to build the pipeline, and then you have Site C,” he said. “We’ve got to make sure we’ve identified the skills we need.”

Tom Sigurdson, spokesman for the building-trades council, said the recently completed modernization project at Rio Tinto Alcan’s smelter in Kitimat employed more than 3,000 construction workers and 75 per cent were from B.C.

He said he’s concerned the LNG legislation and the project-development agreement do not include job-guarantee language for B.C. workers.

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