Canadian Manufacturing

B.C. Liberals use legislature to set stage for LNG development

Majority Liberals LNG tax, emissions laws have cleared way for development, yet none of claimed 18 potential deals has yet to come to fruition



VICTORIA—The stage has been set for the development of a liquefied natural gas (LNG) industry by British Columbia’s majority Liberal government, even though the first of what it says are 18 potential deals has yet to come to fruition.

Liberal House Leader Mike de Jong said income tax and emissions-reporting legislation introduced this fall have laid the ground rules for oil and gas companies to develop an industry the Liberals have said will create as many as 100,000 jobs and rival Alberta’s oilsands in economic potential.

Industry officials reacted favourably to the 3.5 per cent income tax, as well as the emissions standards Environment Minister Mary Polak said are the most stringent and will make B.C.’s industry the cleanest in the world.

“We have accomplished those things precisely in the way we hoped to,” said de Jong.

“We were seeking to achieve a balance … between securing a fair return for British Columbians as the owner of the resource and ensuring we had a competitive jurisdiction that would attract investors.”

De Jong said last month when he introduced the LNG income tax legislation that one mid-sized LNG plant would pay about $800 million in taxes annually, which is equivalent to the taxes B.C.’s forest industry pays in one year.

He said a plant that produces 12 million tonnes of LNG annually will pay between $8- billion and $9 billion in taxes over 10 years.

Yet, there’s also been increasing competition and declining natural gas prices, and companies with huge plans for the northwest coast are still hedging on making final investment decisions.

De Jong said he hopes some companies will make their decisions known in the coming weeks.

On the opening day of the legislative session last month, Malaysian energy giant Petronas, which is planning a multi-billion-dollar LNG export facility near Prince Rupert, B.C., issued a statement, saying it may delay development for a decade unless it can reach cost and environmental agreements with provincial and federal governments by month’s end.

The statement issued by Petronas president Shamsul Abbas said “tax and high cost environment will negatively impact the project’s economic viability and competitiveness. In fact, in our last portfolio review exercise, the current project economics appeared marginal.”

Premier Christy Clark rejected suggestions her government was downplaying its LNG expectations, after the throne speech did not repeat past statements that the industry would create 100,000 new jobs and eliminate the provincial debt that’s more than $60 billion.

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