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BC govt unveils tax incentives to induce Kitimat LNG development

BC govt unveils tax incentives to induce Kitimat LNG development

Photo by Bloomberg

22nd March 2018

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

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VANCOUVER (miningweekly.com) – The British Columbia minority government on Thursday unveiled several measures to entice natural gas development in Kitimat, where LNG Canada is working towards a development decision on a new C$40-billion terminal that will process and ship liquefied natural gas (LNG) to Asian markets.

Government confirmed that it is in discussions with the project proponent, and that the crux of the discourse hinges on a revised fiscal framework that is designed to put natural gas development on a level playing field with other industrial sectors, accessing the same fiscal policies and working within the same overall provincial framework to achieve greenhouse-gas (GHG) emissions reductions.

LNG Canada will be subject to a new framework that aims to provide relief from provincial sales tax, in line with the policy for manufacturing sectors, subject to repayment in the form of an equivalent operational payment; new GHG emission standards under the Clean Growth Incentive Programme, announced in Budget 2018; general industrial electricity rates consistent with other industrial users in the province; and the elimination of the LNG income tax that had required LNG-specific tax rates. Some observers have estimated the tax breaks to add up to C$6-billion in total.

“No premier or government can dismiss this kind of critical economic opportunity for the people of British Columbia,” Premier John Horgan said. “Our new approach welcomes investment that puts our province’s people and future first, and rejects the old ways of resource development at any cost.”

He outlined that the new approach will guarantee a fair return for British Columbia’s natural resources, guarantee jobs and training opportunities for British Columbians, respect and make partners of First Nations, and protect the province’s air, land and water, including living up to the province’s climate commitments.

If approved, it would be the largest private-sector investment in the province’s history, seeing the construction of a natural gas pipeline from north-east British Columbia to Kitimat.

However, the New Democratic Party-led government showed cracks soon after the announcement, when coalition government partner, the BC Greens, said it is not fully on board with government’s position on LNG development, arguing that the Green caucus does not fully support extending the proposed measures to support existing emissions-intensive, trade-exposed industries as currently conceived to prospective LNG companies – a policy that would, in effect, freeze the carbon tax at C$30/t for certain facilities.

“Not only is a plan to meet our climate commitments a core component of our Confidence and Supply Agreement (CASA) which forms the stability of this government, it is essential for ensuring we do not betray our duty to future generations,” BC Green Party leader Andrew Weaver said in a statement.

He noted that the three-member Green caucus sent a letter to LNG Canada on Monday to reiterate its position that the proposed measures are incompatible with the province’s ability to meet its climate targets.

“If these measures were to go ahead unamended, we would no longer have confidence in government. CASA commits government to extend the carbon tax to fugitive emissions, and the caucus expects that this will include the natural gas industry. Further, the caucus is concerned that increasing BC’s emissions through LNG developments will place an undue burden on existing industries and the public to reduce their emissions beyond what is already required,” weaver stated.

LNG Canada responded to the development on Thursday in a post to social media, saying it welcomes these measures, which it believes will promote access for natural gas from British Columbia to be exported as LNG to the fastest growing economies in the world. “The measures announced today will be important to our effort to submit a competitive proposal for our joint-venture participants' decision-making,” the company said on Facebook.

The JV, comprising Royal Dutch Shell in partnership with Petrochina, KOGAS and Mitsubishi Corp, is working towards making a final investment decision for the LNG Canada Kitimat project soon.

Edited by Creamer Media Reporter

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