B.C. government offers tax breaks as incentive to $40B Kitimat project

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An aerial view of Kitimat, B.C. (Darryl Dyck/Canadian Press). Courtesy of CBC.

An aerial view of Kitimat, B.C. (Darryl Dyck/Canadian Press). Courtesy of CBC.

B.C. Premier John Horgan has announced that the provincial government is willing to offer an exemption on provincial sales tax and a break on carbon tax in relation to a $40 billion liquefied natural gas (LNG) export terminal being considered for Kitimat B.C.

The incentives are part of a new natural gas framework announced by the premier in Victoria on Thursday ahead of a final investment decision on LNG Canada’s $40-billion project.

“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,” Premier Horgan said. “Our obligation is to the people who call British Columbia home, and our job is to get the best deal for them and the generations that follow.”

According to Horgan, under the new framework, the projects should guarantee a fair return for B.C.’s natural resources, guarantee jobs and training opportunities for British Columbians, respect and make partners of First Nations and protect B.C.’s air, land and water, including living up to the province’s climate commitments.

The framework, which LNG Canada would be subject to, also provides relief from provincial sales tax, subject to repayment in the form of an equivalent operational payment, new greenhouse gas emission standards, general industrial electricity rates and elimination of the LNG income tax that had required LNG-specific tax rates. That surcharge was levied by for the former Liberal government.

The provincial government said the four conditions form the basis for the government’s discussions with LNG Canada. If the Kitimat project is approved, it would be the largest private-sector investment in B.C. history. The project includes a new natural gas pipeline would go from northeast B.C. to Kitimat, as well as a new terminal that will process and ship LNG to Asian markets.

The government said this will create up to 10,000 construction and 950 full-time jobs in northern B.C.

“The LNG Canada proposal has the potential to earn tens of billions of dollars and create thousands of jobs for British Columbians over the life of the project,” Premier Horgan said. “It’s a private-sector investment that could benefit our province for decades to come, but not at any price – we need to make sure the values British Columbians believe in come first.”

The BC Green Caucus letter to LNG Canada, sent on March 19, says they don’t support the rebate on the carbon tax for the LNG industry.

The caucus said it does not support extending the proposed measures to support existing Emissions Intensive Trade Exposed (EITE) industries as currently conceived to prospective LNG companies, adding that the policy that would in effect freeze the carbon tax at $30 per tonne 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.? B.C. Green Party Leader Andrew Weaver said.

?When it became clear that the government intended to propose measures that are incompatible with B.C.?s ability to meet our climate targets, we felt it was our responsibility to communicate to LNG Canada that if these measures were to go ahead unamended, we would no longer have confidence in government.”

Weaver also said the B.C. Green Caucus is committed to working in partnership with the NDP government to meet climate targets.

In the past year, companies have pulled the plug on three LNG projects proposed in B.C., including the $36-billion Pacific Northwest LNG pipeline project.

LNG Canada, which includes partners Shell, PetroChina, Korea Gas and Mitsubishi, said in 2016 that its final investment decision for the Kitimat facility would be delayed because of poor global markets.

Those markets are turning around, says Shell’s 2018 LNG outlook. It found the market has defied expectations, growing by 29 million tonnes in 2017.

“Based on current demand projections, Shell sees potential for a supply shortage developing in the mid-2020s, unless new LNG production project commitments are made soon,” it said.

In a statement, LNG Canada said it welcomes British Columbia’s new measures.

“LNG Canada has designed our facility to have the lowest carbon intensity of any large LNG export facility in the world. We have done so to live up to the promise of ‘cleanest LNG’ and we are committed to working with local, provincial and federal governments and industry to meet our greenhouse gas reduction commitments under Paris COP.”

The Wilderness Committee disputed the idea of clean LNG, pointing to estimates from the Pacific Institute for Climate Solutions and the Pembina Institute showing the annual carbon dioxide emissions from the LNG project would exceed 9.6 megatonnes by 2050. That’s 80 per cent of British Columbia’s total emissions target of 12 megatonnes annually by 2050.

“From escaped methane at the drill sites to the massive carbon emissions required to cool the gas, to more escaped methane on the long trip across the ocean to Asia and then the emissions from burning the gas: It all adds up to a big bad climate change. How would B.C. ever meet our climate commitments with this LNG plant chugging along?” the environmental organization said in a news release.

The Business Council of British Columbia said the framework will provide more regulatory certainty and important fiscal incentives for potential investors across industries.

LNG development was a centrepiece of the B.C. Liberal party’s 2017 election campaign.

With files from the Canadian Press

 

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