Artist’s rendering of LNG Canada’s proposed plant and shipping terminal at Kitimat. (LNG Canada) Artist’s rendering of LNG Canada’s proposed plant and shipping terminal at Kitimat. (LNG Canada)

Could new LNG tax breaks resurrect a project on the North Coast?

Reactions to Premier Horgan and the B.C. government’s incentives for LNG Canada’s Kitimat project

Premier John Horgan announced on Thursday, March 22, that his government has offered incentives for the Shell-led liquefied natural gas (LNG) project in Kitimat, introducing a new approach toward LNG projects on the North Coast.

Should LNG Canada and Shell pursue the $40-billion facility on B.C.’s North Coast by November 2018, the project would be exempt from provincial sales tax for its construction, and the previous government’s income tax on LNG sales would be removed.

When asked if these new tax breaks, in conjunction with increasing LNG prices, could resurrect one of the projects formerly proposed for Prince Rupert, North Coast MLA said she can’t speculate on the plans of various proponents, “but our new approach welcomes investment, should the proponents decide that market conditions justify it.

“Our approach sets out tax policies that would put LNG on the same footing as other manufacturing industries, and sets out four conditions that ensures that our province’s people are put first, and that protects our environment and climate commitments,” Rice said in an email.

READ MORE: B.C. NDP offers tax breaks to jumpstart LNG Canada in Kitimat

Two past BC Liberal candidates for the North Coast also welcomed the news.

“I’m the eternal optimist,” said Herb Pond, who ran for in the 2017 election, and who also worked for BG Group, a company that had proposed an LNG terminal on Ridley Island, near Prince Rupert.

“I’ve never lost hope for the viability of a good project in the Prince Rupert area, and certainly anything that improves the environment for that is good news. We’ve got a number of places that would be great locations and hopefully if and when we get the chance to do it again we have the opportunity to all come around a location that works for everyone.”

Judy Fraser, who was the BC Liberal candidate in 2013, was more critical about Horgan’s announcement.

“I think it’s extremely hypocritical. No LNG projects would be happening in B.C., or even thinking of happening, without the time and money invested by former premier Clark, former minister Coleman and the BC Liberals, and I feel that if the NDP hadn’t been so vocal leading the opposition to LNG Prince Rupert might already be seeing the fruition of the Pacific NorthWest LNG project,” Fraser said.

However, she supports Premier Horgan moving ahead with any LNG project as it is definitely going to benefit our area.

“I support the proceeding with LNG projects, I just think it’s hypocritical him getting on the bandwagon at this point when the hard work’s been done,” she said.

READ MORE: Australian company ends Grassy Point LNG project

Not everyone was pleased with the premier’s announcement. Des Nobels, the North Coast campaign manager for T. Buck Suzuki Environmental Foundation said he’s “very disappointed but not surprised.”

LNG Canada spokesperson Susannah Pierce welcomed the measures announced by Horgan, saying they would promote the export of LNG from B.C. to the fastest growing economies in the world.

“The LNG electricity tariff was about 40 per cent higher than the industrial tariff. We had a big issue with that for a long time,” said Pierce. “We’ve also had an issue with the fact that we would have had to pay the LNG income tax, as well as PST, which mining and forestry do not have to pay.”

She said without a level playing field there would be no investment and no taxes to begin with, highlighting the fact that the U.S. currently has one LNG facility operating with another five under construction.

“We’re not winning the game right now and these measures will at least help us to stay on the field,” said Pierce. “These are large projects and certainly you need to get through the permitting process, but the challenge for Canada has always been the high capital costs that comes with building new infrastructure.”

She said it was difficult to judge how the measures would reduce the overall cost of the project, but that they would be important for LNG Canada’s effort to submit a competitive proposal for the Joint Venture Participants’ decision-making.

“Considering what we were up against relative to the LNG Income Tax Act, the electricity tariff and PST, these measures are very helpful,” Pierce said.

She applauded the provincial government, saying the measures announced were a direct result of Premier John Horgan tasking BC’s Energy, Mines and Petroleum Resources minister Michelle Mungall to evaluate the competitiveness of the LNG sector in B.C.

She said one of the last remaining hurdles for a positive FID are the federal government’s anti-dumping tariffs on the components required for the construction of LNG plants in Canada.

“We are waiting for the provincial government to do their due diligence on that and we’re hopeful for a good outcome,” said Pierce. “Meanwhile we are in the process of making a decision on our final engineering, procurement and construction (EPC) contractor next month.”

District of Kitimat Economic Development officer Mike Dewar said the district was very pleased with B.C. government’s decision to remove some of the barriers associated with the establishment of an LNG industry in the northwest.

“This is a positive step forward for the LNG industry in B.C. The District is looking forward to working with the B.C. Government, LNG Canada, First Nations groups and the federal government to move toward a positive final investment decision in 2018,” Dewar said.

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