British Columbia to unveil details of the new LNG taxEnergy
British Columbia to unveil details of the new LNG tax the industry is waiting for within days
Julie Gordon, Reuters | October 20, 2014 11:07 AM ET
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Postmedia NewsThe B.C. government, which is banking on the nascent LNG industry to create thousands of new jobs and add billions to government coffers, has promised the new tax legislation will be introduced this week.
VANCOUVER — British Columbia is set to unveil the details of its long-awaited liquefied natural gas (LNG) tax regime within days, which could sway investment decisions on a handful of proposed export terminals in the Pacific Coast province.
The provincial government, which is banking on the nascent LNG industry to create thousands of new jobs and add billions to government coffers, has promised the new tax legislation will be introduced this week.
That should provide some much needed clarity for companies like Malaysia’s Petronas, which threatened earlier this month to delay its $11 billion LNG project by more than a decade unless a favorable tax deal was reached by the end of October.
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All told, there are 17 LNG terminals proposed for British Columbia’s rugged coastline, with major players like Petronas, Royal Dutch Shell and Chevron Corp all racing to build capacity to ship cheap Canadian gas to Asian markets.
So far, no projects have board approval, with the details of the province’s new LNG tax often cited as a key outstanding hurdle holding back those multi-billion dollar investments.
“This is a very pivotal moment,” said Barry Munro, Canadian Oil & Gas Leader at EY in Calgary. “These are large, very complex, highly capital intensive projects where the overall returns to the project owners aren’t anywhere near as high as people initially assumed they would be.”
With the tax picture crystallizing, Petronas plans to make an investment decision on its export terminal in mid-December, while Singapore-based Woodfibre LNG is expected to decide on a smaller project in early 2015.
Proponents are looking beyond just the new LNG tax to other provincial and federal taxes, as well as property taxes and levy payments to aboriginal communities, said David Keane, head of the B.C. LNG Alliance, an industry group representing six of the more advanced projects.
British Columbia Premier Christy Clark has said her government is working hard to ensure the new LNG tax is not too onerous, while still providing a fair share to the province.
Her government gave a rough outline of its planned tax in February, laying out a two-tier levy that would start at 1.5% and climb to up to 7% once capital costs were recouped. Industry criticized that top rate as too high.
The final tax legislation will be introduced this week and is expected to pass before the end of November. British Columbia will also be introducing new rules on greenhouse gas emissions for the LNG industry.
© Thomson Reuters 2014