Canada’s new government has assured British Columbia that it will not remove a tax break viewed as an essential stimulant for the province’s fledgling LNG industry.
Premier Christy Clark said the commitment means the capital cost allowance tax break promised by the former Conservative government of Prime Minister Stephen Harper will not be phased out when measures are introduced to phase out all subsidies to the oil and natural gas sectors.
She said the Liberal administration of Prime Minister Justin Trudeau has “been clear” that no changes will be made to the tax break which will allow an acceleration of the allowance on equipment to 30 percent annually from 8 percent.
For LNG companies that means they can write off their investments more quickly, leaving them with more money during the early years of a project.
The proponents have left little doubt that without the capital allowance they would be unlikely to sanction their projects.
Call for LNG exports
“The reason (the Trudeau government) supports the allowance is the same reason we support it,” Clark told the Vancouver Sun. “We have a chance to make a huge contribution to cleaning up the world’s air by exporting LNG. So they want to make sure we get the chance in Canada, in British Columbia, to make the contribution.”
A spokeswoman for Trudeau confirmed to reporters that the new government will stick with the cost allowance, even though it has signaled that all industrial projects will be subject to more intense environmental and climate change scrutiny.
Clark drove home the point during a meeting Nov. 23 with Trudeau and the premiers of Canada’s 10 provinces and three territories that British Columbia has been a world leader in tackling carbon emissions by introducing a tax in 2008 that climbed from C$5 per metric ton to C$30 in 2013 when it was frozen until 2018.
However, the government along with environmental, First Nations and industrial groups is now drafting the next phase of the province’s climate change plan which is due to be announced in December, advising the Clark administration on ways to achieve its target of lowering greenhouse gas emissions by 33 percent below 2007 levels by 2020 and 80 percent by 2050.
Pressure intensifies
The pressure on British Columbia to take action has intensified as critics have argued that an LNG export industry would significantly add to carbon emissions, with the Alberta-based Pembina Institute estimating that three LNG plants would add 27 million metric tons a year of carbon to the atmosphere by 2030.
Those increases would include emissions from drilling and extracting natural gas to serve as LNG feedstock, removing impurities from the gas and transporting it over long distances by pipelines to liquefaction plants.
Currently, British Columbia’s emissions are about 64 million metric tons a year, meaning that only one LNG plant would throw the province off track in its attempt to achieve carbon reduction goals.
The energy industry has conceded it must evolve to the “new political reality” on climate change.
Ben Brunnen, manager of fiscal policy with the Canadian Association of Petroleum Producers, said a possible solution could involve the use of hydro electricity instead of natural gas to power the production, transportation and processing of gas for LNG.
But he also cautioned that any emission-reduction policies must take into account the industry’s global competitive position and ensure the industry can continue planning for LNG projects.
Call for bold steps
Polls and policy statements in British Columbia have called on the Clark government to take bold steps to reduce GHGs.
An Insights West poll found that only 24 percent of British Columbians were satisfied with the province’s work on reducing emissions.
In addition, more than 20 Canadian academics and policy experts issued a statement calling on Clark to introduce tougher measures, such as raising the carbon tax, strengthening building standards and regulating emissions by the natural gas industry.
The Sierra Club was even blunter, arguing that an LNG industry would be “incompatible with any serious approach” to lowering emissions.
