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Going for broke on LNG
BC dangles billions in tax, carbon concessions, power rates to woo investors
Gary Park Petroleum News
British Columbia’s socialist government has pulled one of the most startling aboutfaces in Canadian energy history by dangling a bundle of multibillion-dollar incentives to secure a C$40 billion LNG project by the Shell-led LNG Canada joint venture.
The breaks include foregoing up to C$6 billion in potential tax revenues over 40 years, along with exempting the project from a scheduled C$20 per metric ton of carbon levy until 2021, making it difficult for B.C. to achieve its greenhouse gas reduction target of 40 percent below 2007 levels by 2030.
LNG developers will also be exempted from having to pay provincial sales taxes up front in exchange for paying back the amounts over 20 years once they start to report profits.
In addition, government-owned B.C. Hydro will cut its power rate for LNG facilities and offer the standard industrial rate.
FID by November The package is contingent on the partnership of Shell, PetroChina, Korea Gas and Mitsubishi making a final investment decision by November.
The immediate reaction from LNG Canada was positive, with a spokeswoman telling reporters that the announcement will likely be “received very well” when the joint venture partners hold their next monthly meeting.
She said LNG Canada is working on its final proposal that will allow the participants to settle on a go-ahead decision in the second half of 2018, noting that the government’s measures are “very important and they’re very timely.”
As well, she implied that British Columbia had little choice, given that the U.S. has one major operating LNG project and six more in advanced phases, all pursuing Asia’s new-found desire for LNG to help those countries meet their climate change commitments under the Paris accord.
Issue of giveaways Supporters and opponents of the B.C. government were left reeling, with the proposals coming only two years after the New Democratic Party scorned the efforts of former Premier Christy Clark to attract would-be LNG investors through what were viewed as giveaways.
But Premier John Horgan argued that even with the tax relief the government would still collect C$22 billion over LNG Canada’s lifespan, or C$550 million a year.
He and senior government officials hammered home their case that, provided B.C. acts quickly it has a chance to enter the suddenly improving LNG market in Asia, and take advantage of its closer proximity to Asia than its Lower 48 rivals and its lower ambient air temperature to gain a head start over other competitors on cooling LNG.
First Nations’ issues But Horgan hedged his enthusiasm for an “exciting opportunity” by conceding that LNG Canada is “potentially fraught with risk,” including holdout First Nations.
Although 16 indigenous communities along the route from natural gas wellheads in northeastern British Columbia to the tanker and processing terminal at Kitimat have formally endorsed the project an estimated half-dozen have yet to sign on, raising concerns that any one of them could set up protest encampments and construction blockades.
Also lurking in the background is Green Party leader Andrew Weaver, who said he won’t support the “LNG folly” of tax and carbon breaks and will consider bringing down the NDP government this fall unless it demonstrates how it will cut pollution while adding 8 million metric tons a year of carbon dioxide from LNG Canada on top of the 64 million metric tons that B.C. already emits.
Alberta bitter On the other side of the Canadian Rockies the mood was bitter, with Alberta Energy Minister Margaret McCuaig-Boyd calling the Horgan administration an “environmental hypocrite” in its handling of LNG Canada and Kinder Morgan’s planned Trans Mountain crude pipeline expansion.
“On one hand, they’re willing to increase emissions in their own backyard, yet on the other they’re trying to stop our efforts in Alberta to diversify (our crude) markets by building a pipeline that is under the emissions cap,” she said. “B.C. is, frankly, speaking out of both sides if its mouth.”
McCuaig-Boyd said B.C. cannot build its own energy industry while blocking Trans Mountain. “It’s not fair, it’s not Canadian and it needs to stop,” she said.
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