Premier Christy Clark speaks to LNG conference in Vancouver

Difficult birth for LNG cash cow

Before Premier Christy Clark can launch a natural gas prosperity fund, BC has to stop the bleeding from loss of US exports

VICTORIA – Debate is underway on the B.C. Liberal government’s tax and environmental plan for liquefied natural gas exports, amid the usual political theatre.

Most media reported that the government “slashed” its proposed seven-per-cent LNG processing income tax by half, caving in to demands of international energy giants led by Petronas of Malaysia.

The 3.5 per cent tax wouldn’t even take full effect until the massive capital investment is written down, and would rise to five per cent after 20 years of production. All of this casts further doubt on Premier Christy Clark’s extravagant election campaign promise to use LNG revenues to wipe out B.C.’s debt, currently approaching $70 billion, and provide an Alberta-style “prosperity fund” to perform further miracles.

The seven per cent figure was the top end of the range presented this spring while negotiations with LNG investors were ongoing, so it’s not really accurate to say it was “slashed.” This cash calf hasn’t been born yet, and it remains to be seen if it will survive.

Finance Minister Mike de Jong pointed out some of the shifts in the global gas market that have reduced expectations. Japan, one of the potential investors, is considering restarting its nuclear plants as it recovers from the 2011 Fukushima earthquake.

China’s manic growth is slowing, and it has signed a long-term deal to import cheaper Russian pipeline gas. Oil prices have dropped.

The government’s change of tone started with the recent throne speech, which emphasized the fate of B.C.’s only current export market.

“Like forestry, B.C.’s natural gas industry has relied on exports to the United States,” the speech observed. “But the American shale gas revolution has meant the export south has dried up – and is never coming back.”

So before B.C. gets to that prosperity fund, it’s got to stop the bleeding. You may recall it was a U.S. hurricane-induced spike in gas revenues that allowed the province to spread an extra billion to calm its labour waters for the 2010 Olympics.

The finance ministry estimates that after the startup period, a medium-sized LNG export operation would pay total taxes of around $800 million a year to the province. De Jong notes that this is more revenue than B.C. will collect from the entire forest industry this year, from a single plant. There are 18 currently proposed.

This new LNG income tax is nowhere near the biggest source. It’s bigger than the carbon tax that LNG producers will pay on fuel use, but only a fourth of what B.C. collects in royalties for selling the gas.

The biggest source of revenue from this hoped-for plant is “other taxes,” which include sales tax and corporate income tax, which B.C. increased to 11 per cent last year.

University of Calgary economist Jack Mintz, who supported B.C. on its ill-fated harmonized sales tax, says this additional LNG tax is wrong-headed at any rate.

“If other provinces take the same view with respect to resource taxation, new levies would be applied to oil refining, forest product manufacturing, mining processing and a host of other activities linked to resource industries,” Mintz wrote last week in the Financial Post.

If B.C. does get a substantial LNG export industry, it will include gas from Alberta, with royalties going there, not here. And companies are also wrangling with the federal government over its taxes, with local governments and First Nations still in line for their cut.

The big question isn’t whether B.C. will get its fair share. It’s whether there will be anything to share.

Tom Fletcher is legislature reporter and columnist for Black Press. Twitter: @tomfletcherbc

Just Posted

100 years since the surrender of Simon Gunanoot

The famed Gitsxan hunter was a fugitive for 13 years

Smithers celebrates National Indigenous Peoples Day

The day included dancing, singing, a moose call contest and a soapberry ice cream tutorial.

UNBC researcher leads study on cannabis-impaired driving

Dr. Russ Callaghan hypothesizes increased motor vehicle collision injuries among young people

Bestselling Indigenous author enlightens Smithers audience on the Indian Act

Bob Joseph is the author of 21 Things You May Not Know About the Indian Act

Scheduled roadwork for June 20 – July 17

Some lane closures expected as Town proceeds with maintenance

Air Canada reviewing how crew left sleeping passenger on parked plane

In a Facebook post, the woman said she woke up ‘all alone’ on a ‘cold dark’ aircraft

‘Text neck’ causing bone spurs to grow from millennials’ skulls, researchers say

Technology use from early childhood causing abnormal bone growths in 41 per cent of young adults

B.C. judge defies lawyers and adds six months to man’s sex assault sentence

‘I find the joint submission is contrary to the public interest and I’m rejecting it’

Tiny Yorkshire terrier survives days on remote B.C. island

ROAM rescue crews, family searched for dog, missing in Greater Victoria for days

Man presumed dead after boat capsizes in Columbia River

Search and rescue efforts recovered a life jacket

Crews fight wildfire along Sea-to-Sky Highway

A cause has not been determined, although a downed power line is suspected

PHOTOS: Event marks one year since soccer team rescued from Thai cave

Nine players and coach took part in marathon and bike event to help improve conditions at cave

Rock climber dies after fall at Stawamus Chief in Squamish

The man had fallen about 30 metres while climbing in the Grand Wall area

Five B.C. students taken to hospital after playing with vaping device

School district said students were taken to hospital ‘out of an abundance of caution’

Most Read