B.C. government promises rebates to carbon tax and PST for LNG industry

The B.C. government is redoing its fiscal framework for the liquefied natural gas industry in an attempt to secure a final investment decision from LNG Canada. The province announcing on Thursday that it will provide a PST exemption on construction costs of any LNG facility.

The government is projecting that would be a $6 billion rebate for LNG Canada, compared to the framework designed by the previous provincial government.

“Our new approach welcomes investment that puts our province’s people and future first, and rejects the old ways of resource development at any cost,” said B.C. Premier John Horgan. “Our obligation is to the people who call British Columbia home and our job is to get the best deal for them and the generations that follow.”

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The government has set guidelines for any LNG projects. The province’s four conditions are: a guaranteed fair return for B.C.’s natural resources, guaranteed jobs for British Columbians, respect & make partners of First Nations and protect B.C.’s air, land and water.

The PST exemption would be paid back to the province if the facility gets up and running through operating performance payments.

LNG Canada is expected to make a final investment decision by the fall of 2018. The project would be the single, biggest capital project in B.C. history with an expected $40 billion investment. The partners on the project, which include Shell, are expected to meet next week.  If a final investment decision comes this year, the expectation is work on the project would peak in 2021 with 10,000 workers.

This morning, the BC Government announced it would be putting measures in place to remove barriers to the LNG export industry development in British Columbia.

“LNG Canada looks forward to working with government, and the many provincial stakeholders and First Nations that continue to strongly support our project as it progresses towards a future Final Investment Decision by our Joint Venture Participants,” said the company in a statement. “The measures announced today will be important to our effort to submit a competitive proposal for our Joint Venture Participants’ decision-making.”

If the investment comes, LNG Canada has committed to hiring B.C. workers first and if that workforce is tapped out to hire other Canadian workers next.

WATCH: Keith Baldrey explains how Premier John Horgan and the BC NDP plan to offer incentives for LNG production in the province

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As part of this new framework on LNG, the government will also be setting a cap on carbon tax at $30 dollars, exempting LNG facilities from paying increases in carbon tax that are expected to go up to $50 a tonne by 2021. The rebate on the additional carbon tax would only come if LNG Canada meets its target of being the cleanest LNG facility, in terms of carbon emissions, in the world.

The new policy on LNG comes as Premier John Horgan prepares to head to northern B.C. next week. The B.C. NDP have been reluctant to support the industry that was long considered former premier Christy Clark’s pet project. The NDP were opposed to the project and the tax structure put forward by the previous government.

“Shell does not need handouts from government, in my view,” said Horgan on CFAX on February 26, 2013.

Horgan says the approach the previous government took is much different than the one his government is taking. The premier says the big difference is that the Liberals provided tax breaks before a final investment decision while the NDP will wait to put these new policies in place until after a potential investment decision.

“The Liberals got zero, we may get one. I believe there may be a benefit to British Columbia,” said Horgan. “Not one plant was built, one plant may be built now. Should LNG Canada we will be repealing Liberal legislation and put in place the one we introduced today.”

The NDP has also pledged an elimination of the LNG income tax as part of the policy shift. Green party leader Andrew Weaver has threatened to take down the current government if it pushed former with the LNG industry.

B.C. was the also jurisdiction with an LNG income tax on top of other taxes to industry. LNG industry groups had been calling for the tax to go away.

“We have been saying for a long time that we have cost competitiveness issues and I think a clearer example of that was the fact we saw Pacific Northwest cancel it’s project last July,” said B.C. LNG Alliance CEO David Keane. “What we are looking at is actually removing barriers to develop an industry.”

The B.C. Green Caucus has sent a letter to LNG Canada. The caucus does not support freezing the carbon tax at $30/tonne for certain facilities. The agreement the Greens and the NDP have in place included an increase in the carbon tax by $5 per tonne per year beginning April 1, 2018.

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“If such a measure goes forward without amendment we do not see how a climate action plan, as agreed to in CASA, would have any legitimate pathway forward to reach our GHG reduction targets,” reads the letter from Weaver. “As such, our caucus would no longer have confidence in government, as they would not be living up to their commitments laid out in CASA.”

Environmental groups are concerned that even if the LNG Canada facility is the cleanest in the world, the province will struggle to meet carbon emission reduction targets. Pembina Institute projections have the facility, if approved, emitting 9.6 mega tonnes of carbon every year. British Columbia’s current target is 12 mega tonnes a year for the entire province.

“We see this as a huge, huge broken promise from the B.C. NDP which promised to take climate change seriously,” said Wilderness Committee campaigner Torrance Coste.

“This one project will represent 80 per cent of the province’s 2050 emission targets. Meaning you and me, families across this province have to make massive, massive cuts while one of the most massive oil corporations in the world gets a huge break.”

The Canadian Taxpayers’ Federation (CTF) is welcoming the news about the rebate, but it would like to see B.C. expanding that relief to everyone, citing the recent record-breaking numbers at the gas pumps in Metro Vancouver.

B.C. CTF Director Kris Sims believes there’s room for the government to try and do more.

“If they’re going to give a carbon tax break here, wouldn’t it be nice if the premier actually expanded that lens of forgiveness and actually reduced our carbon tax for all of us, those of us trying to pump gas and diesel, those of us paying for our home heating fuels, those of us paying for the trucking for all of our food that comes into our stores.”

Sims also believes that once the tax goes into effect, everyone will be dinged one way or another.

“If you are one of the lucky few that can go car-free in a downtown hyper-urban setting, everything that is brought to you has gotten there by a vehicle. So unless you’re picking a plum off of a plum tree in your own backyard or a city park, everything you’re eating has been brought to you by some form of a fossil fuel, some form of natural gas, or gasoline or diesel.”

With a file from Michelle Morton