B.C. Premier John Horgan offers tax breaks to boost LNG industry

Premier John Horgan offered billions of dollars worth of tax breaks to liquefied natural gas producers Thursday in a move to entice the construction of an export facility in Kitimat.

Environmental groups called it a reckless abandonment of the NDP’s climate promises and Green Leader Andrew Weaver said he might withdraw his support of the minority NDP government.

Horgan said he hopes the exemptions, which forgo up to $6 billion in potential government revenue over 40 years, would lure the Shell-led LNG Canada project to make a final go-ahead decision this year on its $40-billion LNG proposal for Kitimat and an associated gas pipeline.

“This new approach is one that I believe British Columbians want to see from their government,” the premier told reporters at the legislature.

“If we can realize industrial development, spectacular. If we can do that within a framework that protects our environment and meets our climate objectives, brilliant. If we can ensure that genuine reconciliation can happen with Indigenous peoples, I believe we’ve not just checked all the boxes, but we’ve developed a framework that will mean something to British Columbia now and into the future.”

Horgan faced immediate opposition for encouraging the development of an LNG industry that will make it difficult to reach B.C.’s greenhouse gas reduction target of 40 per cent below 2007 emission levels by 2030.

“Today’s announcement is a new form of climate denial: The idea that we can build new fossil fuel projects that will cause millions of tonnes of additional emissions while reducing our emissions at the same time,” said Sierra Club B.C.’s climate campaigner, Jens Wieting. “By sweetening the pot for fracked gas export, the government is laying out a red carpet for investors to help destroy our climate.”

Weaver said he won’t support the proposed changes, and will consider withdrawing his party’s support of the NDP later this fall if the government can’t produce a climate plan that shows how it will cut pollution while also adding eight million tonnes of carbon dioxide annually from LNG Canada.

“If you are going to add eight (megatonnes) on the top of about 64 (megatonnes) we have now, you’re going to have to show us the means and ways you are actually going to have to get to 40 per cent reductions,” he said, adding it would take “magic” to accomplish the feat. “Because our confidence (support of the NDP) is predicated on you showing us that.”

Weaver stopped short of giving an exact deadline or method for bringing the government down if it fails to produce such a plan. He said the confidence and supply agreement the Greens signed with the NDP in May 2017, which toppled the Liberal government, requires the NDP to implement a climate action strategy that meets the 40 per cent target.

Horgan’s tax breaks would water down LNG taxes enacted by then premier Christy Clark after the 2013 election. Instead of the provincial treasury receiving an estimated $28 billion in revenue over 40 years if LNG Canada were built, B.C. would take in $22 billion.

Government officials argued Thursday that B.C.’s diminished revenue projections are hypothetical and better than getting nothing if LNG Canada cancelled the project.

Horgan’s proposal is contingent on LNG Canada making a final go decision by November. If it does, the government would exempt the project from paying provincial sales tax on its construction, and then recapture that forgone revenue over 20 years in new “operating performance payments” once the LNG terminal is operational.

The government would also exempt the project from the scheduled $20-a-tonne carbon tax increases until 2021 if the company could hit targets that make it the cleanest LNG facility in the world. The plan would also scrap a Liberal LNG corporate income tax surcharge.

B.C. Hydro would cut its rate for LNG facilities and offer the standard industrial rate, in an attempt to get LNG Canada to use electricity and not natural gas to  power some of its ancillary operations. 

“The good news in that regard is we have an abundance of clean hydroelectric power that we can use to displace more noxious substances,” Horgan said, without mentioning the controversial Site C dam that his government chose last year to continuing building, also to the dismay of the environmental community.

B.C. Business Council president Greg D’Avignon said the LNG tax changes could produce a valuable industry for the province.

“This will create new jobs in B.C., strengthen our economy and generate billions of new government revenues over time, while also contributing to the reduction of global carbon emissions,” he said.

However, the tax breaks will also likely be contentious, given Horgan spent years in opposition accusing Clark’s Liberal government of giving away too much revenue to the large, foreign, multinational LNG proponents.

“Shell does not need handouts from government, in my view,” Horgan said in 2013. Now his government has delivered an even more favourable deal to those same companies.

“Did we oppose the B.C. Liberal approach to this? Absolutely,” Horgan said Thursday.

“They put in legislation commitments without ever having a final investment decision. The difference between them and us today is after five years of talking about one, two, three, five LNG facilities there are zero.

“I’m standing before you today and speaking directly to the people of British Columbia saying there may well be final investment decision on an LNG facility in northern B.C.”

Horgan said he was heavily influenced by a trade mission to Asia in January where he met with project proponents and saw the pollution caused by coal-fired power plants. B.C. could help displace coal in Asia with cleaner LNG, said Horgan, echoing an argument Clark’s Liberals had long trumpeted and the NDP had once belittled.

The tax breaks come as the proposed $40-billion LNG Canada project for Kitimat moves toward selecting a prime contractor. The project stakeholders, including Shell, South Korea’s Kogas, Japan’s Mitsubishi Corp and PetroChina Co. Ltd. are meeting next week to discuss its future. A final investment decision is expected later this year.

“The measures announced today will be important to our effort to submit a competitive proposal for our Joint Venture Participants’ decision-making,” LNG Canada said in a statement Thursday.

The LNG Canada project remains B.C.’s largest proposal, after Malaysian state-controlled oil and gas giant Petronas announced in July 2017 it was cancelling its proposed $36-billion Pacific NorthWest LNG project on Lelu Island south of Prince Rupert. There have since been reports that Petronas may be considering a minority stake in Shell’s LNG Canada.

When Clark was premier, the Liberals pursued the creation of an LNG industry, setting up a tax regime and pollution guidelines for the sector in the hopes of luring massive investment to back up her election promises of a “prosperity fund” that could pay off the provincial debt.

Horgan, then opposition leader, was sharply critical of the Liberal pursuit of the industry, accusing the government of giving away too much revenue to attract foreign investment.

Bob Shaw

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