Premier Christy Clark speaks to LNG conference in Vancouver

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

A tent housing a mobile vaccination clinic. (Interior Health/Contributed)
Over 5K jabbed at Interior Health mobile COVID-19 vaccine clinics

The clinics have made stops in more than 40 communities since launching last week

Provincial Health Officer Dr. Bonnie Henry talks about B.C.’s plan to restart the province during a press conference at Legislature in Victoria, Tuesday, May 25, 2021. THE CANADIAN PRESS/Chad Hipolito
Interior Health COVID-19 cases falling slower than the rest of B.C.

More than a third of provincial cases announced Thursday came from the Interior

A tent housing a mobile vaccination clinic. (Interior Health/Contributed)
Second dose vaccinations accelerating throughout region: Interior Health

To date, more than 675,000 doses have been administered throughout the region

Okanagan Lake (File photo)
Thompson-Okanagan ready to welcome back tourists

The Thompson-Okanagan Tourism Association expects this summer to be a busy one

Aerial view of a wildfire at 16 Mile, 11 kilometres northwest of Cache Creek, that started on the afternoon of June 15. (Photo credit: BC Wildfire Service)
Wildfire at 16 Mile now being held

Wildfire started on the afternoon of June 15 at 16 Mile, east of Highway 97

A small pod of Pacific white-sided dolphins pass by close to shore in Campbell River June 16, 2021. Still capture from video courtesy of Kimberly Hart
VIDEO: Dolphin sunset captured from Vancouver Island shore

Spectacular setting for view of travelling pod of Pacific white-sided dolphins

Police are asking for public assistance in locating Anthony Graham who has been charged with the murders of Kamloops brothers Carlo and Erick Fryer. (RCMP photo)
2 charged, suspect at large in killings of B.C. brothers linked to gang activity: RCMP

Kamloops brothers Erick and Carlo Fryer were found deceased in May on a remote Okanagan road

Albert Health Minister Tyler Shandro and Alberta Premier Jason Kenney unveil an opening sign after speaking about the Open for Summer Plan and next steps in the COVID-19 vaccine rollout, in Edmonton, Friday, June 18, 2021. THE CANADIAN PRESS/Jason Franson
Alberta 1st province in Canada to lift all COVID-19 public health restrictions

70.2% of eligible citizens 12 and older in the province have received a dose of the vaccine

Fraser Health registered nurse Ramn Manan draws a dose of the Pfizer COVID-19 vaccine into a syringe at a walk-up vaccination clinic at Bear Creek Park, in Surrey, B.C., on Monday, May 17, 2021. THE CANADIAN PRESS/Darryl Dyck
‘Honour our fathers’ with COVID-19 vaccine protection, B.C. urges

109 new cases Friday, 75 per cent of 12 and up immunized

(Paul Henderson/ Chilliwack Progress)
Trutch Avenue in Chilliwack to be renamed to remove racist taint

New name to have Indigenous significance as Chilliwack takes new step toward reconciliation

Canadian Prime Minister Justin Trudeau is seen during a joint news conference following the EU-Canada Summit, in Brussels, Belgium, Tuesday June 15, 2021. Trudeau says Canada is on track now to have 68 million doses delivered by the end of July, which is more than enough to fully vaccinate all 33.2 million Canadians over the age of 12. THE CANADIAN PRESS/Adrian Wyld
Vaccine deliveries enough to fully vaccinate all eligible Canadians by end of July

Three in four eligible Canadians now have their first dose, nearly one in five fully vaccinated.

Chief Public Health Officer Theresa Tam listens to a question during a news conference, in Ottawa, Tuesday, Jan. 12, 2021. The number of confirmed COVID-19 cases attributed to the highly contagious Delta variant grew in Canada this week. THE CANADIAN PRESS/Adrian Wyld
Canada’s public health agency reports spike in confirmed cases of Delta variant

More than 2,000 cases of the variant confirmed across all 10 provinces and in one territory

Bella Bella is on B.C.’s Central Coast, accessible only by air and ocean. (Tom Fletcher/Black Press)
B.C. provides $22 million for Heiltsuk development on Central Coast

Elders care home project, tourism, lumber mill supported

Most Read