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Potential $6-billion tax break for LNG producers in BC

Last Updated Mar 22, 2018 at 11:58 pm PDT

FILE - Premier John Horgan (April 24, 2017) (Lasia Kretzel, NEWS 1130 Photo)
Summary

BC's premier is offering tax breaks to the province's natural gas industry, but they come with conditions

Green Party and Liberal leaders are critical of the NDP's LNG tax breaks, but for different reasons

The Green Party is holding off on dissolving its alliance with the NDP dependent on climate change goals

VANCOUVER (NEWS 1130) – Premier John Horgan is offering tax breaks to BC’s natural gas industry, but they come with conditions.

They include provincial sales tax exemptions, as well as a promise to get rid of an income tax surcharge imposed by the former Liberal government.

Horgan admits this could lead to the province losing as much as $6 billion worth of possible tax revenue over a four-year period, but he’s rejecting Opposition claims his actions are hypocritical.

“We’re going to make sure that the benefits are obvious and they only are realized, should there be a final investment decision,” he says.

“The previous Liberal government put forward a whole host of legislation that locked the province in, without ever having a final investment decision take place,” he adds.

Plans are currently in the works for a natural gas pipeline from northeast BC to Kitimat, where a new terminal will process and ship LNG to Asian markets. That $40-billion project is expected to create up to 10,000 construction and up to 950 full time jobs.

Last year, Horgan promised to reduce greenhouse gas emission by 40 per cent below 2007 levels by 2030 and by 80 per cent by 2050.

BC’s carbon tax is also slated rise $5 per tonne every year until 2022, but Horgan says that’s still not expected to help BC meet climate change targets. He says new legislated targets for 2030 will be introduced later this year.

Greens not ready to bring down minority government yet

BC’s Green Party leader doesn’t support the new tax breaks, but Andrew Weaver says he’s not ready to bring down the NDP’s minority government.

Weaver has previously threatened to force a confidence vote over something like this, but now says he wants to give the New Democrats time to deliver a plan the Greens can support.

“The fall of this year is the government’s promise to actually have such a plan in place,” Weaver tells NEWS 1130. “They need to get a move on on this.”

He’s also giving Horgan’s government time to prove increased LNG production will not hurt climate change targets promised by the year 2030. “I don’t think it’s possible. In fact, I’m convinced it’s not possible, but the challenge is there to show us that and yes, our confidence in this government relies on this.”

Weaver is giving it until this fall to decide whether or not the Green Party will dissolve its alliance with the NDP, pending whether or not climate change targets can be met. “It would require all aspects of the BC economy, everybody and everything, to reduce their emission by 50 per cent by 2030.”

Liberal leader accuses Horgan of ‘tossing away’ revenue

Meanwhile, BC’s Liberal party leader says he too is critical, but not for the same reason Weaver is. “[The NDP has] increased taxes across the board for British Columbians,” Andrew Wilkinson says. “Now they’re giving tax breaks to the LNG industry which is something they said they would never do.”

He says he’s not surprised the Green Party leader is not making good on past threats to bring down the minority government.

“There’s a lot of posturing going on. Clearly, it’s not working because the NDP and the Greens can’t get their act together.”

Wilkinson is accusing the NDP of tossing away $6 billion worth of tax revenue over four years. “The NDP have reversed themselves on the LNG industry and decide to give them tax breaks, while they’re increasing taxes across the board for British Columbians.”

Michael Prince is a political scientist at the University of Victoria.

He says this still isn’t enough to bring down the government, but Andrew Weaver is still sending out a warning.

“Rather than a red line, I think what Dr. Weaver has done is drawn a yellow line. ‘Proceed with caution’ I think is what he is trying to signal to the NDP and John Horgan.”

Prince says next years budget will be interesting to see if these tax credits are in it.

“That’s where I think Dr. Weaver and the Green caucus have to decide whether they would support that budget or not.”

Environmental activists not pleased

Joe Foy with the Wilderness Committee says he’s shocked with the premier’s announcement. “The provincial government has said they are putting in policies to fight climate change, but tying us in — if we get tied into these long-term contracts for this LNG project, water quality and our climate commitments go out the door.”

“I know it’s difficult. I know we want to keep people employed. But we have to live up to our commitments for our people here to protect the landscape, the wildlife, and the water. And we have to live up to our global commitments. We can’t do that with LNG. It’s too bad. But we can’t. Maybe in the future, but not now,” he adds.

Foy argues a tax break for LNG producers doesn’t make sense, given the province’s stance on the Trans Mountain pipeline expansion,

“You can’t fight climate change on the one side, by fighting Kinder Morgan — and we support them and we’re very happy that they are — but at the same time, allow this polluting climate changing LNG industry to get a foothold in British Columbia. You can’t do both. We end up blowing our climate targets.”

He says while some feel LNG is a cleaner gas, it has big effects on climate change.

“When we drill with gas out of the ground, using the fracking method, there’s a lot of escaped gas, which is hugely damaging to our climate. Then, when we freeze the gas… it take a lot of energy. And we get that energy by burning gas, in order to freeze it. Then, when we ship it across the ocean, it’s constantly escaping.”

LNG markets are improving

Back in 2016, the price LNG fetched on international markets was so low, many were saying it was crazy to consider getting into the LNG industry.

But Shahin Dashtgard, professor of Earth Sciences at SFU, says that’s changing.

“We’ve seen on the Japanese spot market, an increase from about $6 to about $8.80 per million BTU, which is a substantial increase in the price.”

Still, he says companies such as Shell would be taking on an uncertain future.

“I think it’s still a risky investment. It’s a lot of money getting put on the table. Shell is looking at the long-term prospects. Getting an industry going now will have benefits down the road, so they’re looking at the long term rather than the shorter term.”

Besides the financial risks, there are other related controversies, such as hydraulic fracturing or ‘fracking’ and its role in triggering earthquakes – which is why the province has launched a review into the practice.

Meantime, workers who stand to benefit from an LNG industry in BC are understandably happy about the province’s move.

Chris Gardner is president of the Independent Contractors and Businesses Association and points to both the construction and the ongoing jobs that are expected to stem from the industry.

“There will be permanent jobs at the LNG facility, which is in Kitimat. There will be jobs upstream, in the Fort St. John/Dawson Creek area, because that’s the source of the natural gas.”

He adds just because most of the jobs that would be created would be short-term, it doesn’t mean we should dismiss them.

“If you think of it, this is a five-year construction project. That’s a lot of work. If you think of it, every construction project has a beginning, middle and end. Construction jobs are project-driven, and we need those projects.”