ANNOUNCEMENT 22 Mar 2018

The proposed tax breaks include exemption from sales tax and repeal of the existing LNG income tax.

 

NUMBER OF INTERVENTIONS

1

  • 1 harmful
  • 0 neutral
  • 0 liberalising
Inception date: 01 Oct 2018 | Removal date: open ended

Tax or social insurance relief

On March 22, 2018 the government of British Columbia announced a new framework for natural gas development that includes additional tax breaks for developers. The principal aim of the project is to promote exports of energy outside of North America. “While B.C. has been exporting natural gas to U.S. markets for decades,” according to the government announcement, “it has an opportunity to export the same fuel to other jurisdictions. To that end, government will introduce a fiscal framework that will provide fair returns to both British Columbians and investors, as well as a climate strategy that will allow B.C. to meet its legislated climate targets.”

The most immediate goal is to incentivize LNG Canada’s proposed facility in Kitimat, “a project that involves one of the largest private sector developments in B.C. history.” To that end, the provincial government said that it had “developed a new framework aimed at ensuring British Columbians receive a good return for their natural gas resource and proponents receive a reasonable return on investment.” The government observed that --

As part of this work, British Columbia and LNG Canada jointly conducted a financial analysis of the LNG Canada project. This analysis corroborated evidence and information from internationally recognized LNG analysts that B.C. has a competitiveness issue and formed the basis of a mutual understanding upon which the Province is prepared to commit measures that will increase the competiveness of British Columbia’s LNG industry.

These measures “will only be implemented if the proponents are able to conclusively decide on or before Nov. 30, 2018, to proceed with the construction of the LNG facility and associated investments,” but if they are implemented the new measures “would apply to the entire LNG sector.”

That approval was granted October 1, 2018. 

As part of the new framework, the B.C. government pledged to exempt LNG Canada from the provincial sales tax (PST). “This will be conditional on LNG Canada entering into a separate agreement with the province whereby LNG Canada will pay annual operating performance payments over 20 years, a total amount equivalent to what LNG Canada would have otherwise paid in PST during the initial facility construction period.”

The government also that that it intends to introduce legislation to repeal the existing LNG income tax and will instead utilize “a number other tax and royalty measures under its new fiscal framework, to ensure that British Columbia gets a fair return for its natural gas resource.”

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AFFECTED PRODUCTS