Duty removal would create level playing field for lng

If the exemptions are granted, LNG projects in B.C. not only might be on a more even footing with competitors in other countries, but also might even have a slight advantage over U.S. LNG projects, which now face escalating capital costs, thanks to American steel tariffs.

On March 22, the BC NDP government announced it was scrapping a suite of special taxes that the previous Liberal government had placed on the LNG industry. One would have taxed income from LNG production at 1.5%, then 3.5% after the initial capital investment was paid for and, finally, 5% after 2037.

It will also defer PST on capital investments and offer a break on carbon taxes, if LNG projects can stick within certain benchmarks for carbon intensity.


If they meet these benchmarks, they will pay a carbon tax of only $30 per tonne, not $50 per tonne, in 2021.

The carbon tax credit, for example, is offered to all energy-intensive, trade-exposed industries, in acknowledgement of the competition certain industries in B.C. – cement manufacturing and greenhouses, for example – face from imports from countries that have no carbon taxes.

In total, the LNG Canada project is estimated at $40 billion, about $7 billion of which would be spent on the LNG plant itself in Kitimat, and about $5 billion for a new pipeline. LNG Canada will now be able to defer the PST on the capital costs of the LNG plant.

“Capital costs of these projects are huge, so PST is very important,” said Susannah Pierce, director of external relations for LNG Canada. “Addressing the capital cost for construction is fundamentally the most important thing you can do to drive large investment.”

LNG Canada plans to award the engineering, procurement and construction contract for the Kitimat project within about a month, Pierce said. A final investment decision is expected as early as summer, and LNG Canada CEO Andy Calitz recently said he hopes to see construction start in 2018.

Pacific Oil & Gas Ltd. already made a final investment decision on its Squamish plant, but put the project on hold after the last provincial election. It was waiting to see if the new NDP government would confirm its power rates, and now it is waiting to see if the federal government will exempt LNG modules from its steel duties.

Traya said the deep well credits are intended to promote drilling in high-cost, lower-value areas like the Horn River Basin, whereas most of the extraction in B.C. now is in the Montney formation, so a lot of those credits might never be claimed.

Should the LNG Canada project go ahead, the government estimates it would generate up to 10,000 jobs at peak construction, and 950 permanent jobs on the plant, pipeline and gas fields. LNG Canada has agreed to a 25% apprenticeship hiring policy.

In 2016, several LNG projects in B.C. were put on hold or cancelled outright, following an oil price crash that left energy companies tightening their belts, a drop in demand for LNG in Asia, and an anticipated glut of LNG from new plants in Australia.

If the exemptions are granted, LNG projects in B.C. not only might be on a more even footing with competitors in other countries, but also might even have a slight advantage over U.S. LNG projects, which now face escalating capital costs, thanks to American steel tariffs.

On March 22, the BC NDP government announced it was scrapping a suite of special taxes that the previous Liberal government had placed on the LNG industry. One would have taxed income from LNG production at 1.5%, then 3.5% after the initial capital investment was paid for and, finally, 5% after 2037.

It will also defer PST on capital investments and offer a break on carbon taxes, if LNG projects can stick within certain benchmarks for carbon intensity. If they meet these benchmarks, they will pay a carbon tax of only $30 per tonne, not $50 per tonne, in 2021.

The carbon tax credit, for example, is offered to all energy-intensive, trade-exposed industries, in acknowledgement of the competition certain industries in B.C. – cement manufacturing and greenhouses, for example – face from imports from countries that have no carbon taxes.

In total, the LNG Canada project is estimated at $40 billion, about $7 billion of which would be spent on the LNG plant itself in Kitimat, and about $5 billion for a new pipeline. LNG Canada will now be able to defer the PST on the capital costs of the LNG plant.

Capital costs of these projects are huge, so PST is very important,” said Susannah Pierce, director of external relations for LNG Canada. “Addressing the capital cost for construction is fundamentally the most important thing you can do to drive large investment.”

LNG Canada plans to award the engineering, procurement and construction contract for the Kitimat project within about a month, Pierce said. A final investment decision is expected as early as summer, and LNG Canada CEO Andy Calitz recently said he hopes to see construction start in 2018.

Pacific Oil & Gas Ltd. already made a final investment decision on its Squamish plant, but put the project on hold after the last provincial election. It was waiting to see if the new NDP government would confirm its power rates, and now it is waiting to see if the federal government will exempt LNG modules from its steel duties.

Traya said the deep well credits are intended to promote drilling in high-cost, lower-value areas like the Horn River Basin, whereas most of the extraction in B.C. now is in the Montney formation, so a lot of those credits might never be claimed.

Should the LNG Canada project go ahead, the government estimates it would generate up to 10,000 jobs at peak construction, and 950 permanent jobs on the plant, pipeline and gas fields. LNG Canada has agreed to a 25% apprenticeship hiring policy.

In 2016, several LNG projects in B.C. were put on hold or cancelled outright, following an oil price crash that left energy companies tightening their belts, a drop in demand for LNG in Asia, and an anticipated glut of LNG from new plants in Australia.