In my last column I outlined the reasons for being upbeat about the LNG Canada project getting the green light.
Since then LNG Canada CEO Andy Calitz has reinforced the grounds for optimism in comments he made at the GLOBE Forum 2018 held in Vancouver.
As reported by Business in Vancouver, Calitz on March 14 flat out said the goal is to begin construction this year.
With that timetable in mind, the Final Investment Decision (FID) documents are being drawn up for presentation to and approval by Royal Dutch Shell and its partners.
Why was he so optimistic? “I’m hopeful because of the incredible conviction of (partners) PetroChina, Kogas and Mitsubishi to do this project,” he replied.
Now for the buts.
The overarching ‘but’ is that no matter how enthusiastic about the project the partners might be, the cost versus return math has to work.
And there is a real danger it won’t if the federal government insists on its 45 per cent tariff on fabricated steel products from China and South Korea.
The feds justify that tariff as a countermeasure to those countries dumping their fabricated steel products into Canada at prices below their own cost of production.
While that rationale might sound reasonable, in reality, it is idiotic in as much as there is not a single steel plant in this country that makes the large LNG modules.
And the tariff could put any FID at risk.
Susannah Pierce, External Affairs director for LNG Canada, said the company had applied to the federal court for a judicial review of the tariff but the problem with that route is a court decision would not likely come down until 2019.
So LNG Canada has asked the federal minister of finance Bill Morneau for what’s called a remission order, basically an exemption from the tariff.
Pierce said LNG Canada needs a positive answer from Morneau by May, adding, “If we don’t have clarity on it then we would be concerned that it would push the decision out or cancel the decision.”
One can only hope that the minister, mindful of the urgency of the matter and the fact that federal government revenues will be boosted by the project going ahead, will grant that exemption.
The other ‘but’ requires action by the provincial government.
While the pending increases in the carbon and payroll taxes both add to the cost of the project, Victoria cannot be expected to conjure up a special exemption for LNG Canada or any other LNG project for that matter.
But the province can, and should, kill the special LNG export tax dreamed up by Christy Clark’s Liberal government, a tax that LNG producers in Australia and the U.S. - countries competing with us for investment dollars - are not required to pay.
While Pierce noted the NDP government has set up a review to examine the issue of the competitiveness of a B.C. LNG industry, I strongly suggest that in this case it overcomes its addiction to such time-consuming reviews and take immediate action that will benefit not only the northwest but also its own bottom line.