Kitimat Council is backing a proposal to get the federal government to change the tax class of liquefied natural gas liquefaction plants.
The recommendation passed from Counci is for them to send a letter to the federal government supporting a submission by the Canadian Association of Petroleum Producers (CAPP) to the House of Commons, requesting that LNG facilities — for example the proposed Kitimat LNG and LNG Canada projects in Kitimat — be moved from Class 47 to Class 43 under Capital Cost Allowance tax classification.
In short, LNG facilities being in Class 47 means they have a depreciating value of eight per cent. To let that make a bit more sense in context, liquefaction facilities in Canada reportedly have a 10 per cent higher after-tax operating cost than they would have in, for instance, the United States, according to the CAPP.
The submission from the CAPP to move the LNG facilities to Class 43 would mean LNG facilities have a 30 per cent declining balance, which would correct the cost difference between Canada and the U.S. and other countries and make running such facilities in Canada more cost competitive.
Kitimat was introduced to this proposal in a conference call lead by CAPP on November 23 which was attended by Mayor Joanne Monaghan and Kitimat’s Chief Administrative Officer Ron Poole. On that call also were the mayors of Dawson Creek, Fort St. John, Fort Nelson and Prince Rupert.
A report from Kitimat administration say that all of the other mayors were in support of CAPP’s proposal.
“This classification change will properly recognize these assets as manufacturing and processing,” said Kitimat staff’s report.
Due to this proposed change being a federal tax, it would not affect municipal taxation or assessments.
Mario Feldhoff, who brought forward the motion, said that now is the time for this change to happen.
“The government needs to act…in order to make our LNG facilities become a reality,” he said. “This motion helps make it more likely these projects will move forward in a timely basis.”
In CAPP’s own report, they state that “The window of opportunity to ensure Canadian competitiveness and positively influence final investment decisions is now.”
In the draft letter to the government from Monaghan, she requests that the government consider this tax change in their 2013 budget so as to possibly sway favourably the eventual investment decisions of LNG facilities.