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Kitimat is one step closer to securing LNG plant

Horgan offers incentives, introducing a new approach toward LNG projects on the North Coast.
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Kitimat is one step closer to getting an LNG plant following provincial government’s announcement that it plans to implement tax breaks and lower electricity costs for the LNG industry in B.C.

Premier John Horgan announced last Thursday that his government has offered incentives for the Shell-led liquefied natural gas (LNG) project in Kitimat, introducing a new approach toward LNG projects on the North Coast.

“Our new approach welcomes investment that puts our province’s people and future first, and rejects the old ways of resource development at any cost,” said Horgan.

“Our obligation is to the people who call B.C. home, and our job is to get the best deal for them and the generations that follow.”

Should LNG Canada and Shell pursue the $40-billion facility on B.C.’s North Coast by November 2018, the project would be exempt from provincial sales tax for its construction, and the previous government’s income tax on LNG sales would be removed.

The B.C. government would also introduce an electricity rate for the project that is consistent with other industrial users in the province.

LNG Canada spokesperson Susannah Pierce welcomed the measures announced by Horgan, saying they would promote the export of LNG from B.C. to the fastest growing economies in the world.

“The LNG electricity tariff was about 40 per cent higher than the industrial tariff. We had a big issue with that for a long time,” said Pierce. “We’ve also had an issue with the fact that we would have had to pay the LNG income tax, as well as PST which mining and forestry do not have to pay.”

She said without a level playing field there would be no investment and no taxes to begin with, highlighting the fact that the U.S. currently has one LNG facility operating with another five under construction.

“We’re not winning the game right now and these measures will at least help us to stay on the field,” said Pierce.

“These are large projects and certainly you need to get through the permitting process, but the challenge for Canada has always been the high capital costs that come with building new infrastructure.”

She said it was difficult to judge how the measures would reduce the overall cost of the project, but that they would be important for LNG Canada’s effort to submit a competitive proposal for the Joint Venture Participants’ decision-making.

“Considering what we were up against relative to the LNG Income Tax Act, the electricity tariff and PST, these measures are very helpful,” said Pierce.

She applauded the provincial government, saying the measures announced were a direct result of Premier John Horgan tasking BC’s Energy, Mines and Petroleum Resources minister Michelle Mungall to evaluate the competitiveness of the LNG sector in B.C.

She said one of the last remaining hurdles for a positive FID are the federal government’s anti-dumping tariffs on the components required for the construction of LNG plants in Canada.

“We are waiting for the provincial government to do their due diligence on that and we’re hopeful for a good outcome,” said Pierce. “Meanwhile we are in the process of making a decision on our final engineering, procurement and construction (EPC) contractor next month.”

DoK mayor

Phil Germuth

District of Kitimat mayor Phil Germuth was in Ottawa along with six other B.C. mayors last week when Premier John Horgan announced the tax breaks for the LNG industry.

Germuth, along with the mayors from Dawson Creek, Fort St. John, Pouce, Terrace and Tumbler Ridge, were ironically in Ottawa to promote the development of an LNG industry in B.C. when the announcement came through. The news was relayed via a conference call from BC’s Energy, Mines and Petroleum Resources minister Michelle Mungall shortly before Horgan made his announcement.

“There was a lot of smiling and some hi-fives when the announcement came through,” said Germuth.

The group of mayors met with federal government representatives to impress on them how important the development of an LNG industry is to B.C., as well as to the broad-based support from communities that would be most affected by a positive FID.

“After the announcement we were able to relay to the federal government how the provincial government is doing their part to see that this project will get to a positive FID,” said Germuth.

“The federal government still has some work to do, especially on the Fabricated Industrial Steel Component issue, but they are certainly willing to work with LNG Canada and see what they can do.”

He thanked Horgan and his cabinet for ensuring that LNG Canada project could be competitive on a global scale for as much as the province could do.

MLA Ellis Ross

Skeena BC Liberal MLA Ellis Ross says he’s surprised but happy at the revenue concessions announced by the provincial government last week in hopes of convincing LNG producers to set up plants in B.C.

“After all these years with the NDP being among the harshest of critics with LNG, this wasn’t something I would have expected from a NDP government,” Ross said of taxation and other concessions which, in the case of front-runner LNG Canada at Kitimat, could cut provincial revenue expectations from $28 billion to $22 billion.

He even acknowledged that one item, exempting LNG Canada from paying the provincial sales tax on construction provided it decides to build by Nov. 30, isn’t really a concession because it calls for the company to pay the equivalent over 20 years once it starts producing.

“What I’ve always said, it doesn’t matter if it is the BC Liberals or the NDP, I’ve pushed for LNG,” said Ross.

He was also pleased the NDP will do away with the prospect of a LNG-specific tax regime as put into law by the previous B.C. Liberal government.

“What I worried about was the competitiveness of the province, are we competitive enough?” he said of other jurisdictions around the world which offer incentives to attract LNG developers.

Ross said he has every intention of voting in favour of government legislation to be introduced this fall to put into the force the changes announced last week.

“I will, but first I want to read the legislation before I vote for it,” said Ross in adding that he’ll want to know all of the details. “I really want LNG to go ahead.”

Ross said the province now needs to work on the federal government to eliminate the threat of tariffs on imported steel components that will make up large portions of LNG facilities.

Estimates place the tariff cost for LNG Canada alone in the neighbourhood of $1 billion.

“Imported steel. That’s the big one. The concessions are short term but in the long term, they need to get rid of that tax,” Ross said.

HNC chief cllr. Crystal Smith

Haisla Nation chief councillor Crystal Smith said Horgan’s announcement was an important milestone towards an operational LNG facility in Kitimat.

“Today’s announcement shows that the provincial government can make tough decisions despite threats from those in the minority, and will keep the interests of the majority of B.C. in mind,” said Smith.

She said the industry will create real opportunities for thousands of people “by providing good paying and long-term careers.”

“These steps towards developing an LNG industry also means utilizing our resources in a way which supports people here, rather than losing out to global competitors,” said Smith.