BRITISH COLUMBIA

Emissions control and LNG tax coming for B.C. fall sitting: finance minister

10/01/2014 04:00 EDT | Updated 11/30/2014 05:59 EST
VICTORIA - The issue of a liquefied natural gas tax is set to heat up debate during British Columbia's fall legislative session, but the potentially controversial issue of emissions controls is also part of the package.

Finance Minister Mike de Jong said the Liberal government plans to introduce two separate pieces of legislation focusing on LNG — taxes and emissions reporting.

De Jong said the tax legislation will be tabled within the next two weeks and the emissions reporting bill is due in late October.

He said the primary focus of the legislative session starting Monday will be the introduction and debate of the proposed LNG laws. A template of a proposed two-tier tax was introduced in last February's budget.

Premier Christy Clark has sold the LNG industry as a potential generator of a trillion-dollar economic opportunity that could create up to 100,000 jobs. She promised to devote royalties from the industry to create a prosperity fund that would fuel projects and wipe out the province's debt, currently at more than $60 billion.

There are more than a dozen LNG projects in the proposal stages in B.C., but the companies have yet to make their final decisions on investment.

Several major companies, including Malaysian energy giant Petronas, which is part of a multibillion-dollar LNG proposal near Prince Rupert, have said they need to see the government's taxation plan.

Clark met with Petronas chief executive officer Shamsul Abbas on Tuesday, with officials describing the meeting as "cordial."

"These are sizable investments with a lot at stake for the citizens of B.C. and the proponents and we want to get it right," de Jong said in an interview.

He said much of the negotiations have focused on finding a tax figure that is good for the industry and provides benefits to the province.

"There's certainly been discussion around the overall cost structure," he said.

"We're also mindful of who owns the resource that lies at the heart of this process. That's the citizens of B.C. They deserve a fair return as well."

An oil and gas industry analyst said B.C.'s tax announcement is being eagerly awaited by the energy industry.

"You really don't get total certainty until you get certainty in all of the financial drivers," said Deloitte's Calgary-based oil and gas analyst Geoff Hill. "The sooner the B.C. government can come up with a very predictable and concrete tax rate, whether it's a carbon tax, an LNG tax or an income tax, I think that'll be positive."

He said companies can crunch their numbers and make investment decisions once the tax announcement is made.

"A company is interested in knowing what the federal tax is, the municipal tax, the provincial tax, the carbon tax, the environmental tax. They have to add all those up to their cost of doing business in the region. If one or more of those are uncertain then it's not good."

He said a low, predictable and consistent tax rate is what industry wants.

De Jong said calls by industry for tax relief are expected.

"If you ask a proponent what level of taxation they would like to pay, the most honest among them would say zero," de Jong said. "Folks are going to advocate in the best interests of the organization they represent. The organization we represent is the taxpayers of British Columbia."

De Jong said that an emissions-reporting scheme would also be legislated, but he refused to elaborate.

The Environment Ministry said in a statement that the "government is working to ensure any LNG facilities built in B.C. are the cleanest in the world. The province plans to bring legislation forward in the fall to make this a reality."

In July, Clark told an international conference at Whistler that selling LNG from B.C. to China will reduce greenhouse gas pollution worldwide because it will lessen China's dependence on coal as an energy source.

Clark said she remains committed to meeting B.C.’s legislated greenhouse gas reduction targets to one-third less emissions by 2020.

Environmental groups say plans to allow the proposed LNG plants to run on natural gas rather than electricity will increase greenhouse gas emissions at home.

Pembina Institute spokesman Matt Horne said the government's environmental component of the LNG legislation must address carbon pollution at all levels of the process — from terminals, to pipelines and the extraction of shale gas.

"I think this legislation will be a good test of how serious they are," Horne said.