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B.C. legislature to debate law on 25-year LNG deal

07/13/2015 08:00 EDT | Updated 07/13/2016 05:59 EDT
The B.C. legislature will hold a rare summer sitting Monday to debate an unprecedented 25-year liquefied natural gas agreement projected to be the cornerstone of the province's financial future.

The government plans to pass legislation enabling the $36 billion deal with Pacific NorthWest LNG, a consortium led by Malaysian energy giant Petronas.

The consortium wants to build an LNG export terminal near Prince Rupert. The agreement would protect the business from tax increases made specifically to target the LNG industry.

'A brave move'

Critics claim the rules would tie the hands of future governments to regulate an industry whose impacts have yet to be tested.

But supporters say the agreement allows B.C. to leverage a valuable asset in the hunt for international business: stability.

"I think this is a brave move," said Ron Loberec, an energy expert with Deloitte and Touche.

"It's made even braver by the fact the government of the day may not enjoy the benefits."

Under the terms of the 140-page agreement, B.C. would compensate the consortium if future governments raise income rates for LNG operations, add carbon taxes that specifically target the industry, reduce natural gas tax credits or make changes to rules on greenhouse emissions that financially harm the industry.

The company could seek compensation of $25 million a year or more.

Loborec says the agreement is necessary to provide Petronas the stability needed to invest billions of dollars in a long term project. 

Critically, he says, the deal wouldn't leave a "poison pill" for future governments because it does not affect changes to corporate or income taxes.

But Matt Horne, associate regional director for B.C. at the Pembina Institute, believes the deal could be bad for the environment.

"Essentially, what they're doing is locking in climate policy so that future governments have limited ability to strengthen it," he said.

"We don't make that promise for individuals or any other sector in the economy."

Horne notes that the length of the deal could see major environmental changes and climactic challenges that can't be foreseen at this point.

A blueprint for the future?

In releasing the details of the agreement, B.C. Finance Minister Mike de Jong described the project as the single-largest private sector investment in the province's history.

He said the project should contribute more than $9 billion into provincial coffers in its first decade and create 4,500 jobs.

The opposition NDP has said the deal is a good one for the company, but not good enough for British Columbians because it lacks firmer commitments on jobs and training.

The purpose of the special session is to debate the agreement and pass legislation which would enable the government to enter into the deal. The agreement would then serve as a blueprint for future projects.

The project faces a number of hurdles including opposition from native groups who have vowed to fight it in court.

In May, the Lax Kw'alaams Band rejected a $1 billion deal with Pacific NorthWest LNG  to build a pipeline and terminal in Prince Rupert.

On Monday, those opposed gained another supporter when the Gitga'at First Nation announced it would launch a judicial review of the LNG project, claiming it had been excluded from the provincial environmental assessment. The project is still awaiting federal environmental approvals.

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