THE BLOG

The Future of LNG? Sold to the Lowest Bidder in the Back Row

05/30/2015 02:16 EDT | Updated 05/29/2016 05:59 EDT
BC Gov Flickr

You know that uneasy feeling you get in your gut when you realize you might be getting played? Well, May 20 could turn out to be one of those days for B.C.

World's apart -- literally and figuratively -- it was a busy day on the LNG (liquified natural gas) front.

In Vancouver, with incredible fanfare, a 220-word memorandum of understanding was signed between British Columbia and Pacific Northwest LNG.

Gotta love this line of it: "Nothing in this MOU creates legal or financial obligations or liability on the Province or the Proponent." Glad that's cleared up.

Down Under -- 13,200 kilometres away - at the Australian Petroleum Production & Exploration Association conference in Melbourne - the tone was more sombre.

Some might say a tad threatening in a shakedown sense of that word.

Roy Krzywosinski, managing director of Chevron Australia, was speaking at the conference and laid out some pretty blunt views on the future of the LNG industry in that country.

Krzywosinski reminded delegates that "there was a potential $US100 billion waiting in the wings with the associated economic benefits if the next wave of investment could be attracted."

But -- there's always a but -- Australia could miss out: "As many of us forewarned, the second wave of LNG investment for Australia -- which promised to deliver further benefits -- is at serious risk of not happening, at least in the foreseeable future."

Ever so thoughtfully he laid out some of the stumbling blocks standing in the way of Australia securing that investment, which may or may not be the same $US100 billion in investments that B.C. is trying to attract.

Those obstacles included: too much government regulation, inflexible industrial relations systems, government policies that don't support investment, high labour costs, and -- this is where B.C. really needs to sit up and take notice -- high taxes.

It was an interesting observation on his part, because 13,200 kilometres away in Vancouver on the very same day (give or take the international dateline), the B.C. government said its deal with Pacific NorthWest LNG "is consistent with similar pacts in Australia."

Effectively, the B.C. government has lowered its tax rates to be competitive with Australia, even though that country's LNG industry is complaining bitterly that tax rates there are too high, among a fairly long list of beefs they have with the Australian government.

This doesn't bode well for the B.C. government signing investment deals in the future that are longer than 220-words. It also causes that uneasy feeling that we might be getting played.

Then there's that little matter of what to do if an industry player has a different interpretation of various tax rules.

The Australian Tax Office has taken Chevron Australia to court alleging that the company was engaged in a complex scheme to "use a series of loans and related party payments worth billions of dollars to slash its tax bill by up to $258 million."

The company draws issue with the allegations. However, it could be forced to pay the Australian Tax Office up to $AUD322 million including penalties.

Earlier this month, Sydney Morning Herald business columnist, Michael West, called Chevron: "a hornswoggler of the highest order" over its tax dispute with Australian authorities. Evidently, hornswoggler isn't a complimentary term Down Under.

There's also those "high labour costs" in Australia.

Turns out Roy Krzywosinski is quite a chatty Chevron executive.

In 2008, he spoke at the American Chamber of Commerce in Australia Business Briefing Breakfast on The Consequences of Complexity: Energy and the Environment in the 21st Century.

One line jumps from the 33-pages of that speech: "Perhaps it is only just and proper that Chevron Australia -- as well as other energy companies in this region -- has a multinational workforce."

That's a nice way of saying migrant workers. It may also help explain why six years later, the B.C. government and China signed a memorandum of understanding to allow temporary foreign workers into the province to meet labour demand in the event a LNG project actually gets past a 220-word MOU.

And just when you thought that promised prosperity fund was about to be snatched from the jaws of the LNG industry, a new twist or two emerges.

ALSO ON HUFFPOST:

B.C. LNG Facts