B.C. legislature convenes next week to debate LNG project deal

(CBC News; July 6) - The B.C. government has agreed to compensate a major liquefied natural gas project if the province raises taxes on the LNG industry during a 25-year period after plant start-up. Finance Minister Mike de Jong released details July 6 of the deal it reached in May with Pacific NorthWest LNG, a consortium led by Malaysian energy giant Petronas which wants to build an LNG export terminal near Prince Rupert. The legislature will convene next week for a rare summer session to debate the deal.

Under the terms of the agreement, B.C. has agreed to compensate the LNG consortium if taxes on the industry are raised, natural gas tax credits are reduced or new carbon taxes target the LNG sector. The agreement does not protect the company from increases in provincial sales and corporate taxes. De Jong said the deal gives the company the certainty it needs to make a final investment decision.

"It provides a measure of stability that says to them, here are the rules of the game that will govern this industrial activity within this jurisdiction for the term of the agreement and they can bank on that and know those rules are not likely to change," he said. Opposition party member Bruce Ralston said it's a good deal for the company, but not good enough for British Columbians. The project still faces a number of hurdles, including opposition from aboriginal groups that have vowed to fight it in court.

The key determination would be if a tax or regulatory change were to increase costs to the LNG operator by $25 million or more in a year or by a cumulative $50 million over five years. The province would be contractually obliged to “make the proponent whole,” offsetting those costs directly or via deductions from provincial taxes. If the parties could not agree on compensation, the dispute would be submitted to commercial arbitration.