B.C. legislature approves 25-year fiscal terms for LNG projects

(Financial Post; Canada; July 23) -The British Columbia legislature late evening July 21 passed the Liquefied Natural Gas Project Agreements Act, removing one of the final conditions to construction of the first LNG plant in the province. The bill means that the Pacific NorthWest LNG project can now count on a 25-year fiscal deal that protects it from targeted tax increases. The other conditions are outside the province’s control: Federal environmental review, First Nations and the global LNG market.

Malaysia’s Petronas-led group wants to build a multibillion-dollar LNG plant and export terminal on Lelu Island, near Prince Rupert, B.C. Premier Christy Clark recalled the legislature for an extraordinary summer session to pass the law. After a week of debate, the bill passed with 43-27. The opposition New Democrats Party wanted the province to drive a harder bargain, and the Green Party member said the LNG industry “cannot coexist” with B.C.’s greenhouse gas reduction targets.

B.C. Finance Minister de Jong said proponents wanted long-term assurance over fiscal terms. The agreement provides four areas of protection: LNG income tax, natural gas development tax credit, carbon tax, and key features of greenhouse gas regulations. Proponents “wanted to know … they and their industry wouldn’t be singled out for discriminatory tax policy and in a couple of very specific areas, we provided in the agreement a mechanism to ensure that that wouldn’t happen,” de Jong said. The agreement will be a template for other LNG projects planned for the B.C. coast.