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A cryogenic LNG storage tank in Mt. Hayes, B.C. (CHAD HIPOLITO For The Globe and Mail)
A cryogenic LNG storage tank in Mt. Hayes, B.C. (CHAD HIPOLITO For The Globe and Mail)

B.C. continues to debate LNG tax rates Add to ...

Setting the tax rules for the province’s fledgling liquefied natural gas industry has turned into a more time-consuming and complex process than the B.C. government originally thought.

B.C. Natural Gas Development Minister Rich Coleman said on Tuesday that government officials are being sensitive to the need for globally competitive tax rates on exports of LNG.

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Mr. Coleman said consultations with companies that want to ship LNG abroad are winding down, and the government has a better appreciation for the need to nurture the nascent industry while reaping benefits for the province through energy taxation.

“I have never come across a file that is quite as complex as this,” he said in a conference call. “We got into pretty detailed conversations on all the technical aspects that affect the cost competitiveness worldwide.”

Mr. Coleman made the comments two days before Premier Christy Clark kicks off a trade mission to strengthen ties with Asian energy investors. More than 180 people will leave Vancouver on Thursday for Beijing. Other stops will include Seoul and Tokyo.

While Mr. Coleman indicated last month that details of the tax rates on LNG exports would be released by the end of November, he now says more time is needed to sort out a complicated fiscal structure that must take into account companies’ business models.

He emphasized that the tax details will be released long before companies make final investment decisions on their proposals to build multibillion-dollar LNG terminals. In one scenario, a fiscal framework would be in place by the end of this year and then details ironed out and publicly announced in next February’s provincial budget.

Several companies are aiming to make their decisions by the end of 2014.

The formula for tax rates will be crucial, but not the only component for companies to consider, said Geoff Morrison, manager of B.C. operations for the Canadian Association of Petroleum Producers.

“Certainty is always desirable, but so is getting it right,” he said. “If it takes a little longer, good. Getting it right is fundamentally important.”

LNG proponents are reviewing a broad range of issues such as taxation, constructing natural gas pipelines through challenging terrain, and building LNG export terminals, Mr. Morrison said.

At least 10 joint ventures have proposals for building LNG terminals near Kitimat, Prince Rupert and Grassy Point, but industry experts say there is only room for three or four projects at most.

Follow on Twitter: @brentcjang

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