Premier Christy Clark is building her BC Liberal election platform on plans for spending revenues from an industry – liquefied natural gas – that is still on the drawing board.
Ms. Clark used the annual Throne Speech on Tuesday (click for full text) to promise the creation of a B.C. Prosperity Fund, which would begin, in 2017, to collect some of the billions of dollars in revenue that her government expects will flow from the construction of at least five LNG plants.
“We are at a crossroads now – this is when the decisions will be made about whether or not we seize this incredible opportunity for our province, or whether we turn away from it,” Ms. Clark told reporters.
This is the last Throne Speech before the BC Liberal government faces the polls on May 14, and was crafted to telegraph the party’s focus for the coming campaign.
The B.C. Prosperity Fund would be primarily devoted to reducing the government debt, although the Throne Speech hinted that it could also be used to eliminate the provincial sales tax. Ms. Clark suggested the fund could wipe out the provincial debt in the span of a decade.
It is similar to Alberta’s Heritage Fund, established in 1976, in its intent. “This resource belongs to the people of British Columbia, both here today and those to follow,” the Throne Speech stated.
The Premier said her intent is to put clear limits on how the benefits will be spent.
“If you just grow government, you will eventually get yourself in trouble,” she said.
“We need to set some rules around the Prosperity Fund to make that difficult or impossible to do.”
The fund would receive a portion of royalties collected on natural gas used for LNG, plus a share of corporate income taxes collected from the industry.
As well, the government proposes a new LNG tax designed to be competitive with the province’s chief rival in the market, Australia, which has an LNG tax and a more costly royalty regime.
The B.C. government retained Ernst & Young to compare the jurisdictions and found that the current provincial tax regime is 33 per cent lower than Australia’s.
The government first signalled last November that it was looking at a new LNG tax, but in recent months seemed to back away from the plan. In a press release on Tuesday, however, the intent seemed clear: “By introducing an additional tax applicable to LNG in B.C., we can maximize the benefits to British Columbians while still remaining competitive.”
Ms. Clark stressed that no decision on a new tax has been made yet.
“I’m not going to negotiate that with you,” she told reporters.
At a time when the prospective LNG industry is seeking tax relief, there is little enthusiasm for more taxes.
“None of the LNG proponents has made a final investment decision. They are going to take some time to analyze where the government is going,” said Geoff Morrison of the Canadian Association of Petroleum Producers. “Any signal to increase costs and reduce competitiveness is going to cause investors to take a good look at what it means.”
He said the government’s tax analysis is based on the entire sector, from extracting natural gas from the ground to the export terminals.
Investors look at LNG processing as a discrete industry and, by that measure, B.C. is already at a competitive disadvantage, he said.
The BC New Democratic Party is supportive of creating an LNG industry, but NDP Leader Adrian Dix mocked the plan, noting that the government’s projections of revenues a decade from now are absurd, given that it has been wildly off just in the current fiscal year on natural gas revenues.
According to the province, the new tax could produce between $130-billion and $260-billion over 30 years.
However, more details are expected to be included in the B.C. budget when it is tabled next Tuesday.