British Columbia is offering new conditions and tax incentives for liquefied natural gas projects in the province in a move to attract investment that could put the province’s minority NDP government at risk of losing the Green party’s support.
Premier John Horgan made the announcement Thursday ahead of a final investment decision on LNG Canada’s $40-billion project, which would include building a natural gas pipeline from northeast B.C. to a new terminal in Kitimat.
“Potential opportunity is extraordinary. Potential risks are significant,” Horgan said. “I believe LNG Canada is working diligently to address those risks and I believe it’s the responsibility of the government to make sure we’re working to develop those opportunities for all British Columbians.”
Under the new fiscal agreement, LNG projects will see relief from provincial sales taxes, subject to repayment in the form of an equivalent operational payment. They will be subject to new greenhouse gas emission standards and pay general industrial electricity rates consistent with other industrial users in B.C. The framework will repeal an LNG income tax introduced under the B.C. Liberals.
Horgan said the province will review LNG projects using four conditions. All LNG projects should guarantee a fair return for B.C.’s natural resources, guarantee jobs and training opportunities for British Columbians, respect and partner with First Nations, and meet the province’s climate commitments, he said.
In January, Green party Leader Andrew Weaver threatened to bring down the minority NDP government if it continued what he described as the “LNG folly,” saying the province couldn’t meet its greenhouse gas emission targets if it pursues the LNG industry.
On Thursday, he said the three-member Green caucus will wait until the fall to see if the NDP’s new climate plan finds a way to meet those targets of 40 per cent below 2007 levels by 2030 and 80 per cent below those levels by 2050.
“We want to see what their plan is. And frankly, we’re very, very skeptical that you can even have such a plan that includes adding eight megatonnes of greenhouse gas emissions,” Weaver said.
He said the Greens won’t vote in favour of any legislative measures that support the new LNG framework and also wrote a letter to LNG Canada, warning that the proposed framework may violate his party’s power-sharing agreement with the NDP.
In the past year, companies have pulled the plug on three LNG projects proposed in B.C., including the $36-billion Pacific Northwest LNG pipeline project.
LNG Canada, which includes partners Shell, PetroChina, Korea Gas and Mitsubishi, said in 2016 that its final investment decision for the Kitimat facility would be delayed because of poor global markets.
Those markets are turning around, says Shell’s 2018 LNG outlook. It found the market has defied expectations, growing by 29 million tonnes in 2017.
“Based on current demand projections, Shell sees potential for a supply shortage developing in the mid-2020s, unless new LNG production project commitments are made soon,” it said.
Susannah Pierce, director of external relations for LNG Canada, says the new framework levels the playing field for the natural gas industry by removing barriers like the LNG income tax.
“In our case, that removes substantial complexity. It would have been very difficult to administer,” Pierce said.
LNG Canada hopes to make a final investment decision in the second half of the year, she said, but nothing is set in stone.
“There’s a great next wave for LNG coming in all parts of the world, particularly in Asia as it looks to reduce CO2 emissions, and we really want to be a part of that,” she said. “So from our perspective, the time to move forward is now.”
LNG Canada describes its project as the “cleanest LNG” with the lowest carbon intensity of any LNG export facility in the world. It says its committed to working with all three levels of government and industry to meet greenhouse gas reduction commitments under the Paris Agreement.
The Wilderness Committee disputed the idea of clean LNG, pointing to estimates from the Pacific Institute for Climate Solutions and the Pembina Institute showing the annual carbon dioxide emissions from the LNG project would exceed 9.6 megatonnes by 2050. That’s 80 per cent of British Columbia’s total emissions target of 12 megatonnes annually by 2050.
“From escaped methane at the drill sites to the massive carbon emissions required to cool the gas, to more escaped methane on the long trip across the ocean to Asia and then the emissions from burning the gas: It all adds up to a big bad climate change. How would B.C. ever meet our climate commitments with this LNG plant chugging along?” the environmental organization said in a news release.
The Business Council of British Columbia said the framework will provide more regulatory certainty and important fiscal incentives for potential investors across industries.
LNG development was a centrepiece of the B.C. Liberal party’s 2017 election campaign.
Liberal Leader Andrew Wilkinson said the party had worked out a package with the LNG income tax that was designed to make the industry viable for both British Columbia and the industry. He said he was surprised the NDP would discard that in a “fairly desperate attempt to get good economic news.”
“The NDP have been raising taxes across the board for British Columbians and now they’re giving tax breaks to an industry that they firmly opposed for years. It’s an industry we support in principle, but we’re going to have to see the NDP proposal in detail before we ask for amendments or decide how to vote on it,” he said.
The B.C. government’s LNG framework also provoked reaction from Alberta, which it is locked in a dispute over on the expansion of the Trans Mountain pipeline from Edmonton to Burnaby, B.C.
Alberta Energy Minister Marg McCuaig-Boyd accused B.C. of “blatant hypocrisy” for backing the LNG industry with tax incentives while blocking its provincial neighbour from transporting oil to its markets.
“Let me be clear, I support LNG and I support B.C.’s efforts to develop their energy industry,” she said.
“On the one hand, they’re willing to increase emissions in their own backyard, but on the other, they’re trying to stop Alberta from diversifying our markets for products produced under an emissions cap.”
B.C. has “lost credibility” with its position, she said.
“B.C. can’t have it both ways. You can’t build your own energy industry while trying to block Alberta from developing ours. It’s not fair, it’s not Canadian, and it’s got to stop.”