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British Columbia B.C. touts LNG's critical importance to provincial economy

The British Columbia Legislature in Victoria

Darryl Dyc/The Canadian Press

The "really hard" negotiations with industry around a new liquefied natural gas tax package are getting started, B.C. Premier Christy Clark says. With the legislation expected to be introduced in just three weeks, the Premier said these talks are critical for securing a new industry that stands between economic growth and decline for British Columbia.

"There is a lot at issue at the negotiating table at the moment. We are getting down to the short strokes of it," Ms. Clark told reporters. "The really hard part is coming right now for both sides."

Ms. Clark's government outlined the fall agenda for the legislature on Monday, but last year's sweeping election campaign promise of a "debt-free B.C." and a trillion-dollar industry seemed muted in the Throne Speech. "This is a chance – not a windfall," Lieutenant-Governor Judith Guichon read. "It will not be simply given to us, but achieved after a lot of hard work."

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The province has yet to secure any final investment decisions for LNG facilities and has been under fire from one of its leading proponents, Malaysia's state-owned energy company Petronas, for taking too long to put together a competitive tax and regulatory regime.

Petronas set the tone for Monday's Throne Speech with an announcement that the company's plans for a $36-billion investment in LNG will be delayed by a decade or more if the company isn't happy with the package that will be unveiled in the second half of October.

Ms. Clark told reporters that Petronas is just one of 15 potential LNG investors the province is courting right now. "There are other, larger projects that are also hurtling down the track toward a final investment decision," she said. "I'm really hopeful that we'll get five of the 15."

But John Horgan, the Opposition Leader, said Ms. Clark has put those ambitions at risk by overpromising voters during the 2013 election campaign. The industry is supposed to create 100,000 jobs and give the province the ability to pay off its fast-growing debt, which will reach $69-billion by the time any LNG tax money might start to roll into the province's treasury.

"We have given away our bargaining power when it comes to liquefied natural gas; everyone in this sector knows the Premier is way out on a branch," the New Democrat Leader said. "They made outrageous commitments and they can't deliver … and that makes it extremely difficult to get the best deal for B.C."

Last spring, the province outlined a framework for a two-tier LNG income tax that would rise up to 7 per cent, with the details to be finalized after "consultation" with industry. Negotiations also involve the provincial sales tax, the B.C. carbon tax and the federal tax on capital costs. As well, the province's environmental regulation of the industry has proven to be a sticking point. Petronas is facing delays in its application for an environmental certificate at the Prince Rupert location for its proposed LNG facility.

The B.C. Liberal government maintains that LNG is critical to the province's economy. "This is our turning point," Ms. Guichon read in Monday's Throne Speech. "We must choose whether to grow or to decline."

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The province's natural gas industry has relied on North American markets for decades, but a glut of shale gas in the U.S. means that market "has dried up and is never coming back," the speech warned. The LNG industry, if it is built, would open up markets in Asia.

Ms. Clark has been touting the economic benefits of LNG since the election, but in recent months has started to address the environmental impact of an industry that produces significant greenhouse gas emissions. A single LNG manufacturing plant would create a noticeable increase in the province's total GHG footprint.

On Monday, the government described LNG not as a fossil fuel, but as "the world's cleanest-burning non-renewable resource." Selling it to China would displace dirtier coal power, providing "an opportunity to dramatically reduce air pollution in the world's biggest emitter of greenhouse gases."

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