Skip to main content

In the foreground is Lelu Island, site of an LNG export terminal proposed by Pacific NorthWest LNG.Brent Jang/The Globe and Mail

A liquefied natural gas consortium would be entitled to compensation if future B.C. governments increase energy and environmental taxes.

On Monday, B.C. Finance Minister Mike de Jong released the 140-page project-development agreement the provincial government signed with Pacific NorthWest LNG, which is led by Malaysia's state-owned Petronas.

The agreement would give the joint venture's Asian backers some protection from unexpected increases in taxes. Mr. de Jong said it would provide stability and certainty for Pacific NorthWest LNG if it gets final approvals to export liquefied natural gas from the West Coast to Asia.

Should future governments raise income tax rates for LNG operations, reduce tax credits for producing natural gas, add carbon taxes that target the LNG sector or make changes to the rules on greenhouse gas emissions that cause the company financial pain, it could seek compensation of $25-million a year or more and would likely be successful.

Pacific NorthWest LNG signed the development deal in May with the B.C. government.

The B.C. Liberals, led by Premier Christy Clark, called LNG the province's economic salvation during the 2013 election campaign. Backers of Pacific NorthWest gave conditional approval to the venture last month, subject to receiving a federal environmental certificate and having the B.C. Legislature ratify the project-development agreement. The B.C. Legislature will be recalled for a rare summer session, beginning next Monday, with the tabling of an LNG bill that would ratify the deal and make it a template for other proposals. "We have come a great distance in a relatively short period of time to be where we are," Mr. de Jong said during a conference call from Victoria.

The B.C. LNG Alliance, which represents seven major projects, welcomed Mr. de Jong's announcement. "LNG projects are large undertakings that require tens of billions of dollars in capital investment, and therefore require certainty with respect to the fiscal, legal and regulatory framework in British Columbia," alliance president David Keane said in a statement.

The B.C. Opposition NDP criticized the agreement, saying it is a good deal for the foreign companies, but not for taxpayers.

Earlier Monday, the Gitga'at First Nation said it wants a judicial review of the B.C. government's consultation process, which excluded the aboriginal group from being fully recognized in a provincial environmental assessment of Pacific NorthWest.

Gitga'at leaders say they are seeking to have B.C. Supreme Court examine their aboriginal rights related to the planned $11.4-billion LNG terminal to be built on Lelu Island, near Prince Rupert on the province's north coast.

Gitga'at chief councillor Arnold Clifton said his group is asking B.C. Supreme Court to compel the B.C. government to add the Gitga'at to the list of Tsimshian First Nations entitled to full consultation by the B.C. Environmental Assessment Office on the Pacific Northwest project.

Last November, two B.C. cabinet ministers granted a provincial environmental assessment certificate to Pacific NorthWest. The B.C. Environment Ministry said it would be inappropriate to comment before the B.C. Supreme Court rules.

The Lax Kw'alaams, one of five Tsimshian First Nations consulted last year during the provincial environmental review, has opposed the energy export proposal. Two groups, the Metlakatla and the Kitselas, signed impact benefit agreements with the joint venture in December. Two others, the Kitsumkalum and Gitxaala, have not yet announced their decisions.

The LNG project remains under a lengthy federal review by the Canadian Environmental Assessment Agency. The federal regulator temporarily halted its assessment on June 2 because it requires more information from project officials about the potential impact that building an export terminal will have on juvenile salmon habitat in Flora Bank.

The proposed Lelu Island terminal site, which has forested areas spread over bog deposits, would be next to Flora Bank in the Skeena River estuary.

B.C. has received 19 proposals for LNG operations, although industry experts say only three or four terminals can become reality due to fierce global competition to export to Asia.