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We now know how much time British Columbia has to either turn its liquefied natural gas (LNG) dream into reality, or suffer a rude awakening. It's seven months.

B.C. Premier Christy Clark on Monday signed a letter of intent with Malaysian state energy company Petronas, in which both sides agreed to do things that, one could argue, they were doing anyway. The province will clarify the tax structure it plans to place on LNG; it had already said it would introduce LNG tax legislation in the fall. Petronas has pledged to work toward a formal deal to develop its $11-billion project by Nov. 30; the company and its partners had already said they would make their investment decision before the end of the year.

The deal signing was, in many respects, a PR event to kick off the Premier's visit to Malaysia. But it also underlined that until the B.C. government nails down an LNG tax structure that developers of the numerous proposed projects can live with, the province has no LNG industry. The government is going to set that taxation bar together with Petronas – and it's now wedded to doing so by Nov. 30.

The province has, indeed, already proposed an LNG tax structure – a two-tier system, introduced in its February budget, that would charge 1.5 per cent on profits while the operator is still deducting its immense capital expenses from developing the project, and 7 per cent on profits once those expenses have been fully deducted. The government says this proposed structure is competitive with the tax regimes for LNG in Australia and several U.S. states that it considers B.C.'s key competitors; the industry has argued that once you consider other B.C. taxes (natural gas production royalties, carbon tax), another 7 per cent is too steep.

The government absolutely left the door open to lower the tax hit, by saying that nothing would be set in stone until the fall. Still, there's little doubt the province can see dollar signs dancing before its eyes. A recent Ernst & Young report, commissioned by the government, projected that LNG could generate $8-billion to $14-billion a year (based on 2012 dollars) in tax and royalty revenues.

This is certainly a rough estimate . It also covers an awful lot – not just the proposed LNG tax itself, but corporate and personal income taxes and other royalties generated from all aspects of the business, including upstream natural gas exploration and production, as well as the pipelines to bring the gas to the LNG plants.

Most of this won't come directly from the proposed LNG tax regime, however. Calgary-based energy research firm Ziff Energy estimated that the tax plan would work out to roughly 50 cents per million British thermal units. Based on the Ernst & Young study's base-case assumptions of annual LNG production, this implies about $2-billion a year.

It's nothing to sneeze at, but it's also only a small slice of the total revenue potential the province envisions from a successful LNG industry. The government can ill afford to get too greedy on its direct LNG tax take, and risk having its citizens lose out on the indirect revenue by chasing developers to more tax-friendly jurisdictions .

And Petronas is critical. B.C. is already behind many other jurisdictions – most notably Australia – in getting LNG development moving. The Petronas-led Pacific NorthWest LNG project has emerged as the most promising project to break ground. Getting one large project started is seen as a critical catalyst to natural gas production and pipeline development that will enable the entire LNG industry to expand.

But only if British Columbia can fine-tune its proposed tax structure to keep the province as an attractive choice. The letter of intent puts the ball squarely in provincial legislators' court.