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British Columbia Announces Tax Breaks For Gas Investors

by Mike Godfrey, Tax-News.com, Washington

23 March 2018


British Columbia is to offer a provincial sales tax (PST) exemption to a proposed new liquefied natural gas (LNG) project.

The Government is in discussions with LNG Canada on a project that, if approved, would be the largest private-sector investment in the province's history. It would see the construction of a natural gas pipeline from northeast British Columbia to Kitimat, where a new terminal would process and ship LNG to Asian markets.

The Government has announced a new fiscal framework for LNG that is designed to put natural gas development on a level playing field with other industrial sectors.

Under the new framework, the Government will exempt LNG Canada from the PST on the construction of its initial proposed facility. This will be conditional on LNG Canada entering into a separate agreement with the province, whereby LNG Canada will pay annual operating performance payments over 20 years, with the total amount to be equivalent to what LNG Canada would have otherwise paid in PST during the initial facility construction period.

This framework will be available to all proponents constructing significant manufacturing facilities in the province.

The Government will abolish the existing LNG income tax regime, which it said is not the most efficient or effective tool for generating investment in the province and is cumbersome to administer. The Government intends to instead utilize a number of other tax and royalty measures under the new fiscal framework, to ensure that the province gets a fair return from its natural gas resources.

British Columbia Premier John Horgan said: "No premier or government can dismiss this kind of critical economic opportunity for the people of British Columbia."

"The LNG Canada proposal has the potential to earn tens of billions of dollars and create thousands of jobs for British Columbians over the life of the project."

The Government expects the project to fit within the goals of the province's climate change plan and its legislated greenhouse gas reduction targets.

LNG Canada is a joint venture company comprised of four global energy companies – Shell, PetroChina, KOGAS, and Mitsubishi Corporation. The company was formed in 2011. A Final Investment Decision was planned for late 2016, but LNG Canada said that the global energy market and the affordability of the project in that context prevented that decision being taken. The company's website said that the project has been delayed but has not been cancelled.

TAGS: environment | tax | investment | sales tax | tax incentives | energy | oil and gas | manufacturing | Canada | tax breaks | construction

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