BC Liberals to release LNG tax details on Oct 21


#1

The BC Liberals will reveal the much anticipated LNG tax package, tomorrow Oct 21. This is likely to be a big week for Prince Rupert based projects, as we will have a ton of commentary later in the week I am sure one what these new tax rules mean in regards to PNW LNG making a final investment decision, in addition to the other major projects by Woodside, BG Group ect.

Today they discussed how they are going to control greenhouse gas emissions from LNG projects and the associated financial measures associated with that.

theglobeandmail.com/news/bri … e21178932/


#2

Whatever they announce, it has been rubber-stamped and approved by Petronas already.


#3

theglobeandmail.com/report-o … e21197502/


#4

The Liberals have reduced the tax rate from 7% to 3.5%…it has also promised a reduced corporate tax rate from 11% to 8% for LNG companies that make final investment decisions. Kicks in Jan 1, 2017. The tax rate will rise to 5% in 2037.

For a medium sized LNG project this tax will equal $800 million in tax revenue over a 10 year period (this is reduced from the $1.5 billion that was proposed earlier in the year). That amount does not include PST, royalties or corporate tax. Add those in and 1 LNG terminal will be contributing $8.1 billion to the provincial economy over a 10 year period.

CAPP is already saying the tax regime is very competitive, favourable and is likely to be met very positively by potential LNG investors.

Sounds like this going to be good news in the end for Prince Rupert & Kitimat.


#5

Time Columnist Article

Assume Petronas decides it can live with the final version of B.C.’s liquefied natural gas tax regime and pushes the green light on its massive LNG plant near Prince Rupert.

Construction would start on a four-year project to build two processing plants, an export facility and a 900-kilometre pipeline to northeast B.C. It would be an $11-billion build and bring 4,500 workers at the peak. It’s just one of seven such projects being contemplated in the area.

Is Prince Rupert ready for this?

The city’s chief financial officer, Corinne Bomben, briefed a committee of MLAs recently and the answer seems pretty clear. The place would be swamped.

Coping with a major pulse of activity after many years in the doldrums would put enormous pressure on a community that has been just making do with aging infrastructure for years. She said there are some gaps between what the city offers in services and what the proponents need.

She offered a quick run-through of the city’s infrastructure. The water comes from a 100-year-old dam piped through an equally old supply line. Every component of the system is past its expected life cycle and it would take $12 million to upgrade it.

The sewage system dates back to the early 1900s and discharges into the harbour with almost no treatment, a scenario familiar to Victorians. Ottawa is demanding a treatment plan and the early estimates are up to $150 million.

The city has four traffic bridges and three of them are wooden. “The bridges are on borrowed time,” she told MLAs. The majority of the roads are rated in poor condition, over half are more than 25 years old. Retaining walls are a common feature due to geography, and many no longer meet code requirements. Cost of an overall road upgrade is pegged at $85 million.

The landfill is maxing out and it will cost $7 million to expand it, which needs to be done in the next five years.

The potential LNG hyper-boom could create huge fly-in, fly-out construction traffic, even if only one or two projects go ahead.

The airport was built on Digby Island and the only access is a city-owned ferry. It runs to a single-lane steel ramp at the dock. The system was built in 1959 and now has a reduced weight limit due to its age and is in constant need of repair. The 12-car ferry needs an upgrade or replacement.

The cost of improving the air link is put at $25 million.

That’s $279 million in spending requirements on the near- to mid-term horizon to address deferred-maintenance challenges.

The total doesn’t include anything for housing, another principal concern in a town rife with renovictions.

An LNG plant would bring some tax revenue, but the city isn’t expecting a bonanza. Tax rates on port lands were capped in 2004 to guard against municipalities gouging industries.

Bomben told MLAs the tax regime is a challenge because the nature of the developments is that their assessable value declines.

“A capped taxation rate on a declining value results in a decreasing revenue stream to the city,” she said. And all the major industrial properties in Prince Rupert qualify for the cap. (Petronas’ proposal is outside of the city limits.) The B.C. government provides compensation grants to affected municipalities, but Bomben said it doesn’t make up the amount of subsidization by the remaining tax classes.

The result is that the tax burden shifts to residents and businesses. Since the population has declined by several thousand over the past 20 years, the burden is significant, she said.

LNG plants are not specifically covered by the now-permanent cap on port tax rates. But Natural Gas Minister Rich Coleman warned northern municipalities not to “go crazy” on industrial tax rates at last month’s Union of B.C. Municipalities convention and suggested to the Vancouver Sun some kind of limit on municipal taxes will be included in the upcoming LNG tax legislation.

Divvying up the tax take from prospective LNG plants is a balancing act that’s unlikely to leave all the host communities happy.

lleyne@timescolonist.com


#6

That is a very interesting article. Everyone in Rupert knows that the infrastructure deficit is a huge problem, but it makes for some rather bracing reading when the various issues are compiled so concisely with price tags.

Terrace City council raised similar issues soon after Kitimat was identified as a possible location for LNG. They pointed out the inequity of receiving no tax revenue but having to deal with increased infrastructure and services costs. Since then the Kitimat-Stikine municipal governments have formed the Northwest BC Resource Benefits Alliance to lobby the provincial government.

Meanwhile, what has the current Mayor and council in Rupert been doing to raise these issues with the Province? Not much comes to mind.


#7

[quote=“BTravenn”]That is a very interesting article. Everyone in Rupert knows that the infrastructure deficit is a huge problem, but it makes for some rather bracing reading when the various issues are compiled so concisely with price tags.

Terrace City council raised similar issues soon after Kitimat was identified as a possible location for LNG. They pointed out the inequity of receiving no tax revenue but having to deal with increased infrastructure and services costs. Since then the Kitimat-Stikine municipal governments have formed the Northwest BC Resource Benefits Alliance to lobby the provincial government.

Meanwhile, what has the current Mayor and council in Rupert been doing to raise these issues with the Province? Not much comes to mind.[/quote]

It is a reality check : I am honestly going to find it tough to cast a ballot… Any further thoughts Btravenn


#8

Even in my tiny slice of the world I worry about this kind of thing. In 1993 we had 7 employee’s. Today we have 3. If even one LNG plant get’s approved and built, I don’t see my employer ready to acept the reality that will bring for us. They aren’t ready for this, and will react much slower than will be required. The result will not be pleasant.


#9

If there is one issue in the upcoming election, whoever is elected needs to make a deal with the province on LNG taxes to ensure that there is enough revenue to start addressing the infrastructure and service issues summarized in the Times Colonist article.

When Ridley was built, the Lester council of the day ensured that the City received a major share of the property taxes.

Years ago I talked to a mayor of another city who said that in meetings with the Province Mayor Peter Lester was known for being “very cagey”. He said that in an admiring way; among his peers Mayor Lester was regarded as very effective at that level.

Does Prince Rupert have that kind of representation today? I don’t think so. This Mayor and council mostly engages in bluster, often about things that are not even in their jurisdiction. They seem to spend a lot of time being upset.

I know that some will disagree and will perhaps call me names (which bounce off), but in my view Sheila Gordon-Payne and Tony Briglio are the mayoralty candidates who are best able to represent the City at a Provincial level. The objections that I’ve heard against both of them are consistently petty and irrelevant to the problems that the City is facing.

What sets them apart is that both have senior experience dealing with health issues at a regional level, where the Province is the elephant in the room and budgets are huge. That’s the kind of experience that is needed, particularly in a Mayor, if these big ticket issues are going to be addressed.


#10

quote from the vancouver sun : The thud you heard early Tuesday afternoon was the sound of the B.C. Liberal government dropping back to Planet Earth after a heady trip through clouds of speculation on the liquefied natural gas file.

Now only half the tax revenue will be acquired so we need a leader that is going to fight see that our infrastructure upgrade gets as much as possible …


#11

[quote=“BTravenn”]If there is one issue in the upcoming election, whoever is elected needs to make a deal with the province on LNG taxes to ensure that there is enough revenue to start addressing the infrastructure and service issues summarized in the Times Colonist article.

When Ridley was built, the Lester council of the day ensured that the City received a major share of the property taxes.

Years ago I talked to a mayor of another city who said that in meetings with the Province Mayor Peter Lester was known for being “very cagey”. He said that in an admiring way; among his peers Mayor Lester was regarded as very effective at that level.

Does Prince Rupert have that kind of representation today? I don’t think so. This Mayor and council mostly engages in bluster, often about things that are not even in their jurisdiction. They seem to spend a lot of time being upset.

I know that some will disagree and will perhaps call me names (which bounce off), but in my view Sheila Gordon-Payne and Tony Briglio are the mayoralty candidates who are best able to represent the City at a Provincial level. The objections that I’ve heard against both of them are consistently petty and irrelevant to the problems that the City is facing.

What sets them apart is that both have senior experience dealing with health issues at a regional level, where the Province is the elephant in the room and budgets are huge. That’s the kind of experience that is needed, particularly in a Mayor, if these big ticket issues are going to be addressed.[/quote]

Not sure when Lee put up his website, but I am certain it was well before the Times Colonist article.

leebrain.com/infrastructure_deficit

Whether he is “cagey” enough to get the job done is one thing. But he is certainly well aware of the problem. He understands the difficulties of addressing the problem but has a plan to do so.

I am finding this mayoralty race very interesting. BTravenn may find the objections against Gordon-Payne and Briglio petty, just as I see the complaint against Brain’s inexperience petty. Some people will find objections to Jack petty. On other threads, people have made the comment that they wish Lee were running for counsel because they would vote for him then. Well the same could be said for Sheila and Tony. No disrespect to the people running for council but the three losers in this mayor’s race would make a more impressive trio than any other trio on the council ballot.

In the provincial election, you might have hated Clark but you feared Dix more. Or you might have hated Dix but you feared Clark more. For mayor, I know who I am supporting, but I am not afraid any of the other candidates.


#12

[quote=“DWhite”]

I am finding this mayoralty race very interesting. BTravenn may find the objections against Gordon-Payne and Briglio petty, just as I see the complaint against Brain’s inexperience petty.[/quote]

Experience or the lack of it is a real issue, regardless of who the candidate is; even more so when we are talking about $279 million just to catch up.


#13

1.5% to 3.5% Is way to low, we should just let it pass, countries that do well selling their nonrenewable resources, usually tax in the range of 30 %, that way if there is problems and spills like there is going to be, they at least have some money to pay for it.


#14

Please educate yourself by looking at the tables in this document:
kpmg.com/Ca/en/industry/Ener … -final.pdf

They show the various tax regimes in place in other jurisdictions. Consensus seems to be that this latest move brings BC closer to its international competitors.

Also be aware that BC would have to raise billions of dollars, and take significant risk, to do this business without outside help.


#15

This also provides a useful international perspective. theaustralian.com.au/busines … 7099068940

Remember that the gas is really worth nothing until someone makes an economic decision to get it out of the ground.


#16

There is way too many posts like this around the internet yesterday and today…people think that somehow these LNG projects will only be taxed at 1.5 to 3.5% tax rate…wake up people and READ.

The 3.5% figure is just the LNG tax, that is an add on tax…on top of PST, corporate tax and royalties, which if you add all those up would put the total tax over 20%.

1 LNG terminal will = 8 billion dollars in tax revenue over a 10 year period…of course the other alternative is build nothing and get $0 over a 10 year period (not to mention the loss of jobs and all the associated personal/payroll tax revenue that the province would not receive if nothing is built). The economic shockwave of 1 terminal will go far beyond just the $8 Billion.


#17