Natural gas tax credits to allow LNG
The consortium is digesting the details of the province’s tax regime announced this week. “We’re still reviewing the legislation. It takes a while to go through legislation in detail and understand the implications,” Mr. Sproule said in an interview Wednesday.
On Tuesday, the B.C. government unveiled an LNG income tax rate of 3.5 per cent on net income once LNG export terminals recover capital costs, down from its earlier plan in February’s provincial budget to slap a tax rate of up to 7 per cent. B.C. Finance Minister Mike de Jong also introduced a program for natural gas tax credits to allow LNG proponents to chop their B.C. corporate income tax rate to 8 per cent from the current 11 per cent.
Pacific NorthWest LNG is viewed by industry analysts as the B.C. project with the best chance to forge ahead first with a final investment decision. The Petronas-led group is aiming to make its decision by mid-December on whether to invest billions of dollars in the province.
Industry analysts said Wednesday that the revised tax regime is a step forward for the province’s nascent LNG sector, but many hurdles remain.
The B.C. government is also placing carbon dioxide emission benchmarks on LNG facilities, above which offsets will need to be bought by LNG proponents – a system that is “a tax by any other name,” said Raymond James Ltd.
“The government’s goal is to make ‘B.C. LNG facilities the cleanest in the world.’ Our rough estimate is that this tax could clip just under 1 per cent of net operating profits to a facility, effectively increasing the LNG tax to something closer to 4.5 per cent,” according to a research note from Raymond James. “The B.C. government giveth, but it taketh some away.”