Bill Streeper, mayor of the Northern Rockies Regional Municipality, has blasted the provincial government’s delay in getting an LNG tax to a vote as “terrible and disgusting,” and challenged Victoria to finalize the tax by the end of March.
“I challenge Premier Clark to make a commitment that the B.C. government will have this all completely done by the end of March,” he said.
“Thirty days. She should tell Minister [of Energy, Mines and Natural Gas, Rich] Coleman he has 30 days to get it done.”
Premier Christy Clark’s government had originally pledged to unveil the tax last fall, but the broad framework wasn’t announced until last month, and the long-overdue tax won’t be put to a vote until the fall sitting of the provincial legislature.
Then, further details would have to be ironed out, and the plan may not be ready to implement until 2015, the government has said.
A number of energy companies had been expecting to make final investment decisions on multibillion-dollar projects by the end of this year. But the delay in the tax, which the province has dubbed the LNG Income Tax, could potentially push those announcements back, as the companies study how the levy would impact their bottom lines.
For Streeper and the Northern Rockies Regional Municipality, that’s not acceptable.
“I think this government ought to hurry up and think about what they’re doing,” he said. “LNG right now is very time-sensitive. You’ve got a lot of other countries in the world that are gearing up for LNG. [Asia] wants it. They want certainty. They want to know when they can get it, and I think we’ve got to get the LNG in British Columbia off and running as quickly as possible.”
The LNG Income Tax is being proposed as a two-tier tax with a Tier 1 tax rate of 1.5% and a Tier 2 rate of up to 7%.
The Tier 1 rate of 1.5% applies to an operator's net proceeds (revenue minus expenses) after the commencement of commercial production. The amount of the Tier 1 tax that has been paid will be deducted from the Tier 2 tax.
Premier Christy Clark’s government has said revenue from the tax would eliminate the province’s nearly $60 billion debt, and fill the Prosperity Fund with between $100 billion and $260 billion.
“Our LNG income-tax-revenue framework strikes the right balance between the need to maximize the return to British Columbians, while also ensuring B.C. is an attractive and competitive place to develop LNG,” said Finance Minister Mike de Jong after the 2014 budget was announced in February.
Calgary-based Ziff Energy, an influential LNG analyst, and the Canadian Association of Petroleum Producers are more cautious. They have expressed concern that the tax could make B.C. uncompetitive compared to other jurisdictions that are competing to export natural gas to Asia. That list includes Australia and the United States.
Whether the companies decide to go ahead with their projects will require consideration of a number of factors, including firm contracts with Asian buyers, costs of facilities, pipelines and processing, government taxation and access to labour.
For the Northern Rockies Regional Municipality, the stakes are high. The area’s economy, to a large extent, has relied on the production of natural gas since Canfor shut down its operations, taking most of the forestry business with it.
“This is a lifeline for Fort Nelson. We have no other major source [of jobs] right now,” said Streeper. “Forestry is at a complete standstill. Our mills are completely shut down. We have been given no indication when they’re going to reopen, or if they’re going to reopen. They’ve already started pulling different assets out of the sawmills to send them to other locations. The employment [from those mills] is zero.”
Streeper predicts that if a number of companies make affirmative final investment decisions and large amounts of gas begin coming out of the ground in the near future, Fort Nelson will grow in population by four times, reaching 15,000 or 20,000 people by 2030. He said the town has plans for subdivisions that can ultimately service a population of 15,000 people.
Streeper has good reason to make those predictions. In the vicinity of the Regional Municipality rest two of the biggest shale gas fields in North America, Horn River and Liard Basin.
Apache Canada has called the Liard Basin “the best shale gas reservoir in North America” and the Horn River Basin “among North America's leading shale gas basins.”
Chevron and Apache are 50/50 partners in the proposed Kitimat LNG project, which would produce gas from fields near Fort Nelson and pipe it to Kitimat for cooling and shipping to Asia.
Chevron is part of the Horn River Basin Producers Group, which consists of 11 companies that are working together to develop the Horn River Basin. The list also includes ConocoPhillips, Devon, EnCana, EOG Resources, Imperial Oil, Nexen, Pengrowth, Suncor, Quicksilver and Stone Mountain.
Streeper says that the delay in the tax framework has already put development plans behind schedule.
“I think the government is dragging its feet,” he said. “This LNG means more to British Columbia, the northern part of the province and the northwest than any other development project that’s happened in the history of Canada.”
Of approximately 15 proposals to export natural gas from British Columbia to Asia, none have made final investment decisions yet. Eight export permits have been issued by the National Energy Board, and three more are under review.
Streeper warns that the government could end up derailing the whole process if it doesn’t play its cards right, evoking the National Energy Program that the federal Liberals introduced in 1980. The NEP is blamed by many critics for helping to cause the ensuing economic recession that crippled Western Canada.
“We were supposed to be shipping LNG at the end of this year and in early 2015. And now it’s way off. We’re not the only company that can supply LNG,” he said.
“Let’s talk about the jobs today. Let’s talk about the young people coming out of school who want to get involved in this industry. Are you going to tell them, ‘Yeah, go get trained to be a gas plant operator, but we don’t need you for another year?’ They’re not going to come into the industry.”
Streeper’s message for the provincial government is “get going.”
“You have 30 days to hammer this out. Get it done,” he said.
Bob Zimmer, the MP who represents the massive stretch of land between Prince George and Fort Nelson, said the federal government, for its part, is doing what it can to make the regulatory process as streamlined as possible.
“Even though gas is something that’s coming, [Fort Nelson] doesn’t benefit from it right now,” he said. “There’s a lot of activity up there, but it’s not as busy as it could be. We’re trying to get the gas to the West Coast as soon as possible.”
