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Woodfibre applauds provincial natural gas tax breaks

Province intends to use alternate payment structure in lieu of PST for gas developers

The province has announced tax breaks intended to benefit natural gas development, including Squamish's Woodfibre LNG project.

It was a move applauded by natural gas advocates but decried by local environmentalists.

Byng Giraud, country manager for Woodfibre, said the announcement made on Thursday would substantially help the company's planned project for Howe Sound.

"Kudos to the government — this is a real step on their behalf," Giraud told The Chief shortly after the announcement.

However, on the environmentalists' end, local activist group My Sea to Sky put out an announcement of their own.

"It appears that Premier John Horgan has inherited Premier Christy Clark's hard hat," the group said in a press release.

"This is jeopardizing B.C.'s economy, health, and environmental security. The BC Liberals had already promised the LNG industry an unconscionable level of public subsidization, and the BC NDP has upped the ante by promising foreign LNG producers a level of privilege not granted to any other citizen or business in B.C."

While LNG advocates and critics greeted the news in radically different ways, one thing that both appeared to agree on was that the tax announcement would benefit LNG initiatives.

From Woodfibre's perspective, Giraud said that out of the measures that were announced, two would be particularly favourable.

First, one of the new proposals on the table would substitute the way PST is billed.

Instead of paying PST charges upfront, the province is proposing to space out the fees via "annual operating performance payments over 20 years," reads a government news release.

These payments would equal what the LNG developers would have otherwise paid in PST during the initial facility construction period.

In Giraud's view, this could substantially help the Woodfibre project.

"The ability to pay out over time as opposed to upfront; that's a big deal because you know — anybody in capital investment, whether you're a small or big business — having to pay upfront before you've made your profit is always a challenge," he said.

"That way, you're not taxing people before they've made a profit."

The second important takeaway from the provincial announcement was regarding electricity rates.

"Proponents who make a positive final investment decision will receive the general industrial electricity rate charged by BC Hydro," reads the government release. "This is the same rate paid by other industrial users in British Columbia."

This isn't a new promise, as it echoes what was previously announced by the BC Liberal government with the eDrive program.

However, the election got in the way of its implementation, tossing things up in the air, so Giraud said that it is reassuring to see the NDP make the same commitment.

"Reaffirmation of that justifies the decision we made years ago," he said. "That's a big deal to us."

Giraud added that if things line up well for the company, an announcement about full-scale construction could be made in either summer or early fall this year.

There were other points publicized by the province on Thursday.

One other new initiative was announced — the province said it will eliminate the LNG income tax, as authorities consider it "cumbersome" and prone to "uncertainties."

Instead, the government says it will use "other tax and royalty measures" to obtain revenue from natural gas development.

The rest of the announcements were callbacks to points the province had previously made.

The province said that proponents making a final investment decision to proceed will be subject to the new Clean Growth Incentive Program.

This a repeat of what was announced in the 2018 budget speech, which is intended to create new greenhouse gas emission standards.

However, details of this program have yet to be laid out.

The province reiterated its previous promise that starting April 1, it would increase carbon tax by $5 a tonne annually, until 2022.

Some of the cash from the carbon tax revenue paid by large industry will fund a rebate program to encourage the use of the greenest technology available.

In the provincial budget released earlier this year, it was announced that the government would consider fully reimbursing carbon taxes paid above $30 per tonne if a company's emissions are below certain levels.

It's uncertain how the natural gas tax breaks will play out in the legislature, however.

The NDP will need the support of the Green Party, and the same day the NDP made their announcement, the Greens expressed discomfort with the ruling party's stance on LNG.

"Future development must fit within our climate targets, and the numbers on LNG simply don't add up," said Green leader Andrew Weaver in a press release.

The release also said that the party is concerned increasing B.C.'s emissions through LNG developments will place an "undue burden" on existing industries and the public to reduce their emissions beyond what is already required.

"When it became clear that the government intended to propose measures that are incompatible with B.C.'s ability to meet our climate targets, we felt it was our responsibility to communicate to LNG Canada that if these measures were to go ahead unamended, we would no longer have confidence in government," Weaver said.

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