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LETTER: About LNG Subsidies

We have federal and provincial governments that talk a good climate game, but other than an electric vehicle incentive program, are doing very little to help launch our green energy/technology initiatives.

We have federal and provincial governments that talk a good climate game, but other than an electric vehicle incentive program, are doing very little to help launch our green energy/technology initiatives. But meanwhile, its full speed ahead with pipelines and LNG plants.

What follows is a list of subsidies, waivers, concessions and other benefits that the LNG industry and Woodfibre LNG has or will receive from various levels of government so far according to a list of government publications and newspaper articles.

1) Near elimination the LNG royalty taxes, income tax avoidance
Thanks to the prior (Liberal) government, the LNG royalty tax was watered down by a major reduction in the LNG royaltyincome tax rate cut to 3.5%from the original 7% rate, as well as by the ability of companies to fully deduct capital costs before paying any LNG income tax.

2) 25-year Tax breaks
In 2015, the BC Liberal government introduced legislation which granted 25-year tax breaks and provided the legal authority for future governments to compensate the (NorthWest LNG) consortium for increases in the LNG income tax or carbon tax, and changes to the natural gas tax credit or greenhouse-gas-emissions regulations. John Horgan, then opposition leader, was quoted as saying at the time "the project handcuffs future governments by granting a 25-year tax holiday to a foreign company that will rely heavily on temporary foreign workers."

3) Elimination of PST on construction materials
This measure would reduce provincial sales taxes on the upfront costs of getting LNG plants built. It would be repayable as an “operational payment” over the following 20 years. Whether there would be any interest paid has not been disclosed.

4) Near elimination of gas royalties and taxes
Royalties were designed as a way for the people of B.C. to get a share of the development profits from exploiting the public gas resource. However, the current regime in B.C. is effectively giving its gas away such that royalties on record levels of production continue at extremely low levels, and companies have stockpiled over $3 billion in tax credits for fracking and other infrastructure that will be used to reduce future taxes. Fracking companies have also been receiving a tax credit of $120 million a year to defray the cost of building roads and pipelines to fracking sites in N.E. BC. 

5) Carbon taxes substantially reduced
The government will exempt LNG projects from the scheduled $20-a-tonne carbon tax increases until 2021. LNG Canada would be able to access a new Clean Growth Incentive Program, which is currently under development. BC Budget 2018 provides a rebate on new and incremental carbon taxes paid (i.e. the amount above $30 per tonne) by a company if it meets a performance benchmark based on the lowest emitting facilities in the world. The Liquefied Natural Gas Environmental Incentive Program rebates industry 50-100 per cent of the compliance costs of the LNG benchmark regulations established by B.C.’s Greenhouse Gas Industrial Reporting and Control Act (GGIRCA).1 This incentive only applies to Pacific NorthWest LNG (PNW LNG), which is the only project that fails to achieve the emissions benchmark set by the provincial government. The value to PNW LNG is estimated at up to $16 million a year. Woodfibre has submitted a letter arguing for similar treatment. Because it will be mostly powered by subsidized grid electricity,

6) Electricity breaks
In November 2013 the B.C. Liberal government announced it would charge the LNG sector $83.02 per megawatt hour for electricity. But in November 2016, the government announced it would lower that rate to $54.34, a further 35% break - worth an estimated $40 Million a year to Woodfibre. Households now pay $88.40 (Step 1) and $133.20 (Step 2) per megawatt hour and power from the Site C dam will cost over $120/ MWh.

7) Extend 25-year LNG export license to 40 years
Woodfibre's 25-year export license was extended to 40 years by the National Energy Board. The extension was approved by the Federal Cabinet in 2017, effectively increasing the amount of allowed gas exports by 60%.   

8) BC-China LNG foreign workers agreement (2014)
"The two sides will “work together with the appropriate authorities to secure and facilitate the entry of foreign workers” in B.C., while “respecting the priority of hiring domestic labour wherever possible,” according to the agreement." No limits or requirements for Canadian workers were set on an agreement that could see thousands of foreign workers fill LNG construction jobs.

9) Ottawa eliminates LNG steel tariffs, jobs for Canadian steelworkers
According to a September 26th report in the Globe & Mail, the Federal government has conceded that LNG Canada can’t source steel domestically for the LNG facility and will exempt LNG projects from the 45.8% anti-dumping tariffs imposed by the Canadian Border Services Agency last Spring. The tariff applies to fabricated steel, imported from China and South Korea, that is needed to build the LNG facilities.  The tariffs could have added $1 billion to construction costs for LNG Canada. Woodfibre LNG applied for the same exemption - worth over $100 million that taxpayers will now not receive. 

~Matt Blackman, founder of Squamish Alternative Energy Group and Eoin Finn, of My Sea to Sky


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