LNG Subsidies


Sukanto Tanoto (left) and Rich Coleman, holding documents the BC Government refuses to release. See Breaker news article for details.

The LNG industry in BC as been offered and has demanded a list of subsidies. It is by now unclear that the province will see revenue from LNG at all.

Here is the list of the Provincial and Federal tax breaks/cuts and subsidies for the LNG industry:

  • BC Hydro LNGeDrive rate: a reduction of the regular rate from $83.30 to $53.60 per Mega Watt Hour (MWH), this rate-cut is the equivalent of every one of the 100 jobs from this project being subsidized by at least $340,000 per year.(1)
  • LNG tax cut from 7% to 3% for the LNG industry. Companies are able to deduct the full capital costs of their LNG plant investment before they pay the full 3%. (This could take 6-12 years depending on what price they are able to get in Asia. If there are capital cost over-runs, as in the case of Australian LNG or Canadian tar sands, it could be as much 16 years before the full tax kicks in.)(2)
  • There is early 1.5% tax to get some funds into the Treasury but those funds are deductible from the full 3.5% tax.(3)
  • A Corporate Income Tax (CIT) credit for LNG producers for its cost of natural gas. That works out to be equivalent to a CIT cut from 11% to 8%. Once we factor in the delayed application of the LNG tax and cost over-runs, this CIT reduction essentially wipes out any revenue gain from the LNG tax.(4)
  • LNG producers may be eligible for the PST exemption for Production Machinery and Equipment obtained for use in the extraction or processing of natural gas.(5)
  • If the LNG is being produced for the purpose of sale, including exported for sale, the natural gas purchased by the producer of the LNG would be exempt from PST.(6)
  • BC’s royalties on LNG are not paid on units of gas, but rather on the net-profits of the LNG producer/exporter. If there is no profit, BC will get zero royalty income from a project.(7)

Footnotes:
(1) From announced by BC Government Nov 4 2016
(2) Path to Prosperity? Canadian Centre of Policy Alternatives, April 30 2014
(3) Path to Prosperity? Canadian Centre of Policy Alternatives, April 30 2014
(4) BC Government website: Provincial Sales Taxes
(5) BC Government website: Provincial Sales Taxes
(6) BC Government website: Provincial Sales Taxes
(7) Path to Prosperity? Canadian Centre of Policy Alternatives, April 30 2014

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