CPABC Industry Update Summer 2014 - Page 7

projects in BC has deployed well in excess of $2 billion on project-related expenditures to date. 2 And several projects currently have go-forward budgets exceeding $1 billion. 3 This activity includes a growing number of LNG project offices in BC and a material increase in the work flowing to goods and services companies, as well as a sizable number of global LNG supply chain firms entering the local market.4 When the value of market transactions to build out project consortiums is included, the relevant investments quickly grow by multi-billion dollar increments. On the regulatory and permitting front, in terms of environmental assessment (EA) process activity, one LNG project is now fully certified, four are currently going through EA reviews, and several others are in a pre-application phase. Turning briefly to LNG export requirements, permits to export have been issued to nine domesticbased LNG export facilities by the National Energy Board, with two others still in the review process. On the financing and partnership development side, most LNG projects continue to build and diversify their ownership structures, with domestic and Asian partners being announced for several projects. Overall, most project proponents have indicated that they expect to arrive at final investment decisions within the next 6 to 24 months. Judged against this backdrop of strong private sector investment interest and activity, the provincial government’s desire to facilitate LNG development is sensible and economically prudent. Given the significant financial benefits that will be derived from establishing a commercially viable LNG industry in BC, we believe the government’s approach is clearly in taxpayers’ interest. Concern that the LNG marketplace is highly competitive and that the BC government may be putting “too many eggs” in the LNG basket may or may not turn out to have some validity. However, it is market factors and market forces that will determine the size and shape of the nascent LNG industry in British Columbia. BC has faced commodity cycles many times in the past – the reality of global commodity market fluctuations is not particularly new. But entering this market does merit some caution, as well as careful management of both policy development and public expectations. At this stage, we believe the high level of private sector interest and real expenditure activity around LNG in the province is a clear signal that government should continue to vigorously advance its work on the policy frameworks needed to enable LNG development. Many critics fall into the trap of thinking that LNG is primarily a government initiative. This is untrue. At its core, LNG is a private sector, market-driven opportunity. Drilling deeper into critics’ commentary, much of the focus centres on a complaint that government is rushing policy development and hasn’t been transparent or consulted widely enough with other key interests. Below, we assess this concern as it relates to tax and fiscal matters associated with LNG development. Assessing the Tax Framew