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