Shell Wooed by British Columbia With Tax Cuts for LNG
(Bloomberg) -- British Columbia Premier John Horgan lightened the tax burden on proposed liquefied natural gas projects as his government seeks to convince Royal Dutch Shell Plc to move ahead with a C$40 billion ($31 billion) development in the western Canadian province.
The province will eliminate an extra tax ranging from 3.5 to 5 percent of net income that the previous government imposed on proposed LNG projects, Horgan told reporters in Victoria on Thursday. New projects will also pay lower electricity rates in line with other industrial users, he said.
In B.C., manufacturers are exempt from sales taxes on production machinery and equipment. The new framework will extend that exemption to LNG projects, but the lost revenue will be subject to repayment once the project is up and running, according to a government statement.
Horgan said the new terms were justified because under the existing framework, not a single project was likely to get built.
“After five years of talking about one, two, three, five LNG facilities, there are zero,” Horgan said. With the changes, “we may get one.”
Shell and its partners Mitsubishi Corp., PetroChina Co. and Korea Gas Corp. are expected to make a final investment decision this year on whether to build an export facility in Kitimat in northern B.C. The project would allow Canadian gas to be shipped to Asian markets and could eventually reach 26 million tons a year in capacity.
The group, known as LNG Canada, welcomed the announcement in a statement, saying the new measures “will be important” in their effort in reaching a final decision.
Horgan set a Nov. 30 deadline for Shell and its partners to formally greenlight the project in order to be eligible under the new rules.
The previous Liberal government under former Premier Christy Clark had set up a C$100 billion “prosperity fund” to collect taxes from an LNG industry it expected would grow to more than 20 developments. Not a single major one has moved forward and five have been canceled since then amid a global supply glut of LNG.
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