John Horgan’s $6 billion LNG giveaway
A bad deal for BC
by Eoin Finn B.Sc., Ph.D., MBA
The announcement – on World Water Day – that the NDP Government is to enact regulations and legislation to “make BC LNG competitive” caught many by surprise. Though the fine-print details are not yet available, the Premier’s announced provisions for all of BC’s wannabe LNG industry include:
- A 20-year postponement of PST payable on construction materials (PST on these will be a hefty 7% on the 70%-or-so materials portion of the $40 Billion capital expenditure on liquefaction, treatment, storage, port and pipeline components of the project):
- As an EITE (emissions-intensive and trade–exposed) industry, exemption from future carbon tax increases above the current rate of $30/ tonne all others in BC will be paying. (This is totally the opposite of the Government’s announced policy of “polluter pay”);
- Elimination of the 3.5% LNG income surtax (already reduced from the 7% royalty rate originally announced in 2015);
- Application of the BC Hydro industrial rate ($54/ megawatt-hour) for grid electricity service to LNG facilities. (This rate is half the current $110/ MWh residential rate, well below BC Hydro’s $120/ MWh marginal cost of new electricity from Site C and below its breakeven average rate of around $90/ MWh. Giving power away for half-price will make residential customers foot the bill via future BC Hydro rate increases – lest BC Hydro slide further into debt).
These are extraordinary measures for any Government – let alone one recently critical of the previous Clark government’s largesse to well-heeled LNG proponents, many of them large contributors to BC Liberal election coffers. And to an industry which has so far dismally failed to deliver on its promised 100,000 jobs, a debt-free BC and a BC treasury overflowing with a $100 Billion taxation bounty.
All in all- these concessions represent a gift of $6 Billion of taxpayer money – primarily to LNG Canada’s Kitimat project and spread over the expected lifetime of that project. If enacted, it will make all British Columbians, willing or not, silent partners in LNG Canada, a company jointly owned jointly by Shell Canada (50%), Petro China (20%), Korea Gas and Mitsubishi (both 15%).
So what’s the problem?
Simply put, the “deal” is woefully one-sided. We BCers are neither shareholders nor guaranteed creditors of the LNG venture(s) we may so generously give to. We failed to secure any guaranteed dividends or tax payments (as Qatar and Norway both did), there are no minimum employment quotas for British Columbians (Australia got those), there are no guarantees that profits won’t be siphoned off to tax havens via imaginative accounting practices (as happened in Australia, where that Government is suing Chevron to recover over $300 Million in evaded taxes. Woodfibre LNG’s owner, Sukanto Tanoto, appears prominently in both the leaked Panama and Paradise papers that expose the murky world of off-shore finance – this subsequent to his company being convicted and fined $250 Million for evading taxes in Indonesia), nor any guarantees that most of the construction work won’t be offshored to Korea or China and temporary foreign workers brought in to staff the project (as LNG Canada and Woodfibre LNG both plan to do. These LNG proponents are currently lobbying Ottawa and filing in Federal court, appealing for exemption from a 45.8% anti-dumping tariff levied on the Chinese and Korean steel they plan to use to construct their LNG plants there and float them into the BC coast).
Neither do we have assurances that selling our gas to Asia won’t cause supply shortages and a tripling of prices here, as has happened in Australia’s sad LNG experience. Add to those the perils of fracking and polluting First Nations land in Northeast BC and the difficulty this plant – emitting 8-9 million tonnes of GHGs every year – will create for BC’s 2050 commitment of an 80% reduction in GHG emissions (to a total of 12.6 tonnes, which this one plant would commandeer 80% if), and the rottenness of this deal for BCers becomes woefully apparent.
A BC LNG industry would struggle to be profitable (the only operating LNG export plant in the U.S. – Cheniere Energy – lost about $600M in each of the last 5 years). It would be another boom-and-bust industry (the very last experience many BC towns want to repeat), and would, even at its inception, be an industry already in its sunset years as the world transitions away from fossil fuels to avoid the worst of runaway climate change.
We should all admonish our Premier to stop this ill-advised giveaway of taxpayer money. Well-heeled proponents begging for tax concessions to “make them competitive” isn’t how capitalism is supposed to work. Rotten deal, John. Stop it!