BC Budget Announces Tax on LNG, Silent on Carbon Price

On February 18th, British Columbia tabled a provincial budget that touts its Liquified Natural Gas (LNG) development plans and offers some highly anticipated clarification on the sector’s tax structure.

Proposed taxation will include a 7% levy on the liquefaction process (the most emissions-intensive part of the process), which will take effect after capital costs are recovered. Until then, companies will pay only 1.5%. While companies argue the tax may render B.C. LNG uncompetitive, Sustainable Prosperity argues that the rate will likely be lower in practice. Adding to the confusion over just how much revenue will accrue to the province is uncertainty about future LNG prices, and whether the existing carbon tax will apply.

The budget did not address the expected impacts on B.C.’s emissions reductions wellhead-to-waterline-022014targets. According to Sustainable Prosperity, five proposed LNG plants will emit 73 megatons of carbon alone, along with emissions from fracking, transportation, combustion, and any additional plants. In a new report, the Pembina Institute argues that the jobs and revenue figures published by the government would require five to seven LNG terminals, which it claims could put B.C. LNG emissions on par with oil sands emissions by 2020.

While the budget rolls back public spending overall, it also includes an expansion of the provincial Carbon Neutral Capital Program (CNCP) which will draw the health and post-secondary education sectors into an existing scheme to establish a carbon-neutral school system. CNCP collects $25 per ton of greenhouse gas emissions from participating sectors, which is then invested in low-carbon capital upgrades.

See the B.C. Budget and Fiscal Plan, along with highlights and backgrounders, at: http://bcbudget.gov.bc.ca/2014/default.htm. For reaction, see “Carbon regime missing in action in BC’s new LNG tax regime” from Sustainable Prosperity at: http://www.sustainableprosperity.ca/blogpost87; “B.C. Budget 2014: About that LNG Prosperity Fund” Blog from Marc Lee of the Canadian Centre for Policy Alternatives at: http://rabble.ca/blogs/bloggers/policynote/2014/02/bc-budget-2014-about-lng-prosperity-fund. Also see Wellhead to Waterline: Opportunities to Limit Greenhouse Gas Emissions from B.C.’s Proposed LNG Industry from the Pembina Institute at: http://www.pembina.org/pub/2524.

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