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British Columbia unveils tax plan to aid LNG development

British Columbia is set to overhaul the tax structure surrounding liquefied natural gas production and related facilities to make the Canadian province more attractive to developers.

The government said it would amend its income tax rules to provide a natural gas tax credit for LNG facilities. It would also repeal a law that set a legislative framework for LNG project agreements that it claims "left British Columbians vulnerable to footing the bill for special industry tax and regulatory protections," the province said in a March 25 statement.

The new legislative package is aimed at the Royal Dutch Shell PLC-led LNG Canada Development Inc. project in Kitimat on British Columbia's northern coast. "These steps will deliver the fiscal setting needed for LNG Canada's proposed [C]$40-billion project in northern British Columbia," the statement said. The project will use hydroelectric power in processing, which the government claims will make it the cleanest of its kind in the world.

British Columbia once viewed LNG as a cornerstone of its economic growth, with almost 20 facilities planned on its shore. Developers walked away from most of those projects for economic reasons, even though the province's location provides a shorter route to Asia markets from its deep water ports. Malaysia's Petroliam Nasional Bhd. abandoned plans to develop a C$36 billion facility in the province and is one of the partners in the Shell-led consortium.

The proposed changes have raised the ire of British Columbia's Green Party, which the ruling New Democrat Party relies on for support in its minority government. The Green Party's three members in the province's legislative assembly give the New Democrats a slim majority in the provincial government, making their support essential for most legislation to pass. The Greens called the proposal "antithetical" to the government's CleanBC program, which is aimed at increasing the province's renewable energy use, and claimed the LNG-related proposal is a worse deal than one crafted by the Liberal party, which was ousted by the current coalition.

"Continuing to push for LNG development is short-sighted and works directly against CleanBC objectives," Green leader Andrew Weaver said in a posting on the party's website. "After years of criticizing the BC Liberals for their generous giveaway of our natural gas resources, the BC [New Democratic Party] have taken the giveaway to a whole new level. The legislation brought forward by this government is a generational sellout."

The new natural gas tax credit, which would take effect Jan. 1, 2020, would be available to eligible companies at 3% of the cost of natural gas. The tax credit could be used to reduce the province's corporate income tax rate from 12% to 9%.