British Columbia Premier Christy Clark, from BC’s Liberal Party, announced Tuesday that BC will impose a tax on LNG sales, taking part of the revenue that producers anticipate receiving in exporting BC gas to the Pacific Rim.
According to an article yesterday in the Vancouver Sun, “[t]he new tax is expected to play an essential role in building Clark’s promised Prosperity Fund …. Clark has said the fund, which is also financed from natural gas royalties and corporate tax income from the LNG industry, could amass more than $100 billion over 30 years.”
The proposed tax has raised understandable concerns about the potential impact on BC LNG’s competitiveness. In a commentary today in the Calgary Herald, Energy and Economics Editor Stephen Ewart says “[i]t appears the honeymoon is quickly coming to an end for the LNG business in British Columbia as the tough sledding begins in the marriage between industry and government.”
But all that makes even more fascinating the following quote from Premier Clark about the process she intends to follow in determining the level of the tax:
Clark said Wednesday she will not be able to discuss any of the proposals that are being considered for the new tax regime until after negotiations are complete.
“We have to make sure that, first of all, we are getting maximum benefit for the people of our province, and at the same time that we aren’t imperilling their business case,” she said.
“Because if we want to be competitive, we need to do that through the course of negotiations with (industry), so that’s what we’re working on right now.”
Even though of a (significantly) different party, it appears that Premier Clark is building on the lesson learned from Alberta’s 2007 tax increase debacle. As Ewart puts it in his piece today, “[t]he B.C. government would be wise to look to Alberta to better appreciate the complex dynamics of the marriage of convenience between a province and companies developing its resources when it becomes the lifeblood of the economy. In that scenario, government is a partner as much as a resource owner or a regulator.”
Alaska would be wise in heeding the same advice in revising its oil and gas taxes. From Premier Clark, the quote of the month: “if we want to be competitive, we need to do that through the course of negotiations with (industry).”
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