Friday, February 20, 2015

Federal Government offers tax break encouragement package to LNG industry

Prime Minister Harper in Surrey
On Thursday for LNG announcement
(photo from Govt of Canada website)
Whether it's enough to kick start the stalled LNG industry on the North Coast remains to be seen.

But with an appearance in Surrey on Thursday afternoon, Prime Minister Stephen Harper answered one of the main concerns that many of the proponents of LNG development in British Columbia had made as discussion points.

As the Prime Minister announced that his Government was introducing tax breaks to LNG companies that are in the process of developing their terminal plans in the province.

The announcement of the new capital cost allowances, is one that it seems to have the Prime Minister tossing Premier Clark's LNG ambitions a bit of a lifeline.

“Our Government is committed to providing the right conditions so that industries and businesses can succeed and compete in the global economy, by lowering taxes, cutting red tape and encouraging entrepreneurship. Today’s announcement builds on our low tax plan for jobs and growth, strengthening the already strong case for business investment in Canada.” -- Prime Minister Stephen Harper speaking is Surrey on Thursday

It was an action that was welcomed by the BC Government, with the Premier hailing the move as one that was great news for British Columbia and Canada.

The BC LNG Alliance, the group that has been formed to represent some of the larger LNG companies in the province, was also was quick to celebrate the federal news outlining its enthusiasm for the decision in a media release.

The tax break initiatives as outlined by the Government, will offer LNG proponents the opportunity to seek capital cost allowances of 30 percent on equipment used in natural gas liquefaction and 10 percent  allowances on buildings at a facility that liquefies natural gas, a significant shift from current rates in place.

The new cost allowances will be available for capital assets acquired after February 19, 2015 and before 2025.

You can review the full background sheet on the Capital cost allowances here.

Assistance on fixed assets of development was among some of the concerns about Canadian investment that then Petronas President Shamsul Abbas (a change was made at the top of Petronas earlier this month ) identified back in October.

Marking them as issues for further discussion with the Federal government, suggesting that the standards in place at that time were proving to be a concern for his company's financial planning.

The big question for the provincial government and communities in the Northwest looking to find some Final Investment Decisions from the major proponents, is whether the tax breaks perhaps are coming too late to the game, considering the changing nature of the landscape of investment for LNG.

Two major projects in the Prince Rupert area have been put on pause, in part, owing to the current financial situation affecting the energy markets, events which have had major impact on the plans for development.

Those conditions and a few internal factors for some of the proponents  have been among some of the concerns of the LNG companies, none of which have yet to deliver any Final Investment decisions for any of the major proposals for the North Coast.

Some of the media review on the Prime Minister's statement from Thursday can be found below:

Vancouver Sun -- Ottawa Tax Break boosts B. C. LNG
Globe and Mail -- Ottawa grants tax breaks for LNG sector in B. C. 
Victoria News -- Federal tax credits target LNG investment
Financial Post -- Canada to reduce taxes for LNG projects, Stephen Harper says
Global BC -- Harper announces tax breaks for LNG in BC
BC Business -- Stephen Harper announces major LNG tax break
Business in Vancouver -- Stephen Harper promises LNG tax breaks at Surrey appearance

For more on LNG development on the North Coast see our archive page here.

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