LNG and Bill 10

Thank you for writing to me about the LNG Canada project in Northwestern B.C.

I share your concerns about carbon pollution, responsible resource use, and sustainable development in our province. That’s why, during our election campaign in 2017, I assured you that I would not support any LNG project that did not meet the following requirements:

  • Projects must fit within our climate plan to reduce carbon pollution in BC;
  • Projects must guarantee jobs and training opportunities for British Columbians;
  • Projects must provide a fair return for our resources; and,
  • Projects must respect and make partners of First Nations.

Emissions from this project are included in B.C.’s Clean BC project, which will reduce our 2007 emissions level by 40% by 2030. This project will also be one of the, if not the, cleanest LNG project in the world. It will create 10,000 construction jobs and 950 permanent jobs in an economically depressed region of our province, with a local-hire first policy. It will contribute $23bn in new revenues over the life of the project. It is supported along the length of the pipeline by every elected band council and $175m in contracts have already been signed with First Nations businesses.

With respect to “tax breaks”, my colleague Bowinn Ma, MLA for North Vancouver Lonsdale, summarized the tax treatment of this project quite well, so I’ll borrow what she has written on the subject:

I have had many conversations with the Minister of Finance, expressing my concerns and learning about the Bill. I’d like to offer what I’ve learned about Bill 10 — not in any attempt to try to change your mind on LNG, but rather to provide my honest interpretation of it as someone who is sympathetic to your position.

Generally speaking, Bill 10 does three things:

  1. Bill 10 uses a tax credit to try and capture as much corporate income tax as possible.

 At first blush, mentions of an LNG tax credit read to me like a corporate giveaway, but after diving deeper I learned the reality is actually more complicated.

 Corporations that operate in multiple jurisdictions do not have to register corporate profits in every jurisdiction that they operate in — they can shop around and choose their preferred jurisdiction to register their profits in. This means that oil and gas companies that extract in BC are *not* required to report any profits in BC if they choose to report them elsewhere, nor is it in a province’s power to force them to do so through legislation or otherwise.

 To address this, Bill 10 offers an up-to-3% tax credit that is *non-refundable* and redeemable if-and-only-if the company pays corporate income taxes in BC. The current corporate tax rate is 12%, but if the company chooses not to register their profits here, then BC ends up getting nothing in corporate income taxes, even as they are extracting in BC. The non-refundable tax credit is offered to entice the company to *choose* to register their profits in BC in order to get the tax credit, allowing BC to at least capture 9% of their profits instead of nothing.

  1. Bill 10 REPEALS the LNG Income Tax Act brought in by the BC Liberals in 2014.

 The 2014 LNG Income Tax Act was designed on the presumption that BC would become a massive LNG producer with many, many plants. As a result, the thresholds set for when any taxes would have to be paid were so high that it simply did not work for an agreement with just one project. There were other problems with the Act, but in short, BC would never see any income taxes come its way through it and so it is being removed in favour of Item 1 above.

  1. Bill 10 REPEALS the LNG Project Agreements Act brought in by the BC Liberals in 2015.

 The 2015 LNG Projects Agreement Act is hugely problematic for BC and needed to be repealed. Not only does it offer many different tax credits potentially claimable by a large number of companies that are only loosely related to the industry without ever having to pay taxes to claim them, but it also indemnified companies against future government decisions.

The indemnification meant that companies would have been protected from future government decisions like those to increase corporate taxes, protect the environment and address climate change, or more. This kind of indemnification is unconscionable and is a massive liability as governments work to improve environmental protections and more, which is why it had to go.

Unfortunately, the repeal of this Act was also the part of Bill 10 that the BC Liberals were able to amend out of the bill after the Greens walked away from the vote, leaving the final count 42-41.

The BC Liberals argue that they want to keep the Act because it included transparency clauses to ensure agreements are made available to the public. However, this ignores the incredibly damaging indemnification clauses in that Act and falls flat when you consider the full agreement has already been made public (published March 25).

The silver lining is that the LNG Project Agreements Act of 2015 was never granted Royal Assent, which is required to bring an Act into law, and as long as we are in government we will not bring that Act forward for Royal Assent. It is my hope that we will have an opportunity to try again to repeal this, however, so that it can be removed cleanly.

 I hope that this assists you in knowing why I support this project, which is the largest private sector investment in BC history, will bring economic opportunity to so many predominantly First Nations communities that badly need economic opportunity, and will achieve all of the goals we set out for this type of project within our provincial emissions budget.

Thank you, as always, for sharing your concerns with me.

Yours truly,

 

David Eby

MLA, Vancouver Point Grey