Thursday, August 28, 2014
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First Nations want a piece of new LNG tax

Levy expected to pump hundreds of millions of dollars per plant into government coffers

By Gordon Hoekstra, Vancouver Sun

The Carrier Sekani Tribal Council says First Nations should receive a share of a new tax on liquefied natural gas the province expects to help feed a $100-billion prosperity fund.

The first details of the tax for the nascent industry were unveiled by Premier Christy Clark’s government last week.

Although legislation is not set to be introduced until the fall, the government has said it wants to put a seven-per-cent tax on income from facilities that produce LNG, after capital costs are recovered.

No companies have made final investment decisions to go ahead on an LNG project, but preliminary provincial estimates show that eventually the new tax could pull in hundreds of millions of dollars per plant each year.

The premier wants to see as many as five plants built in B.C., although critics suggest there will be fewer.

“I think our people would want to see — if any of these projects go through, and that’s a big if — that we should be involved in terms of the tax regime. There should be an allocation to the communities,” Carrier Sekani Tribal Council chief Terry Teegee said Monday.

“We’re not part of that conversation, and that’s troublesome. If we are talking tax, and we are recognized as one of the decision making authorities, then I think we should be part of that negotiation,” said Teegee.

He said he expected other First Nations would be interested in a share of LNG tax revenues as well, and noted that discussion is starting to take place among First Nations including at a First Nations LNG summit in Fort St. John last week.

Natural Gas Development Minister Rich Coleman said the first order of business for the province is hammering out the final framework and level of the LNG tax so companies can make investment decisions.

However, the province is also beginning discussions with First Nations over potential revenue sharing, he said, noting he met with the Carrier Sekani last week.

“We do it on mining now, where we give a portion of our royalties, so this isn’t foreign to us to work with the First Nations. And it won’t be foreign on this one (LNG projects),” Coleman said Monday.

Coleman noted that gas royalty revenues are also already shared with First Nations in northeastern B.C. Some First Nations have also signed an equity deal on a gas pipeline meant to feed Chevron and Apache’s proposed Kitimat LNG project.

The eight First Nations the tribal council represents have claim to large swaths of territory in north-central B.C. along the routes of pipelines that would supply several leading projects in Prince Rupert and Kitimat in northwestern B.C.

Pipeline proposals by TransCanada and Spectra Energy would feed projects such as Shell’s proposed $12-billion LNG Canada project in Kitimat, and Petronas’s planned $11-billion NorthWest Pacific LNG in Prince Rupert.

The request from the tribal council adds a new twist to the debate surrounding the new tax.

The provincial government has said the tax is needed to get a “fair share” for British Columbians from the export of its gas overseas to hungry Asian markets.

But the LNG industry, including global heavyweight Shell, have cautioned that the province is in danger of making the projects uncompetitive with a seven-per-cent tax, particularly given the existing large tax load in B.C. that includes a unique carbon tax.

Companies have been having private discussions with the province on the LNG tax.

First Nations have argued for decades for a share of revenues from natural resources in recognition of their aboriginal rights and title on unceded traditional territory.

Starting in earnest in 2010, the B.C. government began inking revenue-sharing agreements, part of a larger effort of reconciliation with First Nations.

According to the province, about $50 million in resource revenues annually are shared with First Nations, including from forestry and clean-energy projects.

For example, revenue-sharing deals for the first 12 years of the Mount Milligan mine in northern B.C. are expected to provide the McLeod Lake Indian Band $30 million and the Nak’azdli First Nation $24 million.

A 60-year deal on the Forest Kerr hydro power project in northern B.C. is expected to provide the Tahltan Nation with $150 million.

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