UPDATE 2-British Columbia unveils LNG tax, projects budget surpluses

Tue Feb 18, 2014 6:58pm EST
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By Julie Gordon and Jennifer Kwan

VICTORIA, British Columbia Feb 18 (Reuters) - British Columbia on Tuesday provided long-awaited details on a new income tax for its nascent liquefied natural gas (LNG) industry, as Canada's westernmost province released its second consecutive balanced budget.

The coastal province is eyeing a two-tier tax that would apply to income from the liquefaction of natural gas, the process of cooling gas into a liquid to be transported by ship, at facilities in British Columbia.

The first tier, set at 1.5 percent, will apply as soon as commercial production is achieved, while the second tier, pegged at up to 7 percent, would kick in once the operator has recouped the capital investment related to building the LNG facility.

Premier Christy Clark has prioritized the development of LNG export terminals along the rugged Pacific coast, which she has said could boost the provincial economy by as much as C$1 trillion and create some 100,000 jobs over the next 30 years.

Energy regulators have so far awarded seven export permits, but no final investment decisions have been made and production is still years away, prompting some to question the feasibility of the province's big bet on LNG.

"There are some skeptics out there who question whether this industry is real, and whether it will proceed in B.C.," Finance Minister Michael de Jong said in the budget speech. "It is very real."

He added that the framework strikes a balance between the need to maximize tax revenues into government coffers, while also ensuring the province is an attractive and competitive place to develop an LNG industry.   Continued...