Canada unveils new tax measures to boost LNG investment

Thu Feb 19, 2015 9:35pm EST
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By David Ljunggren and Julie Gordon

OTTAWA/VANCOUVER (Reuters) - Canada unveiled tax measures on Thursday that will allow investors in new liquefied natural gas plants to recover costs more quickly, improving the competitiveness of projects proposed for the Pacific coast province of British Columbia.

Industry groups said the new measures would encourage investment in LNG projects in Canada, some of which have stalled in recent months as companies cut spending in response to plummeting oil prices.

"It certainly helps move the ball forward," said David Keane, president of the B.C. LNG Alliance, which represents seven of 19 projects proposed in British Columbia.

Under the rules, companies building new LNG export terminals will be able to deduct capital costs at a faster rate, allowing them to defer tax payments and recoup investment more quickly.

Ottawa will establish a capital cost allowance rate of 30 percent for equipment used in natural gas liquefaction, up from a current rate of 8 percent rate, and 10 percent for buildings at a facility that liquefies natural gas.

The tax relief will be available for capital assets acquired after Feb 19 this year and before 2025.

The Canadian Association of Petroleum Producers (CAPP), which lobbied for the changes, said the tax breaks will allow Canadian projects to better compete with rival developments in the United States and Australia.

"This tax classification change actually puts Canadian LNG facilities on a more level playing field with our international competitors," said Ben Brunnen, manager for fiscal and economic policy with CAPP. "And that's going to improve our competitiveness for those scarce dollars."   Continued...

Canada's Prime Minister Stephen Harper speaks during Question Period in the House of Commons on Parliament Hill in Ottawa February 18, 2015. REUTERS/Chris Wattie