Canadian communities study tax impact of proposed LNG facilities

Many Canadian communities that are dealing with liquefied natural gas projects are working hard to understand the impact these facilities will have on their local economies.

In British Columbia, the community of Port Edward agreed to a 25-year, $152-million deal last month on property taxes for a proposed LNG export facility with Petronas, the Malaysia state-owned energy company.

Port Edward, a municipality of about 550 people in northwestern British Columbia, signed the agreement even though Petronas is still evaluating the LNG project.

"They want certainty as much as we want certainty," Port Edward Mayor Dave MacDonald told CBC News.

A CBC report on Monday showed Saint John may be able to rewrite a costly 25-year property tax deal if the city's LNG terminal becomes an export facility, has generated little interest among city politicians.

Mayor Mel Norton's office says the city has not spoken to any officials at Canaport LNG about the possible tax consequences of the facility undergoing a conversion from an import to an export facility.

"This is not being discussed," Christopher Dever, Norton’s executive assistant, said in an email last week.

There is no shortage of discussions ongoing in British Columbia among LNG companies and communities.

British Columbia has 18 separate LNG export facilities currently being studied with companies negotiating property tax arrangements with several communities to nail down costs for a final evaluation. 

Port Edward’s MacDonald says he understands Kitimat, B.C., and Chevron are also close to reaching a property tax deal.

The advance work is not only being done in British Columbia.

In Cape Breton, the County of Richmond has a $3 million a year property tax deal ready to go if a LNG export project gets off the ground in Bears Head, according to Warden Victor David.

"Hopefully, it means we can keep our tax rate at what they are and we can continue with the projects that we have going," said David.

Saint John began dealing with LNG tax issues a decade ago.

The city has an existing 25-year property tax deal with Canaport LNG, which is a joint partnership between Irving Oil Ltd. and Spanish energy giant Repsol, that requires it to pay $500,000 a year, a fraction of the $5.3 million it would owe without the deal.  

The property tax deal was struck between Saint John and the company in 2005.

However, on Monday CBC reported legislation that governs the deal specifies it applies "solely for the receiving" of LNG, a practice that would cease if the terminal is converted for export.

But if that would allow Saint John to escape the deal, or at least renegotiate its terms, Norton won't say.

"This hypothetical scenario has not been the subject of any discussions by council. If, in the future, this council receives any requests related to the taxation of any property in Saint John, such a request would be fully discussed and debated by members of council," Norton’s office said in an email.