B.C. Legislature debates law on 25-year LNG deal

The B.C. Legislature isholding a rare summer sitting todayto debate an unprecedented25-year liquefied natural gas agreement projected to be the cornerstone of the province's financial future.

The governmentplans to pass legislation enabling the $36-billion deal with Pacific NorthWestLNG, a consortium led by Malaysian energy giant Petronas.

The consortiumwants to build an LNG export terminal near Prince Rupert.The agreement would protect the businessfrom tax increases made specifically to target the LNG industry.

'A brave move'

Critics claim the rules would tie the hands of future governments to regulate an industry whose impacts have yet to be tested.

But supporters say the agreement allows B.C. to leverage a valuable asset in the hunt for international business: stability.

"I think this is a brave move," said Ron Loborec, an energy expert with Deloitte and Touche.

"It's made even braver by the fact the government of the day may not enjoy the benefits."

Under the terms of the 140-page agreement, B.C. would compensatethe consortium if future governments:

• Raise income rates for LNG operations.
• Add carbon taxes that specifically target the industry.
• Reduce natural gas tax credits.
• Make changes to rules on greenhouse emissions that financially harm the industry.

The company could seek compensation of $25 million a year or more.

Loborec says the agreement is necessary to provide Petronas the stability needed to invest billions of dollars in a long-term project.

Critically, he says, the deal wouldn't leave a "poison pill" for future governments because it does not affect changes to corporate or income taxes.

But Matt Horne, associate regional director for B.C. at the Pembina Institute, believes the deal could be bad for the environment.

"Essentially, what they're doing is locking in climate policy so that future governments have limited ability to strengthen it," he said.

"We don't make that promise for individuals or any other sector in the economy."

Horne notes that the length of the deal could see major environmental changes and climatic challenges that can't be foreseen at this point.

A blueprint for the future?

In releasing the details of the agreement, B.C. Finance Minister Mike de Jongdescribed the project as the singlelargest private-sector investment in the province's history.

He said the project should contribute more than $9 billion into provincial coffers in its first decade and create 4,500 jobs.

The opposition NDP has said the deal is a good one for the company, but not good enough for British Columbians because it lacks firmer commitments on jobs and training.

Thepurpose of the special session is to debate the agreement and pass legislation thatwould enable the government to enter into the deal.The agreement would then serve as a blueprint for future projects.

The project faces a number of hurdles including opposition from native groups who have vowed to fight it in court.

In May, theLax Kw'alaamsBandrejected a $1-billion deal withPacific NorthWest LNGto build a pipeline and terminal in Prince Rupert.

On Monday, thoseopposed gained another supporter whenthe Gitga'at First Nation announced it would launch a judicial review of the LNG project, claiming it had been excluded from the provincial environmental assessment.The project is still awaiting federal environmental approvals.