Petronas CEO Shamsul Abbas speaks during the LNG conference in Vancouver, B.C. Wednesday, May 21, 2014. Malaysia's Petronas is threatening to quit a proposed liquefied natural gas project on British Columbia's north coast, complaining the government hasn't done enough to convince the oil and gas company that it would be worthwhile to invest billions of dollars, the Financial Times reported Thursday. THE CANADIAN PRESS/Jonathan HaywardJONATHAN HAYWARD/The Canadian Press
Shamsul Abbas, the CEO of Petronas, the state-owned Malaysian oil-and-gas company, has not given up on British Columbian liquefied natural gas – not yet anyhow. He arrived in B.C. on Friday, having expressed his displeasure with the province's government in the Financial Times on Thursday. As a prospective multibillion-dollar investor in B.C.'s natural gas, he was striking a pose for negotiating purposes.
Even so, he may have a legitimate point.
The Liberal government of B.C. is planning to table a bill later this year, which would establish a special income tax on liquefied natural gas. That would be on top of regular corporate income tax and the companies' payment of royalties for use of a province's underlying natural resources.
The B.C. government asked Ernst & Young to compare its fiscal-framework plans for LNG to those already in place in Australia and five American states: Alaska, Georgia, Louisiana, Oregon and Texas. The firm concluded that the B.C.'s taxes and royalties on LNG, including the new tax, would be competitive with the other jurisdictions. But E & Y cautiously did not "comment on the appropriateness" of any of these fiscal frameworks, neither the existing ones elsewhere nor the projected B.C. plan.
Premier Christy Clark, Mike de Jong, the Minister of Finance, and Rich Coleman, the Minister of Energy, may have good explanations for what looks like double taxation on a particular industry. If it were just a matter of asking LNG enterprises to contribute a fair share of the cost of roads and other new public infrastructure in remote parts of northern B.C., a new revenue source would make eminent sense. But the current plan, for an extra tax specific to one industry, doesn't seem like a good precedent.
Mr. Abbas would not have come to Canada at all, nor would he have spoken out prior to his visit, if he wasn't interested in building an LNG business in B.C. This looks like negotation via media. But in the process, he's raised some good questions. The government needs to answer them with the right policy.