The creation of a "prosperity fund" will be unveiled in B.C. Finance Minister Mike de Jong's new budget, but the original promise – to fill the provincial coffers with revenue from a liquefied natural gas industry – has been rewritten in the absence of any LNG income.
The prosperity fund was a key B.C. Liberal election campaign commitment in 2013. However Mr. de Jong, until now, resisted the temptation to launch the fund because the province has yet to secure a final investment decision from any of its prospective LNG investors.
"The ability to establish a prosperity fund is tied directly to the establishment of an LNG industry," Mr. de Jong said in October of 2014. The fund was supposed to collect a portion of royalties, sales tax and other tax measures collected on natural gas used for LNG, plus a share of corporate income taxes collected from the industry. Last spring, Mr. de Jong told the legislature: "The prerequisite to the creation of a sizable prosperity fund in B.C. is positive investment decisions by proponents in the burgeoning LNG industry."
On Monday, the eve of the introduction of his fourth consecutive surplus budget, Mr. de Jong said he will establish the new fund with an admittedly arbitrary $100-million contribution from general revenues.
"We are leading the country in economic growth," Mr. de Jong told reporters Monday. "So the fact that we would take a very small amount out of the chequing account, as it were, and transfer it into a savings account to look ahead is, I think, a natural for us."
Opposition finance critic Carole James said the contribution just happens to match the amount of additional revenue the province is collecting from its Jan. 1 increase to medical service premiums.
"The Premier is looking for a way out of her embarrassment of not having an LNG plant," she said in an interview.
"That's $100-million of taxpayers' dollars. The public shouldn't be paying for this. This is the Premier's fantasy fund," Ms. James said.
Mr. de Jong conceded the initial transfer of $100-million is not related to any LNG income, although he said potential investors have spent billions of dollars trying to move ahead with LNG projects in British Columbia.
"These funds will accrue from the anticipated surplus from [the fiscal year just ending]. It's arbitrary to that extent," he told reporters after picking up his resoled shoes, which he will wear, for the third year running, on budget day.
"I think British Columbians are supportive of the idea that, at a time when we are leading the country, when our fiscal circumstances are such that we are able to do this, that we would put just a little bit of money aside for a rainy day."
He said he remains committed to paying down the provincial debt – which is where the budget surplus would otherwise go.
On the eve of the 2013 provincial election, the B.C. Liberal government used the Speech from the Throne to promise to establish the B.C. Prosperity Fund that was to capture more than $100-billion in tax revenues from at least five new LNG plants over the next three decades.
But low oil and gas prices have weakened the industry, casting doubt on all 20 proposals to export LNG from British Columbia.
Royal Dutch Shell PLC disclosed in early February that a decision on its LNG Canada joint venture in northern British Columbia is being delayed by about nine months. Shell is now aiming to make a final investment decision – yes or no – at the end of 2016.
The Pacific NorthWest LNG project in the Port of Prince Rupert is at risk of being delayed, too, analysts say. Pacific NorthWest LNG, led by Malaysia's state-owned Petronas, has been undergoing a federal environmental review since April, 2013, but the province is hoping a final investment decision will be made this spring.
Mr. de Jong maintained that the LNG income will arrive at some point. "We are still confident it is a question of when, not if."