When Premier Christy Clark stated during the last provincial election that we don't need Ottawa to develop a liquefied natural gas industry in British Columbia, she was wrong.
It seems the federal tax on capital costs is a stumbling block for investors who are still debating whether to sink billions of dollars into LNG facilities on B.C.'s coast.
Since 2012, B.C. has been shouting from the rooftops that its plan to export liquefied natural gas to Asia compares to the economic value of Alberta's oil sands.
But Ms. Clark has been unable to attract Ottawa's help to secure this new industry.
Other countries are pulling ahead in the race to land LNG investment dollars while B.C. has slowly pieced together a regulatory and fiscal framework for the industry.
Those decisions are now coming down to the wire.
Initially, Ms. Clark focused on selling British Columbians on the promise of LNG, and then turned to courting prospective investors.
It wasn't until this year that the provincial finance ministry produced numbers designed to get the attention of the federal finance minister.
By the province's calculations, investment in LNG will provide the federal treasury with a boost in corporate income-tax revenue ranging between $750-million and $2.9-billion, annually. Those figures are based on seven mid-sized LNG plants – although not one has been secured with a final investment decision.
B.C. Finance Minister Mike de Jong is now encouraged that the numbers have worked their magic.
"We are talking about federal revenues of a magnitude that would impact, in a positive way, federal transfer payments," he said an interview.
"I will be a little bit cryptic but I am cautiously optimistic that we will see evidence in the next federal budget of measures that demonstrate the degree to which Ottawa understands and assigns importance to the establishment of an LNG sector in Canada."
In his roundabout way, Mr. de Jong is saying he expects there will be a tax break for LNG manufacturing in the February, 2015, federal budget.
If he is correct, it will have taken three years to get Ottawa to embrace Ms. Clark's vision.
Trouble is, investors have made it clear that they won't put their money down until they know the regulatory and tax framework that will apply in Canada. Which means, at the very least, Ms. Clark's prediction that the first B.C. LNG plant would be in production by 2015 has evaporated.
Alberta faced a similar challenge in the 1990s when then-premier Ralph Klein grasped for his own generational opportunity – the one that became his legacy. Production in the oil patch was spluttering, hindered by the engineering cost of extracting the massive reserves from the muck. Mr. Klein pushed for federal tax breaks to help unlock the energy in the oil sands, efforts that paid off with a sustained energy boom for his province.
But the government of Alberta had to move first, reducing its share of royalties to encourage investment in new large-scale development. Seven months later, in June, 1996, then-prime minister Jean Chrétien travelled to the heart of the oil sands in Fort McMurray to sign a "declaration of opportunity" that included the federal tax relief to kick-start development.
During the provincial election of 2013, Ms. Clark travelled the province in a campaign bus with the bold promise of a debt-free B.C. Politically, the promise paid off when Ms. Clark won re-election. But from a bargaining standpoint with hoped-for investors, she had showed her hand. At some point the government's "consultations" with industry morphed into hard-nosed negotiations, and they are not over yet.
In the next few weeks the Clark government will finally reveal its LNG tax and, importantly, its solution to the environmental challenge of building greenhouse-gas-intensive industry in a province that is by law required to reduce its carbon footprint.
Last week LNG proponent Petronas, long considered one of B.C.'s top prospects, threatened to cancel its $36-billion plans, citing high taxes and continued uncertainty. Ms. Clark, once so confident that B.C. could go it alone, does need Ottawa at the table, soon.
Justine Hunter