In the throne speech to open the legislature this week, B.C. Premier Christy Clark’s government revealed it will add a tax on exports of liquefied natural gas to generate $100 billion over 30 years for a provincial “prosperity fund” similar to Alberta’s Heritage Savings Fund.
The industry isn’t happy. In fact, it’s already crying poverty.
The B.C. announcement came less than a week after a Vancouver Sun report that LNG producers have asked the federal government for $2 billion in annual tax savings to support development of the 10 LNG plants on the drawing board for Kitimat and Prince Rupert.
Clark’s government also used the throne speech to increase the number of LNG plants it expects to be in operation by 2020 from three to five.
It’s worth noting the first LNG plant isn’t likely before 2015 and most companies have yet to make final investment decisions.
The B.C. government would be wise to look to Alberta to better appreciate the complex dynamics of the marriage of convenience between a province and companies developing its resources when it becomes the lifeblood of the economy.
In that scenario, government is a partner as much as a resource owner or a regulator.
Alberta is as rich in natural resources as any jurisdiction but the vagaries of commodity price economics have translated into five consecutive government budget deficits and fears of a $6-billion revenue shortfall this year due to lower-than-forecast oil royalties.
As for a $100-billion Prosperity Fund, remember that Alberta launched its Heritage Fund in 1976 and today it is worth just over $16 billion.