January 2015 Letter Re: LNG Capital Cost Allowance Reclassification
January 30, 2015
The Honourable Joe Oliver, P.C., M.P.
Minister of Finance
90 Elgin Street, 17th floor
The BC Chamber of Commerce would like to start by thanking you and your government for your leadership in helping to ensure that Canada’s economy continues to grow and remain stable during the current global economic malaise. The Chamber appreciates how you and your colleagues have supported opening up new trade relationships that will benefit British Columbians and Canadians by providing new global opportunities that help grow our economy. In B.C., we have seen the challenges of over-reliance on a single, though important, market such as the U.S. At the same time, we also recognize the benefits of having multiple trading partners, especially in Asia.
In terms of export opportunities, British Columbians and B.C. businesses are excited about the possibility of a liquefied natural gas (LNG) export sector in the province. It could represent the largest private sector investment in B.C.’s history. It would also provide new markets for western Canadian upstream natural gas resources that are currently reliant on only North American markets. We know that given overall energy trends, this is not sustainable. B.C. and Canada need a new market for our gas.
The success of an LNG sector is not only in the interest of project proponents and the province of B.C. The BC Chamber believes it is a national imperative. Of course, it will support significant value transfer to municipal, provincial and federal governments, but there is an entire value chain in B.C., and across the other provinces and territories, that will see the uplift of supplies, services and other opportunities. This is a major economic prospect for the provinces, as well as a major potential driver for the national economy. The Chamber wants to see all businesses, including small and medium sized enterprises, benefit from these projects.
As you are well aware, Canadian businesses operate in a globally competitive world and the LNG industry is no different. The companies looking to establish LNG export facilities are striving to reach final investment decisions in an investment climate that offer multiple jurisdictions to invest. To help get these final investment decisions, the Chamber understands that a capital cost allowance reclassification, from Class 47 to Class 43, would increase the competitiveness of Canadian projects not only in B.C. but also in Quebec and the Atlantic
provinces. This amendment will more accurately define the function of LNG facilities as manufacturing facilities. Under the current rules, LNG export is treated the same as LNG import notwithstanding the significant chemical/process differences as well as a completely different profile of capital investment. In 2007, Canada was not contemplating being an LNG exporter, but the world has changed. The opportunity for B.C. and Canada has changed and the 2015 budget cycle offers the federal government the chance to make a change that will greatly increase the global competitiveness LNG export industry in B.C.
The Chamber asks that your government consider ensuring that the depreciation rates for LNG facilities are increased to 30 percent, as part of Budget 2015, in order to provide a greater probability that financial investment decisions can be made.
We will also be advocating that the B.C. government take a number of measures to ensure that there are policies that are competitive from a regulatory, financial and labour perspective, but we believe that in the coming months, LNG proponents, small businesses, First Nations and other communities across B.C. would be supportive of any measure from the federal government that would also help enable these projects to proceed.
Thank you for your consideration on this important matter. The BC Chamber would be pleased to discuss this further with you at any time.
President and CEO
BC Chamber of Commerce
C.C. Honourable Perrin Beatty
President and CEO, Canadian Chamber of Commerce
Further to the above letter, the Canadian Chamber of Commerce acknowledge the BC Chamber in this letter to the Honourable Joe Oliver, P.C., M.P. February 6, 2015.