The Province is amending the Depreciation of Industrial Improvements Regulation under the Assessment Act to allow a fixed depreciation rate regime specific to large LNG facility improvements that will help smooth provincial property tax revenues where development occurs.

Under the Assessment Act and its regulations, new LNG plants would be classified as Class 4, Major Industry (Class 4 includes oil refineries, pulp mills, mines, etc.). LNG capital investments are projected to far surpass other Class 4 investments in the province. To provide greater stability and predictability to the resulting provincial tax revenues from LNG facilities - including school, hospital, police, and regional district taxes - changes to the Regulation allow for:

• A one-time depreciation to 60% to be applied during the plant construction and for the first 15 years of full operation.
• An eight percent annual depreciation rate starting in the 16th operating year, accumulated annually to a current maximum of 80%.

These changes will shift some of tax burden from early years to later years, as well as ensuring a competitive, balanced and equitable framework for the industry. This approach also means that taxes for other taxpayers in the area will not increase rapidly over time as a result of the depreciating assessment of the LNG facility. Municipal property tax revenues will not be affected by these amendments.

For the Pacific NorthWest LNG project, taxes paid to the District of Port Edward are being dealt with under a separate agreement-in-principle signed last December between the district and the proponent. Under the agreement, Pacific NorthWest LNG will provide negotiated municipal property tax payments to the district over the next 25 years (unrelated to assessed value), as well as infrastructure investments (e.g. support for water and sewer system upgrades and future construction of the Wampler Way bypass).

Pacific NorthWest LNG will also pay the District of Port Edward upfront monthly sums in 2015, allowing the district to begin preliminary work in the community. The first full taxation year will be 2016, with escalating annual payments for 25 years.

On May 20, 2015, the Province and Pacific NorthWest LNG signed a Project Development Agreement that sets the stage for a LNG facility on Lelu Island, located in the District of Port Edward on land administered by the Prince Rupert Port Authority. The facility would liquefy and export natural gas produced by Progress Energy Canada Ltd. in northeast B.C. for transport to Lelu Island by the Prince Rupert Gas Transmission project.

Media Contacts:

Jamie Edwardson
Ministry of Finance
250 356-2821