B.C.’s liquefied natural gas boom to fuel $100 billion Prosperity Fund

VICTORIA – Premier Christy Clark says her Liberal government’s plans to embrace the trillion-dollar potential of exporting liquefied natural gas to Asia means making decisions today that won’t pay off for many years.

The government’s throne speech delivered Tuesday announced a new B.C. Prosperity Fund that could accumulate between $100 billion and $260 billion in revenues from LNG royalties and business taxes, enough to wipe out the province’s current debt of $56 billion and eliminate the need for a provincial sales tax.

Opposition New Democrat Leader Adrian Dix charged Clark is asking British Columbians to trust a government that is making plans 30 years ahead when it hasn’t shown much skill in forecasting six months into the future.

B.C. Conservative Party Leader John Cummins was even more blunt, saying the plan appears to be based almost entirely on winning a lottery-like windfall from liquefied natural gas or LNG.

Clark’s throne speech highlighted both her government’s political agenda for the coming year and its plans for the May 14 provincial election campaign. The speech focused on proposed LNG developments in northern British Columbia and what she called a generational opportunity.

Clark deflected concerns that her government was focusing too much of its economic energies towards LNG projects that at the moment are more blueprints than reality.

The first LNG facility is projected to be in operation in two years and most of the others are seven years away.

“We did not win the Olympics in 2010,” she said at a news conference following the release of the throne speech. “We won it seven years before that.”

Clark’s throne speech said LNG export possibilities represent a possible $1 trillion boost to B.C.’s gross domestic product over the next 30 years, and a portion of that would go into the new B.C. Prosperity Fund.

“Future revenues will be designated to this fund, ensuring British Columbia families can benefit from the prosperity created by natural gas in our province,” said Lt.-Gov. Judith Guichon, who read the throne speech.

Dix said the government’s track record on forecasting natural gas revenues in its regular financial updates has been off the mark, leading him to have doubts about projections that look ahead years.

“They were dramatically wrong over six months in terms of natural gas revenues,” he said. “A government that has over time … been completely wrong and completely out of step on its estimates, one has to take its estimates with a grain of salt.”

Clark would not elaborate on her government’s plans to build the Prosperity Fund through a new LNG tax to generate revenues. She said sensitive negotiations are underway with the LNG companies and the timing isn’t right to discuss the tax issue.

The throne speech emphasized that the prosperity fund can’t be used as type of slush fund.

“Your government is resolute that the Prosperity Fund cannot become a back stop or excuse for poor fiscal management of government,” said Guichon.

The main focus of the Prosperity Fund will be to cut the provincial debt, which costs the province $2.4 billion annually in debt-servicing costs, she said.

“Whether it’s eliminating the provincial sales tax, or making long-term investments in areas like education or vital infrastructure that strengthen communities — these are the kinds of opportunities the B.C. Prosperity Fund can provide,” Guichon said.

Recent estimates of the impact of LNG development in B.C.’s north includes the creation of 39,000 jobs over the nine-year construction period and 75,000 new full-time jobs if the five facilities reach full production.

The Liberal government promised in its September 2011 jobs plan the development of three LNG plants in northwest B.C. by 2020. That figure has since been upgraded to five plants, but the completion dates are not as firm, and the companies have yet to make their final investment decisions.

Since last year, major gas and oil companies, including Chevron and Shell have invested $6 billion in British Columbia LNG projects, including preparing export sites in the Kitimat area.

The LNG projects involve building pipelines from northeast B.C.’s natural gas fields to LNG terminals near Kitimat, where the product will be shipped to Asian markets. LNG is natural gas that is cooled to a liquid form where it can then be loaded onto tankers.

Last year, Clark said her government’s plan to export LNG to Asia is B.C.’s economic equivalent to Alberta’s oilsands.

While the throne speech centred on the LNG opportunities, the government said it has other plans in the works.

Guichon said the Liberals will soon start work creating an environment for a school of traditional Chinese medicine at a B.C. post secondary institution.

An announcement will be made in the coming weeks about a federal, provincial and business community plan that transforms Vancouver into a focal point for Asian and South Asian corporate offices and investment activity.

The government also expressed its support for the proposed $7.9 billion Site C hydroelectric project in northeastern B.C.

“British Columbia has sufficient power to meet today’s needs,” said Guichon. “However, planning for the future is not about meeting present needs, it’s about having the foresight to meet the demands of tomorrow.”

The government also stated that it has reduced the provincial child poverty rate despite reports that B.C.’s child poverty rate has been the highest or near the highest in the country for much of the years the Liberals have been in government.

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