ILLUSTRATION shows lay out of the proposed Douglas Channel floating LNG project near Kitimat.

Customs duty hangs over northwestern B.C. LNG project

The federal government wants to add $100 million to cost of planned project near Kitimat

  • Fri Nov 6th, 2015 6:00pm
  • News

A Calgary-based energy company expects to find out this month if it will be successful in appealing a decision by the federal government to impose a $100 million customs duty on a planned liquefied natural gas (LNG) project at Kitimat.

The appeal was filed by AltaGas, a Canadian partner in the Douglas Channel LNG project which would feature a LNG plant affixed to a floating platform to be built in Asia and ferried to Kitimat.

Because the federal Canada Border Services Agency is classifying the platform as a ship, it’s subjecting the barge-shaped platform to a 25 per cent duty fee.

AltaGas vice president John Lowe, in speaking to analysts during a conference call held to discuss the company’s latest earnings, said it takes the opposite view.

“The floating unit is incapable of navigation, it has no self-propulsion and it’s going to be moored permanently,” he said.

And the equipment on the platform should not be subject to any duty which is the case for all equipment that liquefies air or gases, Lowe said.

AltaGas and other members of the Douglas Channel consortium have been working toward a final investment decision on the $600 million project by the end of the year and an appeal of the $100 million duty fee is necessary to make that decision, said Lowe.

He noted that the Douglas Channel LNG project is not the only proposal involving a floating platform.

“We feel that on a policy basis it’s not in Canada’s interest to impose this sort of a barrier to these developments, particularly when there really aren’t any shipyards in Canada that would be able to undertake this sort of a project,” said Lowe.

NDP MP Nathan Cullen says he’ll be contacting AltaGas to find out more about the $100 million federal customs bill.

While Cullen acknowledged that the 25 per cent duty is meant to protect and encourage Canadian shipbuilders, he noted the importance of the project to the area.

“This is a situation where the company is doing the right thing,” said Cullen. “It has the approvals and the approval of the local First Nations.”

“I certainly feel AltaGas deserves a fair hearing.”

Cullen did wonder if the duty was an item AltaGas knew about in the planning of the project or whether it was something just recently sprung by federal customs officials.

In the meantime, provincial natural gas development minister Rich Coleman says he’s talking to the federal government about a duty remission.

“We are working with our industry partners, stakeholders and other levels of government to ensure British Columbia is a competitive place to do business,” said Coleman.

“We believe providing duty remission for Douglas Channel LNG, consistent with other LNG facilities, will make Canada more attractive for companies considering establishing projects here.”

“The province has contacted the federal government to support duty remission for the proposed Douglas Channel LNG facility. We look forward to continuing these discussions,” Coleman said.

Provided there is an investment decision made by the end of this year, the Douglas Channel project would be the first LNG facility off the mark.

At $600 million it would also be the smallest compared to others, such as Chevron-backed Kitimat LNG and Shell-backed LNG Canada, also at Kitimat, that would cost upwards of $40 billion.

And unlike other projects which would required pipelines to deliver natural gas, Douglas Channel LNG would be fed by the existing natural gas pipeline servicing the northwest. It’s owned by Pacific Northern Gas, an AltaGas subsidiary.

The other members of the consortium are Belgian-based LNG shipper called Exmar, which would supply the floating LNG platform, Indemitsu Kosan of Japan and EDF Trading Ltd., a subsidiary of Electricite de France S.A.

The AltaGas investment in Douglas Channel LNG is $100 million and the Haisla First Nation is an equity participant as well.