LNG Tanker
The $100 billion Prosperity Fund that the British Columbia government claims will be generated by LNG development in the province is unrealistic, according to theCanadian Centre for Policy Alternatives (CCPA).
The projections are based on assumptions of large export volumes and high prices in Asia, which the CCPA said are "too good to be true." The government said the fund will accumulate over 30 years due to a $1 trillion injection into B.C.'s gross domestic product from the LNG industry, but the CCPA said a more realistic estimate shows yearly income tax revenue of $200-600 million for a total of between $6-18 billion over three decades.
The report argues that more than half of global exports are expected to go to Japan and South Korea, but both of these countries may reduce their reliance on LNG as they turn back tonuclear power after shutdowns in the past few years.
As well, other countries will be increasing their LNG capacity over the next five years.
The report also says that Asian importers, which make up 70% of the market, are looking to negotiate lower pricing.
"At more plausible Asian prices and production levels, combined royalties and LNG income taxes would likely be much smaller than the best-of-all-possible-worlds projection from the B.C. government," said author Marc Lee, CCPA senior economist, in the report.
"The B.C. government should go back to the drawing board and develop a tax/royalty regime that puts more emphasis on achieving public benefits before signing away rights to this non-renewable public resource."
The full report can be found here.