Local Citizens Enraged By Proposed Tax Breaks for Irving's LNG Plan
(Copyright © 2005 Energy Intelligence Group, Inc.)
Friday, June 10, 2005
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Residents of St. John, New Brunswick in Canada are crying foul after the provincial government introduced legislation on Wednesday to approve a special tax break worth as much as C$100 million (US$80 million) over 25 years for St. John-based Irving Oil to build a liquefied natural gas (LNG) terminal near its Canaport oil refinery.
The legislation, which is due to be voted on in the coming days, would supercede existing laws designed to prevent municipalities from offering such tax breaks to industry for fear that taxpayers throughout the province would end up subsidizing business. Brenda Fowlie, the provincial minister responsible for local government, was quoted by the Canadian Broadcasting Corp. (CBC) on Tuesday as saying it "could be months" before the province made a decision.
Irving Oil, which is privately owned by the billionaire Irving family of New Brunswick, announced it had signed a "definitive deal" with Spain's Repsol YPF to build the C$750 million (US$597 million) terminal to import LNG (OD Jun.8,p6). Irving will handle gas sales to Atlantic Canada while Repsol will concentrate on sales to the US, where most of the gas will go.
But the C$500,000 (US$398,000) per year in taxes that the city will receive is only about one-tenth the amount that LNG proponents have offered to municipalities in similar deals elsewhere in Canada and the US. According to City Councilor Ivan Court, the mayor of St. John told the council late on Mar. 14 that it had until midnight to decide whether to grant Irving the tax break, after Irving and Repsol said they could not afford to build the LNG terminal without it. Given only one hour to decide, the council acceded to Irving's demands.
Until details of the tax break were made public a few weeks ago, Irving's proposal to build the LNG terminal had faced very little opposition in terms of environmental and safety concerns, and had been granted environmental approvals from both the federal and provincial governments. During a three-year review process, no lawsuits against the terminal were filed.
"We support the LNG terminal but we also support fair taxation," Court said.
When details of the tax deal broke, opponents to the financial arrangement began to make noise.
At a public meeting Wednesday night organized by a group calling itself the Coalition Concerned with LNG and Fair Taxes, the tax deal came under heavy fire, but attendees also expressed concerns about safety, the environment, fishing, local infrastructure, tourism, and other more familiar LNG terminal complaints.
Court said the council did not even have the authority to grant the tax concession to Irving in the first place, adding that this responsibility rests with the province. He also said that city employees withheld information pertaining to the true costs to the city, which is already the most heavily taxed municipality in the province.
Irving Oil, which expects the LNG terminal to be complete by 2008, did not respond when asked to comment on the taxation issue.
James Irwin, Washington