"He had been eight years upon a project for extracting sunbeams out of cucumbers, which were to be put in phials hermetically sealed, and let out to warm the air in raw inclement summers."
- Jonathan Swift, Gulliver's Travels So Premier Christy Clark is pinning B.C.'s economic prospects on liquefied natural gas, with billions of dollars of extra revenue projected for the 2020's. Meanwhile, the Canadian oil and gas lobby is asking Ottawa for subsidies that may add up to $2 billion in tax savings. This will supposedly encourage the development of LNG plants in British Columbia.
Once more, the so-called free market - an oligopoly, actually - somehow can't seem to function without wringing special concessions from government. David Collyer, president of the Canadian Association of Petroleum producers, wants to see a change in the taxing structure for liquefied natural gas. Reclassifying LNG plants from gas transmission to manufacturing plants would result in a 30 per cent capital cost allowance when they are constructed. It will take only nine years to write off 90 per cent of the investment, rather than 27 years.
The manufacturing sector usually creates twice as many jobs as the oil and gas sector, hence the current taxing structure. LNG in particular is much more capital intensive than labour intensive. Kin Lo, an associate professor at the University of B.C.'s Sauder School of Business, estimates that the sought-after tax break will translate into $1.5 to $2 billion over seven years for a paltry 800 permanent jobs.
I will leave the math about job creation versus treasury attrition to the economists, and the postmodern oxymoron "permanent jobs" to the linguists, especially given Canadian policy makers' enthusiasm for foreign worker programs.
The oil and gas sector already gets a huge break in this country. Canadian nationalist Mel Hurtig has noted that most manufacturing and oil and natural gas operating revenues in Canada go to foreign owners. That includes Canada's largest oil and gas producer Encana. "Dozens of other important 'Canadian' corporations are already majority-foreign-owned, mostly by Americans," notes Hurtig.
Marc Lee, economist with the B.C. Centre for Policy Alternatives, insists we are giving away our natural resources. In November 2012, he condemned B.C.'s natural gas strategy for being "immoral, illegal and bad economics."
Here's one item highlighted by Lee. In September 2012, the B.C. government's First Quarterly Report on the B.C. Budget noted that natural gas royalties were plummeting. The solution: public service cuts to balance the books. As the update states on page 6:
"The deterioration in natural gas royalty revenue is the main issue that needs to be managed in order to balance the budget.... Government will need to adopt revenue and/or expense measures as part of its management strategy... Immediate measures include a freeze on hiring across the B.C. Public Service and a salary freeze for all public sector excluded management staff, including those in Crown corporations and the SUCH sector (schools, universities, colleges and health organizations)."
Given the Clark government's failure to project LNG revenues for just the past year, pinning our future prospect on the mercurial global energy market sounds like extracting sunbeams from cucumbers - especially if a quarter of B.C. Hydro's existing hydroelectric production is directed to servicing liquefied gas plants that are still on the drafting board.
To her credit Clark is talking about a new tax on LNG, but you can expect resistance from energy investors dealing with market mood swings (look at the multibillion dollar infrastructure projects now in cobwebs on the Alberta Oil Sands). The long-term trend has been for governments to bend over backwards for big business while condemning other constituents for living beyond their means. Public services go on the chopping block to service deficits, with the disease of private-public partnerships trumpeted as the cure.
For years, the song has remained the same in our resource rich land: socialism for transnational corporations and cutthroat competition for everyone else, including small businesses. Is that about to change under another right-wing B.C. government?
If B.C. insists on remaining a third-rate export economy of raw resources, let's do it up right. Legalize cannabis like Washington State, and tax the profits of an underground economy that's on a par with the forest industry. With our province's Brobdingnagian stores of natural capital, there's no reason for us to keep behaving like Lilliputians. www.geoffolson.com