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Message to B.C.: Lower taxes or Petronas will shelve project

If they had had time to edit it on the fly, Monday’s throne speech might have looked different.
If they had had time to edit it on the fly, Monday’s throne speech might have looked different.

But the traditional speech outlining the government’s agenda was locked down several days before delivery, so it was given as finalized last week, with no time to recognize Monday morning’s development.

That was a formal statement from the bellwether liquefied natural gas proponent, Petronas, which amounted to a power play against the B.C. government. In two pages, the Malaysian giant said increasing costs, government regulations and market changes “threaten” the project. The message to B.C. was: Lower the taxes, or we walk. Not only that, but do it by the end of October or we’ll put it on the back burner for 10 to 15 years.

So after two years of work on the $36-billion Prince Rupert LNG plant and pipeline, Petronas now portrays itself as looking skeptical about the chances and indifferent about the outcome, because of high taxes and costs.

“In our last portfolio review exercise, the current project economics appeared marginal,” the firm said.

One response to that position would be to play it just as cool as Petronas did. The government could have said the company has its priorities and B.C. has its own. If they don’t want to play, maybe the next outfit in the 15-proponent lineup does.

But the government didn’t have time to adjust its message. So a few hours after the company portrayed itself as standoffish and lukewarm at best, the throne speech rolled out and B.C. committed itself once again as enthusiastic to the point of desperation about LNG.

It was pitched as the pivotal turning point in provincial history, an epic choice between growth and decline. Saying no to LNG equates to “choosing to tell our children they should expect nothing from us but a bill to pay,” the speech said.

“The choice is between more jobs — or far fewer than today.

“The core services this government provides need to be protected. And the inescapable truth is they can only be protected if we can afford them.”

The speech said LNG will pay for new hospitals, a new law school, new social housing, care for seniors and jobs for youth.

So the government, with its heart on its sleeve, is once again committing itself overwhelmingly to doing whatever it can to land a project. Just when one of the main proponents indicates it’s getting cold feet.

It makes for a certain imbalance at the negotiating table, when one partner is avid to the point of being obsessive and the other is looking a little reluctant.

That’s the most obvious read. Everyone is going through the Petronas statement and trying to divine deeper meanings. Maybe it’s just a ploy. The state-owned company is a worldwide giant. It funds a good chunk of the Malaysia’s national government all by itself. Maybe it’s facing internal pressures and is actually just as desperate to do the B.C. deal, but needs to drive the upcoming tax regime down as far as it can before signing on.

Premier Christy Clark said it’s all part of the negotiating game. “What we can take from that [statement] is that there is a lot at issue at the negotiating table at the moment. They’re getting down to the short strokes and the hard part is coming up for both sides.”

Natural Gas Minister Rich Coleman said they’re still observing the niceties of negotiations. He and Clark met the Petronas bosses a week ago and had subsequent meetings. The company sent them advance notice of Monday’s message.

“It’s all negotiating at this point. It’s just a case of continuing discussions, as you get closer it raises some of the interest,” said Coleman.

The Oct. 31 deadline has always been a fixture, given the company’s goal of making a final investment decision by December.

They just amped up some of the pressure Monday, saying: “Without cost reduction efforts across the project, we’ll have a tough time reaching a positive decision.”

Over to you, premier. Try not to show how much you care.

> Warning from Petronas, B1