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Binding future governments

The focus of the special legislative sitting set to start July 13 will likely be a hypothetical scenario that could develop in the next 23 years.
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The focus of the special legislative sitting set to start July 13 will likely be a hypothetical scenario that could develop in the next 23 years.

The legislature has been recalled to do just two things - pass a bill that represents the provincial government's final legal outline of how the liquefied natural gas industry might proceed, and publicly release the terms of the project-development agreement under which the front-running venture could take shape.

One of the key terms is a virtual guarantee that any of the provincial taxes and royalties that would apply to LNG projects will remain unchanged for at least 23 years.

One of the cardinal parliamentary principles is that governments can't bind future governments to particular decisions.

But the B.C. Liberals have been desperate to maintain the long-term certainty that Pacific NorthWest LNG insisted on for its $36-billion investment.

The government will try to square that circle by recognizing any future legislature or government could change the terms. But there's a catch - PNW LNG will be indemnified against any such increases. Taxes or other government-imposed costs might increase, but the company will be entitled to get the money rebated under the law that's coming up in three weeks.

That effectively casts the current rates in stone for the foreseeable future.

The indemnification would apply to the LNG tax, the natural gas tax credit, any carbon tax changes specific to the industry, and any changes to the greenhouse-gas emission standards that would adversely affect the company.

A background document to an announcement last month states: "The project development agreement requires the province to indemnify the proponent and partners under certain circumstances against adverse changes."

If the additional costs rise above a certain threshold, "the province and the proponent will then discuss what compensation measures the province can implement to place the proponent in the same position it would have been if the change in law had not occurred."

Finance Minister Mike de Jong said Tuesday the legislation and the agreement amount to B.C. saying: "Here are the rules of the game and, although we can never bind future legislatures and governments, in the event someone down the road were to propose specific changes ... there are certain remedies that kick in."

He said attention to that particular point will be legitimate and "I'm sure it will attract some measure of attention."

The kind of extra costs covered would likely be imposed if gas prices jumped and the companies started making bonanza profits. It's not hard to picture a government in the 2020s watching that happen and getting the urge to rewrite the terms.

On the flip side, if prices drop and the venture doesn't produce as anticipated, there is some measure of protection for the government in the royalty scheme.

The rate rises over the years and includes a minimum threshold, so the company must pay a set amount for the Crown-owned gas even if they don't ship that amount.

Apart from the specifics, the brief sitting could also put the NDP stance under scrutiny. The Opposition has been consistently critical of LNG details, but says it supports the general concept and voted in favor of the tax regime earlier.

Leader John Horgan told host Voice of B.C. host Vaughn Palmer this month he "got a lot of grief from within the NDP and outside the NDP" for that.

Some of that grief came from people who oppose LNG for environmental reasons. But some of it came from the camp that is innately opposed to anything that comes from the Christy Clark government. They are ardently hoping for the project to fail just on political grounds.

Horgan is balancing between avoiding the perception of being anti-everything when it comes to job creation, and avoiding any perception his party supports anything Clark does.

But those details may well get lost in summer holidays.

"They're bringing forward a secret deal with a foreign company in July because they don't want people to pay attention... Most British Columbians will have checked out," he said.

He's more interested in pursuing the health firings in the upcoming series of question periods.