LNG executives face ‘time crunch’ for tariff relief
Government reviewing issue that’s seen as the last hurdle to sector’s development
CALGARY Canadian liquefied natural gas proponents face a “time crunch” as executives fly back and forth to Ottawa with increasing frequency to ask for tariff relief, now considered among the last remaining obstacles to the nascent industry’s development in British Columbia.
Woodfibre LNG is sending a delegation to Ottawa this week to meet with officials from Finance Canada and reiterate its request for relief from the 48.5-per-cent duty in place for fabricated imported steel components (FISCs) that would be used in its $1.8-billion LNG project in Squamish, B.C.
“We had never anticipated these kinds of duties,” Woodfibre spokesperson Jennifer Siddon said, adding the company initially filed for a duty remission order in September and provided followup information in November but is still not clear how long it would take to get an answer.
“The timing is unfortunate for us, because we are getting down to wanting to award that (engineering, procurement and construction) contract and wanting to get started on construction,” Siddon said.
Woodfibre had initially announced its 2.1-million tonne export facility in Squamish would go ahead, but paused parts of the project when the tariffs were first imposed in 2017.
Siddon said the company had recently resolved other recent obstacles to construction, including obtaining certainty on what it would pay for electricity and the tax it would pay in British Columbia.
“I think, within the LNG industry, we know that the window is opening and we want to be ready to go get it. You don’t want to be delayed so that you miss it again,” Siddon said.
Singapore-based Woodfibre is not the only company making visits to Ottawa to seek relief from the tariffs.
At the beginning of April, LNG Canada, Suncor Energy Inc. and Fluor Canada appealed the Canadian International Trade Tribunal ruling from 2017 that initially imposed the duties on the steel components, which have also been used for oilsands projects.
Suncor spokesperson Sneh Seetal said in an email the company isn’t sure when the Federal Court of Appeal will render its judgment. She added that Suncor does not expect the tariffs will affect its recently completed $17-billion Fort Hills oilsands project “as steel and equipment were already imported.”
LNG Canada did not respond to a request for comment. Fluor declined to comment on the basis for its appeal.
Analysts say Finance Minister Bill Morneau has power to relax the tariffs, which could remove a major hurdle to construction starting on Woodfibre LNG. They also believe the tariffs are the last remaining obstacle for Shell Canada Ltd.’s LNG Canada project, which was initially estimated to cost $36 billion and would mark the largest single investment in Canadian history.
“We are aware of Canadian LNG proponents’ concerns about the imposition of anti-dumping and countervailing duties on fabricated imported steel components,” Finance Canada spokesperson Jack Aubry said when asked whether a remission order was being considered.
“Finance Canada continues to carefully monitor this issue, and we are conducting normal due diligence and consultation with implicated stakeholders as we do when considering all remission
I think, within the LNG industry, we know that the window is opening and we want to be ready to go get it.
requests,” Aubry said.
In March, a group of seven mayors from cities in northern British Columbia flew to Ottawa to raise concerns that the import tariffs could hurt the chances of LNG projects being built in the province.
“Clearly, something needed to be done to ensure the opportunity for LNG and the $22 billion in government revenue, the tens of billions of capital investment, and the 10,000 skilled jobs that come from construction wouldn’t be lost,” mayors of the cities including Kitimat, St. John’s, Dawson Creek and Terrace wrote in a letter to the federal government on April 6.
Financial analysts also believe tariff relief could be on the way.
“There has been a precedent of LNG companies getting a favourable ruling,” Wood Mackenzie principal Americas gas analyst Dulles Wang said, citing a previous decision on a now cancelled LNG project by AltaGas Ltd.
“That is the remaining obstacle for both projects,” Wang said of Woodfibre LNG and LNG Canada, adding that both of those companies are facing a “time crunch” and feel a sense of urgency in getting a response from the federal government.