New Brunswick

Canaport LNG's tax deal won't cover export, city lawyer says

Canaport LNG's property tax deal with the City of Saint John would not cover any future export activities, the city's solicitor says in an email leaked to CBC News.

City manager sought city solicitor's legal opinion, following CBC report, source says

Saint John's city solicitor says Canaport LNG's tax deal would not cover any export activities. 2:12

Canaport LNG's property tax deal with the City of Saint John would not cover any future export activities, the city's solicitor says in an email leaked to CBC News.

"Legislation is clear, concession is only to facility for …"receiving and containment of lng … Amendment would be required to alter terms," John Nugent states in the email Tuesday to city manager Pat Woods.

Woods requested Nugent's legal opinion on the terms of the tax deal.

The request came on the heels of a CBC report, which suggested a wrinkle in the wording of the 2005 deal could kill the 25-year arrangement if the liquefied natural gas terminal begins to export LNG.

Canaport LNG gets a 91 per cent discount on its $5.3 million in annual property taxes under the current deal, which extends until 2030. (CBC)
The facility, a joint venture between Irving Oil Ltd. and Repsol, the Spanish petroleum company, carries the highest property tax assessment in New Brunswick at $299.4 million.

But under the deal, struck in 2005, its annual property tax bill is frozen at $500,000.

That's a 91 per cent discount on the $5.3 million in annual property taxes the plant would owe Saint John without the deal, an arrangement that does not expire until 2030.

However, the tax deal's precise wording says it applies to property "solely for receiving" LNG and there are discussions now underway to convert the facility to manufacture and export LNG instead.

Province following developments 'closely'

Mayor Mel Norton was not immediately available for comment on Tuesday.

But Coun. Donna Reardon says she's hopeful that if the deal does dissolve, something better could be worked out for the city.

"I know Repsol and Irving — they would want a fair deal for Saint John as well. I mean, we're all in Saint John together, we're all working together", she said.

"So hopefully there would be that will on the other side of the coin to move ahead with a new set of terms."

Coun. Bill Farren said "it would be great to get a few more tax dollars."

"But I'd also want to know what we'd do with those tax dollars," he said. "If I give them another couple of million dollars, what are they going to do with that — spend that too?"

Asked whether he was suggesting the city might waste any additional tax revenue it might get out of the LNG facility, Farren replied: "I think with what I've seen in the 2015 budget, it’s a good likelihood."

The New Brunswick government believes there would be "great economic opportunity for our province in converting the Canaport LNG terminal to an export facility," Minister of Energy and Mines Donald Arseneault said in an emailed statement.

"Our government is following the developments on this file closely, and if the project materializes, we would have to re-examine the property tax arrangements in place with the city and project partners," said Arseneault.

"For the moment, it’s too early to speculate on this as no formal plans for the conversion are underway," he said.

Originally, Canaport LNG was built to import liquefied natural gas by ship into Saint John, return it to a gas onshore and ship it by pipeline to the United States.

But shale gas developments in the U.S. have flooded the markets, undercutting the need for imports. As a result, Canaport is exploring the feasibility of converting the facility to bring in cheap U.S. gas by pipeline, liquefy it and then load it onto ships for export to Europe and other destinations where prices are higher.

The conversion to an export facility would cost up to $4 billion, according to one published report.

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