New Brunswick

Irving Oil says Saint John's 'hands are tied' over LNG deal

The City of Saint John and Irving Oil have had informal discussions about possible changes to a 25-year tax deal at Irving's Canaport LNG property, but they did not go well for the city, according to Coun. Shirley McAlary.

Coun. Shirley McAlary says city and Irving Oil held informal talks over changing the LNG property tax deal

The City of Saint John and Irving Oil Ltd. have held informal talks about changes to the LNG property tax deal signed in 2005. (CBC)

The City of Saint John and Irving Oil have had informal discussions about possible changes to a 25-year tax deal at Irving's Canaport LNG property, but they did not go well for the city, according to Coun. Shirley McAlary.

"They [Irving Oil] said that you know really the city's hands are tied with this agreement, that we can't make any changes to it or do anything about the tax deal," said McAlary.

Samantha Robinson, Irving Oil spokeswoman, did not confirm if a meeting with the city was held but says the company feels positive about what it has done with the Canaport development.

"We are proud of what we have been able to build at Canaport LNG. We believe that Canaport LNG brings value to our region, and it positions our community for other investments," she said in an email to CBC News.

"We will continue to work with various stakeholders to ensure our company's commitments are met."

City council received a report last February from then-city manager Patrick Woods suggesting there might be an opening to challenge the tax deal since Irving Oil began using the LNG wharf to unload crude oil last year. 

The terms of the city's property tax arrangement are outlined in provincial legislation and regulations, which specify it is to apply to property "solely for the receiving and containment of liquefied natural gas."   

But last year, Irving Oil constructed an oil pipeline on the site so it could use the LNG wharf to handle oil shipments as a backup to its existing mono buoy.

Over the last year, Port Saint John records show only 12 ships have unloaded at the LNG wharf and six of them were oil tankers.

City studies options

Woods told city council that might provide an opening to challenge the tax deal.

"The options are relatively straight forward," wrote Woods in his report, who then listed three possibilities. 

He said the city could do nothing, obtain legal advice from city solicitor John Nugent on whether oil handling might have negated the tax deal or it could begin talking to Irving Oil about making changes.

McAlary said Nugent met with lawyers from Irving Oil and reported back that the company felt the tax deal was not materially affected by the addition of oil handling at the LNG site, including construction of the oil pipeline there.

"They have said that there is a small possibility that maybe part of the jetty [wharf] or something we could get a few tax dollars on, but they feel the pipeline, at this point in time, we can't do anything about that," she said.

"We can't collect taxes on that."

Coun. Gerry Lowe said Nugent was pessimistic about whether anything could be done about the tax deal, but he says he thinks the city should keep pushing the issue given the money at stake.

Irving Oil began earning rent from the Canaport LNG development 10 years ago this week. 

According to its lease agreement, obtained by CBC News, it has been paid more than $80 million US on the property so far and paid $5 million CDN in taxes to the city.

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