New Brunswick

Saint John's LNG tax repeal unlikely to face opposition by municipalities

Saint John is unlikely to encounter any opposition to its complex plan to unwind a multi-million dollar tax deal on Irving Oil's LNG property from other New Brunswick communities, according to representatives of three major municipal organizations.

Province's 3 municipal organizations will formally vote on Saint John city council's proposal

The Canaport LNG terminal, located on Saint John's east side, is owned by Repsol and Irving Oil Ltd. (CBC)

Saint John is unlikely to encounter any opposition to its complex plan to unwind a multi-million dollar tax deal on Irving Oil's LNG property from other New Brunswick communities, according to representatives of three major municipal organizations.

"My personal opinion -- I don't suspect there's going to be any objection to this deal," said Denis Roussel of the Cities of New Brunswick Association.

The association is one of three municipal groups consulted in a province-wide conference call Tuesday to check for opposition to the way Saint John wants to undo the tax arrangement.

Roussel said people on the call had questions but all seemed to appreciate the unique situation facing Saint John. His organization, which includes the province's eight cities, will officially discuss and vote on the issue next week.

"I think everybody's glad that Saint John decided to go that direction." said Roussel. "I do not expect any problem to getting a resolution supporting the deal."

Saint John city council voted last December to ask the province to repeal legislation that freezes municipal property taxes on the LNG property at $500,000 per year until 2031, well below the $8.02 million it would owe otherwise.

Assessment cut?

In April the Gallant government formally said it would agree to the request on the condition Saint John absorb any financial loss suffered by the province after the repeal takes effect.

The province's worry is that its own assessment on the LNG property, which it values at $299.5 million, might be grossly overvalued.

That could result in the assessment being significantly cut in the face of an aggressive appeal by Irving Oil after the tax deal is dissolved and the province wants Saint John to pay for refunds Irving Oil might win.

The issue involves other municipalities because about half of any increase in Saint John's tax revenues caused by killing the LNG deal, up to $4 million, will be clawed back by the province and distributed to other communities under New Brunswick's municipal equalisation formula.

Saint John didn't want to lose 50 per cent of the new tax revenue to the equalization pool up front and later be on the hook for 100 per cent of a major refund if Irving Oil wins a large property tax appeal.

Trust fund

As a solution, in May Saint John proposed the province kill the tax deal but hold all new revenue in a trust fund and wait on equalization changes until all Irving Oil appeals are settled.

Agriculture, Fisheries and Aquaculture Minister Rick Doucet suggested in a letter all three municipal associations be consulted. (CBC)
Last week the province said it would adopt Saint John's complex proposal, but only after seeing if other municipalities agreed, since their new equalization money would also go into the trust fund and be held back until any property tax appeal launched by Irving Oil is resolved.

"Because your proposal contemplates holding back funds payable to all municipal equalization recipients for a number of years we believe before proceeding we should consult the three municipal associations," wrote Liberal cabinet ministers Rick Doucet and Ed Doherty in a letter to Saint John mayor Don Darling last week.

Government Services Minister Ed Doherty advised Saint John city council to consult the province's three municipal associations about the proposed trust fund. (CBC)
Those three associations along with Saint John and the province talked the issue over Tuesday with everyone siding with Saint John according to Frederick Dion of the province's association of francophone municipalities.

"The proposition was well received. I think everybody sees this as common sense," said Dion.

"We are looking at the possibility of money that will be sent to municipalities. Even if it is in four or five or six years from now it will be a win/win situation for everybody."

Raymond Murphy of the Union of Municipalities of New Brunswick, who was also on the call, said his group will discuss the matter officially in August but he has heard nothing to suggest anyone opposes Saint John's plan.

"It doesn't look as though its going to run into any significant opposition," said Murphy.

Big winner

Up to 72 communities will receive some money if the LNG tax concession is repealed.

Miramichi would be the big winner and qualify for more than $500,000 a year in increased equalization if the tax deal is killed and $4 million a year in LNG money is added to the equalization pool, according to the current formula. 

Bathurst and Edmundston would receive more than $300,000 each, Campbellton and Moncton more than $200,000 each, and Dalhousie, Memramcook, Riverview and St. Stephen more than $100,000.

Saint John moved to end the tax deal following a series of reports by CBC News last year showing Irving Oil has been collecting $12.25 million US per year in rent on the property the LNG development sits on. The deal took effect in 2006 and was supposed to last until 2031.

About the Author

Robert Jones


Robert Jones has been a reporter and producer with CBC New Brunswick since 1990. His investigative reports on petroleum pricing in New Brunswick won several regional and national awards and led to the adoption of price regulation in 2006.