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Benefits of Canada’s LNG Tax Break Widespread, Industry Group Says

The Conservative government in Ottawa won high praise Friday from industry for a tax break for liquefied natural gas (LNG) plants that is forecast to help a little-known but widespread branch of domestic utility services as well as export schemes.

The concession, accelerated writeoffs of facilities costs, was sought for years by overseas tanker terminal projects, and their sponsors applauded Thursday. But after reviewing the tax change, distribution companies stepped forward as likely the most immediate beneficiaries.

While 25 proposals for export terminals on the Pacific and Atlantic coasts remain distant prospects still trying to drum up overseas sales, the Canadian Gas Association (CGA) said all types of consumers on widely dispersed domestic markets stand to benefit swiftly.

CGA President Timothy Egan said, "LNG, a clean and affordable energy solution, has just become a much more realistic option for a number of domestic markets, including northern and remote communities and the transportation sector." He described the distribution companies represented by the CGA as “highly supportive” of a tax measure “that will help support new LNG facility investments and expansions in Canada, supporting jobs and growth."

Canadian utilities have operated LNG facilities for more than 40 years, according to CGA.

Uses range from industrial sites, such as mines, to remote communities where clean-burning gas replaces bunker oil and diesel in local space heating fuel networks and steam-driven power stations.

The CGA is also a stalwart promoter of new markets for natural gas. “LNG can be used as a clean and affordable transportation fuel choice for truck, rail, marine and off-road transportation operators,” CGA said.

The federal tax change sweetens a provision known as capital cost allowance by enabling LNG developers to accelerate writeoffs of expenses on facilities to 30% per year compared to a national standard 8% for other industries. The government predicts that the annual value of the break will make a small start at C$50 million but grow much larger as use and potentially exports of LNG increase.

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