The British Columbia (BC) government chopped its liquefied natural gas (LNG) export tax in half Tuesday and added corporate tax cuts as lure to build tanker terminals on Canada’s Pacific coast.

Industry promptly praised provincial Finance Minister Mike de Jong for showing realism by beating a retreat from inflated revenue targets set by his Liberal party in the heat of a mid-2013 BC election.

With a long-awaited bill introduced in the provincial legislature in Victoria, de Jong pared the rate of a special tax on LNG export terminals down to 3.5% of net or after-expense revenue from 7% proposed last spring.

As originally announced, the LNG export tax would be held down to a nominal 1.5% of terminals’ net revenues until capital costs of building them are paid off. The policy sets a target of eventually regaining lost ground by raising the rate to 5%, but not until 2037.

The finance minister also outlined a forthcoming credit against general corporate taxes for “any LNG income taxpayer that has a permanent establishment in BC.” Details remain sketchy. But the policy sets the highest rewards for terminal project sponsors that generate the greatest levels of northern BC gas drilling and production.

“This credit will be calculated based on the natural gas acquired for an LNG facility,” the government stated. “The credit will have the effect of reducing the provincial corporate income tax rate from 11% to as low as 8% for that company.”

Provincial estimates of tax revenues from the first 10 years of operations by a typical LNG export terminal have been dropped to C$800 million ($712 million) from a forecast last spring of C$1.5 billion ($1.3 billion).

The complex tax structure is not a complete revenue picture, and the final formula will reflect a Canadian difference from the United States. In BC, as in Alberta, the vast majority of oil and gas rights are public or Crown property owned by the provincial governments. Development generates provincial lease sales and production royalties.

Counting all potential revenue sources, the BC finance department predicted that a typical Pacific coast LNG export terminal could enrich the provincial treasury by C$8 billion ($7.2 billion) in 10 years. But the province has kept its options open for royalties on gas tapped in extensive northern shale formations to fill export terminals, and special policies continue to be hot but private discussion topics between the government and the industry.

Methods expected to be used for LNG supplies — deep, horizontal drilling and costly well completion systems such as hydraulic fracturing– already earn BC royalty “holidays” or deferrals and special rates in limited, remote locations. The structure mimics an Alberta incentive regime that has stimulated oilsands development since the mid-1990s.

LNG Canada, a consortium led by Royal Dutch Shell plc that is proposing one of the largest export terminals in the 18-entry BC project lineup, praised de Jong for adopting a fairer, balanced tax policy. “There is a lot of competition in the global LNG marketplace and we know that the BC government recognizes this,” the group stated.

The Canadian Association of Petroleum Producers, added, “Clearly the government has recognized the issue of competitiveness globally. That’s a reality for us.”

De Jong attributed the change to a combination of dropping energy prices, stubbornly high or rising project costs and accelerating international rivalry for overseas LNG sales since the Pacific coast export project lineup started forming five years ago.

BC’s Liberal government still stands by its 2013 re-election promise to parlay surplus revenues from LNG exports into a “prosperity fund” akin to the Alaska Permanent Fund and the Alberta Heritage Savings Trust Fund. But de Jong no longer mentions the original political target of C$100 billion ($89 billion) for the BC treasure chest.

“The opportunity remains but the design and the tax structure needs to take into account changing circumstances in the market and potential for return,” the finance minister said. “It’s not quite as lucrative as it once was.”

No export terminal projects on Canada’s Pacific coast have announced overseas sales contracts for their full capacity or begun construction, although two have predicted they will make final decisions this winter. A lineup of pipeline projects, proposed to link northern shale gas deposits to LNG terminals, is advancing through provincial and national regulatory processes.