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Sentinel
Northern
www.northernsentinel.com
Volume 58 No. 01
Chevron, Apache team up for LNG Cameron Orr One will have the gas, one will have the plant. In a nutshell that’s how the new set up is for Kitimat LNG, which saw a change in the investment structure just ahead of Christmas. In this new model, Chevron Canada has taken a 50 per cent stake in the Kitimat LNG project and Pacific Trails Pipeline, and 644,000 of undeveloped acres in the Horn River and Liard basins. The other 50 per cent will go with current backer Apache Canada, which previously held 40 per cent in the project. Bowing out of the LNG plan for Kitimat is EOG Resources and Encana, each of whom had a 30 per cent non-operating interest in the project. The announcement on December 24 sets out that Chevron will operate the LNG plant while Apache will operate the natural gas extraction operations upstream. Those operations will include development of 220,000 acres in the Horn River basin, and 424,000 acres in the Liard Basin. The company says there is more than 50 trillion cubic feet of resource potential in those basins. “This agreement is a milestone for two principal reasons: Chevron is the premier LNG developer in the world today with longstanding relationships in key Asian markets, and the new structure will enable Apache to unlock the tremendous potential at Liard, one of the most prolific shale gas basins in North America,” said G. Steven Farris, Apache’s chairman and chief executive officer in a press release. Apache’s 100 per cent owned Liard and Horn River acreage will be sold to Chevron for their 50 per cent share for $550 million. Apache will then pay Chevron to equalize interests in the other Horn River properties which are owned by Apache, Encana and EOG. This transaction is dependent on government approvals and the companies expect the deal to close in the first quarter of 2013. Continued on page 3
Wednesday, January 2, 2013
$
1.34 INCLUDES TAX
Here’s something to fill your time; Google has added Kitimat to its Google Street View service. From Google Maps, you can drag a little yellow icon of a person onto Kitimat roads and see what it looks like from the ground, such as shown above, the view of Hospital Beach. Most residential streets aren’t on, only Haisla Boulevard/ Highway 37S, Lahakas Boulevard from in front of the mall, to the loop around Kildala of Quatsino and Kuldo, and then the Service Centre and the industrial area. Screen capture from Google Street View
Council wants federal tax change than they would have in, for instance, the Cameron Orr Kitimat Council is backing a pro- United States, according to the CAPP. The submission from the CAPP posal to get the federal government to change the tax class of liquefied natural to move the LNG facilities to Class 43 would mean LNG facilities have a 30 gas liquefaction plants. per cent declining balance, The recommendation passed from Counci is for “This motion which would correct the cost difference between them to send a letter to the helps make Canada and the U.S. and federal government supporting a submission by the Ca- it more likely other countries and make such facilities in nadian Association of Petrothese projects running Canada more cost competileum Producers (CAPP) to will move tive. the House of Commons, reKitimat was introduced questing that LNG facilities forward in a to this proposal in a confer— for example the proposed timely basis.” ence call lead by CAPP on Kitimat LNG and LNG CanNovember 23 which was ada projects in Kitimat — attended by Mayor Joanne be moved from Class 47 to Monaghan and Kitimat’s Class 43 under Capital Cost Chief Administrative Officer Ron Poole. Allowance tax classification. In short, LNG facilities being in On that call also were the mayors of Class 47 means they have a depreciating Dawson Creek, Fort St. John, Fort Nelvalue of eight per cent. To let that make son and Prince Rupert. A report from Kitimat administraa bit more sense in context, liquefaction facilities in Canada reportedly have a 10 tion say that all of the other mayors were per cent higher after-tax operating cost in support of CAPP’s proposal.
“This classification change will properly recognize these assets as manufacturing and processing,” said Kitimat staff’s report. Due to this proposed change being a federal tax, it would not affect municipal taxation or assessments. Mario Feldhoff, who brought forward the motion, said that now is the time for this change to happen. “The government needs to act...in order to make our LNG facilities become a reality,” he said. “This motion helps make it more likely these projects will move forward in a timely basis.” In CAPP’s own report, they state that “The window of opportunity to ensure Canadian competitiveness and positively influence final investment decisions is now.” In the draft letter to the government from Monaghan, she requests that the government consider this tax change in their 2013 budget so as to possibly sway favourably the eventual investment decisions of LNG facilities.
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Did you see the banded swan? ... page 7