. Draft Scenario Analysis Preliminary Draft [Be [.... [ Advice to Cabinet· Not for Public Disclosure Case Selector: l~sec;,paClty 1.... 1 REAL PROVINCIAL REVENUES ($ billions) ' .. :~.... :, 'f. '.:. Royallies .: I PRRT CIT CIT - BC Levy PIT PST s13, s17, s21 PRESENT VALUEs13, s17, s21PROVINCIAL REVENUES ($ bill CIT CIT - BC Levy PIT PST l ~ Page 1 FIN-2014-00006 Key assumptions used in model Australia Tax Case BC Capacity Case Base Capacity High Capacity CIT rate Canadian rate Federal Proportion Federal Rate Provincial Proportion Provincial Rate As provided by Deetken on 7 February 2013 s13, s17, s21 Add: New Levy" BC Tax As provided by Deetken on 7 Febru ary 2013· s13, s17, s21 As provided by Deetken on 7 February 2013 As provided by Deetken on 7 February 2013 Provincial Income Tax Rate s13, s17, s21 Initial s13, s17, s21 PRRT rate BC Treasury (based on Au stralia) PST Assumptions Capex proporlion upon which PST applied As provided by Deetken on 7 February 2013 PST rate As provided by Deetken on 7 February 2013 Employment" PIT income Include? (1 for yes, 2 for no) Operational commencement dates for purposes of BC Tax Base Case High Case Selected Other Assumptions s13, s17, s21 Page 2 FIN-2014-00006 LNG I NG Pricing Assumptions Ikiiiii""''''---- 2011 20 :1 20 3 20 5 20]6 2031 203 Inflatioo Base Year Revenue and cosl blsls: Cosl price Indexation Inllation Index app::ed to Model Revenue price Indexation CBOElEIA indeKaIion (2011 base) World Bank indexation (2012 base Price ForeClilts tmPriee J "''''Btu CooE Forecast Ell. forecast \Volld Bank (EINCBOE) World Dank ( e ~t endOO) Would Ban)( (m."d) LNG Prk:e /S/ MM8tul CBOE Forecast EIA Forecast WOfId IJank (EINCOOF.) \'lot1d Ba nk (olrtcnded) Would Bank (mlcI) REAL PRICES flO Price (S I W.IBtul CooE Forecast EIA FOI'eeast \'/or1cIBank (EIAfCBOE) World Bank (extended) Would Baril< (m!d) LNG Price ($ II.tM Btul COOE Forecast s13, s17, s21 EIA Forecast Wor1d Bank (EIA/CBOE) World Bank (extended) Would Bank m!dl NOMINAL PRI CES NG Price ($/I.IMBtu) csoe FOI'8¢ast EtA Fore<:asl World Banlc (EIAICBOE) World Bal'll< (extended) Wou ld Bank (mJd) tlomlna! Growth· NO CBOE EIA Averag e Nominal Growth· LNG CBOE EIA Ayer l gl NG Prices · Real --(SOEfore<ut NG Prices· NomInal '.0 --EtA rore<.ilt 14.0 .. L ., ___ World~nk-tmpliN' 11.0 1.0 --; ,;z. --(80E f oreult -- ...... \'IOfId 8,nk· mid ' .0 ___ .c .·· ~·c= ~~ 10.0 .......... ~ -- ElA ror~. 1 ----.--- - - - Wor1d8i M- TrfOO -- ! S.O 8.0 __~ . --- World~nk - I m pl j fd ' --World Bi nk i 14.0 146- --World ~M(£1A/eBOE) ' .0 ~: : ~:';;. ~~::",,------- 7.0 • Impl lfd Il'f;ivfrlle • Impl i Nby;i'~"le lfO'Nthof eBOE 100 ( IA 1.0 2.0t-- lrO'lothof eBOE 1M! UA ' orK.II,li f ", ...-s ol. Page 3 FIN-2014-00006 ,..~ ~ , ~ "g ~1 2 ~ ~ ~ • ~ 2 '" ~ • ~ i~ ~ , ,~ ~ :::) 1! 0 .:: I i I 1~1] •~ •~ ..c 'E 1\ 1\ ~ z0 "~ ~ ·~ ~ 1\ ~ ~ '"3 ~ •~ •~ 1\ ' ~ ~ ~ t \\ ·~ ~ · " I ", ~ ~ 8 8 ~ 8 ~ ~ ~ o • S 0; " " " niS ww/S ~ ,~ [ , ~ ~ ~'i i ~ -i ~ . ~ £ i ~ g , • ~ ];0 , ~ 1< ~ ~ ~ 1)o!': " 0 , , ~ ~ ¥ ~ ~~ }1 § ~ i ~ ~~ " ;- i>o l! ~ • ];0 •, •, '2'0:: I I I I ~ ~ , , l12 ,, I I I :- .. .2 ~ , ,, ~ , ,, •• ~ .. , , •• • , • '" I •, I " • •~ •0 I , ~ • ."· , • • ~ ,, • , ~ • • '"3 " "~ ~ ~ " ~• ~ · " " ~ 0 0 0 ~ " ~ ~ ~ g ~ '" ~ 0 ~ , , " • nleww/S e--J.---I-+--+--+--F-I-+-l- " f-l--+-=--I-I--l---I-+-I- " ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ g ~ ~ ~ N ~ nlew w/s nliWW/S Page 4 FIN-2014-00006 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 Page 5 FIN-2014-00006 Downslleam D ep!edab~e Base Depredation CImlJI.ali'lewrinen-doWn yaw High C.pacity Upslltam Depledab/e Base Deplocl.Jlion ClmllaliYe v.;rilten-do' .... n yalue Pipelines OeP!OOab'.e Base Dep!eda6on ClnlIi.awe wrineo-doY>'n yaw s13, s17, s21 Downslrtam Dep!oclatt.e Base Dep!edalion Clmtlall'"e v.;ritlen-do'liI\ y~ue ~ ase Case Depreclallon ,Upstream t{K!f;0e:5 [)(Mm "eam 6h,-Capatity DepreclaUon r~ .DoYm:slream_ Page 6 FIN-2014-00006 »(J) (J) c 3 -g. 0" :::l (f) s13, s17, s21 Page 7 FIN-2014-00006 PST Assumptions PROVIDED BY OE ETKEN 7 Feb 2012 s13, s17, s21 Page 8 FIN-2014-00006 s13 s17 s21 s13 s17 s21 s13 s17 s21 s13 s17 s21 .. ! .,• .. ~ s13, s17, s21 d d Page 9 FIN-2014-00006 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13 s17s13, s21 s17, s21 s13, s17, s21 Page 10 FIN-2014-00006 ! s13, s17, s21 Page 11 FIN-2014-00006 ~m H H I • !H' II I ' , I I s13 s17 s21 s13 s17 s21 s13 s17 s21 E I r I s13 s17 s21 , i. s13, s17, s21 Page 12 FIN-2014-00006 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17,s13, s21 s17, s21 s13, s17, s21 I I I Page 13 FIN-2014-00006 s13, s17, s21 Page 14 FIN-2014-00006 • ! s13, s17, s21 s13, s17, s21 s13, s17, s21 i i s13, s17, s21 • t !, ! ! i i s13, s17, s21 Page 15 FIN-2014-00006 s13, s17, s21 , I s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 1 s13, s17, s21 ; , jl • , I I I! Page 16 FIN-2014-00006 s13, s17, s21 Page 17 FIN-2014-00006 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 Page 18 FIN-2014-00006 ~H: ~~ [ ! ,r " ~ ; '"I >;~ -§', . '(~~~"'"_0' :';'__ I ~ , H , HI ~ I ~ m i rp![F Ii~ , ,. ~r l ., , !!Ii I , ~ l gB 2 •• • ' ~ I"l h m i i s13, s17, s21 ! , ! I n s13, s17,s13, s21 s17, s21 I, !, I L.IB l lit ~~ " m :! !I ~H~ ~ s13, s17, s21 .i ! , JH ! , ~~~~~ ,f '# -= _ p i ~ ~~iU . 11 .; i ~ ~ ...! ........Hh! 1... l i ,' ., , . , ~ s13, s17, s21 j Wd ! 1 ; s13, s17, s21 '___0, 0 Page 19 FIN-2014-00006 •! s13, s17, s21 Page 20 FIN-2014-00006 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 Page 21 FIN-2014-00006 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17,s13, s21 s17, s21 s13, s17, s21 I I Page 22 FIN-2014-00006 ~ ~ s13, s17, s21 Page 23 FIN-2014-00006 s13 s17 s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 Page 24 FIN-2014-00006 0 '''----' s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21s13, s17, s21 Page 25 FIN-2014-00006 ! . s13, s17, s21 Page 26 FIN-2014-00006 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 Page 27 FIN-2014-00006 s13, s17, s21 s13, s17, s21 HI H! s13, s17, s21 s13, s17, s21 IH s13, s17,s13, s21 s17, s21 m Hi Page 28 FIN-2014-00006 , s13, s17, s21 'i" ~"H 'n iHE n: a ~ :i.!~ ~.ff ~ j>- ~ ~ ... ~ , ~ ". .," r w ••'I' l = I j -,= ' ! j ! ~ j • it ~ t~ ~g J! & i ~ ~ iit~ .lfl!" ~ 'J~ HI ~~~ ,1 I ji'! Hh HMf U Hh t~H~H H . H! !~! Page 29 FIN-2014-00006 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 Page 30 FIN-2014-00006 s13, s17, s21 ; ; ; s13, s17, s21 s13, s17, s21 s13, s17,s13, s21 s17, s21 s13, s17, s21 l, I Page 31 FIN-2014-00006 s13, s17, s21 Page 32 FIN-2014-00006 s13 s17 s21 s13 s17 s21 s13 s17 s21 s13, s17, s21 s13, s17, s21 Page 33 FIN-2014-00006 s13, s17, s21 , ,; i s13, s17, s21 s13, s17, s21 s13, s17,s13, s21 s17, s21 s13, s17, s21 Page 34 FIN-2014-00006 ~ . s13, s17, s21 Page 35 FIN-2014-00006 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 s13, s17, s21 Page 36 FIN-2014-00006 s13, s17, s21 ! s13, s17, s21 ! P H l s13, s17, s21 s13, s17,s13, s21 s17, s21 III s13, s17, s21 ,1 m , II! ! Page 37 FIN-2014-00006 ! s13, s17, s21 Page 38 FIN-2014-00006 Potential Revenues to the BC Government from LNG Development in Northern BC Ministry of Energy, Mines & Natural Gas March 2013 Page 39 FIN-2014-00006 Contents 1. Background and scope......................................................................................... 2 2. Key Assumptions ................................................................................................ 4 3. Analysis overview ............................................................................................. 11 4. Analysis Outputs – Australia Case ...................................................................... 13 5. Analysis Outputs – BC Case ............................................................................... 19 Appendix A Price Forecasts .............................................................................. xxvii Page 40 FIN-2014-00006 1. Background and scope 1.1 Background The Province of British Columbia (“Province”) though the Ministry of Energy, Mines and Natural Gas (“Ministry”) is seeking to engage the private sector to develop Liquefied Natural Gas (“LNG”) in Northern British Columbia. The Ministry is currently negotiating with a number of potential private partners. As a result of the potential for significant revenues, and economic activity, from the LNG developments, the Province is working with its advisors to determine an appropriate taxation framework for the LNG Projects. This framework could include using the existing Provincial and Federal royalty regimes and taxation legislation as well as extending this on an appropriate, economic and competitive basis to maximize Provincial revenues while continuing to stimulate project development. The Province has engaged Ernst & Young (“EY”) to develop an indicative range of Provincial revenues 1 that could result from the LNG Projects under two separate potential revenue regimes (the “Cases”): 1. Application of the regime currently implemented in Australia to BC, following a provincial review which determined that the Australian system is the most appropriate regime to consider in the context of taxation of LNG projects 2.