Case Studies
Case Study: Using Low-Carbon LNG Asset Expensing & Tax Credits to Improve Project Viability
An in-depth example showing how new Canadian policy on accelerated capital cost allowance and CCUS tax credit can make low-carbon LNG projects more attractive.
By NomadicTax Research Team • 5-8 min read • May 5, 2026
## Background & Policy Changes
Canada’s Spring Economic Update 2026 introduced two major measures that benefit energy projects:
- **Accelerated Capital Cost Allowance (CCA)** reinstated for eligible low-carbon liquefied natural gas (LNG) equipment and non-residential buildings—50% for Class 47 liquefaction equipment and 10% for Class 1 buildings. Eligible assets acquired on or after November 4, 2025, up to end of 2034. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/tm-mf-en.html?utm_source=openai))
- **Investment Tax Credit for Carbon Capture, Utilization, and Storage (CCUS)** expanded: adding uses such as enhanced oil recovery (at reduced rates), with different credit rates for capture equipment versus transportation/storage. ([pwc.com](https://www.pwc.com/ca/en/services/tax/budgets/2026/2026-federal-spring-economic-update.html?utm_source=openai))
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## Project Setup: Example
Acme LNG Inc. plans a new facility to produce low-carbon LNG. It will include liquefaction equipment, storage, buildings, plus CCUS infrastructure.
- **Facility emission threshold**: To qualify for the accelerated CCA, facility must meet emissions intensity ≤ 0.20 tCO₂e/tLNG. Acme’s design plan shows 0.18 so it qualifies.
- **Asset purchases**: 25% of project cost in liquefaction equipment (Class 47), 15% in non-res buildings (Class 1), 10% in capture system, 20% in transport/storage.
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## Tax Treatment & Financial Impact
| Component | Policy Applied | Quantitative Effect |
|---|---|---|
| Liquefaction equipment (Class 47) | 50% accelerated CCA | Instead of standard depreciation (say 8-15%), can write off **half of cost** faster; cash-flow advantage in early years |
| Non-residential buildings (Class 1) | 10% accelerated CCA | More depreciation up front vs slower build-up of capital base |
| CCUS capture equipment | 50-60% refundable ITC | Reduces net cost dramatically; with high capture credit, gets back up to **60%** of eligible cost |
| Transport/storage/EOR use | Lower rates for non-capture elements; enhanced credit for certain uses including EOR | Benefit but less generous—still material savings |
Example: on a $100M cost split as above, net tax savings equivalent to ~**$30-40M** in early years when combining CCA accelerations & ITCs, improving Internal Rate of Return by several percentage points.
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## Steps to Leverage These Policies
- **Certify emissions intensity**: Submit engineering study to Minister of Energy & Natural Resources. Without it, facility won't qualify. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/tm-mf-en.html?utm_source=openai))
- **Time asset acquisitions**: Assets must be acquired between Nov 4, 2025 and end of 2034 to be eligible. Plan procurement accordingly.
- **Classify assets properly**: Class 47 for liquefaction equipment, Class 1 for buildings; ensure design/build structure matches requirements.
- **Choose CCUS equipment types wisely**: Capture vs transport/storage/EOR—credit rates differ. Use higher-rate capture where possible.
- **Engage with professional advisors**: Tax, engineering, environmental specialists to document compliance, capture credits, and amortization schedules.
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## Risks & Considerations
- If emissions threshold is missed or modified, you may lose accelerated CCA.
- Delays in procurement might push asset acquisition outside eligible period.
- CCUS investments rely on regulation clarity and operational capacity. Uncertainty remains around performance, permitting, costs.
- Cash flow timing: large upfront CAPEX still requires financing; tax benefits may lag.
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**Bottom line**: For companies in clean energy, especially LNG and CCUS, this policy shift makes low-carbon projects much more financially viable. Early action, meticulous planning, and compliance with eligibility rules turn these new policies into competitive advantage.