Friday, The Common Sense Canadian — a site that usually provides worthwhile journalism — posted an article written by Keith Baldrey for Glacier Media, publisher of numerous community recyclables. Not surprisingly, anyone reading the Global News reporter’s account needs the rest of the story.
Here is part of Baldrey’s item:
“…Clark is arguing that the glut of natural gas on North American markets has kept the price low, and therefore B.C. must look to other markets to make money. China, Korea and Japan all loom as potential customers of B.C.’s LNG.“To be fair, she has a point here. The steady decline in the price of natural gas in North America has meant dwindling revenues to the provincial treasury arising from royalties on gas sales, and this has been going on for several years.
“Annual natural gas royalty revenues for the B.C. government peaked in 2005-06 at almost a whopping $2 billion…
“The revenues bottomed out at a measly $169 million in 2012-13 and are expected to hit nearly a half-billion dollars or so this year, but the days of royalties generating more than a billion dollars per year appear over…”
Apparently, Liberals asked media friends to lower the public’s LNG expectations. It is what RossK, The Gazetteer, calls “The Downgrading of the Sparkle Ponies.” Vaughn Palmer did his part this week, recounting how pre-election talk of a debt-free province rolling in cash from gas royalties was merely aspirational. Baldrey does not suggest that Christy Clark and friends were lying. Instead, he blames citizens for Liberal deceit:
People seem to at least want to believe the fairy talelike talk about billions of dollars coming our way to help eliminate the provincial debt and even the sales tax.
Regular readers here will be better informed than our timid reporter but I’ll recount the numbers that Baldrey ignored.
Unrecorded credits owed gas producers have been growing steadily. These liabilities, which total $1.2 billion at the end of fiscal year 2014, will reduce future royalty payments. While Global’s reporter states that royalty revenues were “a measly $169 million in 2012-13,” he fails to mention that the future royalty credits owed producers grew by $160 million in that same year. Were the province not inventing its own accounting standards, the gas royalty revenue would have been reported as an even more measly $9 million.
The province’s Budget and Fiscal Plan, dated February 18, 2014, reported 2013/14 royalties of $368 million in fiscal 2014, not the “half-billion dollars or so” that Baldrey writes. However, credits owed gas producers grew another $316 million so the net royalty revenue for the fiscal year was $52 million, not $500 million or so.
Even Baldrey’s “almost a whoppping $2 billion” of revenues reported for 2005-06 was misleading. In those years, while the gas industry enjoyed high prices, the province was still offering about $250 million a year in production subsidies. Net gas royalties were closer to $1.6 B than $2.0 B in 2005/06.
The earlier In-Sights article, From outside the Liberal spin machine, provides numbers in a downloadable form.
From 2013/14 Audited Financial Statements, Public Accounts:
“The province offers credits for certain costs incurred by producers including the deep well, road and summer drilling programs. Deep well credits of $1,241 million (2013: $997 million), road credits of $6 million (2013: $12 million) and summer drilling credits of $3 million (2013: $9 million) have been incurred by producers and will reduce future natural gas royalties payable when wells go into production.”