Ever notice that corporate media seems to speak with one voice? On balance – or rather, on lack-of-balance – they do. It is the voice of big business.
Vaughn Palmer, with American shale gas boom a major threat to B.C. exports, is the latest columnist lobbing fat pitches into the wheelhouse of natural gas promoters. Given the headline, for a moment I hoped Palmer would note that technology responsible for North America’s gas glut is being applied in Eurasia, meaning growing supply and declining prices there too, something that should be a caution to custodians of BC’s gas resource who are negotiating financial agreements with foreign companies. Not quite. The Explainer had a different purpose.
Palmer heard the Throne Speech say that the U.S. gas market “has dried up and is never coming back.” Testing the claim, he asked the Ministry of Natural Gas Development. They told him it was “entirely realistic.” Seeking independent confirmation, Palmer asked the Liberal Minister most responsible for gas, Rich Coleman.
After this in-depth examination, the Sun columnist concludes the gone-and-never-coming-back scenario “would be disastrous for British Columbia” because,
…the province realizes hundreds of millions of dollars in royalties in a good year, plus it can count on hundreds of millions more in the sale of leases for future exploration and development.
Mind you, had Palmer relied on facts instead of the Liberal spin machine, he might have avoided egregious inaccuracy. The natural gas industry is not a contributor of many hundreds of millions of dollars a year for royalties and hundreds of millions more from rights purchases. Palmer is plain wrong and he should know better since he has access to audited accounts that reveal a different picture. He would be better informed on natural resources if he read the archives of this blog.
Net of the increase in unrecorded credits owed producers, gas royalties in fiscal year 2013 were $9 million. The net was $130 million in fiscal year 2014. Additionally, the Ministry of Natural Gas Development has been spending more than $400 million a year promoting and not-regulating the gas industry.
Ministry of Energy, Mines and Natural Gas reports reveal that the sale of leases for future exploration and development is not any longer a major contributor to provincial accounts. In the first seven months of the current fiscal year, crown petroleum and natural gas rights tenders brought in a monthly average of less than $12 million, down a third from the previous fiscal year.
|A Hidden Cost|
Additionally, Palmer repeats gas dependent employment claims that are fictions of the BC Liberals, despite reports from BC Stats and Statistics Canada that reveal much lower numbers. Even if the jobs number quoted in the Sun were true, each position would come at a cost to government of more than $60,000 a year.
Palmer and others in media, including Globe and Mail columnist Gary Mason, aim to lower expectations created by pre-election lies of the BC Liberals. However, the pro-media scribes go further. They’re now selling the idea that, even if there are no riches to be gained from LNG, the proposed projects must proceed or a huge part of the BC economy will die. The real certainty is that any ride conducted by untrustworthy and incompetent guides is headed for catastrophe.
Uncertain gas markets mean price instability. As a result, potential exporters aim to protect their own fortunes from risk. That means guaranteeing little or nothing for the actual commodity, demanding subsidies for capital costs, provision of publicly funded transport infrastructure, relief from import barriers affecting machinery and personnel and exemption from property taxes, carbon levies and local imposts. The objectives are to minimize up-front and fixed costs and to ensure amounts due government are paid through profit sharing, which multinational gas companies will commit to if they can make the calculations.
The Guardian described tricks of high finance that were refined by but not confined to the movie business,
…through the miracle of Hollywood accounting, a studio may fairly claim that a huge hit hasn’t actually turned a profit, lest they be forced to pay the stars, director or writers the percentage of the earnings to which they may be contractually entitled.
Only people outside the entertainment business are surprised to learn examples of Hollywood accounting.
- Despite making over $938 million at the global box office, ‘Harry Potter And The Order Of The Phoenix’ was adjudged to have actually lost $167 million.
- The third Star Wars movie, Return Of The Jedi, despite earning over half a billion dollars in revenue, is not in profit.
Last year, investigative news agency ProPublica published a report titled, How Oil and Gas Drillers Avoid Paying Royalties
Chesapeake Energy, the company that drilled [dairy farmer Don Feusner’s] wells, was withholding almost 90 percent of Feusner’s share of the income to cover unspecified “gathering” expenses and it wasn’t explaining why.
“They said you’re going to be a millionaire in a couple of years, but none of that has happened,” Feusner said. “I guess we’re expected to just take whatever they want to give us.”
At hearings in Pennsylvania, landowners complained they’re being cheated out of royalty payments. A legislator asked where the specific point of sale is for natural gas. The industry’s answer:
It’s complicated. It could be the wellhead. It could be downstream. It’s an intricate and complicated structure of contractual arrangements.
Palmer repeats another Liberal falsehood about natural gas, quoting Rich Coleman:
You have a resource that is so large that you could supply the North American market for 200-plus years, all your customers, and still have gas left.
Three months ago, when the government was still promising 100,000 LNG jobs, the Premier’s Office published a press release that included,
British Columbia’s natural gas potential exceeds 2,900 trillion cubic feet. This potential supply could support domestic and international project operations for over 150 years.
However, the BC Oil and Gas Commission, in the most recent report on Hydrocarbon and By-Product Reserves in British Columbia, sets remaining reserves at 40.2 TCF. A knowledgeable person provided this information to me:
Potential reserves are no where near what is ever recovered. Not even close.
The figure quoted in the press release is 72x the amount of proven reserves.
It’s about P1, P2 and P3 reserves. P1 is proven. P2 is proven plus probable and the most likely amount to be actually recovered. P3 is all the stuff that’s under the ground and is a figure everyone in industry knows will never come close to being recovered (you cannot recover 100% of the stuff under the ground, not ever.
I believe it inexcusable that political columnists act as uncritical promoters of the fossil fuel industry and apologists for a government that is devious and untrustworthy. Doing so is an abdication of professional obligations.