BC Liberals, particularly Premier Clark, are proving to be a fine investment for British Columbia’s natural gas producers. Today’s budget predicts gas royalties will be $151 million for the current fiscal year and $128 million for the next. Cash from sale of gas and petroleum rights is forecast to be less than $20 million a year for fiscal years 2016 to 2019, down from $2.4 billion in the year before Gordon Campbell was pushed from office.
Less apparent are Liberal promises of a debt free province made wealthy by natural gas production. Those election undertakings are not gone, they’re being reworked for the 2017 campaign. In the words of G.W. Bush,
“There’s an old saying in Tennessee — I know it’s in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can’t get fooled again.”
Numbers taken from provincial reports and Statistics Canada demonstrate the extent of change since British Columbia’s government decided it wanted little revenue from the provincial gas resource:
Statistics Canada tells us (CANSIM Table 131-0001) the volume of gas produced has about doubled since 2001:
From that, we calculate the provincial return on each million cubic metres of gas produced:
Government continues not to reveal the liability accrued for drilling and infrastructure credits owed producers. According to the last Auditor’s Report, that amount was $1.4 billion as of March 2015 and has been growing by more than $200 million a year. If that liability is recognized, the finance ministry’s numbers demonstrate that government is in a deficit position in its dealings with natural gas companies. The Natural Gas Development ministry budget, which was $401 million in 2015, grows to $444 million in 2016 and is forecast to continue increasing.
BC Liberals must have new accounting tricks in store for BC Hydro. The third quarter report that accompanied Budget 2016 reveals that government expects a $653 million “dividend” from the utility by March 31, with more than $700 million to follow in each of the next three years. However, the most recent quarterly report of BC Hydro says this:
Under a Special Directive from the Province, the Company is required to make an annual payment to the Province (the Payment) on or before June 30 of each year. The Payment is equal to 85 per cent of the Company’s net income for the most recently completed fiscal year unless the debt to equity ratio, as defined by the Special Directive, after deducting the Payment, is greater than 80:20. If
the Payment would result in a debt to equity ratio exceeding 80:20, then the Payment is the greatest amount that can be paid without causing the debt to equity ratio to exceed 80:20.
No Payment has been accrued as at September 30, 2015 as the Company’s debt to equity ratio is at the 80:20 cap prior to the calculation of the Payment.
What may be planned is elimination of the 80:20 ratio. I find it amusing that government has a crown agency borrow money to pay a dividend that allows government to declare a fake surplus… and the Press Gallery gang applauds in admiration for the fiscal restraint.
— Bob Mackin (@bobmackin) February 17, 2016