Today, in the 2016 Financial and Economic Review, the BC Government admits that 2016 net royalties from natural gas production were only $139 million. However, in this 112 page report, there is no effort to disclose the whole story.
Not a single mention of the $1.95 billion unrecorded liability for future royalty reductions revealed in footnotes of the province’s audited financial statements. No indication that production credits have returned $7 billion – 64% of royalties payable – to the gas companies since 2007.
If there were even a hint of honesty within the Finance Ministry, they would have explained the impact and purpose of royalty reductions. Originally, these were to encourage drilling of marginal properties but, under Premier Clark, the program evolved into a scheme of generous subsidies where almost every production activity claimed to be dubitable.
Although almost $2 billion in credits is owed to producers, Government refuses to record the amount on the books. Doing so would destroy the budget surpluses they’ve claimed as badges of competence.
Anyone remember the pre-election promise of a debt-free BC loaded with cash for expanded social programs?
According to Statistics Canada, natural gas producers employ 1/4 of 1% of BC workers. Yet, they receive extraordinary financial assistance from government. That may result because Christy Clark’s BC Liberal party receives extraordinary financial assistance from natural gas producers.
To calculate net, net royalties, I’ve deducted the increase in credits owing in each year from the royalty income reported by the province.
Categories: Methane Gas, Taxation
in-sights.ca 
Home-based business owners are — like all business owners — allowed to write off all sorts of legitimate company expenses against their income.
If the business is in the red, though, the CRA does not allow the office-space part of home expenses (heat, light, taxes, mortgage) to be thrown in until the books are in the black.
Home expense credits can be saved up in the red years and brought forward when/if the company is doing well. Thus, a profitable year could be wiped down to “zero” on the books and the CRA wouldn’t get a nickel.
I’m not saying the production credits are legitimate… but are they used in roughly the same way: you don’t get to use them unless you turn a “profit”?
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I get your point that the production credits need to be accounted for… but are they truly “debt”?
If all gas companies packed up and left the province tomorrow, they’d be leaving the credits on the table.
They certainly are a debt on future gas industry income to the province, of course… but a weasely “different” kind of debt. No?
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I have to say Norm, the more I glance at the MSM, the more I’m led to believe that there’s nothing to be concerned about in BC. I don’t read the MSM, but I do glance. Lately headlines include all sorts of jabs at the Alberta NDP and this morning, the Sun has a headline that reads all is great with the Port Mann bridge.
Then I turn to what I enjoy reading from the many bloggers who are researching and presenting what all taxpayers should be concerned about, the wasteful & reckless spending of your tax dollar.
I can’t imagine the MSM putting in the time and energy producing actual facts.
Thanks for putting in the time Norm,
Guy in Victoria
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Excellent analysis Norm. The recent WSJ article regarding the delay of an investment decision by Petronas illustrates the folly of this low royalty policy. The current government is very generous with taxpayers money. Minister Coleman could barely contain himself as he announced the latest gift of $120 Million. Suggestions that this will increase the amount of jobs available is ridiculous as Alberta based services starved for work cut rates and edge out BC based employers.
No question who to blame and the locals looking for work will remember come next May.
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