The Crown Petroleum and Natural Gas Rights Public Tender brought in $950,121 this week, raising the 2016 eight month total to $5.8 million. 2015 and 2016 are the two worst years among the last 20.
It’s another bad result for a Premier who ran the last election on a claim that large natural gas revenues would result in a debt-free, sales-tax-free BC.
B.C.’s liquefied natural gas boom to fuel $100 billion Prosperity Fund, Canadian Press, February 13, 2014:
The government’s throne speech delivered Tuesday announced a new B.C. Prosperity Fund that could accumulate between $100 billion and $260 billion in revenues from LNG royalties and business taxes, enough to wipe out the province’s current debt of $56 billion and eliminate the need for a provincial sales tax.
Reporting actual rights sales results, these charts are free of spin:
Rights sales aren’t the worst part of the BC natural gas story. The other potential revenue source is from payment of royalties on produced gas. Royalties are not calculated as a share of revenues received from gas deliveries; they are based on net values calculated after various deductions and further reduced by government contributions to production costs.
These subsidies are deducted from calculated royalties but the government share is already so low that producers can’t deduct all of the credits earned. That has resulted in a steady growth of the amounts owed producers. Under Premier Clark, the liability has grown from $650 million to about $2 billion.
Because accounting for the production credits owed would erase claimed Liberal surpluses, government chooses not to record the amount owed. They’re allowed to build this poison pill for their successor because, unlike private businesses, governments can make their own accounting rules.
When we include credits owed, the royalty income looks much different. Accountants that I know believe this is a more accurate representation of natural gas royalties:
If you are waiting for a debt free province or elimination of sales taxes, you’d best be very, very patient.
Categories: Natural Gas