This news release from the Canadian Centre for Policy Alternatives (CCPA) is worth repeating. Many citizens — although not In-Sights readers — will be shocked to learn that credits owed natural gas producers soared by more than $1 billion from April to November 2017.
That increase is two and a half times more than the total gas royalties received by government in the three fiscal years ended March 2018. The $3.2 billion balance owed to producers ensures that royalty revenues will remain at paltry levels throughout the Horgan Government’s present term.
This is the CCPA release:
CCPA calls on Auditor General to investigate stunning $1-billion annual increase in provincial natural gas-drilling subsidy program
MAY 31, 2018
VANCOUVER – An unprecedented increase in a special “credit” account set up by the BC government to subsidize the fracking industry should be immediately investigated by the province’s Auditor General, says the BC office of the Canadian Centre for Policy Alternatives.
In November 2017, BC’s Minister of Energy, Mines and Petroleum Resources said the balance in the “deep well credit” account was $3.2 billion. But according to the BC Public Accounts, in March 2017 the balance was $2.15 billion.
The increase is by far the largest ever recorded yet, to date, the ministry has declined to explain the sudden surge in the account balance.
The increase is more than double the previous annual increase, leading the CCPA to ask BC’s independent Auditor General to investigate the unusual increase and whether or not figures published by the government on the account balances are accurate.
The account represents the value of “credits” that the Province allows fossil fuel companies to deduct from royalty payments to public coffers. Fossil fuel companies use the credits to dramatically reduce the royalties they pay to the Province for the wells they drill and frack.
In the past 10 years, the Province’s credit programs translated into $4.9 billion in savings for those companies and correspondingly large foregone revenues to the Province.
“The ugly truth is that in 10 years we’ve produced more fossil fuels than ever while the royalties we received went into the toilet,” says Ben Parfitt, a resource policy analyst with the BC office of the CCPA.
“All of that foregone $4.9 billion, plus the foregone revenues in the $3.2-billion credit account, plus any future credits claimed by the industry translates into reduced services for school kids, hospital patients, transit users, people who are homeless, First Nations, you name it,” he explained.
Largely because of those credits, revenues collected from fossil fuel companies have fallen steadily. In the last 10 years, as natural gas production in BC shot up 72 per cent, royalty revenues collected from fossil fuel companies went in the opposite direction. In 2007-2008, royalty revenues were $1.16 billion. By 2016-2017, they were just $147 million.
That 87-per-cent decline in royalty payments meant that in the most recent year for which information is available, British Columbians received only 3.6% of the market value in royalties for the natural gas extracted in the province. By comparison, citizens in the United States saw a return of 12.5 per cent on gas produced on federally owned lands.
The CCPA repeatedly asked the Ministry of Energy to explain why the credit account ballooned so quickly, but the Ministry’s eventual response raised even more questions than it answered.
“It’s not due to expanded natural gas industry activity,” David Haslam, the Ministry’s director of communications, said in an email. Haslam added that the published credit account balance as reported annually in Public Accounts may, in fact, not fully capture the value of all outstanding credits.
“The public accounts figure represents the most likely to be used in the future,” Haslam said.
This response is inadequate, Parfitt said.
“That is why we have asked the Auditor General to investigate this subsidy scheme and what lies behind the massive increase in the account this past year,” he said. “If the increase is not due to ‘expanded natural gas industry activity’, then what other explanation is there? This is a publicly owned resource. How many billions of dollars have we actually given away to these companies?
“In addition, when the Ministry says that the published credit figures reflect those credits that are ‘most likely’ to be used, the clear inference is that someone in government is making a judgment call. How many more credits are out there that might be claimed? Why aren’t those other credits publicly accounted for? The Auditor General is best positioned to get the answers to such questions,” Parfitt said.