Citizens of British Columbia are facilitating and subsidizing production of bitumen from Alberta tar sands. How’s that for another example of hypocrisy by a government that claims it objects to expanded shipments of dilbit through Vancouver’s inner harbour?
Ben Parfitt, resource policy analyst for Canadian Centre for Policy Alternatives, explains.
How BC’s Gas Giveaway Fuels Alberta’s Oilsands, Ben Parfitt, The Tyee, August 8, 2018:
…Heavy oil production in Canada’s petro province of Alberta is powered, in part, by a glut of cheap natural gas in North America, which gas producers in B.C. have helped to create.
B.C. is also helping to prop up Alberta’s oil industry by shipping it lots of extremely valuable “gas liquids” — byproducts of natural gas which are essential to dilute heavy oil or bitumen so that it can move more readily through pipelines…
Much of that out-of-sight, out-of-mind energy flow is also, paradoxically, heavily subsidized by the B.C. government. Once again, it barely rates a mention in the mainstream press.
…Those subsidies are a powerful inducement to the industry, particularly in the Montney Basin, the southernmost of the two big natural plays in the province, where there’s plenty of natural gas. But there is also plenty of something else, which is the only thing that is really driving industry profits these days.
Gas liquids: The big cash prize
Within the Montney Basin, which includes areas near Fort St. John, Dawson Creek and Chetwynd, the favoured drilling sites are those containing large amounts of naturally occurring “wet” gas liquids, as opposed to “dry” conventional natural gas or methane. The most important of those liquids are pentane and condensate, which are used to dilute bitumen or heavy oil, thus allowing it to flow through pipelines. Hence the name “dilbit.”
Condensate is also sometimes called natural gasoline. In addition to flowing to the surface at drilled and fracked gas wells, it is also separated from the dry gas at gas processing plants. (Note: Those processors pay for electricity from BC Hydro at about half the average price Hydro pays to IPPs – N.F.)
The big user of all the wet gas that B.C. produces? You guessed it — Alberta’s heavy oil industry…
The end result is billions fewer dollars flowing into provincial coffers and from there into public programs like health and education. In the last 10 years, according to figures supplied by Cathy Mou, markets analysis manager for B.C.’s energy ministry, the difference between the gross royalty charges to companies drilling for natural gas and gas liquids in northeast B.C. and the net royalties they actually paid was close to $5 billion. A significant factor behind those reduced payments were the above-mentioned credits…
B.C.’s generous trade in natural gas and wet gases with Alberta carries with it enormous ecological costs, almost all of which are borne by Indigenous and non-Indigenous communities located in the northeast region.
This includes stunning and repeated violations of provincial laws, for example fossil companies building dozens of unlicensed dams to trap water for use in their increasingly intense fracking operations — dams built under the watch of the fossil fuel industry’s own dedicated regulator, the BC Oil and Gas Commission.
It also includes evidence of potential groundwater contamination at hundreds of gas wells in the remote northeast of the province, evidence that the OGC withheld from the public for four years and apparently never bothered to share with successive provincial energy ministers.
It also includes evidence of natural gas companies repeatedly breaking rules to protect threatened wildlife species, with the OGC once again withholding that information from the public.
It also includes evidence of mounting liabilities at abandoned well sites where insufficient industry funds have been posted to cover environmental reclamation costs, and where the provincial government may now be on the hook to cover cleanup costs.
And it also includes disturbing evidence of methane leaking into the atmosphere at numerous gas well sites and wreaking climatic havoc. Given this, it is entirely conceivable that if the day ever came when a major LNG facility — or more accurately, a liquefied fracked gas plant — was built in B.C., the greenhouse gas emissions associated with that gas would put it on par with coal in terms of carbon emissions.
Either the present government of British Columbia is oblivious to climate change science or, like the Liberals, they believe in transitioning to clean renewable energy by producing and burning more fossil fuels. Of course, that’s utter nonsense, particularly when climate change is headed quickly toward a crisis point. This chart is from NASA.
In his Tyee article, CCPA’s Ben Parfitt reports a statement from the energy ministry that subsidies have reduced royalty payments by more than $5 billion in the last ten years.
However, as of March 2017, an additional $2.16 billion in royalty credits had been accrued by producers but not yet deducted from royalty accounts. In November of 2017, Minister Michelle Mungall told the legislature that the accrual account had grown to $3.2 billion.
If Minister Mungall is correct, counting fiscal year 2007 until late 2017, BC citizens have offered subsidies of $8.6 billion to natural gas producers. Knowing that, how do you feel about paying carbon taxes to heat your home or fuel your car?
As the province’s own numbers show, BC’s real share of oil and gas production has reduced to almost nothing. That is despite output rising hugely since the days natural gas was a multi-billion dollar contributor to the provincial treasury.
In Norway, the government has a firm commitment to gaining a share of resource revenues. As a result, a typical family’s share in the national wealth fund from oil and gas revenues is about $1.2 million. An Albertan family’s share in the Heritage Fund is about $18 thousand, although that misleads because in the current year and the two before it, the Alberta Government is responsible for deficits of $29 billion, which is $30 thousand in new debt per family.
In fiscal year 2017, Alberta’s total resource revenues amounted to $3.1 billion. That compares to Norway’s C$36 billion in cash flow from oil and gas activities. The country publishes this graphic about petroleum but governments in Canada would be too embarrassed to illustrate like numbers.
Bail out for Trans Mountain $15 – $20 b. $4.5b for old assets, over $9b for expansion, $3.6b financial assurances for land and marine spills. Kinder Morgan’s no-lose bet makes Ottawa go all in and Canadians pay https://t.co/z83kg8eCez
— Robyn Allan (@robynallan) May 30, 2018
Categories: Natural Gas