Natural Gas

BC subsidies to gas producers: $8.6 billion, 2007-2017

destroy 180Citizens 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.

NASA 203_co2-graph-021116.jpeg

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?


chart

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.

norway 500


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Categories: Natural Gas

4 replies »

  1. Good point about us having to pay as carbon tax while we subsidize Alberta for wet gas instead of a profit, and contrary to the reason for having a carbon tax at all. Neglecting to do business as the opportunity strikes.
    Really.
    I now think the politicians of our social realm do have intelligence but it is plant based.
    They grow in fertile ground without an insight into the future. Climate change?? Until I see a plant read a book……
    Ben Parfitt ought to be honoured by us for his journalism.
    Hugh

    Like

  2. .. that is simply stunning analysis..
    It needs to presented to current BC Government
    probably via an intrepid journalist.. & media
    at the same time as it is made public

    That’s black & white to anyone intelligent
    ie a BC voter..

    But then, again, the Cohen Commission
    shone a spotlight on salmon farms..
    and issued major recommendations
    and.. ? And.. ?.. uh, well ..
    successive BC governments
    renewed salmon farm licences

    Like

  3. that does not make me a happy camper. Having read here previously about these governmet give aways, well it were the B.C.. Lieberals in office. The NDP and GREENS need to get with the agenda and stop these subidies.

    Not to put too fine a point on it, but these corporations are getting subsidies and I’m not. I would like a subsidy or two for having paid taxes in this province for over 50 years. I’d like my friends kids to get subsidies so they don’t have student loans and could buy homes of their own.

    Lets hope there are not tolls or fees for cars becasue that would be a tax while these foreign corporations are getting freebies. ah, John John John and where oh where is green Weaver? You are supposed to be the environmental group are you not?

    TIME TO END ALL OF THESE SUBSIDIES. ITS CORPORATE WELFARE, I’d LIKE TO SEE WELFARE RATES FOR HUMANS INCREASED. If the did away with corporate welfare the province might be able to build some affordable housing for those working for less than $70K a year.

    Like

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