Natural Gas

Unbelievable giveaway

During an April 2018 debate in the BC Legislature, Green Party MLA Adam Olsen stated:

adam-olsen

…the net revenue collected from the natural gas sector in British Columbia has plummeted in recent years.

In 2016, British Columbia lost $383 million from exploration and development of our gas. Why? It’s because the tax credits earned were more than the income received from the net royalties and rights tenders combined. Again in 2017-2018, we gave companies more through royalty programs and credits than we collected in royalties, fees and levies combined — all of this in the context of an urgent need to transition to a low-carbon economy.

My question is to the Minister of Energy. Why is your ministry continuing this unbelievable giveaway?

NDP oil and gas advocate Michelle Mungall replied:

pinocchio …in terms of our royalty credit program here in British Columbia, it’s very important to note that the credits that are accumulated are not necessarily disbursed. They’re not necessarily claimed by companies. …In terms of this program, how it is working is ensuring that British Columbians are getting a fair rate of return on their resources.

Not necessarily disbursed? A fair rate of return?

Really.

Minister Mungall is dishonest. Just as she was when she told people at Paddle for the Peace that Site C was an intolerable and unnecessary project.

Mungall

As of November 2018, more than $6 billion in royalty credits have been disbursed to natural gas producers, with around $3 billion in credits still owing. This chart compares net royalty income of the past five fiscal years to the receipts in the five years ended 2005.

5 year comparison

These numbers in this table are confirmed by BC’s Auditor General.

royalties.PNG

Of course, in addition to royalties, companies once paid billions into the provincial treasury for rights to explore and produce natural gas. In the last five years, payments for rights were one-tenth of the contributions in the five years before Christy Clark was appointed Premier. Encana founder Gwyn Morgan, Clark’s transition advisor, is pleased.

This chart shows the history of revenue from sale of rights:

Rights

There is a reason for the decline in rights payments.

Land parcels are offered each month and gas companies compete to acquire them for terms ranging from three to ten years. In addition to modest fees, producers offer to pay “bonus” amounts. Over the last 20 years, bonuses averaged 250 times site rentals.

Competitive tendering was instituted to gain the highest value for the public. However, the system has been distorted. When initial terms expire, instead of parcels being re-tendered, rights are renewed administratively. Of course, no bonuses are paid on renewals.

renewal

The net effect is that existing producers control subsurface oil and gas in vast areas of the province and pay almost nothing to continue holding these rights. As a result, the Province has few properties to offer in new tenders. This advantages existing producers and obstructs new participants who might wish to enter the industry.

hectares

The case is clear. British Columbia’s Government decided to reduce the public share of natural gas revenues to almost nothing so that gas companies could maximize profits. Minimal public revenues are realized despite substantial growth in the quantities of natural gas extracted in BC.

Production

Categories: Natural Gas

24 replies »

  1. It is unbelievable that this malfeasanse by our government officials against the public interest continues. Michelle Mungal is not only a bloody liar, she is a shameful hypocrite. Completely against Site C before the election, then after the election her moral compass spun over 180 degrees and bowed to the puppet master John Horgan and took her powerful and well paying position as…. wait for it….. Yes, Minister of Mines Energy and Petroleum Resources and stood by the decision to continue with the dam. Unbelievable. What a before and after picture here. Instead of having the moral courage and decency to stick to her pre election guns she decided to sell those guns for her personal political ambitions. We need to have some kind of better system of accountability, so the people can have these kinds of disgraceful politicians thrown out on their rears.

    Liked by 3 people

  2. Amen! In opposition the NDP seemed to offer hope should they ever gain the reins of power. Where do politicians park their conscience?

    On the topic of gas/hydro….now Mr. Horgan wants to use us to help him balance his carbon file. In order for the 40 billion dollar LNG/Fracking numbers to balance we’re supposed to convert back from gas to hydro. That will never happen unless legislated. I along with many others could no longer afford my two tier electric heating. With government and Hydro’s blessing we converted to gas. John’s government has definitely done the 180.

    Liked by 1 person

  3. Part of what Michelle Mungall said at that Paddle for the Peace in Nelson, before the May, 2017 election:
    “We will go through the BC Utilities Commission and we will work to end Site C and we will work on a new 2016, a new solution to our energy needs that are actually in this century [laughter]. So that’s where we’re at, that’s where things are at. There’s a lot of questions, a lot of things up in the air, but our, our desire is to, ah, keep the Peace where it is, running free, to stop the Site C dam and hopefully we’ll have the ability and the opportunity to do that after 8 o’clock on May 9th.”
    Full clip at https://youtu.be/zFR78s-BWs8

    Liked by 1 person

  4. Let’s assume that most politicians are in politics for the hidden rewards.
    The backroom deals are made with handshakes and little FOI paper-trails.

    “Politicians without borders” nod their approval. Federal MP’s run and are elected as Mayors in (Nanaimo) (Vancouver) and in byelections (Federal NDP Leader) in the
    NO UBER swing-riding of Surrey.

    The objective:
    Get the pipelines built with donor engineered agreements … use Union Labour and throw cash at the First Nations hoping they will forgive and forget all the broken promises.
    Royalties will not be collected but the” insider trading” will guarantee the retirement bonus packages for all top executives, CEO’s and politicians who lose in the next election.
    The trickle down rewards go to the Board of Directors of Crown Corporations, the BC Resource Directors who have the fortunate position of choosing the stocks/shares for the CPP & OAS holdings.
    Local Municipal Pensions, Federal Senators pensions, MLA, MP, BC Civil pensions are supported and are sustained by theses agreements. We should be questioning (examing) the Numbered Companies in the Shanghai/Asian stock markets.

    In the end, it is the BC taxpayer who gets to share in the environmental clean-up while politician’s heirs get a share of the “old boys” political fortunes like (Trudeau/Harper/Mulroney) when they pass away.
    Fortunately, there is no pipeline to Heaven … yet.

    Liked by 1 person

  5. So the CFO of a company operating in British Columbia’s natural gas sector presents the financials at its annual shareholders meeting and states, “It’s very important to note that although the government has issued major credits, our company will not be claiming them.”

    What are the chances the same CFO will be doing next year’s presentation?

    Liked by 3 people

  6. I put solar panels on, installed a heat pump, and an electric water heater. Cut ties to the gas line. The panels are creating more energy than we are using, so we received a letter from B.C. Hydro saying that they would let our house be grandfathered in, but going forward, they would not allow home-owners to install more energy-producing panels than used (as it’s not in the best interests of their customers, a.k.a. their profits). I no longer have any energy bills in my mailbox.

    Authorities in California are distraught with the wildfires that get worse every year, as are we in B.C. Climate change must be reversed now or all the money in the world will not save us. Enough of the nauseating profit margins of oil/gas/hydro. Enough of the corruption and wink-nudging that sees these corporations get away with murder. Literally murder; in the case of wild fires, heat exhaustion, not to mention entire communities that have no access to clean air or water, and their land is contaminated by fracking for natural gas.

    The point is, yes, rein in B.C. Hydro. Come up with green solutions that could use some much-needed support from the tax coffers to make them affordable for everyone. We don’t need to flood a valley for goodness sake… Anyone else have a roof?

    Liked by 3 people

  7. Someone needs to start a political party that puts the BC taxpayers and the Province of BC as the chief beneficiary of our resource development. More like the Norway model than our current model of fire sale give away. It’s painfully obvious that the people we elect to represent us at the bargaining table are lying to us and selling us out financially , on both sides. Why can’t some party with the idea that ….wait for it , the province as a whole should be the chief beneficiary of our natural resource development instead of getting debt and pollution. It makes me sad inside for all the work past generations put into building this province only to have it stolen by crook or hook by consecutive governments of differing stripes. We do need PR just to pry the levers of power from corporate cabal that is robbing us blind.

    Liked by 2 people

  8. The NDP are nothing more than BC Liberal light.

    Massive Casino money laundering scandal and what do the NDP do, allow a new casino to be built on land owned by a very questionable individual.

    Mayor of Surrey wastes $70 million in taxpye’s money to flip flop from light rail to obsolete SkyTrain and nary a peep form Horgan and his crew.

    Natural gas, Site C, all questionable projects glad handed by Horgan.

    The whole damn government is disgusting.

    Liked by 2 people

  9. Great analysis Norm. Your work on this needs to be on every kitchen table in BC as residents unfamiliar with an industry that operates in what is considered a remote corner of the province, and is headquartered outside the province writes their own rules. Residents of the Northeast are pressured into quietness on this as a dribble of money for services does continue to flow, dwarfed by monies spent out of province.
    Not one gas producer has head office structure in BC. Some don’t even maintain field offices in BC, limiting spin offs and one would assume any benefits that should accrue due to the heavy subsidies. Creative accounting methods allow budget line item to show positive although observers know otherwise. Norm’s numbers show it clearly.

    Liked by 1 person

  10. They’re not BC Liberal Light Evil…they’re BC Liberals on steroids! I can NOT wait to vote against them after voting NDP all of my life. 50 years of voting. And I’m going to take as many votes as I can with me when I go. 9 that I know of. So far.

    I’m only getting started. The rage I feel when it comes to these liars and thieves is visceral, and using the facts found on this website and others similar to it, is doing wonders when it comes to the blinders being ripped off of those who say “oh no, the NDP wouldn’t do that”. People are waking up, realizing that there is NO political party that’s worthy of anything but total disdain. We need a new and powerful one that can’t be bought, sold, or stolen.

    Thanks for all you do Norm.

    Liked by 2 people

  11. I can’t get it through my thick skull why we would GIVE our resources away. It’s bad enough to sell these poisonous products to justify revenue for some very important issues, but to do it with negative resource income defies all logic.
    And yet we continue to do it! Fool me once,……

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  12. We have to remember and add in also the fact that our government decided to continue the Site C dam against all good advice and in the face of no market for the power. The only explanation is that it is an additional subsidy to the Liquefaction of natural gas industry which could be persuaded to take our excess electricity if we are willing to sell it for about a quarter of what it would cost us to produce it. And that is only the financial costs. The social and environmental costs are on top of that.

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  13. So … here is the deal. The gas companies make a profit, the government does not collect royalties and the taxpayer cleans up the mess. Sounds more like Alberta. And if you have a minute … go to Google maps … north eastern BC look at the hundreds of fracking wells near the Site C dam. Doesn’t fracking cause earthquakes. Is everyone in the government on some kind of blinding drug that prevents them from seeing what everyone else sees.

    Liked by 1 person

    • Tweedie, go to Google Earth instead to see the current number of pads & water ponds in BC then cross over into Alberta to see worse. This has all been done on FN Treaty Lands, I have seen a presentation of the extent of this intrusion upon treaty lands, its mind boggling!

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  14. Thank goodness Norman is back as the weather is cold ,damp, and chilling and his insights bring out the warmth of discourse amongst us.
    So instead of retendering the permits when they expire to create revenue, the government just rolls them over. The giveaway.
    Thank you Adam Olson.
    These oil/gas boys are pretty spoiled by us. Total control is what they are after even to the point of having BCHydro with their political friends cancel people contributing to the power grid with their solar panels.
    Totalitarian in simple fact.

    We could end like up Alberta, a vassal state to American oil interests. What misery they are in now for failing to contemplate it beforehand.
    What a social mess.
    Now the world is awash in oil, and what they have now is worthless.
    Time for refining, and a completely different approach for Canada.
    I don’t think the politicains are intelligent enough to find one.
    I mean when politicians lie, how can they judge what a simple truth is? They know now because someone tells them what it is. We know this now.
    Generally speaking we won’t survive the Anthropocene with leaders like this.
    Warmth to all.
    Hugh

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  15. Thank you Norm for presenting this information in such a clear and concise manner.

    I am assuming that this level of criminality exists throughout all aspects of the resource extracting industries in BC. Do you have any information concerning the mining sector and whether those industries pay any royalties for the minerals they extract?

    I am also curious if the logging industry’s royalty rate is in the realm of pennies for a cubic meter of wood? Two years ago WFP’s contractor had stored twelve Sitka Spruce Logs in an open area near the base of the Klaskino Inlet. Logs with base diameters of approximately six feet with a minimal taper out to forty feet. As I looked at the logs, I couldn’t help but wonder if the province was receiving anything for these very valuable logs. Mike

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    • There is a surprising lack of separated information available on mining but I’ve seen evidence that in some years, investors have gotten more income tax credits than the province received in royalties.

      In addition, extractive industries have been taking delivery of power at about half the price BC Hydro pays for electricity purchased from IPPs. That is a subsidy covered by residential, commercial and light industry electricity consumers.

      Mount Polley is another example where taxpayers have been subsidizing mining interests. Of course, the company’s controlling shareholder and his associates were among the largest contributors to BC Liberal coffers.

      In addition, taxpayers commonly get stuck with environmental costs and cleanup bills after mining companies do their deeds.

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  16. Read about Resource Extraction Economics, and you’ll find its a curse around the world.
    We are in this phenom
    But what can we do. We are recognising it now but next is to change this paradim to serve us into the future.
    It won’t be easy at all.
    I can’t see the politics here doing anything about it.
    No thinkers up to it.
    After watching Maserati cars delivered to Papau New Guinea for the Apec conference paid for by the people under protest. I couldn’t but imagine this leader’s shrunken head on the bonnet of a Maserati driving through town as a vindication of how they felt about it.

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    • The function of governments in British Columbia , all other provinces and Canada are to manage the population while implementing the CORPORATE AGENDA and their dictates.That is why there have been little change between Christy Clark government and John Horgan’s government on LNG, Site C dam, Fish Farms, Mount Polley and others. When the population get tired of one set of puppets and their policies, they bring the other set of puppet to power to makes us feel we have democracy and choices here.

      Liked by 1 person

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