Citizens of BC are misled by government about economic returns from natural gas. Relevant statistics are not readily available and the ministries prefer to conceal them. Since government does not issue press releases with awkward news, the incurious press gallery ignores information like that shown below.
Occasionally, facts emerge from financial documents. The recently released Budget and Fiscal Plan 2020/21 – 2022/23 provides a few details about natural gas.
For example, production volumes for the current year and the three years following are available. Those three years project 26% growth in production but we can be confident public revenue will not increase at the same rate. Using earlier B&F Plans, we can chart the growth of natural gas production in BC.
From various reports, we can calculate revenue gained by the provincial treasury. My numbers are a little different than those reported by the Finance Ministry. I think it appropriate to follow the year by year cash proceeds of rights sales.
Government defers these revenue and recognizes it over time. Until 2011, the period was eight years, then it was nine years. In FY 2019, the revenue recognition period was changed to ten years.
In the years large sums were coming in, the revenue deferrals served Liberal governments. Hiding revenue allowed them to freeze social benefits and justify program cuts.
Accountants might find it odd that revenue is spread over ten years on contracts that typically last three or five years. But, there is another factor at play. The Energy Ministry renews land deals administratively rather than re-tendering properties when contract period end.
This works in favour of companies already involved in the gas fields and works against new entrants to the industry. This process of administrative renewals also works against the public. Fewer and fewer land parcels are available in the monthly auctions. This chart illustrates:
With the growth of royalty credit programs, that segment of natural gas revenue is disappearing as well. When looking at this chart, look back at the production figures.
Like Liberals before them, the Horgan NDP has no intention of maximizing the public share of natural resources. They continue the royalty credits program without change and the total available to reduce producers’ future payments is now between $2.7 and $3.0 billion.
I conclude NDP politicians are like Liberals but with a little more commitment to social justice. That’s not what we were promised in 2017.
Categories: Natural Gas