The majority of subsurface petroleum and natural gas resources are theoretically owned by the citizens of British Columbia. For years, government held monthly auctions of rights to develop these fuels.
Since 1997, monthly rights sales produced about $13 billion in today’s dollars. Additionally, government assessed well more than $20 billion in gross royalties.
Income from natural gas rights and royalties in fiscal year 2009 was $3.75 billion ($4.5 billion in 2020 dollars), equivalent to 10% of the province’s total revenues.
But the revenue streams have run dry.
The methods of revenue generation changed abruptly in 2011, when Christy Clark became Premier, her transition assisted by gas industry titan and SNC-Lavalin Chair Gwyn Morgan.
Royalties were slashed, largely by royalty reduction programs that were originally designed to encourage development of marginal wells, but now apply to nearly every form of gas production.
Additionally, more and more exploitation rights were granted by administrative acts rather than by competitive bids. In March 2020, using coronavirus as an excuse, monthly rights offerings were suspended entirely. Production and exploration continued but, somehow, remote bidding could not.
In fiscal year 2020, the province expects $166 million in revenue for natural gas rights and royalties. That amounts to 0.28% of the province’s total revenues.
Not every natural gas value is dropping for the public. In August, Fortis is applying a 47% increase to the price it charges consumers for natural gas.
Despite the NDP promise that resource development must provide a fair return to the public, John Horgan’s Ministry of Energy, Mines and Petroleum Resources functions just as it did under Christy Clark.
When NDP appointed Deputy Minister Fazil Mihlar was employed by the Fraser Institute, he argued for much less government involvement in the affairs of business and promoted the idea that natural resources should be owned privately, with development unimpeded by regulation or taxation.
I suspect Mihlar has gained more satisfaction by influencing government policy from within, rather than without.
To paraphrase Lyndon Johnson, “Better to be inside the tent pissing out, than outside pissing in.”
Categories: Natural Gas