Is the NDP about to cancel B.C.’s biggest fossil fuel subsidy?
Or are they pulling a bait and switch?
The provincial government is nearing the conclusion of its Natural Gas Royalty Review, which could overhaul the way that the province charges fracking companies to access gas. As part of those changes, it seems more and more likely that the NDP government will cancel a policy called Deep Well Royalty Credits, which is B.C.’s largest single fossil fuel subsidy.
Originally created in 2003 by Gordon Campbell’s B.C. Liberal government, Deep Well Royalty Credits were intended to incentivize what at the time was a new type of natural gas extraction — fracking. Today, over 80 per cent of the gas wells in B.C. are fracked, and the cost of Deep Well Credits have exploded. According to the 2020/21 provincial budget this year the royalty credit will cost the province $421 million in lost revenue, and estimates that if the policy is not changed by 2023/24 that figure will grow to $657 million. It’s also a system these companies have been gaming: because royalty credits exceed royalties for many fracking wells the companies that operate them have now built up a surplus of $3.1 billion credits that they can use to avoid future royalty payments to the provincial government.
So it shouldn’t surprise you that when the province brought in two academics as part of the Royalty Review process to conduct an independent review, they concluded that “the BC royalty system for oil and gas is broken.” And when the government opened this process up to the public, thousands of British Columbians took the time to write in to the public consultation and overwhelmingly called on the government to root out the fossil fuel subsidies embedded in the royalty system, and to create a new system that helps the province achieve its environmental goals, its climate targets, and its commitment to reconciliation with Indigenous Peoples, rather than undercutting them.
What came as a surprise was how Premier Horgan responded on Twitter to the release of a report on those public consultations . Clearly, the province has heard people loud and clear that the current system is unacceptable and changes need to be made.
However, there is a hidden warning in that tweet: the use of the term “inefficient”. In a province that is already battered by floods, heat domes, and forest fires — which are all undeniably made worse by climate change, and not only cost our province billions of dollars but actually have led to loss of human lives — there can be no such thing as an efficient fossil fuel subsidy.
Replacing old fossil fuel subsidies with new ones is not progress; and based upon the discussion paper that the province released before the public consultation, it is one of the options that the B.C. NDP government is considering. That document suggests replacing royalty credits with a policy called capital cost recovery, which would allow fracking companies to deduct the cost of drilling new wells off the fees they pay the province.
British Columbians have been clear that the time for half measures is over: we want a government that tackles climate change head on. That means a government that is willing to stand up to oil and gas companies and tell them that the days of government handouts for major polluters are over. The royalty review is an opportunity for Premier Horgan to prove that not only has he heard the message, but that he plans to do something about it .
Sven Biggs is the Canadian Oil and Gas Programs Director for Stand.earth
