After an independent review of oil and gas royalties and subsidies in the province, the B.C. government has committed to transforming and updating the current system.
Though it removes some subsidies, experts both for and against continued production say it will not directly decrease oil and gas activity in the Peace region or elsewhere in the province.
The current system, which the NDP government promised to phase out as part of their 2020 campaign, is 30 years old.
The production, market, and climate conditions have shifted massively since the current system’s origin in the 1990s, according to the province. The new royalty system will eliminate outdated and inefficient subsidies and raise the minimum royalty rate for all new wells.
Lisa Baiton, president and CEO of The Canadian Association of Petroleum Producers (CAPP), said her organization will examine the review more thoroughly but initially recognizes it as an important
Though the royalty rates rose and some subsidies ended, the new system is not an act against the industry, and the CAPP is looking forward to “working in earnest with the government to enhance the industry’s competitiveness.”
“B.C. produces some of the world’s cleanest and lowest emission natural gas.,” she said in a statement. “In order to play a role in lowering net global emissions, B.C. must not get left behind in the global push to grow natural gas supply. The province must continue to ensure a competitive environment that attracts investment to B.C.”
Ben Parfitt, a resource policy analyst with the Canadian Centre for Policy Alternatives’ B.C. office, does not believe that ending these subsidies will end or even limit oil and gas production in the province.
A critic of the subsidies provided under the previous program to the oil and gas sector, Parfitt was encouraged by the elimination of major subsidies, including the Deep Well Program. “There is simply no justification for continuing with that program,” he said, when the process it subsidized was far less common and more expensive in 2003 than it is in the current climate.
Oil and gas subsidies are changing— not disappearing. Though royalty rates are rising, he said, that change is not enough to limit production. In fact, it only implies that the province supports the industry and does not want to eliminate it. From an environmental standpoint, this is an action against climate change that the provincial government does not seem practically interested in, he said.
“There is nothing in this proposed change to the royalty regime that is going to do anything other than infer that there’s increased natural gas production in the province,” Parfitt said.
Locally, opinions are less swayed. Dan Davies, the MLA for Peace River North, is concerned for the industry under the new system.
“It slowly but surely is another nail in the coffin for industry,” he said. “This provincial government is not in favor of B.C’s resource sector.”
“We are in a world energy crisis right now and British Columbia can play an integral part of solving it. We can do it to the most environmental standards on the planet and while keeping our people employed,” Davies said.