B.C.’s largest single fossil fuel subsidy costs province over $1 billion
March 23, 2022
New analysis reveals that last year, British Columbia forwent $1.162 billion in natural gas royalty revenues due to Deep Well Royalty Credits, a tax credit for fracking wells.
Unceded Coast Salish Territories (VANCOUVER, BC) — New analysis reveals that last year, British Columbia forwent $1.162 billion in natural gas royalty revenues due to Deep Well Royalty Credits, a tax credit for fracking wells. This is according to the 2021-2022 provincial budget, which was released in late February. This figure is more than twice the amount that the government estimated at $514 million.
The Ministry of Energy, Mines, and Low Carbon Innovation is currently conducting a review of natural gas royalties and is due to make an announcement on its fate later this spring, as well as other fossil fuel subsidies that are part of the system of fees and rent the province charges fracking companies to access B.C.’s natural gas reserves.
“This year’s budget shows that fracking companies are taking our province to the cleaners, and have been allowed to to walk away with over a $1 billion that otherwise should have gone into the provincial treasury to pay for things like hospitals and schools,” said Sven Biggs, Canadian Oil and Gas Program Director for Stand.earth. “While I am hopeful that the province will close some of the worst loopholes as part of their royalty review, if they create new fossil fuel subsidies at the same time, as they signaled they might, I fear that we will find ourselves back in the same situation in the years to come.”
The uncontrolled growth in royalty credits has led to the government handing out more royalty credits than the companies can use in a given year, leading to surplus of credits totaling $3.4 billion, which the companies can claim in the future, which means lost revenue for future governments.
Last year, Stand produced a report based on the province’s 2021/22 budget predicting that the B.C. government would give out as much $1.3 billion on fossil fuel subsidies that year. We now know that the government greatly underestimated the cost of subsidies. Based on our analysis, the true total for provincial fossil fuel subsidies last year was as much as $1.9 billion.
“In the Throne Speech, the province signaled they were ready to cancel inefficient fossil fuel subsidies,” said Biggs. “But if this government is really committed to fighting climate change, they will have to admit that there is no such thing as an efficient subsidy for the industry that is driving the crisis.”
Fossil fuel subsidies are a huge barrier to climate action and transitioning our economy away from fossil fuels. They make it almost impossible for B.C. to meet its 2030 carbon emission targets. Emissions from liquid natural gas production alone would exceed B.C.’s target by 160 per cent, and without support from taxpayers this industry is not financially viable. Stand.earth is calling on the NDP to use this opportunity to cancel royalty credits and begin the phase out of all fossil fuel subsidies.
Ziona Eyob, Media Director – Canada, firstname.lastname@example.org, +1 604 757 7279 (Pacific Time)