Public consultation on B.C. gas royalties is key opportunity to address fossil fuel subsidies

Amid ongoing COP26 talks in Glasgow, Royalty Review will be first test of recently announced provincial climate plan.

Xʷməθkʷəy̓əm (Musqueam), Sḵwx̱wú7mesh (Squamish) and səlilwətaɬ (Tsleil-Waututh) (VANCOUVER, BC) — As provincial delegates participate in climate talks in Glasgow for COP26, the B.C. Government released a new decision paper today and opened public consultations as part of its review of the province’s Natural Gas Royalty System. This review will not only examine the rates that gas producers pay the province, it will also examine the system of royalty credits, which has been identified by Stand.earth as the single largest provincial fossil fuel subsidy. 

“Fossil fuel subsidies in B.C. are out of control, now amounting to $1.3 billion. Which means they have more than doubled since 2017 and are projected to keep rising at an alarming rate,” said Sven Biggs, Stand.earth’s Canadian Oil and Gas Program Director. “This royalty review is an opportunity to start reining in those subsidies, and to make sure that our royalty system is in line with the province’s goals on climate and reconciliation with Indigenous People.” 

The largest royalty credit is the Deep Well Royalty Credit, a subsidy that is designed to incentivise fracking, which is projected to cost taxpayers $421 million this year. That one subsidy single handedly surpasses the $282 million that the province projects it will earn from all oil and gas royalties this year, which points to the most alarming part of these policies. Because the government gives out tax credits faster than the companies can cash them in, fracking companies have now amassed an outstanding liability of $3.1 billion which can be used to reduce future royalty payments. 

“You can’t solve the climate crisis without canceling fossil fuel subsidies,” said Kiki Wood, Stand.earth’s Senior Oil and Gas Campaigner. “Which is why we are calling on the Provincial Government to enact a new royalty system that is not only designed to tackle climate change, but also return as much value as possible to the province, and doesn’t allow existing wells to be grandfathered into the current broken system.”                                                                                                         

The provincial government identified this royalty review as a mechanism to reduce oil and gas emissions in the CleanBC Roadmap, their updated plan to reach B.C.’s 2030 climate target that was released two weeks ago. This is particularly important because the core of their climate strategy is a price on pollution, through a carbon tax. Fossil fuel subsidies effectively undercut carbon pricing by using public funding to tip the scales back towards polluting industries. 

Consultations on a new natural gas royalty will be open to the public until December 9th. However, the government is not expected to announce the outcome of the review until early 2022, when changes in the royalty system will be reflected in next year’s provincial budget.  

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Media contacts:
In Canada: Sven Biggs, Canadian Oil and Gas Program Director, Stand.earth, 778-882-8354 sven@stand.earth (PT)
At COP26: Ziona Eyob, Media Director – Canada, canmedia@stand.earth, +1 604 757 7279 (GMT)