The BC government is finally undertaking a review of their natural gas royalty system. The 30 year old system was described as 'broken' by an independent assessment.
Members of the public are invited to give feedback on what a new system should look like, either using an online questionnaire or by submitting a longer more comprehensive written submission. To maximize your impact, we suggest using the written form. Feedback can be submitted at https://engage.gov.bc.ca/royaltyreview/
On their website, the BC government provides a backgrounder and the results of an independent review. BC Climate Alliance members looked at these documents, and other research, in order to give informed feedback.
What was our conclusion?
The short answer - we want less gas, more trees. The current royalty system incentivizes production by giving money to oil and gas. Through generous royalty credits, it excuses payments oil and gas companies should be making when they profit from the use the British Columbia's resources. That's public money which could - and should - be going into clean energy, communities, and nature based solutions. The revised royalty system must also penalize gas companies for methane leaks, and take into account the rights of First Nations. That's the short answer.
For the long answer, you can find the BC Climate Alliance's submission below. Feel free to use any parts you find relevant in your own submission. And remember, the deadline is Dec. 10th!
BC Climate Alliance's submission to the Royalty Review.
The specific issues ● Fossil fuel subsidies, such as royalty credits, act as a negative carbon price, stunting the effectiveness of BC’s climate policies. Revenue lost from these credits pull vital government resources away from climate change strategies that can work towards reducing emissions. ● Subsidizing fossil fuel extraction while attempting to dramatically lower the province’s emissions is contradictory. ● The deep well royalty credit is the largest such fossil fuel subsidy in BC, supporting well established gas companies to frack gas for export (88%) at a time when we need to be supporting low carbon alternatives. ● As noted in the Independent Review, royalty credits result in higher production and emissions, keeping older, leaky wells producing longer by lowering firms’ operational costs. In addition, the authors note that the current royalty structure provides “no monetary penalty for natural gas “lost” to the atmosphere, which reduces the firm’s incentive to avoid such losses. This is of concern as direct natural gas releases have a global warming potential far greater than CO2.” ● When total life-cycle emissions are calculated, there is little difference in emissions between natural gas and coal-fired electricity generation in Asia (Nature 2020). ● The Centre for Future Work finds that the fossil fuel sector generates fewer jobs than any other industry in Canada: from 0.5 – 1.6 jobs per $1 million of production compared to an average of 8.6 jobs for other industries. “If the goal is genuinely to create and sustain employment, fossil fuel production is one of the worst ways to go about it.” ● The onus of reconciliation is on the province to develop legislation and processes that businesses and industry must follow in order to support First Nations interests. In addition, recognition that these industries have grave and significant negative impacts on Indigenous women.
Our recommendations ● Change the royalty framework: We agree with the Independent Assessment that the current natural gas royalty framework is not meeting the government's goals and should be completely reformed so that gas companies do not continue to be compensated for a level of risk that no longer exists. Transparent accounting and reporting are critical. ● Environmental protection needs to be paramount in the determination of the royalty framework - while GHG emissions reduction may not be the goal of the royalty framework, the framework cannot incentivize increased emissions. We disagree with the authors that environmental mitigation of this type should not be the goal of a royalty framework. In the midst of a climate crisis, every government policy must be seen through a climate, equity, and planetary lens. We note that the significant health effects of incentivizing the development of fracked gas is also a critical part of this picture. ● There should be a monetary penalty for natural gas “lost” to the atmosphere, i.e. methane leaks. This will address improving transparency for true emissions within the LNG sector. ● Royalty frameworks need to be considered in a global context. We disagree with the authors that higher royalty rates “will not alter the demand base for this energy source.” This statement does not take into consideration the insurance and investment industries’ increasing reticence to insure or invest in fossil fuel industries nor considers the impact of investing in alternative energy sources and energy efficiencies. ● Ensure an equitable return: We see no reason to offer discounted royalty rates. Royalties should be used to provide a fair return to taxpayers, while supporting a phase out of fracked gas, especially for export. ● Fast transition: The transition from the current royalty credit regime should happen as quickly as possible. We have no time to waste, especially as methane is an incredibly strong contributor (84 x CO2) to global warming during the first 20 years