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BC is considering reviewing its oil and gas loyalty system decades ago

Prime Minister John Horgan states that the goal is to ensure that the decades-old system not only brings fair benefits to the population, but is in line with the state’s climate goals.

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The British Columbia government will review and review its oil and gas loyalty system, which once invested more than $ 1 billion annually in state funding.

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John Horgan’s NDP government said that a decade-old review of the royal system was in line with the state’s climatic goals of modernizing the system and reducing carbon emissions, bringing fair benefits to British Colombian citizens. The purpose is to guarantee that.

Loyalty has exceeded $ 1 billion annually for nearly a decade since 2000, primarily from natural gas. Gas usage peaked at $ 1.92 billion in 2005-06, but by 2010, usage had plummeted to less than $ 150 million, despite rising gas production.

Loyalty systems are systems in which businesses pay to access natural gas resources and share their income with state owners. The amount a company pays is determined by a complex system that can provide credit to infrastructure such as access roads and deduct some costs.

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At the same time as announcing the overhaul, the government announced an independent assessment by BC University economist Nancy Olevilla and University of Calgary economist Jennifer Winter. The assessment found, for example, that credits for drilling deep natural gas wells played a major role in reducing royalty payments to the state.

As of March, the industry had accumulated $ 7.325 billion in deep well credit, of which $ 3.56 billion was already being used to reduce royalty payments. The Olewiler and Winter reports conclude that deep well credits are outdated, as deep well drilling is now a standard practice.

The decline in royalties is somewhat related to the price of natural gas, but the royalty rate calculated based on the price has declined in the last eight years, rising from 8.4% in 2013 to 2.4% in 2020. bottom.

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“The BC loyalty system for natural gas and oil is broken,” their report said.

Environmentalists and other climate policy advocates have long pointed out that British Columbia’s natural gas sector has been subsidized to encourage production when the state needs to cut back to tackle climate change. I did.

Ben Parfit, a resource policy analyst at the Canadian Consumer Privacy Act (CCPA), said basic information about loyalty and credit from each British Columbia oil and gas producer is required for the review to be legal. Said it was necessary. Parfitt states that information is not publicly available, for example in the case of British Columbia’s forest industry.

“I feel very strongly that the public deserves to have some basic information before that in order to have an informed discussion,” Parfitt said Wednesday.

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The CCPA is one of the groups calling for reforms in their loyalty programs, highlighting the multi-billion dollar credits this sector receives.

However, the industry sees natural gas as part of a solution, not as a climate change problem. The Canadian Petroleum Producers Association (CAPP) claims that BC produces some of the cleanest, lowest-emission natural gas in the world that can replace coal.

“If we are really interested in reducing global emissions, BC will expand its natural gas supply and attract investment here, not in countries that do not meet our high environmental standards. We need to be left behind in the global push to develop a competitive environment, “said Geoff Morrison, BC Manager at CAPP.

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“Loyalty reviews offer the opportunity to do just that, and the natural gas industry is working seriously with the state government to strengthen the industry’s competitiveness while preserving the value our resources provide to British Columbia citizens. I will, “says Morrison.

The British Columbia Government plans to release a discussion paper in November backed by a report by Olewiler and Winter on options for establishing a new loyalty system that meets state objectives.

The state plans to consult with industry, stakeholders, indigenous peoples, and interested British Columbia citizens.

The findings will be announced in February 2022.

In a report, Olewiler and Winter helped the loyalty system significantly reduce its share of the crown of net economic value from oil and gas resources over the last 15 years and transfer value from state to industry. Said. They said it consisted of fragmentary changes to systems designed for different times with different risks, technologies and market conditions. They also add that it creates incentives that do not promote sector efficiency.

ghoekstra@postmedia.com

twitter.com/gordon_hoekstra

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BC is considering reviewing its oil and gas loyalty system decades ago

Source link BC is considering reviewing its oil and gas loyalty system decades ago

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