Subsidies drive the BC government’s energy plans

Summer is usually a fairly tranquil time in BC politics as people enjoy the sun and time away with family and friends. This summer however, the BC government has attempted to use the quiet of the summer recess to aggressively implement a fossil fuel based energy plan driven by subsidies.

The BC government continues to prioritize carbon emitting projects, like coal fired power plants and oil and gas drilling, over clean burning options.  And if that wasn’t bad enough, they are giving away millions of dollars in taxpayer’s money to promote these fossil fuel driven schemes.

  Intoxicated by revenues from oil and gas, BC Liberal MLAs attack anyone who dares question the billion plus dollars in royalty reductions and subsidies British Columbia is giving to fossil fuel companies. 

This came to a head this summer when MLA Gregor Robertson, the NDP’s small business critic from Vancouver-Fairview, questioned the millions in subsidies given to oil companies.   Following on questions he raised in April during budget estimates, Mr. Robertson called the over $242.5 million in “credits” and reduced royalties given  to the oil sector (since July 2003) under six new Liberal programs a “short-sighted subsidization scheme for a highly profitable industry, one that other sectors of the economy don’t get.”

Perverse subsidies

The $242.5 million in subsidies the government has disclosed doesn’t include the subsidies given to oil and gas companies via six other programs. If you add in a $50,000 per well subsidy for coalbed methane, the royalty credit program for “pilot” pipeline initiatives, special royalty rates for low productivity natural gas, special royalty rates for deep re-entry and the “Net profit” royalty regime for tight gas, shale gas, and new basins, the total would be much much higher.

And neither Mr. Neufeld, nor his BC Liberal colleagues, wants to talk about the how they reduced royalty rates to 9% from 12% by permanently extending what had been a temporary reduction in the royalties on fossils fuels produced in BC from new tenures.

The government has made its priorities clear. Instead of incentives to promote energy efficiency, or a Legacy Fund to use revenues from the current boom to ease the transition to renewables, the BC liberals have chosen to give money to companies making record profits off a pubic resource.

Attacking the messenger

Shouldn’t we begin questioning subsidies for fossil fuels with the evidence of a climate crisis mounting daily and oil companies reporting billions of dollars in profits?

Not with this government. Mr. Robertson touched a nerve by simply asking the obvious questions: “Do they really need a subsidy to drill for that resource? …That oil has been there 250 million years. It’s worth more and more every passing year. Why not wait until you can do it without subsidies? …

The BC Liberal’s response was vitriolic. Instead of trying to respond with a coherent rationale for spending millions of taxpayers money subsidizing the Canadian arms of some of the richest corporations in the world, they launched a personal attacked on Mr. Robertson.

BC Liberal MLA Ralph Sultan called Mr. Robertson “clueless” saying “Robertson’s comments are just the latest in a series of disturbing messages that show the NDP are moving further to the political left and aren’t interested in developing resources that create jobs and pay for government services.”

Richard Neufeld, BC’s Energy Minister, tried to turn a duck into a swan by saying the millions in giveaways were not subsidies, but “incentives.”

The distinction between an incentive and a subsidy is in the eye of the beholder. Wikipedia defines a subsidy as”…  generally a monetary grant given by a government to lower the price faced by producers or consumers of a good … Subsidies are also referred to as corporate welfare by those who oppose their use… A subsidy normally exemplifies the opposite of a tax, but can also be given using a reduction of the tax burden. These kinds of subsidies are generally called tax expenditures or tax breaks.

If it looks like a duck, smells like a duck, most people would call it a duck (or a subsidy), but not the BC Liberals. Perhaps Mr. Neufeld was worried British Columbians would remember that his government made a promise to “end subsidies to business,” back in 2001.

A new era?

The government and their acolytes say the $50.5 million for drilling marginal wells, $61.4 million for drilling deep wells, $61.3 million for summer drilling and $69.3 in subsidies for building roads to oil and gas wells has increased oil and gas activity in BC. No doubt it has. Giving away a resource for less than it is worth may generate some revenue, but is it in the public interest?

At a time when oil prices and company profits (see table below) are at record highs and the global impact of fossil fuels on our climate are becoming clearer daily, do we really need to subsidize corporations drilling for oil and gas?

Surprisingly, the mud slinging against Mr. Robertson wasn’t limited to BC Liberals. Vaughn Palmer, in a column in the Vancouver Sun, insinuated that Mr. Robertson should be tarred and feathered for his comments. Mr. Palmer attempted to ridicule Mr. Robertson by implying that the subsidies have increased the number of wells drilled recently, and by pointing out that the NDP supported, (in fact initiated) some subsidies for oil and gas in 1998. 

But what the BC Liberals and Mr. Palmer seem to be ignoring is that the world has changed significantly since 1998. 

In 1998 oil was trading at about US$11 now it is trading over 600% higher at around US$70.  In 1998, gas was trading at US$1.96 at the wellhead, last year it was trading 365% higher at US$7.51. In 1998 scientists’ concerns about climate change  had yet to penetrated the public consciousness. Now people are realizing we had better start making changes, or else.

Skyrocketing share prices and profits also raise serious questions about the need for subsidies. Share prices for the major players in BC’s oil and gas industry have increased by between 259% and almost 900%. Profits have increased between 800% and an astounding 1800%. 

Despite the rhetoric from the BC Liberals and Mr. Palmer, these figures illustrate it is entirely appropriate to question whether BC taxpayers need to continue these subsidies. These were the concerns Mr. Robertson was raising. And they are valid concerns that deserve a rationale response not ad homonym attacks.

Oil Company Share Prices, 1998 and present

  Aug-98 Now  + %
Imperial Oil
(
subsidiary Exxon Mobile)
$4.71   $37.77  802%
Shell Canada $9.23 $23.95 259%
PetroCan $4.88 $43.54 892%

Oil Company Revenue, 1998 and present

  Aug-98 Now +%
Imperial Oil
(subsidiary Exxon Mobile)
$554   $2,600 481%
Shell C
anada
$432 $2,014 466%
 PetroCan $95    $1,791    1885%

Given the radically different situation we now find ourselves in compared to 1998 shouldn’t our elected representatives start asking tough questions about whether we want to continue to subsidize fossils fuels whether those resources would be better used to  provide incentives for a quick transition to renewables?

The subsidies Mr. Robertson has questioned should be reexamined based on whether they are necessary and in line with the larger public interest. 

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