Roland Willson: Provincial government must correct its flawed revenue assumptions and ensure the updated royalty system does not erode the intended fair return to British Columbians
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In good faith, West Moberly First Nations and several other Treaty 8 Nations provided input on a royalty system that would ensure British Columbians would benefit when natural-gas prices and industry profits rise. We aimed to strike a balance between economic growth and the funding of critical public resources.
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As chief of West Moberly, I have been part of a team working since 2021 to provide recommendations to the B.C. government’s plan to update its oil and gas royalty framework. The government committed early on to eliminate the outdated Deep Well Credit program (the largest oil and gas subsidy in B.C.) and design a system that captures around 50 per cent of industry profits after production costs.
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These promises formed the foundation of our consultation on behalf of all British Columbians. In 2023, there were early indications that the provincial government was considering our feedback by pausing a flawed model that would have lost British Columbians $50 billion in revenue.
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Sunrise
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More recent signs, however, point to a shift toward an overly industry-favourable system. A calculation error on natural gas pricing means B.C.’s revenue forecasts are about $500 million per year too high. We informed provincial government ministries of this gross miscalculation over a month ago, but were ignored.
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This is not a minor mistake that can be written off, and it will not only affect Indigenous communities. All British Columbians will lose if the B.C. government decides to adopt an unfair and unreasonable royalty system based on bad math.
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According to calculations by industry experts working with Treaty 8, the proposed royalty model will only result in returns of 11 to 14 per cent of net profits under most conditions — far short of government commitments to achieve a 50 per cent rate of return.
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In the face of massive provincial budget deficits, trade wars, extreme wildfire events and crises in health and education, we need to carefully consider the impacts of a faulty royalty system.
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B.C.’s oil and gas sector is the largest source of provincial revenue from natural resource development, especially now that the province is increasingly relying on natural gas extraction. A poorly designed royalty framework may be a boon for oil and gas companies, but it does not make sense to drastically diminish public revenue.
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British Columbians own natural gas resources and deserve a fair share of economic rent, profits after costs, to strengthen our fiscal health and cover the downstream expenditures of extraction. Those are real dollars needed for our schools, hospitals, and other essential services.
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In my own community, shortchanging the public on royalties has very clear consequences. Treaty 8 territory is home to the natural gas-producing Montney Reserve, with a value estimated to be in the trillions.
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We are often left to deal with the direct impacts of the oil and gas sector, such as billions of dollars of liabilities for abandoned wells that need to be cleaned up or restored. We also suffer the long-term public health effects due to natural gas production, which can flare and vent toxic chemicals into the air.
