The province is introducing a new oil and gas royalty system.
“Our province is blessed with abundant resources, which belong to all of us. But for too long, a broken system of fossil-fuel subsidies has failed to align with our climate goals or ensure people fully benefit from these resources,” said Premier John Horgan, in a news release. “That’s why we’re fixing the outdated oil and gas royalty system by eliminating the largest fossil-fuel subsidy in British Columbia. This will give British Columbians a fair return and allow us to invest in their priorities – like improving services, bringing down costs and tackling carbon pollution.”
The new system will eliminate the Deep Well Royalty Program, the largest oil and gas subsidy, as well as other outdated and inefficient programs, such as the Marginal Well, Ultramarginal Well, Low Productivity Well Rate Reduction and the Clean Growth Infrastructure Royalty programs.
The new system will apply to all new wells. It will be phased in during two years starting on Sept. 1, 2022. In 2017, Alberta announced it would modernize its royalty system over a 10-year period.
“This new system is long overdue and will replace an outdated system that was in place for nearly three decades,” said Bruce Ralston, Minister of Energy, Mines and Low Carbon Innovation. “This will support vital public services, such as roads and hospitals, while advancing continued environmental protection for British Columbians.”
A new minimum royalty rate of five per cent will be in effect, which is a significant increase from the current three per cent. This increase will provide more revenue for public services and climate action. It also recognizes the surplus of credits that companies have accumulated and the need for British Columbians to get a fair return.
Under the new system, existing credits will expire in four years unless transferred to an environmentally focused land healings and emissions reductions pool. Using this pool, companies may use credits to fund healing the land and emission-reduction work, but only if it is beyond regulatory requirements