NDP critic heads down wrong hole on gas 'subsidies'

VICTORIA -- The New Democrats engaged in a courtship with the oil and gas industry back in 1998 when they announced some major incentives for development and exploration.
 
Government had been taking the sector for granted for too long, conceded then-premier Glen Clark. "Clearly we can do better."
 
He offered reductions in royalty rates of up to 40 per cent, aimed at encouraging the industry to drill new wells.
 
Subsidies? Giveaways to big business? Not at all, explained Dan Miller, then energy minister. "Incentives."
 
The discounted royalty rates would act as a spur to development. Additional production would boost provincial revenues by more than the cost of the incentives, Miller predicted.
 
Spot on. The provincial take from natural gas royalties has increased 10-fold since the New Democratic Party government cut the rate to encourage development.
 
There were other factors at play, including regulatory change, soaring commodity prices and and additional incentives brought in by the B.C. Liberals.
 
But the New Democrats can rightly claim their fair share of the credit, and they've not hesitated to do so.
 
On the eve of the last provincial election, party leader Carole James reminded the Fort St. John Chamber of commerce how the NDP laid the groundwork for the current boom in the industry.
 
"It was the New Democrats who really kicked off the oil and gas sector in the northeast of this province," she declared on another occasion.
 
Last fall, MLA Corky Evans, then the party's energy critic, was saying, vis-a-vis the oil and gas industry, that "the position developed by Dan Miller remains the New Democrat vision."
 
But you wonder if that is still the case after comments this week by another NDP MLA, Gregor Robertson.
 
Robertson lashed out at the practice of offering reduced royalty rates -- "subsidies" as he sees it -- as an incentive for development.
 
"Do they really need a subsidy to drill for that resource?" the Vancouver-Fairview MLA challenged in an interview with Miro Cernetig of The Vancouver Sun.
 
"That oil has been there for 250 million years. It's worth more and more every passing year. Why not wait until you can do it without subsidies?"
 
He didn't cite the incentives announced by the last NDP government, rather focusing on the more recent ones brought in by the Liberals.
 
But in lashing out, Robertson targeted programs that have produced some persuasive results.
 
The Liberals crafted a summer drilling incentive to address concerns about a lack of year-round activity in the northeast corner of the province.
 
Companies prefer to drill in the winter months in a region where the ground runs to muskeg.
 
So government offers a $100,000 credit against future royalties if companies assume the extra cost of dispatching the drill crews in summer.
 
That's resulted in a better-than-three-fold increase in the number of wells being drilled in what was once the off-season for workers and employers alike.
 
A similar credit encourages the industry to drill deeper wells -- 2,000 metres or more. Before the incentive, about two dozen wells were being drilled every year in the northeast. Last year, the tally was 150.
 
A third incentive reduced the royalty rate on marginal wells, where output has fallen to such a level that the operators are inclined to shut down altogether.
 
"Better to get some money than none at all," is the justification of Energy Minister Richard Neufeld.
 
He clashed with Robertson over this issue last spring. And it was his updated estimate of the cost and benefit of the incentives that prompted the latest exchange.
 
The three programs discussed above, plus some smaller ones, have generated $900 million in additional natural gas royalties for the province, by Neufeld's reckoning.
 
That's net of the value of the credits, which tallied at about $250 million -- Robertson's "subsidies."
 
But it is hard to see the $250 million as any kind of loss to the provincial treasury.
 
Without incentives, the deep wells and the summer wells would probably not have been drilled and the marginal wells might have been shut down altogether.
 
"We wouldn't have gotten that money at all, without the incentives," as Neufeld put it this week.
 
Robertson stuck to his position that the gas should be left where it is until the companies are prepared to pay full freight. "It's a short-term strategy and an unfair subsidy to big business," he said.
 
But note that he is his party's critic for small business, not energy policy.
 
The NDP energy critic, newly appointed, is MLA John Horgan.
 
On taking up his duties last month, Horgan wisely avoided taking any strong stands on the oil and gas industry, saying he first needed to learn more about the sector.
 
In light of his colleague's comments, the northeast is doubtless preparing a warm welcome.
 
Something with a petroleum theme, I'm thinking, like maybe a tar and feathering.