The Runner | British Columbia to phase out largest fossil fuel subsidy programs starting this fall

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Last month, the provincial government announced its intention to eliminate the province’s largest fossil fuel subsidy program. (John Koetsier/Flickr)

Last month, the government of British Columbia announcement plans to eliminate the province’s largest fossil fuel subsidy, the Deep Well Royalty Program. The change should benefit British Columbians and their investments, and align with government plans to address climate change.

A report from International Institute for Sustainable Development found that British Columbia, along with Alberta, Saskatchewan, Newfoundland and Labrador, paid out $2.5 billion in fossil fuel subsidies in fiscal year 2020/2021 and $1.5 billion billion in fiscal year 2021/2022.

British Columbia contributed $765.3 million in 2020/2021 and $566.0 million in 2021/2022. The 2020/2021 figures for all four provinces are higher due to government assistance in the first year of the pandemic.

The report found that these provinces “encourage the production of fossil fuels” by providing these amounts of fossil fuel subsidies. It also mentions 1.5 C, the overall value target for the planet’s temperature by 2100, will not be possible with “additional fossil fuel developments”.

In British Columbia, oil and gas companies pay the government in exchange for “oil and gas developments on Crown land.” The Deep Well Royalty Program produced the biggest royalty returns. However, government officials believe the new change is good and will benefit British Columbians.

The other royalty programs that will be eliminated are marginal sink, ultramarginal sink, reduction of low productivity sinks and clean growth infrastructure.

According to the natural gas royalty exam, the new oil and gas royalty system will be “price sensitive” with the aim of bringing back a 50% profit. The review shows this estimated profit figure after taking into account the cost of using public resources.

A five percent royalty rate will be charged to companies once they start drilling the wells. Then the price will be adjusted once the revenue from the well “exceeds the total capital cost for drilling and completion.”

This amount should represent between 5 and 40% of the cost. The new amount should be paid five percent. Businesses currently pay three percent.

The report also shows that the cost of creating the well will be factored into the amount charged to companies for their wells. Companies are expected inform the government of these details once they begin work on the wells. This change is expected to take effect on September 1, 2024.

This new rule ensures that any company that begins drilling a well on or after September 1, 2022 will have to pay the price listed in the new royalty program, as the old ones will no longer be in effect. Well, productions that start before September 1, 2022 will pay the price listed in the old programs, but must switch to the new program by September 1, 2024.

The International Institute for Sustainable Development remains recommended the provinces “will phase out fossil fuel subsidies by 2023”. For British Columbia specifically, the report says any subsidy program that creates ways for companies to produce more fossil fuels “needs careful consideration” because it won’t help the province meet its policy goals. climatic.

Bruce Ralston, British Columbia’s Minister of Energy, Mines and Low Carbon Innovation, said in a Press release that the new levy program “will support vital public services, such as roads and hospitals, while advancing the continued protection of the environment for British Columbians.”

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