Hang Tough, Premier Eby, on Gas Royalties

The British Columbia government is poised to implement a long-awaited overhaul of its natural gas royalty system, which is set to take effect on January 1. However, key details remain unclear, leaving uncertainty about whether the new rules will deliver meaningful financial returns to taxpayers. For years, the province has struggled to modernize its outdated royalty framework, which has consistently undercharged energy firms while failing to generate substantial revenue for the public. The current system, a patchwork of regulations and exemptions, has been repeatedly delayed and is now set to expire at year's end. Negotiations between the provincial government, the gas industry, and Indigenous communities continue in secret, with little progress made toward finalizing terms. Industry representatives have repeatedly warned that changes to royalty rates could drive investment away from the province, though these claims have been widely dismissed as exaggerated. Natural gas royalties have become a critical issue for British Columbia, particularly given the province's vast reserves and growing production levels. An independent review conducted in 2021 highlighted the systemic undercharging of gas companies, noting that the province had essentially subsidized production through generous tax breaks and cost allowances. This has led to a dramatic decline in royalty revenues, despite a sharp rise in output. Between 2008 and 2009, the government collected nearly double the amount in royalties compared to the previous decade, even though production was significantly lower. At that time, gas royalties represented 3.4 percent of the province’s overall revenue. By 2023, that share had dropped to just 0.8 percent. The drop reflects both falling gas prices and the continued exploitation of loopholes that allow companies to minimize their payments. Despite increased production, up 80 percent between 2016 and 2025, the government has collected only $672 million in gas royalties during the 2024-25 fiscal year. Most of this revenue came from propane and other liquid condensates, which command higher prices than raw natural gas. In contrast, the 2008-09 period saw much greater returns from smaller volumes of production. The industry’s resistance to reform has been consistent, with lobbyists arguing that changes to royalty structures would harm economic competitiveness. Yet, British Columbia possesses two major advantages that make such concerns unfounded. First, the province holds a large portion of Canada’s natural gas reserves, with production increasing steadily despite historically low prices. Second, its coastal location makes it uniquely positioned to export gas to high-value international markets, including Asia and Europe, where prices are significantly higher. Recent data shows that British Columbia accounts for 38 percent of Canada’s total gas production, up from 24 percent in 2016. Without the province’s contributions, national production would have stagnated. As global demand rises, especially among countries willing to pay premium prices, the importance of B.C.’s role in the energy sector continues to grow. The government faces a pivotal moment to ensure that the public receives a fair share of the wealth generated by its natural resources.