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British Columbia faces carbon tax hike
Gary Park For Petroleum News
British Columbia leads the only three of Canada’s 10 provinces to have imposed a carbon tax and if the province changes government after its May 14 election that role will be strengthened.
Adrian Dix, leader of the socialist New Democratic Party that has entered a month-long election campaign with a seemingly insurmountable advantage in the polls, has pledged to expand the tax to cover vented oil and natural gas emissions.
Premier Christy Clark, whose Liberal party faces defeat for the first time in 12 years, has countered with a vow to freeze the tax for at least another five years.
The NDP, which has 48 percent support among decided voters in the latest polls compared with the Liberals 29 percent, has also declared it will block Enbridge’s Northern Gateway pipeline if the project, which Prime Minister Stephen Harper views as a strategic imperative, is approved by the Canadian government.
‘Economic suicide’ warnings Together, his two commitments are generating warnings of “economic suicide” from energy industry analysts.
Bill Gwozd, senior vice president of gas services at Ziff Energy, said a tax increase would amount to “throwing darts” at an industry suffering from weak commodity prices.
He predicted exploration and production companies would start moving their capital elsewhere, resulting in British Columbia “committing economic suicide.”
Peter Tertzakian, chief energy economist at ARC Financial, said that adding more costs to a gas industry that is fighting for survival would be a bad move until producers can sell their production into LNG markets in Asia.
“Until there is some price recovery for natural gas from accessing global markets — which is five years away — the industry has almost no capacity to absorb another tax,” he said.
“To burden a fuel that is actually helping to reduce carbon emissions across the continent doesn’t make sense.
“Producers are looking to British Columbia to spend money developing LNG terminals and to send that kind of signal to them creates uncertainty,” he said.
NDP plans to broaden tax Dix said an NDP government would broaden the carbon tax, first introduced five years ago, in increments to charge C$10 per metric ton on production emissions in the first year, rising to C$20 in 2015 and C$30 in 2016.
He said the move would cover an additional 5 percent of carbon emissions in the province and generate an extra C$100 million in 2016 on top of the C$1.2 billion in taxes collected in 2012.
NDP energy spokesman John Horgan said he has told the industry his party’s aim is to drive down emissions, not increase costs for producers who are struggling with both low gas prices and the added costs of accessing distant markets in North America.
“Our objective here is not a revenue grab,” he said.
Clark argued it was now time for other North American jurisdictions to catch up to British Columbia, a view that has been endorsed by Canada 2020.
The new think tank said it is time for a national debate on the issue, despite the outright rejection of a carbon tax by the Harper government.
Canada 2020 leaders, former Quebec premier Jean Charest and Eric Newell, former chief executive officer of the Syncrude Canada oil sands consortium, suggest that unless Canada shows it is serious about tackling greenhouse gas emissions it cannot expect support from the United States for projects such as the Keystone XL pipeline.
Seven years of decline But the prospect of an added squeeze on British Columbia’s gas sector comes after seven years of steady decline, with the B.C. Oil and Gas Commission reporting that 131 wells were drilled in the first quarter of 2013, compared with 1,435 wells for all of 2006.
The natural gas sector is the largest single source of greenhouse gas emissions in British Columbia, which produces about 1 trillion cubic feet a year, second among Canada’s three producing provinces behind Alberta.
The existing carbon tax covers combustion and flaring. Venting occurs at either the well site or processing plant when CO2 is stripped out and released as well as when methane is released from pipelines.
The Alberta-based Pembina Institute estimated that imposing a tax on venting will increase the tax coverage to 75 percent of all British Columbia emissions from 70 percent.
On the national front, Greg Stringham, vice president of markets and fiscal policy with the Canadian Association of Petroleum Producers, told an industry meeting that new oil sands mining and in-situ projects are making headway in dealing with GHGs.
He said emissions per barrel of production have been lowered by 26 percent over the past 20 years, applying what he ranked as best-in-class technologies.
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