Provincial oil and gas incentives draw fire

The B.C. government may be going green, but that doesn't mean it is bidding farewell to fossil fuels any time soon.

Far from it, in fact. In the same provincial budget that won plaudits this week from environmentalists for introducing a carbon tax, the government included $327 million in incentives to the oil and gas industry for 2008-09 alone.

As well, in each of the next three years, the B.C. Liberal government is counting on receiving revenue of roughly $2.2 billion from the same sector.

Those numbers leave environmentalists who praised government for the carbon tax wondering how its support for and reliance on big oil and gas squares with its green theme.

Will Horter of the Dogwood Initiative said B.C. deserves an "F" for "cross-budget consistency." Lisa Matthaus of the Sierra Club described the incentives to oil and gas production -- nearly $50 million more than government provided in 2007-08 -- as "undermining investments.''

But B.C. Energy Minister Richard Neufeld sees no contradiction between government's green plan and its actions on the oil and gas front.

"None whatsoever,'' Neufeld said in an interview. "We will continue to need fossil fuels well into the future. We can't just quit producing them and quit using them tomorrow. That would be ridiculous to think that.

"I know there are some environmental organizations that say we should do that, but they forget that the industry brings us about $2.3 billion a year -- lots of money for health care, hospitals and all those kind of things and lots of employment. Maybe they don't like the employment, I'm not sure."

Government has budgeted $327 million for next year for what it describes as "royalty programs and infrastructure credits" that provide companies with breaks for things such as summer drilling, deep drilling and building road and pipeline infrastructure. Over the next three years, government has dedicated nearly $1 billion for these breaks.

Environmentalists and the NDP refer to these as "subsidies" to the industry and say the government should not be rewarding rich oil and gas companies for work they would do anyway.

Neufeld disputes that characterization, saying government is providing "incentives in the oil and gas industry to encourage development, but no subsidies."

NDP Leader Carole James said the oil and gas industries are important to B.C. But she disagrees with the Liberal government's exemption for oil and gas producers from its new carbon tax. (The industry is expected to be regulated through a cap-and-trade system implemented by the Western Climate Initiative later this year.)

"I don't think you'll see the oil and gas industry leave British Columbia,'' James said. "The oil and gas industry provides jobs in the northeast of our province, it provides revenue for the government."

Still, James said government shouldn't now be increasing its subsidies to the industry and should "put a requirement on the industry to look at what they're doing, so they can do their part [to fight climate change.]"

Horter said B.C. should be pouring at least some of its oil and gas revenues into a legacy fund to help eventually wean the province off fossil fuels.

"All that money is going into general revenue," he said. "So the government is addicted to oil and gas revenue. And not only is it not starting to wean itself off of that by starting to segregate some of that, what they're doing is subsidizing increased activities. And that seems to be a major disconnect.''