Government's natural gas royalties plummet

Finance Minister Colin Hansen expressed continued confidence in the natural gas sector, even as his government is forecasting a decline in the royalties it earns from the development of that resource. That decline, which will be $167 million in the present fiscal year and $347 million in 2011/12, reflects a drop in the price of natural gas owing to an increase shale gas production. But when asked how the government would respond to that price drop, Mr. Hansen told Public Eye, "The upside potential (for natural gas) in the medium and long-term is very significant."

"There is every expectation," he continued, "that in the United States - as the U.S. comes out of their economic downturn and we start to see more economic growth - we're going to see displacement of coal-fired electrical plants in the United States with natural gas-fired electrical plants in the United States."

According to the finance minister that displacement, along with natural gas exports to Asia, will increase demand for the resource.

So does that mean the government will continue policies and programs fostering natural gas development in British Columbia? "Absolutely," Mr. Hansen responded.

But when asked specifically about its proposed northeast transmission line, which would power shale gas wells in the Horn River Basin, he hedged.

Noting that companies operation in the region are "very interested in the idea of being able to further reduce their carbon footprint by electrifying some of their operations," the minister added there's still "work to be done yet to ascertain the financial-economic viability" of the line.

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Natural gas royalties estimates

2010/11 - $365 million ($167 million less than estimated in budget 2010)
2011/12 - $447 million ($347 million less than estimated in budget 2010)
2012/13 - $597 million ($478 million less than estimated in budget 2010)
2013/14 - $856 million ($475 million less than estimated in budget 2010)

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