B.C. faces $1.5 billion natural gas revenue shortfall as dispute over forecasts widens

B.C. is facing a $1.5 billion shortfall in projected natural gas revenues over the next five years — a gap so large that the B.C. Conservatives are calling for an auditor general investigation into how it happened and why Premier David Eby initially claimed to know nothing about it.

The error was revealed by Business in Vancouver, which found the shortfall could reach $2.5 billion over five years after consulting independent experts. The ministry said the miscalculation was an "administrative error relating to unit and currency conversions" in the price forecast for natural gas.

But the timeline and the explanation are now disputed. On Tuesday, Eby told reporters he had no knowledge of any miscalculations. On Wednesday, the Energy Ministry said it had been informed of the error in July. However, Chief Roland Willson of the West Moberly First Nations said he spoke directly to the premier on July 14 and handed him a letter that day outlining Treaty 8 nations' concerns about how the government calculated natural gas revenue. Willson also said his technical team had informed Energy Minister Adrian Dix of the problems in June.

"He told us that the message was received, and that he'd have his people look into the error and get back to Treaty 8 right away. B.C. has never responded to our letter," Willson said, characterizing the situation as "a much, much larger problem than what B.C. is making it out to be."

Economists consulted by Business in Vancouver are equally skeptical of the government's "administrative error" framing. SFU economist Nancy Olewiler disputed the ministry's claim, saying the shortfall does stem from a failure to account for transportation and processing costs. She said the total revenue for the government from natural gas could be anywhere from $300 million to $700 million a year, and that even the more conservative estimate would have enormous implications for the provincial budget. "You add it up, and over three or four years, you're a billion dollars less," she said. "Every dollar counts."

UBC economist Werner Antweiler said the government needs to be forthcoming with how it is estimating resource revenues. However, he believes the new royalty system scheduled to take effect January 1 will be much fairer and reflect the maturation of B.C.'s natural gas sector.

The B.C. Conservatives are calling for an investigation by the auditor general. Finance critic Gavin Dew called it "a stand-alone scandal, big enough to take down the government," citing both the revenue forecast error and the government's apparent lack of transparency after internal warnings.