Heritage fund makes for better energy decisions

VICTORIA - The NDP and the Liberals have been slagging each other over whether the government is selling off B.C. natural gas reserves too cheaply.
The NDP says royalty rate cuts worth about $240 million to oil companies since 2003 have been too generous. The Liberals say the New Democrats are “clueless” and the industry wouldn’t be as active without the special deals.
The whole affair is a reminder of why B.C. needs a heritage fund for a chunk of B.C.’s energy revenues.
The B.C. government cut the price of some of our natural gas reserves in 2003 to encourage companies to get the resources out of the ground quickly.
Across the country, Newfoundland Premier Danny Williams is raising prices on his province’s offshore oil reserves. If the energy companies don’t want to pay, that’s fine, he says. The oil will be worth more in the future anyway.
It’s a dilemma faced by anyone setting prices, even if you’re just trying to sell an old car. Too high and buyers may go elsewhere. Too low, and you give away money that you could have had. There's no easy formula.
The government put some of B.C.’s gas reserves on sale in mid-2003, cutting prices to encourage companies to step up their operations. The deals have cost taxpayers about $240 million. But the ministry figures that the activity they sparked was worth $900 million in additional revenue to the province — plus a lot of jobs in the northeast.
The discounts seem sensible. Companies got a lower rate for drilling deeper wells to get gas, for example, as an incentive to take on the challenge.
Another program cut royalty rates once the amount of gas coming from a well fell below a threshold. The idea was that companies would be encouraged to keep on pumping gas, instead of capping wells. Even at a lower rate, the province would get more money.
Based on the ministry’s analysis, the discounts worked.
But the Liberals’ claim the NDP was “clueless” for questioning the cuts looks shaky. This week the Alberta government announced it’s changing four royalty programs because oil and gas companies aren’t paying enough. The changes will bring in an extra $186 million a year.
Alberta’s equivalent of the deep-well and low-volume well discounts that I just described are getting an overhaul to increase the amount the oil companies pay. Alberta’s Conservative government and the NDP are on the same page.
Ultimately government has to makes the pricing decisions based on the best advice of professional staff.
But there is a built-in conflict of interest.
These are non-renewable resources that will appreciate in value. It may be in the overall public interest to hold out for the best price, even if that means waiting.
But governments face short-term pressures. They may be tempted to cut royalties to get cash quickly to pay tor today’s problems - even if it’s not in the province’s long-term interest.
A heritage fund reduces that pressure. If a chunk of oil and gas revenues are going into a fund to cushion future economic bumps, then governments face less temptation to cut royalties in a bid for quick cash.
A heritage fund also helps prepare for the day the oil and gas run out. There’s been a steady growth in identified gas reserves, but B.C’s. known reserves only support 16 more years of production at current rates. The government’s natural gas revenues were $100 million a decade ago. This year they will be $2.3 billion. In 20 years, no one knows.
And a fund would acknowledge that these resources should be creating benefits for future generations, not just for the people who happened to around while they lasted. It’s not a wacky idea. The BC Progress Board said last year the government should be looking at a heritage fund.
Now is the time to start.
Footnote: Neufeld says the measures have worked. More than 1,400 oil and gas wells were drilled in B.C. last year, more than double the 2002 total, the last full year before the royalty cuts. But it’s difficult to isolate the effect of the discounts. Natural gas prices were almost four times higher in 2005 than they were in 2002, a large factor in companies’ eagerness to develop the resource.

Battling researcher proves a sea-lice point

VICTORIA - Alexandra Morton has taken some serious abuse for her research showing that sea lice from fish farms were killing wild salmon.
“Questionable research methods,” critics said. “Blatant misrepresentations.” Unqualified and biased.
Turns out she was right. The question now is what are the federal and provincial governments are going to do about it?
Morton lives in the Broughton Archipelago, the dense scattering of islands off the northeast coast of Vancouver Island. She moved there to study whales 27 years ago and has been doing research ever since.
In the last few years she has been alarmed at the spread of sea lice from salmon farms on to migrating wild salmon. The sea lice are like blood-sucking tiny tadpoles. On a five-kilogram Atlantic salmon in a net cage, they’re a nuisance. On a wild salmon as long as your little finger, they’re life-threatening.
Morton didn’t just work up a theory. She did the research, spent the days and weeks on the ocean. Her work has been peer-reviewed and published.
But the critics kept sniping. The provincial government ordered some fish farms along the migration emptied for a few months as a precautionary measure. The industry continued to say Morton was wrong. Governments said nothing was proven.
So Morton launched a private prosecution under the Fisheries Act, charging a company and federal and provincial governments with releasing sea lice into the salmon habitat, harming the wild fish.
Private prosecutions rarely go ahead. Generally, the Crown takes over the case and stays the charges.
This time, because the province was charged, an outside lawyer, Bill Smart, was named special prosecutor. He decided to hire an independent science expert to review Morton’s research and look at the allegations.
And the expert, Dr. Frederick Whoriskey of the Atlantic Salmon Federation in New Brunswick, found she was right.
Morton alleged the salmon farm was releasing millions of sea lice a month. Whoriskey calculated the farm would produce 55 million sea lice eggs per year. Studies had found 95 per cent of sea lice off a section of Ireland’s coast came from salmon farms.
Morton charged that sea lice from the farm infected passing young salmon. Whoriskey, after reviewing her research and studies from around the world, concluded that is also true.
And Morton alleged that the pink salmon smolts were vulnerable to sea lice and many were killed. There hasn’t been a definitive study, Whoriskey reported, but sea lice infestations have found to weaken and kill young salmon.
Whoriskey summed up. “The evidence shows that sea lice in the Broughton Archipelago are infecting and killing pink salmon,” he found.
And the independent expert also commented on her research. “Ms. Morton and her colleagues have carefully and diligently executed their scientific work,” he wrote. It meets “the globally accepted procedure for good science.”
Smart, the special prosecutor, said Morton’s charges were sound and raised an important public issue. “It appears to us that there is validity to Ms. Morton’s assertions that sea lice from fish farms are having a deleterious effect on the pink salmon population in the Broughton Archipelago”, he reported. “There may be debates about the extent of the problem or risk, those debates cannot obscure the existence of the problem itself.“
Smart still decided the prosecution shouldn’t go ahead because convictions were unlikely. The law prohibits the release of harmful species, but the sea lice weren’t really released. And the company could argue that it had obeyed all the governments’ rules.
But he noted that while he had to apply a strict test in deciding whether to go ahead with case, governments don’t when it comes to “addressing the potential environmental consequences of fish farms.”
Morton won the important victory. An independent review by the government’s own prosecutor found the evidence showed the fish farms are hurting wild salmon stocks.
Now it’s up to government to say what it’s going to do about that reality.
Footnote: Meanwhile, the legislative committee looking at the aquaculture industry is heading back out for another round of hearings this fall. The committee, which has an NDP majority, has been hearing completely contradictory and equally passionate views from the industry’s supporters and opponents. It’s trying for an interim report before the end of the year and a full report next May.

Park development a bad idea

VICTORIA - There are some passable arguments for promoting development in provincial parks, but ultimately it remains a bad idea. The government is opening the door to development in a dozen parks this month, encouraging everything from cabins for hikers to lodges with up to 100 beds. The first calls for proposals have already gone out, and they include wilderness parks like Cape Scott at the northern tip of Vancouver Island.
Environment Minister Barry Penner says it’s all about access. Just because people can’t sleep in a tent doesn’t mean they shouldn’t get to stay in a wilderness park, he says. British Columbians are getting older and more rickety and want somewhere comfy to stay, and Penner says the environment ministry has to meet the need. And he promises that the government is being careful to make sure that any development won’t wreck the parks.
The problem is that once you begin constructing lodges and cabins and the various facilities needed to support them, you no longer have a wilderness park. Paving the West Coast Trail and creating little lodges along the way would make it more accessible. It would also destroy it.
Penner doesn’t mention the money, but that’s also behind this drive for commercial development. The government is counting on companies to pay for the right to build and operate businesses inside parks. The successful developers will get 30-year leases.
You can make a weak case for development in some parks, I suppose, particularly ones already on major highways or partially developed.
But the best policy would be to recognize the importance of preservation and the responsibility to keep parks whole.
That doesn’t mean that parks have to be exclusively for the fit and able-bodied.
If greater access is the goal – and if there is consumer demand - then development could be encouraged just outside parks, in communities that would be glad of the economic activity and additional tax base. Instead of plunking a lodge down inside a park, services could be provided just outside the park boundaries and steps taken to improve access for visitors.
And if developers want a shot at operating a true wilderness lodge, there are thousands of square kilometres of Crown and private land available outside parks. Negotiate a lease and build away.
That’s what some operators have already done. And those projects have shown that development inevitably brings significant change. It’s not just the construction of a lodge or cabins. The operator needs to transport supplies into the park; staff have to be housed; visitors will almost certainly demand more services or better roads. The government claims it consulted with the public on the plan to expand commercial development in parks, but it’s hard to find supporters.
The opposition, however, is remarkably broad-based. More than a dozen conservation and environmental groups oppose the plan. The B.C. Wildlife Association, which represents fishermen and hunters, thinks it’s a bad idea. So do wilderness tourism operators.
And they all fear that these proposals are just the start and that development will be encouraged in more provincial parks across the province.
These aren’t the extremists, the people who would be happiest if no one – or at most a handful of people - ever ventured into parks. They recognize that parks, while vital in protecting wilderness, are also for people.
But they believe that access can be offered without unnecessary commercial development inside park boundaries. Penner says the public will get a say on whether the specific proposals go ahead. But the government’s official policy on park development, released last month, is alarmingly vague on how the public will have a meaningful chance to offer its views. There are no provisions for public hearings or formal consultation.
B.C. has a magnificent park system, which we hold in trust for future generations.
We shouldn’t permanently damage that heritage, especially when there are alternative ways of improving access.
Footnote: The 12 parks covered in the first new development wave are Mount Robson in the Omineca Region, Elk Lakes, Mount Assiniboine and Nancy Greene in the Kootenays,  Wells Gray (in the Cariboo, Foch-Giltoyees in the Skeena region, Cape Scott on northern Vancouver Island, Maxhamish Lake in the Peace, Golden Ears in the Lower Mainland and Fintry, Silver Star and Myra Bellevue in the Okanagan.