A new report names B.C.’s top ten fracking companies, showing how they get “sweetheart deals” from the provincial government through lucrative fossil fuel subsidies that are often worth more than what companies pay in taxes and royalties.
“These companies are the ones that are causing us to fail to meet our climate targets in B.C.,” report author Peter McCartney, climate campaigner for the Wilderness Committee, told The Narwhal.
“They are specific companies and I think it’s good for the public to know who is doing this and whose fault it is when the provincial government comes out and says we’re 28 to 44 per cent away from meeting our climate targets.”
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At the top of the list, by volume of gas produced, is Denver-headquartered Ovintiv Inc. (formerly Encana Corporation), with 705 active wells and a tenure totalling almost 400,000 hectares, mainly in the Montney shale formation around Dawson Creek, which is home to the province’s highest concentration of fracking wells.
Ovintiv paid $3.7 million in provincial taxes last year and $72 million in royalties over a three-year period ending in 2018, according to the four-page report.
McCartney found that Ovintiv received more than twice that total amount — $167 million — from the B.C. government in deep well royalty credits over two fiscal years starting in 2016.
Shell Canada and Petronas Canada, two companies in the LNG Canada consortium, are fifth and sixth on the list.
Shell, the global behemoth of the top ten fracking companies, with revenues of $404 billion, paid $2.3 million in B.C. taxes in 2020 and $6 million in royalties over a three-year period from 2016 to 2018. It received more than ten times that combined amount — $99 million — in drilling royalty credits over two fiscal years starting in 2016.
Petronas, with assets of $198 billion, paid $5.2 million in B.C. taxes in 2020 and $27 million in royalties over a three-year period ending in 2018. The company received roughly five times the total — $165 million — in drilling royalty credits over two fiscal years starting in 2016.
In second place on the top ten list is ARC Resources, a Calgary-based company with $5.8 billion in assets that paid $1.8 million in B.C. taxes last year.
ARC has 250 active wells and a tenure totalling more than 227,000 hectares — the size of 567 Stanley Parks — mainly northwest of Fort St. John and north of Dawson Creek in the Montney formation.
ARC paid $157 million in B.C. royalties over a three-year period from 2016 to 2018 and received $74 million in drilling royalty credits over two fiscal years from 2016 to 2018, making it the only top ten company to pay more into provincial coffers than it received in drilling credits, according to McCartney’s research.
The province’s third largest fracking company is Calgary-based Tourmaline Oil, one of Canada’s largest natural gas producers, with assets of $10 billion. Tourmaline paid $1.7 million in provincial taxes in 2020 and $71 million in royalties over the three-year period, the report says.
The company, whose operations are scattered throughout the Montney formation, was granted $137 million — almost twice that amount — in drilling royalty credits over two fiscal years starting in 2016.
Canadian Natural Resources Ltd., the country’s second largest natural gas producer, is fourth on the list of B.C.’s top fracking companies by volume but has the largest tenure — more than 1.9 million hectares — and the most active wells in the province, with 782.
The company, which has $76 billion in assets, also received the most drilling royalty credits — $210 million over two fiscal years starting in 2016. It paid less than half that amount in 2020 taxes ($12.3 million) and royalties over a three-year period ending in 2018 ($91.6 million).
Fracking only profitable with ‘government handouts’: report
“Fracking companies are only able to operate with enormous public giveaways from the NDP government,” McCartney said.
Deep well drilling credits were introduced when fracking — a technique that involves blasting a mixture of water, chemicals and sand into a well to break apart rock formations and release previously inaccessible gas deposits — was a relatively new, expensive technology.
But the credits remained in place after fracking became cheaper and widespread.
Depending on the depth of a well, a company can receive a rebate worth between $440,000 and $2.8 million on its resource royalty payments to the province, according to the report, which lists six other provincial subsidies that “whittle away any benefits to the public purse” from fracking, including carbon tax exemptions.
“There are all of these insidious ways that these companies don’t have to pay,” McCartney said.
“The provincial government is rolling out the red carpet for fracking and LNG companies — some of the biggest polluters in the province — and they’re not being treated in the same way as every other industry in the province.”
In response to questions from The Narwhal, the B.C. Ministry of Energy, Mines and Low Carbon Innovation (formerly the Ministry of Energy, Mines and Petroleum Resources) said it is reviewing oil and gas royalty credits “to ensure they meet B.C.’s goals for economic development, a fair return on our resources, and environmental protection.”
Natural gas fracked in B.C. is composed mostly of methane, a potent greenhouse gas with a climate warming potential 25 times that of carbon dioxide on a 100-year timescale.
Global efforts are underway to curtail methane emissions and, as part of Canada’s international commitments, B.C. set a goal of reducing provincial methane emissions 45 per cent by 2025, compared to 2014 levels.
The energy ministry said B.C. will continue to implement “world-leading technologies” to support detection and reduction of harmful methane emissions.
Late last year, the B.C. government admitted its much-touted Clean BC plan falls 28 to 44 per cent short of the province’s 2030 target for reducing carbon emissions.
In its email, the ministry pointed to December’s announcement that B.C. will miss its near-term 2025 emission reduction target, saying the adjusted 2025 target will enable the province to stay on track to achieve climate targets for 2030 and beyond.
“Our government is fully committed to strong climate action, accountability and a clean economy for everyone through CleanBC,” the ministry wrote, side-stepping questions about how the government intends to square its stated goal of reducing carbon emissions with its support of increased fracking and what role fracking companies have played in B.C. missing its near-term climate target.
The release of the Wilderness Committee report follows an announcement from U.S. President Joe Biden that federal agencies will no longer subsidize the fossil fuel industry, as part of a suite of new policies aimed at curbing global warming before greenhouse gas emissions in the Earth’s atmosphere reach a dangerous tipping point that scientists warn will cause cascading impacts such as faster sea level rise, making some coastal communities uninhabitable.
The Wilderness Committee and other environmental and public interest groups have long criticized Canada and B.C. for generously subsidizing the fossil fuel industry. A 2018 report revealed that Canada provides more government support for oil and gas companies than any other G7 nation and is among the least transparent about fossil fuel subsidies.
In September 2020, a Stand.earth report found B.C.’s NDP government had doubled fossil fuel subsidies over a two-year period, to $1 billion.
“The government of British Columbia, elected to fight climate change, continues to prop up the fossil fuel industry, using tax dollars to fill the coffers of fracking companies,” Julia Levin, climate and energy program manager for the advocacy group Environmental Defence, told The Narwhal.
“The lion’s share of these subsidies have gone towards expanding the province’s fracking sector — a sector that would not be profitable without government handouts.”
Levin said the B.C. government spends twice as much on tax breaks and direct subsidies for fracking companies and LNG as it does on its plan to fight climate change.
“Subsidies are often justified by politicians on the basis that royalties will generate more public revenue. But B.C. pays out substantially more in fossil fuel subsidies than the province earns in oil and gas royalties — and that gap is growing year over year.”
Royalty revenues have fallen from more than $1 billion per year one decade ago to less than $200 million, even though B.C.’s total gas production has increased by more than 60 per cent, Levin noted.
“On top of that, the government has allowed fracking companies to stockpile over $3 billion in outstanding royalty credits. This is foregone revenue that is being borrowed from future generations.”
In an emailed statement, Jay Averill, media relations manager for the Canadian Association of Petroleum Producers (CAPP), said the natural gas and oil industry has invested $90 billion into B.C. since the deep well royalty credit program was introduced in 2003 — in-turn generating $24 billion in direct provincial government oil and natural gas revenues.
Averill said the upstream natural gas and oil industry is the largest private investor in B.C. and is forecast to invest $3.9 billion in the province this year, up from $3 billion last year.
“This is desperately needed investment growth that will put British Columbians back to work, generate government revenues and help the economy recover from the devastating impacts of the COVID-19 pandemic,” he said.
Top fracking companies charged multiple times
The report also lists charges against each of the top ten companies for violating provincial regulations.
Tourmaline was charged once from 2007 to 2019, making it the company with the fewest charges, according to a spreadsheet the Wilderness Committee obtained from the BC Oil and Gas Commission through a Freedom of Information request.
The spreadsheet shows Tourmaline was fined $15,000 in 2015 for failing to prevent and report spillage.
Ovintiv was fined more than any other top fracking company, racking up 19 charges from 2007 to 2019 while operating as Encana, according to the spreadsheet.
In 2010, Ovintiv (then Encana) was fined $250,000 under the environmental emergency act — by far the largest fine levied against any of the top ten companies — after a pipeline rupture near Pouce Coupe released a cloud of gas that contained deadly hydrogen sulfide. The company also received fines totalling about $4,000 for breaching B.C.’s water act.
Petronas (formerly Progress Energy) was charged 16 times, according to the report, while Shell racked up five charges, including four totalling $920 for failing to keep or produce water records.
Progress was fined $10,000 in 2014 for failing to prevent spillage and ensuring fracking water did not pollute or damage any land. The company was fined $15,000 the following year for failure to minimize the loss of well control, while also accruing a $25,000 fine in 2020 for failure to prevent spillage.
Major growth in fracking needed to feed B.C.’s LNG industry
The LNG Canada project in northwestern B.C., which will become B.C.’s largest carbon polluter when it comes online in 2023, will ship fracked gas from Kitimat to Asia.
LNG Canada, a consortium of some of the largest and most profitable multinationals in the world — Royal Dutch Shell, Mitsubishi Corp., Petronas, PetroChina Co. and Korean Gas Corp. — has been granted more than $5.3 billion in provincial government subsidies, including tax reprieves, tax exemptions, cheaper electricity rates and an exemption from carbon tax increases.
A July 2020 report by earth scientist David Hughes found that emissions from B.C.’s oil and gas sector will exceed the province’s 2050 emissions reduction target by 54 per cent, even without emissions from LNG exports.
Hugh’s analysis, based on the Canada Energy Regulator’s oil and gas production forecast and federal emissions data, found the oil and gas sector would exceed B.C.’s 2050 target by 160 per cent if emissions from producing and liquefying the gas required for LNG Canada were added — even if all other sectors of the economy reached zero emissions.
Averill, from CAPP, said B.C. can produce some of the lowest emission natural gas and LNG in the world.
“The rapidly growing global demand for natural gas should be met by resources from Canada rather than other countries that are not making the same efforts to drive down their emissions,” he said.
McCartney said tens of thousands of new fracking wells will be required to supply the LNG Canada project and two other LNG projects approved in B.C — the Woodfibre LNG project in Squamish, owned by Indonesian billionaire Sukanto Tanoto, and Kitimat LNG, owned by Chevron Canada and Woodside Energy, Australia’s largest natural gas producer.
Hughes concluded that B.C. will exceed its 2050 emissions reduction target by 227 per cent if Kitimat LNG and Woodfibre LNG are built in addition to the LNG Canada project.
Gas for the Woodfibre LNG project would come from Pacific Canbriam, a Singapore-based company that is eighth on the list of B.C.’s top fracking companies.
Pacific Canbriam paid $2.6 million in provincial taxes in 2020 and $9.5 million in royalties over three years, from 2016 to 2018, while receiving $109 million in drilling royalty credits over a two-year period ending in 2018, according to McCartney’s research.
Carbon emissions from the Woodfibre LNG project would add the equivalent of 170,000 new cars to B.C. roads each year, while the project would use the same amount of freshwater annually as 5,500 households, according to the Pembina Institute.
McCartney said persistent low prices and global oversupply would spell the end of B.C.’s LNG industry in the absence of “colossal” financial support from the provincial government.
“Take those subsidies away and this industry doesn’t exist. That’s really why it’s so offensive that the provincial government is propping this whole industry up, when all they really need to do is to let them stand on their own two feet in order to take climate action.”
“If these LNG plants on the west coast are not built, fracking will just taper off and fall in line with exactly how it needs to decline for us to meet our climate targets.”
About 20,000 fracking wells in northeast B.C. are spread out over an area the size of Nova Scotia, including on farmland.
The area covered by fracking access roads, seismic lines, well pads, water hubs, pipelines, compressor stations, gas plants and waste disposal takes up five times as much land as Alberta’s oil sands, according to the Wilderness Committee report.
“It happens in a corner of the province few southerners ever visit,” McCartney said, “but the scale of this industry is staggering.”
Update February 9, 2021 at 7:55 a.m. PST: This article was updated to correct a typo. A previous version of the story reported CNRL paid $12.3 billion in 2020 taxes. In reality the company paid $12.3 million in 2020 taxes and the story has been updated to reflect that.
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