Friday, August 7, 2009

Stimulus package for B. C. oil and gas industry

The government of British Columbia announced a "stimulus package" for oil and gas, of all industries. (What's next? A stimulus package for Walmart?) It clearly shows what's really behind all this free money for (supposedly) capitalist corporations. Billions are given away to private businesses in the name of economic growth. The just announced program is an addition to many existing subsidies like it as well as expenses like building access roads, for instance. (Compare B.C. Health Services Minister Kevin Falcon's tough stand with respect to rising health care costs: "The province won't be providing any bailout money as costs continue to climb.")

If stimulating economic growth was really the intention the government could raise individual (as opposed to corporate) welfare levels. People would surely spend all the increase in their meagre incomes and that would really stimulate the economy.

Energy, Mines and Petroleum Resources Minister
Blair Lekstrom said in a statement that the package of incentives includes a 2% royalty rate on gas and oil extracted from wells drilled from September 2009 through June 2010 and an increase of 15% in the existing royalty deductions for natural gas deep drilling. According to the government this is to attract investment.

The province is also offering to expand its deep-gas discounted royalties to encompass horizontal wells drilled between 1,900 and 2,300 metres.

As well, it's increasing by $50 million its Infrastructure Royalty Credit Program to stimulate investment in oil and gas roads and pipelines.

The Minister claimed that
"B.C. is one of the most competitive oil and gas jurisdictions in North America, and this stimulus package will further strengthen the sector while increasing provincial revenues. In this day and age capital investment is very fluid and we want to encourage the oil and gas sector to invest in British Columbia."

No Minister!

You are giving public money to private corporations. Nobel Laureate Paul Krugman called this kind of stimulus "lemon socialism", i.e. profits are privatised and losses are socialised.

This latest give-away is going even further than socialising losses: It provides some of the funds (albeit indirectly) to invest. The Soviets weren't particularly successful acting this way but at least when there were positive returns they went to the state, not private shareholders.

When times are good for the industry the government increases its take somewhat because royalty rates are related to the price of natural gas.

The top 10 BC natural gas production companies made about $1 billion in profits in 2001. (Scroll down a bit.)

The government of BC announced on March 26, 2009 that British Columbia received a record $2.4 billion in oil and gas land rights sales for the 2008-09 fiscal year. This beat last year's record-breaking sum of $1.2 billion and underscores the "unprecedented growth" of B.C.'s energy sector, according to a statement released by the government Thursday morning. That was only a little over 4 months ago! And now we're told that the industry needs to be stimulated. (It's more of a game between Saskatchewan, Alberta and BC to attract companies. The corporations win and the people lose.)

The B.C. oil and gas industry is forecast to drill 900 new wells in the next four years and increase revenues by $2 billion, Lekstrom said.

It doesn't seem like an industry in need of stimulus.

While this is a provincial endeavour it fits most of the other stimulus packages in Canada, the USA and elsewhere. It is nothing but a shameful give-away to corporations and is a step beyond the saving of jobs in the automobile industry through the injection of billions of dollars of taxpayers' money into private corporations. Capital has been dirt cheap since the financial meltdown last year. Now some of it is totally free, it seems. I doubt it will create many jobs or improve most people's lives.

If the latter was really the intention the BC government, as mentioned above, could increase welfare rates. The Canadian federal government could help the people in Attawapiskat whose sewage system failed recently. 52 people had to be evacuated because Health Canada said it is unsafe to live in these houses with the basements flooded with raw sewage. Indian Affairs has so far refused to pay for the emergency evacuation. Or build badly needed infrastructure in other First nations communities.

The federal government is responsible for First Nations, a duty it has mostly shirked. For more information see here.