The recently re-elected BC Liberal government presented its Throne Speech on June 26, 2013, and followed up with its June 2013 Budget Update on June 27, 2013. Although it was first presented in February 2013, the budget did not pass before the provincial election was called and required updating once the Legislature re-convened.
Not surprisingly, the Throne Speech focused on the energy sector and highlighted the economic opportunities surrounding the government’s plan to develop a liquefied natural gas (LNG) industry focused on exports to Asia. To this end, the BC government has created a new Ministry of Natural Gas Development, which will focus on industrial development, job creation and the establishment of a “BC Prosperity Fund” that will collect natural gas revenues for the purpose of eliminating provincial debt. Renewable power was also mentioned, and the government confirmed that it intends to grow the clean energy sector, both through the development of the Site C hydroelectric project and other new sources of renewable energy.
Similarly, the updated 2013 budget also focused on a number of energy-related issues. Although the BC government continues to assert that its budget will be balanced (a small surplus of $153 million in 2013/2014), it predicts lower growth this year (1.4%, in contrast to 1.6% as predicted in February). This lower growth is expected to reduce government tax revenue (e.g., personal and corporate income, carbon tax and property tax), but natural gas revenues will likely increase given the improved outlook for natural gas prices.
While BC’s carbon tax is reported to have a small negative impact on the provincial economy, the provincial government has committed to keep its carbon tax at $30 per tonne of CO2 equivalent for another five years. Rather than reduce or eliminate this tax, the government has indicated that it plans to pressure other jurisdictions to follow BC’s lead in order to “level the field” economically.
Although not expressly mentioned, BC Hydro played an important role in the 2013 budget update. According to an article by Vaughn Palmer in the Vancouver Sun, BC Hydro surprised the government with significant revisions to the utility’s capital plan shortly before the revised provincial budget was to be tabled in the Legislature, including a $129 million increase in capital spending attributed to cost overruns on the new Northwest Transmission Line. These last-minute changes prompted Finance Minister Mike de Jong and Energy Minister Bill Bennett to publicly express their frustration with BC Hydro’s approach to financial management.
Although we are heading into the slower days of summer, BC’s energy sector will remain alert over the coming months. With BC Hydro under scrutiny by cabinet and LNG projects actively moving through their respective regulatory processes, a number of other major announcements should be expected in the short term. Moreover, the industry anxiously awaits the release of BC Hydro’s updated Integrated Resource Plan (IRP). Although it was released in draft in May 2012, the government delayed the submission of the final IRP until August 3, 2013 to allow BC Hydro’s forecasts to be updated once uncertainty regarding the electricity requirements of prospective LNG projects had been resolved.