Premier’s office blames ‘administrative error’ for missing $1.5B in gas royalties; experts call the government’s explanation confusing, and in some cases, demonstrably false
The B.C. government has acknowledged it made a nearly $1.5-billion error in its latest budget—a mistake that will slash the projected natural gas royalties it receives from industry over the next five years.
The admission came hours after Business in Vancouver published an investigation in which experts calculated the province had overstated expected natural gas royalty revenues by roughly $500 million per year.
In an email Wednesday, the Office of the Premier said the Ministry of Energy and Climate Solutions undertook a review that identified an administrative error related to its natural gas price forecast.
The statement said the error would drop forecasted gas royalties by an average of $292 million per year over five years—more than 40 per cent short of the estimate reported by BIV and on the extreme low end of what independent experts have calculated. The mistake, added the premier’s office, would be corrected in a September financial update.
B.C. moved to overhaul its gas royalty framework five years ago after an independent review found the previous framework had likely hemorrhaged billions of dollars to industry.
The new system, slated to roll out on Jan. 1, 2027, is ostensibly designed to reel in the public’s share of fossil fuel profits extracted from Crown land.
Its effectiveness is especially consequential because royalties account for the overwhelming majority of the revenue B.C. captures from the oil and gas sector.
The government has yet to release details of the new system, including whether it would meet its previously stated target of capturing 50 per cent of net industry profits.
Premier’s office appears to contradict energy minister, pushes back against source of budget error
Under the current transitional system, the B.C. government calculates monthly gas royalties using the “plant inlet price”—the market price of gas minus the cost of getting it to processing plants.
Nancy Olewiler, an economist at Simon Fraser University who verified the error, previously told BIV that the province failed to subtract those transportation and processing costs in its latest budget forecasts, leading to a $500-million-per-year overestimation of its share of industry profits.
At that rate, the five-year sum of lost revenue could rival all the money spent fighting wildfires between 2021 and 2024.
Behind closed doors, one senior B.C. official praised the new royalty system, stating that based on numbers in its Budget 2026, it would generate a vast pool of new revenue.
On June 29, Energy Minister Adrian Dix told Treaty 8 First Nations that, compared to a previous plan, the new royalty framework would allow the province to reap a $2.4-billion windfall over five fiscal years.
Dix said those financial gains were based on numbers from Budget 2026, according to a recording of the meeting obtained by BIV.
The premier’s office disputed Olewiler’s analysis while appearing to contradict Dix’s justification that the $2.4 billion in projected gains under the new royalty system are based on numbers in the Budget 2026.
Instead of attributing the error on to failure to deduct transportation and processing costs, as reported by BIV, the province said the “administrative error” was connected to “unit and currency conversions.”
“It is incorrect to claim that this was due to a lack of accounting of transportation and safety costs,” stated the premier’s office.
“In implementing the new system, government analyses a range of price environments and scenarios, rather than relying solely on one price forecast to make decisions.”
The ministries of finance and energy have yet to respond to a series of detailed questions surrounding the error and its long-term impacts.
Government explanation ‘incomplete and confusing’
Olewiler and other experts in the oil and gas industry said the government’s explanation—including how the province arrived at the $292-million-per-year mistake—does not add up.
“The government’s statements about the nature of the error and how they have corrected it are incomplete and confusing,” said Olewiler in an email.
“For example, what are ‘safety costs’? This is not a term I’ve ever seen in royalty computations. Their [$292-million-per-year] estimated correction is at the lower bound of the projected values I have seen.”
The economist, whose 2021 independent assessment prompted the B.C. government to overhaul the oil and gas royalty framework, said the government has a duty to show the public how it arrived at its numbers.
Her assessment that B.C. overestimated its share of gas royalties by $500 million per year was backed up by oil and gas experts working with Treaty 8 First Nations. Their traditional territory overlaps with B.C.’s Montney Formation, the richest gas fields in the province.
James Tate, a lawyer for one of the nations who has been deeply embedded in the royalty negotiations for five years, said oil and gas experts he works with have found major holes in the government’s latest explanation.
“In addition to the original budget error, now, the explanation is so wrong and makes no sense,” said Tate. “And in certain cases, [it’s] just absolutely false.”
One expert, who was granted anonymity over concerns they would face professional repercussions, said most of the gas price forecasts in the Budget 2026 are in Canadian dollars, and therefore could not be the source of the error.
Any errors with a currency conversion wouldn’t likely exceed $30 million, would mainly have an effect on oil rather than gas, and would likely move their forecasts in the opposite direction, the expert said.
Like Olewiler, the expert said calculating gas royalties has nothing to do with “safety costs” while market volatility also doesn’t justify the error.
What is clear, they said, is the budget overestimation is a direct result of failing to deduct transportation and processing costs—a basic mathematical error.
Premier denied knowledge of budget error despite warnings
Earlier this week, Premier David Eby denied knowledge of the budget error. He had been handed a letter July 14 detailing the mistake and its long-term implications beyond a single budget cycle.
That letter, signed by the chiefs of four Treaty 8 First Nations and obtained by BIV, warned that the error was being used to inform the rollout of a new oil and gas royalty framework.
Under most gas price scenarios, the letter stated the B.C. government’s new royalty system would capture between 11 and 14 per cent of producer profits—far short of its 50 per cent target.
Beyond the budget error, the letter also identified a series of new programs embedded in the new royalty framework that would significantly reduce the share of net gas profits captured by the government.
That includes a drilling and completion allowance (DCA) that would effectively resurrect the financial consequences of the old regime’s deep well credit program, and in the process, forgo up to $1 billion more in revenue.
In another program favourable to industry, Tate said the proposed system also allows energy companies to deduct carbon costs—and in some cases, environmental disturbance payments—from their royalties.
Tate claimed that would effectively shift the financial burden from polluters to B.C. taxpayers, and in so doing, would transform a “polluter pays” model into a publicly subsidized system.
Even more concerning, said Tate, was that all of the government’s $2.4 billion in projected gains under the new system were being measured against a scrapped system that was previously projected to lose $600-$800 million per year.
“Suddenly, we’re in a world where the system being introduced is worse,” Tate said.
The premier’s office did not address questions raised over the contents of the new royalty system. It said the government would provide more information in the fall.
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