Upbeat messaging belies dismal revenue forecast

Written By Rob Shaw

Just a few weeks after pledging a bright future for B.C.’s natural resource sector, Premier David Eby tabled a budget in the legislature that shows the reality is anything but.

Forestry, mining and natural gas are all expected to decline sharply this year, according to the budget. 

In addition to the jobs lost, and the worksites closed, it will mean a major loss of revenue that the government relies upon to fund core programs and services — from $6 billion in 2022/23 to a $4.7 billion forecast in 2023/24.

That drop of 21.4 per cent is a huge whipsaw from the previous year, when the sector was booming as part of a post-pandemic rebound and revenues were up 35.6 per cent.

“It’s really scary to think they are planning to see mills close down, see less oil and gas activity, less mining,” said Opposition BC Liberal MLA Mike Bernier, the MLA for Peace River South.

Forestry revenues are expected to decline by more than 50 per cent in 2023/24.

“When you look across the entire resource sector, every year they are saying revenue for resources are going to go down,” said Bernier.

“At one point we used to brag about how our resource sector was building our schools and hospitals and bridges, because that’s where our revenue was going to come from. This government has abandoned that.”

Premier David Eby announces a federal-provincial partnership to help Crofton Mill retool to manufacture new pulp products. [Photo BC Goverment]

Eby toured northern B.C. in January, speaking to the Natural Resources Forum about the bright future of mineral exploration, and then later to B.C. Truckloggers about helping the sector transform to survive the downturn in forestry. In both cases, he said the future of the resource sector was challenging, but positive.

Yet, his first budget, with its forecast $4.2 billion deficit, paints a dismal picture.

Forestry hardest hit

Among the hardest-hit sectors is forestry, which is predicting an astonishing decline of more than half its revenue in a single year, or 54.45 per cent. 

The sector has been hard-hit by a lack of available economical fibre, several major mill closures and a steady drop in lumber prices in markets like the United States. It will go from providing $1.86 billion in revenue last year, to only $846 million in 2023/24, according to the budget.

“We used to brag about how our resource sector was building [infrastructure] … this government has abandoned that.”

Mike Bernier

The forest sector is also facing immense uncertainty over the NDP government’s implementation of the old growth deferrals, and reconciliation and participation efforts with Indigenous nations — including in the Northeast where a court settlement with the Treaty 8 Nations will limit logging in some areas.

“What we’re trying to do in the forest industry in British Columbia is move it away from the boom and bust cycle,” Forests Minister Bruce Ralston said in an interview.

“This is one of the downsides of the resource cycle. You have tremendous revenue when the prices were very high, and they were extraordinarily high in the United States because people bought lumber to do renovations in their house during the pandemic. That’s what really drove unheard of prices. We’re trying to move away from that, and to have a more stable, predictable industry.”

Total harvest volumes on Crown land are expected to decrease one million cubic metres from last year, and old growth logging deferrals have halted logging on more than 11,000 hectares.

“What we’re trying to do in the forest industry in British Columbia is move it away from the boom and bust cycle.”

Bruce Ralston

The budget predicts a minor uptick of 5.4 per cent growth in the years after the collapse, as things begin to restabalize. 

But overall the natural resource sector is getting hammered. There’s a forecasted three-year cumulative drop of 37.8 per cent in natural resource revenue to be felt across the province. 

The only part of the sector increasing in value are the fees and licences charged for water, hunting and fishing. Imagine that.

Rural parity

Finance Minister Katrine Conroy stated several times in her budget speech that rural British Columbia would not be left behind. As the ranking rural cabinet minister, from the West Kootenays, Conroy often infuses her speeches with promises of rural parity in an NDP government that everyone is fully aware mostly focuses on urban B.C.

“We are strongest when everyone, rural and urban, shares in the benefits of a strong economy,” she said during her budget lockup.

But it’s a harder argument to make when the economic lifeblood of rural B.C. is in freefall.

Natural gas royalties are predicted to fall 8.6 per cent, followed by 13.2 per cent the subsequent two years, due to lower natural gas prices.

Mining revenues are forecast to drop 19 per cent this year, due to lower metallurgical coal and copper prices, and better global access to cheaper sources of coal now that the pandemic is over, according to the budget. Coal is one of B.C.’s top exports — though you will never hear New Democrats acknowledge that out loud.

By 2025, natural resource revenue will have fallen by one-third, in total.

Few solutions in the budget

The budget offers few solutions.

There’s $6 million to study a critical minerals strategy. 

“We need to ensure we have supports in place for those critical minerals that we need.”

Katrine Conroy

“We need to ensure we have supports in place for those critical minerals that we need for all your laptops and your phones and all the things we need,” said Conroy. “We need copper, we need those critical minerals, we need to mine them so that we can move forward and build a sustainable, clean economy.”

Elsewhere in the budget, there was money set aside to hire more people to speed up permitting — though most of that appears dedicated to housing permits, and not the kind of permits that would free up resource development.

Fundamental failure

Bernier said it’s a fundamental failure of the NDP government to take rural B.C. seriously.

“If you look at the throne speech and budget, there’s no commentary that says they understand the importance of rural British Columbia and the resource sector — that includes Vancouver Island mills, and even shake and shingle plants in Maple Ridge, this is right across the province,” he said.

“People are being left to guess whether this government will support them or not.”

Bernier called it a “cop out” that global factors are the primary cause.

“They just recently quietly declined a new mine expansion up in Northern British Columbia here, right before Christmas, so to me it looks like they are catering to the environmental movement which just wants to see rural parts of our province shut down completely,” he said.

“It’s a bit of a slap in the face to the communities and families that rely on the sectors.”