British Columbia’s poor fiscal position is not simply the result of external pressures. It reflects a series of policy choices that have driven spending higher while leaving the province increasingly reliant on resource revenues. The province’s 2025 budget places taxpayer-supported debt at just under $100 billion today, with projections rising sharply in the years ahead and some estimates placing that figure in the range of $120 billion in the near term. Annual deficits, meanwhile, are expected to remain around $10 billion. In that context, it is entirely reasonable for government to examine its revenue sources, including royalties from oil and natural gas.
 

What matters is how those policy changes are made, and what they signal to investors making long-term decisions about where to allocate capital. Provincial leaders need to think long and hard before making more changes to royalty policies that risk driving investment capital away, something British Columbia can ill afford.
 

British Columbia is now working through the royalty framework it introduced following its 2021 to 2022 review, with full implementation set for Jan. 1, 2027, after the transition period was extended last year. As part of that shift, longstanding features of the system, such as deep well credits and other cost-based deductions, are being phased out or replaced with a different structure.
 

Governments are entitled to revisit these systems. But natural gas development in northeastern British Columbia is not a short-cycle business. These are large, capital-intensive projects that require years of planning and billions in upfront investment. Companies commit that capital based on a reasonable expectation that the fiscal terms they are operating under will be durable.
 

When those terms are adjusted more than once within a relatively short period, it introduces uncertainty that is difficult to ignore. Investors need confidence that the ground they stand on won’t move. Capital does not remain in place out of loyalty. It moves to where the conditions are most predictable and the risks are best understood.
 

As the International Energy Agency has noted, attracting long-term energy investment depends on clear and stable policy and regulatory frameworks. RBC and other Canadian analysts have similarly observed that capital allocation in the energy sector is highly sensitive to policy certainty and the relative competitiveness of jurisdictions. That concern has also been raised directly in discussions convened by the Canada West Foundation with industry and stakeholders focused on natural gas development.
 

British Columbia has much working in its favour. The Montney formation is among the most competitive natural gas plays in North America, and the province is well positioned to supply liquefied natural gas to growing markets in Asia. At a time when global demand for natural gas remains resilient, that is a meaningful strategic advantage that must be capitalized upon.
 

The province’s fiscal plan reflects an expectation that the sector will continue to perform, with natural gas royalty revenues projected to rise to approximately $920 million in 2025 to 2026. Those projections assume that investment remains steady and that production continues to grow, an unfounded assumption if investors shy away.
 

None of this suggests that British Columbia should avoid change altogether. Royalty systems do need to evolve over time, and governments have a responsibility to ensure that the public receives fair value for its resources. Periodic review is both appropriate and necessary. But it should be rare, signalled well in advance and made for the right reasons, such as technological change. Not to fill a self-inflicted short-term funding gap.
 

British Columbia has a strong resource base and a clear opportunity to build on it. It has a golden chance to be Canada’s LNG export champion. Ensuring that the fiscal framework is predictable, transparent and durable will do more to support long-term prosperity than any short-term adjustment to royalty rates. British Columbia’s residents and future government treasurers will thank their leaders for their foresight in choosing a long-term vision that attracts capital and prosperity over short-sighted temptations that drive it away.
 

Gary Mar is president and chief executive of the Canada West Foundation

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