In estimating government revenues in his budget earlier this year, Finance Minister Kevin Falcon predicted natural gas sales would generate $398 million and $846 million in royalties for the next two fiscal years.
The underlying premise was that the unit price would increase during the period from 2012 to 2015. Four months later, the unit price has yet to show any real movement upward, and Falcon now expects a $200-million revenue shortfall in the current fiscal year.
His royalty estimate was based on the advice of natural gas industry representatives. And it's not the first time they have been overly optimistic about the economic health of their sector.
In November 2011, Falcon had to announce a $1.6 billion-deficit caused by a gas royalty revenue shortfall. The industry apparently had previously advised the government that the unit price would triple when in fact it fell dramatically due to a market glut.
Is it really reasonable to expect industry spokespeople to paint anything but a rosy picture?
After all, their first concern is maintaining investor confidence, not avoiding government deficits.
Bill Brassington, Burnaby