BC government admits budget error of nearly $1.5-billion for natural gas royalties — what it means for all taxpayers

For a province already carrying a record deficit, this shortfall isn’t a rounding error. At this point, the BC provincial government is forecasting a $13.3-billion shortfall for the 2026-27 fiscal year — and residents are already absorbing tax increases meant to help close that gap. This hole in forecasted revenues for the natural gas project — one of the government’s own revenue projections — raises a harder question: How much can taxpayers trust the numbers behind future tax and spending decisions?

Here’s what the error actually involves, why independent experts still aren’t satisfied with the government’s explanation, and what stakeholders should watch for as the new royalty system rolls out.

What is the BC government’s $1.5-billion error?

Under BC’s current transitional royalty system, the government calculates what it’s owed each month using the “plant inlet price” — the market price of gas minus the cost of transporting and processing it before it reaches a plant. Nancy Olewiler, an economist at Simon Fraser University (SFU) who reviewed the province’s numbers, found the government’s latest budget forecasts failed to subtract those transportation and processing costs — inflating BC’s expected share of industry profits by an estimated $500 million a year.

Confronted with Olewiler’s facts, the Office of the Premier acknowledged an “administrative error,” though it attributed the mistake to “unit and currency conversions” rather than a missed cost deduction. As a result, the average annual hit is about $292 million over five years — about 40% below the figure calculated by outside experts.

Why the explanation still doesn’t add up

Olewiler called the government’s account “incomplete and confusing,” noting officials cited “safety costs” — a term she said doesn’t exist in royalty calculations — and that its $292-million estimate sits at the low end of the range independent analysts have calculated.

As a result of Business in Vancouver (BIV) investigations, a second industry expert spoke out about the situation but asked and was granted anonymity by the BC publication. Speaking candidly to BIV reporters, this anonymous source confirmed that most of the province’s gas price forecasts are already in Canadian dollars so that a currency-conversion error couldn’t be the real source of the shortfall.

By the numbers:

• $1.5 billion — Error the BC government admits to in its natural gas royalty forecasts over five years
• $500 million per year — Independent estimate of the annual overestimation (credit to SFU economist Nancy Olewiler)
• $292 million per year — The government’s own, disputed estimate of the annual error
• 50% — The share of net industry profits BC’s new royalty system was designed to capture
• 11% to 14% — The share Treaty 8 First Nations say the new system will likely capture instead
• $13.3 billion — BC’s forecast deficit for the 2026-27 fiscal year

What’s riding on the new royalty system

And it gets worse, as the stakes go beyond one bad forecast.

BC’s new royalty framework, set to take effect January 1, 2027, was designed to capture 50% of net industry profits from Crown land. But according to a July 14 letter from four Treaty 8 First Nations chiefs, most price scenarios show the new system capturing only 11% to 14% of producer profits.