Pimm believes northeast economy remains strong despite poor natural gas prices

Shawn Gill
Alaska Highway News
Falling natural gas prices have hit the region hard and are being blamed for the growing provincial deficit but Pat Pimm, MLA for Peace River North and a member of the financial committee, believes the region’s economy remains strong.
The province’s 2012 budget deficit has grown by 50 per cent in the last six months due to falling prices for natural gas and it is expected to be $1.47 billion, a $328 million increase from the first quarter. In February the government had projected a 2012-13 deficit of $968 million.
“I think our economy in the Northeast, we are still doing pretty good,” said Pimm.
The enlarged provincial deficit is largely the result of a $241 million shortfall in revenues from natural gas royalties.
“We projected that the natural gas royalties would be a little higher,” Pimm said.
The 2012–13 B.C. budget projected that the province would gain $396 million in revenues from natural gas royalties. The projection for 2013-14 is $652 million and $846 million for the budget year following.
“Our expenses are right on target where they’re supposed to be, but some of the revenues didn’t come in as projected and that is what is causing the shortfall at this time,” Pimm said.
To make up the shortfall, the government continues cuts in discretionary spending. Salaries in public sector management have been frozen and a public sector hiring freeze continues.
“Obviously you’ve got to keep it in balance…you can’t just cut everything to death but you have to pinch your pennies in the right places,” Pimm said.
Previous austerity measures have yielded $86 million in deficit reducing savings.
“To achieve the balance target in a way that I think will withstand reasonable scrutiny, we’ve still got $200 million to $300 million of work to do,” said Mike de Jong, B.C.’s Finance Minister, as he revealed the government’s second quarter number’s on Wednesday.
Pimm said that the Northeast generates about 62 per cent of the province’s total resource revenue. That figure translates into anywhere between $1-2 billion per year in added revenues.
Falling prices for natural gas are driven in part by its increasing availability due to a marked increase in the use of unconventional drilling techniques to extract shale gas throughout North America.
He added that Fort Nelson is experiencing a bit of lull at the moment because the dry natural gas produced in the area commands less money on the open market.
“They have a very dry gas whereas in the Fort St. John/Dawson Creek area, in the Montney play, we have a king of wet gas,” said Pimm, noting that wet natural gas contains liquids and condensates, resulting in a higher dollar value.
Pimm sees great promise in the Peace Region’s future as a natural gas supplier.
“Right now we transport about 1 trillion cubic feet a year,” Pimm said, noting that the Horn River basin alone has a capacity for about 78 years production years at that rate of transport.
“The big driver for our area is going to be when we get an LNG announcement,” said Pimm.
The MLA is confident that an announcement confirming the construction of a new LNG plant will bolster the northeast’s economy.
“We’re all crossing our fingers that we’ll get an absolute date sometime in the near future. The sooner the better for me,” he said.
“That will absolutely kickstart everything. That’ll make it to the point where we’ll have to go like crazy [up here],” Pimm said, noting that the LNG plants will give gas suppliers a linkage to Asian markets where they can command higher dollar values for their product.
“They should be able to sell it for a little bit more and they should be able to sell more of it.”

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