The B.C. government is changing its decades-old royalty system – the fees it charges companies to extract publicly owned oil and gas – in an effort to align with provincial climate goals.

In announcing the change Thursday, Premier John Horgan says the “broken system” of fossil-fuel subsidies does not fit with his government’s climate goals or ensure people benefit from the resources.

“Our province is blessed with abundant resources, which belong to all of us,” he said.

“That’s why we’re fixing the outdated oil and gas royalty system by eliminating the largest fossil-fuel subsidy in British Columbia. This will give British Columbians a fair return and allow us to invest in their priorities – like improving services, bringing down costs and tackling carbon pollution.”

In addition to eliminating the deep well royalty program, which was created in 2003 and was initially intended to offset higher drilling and completion costs, the minimum royalty rate for oil and gas firms will move up from three to five per cent.

This new royalty system, which will apply to all new wells, will be phased in over two years for those currently operating, starting September 1.

The elimination of the so-called deep well royalty program will mean a loss of credits between $440,000 and $2.81 million for companies, depending on the depth of the well. The change is expected to bring in $200 million more in revenue annually for the government.

“This new system is long overdue and will replace an outdated system that was in place for nearly three decades,” Energy Minister, Bruce Ralston, said.

“This will support vital public services, such as roads and hospitals, while advancing continued environmental protection for British Columbians.”

– With files from The Canadian Press