Over the last three years the Government has increased investment in energy and mineral resource development throughout British Columbia.

The Ministry of Energy and Mines continues to take the necessary steps to maximize British Columbia's energy potential, by opening up access to the province's vast reserves of oil, natural gas, coalbed gas, minerals and coal and hydro-electric power.

At the same time the Ministry takes its responsibility within the area of environmental stewardship very seriously. The Ministry of Energy and Mines has taken a significant leadership role in the areas of clean energy initiatives, mine reclamation, energy efficiency and pre-tenure planning. The Ministry is also making strategic financial investments to environmental conservation and protection initiatives like fuel cell development and research that integrates sound science, traditional environmental knowledge and resource development.

In June 2003, we announced the Oil and Gas Development Strategy (OGDS) for the Heartlands, a comprehensive strategy to improve infrastructure, target royalties, grow the BC based service sector and reduce regulations. In November 2003, we announced further initiatives to accelerate OGDS. Strategy actions include initiatives to encourage new basin exploration; investment in public-private resource road infrastructure; royalty credits for the use of exploration technology and funding for education and training.

In September 2003, British Columbia achieved a Canadian record for petroleum and natural gas tenure sales reaching $418 million. Of this sale, $360 million is directly attributed to the royalty changes government made for deep gas and other marginal oil and gas resources. Oil and gas tenure sales totalled more than $626 million in total during fiscal 2003/04.

Oil and gas exploration and production are now the largest single natural-resource generators of direct revenue for the province.

Revenues from crude oil and natural gas were $2.032 billion for 2003/04 — 22 per cent higher than originally forecast and 35 per cent over fiscal 2002/03.

British Columbia has a huge coalbed gas endowment of approximately 89 trillion cubic feet. In order to provide certainty of coalbed gas ownership to enable development of a coalbed gas industry in British Columbia, the ministry developed the Coalbed Gas Act that was brought into force in 2003/04.

The total number of mineral claim units staked in fiscal 2003/04 has increased by 12,000 — 38 per cent higher than the previous fiscal year.

Revenues from coal tenure fees and rentals totaling $4.1 million increased by 10 per cent over fiscal 2002/03.

This past year, we prepared enabling legislation to streamline the administration of coal tenures, reducing regulation and creating a modern, simplified system for acquiring and holding Crown coal rights.

Government also developed changes to the Mineral Tenure Act that will enable a new internet-based system for acquiring mineral and placer claims (Mineral Titles Online) in the province.

The Ministry made significant progress in implementing the government's energy plan, Energy for Our Future: A Plan for BC. The British Columbia Transmission Corporation was established and key changes made to the Utilities Commission Act. Legislation and direction to implement a Heritage Contract, and ensure public ownership of BC Hydro's core assets and stepped rates for industrial customers was enabled. Clean Electricity Guidelines were also established, along with a process to review energy performance standards for buildings.

In the area of alternative energy and energy efficiency development, the ministry completed the first phase of the Alternative Energy and Energy Efficiency Strategy, and established a pilot Community Action on Energy Efficiency program.

In keeping with Government's deregulation goal, in 2003/04 the Ministry eliminated 2,244 regulatory requirements, or about 12.7 per cent of its total, providing an overall 27 per cent reduction in the first two years of the deregulation initiative. This reduction in regulation saves money, and is more effective and more responsive to the fast-changing world. The remaining regulations are more results-based and more flexible to promote competitiveness and innovation which benefits all British Columbians.

The Government clearly understands the economic potential of the province's abundant energy resources and the need to remain competitive.

The Ministry of Energy and Mines will continue to lead the way to a prosperous future, full of opportunity for all British Columbians.

I am pleased to present the details of our success in this annual report for fiscal year 2003/04.

Honourable Richard Neufeld
Minister of Energy and Mines

Message from the Minister of State

B.C.'s mining industry today provides close to 10,000 direct jobs and $2.9 billion in economic activity.

Global demand for metals is growing, and B.C. has vast coal and mineral resources.

The recent increase in metals prices provides a unique opportunity for our government and mining industry. We need to ensure that our taxation and regulatory environment is globally competitive so that we can maximize the benefits of British Columbia's world class geology. By taking advantage of this opportunity B.C. can produce the long-term benefits in economic and job growth that will result from future development.

The Premier appointed a Minister of State for Mining in January 2004 to support the long tradition of mining in British Columbia. In the Premier's letter to the Minister of State for Mining he identified four key areas for the minister to work on. Strengthening the provincial geoscience base, market and communicate the industries environmental and sustainability principles, increase clarity for access to Crown land, and draft a detailed action plan for mining and skills development.

In September 2003, Minister of Energy and Mines Richard Neufeld (in partnership with the BC and Yukon Chamber of Mines and the TSX' s Venture Exchange) traveled to London, England with a mining investment delegation of representatives from government, First Nations, exploration and mining industries and financial/investment experts. This trip has been credited with contributing to the rebound in exploration spending in British Columbia and also resulted in the international Mines and Money conference holding its 2004 conference in Vancouver.

Amendments to two pieces of legislation, the Coal Act and the Mineral Tenure Act, were passed in April 2004. The Coal Act amendments streamline administration of coal tenures for both government and industry. The Mineral Tenure Act provides the basis for a map-based claim process and enables the implementation of Mineral Titles Online. We continued to refine the two-zone land use system to ensure land outside of parks and protected areas will be open for mining.

As part of the government-wide initiative to reduce regulatory requirements, in fiscal 2003/04, we eliminated 468 regulatory requirements in the mining division alone — about a 9 per cent reduction. The total reduction for the mining section since the initiative began is 26 per cent. By the end of June 2004, I anticipate a total of more than 2,000 (about 38 per cent) regulatory requirements will have been eliminated. This reduction in regulation saves money, is more effective and is more responsive to the fast-changing world. The remaining regulations are more results-based and more flexible to promote competitiveness and innovation which benefits all British Columbians.

In the area of geoscience, we participated in the British Columbia and Yukon Chamber of Mines Rocks to Riches program, which invests $2.1 million over two years — in partnership with the federal government, First Nations and industry — to produce geoscience surveys in under-explored areas of B.C. We also expanded the province's database for prospectors and industry by releasing new geological maps of mineralized areas in three significant areas of the northern part of the province. These initiatives contributed to a 42 per cent increase in mineral claims staked over the last fiscal year.

British Columbians and the mining industry continue to benefit from the extension of the super flow-through share tax credit program, elimination of the provincial sales tax on mining machinery and equipment, reduction in corporate and personal income taxes and the streamlining of environmental assessment reviews. These initiatives have resulted in a continued upswing in exploration spending while other competing jurisdictions such as Australia, have witnessed a decline.

In 2003, mineral exploration spending increased to an estimated $55 million; mineral exploration in the northwest was double the previous year's level; mineral claims staking was up by one-third over the previous year; and mineral production is forecast to be about $3 billion, up four per cent from 2002.

A 15-member task force was appointed to provide recommendations on revitalizing the mining industry in BC. These recommendations will provide the basis for the development of a provincial mining plan, to be completed by fall of 2004 and implemented over the next three years.

The government's new action agenda for mining will help restore mining's economic potential and will help generate new investment, jobs and opportunities to benefit all British Columbians. As the mining industry rebounds, government will also be working closely with First Nations to foster partnerships and enhance employment opportunities in this growing industry.

Honourable Pat Bell
Minister of State for Mining