As natural gas prices drop, the B.C. government is increasing subsidies to encourage drilling in hard-to-reach places.

Last week the Ministry of Energy, Mines and Petroleum Resources increased funding available for royalty credits in the oil and gas sector -- from $100 million in 2008 to $120 million this year.

And today, the B.C. government announced it will spend $187 million to upgrade the Sierra Yoyo Desan Road in northeastern B.C., which would service development of the Horn River Basin, believed to be one of the world’s largest sources of natural gas.

In 2008, land lease sales there were going for $655 per acre, and the sale of six licenses that year attracted bids of more than $67 million.

Encana Corp. is one of the biggest players in the Horn River Basin, where natural gas reserves are locked up in shale rock, making them harder and more expensive to access.

Last year, an RBC analyst told the Financial Post that EnCana would need long-term gas prices of at least US$8 to obtain to cost of capital returns.

However, natural gas prices dropped 28 per cent this year. Last month, one analyst predicted the North American shale gas rush will slow to a trickle by summer, with gas prices falling below US $3 by fall.

Colleen Kimmett writes for The Tyee