Auditor General

All the spin that’s fit to print

British Columbia’s June sale of oil and gas rights brought the 2015 six month total to $7.1 million. The monthly average for this calendar year is the lowest in 38 years reported by government. Even without adjusting earlier years to current dollars, Christy Clark’s receipts are 4% of the average since 1978, when Bennett the Younger was Premier. No one will be surprised that BC Liberals are enjoying rewarding relations with financial supporters who happen to be natural gas producers.

Don’t expect to read about this in your daily newspaper or hear about it on TV or radio. It is not information the Canadian Association of Petroleum Producers and compliant news partners want spread widely. With rights costs in the last five years running at 15% of the preceding five years, gas companies have a good thing going with Christy Clark and Rich Coleman. However, it’s not something they want to publicize.

Seven months ago, I wrote about direct subsidies to gas producers in BC and pundit Vaughn Palmer’s helpfulness in explaining government policies. It’s repeated below.

This week, British Columbia saw evidence that corporate media does not report adverse details about public finance unless the material is dropped on desks in digested form, complete with defensive spin from government or industry.

The issue of BC taxpayer subsidies to the oil and gas industry is not new. Auditor General John Doyle qualified his opinion of the province’s 2012 financial statements for reasons that included this:

Failure to provide for earned natural gas producer royalty credits

No provision has been made in the summary financial statements for royalty credits earned by natural gas producers under the government’s deep-well drilling program. In this respect the summary financial statements are not in accordance with Canadian public sector accounting standards.

Had a provision been made prospectively, as required by Canadian public sector accounting standards when an issue is raised by an auditor in one period but not corrected until a subsequent period, accounts payable and accrued liabilities as at March 31, 2012, would have been greater by $702 million, natural resources and economic development expenses for the year then ended would have been greater by $702 million and the deficit for the year then ended would have been greater by $702 million.

Although the required provision had grown by $160 million in 2013 and another $316 million in 2014, Acting Auditor General Russ Jones dropped the issue from Independent Auditor’s Reports issued in annual Public Accounts. It was restored in Auditor General Carol Bellringer’s first major work, The 2014 Summary Financial Statements and the Auditor General’s Findings.

MSM political pundits ignored the information reported here but when highlighted by the Auditor General, it was covered by Canadian Press. But, the news needed spin so who better than Vaughn Palmer to provide it. Here is part of his October 31 column:

Another matter that may be of interest to British Columbians is around the incentives that government offers oil and natural gas producers,” wrote Bellringer in the letter signed by herself and deputy auditor general (and her immediate predecessor) Russ Jones.

Going back to the New Democratic Party time in office, the province has been offering incentives to develop and maintain production. Companies that undertake less profitable activities like drilling in the off-season or tapping into deeper reserves are in line for the incentives, taken as discounts against current or future royalties.

Curious the columnist would state the letter was signed by Russ Jones, even though it is not. That misstatement could be the work of a helpful spin doctor aiming to shelter the former acting AG who months ago chose not to report on the unrecorded royalty issue. Palmer makes no mention of Bellringer reinstating AG John Doyle’s concerns or of the fact that the $1.25 billion in outstanding credits is not recorded in the province’s books and, if it were, the Liberal deficit record would be quite different.

Also interesting that Palmer has the NDP share responsibility for current financial incentives to the oil and gas industry, although the opposition party was last elected 18½ years ago and, over time, Liberals broadened the subsidy program so that today, almost all exploration work earns credits. In fact, a source told me that the acceleration of the producer credit program was government’s response to industry concerns they had paid too much for drilling rights when the gas market was stronger.

Here is the important message of Palmer’s column:

…this would be a risky time for the government to begin scaling back on incentives to develop and maintain production. In a continent awash in gas, companies would probably shift operations elsewhere.

That is the race-to-the-bottom argument of Extractivism that supposes government should expect little and even be prepared to pay multinational companies to come here, extract resources and export them to other places.

Palmer also touches on the near-double financing costs of public-private partnerships but he allows, without further comment, that:

Liberals will cite the reputed benefits of private-sector innovation, on-time construction, capped budgets and off-loaded risks.

Ah, yes, the on-time, on-budget argument that Liberals so enjoy. However, In-Sights readers are not easily misled.

The Sea to Sky Highway, initially a $400 million project, finished late at a cost of almost $800 million plus a great deal more for parts of the highway not included in the P3 adventure. The $3.3 billion Port Mann megaproject was to be a $2 billion P3 project until the lead proponent suffered financial difficulties. So much for off-loaded risks and capped budgets.

The Sun’s political pundit conveyed another message for the government:

Not all of the report was critical of the Liberals. The new auditor general dropped some of her office’s long-standing disagreements with the in-house government comptroller. She also concluded that the Port Mann Bridge will eventually be self-supporting from tolls, just as the government always said it would be.

Reality is that the Auditor did not drop the Port Mann concerns. The fact set changed. The bridge opened and, with the plan for dramatically higher tolls and the intention of eliminating untolled Fraser River crossings (Pattullo and Massey), Port Mann will become self-supporting. The Transportation Investment Corporation provides clear evidence of what is intended for commuters. That is 2017 toll revenue 78% higher than in 2014.

Apparently, Vaughn Palmer and the Liberals have forgotten the commitment to restraint that was so vital in September when schools were closed.

Palmer ends his piece by saying that, with a new financial watchdog in town, politicians ought to wake up and pay attention. I respect what I’ve seen from Ms Bellringer but I had great respect for John Doyle before he was forced out for excessive diligence.

What the Press Gallery member should have written is that he and his colleagues were going to start analyzing financial records of the province and take counsel from financial experts instead of government spin doctors. A well informed public and rigorous financial controls may assure good management of public finances. Hollow advice to politicians will not.

23 replies »

  1. Analyze financial records?

    But Norm, isn't that hard work that can be done without succumbing to the pablum generated by the evils of access?

    All joking aside, I really found further cover given to P3's by the good Mr. Palmer to be most egregious.


    Because, it would appear that Ms. Bellringer's comments on the differential in carrying costs is actually the final (i.e. not the first) nail in the coffin-lid that should be slammed shut on P3's forever.

    Instead, the zombie that is costing us billions will just start working on the Deas Island crossing….How high will that one go…Four billion?…Heckfire, why not five…Or even six?



  2. Can anyone demonstrate a series of highway or transit projects (excepting Seabus) that have been more costly than those in British Columbia, in terms of traffic capacity?

    P3 was sold as a way to save money and limit budget risks. It has done neither. Instead it has enriched a small number of deal-makers and provided economic activity to benefit foreigners.

    At least when Phil Gagliardi and the Socreds provided opportunities for enrichment, the beneficiaries were close to home.


  3. Palmer seems to be tasked with responding to Carol Bellringer's report. Google searches turn up his column and a rather meek Canadian Press item that is published elsewhere. Other people who hang around the Press Gallery have had nothing to say, to this point at least. Even alternative media like The Tyee and Vancouver Observer are silent about the Auditor General's report.

    One has to wonder why since the sums involved are hugely material. Cost overruns on megaprojects measure in the billions. So do subsidies to oil and gas companies. Most of that money leaves the province for places where taxes are avoided.

    The $100 million a year difference in interest rates between government's 4% borrowing rate and the amounts paid by P3s and public owned private companies doing government business could have been spent in our communities, perhaps funding improvements to schools. Instead that money went to lenders in New York or Beijing.


  4. We have all, at one time or another said something “turned my stomach” but it was usually just a cliché. I am not being melodramatic when I say this column did just that. When I read the bit about Vaughn Palmer stating Russ Jones had signed the document it did actually turn my stomach.
    In my opinion, Mr. Palmer has these options:
    1) Remain silent and allow us to believe he was deliberately deceptive.
    2) Offer up that it was an oversight, or he was mistaken and allow us to believe he was deliberately deceptive but now practicing damage control.
    3) Write something that would convince us he really did make an honest mistake and apologize for any misunderstanding.
    I doubt Mr. Palmer is likely to react to a piece done by a curmudgeon in his underpants so, until I see something to convince me otherwise, I will believe it was deliberate which, indicating how low the MSM has sunk, really is gut wrenching.
    As I was about to post this I saw your comment about “Flying Phil.” It’s likely only a few here remember those days and how things like highway off ramps materialized adjacent to a struggling Socred friendly gas station. “Scoundrels” was an oft used term but, looking back now, they were practically saints. In those days the media actually went after them and we had great exposure of and entertainment with, the Sommers affair, Stephen Rogers, Bud Smith and The Coquihalla cost over runs. One of the most colorful, of course was Vancouver’s own Police Chief, Walter Mulligan. How the press loved that scandal. The seat got so hot he fled to the US.


  5. Flying Phil was a regular target but the media didn't really report much details of who owned lands at the intersections when “by-pass” roads were rerouting traffic around many towns and villages along provincial highways. Nor did they report much about how money got spent on large BC Hydro projects. Sufficient to say that in the sixties, the Social Credit Party was partly financed by contract kickbacks.


  6. You really need to thank VP, it is due to your coverage of his poor attempt at spin I am clicking “donate” to support your continued efforts.


  7. Thank you. The support is appreciated and helpful. It will assist in the new website that I hope will be running within the month of November. It has been delayed because old articles written with Blogger must be reformatted to display properly in the revised style. I am convinced it will be a better experience and will allow better access to the 2,200 articles posted here over 5 1/2 years.


  8. I don’t believe Mr. Palmer lacks intelligence, nor do I believe he is so lazy as to have missed the facts on this issue or many other government transgressions. That leads me to the inescapable conclusion that given his role in an important cornerstone of our democracy (the fourth estate), his misrepresentations constitute a threat to another cornerstone; an informed public. He should be regarded accordingly.


  9. Palmer is very capable and years ago, he demonstrated how to hold the sitting government to account. But, those were the days when he was a full time journalist.

    Now, as an entertainer, he has to please the customers and he would not be depositing as many checks for speeches and public appearances if he didn't make the crony capitalists feel warm and fuzzy about the way they do business.


  10. I find the following quote very revealing; “That could be Palmer's mistake or that of a helpful spin doctor aiming to shelter the former acting AG who months ago chose not to report on the unrecorded royalty issue.”

    This is the very same AG, who two years ago said that SkyTrain was the cheaper option than LRT for the Evergreen Line, even though SkyTrain costs 2 to 4 times more to build than LRT and costs about 40% more to operate than modern LRT. It was also around this time that a delegation from Ottawa decided to build with light rail instead of SkyTrain because on a fact finding tour of Translink's SkyTrain, found that SkyTrain cost more to build; cost more to maintain; and cost more to operate than light rail!

    When the AG starts not reporting outstanding credits and/or makes bogus statements about $billion$ dollar R/T lines, we are in very deep trouble.


  11. The Liberals play the same game. The multi billion dollar SFPR and new Port Mann Bridge was nothing more than a vehicle to funnel taxpayers dollars into the hands of cronies; the Road builders Association and SNC.

    Part of the reason for Campbell to sell the BCR to CN was to rid the world acclaimed passenger rail service (voted one of the best 10 rail journeys in the world) so it would not compete against good Liberal friend Peter Armstrong, who is Chair of the rmstrong Group which operates the Rocky Mountaineer.


  12. Evil Eye! Normally I look forward to your erudite comments, but this time you're way off base. You've sullied the name of a reputable (for the most part) organization charged with the construction of roads throughout the Province. The “cronies” are Kiewit and SNC. I don't know if they are members of the Roadbuilders. I kinda doubt it.
    Laila has a lot more information on those two.


  13. Members of BC's Road Builder's Association donate heavily to the BC Liberal Party. As for SNC, not only do they get taxpayers monies for highway engineering, they also own half the SkyTrain patents and suck taxpayer's monies for every km of Skytrain that is built. And when that fails, as in Gordon Campbell's mock P-3 Canada line, SNC were part of two consortium's bidding for the job. Both Siemens and Alstom, were both rejected due to offering cheaper LRT based solutions.


  14. In your past few articles, Norm, you have laid out a litany of financial horrors that will haunt this provinces finances for decades to come. We are borrowing on the backs of future generations, and those corporate insiders and friends of the party, reap or skim the rewards of project planning that to say the least, is extremely questionable in its accuracy.
    The people that are involved in this, are manipulating our democracy and taxpayer dollars, for their own ends. One wonders where the newly formed RCMP Corruuption investigation unit is, given the hype a few years back, when it was launched. Economic subversion at its finest, with no investigation or media questioning in sight. The kleptocracy continues, unabated.
    Is this the democracy we want to continue with, or is there a better option?


  15. I am sure the rcmp are too busy enjoying their shiny new billion dollar country club in surrey,If however their was a deck contractor to be investigated not only would they show up quick but they would certainly bring the media with them.LOL


  16. The sleaze emanating from every orifice of the BC Liberal operation has seeped into government offices heretofore insulated from the political theater and trusted to serve the public impartially. Who could have imagined at the time legislation was enacted to establish these offices we would witness the mistrust now so evident.

    The offices of the Conflict Commissioner, the Public Service Agency, the Auditor General, and the Attorney General have been defiled to the extent they are no longer trusted by the public to carry out their respective mandates. The actions that caused this decay began under Gordon Campbell’s watch and like the public debt, intensified under Christy Clark’s. Names like de Jong, Whitmarsh, Dyble, Tarras, Fyfe, and Jones never seem far away from culpability. But the real cause lies with the spineless, sycophantic caucus that allows these travesties to continually be inflicted on once-proud public institutions.

    Differences on matters of public policy are understandable, healthy, and indeed necessary in our democratic system, but these actions transcend public policy and should be abhorred by every citizen on the political spectrum. In the past decade or so the BC Liberals and those who support them have moved dirty back room dealings that are an affront to democracy from the exception to the rule and from the back rooms right into the halls and offices of our government.

    Meanwhile, the ink-stained wretches from the fourth estate holstered their pens in favor of hand dollies to help with the move.


  17. Hansard: TUESDAY, JUNE 1, 1999

    G. Farrell-Collins: How would I characterize the government's continued comments on the bright future of British Columbia's economy? I suppose, when you're at the bottom of a valley, anywhere upslope looks higher than where you are at the present time. For the minister to say that a number of indicators in the last quarter have started to trend upwards. . . . I think that while it's nice to hear, it's going to be an awful long time before we get anywhere near where we were prior to the downturn.


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