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.