Canadian Manufacturing

B.C. handed out $1.25B in oil and gas incentives since 2009

B.C.'s auditor general said the incentives designed to encourage the production of oil and gas are deducted from royalties owed

October 31, 2014  by The Canadian Press

VICTORIA—British Columbia’s auditor general says doing business with the oil-and-gas industry has cost the province’s coffers about $1.25 billion in royalties even before most of the product has been pulled from the ground.

The incentives to be paid to the industry were just some of the items highlighted by auditor general Carol Bellringer in her 2013-2014 summary of B.C.’s financial statements.

Bellringer also noted how much money the government made from selling its assets, how much it paid in interest on debt accumulated through public-private partnerships, and she even took issue with government accounting methods.

“The bottom line is certainly an important element of looking at a set of financial statements, but there’s a huge amount of rich information that can be taken out of the financial statements,” she said in an interview.


“I hope that the report does show that, you know, there are lots of things that need to be very carefully looked at in a set of financial statements.”

Among Bellringer’s items that she said “tell an interesting story” are the incentives given in the form of credits to the oil-and-gas sector. The incentives are designed to encourage the production of oil and gas.

Bellringer said the industry has accumulated $1.25 billion in credits over about five years, and last year alone that figure hit $587 million.

“When these producers claim their incentive credits, that money will be deducted from the royalties that they owe, thereby reducing the amount of money government will generate,” she wrote in her report.

A spokeswoman for Natural Gas Development Minister Rich Coleman said he was unavailable for comment.

When it came to the sale of provincial assets, land and buildings, the government made $601 million last year and expects another $200 million in revenue from similar sales in the current fiscal year.

The $601 million was only a small percentage of the government’s total revenue for the 2013-2014 fiscal year, but Bellringer said it formed a “significant part” of the bottom line helping the government record a $353-million surplus.

Bellringer said the provincial government also paid higher interest rates, ranging from 4.42 per cent to 14.79 per cent, on the debt it accumulated through public-private partnerships.

She said the interest rate on taxpayer supported debt averaged at about four per cent.

The auditor said because of the “inappropriate deferral” last year of federal transfer payments and university endowments for such things as capital projects, the government’s books should have shown an extra $232 million in revenue.

“The government is interpreting the accounting standards to say that they can bring that into revenue over the life of the asset, and we’re saying, no, you have to bring it in as soon as the asset’s ready to be used,” she said.

B.C. comptroller general Stuart Newton disagreed with the auditor over the transfer payments, saying the government marked some of that revenue as a liability for an important reason.

“Those contributions have been recorded as a liability rather than revenue when received because it best represents the ongoing obligation of the recipient to deliver the service to taxpayers for the useful life of the asset,” he said.

About 65 staff from Bellringer’s office and 28 private-sector firms undertook what she said was the largest financial audit in B.C., looking at 165 government ministries and organizations.

Bellringer said members of the legislature will now discuss the findings in committee.

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