BURSTThe B.C. government is working to explain away a $1.5 billion natural gas royalty accounting blunder, blaming a spreadsheet error related to currency conversion.
“I’m not pleased by this situation,” Premier David Eby said a few hours before ministry officials convened a media briefing to explain the mistake.
Those officials detailed a spreadsheet error in which Canadian dollars were mistaken for American dollars, and converted when they shouldn’t have been.
Energy and Climate Solutions Minister Adrian Dix told reporters this led to an overstatement of revenue.
“A serious mistake, but it was a human error,” he said.
That human error resulted in roughly $300 million needing to be shaved off provincial revenues for this and each of the next four years. The total correction will equal approximately $1.462 billion.
This royalty regime is supposed to ensure the B.C. government and First Nations benefit financially from natural gas extracted from public and Aboriginal lands.
The amount of money the government gets from these royalties — or is projected to get in the budget — is based on the price of natural gas. But that prediction needs to be accurate.
Price calculation errors were brought to Eby’s attention in a July letter from the Treaty 8 First Nations, and first made public by Business in Vancouver on Aug. 26.
But the Treaty 8 letter blamed the error on the government failing to account for transportation costs.
The group of First Nations was also concerned that errors are being baked into the incoming royalty changes slated to take effect on Jan. 1, 2027, which the letter also says fall short.
It says the government is “stacking mistake upon mistake upon mistake.”
In 2022, the B.C. government announced a redesign to ensure that at least 50 per cent of profits, after production expenses, are collected as royalties.
But the letter says that based on what the nations have been told, the incoming royalty regime falls short and real royalty rates will be just 11 to 14 per cent, far from the promised 50 per cent.
The combination of the errors and what the nations see as flaws in the new royalty system led to a stark warning.
“This is your last chance to avoid a basic — and embarrassing — mistake that will cost the province billions of dollars,” the letter reads. “You cannot afford to get this wrong.”
Ministry officials dispute some of this characterization, contending that after an independent economist checked the numbers, a few accounting errors were found, but were unrelated to transportation costs.
Officials say the currency conversion issue is responsible for most of the discrepancy, and while a few other errors were found, they were minor.
And they say the identified errors do not relate to the new royalty regime coming into effect on Jan. 1, 2027.
Officials also point out that market prices have since changed, impacting prices.
Dix pointed out these are all estimates anyway.
“The predictions are just that; you have to put a number in the budget of what you think the revenue will be,” he said.
But when asked about the new royalty framework, Dix would not commit to upholding the 50 per cent promise.
“We’ll provide any information on that when we’re ready to announce it,” he said.
James Tate, a lawyer representing the Treaty 8 First Nations, says the nation’s technical experts are reviewing the government’s explanation and he will have more to say once this review is complete.