11/16/2011 01:15 EST | Updated 01/16/2012 05:12 EST

Nova Scotia auditor general says offshore industry denied him access to info

HALIFAX - Nova Scotia's auditor general launched a stinging salvo at the province's offshore regulator Wednesday, saying he was denied access to information about the gas operations of two companies.

Jacques Lapointe said the Canada-Nova Scotia Offshore Petroleum Board wanted assurances that the requested information would not be included in his report that was released in the legislature.

He said he refused to give them that assurance and the board denied him the material following advice from ExxonMobil Canada and EnCana Corp. (TSX:ECA)

Lapointe said if he agreed to the conditions, his office would have surrendered its ability to inform the public about matters it has "every right to know."

"We are unable to provide assurance to the legislature or the people of Nova Scotia that the board is properly meeting its regulatory responsibilities to ensure offshore activities are conducted safely with due regard for the environment and protecting the interests of the public," he said in a statement.

Lapointe said his office believed the board's exercise of those responsibilities should be "open and transparent."

"It is not," he said.

The report said the audit was to be completed jointly with the auditor general of Canada.

It was anticipated the federal watchdog would focus on the offshore board's protection of the environment and governance while the provincial auditor would focus on area's such as worker safety, issuance of offshore licences, and employment and industrial benefits.

Lapointe said it was clear to him that it would be impossible to do his job after ExxonMobil and EnCana weighed in with the board to protect what they say is their lawful privilege to withhold sensitive competitive information.

He said it would be "folly" to fight the issue in a prolonged court battle given the financial resources that could be summoned by the oil and gas companies.

"Without the unfettered ability to report what we find, we had no tenable alternative but to abandon our audit of the board," Lapointe said.

Lapointe concluded the board was in contravention of the Nova Scotia Auditor General Act, which gives his office the "full authority" to report on any agency of government — something that's not trumped by federal legislation governing the board.

However, he acknowledged that the board disputes his interpretation that it was acting at the behest of the companies and also his assertion that the provincial act supersedes the federal law the board says protects the companies information.

Lapointe said he disagrees and as a matter of principle will not conduct an audit in which the subject is able to "dictate" what he can disclose.

In a statement, the board said it co-operated with Lapointe's office as much as it could under federal and provincial laws.

Board CEO Stuart Pinks said it actually agreed with Lapointe's recommendation that its regulatory framework be evaluated by the Energy Department to ensure it can comply with the Auditor General Act.

"We have recommended in the past ... the provisions dealing with privilege of third-party information be changed," said Pinks.

However, he said the board made it clear from the beginning to both Lapointe and the federal auditor that there is legislation that protected certain information. He said Lapointe's assertions on the law are simply wrong.

"There's a big question mark as to whether provincial legislation trumps or overplays federal legislation. We don't believe that to be the case," Pinks said.

He also took issue with Lapointe's assertion that the board was taking its cue from the companies, saying they simply pointed out they had privilege under the federal legislation.

When contacted, both ExxonMobil and EnCana confirmed that was the case.

Finance Minister Graham Steele said the government was disappointed the dispute over the information wasn't settled between the board and the auditor general's office.

He said the Auditor General Act is clear on how to deal with the issue.

"Where there is a dispute ... either party may apply to the court for a resolution of the issue," Steele said. "That is exactly what they should do, and the sooner they get to it the better."

Liberal critic Andrew Younger said the government's stance in this case "isn't good enough."

"The fact is that the minister of energy could stand up and insist that the board make the documents public," he said. "We need to stand up for the public interest, not the interest of big multinational companies."