The Pitfalls of Short-Circuited Project Reviews

Mark Winfield is professor of environmental studies at York University and co-chair of the university’s Sustainable Energy Initiative. This piece originally appeared on Policy Options.

Newfoundland and Labrador Premier Dwight Ball announced in late November a public inquiry into how the economically disastrous Muskrat Falls hydroelectric project was approved.

In reality, there is little mystery.

The project was strongly supported by the governments of former premiers Danny Williams and Kathy Dunderdale. A very limited economic review was permitted by the province’s Public Utilities Board, and the federal-provincial environmental review panel established in relation to the project was barred from examining its economic viability.

Both the board and the panel, to their credit, questioned the need for the project, but their advice was ignored.

A similar story has been unfolding on Canada’s west coast. The new British Columbia government of Premier John Horgan found itself faced with the question of whether to continue the construction of the controversial Site C hydro dam project. In the end, the B.C. government determined that it had no choice but to proceed, given the costs of cancelling the project.

ICYMI: NDP Government’s Site C Math a Flunk, Say Project Financing Experts

The story behind Site C is very like that around Muskrat Falls.

The project was strongly supported by the government of former premier Christy Clark, and the normal economic review process before the B.C. Utilities Commission was bypassed. The joint federal-provincial environmental assessment process that did occur was deeply constrained, and it remains the subject of long-standing criticism from the affected First Nations and communities.

The stories of these projects in B.C. and in Newfoundland and Labrador stand in contrast to the process that occurred in Manitoba over the same time period.

That province had proposed a massive hydro project of its own: the 1,485-megawatt Conawapa Dam.

However, Manitoba’s approach was fundamentally different from that taken in B.C. and Newfoundland. Rather than short-circuiting the normal assessment and approvals processes for these types of projects, the government of Manitoba undertook a substantial public review of the economic rationale and environmental and social impacts of the project.

This included consideration of the need for the project and the availability of alternative ways of meeting the province’s electricity needs.

Given the opportunity for a proper review, the Manitoba Public Utilities Board determined that there was no economic justification for the project. The dam did not proceed as a result.

Although several smaller related projects did still go ahead, notably the controversial Bipole III transmission project, the outcome of the review saved Manitoba residents from the kinds of catastrophic costs now faced by people in B.C. and in Newfoundland and Labrador.

The story, however, does not stop there.
 

If B.C. and Newfoundland and Labrador had followed the type of comprehensive public review undertaken by Manitoba for its hydro megaproject, they might well have avoided the disastrous situations they now find themselves in. https://t.co/gmBrjD2nkl

— DeSmog Canada (@DeSmogCanada) January 24, 2018

In central Canada, the government of Ontario has embarked on an energy megaproject of its own: the reconstruction of 10 nuclear reactors at the Bruce and Darlington nuclear power plants. If everything goes according to plan, the projects are estimated to cost in the range of $26 billion. Many critics suspect, based on the outcomes of the province’s previous nuclear refurbishment projects, that things will not go according to plan.

The costs could be tens of billions of dollars higher than the province’s estimates.

There is even less excuse for the behaviour of the government of Ontario, which seems poised to condemn its residents to decades of massive electricity debt as well.

Surprisingly, particularly in a province where rising hydro rates are the number one political issue, Ontario’s nuclear reconstruction projects have been subject to even less meaningful public review than the Site C and Muskrat Falls projects.

There have been no public hearings at all before the province’s energy regulator on the need for these projects, their likely costs or the availability of alternatives to them. It has been reported, for example, that Hydro-Québec has offered Ontario firm, long-term deals for electricity exports at a fraction of the best-case estimates of the costs of the nuclear refurbishments.

There has been no formal public examination of this option, or of the need for the refurbishments in the context of the province’s current electricity surplus.

The lessons that flow from the experiences of these four provinces seem clear. If B.C. and Newfoundland and Labrador had followed the type of comprehensive public review undertaken by Manitoba for its hydro megaproject, they might well have avoided the disastrous situations they now find themselves in.

There is even less excuse for the behaviour of the government of Ontario, which seems poised to condemn its residents to decades of massive electricity debt as well.

The federal government is not without blame in these events. All these projects were subject to some form of federal approval and environmental assessment.

In each case, the federal government deferred to the wishes of the projects’ provincial sponsors, limiting the scope of federal reviews and avoiding unwelcome questions about need, alternatives and economic viability.

Justin Trudeau’s government was elected two years ago in part because of promises to reform the federal environmental assessment and regulatory review processes that apply to these types of projects.

So far, the Trudeau government has produced a discussion paper, which in large part proposes to leave in place the existing processes, established in their current form through former prime minister Stephen Harper’s 2012 “responsible resource development” initiative.

ICYMI: Is Trudeau Quietly Turning His Back On Fixing Canada’s Environmental Laws?

The situations that are now emerging in British Columbia, Newfoundland and Labrador, and Ontario make it clear that those approaches are not good enough.

Federal and provincial assessment and review processes need to ensure that there are meaningful, public evaluations of the economic rationality and social and environmental impacts of energy and resource projects before they proceed. It remains to be seen whether Canadian governments will draw the same conclusion.

Canada’s taxpayers and energy ratepayers should hope that they do.

Image: Early Site C construction along the Peace River, 2016. Photo: Garth Lenz | DeSmog Canada