A highly anticipated review of B.C.’s Site C dam has found the project is likely to be over budget and behind schedule and alternative energy sources could be built for an equal or lower unit energy cost.

The report from the B.C. Utilities Commission released Wednesday confirmed many of the concerns that have been raised about the project for years.

The panel found BC Hydro’s mid-load forecast for electricity demand in B.C. “excessively optimistic” and noted there are risks that could result in demand being less than even BC Hydro’s lowest demand scenario.

The panel was “not persuaded that the Site C project will remain on schedule” and found “the project is not within the proposed budget of $8.335 billion.”

Currently, completion costs may be in excess of $10 billion, the report read.

The panel concluded it would be too costly to suspend the dam and potentially re-start construction later and focused its efforts on laying out in detail the consequences of either abandoning or completing the dam. The decision now rests with the B.C. government.

Site C, the third dam on the Peace River, has been controversial for many reasons — but perhaps most of all because the project was exempted from review by the province’s independent utility regulator, the B.C. Utilities Commission.

After coming to power this July, B.C.’s new NDP government immediately sent Site C — which has been under construction for two years — for an expedited review by the commission.

The commission considered 620 written submissions and 304 oral submissions from experts and members of the public in preparing its report.

Minister of Energy, Mines and Petroleum Resources Michelle Mungall said the government plans on making a final decision on the project by the end of the year.

“Now it is our turn, as government, to determine whether Site C is in the best interests of British Columbians, after considering the BCUC’s findings and other issues outside the scope of this review,” Mungall said in a statement.

“This will be an extremely difficult decision. We inherited a project that was advanced by the previous government without proper regulatory oversight, is now more than two years into construction, employs more than 2,000 people, and on which about $2 billion has already been spent.”

The government will meet with First Nations before making a decision, Mungall said.

Energy analyst Robert McCullough, working on behalf of the Peace Valley Landowner Association, said he believes the BCUC report spells the beginning of the end for Site C.

He called the report “courageous” because it basically rejects every part of BC Hydro’s submission, McCullough said.

Site C Dam Over Budget, Behind Schedule and Could be Replaced by Alternatives: BCUC Report https://t.co/u1Mh7hGwVv #SiteC #Hydro #bcpoli pic.twitter.com/9aycFzvRWg

— DeSmog Canada (@DeSmogCanada) November 1, 2017

Faulty Demand Forecasting Used to Justify Site C

The panel’s report finds BC Hydro has continued a historical pattern of over-forecasting electricity demand and notes the accuracy of BC Hydro’s industrial forecasts has been “considerably below industry benchmarks.”

The failure of an LNG export industry to materialize in B.C. has significantly reduced the likelihood that BC Hydro’s load forecasts will be accurate, the panel found.

The panel also found BC Hydro failed to accurately account for the impact that rising electricity costs have on consumption.

Additionally, given current low market prices and the likelihood of increasing supply, the panel found that BC Hydro’s proposed export price forecast “should not be relied upon.”

An independent analysis provided to the BCUC by the auditing firm Deloitte found between 1964 and 2016, BC Hydro overestimated future electricity demand in B.C. 77 per cent of the time.

The panel’s critique of BC Hydro’s demand forecasting falls in line with the analyses and opinions of numerous experts who have pointed out the crown corporation’s long history of inaccurate forecasting and the potential for costly oversupply.

Alternative Energy “Increasingly Viable,” Panel Finds

The panel critiqued BC Hydro’s modelling of alternatives as unreliable, saying it is “opaque in its assumptions” and uses out-of-date cost estimates for wind and solar.

The panel stated it found a pairing of alternative energy sources and conservation efforts “increasingly viable” at an equal or lower cost than Site C

During two days of technical briefings by experts, the panel heard BC Hydro consistently ignored or over-inflated the costs of wind, solar and geothermal.

In a submission prepared for the BCUC, North American hydroelectric expert Robert McCullough noted the price of renewables has dropped dramatically since 2010, when the Site C project was resuscitated by the B.C. government. During the last seven years the price of solar dropped 74 per cent, while wind dropped 65 per cent.

In August, BC Hydro submitted to the BCUC that it had screened out solar energy on the basis of a cost estimate in 2025 of $97/MWh. In response to a follow-up question from the commission, BC Hydro provided updated cost estimates of $48/MWh.

Marc Lee, a senior economist with the Canadian Centre for Policy Alternatives, is calling for a public inquiry into how BC Hydro and the former Liberal government made the case for the project.

“It’s amazing. I would like to see a full inquiry to investigate how BC Hydro executives and the previous government essentially conspired to manufacture the case for Site C,” Lee said.

“As someone who strongly believes in public sector institutions and Crown corporations, to have our electricity utility lying to us, making up numbers and doing all sorts of spurious comparisons between its preferred option and the alternative is shameful,” he said.

ICYMI: Geothermal Would Create 15 Times More Permanent Jobs Than Site C, Panel Told

The panel developed its own model for assessing Site C alternatives and found “it is possible to design an alternative portfolio of commercially feasible generating projects and demand-side management initiatives that could provide similar benefits to ratepayers as Site C.”

Further still, the panel found B.C. could pursue alternative energy and swallow the estimated $1.8 billion cost of terminating Site C and still end up with overall electricity costs comparable to building Site C.

The advantage of alternative energy, the panel states, is its incremental nature.

Combining energy conservation efforts with “smaller scale renewable projects provides flexibility to better match generation with demand.”

Conservation programs and smaller scale projects built by independent power producers “have project completion times in the range of months to a few years, and each project (or energy contract if it is contracted through an IPP) is much lower in price than Site C,” the panel found.

Site C Behind Schedule and Over Budget

Construction of Site C has been plagued with costly setbacks, the most significant of which occurred with the appearance of tension cracks along the left bank of the Peace River.

In October, the new CEO of BC Hydro, Chris O’Riley, wrote a letter to the BCUC, acknowledging the crown corporation would not meet its own timeline for river diversion due to “geotechnical and construction challenges” — a setback that would add an additional $610 million to the project’s budget.

An independent audit conducted by the firm Deliotte on behalf of the BCUC also identified the risk of construction setbacks inflating the Site C budget.

DeSmog Canada first reported on June 30, 2016, that the Site C dam was behind schedule and over budget. Documents obtained via Freedom of Information legislation later revealed a co-ordinated attempt by BC Hydro and Premier Christy Clark’s Office to discredit the story.

Because Site C is in the early stages of construction and due to “the lack of certainty” around persistent geotechnical issues, “the additional $610 million may just be the first in what could be a continuing series of additional risk events occurring, resulting in further cost overruns,” the panel stated.

Infringement of Treaty 8 Rights Still a Question

In addition to cost overruns from construction delays, the panel found unresolved questions regarding the infringement of Treaty 8 First Nations’ rights could further add to Site C costs.

The West Moberly and Prophet River First Nations maintain the Site C dam represents an infringement of their rights guaranteed under Treaty 8. Although the two nations have brought and lost legal challenges in B.C. courts, the question of rights infringement is far from settled, the panel found.

“The courts have addressed administrative law issues including the Crown’s duty to consult but have not addressed whether the Crown, by approving Site C has unjustifiably infringed the Treaty 8 rights. West Moberly and Prophet River First Nations submit that the Crown bears the risk that in the event a lawsuit is commenced, the court will find in favour of Treaty 8 First Nations.”

Under Treaty 8, the government of Canada promised to guarantee the rights of local First Nations to hunt, trap, fish and continue their traditional way of life on their land.

The option remains for Treaty 8 nations to file a civil case for damages caused by Site C, a possibility the panel considered.

The panel also noted the protection of Indigenous rights and reconciliation were present as a “major sub-theme” in its community input sessions.

“The termination of Site C would be interpreted as a positive and meaningful step in the reconciliation process for those First Nations who did not reach an agreement with BC Hydro,” the panel stated in its report.

So what now?

The panel’s alternative portfolio indicated that under the low-load forecast, new power supply wouldn’t be needed until 2039 and could be met by the addition of 444 MW of wind and demand-side management initiatives, such as increased energy efficiency and optional time-of-use rates.

“The cost to ratepayers of Site C and the Illustrative Alternative Portfolio are virtually equivalent,” the panel states.

But, regardless of the comparative costs, there are other issues to consider when comparing the completion and termination cases, the panel notes.

“Both scenarios involve risk that is not easy to quantify. The major risk of Site C in the short term is whether there will be further construction cost overruns. Site C is a major construction project and therefore inherently at risk of larger cost overruns than a smaller project. It has already exceeded its budget, only two years into a nine-year schedule. There are tension cracks and disputes with its contractors both of which remain unresolved,” the report reads.

B.C. Green Party leader Andrew Weaver said he was encouraged by the report’s finding about alternative energy sources.

“I have long argued that the plummeting cost of alternative renewables makes Site C the unequivocal wrong direction for B.C.’s energy future,” Weaver said in a statement. “Supporting the development of smaller renewable projects presents a significant economic opportunity for all corners of British Columbia.”

It will take leadership to cancel Site C, but it is the right decision, according to Weaver.

“It is unconscionable that the BC Liberals demonstrated such reckless disregard for British Columbians and for sound fiscal management by pushing through such a substantial megaproject without proper due diligence and oversight,” he said.

The panel also notes that there are other ways to meet future energy needs that include changes to government policy. These include re-patriating some or all of the Columbia River Treaty entitlement.

“This energy is generated from water stored behind BC Hydro dams in British Columbia and is as firm and flexible as the energy from Site C,” the panel notes.

Ultimately though, the panel doesn’t take a position on which of the termination or completion scenarios has the greatest cost to ratepayers.

Galen Armstrong, Peace Valley campaigner with the Sierra Club BC, said the case for Site C fell apart “at the hands of BC Utilities Commission.”

“The government is faced with two options: continue with an unnecessary boondoggle, leaving taxpayers and ratepayers on the hook for decades to come, or pivot to a lower-cost alternative energy portfolio including wind and geothermal that would provide jobs for British Columbians at a lower cost,” Armstrong said.

Update Notice: This story was updated at 5:30 p.m. to include additional comment.

– With files from Judith Lavoie

Image: Site C dam construction September 2016. Photo: Garth Lenz | DeSmog Canada

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In only its earliest phases of construction, the Site C dam project has already spent more money than projected and missed key benchmarks, threatening to undermine Premier Christy Clark’s commitment to taxpayers to keep the project on budget and on time.

BC Hydro documents filed June 10 with the province’s independent public utility watchdog, the B.C. Utilities Commission (BCUC), show that that Site C expenditures totalled $314 million more at the end of March than was originally budgeted for that date.

The same documents, reviewed by DeSmog, also flag the potential for cost overruns if interest rates climb, taxes increase or the Canadian dollar continues to depreciate over the projected eight remaining years the dam is under construction.

More than $1.4 billion of Site C’s $8.8 billion price tag consists of interest payments, and twenty percent of its capital costs are based on foreign currency.

“The project is monitoring and evaluating some specific cost pressures and is conducting detailed budget reviews to identify opportunities for savings,” BC Hydro said in its quarterly progress report to the utilities commission, noting that Site C’s overall cost forecast remains “on track.”

Despite Hydro’s assertion that the project’s total price tag will not increase, the Crown corporation’s latest report is an early indication that the Site C dam may be headed the way of major hydroelectric projects worldwide, which have posted average cost overruns of 56 percent.

Former BC Hydro CEO Marc Eliesen said the higher than projected expenditures by March are not at all surprising, especially given that Site C is proceeding “without due diligence.” In 2010, the provincial government changed the law to exempt the BCUC from decision-making authority to determine if the project was in the best interests of British Columbians.  

“We can expect nothing but escalating increases in the future if Site C is to go ahead,” Eliesen said in an interview with DeSmog. “This is scheduled to become a big white elephant.”

Eliesen predicts that Site C’s final price tag will be $11 to $12 billion. He points to last week’s announcement that the cost of Labrador’s Muskrat Falls hydroelectric dam has ballooned to $11.4 billion, from $7.4 billion in 2012, as an indication of what will happen with Site C.

As Newfoundland and Labrador consumers face huge hydro bill increases, the man in charge of Muskrat Falls, Nalcor Energy CEO Stan Marshall, admitted the project was too large and “not the right choice” but said it is too late to discontinue building.

“If [Site C] goes ahead this is exactly what B.C. ratepayers face,” said Eliesen. “They will be paying rates among the highest in the country.”

Notably, the Joint Review Panel that examined Site C for the federal and provincial governments said it could not conclude on the likely accuracy of Site C’s cost estimates because the panel did not have “the information, time, or resources.”

Premier Clark, who visited the Peace River region June 19, made no acknowledgement of higher than projected Site C spending or tardiness in meeting this year’s major benchmarks. Choosing her words carefully, the Premier said the government must ensure “we don’t go overtime, we don’t go over budget.”

BC Hydro attributes the spending variance to early expenditures for workers’ accommodation facilities and the main Civil Works contract, according to the quarterly report, which also notes that BC Hydro “has encountered challenges in the early stages of mobilization” of the main civil works contractor.

The $1.75 billion civil works contract, the largest single Site C contract, was awarded last December to a consortium called the Peace River Hydro Partners, which is responsible for building river diversion tunnels and constructing the 60-metre high dam across the Peace River. The consortium includes ACCIONA Infrastructure Canada Inc., a wholly owned subsidiary of a Spanish company, the Calgary-headquartered Petrowest Corporation and Korean-owned Samsung C&T Canada Ltd.

Hydro’s report to the BCUC also shows that Site C has fallen behind on four of seven key 2016 milestones, and is at risk of being late on a fifth.

#SiteC has fallen behind on 4/7 key milestones & is at risk of being late on a 5th https://t.co/vyTKfIkElj #bcpoli pic.twitter.com/idXKq56OQi

— DeSmog Canada (@DeSmogCanada) July 2, 2016

The only two key milestones BC Hydro expected to meet from April to October 2016 involved the on-time construction of workers’ accommodation facilities, recently showcased to the media. Missed milestones, which fall one to eight months behind, involve site preparation, road work and excavations on the Peace River’s north bank, the latter of which is slated to be carried out by the Peace River Hydro Partners.

BC Hydro’s previous two quarterly reports to the BCUC listed all but two of 16 milestones as on track.

Hydro’s most recent report to the BCUC provides an intriguing snapshot of some of the other financial risks Site C faces as the government strives, in Clark’s words, to push the project “past the point of no return.”

Among the risks are unexpected geotechnical problems BC Hydro says it is monitoring to determine how they will affect the project’s future finances.  

Key geotechnical surprises to date include unexpected shearing during construction, unexpected slope failure on the project’s north bank, larger than expected deterioration of shale bedrock exposed during construction and a phenomenon called rock rebound/swell.

To mitigate geotechnical risks, BC Hydro recommends transferring “some degree of ground condition risks to the Contractor,” Peace River Hydro Partners. The Crown corporation says it will have more information about geotechnical risks once the consortium commences its excavation of 32 million cubic metres of earth and rock.

Other noted risks to delivering the project on time and on budget include three on-going lawsuits against the dam by First Nations and outstanding permits requested from the federal government, under the Fisheries Act and Navigable Waters Act.

Hydro notes that up to 34 provincial permits are also needed, but tells the BCUC it is conducting weekly meetings with the Ministry of Forests, Lands and Natural Resource Operations (FLNRO) “to ensure that these future applications meet the scheduling needs of the project.”

DeSmog previously learned that FLNRO granted BC Hydro several exemptions from the B.C. Wildlife Act to keep Site C dam construction from falling behind expected timelines, a move that experts said was illegal.

The financial risk that is judged by Hydro to have risen the most this year involves the successful execution of Site C contracts, including the main civil works contract. “Contractors may be unable to execute successfully on scope of contract without resulting costs to BC Hydro,” BC Hydro notes.

As part of its response, BC Hydro has increased supervision to address the failure of some contractors to comply with conditions outlined in Site C’s environmental assessment certificate, an issue that has begun to dog the project.

In April, BC Hydro was issued a non-compliance order by the B.C. Environmental Assessment Office for failing to adhere to measures to control run-off water and sediment. That was followed by a warning letter to BC Hydro from the Canadian Environmental Assessment Agency in May after federal investigators discovered air monitors near Site C operations were not collecting any data.

On June 24, an Edmonton-based Site C contractor, Morgan Construction & Environmental Ltd., was issued two non-compliance orders by the B.C. Environmental Assessment Office, following months of verbal and written warnings. 

Chris Parks, Senior Compliance and Enforcement Officer with the B.C. Environmental Assessment Office, wrote in the orders that Morgan had failed to implement measures to control and clean up leaks and spills of hydrocarbon material, and to segregate and dispose of waste material properly.

An inspection by Parks last December found that Morgan had deposited recyclables, food waste and hazardous waste containing hydrocarbons in a single bin marked “municipal waste.”

BC Hydro’s Site C spokesperson Dave Conway was travelling and not available for comment.

Image: Site C construction. Photo: Garth Lenz

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Finance Minister Jim Flaherty is set to release the 2013 federal budget today, outlining the government’s spending plans and economic priorities for the year ahead. As has been the custom since 2009, the budget won’t simply be called a budget, but rather an Economic Action Plan. So what kind of action can we expect from this year’s Economic Action Plan?

As Flaherty is fond of repeating, Canada is still facing a fragile recovery in the midst of a global economy coping with the lingering effects of the financial crisis. For Flaherty, the fragility of the Canadian economy means that a return to stability and growth can only be assured through a commitment to balancing the budget. Flaherty claims to be “focused like a laser” on cutting government spending to achieve that goal.

A balanced budget has become something of a sacred priority in Canadian politics, functioning as an indisputable sign that the country is on track for prosperity and stable growth. In Conservative messaging, government spending is equated with waste, or a kind of creeping addiction that can only be held in check by ruthless cuts to government programs.

It’s a bit of an awkward communication strategy considering the Conservative record. Having inherited a $13 billion surplus upon entering office, Prime Minister Harper cut the GST by two points and slashed corporate taxes, drastically reducing government revenue. By the time the recession hit in late 2008, that surplus had nearly eroded, and would slide deep into the red as the government expanded stimulus spending to cope with the crisis.

Moving towards a balanced budget and securing their reputation as prudent fiscal managers is a top priority for Conservatives on the eve of the 2013 federal budget. But too often the goal of a balanced budget obscures the real challenges facing Canada—both when it comes to jobs and the environment.

Government expenditures are not merely wasteful largesse. On the contrary, a 2013 federal budget that included increased government spending, specifically targeted on expanding green energy infrastructure and jobs training, would serve two crucial purposes.

The first, more immediate purpose is preventing the Canadian economy from sliding back into recession. Across Europe, governments in thrall to the same balanced-budget dogma have been slashing spending despite sluggish growth and high unemployment. The predictable result can be seen in the UK, where major austerity cuts have put the economy on the verge of a triple-dip recession. Even the International Monetary Fund, long the leading international body calling for governments to reign in their spending, has admitted that budget cuts during a period of slow growth can end up further harming the economy and killing jobs.

The second purpose, though directed towards the long term, is no less urgent. In order to meet its obligations to both the international community and future generations, Canada needs to transition towards a low-carbon economy. This transition can only happen if the federal government steps up to provide the right combination of investment and incentives to the private sector. 

This was the message from the National Round Table on the Environment and the Economy, a federal advisory body whose $5.7 million annual funding was cut by Harper in the last federal budget. The reason? Their research consistently concluded that Canada’s long-term economic health hinges on making the transition from an economy dependent on polluting industries like the tar sands towards providing low-carbon goods and services.

The Canadian Centre for Policy Alternatives (CCPA) supports their findings, further arguing that the green economy has greater potential for long-term job growth than the oil and gas industry. Like the National Round Table on the Environment and the Economy, the CCPA outlines specific ways that the federal government can act to stimulate green economic growth and promote well-paying green jobs.

The environment is not a secondary concern, or something that can be addressed with an advertising campaign that bills the tar sands as “green." Canada needs a real economic action plan that puts the lives of its citizens ahead of balanced budgets, and promotes responsible green growth instead of feeding an oil boom. 

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A new report from policy analysts calls on the Harper government to end the use of overloaded omnibus bills such as C-38 and C-45.

Based on posts originally published on Scott Clark and Peter DeVries’ blog 3D Policy, the report is set to appear in Inside Policy magazine. It harshly criticizes the government’s record when it comes to budget transparency.

“It is now recognized by most observers of the federal budget process, that the integrity and credibility of the process has been seriously eroded in recent years,” they write.

“Less information is now provided to the public in budgets than under previous Liberal and Conservative governments; the authority of Parliament over government spending has been weakened; the understanding of Canadians as to what the government is actually planning to do in the budget has been eroded. Canadians should be concerned not just with the erosion of Parliament’s authority, but also ultimately with their own ability to hold the government to account for its actions.”

Though they keep their comments to fiscal concerns, the issues they target also throw light on the Harper government’s tactics of obfuscation when it came to issues of environmental regulation, specifically in terms of Bill C-38 and Bill C-45.

“The two budget Bills associated with the 2012 budget were, to put it mildly, a disgrace and an insult to Parliament and to Canadians,” the report reads. “The use of Budget Omnibus Bills has grown to the point that they seriously undermine the integrity and credibility of the budget process and the authority of Parliament. Little information is now provided in the Budget, so it has become impossible in reading the budget documents to fully understand what the government is actually proposing to do. There is a clear lack of transparency and accountability.”

This echoes sentiments of protesters in the Idle No More movement who saw Bill C-38, which included changes to 70 federal laws in a single bill, and Bill C-45, which included the sweeping changes to environmental regulations, as directly circumventing their democratic rights.

Clark and Devries size of these bills, their lack of specific detail and the short time frame of their introduction make it impossible to for Parliament to ensure that the premier is accountable to Canadian citizens.

“Budget omnibus bills should be restricted to proposed tax changes only and all proposed spending initiatives should be presented either through the Main Estimates or through separate legislation, submitted to the applicable Parliamentary Committee for review,” they write.

Although this criticism is certainly not new, Harper is not open to it. Yesterday he accused Clark and DeVries of launching a partisan attack, saying that their work contradicted a “non-partisan” report by the CD Howe Institute.

What he did not notice, points out iPolitics's Colin Horgan, is that the CD Howe report contained similar criticism.

For their part, Clark and DeVries deny any partisan leanings. “We have never been members of any political party. We have both served under Conservative and Liberal governments and were never accused by them of being partisan. We provide independent advice to anyone or any organization/party who seeks it,” they told Maclean's Aaron Wherry.

“To date, there are over 100 articles on our blog. The article for Inside Policy brings together observation made in previous blogs – none of which received any reaction from the Government.”

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