On January 17, 1961, Canadian Prime Minister John Diefenbaker and United States President Dwight Eisenhower signed the Columbia River Treaty.

It was a landmark agreement that required Canada to build three dams to aid in U.S. flood protection and power generation. In exchange for taking on the impacts of these water storage projects, Canada was paid $64 million for 60 years of flood control benefits.

Canada also received an entitlement to one-half of the estimated additional hydroelectric generation capability at power plants on the Columbia River in the United States made possible by the operation of the dams in Canada.

This power is referred to as the “Canadian Entitlement” and since 2003 it has amounted to at least 1,176 megawatts of capacity and 4,073 gigawatt hours of energy a year.

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That just so happens to be nearly identical to the amount of electricity B.C. could create via the controversial $8.8 billion Site C dam — the most expensive public project in B.C. history.

The B.C. government gave Site C the go-ahead in December 2014, but the third dam on the Peace River is facing several court challenges from landowners and First Nations who oppose flooding 83 kilometres of the Peace Valley.

This week, a U.S. energy economist said the power from the dam is dramatically more costly than previously thought. The B.C. government has argued the dam is the most cost-effective way to meet the province’s electricity needs and has rejected repeated calls for an independent review of costs by the B.C. Utilities Commission.

Failure to Consider Columbia River Power ‘Inexplicable’: Panel Chair

Harry Swain, the chair of the joint federal-provincial panel that reviewed the Site C dam, panned the B.C. government’s actions on the dam in March, in comments called “unprecedented” by environmental law experts.

 “To say we will not consider our entitlement under the Columbia River Treaty is inexplicable,” Swain told DeSmog Canada.

In recent years, B.C. has been selling off the Canadian Entitlement to the tune of $100 to $300 million annually. From 2010 to 2012, the province received about $30 per megawatt-hour for that power. Meantime, the cost of power from the Site C dam is estimated at $83 per megawatt-hour.

“On the face of it, it doesn’t make a lot of sense to be building new sources at $83 (per megawatt hour) and continuing to export at $25 or $30 or $40 per megawatt hour,” said Philip Raphals, an energy analyst hired by the Treaty 8 Tribal Association to provide expert testimony during the Site C hearings. “Why not just use our own inexpensive resources instead of selling them off for so little?”

Using Columbia River Power Would Save B.C. $2 Billion: Treaty 8

In a 20-page letter to the B.C. government, the Treaty 8 Tribal Association made the case that taking into account just 50 per cent of the Canadian Entitlement would defer the need for new electricity capacity in the province to 2034.

“We have estimated the potential benefits to ratepayers of enacting such a regulation to repatriate the Canadian Entitlement to be at least $2 billion compared to the Site C portfolio preferred by BC Hydro,” said the letter sent in Dec. 2014 to Minister of Energy and Mines Bill Bennett and Minister of Finance Mike De Jong.

Days after the letter was sent, the B.C. government announced it intended to move ahead with the Site C project.

Canadian Entitlement ‘Fell Between Cracks’: Energy Expert

The panel that reviewed the Site C dam was not allowed to consider the possibility of repatriating the Canadian Entitlement, nor did BC Hydro bring it forward as an option.

Why not? B.C.’s Clean Energy Act.

The act includes a self-sufficiency requirement, which requires that BC Hydro be able to produce enough electricity to satisfy provincial electricity demand. It was designed so BC Hydro can’t rely on market purchases, particularly imports of high-polluting power, for planning purposes.

 “The Canadian Entitlement, however, consists of hydropower, the environmental costs of which are already borne by British Columbians,” reads the Treaty 8 letter. “Adopting a regulation allowing the import of the Canadian Entitlement (for planning purposes) could not be seen as compromising B.C.’s climate polices or its goal of energy self-sufficiency.”

Because of this requirement, BC Hydro never examined the possibilities of using the Canadian Entitlement to meet B.C.’s needs, Raphals says.

“How, then, would the provincial government ever become aware that it could avoid the environmental and treaty infringement consequences of the Site C project, avoid borrowing billions of dollars and avoid major rate impacts by repatriating BC Hydro power, if BC Hydro believes it is barred from even mentioning this possibility unless explicitly asked to do so by the government?” the Treaty 8 letter to government said.

The panel’s mandate was to work within existing laws, regulations and policy, which meant the Columbia River power only came up as an aside during the environmental review.

“The downstream benefits are off of everyone’s radar … It seemed to us that it’s a solution that has fallen between the cracks,” Raphals said.

The joint review panel did comment on the self-sufficiency requirement briefly, saying:

“Taken literally, this means a B.C. disconnected to the outside world, a vision of autarchy truly strange for a province that relies on trade, and a long way from its recent history …. Minor relaxations could mean being connected for reliability or for diversity exchange …”

The consequences of the self-sufficiency requirement were also evaluated in a 2011 BC Hydro review.  That panel wrote:

“The panel recognizes that the economic and energy situations have changed, and that the existing self sufficiency definition may be overly conservative and place an undue burden on ratepayers. The panel recommends that BC Hydro and the province evaluate alternative definitions and timelines for self-sufficiency that meet the needs of the province and ratepayers in a way that is sustainable for the long term.”

Re-Negotiation of Treaty Creates Too Much Uncertainty: B.C. Government

Given these well-documented concerns and the low market rate of electricity, why hasn’t the B.C. government considered using the Columbia River power to defer the need to build more expensive sources of power, such as the Site C dam?

In low water years, B.C. currently may import up to 10 per cent of annual demand, according to the Ministry of Energy and Mines.

“Meeting new B.C. demand by relying on the Canadian Entitlement instead of building new sources of power in B.C. would increase this exposure,” a ministry spokesperson said in a written response to DeSmog Canada. “While BC Hydro is comfortable with a 10 per cent level of exposure, a higher level of exposure would introduce risks regarding the ability of the market to reliably meet B.C.’s electricity needs under certain conditions.”

In addition to that, the treaty is up for re-negotiation.

“It is also not a long-term resource as either country may unilaterally terminate the treaty with 10 years notice,” the spokesperson said.

Raphals argues that, given the importance of the treaty for U.S. system operations, it is “implausible” that the U.S. would simply abrogate it. 

“It is, however, entirely possible that the amount of the Canadian Entitlement will eventually be reduced,” he said.

And that’s why, when modeling the impact of the Canadian Entitlement, Raphals limited the downstream benefits to half of what is currently available.

Raphals argues that taking the Canadian Entitlement into account allows B.C. to delay the need to build new projects and ultimately make smarter planning decisions.

“There is no need for BC Hydro to make firm decisions in 2014 on how to serve its loads 20 years from now,” Raphals said. “The world today is very different than it was 20 years ago, and there is every reason to believe it will be very different as well, in very unpredictable ways, in 2034.”

Photo: Canadian Prime Minister John Diefenbaker and U.S. President Dwight Eisenhower sign the Columbia River Treaty in 1961.

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Thirty-one years ago, when the Site C dam in B.C.’s Peace Valley was rejected for the first time, BC Hydro was told to investigate alternatives sources of energy, specifically geothermal energy, by the B.C. Utilities Commission.

But the Crown corporation has utterly failed to do so, according to the report of the joint review panel on the Site C project, released last month.

Ken Boon, a Peace Valley farmer whose land would be flooded by the dam, pointed this out to the panel, noting that somehow “we’re back here now 30 years later and still talking about the dam.”

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The panel doesn’t mince words on the province’s failure to investigate alternatives.

“The low level of effort is surprising, especially if it results in a plan that involves large and possibly avoidable environmental and social costs,” it writes.

The $7.9-billion dam would flood 107 kilometres of the Peace River and its tributaries, threatening endangered wildlife and putting farmland under water.

Why haven’t alternatives been researched? The panel points the finger at the government’s lack of funding for geological exploration, while outlining a culture of complacency fuelled by plentiful, low-cost electricity.

But times have changed, the panel says, and failure to ramp up exploration of alternative renewable sources a decade ago is hurting the province now: “The panel concludes that a failure to pursue research over the last 30 years into B.C.’s geothermal resources has left BC Hydro without information about a resource that BC Hydro thinks may offer up to 700 megawatts of firm, economic power with low environmental costs.”

With the largest public expenditure of the next 20 years on the table and a lack of clear demand for the Site C project, a serious look at the alternatives is in order.

Someday, a growing B.C. population will need more energy. “The question is when,” the panel writes. “A second question is what alternatives may be available when that day comes.”

Geothermal offers alternative reliable source of power

Even with next to no research, BC Hydro has estimated geothermal energy could replace two-thirds of Site C’s power.

Canada is currently the only major country located along the Pacific Rim’s Ring of Fire not producing geothermal energy. A Geological Survey of Canada report recently noted that northeast B.C. has the “highest potential for immediate development of geothermal energy” anywhere in the country.

The advantage of geothermal power over other types of renewable energy is that it’s considered a “firm” source of base load power, comparable to a hydro dam. The United States has about 3,400 MW of installed geothermal capacity.

“The wind doesn’t always blow and the sun doesn’t always shine, but the earth is providing heat at a constant rate,” explains Grant Van Hal, a senior policy advisor for the Canadian Geothermal Energy Association (CanGEA).

During the Site C hearings, the association argued geothermal energy offers more jobs spread through B.C. and First Nations, less transmission upgrade costs, fewer environmental impacts and the planning flexibility to follow the actual demand growth in the provincial system.

Despite this potential, the panel noted that BC Hydro reported its current investment in geothermal research as under $100,000 a year.

“We don’t really have funding to do R&D… In fact we’re expected not to do that,” BC Hydro said at the hearings.

However, the Clean Energy Act states it is a provincial objective “to use and foster the development in British Columbia of innovative technologies that support energy conservation and efficiency and the use of clean or renewable resources.”

The panel doesn’t overlook this contradiction and raises several issues with it — chiefly that “if BC Hydro is to continually scan the resource and technology horizon for future supply and conservation possibilities, it must have a budget and a mandate to do so. Without these, long-term planning is seriously uninformed.”

In an effort to prevent future decision-makers from also being “seriously uninformed,” the panel re-iterates what was said in 1983:

The Panel recommends, regardless of the decision taken on Site C, that BC Hydro establish a research and development budget for the resource and engineering characterization of geographically diverse renewable resources.

Next, in one of the panel’s more pointed remarks, the report reads: “If the senior governments were doing their job, there would be no need for this recommendation.”

Building new supply bit by bit reduces costs

Despite the lack of detailed information for B.C., based on costs in other jurisdiction, the panel is able to say that geothermal power is available at a similar cost to Site C — and is more flexible.

“These sources, being individually smaller than Site C, would allow supply to better follow demand, obviating most of the early-year losses of Site C,” the report says.

That’s a point re-iterated by Paul Kariya, the executive director of trade association Clean Energy BC.

“Times have changed. We’ve been through an era of building big dams,” he told DeSmog Canada. “When you build a dam, you get this one massive lump of power and that’s not the way that energy is planned for anymore.”

This part of the Peace Valley would be flooded if the Site C dam is built. Credit: Graham Osborne.

While much has changed, some things haven’t.

“One of the things that hasn’t changed is governments of all stripes like mega projects,” Kariya says. “Site C is potentially the last mega hydro dam project in B.C. They’ll want it there as a potential.”

Matt Horne of the Pembina Institute, a sustainable energy think tank, says predicting future power demand is an uncertain game.

“One of the uncomfortable parts of Site C, is that you’re saying, ‘This is where demand is going to be at in 15 years,’ whereas other options … are much more scalable and can be matched to demand over time,” he says.

“That way, if we end up in a scenario where demand doesn’t increase as fast as BC Hydro is predicting, we don’t have to overbuild, whereas with Site C it’s one big block.”

A study commissioned by the Treaty 8 First Nations, “Need for, Purpose of and Alternatives to the Site C Hydroelectric Project,” found Site C is not a cost-effective solution to meeting BC Hydro’s forecast needs for additional energy and capacity. Study author Philip Raphals of the Helios Centre found that when compared to alternative portfolios built as needed to meet demand, the dam comes out as the most expensive of alternatives.

But what about natural gas plans?

Some of the bigger uncertainties in terms of electricity demand are around the scale of resource development, particularly the liquefied natural gas (LNG) industry. That’s because each large LNG terminal, if run entirely by electricity, would require an entire Site C dam to power it.

However, the panel found large LNG plants are likely to be powered by natural gas directly (because they’ve been given an exemption from the Clean Energy Act) and, even if they did use electricity, the power would be required before Site C became operational.

The panel seemed unimpressed by B.C.’s double-standard on the topic of burning natural gas for electricity (much more on that coming later in this series).

“LNG developers have been promised a free hand to burn their gas here for their own purposes, but BC Hydro has been denied the same privilege,” the panel wrote.

Cost of renewables dropping rapidly, cost of dams increasing

Merran Smith, executive director of Clean Energy Canada, says the cost of renewables has gone down rapidly in the past five years, with solar costs dropping 80 per cent and wind costs dropping 35 per cent.

“And we only see those lines continuing down, so a decade from now, the cost one will assume will be lower,” Smith told DeSmog Canada. “Whereas the cost for building large dams is only going up.”

After conserving as much as possible, it makes most sense to build new electricity supply where it’s needed, Smith says.

“There’s renewable potential all over this province, so rather than having one large dam in the north with a huge transmission line, we can create renewable energy in the regions where it’s needed,” she says.

Given this, Smith questions whether Site C is the best path forward for British Columbians.

“Why would we lock ourselves into a very expensive large dam when we could build units in clean, efficient renewable energy as we need it and where we need it?”

Photo: “Geothermal borehole house” by Lydur Skulason via Flickr

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.