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  • The slippery slope of Site C


    Harry Swain
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    Cascading and compounding mistakes may be leading BC to an $8-billion loss.

     

    ON A TROUBLED PROJECT, there is a tendency for every sequential decision to narrow the options and increase the costs of the next one. Path dependency, once it has set in, makes out-of-the-box thinking harder and harder since it requires the proponent to say, “I was wrong.” This is one reason why democracies, with their habit of changing ruling parties every so often, are often economical. Quite radical decisions to staunch bleeding can be easily taken when there is a failed predecessor to blame.

    Poor John Horgan! He paused—and plunged forward. When he took office in the spring of 2017, he brought with him the hopes of many, which he had encouraged, that the Site C project would be cancelled. Fearful that his predecessor had indeed already gone past the point of no return financially, as she had promised, he asked the BC Utilities Commission for advice.

     

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    BC Premier John Horgan made a number of  costly errors

     

    He did so without purging the BC Hydro Board of incompetent Liberal placemen who had no business on the board of a large utility. Its management of dreamers (“We’re dam builders!”) hadn’t built a dam since the 1980s and had no one on staff who had, but were still transfixed by Wacky Bennett’s vision of a BC with cheap power and flooded valleys. The new government also failed to purge the provincial bureaucracy, whose relevant senior jobs were filled by men (obviously) consumed by the same theology. One of them was asked to draft terms of reference for the Utilities Commission. First mistake. These folks were not Horgan’s friends.

    The Commission, with a short deadline and a restricted mandate, answered the questions asked, with evidence that came principally from the proponent BC Hydro. Despite some manful attempts to smuggle a few home truths into the text, such as around over-capacity and flat demand, the government allowed the Commission’s analysis to be savaged by the provincial bureaucracy. Second mistake. Premier Horgan and his Cabinet should have asked for the views of external critics as well. 

    In consequence, the Premier wound up accepting, with a degree of public reluctance, a decision that flew in the face of basic textbook advice about the fallacy of sunk costs. He decided that explaining a $3-billion dead loss to an electorate conditioned to expect profligacy from a left-wing government—a minority government at that, dependent on three Green Party votes for its continuance in office—was too high a risk, and opted to continue construction. Third and fundamental error. The opportunity to blame the Liberals winked out.

    Continuing construction required reposing trust in the general contractor, a Spanish firm that won the contract with an underbid and a local partner firm that shortly collapsed. Horgan, newly cautious, might have asked why none of the great Canadian dam constructors decided to bid, but apparently didn’t. Fluor and Bechtel, large and experienced US firms in the same time zone, passed. Low bid won. The subsequent history of poor quality control by a firm without relevant experience (the 800 MW they claimed to have built was in some 50 projects, none of which were in countries with cold winters) meant change orders—change orders that upped the price and ate more time.

    Even as his options narrowed, the Premier was wary of BC Hydro’s blithe promises about cost controls and engineering competence. He appointed a Project Assurance Board to continuously monitor BC Hydro’s promises, and a Technical Advisory Board of engineers and scientists. But—fourth mistake—he allowed the inmates to appoint the wardens and, suspecting the make-up of these boards would not withstand public scrutiny, acquiesced in a degree of secrecy of North Korean quality. The membership was unknown, though a director of BC Hydro and former chief engineer on the Site C project chaired the Assurance Board. Their expert advisers were unnamed. Their reports were classified. 

    Horgan’s new Assurers were mostly the people who had designed the project in the first place, or were technically incompetent BC Hydro Board members. There were no genuine outsiders— people without past, present, or anticipated future financial connections to BC Hydro. BC Hydro’s reliance on its own staff for technical and economic advice, or on that of engineering firms in receipt of large fees and hoping for more, or on provincial officials still starry-eyed by the Bennett dream, continued unabated. 

    By late 2017 it became apparent even to outsiders that something was rotten in Denmark. Vern Ruskin, 94, a retired BC Hydro chief engineer from the glory days of half a century past, had been warning all and sundry that there were unexamined geotechnical and dam safety problems with the novel dam design and the crumbly rock below. He recommended engaging world-class experts for an independent review. Nothing was done. In 2019, the drillers of the diversion tunnels on the left bank encountered unexpected high-pressure water in unconsolidated gravels which required unplanned money and time to fix. Grout sellers rejoiced. 

    Seismicity related to nearby gas well fracking was well beyond predictions, both in frequency and strength. All demands for external review were brushed aside by BC Hydro. The government took no action. Fifth mistake. 

    The history of doubling down as costs rose was now habitual.

    By January 2020 the problems could no longer be hidden even by the tame Project Assurance Board. BC Hydro and its owner squirmed as the news kept getting worse through the first half of the year. On July 31, a Friday, on the eve of a long summer weekend, BC Hydro at last confessed via press release that “unexpected” geotechnical problems had arisen under the concrete powerhouse and spillways they had just completed on the right bank. The current $10.7 billion cost estimate was out the window, and the schedule would have to be recalculated after more remedial engineering. They would report back later in the fall. In the meantime, the Premier said, he would appoint Peter Milburn, a retired engineer and former deputy minister of finance, to investigate and report back.

    The immediate joke in Fort St John was that the 1.5 million ton powerhouse had already slid two or three inches toward Alberta. Unique in the world, its design called for a concrete powerhouse at right angles to an earthfill dam.

     

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    View of the spillway headworks, stilling basin, intakes, penstocks and powerhouse in June 2020 (BC Hydro photo)

     

    Elsewhere suspicion sprang up that there would be an election in October. 

    Mr Milburn‘s terms of reference were not released. However, despite the focus on dam safety, he had no independent expert assistance and was at the mercy of BC Hydro, its contractors, and the hapless Project Assurance and Technical Advisory Boards, which had obviously failed. Error six. 

    In January 2021, Milburn’s report (and, presumably, the long-promised BC Hydro response to their confessions of July 2020) were reportedly on the Cabinet table—which august body discovered that Milburn could not provide a definitive answer to the go/no go question because he had not been provided with the resources to find out and had no capacity independently to review the doubtless voluminous reports of BC Hydro and its contractors. The Premier announced that two renowned international experts would be hired to review the file again; meanwhile construction would continue.   

    What can the experts say? They cannot say the project is without risk; their professional reputations depend on having enough weasel words in their report so that if anything does go wrong they can say they warned the government. If they are really mean, they will not say it’s unsafe, either, thus leaving the Premier twisting slowly in a Peace River breeze, forced to make a fateful decision without unequivocal professional advice. If they say it’s not really safe the Premier will be forced to do, at great political and financial cost, what he should have done four years ago. 

    About $6.5 billion has now been spent, with more under contract, and a large but unconfessed sum has been lost in related lawsuits by First Nations, with more to come. On an unrelated matter, the inept managers of BC Hydro will have lost $1.15 billion by March 31 on interest rate hedges on their massive debt that have gone sour, some of it Site C-related. The gang that couldn’t shoot straight thought they could beat Goldman Sachs.

     

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    With the rockfill berm and upstream cofferdam complete, the Peace River flows through Site C’s twin diversion tunnels at centre-left (October 2020)

     

    British Columbians are now well down that slippery slope that many had feared ever since the joint federal-provincial environmental review panel reported in 2014. Each step has made the next less avoidable. A project that was sold to Premier Campbell at $3.5 billion had grown to $6.9 billion by 2014, was shortly increased to $7.9 billion once the environment review was safely forgotten, and now sits somewhere well north of $10.7 billion. Estimates—not BC Hydro’s—are that the total could be between $12.5 and $14 billion, assuming the geological conditions will allow safe completion at all. 

    The price of kicking the can down the road has increased at every step. The dead-weight loss during the terms of the present government has at least doubled, to a probable total of more than $8 billion: $6.5 billion spent and a good bit more for liquidated damages and minimal land reparation. 

    The options facing the Premier and his government are increasingly unpalatable. Each choice is narrower, and the cost higher. The reputation of a government which soared on its handling of COVID-19 is being eroded by its embarrassing and increasingly public handling of the largest public works project in provincial history. If Premier Horgan chooses to finish the dam, the next election will coincide with the completion of the project—and the entry of Site C’s enormous cost to a rate base already stressed by having too much capacity. It’s far too late to blame things on their predecessors. The current government now “owns” the project in every sense. Mr Horgan must be praying that the latest reviews give him an excuse to cancel the project while blaming somebody else.

    Harry Swain chaired the Joint Review Panel on Site C in 2013-14 and is a former deputy minister of Industry Canada. He lives in Victoria.

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    An excellent summary of a slowly unfolding financial (not to mention political) disaster. While the intent of the project might have been noble and even eventually correct it is turning into a un-salvageable mess. As the author points out there have been numerous opportunities to step back from this brink, all of them willfully ignored.

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    A couple of positive notes that the Premier can promote.  Now that the price of Site C, if, as Mr. Swain points out it can be built, has basically doubled since the Joint Review panel looked at this, and the cost of the alternatives has dropped, the Province can now get more electricity from those alternatives than Site C would provide just by stopping building Site C now and developing the alternatives.  That has to be a good thing for when we do actually need more power.

    And then there is the value of the valley which as far as I know has not been considered in Hydro's or the governments calculations of cost yet.    The valley is very important to the objective of developing a sustainable society in the Province, and by stopping Site C the government can take credit for preserving such an important piece of our future.

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    Having followed this debacle from the start , I am still puzzled as to why the province continued to allow fracking permits to continue when their effects where first noted. This has only compounded an already risky mega-dam build site. 

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    27 minutes ago, Guest sue said:

    Having followed this debacle from the start , I am still puzzled as to why the province continued to allow fracking permits to continue when their effects where first noted. This has only compounded an already risky mega-dam build site. 

    Wait until the reservoir is filled to the brim to see if it can withstand a 4.6(+) fracking-caused earthquake.

    https://thetyee.ca/News/2020/08/13/Quakes-Fracking-Site-C-Dam-Region/#:~:text=Drilling by Canadian Natural Resources,shook buildings in Fort St.

    Edited by Rick Weatherill
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    It is so evident from Harry Swain's argument, the Site C project was not supposed to proceed. I was one of the individuals that presented information to that same 2014 panel, over which Mr Swain officiated.

    Harry's summary ultimately spoke out against this project but some of the wording of his final report was not so clear. It left many of us wondering what he and the panel ultimately thought should happen....

    It is good to see that he has tightened his opinions and re-articulated his thoughts on the matter of the Site C project. 

    Sadly, too little ....too late for the valley.

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    Sadly, too little ....too late for the valley.

    If the prognosticators say the dam is indeed on a slippery slope and the worst inevitable happens, within a 100 years no one will even know a dam existed......except for perhaps some rapids where there were none BC (before construction).

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    Guest normanfarrell.ca@gmail.com

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    5 hours ago, Guest rickkoechl@gmail.com said:

    It is good to see that he [Swain] has tightened his opinions and re-articulated his thoughts on the matter of the Site C project. 

    Sadly, too little ....too late for the valley.

    Perhaps Rick, the difference is that Dr. Swain now presents his own opinions, helped by a few years observing new developments, while the earlier report you mention was that of a panel. Remember the old joke about a committee's design for a horse looking like a camel.

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    All these Site C analysis miss a very key item. Horgan backs Site C to cater to the BC Building Trades. It's that simple folks ... very basic politics. And Horgan being fully worker and jobs oriented, with virtually no meaningful commitment to the environment, is not going to be swayed by all the enviro or even safety arguments. That's why he continues to allow Site C to be built even despite the cost over-runs and  safety risks. Site C is also the energy generation source he wants to waste on compressing  LNG for export - again for construction jobs. It's time for the Harry Swains and the Sarah Coxes to get this key part of the awful Site C puzzle.

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    I have said all along that this failing project is a major reason why he called an election mid pandemic. The government hasn't handled the pandemic any better, we were just lucky in the beginning and they knew it. We still have tourists coming from other provinces and countries yet actual BC residents are being asked to limit their bubbles to immediate households and put their lives on hold indefinitely. Oh ya and the recovery benefit can't even get out the door because they put up a bunch of red tape, the exact opposite problem of cerb. Which party is up next??

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    Spot on Mr. Careless. Premier Horgan’s bosses at organized labour and Engineering faculties call the shots. The giant turbines are on route to Site C. We can all count on gargantuan increases in home heating costs to pay for NDP vote buying. What’s next, log the Parks? More coal mines? Expand the bureaucracy? Keep putting the squeeze on till the hinterlands are wreckage? More sell outs to foreign “investment” ?  
    The time of globalist mega projects wringing us dry with 400 percent increases in costs, a game that is played again and again on “public” projects, is ending, what now Mr. Horgan?
     

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    lets not kid ourselves, John Horgan has made the decision to continue Site C like he did prior to the previous studies. John was once an opponent of Site C and even visited the site when we had to trespass to take photos of the site prior to continuing the project. I have photos from that time. This project has and continues to have an open check book for completion. The general public will pay for the current and future costs to complete the project. Hopefully the Dam will last until it is completed and fails just after the next election as it will fail in time!

    No reviews of the  project will supply John Horgan enough proof of what is needed by him to cancel the project. Be prepared to pay significantly more either in taxes or electricity rates to pay the cost of completion. The Project will not pay for itself!

     

     

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    17 hours ago, Guest Ric Careless said:

    Horgan backs Site C to cater to the BC Building Trades.

    This is no revelation.  Certainly, Sarah Cox and Harry Swain know this.  One commentator suggests that Premier Horgan's bosses on site C policy are "organized labour and Engineering faculties".  I would suggest that a small cabal comprising unelected BC NDP insiders are calling the shots for Horgan knowing full well that organized labour and the construction industry pay the NDP's bills. 

    Before the 2017 provincial election, most former and present NDP MLAs were aligned with the BC NDP party platform to halt construction of the site C dam.  But honour and trustworthiness proved to be scarce traits among some of those politicians.  

    With a carrot of a Cabinet appointment dangling before the eyes of some of the most vocal critics of the site C dam, Horgan, persuaded by his backseat cabal,  forced his caucus to change direction and support continued construction of the dam.  

    This reversal in policy gave rise to one of the most awkward public announcements that I have ever witnessed:  Horgan standing on stage flanked by newly appointed Cabinet ministers The Honourable Michelle Mungall and The Honourable George Heyman, two of the NDP's most vocal critics of the site C dam, in a fake show of unity announcing continued construction of the dam.  

     

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    Great article, Mr. Swain! I knew it was not a good thing, but I didn't know how bad it truly was.

    I note natgas hit $2.72 today, down from $3.06 in November, and way down from the $13.33 in 2008, when this damn was just a gleam in then Education Minister Christy Clark's eye.

    Gordon Campbell hired her to destroy the public education system, and she nearly succeeded. Little did he know that she would destroy the natgas industry, too!

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    Site C will increase cost the hydro power for BC citizens. With rooftop solar becoming more affordable more people will switching making the glut of hydro power even worse. This could be the end of BC Hydro.

     

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    It's a great make-work project for gravy-train unions. Who needs a decent minimum wage, when some thousands of guys have such good jobs paid for by taxpayers? 

    On the investors' front, I wonder if foreign firms from questionable countries might use their free-trade agreements' secret tribunals to extract $-billions from B.C., whether the dam is built or not. If so, then we might as well have the infrastructure to show for all the LNG we produce to sell for a song.

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    B. C. Hydro is long overdue to change its name and its basic psychology, reverting back to B. C. Electric. That would get it unstuck from dams, dams, dams and considering our various other means for generating the electricity we need. We have vast geothermal potential, for instance, on par with New Zealand and Iceland, left tonally ignored and untapped. How many Te Mihi equivalent facilities could B. C. Hydro have built with the money sunk into Site C if it had not been stuck on damming as the only solution?

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    Only 3% of the world's water supply is drinkable. Water is a precious commodity in a world with increasing population and pollution. Water is now traded on the stock market. Maybe Site C will just become a giant rain barrel?

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    Thank you Harry Swain,  all this so we can sell electricity to industry at a reduced cost, while trying to shut down the NG that will provide the much touted LNG to other countries. Doesn’t make sense. 

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    Good history lesson of how to create a disaster - too bad we don't learn from history. The Peace River Valley is worth $10B Stop the madness & cancel the Dam Thing.

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    Whether a slope is slippery or not only matters after the first push. For those of us who worked on Site C during the EA Panel hearings, the first and most powerful push in favour of Site C, quoted over and over again by project proponents, were these two conclusions in the EA Panel Report:

    "The Panel concludes that a number of supply alternatives are competitive with Site C on a standard financial analysis, although in the long term, Site C would produce less expensive power than any alternative."

    "Site C would be the least expensive of the alternatives, and its cost advantages would increase with the passing decades as inflation makes alternatives more costly."

     

    Neither of these conclusions could be drawn from the evidence then, and they are certainly not true now.

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    In 1983, the BCUC decided that a project certificate should *not* be issued to Site C.  In 2014, the Joint Review Panel, chaired by Mr. Swain, equivocated.  Glass houses, Harry.

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