In a highly unorthodox move for a person in his position, the chair of the Joint Review Panel for Site C Dam has come out with harsh words for the $9 Billion project and the BC government’s hurry to get it built.

Harry Swain, a former federal deputy minister with deep experience in the environmental assessment business, made the comments in an eye-opening interview with Desmog Canada’s Emma Gilchrist, almost a year after the panel he led issued its report. Speaking for himself, Swain said:

[quote]There’s a whole bunch of unanswered questions, some of which would be markedly advanced by waiting three or four years. And you’d still be within the period of time, even by Hydro’s bullish forecasts, when you’re going to need the juice.[/quote]

The province and BC Hydro, by contrast, want shovels in the ground on the project – which would flood or disrupt 30,000 acres of prime farmland – as early as this summer.

Cost and need questioned

Recent changes to environmental assessment laws in Canada mean review panels no longer make decisions on projects,  instead issuing recommendations to Cabinet, which has the ultimate say. Swain agrees with this approach, noting to Gilchrist, “I’m still strongly of the view that review panels are advisors and governments get paid to make the decisions and live with the consequences at the next election.”

To that end, Swain’s panel gave the provincial and federal governments plenty of food for thought in a 471-page report  that raised tough questions about the economic case and need for the project.

And with good reason. In just the few months between the province issuing Site C’s environmental certificate to confirming the project will proceed, the cost ballooned by nearly another billion dollars. This from a government with a long track record of doubling the cost of major capital projects on its watch.

As our resident economist Erik Andersen has demonstrated time and time again in these pages, the power from Site C is simply not needed – not now, nor far into the future. BC’s electrical demand has flatlined, thanks to increased conservation and a decline in industrial demand, and Hydro has consistently, vastly overestimated future demand.

Swain echoed this point in his recent interview. “Frankly, I think their low-demand figure was probably overstated,” he noted. “So far there is no evidence that even their low usage scenario is likely to take place.”

To this point, the stated need for Site C has changed several times, including powering LNG and a new justification that emerged before the panel – that BC could sell this excess power to California.

A $350 million/year loss

The only trouble with this plan is that it’s a losing proposition for BC ratepayers and taxpayers. With power trading consistently for $30/megawatt hour on the spot market and Site C’s anticipated cost at over $100/MWh, it’s not hard to see how the project could end up costing the public far more than the crippling $9 Billion sticker price and financing.

In fact, the panel projected an $800 million operating loss for the project in its first four years. Dan Potts, retired head of the Association of Major Power Users of BC, pegs this figure even higher, at $350 million a year loss going forward.

Then there’s the matter of the risk the project’s escalating cost poses to the province’s credit rating – enough of a concern that it prompted Finance Minister Mike de Jong to take a last-minute trip to Toronto, before announcing Site C would proceed, to meet with ratings agencies and plead the province’s case. So far, we’ve held onto our Triple-A rating. But how long will that last with massive new debts like these and the likelihood of major cost overruns?

Energy watchdog stripped of oversight

Swain is also highly critical of the government’s process in reviewing the project, especially stripping the public’s energy watchdog, the BC Utilities Commission, of its oversight. Says Swain:

[quote]Knowing that the province had decided to exempt the project from the scrutiny of the utilities commission, we nonetheless felt that that was not good public policy and recommended otherwise. They of course gave us the back of their hand.[/quote]

The BCUC specializes in reviewing proposed projects and energy plans based on their need and value to the public. Swain’s panel was not as well equipped to review these issues, as he now acknowledges. “That requires much, much more time and expertise,” he noted to Gilchrist. “Moreover it is a job that the utilities commission is specifically set up to be able to do.”

Alternatives ignored

Swain calls the government and Hydro’s failure to investigate alternatives to Site C “a dereliction of duty.” While reports from the geothermal industry suggest this untapped energy source could provide for all of the province’s future needs, it has received little to no attention from a government hellbent on this antiquated dam.

“The province or the province and its wholly owned subsidiary BC Hydro should have taken to heart the admonitions of the utilities commission 32 years ago and done some of the basic work that would allow an industry to develop,” Swain told DeSmog Canada. “But they didn’t do it, so there we are.”

First Nations not going away

The panel’s terms of reference restricted it to merely cataloguing First Nations concerns about the project. “We were not to pass an opinion on them,” noted Swain. “We were not to say whether consultation had been adequate and so on and forth. If you are forbidden to talk about that, you can not come to a conclusion about the overall project.”

But the review panel and the governments which issued the project’s environmental certificates only delayed and intensified the threat from First Nations to derail the project. Site C now faces multiple provincial and federal lawsuits, already in progress, from First Nations and farmers. These legal challenges are based, essentially, on the BC Liberal government’s choice to ignore many of the panel’s most critical findings, relating to cost and need.

Recent attempts by BC Hydro to speed up hearings in order to facilitate a summer construction start failed to persuade a federal judge. Then, just last week, the Blueberry River First Nations upped the ante with an ambitious civil claim against the province over longstanding treaty violations. Central among their concerns is Site C, for which they acknowledged they may seek an injunction as part of this lawsuit.

This just doesn’t happen

The most striking fact of Mr. Swain’s recent interview is that it happened at all. I’ve been documenting environmental assessments at the provincial and federal level for close to a decade now and you simply don’t see this. Panel chairs don’t comment publicly on political decisions that relate to their recommendations after they’ve rendered them.

The fact that Mr. Swain felt compelled to unburden himself of his frustration with the government’s haste in building Site C should – on top of all the other noteworthy critiques from agrologists, economists, lawyers, citizens and First Nations – give us all pause. It should convince this government to take a deep breath and reevaluate the most costly capital project in the province’s history.

But then, a government that demands this kind of public chastising is probably the least likely to listen to it.

A federal court judge has denied BC Hydro’s motion to rush a legal challenge against the crown corporation’s planned Site C Dam project. Hydro sought to expedite the hearing in May in order to keep to its planned construction start this summer – after receiving its provincial and federal environmental certificates late in 2014 – but that’s now up in the air.

According to a media advisory from the plaintiff, the Peace Valley Landowners’ Association (PVLA), the hearing will likely be scheduled for sometime this summer, depending on the court’s availability. Hydro argued that such a delay would cost the utility money, but the judge gave more weight to the plaintiff’s need for time to prepare its case.

Need, financial case for Site C challenged

The case is being brought by lawyer and ex-TD Bank Comptroller Rob Botterell on behalf of many of the landowners in the Peace Valley whose farms would be flooded or disrupted by the dam. Their challenge is built partly on the fact that the Liberal Government excluded the public’s independent energy watchdog, the BC Utilities Commission, from reviewing the project. The regulator was built precisely for this purpose: to examine proposed energy projects and plans based on their need and value to taxpayers and ratepayers.

This step, along with the provincial government’s decision to ignore the strong misgivings of the Joint Review Panel surrounding the need and financial case for the project constitute excessive political interference in the plaintiff’s view. Noted Botterell in a media advisory on the eve of the project’s approval last year:

[quote]Public infrastructure decisions of the size and scope of Site C…require the most thorough public scrutiny. It is simply unacceptable to make such decisions behind closed doors, release limited explanatory information, and conduct public policy by news conference sound bite. For the largest public infrastructure decision in provincial history we deserve better: open, transparent, and unfettered review of Site C’s economics  by the independent and expert BC Utilities Commission.[/quote]

Government ignored its own rules

The PVLA’s case is also anchored in the fact that the provincial government violated the very rules that it laid out in the terms of reference for the Site C review. According to the PVLA:

[quote]The Ministers relied upon a referral package from the Environmental Assessment Office that declared several key Panel recommendations to be beyond the scope of the Panel’s mandate. The PVLA Petition is based on a thorough review of the documents which set the scope of the Panel’s mandate, and which reveal that the Panel was not only permitted but was expressly required to assess the very economic impacts of the Project that were the subject of the recommendations the Ministers failed to consider. (emphasis added)[/quote]

They argue the government was not permitted to simply set aside the panel’s concerns about project need and cost – which has already increased by nearly a billion dollars from the time of the hearings to the approval announcement, now weighing in at $9 Billion – by far the most expensive capital project in BC history.

Four challenges heard together

In the federal court’s recent ruling on the case, it also decreed that three other plaintiffs bringing similar cases – two Alberta First Nations and BC’s Treaty 8 First Nations – present their arguments at the same summer hearing, alongside the PVLA.

Meanwhile, two more legal challenges in BC provincial court have a joint preliminary hearing on February 25. Following that, the PVLA’s provincial judicial review petition will begin being heard on April 20, with a similar petition by BC’s Treaty 8 First Nations yet to be scheduled.

The PVLA has already raised close to $100,000 for its legal challenges of Site C Dam.

UPDATE – 2:30 PM PST: The BC Liberal government has approved Site C Dam, with construction tabled to start this summer.

Even if the BC Liberal government decides today to approve the now $8.5 billion Site C dam, the project still faces some big legal hurdles – based on mistakes the government made following the environmental review process.

In a nutshell, Site C faces six lawsuits from three different groups – each bringing both provincial and federal challenges. The plaintiffs include Alberta First Nations, BC First Nations and the Peace Valley Landowners’ Association (PVLA). Each case boils down to two main issues that linger from the Joint Review Panel’s indecisive verdict on the project earlier this year.

The first issue is the fact that the need for the project has still not been demonstrated. The second is the lack of fiscal due diligence surrounding the project.

Rob Botterell, former Comptroller for TD Bank in BC and the lead lawyer representing the landowners, reminds taxpayers, “At $8.5 Billion+, this would be the largest public infrastructure expenditure in the history of the province – the equivalent of 19 fast ferries.”

Independent regulator had its hands tied

Botterell’s case is built partly on the fact that the Liberal Government excluded the public’s independent energy watchdog, the BC Utilities Commission, from reviewing the project. The regulator was built precisely for this purpose: to examine proposed energy projects and plans based on their need and value to taxpayers and ratepayers.

The fact that the regulator was deliberately barred from doing its job on Site C constitutes gross political interference which may be legally actionable, in Botterell’s view. In a release prior to today’s announcement on the project, he noted:

[quote]Public infrastructure decisions of the size and scope of Site C…require the most thorough public scrutiny. It is simply unacceptable to make such decisions behind closed doors, release limited explanatory information, and conduct public policy by news conference sound bite. For the largest public infrastructure decision in provincial history we deserve better: open, transparent, and unfettered review of Site C’s economics  by the independent and expert BC Utilities Commission.[/quote]

Botterell’s clients, a group of landowners in the Peace River Valley – some 30,000 acres of which would be flooded or disrupted by the project – have been granted a hearing at the BC Supreme Court on April 20. They will be seeking a Judicial Review that quashes the government’s issuance of the environmental certificate for Site C in October.

The PVLA is alleging that Cabinet erred in dismissing key portions of the Joint Review Panel’s findings on the project. While the JRP neither recommended nor argued against Site C, it found some gaping holes in the case for the project, which the government has thus far completely ignored.

BC govt breaks its own rules, gets sued

According to a legal backgrounder on the PVLA’s case, these issues include the overall need for the project – which was not demonstrated throughout the hearings – and the “uncertain economic effects of the Site C Project, including the Project cost, Site C electricity costs, and revenue requirements for the Project.”

This is the crux of the case: According to the PVLA’s legal petition, in ignoring these key findings from the panel, the government violated the very rules that it laid out in the terms of reference for the Site C review.

[quote]The Ministers relied upon a referral package from the Environmental Assessment Office that declared several key Panel recommendations to be beyond the scope of the Panel’s mandate. The PVLA Petition is based on a thorough review of the documents which set the scope of the Panel’s mandate, and which reveal that the Panel was not only permitted but was expressly required to assess the very economic impacts of the Project that were the subject of the recommendations the Ministers failed to consider. (emphasis added)[/quote]

In other words, the Liberal government set the rules for the review process, then broke them as soon as they became inconvenient. Project cost and need are no mere trivial matters and to cast them aside and proceed with Site C is highly irresponsible – and possibly illegal, according to this suit.

“The Ministers were not permitted under the Environmental Assessment Act to ignore the Panel’s findings and recommendations about the significant problems and uncertainties relating to Project and electricity cost estimates, load-forecasts, and valuation of alternatives for the Project,” say the plaintiffs.

And these are far from the only warning signs that should compel the government to halt the project or defer its decision.

Project’s cost keeps climbing

For starters, there’s the almost billion-dollar increase to the project’s sticker price leading up to the government’s announcement – now up to $8.775 Billion, making it the most expensive capital project in BC history. This from a government with a long track record of doubling initial estimates on much smaller capital projects – far, far worse than the NDP’s fiscal record in the 90s.

With dams particularly notorious for going over budget, there is no reason to expect Site C not to balloon further in cost.

BC’s credit rating in jeopardy

This would be compounded if Site C cost BC its Triple-A credit rating – a justifiable fear only made more real by Finance Minister Mike de Jong’s last-minute trip to meet with ratings agencies in Toronto on the eve of this announcement.

A lower credit rating means a higher cost of borrowing, hence a more costly dam – not to mention other fiscal challenges across the board. This last-minute trip by de Jong also begs the question: If you’ve already made the decision to proceed with Site C, then why go to Toronto now; if you haven’t, then why not leave more time to carefully contemplate your findings before rushing to announce your decision?

With soaring debt at BC Hydro, plus over $100 Billion in hidden taxpayer obligations (from private power contracts, public-private-partnership deals and the like) and close to $70 Billion in conventional provincial debt, BC’s credit rating should be in jeopardy.

Remember, when the NDP left power in the early 2000s, our provincial debt was a mere $34 billion, with none of these extra costs. Pile on Site C Dam, plus these hidden obligations – which are debt by another name – and the Liberals will have raised the real burden to BC taxpayers by over 5 fold since coming to power!

Already, we’ve seen skyrocketing power bills in recent years – which we can only expect to intensify if Site C proceeds.

No need for Site C

This will be compounded by the lack of need for the project, as we learned throughout the JRP’s hearings. This notion has been reinforced by both the premier and BC Hydro’s confused messaging around the project.

At first, Site C was to power BC’s homes, but when we became a solid net exporter of power in recent years – according to BC Stats – the rationale morphed into powering energy-intensive LNG projects. But BC Hydro undermined that statement during the JRP hearings, saying it was instead to export excess power to California – likely a money-losing proposition for BC.

Then, just last week, Christy Clark went back on her LNG argument, admitting that Site C was not in fact required for that industry. Even Hydro acknowledges we won’t need the power from Site C until 2022 at the earliest, but the crown corporation has a long history of exaggerating demand, and, thanks to improved conservation, BC’s power consumption has barely risen since the early 2000s and shows no signs of increasing – an important fact Hydro ignores.

Buy high, sell low

Because the need isn’t there, and because Site C would be one of the most expensive new energy options available to British Columbians, every watt will be produced at a loss as we dump unused power on the North American grid – which pays something like $30-35/megawatt hour for power which will cost us around $100 to produce.

This led the retired head of the Major Power Users’ Association of BC, Dan Potts, to predict a $350 million/year operating loss for taxpayers from Site C . “This project is turning gold into lead,” said Potts at a recent Vancouver press conference on the project.

[quote]It’s going to have a legacy of wealth destruction…It’s going to sap the province’s ability to raise money and borrow money, to do other things, such as infrastructure, hospitals, schools – all the things we need to do.[/quote]

First Nations lawyer up too

Finally, in addition to both provincial and federal lawsuits from the Peace Valley landowners, Site C faces legal challenges from BC’s Treaty 8 First Nations, as well as separate actions from Alberta’s Treaty 8 First Nations.

Knowing the victorious track record of Aboriginal court cases in Canada of late, even if the Liberal government makes the mistake of forging ahead with Site C Dam, it can expect to run headlong into a wall of legal challenges.