Rick Koechl & Mike Kroecher: The financial mysteries at Site C

On December 14, 2017, Premier John Horgan, stood in front of a microphone with Energy Minister Michelle Mungall. The imminent decision regarding the fate of the Site C project was soon to be sealed during this press conference.

Months after having been crowned as the new premier, Horgan became an apologist for the third dam on the Peace. He stated what former premier Christy Clark had already made clear during her tenure, saying her objective was to get Site C “past the point of no return.”

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This was, in effect, the identical statement made by Horgan during his December press conference. He also pointed out that it was too late to stop the project. As a result, the NDP could not and would not justify stopping the project.

In moving forward, Horgan did announce, however, a new Project Assurance Board, which, according to him, would “mandate delivering the project on time and on budget.” BC Hydro had also revised the Site C budget up to $10.7 billion, from an estimate of $8.9 billion in 2014.

So, this would be the final figure. No more diddling with numbers. The NDP had put its proverbial foot down with BC Hydro and told it to live within its means.

Fast forward to July 2019, and along comes BC Hydro’s latest quarterly report, based on January 2019 to March 2019. In the 55 pages or so of fun facts, BC Hydro was required to release a variety of updates on the Site C project to the BC Utilities Commission.

In this latest update, BC Hydro was required, by law, to give the Commission a variety of budgetary data based on its own best estimates. Pages 51 to 53 of the report identify 13 specific “material project risks.”

These are risks that BC Hydro has clearly identified about the Site C project. There are even more risks not included in this quarterly report. BC Hydro did not include risks that might affect certain partners or contractors under its “confidentiality obligations or solicitor-client privilege” clause.

With each description of identified risks comes the BC Hydro risk response. Here is the general list of risks and BC Hydro’s responses:

  1. River diversion delay - increased costs
  2. Borrowing costs for project – interest costs above amount budgeted
  3. Labour costs - increases beyond prescribed amounts
  4. Safety incidents - associated costs
  5. Work fronts other than left bank diversion - increased cost
  6. Highway 29 realignment - overall cost increase
  7. Spillway design changes - higher construction costs
  8. Indigenous groups & issues - increased costs
  9. Insufficient local aggregate - increased costs
  10. Reservoir clearing - overall cost increases
  11. Roller compacted concrete productivity - schedule not achieved
  12. Hwy 29 realignment not completed on time - increased costs
  13. Retention of skilled workers - productivity and cost

If each of the known 13 categories are going to cost more, and there are still those confidential additional risks, another question is: What is the real cost increase in dollars? Will it be more than the overall allotment already prescribed by Horgan and Mungall?

Given that BC Hydro has not given any definite numbers for the above increases in its report simply adds to the financial mystery.

The real litmus test will come from the Horgan government’s response to the report. The likelihood of the general public learning of any specific amount increases referred to in the report also seems highly unlikely. We are rarely, if ever given the appropriate numbers of cost overruns.

In November 2017, the BC Utilities Commission did its own study of Site C costs and overruns and identified a possible number as high as $12 billion for the Site C project.

If this is the case, the NDP might well be willing to “rationalize” its latest budget figure upwards to the $12 billion mark without any guilt or apprehension.

But, Horgan’s Project Assurance Board mandates that the project be delivered on budget. Horgan and Mungall may well be hoping that the public has simply forgotten about his promises through the Assurance Board.

Public be warned: Look forward to more excuses, finger pointing, whitewashes, and blame deferrals coming from the NDP and BC Hydro as costs continue to skyrocket upwards of $12 billion.

Mike Kroecher is a long retired resident of the Peace, expressing his deep roots in the land through his art. Rick Koechl is a recently retired teacher of the Peace with an enthusiasm for politics and energy.

© Copyright Alaska Highway News

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