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Site C river diversion delayed, BC Hydro says

Delay pushes dam's cost to $8.945 billion, BC Hydro says
North bank slope excavations at Site C outside Fort St. John on July 8, 2017, where ongoing geotechnical issues have challenged construction contractors. The problems, including tension cracks and slope instability, have led to a one-year delay to plans to divert the Peace River, BC Hydro says.

BC Hydro says it will miss its September 2019 deadline to divert the Peace River to build Site C—a one-year delay that will push up the dam's pricetag by $610 million.

The Crown utility informed the provincial utiltities commission of the news Wednesday as part of its response to the commission's ongoing inquiry into the $8.8-billion project.

"BC Hydro has encountered some geotechnical and construction challenges on the project and the risk to the river diversion timeline has now materialized," President and CEO Chris O'Riley wrote, citing the results of a construction review with the dam's main contractor, Peace River Hydro Partners.

"While this will set some activities back a year, we had a one-year float built into our schedule and are confident we can still deliver this project on time, by November 2024."

The Peace River needs to be diverted between Sept. 1 and Oct. 1 in any given year when water levels are lowest. It's a crucial milestone that will allow contractors to start building the kilometre-long, 60-metre high earthfill dam. 

The delay is expected to increase Site C's costs by 7.3 per cent from $8.335  billion to $8.945 billion, O'Riley said. 

However, contigency remains to "prudently manage risks on the project," he said. Those risks include generating station, spillway, and Highway 29 realignment work yet to be procured. 

"We will work to mitigate those challenges," O'Riley said.

Geotechnical problems emerged early this year

Site C construction began in summer 2015, with an estimated $2.1 billion expected to be spent by the end of 2017.

The commission's inquiry began Aug. 9 at the behest of B.C.'s new NDP government shortly after it took power from the BC Liberals, which approved the project in 2014.

Deloitte LLP—consultants hired by the commission to audit the status of the dam, energy supply alternatives, and provincial demand forecasts—has so far found the project's $1.75-billion main civil works contract was $136 million over budget when it was awarded in December 2015, and two months behind when work began in 2016. Roughly $33.5 million in contingencies were used to get construction on track by January 2017.

Construction this year has been hampered by geotechnical problems, including two separate tension cracks that formed on the north bank of the Peace River in February and May. Construction crews have been excavating the bank to remove historic landslides in the dam site area, however, continued slope instability caused a work stoppage and 72 layoffs in July.

The delays have further escalated costs and forced main contractor Peace River Hydro Partners to file for a 435-day schedule delay in August. Another 200 layoffs followed in September.

"Like all large, complex projects, Site C faces risks and uncertainties," O'Riley said.

Deloitte has also raised concerns about BC Hydro's ability to keep the project on time and budget, and to accurately tender and award future contracts for construction still to come. Site C's generating station and main spillway contract is budgeted at $1.255 billion, while transmission line costs have risen by $494 million, Deloitte found.

Still, a cancellation or suspension of Site C would prompt a complicated path forward—BC Hydro has committed to roughly $4 billion in project contracts, and has signed several multi-million dollar agreements with local governments in the Peace Region for construction-related impacts.

BC Hydro and Deloitte have estimated suspending Site C will cost between $1.2 billion to $1.4 billion, while Deloitte estimates a delay of more than a year could drive final costs as high as $12.5 billion.

Completely terminating Site C and acquiring power from different sources would cost around $7 billion, BC Hydro says. That includes roughly $3 billion in sunk and remediation costs that would need to be collected from ratepayers if the dam is cancelled by the end of 2017, BC Hydro says.

The commission's final report is due Nov. 1 with a cabinet decision expected by the end of the fall legislative session on Nov. 30.

“The Site C review is working—giving the BCUC, government and all British Columbians the information, analysis and answers we need to make the right decision on the project," Energy Minister Michelle Mungall said in a statement Thursday.

“Once we have the final report, government will consider the advice from the BCUC, along with other environmental and First Nations considerations, and make a final decision on the future of Site C in a timely manner.”

Former premier Clark, CEO McDonald warned delay would lead to overruns

Despite the delay and extra costs, Site C remains the "best option" for ratepayers and the province's energy needs, O'Riley said.

"Despite the challenges we have encountered and the risks that remain, our analysis continues to confirm that completing Site C as planned is still the most cost-effective option for our customers," he said. 

"Suspending, or terminating and finding the power we need from other sources—which carries its own set of uncertainties—would cost billions more than completing Site C."

In early June, former Liberal premier Christy Clark and former BC Hydro president Jessica McDonald warned missing a summer deadline to award the first phase of Highway 29 realignment work—and begin the relocation of some residents in the river valley—would push the river's diversion back a year at a cost of up to $630 million.

The two were responding to then opposition NDP leader John Horgan, who asked BC Hydro to rein in Site C construction as he sought to form a minority government and order a review following the May election.

Horgan said Clark's claims were "unsupported" and urged her to recall the legislature to face a confidence vote. Clark would later lose the confidence vote at the end of June, while McDonald was quickly fired and replaced with O'Riley after the NDP took office in July.

Landowner Ken Boon, expropriated last December and initially expected to move this summer, was unsurprised by news of the delay.

"It was likely convenient to blame us for delays when it was their own problems causing the delay," he said.

Boon, along with other project opponents, have questioned the location of Site C and the structural soundness of the river valley's slopes throughout years of different hearings on the project.

"Here we are two years in with budget and schedule overruns. What is next to go wrong?" he said.

North Peace MLA Dan Davies was not immediately available for comment.

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