By Roy L Hales
BC Hydro seeks an injunction to prevent Peace River Residents “from obstructing or interfering with the construction of the Site C Clean Energy Project.” In one of his three affidavits before the Supreme Court of British Columbia, Michael Savidant, Commercial Manager of the Site C Energy Project, claims that the cost of delaying this project will amount to approximately $420 million.
Two Cases Before the Court
There is a very real sense in which two cases are before the court. BC Hydro’s case is based on the fact the Government of British Columbia them permission to proceed. The Peace River residents charged with obstructing them[1. Ken Boon (President of the Peace Valley Landowner Association) Arlene Boon (his wife), Verena Hofmann (former staff member of the Treaty 8 Tribal Association), Esther Pedersen (owner of Peace Equestrian Park), Helen Knott (member of Prophet River First Nation), YvonneToppe ] are defending their homes against an energy project whose permits allegedly:
” … contravene Treaty 8, were issued without adequate consultation and accommodation of the West Moberly Band and Prophet River Band and are contrary to the consultation negotiation agreement to which BC Hydro is a signatory. The Environmental Assessment Certificate pursuant to which the Plaintiff purports to carry out its work is invalid. The Plaintiff failed to consult the British Columbia Utilities Commission or otherwise conduct adequate due diligence regarding the timing of the project or its cost, contrary to the recommendations of the Report of the Joint Review Panel conducting the environmental assessment.”[2. items 2 & 3, Division 2 – Defendent’s Version of facts, Response To Civil Claim, BC Hydro vs Ken Boon et al, In the Supreme Court of British Columbia, registry S-160488]
Mr Savidant and the eight other individuals who submitted plaintiff’s affidavits, are all directly or indirectly employed by BC Hydro. [3. Doug Powell (Manager of Safety and Security for BC Hydro with respect to the Site C Clean Energy Project), Andrew Watson (Engineering Division Manager for the Site C Clean Energy Project), Cameron Penfold (Senior Clearing Officer for the Site C Clean Energy Project), Edie Thome (Director of Environment, Aboriginal Relations and Public Affairs for the Site C Clean Energy Project), Kendra Gibbons (Mapping & GIS Specialist at BC Hydro), Michael Bebbington (Acciona Infrastructure Canada’s Project Director for the Site C contract), Patrick Hayes (from Fasken Martineau DuMoulin LLP,counsel for BC Hydro), Siobhan Jackson (Environmental and Community Mitigation Manager for the Site C Clean Energy Project)]
Marc Elieson’s Affidavit
Marc Elieson is not employed by the plaintiffs or defendants. He was the CEO of BC Hydro during the 1990s, when the corporation released a public statement saying “that Site C would not be developed in the future by BC Hydro.”
Elieson’s analysis of Savidant’s testimony was devastating. He excused Savidant’s ignorance of the project’s origins by pointing out that, prior to 2004, Savidant was an employee of Enron Canada. Then Elieson explained:
“Site C construction was first proposed for development by BC Hydro in the late1970 sand early1980s. Following public hearings and a review in 1982 by the BC Utilities Commission, the Commission determined that BC Hydro had failed to adequately demonstrate that Site C was the best project from a provincial perspective and that ‘conditional approval with the Certificate to be withheld pending evidence as to need for the project and timing,'”
” … Michael Savidant in his Affidavits itemizes numerous submissions made by BC Hydro to the Joint Review Panel established pursuant to the Canadian Environmental Assessment Act and the British Columbia Environmental Assessment Act to justify the need for the project based on long term forecasts of both the energy and capacity to meet its customers. The Joint Review Panel released its Panel Report to the Minister and Executive Director of the Environmental Assessment Office on May1, 2014. The Panel Report concluded that, “The Proponent [BC Hydro] has not fully demonstrated the need for the Project on the time table set forth” and recommended that issues of project costs and the need for the project be referred to the BC Utilities Commission for detailed examination…”[4. paragraphs 8-10, Affidavit of Marc Elieson, Vancouver registration S-195064]
(Harry Swain, head of the Joint Review panel, subsequently told DeSmog Canada that, “There’s a whole bunch of unanswered questions, some of which would be markedly advanced by waiting three or four years.”)
Breakdown Of The $420 “Cost” Estimate
There is good reason to ask how much of the alleged $420 million “cost” that delaying this project would incur is of BC Hydro’s own making.
Savidant gave the court the following breakdown:
(a)$160 million of direct cost impacts ,generally due to the following:
- (i)Project team costs for an additional year of construction (including staff, rent, supplies);
- (ii) Additional mitigation and compensation costs due to requirements stated per year of construction;
- (iii)Cost of maintaining site services for an additional year (e.g., security, medical, and the worker accommodation camp, the first phase of which is expected to enter service at the end of February2016
- (iv)Cost of contractor overhead for an additional year for those contracts where work would continue over an extended construction period;
- (v)Demobilization and remobilization costs for contracts where work would be substantially disrupted by the period of delay
(b) $100 million of additional allowance for inflation due to shifting spending into future periods, which are expected to have higher prices due to underlying inflation.
(c)$160 million of increased interest costs due to future higher rates and an additional year of payments on costs already incurred or expected to incur in the next year.[4. paragraph 5, Affidavit #1 of Michael Savidant, Vancouver registration S-160488]
Delays Would Result In Savings, Not Costs
All four of the internationally recognized energy experts, that the defendants asked to examine BC Hydro’s estimates, concluded that delays would result in savings to the utilities ratepayers.
Marc Eliesen testified, “Michael Savidant’s alleged construction cost delays are effectively illusionary because he relies on an unsubstantiated need for the project based on long term forecasts that have not been properly vetted. Delay of the project is likely to save British Columbia ratepayers more than the alleged estimated $420 million costs itemized by Michael Savidant …”[5. paragraph 15, Affidavit of Marc Elieson, Vancouver registration S-195064]
Robert McCullough, who came to the public’s attention after exposing Enron’s lack of financial and commercial transparency in 2002, identified several problems with Savant’s analysis:
“Mr. Savidant’s current affidavit includes two previous affidavits as Exhibits A and B. The three affidavits propound rapidly increasing costs of delay for the same one year period.
“In paragraph 2 of his current affidavit, Mr. Savidant reported that the cost of a one year delay at$175million as estimated of January 15, 2015. This value is supported briefly in Exhibit A to his affidavit as $65 million in increased construction costs,$60 million in increased financing costs,and $50 million allowance for inflation and escalation.
In paragraph 72 of Exhibit B to his current affidavit, Mr. Savidant revised his estimate to $335minion as of August 12, 2015. At this time the additional direct costs increased to $100 million, $135 million in financing costs, and inflation to $100 million.
In paragraph5 of his current affidavit, he again revises his estimate. The direct costs of delay have increased to $160 million, $160 million in financing costs, and $100 million in inflation.
Paragraph 6 of his affidavit would appear to be in error since he states that”Because construction has now been ongoing for over five months, a delay at this time is expected to result in approximately$50 million of additional direct costs that did not exist in August 2015.” This contradicts the values in paragraph 5 of his affidavit since he had increased the value $60 million firom his previousestimate.In a project of this size, an error of $10 million dollars is notsignificant.It is, however, significant in this affidavit since he has provided no details to support these value ….”
The most devastating element of McCullough’s critics is a chart in which he compares the discrepensies between Saviant’s three submissions, whose totals had risen from $175 to $420 million.[6. Review of Mr. Savidant’s Affidavits on page 24 of Affidavit #1 of Robert McCullough, Vancouver Registry S-160488]
Using BC Hydro’s own figures, McCullough concluded, “The net savings of a one year delay (constructing Site C), in present value terms, is $267.68 million; for a two year delay it is $519.44 million; for a five year delay, the net savings is $1,187.4 7million.”[7. Affidavit #1 of Robert McCullough, Vancouver Registry S-160488]
Phillip Raphals, Executive Director of the Helios Cetre, agreed that, “a one- or two-year delay would result in very significant ratepayer benefits”:
” … In the case of a one-year delay, during the first four decades after commissioning, ratepayer impacts of said delay would continue to be positive …. In the case of a two-year delay, ratepayer of said delay would continue to be positive for the full 70-year financial life of the Project for a two-year delay, producing a present value ratepayer benefit of $26.3 million by the end of the Project’s financial life, underthe same assumptions.” [6. Exhibit B: Philip Raphals, Costs and benefits to ratepayers of delaying the commissioning of the Site C Hydroelectric Project, Affidavit #1 of Phillip Raphals, Vancouver Registry S-159064)
Marc Shaffer, a senior economic consultant who advised the BC Utilities Commission when the Site C Dam project was first turned down in the 1980s, testified that deferring construction “until the early 2030’s potentially saving BC Hydro and its ratepayers $1 billion or more in present value costs.”[8. Paragraph 5, Affidavit #1 of Marc Shaffer, Vancouver Registry S-159064]
BC Hydro Seeks An Injunction
BC Hydro seeks an injunction so they can build an energy project that has little support outside of the corporation, provincial government or entities directly or indirectly employed by them.
On September 25, 2015, the Union of BC Municipalities passed a resolution recommending that “Province of British Columbia refer the proposed Site C hydroelectric dam project to the BC Utilities Commission for review and consultation.”
There have been calls for a two year moratorium on this project, so that it can be properly vetted, from the National Farmers Union, Greater Vancouver Regional District Board, BC Government Employees Union and Treaty 8 First Nations.
Despite widespread opposition to this project, the government of British Columbia gave BC Hydro to proceed and construction began on July 27, 2015.
Peace River resident’s first demonstration, against what many view as the environmental destruction of their valley, was on October 17, 2015.
In November some of the defendants “and persons unknown to BC Hydro” set up a protest camp near Rocky Mountain Fort. As they view BC Hydro’s actions as a violation of treaty #8, they set up signs stating *NoTrespassing Treaty 8 Territory” and”Rocky Mtn. Fort Property of Treaty 8 Members.”
BC Hydro alleges the Clearing Contractor will not be able to complete his work by March arch 31, 2016, unless they are removed.[9. Notice of Civil Claim, BC Hydro vs Ken Boon et al, Vancouver Registry S-160488]
The suit went before BC’s Supreme court on Monday, February 22. 2016.
“The afternoon session was canceled due to the judge not feeling well. There are three days scheduled for this, and he proposed that now Thursday morning would be included for missing this afternoon. The morning was BC Hydro lawyers presenting their case and going through a chronological order of “incidents” including social media post,” said Ken Boon, President of the Peace Valley Landowner Assoc.