November 20, 2017

 Background:

  • The BCUC Inquiry determined that completion costs for the dam may be in excess of $10 billion – almost $2 billion higher than the most recent BC Hydro budget estimate and acknowledge uncertainty in additional costs due to geological instability.
  • Termination and remediation costs range from $1 billion, according to BC Hydro[1], $1.2 billion[2] according to Deloitte and $1.8 billion, according to the BCUC[3].
  • The BCUC Inquiry found that the least expensive and least risky scenario for dealing with Site C is the termination scenario[4].
  • Construction of the Site C dam would result in “…more significant adverse environmental effects than any project ever reviewed under the history of the Canadian Environmental Assessment Act.”[5]

Based on the results of the 2017 BCUC Inquiry and consideration of additional factors, such as environmental, cultural and social impacts, the Government of British Columbia is currently deciding whether to proceed with construction of the Site C dam or terminate the project.  Proponents of Site C argue that termination would result in the write-off of considerable “sunk costs.”  However, in the event that construction of the 60-m high earth-filled dam on British Columbia’s Peace River is cancelled, many expenditures characterized as sunk costs would still provide long-term value to both the Province of British Columbia and the Peace Region.

Table 1 provides a list of Site C expenditures that provide confirmed or potential long-term value to the Province and/or the Peace Region; please note this list is not exhaustive.  BC Hydro[6] reports that $46 million dollars of “Offsite Works” had been completed to June 30, 2017.  Offsite works include highway/access upgrades and “Land and Rights” acquisition. Site C offsite works included the upgrading of several roads previously identified by the 1990s Rural Roads Task Force.  The completion of this work provides long-term benefits and cost savings for the Peace Region and the Ministry of Transportation and Infrastructure (MOTI).

If Site C is cancelled and the flood reserve on BC’s Peace River is lifted, BC Hydro will have no future need for lands purchased both recently and through its long-term acquisition program. These properties represent high-value real estate and BC Hydro will recoup considerable funds by divesting in them.

As noted in Table 1, significant long-term regional benefits are provided by the creation of access to new supplies of aggregates, including riprap/gravel quarries.  This will result in reduced costs for future MOTI and infrastructure works.  Prime examples of such future roadwork include the Alaska Highway at the Taylor Hill and Highway 29 at Bear Flat, which both require ongoing remediation and repair due to the inherent geological instability of the slopes of the Peace River valley.

Many of the raw materials and temporary bridges purchased to date for Site C construction have intrinsic value and could be repurposed or sold.  While it is not expected that sale of such materials would result in full recovery of the original purchase costs, recouping partial costs will serve to reduce the overall sunk cost estimate.

Monies spent on training Site C workers to date should not be considered lost.  Investment in training programs for both Indigenous and non-Indigenous workers is an investment in British Columbia’s future.  These individuals bring acquired skills forward and, as a result, have increased value to subsequent employers.

When considering the issue of sunk costs associated with termination of BC Hydro’s Site C dam construction, the Government of British Columbia would do well to apply the ‘Reduce, Re-use and Recycle” creed.  Reduce future losses associated with Site C by cancelling the project immediately.  Reduce current sunk costs by selling unneeded assets. Re-use and recycle raw materials where possible.  And finally, acknowledge that many Site C expenditures to date have resulted in long-term investments in provincial infrastructure and human resources.

For more information, contact:  Bob Fedderly, Owner, Fedderly Transportation, Fort St. John, BC  250-787-2998

[1] BC Hydro.  2017.  British Columbia Utilities Commission; British Columbia Hydro and Power Authority Inquiry Respecting Site C Clean Energy Project  , August 30, 2017, p 69.

[2] BCUC.  2017.  British Columbia Hydro and Power Authority – British Columbia Utilities Commission Inquiry

Respecting Site C – Project No. 1598922 – Final Report, November 1, 2017, p 127.

[3] Ibid, p 128

[4] Ibid.

[5] https://sitecstatement.files.wordpress.com/2016/07/1-site-c-comparative-ghg-analysis-report-final.pdf

[6] Section 4.1.2.5 Project Expenditures to June 30, 2017.  BC Hydro submission to the British Columbia Utilities Commission Inquiry into the Site C Clean Energy Project.

Table 1.  Long-term value to the Province of British Columbia and the Peace River Region of Site C expenditures currently characterized as “Sunk Costs.”

Sunk Costs Table Nov 17

Advertisements