There is no question that the new B.C. government’s decision to proceed with the Site C dam was a very difficult one. The previous government left it with a poison pill. With $2 billion already spent, the Horgan government faced a no-win choice, with substantial political and economic costs for either terminating or proceeding with what is one of the largest and most expensive capital projects in B.C. history. I don’t envy them.
But count me among those who think the resolution was made.
In a complicated resolution like this, it is vital to know who will be heard, what expertise the authority has, and what considerations will prevail. That’s why it’s vital to look at this resolution, so we can think about how progressives might alter the framework in which long-term resolutions are made.
First, this resolution profoundly undermines the clients of reconciliation with indigenous peoples. This basically flies in the face of the government’s stated commitment – affirmed in the NDP-Greens agreement and in each minister’s mandate letters – to bring into force the UN Declaration on the Rights of Indigenous Peoples. The requirement to obtain consent before engaging in primary projects that First Nations lands and names are central to the United Nations Declaration on the Rights of Indigenous Peoples. Obtaining this consent deserves to be incorporated into our decision-making process. And yet, in this case, it is absent.
For thousands of people who strongly oppose Site C on environmental and indigenous rights grounds, this resolution feels like a political betrayal and will last for many years to come. And with there most likely to be new cost overrun announcements in the coming years, more and more salt will be added to the wound.
Marc Lee of the Canadian Centre for Policy Alternatives, in his report last summer to the British Columbia Public Utilities Commission, explained why he felt the electric power provided through Site C was not necessary. In fact, we’ve been arguing for many years that what drove the creation of Site C was the demand for electrical power coming from the vegetable fuel industry, whether for hydraulic fracturing operations and ultimately to electrify the process of liquefying that fuel. This means that it was all about generating “clean” energy for the dirty. fossil fuels, and it may still be.
In the final years of the Clark administration, the push to move Site C “beyond the point of no return” was, I believe, driven by another, albeit similar, political imperative. Having failed to secure foreign investment for a new LNG industry (and the corresponding promise of thousands of jobs for the northern regions of British Columbia), Premier Christy Clark, ironically, fumbled her way into the public sector and turned to British Columbia. Hydro will create those jobs through the Site C dam structure.
Notably, when Premier John Horgan made the announcement that the government would proceed with Site C he appeared decidedly unenthusiastic. Make that downright miserable. He made clear that Site C was, at its outset, a wrong-headed policy choice, and not a project his government would have started. But with $2 billion spent and reclamation costs of termination pegged at $1 to $2 billion more (likely the low end), the premier felt his government had “no choice” but to proceed.
It’s true that the prospect of spending $3 billion to $4 billion without having to get anything hurts.
But the government went further, saying that passing such a bill would jeopardize its progressive economic and social agenda. Some ministers expressed the view that termination fees would threaten B. C. ‘s AAA credit rating. and would increase debt-servicing costs. Minister Michelle Mungall, in an email to those who wrote to her about Site C, said: “To do more than move forward, British Columbians would have to take on $4 billion in debt, resulting in major cuts in services. “Count on us to deliver. After witnessing the legacy of liberal cuts in British Columbia, I cannot allow this to happen again” (emphasis mine).
This line of argument may sound compelling. But on closer inspection, it is not at all convincing.
What would happen if the cancellation payment had been borne through British Columbia? According to Hydro’s books, this would have resulted in an increase in Hydro’s rates, albeit to the extent announced through the government. And the finishing touch of Site C will also lead to long-term (probably longer) construction electricity rate hikes.
Given that the decision to green Site C was politically motivated by the previous government, I believe that the costs associated with finishing the task should not have been borne through British Columbia. Hydro, but rather through the provincial government as a whole (as the government appears to have intended). Some would possibly say that it makes no difference: taxpayers and taxpayers are one after all. But it does make a difference. As the CCPA has noted in previous investigations, Hydro rates are regressive: they have a greater effect on low-income families than on high-income ones. By contrast, the provincial government’s debt is covered by general taxes, which are paid lightly. progressive now that the new government has introduced a tax bracket for higher incomes and is phasing out MSP premiums. With a fairer tax reform, prices would be distributed even more equitably.
By relieving B. C. , Hydro could have hedged termination prices by moving the sunk prices and termination prices from Site C to the provincial government’s debt or, if the government needed to take on the debt from $3 billion to $4 billion from B. C. Hydro, you may have simply agreed to pass on interest prices on that debt to British Columbia on an annual basis. Hydro (as payment for this politically imposed cost).
Would taking on $3 billion to $4 billion in termination debt, with no assets to show for it, crowd out the rest of the government’s program and erode BC’s credit rating, resulting in higher interest prices on the debt? This is very unlikely.
At current interest rates, $4 billion in debt would result in additional interest rates of up to $150 million per year. This is not trivial. But that’s not enough to derail a government’s timeline, either: $150 million is less than the existing surplus. And for context: That’s 0. 3 cents consistent with the province’s $50 billion annual budget.
In contrast, consider that in the September 2017 Mini-Budget, the new government cut MSP premiums by 50 percent and chose not to replace those revenues with progressive tax increases (as the CCPA has previously recommended). In doing so, the government chose to walk away from $1.2 billion in annual revenues—a much more costly decision it did not feel put the rest of its agenda at risk.
Similarly, as Green Party leader Andrew Weaver pointed out, the government opted to cancel tolls on the Port Mann Bridge and take on this debt at a charge of $3. 5 billion (and annual toll revenue replacement prices of around $150 million), but expressed little fear. about the effect this would have on the affordability of British Columbia’s debt.
The September Mini-Budget estimated that taking on the Port Mann Bridge debt would increase BC’s debt-to-GDP ratio (the size of the provincial debt compared to the size of the economy) by about 1.2 percentage points. The cost of terminating Site C would have been similar in debt-to-GDP terms—an impact that is entirely manageable in economic terms and well within B.C.’s recent debt levels.
Would taking on this debt have resulted in a downgrade of B. C. ‘s credit rating?Maybe, but not necessarily. British Columbia’s fiscal position would have remained enviable (both in terms of debt-to-GDP ratio and debt-service prices relative to other provinces). It is also very likely that credit rating agencies welcomed the termination, seeing it as an expression of fiscal prudence that has avoided potential additional cost overruns of billions of dollars (as is the case with these types of megaprojects), especially given that credit agencies and the Auditor General of British Columbia have in the past expressed considerations about British Columbia’s public policies. Columbia. Hydro’s indebtedness.
Even if dismantling were to occur (if it did), B. C. Will you be able to cope with such a situation? Are you facing an increase particularly consistent with interest costs?Again, while there are many fears about these outcomes, these outcomes cannot be assumed: bond markets do not react slavishly to credit rating companies’ assessments. If there had been a credit market reaction to a downgrade, it would have been minimal. Credit ratings in Canadian provinces range from British Columbia’s triple-A to Prince Edward Island’s lowest. But, as economists Trevor Tombe and Blake Shaffer point out, the practical importance of one reason for this difference is that the interest rate on long-term provincial bonds goes from 3. 1 to one cent in B. C. to 3. 1 per cent in B. C. to 3. 5 per cent in the Atlantic provinces. In addition, they note that “on average, each level on the S-score scale
Many NDP MPs have come forward with public explanations for the resolution to be carried out, all pointing to a variation of the following: we referred the BCUC report for further investigation to monetary experts and were much regretted told that while the actual termination prices as opposed to the grand brooch were similar, The accounting remedy of the election would be very different.
Effectively, the government has said that accounting practices—as interpreted by finance ministry officials—trumped good policy and UNDRIP.
The problem, I am worried, is that the full diversity of features is being lost in the closet. If a deputy minister, for example, sounds the alarm about debt and/or credit rating, few politicians feel he or she responds. Or if the government is spooked by a warning from a ratings company (Finance Minister Carole James visited rating agencies early in the new government’s term), there is the political fear of a downgrade.
It is a curse for fashionable social democratic governments which, on economic problems in particular, are liable to let others tell them what is allowed and what is not. This dynamic strikes differently at other progressive people who lack confidence in the economy. , and it is accentuated when senior officials remain in their posts after a government reshuffle: the same people who give the same old recommendation.
Another way was possible. The government could and should have taken on the costs of termination (realistically a figure closer to $3 billion). It could have taken on other energy conservation and renewable electricity projects over the coming years (wind, solar, geothermal, et cetera.) as needed and in partnership with local First Nations and the building trades. In doing so, it could have created just as many jobs as Site C will provide, but more helpfully spread across the province and closer to where people actually live, rather than concentrated in one locale (which will mean having to import much of the labour). Indeed, this is exactly what the NDP proposed in its 2015 PowerBC plan. Sadly, that plan was short-lived. A lost opportunity to move forward with far less of a price and much more to gain.
In the end (and official explanations notwithstanding), Site C was clearly a political decision—not an economic one. Only time will tell if that political decision was strategically correct or a costly mistake.
The government has calculated (confirmed through recent polls) that a majority of the public would be in favor of continuing the program. They were worried about how pundits from the mainstream media and the business sector would react if they decided to lay off workers.
But the economic and political costs of building Site C will affect the government during its tenure and beyond.
At this point, it turns out that customers are very unlikely to request a change of course. So why bother with the decision?
First, it’s vital to question the lame economic justifications – as well as the scaremongering around credit rating downgrades – in a different way, as it would set a precedent that would lead to even more discouraging decisions down the road.
Second, understand this decision matters so that the new government can be encouraged to approach future ones differently. Much progress is clearly still needed to truly implement and operationalize UNDRIP in B.C. policy-making. And this is an opportunity to change the frame, to shift whose expertise wields authority and to reconsider what priorities win out.
In the last election, British Columbians voted for change. Instead of relying on the same accountants and ministerial officials, this still-new government can continue to bring new voices to the table, invite more artistic solutions, and have greater interaction with civil society.
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