It always freaks people out when I say I’m fiscally conservative. The term evokes images of Harper for most Canadians and the terms slice and dice comes to mind with references to budgets. But the truth is when I say it I don’t mean conservative as in the party, I mean I think it’s important to be really careful and cautious when spending public funds in government. Government needs to make sure all best practices are followed and every bit of due diligence is done.
When it comes to mega projects, the province of BC shows little restraint. While claims of on time and on budget are often heard, what they forget to mention is that along the way, the budget was actually increased and the completion dates were changed… 😉 So, yes, technically on time and budget…but not really.
Last week I talked about Muskrat Falls in a blog post detailing Clarks vow to get Site C past the point of no return – an ominous statement considering the lack of due diligence by the BC government on this project.
Today, a compelling column on Newfoundlands equally contentious dam project, the one that government commissioned an independent review on in the middle of construction because of escalating costs and other issues -(detailed in the link above.) http://www.thetelegram.com/Opinion/Columnists/2016-02-08/article-4427462/It&rsquos-official:-Muskrat-Falls-is-a-millstone/1
I guess they were just wrong.
That’s the very best face you can put on it.
For years, the former provincial government argued we could have our fiscal cake and eat it, too: a Crown corporation could borrow billions of dollars with the government as a backstop, and the red ink would never show up on our balance sheet.
The government’s position was definite: no one would consider the money borrowed to build Muskrat Falls to be part of the province’s debt, because the project would someday produce revenue.
The argument continued: while we might borrow billions for the project, its asset value was worth the same amount as the borrowings. So, presto! No one in their right minds would consider it debt.
(I’ve said before that this is convoluted logic: if you buy a house for $300,000 and mortgage the whole thing, you can’t simply say you’re debt-free because your $300,000 house is an asset. You still have to pay the mortgage and the interest. But apparently that’s not the way provincial math worked.)
“Muskrat Falls will not increase our net debt by one cent. … We will have to borrow on one side (of the ledger) but we will have our asset on the other side,” then-finance minister Tom Marshall said on radio in 2012.
It’s a message repeated when the province brought down its mid-year financial statement in 2012: “Muskrat Falls is a project that will not impact net debt by a single dollar while providing us with an affordable, reliable, environmentally friendly source of electricity for generations to come,” Marshall said.
So is it on our balance sheet, or not?
Last week, the answer came in from bond rating agency Standard & Poors.
In this year of massive debts due to oil price declines, the rating agency — while lowering the province’s credit rating and potentially increasing the interest rates we’ll have to pay for future borrowing — still spent a fair bit of time discussing the “not-a-debt” fiscal liability that is Muskrat Falls.
“We view Newfoundland’s contingent liabilities as high. The province’s primary contingent risk relates to its wholly owned local energy provider, Nalcor Energy, a holding company that owns Newfoundland and Labrador Hydro (NLH). Newfoundland has guaranteed C$1.1 billion of NLH’s debt, which represented an estimated 17 per cent of the province’s adjusted operating revenues in fiscal 2015.
“Nalcor (through two trusts) has issued C$5.0 billion of bonds that it used to finance the Muskrat Falls hydroelectric project and its associated transmission lines. The debt carries a guarantee from the Government of Canada. We believe the province has an incentive to provide extraordinary government support to Nalcor in the event of financial stress. This view primarily stems from the essential nature of NLH’s service responsibilities, as well as the high profile and economic importance of Nalcor’s other development projects like Muskrat Falls.”
So, it’s pretty clearly on the balance sheet after all.
When we’ve asked questions, we’ve been told a lot of things about Muskrat Falls. There have been a lot of definitive answers: methyl mercury won’t be a problem downstream of the reservoir, the marine quick clay of the North Spur is totally safe, the project won’t go overbudget (whoops — another definite that didn’t pan out), the project won’t go overbudget again (whoops again).
We were told that Muskrat Falls is the cheapest option for new electricity. When the project started, we were told that ever-increasing oil prices meant that by January 2017, our oil-driven power bills would inevitably increase by 37 per cent over 2011. In fact, at least so far, those rates have stayed relatively flat, thanks to the cheap oil we were told we wouldn’t have.
So what else might they be wrong about?
It’s a chilling thought.
Something wicked this way comes.
Scary because if you swap ” Site C” for “Muskrat Falls”, you might be taking a look into the future for BC. All the same issues. No independent review prior to construction.Don’t worry we need it, it’s all good, we know what we are doing.
Only they don’t, it’s not and they clearly didn’t.
Let me be perfectly clear. This is an important lesson for the province that the premier, Bill Bennett and BC Hydro need to heed.
Both provincial politicians and BC Hydro often assert that Site C has undergone a rigorous environmental review and has been examined by the Joint Review Panel – neither of which can or are qualified to examine the cost or financials of the project.
In fact, even The Joint Review panel recommended Site C be sent to the BC Utilities Commission for an independent review for that purpose – the province of course continued to ignore all of this .
I’ve said it before, and I’ll continue to say it. The province of BC has not done due diligence on Site C and has failed its inherent responsibility to taxpayers by not doing so. And instead of admitting a failure of process and protecting taxpayers from a Muskrat Falls scenario here in BC, the premier has now vowed to get this mess past the point of no return…..
I can only shake my head at such financial irresponsibility.
Check back tomorrow for a compelling photo blog I’m working on and more on BC Hydro and Site C – if there was ever a time for Trudeau and the environment minister to release the rationale for approving the Environmental Assessment Certificate the Harper cabinet kept secret, this is it.
19 thoughts on “Muskrat Falls fiasco provides example for British Columbians of potential future of Site C & why Premier Clark must send project to BC Utilities Commission independent review.”
Former Premier Wondering if Province Should Pull the Plug on …
VOCM-Feb 3, 2016
A former premier is wondering aloud whether or not the provincial government should pull the plug on the costly Muskrat Falls project.
She says there are too many contractual obligations and it’s not their intent to cancel the project because it doesn’t make sense.
Excellent links R.
And even more evidence of how badly our government failed in exempting this project and others, from the oversight of the BC Utilities Commission. The NDP should be calling for an immediate halt based on all of this and call for a change in the Clean Energy Act, the legislation the Liberals passed that exempted these projects from oversight. Taxpayers cannot be given any assurance what BC Hydro is doing is the right thing. It’s like asking a car maker if they should make more cars. Of course they will say yes.
Just wait until you read more tomorrow…
Followed this on Twitter a little earlier, and, yes, it’s frightening, in large part because of the wilful silence of the Premier and her clique on financial mismanagement, a mismanagement that morphs into ecological and social mismanagement that’s tantamount to malfeasance. The blogs were rife and rich with the stuff of sell-outs with Merv Adey, Norm Farrell, Creekside, Dr. Dawg and Grant at PRP all with telling pieces that are a complement to what you have here. And Corey Robin’s piece on what constitutes a conservative is quite enlightening:
It’s clear that Clark and Co. are conserving nothing other than the enhancement of the fortunes of her backers and friends, certainly not our “pristine” environment, or the common weal, or the quality of life for most British Columbians.
Thank you for keeping the pot a-boil.
I, too, am a fiscal conservative despite that c-word having been abused and totured into a grotesque and disgusting synonym for corruption, bullying and mind-numbing stupidity. I am also a social liberal despite its decades long abuse to describe cronyism, waste and elitism. In two languages, no less. I am still wondering how the NDP considers it is anything but old and hoary. They haven’t had a fresh idea since the name was taken. The labels the criminals give their gangs are no more descriptive of the people in them than are crips, bloods, panthers or Broncos.
Names are just the FIRST lie. Like the names they give their legislation. Don’t you love the name of the Freedom of Information Act? My personal favourite: Health Care. I twigged to this deeply embedded lie as a young man witnessing the work of conservation officers. No conservation but a lot of killing of wildlife. Environmental Protection laws define how much pollution is allowed and how you can pay more to dump more. Don’t get me started on child care…
Bottom line: the government and every one I have experienced is a special interests group and the public, by definition, ain’t special.
My personal favourite was “Progressive Conservative”……but Harper even ruined that!.
I guess I would qualify as fiscally conservative too, even though I belong to the Green party, because I would like to see the province in a position to pay for some of these projects before undertaking them.
We are going to be paying for roads and bridges for a long time both in $$$, the impact on the environment and of course through climate change, but our short sighted “fiscally irresponsible” government fails to see that. They just get their creative accounts going and tell us all how much better we are after spending a lot of money we don’t have.
Even though predicted use on the last two bridges is below anticipated they are planning two more!!
That is fiscal insanity. Definition of insanity doing the same thing over and over and expecting different results.
LikeLiked by 1 person
Is use of word ,conservative, cover for wolf in sheep clothing possibly? A sprinkle of word salad with a bit of window dressing.?
I never said I was a fiscal Conservative R. I said I was fiscally conservative-not meaning the party, but meaning cautious.:) I’m more centrist than anything. A bit left on some issues,a bit right on a few but like most people I don’t lean far left or right. And like most people, I think you need to be very careful with spending and make priorities. Site C is not a priority this province should be focused on at all right now with so many issues at hand. And with the Hydro bill deferral plans for the mining industry, how do you think that is going to play into BC Hydro’s bottom line? Hydro is deferring so many regulatory accounts to be paid down the road and borrowing to pay the provinces dividends – do we see government doing anything different? No.That is not fiscally conservative, it’s fiscally irresponsible.
Rememer the word conservative has multiple definitions and not only indicates values etc, but it also means cautious or modest ie, ” a conservative estimate”.
Sadly JDC is right, the word has become maligned because of Harper. Careful doesn’t mean slice and dice. It means doing things right, making sure you have the best prices etc.. More on this tomorrow.
With respect, I mean a bit more than just the Harper influence when describing the contamination of the word conservative. As soon as any group takes a word as a name, it compromises the initial meaning of the word. The Harperites were no more guilty of mangling ideologies with their name selection than are the Liberals or were the National Socialists (Nazis). These groups of liars simply cloak themselves in the words that resonate with the people for acceptance. And then they corrupt those words as they act in their own special-interests way. I promise to vote for the first group calling itself the mean-spirited, greedy-pig party(MSGP). At least they’ll start with the truth.
BC government contractual obligations, going into the future, are $102 billion. That’s for things like P3s, and BC Hydro’s power purchases from IPPs. Things which might previously have been considered government debt:
Click to access Contractual_Obligations.pdf
Add to that BC Total Provincial debt at about $68 billion, which has grown $30 billion since 2008.
See p. 126:
Click to access 2015_budget_and_fiscal_plan.pdf
How the BC Govt can claim they have balanced budgets after adding $billions of debt, I don’t know.
Great post Laila. Looking forward to your follow up too.
You noted that …”When it comes to mega projects, the province of BC shows little restraint. While claims of on time and on budget are often heard, what they forget to mention is that along the way, the budget was actually increased and the completion dates were changed… 😉 So, yes, technically on time and budget…but not really.”
Other ways (that you have previously detailed) how the Christy Pirates can announce a successful mega project all ‘Sparkel Pony’ to the masses is by changing contracts, construction specs and funding structure. All to the favour of Christy and the Pirates and the costs passed on to us plebs. A few examples…
Canada Line tunnel – bored section changed to cut and fill (saved time and $, who got the money?, who got the shaft?)
South Fraser Perimeter Road – modified scope and design, overpasses downgraded to stoplight intersections (same $ but less road)
Port Mann super bridge PUBLIC private Partnership – private funding and risk transferred to government (us plebs) while profit guarantees remain with the operators (we get the tolls, they get the now unriskedprifits and the government hides the debt obligation off book)
Other mega messes… BC Place, North West Transmission Line, all the Government Ministery Information Tech upgrades etc, many more, etc.
All performance fails announced as wins. Next up a rammed through Site C without the due diligence of proper study by the BCUC nor proper First Nation consultations. A BC Liberal mega mess that will haunt our future at great cost.
There is now actually one less intersection for South Fraser Freeway. They just closed Elevator Road which was going to be an overpass to start. Lots of extra fuel for trucks to go around to Tannery.
The closure was due to congestion due to the trains. I thought the signs said South Fraser Freeway would eliminate congestion. And what is going to happen at Tannery now?
Site C construction should cease immediately. Absolutely not required for the :citizens: of this province.
So visiting over at Norm’s site reading on LNG. Came across this and in my opinion, fits Clark.
“If our Princess Enron believed she belonged in Asia – didn’t she claim to be a Phillippina? – then changing career to a Singapore bank manager might prove exceptionally profitable when her political ship leaves port.
See for yourself. Somehow Clare provides an astonishing array of facts, figures, actual documents and well, insight. She’s also requested police protection in the UK after death threats.;.
To me, such insistence defies anything resembling professional fiduciary duty or human reason.”
Princess Enron, now I like that.
[…] Muskrat Falls fiasco provides example for British Columbians of potential future of Site C & why… […]
Alaska Highway News:
[…] This is why independent review of Site C is a must. It just makes financial sense. Otherwise,let me welcome you to the very real potential for Site C to become a Muskrat Falls of our own. […]
And the disaster known as Muskrat Falls continues. http://www.cbc.ca/news/canada/newfoundland-labrador/nalcor-muskrat-collapse-1.3606827
Premiers legacy will be the financial mess Site C brings to BC Hydro and the province thanks to lack of financial due diligence.
[…] I’ve written about Muskrat Falls several times, including this warning back in February in which I detailed the similarities in how both the Newfoundland/Labrador government and the BC government both failed to do an independent review of the project prior to commencing. https://lailayuile.com/2016/02/08/muskrat-falls-fiasco-provides-example-for-british-columbians-of-po… […]
[…] Throughout the last two years that I have been covering site C -at times breaking stories on issues and events not reported elsewhere- I’ve also done a lot of research into alternative energy and other energy projects. In fact that’s how I first discovered the disaster of Muskrat Falls, writing about it in early 2016 making the comparison and warning of the need for a bcuc review for Site C: https://lailayuile.com/2016/02/08/muskrat-falls-fiasco-provides-example-for-british-columbians-of-po… […]
Comments are closed.