If you had told me years ago that one day I would be sitting down to write about the second time Horgan made the worst decision of his career, I would have shook my head and chuckled. And I would have likely said: “No, he’s a smart man, he wouldn’t make the same mistake twice.”
But here we are. It is March 1st, 2021 and I’m sitting down to reflect on the press conference Premier Horgan held Friday, in which he announced that not only would they be continuing, but it was the right thing to do to keep life affordable for British Columbians. (The hubris is strong with this one, because as a knowledgeable energy wonk,he absolutely knows this isn’t true)
It was November 13th, 2017, when I sat down to make my final case again continuing site C. I had just heard the decision would be coming before the end of the year, but many of us already knew the dam was going to continue due to behind the scenes chatter from caucus members who had yet to cut off site c critics from personal communications. We heard about some of the private meetings between Horgan and caucus members. We heard about how much anxiety it was causing. And I warned in that post that if they continued the dam, it would be a financial mess bigger than anything BC has ever seen. This was a view shared by experts then and now, and is backed up by a wealth of documentation, least of which is BC Hydros own material.
First I’m going to post this link to the press release from Friday, which contains links to the Milburn report and the expert reports. These are very important, and I recommend you read them all. https://news.gov.bc.ca/releases/2021PREM0014-000342
Not surprisingly, Horgan has repeatedly referred to the pandemic in his messaging to the public, trying desperately to push that reasoning ahead of the geotechnical ones largely responsible for the increase in price. But let’s take a look back at why Horgan can no longer point to anyone else for whats gone wrong on this project since 2017, when he first became premier.
I spent the greater part of 2016 documenting endless slides, cracks, geotechnical issues on the North( left) bank, with photographs taken by plane.There were many instances where those stories resulted in major media pickup, along with federal and provincial politicians taking up the posts to push for transparency and a call to halt. You can read those posts on this page, under the 2016 listing: https://lailayuile.com/the-case-to-stop-site-c-construction-links-news/
When the NDP formed government with the BC Greens in 2017,Site C critics fully expected the BCUC review of the project ordered by Horgan, would include a geotechnical review, based on the magnitude of problems prior to them taking power. But, he did not. The BCUC was given a tight terms of reference and geotechnical concerns were not specifically reviewed on their own, nor was the dam design or its safety.
Even with that failure to get expert oversight and opinion then, the BCUC did make note of both North ( left ) bank challenges AND right bank challenges briefly, which were already becoming evident. To claim these challenges were not known, is demonstrably false and deceptive on the part of BC Hydro, and of Horgan.
That BCUC report made for big headlines, because it warned then, that the dam would not be on time or budget, and would likely cost up to 50 % higher than the $8.3 budget at the time. And keep in mind, the dam was no where near past the point of no return. ( ndp supporters now claim it was, but at the time they were telling people there is no way he would approve it.)
Horgan was quick to fire Jessica McDonald, the former Hydro president, and replace her with his handpicked choice, Chris O’Riley. He then went onto form a very secretive Site C dam oversight board, the terms of reference for were set up by Peter Milburn...the same bureaucrat who Horgan chose last year to do an ‘independent’ report we now refer to as the Milburn report. (Hardly independent.) See where I am going with this? *I urge you to read all the articles and reports I link to, because one day this will matter when people go to find out why their hydro bills are so high.*
Surprisingly, the Milburn report was chock full of details showing just how much of a gong show the oversight of that board actually was. Ironically, Milburn himself bears some responsibility for that, since he had helped create the terms of reference for it, which both Vaughn Palmer and Andrew Nikiforuk have done an excellent job of detailing. Why was this board so quiet about the inadequacies of what was going on? Horgans deputy minister, Lori Wanamaker, had been on that board, before he offered her the job in the premiers office. Why did everyone let this gong show continue to this point?
There isn’t anyone else to point the finger to now except at Horgan and his circle of advisors, and the people he said would fix what was wrong at BC Hydro. He has had 2 opportunities to right the wrongs of Christy Clark, but has chosen to continue building this money pit both times, trying to point fingers at everyone but himself. He has walked into the sunk cost fallacy so deep that when economics students look into textbooks in the future, they will probably have a photo of John Horgan and a story about site C beside it.
One thing that stood out in the Milburn report for me that hasn’t been mentioned elsewhere, was that Frank Margitan was on the review board.
Frank is a former VP with Kiewit, and this isn’t his first involvement with the Site C project, or other way over budget projects in BC, not by far. (I’ve written extensively about Kiewit projects in BC, as well as their close relationship with bureaucrats like Milburn)
In fact, he was given a $336,000 direct award contract in 2016 by BC Hydro, for ” senior advisory services, including reviewing cost estimates for Site c”. My dear departed friend Dermod Travis took a look into that review back in 2016, and discovered this:
B.C. Hydro asked Margitan — a former vice-president of construction firm Kiewit & Sons — “to engage a panel of industry experts, to undertake an independent review of the direct cost estimate, and provide an opinion regarding its completeness, sufficiency and accuracy. Margitan was Kiewit’s point man on the Sea-to-Sky Highway and Port Mann Highway 1 projects.
For the B.C. Hydro review, he retained three individuals who “have 35 to 50 years of experience [each] in management and construction of major projects.”
He didn’t go far to find two: David Imper and Carl Jonasson. Together with Margitan they share a combined 80 years of construction experience at Kiewit.
While Margitan and Imper’s Kiewit connection was noted in the panel’s report, Jonasson’s was not. The third member was Bev Trautman.
The panel concluded that: “The direct cost estimate appears to be sufficiently complete and adequate to cover all anticipated costs associated” and “has sufficient allowances/contingency to cover any reasonable increase in cost resulting from design development or cost-estimate uncertainty.”
B.C. Hydro puts the “contingency and project reserve” at more than $1 billion on the $8.8-billion project. The Sea-to-Sky and Port Mann projects were first estimated at $2.1 billion. Final price tag? $4.1 billion.
B.C. Hydro then turned to KPMG for a third-party review of Margitan’s third-party review.
KPMG’s two-page December letter is signed by Gary Webster. It’s generously sprinkled with high praise.
Webster noted: “The expert panel of construction estimators that independently reviewed the major components of the estimate was again a level of diligence that increases the confidence of the estimate compared with other capital projects.”
Left out of his letter was the fact that for a good chunk of his 30 years in the construction industry, he had more than a nodding relationship with Margitan. Webster was the province’s representative (boss of the bosses) on the Sea-to-Sky project, and Margitan was Kiewit’s point man.
When terms like “independent external peer reviews” are bandied about, the public might be less skeptical if the peers were independent of each other, too.
It smacks of the old-boys’ network in action.
Indeed, which is why the choice of Frank Margitan for the Milburn review is so curious. Those old boys networks span governments and premiers. Those cost estimates were incredibly off the mark and called into questions by critics who knew better even back in 2016, including ndp mla’s. Margitan has no place on that panel, not after getting it so wrong the first time. Did he get paid again this time ? Why do the same names keep popping up again and again?
(side note, speaking of old boys networks, I will have a post on the potential BC Liberal leadership run of former Gordon Campbell protege, Kevin Falcon soon.)
This is why I want to also touch on the outside expert reports and a key issue with all of this confidence Horgan and Ralston claim to have.
Take a look at these screenshots from the outside expert reports.
That is a hell of a big disclaimer in the first screen and what really concerns me is the part where they say “... it was not possible to provide a detailed review of all the material in the time provided.In particular the panel has not performed detailed checks of calculations and designs completed by the project team. Such detailed checks are provided by the control/quality assurance programs for the project.”
Gosh, I think we are where we are, because those project oversight programs have not been working or managed well! Is it just me or is this a sham of a review, just to make it look good? I don’t call into question the experts whatsoever, i call into question why they were restricted in time and access, and why Hydro set the terms of reference. Because if there is one thing I know about managers who make poor decisions, is that they will continue to try and find ways to make things work long after they should have been stopped to justify them. This should alarm every British Columbian. But now, read this:
That is a pretty clear warning to expect a final cost of way more than $16 billion. My guess is at least $20 billion.
The reports are clear that there is far from certainty with any geotechnical issues, and its also clear the outside experts were not given a free rein, an adequate scope or time to review in detail Hydros calculations or design. And frankly I’m not surprised. BC Hydro ( and the BCUC) has always been intefered with by successive governments, yet still remains out of control even under the NDP. Who is running the show here? But there is one more thing we need to look at before I’m done.
In January I posted a blog detailing some key points about Site C, including details on how Moodys issued a warning to the Province of BC in their last credit rating report.
Regardless of stopping this dam or not, Hydro rates are going up. And provincial debt is serviced at incredibly low rates regardless, amortized over a longer period keeps that under control. This should have been considered, because there is no way to sell the power from Site C at the rate it need to be sold at to service the costs, as Norman Farrell points out.
That is, if we aren’t experiencing climate change extremes like we did in recent years, which resulted in record low reservoir levels at WAC Bennett dam in 2019, and an inability to generate what we needed as a province…
Upstream from Site C, is the Williston reservoir, a reservoir that BC Hydro claims hold a multi year supply of water for electricity. BC voters have been fed a repetitive line of bullshit from BC Hydro and from successive BC governments, that Hydro power is THE most reliable, consistent power source in BC.
Except… when it isn’t. The Williston Reservoir saw record low inflows this last fall .
The WAC Bennett dam and Peace River Dam typically provide 30 % of BC’s electricity. However, due to the lack of rain, coupled with higher demand due to the Enbridge explosion, BC hydro had to import electricity from the US and Alberta this spring, as revealed in this discussion between Andrew Weaver and Michelle Mungall in the legislature this spring: https://www.andrewweavermla.ca/2019/05/13/budget-estimates-bc-hydro-collapse-bcs-clean-energy-sector/
And if WAC Bennett isn’t generating due to low levels, neither will Site C. Climate change, really does change everything. My link above also mentions how low Vancouver Island reservoirs were in 2018, 2019 as well. And BC Hydro knows this. We will only continue to see extremes that test our old ways of thinking. https://www.bchydro.com/news/press_centre/news_releases/2019/report-reservoir-levels.html
I’m not sure how the caucus can continue to stand behind this mess, or express confidence that this is in the best interests of British Columbians as staunchly as Horgan has. The Ndp dodged the bullet with a snap election this time…they won’t in 4 years if this hits $20 billion.
- The Stop site C group has an excellent resource for readers, of site c reports and documents here: https://stopsitec.today/documents/