There is no doubt that B. C. ‘s new policy. The government’s decision to continue with the Site C dam structure is very complicated. The previous government left him with a poison pill. With $2 billion already spent, the Horgan government faced a dead-end decision, with very high political and economic costs to complete or continue what is one of the largest and most expensive investment projects in British Columbia’s history. I don’t envy them.
But count me among those who think the resolution was made.
In a difficult decision like this one, it matters who gets listened to, whose expertise wields authority, and what considerations win the day. That’s why unpacking this decision matters—so we can consider how progressives might shake up the framework by which future decisions 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, motivated by another but similar political imperative. Having failed to secure foreign investment for a new LNG industry (and (the relevant promise of thousands of jobs for B. C. ‘s northern regions), Premier Christy Clark, ironically, worked her way into the public sector and turned to B. C. Hydro to 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, pointing out that passing such a bill would jeopardize its progressive economic and social agenda. Some ministers expressed the view that termination fees would threaten British Columbia’s AAA credit rating and increase debt service 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 million in debt, which would mean major cuts in services. Count on us to deliver. Having witnessed the legacy of liberal cuts in British Columbia, I cannot allow this to happen again” (emphasis added).
This line of argument may sound compelling. But on closer inspection, it is not at all convincing.
What if the cancellation payment had been assumed through British Columbia?According to Hydro’s books, this would have resulted in an increase in Hydro’s tariffs, albeit to the extent announced through the government. And the finishing touch to Site C will also lead to the construction of long-term (probably longer) electric rate hikes.
Given that the decision to give the green light to Site C was politically motivated by the previous government, I believe that the prices of terminating the assignment do not deserve to have been borne by British Columbia. Hydro, but rather through the provincial government as a whole (as the government seems to have envisaged). Some would possibly say that there is no difference: taxpayers and taxpayers are the same after all. But it makes a difference. As the CCPA pointed out in previous research, hydroelectric rates are regressive: they have a greater effect on families with lower sources of income than on those with higher sources of income. In contrast, the provincial government’s debt is covered through general taxes, which are slightly progressive now that the new government has incorporated a higher tax bracket to the source of revenue and is phasing out MSP bonuses. With 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, crowd out the rest of the government’s program and erode BC’s credit rating, resulting in higher interest rates on the debt?This is highly unlikely.
At today’s interest rates, $4 billion in debt would result in additional interest costs of at most $150 million a year. That’s not insignificant. But neither is it enough to derail a government’s agenda: $150 million is less than the current surplus. And for context: it is 0.3 percent of 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 profit 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 Port Mann Bridge debt would increase British Columbia’s debt-to-GDP ratio (the duration of provincial debt relative to the duration of the economy) by about 1. 2 percentage points. Site C would have been similar in terms of debt-to-GDP ratio, an effect that is quite manageable in economic terms and well below 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 decommissioning occurred (if it happened), would B. C. Will he be able to cope with such a situation? Are you facing a particularly consistent increase in interest costs? Again, while there are many fears about these results, these results cannot be assumed: bond markets do not react slavishly to assessments by credit rating companies. If there had been a credit market reaction to a downgrade, it would have been minimal. Credit ratings in Canadian provinces range from triple A in British Columbia to the lowest in Prince Edward Island. But, as economists Trevor Tombe and Blake Shaffer point out, the practical importance 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 percent in the Atlantic provinces. Furthermore, they note that “on average, each level on the S-scoring scale
Numerous NDP MPs have come forward with public explanations for the resolution to move forward, and all mentioned some variation of the following: We referred the BCUC report for further investigation to monetary experts and, much to our regret, they told us that even if the actual versus finish prices were similar, The accounting remedy of the possible options 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. It is possible that the government has fairly assumed and deserves to have borne the termination prices (in reality, a figure close to $3 billion). You may have undertaken other energy conservation and renewable electric power projects in the coming years (wind, solar, geothermal, etc. ). . ) as needed and in partnership with local First Nations and construction sectors. Doing so may have created as many jobs as Site C would create, but it would have been more useful to spread across the province and be closer to where other people live, rather than concentrating them in one place (which would require bringing in a large portion of the workforce). In fact, that’s precisely what the NDP proposed in its 2015 PowerBC plan. Unfortunately, this plan was short-lived. A missed opportunity to advance at a much lower price and with much more to gain.
Ultimately (and despite official explanations), Site C is obviously a political resolution, not an economic one. Only time will tell whether this political resolution is 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 highly unlikely to ask for a change of course. So why worry about 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 that this resolution is vital so that the new government can be encouraged to approach long-term governments differently. Clearly, much progress is still needed to truly bring the United Nations Declaration on the Rights of Indigenous Peoples into force and operationalization. in British Columbia. policy development. And it’s an opportunity to replace the framework, to find out what expertise is exercising authority, and to reconsider which priorities take precedence.
In the last election, British Columbians voted for change. Instead of relying on the same accountants and department officials, this still-new government can continue to incorporate new voices, invite more artistic solutions, and have greater interaction with civil society.
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