Affidavit #1 of Marc Eliesen by sagelegal

Affidavit of Marc Eliesen Affirmed the 26th day of January, 2018 No. 18 0247 Victoria Registry IN THE SUPREME COURT OF BRITISH COLUMBIA BETWEEN: WEST MOBERLY FIRST NATIONS, and ROLAND WILLSON ON HIS OWN BEHALF AND ON BEHALF OF ALL OTHER WEST MOBERLY FIRST NATIONS BENEFICIARIES OF TREATY NO. 8 PLAINTIFFS AND: HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF BRITISH COLUMBIA, THE ATTORNEY GENERAL OF CANADA, and BRITISH COLUMBIA HYDRO AND POWER AUTHORITY DEFENDANTS AFFIDAVIT I, Marc Eliesen, Economic and Energy Consultant, of Whistler, British Columbia, SOLEMNLY AFFIRM THAT: 1.

I am the former President and Chief Executive Officer ("CEO") of British Columbia

Hydro and Power Authority ("BC Hydro"). Part A: Expert Opinion 2.

I have been asked to give my opinion, as a senior executive with extensive experience in

the energy sector and expertise in executive approval and oversight of large-scale energy projects, on: a.

the decisions made prior to 2010 not to proceed with the Site C project, and the

soundness of the reasoning underlying those decisions.

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-2b.

the relevance of the development of mega-dams or other major projects similar to

Site C in other jurisdictions to the current and future state of affairs for Site C with respect to cost and schedule; and c.

the effectiveness of senior management in preparing for and addressing critical

project management issues Site C has faced or now faces, and implications for project cost and schedule. 3.

Attached as Exhibit "A" to this Affidavit is a copy of my expert report in response to

those instructions, entitled Development of BC Hydro's Site C: Project Management, Cost and Schedule ("Expert Report"), my certification of my duty as an expert, an outline of my qualifications (pp. 3-4), and my Resume (Appendix A). I hold the opinions expressed in my Expert Report and adopt the Expert Report as my evidence in this proceeding. 4.

My Expert Report is based in part on my personal knowledge as the former President and

CEO of BC Hydro. I held those positions in 1993 when I voted, as part of a unanimous Board of Directors, to remove Site C from BC Hydro's slate of potential energy projects after determining that there was no business case for the project and one was unlikely to arise in the future. As such, I have personal knowledge of the events leading up to that decision or was informed of relevant facts by other employees of BC Hydro in making that decision, which facts I verily believe to be true. These events are detailed in Part B of my Affidavit. 5.

My Expert Report is also based on my continued personal involvement and experience in

the energy and utility sector, both prior to, and since, leaving my role with BC Hydro. This experience includes working as an economic consultant and financial advisor to governments, First Nations and private companies. Part B: BC Hydroâ&#x20AC;&#x2122;s 1993 Decision Not to Proceed with Site C 6.

The Site C Hydro Electric Project is expected to produce 1,100 mega watts (MW) of

capacity and produce 5,100 gigawatts hours of energy per year (GWh/y). It is located on the Peace River, near Fort St. John in northeastern British Columbia downstream of the WAC

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-3Bennett Dam (2,916 MW capacity and 13,100 GWh/y) completed in 1968, and the Peace Canyon Dam (736 MW capacity and 3,500 GWh/y) completed in 1980. 7.

Site C was identified in 1958 and initially expected to be the third of five major hydro

electric projects to be built on the Peace River between the Peace Canyon and the Alberta Border (hence the name Site C). 8.

In 1975, a public information and consultation program for Site C began. By 1978, the

current Site C location was confirmed by BC Hydro as the best option for its third dam, with development expected in the early 1980s. 9.

Once identified as the third dam, “Detailed studies on Site C were distributed in 1979

throughout the Peace River area and to Government, public interest groups and libraries throughout the province.” Attached as Exhibit “B” is a copy of BC Hydro’s March 1991 report titled: Peace Site C Summary Status Report, which includes an outline of the public consultation carried out at that time and which I considered in my role as President and CEO of BC Hydro. 10.

In September 1980, BC Hydro applied to BCUC for an Energy Project Certificate to

initiate construction of Site C. The Commission held hearings and in May 1983, determined that BC Hydro failed to adequately demonstrate that Site C was necessary or that it would even be the preferred electricity project. Attached as Exhibit “C” is a copy of the BCUC’s May 1983 Site C Report: Report & Recommendations to the Lieutenant Governor-In-Council, the conclusions of which I considered as President and CEO of BC Hydro. At pages 10-11 of the report, the BCUC concluded that: The Commission does not believe that an Energy Project Certificate for Site C should be issued at this time. The evidence does not demonstrate that construction must or should start immediately or that Site C is the only or best feasible source of supply to follow Revelstoke in the system plan. The Commission therefore concludes that an Energy Project Certificate for Site C should not be issued until (l) an acceptable forecast demonstrates that construction must begin immediately in order to avoid supply deficiencies and (2) a comparison of alternative feasible system plans demonstrates, from a social benefit-cost point of view, that Site C is the best project to meet the anticipated supply deficiency.

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-411.

BCUC examined the methodology and underlying assumptions of BC Hydro’s forecast of

electricity demand and found them to be unreliable. At page 4 of the report, the Commission stated that “Hydro’s forecasts…neither explicitly take energy prices into account nor rely on statistically significant past patterns of behaviour.” The Commission concluded that the project was not needed in the proposed time horizon advanced by BC Hydro and that over-supply of electrical power would have significant negative implications for rate payers and therefore starting construction prematurely needed to be carefully guarded against. 12.

BCUC’s decision to reject BC Hydro’s request for a certificate proved sound. Despite BC

Hydro’s claim that construction would need to commence in 1984 and that the power from Site C would be needed by October 1990, no further action was undertaken until 1989 when BC Hydro commenced preparations for a possible new application for conditional approval of an Energy Project Certificate as a contingency measure. These preparations are detailed in Exhibit B, the Peace Site C Summary Status Report. 13.

I was appointed President, CEO and Member of the BC Hydro Board effective November

1992. As part of the long-term planning and budget process we reviewed our options for future generating power. These included an assessment of Site C. 14.

Site C was rejected unanimously by the Board of Directors as a possible future electricity

source for reasons related to economics, financing and cost. The Board found there was no need for the project under reasonable demand forecast projections and its likely impact on ratepayers was unacceptable. 15.

The BC Hydro Board was mindful of the fact that the Revelstoke Generating Station

(2,480 MW) became operational in 1984, but was not required for domestic demand until the 1990s. The excess supply of energy it produced was exported through the spot market to US utilities at prices significantly lower than the cost of production. 16.

Not only was there not a business case for Site C—nor was it expected that demand and

supply conditions would converge in the future to generate one—other considerations, including First Nation rights and environmental impact were also considered important.

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-517.

The Hydro Board considered and rejected Site C on the basis that there was no sound

business or economic case, and likely would never be one, but also addressed the project’s impact on:

18.

First Nations rights;

The environment; and

Agricultural land impacts.

The BC Hydro Board determined that there were no grounds upon which the project

should be advanced for construction in the future. 19.

Due to the factors considered by the Board that clearly determined that rejecting the

development of Site C was not only the prudent business decision but also a socially responsible course, it was agreed that a public statement be made confirming that Site C would no longer be considered by BC Hydro for development in the future—the project would be removed from the slate of possible options. The statement was issued on November 29, 1993, under my name as President and CEO of BC Hydro. In it, I explained that Site C was both too costly and environmentally unacceptable. Attached as Exhibit “D” to this Affidavit is a copy of an excerpt from a newspaper article by Rod Nutt that appeared in the Vancouver Sun titled: “Peace River Site C dam dead”, obtained from the following website: https://in-sights.ca/2017/08/04/from-thenews-archives-site-c-history-updated/. The excerpted quote is, to the best of my recollection, an accurate reflection of the November 29, 1993 statement. Part C: The BCUC Inquiry Respecting Site C 20.

I participated as an expert intervenor in the BCUC Inquiry Respecting Site C (from

August to October 2017). I prepared two reports in support of the BCUC's review and appeared before the BCUC at its request as a technical expert. As part of that process, and in preparing my Expert Report, I reviewed the documents released by the BCUC and BC Hydro as part of the BCUC Inquiry process, including the following documents and reports which I attach as exhibits to my Affidavit:

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-6a.

Attached as Exhibit “E” is a copy of BC Hydro’s Public Quarterly Progress

Report No. 3 F2016 Fourth Quarter January 2016 to March 2016. b.

Attached as Exhibit “F” is a copy of BC Hydro’s Public Quarterly Progress

Report No. 5, F2017 Second Quarter July 2016 to September 2016. c.

Attached as Exhibit “G” is a copy of BC Hydro’s Public Quarterly Progress

Report No. 6, F2017 Third Quarter October 2016 to December 2016. d.

Attached as Exhibit “H” is a copy of BC Hydro’s Public Quarterly Progress

Report No. 7, F2017 Fourth Quarter January 2017 to March 2017. e.

Attached as Exhibit “I” is a copy of BC Hydro’s Public Quarterly Progress

Report No. 8 F2018 First Quarter April 2017 to June 2017. f.

Attached as Exhibit “J” is a copy of extract pages from Submission F1-8 to the

BCUC Inquiry Respecting Site C, which contains BC Hydro’s response to the BCUC’s Information Request 2.30, dated October 4, 2017. g.

Attached as Exhibit “K” is a copy of extract pages from Submission F1-10 to the

BCUC Inquiry Respecting Site C, which contains BC Hydro’s responses to BCUC’s Information Requests 2.70 and 2.10, dated October 5, 2017. h.

Attached as Exhibit “L” is a copy of extract pages of Submission F-1, BC

Hydro’s August 30, 2017 submission to the BCUC Inquiry Respecting Site C, titled: BC Hydro Submission to the British Columbia Utilities Commission Inquiry Into the Site C Clean Energy Project. Only the Executive Summary and Section 4 are included in the extract. i.

Attached as Exhibit “M” is a copy of Submission F1-7 to the BCUC Inquiry

Respecting Site C, which is BC Hydro’s October 4, 2017 submission to the BCUC Inquiry. j.

Attached as Exhibit “N” is a copy of extract pages from the transcript of the

October 14th 2017 submissions of Chris O’Riley, President and Chief Operating Officer

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-7of BC Hydro, to the BCUC Inquiry Respecting Site C’s technical input proceedings in Vancouver, BC. Part D: Recent Events

21.

In preparing my Expert Report, I reviewed and considered a number of additional

documents that were released following the end of the BCUC Inquiry Respecting Site C process, including: a.

A copy of a Government of British Columbia briefing document titled: Site C

Technical Briefing, prepared by Don Wright, Deputy Minister to the Premier, dated December 11, 2017, attached as Exhibit “O” to this Affidavit. b.

A copy of the December 11, 2017 Office of the Premier News Release, entitled

“Government will complete Site C construction, will not burden taxpayers or BC Hydro customers with previous government’s debt”, attached as Exhibit “P” to this Affidavit. c.

A copy of BC Hydro’s Public Quarterly Progress Report No. 9, F2018 Second

Quarter, July 2017 to September 2017, attached as Exhibit “Q” to this Affidavit. 22.

I affirm this affidavit in respect of the Plaintiffs' application for an injunction in these

proceedings. AFFIRMED BEFORE ME at the Municipality of Whistler, in the Province of British Columbia, this 26th day of January, 2018.

_________________________________ A Commissioner for taking Affidavits within the Province of British Columbia

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) ) ) ) ) ______________________________ ) Marc Eliesen ) )

Development of BC Hydroâ&#x20AC;&#x2122;s Site C: Project Management, Cost and Schedule

Report prepared by Marc Eliesen Former President and CEO of BC Hydro

For West Moberly First Nations

January 25, 2018

Table of Contents

1. INTRODUCTION

2. STATEMENT OF QUALIFICATIONS

2.1 Education

2.2 Experience

2.3 Expert’s Duty

3. EXECUTIVE SUMMARY

3.1 Soundness of Prior Decisions to Reject Site C

3.2 Large Dams Lead to Large Cost Overruns and Schedule Delays

3.3 BC Hydro Management: Implications for Cost and Schedule

4. CURRENT HYDRO PROJECTS IN CANADA: COSTS AND DELAYS

5. MANAGEMENT CONSIDERATIONS AT BC HYDRO

5.1 Cost Overruns

5.2 Schedule Delays

5.3 Site C Contracts

5.3.1 Main Civil Works contract

5.3.2 Generating Station and Spillway Work contract

5.3.3 Transmission

5.3.4 Major Contracts Summary

Appendix A Marc Eliesen — Resume

Appendix B Bibliography

List of Tables Table 1 — Site C Project Capital Cost Budget Table 2 — Site C Project Capital Cost Estimate 2014 Compared to 2017

11 12

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1. INTRODUCTION 1.

I was retained by Tim Thielmann, Sage Legal, on behalf of West Moberly First Nations to prepare a report and provide my professional opinion on: • the decisions made prior to 2010 not to proceed with the Site C project, and the soundness of the reasoning underlying these decisions; • the relevance of the development of mega-dams or other major projects similar to Site C in other jurisdictions to the current and future state of affairs for Site C with respect to cost and schedule; and • the effectiveness of senior management in preparing for and addressing critical project management issues Site C has faced or now faces, and implications for project cost and schedule.

2. STATEMENT OF QUALIFICATIONS 2.1 Education 2. I obtained a Bachelor of Commerce degree in Economics at Concordia University (1958-1962) and have undertaken post graduate work in Economics at Carleton University (1962-1964).

2.2 Experience 3. I am a senior executive within the energy sector with a lengthy and successful career in senior executive positions in both the private and public sectors, including the following: • Independent Economic and Energy Consultant (1998-present) • Chairman and President, International Power Group Inc., a joint venture of Asea Brown Boveri Inc., Westcoast Energy Inc. and BC Trade Development Group (1994-1997) • President and Chief Executive Officer, British Columbia Hydro and Power Authority (1992-1994) • Chairman and Chief Executive Officer, Ontario Hydro (1991-1992) • Deputy Minister, Ministry of Energy, Province of Ontario (1990-1991) • Chairman of the Board of Directors, Manitoba Hydro (1984-1988) Page 3 of 30

• Deputy Minister, Ministry of Energy and Mines, Manitoba (1982-1984) • Chairman and Chief Executive Officer, Manitoba Energy Authority (19821988) • Deputy Minister to Premier of British Columbia, Planning Secretary to the Cabinet (1974-1975) • Assistant Deputy Minister of Finance, Deputy Minister to Premier of Manitoba, Planning Secretary to the Cabinet (1970-1974) 4. I have worked for seven governments in Canada, both federal and provincial, and have been a Deputy Minister of Government for nine Ministers of the Crown. I have held a partnership with the management consulting firm Peat Marwick Stevenson & Kellogg (KPMG), and held the position of National Director of Government Services. I have been a corporate director of many organizations and businesses, including Suncor Corporation, Manitoba Hydro, Ontario Hydro and BC Hydro. 5. I was an expert intervenor in the British Columbia Utilities Commission Inquiry into Site C (August to October 2017) and prepared two reports in support of the Commission’s review, as well as appeared before the Commission at its request as a technical expert. I was also an expert intervenor at the National Energy Board Trans Mountain Expansion Project Review (2013 - 2014). 6. I have been Economic and Financial Advisor to a number of Manitoba First Nations on the proposed construction of the Keeyask and Conawapa GeneratingStations (2000-2010). 7. A copy of my curriculum vitae is attached as Appendix A.

2.3 Expert’s Duty 8. I certify that I am aware of my duty as an expert witness to assist the court and not be an advocate for any party. This duty prevails over any obligation that I may owe to any party, including West Moberly First Nations on whose behalf I have been engaged. 9. I further certify that I have made this report in conformity with this duty and will, if called on to give oral or written testimony, give that testimony in conformity with this duty. 10. In particular, in preparing this report, I acknowledge that it is my duty to: Page 4 of 30

• provide evidence that is fair, objective and non-partisan; • provide evidence that is only related to my area of expertise; and • provide such additional assistance as may reasonably be required to determine a matter at issue. 11. My expert report is based on my personal experience and knowledge as the former President and CEO of BC Hydro, as well as my other experience in the energy and utility sector. In addition, except where otherwise stated or implied, I assume that the facts and opinions provided in the documents that I rely on in my export report accurately reflect the facts and opinions as those authors understand them. 12. The scope of the review I conducted included: the history of the proposed development of Site C by the Government of British Columbia and the provincially crown owned BC Hydro; ii) the construction of large mega-dams or other major hydro generating stations in other jurisdictions with emphasis on recent large hydro development in Canada; iii) the report by the BC Utilities Commission on its Site C Inquiry, and the submissions made by BC Hydro, the Commission’s consultants and other participants of the inquiry. i)

13. A list of the documents relied upon in forming my opinion is provided in Appendix B.

3. EXECUTIVE SUMMARY 3.1 Soundness of Prior Decisions to Reject Site C 14. As President, CEO and Member of the Board of Directors of BC Hydro from 1992 - 1994, I have direct knowledge of prior decisions to reject Site C as well as expertise respecting the issues surrounding the Site C project. I attest to the underlying soundness of the decisions made by the British Columbia Utilities Commission in 1983, and the BC Hydro Board of Directors in 1993, to not recommend proceeding with the project. 15. Until the decision made by the BC government in 2010 to proceed with constructing Site C, I am unaware of any other proceeding whereby construction of the project was considered by a decision making authority at any level of government. 16. In 1983, the British Columbia Utilities Commission (BCUC) reviewed BC Hydro’s application for an Energy Project Certificate and rejected the application on the basis that Page 5 of 30

there was no urgent need for the project. Even if there were a need for Site C, the Commission could not conclude that Site C was the preferred project. BCUC was also concerned with the absence in the application of a reliable cost-benefit assessment, and the negative impact on ratepayers of building infrastructure capacity prematurely. 17. In 1993, the Site C project was again considered by the BC Hydro Board. The Board unanimously determined that there was no business case for Site C and it was unlikely that one would arise in the future. The social and environmental considerations surrounding the project were significant enough in their own right for the Board to decide that a permanent removal of the project from the slate of potential energy projects in the future was warranted. 18. On April 28, 2010, the provincial government introduced the Clean Energy Act (CEA). Section 7(1) (d) of the Act explicitly exempts Site C from the requirements of the Utilities Commission Act (UCA) sections 45 to 47 and 71.1 19. At no time between 1983 and August 2017 did BCUC, as an independent regulator, revisit an evaluation of the need for the Site C project, its impact on ratepayers, or whether it would be a preferred electricity project. 20. The 1993 BC Hydro Board decision to reject Site C has proven sound. There has yet to be an independently confirmed business case that indicates construction of the project should have commenced. The findings of the BCUC Site C Inquiry Report, November 1, 2017, and the current Provincial Government’s conclusion that, “Site C should never have been started…” 2 because of the project’s negative impact on ratepayers, and likely over-supply of electricity for many years into the future, confirms the decision made by BC Hydro’s Board almost twenty-five years ago.

3.2 Large Dams Lead to Large Cost Overruns and Schedule Delays 21. There are a number of pre-conditions that are responsible for the cost and schedule of major hydro projects spiralling out of control in Canada. These include: i) the provincial utility had not constructed a large generating station for decades; ii) internal professional staff experience in the planning and construction of large mega projects built by the utility have retired or moved on; 1

Clean Energy Act

Office of the Premier, News Release, December 11, 2017.

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3.3 BC Hydro Management: Implications for Cost and Schedule 23. The necessary experience and due diligence rigour required for managing a major hydro project such as Site C is deficient among the executive at BC Hydro. This is in part due to the fact that it has been more than thirty years since BC Hydro constructed a major generating station. The knowledge and expertise required, which formerly resided in the company, has retired or moved on. 24. Notwithstanding the lack of project management experience and expertise, BC Hydro executive seem unable to learn from hands-on experience directly related to cost and scheduling overruns that have materialized from the management of the the Site C project to date. BC Hydro has approached the cost estimating for its other major contracts yet to be tendered in a manner similar to the approach undertaken with the Main Civil Works contract. As a result, similar cost overruns and delays with these contracts are more likely than BC Hydro remaining within its cost and schedule as reflected in its current $10.7 billion capital cost. 25. It is my expert opinion that the overall budget estimation and cost control process of Site C’s budget, to date, by BC Hydro executives, has been mismanaged. BC Hydro’s executive is not capable of ensuring accurate estimation of costs or ensuring control over those costs. Neither is BC Hydro’s management able to anticipate when conditions will arise that will have a material impact on budget amounts. 26. There are at least seven more years in Site C’s schedule. Pre-existing conditions and management failings at BC Hydro mean that Site C is likely to experience further delay and greater cost than that contemplated in the December 2017 budget.

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27. It is my expert opinion that Site C will not meet its current in-service schedule of 2024, but will be delayed until at least 2025 and its capital cost will reach a range of $12 billion or more—an increase greater than 45 per cent from BC Hydro’s August 2017 estimate of $8.3 billion and an increase greater than 12 per cent from its current budget of $10.7 billion.

4. CURRENT HYDRO PROJECTS IN CANADA: COSTS AND DELAYS 28. Major hydro infrastructure projects experience staggering construction overruns and implementation delays. This is a world-wide phenomenon. In a series of studies on megaconstruction projects, Oxford University researchers have shown that large hydro projects built in 65 countries were, on average, 90 per cent higher (in real dollars) than forecast at the time the project was approved. 3 29. The cost and timing experience related to Site C reveals that the project is experiencing significant cost overruns and schedule delay. Given the relatively short time horizon over which information is available it might be argued that Site C could experience a return to reliable costing and no further interruption in its schedule. However, such a position is unwise when cost and schedule experience of major projects in Canada, that are much further along in their development, is reviewed. 30. The two most recent examples of major cost and scheduling problems with large hydro projects such as Site C, are Muskrat Falls in Newfoundland and Labrador and Keeyask in Manitoba. 31. I was a financial and economic advisor to First Nations for the Keeyask project and a recently postponed project, Conawapa, rejected by the Manitoba Public Utilities Commission for reasons related to need, cost and schedule. Therefore, I have direct knowledge of the issues as they relate to experience in Manitoba. 32. There are a number of pre-conditions that are responsible for major cost overruns and schedule delays of both Muskrat Falls and Keeyask which are similar in nature to the preconditions that exist with Site C. These are: i) the provincial utility had not constructed a large generating station for decades; ii) internal professional staff experience in the planning and construction of large mega projects built by the utility have retired or moved on; 3

Saïd Business School, University of Oxford, New research from Oxford University reveals severe cost and schedule overruns for large hydro-electric dams.

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iii) there is a lack of construction contractor experience with large hydro projects being built in the northern regions of Canada; iv) unexpected or unforeseen major geotechnical problems and challenges exist; and v) the utilities have a history of exaggerating future electricity requirements for their province and rely on recent forecasts to justify the need for new generating stations.4 33. It is common practice in assessing likely future events to assess pre-existing conditions. The pre-existing conditions with BC Hydro’s Site C are such that they send warning signals that material delay and cost overruns for the remaining seven years of construction activity are not only very likely, but almost certain. 34. The budget overruns and project delays for both Muskrat Falls and Keeyask were not publicly acknowledged until after three to four years of construction activity, although they became apparent much earlier. The reason the cost overruns and project delays with Site C have become known earlier in the process is due to the BCUC Site C Inquiry. 35. Senior management for Muskrat Falls and Keeyask—which are further along than Site C— have warned that more cost increases and schedule delays could take place before the projects are complete. In contrast BC Hydro is publicly stating that no further increases will take place, contradicting expected experience with projects such as Site C. BC Hydro’s claim should not be relied upon under the circumstances. 36. BC Hydro has not constructed a large hydro project for many decades. The most recent major hydro dam constructed in BC was the Revelstoke dam completed in 1984. The vast majority of staff with utility expertise in hydro project construction management have retired or no longer work for the company. Consequently there is a lack of professional and management expertise at BC Hydro with respect to large scale hydro construction projects. 37. Before the turn of the century, potential hydro resources owned by provincial utilities in Canada were in a continuous state of generating station construction and as a result had built up knowledgable and experienced in-house construction divisions for such mega hydro projects. In addition, solid and dependable working relationships had been established with external engineering companies for ongoing support and assistance. These two important corporate culture and departmental infrastructure conditions no longer exist in these utilities.

BCUC Inquiry Respecting Site C, An Evaluation of the Need for the Site C Project, Marc Eliesen, August 16, 2017

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38. The 695 MW Keeyask Generating Station is a partnership between Manitoba Hydro and four northern Manitoba First Nations. Keeyask was originally estimated to cost $6.5 billion with a six-year construction schedule for an in-service date of November 2019. Three years into construction it was announced that the budget would increase to $7.8 billion, along with a more than two year completion delay. The most recent projections put project costs at $8.7 billion (an increase of 34 percent over the original estimate) with an in-service date of 2021. 5 39. Keeyask costs have risen significantly. This is primarily because of unanticipated geotechnical issues complicating structural work related to the bedrock under the project. Geotechnical issues relate to the engineering behaviour of earth material and the foundations necessary to support the generating station and the dam. Although significant preconstruction investigative work is undertaken to determine the nature of the geotechnical area, until construction there is no certainty as to what will actually be required. Geotechnical requirements are extremely challenging in the context of Site C and this work is yet to be complete. 40. The construction of the 824 MW Muskrat Falls Generating Station in Newfoundland and Labrador commenced in 2013 at an estimated cost of $7.4 billion with an in-service date of 2018. The current cost estimate is $12.7 billion (an increase of 72 percent) with in-service delayed two years to 2020. Nalcor Hydro (the provincial crown corporation) CEO, Stan Marshall, has described the project as “…a boondoggle. It should have never been built…I don't know what the motivation was. I don't know what happened and who made the decisions. Unfortunately I have seen a lot of evidence … which suggests to me that intentionally or otherwise, the costs were significantly underestimated.”6 41. Nalcor has confirmed that current project costs will result in an increase in domestic residential rates to 23.3 cents per kilowatt hour—almost double current rates. 7

Manitoba Hydro, Control Budget for Keeyask Generating Station revised, March 7, 2017.

CBC News, Labrador’s Muskrat Falls Price tag now 12.7 billion, worse than 1969 Quebec deal, CEO says, June 23, 2017. 7

Ibid.

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5. MANAGEMENT CONSIDERATIONS AT BC HYDRO 5.1 Cost Overruns 42. Since the announcement by the BC government in April 2010 that Site C would be considered for construction, project cost estimates have increased from $6.6 billion to $10.7 billionâ&#x20AC;&#x201D;an increase of $4.1 billion or 62 per cent. Design changes have contributed to the cost increase along with unanticipated costs related to geotechnical considerations, environmental requirements, and economic factors such as cost inflation. 43. Table 1, below provides a comparison of total capital cost budgets from 2010 to December 2017.

Table 1 Site C Project Capital Cost Budget Year

Budget (billion)

2010

$6.6

2011

$7.9

2014

$8.8

2017 October

$9.0

2017 December

$10.7

44. Table 2 below, compares the FID budget announced December 2014 with the revised capital budget announced three years later on December 11, 2017.8

Site C Technical Briefing, Don Wright, Deputy Minister to the Premier, December 11, 2017.

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Table 2 Site C Project Capital Cost Estimate 2014 Compared to 2017

Cost

2014 (millions)

2017 (millions)

Direct Cost

$4,940

$5,839

Indirect and Overhead

$1,194

$2,010

$794

$858

Interest before completion

$1,407

$1,285

Total Before Risk Reserve

$8,335

$9,992

$440

$708

$8,775

$10,700

Contingency

Risk Reserve Total

45. When BC Hydro submitted its 886-page evidentiary information to BCUC on August 30, 2017, it declared that, “BC Hydro expects to complete Site C on time and on budget, and we have the appropriate level of schedule and cost contingency.”9 46. BC Hydro’s evidence also stated that, “The expected total cost of the Project is $8.335 billion and we do not expect to use the additional $440 million project reserve established and held by the B.C. Government.”10 That is, BC Hydro was adhering to the FID budget approved by the provincial government in 2014 of $8.775 billion, but claiming that the risk reserve established by Cabinet when the budget was approved was not necessary and would not be relied upon so that the project could come in at $8.335 billion. 47. BC Hydro included in its August 30, 2017 filing with the Commission a section titled “Site C is On Time and On Budget”. Detailed information on the factors BC Hydro believed were responsible for this claim that the budget would come it at $8.335 billion, were discussed. BC Hydro stated that, “The Project is on time and on budget, through proactive management of geotechnical and construction risks to schedule and budget.” 11

BCUC Inquiry Respecting Site C, BC Hydro Submission, F1-1, August 30, 2017, page 2.

Ibid., page 2.

Ibid., page 24.

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48. Five weeks later on October 4, 2017, Chris O’Riley, President and Chief Operating Officer of BC Hydro, informed the Commission that, “BC Hydro has encountered some geotechnical and construction challenges on the project and the risk to the river diversion timeline has now materialized…we have now determined that we will not be able to meet the current timeline for river diversion in 2019…Not meeting the current river diversion timeline has created new pressures on the project's budget…expected to increase its cost by 7.3 per cent or $610 million, for a total forecast project cost of $8.945 billion.”12 49. It is my expert opinion that BC Hydro knew, or should have known, when the August 30th report was submitted to the BCUC, that the costs for the project were going to be higher than disclosed. If BC Hydro knew the costs were reasonably likely to be higher than disclosed, they violated their obligation to the Commission to be fully transparent and support the Commission’s inquiry. If BC Hydro honestly did not know at the time the August 30 filing took place, that costs would escalate, then BC Hydro was not competently managing its project as it claimed. 50. After claiming to the Commission on August 30th that Site C was on time and on budget, with no threat to the $440 million Treasury Board reserve, only thirty-five days later BC Hydro informed the Commission that the project was a year delayed and the Treasury Board reserve not only tapped, but exceeded by $170 million. 51. In his October 4, 2017 letter, Mr. O’Riley relied upon the inability of BC Hydro to meet the river diversion in 2019 as the reason for an increase in the project budget of $610 million, taking the budget to $9 billion (rounded). 52. On October 14, 2017, Mr. O’Riley appeared before the Commission. He again stated that, “As a result of the disappointing news about missing the 2019 diversion milestone, we have postponed diversion to 2020…it will increase the cost for the project forecast to be 610 million.”13 This suggested that the budget had been revised to $9 billion and that BC Hydro did not anticipate any further upward pressure on the budget. 53. However, Mr. O’Riley foreshadowed the potential for future budget increases unrelated to the cost of the missed river diversion date when he told the commission that, “Given we've missed the 2019 diversion milestone, we will require a budget revision for the project, and

BCUC Inquiry Respecting Site C, BC Hydro Submission, F1-7, October 4, 2017, page 3.

BCUC Inquiry Respecting Site C, Technical Input Proceedings Vancouver, BC Hydro, Chris O’Riley, October 14, 2017, page 1599, lines 12-18.

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we anticipate this process occurring in November, and involving our board and the provincial government.”14 54. Mr. O’Riley statement lacked full disclosure for two reasons. The first is that in the same presentation to the BCUC, Mr. O’Riley stated that the BC Hydro Board had already been made aware of, and presumably approved, the additional cost of $610 million to the budget due to the missed river diversion date. Mr. O’Riley informed the BCUC that “on Friday, September 29, we advised our Board and on Wednesday October 4th we advised the Commission through our IR responses”15 of the missed river diversion milestone and the increase in budget of $610 million. 55. The second reason the foreshadowed budget revision was inadequate is because Mr. O’Riley knew, or should have known, at the time that there were other material factors putting upward pressure on the budget. These pressures are particularly evident in the delay in the process related to the Generating Station and Spillway work—the second largest component of the project—discussed in greater detail in Section 6.3.2 of this report where it is shown that by September 30, 2017, BC Hydro knew contract costs were escalating. 56. Instead, Mr. O’Riley assured the BCUC that other large increases on the Site C capital cost would not take place in the future. “Construction challenges are not unusual on large multiyear infrastructure projects and they were not unexpected on Site C. We knew going into this project that there risks to the project and we made sure we had the resources and contingencies to manage the project. This is why we had one year of flow (sic) to address the risk of a diversion delay. There are additional cost risks on the project. We still have one major contract to procure the generating station and spillway contract, and we have about seven years of construction to go. However, nothing has occurred that would suggest to us we are facing the type of large overruns that have been speculated by some participants in this process, and in the Deloitte report.”16 (Emphasis added). 57. Less than two months later, BC Premier Horgan announced that Site C capital costs had escalated again, this time by almost $2 billion from BC Hydro’s October estimate of $8.945 billion to $10.7 billion—or by 20 per cent.

Ibid., page 1600, line 24 to page 1601, line 2.

Ibid, Page 1602, line 16-25.

BCUC Inquiry Respecting Site C, Technical Input Proceedings Vancouver, BC Hydro, Chris O’Riley, October 14, 2017, page 1605, lines 11-25.

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58. A paucity of information has been provided as to what has driven the additional $2 billion in project costs. The only information publicly provided in this regard was included in briefing material prepared by the BC government when it announced its decision to proceed with the project. It was confirmed in this material that the cost related to the missed river diversion continues to be $610 million while “future contracts projected to be higher than budgeted amounts.”17 59. Clearly, the budget revision exercise that took place in November determined that the additional $2 billion in cost was warranted, while on October 14, 2017, Mr. O’Riley told the Commission there would be no further budget increases. Either BC Hydro knew, or should have known, about the looming budget increases related to future contracts. 60. In summary, in less than three and a half months, Site C costs increased from $8.335 billion to $10.7 billion—an increase of almost 30 per cent. There still remains seven years of scheduled construction to complete the project. BC Hydro claims to have been caught unaware by the material increases in its costs. 61. It is my expert opinion that the overall budget estimation and cost control process of Site C’s budget, to date, by BC Hydro executives, has been mismanaged. BC Hydro’s executive is not capable of ensuring accurate estimation of costs or ensuring control over those costs. Neither is BC Hydro’s management able to anticipate when conditions will arise that will have a material impact on budget amounts. 62. The soundness of this expert opinion respecting a lack of project management capability is underscored by both BCUC and the Provincial Government. 63. BCUC determined in its final report tabled on November 1, 2017 that it could not accept BC Hydro’s budget of $9 billion. The Commission increased the likely capital cost of the Project to about $10 billion. Within six weeks, BCUC’s estimate became outdated. 64. The Provincial Government has concern over BC Hydro management’s ability to deliver on its revised $10.7 billion budget, as, notwithstanding a decision to allow BC Hydro to proceed with Site C, a “new Project Assurance Board – made up of BC Hydro, independent experts and government representatives – will provide enhanced oversight to future contract

Site C Technical Briefing, Don Wright, Deputy Minister to the Premier, December 11, 2017, page 16.

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procurement and management, project deliverables, environmental integrity, and quality assurance – all within the mandate of delivering the project on time and budget.”18 65. BCUC found that “For Site C, the inputs and assumptions that have the greatest impact on rates are the Site C total costs and the magnitude of the load.”19 The Commission determined that a $10 billion capital cost was a “reasonable point estimate to use in making its other findings required under the OIC.”20 66. BCUC found that, “BC Hydro’s mid load forecast to be excessively optimistic and considers it more appropriate to use the low load forecast in making our applicable determinations as required by the OIC. In addition, the Panel is of the view that there are risks that could result in demand being less than the low case.”21

5.2 Schedule Delays 67. In my second submission to the BCUC Site C Inquiry, I extensively documented that BC Hydro relied on two construction schedules to control, monitor and report progress on the Site C project. The first schedule BC Hydro was privately working towards relied upon activities that would deliver a 2023 in-service date, while the second was the publicly announced and provincially government approved in-service date schedule of 2024. 22 68. This situation was confirmed by the BCUC panel and its consultant’s Deloitte.23 69. BC Hydro presented a BC Hydro Final Investment Decision (FID) budget to the provincial government in December 2014. The capital cost it submitted was $7.96 billion with a 2023 in-service date. 70. The BC government changed the costs and timing for the project. 18

Office of the Premier, Site C Quick Facts and Mitigation Elements, December 11, 2017.

BCUC Inquiry Respecting Site C, Commission Final Report, A-24, November 1, 2017, page 9.

Ibid., page 122.

Ibid., page 77.

BCUC Inquiry Respecting Site C, Further Evaluation of the Need for the Site C Project, Marc Eliesen, F13-2, October 11, 2017. 23

BCUC Inquiry Respecting Site C, Commission Final Report, A-24, November 1, 2017, page 96

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71. The government added $375 million to the project cost of $7.96 billion to bring it to $8.335 billion reflecting an adjustment for PST of $200 million and inflation and interest cost. The budget was increased by a further $440 million reserve account to be held by Treasury Board to accommodate events outside of BC Hydro’s control. Thus the total budgeted cost rose from $7.96 billion to $8.775 billion. The government altered the in-service date by extending it to 2024. 72. BC Hydro accepted the increased budget allowance but failed to adhere to the 2024 inservice date which gave rise to part of the increase in costs. BC Hydro did not adjust its schedule to reflect a 2024 in-service date, but continued to award contracts reflecting a 2023 in-service date. Since the announcement of the Provincial FID in December 2014, the BC public believed BC Hydro was working to a 2024 in-service date, while BC Hydro continued to work to a 2023 in-service date. That is, BC Hydro was working with two sets of budgets and two schedules—its private set and the set that was publicly made available with the Provincial FID in 2014. 73. I have numerous years of experience working in utilities while major projects are constructed, such as Manitoba Hydro’s Limestone Generating Station. I have never experienced, nor have I heard about, a situation where there are two sets of budgets and two schedules. 74. BC Hydro informed the BCUC on October 4, 2017, that it “has encountered some geotechnical and construction challenges on the project and the risk to the river diversion has now materialized…we have now determined that we will not be able to meet the current timeline for river diversion in 2019.”24 75. When project milestones are missed, such as the planned river diversion, upon which contracts have been let, the cost to complete rises significantly. Since BC Hydro has always worked towards an in-service date of 2023, the failure to meet river diversion in 2019 has a significantly higher cost that if the target it was working toward for river diversion had been 2020. 76. It would be one thing if the schedule was a 2024 in-service date with a potential for an earlier diversion time line, but when the entire project is predicated on what is now a missed milestone, contractors have significant leverage. Claims mount and costs rise.

BCUC Inquiry Respecting Site C, BC Hydro Submission, F1-7, October 4, 2017, page 1.

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77. As noted by the BCUC Site C Inquiry Report, “…BC Hydro was working towards an inservice date of 2023, and with regards to that in-service date, the project is one year behind BC Hydro’s PMB (Performance Measurement Budget) schedule…Further the Panel finds there are significant risks that could prevent the project from remaining on schedule for a November 2024 in-service date.25

5.3 Site C Contracts 78. BC Hydro has divided the construction activities related to the Site C Project into subprojects, including Worker Accommodation, Early Works, Main Civil Works, Highway 29 realignment, Transmission, Turbines and Generators, and Generating Station and Spillways. 79. The main contracts to be awarded are Main Civil Works (MCW), Generating and Spillways (GSS) and Transmission.

5.3.1 Main Civil Works contract 80. The MCW contract is normally the largest contract to be tendered for any Hydro Generating Station project. The scope of this contract for Site C includes the construction of an earth fill dam, two diversion tunnels, and roller-compacted concrete foundation of the generating station and spillways. 81. The MCW contract has been publicly announced at $1.75 billion. It was awarded to Peace River Hydro Partners (PRHP), a consortium of Alberta based Petrowest Corporation (now in receivership), Spain’s Acciona Infrastructure Canada Inc., and South Korea’s Samsung C&T Canada Ltd. 82. The BCUC preliminary report on the Site C inquiry commented that “BC Hydro underestimated the cost of the main civil works contract which caused cost contingency to be committed when the contract was awarded.”26 83. The Commission’s consultants, Deloitte, reported that “PRHP may have significantly underbid the Project by [redacted] to [redacted. This may explain the claims that PRHP has

BCUC Inquiry Respecting Site C, Commission Final Report, A-24, November 1, 2017, page 108

BCUC Inquiry Respecting Site C, Commission Preliminary Report, A-13, September 20, 2017, page 29

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submitted to the Project to date to recuperate some of its loses. Deloitte believes PRHP may continue this trend as long as it cannot recover the losses.”27 84. In my preliminary report to the BCUC I noted that Petrowest Corporation, one of the JV partners of PRHP had gone into receivership. I raised that question as to how BC Hydro qualified Petrowest since a month after the contract was awarded the media reported that Petrowest was operating on “borrowed time from its lenders.” 28 BC Hydro did not provide an explanation as to how it was unable to determine Petrowest’s compromised financial position when it awarded the contract. 85. BC Hydro’s approach to qualifying contractors is an important issue particularly since corporate non-performance can have significant consequences for a major project, the implications of which cascade throughout the project time line and cost. The negative experience with Petrowest, and its effect on project costs and schedules, is evidence that BC Hydro has been derelict in its due diligence duties with respect to contractor vetting. 86. It is my expert opinion that the financial failure of Petrowest not only has created a period of instability that has contributed to PRHP’s inability to meet its planned work schedule in the short term, but that it will also continue to have a negative impact on project cost and budget at least through the medium-term. 87. There are serious and ongoing difficulties between BC Hydro management and the remaining PRHP management, with ongoing disagreements on MCW activities impacting construction costs and schedule. 88. BC Hydro and PRHP undertook a joint-constructibility review to develop options to recover schedule and maintain the 2019 river diversion milestone which was unsuccessful. The parties are in dispute over the “causes of the delays.”29 89. BC Hydro disclosed to BCUC that the, “…contractor has alleged…that there is global instability within the left bank works that it anticipates has caused a delay of approximately 1

BCUC Inquiry Respecting Site C, Deloitte LLP independent report—Site C Construction Report, A-8, page 38. 28

Financial Post, Petrowest Corp is operating on borrowed time from its lenders as EBIDA cut in half, December 30, 2015. 29

BCUC Inquiry Respecting Site C, Response to BCUC IR 3.20.0, F1-8, October 4, 2017, Question 2.3, page 2 of 2.

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year to its operations on the left bank. The contractor has alleged that the geotechnical conditions observed in the left bank differ from those disclosed by BC Hydro. BC Hydro disputes the Contractor’s allegations and has directed the Contractor to take all required steps to recover schedule pending the resolution of the dispute and on account of the Contractor’s Delay (sic). BC Hydro has notified the Contractor that it considers the Contractor to have failed to apply appropriate factors of safety and appropriately sequence and monitor its work when operating on the left bank, including when constructing its temporary haul roads.” 30 90. It is not uncommon for contractors to seek additional payment for changes to work, found conditions or construction delays. However, the number and severity of these claims and the stark differences in views between BC Hydro and PRHP reflect a dysfunctional relationship that is not conducive to construction of a large hydro dam. In my expert opinion, the acrimonious relationship between BC Hydro and PRHP has lead, and will continue to lead to significant costs increases and schedule impacts.

5.3.2 Generating Station and Spillway Work contract 91. The second largest budget item is the work required for the construction of the powerhouse, penstocks, spillways and power intakes for the generating station. This is identified as the Generating Station and Spillway Work (GSS). 92. The GSS related activity includes four separate contracts. These are the Generating Station and Spillworks Civil Works, Hydro-Mechanical Equipment, Powertrain Balance of Plant Equipment Supply, and Completion (Powertrain Balance of Plant Equipment Installation).31 93. Tendering process conditions with the GSS Civil Works contract (the first and largest of the four separate GSS contracts) have developed that lead to budget overruns. These have been documented by BC Hydro in its Quarterly Reports to the BCUC. 94. A Request for Proposals (RFP) for the GSS Civil Works was first issued in September 2016 with final award expected in July 2017. BC Hydro reported in its Quarterly Progress Report No. 5, that, “The Generating Station and Spillway Request for Proposals was issued to

BCUC Inquiry Respecting Site C, Round 2 Information Responses, F1-10, October 5, 2017, Question 2.7.0, page 5 of 6. 31

BC Hydro Estimate to complete by fiscal control budget.

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proponents in September 2016, with the initial draft contract. All four proponents attended a site inspection in September 2016.”32 95. In its Quarterly Progress Report No 6, BC Hydro indicated that one of the GSS Civil Works contract bidders had withdrawn leaving three remaining bidders and that the July date had been delayed three months to October 2017. Delay in procuring the contract adds to pricing pressures.33 96. In its Quarterly Progress Report No 7, BC Hydro indicated that awarding the GSS civil works contract would be further delayed to December 2017 with a Limited Notice to Proceed.34 It was indicated that although the procurement was delayed, construction milestones were unchanged. 97. In its Quarterly Progress Report No. 8, BC Hydro explained that, “Most procurement activities continue to move ahead and are on track. However, award of the Generating Station & Spillways related contracts are delayed due to updates to the contract in response to proponent feedback and changes to the construction schedule.” 35 98. In its most recent Quarterly Progress Report No. 9, that covers June - September 2017, BC Hydro states that, “The complete Generating Station & Spillways Civil Works Request for Proposals with final draft contract was issued on September 1, 2017. A revised schedule was issued to the proponents on October 14, 2017 with extended in-service-dates. At the request of the proponents, the Request for Proposals close date was extended to November 16, 2017.”36 99. BC Hydro announced on January 6, 2018, that the AECON-Flatiron-Dragados-EBC Partnership (AFDE Partnership) had been selected as the preferred contractor for the Generating and Spillway Civil Work contract (GSS Civil Work).

BC Hydro, PUBLIC Quarterly Progress Report No. 5 – July to September 2016 (Report), page 2

BC Hydro, PUBLIC Quarterly Progress Report No. 6 – October to December 2016 (Report)page 3 and 32. 34

BC Hydro, PUBLIC Quarterly Progress Report No. 7 – January to March 2017 (Report), page 30.

BC Hydro, PUBLIC Quarterly Progress Report No. 8 – April to June 2017 (Report), page 4.

BC Hydro, PUBLIC Quarterly Progress Report No. 9 - July to September 2017, page 13.

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100.AFDE Partnership is a joint venture owned 30 per cent by the AECON Group Inc., 27.5 per cent by Flatiron Constructors Canada LTD., 27.5 per cent by Dragados Canada Inc., and 15 per cent by EBC Inc. 101.The GSS Civil Work contract has yet to be negotiated with work expected to commence in Spring 2018. 102.BC Hydro has recently experienced major contract problems with one of the companies of the GSS Civil Work joint-venture, Flatiron Contractors Canada Ltd. The company when in a joint-venture with Graham Construction Ltd was awarded the contract for the Interior to Lower Mainland Transmission Line which ended up significantly over budget and delayed. The former BC Minister of Energy stated that “serious delays” were triggered by faulty steel towers, problems with contractor’s environmental management and protection plans and turnover with its contractors. BC Hydro was forced to take over construction of one of the most technical portions of the line, with “BC Hydro characterizing (the problem) as a failure to perform.”37 103.BC Hydro has not disclosed the final costs of the Interior to Lower Mainland Transmission Line as it continues arbitration related to it. It is surprising that BC Hydro’s due diligence would still qualify Flatiron as part of the GSS Civil Work joint-venture. 104.There was an unintentional release of a report prepared by the BCUC Commission’s consultant Deloitte during the recent inquiry. As a result, it is publicly known through various media outlets that the GSS activity aggregated for all four portions was estimated by BC Hydro, as recently as August 2017, to cost $1.255 billion. 105.In my expert opinion, the public estimate for the GSS related work is much too low. The negotiations between BC Hydro and the partnership for the GSS Civil Work portion is expected at the end of February. It will not be surprising when the value of the GSS Civil Work portion is released upon completion of the negotiations, that the price is over $2 billion —a 50 to 70 per cent increase over BC Hydro’s estimate for all four segments of August 2017. 106.There have been representations made by the Provincial government that BC Hydro’s estimate for untendered contracts has been increased as part of the upward revision of total

Globe and Mail, March 25, 2017, Conflicts mar BC Hydro Transmission Line, completion still unknown.

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project costs to $10.7 billion. However, what is not clear is how much of the upward revision is related to the GSS Civil Work contract and whether, after negotiation it will be sufficient. 107.The increase of the GSS Civil Work contract from FID in 2014, to negotiated contract anticipated for February 2018, by a material amount, is another example of BC Hydro’s inability to properly forecast cost related to major contracts.

5.3.3 Transmission 108. The transmission scope of work is the third largest major contract for the construction of Site C and relates to the construction of transmission lines SL5 and SL6. BC Hydro has stated that requests for proposals for that contract went out in September 2017. 109.BC Hydro’s recent experience with the construction of large scale transmission lines raises considerable concern regarding the company’s due diligence and project management capabilities respecting transmission construction. These include: i) Northwest Transmission Line was constructed to supply electricity to mines and other developments in the northwest part of the province. Its original budget was $395 million, while the project came in at $716 million—81 percent over budget. ii) Interior to Lower Mainland Transmission Project constructed to deliver new generating capacity from upgrades at BC Hydro’s Mica and Revelstoke dams. Its original budget was $600 million but came in at $743 million—24 percent over budget. (The final cost will likely be higher pending the BC Hydro/Flatiron arbitration). iii) Dawson Creek/Chetwynd Line in the northeast was originally budgeted at $255 million and came in at $296 million—16 percent over budget. iv) Iskut Extension Line primarily to provide electricity to Imperial Metal’s Red Chris Mine was originally budgeted at $130 million and came in at $209 million—61 percent over budget.38

BCUC Inquiry Respecting Site C, An Evaluation of the Need for the Site C Project, Marc Eliesen, August 16, 2017, page 8.

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110.Regarding the proposed Site C Transmission contract BC Hydro has noted that, “There are a limited number of contractors in Canada with the capability and capacity to bid on the 500 kv transmission and high voltage substation work.”39 111.BC Hydro also acknowledges that “Going forward, most of the risk retained by BC Hydro will be in establishing access and clearing prior to commencement of construction of the foundations for the transmission line towers. The transmission line is 75 kilometers (sic) long and the environmental compliance and geotechnical issues cannot be completely known in advance of the construction.” 40 112.To date, BC Hydro has been cited for a number of instances of non-compliance with the Provincial Environmental Assessment Office under the terms of its environmental permits associated with the 344 kilometre Northwest Transmission Line and the 244 kilometre Interior to Lower Mainland Transmission Line. 113.The extensive instances of non-compliance include a lack of environmental monitoring and oversight, a stop-order to prevent damage to waterways, a lack of sediment and erosion control, and smouldering burn piles during a fire prohibition.41

5.3.4 Major Contracts Summary 114.There is a deficiency in the necessary experience and due diligence among the executive and Board of Directors at BC Hydro required for managing Site C. 115.BC Hydro’s mismanagement of the project cost and schedule, and its inability to anticipate or address critical management issues related to MCW has resulted in major cost increases and schedule delay. Given the acknowledged disagreements between the MCW contractor and BC Hydro does not provide a healthy cost environment for the future years of construction activity.

BCUC Inquiry Respecting Site C, Round 2 Information Responses, F1-10, October 5, 2017, Question 2.10.0, page 2 of 3. 40

Ibid.

Environmental Assessment Office, Northwest Transmission Line Compliance Inspection Reports and Interior-Lower Mainland Transmission Line Inspection Reports

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116.Furthermore, the original estimate for the GSS and the process conditions for the GSS Civil Work contract suggest major upward revisions in the budget price of that component of the project. 117.BC Hydro’s major cost overruns and schedule delays in building large transmission lines does not provide any confidence that the Site C transmission portion of the project will come in on budget or on time. 118.All the major factors point toward a budget for Site C well beyond $10.7 billion—likely in the range of $12 billion or more, and a delay in the project’s in-service date by at least another year.

Dated: January 25, 2018

__________________________________ Marc Eliesen

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Appendix A Marc

Eliesen — Resume

Mr. Eliesen has had a lengthy and successful professional career in senior executive positions both in the energy and utility business and in public service. He has worked as the Chief Executive Officer for a wide number of Crown Corporations, private joint ventures and at the Deputy Minister level for departments of Government. In addition, Mr. Eliesen has provided strategic business management and public policy advice to senior personnel in the private sector and in government on a wide variety of issues, with emphasis on energy, investment, industrial development and international trade. In the energy and electricity utility business, Mr. Eliesen has held the following senior positions: • Chairman and President of BC International Power Group Inc., a joint venture of Asea Brown Boveri Inc., Westcoast Energy Inc., and BC Trade Development Co., (1994 – 1997) • President and Chief Executive Officer of the British Columbia Hydro and Power Authority, (1992 – 1994) • Chairman and Chief Executive Officer, Ontario Hydro, (1991 – 1992) • Deputy Minister of Energy, Province of Ontario, (1990 – 1991) • Chairman, board of Directors, Manitoba Hydro, (1984 – 1988) • Deputy Minister, Energy and Mines, Manitoba, (1982 – 1984) • Chairman and Chief Executive Officer, Manitoba Energy Authority, (1982 – 1988) Mr. Eliesen started in public service as an economist with the Federal Department of Finance and the Federal Department of Industry (1966 – 1970). He became Assistant Deputy Minister of Finance in Manitoba and then Deputy Minister to the Premier of Manitoba and Planning Secretary to the Cabinet (1970 – 1974). He was subsequently appointed Deputy Minister to the Premier of British Columbia and Planning Secretary to the Cabinet (1974-1975). In summary, Mr. Eliesen has worked for seven governments in Canada, both federal and provincial, and has been a Deputy Minister of Government for nine Ministers of the Crown. During his professional career, Mr. Eliesen has been a Partner and National Director of Government Services with the management consulting firm of Peat Marwick Stevenson and Kellogg (KPMG) and has been a Corporate Director of many organizations and businesses, including Suncor Corporation, Manitoba Hydro, Ontario Hydro and BC Hydro. Since 1998, Mr. Eliesen has provided consulting services to a variety of governments, First Nations, and private companies in the energy development field. He has written numerous reports and most recently made two submissions and a technical presentation to the British Columbia Utilities Commission related to its inquiry into Site C.

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Appendix B

Bibliography

B.C. Hydro, (August 14, 2017), Responses to Questions Raised by Deloitte B.C. Hydro, (August 21, 2017), Responses to Questions Raised by Deloitte B.C. Hydro, (August 30, 2017), Exhibit F1-1, Submission to the British Columbia Utilities Commission Inquiry into the Site C Clean Energy Project B.C. Hydro, (December 20, 2017), Public Quarterly Progress Report No. 9 July to September 2017 B.C. Hydro, (December 2014), Business Case for Investment Decision by BC Hydro Board of Directors B.C. Hydro, (December 21, 2016), Public Quarterly Progress Report No. 5 July to September 2016 B.C. Hydro, (June 16, 2017), Public Quarterly Progress Report No. 7 January to March 2017 B.C. Hydro, (June 6, 2016), Public Quarterly Progress Report No. 3 F2016 Fourth Quarter January 2016 to March 2016 B.C. Hydro, (June 7, 2016), Overview of 2014 Site C Cost Estimate Methodology and Approval B.C. Hydro, (March 14, 2017), Public Quarterly Progress Report No. 6 October to December 2016 B.C. Hydro, (May 23, 2017), Fiscal 2017 - Fiscal 2019 Revenue Requirements Application, Final Submissions of BC Hydro B.C. Hydro, (October 3, 2017), BCUC Inquiry Respecting Site C Preliminary Report— BC Hydro Responses B.C. Hydro, (October 3, 2017), Exhibit F1-6, Information Responses to BCUC Questions Round 2 B.C. Hydro, (October 4, 2017), Exhibit F1-7, Letter to BCUC from Chris O’Riley B.C. Hydro, (October 4, 2017), Exhibit F1-8, Information Responses to BCUC Questions Round 2

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B.C. Hydro, (October 5, 2017), Exhibit F1-10, Information Responses to BCUC Questions Round 2 B.C. Hydro, (September 18, 2017), Exhibit F1-4, Information Responses to BCUC Questions Round 2 B.C. Hydro, (September 29, 2017), Public Quarterly Progress Report No. 8 April to June 2017 B.C. Hydro, 2015/16 – 2017/18 Service Plan B.C. Hydro, Information on Site C Inquiry, Documents Related to Site C Inquiry, Website: https://www.sitecproject.com/submissions British Columbia Utilities Commission, (2017), Participant Submissions and Comments Exhibits F1-1 to F316-1 British Columbia Utilities Commission, (July 27, 2009 ), Decision, British Columbia Hydro and Power Authority and an Application for Approval of the 2008 Long Term Acquisition Plan British Columbia Utilities Commission, (July 27, 2009), Decision, An Application for Approval of the 2008 Long-term Acquisition Plan British Columbia Utilities Commission, (May 3, 1983), Decision, Site C Report British Columbia Utilities Commission, (November 1, 2014), Exhibit A-24, Site C Commission Final Report British Columbia Utilities Commission, (October 14, 2017), Technical Input Proceedings —Volume 14 British Columbia Utilities Commission, (September 20, 2017), Exhibit A-13, British Columbia Hydro and Power Authority – British Columbia Utilities Commission Inquiry Respecting Site C – Project No. 1598922 Preliminary Report CBC News, (June 23, 2017), Labrador’s Muskrat Falls price tag now $12.7B: Worse than 1969 Quebec deal, CEO says CCPA, Parfitt, Ben, (May 22, 2016),The unintended consequence of massive BC Hydro rate increases Deloitte LLP, (September 8, 2017), Exhibit A-8, Independent Report—Site C, Construction Review

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Deloitte LLP, (September 8, 2017), Exhibit A-9, Independent Report—Site C, Alternative Resource Options and Load Forecast Assessment Ernst & Young BTY, (September 13, 2016), BC Hydro Site C Clean Energy Project – Infrastructure risk and cost management report Financial Post, (December 30, 2015), Petrowest Corp. is operating on borrowed time from its lenders as EBITDA cut in half Globe and Mail, (March 25, 2017), Conflicts mar BC Hydro Transmission Line, completion still unknown KPMG, (October 20, 2014), Site C Clean Energy Project Model Review Manitoba Hydro, (March 7, 2017), Control budget for Keeyask Generating Station revised Moody’s, (January 23, 2017), Credit Opinion, Province of British Columbia Update to Discussion of Key Credit Factors Palmer, Vaughn, (August 2, 2017), Site C review leaves door open to mothball entire project Petrowest Corporation, ( August 11, 2017), Press Release, Petrowest announces receipt of PRHP Termination Notice Petrowest Corporation, (August 13, 2017), Press Release, Petrowest announces Demand Notice and Consent to Receivership Province of British Columbia, (April 19, 2010), Press Release, Province Announces Site C Clean Energy Project Province of British Columbia, (August 2, 2017), Order in Council 244 Province of British Columbia, (December 11, 2017), Government will complete Site C construction, will not burden taxpayers of BC Hydro customers with previous government’s debt Province of British Columbia, (December 11, 2017), Site C Technical Briefing Province of British Columbia, (December 16, 2014), Site C to provide more than 100 years of affordable, reliable clean power Province of British Columbia, (July 18, 2017), Premier John Horgan to mandate letter to the Honourable Michelle Mungall Minister of Energy, Mines, and Petroleum Resources

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Province of British Columbia, (May 31, 2013), Clean Energy Act Province of British Columbia, (October 2014), Site C Capital Cost Estimate Province of British Columbia, Auditor General’s Report (February 2017), The 2015/16 Public Accounts and the Auditor General’s findings Province of British Columbia, Environmental Assessment Office, Interior-Lower Mainland Transmission Line Inspection Reports Province of British Columbia, Environmental Assessment Office, Northwest Transmission Line Compliance Inspection Reports Province of British Columbia, N.R. Catto, (May 1991), Quarternary Geology and Landforms of the Eastern Peace River Region British Columbia NTS 94A/1,2,7,8 Saїd Business School, University of Oxford, (March 2014), New research from Oxford University reveals severe cost and schedule overruns for large hydro-electric dams.

Page 30 of 30

Report Title: Peace Site C Summary Status Report Issuer: BC Hydro and Power Authority Date: March 1991 NOTE TO READER: INFORMATION CONTAINED IN THIS REPORT MAY BE OUT OF DATE AND BC HYDRO MAKES NO STATEMENT ABOUT ITS ACCURACY OR COMPLETENESS. USE OF THIS REPORT AND/OR ITS CONTENTS IS AT THE USER’S OWN RISK. During Stage 2 of the Site C Project, studies are underway to update many of the historical studies and information known about the project. The potential Site C project, as originally conceived, will be updated to reflect current information and to incorporate new ideas brought forward by communities, First Nations, regulatory agencies and stakeholders. Today’s approach to Site C will consider environmental concerns, impacts to land, and opportunities for community benefits, and will update design, financial and technical work.

PEACE SITE C SUMNLARY STATUS REPORT A 900 W1W ELECTRICAL GENERATION FACILITY AND TWO 5001tV TRANSMISSION LINES AT SITE C ON THE PEACE RIVER IN BRITISH COLUWIBIA

TABLE OF CONTENTS

1.0

Introduction .......................................................................................... 1 - 1

2.0

Project Description and Schedule .................................................... 2

3.0

Project Rationale.................................................................................3 - 1

4.0

Public Consultation Program............................................................ 4 - 1

5.0

Engineering Studies............................................................................ 5

6.0

Er~vironmentalStudies........................................................................6

B.C. Hydro and Power Authority March 1991

SECTION 1.0

INTRODUCTION

Hydro previously made application f o r an Energy Project C e r t i f i c a t e (EPC) f o r the Peace S i t e C Project pursuant t o the U t i l i t i e s Commission Act. The application was made in 1980 and reviewed by the British Columbia U t i l i t i e s Commission (BCUC) in public hearings from November 1981 t o November 1982. B.C.

BCUC recommended t h a t an EPC not be issued until two conditions were met:

t h a t the load forecast be acceptable and demonstrate the need t o begin construction of S i t e C in order t o avoid supply deficiencies; and t h a t S i t e C be demonstrated as the best project based on a comparison of t o t a l engineering, construction, environmental and other social costs of alternative projects. The B.C. Cabinet refused the issue of the C e r t i f i c a t e in 1983. I n 1989 B . C . Hydro was forecasting the possible need f o r new supply by j u s t before the turn of the century and therefore undertook preparatory The objective was t o shorten the work on the Peace S i t e C Project. project lead time so that S i t e C would be a viable contingency option t o meet any early supply need. The circumstances which would require an early addition t o B . C . Hydro's Electrical System have not transpi red. Nonetheless, B . C . Hydro wishes t o maintain S i t e C as a viable option f o r the future.

This report out1 ines B . C . Hydro's current s t a t e of preparedness on S i t e C , organized in accordance with the Guide t o the Energy Project Review Process. I t includes:

a description of the project and a proposed construction schedule

a summary of the rationale f o r S i t e C as an option f o r the future

a summary of public consultation carried out t o date and t o be continued

a summary of the engineering and environmental studies carried out t o date

The report i s accompanied by copies of reports generated during the These reports generally update current preparatory phase f o r S i t e C . e a r l i e r material, submitted during the previous application process, much of which i s s t i l l relevant. No environmental issues have been identified which, in the opinion of B . C . Hydro, would negate the BCUC finding s e t out in the 1983 S i t e C Report a t page 268. "In sum, while the Commission recognizes that major impacts will r e s u l t from the S i t e C project, the Commission concludes t h a t they are not so large as t o make them unacceptable. Provided t h a t appropriate conditions are placed on Hydro and that the government responds t o the special needs created in the region, the impacts can be successfully and acceptably managed. "

For further information please contact: Mr. Lachlan Russel Project Manager B.C. Hydro and Power Authority 14th Floor, 1125 Howe Street Vancouver, British Columbia V6Z 2K8 Telephone: (604) 633-3534

SECTION 2.0

2.1

PROJECT DESCRIPTION AND SCHEDULE

GENERATING STATION

2.1.1 GENERAL The Site C dam and power station, proposed to be located 62 km from the B.C.-Alberta border, would be the third facility in the B.C. Hydro system to utilize the Peace River. The W.A.C. Bennett Dam is located about 177 km upstream of the British Columbia-Alberta border. The associated Wi 1 1 iston Lake reservoir has the capacity to regulate the flow in the Peace River, which powers two generating stations at present. The G.M. Shrum Generating Station, located at 183 m high W.A.C. Bennett Dam, houses 10 generating units with a maximum continuous generating capacity of 2730 megawatts (MW). The Peace Canyon hydroelectric facilities, located 22 km downstream of the W.A.C. Bennett Dam, comprise a 50 m high dam and a four-unit powerplant with maximum generating capacity of 700 MW. The Peace Site C Project would be a hydroelectric installation converting the potential energy of the flow of the Peace River at Site C into electrical energy in a 900 MW capacity power station. Energy studies of the combined operation of the upstream stations, G.M. Shrum and Peace Canyon, and of the potential Site C plant have demonstrated that Site C would have an annual average long-term production of 4710 GWh. PROJECT SETTING

SITE SPECIFIC

Site Geoloav The proposed Site C damsite and reservoir are located where the Peace River has carved a valley a few kilometres wide and 190 to 2 3 0 m deep in a relatively flat to slightly rolling plain. The damsite is located about 7 km southwest of the city of Fort St. John

and 0.8 km downstream of the mouth of the Moberly River (Fig. 2-1). The s i t e of i n s t a l l a t i o n s was chosen as the most favourable of a s e r i e s of alternatives studied along the course of the Peace River downstream from Peace Canyon. Base rock a t the s i t e consists o f relatively s o f t horizontally bedded shale which has an upper surface a t elevation 460 m and which has been eroded t o a depth of approximately 60 m t o form a wide f l a t valley. Across the valley f l o o r the rock i s overlain by some 10 m of a1 luvium which contains the meandering flow channel of the r i v e r . Above the rock surface on both sides of the valley are interbedded overburden deposits of clay, s i l t , sand and gravel which have an overall thickness of 140 m and an upper surface a t approximately elevation 600 m. The eroded surface of the rock i s exposed in the lower 50 m on both banks, and a gravel covered mid-slope t e r r a c e occurs on the south bank a t the approximate level of the dam c r e s t . To be addressed in the design of the dam and associated works i s a s e r i e s of weak f l a t seams present in the bedrock. The valley slopes and terraces are wooded. Many shal low s l ides have occurred in the overburden material, particularly on the north bank. Hvdrol oav Detailed analyses have been made of meteorological and hydrological records from sub-basins forming the S i t e C drainage area. This includes the Williston reservoir basin as well as the local t r i b u t a r i e s below Williston which contribute t o the flow a t S i t e C . An estimate of the Probable Maximum Precipitation f o r the basin has been developed and from t h i s the Probable Maximum Flood (PMF) f o r S i t e C has been calculated. With the allowance f o r the regulatory e f f e c t s of the Williston Reservoir, the peak flow of the PMF a t Taking into account S i t e C will be approximately 18,200 m3/s. historical floods and the extremes in operating conditions of Wil liston reservoir, the Project Design Flood (PDF) has been

Figure

2-1

REGIONAL CONTEXT OF SITE C PROJECT

calculated at 11,900 m3/s. This measurement has been used to determine the proportions of the spillway. The reservoir and discharge faci 1 ities have been designed to accommodate both the PMF and PDF. During the early years of construction and until the dam embankment has reached the level of the cofferdam, the diversion works would be capable of passing a flood which has a return period of 50 years. 2.1.3 PROJECT FEATURES

The project would comprise a zoned earthfill dam across the river with a gated spillway, a power intake structure, a powerhouse and switchgear facilities on the south bank. A project road from the north bank is planned to cross the river by bridge 4 km downstream from the site, and would provide construction period access and permanent access to the powerstation and spillway (Fig. 2 - 2 ) . The main project components are described below. Earthfill Dam The dam would be designed as a zoned embankment consisting of a central impervious core with outer shells of sands and gravels. It would extend about 1100 m long at the crest and 60 m high above river level. The cofferdams, which form part of the temporary river diversion works, would be incorporated into the upstream and downstream toes of the main embankment. The base of the impervious core would be set in a trench excavated through the alluvium and into the base rock to provide a water tight cut-off. The dam embankment, i ncl udi ng the cofferdams, would be constructed of materials obtained from excavations for the works and from selected borrow areas. The design will ensure that the structure and foundation rock would accept all loads with complete safety.

CONSTRUCTION ACCESS AND PERMANENT ROADS TO THE DAM SITE AT SITE C

LEGEND permanent road ---=

temporary road

Elevations in metres ASL.

Diversion Tunnels and Low Level Outlet During construction of the dam, spillway and power i n s t a l l a t i o n s ( a t least until the f i r s t turbine i s ready for t e s t i n g ) , the r i v e r would be diverted through two 9.8 m diameter concrete 1 ined tunnels in the north abutment. Each tunnel would be about 650 m l o n g and have a gated concrete intake structure a t the upstream end. Embankment cofferdams near the tunnel intakes and o u t l e t s would protect the dam working areas during the diversion period. When storage i s t o commence, one tunnel would be closed using the intake gate and permanently blocked with a concrete plug. During f i l l i n g and until the reservoir reaches the spillway c r e s t l e v e l , water would be released through the second tunnel t o s a t i s f y downstream requirements. Subsequently t h i s tunnel would also be closed and p l ugged

Reservoir The reservoir would flood 46 km2 of land t o create a t o t a l water surface of 94.4 km' with a maximum normal operating level

461.8 m . I t would extend upstream f o r a distance of 83 km t o the o u t l e t of the Peace Canyon generation s t a t i o n . A t the S i t e C dam, the water depth would be 52 m and the gross volume of the storage would be 2310 million m3/s. (See Section 2.1.7 f o r Operation of S i t e C Reservoir)

The reservoir created by a dam a t the S i t e C would inundate approximately 23 km of Highway 29 between Hudson's Hope and Bear Flats. The major affected sections of the highway would be near Lynx Creek, Farrell Creek, Cache Creek and the Halfway River (Fig. 2-3). Preliminary studies by B.C. Hydro and the Ministry of Highways have resulted in the proposed re-alignment of Highway 29. This realignment and construction would impact surrounding landowners, 23 known heritage resource s i t e s , as well as recreational use and access a1 ong the reservoi r .

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LEGEND

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vs proposed highway relocation

......mm, existing highway

SCHEMATIC OF HIGHWAY 29 REALIGNMENT

ifiSii reservoir 55*

river mileage from B.C./Alberta border

Spillway The spillway would be adjacent t o the dam on the south abutment. I t would have a gated c r e s t structure with an inclined concrete-lined chute leading t o a submerged "hydraulic j u m p " type energy d i s s i p a t o r near the downstream toe of the dam. The dissipator would be designed t o absorb s u f f i c i e n t energy from the spillway discharge t o ensure t h a t downstream erosion would not endanger the dam or powerstation. The spillway, with s i l l a t elevation 446.5 m , would be f i t t e d with s i x radial gates. I t would be designed t o pass the design flood of 11,900 m3/s with the reservoir a t elevation 461.8 m and would be capable of passing the probable maximum flood with the reservoir a t elevation 466.3 m , 4.5 m above normal maximum operating level. Due t o the control exercised by the Williston Reservoir upstream on the Peace River and the adoption of flood forecasting procedures, operation of the S i t e C spillway would be an infrequent event when the power plant i s f u l l y commissioned. Powerplant and Switching F a c i l i t i e s The intake s t r u c t u r e for the powerplant would be in l i n e with, and adjacent t o , the spillway structure. The intake channel would be common t o the intake structure and the spillway. The intake s t r u c t u r e , approximately 400 m long and 45 m high, would consist of six separately gated openings each connected through a s t e e l penstock t o the scroll case of a Francis turbine housed in the powerstation downstream. The 9.35 m diameter penstocks would be encased in concrete and partly buried in granular backfill behind the intake structure. The surface powerstation would contain s i x units rated a t 150 MW each ( t o t a l 900 MW) under a head of 48.4 m. The t o t a l discharge under t h i s head would be approximately 2200 m3/s.

A l t h o u g h t h e s t a t i o n would be operated r e m o t e l y f r o m t h e G.M.

Shrum

g e n e r a t i n g s t a t i o n upstream, o r f r o m t h e Burnaby Mountain System C o n t r o l C e n t r e near Vancouver,

a c o n t r o l room f o r l o c a l c o n t r o l

would be p r o v i d e d i n t h e s e r v i c e bay.

Following transformation t o

138 kV, power f r o m t h e g e n e r a t o r s would be d e l i v e r e d by c a b l e t o t h e switchgear

building

located

platform

excavated

overburden s l o p e above and t o t h e south o f t h e power s t a t i o n .

the From

h e r e t h e o u t p u t f r o m t h e p l a n t would be d e l i v e r e d t o t h e Peace Canyon S w i t c h y a r d by two 500 kV t r a n s m i s s i o n l i n e s and t o F o r t S t . John by t h e e x i s t i n g 138 Kv l i n e . 2.1.4

SIGNIFICANT CHANGES S I N C E 1980 No s i g n i f i c a n t changes t o t h e p r o j e c t have been i n t r o d u c e d s i n c e 1980,

a l t h o u g h t h e accumulation of

additional

hydrological

and

g e o l o g i c a l d a t a i n t h e i n t e r v e n i n g p e r i o d has l e d t o some d e s i g n refinements.

F o r example, t h e d i v e r s i o n t u n n e l s have been reduced

i n s i z e and t h e c o n f i g u r a t i o n o f t h e cofferdams t o be used f o r c o n s t r u c t i o n has been m o d i f i e d .

There would a l s o be adjustments i n

t h e a l i g n m e n t s o f some o f t h e access roads i n t h e s i t e area as w e l l as t h e s i t i n g o f some of t h e c o n s t r u c t i o n f a c i l i t i e s . 2.1.5. PROJECT SCHEDULE C u r r e n t s c h e d u l i n g s t u d i e s s t i l l t o be completed, i n d i c a t e t h a t an 86 month p e r i o d ( 7 y e a r s , 2 months) would be r e q u i r e d f r o m t h e d a t e o f issue o f tender o f t h e f i r s t s i t e construction contracts t o t h e i n - s e r v i c e d a t e of t h e f i r s t two u n i t s ( F i g . 2 - 4 ) . B.C. Hydro r e s o u r c e p l a n n i n g a n t i c i p a t e s an s i n - s e r v i c e d a t e f o r t h e p r o j e c t o f 1 December i n t h e y e a r t h a t energy i s f o r e c a s t t o b e available.

Given t h e a n t i c i p a t e d c o n s t r u c t i o n p e r i o d , a 1 December

i n - s e r v i c e d a t e would r e q u i r e t h a t t h e f i r s t s i t e c o n s t r u c t i o n c o n t r a c t s be i s s u e d f o r ' t e n d e r on 1 October, 7 y e a r s and 2 months e a r l i e r t h a n t h e i n - s e r v i c e date.

T h i s would a1 l o w about s i x months

t i n e f o r submission o f t e n d e r s , award o f c o n t r a c t s and m o b i l i z a t i o n

44 ACTIVITY

YEAR 1

PROJECT APPROVAL

PEACE RIVER BRIDGE 6 ACCESS ROADS CAMP 6 OFFICES HIGHWAY RELOCATION RESERVOIR CLEARING

DIVERSION TUNNELS

EARTHFILL DAM COMMENCE RESERVOIR F I L L I N G

SPILLWAY STRUCTURE INTAKE STRUCTURE GRAVITY SECTIONS f TRAINING WALLS POWERPLANT STRUCTURE POWERPLANT COMPLETION

INSTALL TURBINES INSTALL GENERATORS UNIT Yi62 I N SERVICE UNIT Y3 I N SERVICE UNIT Y4 I N SERVICE UNIT #5 I N SERVICE UNIT 16 I N SERVICE

TRANSMISSION LINES f PEACE CANYON SUBSTATION T/L 6 SUBSTATION READY FOR SERVICE

YEAR 2

YEAR 3

YEAR 4

YEAR 5

YEAR 6

YEAR 7

YEAR'8

over the winter so that commencement of on-site construction work could take place in the spring, approximately 1 April, and the use of the f u l l construction season of the f i r s t year would be assured. CONSTRUCTION The f i r s t major construction a c t i v i t i e s would be creation of access t o the project s i t e , construction of the labour camp and excavations on the north and south banks of the r i v e r . I n i t i a l excavations on the north bank would establish upstream a n d downstream portals f o r the diversion tunnels t o permit a s t a r t on underground excavation. The intake and o u t l e t channels would be isolated from the r i v e r by local cofferdams. Excavations on the south bank would remove a large volume of b u l k excavation before award of the f i n a l construction contracts t o complete the excavations and build the concrete structures. I n i t i a l on-site construction contracts and turbine and generator design, supply and i n s t a l l a t i o n contracts would be simultaneously tendered. Closure of the cofferdams t o divert the r i v e r t o allow construction of the e a r t h f i l l embankment would take place in the f a l l of the third year of construction. The completed diversion tunnels would be opened and the river channel blocked with upstream and downstream cofferdams. After excavation of the riverbed and preparation of the foundations, the main e a r t h f i l l dam would be b u i l t . The construction period f o r e a r t h f i l l would be r e s t r i c t e d by seasonal weather variations b u t would be completed by the s t a r t of summer of the seventh year. One diversion tunnel would then be closed t o permit reservoir f i 11 ing whi l e required r i v e r flows are maintained through the other tunnel. When the reservoir level reaches the spi 1 lway overflow level the other diversion tunnel would be closed and the r i v e r flows would be maintained through the spillway or through the generating units. Following excavations on the south bank of the r i v e r , s t a r t i n g in spring of year four, the major powerplant and spillway concrete

structures would be b u i l t . Progress would be scheduled so that i n s t a l l a t i o n of the turbines could begin a t the end of year f i v e . The f i r s t two units would be available f o r t e s t i n g in the f a l l of year seven when water i s available from the reservoir. The unit testing would be completed and commercial operation could s t a r t by 1 December of year seven. Work areas and borrow p i t s used during construction would be graded and seeded in an appropriate manner when these areas are no longer required. Although a weighted average l i f e of 70 years has been used as the cessation of economic v i a b i l i t y of such dams i t i s estimated t h a t the actual project l i f e may be many times greater. Even i f substantial sedimentation occurs in the reservoir over a few hundred years, the project could continue in operation. 2 . 1 . 7 OPERATIONS AND MAINTENANCE

The S i t e C plant would be operated t o meet B . C . Hydro system load requirements in a manner consistent with the upstream p l a n t s , G.M. Shrum (GMS) and Peace Canyon (PCN) These p l ants are expected t o continue t o provide a significant amount (40%) of the system energy generation and have s u f f i c i e n t f l e x i b i l i t y and capacity t o meet a variable system 1 oad with f 1 uctuations over periods ranging from hours t o years. These changes in generation t o meet system loads would mean t h a t the S i t e C outflows would siinilarly change.

Since PCN and S i t e C have limited storage available f o r the reregulation, or modification, of upstream plant outflows, or f o r the regulation of inflows from t r i b u t a r i e s , and in order t o prevent o r reduce s p i l l a t these projects, the reservoir levels a t PCN and S i t e C are expected t o fluctuate. The amount of the reservoir fluctuations would vary in response t o upstream discharges, local inflows, and available generating units. The fluctuations could be daily, weekly, and seasonally. The expected daily operating range of fluctuation f o r S i t e C based on past experience a t PCN and Revelstoke, would be two meters or less f o r 80% of the time.

However, drawdowns u p t o s i x meters or more could occur f o r emergency or unusual system conditions (e.g. loss or r e s t r i c t i o n of generating units a t one of the projects, r e s t r i c t i o n s on system generation or transmission f a c i l i t i e s , e t c . ) or p r i o r t o the f r e s h e t , b u t with an expected frequency of less than 1%of the time. Infrequently, the S i t e C reservoir could be surcharged above the normal maximum reservoir level due t o unexpected r a i n f a l l runoff from the local basin. The S i t e C tailwater levels would vary with plant discharges. The magnitude, fluctuations, and distributions of plant discharge between generation releases and s p i l l releases, would depend upon available generating units, a1 l o w a b l e reservoir fluctuations,including reservoir surcharge, emergency o r unusual system conditions, and local basin inflow conditions. During the freshet i t may be necessary f o r plant discharge t o increase significantly t o pass floods on the Halfway,and the Moberly r i v e r s . Reservoir f i l l i n g would be carried out under the direction of the B . C . Hydro Engineering Department t o ensure t h a t controlled f i l l i n g occurred with a l l the necessary monitoring. Consistent with other hydroelectric generating units of simi 1 a r s i z e and design in B . C . Hydro's system, the maintenance on the S i t e C units would probably be carried out as follows f o r each unit: s i x weeks f o r major maintenance work in the f i r s t yearland two weeks f o r minor work and warranty inspection in the second year, and four weeks a1 ternate years t h e r e a f t e r . 2.2

SITE C 500 kV TRANSMISSION L I N E

2.2.1 GENERAL The two proposed 500 kV transmission lines would run from the proposed S i t e C hydroelectric development near F t . S t . John t o the existing B . C . Hydro hydroelectric development a t Peace Canyon near

Hudson's Hope. This connection would accommodate the transmission of electrical power generated at Site C to the existing B.C. Hydro transmission system. 2.2.2 PROPOSED ROUTE Two 500 kV 1 ines are proposed to follow an established B.C. Hydro transmission line corridor (Fig. 2-5). From Site C, the route runs south-west parallel to the B.C. Rail line for approximately 28 km. It then continues south-west crossing the Moberly River Val ley just south of Boucher Lake and crosses Highway 29 between Hudson's Hope and Chetwynd before crossing the Peace River and entering the Peace Canyon Switching Station. The route length is approximately 76 km, most of which is forested Crown land with some cultivated private parcels. B.C. Hydro has a 118m right-of-way that runs from the Site C area to Peace Canyon and can accommodate both of the 500 kV lines in place of the existing two 138 kV 1 ines (Fig. 2-6). The existing right-ofway would be used for most of the route with the possible exception of short lengths at the Peace Canyon and the Site C terminations. The existing right-of-way is presently cleared to a width of 65 m to accommodate the two 138 kV lines. This would be increased to approximately 140 m requiring removal of some trees outside of the existing right-of-way that threaten the security of the new lines. As such, minimal property acquisitions and easements are anticipated.

2.2.3 TRANSMISSION The proposed lines would be single 500 kV AC transmission lines physically similar to the existing 500 kV lines running south from G.M. Shrum Generating Station and Peace Canyon. The basic tower design (Fig. 2-7) would be a single-circuit lattice steel structure supporting three electrical phases in a horizontal (flat) configuration. Each phase would consist of four sub-conductors arranged in a square bundle. The relatively flat roll ing terrain traversed by the route would allow use, for approximately 90% of the route, of the guyed type towers. Self-supporting structures would be used only for line terminations, long spans, and large line deflections. The distance between the structures would vary depending on the terrain; however, in most cases it would be between 400 and 500 m typical of B.C. Hydro's 500 kV lines. The average structure height would be approximately 28 m. The conductor to ground clearance would vary but the minimum would be 11 m. B.C. Hydro designs for transmission lines, including their ground clearances, meet or exceed Canadian Standards Association (CSA) requirements. 2.2.4 CLEARING, CONSTRUCTION AND RIGHT-OF-WAY ACCESS There is existing road access along portions of the route as a result of the construction and maintenance of the two existing 138 kV lines. Some additional access would be required from the existing roads to new individual structure and work sites. Due to normally wet soil conditions, some winter construction techniques for winter roads and clearing were utilized for the installations of sections of these 138 kV lines. It is, therefore, anticipated that due to both technical and environmental factors, similar line clearing and construction and road construction techniques would be necessary for the two proposed 500 kV lines.

Figure 2-5 PROPOSED ROUTE FOR 500kV TRANSMISSION LINESITE C/PEACE CANYON

Figure 2-6

500

SITE C - PEACE CANYON kV TRANSMISSION LINE PROJECT TYPICAL RIGHT-OF-WAY CROSS SECTION

PROPOSED 1 LINE

PROSPOSED 2 LINE

5LXX

5lxx

51 2

EXISTING

EXISTING 1L360 TO BE REMOVED

1L374

REMOVED

32.0

54.0

J 3.0

J 9.0

•*rmr

»*

118.0

VIEW NOTE:

DIMENSIONS

METRES

LOOKING

FROM

SITE

C TOWARDS

PEACE

CANYON

2.2.5 ANCILLARY FACILITIES

Line terminations and associated switching facilities would be installed at both Site C and Peace Canyon. This equipment could be accommodated within the existing station boundaries at Peace Canyon and within the development area at Site C.

SECTION 3.0 - PROJECT RATIONALE

In its 1990 Electricity Plan, B.C. Hydro established the following resource development priority , based on cri teri a such as costeffectiveness, avai labi 1 ity, pub1 ic acceptability, socio-economic and environmental impacts, uncertainty and transmission impacts; 1. 2. 3.

4. 5. 6.

Power Smart -- increased efficiency of electricity end-use Coordination and Major Purchases Resource Smart -- increased efficiency of B.C. Hydro's existing facilities Private Sector Generation, Self-generation and Load Displacement New hydroelectric generation in developed river basins New hydroelectric generation in undeveloped river basins

The current outlook for the quantity and price of resources available in categories 1 to 4 i.s such that these resources appear to be sufficient to meet forecast electricity demands until almost the turn of the century, when the Canadian Entitlement of the Columbia River Treaty Downstream Benefits begins reverting to British Columbia. Under current demand projections and on the assumption that these resources (plus the return of the Canadian Entitlement of the Col umbi a River Treaty Downstream Benefits) will be available in sufficient quantity, it appears that no major new hydroelectric generation faci 1 i ties requiring construct ion of dams, either in developed or undeveloped basins, would be required to be in-service until early in the next century. Because of the uncertainties involved in forecasting future demand for electricity and in predicting the degree of success of the various initiatives in categories 1 to 4, preliminary studies were carried out for a number of potential contingency options, including the Peace Site C Project. These studies are currently being finalized and documented in a manner which will maintain the project as a viable option for future supply and will facilitate reactivation of the project when required.

Hydro's resource development planning includes a r i s k management strategy t o protect against the risks of over-supply and under-supply in the event of significant demandlsupply imbalances during the forecast period. Over-supply risks occur when projects are b u i l t too e a r l y , potentially causing energy surpluses. Under-supply risks occur when projects are not b u i l t in time and higher cost options must be u t i l i z e d t o meet demands. B.C.

The S i t e ' C Project plays a vital role in B . C . Hydro's risk management strategy f o r responding t o higher than expected growth in e l e c t r i c a l demand. By having brought the S i t e C studies t o an advanced stage of licence application readiness, B.C. Hydro's a b i l i t y t o reactivate the project quickly, i f required, i s enhanced. I n the event t h a t a significant long-term trend indicating a future undersupply situation were t o emerge, measures involving substantial commitments such as advancement of new generation f a c i l i t i e s , would be required. For example, some of the higher than expected load growth scenarios suggest t h a t a major project or additional IPPs could be required in the early 2000's. Alternatively, the unavai labi 1 i ty of other resources, such as the Canadian Entitlement of the Columbia River Treaty Downstream Benefits, could result in a similar requirement in the early 2000 ' s

The S i t e C Project w o u l d n o t be suitable f o r meeting short-term undersupply s i t u a t i o n s , in view of the s i z e of the project and the r e l a t i v e l y lengthy lead time required t o bring i t into service. Short-term variations, which may balance out over the longer term, can be addressed by measures such as appropriate reservoir management ( e . g . , del i berate f i 1 1 ing or drafting of r e s e r v o i r s ) , variations in non-firm energy purchases, adjustment of i n t e r r u p t i b l e e l e c t r i c i t y exports, and adjustments of existing thermal plant use.

SECTION 4.0 - P U B L I C CONSULTATION PROGRAM

INTRODUCTION

4.1.1 History and Update of Public Consultation Proaram The public information and consultation program f o r the S i t e C project began in 1975 with pub1 i c discussion i n i t i a t e d by B . C . Hydro about the alternatives (Sites C and E ) f o r developing the Peace River between the Peace Canyon development and the Alberta border. Between 1975 and 1977 several infor~nationb u l l e t i n s were published and meetings were held with the Regional D i s t r i c t , property owners, i n t e r e s t groups, Indian Bands and the public. Detailed studies on S i t e C were distributed in 1979 throughout the Peace River area and t o Government, public i n t e r e s t groups and l i b r a r i e s throughout the province. B . C . Hydro's information program was focused in the region with the opening of a S i t e C Infor~nation Centre in Fort S t . John in 1980, followed by open house meetings and the dissemination of information through displays, films, f a c t sheets and summary documents. Upon submission of the EPC application in September 1980, B . C . Hydro ha1 ted active consul t a t i o n except f o r providing information as requested, since i t did not wish t o be perceived as lobbying the public or BCUC. Since the 1983 decision by BCUC, no further action was undertaken by B . C . Hydro until 1989. Once the new S i t e C project mandate was i n i t i a t e d in May 1989, B . C . Hydro commenced preparations f o r a possible new application f o r conditional approval of an EPC as a contingency measure, and began a new public consultation program. I n t h i s program, numerous project f a c t sheets, project newsletters and reports were distributed in the study area and throughout the

province. Letters were sent to 123 people in response to requests for information, or comments about, the project. Meetings were held with special interest groups and the public during 1989. These included:

over 30 special interest group meetings; four pub1 ic information meetings in communities in the region; four open houses in communities in the region.

The consultation process involved identification of issues and concerns related to Site C, a review by the public of the degree to which the issues and concerns were properly stated and described, and inclusion of these issues and concerns in a new round of environmental studies commencing i n mid 1990. More detail on this program is provided in the "Peace River Site C Public Consultation Program, Final Report" published as a separate document. Positions with regard to the project were provided to B.C. Hydro in a "Position Paper of the District of Hudson's Hope" and by letter dated May 3 , 1990, with attachment, from the Peace River Regional District.

4.1.2 Studv Area and Participants The study area for consultation on the Site C project was structured to incorporate both local/regional concerns and province-wide concerns. The regional study area included a1 l interest groups, the publ ic, and communities potentially affected by, or with an interest in, the proposed Site C dam. Specific communities in the region i ncl uded : Fort St. John Taylor Dawson Creek

Pouce Coupe Hudson's Hope Chetwynd

In all, over 35 interest groups were identified ranging from environmental groups (e.g. The Peace Valley Environmental Association), to business interests (e.g., Chambers of Commerce and labour organizations). A full list of interest groups is provided in the "Peace River Site C Public Consultation Program, Final Report". The focus of the current program was on regional stakeholders (communities, interest groups, native groups and the pub1 ic) . Local governments were active in the consultation program. These included one regional district, six incorporated municipal i ties, and various 'Indian bands within the Treaty 8 Tribal Association and the Peace Tribal A1 1 iance. Contacts were a1 so establ i shed with provinci a1 MLAs, federal MP's, school boards, hospital boards, the R.C.M.P., major industries, citizen's committees, wildlife associations, several other provinci a1 and 1 ocal interest groups, local newspapers, radio stations and interested individuals.

4.2

METHODOLOGY The public consultation program has been conducted consistent with the requirements of the "Utilities Commission Act" (1980), as out1 ined in the provincial government's "Guide to the Energy Project Review Process" (1982). The expectations of the federal government agencies with an interest in the project were also addressed.

4.2.1 Internal Organization B.C. Hydro's Public Information and Consultation Program is the responsibility of its External Relations Department (Government and Public Affairs Division). The 1989/1990 Site C Public Consultation Program was'designed and conducted by a consultant, the DPA Group

Inc., commissioned by B.C. Hydro, External Relations department, under the direction of the Site C project manager. Interaction with the consultant was coordinated by the External Relations coordinator and included a team drawn from the Site C project team, B.C. Hydro's Envi ronmental Resources department, and other B. C. Hydro representatives as required. The consultant assumed primary responsibility for the consultation program and was assisted by various members of the project team and other B.C. Hydro staff.

4.2.2 Operational Principles for Public Consultation The approach adopted in the current program was designed to be a constructive, open and interactive planning process providing local and provincial interest groups and individuals the opportunity to participate. Operating principles adopted by the publ ic consultation team and the B.C. Hydro participants in the program, and the results achieved, include:

commitment to meaningful public involvement where the public feels some ownership over the process; characterized by an open exchange of information; recognition that public involvement requires provision of information, however incomplete, to participants; even when final answers were not known, it was better to give the publ ic draft and incomplete information to demonstrate commitment to an open process; recognition of the importance of publ ic input in the design of the public involvement program itself; local representatives were requested to help design the public involvement program; sensitivity to the public consultation process and the role of the consultant as an independent facilitator; the consultant's role was clearly established as a faci 1 itator, working with the public to help identify and express issues, concerns and

suggestions; and working with B.C. Hydro to provide responses to these in a way which was easily understood by the public.

4.2.3 Consultation Proaram 0b.iectives The overall goal and objectives established for the public involvement program are: Goal :

To identify issues and concerns about the Site C project, and to assist B.C. Hydro in finding ways to resolve these concerns.

Guiding Principle:

To identify and respond to community concerns in a pro-active and open manner.

Specific Objectives

To foster an understanding of the project, the project planning process and the potential implications of the project; To provide ongoing opportunities for residents and B.C. Hydro to exchange information and views; To achieve some measure of public consensus on the issues and on how best to address them; To provide useful input to B.C. Hydro regarding appropriate mitigation, compensation and enhancement strategies; To demonstrate B.C. Hydro's commitment to responding to community concerns in an open, honest and straight-forward manner.

The public was fully informed of these objectives through meetings with interest groups, public meetings and open houses, and news1 etters .

4.3

CONSULTATION PROGRAM DESIGN The basic design for the consultation program involved several activities as follows:

identify the study area and its various com~nunities,political structures, and public interests; contact the various community interests and cooperatively develop an information and consultation plan; inform the pub1 ic of the project's requirements through published information, meetings, displays, telephone information "hot-line", and other means; develop dialogue through various forums, e.g., written or telephone response to publications, informal meetings, open houses, drop-in centres, as appropriate; facilitate interactions of the communities and other

stakeholders with B.C. Hydro; identify, define, and document the concerns raised by the publ ic; respond to public concerns and resolve problems where possible; identify and incorporate potential mitigation strategies,

compensation, and other options in the project's design to address issues raised by stakeholders; prepare a summary report on public consultation.

Within this general framework, the consultation program included two general components:

formation of a local public consultation committee; the consultation process itself.

4.3.1 The Local Site C Public Consultation Committee

A Consultation Committee was formed in 1989 to provide advice to the consultant regarding the design and execution of the Public Consultation Program. Its membership included representatives from the following communities/organizations:

Chetwynd Dawson Creek Fort St. John Hudson's Hope Peace Liard Wildlife Association Peace River Regional District Peace Valley Environmental Association Taylor Treaty 8 Tri bal Associ at i on

The objectives for providing advice to the consultation team, agreed to by the Committee, were to:

work with the consultant to devise a consultation process

which would maximize the amount of meaningful and useful input from the community; communicate with the community and the consultant to ensure

that a1 1 members of the community had access to the pub1 ic consultation process; attend the public meetings and open houses in individual

members' respective communities; work with the consultants to ensure that a1 1 issues, concerns,

and resolutions were fully and accurately documented and communicated in such a way that the community understood; provide feedback to the consultant on the effectiveness of the Public Consultation and to provide recommendations for improvements to the process on an ongoing basis.

The Committee met with the consultant 4 times between September 1989 and January 1990. Details of the Committee's input i s provided in the Public Consultation Report accompanying t h i s application. The Committee was instrumental in helping t o refine the design f o r the consultation program. Suggestions which they made ranging from venue selection f o r open houses t o advertising were incorporated ,into the program. 4.3.2 Public Consultation Process

Following review of the proposed consultation process with the S i t e C Consultation Committee, adjustments were made t o r e f l e c t t h e i r suggestions on how t o maximize public access t o , and participation i n , the process. I n summary terms, the general follows:

structure of the process i s as

information meetings t o introduce the S i t e C Project t o the p u b l i c , describe the proposed consul tation program, and begin t o identify t h e i r comments;

meetings with i n t e r e s t groups t o assemble focused information on t h e i r concerns; a comprehensive statement of suggestions, comments, issues and concerns reviewed with the public t o ensure t h a t a l l areas are covered; preparation (by B . C . Hydro) of responses; (not completed) review of responses by the pub1 i c (not conducted).

The consultation program was generally accepted by local groups and members of the public. The consultation team was able t o develop a comprehensive l i s t of the issues and concerns t o which B.C. Hydro has made a commitment t o respond.

B.C. Hydro is designing a program of ongoing communication within the region which, primarily through its local offices, will continue to interact with the community groups.

4.4

PUBLIC CONCERNS

4.4.1 Pro.iect Re1 ated Concerns 4.4.2 General Public Concerns

These are presented in the Peace River Site C Public Consultation Program, Final Report. 4.5

PUBLIC INPUT TO ENVIRONMENTAL STUDIES The next step in the process was for B.C. Hydro to prepare a response document which would then be reviewed by the public. The issues and concerns documented to date were used in the preparation of Terms of Reference for the environmental studies. B.C. Hydro intended to use these study results to prepare the response document. This document would then be presented to the public for their review and input. The 1990 public consultation program associated with the environmental studies consisted of the following main activities:

ongoing communication with the public review of Terms of Reference communication between the environmental consultants and the pub1 ic;

ongoing meetings with the consultation committee

4.5.1 Communication with the Public To inform the public of the environmental studies, a newsletter was prepared by B.C. Hydro and distributed in September 1990 to all

households in the region by mail drop. The newsletter provided a s t a t u s report on S i t e C , notice of Hydro's intention t o undertake the environmental studies, and brief summaries of each study. 4.5.2 Review of Terms of Reference The consultation committee was asked t o advise on the best method t o obtain public review of the Terms of Reference, and i t recommended t h a t the Terms of Reference be mailed t o the i n t e r e s t groups f o r t h e i r input. A l e t t e r was sent inviting i n t e r e s t groups t o review the Terms of Reference and provide comments t o the public consul tation consultant. Fol low-up phone call s were made t o ensure t h a t the i n t e r e s t groups understood the material and the process f o r review. Written comments were received from 5 of the 45 i n t e r e s t groups and local governments which were invited t o comment. The i n t e r e s t groups which received an invitation t o comment on the Terms of Reference are l i s t e d in Table 4-1. Comments recei ved on the Terms of Reference suggested additional emphasis on the following study disciplines:

Socio-economic Studies Heritage Resources Climate Downstream Studies

Details on comments submitted by i n t e r e s t groups are presented in the "Peace River S i t e C Pub1 i c Consul tation Program, Final Report." 4.5.3 Communication with the Environmental Consultants To ensure that the conduct of the environmental studies was consistent with the principles and objectives of the public consultation program, the public consultation consultant conducted a workshop with a1 1 the environmental consultants. The objective of

the workshop was to inform all consultants of the results of the public consultation process, highlighting the issues and concerns obtained to date, discussing areas of overlap between studies, and ways to reduce the dernands on the public (i.e. combining meetings). DPA sent a bi-monthly report to all consultants informing them of all study activities, and helped to coordinate meetings held in the region.

SECTION 5.0

ENGINEERING STUDIES

INTRODUCTION By 1982, when previous engineering studies were suspended, extensive site explorations had been carried out and the designs and planning for Site C had advanced to the stage where drafts of technical specifications and tender drawings had been prepared for:

the majority of the infrastructure works including the left and right bank access roads the main construction camp and a bridge across the Peace River;

the turbines;

a single civil package (PC-1) including the entire diversion works, the first stage left bank stabilization works, the first and second stage cofferdams and the dam embankment; and

supply of the gates, gate hoists and stoplogs for the diversion tunnel portal structures including the associated embedded parts.

In 1988, B.C. Hydro load forecasts indicated that it would be prudent to resume engineering activities on Peace Site C as part of a contingency plan to reduce the project lead time. At the same time it was decided to transfer engineering design to the private sector and, following a thorough competitive selection process, Klohn-Crippen Consultants Ltd. were hired to carry out the engineering. Extensive review of the existing designs was carried out and subsequently Kl ohn-Cri ppen assumed professional responsibility for the design of Site C, with some minor modifications, and advanced engineering and technical specifications for the critical early contracts.

5.2

PROCUREMENT

Consistent with B . C . Hydro's objective of maximizing potential benefits t o the economic development of BC, a review of contract packaging was undertaken and i s described in Report No. ~ ~ 0 3 ' "Preparatory Engineering Activities for the S i t e C and Keenleyside Projects - Contract Packaging", which i s included with t h i s submission. The general conclusion from t h i s review was t h a t , while s i g n i f i c a n t benefits should accrue t o the Province from small contracts, these should be assessed against the potential increased costs and r i s k s t o a project before determining the specific contract packaging. The review of S i t e C contract packaging resulted in subdivision of many of the contracts originally envisaged in the early 1980's. A l i s t of the currently proposed contracts i s contained in Table 5-1. The following tender documents f o r the early c r i t i c a l contracts have now been prepared t o an advanced d r a f t stage (shelf ready), whereby they could be quickly finalized and issued.

Left Bank Clearing Campsite - Grading and Access Road Diversion Tunnels and Tunnel Cofferdams Clearing - Right Bank Right Bank Access Roads Turbines and Governors Campsite Services Peace River Bridge Prefabricated Camp Buildings Diversion Gate Embedded Parts Diversion Outlet Stoplog Embedded Parts

5.3

DESIGN STATUS

5.3.1 Introduction Klohn-Crippen commenced engineering activities on Site C at the end of 1988 and, with the exception of completion of a study on the Probable Maximum Flood (PMF), ceased design activities by June 1990 at B.C. Hydro's direction. Report No. ~ ~ 7 3 '"Peace River Site C, Shelf Ready Design Status Report", included with this submission, has been prepared to document the status of engineering activities as of November 1990 and to provide information required to permit an efficient start up of engineering work in the future. A detailed schedule for the recommencement of design activities is included in the report. Engineering activities were coordinated under B.C. Hydro's project management requirements which are described in Section 5.4, adopting the Work Breakdown Structure as the project management framework. 5.3.2 Accomplishments During the course of the engineering activities Kl ohn-Cri ppen issued 53 reports, their subconsultants 11 reports and B.C. Hydro two related engineering reports. These provide a comprehensive record of the status of engineering on the project and are listed in Table 5-2. The primary objectives of Kl ohn-Cri ppen ' s work program were met. Professional responsibility for design of Site C was transferred to Klohn-Crippen, they became fami 1 iar with B.C. Hydro's design practices and engineering and technical specifications for the early contracts were completed.

The following are some of the significant accomplishments achieved as well as the engineering and technical specifications for the early contracts listed in Section 5 . 2 .

A field investigations program was carried out in 1989 to provide additional information on foundation conditions and construction materials. One result was a reduction in required overburden excavation on the north bank from the early 1980's estimate of 1 5 . 2 million m3 to 8.6 million m3.

Due to changed operating conditions at G.M. Shrum Generation Station upstream, the diversion tunnels diameters have been reduced from 11.2 m to 9.8 m.

It was decided to locate a construction camp on each bank of the river, as compared with the original concept of one camp on the north bank.

Joint studies (Kl ohn-Crippen/B.C. Hydro) on the Probable Maximum Flood (PMF) for the project were undertaken. These studies have extended over a lengthy period due to involvement of key personnel in other activities. This basic design parameter is expected to be satisfactorily defined by mid1991.

New computerized digitized mapping was prepared for the damsite and reservoir area.

A review of the stability, of the reservoir shoreline was initiated. Existing instrumentation was rehabilitated and some new instrumentation was instal led. A monitoring program was implemented and is ongoing.

5.4

PROJECT MANAGEMENT SYSTEM

5.4.1 Introduction In response to some concerns expressed at the BCUC hearings on B.C. Hydro's 1980 application for an Energy Project Certificate for the Site C Project, B.C. Hydro advised that it was in the process of modifying its traditional approach to management for 1 arge hydroelectric projects from a functional management system to a project management system. B.C. Hydro's commitment was emphasized in 1985 with the formation of a Project Management Division. Formal pol icies and procedures for project management together with operational requirements were compiled in manuals issued in 1989. In early 1989 a further initiative was introduced to develop a Work Breakdown Structure (WBS) as a fundamental management tool for the Site C Project in accordance with current project management philosophy. 5.4.2 Work Breakdown Structure The WBS is a hierarchal information classification system, typical ly described or displayed in the form of a tree diagram (Figure 5-1). Each box in the tree is described as an element of the WBS and the elements portraying the final breakdown are unique, each with a precise scope and a distinct set of specified results to be delivered. The WBS is, foremost, a tool for subdividing the scope of a project into manageable portions. The topmost element in the WBS tree contains the entire project scope. In subsequent development of the detailed description, the total scope is systematically subdivided into facilities, then into features, sub-features and finally to elements classified as work packages. Work packages are defined such that a single party is responsible for achieving the specified results or deliverables and each work package can stand alone. 5 - 5

PEACE SITE C PROJECT

PROJECT INFRASTRUCTURE

POWER GENERATION

TRANSMISSION

:.:::::::<c 1:o;i@'Joo::;i:il::i::ii:l;

........................

...: ....:.,...:: .:::::. ...... ...... .

j;i; ?: ;i;I:i$;:j.l,:

STRUCTURES

ELECTRICAL & MECHANICAL

SUBSTATIONS

PROJECT GENERAL

BUILDINGS & STRUCTURES

C20-0000

DIVERSION

WATER RETENTION

APPROACH 8 TAILRACE

STRUCTURES

CHANNELS

C2B-0000

C2C-0000

C2A.0000

SPILLWAY C2D-0000

POWERINTAKES

SURFACE

SWITCHGEAR

8 PENSTOCKS

POWERHOUSE

BUILDING

C2E-0000

C2F-0000

C2G-0000

DIVERSION

LOG BOOM

CONCRETE PLUGS

DIVERSION

GATES 8 GUIDES

TUNNELS

DIVERSION

GENERAL

C2A-A000

C2A-BOO0

C2A-COO0

C2A-DO00

GENERAL C2Z-0000

I DESIGN 8 DWGS

- INSTALLED CLOSURE

CZA-AOID

.I .. RESIDENT ENGINEERING

-. DESIGN 8

DRAWINGS

GATES PRIM. EMBEDMENTS

DIVERSION GATES 8 GUIDES

DIVERSION TUNNELS

DESIGN 8 DRAWINGS DIVERSION LOG BOOM

CZA-A01C

CZA-A01 R

CZA-001D

C2A-CO1D

SUPPLIED PRIM. EMBED. 8

GUIDES - CLOSURE GATES

- INSTALLED CLOSURE

C2A-A015

- UNDERGROUND STRUCT'S

C2A-A02S

DIVERSION TUNNELS

LOG BOOM

C2A-A02C

C2A-B01C

CZA-COl C

INSTALLED CLOSURE GATES

INLET STRUCTURES

C2A-A03C

DIVERSION TUNNELS

I-

1- RESIDENT ENGINEERING

- INSTALLED REGULATING

GUIDES - STOPLOGS

GATES PRIM. EMBEDMENTS

C2A-A035

C2A-AO4C

- OUTLET STRUCTURES

DIVERSION LOG BOOM

DIVERSION TUNNELS C2A-B03C

SUPPLIED CLOSURE GATES .C2A-A04S

- INSTALLED REGULATING GATE GUIDES C2A-A05C

C2A-A05S

DIVERSION TUNNELS C2A-801R

- SUPPLIED REGULATING

GATES

- RESIDENT ENGINEERING

- INSTALLED REGULATING

GATES C2A-AO6C

- SUPPLIED STOPLOGS C2A-A065

- INSTALLED STOPLOG PRIM. EMBEDMENTS

SUPPLIED CLOSURE GATE HOISTS C2A-A07S

C2A-A07C - INSTALLED STOPLOG

GUIDES

- SUPPLIED REGULATING

C2A-AOBC

GATE HOISTS C2A-A085

- INSTALLED STOPLOGS

WORK BREAKDOWN STRUCTURE

C2A-A09C

FIGURE 5-1

SHEET 2 of 2

ARRANGEMENT Z ~ ~ E

CONCRETE PLUGS

DRAWINGS 8 REPORTS DBM

C2A-DO1D

C2A-ZO1D

- CONCRETE PLUGS DIVERSION TUNNEI

DEBRIS DISPOSAL SYSTEM C2A-C02C

DIVERSION TUNNEL

CZA-DO1C

C2A-B02C SUPPLIED PRIM. EMBED. 8

DESIGN 8 DRAWINGS

CONSTRUCTED DIVERSION

GATES GUIDES

SUPPLIED PRIM. EMBED. 8. GUIDES - REGUL. GATES

L RESIDENT ENGINEERING DIVERSION TUNNEL CONCRETE PLUGS C2A-DO1 R

Numbers of work packages are combined to provide the supply, construct and service contracts which are finally awarded to del iver the entire project. The breakdown is also used to illustrate increasing detail for project estimating and cost reporting throughout the project 1 ifecycle. Costs appl icable to individual elements can be estimated with increasing accuracy as the design is developed. The WBS facilitates the roll up to individual structures for capitalization or taxation purposes. Each work package is assigned a start and completion date determined from the project schedule allowing the reporting and summarizing of schedules similar to costs and scope. The WBS is used as the central management tool for achieving the assigned project objectives for scope, cost and time. The principal applications are: Linking performance standards. Scope and design management. Cost estimating and reporting. Activity scheduling. Assigning scope to individual contracts. A unique code consisting of letters and numbers is assigned to each element of the WBS. This code becomes the predominant information discipline for the Project. The WBS code must be used for, or included as an identifier in: Scope Statements Drawings Project Budget Task Assignment Documents Files Reports and Other Deliverables

Early in the development of the WBS, Walter A. Wawruck, Project Management Services, a Consultant on Project Management was hi red to assist with the development of the tree and to be the Principal Author of the Guidelines for the WBS Manual. Within the Manual there are two types of guidelines. General guidelines covering policy, management policies and description of processes. Secondly specific guidelines contain detailed instructions for carrying out a specific operation or step in a large operation. Typically they deal with the preparation of a form or document. WBS Di rectorv The scope management process includes the development of a WBS directory. The WBS Directory is the project baseline document. The basic content of the directory is the documentation of B.C. Hydro and other stakeholder requirements for the project and the description of how these requirements will be achieved. Scope statements have been and are currently being prepared.to reflect the current status of the design of the Project. To aid the user in a search for items whose WBS code identifier she or he does not know, the Directory contains 1 istings of WBS element code numbers and titles. These listings follow the hierarchal code sequence, and include a listing segregated by work package type.

T OF FORESEFN CONTRACTS

Page 1 of 9 Description

Contract Number

E&M Input

Supply

Construction

Possible B.C. Firm

PC-lA*

Clearing - Left Bank

PC-lB*

Campsite - Grading and Access Road 1

PC-lC*

Diversion Tunnels and Tunnel Cofferdams

Main Earthfill Dam with Cofferdams and Excavations on Left Bank

PC-IF*

Clearing - Right Bank

PC-IG*

PC-lOA*

Right Bank Access Roads Campsite Services1,3

Asphalt Paving - Campsite and Approach ~oadl"

PC-ll*

Peace River Bridge

PC-13*

Prefabricated Camp Buildings 1

Campsite Construction - B.C. Hydro Offices and Buildings 1

Camp Catering and Housekeeping 1,2

Petroleum Products Storage Depot

Campsite services233

Prefabricated Camp Buildings 2

Campsite Construction - B.C. Hydro Offices and Buildings 2

Bulk Excavation on Right Bank with Cofferdam for Outlet Channel

X X

X X X

(a)

Page 2 of 9

m (continued) Description

Contract Number

E&M Input

Supply

Construction

Possible B.C. Firm

Powerplant and Spillway - Main Contract

Penstocks and Couplings (Design, Supply and Install)

Powerhouse Superstructure

Powerplant Completion4

---

Spillway Bridge

---

Reservoir Clearing

Environmental Reinstatement

Switchgear Building

Denotes advanced draft contracts as of June 1990. It is considered that engineering has advanced sufficiently on these packages that tenders could be issued within about thirty days of approval to proceed, provided that the relevant outstanding issues listed in Section 3.0 and Section 5.0 could be resolved prior to tender issue.

Denotes Left Bank Campsite Denotes Right Bank Campsite "Campsite Services" include supplying and installing underground services (water, sewer, gas), water storage tanks, water pumping system, sewage treatment plant, buildings to house such services and electrical power and lighting distribution systems. "Powerplant Completion" would be a general contract including civil, mechanical and electrical works. Civil works would include the latter stages of secondary concrete and miscellaneous structural, building and architectural finishes in the powerhouse and elsewhere for the powerplant. See separate lists for details of mechanical and electrical works.

Page 3 of 9

Contract Number PC-.?**

Description

Electrical Input

Turbines and Governors (Design, Supply and Install)

Prescriptive Specifications

Performance Specifications

Supply

Supply & Install

Possible B.C. Firms

Installation Supervision

SUPPLY OF DIVERSION TUNNEL EQUIPMENT PC-30A* --

Diversion Gate Embedded Parts

Closure and Regulating Gates

Regulating Gate Hoisting Equipment

PC-30D*

Diversion Outlet Stoplog Embedded Parts

Outlet Stoplogs and Lifting Beam

SUPPLY OF DRAFT TUBE GATES -Guides and Embedded Parts for Draft Tube Gates

Draft Tube Gates

Draft Tube Gate Crane (Design, Supply & Supervise Instn.)

SUPPLY OF POWER INTAKE EQUIPMENT -Intake Gate Guides and Embedded Parts -Intake Gates

Intake Gate Hoists

Bulkhead Gate Guides and Embedded Parts

(b) Contract Number

Description

---

Bulkhead Gates

Intake Trash Racks

Intake Gantry Crane (Design, Supply & Supervise Instn.)

SUPPLY OF SPILLWAY EQUIPMENT -Seal Plates and Embedded Parts for Spillway Gates -Spillway Gates with Posttensioning Equipment -Spillway Gate Hoists

Electrical Input

Prescriptive Specifications

Performance Specifications

Supply & Install

Possible B.C. Firms

X X

Supply

Guides and Embedded Parts for Spi 1lway Stoplogs

Spillway Stoplogs and Lifting Beam

POWERPLANT EQUIPMENT -Powerhouse Cranes (Design, Supply & Supervise Instn.) -Equalizer Beam (Supply)

Pumps (Design and Supply)

ps PC

Air Compressors (Design and Supply) Fire Protection Systems and Equipment (Design & Supply)

Page 1 of 9

1 Cantl-acts (continued)

Tanks and Receivers (Design & Supply)

Installation Supervision

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Page 6 of 9

cal C o i u m (contil~ued')

Contract Number

Description

Electrical Input

Prescriptive Specifications

other general finishing work to complete auxiliary mechanical systems.

Performance Specifications

Supply

Supply & Install

Possible

B.C. Firms

Installation Supervision

LEGEND *

** I ps pc D K

Installation Only To be installed under To be installed under Conceptual design and Selection only of key

the Powerhouse Superstructure Contract the Powerplant Completion Contract selection of key equipment by Klohn-Crippen equipment by Klohn-Crippen

Page 7 of 9

Prescriptive Specifications

Performance Specifications

Possible B.C. Firms

Installation Supervision

Description

Input from Other Disc.

PC-3**

Generators (Design, Supply and Install)

M& E

Generator Transformers 13.8 to 138 kV

System Transformers 512.5/138 - 12.6 kV

Excitation Systems

Turbine Governor Actuators

Generator Terminal Equipment

100 kV C.G.I. Switchgear

138 kV C.G.I. Switchgear

---

12.6 kV Metalclad Switchgear

12.6 kV-600 V Main Station Service Switchboard

AD/DC Distribution Switchboards

100 kV Surge Arresters

100 kV and 138 kV Line Termination Towers (Supply)

100 kV Capaciter Voltage Transformers

Contract Number

kV LTC Transformers

Supply & Install

M&E

T&S

Supply

12.6-12.6

138 kV Cable Circuits (Design, Supply and Install

138 kV Surge Arresters

X B

Electl-lcal ((coi~tinued) Description

Contract Number

Page 8 of 9 Input from Other Disc.

Prescriptive Specifications

Performance Specifications

Supply

Supply & Install

Possible B.C. Firms

1 3 8 kV Capacitor Voltage Transformers

Protection and Control Printed Circuit Boards (Supply) Protection and Control Switchboards, Consoles and Cabinets (Supply)

Protection and Control Subassembly Equipment (Supply)

----

Fault Recorder

Monitoring Equipment

Transformer Fire Protection Controls (Supply)

M& E

Station Service Air Compressor Controls (Supply)

M& E

125 and 24 V Station Batteries

125 and 24 V Battery Chargers

(Supply) 125 and 24 V DC Supply Cubicles (Supply)

Powerplant Completion including: -

- conduits & ducts -

installation of above supplied equipment

- grounding cable trays and supports

Installation Supervision

I X

Flectlual C ~ ~ -I U L L(continued) S

(c)

Contract Number

Page 9 of 9

Description

Input from Other Disc.

Prescriptive Specifications

Performance Specifications

Supply

- lighting fixtures -

receptacles and switches

wires and cables

X X

- motor starters

I X

- other general finishing work

to complete ancillary electrical systems

M T B I

motor starters - heating and ventilation

Supply & Install

It is considered that tenders for this contract could be issued within six months of a decision to proceed.

Mechanical Input Transmission Line Input Bulk Order by B.C. Hydro Installation Only

E - Electrical Input S - Structural Input H - Other Direct Supply by B.C. Hydro

Possible B.C. Firms

Installation Supervision

Page 1 of 9 TABLE 5-2

BIBLIOGRAPHY SITE C REPORTS ISSLJED DLJRING 1989/90/91 BY KLOHN-CRIPPEN

Report KC01 - Review of Hydrotechnical Studies Undertaken Prior to 1989, Task CH 10, February 1990.

Report KC02 - Contract PC-1, General Review, Task CD40, June 1 989.

Report I<C03 - Contract Packaging (Site C and I<eenelyside), Task GCIO, June 1989.

Report I<C04 - Contract PC-10: General Review and Report, Task CG70, June 1989.

Report KC06 - Review of Cofferdam Designs, Task CD10, August 1989.

Report l<C07 - Review of Left Bank Sl'opes, Task CG10, August 1989.

Report KC08 - Proposed 1989 Exploration Program, Task CG50, April 1989.

Report KC09 - PC-I:

Reference Information Review and Report on

Existing Information, Task CD50, May 1989.

Page 2 of 9 9.

Re11o1-t I<C I0

Turbine Contract Policy (Site C and I<eenleyside), Task

GC20, J~ily1989.

10.

Report I<C1 1 - Left Bank Diversion Tunnels Portal Exciiv:ttion in Rock, Task CG40, June 1989.

11.

Re1~oi.tI<C12 - Preliminary Assessment of Left Bank Slopes, Task CG30, April IOfiO.

12.

Report 1<C13 - Review of Rock Slope Designs, Task CG40, August 1989.

13.

Rcl>ort 1<C14 - Diversion Design Floocl, Task CH40, December 1989.

14.

Rel)ort I<C 15 - Rcview of the Layout of the Riglit Bank Structures, Task CHXO, Noveml>e~1989.

15.

Report KC16 - Review of Pore Pressure Response ancl Dissir);ltion of Weak Seams, Task CD 10, Augi~st1989.

10.

Report KC17 - Review of Rebound in Rock, Task CG40, September 1989.

17.

Report KC 18 - PC 1 1 : General Review and Relwrt, Task CB 10, Decenil>er. 1989.

18.

Report KC20 - Design and Instrun~entationof Test Fill, Task CD10, July 1989.

Report KC21 - Review of Construction Materials Investigations, Task CD20, July 1989.

Page 3 of 9 20.

Rcpot-t I<C22

Diversion and Low Level Outlet Studies, Task CH50,

Dcceml)cr 1980.

21.

"Report KC23 - S1,illw:ry Design Floods, Task CH30, Draft report to be l'inalizecl Mat-ch 1001.

22.

Report KC24 - Preliminary Assessment of Right Bank Slopes, Appl-oach Channel, Task CD70, June 1990.

23.

Report KC25 - Review of the Electrical Equipment, Task CF40, September

24.

Report KC26 - Seismicity Review Upd:ite, Task CDlO, January 1990.

25.

Report KC27 - Manpower and Camp Estimate Update, Task CAIO, May 1990.

26.

Report KC29 - Review of Earthfill Dam Design, Task CDlO, September 1989.

27.

Report I<C31 - Mechanical Equipment Review ancl Report, Task CM40, October 1089.

28.

Report KC34 - PC-2: General Review ancl Report, Task CD80, November 1 989.

Report KC35 - Summary oflnformation for Advisory Board Meeting No. 6, 2 to 6 Octobel- 1989, Report on Status as at 31 August 1989, September 1989.

Page 4 OF 9 30.

+Report I<C36 - Switchgear Selection, Task CFIO, Illcomplete Draft Report, not F i n ~ ~ l i ~ c c l .

3 1.

Report KC37 - Geotecl~liicnl Database Recommenclation Report, Task CG20, Noveniber 1989.

32.

Report I<C40

Slope Stability Analyses of Preliminary Earthfill Dam

Sections, Task C2C-BOI Dl March 1990.

33.

Report KC42

Investigations of Temporary Riprap, Task CG.50, January

1990.

34.

Report I<C43 - I089 Investigation Program Report on the Left Bank Trough, Task CG50, March 1990.

35.

Report I(C.14 - Construction Mitterials Impervions Fill, Prelinlinary Search for Glitcial Till, Task CG50, Janitary 1990.

36.

Report I<C45 - Hyclrotechnicnl ancl Meteorological Reference l ~ ~ f o r ~ n a t i o l ? , Task CD50, Deceniber 1989.

37.

Report KC46 - Tailwater Stuclies, Task CD71, April 1990.

38.

"Report I<C47

Hydraulic Model Studies, Instructions for Si11,mitting

Proposals ~ i n c lConditions for Providing Consulting Services, Task CH70, Draft Report, not Finalized.

39.

Report KC49 - Diversion Design Flood, Risk Analysis Optimization, Task CH40, November 1990.

Page 5 of 9 40.

Report KC50

Preliminary Layout of the Right Bank Structures, Task

CH70, July 1990.

41.

Report l<CSI - Instr~~mentation iind Data EvaI~lationFor n Proposecl Test Enit~ankn~ent, Task C2C-BOI D, Miirch 1990.

42.

Report KC52 - Report on Preparatory Engineering Activities (PEA) - 1989 (Site C ant1 I<eenelysicle), Task CPIO, J u l y 1990.

43.

Report 1<C53- Absessment of Upl~erLeft Bank Overburclen Deposits, Task C9B-BO3D, April 1990.

44.

Report I<C54 - Assessment of Lower Left Bank Overb~~r-clen Deposits, Task C9B-B03D, J u l y 1090.

45.

Report KC55 - Con~parisonof Cofferclam Schemes, Task C2C-ZOlD, April 1990.

Report I<C60 - Evaluation of Concrete Aggregates for Left Bank Stri~ctures,Task C2Z-ZO 1 D, June 1900.

47.

Report KC61 - Penstock Optimization and Turbine Characteristics, Task C2E-Z0 1 D, J 11ly 1990.

'kRel,ort I<C62 - Switchgear Building, Task C2G-AOlD, Draft of Geoteclinical Section only, not Finalized.

40.

Report l<C63 - Powerhoi~seStandby Generating Units, Task C2Z-ZOlD, April 1990.

Page 6 of 9 Report KC64 - Diversion Tunnel Design, Task C2A-201 D, July 1990.

Report I(C69 - Construction Materials Investigations, Task C9B-BO3D, J ~ t l y 1990.

Report KC73 - Advance to Shelf Ready Design Status Report, Task C9A-B02M, Volume 1 of 2, March 199 1 .

Re11o1.t KC85 - Rel>oi~nclof Excavations in Shale, Task C2Z-ZOID, December 1990.

".Report KC93, Local Basin Design Floods, Task C9B-A03D, D ral't Fet~rii:~~-y 109 I.

Page 7 of 9 SITE C REPORTS ISSUED DURING 19X9/9O B Y I<LOHN-CRIPPEN SIIBt'ONSIJLTANTS

Reclamation Criteria, Sli:~leSlope Revegetation, Site C D a m Project, by Polstcr Envi~.onmentitlServices, October 1989.

-.7

Evalulion ol' Aggreg:~teSources l'or Supply ol'concrete Agglxgute - Site C Lel't Bank, Ily Lcvclton :rncl Associates Ltd., March 1990.

Sitc C PI-ojcct,East B L I IAlkali I~ Aggreg:lte Reactivity of Mortar Bars Made wit11 I h l i t n c l Aggrcgi~tcNBRI Test Method, by Levelton ancl Associates Ltcl., MLI1 . ~ 1 1 1000.

Peace Rivcl. Site C Project, Degracliition Stuclies, by Northwest Hydri~i~lic Consilllants L(cI., March 1990.

Pcitce River Sitc C Project, Review of Erosion Protection Works, (Task CZZ-ZOI D ) by Pilclysh & Associittcs Consultants Ltd., May 1990.

Laboratory Tcht~ngReport on Shi~leBedrock Testing for Site C, by Goldcr Associate!, Ltd., M:ry 1000.

Laboi- tory Testing Rcl~ort011 Soils ancl Concrete Aggregate Testing for

Peace River Sitc C Project, 3 Volumes, by Golcler Associates Ltd., Julie 1990.

Page 8 of 9 Cross-Sections for Site C Project, CS 1, CS2, CS3, CS4, Peace River, Data Report by McElhanney Associates, 1989.

Site C Peace River PI-oject, Access Ro:lcl ProFile, ASCII ProCile Listings, Eustings, Nortliings, Elcv:ttions, Description and Chainage, Data Report by McElhanney Associates, 1989.

Site C Peace River Project, Access Road Cross Sections, ASCII Cross Sections Listings, Chi~inages,Eastings, Northings, Elevations, Data Report Associates, July 1989. by McElhali~~ey

Site C Peace River Project, Diversion Tunnel Outlet Portals Cross Sections CSI A-CS I B, CS2A-CS2B, CS3A-CS3B, CS4A-CS4B, CSSA-CSSB, Data Report by McEllianney Associates, August 1989.

Page 9 of 9 SITE C REPORTS ISSUED DURING 1989J90 BY B.C. HYDRO

Report H2243 - Peace River Site C Project, Reservoir Slopes, January 1990.

Report H2299 -. Peace River Site C PMPJPMF Review, April 1990.

SECTION 6.0 - ENVIRONMENTAL STUDIES

6.1

Introduction The 1980 Site C EPC application was based primarily on environmental and socioeconomic studies undertaken from 1975 through 1978. The various study reports were appended to the application and were reviewed extensively by provincial, regional and local agencies and public groups. BCUC held extensive public hearings on Site C in 1981-1982 in which environmental and socioeconomic impacts were reviewed and discussed by numerous witnesses and intervenors. BCUC (1983) concluded from the evidence presented that the project would have numerous environmental impacts but these could be managed in such a way as to render them acceptable from a regional and provincial perspective. The only major deficiency in environmental studies was identified as being in the fisheries area. The socioeconomic data was seen to be in need of updating at the time of the hearings, and since data in this subject area has limited shelf-life, many of the BCUC recommendations called for deferral of decisions on impacts and compensation until actual impacts could be detected via the proposed monitoring program. In 1989 when there was an apparent need to prepare for the project as a planning contingency, an update of the fisheries impact assessment was initiated to address the previously identified deficiency. This assessment was to depend upon the results of a two year fisheries study program. No other new environmental field work was commissioned until 1990, when it became obvious that a new application for the project would be required to address both the provincial and federal regulatory processes.

Hydro, with help from a variety of consultants, compiled detailed terms of reference, which i t f e l t would update a l l of the environmental work t o a level s u f f i c i e n t t o meet the needs of both provincial and federal processes. Some of t h i s material was reviewed with government agencies and changes were made t o the proposed programs. Work on the new "update studies" began f o r most subject areas about mid summer 1990. B.C.

A t the same time t h a t update studies were developing, B . C . Hydro was experiencing increased success with conservation programs, such as Powersmart, and a l t e r n a t e energy supply, such as t h a t obtained through cogeneration and coordination agreements, looked more promising. The contingency requirement t o prepare f o r a new S i t e C application diminished. Accordingly most of the new studies have been carried out t o the revised inventory stage with deferral of environmental impact assessments until the forecast need f o r the project i s more imminent. This deferral r e s u l t s from the uncertainty of how contemporaneous environmental studies should be with project application.

The following information summarizes the work accomplished t o date and the major findings within each environmental subject area. Details are available in the reports accompanying t h i s submission as l i s t e d in Table 6-1. A geographic information system has been used t o compile and display the updated environmental resource data. The information will be Databases from various sources, produced a t a 1:50,000 scale. including those available from several provincial government ministries have been used. As well as the thematic information

available from each of the environmental d i s c i p l i n e s , there will be a presentation of updated land use information. The GIs report i s being produced by Hugh Hamilton L t d .

TABLE 6 - 1 PEACE RIVER SITE C PROJECT RECENT ENVIRONMENTAL REPORTS

AUTHOR

REPORT TITLE F i s h e r i e s H a b i t a t and T r i b u t a r y Surveys Year 1 (January 1991)

A q u a t i c Resources L t d .

F i s h e r i e s H a b i t a t and T r i b u t a r y Surveys Year 2 (January 1991)

A q u a t i c Resources L t d . The DPA Group I n c . and Western Renewable Resources

Peace R i v e r S i t e C S p o r t F i s h i n g Survey (March 1991) F i s h Movements and P o p u l a t i o n S t a t u s Studies

1989

RL&L Environmental S e r v i c e s Ltd.

F i s h Movements and P o p u l a t i o n S t a t u s Studies

1990

RL&L E n v i r o n m e n t a l S e r v i c e s Ltd.

H e r i t a g e Resources Assessment S t a t u s R e p o r t ( F e b r u a r y 1991)

Arcas C o n s u l t i n g Arch. L t d .

R e c r e a t i o n and Tourism Assessment S i t e C P r o j e c t - D r a f t S t a t u s Report ( F e b r u a r y 1991)

MacLaren P l ansearch

Agriculture

Norecol Envi r o n Consultants Ltd.

Consumptive W i l d l i f e

Volume 1

Keystone Bio-Research

Consumptive W i l d l i f e - Volume 2 Review o f U n g u l a t e I n v e n t o r i e s and H a r v e s t and T r a p p i n g Returns

D.A.

I n i t i a l Review o f S i t e C C l i m a t e Impacts (September 1990)

S t a n t o n E. T u l l e r

Resources Mapping Environmental -

Hugh H a ~ n i l t o nL t d .

Forestry

I n d u s t r i a1 F o r e s t r y S e r v i c e s Ltd.

B l o o d and A s s o c i a t e s

6.2

CLIMATE

6.2.1 Backaround The climate of the Peace region i s c l a s s i f i e d as being cold and relatively dry and c l e a r . Temperatures typically range from an average rninimum of -13" C in January t o an average maxiinu~nof 22' C in July. Mean annual precipitation over the Peace valley i s 398 m m , with November through March precipitation f a l l i n g as snow. Wind speeds across the Peace valley average 7 km/hr near Hudson Hope and 10 km/hr near Fort S t . John; the dominant directions a r e southwest in summer and southwest o r northeast in winter. Local climates within the confines of the Peace River valley below Peace Canyon d i f f e r s l i g h t l y from those on the surrounding plateau due t o lower elevations, protection from winds and south-facing aspects along some terraces. The differences are considered t o be significant t o the maintenance of ecosystems within the valley, such as grassland slopes. Growing degree days recorded near Bear Flat are 2190 along the lower t e r r a c e s , 2380 along the intermediate terraces and 2040 on the plateau. The average f r o s t f r e e period i s 111 days within the valley, and lower river terraces have a s l i g h t l y higher risk of f r o s t occurrence. Summer dew point temperatures are near 6' C, with the Peace River having very l i t t l e e f f e c t on dew f a l l within the valley. September.

Valley fogs are extreme from July through

6 . 2 . 2 Previous Studies and Impact Assessments

Potential climate changes due t o reservoir formation were assessed by Thurber Consultants L t d . (1979) based on data from several Ministry of Environment s t a t i o n s located on the upper and lower valley terraces and on data collected in 1976-77 from transects A background review (Atmospheric Environment across the valley Services 1976) dealt with climatic changes resulting from the

formation of Williston Lake in 1968. Additional climatic assessments were made by the Ministry of Environment and presented to the BCUC during the 1981/82 public hearings regarding Site C. The low density of recording stations and the short lengths of record available were significant constraints on the precision of climatic impact predictions. The proposed Site C reservoir would be relatively small in surface area and width. In general, any reservoir-induced climate modifications are considered 1 i kely to be measurable only within the confines of the valley and probably only within 600 m of the shore1 ines. Very small reductions (~0.5' C) in mean daily summer temperatures were predicted, with si~ni1 arly small increases in dai ly minimum summer tetnperatures and mean daily fall and early winter temperatures. The number of growing degree days was expected to be slightly lower (possibly 5 percent less). Small increases in frost risk were anticipated during crop growing seasons, but could not be quantified. Evaporation was expected to be slightly lower from May through July, and slightly higher from August through October (magnitude of change 0.15 gm/cm2 per day). Mean daily humidity was expected to decrease from May through October (magnitude of change 0.12 mb) although nighttime humidity in late summer and fall would likely be slightly higher ( = 0.5 mb). Small increases in wind speed ( - 10 %) were expected throughout the year. Fog frequency was expected to increase from April through December (by 4 to 24 days, depending on the mixing depths) , and fog density from May through October was expected to be higher (by 0.15 to 0.4 gm/m2, again depending on the mixing depths).

The main concerns with climatic changes in the Peace valley relate to:

increased humidity and fog leading to a deterioration in crop drying conditions in late summer and early fall;

decrease in summer temperatures leading to a reduced crop growing season; increased fog occurrence leading to visibility problems along Highway 29 and at Fort St. John airport; and an increased risk of icing along the highway and on bridges.

The BCUC concluded that climatic effects on agriculture would be uncertain and limited in extent; they could be significant to some farmers within the valley. They recommended that priority be given to crop drying in the agricultural compensation program.

6.2.3 Recent Studies No further climate impact assessments have been carried out. A review of the climatic issues (Tuller 1991) indicates that the climatic data base for the Peace valley is still characterized by short periods of record, limited spatial coverage, missing data and a small number of data elements recorded. The 1 ack of humidity data from within the valley is a particular obstacle to improved impact assessment. An additional 3 to 5 years of wind speed and temperature data have become avai 1 able since the previous assessment and could be analyzed to improve some aspects of the previous impact predictions. However, no major improvements to the previous overall impact predictions can yet be made. 6.2.4 Study Status

Any climatic changes caused by the Site C project would be re1 atively small and 1 imi ted in geographic extent. Any specific cases of impacts arising from climactic change, e.g. crop drying at locations within the vicinity of the reservoir could be dealt with through local ized mi tigation or compensation measures, such as provision of crop dryers.

An adequate network of climate recording s t a t i o n s would be required t o obtain t h e necessary s p a t i a l coverage of t h e Peace valley f o r f u t u r e meso- and microcl imatic impact predictions and t o monitor actual climate changes r e s u l t i n g from r e s e r v o i r formation. Temperature, humidity, p r e c i p i t a t i o n and wind speed and d i r e c t i o n would have t o be recorded a t r e l a t i v e l y high frequencies t o obtain a meaningful data base.

100

6.3

LANDFORMS AND SOILS

6.3.1 Backsround The Peace valley i s a major feature of the Peace Lowlands, and i s a deeply incised valley floored with active fluvial materials and bounded by glacio-fluvial terraces, river-cut benches and unstable val 1 ey wall s . The vall ey i s bordered by roll ing plateau u p 1 ands and f l a t benchlands. The northern side of the valley i s generally less steep, more densely vegetated and less geologically active than the south side. The main Peace valley has reached a stage of r e l a t i v e maturity in terms of downcutting and bank erosion, b u t most t r i b u t a r i e s , including the Halfway and Moberly rivers which would flow into the reservoir, are more active and unstable. Lands 1 ides are s i g n i f i c a n t features of the Peace Valley. Four major s l i d e s have occurred within the past 80 years. Slides are of several types including surface erosion due t o water in the bedrock or overburden, flowslides or rotations i n overburden, and s l i d e s within bedrock. The geological s t r a t a underlying the reservoir area are composed predominantly of interbedded Cretaceous shales and sandstones. A t least 750 million m3 of gravel are estimated t o e x i s t between S i t e C and Hudson Hope; use of these resources t o date has been minimal. The Gething formation under1 ies the shales and sandstones and bears coal seams. The Wilder gas f i e l d l i e s a t a depth of some 2100 m below ground surface and extends along both sides of the Peace valley upstream of the Moberly-Peace confluence. Five of eight wells are currently in production. Soils in the valley bottom and along the lower terraces are mainly cumulic regosols and orthic e u t r i c brunisols of alluvial origin and variable texture, depth and moisture- holding capacity. They are generally f e r t i l e with low amounts of organic matter. Soils along

101

the higher terraces are rego black and e u t r i c brunisols of good t o moderate drainage and high f e r t i l i t y . Soils adjacent t o the valley rim b u t outside the inundation zone of the proposed reservoir are mainly of glacio-fluvial origin and are moderately well- drained and moderately f e r t i l e . 6.3.2 Previous Studies and Impact Assessments Physical impacts re1 ated t o geological conditions were documented f o r the previous EPC application by Thurber Consultants (1979). About 20 percent of the river valley between S i t e C and Hudson Hope i s regarded as having no potential f o r i n s t a b i l i t y , the remaining 80 percent has a high probabi 1 i ty of overburden sl ides occurring within the next 70 years. Particular s i t e s with major s l i d e potential are located near Attachie ( s i t e of a major s l i d e in 1973), a t Tea Creek and on the Moberly River. Damage t o surrounding areas and vegetation would occur in the immediate vicinity of such s l i d e s , b u t hydraulic model si~nulationsindicate t h a t waves resulting from such s l i d e s would not overtop nor endanger the physical i n t e g r i t y of the dam. Bank overburden deposits along the upper end of the reservoir near Hudson Hope have been identified as being unstable. The reservoir would not affect any present mineral, natural gas o r gravel extraction in the Peace valley. To date, no resource extraction has been directed a t the coal deposits near Hudson Hope, part of which underlie the valley and proposed future reservoir. One existing gas well qear S i t e C would be flooded, b u t other wells and the gas f i e l d i t s e l f would be unaffected. A gas pipe1 ine above the dam s i t e would require relocation. The region has a low level of historical seismicity. Most of the catalogued earthquakes which occurred within an area bounded by 119"W and 1 2 3 Â° ~ ,and 54"N and 58"N are between magnitude 3.0 and 3.5 ( r i c h t e r s c a l e ) . The largest event on record i s 3.7 which was centred in the Rocky Mountains.

102

The potential for reservoir induced seismicity (RIS) at Site C is considered to be very low. This conclusion is supported by the lack of RIS at Bennett Dam which has a larger and deeper reservoir. The dam structure would be designed to withstand a peak ground acceleration of 0.139 which is equivalent to an earthquake of magnitude 6.0 located at a distance of 50 km from Site C. Earthquake risks to the dam were evaluated insignificant.

and

considered

6.3.3 Recent Studies No additional studies have been undertaken on landforms and soils within the project area by B.C. Hydro. A revised soi 1 survey of the area based on 1:100,000 scale mapping was published by Agriculture Canada in 1988. The main project and reservoir configurations have not changed since the previous studies and EPC application and the impact assessments are still valid. A refined revised application of the safeline concept to protect future development near reservoirs is being developed by B.C. Hydro. 6.3.4 Studv Status Some further detailed studies of soils and landforms will be required when the project reaches an advanced stage of design and is scheduled for development. Most of these will be related to reclamation of construction sites and borrow and spoi 1 areas, and to specific requirements such as the identification of significant topsoil deposits which could be considered for removal prior to reservoir flooding.

103

6.4

AGRICULTURE

6.4.1 Backaround Approximately 75 percent of the Peace River valley from Hudson Hope t o the Alberta border i s estimated t o be suitable f o r cultivation and the production of a range of vegetable, cereal and forage crops. The agricultural land capability ratings are 1 t o 4 with agricultural climate capability ratings 1 and 2 . About 40 percent o f so'ils in the valley are of recent alluvial o r i g i n , and a proportion of these s o i l s on terraces and islands became part of the agricultural resource base fol lowing control of seasonal f 1 oodi ng by the upstream W.A.C. Bennett Dam. Because of the r e l a t i v e l y more favourable climate and higher proportion of productive s o i l types, the Peace valley has a higher agricultural potential than the r e s t of the Peace River agricultural region. As with the r e s t of the agricultural region, actual agricultural use of the Peace valley i s less than i t s potential and i s constrained by economic, marketing, land tenure and infrastructural f a c t o r s . Cereals including wheat, barley, oats and canola are the major agricultural crops. Frost damage in early f a l l and a high incidence of precipitation during harvesting periods are regionally significant constraints t o grain production and storage. Large areas are u t i l i z e d f o r forage and forage seed production or f o r pasture. Relatively small areas are cultivated f o r vegetables. Beef c a t t l e are the dominant livestock resource, and production i s based on combinations of pasture, feed s t a l l operations and extensive range grazing on crown land. The south bank of the Peace val ley i s crown land with very 1 imited agricultural use because of access 1 imitations and steep t e r r a i n along the valley rim. Privately owned and leased lands exitend along the north bank.. All lands with soil capability ratings of 1 though 4 are presently included in the Agricultural Land Reserve.

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Numerous agricultural development programs are under way within the Peace agricultural region. Most are di rected a t improvement of crop and livestock production through technological development, market development, training and information. 6.4.2 Previous Studies and Impact Assessments For the previous EPC appl ication, agricultural resource impacts were assessed and described by Canadian Bio Resources Consultants L t d . (1979). The loss of land of agricultural capability ratings 1 through 4 from reservoir formation was estimated a t 3200 ha, while inundation loss of a l l land of potential agricultural use (classes 1 through 6 ) was measured a t 4130 ha. Of t h i s t o t a l , only about 88 ha was then in agricultural use (including pasture). Construction and other s i t e a c t i v i t i e s would have affected another 166 and 178 ha respectively. Total agricultural l a n d alienation due t o the project a t that time was estimated a t 18 percent of the Peace River valley. These numbers are currently being updated, b u t significant changes are n o t anticipated. Project impacts on actual agricultural use were not quantitatively Eight farming measured prior t o the previous EPC application. operations were identified as being potentially impacted by p a r t i a l flooding or by having portions of the lands included within a s a f e l i n e . Secondary impacts l i s t e d b u t not quantified included reduction of 1 and parcels t o agricultural ly uneconomic s i z e s , e f f e c t s of Highway 29 relocation, and changes t o local water t a b l e s . Changes t o agricultural use within or close t o the reservoir area since the previous studies have been 1 imi ted in extent. Small areas have been brought under cultivation while other areas have been l e f t fa1 1 ow. Basic information on the agricultural resource base has been improved by s o i l surveys undertaken by Agriculture Canada. The flood reserve extending from S i t e C t o near the B.C.-Alberta border was cancel led by a Cabinet Order-in-Council in May 1985 and t h i s could a f f e c t agricultural resource use in the region.

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6.4.3 Recent Studies Additional studies of the agricultural resources in the project area were started in mid-1990 and are being wound down by March 1991. The emphasis of t h i s recent work i s on: updating agricultural resource inventories; identifying and interpreting any significant

trends

resource a v a i l a b i l i t y , quality and use; providing a forecast of the most likely trends in agricultural resource use within the region and study area; and evaluating the agricultural significance of the removal of the S i t e E hydroelectric flood reserves below S i t e C .

Major sources of new agricultural resource inventory are air-photo interpretation and information provided by regional agencies, agricultural organizations and local and regional agricultural experts. Agricultural inventory information wi 1 1 be avai 1 able in report tables and t e x t and as part of a GIs-based land resources inventory

6.4.4 S t u d v Status An updated agricultural resource inventory will be available by March 1991. This i s intended t o be a major component of the basis f o r the development of an impact assessment. Since agricultural production in the impact area i s in the hands of private landowners, compensation f o r l o s t agricultural land would have t o be addressed a t two l e v e l s , f i r s t l y t o land and secondly t o the agricultural resource base.

A passive program of land acquisition by B . C . Hydro through responding t o requests t o s e l l within the future reservoir area was reinstated in 1989 and i s expected t o continue. If the project were t o proceed, a l l privately owned and leased properties within the reservoir safe1 ine would be acquired by B.C. Hydro, with f u l l market

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value being paid to the owners. Easements could be negotiated with owners of marginally affected properties. Management and use of lands adjacent to the reservoir have yet to be defined. Compensation for lost agricultural resources could effectively be developed in cooperation with the Ministry of Agriculture and Fisheries. A number of possibilities, identified to date but not yet investigated in detail, include:

development of new agricultural areas through provision of roads and other supporting infrastructure;

enhancement of the agricultural productivity of existing lands within the Peace agricultural region through techno1 ogical and research development.

Mitigation of impacts to agricultural land use and land-owners were extensively reviewed by BCUC during the previous EPC application and the recommendations remain val i d l a1 though these would be updated and reviewed with regional agencies and the agricultural community if and when the project is reinstated. These include:

reclamation of sites disturbed by construction and their

return to the agricultural land base; continued agricultural use of lands acquired by B.C. Hydro; consolidation and amalgamation of fractioned parcels to

adjacent agricultural units; mitigation of impacts due to Highway 29 relocation; provision of crop drying facilities on lands near the

reservoi r; development of a land-use plan and participation by Hydro to minimize secondary impacts on remaining agricultural and other land: identification of areas where topsoil could be removed and conserved is an element of the plan.

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6.5

FOREST RESOURCES

6.5.1 Backaround The proposed S i t e C project l i e s within the boreal white spruce biogeoclimatic zone which extends across extensive areas of northern B . C . Dominant t r e e species are white spruce, lodgepole pine, balsam poplar and aspen. Periodic wildfires have influenced f o r e s t stand composition and successional s t a t u s within the region. Within the Peace Val 1 ey , elevations , slopes, aspect, erosion, seasonal floodplain inundation (prior t o W . A . C . Bennett Darn construction), local water tables and soil accumulations a l l a f f e c t f o r e s t composition and growing conditions. Forest composition i s heterogeneous, with numerous small dispersed stands of spruce and lodgepole pine. Aspen and poplar stands are dominant a t the lower elevations. The S i t e C reservoir area l i e s along the boundary of two Timber Supply Areas - Fort S t . John and Dawson Creek. Logging, along with agriculture and petroleum extraction, i s a major economic a c t i v i t y in the region. Crown timber supply commitments f o r the two TSA's exceed 2 mi 1 1 ion m3 per year and demand i s expected t o exceed supply within the near future. Current timber harvests are dominated by coniferous species, spruce and lodgepole pine, b u t deciduous timber i s becoming increasingly more important with the development of pulp and processing mi 11s a t Taylor, Dawson Creek and Chetwynd. About 650,000 mVyr of deciduous timber are currently harvested in the two TSA's. Timber resources within close reach of the major milling centres a t Fort S t . John and Dawson Creek have been largely uti 1 ized during the f i r s t cut rotation, and licensees are having t o harvest and transport logs over increasingly greater distances.

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6.5.2 Previous Studies and Impact Assessments Forest resource impacts described in the 1980 E P C application were based on studies and assessments undertaken from 1975 through 1978 (Reid Collins and Associates L t d . 1979). No commercial logging of the f o r e s t s within the proposed reservoir area had been undertaken u p t o t h a t time (nor since) due t o d i f f i c u l t access, r e l a t i v e l y low merchantable coniferous timber volumes, and the a v a i l a b i l i t y of economically more a t t r a c t i v e timber resources elsewhere in the reg i on. The t o t a l forested area which would be flooded was estimated t o be 3824 ha, of which merchantable coniferous timber (predominantly white spruce) occupied 950 ha (27 percent) with a t o t a l coniferous This volume represented an 8-month timber volume of 272,390 m3. supply f o r an average sawmill in the region. The average annual increment of coniferous timber in the whole reservoir area was estimated a t 8373 ~ n ' / ~ r i, .e. about one week's supply f o r an average sawmi 1 1 . The Ministry of Forests (1981) reviewed the assessments and estimated that i f potential agricultural areas and inaccessible and/or environmentally sensitive areas were excluded then only 1724 ha of 1 and producing 4736 m3/yr coniferous timber could be regarded as part of the normal timber resource base.

About 13 percent of the

area was estimated t o have good coniferous growing conditions (good s i t e index), about 52 percent was rated moderate and the remaining 35 percent was rated poor. No merchantable (coniferous) timber would have been impacted by dam construction a c t i v i t i e s . Highway 29 relocation w o u l d have affected about 5 ha containing an estimated 1580 m3 merchantable timber.

6.5.3 Recent Studies I n mid-1990 a new forest resource inventory of the reservoir area and the transmission right-of-way from Peace Canyon t o S i t e C was i n i t i a t e d (Industrial Forestry Service L t d , in preparation). The

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source of the inventory i s Ministry of Forests (MOF) a i r photo surveys and 1:20,000 f o r e s t cover mapping, s i t e c l a s s indices and associated area-volume and mean annual increment estimates prepared from 1987 through 1989. I n i t i a l l y the multiple objectives of the forest studies included the development of a timber and vegetation clearing plan f o r the reservoir a n d construction s i t e . A review of previous reservoir clearing programs in B . C . was t o be undertaken t o provide useful pointers f o r the S i t e C program. Also included were preliminary studies t o establish the basis f o r a future compensation program f o r rep1 acing impacted f o r e s t resources. These 1 a t t e r study elements were postponed when work on the project was deferred in l a t e 1990. The requirement f o r a detailed impact assessment f o r f o r e s t resources was also postponed, b u t inasmuch as the inventory of the reservoir and construction areas represents most of the d i r e c t project impacts, a provisional impact assessment may be available. These i n i t i a l studies are scheduled f o r completion by March 1991.

6 . 5 . 4 S t u d v Status The impact assessment would be completed when the project was close t o an EPC application. I t would include an assessment of the impacts of reservoir clearing and the avai 1 abi 1 i t y of 1 arge volumes of timber within a short time frame on the local f o r e s t industry, as well as an assessment of the significance of the loss of part of the future resource base on long-term forest resource extraction in the two T S A ' s . A s e t of clearing standards would be established f o r the reservoir. BCUC recommended that these be established by the Ministry of

Forests. The chief goals of clearing standards would be t o maximize resource extraction, minimize wastage and t o remove as much organic material from the area as possible prior t o flooding t o protect water qua1 it y

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A reservoir clearing plan would be developed, preferably on a j o i n t

basis between B . C . Hydro and the Ministry of Forests with public input. The chief concerns would be t o develop the necessary infrastructure and arrangements with licensees and contractors t o ensure maximum clearing within the time frames imposed by construction scheduling and coffer dam closures. Agreement would have t o be reached between the various p a r t i e s on the extent of clearing beyond the actual reservoir floodline so as t o address a l l concerns related t o water quality, protection of f i s h and w i l d l i f e h a b i t a t s , future recreational use and public safety.

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6.6

WILDLIFE

6.6.1 Backaround The Peace lowlands, including the Peace valley above S i t e C , have the mildest climate and lowest snowfall in the Peace region. Together with vegetation diversity and a large amount of land-water interface, these factors are responsible f o r the area having a relatively high abundance and diversity of w i l d l i f e . Mule deer are presently the most abundant ungulate species in the region. This i s a change since the previous assessment. Whitet a i l e d deer are increasing in numbers throughout the region, with highest numbers in the Peace lowlands and agricultural areas. Moose are the second most abundant ungulate in the region and valley, and use most habitats except intensive agricultural areas. Elk are increasing rapidly within the Peace Lowlands and are heavily dependent on montane shrub-grassland slopes f o r winter habitats. A variety of furbearers occur -throughout the valley and include

beavers, muskrats, snowshoe hares, red s q u i r r e l s , s h o r t - t a i l e d weasels, martens, f i s h e r s , mink, wolverines and o t t e r s . Carnivores include coyotes, red foxes, lynx and wolves. The Peace valley i s an important flyway f o r mi grating waterfowl , and ducks, geese and swans move westward along the valley from mid-April t o mid-May, and back again in l a t e f a l l . Canada geese and shorebirds breed in the reservoir area. Boudreau Lake, near the confluence of the Moberly and Peace r i v e r s , i s a proposed ecological reserve and a prominent bird nesting area in the Peace region. 6.6.2 Previous Studies and Impact Assessments Previous assessments were based on limited f i e l d data acquired in Total loss of 1976 and 1977 ( D . A . Blood & Associates 1978). habitats within the Peace valley was predicted f o r 4625 ha. Reduction of moose carrying capacity was estimated a t 125 t o 250 b u t

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u p t o 500 were judged t o use t h e p o t e n t i a l r e s e r v o i r a r e a in s e v e r e w i n t e r s . About 50-250 d e e r would have been impacted by h a b i t a t l o s s . Impacts on t h e Moberly e l k herd were not f i r m l y e s t a b l i s h e d due t o t h e lack of d a t a . S i g n i f i c a n t reductions in a v a i l a b l e h a b i t a t would have occurred f o r beaver, weasels, martens, c o y o t e s , lynx, snowshoe h a r e s , red s q u i r r e l s and black b e a r s . 6 . 6 . 3 Recent S t u d i e s The Ministry of Environment commenced a 1:50,000 s c a l e biophysical mapping inventory of t h e lower Halfway River a r e a in 1986 and subsequently extended t h e inventory t o i n c l u d e t h e a r e a south of t h e Peace River. In e a r l y 1991 t h e Ministry provided mapped and d i g i t i z e d d a t a covering t h e S i t e C p r o j e c t study a r e a t o B.C. Hydro's c o n s u l t a n t s who e s t a b l i s h e d t h e biophysical d a t a base on a The mapping provides a Geographic Informati on System (GIs) s t a n d a r d i z e d , updated and q u a n t i t a t i v e b a s i s f o r w i l d l i f e and vegetation s t u d i e s within t h e p r o j e c t a r e a .

Further w i l d l i f e s t u d i e s were i n i t i a t e d in J u l y 1990 on t h e major wi l d l i f e s p e c i e s used consu~nptively f o r hunting and t r a p p i n g . A 1 1 avai 1a b l e d a t a on ungulates and t h e p r i n c i p l e f u r b e a r e r s , including a e r i a l survey and r a d i o - t r a c k i n g d a t a and hunting and t r a p p i n g s t a t i s t i c s were provided by t h e Ministry of Environment t o B . C . Hydro's c o n s u l t a n t s . Analysis of t h e d a t a w i l l be completed by March 1991 and i s expected t o provide a good b a s i s f o r an assessment of regional and local population s i z e s and t r e n d s and t h e e x t e n t of hunting and f u r h a r v e s t s . To provide more s i t e - s p e c i f i c information f o r t h e r e s e r v o i r a r e a , a program of r a d i o - c o l l a r i n g and t r a c k i n g l a r g e ungulates was i n i t i a t e d in J u l y 1990. By January 1991 a t o t a l of 13 moose, 8 e l k and 9 deer had been provided with r a d i o c o l l a r s and were being tracked from t h e a i r on a twice-weekly b a s i s . The r a d i o - t r a c k i n g program i s scheduled t o r u n t o a t l e a s t June 1991, and d e t a i l e d analyses of ungulate movements wi 11 be provided a t t h a t time. Moose

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tend t o move frequently within and through the reservoir area, suggesting t h a t a large population makes intermittent use of the areas t o be flooded. Deer and elk have been found t o be f a r more sedentary. A preliminary aerial census of the reservoir area in January 1991 revealed the presence of 342 deer, 142 moose and 2 e l k . Track counts of the major fur-bearing species are being conducted throughout the winter of 1990/91 and will provide more precise estimates of furbearer densities within the major biophysical habitats in the reservoir area. Aerial and r i v e r surveys in the l a t e f a l l of 1990 indicated a t o t a l of 77 active beaver lodges twice the number recorded during the previous impact assessments in 1976177. 6.6.4 S t u d v Status Radio-tracking of moose, deer and elk i s scheduled f o r completion by A l l wildlife study a c t i v i t y in 1990 and 1991, June 1991. principal ly radio-tracki ng of ungulates plus seasonal surveys of furbearers, waterfowl and u n g u l a t e s , has been directed a t developing a b e t t e r inventory of w i l d l i f e populations and movernents within the project area. No impact assessments have been made. Studies on biological communities and other w i l d l i f e species of nonconsumptive value were considered f o r 1990/91 b u t were not undertaken. The main objectives of these studies would be t o obtain a measure of the biodiversity of the project impact area, t o determine how t h i s would be affected by reservoir flooding and project development, and t o determine the s t a t u s of fauna and f l o r a species of special concern due t o t h e i r conservation s t a t u s , r a r i t y , aesthetic values, e t c . Close liaison has been established with the regional Ministry of the Environment on the wildlife studies. I n f u t u r e , attention would be directed towards the planning and eventual establishment of compensation programs. The scope and intent of such planning would

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be influenced by progress on simi 1 ar co~npensationprograms now being developed co-operatively between the Ministry and B .C. Hydro for Williston and Mica reservoir areas. Compensation-related items which have been identified for discussion and eventual study include surveys of potential compensation areas, preferably near the reservoir and possibly including lands already acquired by B.C. Hydro, establishment of goals and techniques to be employed in habitat enhancement for ungulate species, identification of areas suitable for non-consumptive wildlife enhancement such as wildlife viewing areas. Mitigation of expected impacts to wildlife were extensively reviewed during the previous EPC application and BCUC hearings. These measures would be continued, refined and expanded if the project were to proceed, based on the latest inventory data and on changes to project design and land use patterns, and would include:

developing a reservoir clearing schedule so as to minimize wildlife impacts

appropriate management of activities and waste disposal at construction camps; and

minimizing construction of roads and public access.

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6.7

FISHERIES

6.7.1 Background A t o t a l of eleven species of sport f i s h are found in the Peace River

S i t e C study area. Major species, in order of numerical importance, include mountain whitefish, Arctic gray1 ing, rainbow t r o u t , lake whitefish, and walleye. Low numbers of b u l l t r o u t , kokanee, Mountain northern pike, goldeye, and burbot are also present. whitefish are very abundant upstream from Taylor. Densities of t h i s species increase in most reaches during the open water season, which suggests the occurrence of an upstream movement. Arctic grayling Bull and rainbow t r o u t appeared t o have sedentary popul a t i ons t r o u t are low in number b u t widespread throughout the r i v e r . Kokanee were also 1 imited in number and concentrated in known areas. Warm water species such as walleye, northern pike, goldeye, and burbot exhibited very low catch rates b u t were most often encountered in the reach below the Pine River t o the BC/Alberta border.

Four coarse f i s h species were encountered during f i s h e r i e s surveys Longnose sucker was the dominant species of the Peace River. numerical l y , fol lowed by 1 argescale sucker, white sucker, and northern squawfish. Large spawning concentrations of suckers were observed a t creek mouths, particularly a t Farrell Creek during spring . 6.7.2 Previous Studies and Impact Assessments

An inventory of fish populations in the S i t e C area was conducted during the period 1974 - 1977, and the major impacts of the S i t e C development on the f i sheri es resource were descri bed by Renewabl e Resources Consulting Services L t d . (RRCS 1979). Alteration of the present riverine system into a standing water body and blockage of upstream f i s h movements a t the damsite were the major impacts noted. The surface water area of the r i v e r in the reservoir location would

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increase in area (from 48.4 km2 to 94.4 km2) due to the flooding. The increase in aquatic habitat wi 1 1 result in increased phytoplankton and zooplankton production. Without enhancement, it was predicted that northern pike populations would increase in response to growth of aquatic vegetation in littoral areas of the reservoir, and mountain whitefish and Arctic grayling numbers would remain at present levels. Bull trout may increase although greater angling pressure may reduce their numbers. Rainbow trout numbers are predicted to be low in the reservoir due to the limited availability of suitable spawning habitat. Based on limited data, a maximum sustainable yield of sportfish for the existing riverine system was estimated at 12,000 fish per year, and the Site C reservoir was predicted to support slightly increased angling (RRCS 1979). The Ministry of Environment (1981) concluded, based on the same limited data, that the sustainable yield of the riverine system would be 18,000 fish per year, and that without enhancement, angling use would drop to about 75% of the level expected without the project. The potential exists for high total dissolved gas (TDG) levels downstream of Site C during periods of spi 1 lway discharge, which could cause gas bubble disease in fish. B.C. Hydro (1982) assessed the potential for problems during spillway discharge and predicted that at spillway flows of less than 2200 m3/s, TDG levels should not exceed 120% saturation; however, above 2200 m3/s, the .predicted TDG levels increase rapidly. Discharge from infrequent spillway operation should be below 2200 m3/s more than 99% of the time with five or six units in operation. According to project scheduling at least four units will be operational during the high flow period in the summer following startup. In conclusion, once Site C is in full operation, any problems associated with high TDG levels should occur infrequently; however, spi 1 1 way discharge greater then 2200 m3/s could result in mortality to downstream fish stocks even when the

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high discharge is only for a short duration. The BCUC concluded that there was insufficient information on the fisheries resource and its utilization in the project area on which to base a compensation value, and recommended that additional studies be undertaken as a condition of any Energy Project Certificate for the Site C development. It recommended that:

B.C. Hydro conduct a detailed angling and creel survey;

B.C. Hydro gather information on sportfish movements in the Peace River and tributaries to assist in determining the impacts of flooding and the prospects for survival of existing stocks, This included investigation of sportfish migration and life-history patterns related to habitat associations to a1 low identification of critical 1 imi ting factors and designing appropriate enhancement measures to provide compensation in kind;

B.C. Hydro, in consultation with the Ministry of Environment, conduct studies to ascertain the most effective manner in which shoreline and tributary enhancement programs might be developed for the reservoir. Identification of potenti a1 spawning areas using existing maps, 1 i terature and fol low-up field studies were recommended to determine suitability and feasibility of pre-impoundment enhancement methods;

the appropriate government agency undertake the studies needed to provide information on the productivity of existing reservoirs, particulary northern ones, so that a body of knowledge be developed on the biological impact of the conversion of rivers to reservoirs. The levels of mercury in fish in existing reservoirs should be included in these studies to assist the Ministry of Environment in designing the appropriate enhancement program.

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BCUC recommended mitigation measures as follows:

minimize sediment loadings during construction;

implement suitable handling of waste materials in order t o minimize water pollution.

BCUC also recommended that when the above studies are completed,

appropriate compensation measures be determined in the postdevelopment monitoring program, using the evaluation parameters adopted by BCUC. I n 1985, the B . C . Ministry of Environment conducted an angling use and creel survey of the section of the Peace River between the Peace Canyon Dam and Farrell Creek (Hammond 1986). They found t h a t rainbow trout were the most commonly caught s p o r t f i s h , b u t , due t o release of undersized t r o u t , lake whitefish and mountain whitefish contributed most t o the harvest. An estimated 8629 anglers fished f o r a t o t a l of 16 898 hours, and caught an estimated t o t a l of 7667 f i s h . This represented an average catch r a t e of 0.45 f i s h per rodhour. Hatchery f i s h , stocked into Dinosaur Lake, made u p 38% of the rainbow trout harvest, indicating that entrainment out of the reservoir i s significant t o the downstream sport fishery.

I n 1988, B.C. Hydro undertook a mercury sampling program in 12 B . C . reservoirs and 2 control lakes. In t h i s study, mercury concentrations in f i s h t i s s u e , water samples, and sediments were measured. A limited number of f i s h samples were collected from within the S i t e C area. 6 . 7 . 3 Recent Studies B . C . Hydro i n i t i a t e d a program designed t o address the deficiencies

identified in the BCUC report. After a review of the d r a f t terms of reference f o r the f i r s t year of a planned two year study, in consultation with representatives of the B . C . Ministry of the 6

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Environment, the scope of the studies was agreed upon. Meetings were held with local environmental groups and rod and gun clubs in Fort St. John, Hudson Hope, Chetwynd, and Dawson creek to outline the studies and to receive comments. In 1989, B.C. Hydro commissioned pre-construction studies to update the pre-development database relating to the fisheries resource and its use, and to identify feasible mitigation and enhancement opportunities that exist in the development area. The studies were grouped into three components: a sport fishing survey (The DPA Group Inc.), fish habitat and tributary surveys (Aquatic Resources Ltd.) , and fish movements and population status programs (R.L.&L. Environmental Services Ltd.). 6.7.4

Status of Study Components The final report of the sportfishing survey is to be submitted by 31 March 1991. The report will document sportfishing use of the Peace River between the Peace Canyon Dam and Taylor. Activity is assessed by a combination access point and aerial overflight creel survey. Fishing activity is summarized by month, location and angler type and information on fishing method, angler residence, and age group is provided. Sportfish catches are summarized by size and age classes for each species and is broken down into harvested and released fish categories. Biomass of harvested fish is also provided. Aquatic Resources Ltd. submitted a draft report of the 1989 studies in January 1991. A habitat map atlas (large format; limited distribution) will also be submitted in early March 1991. The report and atlas contain information on fish habitat in the Peace River tributaries in the area between Hudson Hope and Fort St. John. Also included in the report are descriptions of fish populations, assessments of tributary habitats removed by reservoir creationland potential enhancementlmitigation opportunities. A draft report of the 1990 studies was submitted in February 1991. It contains

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detai 1 ed information on habitat use by sportf i sh f o r spawning and rearing purposes in selected t r i b u t a r i e s , as we1 l as assessments of enhancementlmi tigation potenti a1 Final reports f o r the 1989 and 1990 studies and the habitat map a t l a s are expected by the end of March 1991.

R . L . & L completed a final report of the 1989 studies in March 1990. The final report of the 1990 studies will be available in early April 1991. The reports contain information on f i s h abundance, distribution and habitat use, l i f e history data, feeding habits and macroparasi t e s in the mainstern Peace and Halfway r i v e r s . Population estimates were developed f o r major sportfish species and seasonal movement patterns were assessed using tag recoveries and an Information on temperature extensive radio t e l einetry program. regimes and water quality are also contained in the reports.

Sport Fi shinq Survev The estimated e f f o r t over the 12 month ( i . e . , May 1989 t o April 1990) period was 6485 angler-days f o r shore anglers and 1495 angler-days for boat anglers. Over half t h i s e f f o r t was expended in the Hudson Hope region with less than 6% occurring below the proposed dam s i t e . I n t o t a l , 9782 game f i s h were caught by Peace River anglers - 6422 were kept and 3360 were released. Mountain whitefish were the most abundant species captured followed by rainbow trout and Arctic grayling. Most anglers (90%) were local residents. The main types of gear used incl uded 1 ures (65%), bait (33%), and f 1 ies (38%). Rainbow t r o u t were the most sought a f t e r species (75%) followed by Arctic gray1 ing (36%). Most anglers harvested t r o u t in the 290 t o 340 mm size-class with Arctic gray1 ing and whitefish species being s l i g h t l y 1 arger. Rainbow trout and Arctic grayling ranged in age from two t o f i v e years. The majority of rainbow trout being captured were age t h r e e ,

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whereas Arctic grayling were equally comprised of age three and four year 01 ds . Fisheries Habitat and Tributary Surveys I n general, the loss of unique tributary habitat due t o reservoir creation will be minimal.

Significant losses will include spawning habitats in the Moberly River and Lynx Creek. Fish population densities were relatively low in a1 1 t r i b u t a r i e s . Maurice Creek contained the highest densities of rainbow trout of a l l t r i b u t a r i e s examined and appeared t o be the most important spawning tributary for rainbow trout from the Peace River. Although Lynx Creek appeared t o provide rearing habitat f o r rainbow t r o u t , the habitat capacity was limited due t o the high s i l t load. Cache, Wilder, F a r r e l l , and Ground Birch creeks and Cameron River had very few sportfish and relatively high densities of suckers and minnows. Clear water t r i b u t a r i e s of the upper Halfway River appeared t o have extensive rearing habitat f o r several sportfish species, mountain whitefish being the most prevalent species sampled. The Moberly River appeared t o be an important spawning area f o r mountain whitefish and Arctic grayling. Spawning and rearing habitats within the S i t e C reservoir will probably be limited and species such as Arctic grayling, rainbow t r o u t , or wall eye w o u l d 1 i kely require hatchery support t o maintain numbers. Enhancement opportunities may e x i s t in t r i b u t a r y streams such as Lynx Creek ( i . e . , reduce s i l t loads by diverting springs in Brenat Creek) and Maurice Creek ( i . e . , provide spawning channels). Habitats in the upper Halfway system which do not appear t o be near carrying capacity can be stocked with bull t r o u t and rainbow t r o u t t o increase angling opportunities.

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Fish Movements and Population Status Major fish species encountered in the mainstem Peace River included mountain whitefish, lake whitefish, Arctic grayling, rainbow t r o u t , longnose sucker, and largescale sucker. Low numbers of b u l l t r o u t , kokanee, walleye, and northern pike also were present. With the expection of walleye and northern pike a l l species were most abundant upstream of the proposed dam s i t e . Resident populations of sportfish species in the mainstem Halfway River were limited. Mountain whitefish was the only species which appeared t o spawn successfully in the mainstem Peace and Halfway rivers while others spawned outside the study area ( i . e , walleye), or attempted t o use small tributary streams. Radio telemetry r e s u l t s indicate t h a t rainbow trout entered Maurice and Lynx creeks during spawning and b u l l trout undertook extensive migrations into the upper t r i b u t a r i e s of the Halfway River system. A1 1 fish populations appeared t o be "sedentary", except wal leye, which undertook post-spawning migrations from Alberta into the S i t e C study area. The proportion of the walleye population which passed the proposed dam s i t e was suspected of being very small.

Population estimates were developed f o r mountain whitefish, lake whitefish, Arctic grayling, rainbow t r o u t , and walleye. Mercury concentration in muscle t i s s u e samples were typical of background levels f o r the species examined and did not exceed federal guide1 ines f o r maximum a1 1 owabl e concentrations f o r human consumption.

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6.8

SOCIOECONOMIC

6.8.1 Background The S i t e C dam would be located approximately seven kilometres southwest of the City of Fort S t . John. While impacts would be concentrated in Fort S t . John and i t s iminedi a t e area, the study area f o r socioeconomic issues would a1 so cover the nearby communities (and adjoining hinterland) of Taylor, Hudson's Hope, Dawson Creek, Chetwynd and Tumbler Ridge. These communities would be faced with managing a variety of socioeconomic, 1 and use and municipal planning consequences related t o the p r o j e c t ' s construction and operations e f f e c t s . Dawson Creek, Chetwynd, and Tumbler Ridge a r e also of study relevance because of t h e i r roles as sub-regional business and labour market centres, and the f a c t t h a t they f a l l within the p r o j e c t ' s natural commuting shed. The primary area boundaries, therefore, correspond t o the 1 arger Fort S t . John (Fort S t . John, Hudson's Hope, Taylor) and Dawson Creek (Dawson Creek, Chetwynd, Tumbler Ridge and Pouce Coupe) subareas of the Peace River-Liard Regional D i s t r i c t . 6.8.2 Previous Studies and Impact Assessments Socioeconomic impact studies were prepared by Canadian Resourcecon L t d . e t a1. (1979), Thurber Consultants L t d . (1979) and Christine The fol lowing i s a summary of the Latty and Associates (1980) impacts identified and the reaction of the regulatory agencies t o t h i s information.

Empl ovment and Income

From the previous hearings, BCUC concluded t h a t local hiring could well be the most significant compensation t o the region f o r the adverse impacts suffered. Basic employment during the construction phase would increase sharply and induce employment growth in 6

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non-basic sectors. The short-term e f f e c t s on employment and income levels from project construction, with the majority of jobs concentrated in the vicinity of Fort S t . John, would greatly exceed the long-term impact of plant operation. Project-i nduced stimulation of the regional economy would lead t o the creation of service sector jobs which will be available t o residents of Fort S t . John and others in the region. The principal employment e f f e c t s of the project that were forecasted in 1980 by B . C . Hydro consultants were as follows: Manpower requirements f o r project construction, highway relocation, reservoir logging and clearing, and transmission l i n e construction would t o t a l 5400 man-years over the eight year construction period; 1360 man-years would be required in the peak year of construction;

Employment of regional residents on various aspects of the project percent region. peak in

w o u l d be a p r i o r i t y of the project, with as much as 45 of the t o t a l labour requirement coming from the This regional labour employment would be expected t o the f i f t h year of construction;

I t was estimated that 55 percent of the t o t a l construction work force would come from outside the region, and t h a t approximately 1200 non-resident workers would move into the area. O f t h i s t o t a l , i t was estimated t h a t 1000 workers would l i v e in camps located a t the project s i t e , and t h a t the remaining 200 construction workers and supervisory personnel would l i v e with t h e i r families in the nearby a r e a s , principally Fort S t . John;

Indirect employment generated through 1 ocal expenditures by project contractors was forecast t o t o t a l 50 jobs in year three of project construction.

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Net employment growth in regional service s e c t o r s , a t t r i b u t a b l e t o project re1 ated increases in population and income, was projected t o peak a t 150 jobs in years four and f i v e of project construction;

A1 1 short-term enipl oyment increases would di sappear once construction of the project was completed, decl ining a f t e r the peak construction year;

When operational,

the project would

employ a permanent

workforce of 25 persons with primarily technical and ~nanageria1 backgrounds, 1 i kely froin outside the study region. This would lead t o a total increase in local employment of nearly 40 jobs; I t was expected that price levels in Fort S t . John would r i s e due t o buoyant economic conditions during project construction. Therefore, certain segments of the local population, such as those on fixed incomes and those dependent on various forms of social assistance and disabi 1 i t y pensions, would experience a reduction in purchasing power;

A t the end of the S i t e C construction period, employment would decline sharply f o r the project and in businesses t h a t had hired additional s t a f f t o cope with project-induced a c t i v i t y . I n i t s 1983 report, BCUC recommended t h a t :

Hydro and the Ministry of Labour and Consumer Services consult with relevant trade unions t o faci 1 i t a t e increased local membership in unions, a t l e a s t f o r the duration of the project; B.C.

A procurement agreement t o encourage hi ring 1 ocal residents and purchasing from local suppliers be reached between B . C . Hydro, the Ministry of Labour and Consumer Services and union

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representatives. The Allied Hydro Council Agreement had previously enforced the following hiring sequence a t B . C . Hydro construction s i t e s : registered union members in the local areas;

B.C.

registered union members from outside the area; non-union workers from the local area; non-union workers from elsewhere. Hydro make i t known whether the Allied Hydro Counci 1

greement would be renewed and S i t e C designated a closed o r open s i t e . If S i t e C was t o be i s designated a closed s i t e , the provincial government, in cooperation with B . C Hydro, should work with union contractors to increase local membership as required, based on the conclusions of a labour market assessment. If S i t e C was t o be designated an open s i t e , B.C.Hydro should advise contractors of local hiring requirements, i f any, perhaps through the inclusion of appropriate clauses in the tendering agreements;

the need f o r a training program be established immediately before an EPC was issued, based on economic conditions prevailing a t that time. If the need was established, B . C . Hydro should pay f o r and administer the training programs in consultation w i t h the appropriate unions.

BCUC stated that the need f o r training programs would require

knowledge of the labour market conditions a t the time of project construction, and, therefore, could not be assessed until construction was about t o commence. Both the region and the Province as a whole have a sizeable construction work force which would require minimal, i f any, additional training t o meet the needs of t h i s project. The a v a i l a b i l i t y of skilled workers f o r project construction and, therefore, the need f o r training programs would be dependent on the level of construction a c t i v i t y in the province and on the degree t o which local hiring f o r the project was t o be requi red.

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BCUC concluded that the magnitude o f ' t h e impacts of the postconstruction decline would depend on the extent of alternative employment opportunities available at the end of the project, both within and outside of the region. It agreed with B.C. Hydro that few mitigative measures could be taken with respect to any significant post-construction decl ine, except to advise the manpower and employment services as early as possible about the end of the construction phase in order to facilitate retraining and rehiring of local residents or relocation of those available to move to other projects. Population The trend in growth in the northeast B.C. region was upward in the early 1980's with dramatic growth until 1981. Thereafter, the rate of growth fell by 6% to 1986. The long-term outlook for the sector remains positive with current growth in the petrochemical and forest industries, and with potential for increased agricultural and tourism development. Construction of Site C would create considerable additional employment in the Fort St. John area. Direct employment would be available on the project itself and employment opportunities in non-basic sectors would increase as well. While many of these new jobs would be taken by current residents of the region, the magnitude of the employment increase means that non-residents would fill a large number of the employment vacancies. The resultant in-migration would create a 1 arge yet re1 ati vely short-term increase in the area's population. This influx would consist of project workers living in the construction camp near the site, project workers relocating their families to the region and other non-residents who would fill jobs in the local service sector. The project-i nduced population increase would add pressure on municipal services and infrastructure. Re1 ated financi a1 impacts resulting from the anticipated additional costs to be borne by local

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government, and t h e impact of t r a n s i e n t construction workers on t h e community's social f a b r i c and t h e q u a l i t y of l i f e , would r e q u i r e study during preparatory stages of t h e p r o j e c t . Based on t h e impacts i d e n t i f i e d during t h e l a s t application and review process, t h e present estimation of project impacts on t h e population has not changed and i s :

Approximately 55 percent of t h e t o t a l construction work f o r c e

would come from outside t h e region, peaking a t approximately 1200 non-resident workers; Of t h e s e , about 1000 workers would 1ive in camps located a t t h e p r o j e c t s i t e during t h e peak year of construction. The remaining 200 construction and supervisory personnel would l i v e with t h e i r families in t h e nearby a r e a s , p r i n c i p a l l y Fort. S t . John; In-migration t o t h e region of construction workers and t h e i r families and o t h e r non-residents f i l l i n g vacant p o s i t i o n s in local s e r v i c e s e c t o r s would increase t h e r e s i d e n t population of t h e Fort S t . John area by 800 during t h e peak y e a r of construction; The short-term increase in population a t t r i b u t a b l e t o p r o j e c t construction would largely disappear following completion of t h e construction s t a g e . I t i s assumed t h a t some of those who move t o t h e area might choose t o remain i f employment opportunities a r e a v a i l a b l e in t h e region as work on S i t e C nears completion; I t i s estimated t h a t t h e S i t e C project would d i r e c t l y c o n t r i b u t e t o a 1 ong-term popul ation increase in Fort S t . John of 80 people;

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Land Use Impacts predicted during t h e l a s t BCUC review of t h e a p p l i c a t i o n r e l a t e d t o land use, which a r e s t i l l r e l e v a n t , include:

Termination of p r i v a t e ownership in t h e area which would be affected by t h e r e s e r v o i r through B . C . Hydro's responsive land a c q u i s i t i o n program; Forced r e l o c a t i o n ; A l t e r a t i o r t o property below t h e s a f e l i n e of t h e r e s e r v o i r ; Termination of a1 1 types of 1 and use in t h e flooded area of the reservoir; Relocation of Highway 29 and o t h e r f a c i l i t i e s ; Biophysical changes due t o flooding and c l e a r i n g ; Additional planning c o s t s f o r t h e Regional D i s t r i c t ; Alteration in land values due t o perceived imminence of dam construction.

BCUC urged B . C . Hydro t o make every e f f o r t t o d e l i n e a t e a f a i r means

of acquiring additional land i f S i t e C proceeds, and in d i s p o s i t i o n of land not ultimately required f o r t h e p r o j e c t . Land use planning which responds t o biophysical capabi 1 i t i e s and community a s p i r a t i o n s , r a t h e r than t o pressure f o r development, was deemed d e s i r a b l e . Sub-regional planning f o r a g r i c u l t u r a l , r e s i d e n t i a l and recreational development was proposed and r e t e n t i o n of public access t o t h e Peace River was supported. BCUC concluded t h a t land use impacts, mitigation and compensation be referred t o a monitoring program. In general, B . C . Hydro would be

responsible only f o r definable, t a n g i b l e impacts. Appropriate government agencies were requested t o undertake development of a land use plan, and B.C. Hydro was required t o pay f o r incremental project-induced c o s t s , t o p a r t i c i p a t e in t h e plan development, and t o comply with t h e p r a c t i c e s prescribed in t h e plan regarding management and maintenance of 1 ands not required f o r p r o j e c t

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operation. Planning costs f o r the Regional D i s t r i c t would be covered by additional revenues derived from a levy on the project. BCUC recommended that the flood reserve on the Peace River val ley

from the Alberta border t o S i t e C be removed. Hydro announced a responsive land acquisition policy in 1977 which provided f o r purchase a t f a i r market value of a l l private lands below the s a f e l i n e , with an o f f e r t o lease back the land t o each rancher or farmer a t market rent. Sel l e r s would be offered the right of f i r s t refusal t o buy back the property a t the original purchase price i f the project were abandoned: This policy was withdrawn in October 1981. B.C.

A land acquisition program similar t o the responsive program of 1977

- 1981 was r e i n s t i t u t e d in September 1989. Owners of the property which w o u l d be required f o r the project have the option t o s e l l t o B . C . Hydro. The program will r e s u l t in the acquisition of only minimal property rights required f o r safe operation of the project.

The flood reserve from the Alberta border t o S i t e C was removed by Cabinet Order-in-Council in 1985. Housina and Infrastructure B . C . Hydro and i t s consultants estimated that accornmodation could be

needed in Fort S t . John f o r project personnel and service sector workers and t h e i r families during the peak construction years. This could r e s u l t in the need f o r u p t o 280 additional housing u n i t s . The influx of construction personnel t o Taylor and Hudson's Hope would be small and e f f e c t s minor. The flooding of properties in the Lynx Creek subdivision of Hudson's Hope could reduce tax revenue t o the d i s t r i c t . The pumphouse, water intake and i n i t i a l part of the distribution system f o r domestic water in Hudson's Hope would also be inundated.

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Since 1980, t h e population of t h e area has decreased s l i g h t l y , t h e r e f o r e , t h e demand f o r housing and t h e r e l a t e d s e r v i c e s in t h e City of Fort S t . John and t h e Village of Taylor has remained re1 a t i v e l y s t a b l e . Potential expansion r e s u l t i n g from several planned i n d u s t r i a l p r o j e c t s cou'ld lead t o an influx of population throughout the region, and would require an update of housing a v a i l a b i l i t y and s u i t a b i l i t y , as we1 1 as potential f i s c a l impacts in t h e affected areas. The r e s e r v o i r created by a dam a t S i t e C would inundate approximately 23 km of Highway 29 between Hudson's Hope and Bear F l a t s . The major affected s e c t i o n s of t h e highway would be near Lynx Creek, F a r r e l l Creek, Cache Creek and t h e Halfway River. Prel iminary s t u d i e s by B . C . Hydro and t h e Ministry of Highways have resulted in t h e proposed re-a1 ignment of Highway 29. This re-alignment and construction would impact surrounding landowners, 23 known heritage resource s i t e s , as we1 1 as r e c r e a t i o n a l use and access a1 ong t h e r e s e r v o i r . BCUC did not endorse t h e compensation package agreed t o by Fort S t .

John and B . C . Hydro. Numerous impacts were not seen as a l e g i t i m a t e expense of t h e project since t h e magnitude of social impacts was unknown. BCUC recommended instead t h a t t h e matter of impacts, mitigation and compensation f o r t h e City of Fort S t . John be r e f e r r e d t o a monitoring program. Therefore, i t was recognized t h a t a negotiated agreement should not be made a condition of t h e Energy Project C e r t i f i c a t e . To s a t i s f y concerns in Hudson's Hope, BCUC recommended t h a t a s a condition of t h e Water License, B . C . Hydro carry out such monitoring of bedrock banks as directed by t h e Water Comptroller. BCUC a l s o recommended t h a t t h e monitoring reports be made p u b l i c , and t h a t any c o r r e c t i v e action required be c a r r i e d out by B . C . Hydro. With regard t o t h e flooding of municipal land and p r o p e r t i e s , BCUC recommended t h a t as a condition of t h e Energy Project C e r t i f i c a t e , 6

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Hydro negotiate financial compensation f o r the Corporation of Hudson's Hope in an amount equal t o the estimated net decline in property tax revenue a t t r i b u t a b l e t o l o s t land plus the replacement or repair cost of municipal works, land and f a c i l i t i e s t h a t will be l o s t or damaged. B.C.

BCUC concluded t h a t any costs t o the Peace-Liard Regional D i s t r i c t

f o r additional planning be compensated through revenues from a levy on project construction f a c i l i t i e s . Any remaining s h o r t f a l l should be dealt with by the monitoring program. recommended t h a t B . C . Hydro n o t be required t o pay f o r increased costs claimed by Taylor with respect t o i t s water intake constructed prior t o BCUC hearings. BCUC

Communitv Services I n 1980, B . C . Hydro estimated project-induced impacts on community services f o r the peak year of project construction and employment t o include: additional ambulance attendants, doctors, hospital beds, d e n t i s t s , one pub1 i c health nurse, social services clerks and social workers, teachers, classrooms, and probation o f f i c e r s .

Social service issues identified in the BCUC hearings related t o the magnitude of the impacts, the extent t o which the S i t e C project would be responsible, the measures that should be undertaken, and who should undertake them. Also in 1980 i t was estimated t h a t the project would a f f e c t Fort S t . John most d i r e c t l y . This community had a t t h a t time already experienced the s t r e s s and disruption of rapid growth and a large transient population. The major social problems in Fort S t . John, typical of rapid-growth, highly transient population centers, were alcohol abuse and the attendant increase in t r a f f i c accidents, a rising crime r a t e , a migrant school population with a high drop out r a t e , and under-financed transients seeking work in the area. The

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e f f e c t of the project would be t o exaggerate existing community problems and service gaps. L i t t l e evidence was presented a t the hearing on other social service impacts, such as human resources and education. However, intervenors were general ly concerned that those impacts be monitored. BCUC recommended that :

the extent of B . C .

Hydro's responsibility f o r health and

hospital service costs be determined by the monitoring program; B . C . Hydro's responsibility in the matter be carefully limited t o reimbursement f o r the extra health and hospital services required as a r e s u l t of S i t e C ; and, the assessment of other social service impacts be referred t o the monitoring program.

When, and i f , such impacts were identified and B . C . Hydro's share or responsibility determined, appropriate mitigation o r compensation measures were t o be taken a t B . C . Hydro's expense. Social Values and Communi.ty Stabi 1 i t y Early S i t e C hearings noted that the region has a s t a b l e core population, b u t has been subject t o the "boom and bust" e f f e c t s of external economic ventures. There i s a high level of community cohesion and p o l i t i c a l effectiveness in each of the affected communities. There i s a r e l a t i v e l y low level of crime, alcohol and d r u g abuse, and other social deviation a t the present time. Longterm residents value t h e i r physical environment highly, as well as wishing t o retain the existing social values and quality of l i f e . The sense of community in the town of Fort S t . John has increased during the slower growth phase of the 1980's. Community recreation,

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cultural events, the a r t s community, ethnic associations and other organizations have grown and prospered. These values would be endangered by a radical change in the community composition or by events such as an increase in alcoholism and vagrancy a t t r i b u t a b l e t o non-resident workers and transients. Flooding would require relocation of about 25 families in the valley and would cause s t r e s s , and a loss of "sense of place", f a m i l i a r i t y and belonging. The values of the r i v e r valley, including the a e s t h e t i c s , traditional use and other non-tangibles, attributed t o enjoyment of t h i s natural environment would be l o s t by i t s replacement with a man-made reservoi r . BCUC was of the opinion that the social loss of private lands

transferred out of the ALR could not be compensated, as there were no relevant guidelines. Native P e o ~es l Issues raised by the Treaty 8 Tribal Association during BCUC hearings on behalf of the concerned Indian bands ( t h e Blueberry, Doig, Halfway, Salteau and West Moberly) included:

the survival o f the native subsistence economy in l i g h t of S i t e C and other development projects in the region, since e f f e c t s are cumulative on the l i f e s t y l e of the native people. The bands have experienced a great deal of pressure as a r e s u l t of development projects in northeastern B . C . which Increased endanger the traditional subsistence 1 i f e s t y l e . recreational hunting pressure was cited as the greatest t h r e a t t o the bands' resource base.

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the substance and s t a t u s of Treaty 8 , and the protection i t affords t o native hunting and trapping r i g h t s . The United Native Nations suggested that the land t i t l e and t r e a t y s t a t u s should be s e t t l e d before any new development i s a1 lowed t o proceed.

the proposed mitigation and compensation measures, including matters related t o the protection of w i l d l i f e .

Three project impacts that could affect native hunting are:

the flooding of the reservoir which wi 1 1 r e s u l t in the loss of some w i l d l i f e habitat; the loss of the valley as a wintering and calving range f o r

moose, which i s the staple of the native d i e t ; the invasion of recreational hunters further into native hunting t e r r i t o r i e s when they are displaced from the S i t e C area. This would be aggravated i f there were a road across the dam, since new access would be provided t o the south side of the Peace River.

BCUC concluded that

the historical conflict between the native subsistence economy, Treaty 8 land resolution, and the development plans f o r the provincial economy were outside i t s terms of reference. However, BCUC concluded t h a t the project impacts would be significant t o the native population of the region and noted t h a t the experience of the Ingeni ka people when Will iston Lake reservoir was created was relevant in anticipating the social and economic BCUC agreed that there was a widespread subsistence impacts. economy in the S i t e C region which depends on hunting and trapping and that w i l d l i f e habitat would be l o s t , particularly moose wintering and calving grounds, i f the dam were t o be constructed. The Commission believed t h a t the question of the cumulative impacts of development projects on the native economy should not be addressed by a S i t e C monitoring program or by any s p e c i f i c conditions in the Energy Project C e r t i f i c a t e . I t also be1 ieved t h a t

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i t was n o t the appropriate body t o interpret the t r u e meaning of Treaty 8. That issue must be resolved in other forums since i t affects a l l competing uses of land in the region. BCUC recommended t h a t the impacts on native hunting, trapping and

fishing, and the social framework of native comlnunities were t o be dealt with by the monitoring program which would:

identify what those impacts will be;

p u t in place speci-fic programs f o r monitoring r e s u l t s ; take steps t o see that negative impacts are o f f s e t and

redressed; depend on native input t o identify any adverse e f f e c t s and relnedi es .

I n order t o ensure t h a t the native population i s compensated in kind, BCUC recommended that the compensation package f o r w i l d l i f e impacts be determined by the Ministry of Environment in consul t a t i o n with the native people, and that the package provide f o r the Indians' consu~nptiveuse of wi l d l i f e . BCUC recommended t h a t neither B.C.

Hydro nor the Ministries be required t o make any d i r e c t payments t o the native people. The Indians were t o report impacts t o the monitoring program, with suggestions f o r remedial measures. This was in accordance with the native people's expressed desire t o be a1 lowed t o develop t h e i r own mitigation and compensation measures. BCUC f u r t h e r recommended t h a t B.C. Hydro be directed t o provide funds f o r those measures which are approved by the monitoring authority.

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6.8.3 Recent Studies A small amount of socioeconomic related work was completed in fiscal 1990-91 as part of the program intended to bring the project to "shelf-ready" status. The overall objective would be to present a socioeconomic inventory and impact analysis which would meet or exceed the requirements for a new EPC application,and for the federal government's Environmental Assessment and Review Process (EARP) for the project. The uncertainty regarding the timing of the project and the time sensitivity of socioeconomic data, which must be current to be useful, has been a constraint to extensive research. Therefore, much of the base1 ine data which will eventually be necessary was not collected during this phase. Instead, the work was focused on defining a clearly-understood approach and responding to issues and concerns raised by the public consultation process. The approach was designed to address those concerns of government agencies and the public which were raised since the previous application. In addition, the input of related environmental studies is required and will be included as background to a Socioecono~nic Impact Assessment (SIA) . The SIA is planned to occur in four phases: Phase 1 , Scoping; Phase 2, Baseline and Impact Assessment; Phase 3 , Review of Deficiencies; and Phase 4, Mi tigation and Compensation Negotiations. The overall objectives of the SIA are:

to develop a comprehensive socioeconomic baseline profile for the area impacted; to project area conditions without the Site C development; to evaluate the economic and social impacts of project

construction and operations; to examine mitigation and compensation options.

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This Status Report i s limited t o Phase 1 , Scoping, in response t o t h e p r o j e c t requirements in 1990-91. The following baseline p r o f i l e data requirements were i d e n t i f i e d :

Area and major c e n t r e h i s t o r i c a l and projected population s e r i e s , with subseries c l a s s i f i c a t i o n c h a r a c t e r i s t i c s , i . e . , on migration and r a t e s of natural increase and age/sex s p e c i f i c population cohorts. The a v a i l a b i l i t y of t h i s data s e r i e s was v e r i f i e d through t h e Central S t a t i s t i c s Bureau, Ministry of Finance, V i c t o r i a , which can provide t h e necessary information on a 20-year planning horizon, by local health area and major population centre.

Area and major c e n t r e h i s t o r i c a l 1 abour force and unernpl oyment data s e r i e s , with subseries c l a s s i f i c a t i o n c h a r a c t e r i s t i c s by gender and occupation. The a v a i l a b i l i t y of t h i s information was v e r i f i e d through Canada Employment and Immigration sources, including both t h e Vancouver o f f i c e (covering B r i t i s h Columbia) and area Canada Employment Centres (CEC) . The s p e c i f i c data s e r i e s a v a i l a b l e ( f o r example, unemploy~nentr a t e s , p a r t i c i p a t i o n r a t e s , numbers of UIC claimants, numbers of employable income a s s i s t a n c e c a s e s , duration of claims, e t c . ) can be supplemented on an industry and occupational basis through occasional labour market reviews and updates generated by t h e area CEC. Additional invaluable sources of information a r e major employers and t r a d e union c e n t r e s , on local labour

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demandlsupply conditions and ski 1 1 avai 1 abi 1 i ty, as we1 1 as other labour force information. Area economic, business and sectoral profile. A variety of sources were identified that could provide the background information necessary to construct such a profile. These include the Peace River-Liard Regional District offices and reports, the BC Regional Index, area regional and local economic development off ici a1 s , and area business and municipal representatives; for example, Chambers of Commerce. In addition, inore detailed sector-specific profi les can be prepared through the offices of the relevant provincial government ministries, specifically Agriculture and Fisheries; Forestry; Energy, Mines and Petroleum Resources; and Tourism. This study component would be coordinated with related envi ronmental studies, i .e. agriculture, forestry and touri sin. Area social and municipal infrastructure and services. following specific areas are included:

The

educational and training facilities and loading; health and social services faci 1 ities and loading; area housing and land inventory; municipal infrastructure and services, including social

and recreational services and fire and police protection; regional land use and land planning regulations.

This information base would be assembled through on-site interviews with relevant area authorities, i.e, local school district officials; the provincial Ministry of Education; local health district officials; hospital administrators, provinci a1 Ministries of Health; Soci a1 Services and Housing; Canada Mortgage and Housing; and private property market representatives and municipal offici a1 s.

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The municipal fiscal profile of Fort St. John. This information can be assembled directly from Fort St. John offici a1 s, supplemented by provincial municipal statistics (the annual "Blue Book", published by the Ministry of Municipal Affairs, Victoria).

A profile of the populations and services of native Indian reserves within the study area.

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6.9.1 Background

More than a dozen Provincial Parks and Recreation Areas offer day and overnight facilities within the Site C study region. These opportunities are augmented by a number of additional sites maintained by the B.C. Forest Service, the Regional District, B.C. Hydro, Municipalities, the private sector and the Ministry of Highways. Between the Peace Canyon dam and the proposed Site C damsite, there are approximately six roadside reststops, three river access points from Highway 29, seven informal boat launches, five recreation reserves and a municipal park. Primary use of existing regional faci 1 ities involves fishing, boating, hunting and camping or a combination of these activities. Overnight use of Provincial Parks indicates a heavy transient component during July and August, particulary on or near the main A1 as ka Highway route. It appears that the region serves largely as an interim destination for most visitors rather than a final destination. Non-resident tourist use is generally of short duration and usually excludes river boating due to the specialized nature of the sport. Recreational activities in the Peace River Valley are currently impeded by poor and infrequent access to the river, lack of publicly owned useable shoreline and absence of basic facilities for public use. These factors are not insurmountable which may indicate that there has not been a heavy demand for improvement. Although the Peace River and its valley constitutes a valuable recreational resource, it competes with other water areas rivers in

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the region. Existing evidence of public a c t i v i t y on the r i v e r appears t o result from repeated use by a small group of riverboat enthusiasts. 6.9.2 Previous Studies and Impact Assessments Impacts on the recreational resources and use in the Peace region were presented in Edwin Reid and Associates L t d . (1979); DPA Consulting L t d . (1981), and B.C. Hydro Properties Division (1981). Government position papers a1 so reviewed t h i s subject area (Mini s t r y Lands, Parks and Housing 1981; 1982). A tourisrn impact study was prepared by Canadian Resourcecon L t d . in 1980. S i t e C would eliminate river-based recreational opportunities, including many a t t r a c t i v e a c t i v i t i e s on the islands. The projected appearance of the S i t e C reservoir, analyzed from vantage points along Highway 29, would be a dramatic element in the landscape, b u t would lack the variety of the present watercourse. The reservoir would be closer t o the highway than the river i s a t present and the water surface would be v i s i b l e f o r almost 35 k m , as compared t o 16 km. The flooding of islands and small channels would cause the greatest loss of attractiveness. There would also be a net loss of a t t r a c t i v e shoreline, and the recreation c a p a b i l i t i e s along the Moberly and Halfway arms of the reservoir would also be reduced. The reservoir i s expected t o a t t r a c t similar numbers of people from the surrounding area as previously used the r i v e r , b u t the r e l a t i v e importance of recreational a c t i v i t i e s would change. General boating, fishing and camping would be more popular, b u t hunting might decl ine somewhat in popularity depending on game management practices. River canoeing and r i v e r boating would be l o s t , b u t f l a t water canoeing might increase. The qua1 i t y of reservoir recreation might be reduced fluctuating water levels, floating debris and rough water

due t o

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conditions, which have posed problems a t other locations. There i s also concern that safety on the reservoir would be reduced due t o debris and an unstable shoreline. BCUC recommended that as a condition of the E P C , B . C .

Hydro pay an amount equal t o the present value of the recreational l o s s , and t h a t these funds should be used t o develop programs that would contribute t o enhancing recreation both on the reservoir and on remaining rivers in the region. Public access t o the water would be increased by developing four areas on the north shore of the reservoir suitable f o r campground, picnic, boat launching or day-use Land use faci 1 i t i e s up t o Provincial Parks Branch standards. planning studies, including recreation capability, would be required a f t e r reservoir f i 1 1 ing t o determine the optimal location and design of f a c i l i t i e s . From the compensation package, BCUC recommended that the Ministry of Parks develop recreation prograins that enhance river and reservoir recreation in consultation with local authorities. Further funds were t o be s e t aside f o r the development of Alwin Holland Park by Hudson's Hope and f o r the development of wilderness campsites by the River Rats C l u b . Canadian Resourcecon (1980) projected that there w o u l d be no loss in regional tourism as a result of the project as other regional opportunities would meet t h i s demand. However, the a t t r a c t i o n of the project may actually increase the number of t o u r i s t s v i s i t i n g t h i s area of the region b o t h during construction and a f t e r S i t e C i s completed. A Tourism Development Strategy was completed in l a t e 1989 f o r the

Peace River

Liard Community Futures Association.

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6.9.3 Recent Studies As part of activities to update Site C environmental studies to a shelf ready status, MacLaren Plansearch conducted some recent (1990) work on a recreation and tourism assessment for the Site C project. A summary of their activities and results follows: The study process was organized in a series of Tasks within four phases. They include: Phase I:

Refinement of Terms of Reference and Data Gathering

Phase 11:

Collection of New Data, on Site Investigation

Phase 111:

Identification of Impacts, Mitigative Measures and Opportunities for Enhancement

Phase IV:

Identify Additional Research Studies

TASKS ACCOMPLISHED TO DATE: PHASE I: REFINEMENT OF TERMS OF REFERENCE AND DATA GATHERING Task 1: Meeting with Client Initial meetings were held with the Senior Environmental Coordinator and members of the project team. Topics covered were:

discussion of the activities of the Study transfer of all available documentation and background information establishment of communication linkages identification of ongoing studies by B.C. Hydro outlining of the proposed schedule 6

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definition of project status, related issues and concerns and the work plan.

This task was completed. Task 2: Refinement of Terms of Reference This task was completed to the draft level as directed by the client. Copies were circulated to stakeholders for commentary and feedback. Task 3: Meetinas with Reaulatory Bodies Work on this task was not initiated. Task 4: Review of Documents/Literature/Inventory Area A review was made of all documents that provide information on the recreation and tourism resources. It was carried out concurrently with the agency consultation process. This task was completed. PHASE I I:

NEW DATA COLLECTION AND ANALYSIS AND ON SITE INVESTIGATION

Task 5 : Assess Recreation Demand and Tourism Market Potential Using available literature and interviews a review was made of:

existing/potential recreation demand; tourism market potenti a1

This task was partially completed through 1 i terature review, interviews, and a field visit to the .Site C Impoundment area and Peace River Region. A full resource evaluation has not yet been completed. Regional recreation resources were inventoried and G I s

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recreation mapping was completed. The current recreation usage of the Site C area was assessed. A pre, post, and construction phase Assessment was not carried out. Task 6: Initial Data Gap Identification lhis task was completed. Task 7: Presentation to Client A review was presented to the client by both meeting and progress report as speci fi ed . Task 8: Recreation and Tourism Resource Analysis

A review of recreation and tourism resources in the region and communities to be affected by impoundment was made. The region was visited by two team members who investigated all indoor and outdoor recreation features and facilities, tourism accommodation attraction and operations as well as ancillary community and regional infrastructure. The one week field visit focused on updating of the recreation and tourist resources. The resulting data is summarized in this status report, and is by no means comprehensive. More detai 1 ed research is requi red. No transborder issues were addressed. Task 9: Review of Local/Provincial Trends This task was completed in a summary fashion for use projections for the Site C impoundment area, and for general tourism demand for the area.

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Task 10:

Future Demand and Market Pro.jections

This task was not undertaken. Task 11: Meeting with Local Recreation Leaders and Travel Industrv Operators Technical information meetings were held with selected individuals in the recreation and tourism industry: They include:

Hotel/Motel Operators Chamber of Commerce Community Administrators Campground Di rectors Recreation Directors Tourism Development Officers

Emphasis was placed on determining their long term plans and the compatibility of recreation and tourism initiatives. This task was completed. Task 12: Assessment of Completeness of Database Data gaps for immediate action or future study are identified on the basis of existing documentation as well as comprehensive on-site analyses. This task was completed. Task 13: Preparation of Recreation and Tourism Resources Assessment Information Baseline Several elements of this task have been assembled, but not yet written up in report format. Task 14: Presentation to Client This task was not undertaken.

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PHASE 111:

IDENTIFY IMPACTS AND MITIGATIVE MEASURES

Substantial information and data relevant t o Phase 111 has been assembled. The tasks under t h i s phase are Task 15: Identification of Impacts of Construction and Operators of S i t e C; and Task 16: Identification of Mitigative Measures and Enhancement Opportunities. These tasks have not been completed. PHASE IV:

IDENTIFY A D D I T I O N A L RESEARCH A N D STUDIES

Some elements of t h i s phase have been assembled. were not undertaken.

Tasks 17 and 18

EVALUATION O F KEY RESOURCES AND ISSUES

Key resources that were evaluated included:

Natural Resources: v i s t a s , vegetation, parks, waterways; Cultural Resources: special events, ethnic groups; Historic Resources re1 ated t o tourism and recreation; Community Resources, e.g. community centres, museums, parks, area; Commercial Recreation Resources, e.g. pools, golf courses;

Tourism Plant, e.g. accommodation, food services, a t t r a c t i o n s , operators and suppliers; Regional and Community Infrastructure, e.g. a i r p o r t s , roads,

waterways; Current environmental a t t i t u d e s , (Environmental Scan); Agency and stakeholder i n t e r e s t s ; Needs of regulatory bodies.

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Field Visit to Region

A field visit to review and inventory tourism, community recreation, and outdoor recreation features and facilities was completed. Interviews to update existing data and a field survey of the communities and the river corridor were undertaken by the consultants. Community recreation facilities were evaluated in terms of their capacity to absorb increased utilization and their present condition. Information for the G I s mapping project was col 1 ected. Current facilities, usage, and long term plans and prospects are identified in the interview transcripts from the field visit. Notes for a preliminary regional analysis of recreation and tourism were developed ,. including the identification of positive and negative impacts of the project on community plans, strategies, and resources. No specific work was~commencedon the impact assessment of the pre-construction, construction and operational phases of Site C development. The interviews confirmed ongoing resident use of the Peace River Resource at varying levels within each community. Hudson's Hope interviewees identified the river as an essential part of their lifestyle. Informal riverside facilities continue to provide water based activities with additional capacity available. Each community in the region continues to develop plans to enhance recreation opportunities for their residents, and tourists. Outdoor recreation use of the Peace River corridor by residents is based on informal facilities and there hasnot been asignificant increasein demand in the past 5 years. Development of regional outdoor recreation opportunities has provided additional capacity over the past decade for residents. Outdoor activities conducted in the area continue to closely resemble those reported in the 1979 study. There appears to be an 6

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increase in touring activity and in Wildlife viewing. Cross-country $ skiing was identified as in increasing activity as well. GIs Base Map Preparation A base map was prepared updating the outdoor recreation resource inventory for the Site C impoundment, as specified in the terms of reference. The map included current viewscapes and incorporated the Provincial map symbol system for recreation. The base map was forwarded to Hugh Hamilton and Associates for conversion into GIs format. An accompanying map key was constructed indicating the point information to be entered into the GIs system. This data updates the original study prepared by Edwin, Reid and Associates in March, 1979. The GIs base map was completed by the second week of February, 1991. Twenty-four sites were identified and described. Tourism impacts which concerned the public in the 1989/1990 public meetings included the general effect of the project on the tourism, loss of aesthetics of the flooded valley, potential impacts on the proposed underground museum at Hudson's Hope, effect on the region's tourism strategy and its plans for a 1992 Alaska Highway 50th Anniversary celebration, and the potenti a1 for enhancement of tourism by assess to the south side of the river.

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6.10

H E R I T A G E RESOURCES

6.10.1

Backaround Four basic kinds of heritage resources have been identified in the S i t e C study area. Prehistoric Resources Archaeological s i t e s and objects dating to the period prior t o he arrival of Europeans in the Peace River region in the l a t e 18th century. These include seasonal v i l l a g e s , short and long term camps, tool production locations, animal k i l l s i t e s , rock c a i r n s , e t c . Prehistoric s i t e s dating back 10,500 years have been found in the region. Historic Resources Buildings, archaeological s i t e s , and objects dating t o the period following the arrival of Europeans in the Peace River region. These include f u r trade " f o r t s , " homesteads, old wagon roads, missions, e t c . Historic resources from two periods are present in the region: early Fur Trade period f o r t s , and settlement period s i t e s . The former include f o r t s and small posts such as Rocky Mountain Fort and Rocky Mountain Portage House located along the r i v e r dating between 1794 and the 1860s; the l a t t e r consist mainly of log structures of various types dating between the 1860s and about World War 11. Pal eontol oai c Resources Fossils and places which contain fossi 1s (paleontological s i t e s ) .

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Ethno~raphicResources Places of traditional social, religious, and other importance to native people which, because they do not contain any physical remains, do not qualify as archaeological heritage sites. Information about the existence and nature of ethnographic sites is usually obtained through interviews of native people, although archival and literature research is another source of such information. Ethnographic sites, and their contemporary use, are usually the main focus of the heritage concerns of native people for projects such as Peace Site C. 6.10.2

Previous Studies and Impact Assessments The heritage resource study cited in the 1980 EPC application (Spurling 1978, 1980) documented 241 heritage sites within or near the proposed reservoir, of which 30% have been previously disturbed, primarily by agricultural operations, road construction and natural erosion. Earlier reports provided background survey information (Fladmark, 1975; Spur1 ing et a1 . , 1976). The Site C reservoir was projected to inundate 64 known heritage sites, 16 of which were historic in origin, including the Rocky Mountain Fort and Rocky Mountain Portage House sites. Adverse effects of flooding include loss of access for further investigations and possible physical changes due to continued inundation. The surface of these sites could also be disturbed during reservoi r clearing operations . Approximately 49 known sites occur very near full supply level where beaching, water erosion and minor sloughing would be greatest. It is expected that all of these sites would be directly affected. An additional 41 known sites occur above full supply level and beyond the zone of local beach erosion. The degree to which these 41 sites would be affected would depend on the degree of active erosion or instability that develops.

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The relocation of Highway 29 and construction a t the damsite could disturb another 23 known s i t e s bringing the t o t a l number of known heritage s i t e s d i r e c t l y affected by the S i t e C development t o 146. The Heritage Conservation Branch expressed concern about potential additional damage t o , or loss o f , heritage resources. froin post-construct i on devel op~nent. The execution of a comprehensive mitigation program would allow some of these resources t o be salvaged or protected. The nature and extent of the resource base would be destroyed by inundation.

-. BCUC did not recommend t h a t B . C . Hydro be required t o compensate

f o r the value of heritage resources in the region. F i r s t , i t viewed these values as impossible t o measure, and, second, the project would not preclude the immediate excavation of heritage s i t e s prior t o the construction of S i t e C . BCUC stated that B . C .

Hydro must match funds raised by the government through public subscription f o r the extra capital cost of a heritage resource recovery program u p t o a maximum of $500,000. B . C . Hydro was t o continue working with the Ministries t o establish a program f o r impact resolution, including the significance of area and items t o be affected. The public expressed concern in the 1989/1990 public meetings about the archaeological s i t e s which would be l o s t , including the h i s t o r i c O l d Fort s i t e on the south bank of the r i v e r , and about B.C. Hydro policy on protection of h i s t o r i c s i t e s and compensation. Since the BCUC hearings, both the Rocky Mountain Fort and Rocky Mountain Portage House s i t e s have been excavated by Simon Fraser University through Heritage Trust F u n d financing. The regional

154

tourism associations report increased interest in heritage resources in recent years drawing more tourists to the region. 6.10.3

Recent Studies A study was initiated in 1990 to update the heritage resource impact assessment for Site C. The work was conducted by Arcas Ltd. In particular, the assessment was to define changes which have occurred in the heritage baseline information since B.C. Hydro's 1980 EPC application for the Project, and to collect the data needed to meet or exceed the requirements for a new EPC application and for the federal government's Environmental Assessment and Review Process (EARP) for the Project.

B.C. Hydro's draft terms of reference for the update studies identified more than a dozen objectives, and divided the assessment into four sequential phases. The four phases consistent with that used in the provincial Archaeological Impact Assessment and Review Process, are: Phase Phase Phase Phase

I I1 I11 IV

Terms of Reference Overview Impact Assessment Fol 1 ow-up

Work Undertaken and Methods This section summarizes by phase the work undertaken to date (July 16, 1990 to March 30, 1991). Where appropriate, the methods used in the assessment are outlined. Terms of Reference (Phase I)

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Interest Groups Public and i n t e r e s t group meetings were held by DPA Group and B . C . Hydro in the region as part of the P r o j e c t ' s public consultation program. Heritage concerns were raised a t a few meetings. These meetings took place prior t o the i n i t i a t i o n of the heritage assessment, and are not part of t h i s study. The r e s u l t s of these meetings were forwarded t o Arcas L t d . Draft Terms of Reference were sent t o a number of local i n t e r e s t groups by DPA Group f o r review as part of the public consultation program. These groups were identified before the heritage assessment was i n i t i a t e d , and t h i s a c t i v i t y was not part of the heritage assessment. Additional i n t e r e s t groups were identified by Arcas L t d . and t h e i r names forwarded t o DPA Group. As part of t h i s study Arcas L t d . held ~ o n ~ u l t a t i o nins person, by telephone, or by mail with the following i n t e r e s t groups and individuals t o identify heritage concerns about the Project:

North Peace Historical Society

Dr. Finola Finlay, Campus Principal, Northern Lights College, Fort S t . John Mr. Keary Walde, archaeologist, Heritage North Consulting

Services, Fort S t . John Mrs. Myrna Gething, Chairperson "Rendezvous ' 9 2 " , Hudson's

Hope Ms. Donna Kyllo, Curator, Fort S t . John - North Peace Museum,

Fort S t . John Ms. Janice McCarthy, Curator, Hudson's Hope Museum, Hudson's

Hope Mr. Frank Koop, resident, Fort S t . John

The study also identified a number of provincial and national i n t e r e s t groups with a potential i n t e r e s t in the Project.

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Requlatory Aqencies As part of this assessment, Arcas Ltd. held consultations in person or by mail with the following agencies to identify regulatory and other requirements pertaining to heritage resources for an EPC application and EARP review:

Archaeology Branch, B.C. Ministry of Municipal Affairs, Recreation and Culture, Victoria B.C. Ministry of Native Affairs, Victoria Ministry of Communications, Ottawa

The Ministry of Native Affairs is a new provincial regulatory since the last EPC application. Similarly, the Ministry of Communications is a new federal regulatory agency as is the Federal Environmental Assessment Review Office which had not been consulted at the time completion of the assessment was deferred. Native Heritaqe Concerns Initial attempts were made to contact local native Indian groups as a prerequisite to identifying their heritage resource concerns about the Project. Robin Ridington, the anthropologist/ethnographer on the study team, made initial telephone and written contact with the Halfway River Indian Bank, the Doig Indian Band, and the Treaty 8 Tribal Association. Subsequently Arnoud Stryd, the Study Director, was contacted by Harry Slade, counsel for the Treaty 8 Tribal Association regarding participation by the Association and its member banks in the Heritage Resources Assessment. Other EARP Experiences Three individuals familiar with heritage studies for recent largescale hydroelectric developments outside of British Columbia were briefly consulted by Arcas Ltd. to determine their experience with federal regul atory requi rements . They were: (1) Dr. Marty Magne,

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Director of Research, Archaeological Survey of Alberta, who participated in designing the heritage studies f o r the Oldman Project; ( 2 ) Dr. Jirn Finni gan, Archaeology Section, Saskatchewan Research Council, w h o directed a number of the heritage studies f o r the Rafferty-A1 ameda Project; and (3) Dr. David Burley, Simon Fraser University, who co-di rected the heritage studies f o r Nipawin Project in Saskatchewan. Definition of a Heritaqe Assessment Plan

No heritage assessment plan was prepared because the Terms of Reference f o r the assessment had not been finalized. Establishment of Final Terms of Reference Even though a number of possible changes t o the Terms of Reference were identified during the review of the d r a f t terrns, no attempt was made t o prepare final Terms of Reference f o r the assessment because consultations with regulatory agencies, native people, and i n t e r e s t groups had n o t yet been completed. Overview (Phase 11) Review of Previous and Current Heritaae Studies This task consisted of three main a c t i v i t i e s . Review of previous heritaae studies This review included the identification and review of the following:

identification and review of heritage documentation from the 1980 EPC application identification and review o f publications and reports dealing with previous heritage studies in the region

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identification and review of the documentation (field notes, excavation records, catalogues, etc .) from previous Peace Site C heritage studies by Fladmark, Alexander, and Spurling presently stored at Simon Fraser University identification and review of the documentation for non-Peace Site C heritage studies in the area discussion of previous studies in the region with the archaeologist and others who had conducted or participated in these studies. Search of B.C. Archaeoloaical Site Inventorv As part of the review of previous heritage studies, a search of the B.C. Archaeological Site inventory in Victoria was undertaken for registration forms of archaeological sites already recorded in the area. Review of current heritaae studies and plans This task consisted of:

discussions with heritage specialists and interest

groups resident in the Project area as to their current and future heritage study plans discussions with heritage specialists presently

conducting research in the area, or who have recently carried out research in the area, to determine their current and future research plans discussions with the Archaeology Branch

Prel iminary Assessment of Site Significance and, Project Impacts As part of the review of the revised EPC application, a preliminary assessment of site significance and potential Project impacts was undertaken. This assessment followed the

159

procedures out1 ined in the British Columbia Archaeological Impact Assessment Guidelines (1989). Identification of Additional Data Resuirements and Studies A considerable effort was made to identify and assess the additional data and studies which would be needed for an EPC application and EARP review. The emphasis on this task occurred because this information was needed in the preparation of a timetable for completion of the heritage study. Three approaches were used:

heritage experts,fami 1 i ar with the Project area and the requirements of an AIARP Impact Assessment were asked their professional opinions on the current state of heritage information for the area, and what sti 1 1 needed to be known or done in order to meet the requirements of an AIARP Impact Assessment. The experts were: Ms. Diana A1 exander, archaeol ogi st, Simon Fraser University , Burnaby Dr. David Burley, archaeologist, Simon Fraser University, Burnaby Fr. Finola Finlay, historic archaeologist (currently Campus Principal, Northern Lights Col lege, Fort St. John) Dr. Knut Fladmark, archaeologist, Simon Fraser University , Burnaby Dr. Scott Hamilton, historic archaeologist, Lakehead University Mr. Geordie Howe, archaeologist, Arcas Ltd. Dr. Marty Magne, Di rector of Research, Archaeological Survey of Alberta, Edmonton Dr. Jack Nance, archaeologist, Simon Fraser University Dr. Robin Ridington, anthropologist, University of British Columbia, Vancouver 6

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Mr. Bjorn Simonsen, archaeologist, Bastion Group Heritage Consultants, Victoria Mr. Brian Spur1 ing, archaeologist, Saskatchewan Culture, Multiculturalism & Recreation, Saskatoon Mr. Keary Wal de, archaeol ogi s t , Heritage North Consulting Services, Fort S t . John

the heritage

1 i t e r a t u r e was examined f o r c r i t i c a l

assessment of the Peace S i t e C studies t h a t have been conducted, and f o r suggestions or recommendations as t o further data and assessment needs.

i n t e r e s t groups and other individua.1~were asked what they thought s t i 1 1 needed t o be done in order t o address t h e i r heritage concerns f o r the Project. These were then divided into requests f o r Impact Assessment actions/information and Mitigation actions/information. Only those concerned with the Impact Assessment are included in t h i s study since mitigation concerns are beyond the scope of the present assessment.

Overview Report No Overview report was prepared. Impact Assessment (Phase 1111 This phase has n o t been undertaken. Follow-up (Phase IV) This phase has n o t been undertaken.

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6.11

WATER RESOURCES

6.11.1

Backaround Water resources in the S i t e C project area have been studied under the general categories of hydrology, water qua1 i ty and use, and downstream. Hydrology studies include flow regimes, sediment bal ances and ice condi t i ons

The land area t h a t naturally drains t o the proposed S i t e C dam s i t e on the Peace River t o t a l s approximately 85,000 km2 (32,700 mi).

The Lake Wil liston drainage basin accounts f o r about 82

percent of t h i s t o t a l area; the Halfway River drainage basin about 12 percent; and the Moberly River drainage basin about 2 percent. Other smaller drainages downstream of the Bennett Dam make up the t o t a l . The r a t e a t which water i s released from the Bennett Dam i s dependent mainly on power demands. Monthly flows are r e l a t i v e l y constant (k15 percent) and the preregul ation flood flows caused by the melt of the large snow pack west of the Rocky Mountains have been eliminated. The Halfway and Moberly rivers which flow into the Peace River downstream of the Bennett Dam exhibit typical seasonal flood and low flow c h a r a c t e r i s t i c s as well as flood flows produced by summer rain storms.

On an annual basis, the Peace River flow a t Hudson Hope, averaging 1044 m3/s represents 90 percent of t o t a l inflow into the area; the Halfway River, averaging 80 m3/s represents about 7 percent of the t o t a l inflow. In May and June when the t r i b u t a r i e s downstream of Williston Lake are in f r e s h e t , the average monthly Peace River flow a t Hudson Hope drops t o around 75 percent of the t o t a l inflow into the area; in January, when the t r i b u t a r i e s exhibit seasonal low flow, the Peace flow represents 98 percent of t o t a l inflow.

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6.11.2

Previous Studies and Impact Assessments Hvdrol ogy The hydrologic c h a r a c t e r i s t i c s , sediment regime and ice conditions of the Peace River were summarized by Thurber Consultants L t d . (1979a), based primarily on e a r l i e r reports prepared by B . C . Hydro (1976; 1977). Since the S i t e C reservoir will be operated primarily as run-of-the-river, the flow regime downstream of the project will not be altered appreciably a f t e r initial filling. Bed-load materi a1 s entering the reservoir from the t r i b u t a r i e s will be deposited in the reservoir forming gravel deltas a t the heads of the tributary arms. Most of the larger sized p a r t i c l e s of the suspended load ( i . e . sand and s i l t s i z e ) wi 1 1 be deposited in the reservoir, and some of the f i n e r clay p a r t i c l e s will also I t is s e t t l e out before the water i s passed downstream. estimated that the Halfway River arm of the reservoir would take about 50 years t o f i l l with sediments, while the Moberly River arm and the main reservoir would take centuries t o f i l l . Stream bed degradation and bank erosion processes which are now occurring in the t r i b u t a r i e s in the S i t e C area would be halted by the ponding of the reservoir. Ice cover wi 1 1 form on the reservoir in most years, although open water will p e r s i s t f o r more than 13 km below the Peace Canyon Dam, and in the forebay area of the S i t e C dam. Thin ice or open water areas would be expected t o prevail down much of the center of the reservoir. The major potential impacts on hydrological aspects of the proposed project are the downstream e f f e c t s as summarized:

163

decreased f 1 ows during reservoi r f i 1 1 i ng , with part i cul a r concern about the timing of decreased flows; reduced suspended sediment loads t o downstream areas including the Peace Athabasca d e l t a ; reduced ice cover in downstream areas; reduction of peak flows (by attenuation of flood flows from the Halfway and Moberly rivers) which may have an e f f e c t on downstream areas such as the Peace-Athabasca d e l t a .

A review of present and expected ice regimes within the S i t e C

area has been completed (Klohn-Crippen Consultants L t d . 1989). They noted t h a t ice cover currently extends as f a r upstream as S i t e C in 1 out of 10 years. Water Qualitv and Use An assessment of water quality and water use in the S i t e C area was conducted in 1977-1978 (Canadian Bio Resource Consultants (CBRC) 1979a). The major e f f e c t s of the S i t e C development on water quality and use will be related primarily t o increased water temperature and decreased suspended sediment l e v e l s . Other water quality parameters such as dissolved oxygen levels and nutrients are expected t o remain similar t o present conditions.

Average water temperature in the S i t e C reservoir during the summer months i s expected t o be 2'-3' C higher than in the r i v e r a t present, reaching a maximum in July of about 13.5' C a t the end of the reservoir nearest the dam. Thermal s t r a t i f i c a t i o n of the reservoir i s not expected t o occur, a1 though s t r a t i f i c a t i o n may develop in the tributary arms under certain conditions. The tributary arms, especial ly the Moberly, may experience greater temperature increases in l a t e summer due t o low flows and associated long retention time of water.

164

Turbidity and suspended sediment levels within the reservoir a r e expected t o be less than presently encountered in the Peace River since the sediment will s e t t l e out in the calmer waters of the reservoir. The tributary arms, however, wi 1 1 experience turbid conditions during freshet and major storm events due t o incomplete s e t t l i n g of inflowing sediment material. Only three major users in the study area draw water from the Peace River - two for domestic water f o r communities and one f o r cooling and process waters for a Taylor refinery. Small i r r i g a t i o n projects occur a t Bear Flats and a t Taylor. The e f f e c t s of the S i t e C development on water supply use should be beneficial due t o a reduction in seasonal suspended sediment levels and increased summer water temperature which may be b e t t e r f o r i r r i g a t i o n purposes. However, these warmer waters may have a negative e f f e c t on downstream industries t h a t use the waters for cooling. With regard t o increased water temperatures and the potential e f f e c t on downstream cooling water use, the 1983 BCUC report concluded that "Westcoast Transmission f a c i l i t i e s might be affected, b u t the exact nature and consequence cannot be identified a t t h i s time". The B . C . Ministry of Environment generally agreed with the r e s u l t s of the CBRC (1979a) study. The Ministry, however, f e l t that the water temperature increases predicted may be overstated since greater evaporation might o f f s e t the heat gain ( B . C . Ministry of Environment 1981; p.BZ6). No detailed evidence supporting t h i s concern was presented. The Ministry a l s o concurred with BCUCt s position on downstream industri a1 users (e.g. Westcoast Energy and Petro Canada) and was prepared t o advise B.C. Hydro and Westcoast on the design of a monitoring program.

165

The public concerns regarding water quality include both seepage from the F o r t S t . John dump and the possible accu~nulation of mercury in the reservoir. Environment Canada has measured chemical parameters in the Peace River supplementing studies done a t seven s t a t i o n s between the W.A.C. Bennett Dam and the B.C.-Alberta border in 1975-1976 (Sheehan 1986), maintains a water qual i t y monitoring s i t e near the B.C.-Alberta border and conducted a study of dioxins and furans in sediment and f i s h in the Peace River in relation t o the Fibreco P u l p Mil 1 during the summer of 1989 ( S . Sheehan, pers, comm.). B . C . Hydro i n i t i a t e d a seasonal water quality and water temperature study as part of the f i s h e r i e s inventory program. Downstream I n the past, the assessment of downstream impacts has been covered by several separate reports, including those related t o hydrology, suspended sediment, water qual i t y , ice regimes and supersaturation. I t was f e l t , however, t h a t there i s now a need t o consol idate the information into one report and t o analyze t h e data t o determine the expected impacts f o r downstream environmental and social resources. The i n i t i a t i o n of t h i s more comprehensive e f f o r t i s described in the next section.

6.11.3

Recent Studies Downstream A l i s t of

available studies has been prepared, and crossreferenced under subject headings corresponding t o each of the environmental studies t o be performed. A brief summary of some of the major studies will be included in the report, as background t o developing terms of reference. I n some instances, i t will be suggested that former sampling locations ( i . e .

166

surveyed cross sections for geomorphology studies) should be reoccupied to permit comparison with existing data and avoid duplication of effort. Prel irninary Hvdrol oqv Report Most of the existing Peace River flow re,gimehas been fairly we1 1 defined in the report by the Hydro1 ogy Subcommittee associated with the B. C. /A1 berta Water Management Agreement (1990) . However, the proposed Site C regulated flow regime has not yet been defined and routed downstream, so that a comparison can be made with the existing Peace River flow regime. The furthest downstream station where effects of the proposed Site C regulation will be felt should be identified. Study Schedule A schedule for the sequencing and approximate duration of the individual downstream environmental studies has been prepared, with the relative timing of studies. The absolute timing for commencement of the studies is independent of this schedule. Outline of A~proach to Impact Assessment This section outlines suggested integrated studies approach to be followed by the team of consultants participating in the Peace River Site C downstream environmental impact assessment. The use of common data sets and sampling sites to the greatest extent possible will be stressed in order that a consistent and efficient study is performed. The impact assessment would depend upon the following anticipated studies: Flow Regime Thermal Regime Ice Regime Sediment Regime

167

Channel Morphology and Riparian Vegetation Water Q u a l i t y - Reservoir and Downstream Fisheries Wildlife - Furbearers, Waterfowl and Ungulates Preparation of d r a f t terms of reference f o r t h e physical impact s t u d i e s were prepared. However, t h e downstream l i m i t s of t h e study s t i l l need t o be defined. This requires information on t h e proposed S i t e C regulated flow regime s t i 1 1 t o be suppl i e d . The flow regime study should be t h e f i r s t t o proceed, as a l l of t h e o t h e r s t u d i e s will require t h i s information. Outlines f o r t h e biological s t u d i e s have been prepared, b u t cannot be completed a t t h i s time. References Over f i f t y references on t h e Peace River below Taylor have been compiled and reviewed.

168

Sl E C REPORT IN THE MATTER OF THE UTILITIES COMMISSION ACT S.B.C. 1980, c.60 as Amended AND IN THE MATTER OF THE APPLICATION OF BRITISH COLUMBIA HYDRO AND POWER AUTHORITY FOR AN ENERGY PROJECT CERTIFICATE FOR THE PEACE RIVER SITE C PROJECT

REPORT & RECOMMENDATIONS to the LIEUTENANT GOVERNOR--IN--COUNCIL MAY1983

169 169

170

May 3, 1983

TO HIS HONOUR THE LIEUTENANT GOVERNOR IN COUNCIL MAY IT PLEASE YOUR HONOUR

Under Your Honour's Order-in-Council Number 961 approved and ordered April 23, 1981, Your Honour appointed the undersigned and Mr. Robert A. Petrick, Mr. Lorne E. Ryan, and Mr. Earl E. Little temporary commissioners of the British Columbia Utilities Commission. We, together with Mr. Donald B. Kilpatrick, a member of the Commission, formed the Site C Division of the Commission charged with the responsibility of carrying out your order to "review the British Columbia Hydro and Power Authority's Application for an Energy Project Certificate for the Peace Site C Generation/Transmission Project." This Order was accompanied by Terms of Reference dated the same day and signed jointly by the Minister of Energy, Mines and Petroleum Resources and the Minister of Environment. The Terms of Reference directed the Commission to submit a report and recommendations, with supporting rationale, to Your Honour on a number of issues. The Commission has complied with your Order by reviewing B.C. Hydro's Application in accordance with the Terms of Reference. We have the honour to submit herewith our report on the review. Your humble and obedient servant

Keith A. Henry, Chairman, Site c

TWENTY FIRST FLOOR, 1177 WEST HASTINGS STREET, VANCOUVER, B.C., V6E 2L7, CANADA, TELEPHONE (604) 669-1831, TELEX 04-54536

171 171

172

TABLE OF CONTENTS SITE C REPORT Page No. LETTER OF TRANSMITTAL LIST OF TABLES

(xi)

LIST OF FIGURES

(xii)

NOTES

(xiii)

PART ONE

SUMMARY AND RECOMMENDATIONS

CHAPTER I

REPORT SUMMARY

1.0 2.0

3.0 4.0

5.0

CHAPTER II 1.0

Introduction Project Justification

1 4

2.1 2.2 2.3 2.4

Electrical Energy Demand Electrical Energy Supply Financial Impacts Commission's Position on Project Justification

7 9

Project Design and Safety Project Impacts

11 12

4.1 4.2 4.3

12 16 19

Land Use and Environmental Impact Regional Economic and Social Impact Monitoring Program

Other Approvals and Other Matters

5.1 5.2

20 20

Other Approvals Other Matters

REPORT RECOMMENDATIONS Project Justification

1.1 1.2 1.3 1.4

22 22 23

Forecasting Procedures Electrical Energy Supply Financial Impacts Issuance of an Energy Project Certificate for Site C

(i)

173

TABLE OF CONTENTS (cont'd) Page No.

2.0

2.1 2.2 2.3 3.0

Reservoir Safety Project Costs Adequacy of Design and Protection of Public Safety

Land Use and Environmental Impacts Regional Economic and Social Impacts Monitoring Program

Other Approvals and Other Matters 4.1 4.2

INTRODUCTION

CHAPTER III

BACKGROUND

1.0 2.0 3.0 4.0 CHAPTER IV 1.0 2.0 3.0 4.0

5.0

25 25

25 30 32 33 33 34

Other Approvals Other Matters

PART TWO

Project Impacts 3.1 3.2 3.3

4.0

Project Design

The Utilities Commission Act Site C Application B.C. Order-in-Council, April 23, 1981 Terms of Reference

35 36 37 37

INTERPRETATION OF TERMS OF REFERENCE Documents to be Reviewed Government of British Columbia's Energy Policy Statement of February 1980 Utilities Commission Act and B.C. Hydro Power and Authority Act

39 39 41

The Province's Guidelines for Benefit-Cost Analysis and Environmental and Social Impact Compensation/Mitigation Guidelines

Commiss_ion's Interpretation of Terms of Reference

(ii)

174

TABLE OF CONTENTS (cont'd) Page No. CHAPTER V.â&#x20AC;¢ 1.0 2.0 3.0

REVIEW PROCEDURES Prehearing Procedures Hearing Procedures Report and Recommendations

PART THREE

PROJECT JUSTIFICATION

CHAPTER VI

INTRODUCTION TO PROJECT JUSTIFICATION

1.0 2.0 CHAPTER VII 1.0

2.0

Terms of Reference Organization of Project Justification Review

4/t

ELECTRICAL ENERGY DEMAND Forecast Results

1.1 1.2

B.C. Hydro Ministry of Energy, Mines and Petroleum Resources

The Issues

2.1 2.2 2.3

57 64 73

Forecast Methodology and Reliability The Role and Forecast of Key Underlying Variables Other Forecasting Issues

3.0

Electricity Exports

4.0

Overall Assessment of Hydro's Demand Forecast

CHAPTER VIII ELECTRICAL ENERGY SUPPLY 1.0 2.0

B.C. Hydro's Supply Policy and Analysis The Issues 2.1 2.2 2.3 2.4 2.5

Supply Assumptions Consequences and Costs of Overbuilding vs. Undersupply Alternatives to Site C Evaluation Methods Site C Benefit-Cost Analysis

(iii)

89 89

94 100 106 108

175

TABLE OF CONTENTS (cont'd)

Page No. CHAPTER VIII ELECTRICAL ENERGY SUPPLY (Cont'd)

3.0 CHAPTER IX

1.0 2.0

CHAPTER X

1.0 2.0

Summary and Overall Assessment of Supply and Project Justification FINANCIAL IMPACT OF SITE C

114

Hydro's Position The Issues

115

2.1 2.2

117 119

Borrowing Requirements and Financing Cost of Service and Rate Impact of Site C

PROJECT JUSTIFICATION: CONCLUSIONS AND RECOMMENDATIONS Summary of Positions Taken by Hydro and Intervenors

122

The Commission's Position on Project Justification

125

PART FOUR

PROJECT DESIGN

CHAPTER XI

ADEQUACY OF DESIGN AND PUBLIC SAFETY

1.0 2.0 3.0

128 128 129

Introduction Hydro's Position The Issues 3.1

3.2 3.3 3.4 3.5

3.6 4.0

113

Reservoir Bank Stability and Reservoir Management Powerhouse, Dam and Spillway Design Earthquakes Downstream Effects Transmission Project Schedule, Project Management and Cost Estimate

Assessment of the Adequacy of Design and Protection of Public Safety

(iv)

129 133 134 135

136 136 140

176

TABLE OF CONTENTS (cont'd)

Page No.

IMPACTS

PART FIVE

CHAPTER XII INTRODUCTION TO PROJECT IMPACT ASSESSMENT 1.0 2.0

Terms of Reference Organization of Environmental and Socio-Economic Impact Review

141 143

CHAPTER XIII PRINCIPLES FOR RESOURCE VALUATION, MITIGATION AND COMPENSATION 1.0

1.1 1.2 1.3 2.0

144

Resource Valuation 'Maximum' vs. 'Realistic' Resource Use Valuation Willingness to Pay vs. Willingness \ to be Compensated Discount Rate: Social Opportunity Cost vs. Time Preference

Mitigation and Compensation 2.1 2.2

Validity and Purpose of Compensation Scope of Compensation

146 147 148 152 153

154

CHAPTER XIV LAND USE AND ENVIRONMENTAL IMPACTS 1.0 2.0

Introduction Impacts on Climate and Agriculture 2.1 2.2

3.0

4.0

156 161

Hydro's Position The Issues

174

Impacts on Forestry 3.1 3.2

174

Hydro's Position The Issues

175

Impacts on General Outdoor Recreation 4.1 4.2

155

156

181 181 185

Hydro's Position The Issues

(v)

177

TABLE OF CONTENTS (cont'd)

Page No. CHAPTER XIV LAND USE AND ENVIRONMENTAL IMPACTS (cont'd)

5.0

Impacts on Wildlife and Recreation Hunting

190

5.1

190 193

5.2 6.0

7.0

8.0

9.0

Hydro's Position The Issues

Impacts on Fisheries Resources

199

6.1 6.2

199 201

Hydro's Position The Issues

Impacts on Water Quality and Downstream Uses

208

7.1 7.2

208 209

Hydro's Position The Issues

Impacts on Heritage Resources

211

8.1 8.2

211 212

Hydro's Position The Issues

Impacts on Terrain and Mineral Resources

215

9.1 9.2

215 216

Hydro's Position The Issues

CHAPTER XV REGIONAL ECONOMIC AND SOCIAL IMPACTS 1.0 2.0

3.0

Introduction Regional Economic Impacts

217 221

2.1 2.2

221 222

Hydro's Position The Issues

Infrastructure and Financial Impact on Local Municipalities and Regional District

227

3.1 3.2

227 229

Hydro's Position The Issues

(vi)

178

TABLE OF CONTENTS (cont'd)

Page No.

CHAPTER XV REGIONAL ECONOMIC AND SOCIAL IMPACTS (cont'd) 4.0

5.0

Social Service Impacts

235

4.1 4.2

236

Social Impacts on the Rural Community

237

5.1

239 240

5.2 6.0

235

Hydro's Position The Issues

Hydro's Land Acquisition Program for Site C The Issues

Social and Economic Impacts on Native Communities

240

6.1 6.2

240 241

Hydro's Position The Issues

CHAPTER XVI MONITORING PROGRAM 1.0 2.0 3.0

Introduction Hydro's Position Summary of Issues

247 247 248

3.1 3.2 3.3 3.4

248

Purpose of Monitoring Scope of Program Structure and Responsibilities Funding

250

254 257

CHAPTER XVII PROJECT IMPACTS: CONCLUSIONS AND RECOMMENDATIONS 1.0

2.0

Summary of Positions Taken by Hydro and Intervenors

259

1.1 1.2

262

Hydro's Position Intervenors' Positions

The Commission's Position on Project Impact

(vii)

i J

259

264

179

TABLE OF CONTENTS (cont'd)

Page No. PART SIX

COMMUNITY AND SPECIAL HEARINGS

CHAPTER XVIII BRIEF SUMMARY OF STATEMENTS AT COMMUNITY AND SPECIAL HEARINGS 1.0 2.0 3.0 4.0 5.0

Introduction Demand Related Topics Supply Related Topics Design Socio-Economic and Environmental Impacts

269 270 272 273 273

5.1 5.2

275

5.3 5.4 5.5 5.6 5.7

6.0 7.0 PART SEVEN

4.0

273 278 279 280 281 281 282 283

OTHER MATTERS OTHER APPROVALS 284

Introduction The Water Act 2.1 2.2 2.3 2.4

3.0

Economic Impacts Native Impacts Agricultural Impacts Recreational Impacts Archaelogical and Heritage Resources Social and Cultural Impacts Other

Financial Topics Assessment of the Less Formal and Special Hearings

CHAPTER XIX 1.0 2.0

269

285

Hydro's Position Ministry of Environment The Issues Commission's Position

285 285

286 290

The Pollution Control Act and Waste Management Act

293

3.1 3.2

294 294

Hydro's Position The Issues

Agricultural Land Commission Act

(viii)

294

180

TABLE OF CONTENTS (cont'd)

Page No.

CHAPTER XX OTHER MATTERS 1.0 2.0 3.0

Introduction Certificate of Public Convenience and Necessity Provincial Energy Policy

296 296

3.1 3.2

297

3.3 3.4 4.0

Energy Pricing Policy The Role of Government and Hydro in Forecasting Future Load Growth and Requirements Electricity Export Policy Development Policy

297

298 299 300

Other Matters

301

4.1 4.2 4.3 4.4 4.5

301 303 304 305 306

Future Land Acquisition and Disposition Policy Data Requirements Equity Considerations Cumulative Impacts Onsite Power

309

PARTIALLY DISSENTING OPINION

310

GLOSSARY

(ix)

181

TABLE OF CONTENTS (cont'd)

Page No. APPENDICES (Separate Volume) 1.

Letter of Application for Energy Certificate

Order-in-Council Appointing Temporary Commissioners

Identification of Commissioners

4-.

Terms of Reference

Intervenors

Witnesses by Phase and Order of Appearance with Reference Documents

Exhibits

Site C Staff and Consultants to the Commission

Recommended Water Licence

10.

Costs

84-

THE SITE C DIVISION'S REPORT ON THE REVIEW PROCEDURES AND RECOMMENDATIONS FOR FUTURE REVIEWS (Separate Volume)

(x)

182

LIST OF TABLES Page No.

Table 1

B.C. Hydro's September 1981 and September 1982 Electricty Load Forecasts

Table 2

B.C. Hydro's September 1981 and September 1982 Probable Forecast by Sector

Table 3

Ministry of Energy, Mines and Petroleum Resources 1981 Electricity Requirement Forecast

Table 4

Adjusted Ministry of Energy, Mines and Petroluem Resources Forecast

Table 5

Real Growth in B.C. GPDP, Hydro July 1982 Projection

Table 6

Hydro Real Electricity Price Projections for September 198 2 Forecast

Table 7

Hydro Conservation Allowances Probable Forecasts

Table 8

Energy Supply/Demand Balance Integrated System

Table 9

Unit Energy Costs of Potential New Power Projects

102

Table 10

B.C. Hydro Estimated Cost of Service For Site C Electrical Energy Delivered to Kelly Lake

116

Table 11

Peace Site C Project Generating Facilities ~stimate of Construction Costs

138

Table 12

Direct Land Impacts of Site C Project

Table 13

Breakdown of General Outdoor Recreation Activities, 1981

Table 14

General Recreational User Days

Table 15

B.C. Hydro's Estimate of Angling Days

Table 16

The Ministry of Environment's Estimates of Angling Days

202

Table 17

The B.C. Utilities Commission's Recommended Compensation Package

267

(xi)

155

182 183 200

183

LIST OF FIGURES

Page No.

Figure 1

Plan Showing the Site C Region

Figure 2

Profile of the Peace River

Figure 3

B.C. Hydro Load Forecasts 1981 and 1982

Figure 4

Demand/Supply Balance

Figure 5

Hudson's Hope Bank Stability

131

(xii)

184

NOTES

References are made in the report to transcripts of the hearings and exhibits entered in evidence. The transcript references are shown thus: (100: 16,485) indicating Transcript Volume 100, page 16,485. The exhibit references are shown thus:

(Ex 37: 20) indicating Exhibit 37, page 20.

Any other references are fully self-explanatory. 2.

There is a glossary of technical expressions at the end of the report.

Units and abbreviations are described at the end of the glossary. \

Appendices to the report are bound separately.

The

Site C

Division's

Report

the

Review

Procedures

and

Recommendations for Future Reviews is bound separately.

The Rationale and Criteria for Awarding of Costs in the Site C Review is Appendix 10.

For the convience of the reader, the Commission'-s report is summarized in Chapter I and the recommendations are collected in Chapter II. If there are any real or apparent discrepancies between these chapters and the main body of the report, the main body of the report is to be considered the authoritative version.

(xiii)

185 185

186

PART ONE SUMMARY AND RECOMMENDATIONS CHAPTER I- REPORT SUMMARY 1.0

INTRODUCTION

In September 1980, Hydro applied to the government of British Columbia for an Energy Project Certificate to allow it to build a hydroelectric generating station and related transmission facilities. The hydro station, known as Site C, would be located approximately 7 km southeast of Fort St. John on the Peace River (see Figures 1 and 2). The government referred Hydro's application to the B.C. Utilities Commission under Part 2 of the new B.C. Utilities Commission Act for review and recommendations.

The terms of reference for this review call for an I

examination of the project's justification, design, impacts and other relevant matters. They specifically direct the Commission to recommend whether an Energy Project Certificate should be issued, and if so, what conditions should be attached. The Commission held formal, local community and special native hearings to hear and examine evidence on all aspects of the project. Over 70 panels of witnesses

made

presentations

during

the

formal , hearings

and

over

100 individuals made presentations during the local community and special native hearings.

The Commission's conclusions, based on the evidence and

submissions, are summarized in this chapter.

~---~-~----------,-----r:::-------------

.2 187

1-·-. \ _,.:-, 1-•

-·- ·-·-·-·-··i

'L.,

'·

FortSthn•IJ i

\ '\r\. 1.'\

COLUM 8 I A

''\

·-..

._,......_,_,

".,.I

----~l

KEY PLAN

-l Ul

:::c

I)> .r

(")

lCD _.,

l::o

--l

I)> )> II

PLAN

SHOWING

THE SITE C REGION FIGURE

_--:;_:c:=-=.c===cc:::::=:-.:-::::.c; ________ c:.,_ _______ ____::_::..:..c._ _ _

188

FIGURE2

I I

ce' -I liDo

~lc( ........

Ollllii

uolll

.,:z::l~ j: ;

liD

W.A.C. BENNEn DAM (Reservoir full supply level El. 672)

700

PEACE CANYON DAM (Reservoir full supply level El. 503)

fYJ

..."'

Ill

PROPOSED SITE C DAM

IIIIi

(Reservoir full su level El.

Ill

z z 0

~....

Ill Ill

300 450

400

350

300

250

200

150

100

DISTANCE IN KILOMETRES FROM B.C./ALBERTA BORDER

PROFILE OF THE PEACE RIVER

;

A L 8 E R T A

]_____________

,..,

189

2.0

PROJECT JUSTIFICATION

2.1

Electrical Energy Demand

Hydro's latest (September 1982) "probable" forecast of electricity demand shows Hydro's load growing from 32,359 GWh in its fiscal year 1981/1982 to 51,150 GWh by 1992/1993, an average annual growth rate of 4.3%.

The

September 1982 "low" forecast indicates an 11-year growth rate of 3.0% ; the "high" forecast a rate of 5.3%.

This compc;1res to Hydro's September 1981

"low", "probable" and "high" forecast growth rates (1980/81 to 1991/92) of 3.4%, 5.7% and 8.0% per year.

The Commission examined the methodology and underlying assumptions of Hydro's forecast in detail. The

Commission

concludes

that,

while

Hydro

has

made

significant

improvements in its forecast methodology, further improvements can and should be made. Hydro's forecasts, like those of the Ministry of Energy, Mines and Petroleum Resources, neither explicitly take energy prices into account nor rely on statistically significant past patterns of behaviour. Incorporating econometric methods into the forecasting process in a total energy context could improve the reliability of Hydro's forecasts, which, as Hydro itself noted, have been unreliable in the recent pas.t. Gross provincial domestic product (GPDP), the measure of total economic activity in the province, is a key variable underlying the forecast of electricity requirements. Hydro's latest GPDP projections were prepared in July 1982 and were predicated on an immediate turn-around in the U.S. economy, shortly followed by a turn-around in the provincial economy. On that basis Hydro projected that GPDP (adjusted for inflation) would only fall 2% in 1982 and would increase by 3.2% and 4.4% in 1983 and 1984 respectively. Over the long

190

term, steady growth between 3.5% and 4.0% per year was expected.

The

Commission notes that Hydro's 19&2 projection has now proven overly optimistic and the 1983 and 1984 projections may prove overly optimistic as well. The Commission concludes that, unless very high economic growth rates are realized in the late 1980's, Hydro's GPDP projections will be too high for the entire period. In terms of specific industry outlooks, the Commission notes that Hydro's forecasts assume considerable expansion in all sectors, with major expansions in

forestry,

mining,

petrochemical

and

other

industries.

Seven

new

chemi-thermal mechanical pulp mills are assumed to come onstream by the mid 1990's. All existing and newly constructed coal mines are assumed to be operating at full capacity by 1990. A liquefied natural gas plant, 'natural gas liquids

extraction

plant,

ethylene

and

derivatives

plant,

and

ammonia/urea plant are all assumed to be constructed by 1992.

an The

Commission concludes that these forecasts deschbe the maximum potential outcomes rather than the most likely. Hydro's evidence clearly indicates that electricity prices can be expected to rise in real terms over the next 10 years with particularly pronounced increases over the next five-year period.

The Commission concludes that these

increases are not fully reflected in Hydro's load forecast. Hydro explicitly incorporated conservation allowances in its forecast, and attributed these allowances to price impacts. The Commission concludes that Hydro's treatment of conservation is inadequate and confusing. It is not clear how much of the allowances are due to appliance standards or regulatory measures, and how much are due to B.C. energy prices and conditions. The Commission notes that the conservation allowances are lower in Hydro's September 1982 than in its September 1981 forecast, even though higher real electricity prices are now forecast.

191

Hydro's forecasts assume technological shifts to more electricity-intensive industrial processes.

This is most important in the forestry sector, where

some 73% of the forecast growth in forestry electricity requirements is assumed

derive

from

electricity-intensive

mechanical

pulping.

The

Commission questions whether such shifts will take place as extensively or rapidly as Hydro has forecast in light of rising electricity prices and deferrals of new capital spending. In forecasting the amount of electricity it will have to supply, Hydro deducted from its forecast of total electricity requirements the amount that will be supplied by industry itself. The Commission concludes that the potential for industry self-generation and co-generation is greater than Hydro has assumed, but whether that potential will be realized is unclear. In part, this will depend on whether various pricing and institutional impediments to self-generation are removed. The Commission concludes that Hydro's demand forecast should be viewed as an upper limit to possible future electricity requirements and that for all of the foregoing reasons, a lower demand than Hydro has forecast in its "probable" case is likely. The Commission reviewed demand in the export markets. The Commission concludes that markets do and will continue to exist in California where hydroelectric power can be used to displace oil and gas-fired thermal power generation. Because of Hydro's ability to store water and to time its sales to when intertie capacity is available, transmission constraints should not pose an insurmountable impediment to export sales destined for California. However, the value of these sales will depend on oil and gas prices and on the extent of electricity surpluses in other reg ions, both of which are likely to constrain export prices until the late 1980's. The market in the Pacific Northwest is less certain, depending on water conditions and future developments in both demand and supply in the region.

192

2.2

Electrical Energy

On the basis of its September 1982 probable forecast Hydro indicated that a new energy source will be required by October 1990 to avoid shortfalls of firm supply. Hydro recommended Site C as the best feasible source of supply to meet the forecast requirements. Hydro defines firm supply as the sum of its hydroelectric capability under critical water conditions, plus the energy capability of its Burrard thermal plant using gas supply available during off-peak periods, plus the energy available from firm purchase contracts. Hydro tries to time new facilities to ensure that probable demand does not exceed this firm supply. The Commission notes that if better than critical water conditions prevail, if more than just off-peak gas could be made available to Burrard, if firm purchase or contingency planning agreements could be negotiated with neighbouring utilities or if new purchase contracts could be negotiated with Âˇ industrial producers, the need for a new project could be significantly deferred. With respect to water conditions, the Commission concludes that, while it is prudent to plan on the basis of a recurrence of a series of low-water years, Hydro should give high priority to investigating other ways of dealing with this possibility. One such method would be a planning agreement with Alberta whereby offpeak thermal power could be used to conserve water during low flow periods.

Hydro officials cited this as a potential advantage of the

Alberta lntertie line when it was proposed and reviewed. With respect to the Burrard thermal plant, the Commission concludes that greater utilization of Burrard could defer the need for a new project by about one year. Policy direction from government on the value and marketability of natural gas and other matters is required in order to determine if greater use of Burrard is in the provincial interest.

193

In light of continuing uncertainties regarding both demand and supply, the Commission concludes that it is unclear when a new source of electrical energy will be needed.

While Hydro's "probable" forecast and firm supply

indicated a 1990 in-service date, its "low" forecast and any new arrangement that would increase its supply capability by 4,000 GWh per year would indicate a 1998 in-service date. The latter is only a possibility and is not necessarily the most likely, but it does indicate the wide range of uncertainty. The Commission concludes, that because of this wide range, it is important to consider the consequences and costs of planning errors that result in overbuilding

undersupply.

While

the

Commission

recognizes

that

undersupply can impose serious consequences and should be avoided if at all possible, the Commission also recognizes that overbuilding imposes significant economic costs, particularly in light of the export market conditions currently forecast to prevail over the next decade. The Commission concludes that overbuilding should be avoided if possible, and that overbuilding could occur if a decision to build new generating capacity is made too soon. Given a realistic construction schedule of six years, the Commission concludes that construction of Site C does not need to begin any earlier than the spring of 1985.

In addition to the question of timing, the question of alternatives was considered in the assessment of the need for Site C.

A wide range of

conventional and nonconventional alternatives were addressed at the hearings. The Commission concludes that the nonconventional alternatives cited at the hearings do not constitute viable alternatives to Site C; with the possible exception of geothermal power, they are too small and too expensive to have a major impact on supply in the foreseeable future.

On the other hand, the

Commission believes that there might be major conventional projects that could substitute, in whole or in part, for Site C.

194 9

When Hydro originally applied for SiteC, it argued that Hat Creek was the only major alternative to Site C that could be built for the late 1980's. However, with the slippage in load growth predicted in Hydro's latest forecast, a late 1980's in-service date is no longer required, so the smaller alternative, Murphy Creek and Keenleyside, could be considered. Other projects could also become feasible alternatives if Hydro's load forecast continues to fall or if greater use of existing sources defers the need for new supply. Hydro's benefit-cost justification of Site C was based on a comparison of the social costs of Hat Creek with those of SiteC. Since Hat Creek is no longer an alternative, the Commission concludes that this benefit-cost test is not relevant. Such a test does not indicate whether a system expansion plan with Site C following Revelstoke is preferable from a social point of view to all other feasible expansion plans, given the current forecast of demand. The Commission recognizes that Hydro would not construct Site C if it did not consider it to be the best feasible project.

However, Hydro uses private

corporate criteria to evaluate and select projects whereas the province recommends the use of social benefit-cost criteria, which takes into account all resource losses and the social value of capital and labour. The Commission concludes it has not been adequately demonstrated that Site C is the best possible project from a provincial point of view. This matter req';lires further consideration. 2.3

Financial Impacts

As part of its justification for the project, Hydro indicated that the $3.2 billion financing requirement for Site C is feasible and that the rate impacts would be relatively small, peaking in the first full year of operation at a real increase of 6%. The Commission concludes that the financing of Site C is feasible and that the impacts on customer rates would be acceptable.

195

The

Commission

notes,

however,

that

Hydro's

financing

abilities

are

predicated on the province's 100% guarantee of its borrowing. The Commission also notes that the regulatory environment in which Hydro operates could affect the availability and cost of capital. A prolonged shortfall in meeting its financial targets due to falling markets, operating inefficiencies or legislative and regulatory constraints would adve.rsely affect Hydro's ability to raise capital. The Commission concludes that, while the rate impacts of Site C could be moderate, they could become significantly larger if the project is built prematurely, if costs escalate or if real interest rates increase above the levels assumed by Hydro. The Commission is confident Hydro can manage its construction costs effectively. With regard to interest rates, the Commission notes that falling inflation rates may have the effect of increasing the real cost of money borrowed at locked-in rates.

Opportunities for flexible

financing (eg. better redemption provisions) are important in this regard. With regard to timing, the Commission concludes that underutilization would increase the rate impact. This possibility, particularly in the context of relatively poor export markets, is an important reason for the government and Hydro to guard against starting construction prematurely. 2.4

Commission's Position on Project Justification

The Commission does not believe that an Energy Project Certificate for Site C should be issued at this time.

The evidence does not demonstrate that

construction must or should start immediately or that Site Cis the only or best feasible source of supply to follow Revelstoke in the system plan; The Commission therefore concludes that an Energy Project Certificate for Site C should not be issued until (1) an acceptable forecast demonstrates that construction must begin immediately in order to avoid supply deficiencies and (2) a comparison of alternative feasible system plans demonstrates, from a

196

social benefit-cost point of view, that Site C is the best project to meet the anticipated supply deficiency. These matters should be reviwed by Cabinet in the fall of 1984 as recommended in Chapter X. 3.0

PROJECT DESIGN AND SAFETY

Hydro presented a detailed preliminary design at the hearings. It indicated that this would evolve into a final design as the project progressed and would be subject to extensive internal and external checks to ensure its reliability. Hydro testified that the designs of the dam, spillway and powerhouse were carried out according

to sound engineering principles by a thoroughly

experienced staff and reviewed by renowned experts. In the highly unlikely event that the dam failed, the failure would be gradual. The dam would not be over-topped by slide-induced waves in the reservoir. Hydro concluded that, under all foreseeable circumstances, downstream warning could be provided in time to avoid loss of life. The Commission concludes that the design presented by Hydro for Site C is sound and reflects concern for public safety.

The Commission further

concludes that Hydro's system of internal and external checks ensures a safe design. Hydro testified that reservoir bank stability was a matter of on-going concern and that it had conducted extensive studies to predict areas most susceptible to instability. In addition, it proposed a comprehensive monitoring program to be conducted after the reservoir is filled to identify dangerous or unstable areas. The only area in which Hydro predicted a problem with bank stability that might endanger existing structures was immediately east of the bedrock strata at Hudson's Hope for a distance of 1,300 meters. Hydro proposed to construct a protective berm in that area. The Commission concludes that, as long as Hydro diligently conducts the monitoring program it has proposed, the problems of bank instability arising

197

from filling the reservoir can be minimized. Hydro estimated the total construction cost of the project would be $1.1 billion in constant 1981 dollars (excluding interest during construction).

Hydro

indicated it would take six construction seasons to build the project, and it would use a project management system of control during the construction phase. The Commission concludes that, within an acceptable margin of error, Hydro can construct the SiteC project in six years for a total of $l.lbillion and that Hydro is fully competent to manage the construction. 4.0

PROJECT IMPACTS

4.1

Land Use and Environmental Impact

The SiteC project will result in the flooding of 4,600 ha of land between the dam site, 7 km southwest of Fort St. John, and the Site One dam, near Hudson's Hope. Another 1,400 ha of land will be affected as a result of construction and highway relocation activities and transmission line clearing between Site One, SiteC and Fort

St. John.

Outside

the

immediate area,

the

proposed

transmission line between Williston and Kelly Lake will affect 1,150 ha of land. The Commission has attempted to assess the significance of these impacts in terms of their effect on all of the resource activities the area would otherwise have supported. The Commission's conclusions on each resource impact are as follows. 4.1.1

Climate and Agriculture

The Commission concludes that the project's impacts on climate are uncertain, but are likely to be relatively small and limited in extent.

There could

nonetheless be some impacts on climate in the immediate area of the reservoir from increased fog and region.

humi~ity

which might adversely affect farming in the

198

The principal impacts on construction activities.

agriculture

would

result

from

flooding

and

The Commission concludes that almost 3,000 ha of

potential agricultural land would be lost as a result of the project. Commission estimates the social value of this land to be $59.8 million.

The 1

The

social value of the agricultural losses on Crown land alone would be $18.6 million. The Commission recommends that compensation equal to the agricultural loss on Crown land be paid to the government and be used to fund agricultural programs in the region. The Commission recommends removal of the flood reserve below Site C to encourage further agricultural development in the region.

A number of mitigation measures should be implemented in

order to minimize adverse impacts of transmission line rights-of-way, construction and highway relocation. Concern was expressed about the long-term implications of agricultural land losses in light of increasing world food demands. The Commission recognizes that the agricultural land that will be lost as a result of Site C is of high quality and cannot be replaced.

However, the Commission concludes that

agricultural productivity can and should be enhanced on the remaining lands and that the agricultural losses caused by Site C do not constitute an insurmountable obstacle to the project. 4.1.2 The

Forestry Commission

concludes

that

flooding

will

result

the

loss

approximately 1,700 ha of productive forestry land, causing a social loss of $1.0 million less the amount of stumpage Hydro pays in its clearing operations. In addition, losses will occur due to transmission line clearing. These forestry

All values are reported in 1981 constant dollars. Resource losses have been calculated on the assumption of a 1985 issuance of an Energy Project Certificate and have been present valued to that date. A hybrid discounting procedure has been used for the calculations. Values for an 8% discount rate are shown in the main report.

199

losses have not yet been quantified, but Project Certificate is issued.

th~7y

should be before an Energy

The Commission concludes that, while the

forestry loss is relatively small, compensation should be paid and the funds used to enhance forestry in the region. In order to maximize potential recreation benefits from the reservoir the Commission recommends that Hydro remove all accessible timber below the full supply level elevation of 461.8 meters and all timber, whether readily accessible or not, extending above an elevation of 452 meters.

Clearing

standards will be set out by the Ministry of Forests, but the Commission recommends that the Ministry of Lands, Parks and Housing and the Ministry of Environment be consulted regarding appropriate specifications to protect wildlife and recreational resources. 4.1.3

General Outdoor Recreation

The Commission concludes that, while the project will create new reservoir recreational opportunities, these will not offset the quality and value of lost river-based recreation. The Commission estimates a net recreational resource loss of $6.9 million.

The Commission concludes that compensation of this

amount should be paid by Hydro to the government and that it should be used to enhance recreational resources in the region. The Commission recommends that the Ministry of Lands, Parks and Housing undertake the recreational enhancement programs, except for certain projects to be undertaken by the District of Hudson's Hope, the local River Rats Club and the Ministry of Environment. Recreational enhancement should be undertaken both on and off the reservoir. 4.1.4

Wildlife and Recreational Hunting

The Commission concludes that the flooding will result in significant loss of both

game

and

non-game

wildlife in the

region.

The

potential

for

enhancement of these wildlife resources will also be lost. The Commission estimates the recreational hunting loss due to flooding at $2.8 million, and

200

recommends that Hydro pay that amount in compensation and that the funds be used to enhance wildlife in the region. Losses from sources other than f loading should be identified and dealt with under the monitoring program that the Commission recommends be established for Site C. 4.1.5

Recreational Fishing

The reservoir will create lake-type habitat and fishing opportunities, but eliminate some river-based fishing.

The net effect depends on the carrying

capacity of the two types of habitat and the relative attractiveness of the fishing they offer. The Commission concludes that the evidence presented at the hearings on these fishing impacts was based on insufficient data and thus is inadequate for assessing losses. The Commission recommends that Hydro be required to undertake certain studies in consultation with the Ministry of Environment in order to provide a reasonable basis for assessing impacts and losses due to flooding and that this be a condition of an Energy Project Certificate. The Commission further concludes that, based on the results of these studies and the valuation assumptions established in this report, appropriate fisheries compensation should be determined. 4.1.6

Water Quality and Downstream Users

The Commission concludes that, while downstream water users, in particular, Westcoast Transmission Co. Ltd., might be affected, the exact nature and consequences of these effects cannot be determined at this time.

The

Commission recommends that Hydro, in consultation with Westcoast, institute a measurement program to identify the impacts.

Compensation for any

adverse impacts should be negotiated between Hydro and Westcoast.

201

4.1.7

Heritage Resources

The Peace River Valley is important for its heritage resources. While Hydro has already undertaken an extensive $600,000 heritage resource program, in the absence of further work, a considerable amount of archeological resources would be lost. The Commission concludes that the Heritage Resources Branch of the government should be responsible for the recovery of these resources. Hydro's responsiblity should be limited to paying the extra capital costs, less i

the $600,000 already spent, that would be incurred as a result of an intensive

recovery program prior to flooding, as opposed to an attenuated program

which could otherwise take place. On this basis the Commission concludes

that Hydro should be required to pay $0.5 million as compensation, but only if matched or exceeded by funds raised through the Heritage Conservation Branch for the purpose of implementing the intensive recovery program. 4.1.8

Terrain and Mineral Resources

The Commission concludes that impacts on terrain and mineral resources would be minor.

No evidence was presented that would justify imposing

mitigation or compensation measures regarding them. 4.2 "I

I I ! I

Regional Economic and Social Impact

Construction of Site C and related activity would require an estimated 5,400 man-years of work over a seven year period. The construction and the resulting influx of workers would have economic and social impacts on nearby urban, rural and native communities.

These communities would also be

affected by the project's environmental i"mpacts.

4.2.1

Regional Economic Impacts

The employment and related spending generated by Site C will give rise to significant economic impacts, but the share accruing to regional residents would depend on the extent of .local hiring. The Commission concludes that,

202

under prevailing economic conditions in the northeast, local hiring could constitute the most significant compensation for adverse project impacts. If such economic circumstances continue, an aggressive training program to facilitate increased local participation in construction should be implemented. Cooperation among all concerned parties would be required for this to be successful. From a provincial point of view, the benefits of the employment created by Site C will depend on the extent of unemployment at the time of construction. Similarly, the social costs associated with the layoffs at the end of construction will depend on employment opportunities that then prevail. The Commission concludes that project timing is important in both these respects, but does not recommend that project timing be determined by employment considerations. 4.2.2

Infrastructure and Financial Impacts on Local Governments

The Commission concludes that the City of Fort St. John will suffer increased administration costs and costs associated with providing additional water and sewage

services.

The

Commission,

however,

does

not

endorse

the

compensation package proposed by Hydro and accepted by the City since the magnitude of the impacts cannot be determined at this time. The Commission therefore recommends that the identification of,, and compensation for, financial impacts on Fort St. John be referred to the monitoring program. The Commission recognizes the concerns that Hudson's Hope property owners have about bank stability. The Commission recommends that bedrock banks be monitored as directed by the Water Comptroller, that the monitoring reports be made public and that corrective measures be taken as required.

For

overburden banks, the Commission concurs with Hydro's proposals to construct a berm and to institute a monitoring program.

203

The Commission also recognizes that Hudson's Hope would suffer losses of land and properties, and recommends that compensation be paid in an amount equal to the net decline in property tax revenue plus the replacement or repair cost of affected municipal works and facilities. Regarding impacts on the Peace-Liard Regional District, the Commission concludes that net revenue losses, if any occur, should be identified and dealt with under the monitoring program. Regarding the Village of Taylor's claim to compensation for special design costs in its recently constructed water intake, the Commission agrees with Hydro that no compensation should be awarded because modifications were not required in anticipation of Site C. 4.2.3

Social Service Impacts

The Commission recognizes that health and other social service requirements will increase as a result of the project's construction, but the exact magnitude cannot be determined until the in-migration patterns of the construction labour force have been established. The Commission therefore concludes that the identification and compensation for social service impacts should be dealt with under the monitoring program. 4.2.4

Rural Community Impacts

The Commission believes that the impacts on the approximately 100 families in the Peace River Valley who will be directly affected by flooding constitute the most significant social impact of the project. The Commission concludes that Âˇ these impacts cannot be mitigated to any significant degree.

The Commission

also further concludes that, while Hydro's land acquisition policy is essentially a private matter between it and the local landowners, Hydro should make every effort to be fair in the way it acquires additional land if Site C proceeds and in the way it disposes of land it does not ultimately require.

204

4.2.5

Native Community Impacts

The Commission notes that the native subsistence economy in the northeast is threatened by various developments in the region. The Commission considers the cumulative impact of development on the local native communities to be outside the terms of reference for these hearings, but does recommend that the appropriate Ministries of the federal and provincial governments carefully review and consider the evidence presented by the native witnesses and representatives. With respect to the impacts of Site C, the Commission concludes that, while small on a provincial scale, they could be significant to the native population in the

region.

The Commission

recommends

that

impacts on

native

communities be monitored. If adverse impacts on hunting are identified, the Commission

recommends

that

measures

compensate

implemented; monetary compensation will not suffice. recommends that

kind

The Commission

the native people report any social impacts to the

monitoring program with their suggestions for remedial measures. 4.3

Monitoring Program

The Commission has identified a number of social and environmental impacts that should be dealt with by a monitoring program.

The Commission

recommends that a monitoring program be established to identify and resolve these impacts as well as unanticipated impacts that arise during construction. The Commission recommends that the monitoring program also be used to verify compliance with the conditions imposed on the Energy Project Certificate. The Commission concludes that a monitoring office in Fort St. John, headed by a monitoring commissioner with a small staff, is the most appropriate structure for such a program. The monitoring commissioner must have the authority to issue orders to Hydro, must have close liason with government

205

Ministries and agencies, and must be accessible to the public. The Commission recommends that the monitoring commissioner be appointed as a temporary or permanent member of the Utilities Commission. This would provide him with the necessary authority and would enable the Utilities Commission to review his orders on appeal. Funding for the monitoring program should be provided by Hydro.

5.0

OTHER APPROVALS AND OTHER MATTERS

5.1

Other Approvals

In addition to an Energy Project Certificate, Hydro requires approvals under the Water Act and the Waste Management Act before it can construct Site C. The Commission concludes that, at such time as the issuance of an Energy Project Certificate is warranted, approvals under these acts should also be granted. The Commission's specific recommendations with respect to a Water License are contained in Appendix 9. The Commission further recommends that when an Energy Project Certificate is issued, Cabinet take whatever steps are required under the Agricultural Land Commission Act to allow the project to proceed. 5.2

Other Matters

Under the Utilities Commission Act, a Certificate of Convenience and Neccesity is deemed to have been issued by the issuance of an Energy Project Certificate.

The Commission concludes that, if and when the conditions

related to project justification are satisfied, the project will indeed be in the public convenience and necessity.

206

The Commission concludes that a number of energy policy issues should be clarified in order to assist Hydro and future panels in developing and reviewing Hydro's projects and system plans. In particular, more explicit direction on energy pricing policy and industrial development policy should be provided. The Commission also concludes that the government should reconsider its policy with respect to electricity exports. Several other policy rna tters were raised at the hearings. The Commission's views on them are contained in Chapter XX of this report.

207 207

208

CHAPTER TWO REPORT RECOMMENDATIONS The Commission's recommendations are paraphrased in this chapter.

The

reader should refer to the text of the report at the indicated page numbers for the precise wording of the recommendatons. 1.0

PROJECT JUSTIFICATION

1.1

Forecasting Procedures

The Commission recommends that Hydro be directed to: I.

include econometric techniques in its long term load forecasting (p. 63);

develop its forecasts in a total energy context (p. 63);

improve its treatment of conservation (p. 78);

'+.

analyze relative fuel prices and policies in the context of a total energy forecast for purposes of estimating interfuel substitution (p. 80).

1.2

Electrical Energy Supply

The Commission recommends that Hydro be directed to: 5.

investigate alternative methods of dealing with the possibility of critical water conditions in order to moderate its firm supply criteria; specifically, consider and pursue planning agreements with Alberta in this regard (p. 91, p. 93).

209

The Commission recommends that the Government: 6.

provide specific policy direction to Hydro on the value of capital and natural gas from a provincial point of view in order to assist Hydro in determining the appropriate use of the Burrard Thermal Plant (p. 92);

consider whether institutional impediments (e.g.

regarding purchase

pricing, financial and wheeling policies) to the private development of non-conventional energy sources might be removed or lessened (p. 106); 8.

advise Hydro of the evaluation criteria it should adopt in future planning and facility applications and resolve the present inconsistency between the private criteria Hydro uses to select and evaluate projects and the social criteria which the government has directed the Commission to use in evaluating Site C (p. 108).

1.3

Financial Impacts

The Commission recommends that in future applications Hydro: 9.

provide data on the full rate impact to customers of the proposed project isolated from the impacts of the projects which may follows (p. 120);

10.

provide data on the different patterns of rate impact that would result from the alternative system plans (p.l20).

1.4

Issuance of an Energy Project Certificate for Site C

The Commission recommends that Cabinet: 11.

defer

issuing an

Energy Project Certificate for Site C until an

acceptable load forecast demonstrates that construction of Site C must begin immediately in order to avoid supply deficiencies, and a compari-

210

son of alternative system plans demonstrates that Site C is the best project to meet the anticipated shortfalls (p. 126); 12.

determine, in the fall of 1984, if the above two conditions are met, and either issue, further defer or reject the issuance of an Energy Project Certificate depending on the information available at that time (p. 126-7);

13.

direct the B.C. Utilities Commission to hold public hearings at that time to assist it in making these determinations (p. 127) â&#x20AC;˘

2.0

PROJECT DESIGN

2.1

Reservoir Safety

The Commission recommends that as conditions of a water license for Site C Hydro be directed to: 14.

make inspections of known potential slide areas as frequently as appropriate but at least once a year (p.l33);

15.

annually inspect the reservoir perimeter to identify new slide areas (p.l33);

16.

report on inspections to the Water Comptroller to give warning of any potential slides (p. 133);

17.

maintain a constant monitoring program around the reservoir perimeter during flooding (p.l33);

18.

monitor the stabilization of banks after flooding (p.l33);

19.

differentiate between truly dangerous areas and those areas that can be used with Âˇsafety by the posting of specific warning signs (p. 133);

211

2.2

Project Costs

The Commission recommends that prior to the future review of project justification Hydro be required to: 20.

provide a detailed cost estimate following present day budget estimate practices (p. 14-0).

2.3

Adequacy of Design and Protection of Public Âˇsafety

The Commission recommends that upon issuance of a

Energy Project

Certificate the Comptroller of Water Rights be directed to: 21.

issue a Water License with the terms as outlined in Appendix 9 of this report (p.ll!-0);

22.

monitor the design, construction and operation of Site C to ensure the

I I I f':

reservoir is operated in the best possible manner (p. 14-0). 3.0

PROJECT IMPACTS

3.1

Land Use and Environmental Impacts

With

respect

impacts on

climate

and

agriculture the Commission

recommends that as conditions of an Energy Project Certificate: 23.

Hydro undertake the eight agricultural impact mitigation measures related to transmission line development and dam construction as oulined on page 171 of this report (p.l71);

24.

Hydro fund and participate in the development of a land use plan and be subject to it (p.l71-2);

212

25.

if the

land use plan identifies areas where top soil removal is

appropriate

and cost effective, Hydro undertake this

mitigation

measure (p. 172); 26.

Hydro be required to pay to the government $18.6 million (in constant 1981 dollars) as compensation for the loss of crown agricultural land due to the flooding; no compensation is recommended for social loss on privately held lands (p.l72).

The Commission further recommends that: 27.

Cabinet remove the flood reserve below Site C to prevent futher agriculture resource loss in the region (p.l64-);

28.

compensation funds be dedicated to agricultural programs in the region

developed by the Ministry of Agricultural and Food in consultation with a planning committee as recommended by the B.C. Federation of Agriculture (p.172); 29.

concerns about climatic impacts, such as increased fog effects on crop drying,

compensation

given

high

programs

priority for

the

when region;

developing but

agricultural

climate-related

conditions be imposed on Hydro or referred to the monitoring program (p.l62); 30.

the Ministry of Highways follow the procedures and practices it described at the hearings with respect to mitigating impacts of highway relocation and, in consultation with affected land owners and other government agencies, in particular, the Ministry of Agriculture and food, establish and make public a definite route for the highway as soon as possible (p.174-).

With respect to impacts on forestry, the Commission recommends that, as a condition of an Energy Project Certificate:

213

31.

Hydro be required to pay compensation of $1 million less stumpage fees from clearing for forestry losses due to flooding (p. 180).

The Commission further recommends that: 32.

the

Ministry

of Forests canvass

the views of the Ministry

Environment and the Ministry of Lands, Parks and Housing to establish clearing standards that best serve the goals of forestry, environment and recreation (p. 179-80); 33.

prior to the issuance of an Energy Project Certificate, the value of forestry losses resulting from transmission line clearing be determined on the same basis as used for reservoir losses and compensation be paid for these losses as well (p.l80);

3/t.

forestry compensation payments be directed to a program managed by the Ministry of Forests aimed at enhancing forestry activity and potential in the region (p. 180).

With respect to general outdoor recreation the Commission recommends that as a condition of an Energy Project Certificate:

35.

Hydro be required to pay $6.9 million as compensation for general outdoor recreational resource losses (p. 189).

The Commission further recommends that: 36.

these funds be used to develop programs under the Ministry of Lands, Parks and Housing, in consultation with local authorities, that will enhance recreation both on the reservoir and on the remaining rivers in the region (p. 189);

:Âˇ, ,j

;~), . .

214

37.

$50,000 of these compensation funds be used by Hudon's Hope for the

development of Alwin Holland Park and $20,000 be used by the River Rats Club for development of wilderness campsites (p.l89); 38.

$833,000 of the compensation funds be directed to wildlife programs in the region developed and administered by the Fish and Wildlife Branch of the Ministry of Environment in recognition of non-consumptive wildlife losses (p.l90);

39.

except as otherwise recommended above, the Ministry of Lands, Parks and Housing or appropriately designated public bodies be responsible for all new recreational facilities including those on the reservoir, and that Hydro be given public credit for its financial contributions (p. 189).

With respect to wildlife and recreational hunting losses, the Commission recommends that as conditions of an Energy Project Certificate: 40.

Hydro

undertake

number

mitigation

measures

transmission line development and construction as outlined on pages 197 of this report (p. 197); 41.

Hydro

pay $2.8 million as compensation for

recreational hunting

resource losses (p. 198). The Commission further recommends that: 42.

these funds be directed to wildlife enhancement programs in the region to be developed by the Ministry of Environment in consultation with local groups (p.l98).

With respect to impacts on fisheries and recreational fishing, the Commission recommends that, as conditions of an Energy Project Certificate:

215

43.

Hydro conduct a detailed angling and creel survey, gather information on sport fish movement in the Peace River and tributaries to assist in determining the impacts of flooding, and conduct a study to ascertain the most effective manner in which shoreline enhancement programs and tributary might be developed for the reservoir (p. 203-4);

44.

Hydro undertake a number of mitigation measures as specified on page 207 of this report to minimize impacts during construction and transmission line development (p. 204).

The Commission further recommends that:

45.

when Hydro's studies are completed the level of compensation be determined using evaluation parameters established in this report, and appropriate compensation programs be determined as part of the monitoring program (p. 207);

46.

The appropriate government agency undertake studies to determine the productivity of existing man-made reservoirs in order to provide more information on the biological impact of the conversion of rivers to reservoirs (p. 205) â&#x20AC;˘

With respect

to impacts on water quality and downstream users, the

Commission recommends that as a condition of the Energy Project Certificate: 47.

Hydro

required

to institute a

program

in consultation

with

Westcoast, in order to identify and measure impacts (p. 210). With respect to impacts on heritage resources, the Commission recommends that as a condition of the Energy Project Certificate: 48.

Hydro match funds raised by the Heritage Conservation Branch up to a limit of $500,000 for the extra capital cost for an accelerated excavation program (p. 214).

216

3.2

Regional Economic and Social Impacts

With respect to regional economic impacts, the Commission recommends that:

4-9.

Hydro and the Ministry of Labour consult with the appropriate trade unions to facilitate increased local membership at least during the construction period of the project (p. 225);

50.

the need for a training program be determined immediately before an Energy Project Certificate is issued based on economic conditions prevailing at that time (p. 225);

51.

the timing of the project not be governed by prevailing regional economic conditions even though they are important in determining the extent of social benefits (p. 226).

With respect to infrastructure and financial impacts on local municipalities and the regional districts, the Commission recommends that: 52.

the matter of impacts and mitigation and compensation for the City of Fort St. John be referred to the monitoring program; the existing negotiated agreement between Hydro and the City should not be made a condition of the Energy Project Certificate (p. 230);

53.

Hydro not be required to pay for increased costs claimed by the Village of Taylor regarding its recently completed water intake (p. 232);

51+.

Hydro monitor the bedrock banks and overburden banks as part of its slope stability monitoring program, and design and construct a berm to protect Hudson's Hope's residents (p. 233-4-);

217

'' t

55.

Hydro provide financial compensation to the Corporation of Hudson's Hope for an amount equal to the estimated decline in property tax revenue attributable to lost land plus the replacement or repair cost of municipal works, land and facilities that will be lost or damaged, determined by negotiation between Hydro and the Corporation of Hudson's Hope or referred to the monitoring program if a resolution or agreement cannot be reached (p. 234);

56.

any net revenue shortfalls of the regional district be dealt with by the monitoring program (p. 235).

With respect to the social service impacts, the Commission recommends that:

57.

assessment of the magnitude and incremental cost of health, hospital and other social service impacts resulting from the project be referred to the monitoring program (p; 237) .

With respect to social and economic impacts on native communities, the Commission recommends that:

58.

impacts on native hunting, trapping and fishing and social impacts be dealt with by the monitoring program (p. 242);

59.

compensation for recreational hunting losses be made in kind through wildlife habitat enhancement programs (p. 245);

60.

Indian

communities be responsible

for

reporting impacts to

the

monitoring program and suggesting remedial measures (p. 246); 61.

Hydro be required to provide funds for those remedial measures that have been approved by the monitoring authority and that neither Hydro nor the Ministries be required to make any direct payment to the native people (p. 245);

218

62.

the evidence submitted by the Treaty 8 Tribal Association be reviewed by the appropriate federal and provincial ministries to consider the question of cumulative impacts of development on the northeast native economy (p. 243).

3.3

Monitoring Program

With respect to a monitoring program, the Commission recommends that as a condition of an Energy Project Certificate: 63.

Hydro fund and be subject to a monitoring program which should be established by the government to deal with unresolved or unanticipated impacts and to verify compliance with all conditions specified in the Energy Project Certificate (p. 250).

In terms of the structure and operation of the program the Commission recommends that: 64.

the monitoring program terminate upon completion of construction (p. 253) j

65.

the responsibilities of the_ monitoring program be carried out by a monitoring commissioner appointed by Cabinet pursuant to Section 25.1 of the Utilities Commission Act (p. 255);

66.

the monitoring commissioner, aided by a small staff, draw as far as possible on the resources of existing ministries or agencies and that each provincial ministry and local government agency designate a person to work with the monitoring commissioner in this regard (p. 256);

219

67.

the monitoring commissioner have the authority to order Hydro to take such measures as deemed appropriate by him and to the appropriate Ministries necessary action on their part (p. 256);

68.

the monitoring commissioner's decisions be subject to review; for this reason

the

monitoring commissioner should

temporary

permanent member of the B.C. Utilities Commission (p. 257); 69.

Hydro be

required to provide

base

funding

for

the

monitoring

commissioner's salary and office staff in an amount determined by the B.C. Utilities Commission; additional funding should be reviewed by the B.C. Utilities Commission based on the recommendations of the monitoring commissioner (p. 257); 70.

Cabinet direct the permanent Utilities Commission to review any decision of the monitoring commissioner at Hydro's request (p. 258);

71.

costs incurred by complainants in bringing a matter to the attention of the monitoring commissioner be borne by the complainants themselves unless otherwise directed by the monitoring commissioner (p. 258).

4.0

OTHER APPROVALS AND OTHER MATTERS

4.1

Other Approvals

With respect to other approvals, the Commission recommends that: 72.

the Comptroller of Water Rights issue a Water License incorporating terms addressed in Chapter XI and XIX of this report and outlined in Appendix 9 (p. 290-3);

220

34-

73.

Cabinet direct the Minister of Environment and managers under the Water Management Act to issue such permits as Hydro will require for the construction of Site C provided Hydro demonstrates it will employ techniques most likely to minimize pollution (p. 294-);

74-.

Cabinet of its own motion exclude affected land from the Agricultural Land Reserve if and when it issues an Energy Project Certificate (p.295).

4-.2

Other Matters

The Commission recommends that: 75.

forecasts made by Hydro and MEMPR employ a common data base and definitions of sectors and years (pg. 299);

76.

government re-evaluate electricity export policy (p. 300);

77.

government clarify industrial development policy (p. 301);

78.

Hydro reinstitute its passive land acquisition policy until an Energy Project Certificate is issued (p. 302);

79.

Hydro offer to include buy-back provisions in all private property acquisitions for the project (p. 303);

80.

any inquiry into future northern river development should examine the cumulative impacts of the entire development of each basin and not just the first step of the development (p.306) .

221 221

222

PART TWO

INTRODUCTION

CHAPTER Ill-BACKGROUND 1.0

THE UTILITIES COMMISSION ACT

On September ll, 1980, with the proclamation of the Utilities Commission Act S.B.C. 1980, Chapter 60, the British Columbia government established a new process for the review and approval of major energy projects in the province. The Act requires that proponents of all regulated projects obtain from the Minister of Energy, Mines and Petroleum Resources an Energy Project Certificate before starting construction.

Regulated projects include high

voltage transmission lines 500 kilovolts or greater, power generation plants over 20 megawatts, facilities that can ship, store or use more than 3 petajoules of energy, pipelines capable of carrying more than 16 petajoules per year and other facilities as specified in Section 16 of the Act. To obtain an Energy Project Certificate, proponents must submit an application to the Minister of Energy, Mines and Petroleum Resources, providing the information that is prescribed in the Regulations under the Act (B.C. Reg. 388/80).

On receiving an application the Minister has three

options: (i) he can refer it to the B.C. Utilities Commission for review under Part 2 of the Act; (ii) in the case of provincially regulated utilities, he can order that the application be heard by the Utilities Commission as an application for a Certificate of Public Convenience and Necessity under Part 3 of the Act; or (iii) he can order that the project be exempt from all or any provisions in the Act. The first and third options require the agreement of the Minister of Environment.

223

When an application is referred to the Commission for review under Part 2 of the Act, the Commission is required to hold public hearings in accordance with terms of reference specified by the two Ministers.

Recommendations on

whether or not an Energy Project Certificate should be issued and if so, what conditions should apply, are then made by the Commission to the Lieutenant Governor-in-Council.

At that point, Cabinet can approve or deny the

application and attach any conditions it deems advisable.

Once an Energy

Project Certificate has been issued, an Energy Operating Certificate will be issued if, during construction, the conditions of the Energy Project Certificate have been met. 2.0

SITE C APPLICATION

Prior to September 11, 1980, hydro-electric development in the province was regulated by the Water Act, R.S.B.C. 1979, Chapter 429. That Act empowered the Comptroller of Water Rights to hold a public hearing to hear the submissions of those who had registered objections to an application for a Water Licence.

Hydro applied for a Water Licence for its proposed Peace

River Site C hydro-electric project, and a number of objections were filed with the Comptroller. However, the provisions of the Water Act and the processes under it were superseded by the proclamation of the Utilities Commission Act. On September 29, 1980, the British Columbia Hydro and Power Authority applied for an Energy Project Certificate under that Act for the proposed Site C Project. 1 The project requires the construction of an earthfill dam across the main channel of the Peace River, about 1 kilometre downstream of the mouth of the Moberly River, and some 7 kilometres southeast of the City of Fort St. John. The dam would raise the water level about fifty metres, and it would create a

B.C. Hydro and Power Authority, Peace Site C Project Application for an Energy Project Certificate with Supplemental Material, Ex 15. â&#x20AC;˘I

'li ,.

224

reservoir with a surface area of some 9440 hectares, about 4600 hectares of which would be newly flooded land. penstocks and

generating units.

Facilities include six power intakes,

The

project also requires a spillway,

temporary and permanent access roads, and a

diversion tunnel during

construction. In addition to the dam, powerhouse and related facilities, two 500 kilovolt (kV) transmission lines between Site C and the existing Peace Canyon hydro plant, and one additional 500 kV circuit between the Williston Substation at Prince George and Kelly Lake, are proposed. The

six-unit

Site C

hydro-electric

plant

would

940 megawatts (M W) of

nameplate capacity and,

Application

4455 gigawatt

(Ex 15:B-9),

hours

provide as

(GWh)

approximately

estimated in of

firm

the

annual

hydro-electric energy and 4530GWh of energy per year under average water conditions.

The transmission facilities would permit the delivery of that

energy to the grid at Kelly Lake. 3.0

B.C. ORDER-IN-COUNCIL, APRIL 23, 1981 1

In response to Hydro's application, the government, under Section 19(1a), Part 2 of the Act, referred the matter to the Utilities Commission for review. By Order-in-Council dated April23, 1981, a special division of the Commission consisting of a Chairman and three other temporary Commissioners and one permanent Commissioner was appointed to hear the application.

A brief

biographic note on each of the Commissioners is found in Appendix 3. 4.0

TERMS OF REFERENCE 2

Terms of reference for the review were determined jointly by the Minister of Energy, Mines and Petroleum Resources and the Minister of Environment and were transmitted to the B.C. Utilities Commission on April 23, 1981.

1 2

Reprinted in Appendix 2. Reprinted in Appendix 4.

225

These terms of reference require consideration of the following : (a)

Project Justification

, Including consideration of electricity demand relative to supply in a total energy context and relative to industrial development opportunities to be made available in the province; financial impacts; and social benefit-cost, taking into account environmental, land use, social and economic effects. (b)

Project Design and Costs

Including consideration of the adequacy and safety of all works and undertakl ngs. (c)

Land Use, Environmental, Social and Economic Impacts

With specific regard to land use and regional settlement, agriculture, forestry, outdoor recreation, terrain resources, wildlife, hydrology, local climate, infrastructure, social services, social structure and local economies. (d)

Other Matters

Including whether approvals should be provided under specified sections of the Pollution Control Act and the Water Act, all matters regarding the Applicant's Water License Application, and any other issues deemed to be relevant by the Commission including those related to the issuance of a Certificate of Public Convenience and Necessity. The terms of reference further direct that the Commission submit a report and recommendations to the Lieutenant Governor-in-Council on : (a)

whether or not an Energy Project Certificate should be issued;

(b)

the conditions that should be attached if Energy Project and Energy Operating Certificates are recommended; and

(c)

the granting of approvals, permits or licences and terms and conditions under the Pollution Control Act and the Water Act.

226

CHAPTER IV- INTERPRETATION OF TERMS OF REFERENCE 1.0

DOCUMENTS TO BE REVIEWED

The terms of reference for the review of Hydro's proposed Site C project are broad, calling for an examination and assessment of virtually all aspects and potential impacts of the proposed project. In addition to specifying the wide range of questions and issues that the government wants the Commission to address, the terms of reference also refer to a number of documents the Commission is to take into consideration in its review. These include the Government of British Columbia's Energy Policy Statement of February 1980 (An Energy Secure British Columbia: The Challenge and the Opportunity) (Ex 46), and, as appropriate, the province's Environmental and Social Impact Compensation/Mitigation Guidelines (Ex 229), and Guidelines for Benefit-Cost Analysis (Ex 122) for the project justification component of the review. They also refer to the Utilities Commission Act itself. The Commission has attempted to ensure that, insofar as possible, its report and recommendations are consistent with the documents to which it was referred.

The Commission's understanding of these documents and their

significance for the Site C review are outlined below. 2.0

GOVERNMENT OF BRITISH COLUMBIA'S ENERGY POLICY STATEMENT OF FEBRUARY 1980

The introduction to the Energy Policy Statement (Ex 46) describes the overall approach of the provincial government to energy projects.

227

".~. the key word is stewardship. We - the Government on behalf of the people of B.C. - are entrusted with the management of our energy resources. Just having resources is not enough. They require careful and responsible government."

The Policy Statement goes on to describe the role of the hearing process in facilitating stewardship : "Major energy projects have significant social, environmental and economic implications. Recognizing the need for comprehensive, advance evaluation of these energy developments, the Government will set up a new, integrated review process. i I

â&#x20AC;˘

This process will streamline, not shortcut, the review process now in place. This streamlining will ensure that socially and economically desirable projects will be evaluated with a minimum delay, while also ensuring that all appropriate safeguards will be taken. Major developments will be permitted only after full consideration of the impact on our economy and environment."

The Policy Statement also comments on the role of hydro-electric projects in the development of the province's energy resources. It draws attention to some of the most significant factors in assessing these projects. "We still have considerable untapped hydro-electric potential, and British Columbia Hydro is currently investigating remote sites which could be used to meet the continuing growth in demand for electricity. But because of their remoteness from major load centres, development and transmission costs will be higher than in the past. In assessing future hydro-electric developments, it is important to stress that alternative sources of energy - as well as social, economic and environmental factors - will all be carefully weighed and that the balancing of these factors will determine whether a project will proceed."

228

The Policy Statement also discusses the appropriate role of Hydro in undertaking hydro-electric projects. It says the importance of these projects to the Province requires that only Hydro, the province's public utility, undertake them. "The province's hydro-electric potential is perhaps the strongest attraction for firms considering where to locate and expand. As well as economic benefits, hydro-electric projects also have significant social and environmental consequences. Therefore, the Government must take the leading role in guiding future hydro-electric development to ensure that these projects are in the best overall interests of the Province; that a secure and reliable source of electricity is available to meet the Province's normal growth; and that electrical energy is available to all industries on a fair and equitable basis."

TO ACCOMPLISH THESE AIMS, THE GOVERNMENT WILL REQUIRE THAT ALL FUTURE HYDRO-ELECTRIC

DEVELOPMENT BE CARRIED OUT BY

THE PROVINCE'S PUBLIC UTILITY- THE BRITISH COLUMBIA HYDRO AND POWER

AUTHORITY

ACCORDANCE

WITH

AND

POLICY

THAT

THESE

DEVELOPMENTS

DIRECTIONS SET BY THE GOVERNMENT

(Ex 46:10, emphasis in original).

These statements, together with the terms of reference for these hearings, indicate to the Commission that the government wishes to have proposed energy projects assessed in the context of the province as a whole and in the context of the province's total energy policy. 3.0

UTILITIES COMMISSION ACT AND B.C. HYDRO AND POWER AUTHORITY ACT

The Utilities Commission Act became law in September 1980 and put into effect many of the policies expressed in the Policy Statement. Part 2 of the Act empowers the Minister to assess major energy projects and enables him to obtain advice from the Commission when he considers such advice necessary. Part 3 of the Act subjects Hydro to regulation as a public utility for the first time.

229

The British Columbia Hydro and Power Authority, or Hydro, was created in 1962 by the Hydro and Power Authority Act, subsequently amended and currently R.S. B.C.l979, c.l88.

It gives Hydro broad powers regarding the

generation and supply of power in the province and the additional necessary authority to carry out its work. It does not impose any obligation on Hydro to pursue any particular policy goal. Hydro's only obligations are those generally imposed on public utilities by the common law. The two Acts together invest Hydro with broad powers to produce and supply energy subject to regulation by the Utilities Commission, to ensure that its actions are consistent with the interests of the province as a whole. In the case of Site C, the Commission is the vehicle chosen by government to provide indirect policy guidance to Hydro through Cabinet under Part 2 of the Act to ensure that development of Site C, if it were approved, is undertaken in a manner consistent with the best interests of the people of J?.C. 4.0

THE PROVINCE'S GUIDELINES FOR BENEFIT-COST ANALYSIS AND ENVIRONMENTAL AND SOCIAL IMPACT COMPENSATION/ MITIGATION GUIDELINES

The Guidelines for Benefit-Cost Analysis (Ex 122) were developed so that projects could be assessed on a consistent basis. They are designed to ensure that public financial resources are allocated to those projects that are most beneficial to the people of the province. The Environmental and Social Impact Compensation/Mitigation Guidelines (Ex 229) were developed to establish a consistent, fair approach to determining the compensation and mitigation measures to be taken with respect to projects affecting public resources and communities.

230

5.0

COMMISSION'S INTERPRETATION OF TERMS OF REFERENCE

The Commission interprets its terms of reference to direct it to assess the Site C project, not from the viewpoint of any particular entity, person or group of persons but from the viewpoint of the province as a whole. This is the position the Commission has taken in weighing and assessing the evidence and in reaching its conclusions and recommendations.

231 231

232

CHAPTER V -REVIEW PROCEDURES 1.0

PREHEARING PROCEDURES

Upon receiving its ,terms of reference, the Site C Division of the British Columbia Utilities Commission began to review Hydro's application and to consider appropriate procedures.

Commission staff and consultants advised

the Panel on the application's technical aspects, and legal counsel was retained to advise on procedural matters and to serve as Commission Counsel through out the review. The Commission ordered Hydro to publish a Notice of hearing by June 30, 1981 asking all interested parties who wished to intervene in the hearings to identify themselves to the Commission ln writing. Such identification was all that was required in order for individuals or organizations to participate. The Notice of Hearing was published in newspapers throughout B.C. and in some nearby Alberta communities.

In addition, the Commission wrote to all

registered objectors to the application under the Water Act informing them that their objections would be considered by the Commission, and asking them to indicate their intention to participate in the hearing if they so wished. A total of 115 interventions were ultimately received in response to these notices. As part of its pre hearing activities, on June 18, 1981, the Commission visited the site to familiarize itself with the proposed project area.

An informal

meetl ng , was held in Fort St. John on July 30, 1981 at which the public was invited to offer comments and suggestions on how the review should be carried out. A formal pre hearing conference was held on October 7, 1981 to hear submissions on, and to establish procedures for, the hearing.

During this

period, interested parties registered with the Commission as intervenors and both the Commission anq the intervenors reviewed the application in detail.

233

Requests for additional information . were made by the intervenors and forwarded to Hydro through the Commission for response. The Commission itself had specific questions concerning the application and presented Hydro with a detailed request for

supplemental information, to which Hydro

responded in a two-volume report (Ex 20 and Ex 21). The Commission considered that to make the review comprehensive it would be important to have the input from a number of government ministries concerned with various aspects of the Site C project and its impacts.

response to a request from the Commission the ministries submitted "Blue Papers" containing their views on what needed to be done and also provided witnesses to answer questions about those papers. In a series of Orders issued between June 19, 1981 and October 27, 1981 (Ex 3 to 10), the Commission established procedures and proposed a date for the hearings to begin. The Commission planned both formal hearings and less formal community hearings. The formal hearings involved presentation and cross-examination of evidence relating to the application. The community hearings gave individuals interested in the project an opportunity to express their views in a less structured setting. Cross-examination by and of Hydro i

~l I

was not permitted at these community hearings.

At both the July 30, 1981 meeting and the prehearing conference on October 7, 1981, several intervenors asked that the Commission consider awarding of costs. The Commission indicated it would accept applications for costs at the end of each phase, and that awards would be based on specific criteria and guidelines. The initial Order on this matter, indicated that "a significant criterion that will be used in the determination of cost awards, aside from need, will be the degree to which the intervention contributes to the understanding of the issues raised by the application" (Ex 6: Appendix A). This test was applied throughout the review.

234

At the pre hearing conference and in subsequent Orders, the Commission emphasized the importance of minimizing duplication of information and effort. To this end, the Commission had its own consultants produce reports on each major phase of the hearing for distribution to all parties. In addition, the

Commission

encouraged

intervenors

coordinate

their

activities

whenever possible so that information would be presented as concisely and effectively as possible. To facilitate the orderly presentation of evidence and to assist intervenors in identifying what aspects of the application would be considered at particular stages in the proceedings, the Commission divided the formal hearings into six phases:

The

-Demand

-Supply

III

- Project Cost and Adequacy of Design

- Environmental, Land Use, Social and Economic Impacts, and Economic Cost-Benefit Evaluation

- Financial Impacts on Hydro and on Electricity Users

- Final Argument.

formal

hearings

were

initially

scheduled

held

entirely in

Fort St. John, with the exception of special Vancouver sessions for January 1982 where submissions were permitted on any aspect of the application. It was subsequently decided to hold regular formal sessions in Vancouver for the later phases of the hearings. 2.0

HEARING PROCEDURES

The formal hearings began in Fort St. John on November 24, 1981, with Hydro presenting its evidence on electrical energy demand, and were completed in Vancouver on November 2, 1982, the last day of Final Argument. In total, 80

235

individual witnesses or panels of witnesses were heard during the 116 days of formal

hearings.

Over

70%

the

hearing

time

was

spent

cross-examination, testing the evidence given by Hydro and intervenors on the Site C application. This process proved essential in clearly identifiying the issues and in clarifying the evidence on which the Commission could base its report. Six less formal community hearings were held in towns located near the proposed project. Two were held in Fort St. John and the others at Taylor, Hudson's

Hope,

Chetwynd

and

Dawson

Creek.

Sixty-three

individuals

expressed their views on the application during these less formal community hearings. At the request of the Treaty 8 Tribal Association, special hearings were also held with the Saulteau, West Moberly, Blueberry, Doig and Halfway River Indian

bands on or near their reserves.

Forty-six native people

expressed their views at these meetings. 3.0

REPORT AND RECOMMENDATIONS

The following report constitutes the response of the SiteC Division of the British Columbia Utilities Commission to the Government of British Columbia on all matters raised in the terms of reference.

The conclusions and

recommendations are based on the evidence presented and examined during the hearings. The Site C Division of the B.C. Utilities Commission is satisfied that the conclusions and recommendations contained in this report are well founded and provide a solid basis for government decisions.

236

PART THREE

PROJECT JUSTIFICATION

CHAPTER VI

INTRODUCTION TO PROJECT JUSTIFICATION

1.0

TERMS OF REFERENCE

With respect to project justification, the Minister of Energy, . Mines and Petroleum

Resources

and

the

Minister

Environment

directed

the

Commission to review the requirement for the project, including consideration of electricity demand forecasts relative to supply in a total energy context, and industrial opportunities made available in the Province; the project's financial impacts on the Applicant and on electricity users; and the project's overall impact on the Province, specifically its social benefit-cost, including environmental, land use, social and economic impact. The Ministers further directed that The Province of British Columbia's Environmental and Social Impact Compensation/Mitigation Guidelines and Guidelines for Benefit-Cost Analyses are to be used as a reference to the above review, as appropriate.

These broad terms of reference call for the Commission to consider the need for the project in terms of future electricity demand and supply in the province, and the total financial, economic, social, and environmental impacts of the project on the province as a whole. The purpose of Part Three of the report is to present the evidence and draw conclusions on project justification from this broad perspective.

237

2.0

ORGANIZATION OF PROJECT JUSTIFICATION REVIEW

The following basic issues are addressed in the project justification review: i)

Does society in British Columbia value the benefits of further hydroelectric or other electrical energy by an amount at least as great as its tot af social cost?

ii)

When will new electricity ~upply be required or be of benefit to the Province, in light of future demand relative to supply?

iii)

Is Site C the appropriate source of supply to meet new power requirements from a broad provincial perspective?

Chapters Vll and Vlli contain the findings on electricity demand and supply. This material relates directly to the question of need. Chapter IX findings on the financial impacts.

~ontains

the

Chapter X contains the Commission's

conclusions on the justification of the project and its related recommendations regarding the issuance of an Energy Project Certificate.

l .

238

CHAPTER Vll -ELECTRICAL ENERGY DEMAND

1.0

FORECAST RESULTS

Only

two

panels

presented

specific

forecasts

future

electricity

requirements in the province- Hydro and the Ministry of Energy, Mines and Petroleum Resources (MEMPR).

Other demand projections were made but

they really constituted evaluations of the effects on demand of specific variables like price, rather than independent forecasts of future requirements. 1.1

B.C. Hydro

Over the course of the hearings, Hydro submitted three forecasts of electricity requirements for its service area:

the September 1981 forecast

(Ex 27); the May 14, 1982 Interim Forecast (Ex 265A); and the September 1982 forecast (Ex 429). In addition, Hydro filed a 1982 econometric forecast of energy requirements in the province which was prepared for them by Datametrics Ltd. (Ex 432). Hydro based its original and final submission on the need for Site C on September 1981 and September 1982 forecasts. examined in detail during the hearings.)

(These two forecasts were

The "low", "probable" and "high"

ranges are shown in Table 1 and depicted graphically along with the Ministry's 1981 forecast in Figure 3.

239

TABLE 1 B.C. Hydro's September 1981 and September 1982 Electricity Load Forecasts (GWh)

Low

SeEtÂ· 81 Pro b.

High

Low

Se2t. 82 Pro b.

High

1980/81a

31,114

31' 158

31,158

1981/82b

32,040

32,930

32,359

1982/83

35,110

36,160

37,140

31,800

32,570

33,100

1983/84

36,920

38,690

40,330

33,600

34,320

35,400

1984/85

38,420

41' 540

44,120

35,300

36,310

38,000

1985/86

39,580

43,690

47,450

36,600

38,060

40,100

1986/87

40,590

46,160

51,470

38,300

40,290

42,700

1987/88

41,680

48,410

55,410

39,500

42,120

45,000

1988/89

42,320

50,390

59,190

40,700

43,650

47,200

1989/90

43,150

51,670

63,840

41,500

45,340

49,300

1990/91

43,990

54,770

67,820

42,900

47,290

51,900

1991/92

44,910

57,090

72,500

44,000

49,570

55,000

1992/93

46,100

59,700

77,300

44,700

51,150

57,000

AAGRc 1980/811991/92

3.4

5.7

8.0

3.2

4.3

5.3

1981/821992/93

3.4

5.8

8.1

3.0

4.3

5.3

Actual or estimated actual.

Actual in case of September 1982 forecast only.

Average Annual Growth Rate.

Sources: Ex 27 and Ex 429

24052 FIGURE 3

1981

GWh (OOO's)

66-

HIGH

B.C. HYDRO LOAD FORECASTS, 1981 & 1982.

64-

1981 62-

_,. MEMPR

/• 60-

HIGH

5856-

54-

52-

so-

48-

46-

/ •

../

/ •

1981 PROBABLE

•

1982 HIGH

•

1981 MEMPR . - - - PROBABLE

1982 PROBABLE

•

1981

;·

44-

LOW

1982

•

LOW

4240383634-

30-1

81/82

82/83

83/84

84/85

85/86

86/87

87/88

89/90

90/91

91/92

Year

241

As shown in the table and graph, Hydro's 1982 forecast indicates considerably less growth than its 1981 forecast. The forecast "probable" average annual growth rate fell from 5.7% (1980/81-1990/91 in the September 81 forecast) to 4.3% (1981/82-1992/93 in the September 82 forecast). In Table 2 Hydro's September 1981 and September 1982 "probable" forecasts are broken down by sector. The table shows that a reduced rate of growth is expected in all sectors, though particularly pronounced in the general and bulk categories.

242

-;:··

TABLE 2

B.C. Hydro's September 1981 and September 1982 Probable Forecast by Sector. (GWh)

Sept. 81 Bulk

Losses

Tot.a

9,344

9,597

3,594

31,158

8,042

12,660 16,148

21,345

6,608

59,700

11,735

Res. 1980/81

1992/93

Gen.

8,042

Res.

Sept. 82 Bulk

Losses

Tot.a

9,344

9,597

3,594

31,158

13,540

17,295

5,823

51,150

Gen.

U1 ~

AAGR 1980/811992/93

3.9

4.7

6.9

5.2

3.2

5.6

3.1

5.0

4.1

Includes other load requirements not elsewhere specified, such as Cominco and West Kootenay Power and Light Company, Limited.

Source :

Ex 429

4.2

243

1.2

Ministry of Energy, Mines and Petroleum Resources

The forecast of electricity requirements submitted by the Ministry was taken from its 1981 provincial total energy forecast for the period 1980-1995. The base and high ranges of electricity requirements in the Ministr,y's forecast are shown in Table 3 below. TABLE 3 Ministry of Energy, Mines and Petroleum Resources 1981 Electricity Requirements Forecast (GWh)a Base

High

1980b

'+ 1,670

41,9'+8

1985

51,671

53,338

1990

58,894

67,228

1995

62,227

77,228

AAGR 1980-1990

3.5

4.8

AAGR 1980-1995

2.7

'+.2

MEMPR forecast in petajou1es converted to GWh@ 1 PJ = 277.8GWh.

Preliminary

Source: Ex 55: 9-2.

244

The Ministry's forecasts are not directly comparable to Hydro's for several reasons. First, the commercial and industrial sectors are not the same as Hydro's general and bulk categories. Second, the Ministry's forecasts are for all requirements in the province as a whole, whereas Hydro's are for purchased requirements in its own service area. Finally, the Ministry's forecasts are for 1 calendar years, whereas Hydro's are for its (April 1 to March 31) fiscal years. Table 4 and Figure 3 show the Ministry's adjusted forecasts of total purchased electricity requirements for Hydro's service area.

The 10-year 1980-1990

growth rate of electricity requirements in the adjusted forecast is 4.7% per year. This is higher than the growth rate for the province as a whole (forecast at 3.65% per year) because of the Ministry's assumption that Hydro will have to meet all major incremental requirements in the province, including those not in its current service area (Ex 55: 9-3). TABLE 4 Adjusted 1981 Ministry of Energy, Mines and Petroleum Resources Forecast (GWh) Ministry Base Case for Province

Adjusted Ministry Base Case for B.C. H~dro Service Area

1980

41,670

30,558

1985

51,671

41' 114

1990

58,894

48,337

1995

62,227

51,671

AAGR 1980-1990

3.5

4.7

AAGR 1980-1995

2.7

3.6

Source: Ex 55 : 9-2; 9-4.

See Chapter XX regarding conclusions rationalizing the two forecasting procedures.

and

recommendation

for

245

The Ministry's forecast for the Hydro

s~rvice

area is only slightly lower than

Hydro's "probable" September 1981 forecast over the 1980 to 1990 period. The difference in the forecasts is more marked after 1990. The Ministry did not submit a 1982 forecast of electrical energy requirements to the Commission.

2.0

THE ISSUES

A number of major issues were identified in the submissions on demand. The principal issues relate toforecast

me~hodology

and reliability

the role and forecast of key underlying variables specific factors such as industrial sector growth, technological change, interfuel substitution, conservation and self-generation prospects and potential in the export market. These issues are discussed below. 2.1

Forecast Methodology and Reliability

For its September 1981 forecasts, Hydro used a variety of methodologies to develop its 10-year projections of total electricity requirements. Residential sector sales were forecast by estimating the number of heating and nonheating accounts and then multiplying by the estimated average use of each type of account.

The number of accounts was forecast on the basis of future

population growth; use per account was forecast on the basis of past trends, but with the estimated effects of conservation taken into account.

246

General sector sales

were

forecast

by using an historical exponential

relationship between sales and gross provincial domestic product (GPDP), adjusted to take into account the estimated effect of conservation.

Bulk

sector sales were forecast using a subjective approach based on customer requests for power. Forecast purchases by West Kootenay Power and Light and Cominco were based on forecasts provided by those companies. The forecasting process used by Hydro draws on the resources of numerous departments. For projecting over the short term (i.e., two years), primary 1 emphasis is placed on the input of. the power district managers, who provide a two-year projection of customers, average annual energy use and sales by customer,

well

five-year

projection

customers

class.

Longer-term projections (the remainder of the 10-year period) are made at Head Office by the Load Forecast Department, which draws on the Energy Conservation Division for estimates of conservation by end-use in the residential and general sectors; on the Corporate Economist Department for the long-term economic outlook, including projections of population, GPDP, energy prices and industry outlooks; and on the Special Power Contracts Department for Bulk Sector sales information. The Commission heard considerable evidence regarding Hydro's forecasting record. In presenting the September 1981 forecast, Hydro acknowledged that: Quite frankly, our forecasting record, like that of other energy forecasts, has deterioriated during the energy troubled seventies. (1: 46)

A review of its past forecasts indicated that during the 1970's Hydro overestimated demand by an average of 11% in the fourth year and by 37% in the eighth year following the year of the forecast. Hydro's estimates for the largest component of demand, the bulk sector, have been the poorest (Ex 12: C-14).

There are currently 58 power district managers in the Hydro system (Ex 429:7-1}. There were 57 at the time of the 1981 forecast (Ex 27:13).

247

In light of this record, and based on an internal review of its forecasting procedures, Hydro indicated, when it presented its September 1981 forecÂˇast to the Commission, that it intended to develop new techniques to supplement the old. Specifically, 1.

Hyd~o

concluded that-

It should establish more explicit links between forecasts and the Long-Term Economic Outlook prepared by the corporate economist.

It should prepare a total energy forecast for 1982 given the increasing volatility of prices and the availability of alternative fuels.

As part of a total energy forecast, it should develop the ability to take explicit account of price effects -- both own-price and cross-price 1 elasticities.

It should include other techniques, such as econometric modelling, in its long-term forecasting. Detailed customer-level forecasting will still be necessary for

much of Hydro's planning, for example short-term

revenue forecasts, distribution level planning, etc. 5.

It should establish a permanent load forecast committee (Ex 29: 7-8).

The September 1982 forecast includes two of these five changes. More explicit linkages were made to the Long-Term Economic Outlook (109: 17,819) and a permanent load forecast committee was established (109: 17,843-5).

These terms are defined in Section 2.2.2 of this chapter, (pg. 66).

248

However,due to budgetary constraints the forecast was not prepared within a total energy framework (1 09: 17,826-7). In the future, this could be done "in conjunction with or parallel to the Ministry of Energy, Mines and Petroleum Resources ... " (1 09: 17,824). Also, the 1982 forecast did not explicitly take account of energy price effects, although some improvement in methodology over its 1981 forecast was identified (109: 17,829).

Finally, Hydro did not

integrate econometric modelling techniques into its forecasting procedure (109: 17,843). But it did retain a consultant to prepare an econometric total energy forecast as a sensitivity test (Ex 432). In effect, in preparing the September 1982 forecast Hydro developed what was called at the hearings an "end-use/engineering" approach. Whilethe techniques ... are in many ways similar to those used in 1981 and previous years, â&#x20AC;˘.. generally the depth and the level of detail of the analysis have been increased. The major changes in the load forecasting methods have been: 0

greater emphasis in estimating the likely level of future energy prices and the resulting impact of changes in electricity use;

development of a residential forecasting model to facilitate more in-depth analysis of this category;

more detailed analysis of general sales, relating the various components of this category to the growth in certain industrial activity, to growth in commercial floor space requirements and the changing electrical requirements in new buildings, and to certain segments of population; and assessments of the growth and electrical requirements of the major industrial sectors based on the resource base and world market, including coal mining and petrochemicals in addition to forestry and metals mining and smelting (Ex 429: E-1).

The Ministry of Energy, Mines and Petroleum Resources also used the end-use/engineering approach in preparing its 1981 forecast. It developed its forecast on the basis of a detailed examination of total energy use patterns

249

and fuel shares in each sector.

Projections of energy use coefficients and

levels of activity for each sector were multiplied to determine sectoral demand and then totalled to determine the overall forecast. In cross-examination of Hydro and Ministry witnesses, questions were raised about the reliability of the end-use/engineering approach.

These questions

related largely to consistency in the use of important variables such as price and income, and the degree of judgement applied to the large industrial user requirements (10: 1,617). In comparison to the end-use/engineering approach, the Commission heard evidence on econometric modelling of energy demand. In econometric models, a set of equations incorporating variables that explain demand (for example, 1 output, income, energy prices, prices of other factor inputs) are developed; observed patterns of behaviour (historical data) are then used to estimate the parameters in these equations. To forecast energy demand, projections of the explanatory variables are applied to the estimated equations. The reliability of energy requirement forecasts based on econometric models clearly depends on the reliability of the projections of the explanatory variables as well as the set of equations used. As in the end-use/engineering approach, the projections of explanatory variables

In the model presented by Drs. Helliwell and Margolick the variables used to explain total energy demand in British Columbia were the capital stock in Canada, the relative price (index) of energy and capital in Canada, and the relative price of energy in British Columbia versus the rest of Canada. The variables used to explain each fuel's share of total energy demand were relative fuel prices and an index of gas availability. In the econometric model prepared for Hydro by Datametrics, the variables used to explain total B.C. energy Âˇdemand in the commercial and industrial sectors were output, the price of energy, the price of labour, and the capital stock. Fuel shares were explained by historical consumption, relative fuel prices and, for the industrial sector, an "urbanization index". The variables explaining residential demand were real income per household, the price of electricity, degree days (a temperature index) and previous period consumption.

250

can be quite subjective. The advantage of the econometric approach is that it reduces the degree of subjectivity by ensuring that the effect of the explanatory variables in the forecast is consistent with statistically significant past patterns of behaviour. There is, of course, some question as to whether past relationships between price and demand are good guides to what the future will hold (109: 17,834). With regard to forecasting reliability, Dr. Singh of the Ministry of Industry and Small Business referred to studies which suggested... that the forecasting accuracy is improving over time, and recent developments of econometric models had largely to do with that improvement. That is contrary to the general perception that the models don't necessarily improve the accuracy (21: 3,536).

The Ministry of Energy, Mines and Petroleum

~esources,

which to date has

been using an end-use/engineering approach, announced that it intends to develop an econometric model for its next forecast (9: 1,437). The Commission's consultants on load forecasting recommended that the end-use and econometric approaches be integrated in order to incorporate effectively both the technological and the economic factors in the energy sector. This view was endorsed by Hydro in final argument and supported by intervenors, including SPEC, Dr. Helliwell, and the Ministry of Energy, Mines and Petroleum Resources. Since the laad forecast is critical to the question of project justification, the manner in which the forecast is made and the confidence one can place in it are of concern to the Com mission.

251 63

The

Com mission acknowledges and approves the steps Hydro has already

taken to improve :ft.s forecast

methodology.

The level of detafl and the

background cons.iilerations that went into the Septemberl982 forecast indicate that the methodology has been improved over that used in the September 1981 forecast. should be

Nevertheless, the Com mission concludes that further improvements made in the

techniques

econometric techniques into should be pursued.

While

used to forecast

demand.

Hydro's forecasting procedures econom etxic

techniques

cannot

Integrating

may help and eliminate

the

inherent uncertainties about future trends in the economy, the Com mission concludes that they can ensure that the energy demand forecast is consistent with the economic and price forecasts that appear reasonable at the time of the forecast.

THE

COMMISSION

DIRECTED

THEREFORE

INCLUDE

RECOMMENDS

TECHNIQUES

THAT

SUCH

HYDRO

ECONOMETRIC

MODELLING IN ITS LONG-TERM FORECASTING, A CONCLUSION HYDRO REACHED IN ITS OWN INTERNAL REVIEW.

Econometric modelling should

be integrated into the forecasting process where it. is demonstrated to be useful, and should be used for more than outs.iile sensitivity testing. COMMISSION DEVELOP

ALSO

ITS

FRAMEWORK, A

RECOMMENDS

ELECTRICITY CONCLUSION

THAT

FORECAST THAT

HYDRO IN

HYDRO

A ALSO

DIRECTED

TOTAL

THE TO

ENERGY

REACHED IN ITS

INTERNAL REVIEW.

Both of these measures, the Com mission concludes, will serve to increase the consistency and reliability of Hydro's forecasts.

At the same

time, the

Com .mission concludes that a major cause of uncertainty in predicting future demand is the inherent uncertainty about the underlying economic conditions that drive demand. overcome.

This is

oo m ething that no forecasting technique can

252 64

2.2

The Role and Forecast of Key Underlying Variables

Many factors or variables can influence the demand for electricity, but perhaps the two most important are the level of income or economic activity in the province (as measured, for example, by gross domestic provincial product) and the level of electricity and other energy prices. These variables received considerable attention at the hearings. 2.2.1

Gross Provincial Domestic Product

In Hydro's September 1981 forecast, gross provincial domestic product (GPDP) played a direct role in determining the general sales forecast, but its role in determining residential and bulk sales was less clear.

Several intervenors

expressed concern about the absence of any clear llnkage between the bulk sector sales forecast and Hydro's GPDP forecast, and some suggested that the '

two forecasts may even be inconsistent. Several intervenors also expressed concern about the type of llnkage made between the general sales forecast and GPDP (a simple exponential relationship) since, by Hydro's own admission, this relationship has not been constant in recent years (Ex 27: 31). In Hydro's September 1982 forecast, several changes were made regarding linkages between GPDP and demand. In the residential sector, Hydro assumed load growth to be driven by population and household formation, and then related these to GPDP. In the general sector, Hydro assumed GPDP to be an important driving variable, though not the only one as assumed in the 1981 forecast.

In the bulk sector, Hydro assumed load growth to be driven by

projected growth in output in the major industrial sectors, creating a linkage to GPDP. For all sectors, therefore, GPDP played an important, explicit role in Hydro's September 1982 forecast.

253

Recent economic events gave rise to many questions regarding the validity of GPDP projections. When Hydro testified on its September 1981 load forecast and the Ministry of Energy, Mines and Petroleum Resources on its 1981 requirements forecast, the GPDP growth rates they had both used were generally recognized as being too high, averaging 4.0% to 4.4% real over the 1981-86 period (Ex 23: 44; Ex 55: 1-3).

Representatives from the Ministry of

Industry and Small Business Development indicated that their forecast of 4 to 4.5% annual growth over the next five years should not be relied upon---the recession was more severe than they had thought it would be (21: 3,569). For its September 1982 load forecast, Hydro reduced its GPDP projections. Indeed, lower economic growth prospects were cited as a significant factor underlying the reduction in Hydro's load forecast between September 1981 and September 1982. Nevertheless, while Hydro presented a lower GPDP forecast than it had a year earlier, questions were still raised about the magnitude of economic growth Hydro continued to project. The GPDP forecast Hydro used for its September 1982 load forecast was prepared in July 1982 and was predicated on an immediate turnaround in the U.S. economy (3rd quarter 1982), followed shortly thereafter by a turnaround in the B.C. economy (4th quarter 1982).

For 1983 and 1984, real GPDP was

projected to grow at 3.2% and 4.4% respectively. For the balance of the decade, uninterrupted growth between 3.5% and 4.0% per year was expected (Ex 429: 1-3). Hydro witnesses acknowledged that the immediate turnaround assumed in the 1982 GPDP forecast was no longer valid, though the degree of adjustment, Hydro suggested, would not be great: the corporate economist would be looking at some slippage in those [turnaround] times, but right now not more than the one or two quarters (109: 17,867).

254

In Table 5, Hydro's (July 1982) low, central and high GPDP projections are shown. Hydro used the central projection for its September 1982 probable load forecast and stood by it as a "best-guess" case. The low and high GPDP projections were used for developing the low and high ranges in future electricity requirements. TABLE 5 Real Growth in B.C. GPDP . Hydro July 1982 Projections (expressed in annual % change) Low

Central

High

1982a

-3.0

-2.0

0.3

1983

2.5

3.2

5.0

1984

2.9

4.4

6.2

1985

3.1

4.0

4.8

1986

2.9

3.6

4.2

1987

2.4

3.5

4.5

1988

2.4

3.5

4.5

1989

2.4

3.5

4.5

1990

2.4

3.5

4.5

1991

2.4

3.5

4.5

Source: Ex429

It is now apparent that actual GPDP in 1982 was below the "low" forecast.

255

GPDP is a key determinant of energy demand, irrespective of the forecasting techniques employed.

With respect to the G PDP forecasts presented at the

hearings, the Com mission notes that Hydro's July 1982 GPDP projections for the

last

quarter

of 1982

have

not

materialized;

accordingly,

Hydro's

projections, at least in the short term, must be seen to be too high.

Unless

this is offset by rapid economic growth in the mid to late 1980's, Hydro's central GPDP projection for the entire period will be too high.

To achieve

Hydro's projected growth in G PDP over the forecast period would require growth rates consistently in excess of 4 to 5% in real terms in the late 1980's. The Com mission heard no evidence to support such a prospect and concludes that further slippage towards Hydro's low projection may occur.

2.2.2

Electricity and Other Fuel Prices

Energy prices can affect electricity demand in two ways. First, the price of electricity can affect demand by influencing the amount of electrical energy that people and industry are willing to purchase. As with virtually all goods and services, the higher the price, the lower the amount of consumption. This is called the own-price elasticity effect. Second, the relative price of other fuels can affect demand by influencing the type of fuel or energy source used for certain applications, like space heating, where choice is possible. The higher the relative price of competing fuels, the more electricity will be used. This is called the cross-price elasticity effect. Most witnesses who addressed the issue of demand acknowledged the existence and potential importance of these effects: in a study undertaken for Hydro, National

Economic

Research

Associates

concluded

that

"a potentially

significant price elasticity response to increased rates will occur" (Ex 29: 9); the econometric studies presented to the Commission identified significant own-price and cross-price elasticity effects (Ex 85A and Ex 432); and, one

â&#x20AC;˘ '

256

witness indicated that an OECD

study found that energy demand was in

fact becoming increasingly responsive to price (23: 3,749-50). The main issue addressed at the hearings was not whether prices affect demand, but whether future electricity prices have been fully taken into account in the load forecasts. For the September 1981 forecast, Hydro's load forecasters made no explicit forecast of real electricity prices, though they did assume that electricity 2 would remain more expensive than natural gas for space heating. The 1981 Ministry of Energy, Mines and Petroleum Resources' forecast also assumed that real electricity prices would generally remain constant, though some increases in the bulk sector were expected (Ex 55: 1-60). For Hydro's September 1982 forecast, much more emphasis was placed on estimating future electricity price levels. Three projections were developed, and a trend line based on them was adopted for developing the load forecast. Case 1 was based on an expansion plan satisfying a 4.8% average annual growth in demand and the financial parameters in Hydro's Corporate Plan of May 1982. Case 2 updated Case 1 by incorporating revised interest, inflation and exchange rates presented in Hydro's July 1982 Long-Term Economic Outlook 1982-2001 (Ex 23A). Case 3 employed all the assumptions of Case 2 except for the rate of load growth, which was decreased by 0.5% to a 4.3% average annual rate. The trend line was a weighted average of Cases 1 to 3. These projections are shown in Table 6.

Organization for Economic Co-operation and Development 2

Hydro assumed that natural gas prices would not exceed a substitution of 75-80% of the price of electricity.

"threshol~"

257

TABLE 6 -Hydro Real Electricity Price Projections for Se~tember 1982 Forecast Â˘/kWh Case 1a

il~

t .

Case 3c

Trend

1981/82

3.08

1982/83

3.59

3.65

3.67

3.64

1983/84

3.73

3.86

3.90

3.82

1984/85

4.26

4.55

4.61

4.44

1985/86

4.20

4.50

4.60

4.40

1986/87

3.97

4.26

4.38

4.18

1987/88

3.83

4.04

4.18

3.98

1988/89

3.66

3.86

3.95

3.80

1989/90

3.64

3.83

3.44

3.80

1990/91

4.08

3.91

3.51

3.80

1991/92

4.35

3.89

3.72

3.80

Average Annual Growth Rate 1981/82- 1991/92

3.5%

2.4%

1.9%

2.1%

Based on expansion plan (4.8% average annual load growth rate) and financial parameters in Hydro's Corporate Plan of May 1982.

Based on revised interest, inflation and exchange rates presented in Hydro's 1982 Economic Outlook.

Same as Case 2 but with 0.5% lower load growth (i.e. 4.3% average annual growth rate).

Source: Ex 429

f:j:

Case 2b

258

The trend line price projection exhibits a sharp increase in the early to mid 1980's, moderating towards the end of the decade. Over the 10-year period, the average real increase is expected to be about 2.1% per year. In the financial phase, and to some extent, in the demand phase of the hearing, many questions were raised about the factors underlying the price projections. The forecast of electricity sales itself plays a key role. In the short term, and particularly with Revelstoke coming on-stream, reduced sales have a marked upward influence on price. With costs for the most part fixed in the short term, lower sales means that a greater amount of costs must be recovered from each kWh that is sold. Over the long term, however, as the reduced sales outlook causes a deferment of new expensive capacity, prices tend to fall or moderate relative to what they might otherwise be. In a hydroelectric system like Hydro's, long term price increases are due almost entirely to the rolling-in of new high-cost sources of supply. As the new sources are deferred, so are the accompanying price increases. These factors, as well as current financial conditions, explain the new pattern of electricity prices anticipated by Hydro. They also suggest that if sales fall even further than Hydro is currently forecasting, sharper price increases can be expected in the near term, and greater, or perhaps longer, moderation of prices can be expected in the more distant future. The Com mission concludes that real electricity prices can be expected to increase over the next decade, with particularly pronounced increases over the next five years.

To the extent that these increases, or indeed any other

factors, cause electricity demand to faJl further than Hydro is currently expecting, an even greater up ward pressure on price could occur in the short term.

The Com mission agrees with Hydro that the impact of lower load

growth will be to reduce rates in the lJ:;ng-term provided that the lower growth

259

Âˇ'

rate is anticipated and does in fact cause a deferment of new capacity.

; l

The Commission emphasizes that its conclusions with respect to the role and forecast of price are predicated on the "status quo" as far as energy pricing policy

concerned.

These

conclusions

not

reflect

the

potential

implications of any policy changes affecting the manner in which B.C. Hydro rates are determined. Various intervenors made submissions with respect Âˇto rate structure and rate policy at the hearings, particularly during the Vancouver sessions. However, given the terms of reference of this review, the Commission does not believe 2 it is within its mandate to make recommendations on these matters. In the end-use/engineering methodology used by Hydro and the Ministry of Energy, Mines and Petroleum Resources, energy prices do not play an explicit role. Rather, they are taken into account implicitly in the development of certain fuel share and energy-use coefficients and assumptions. For example,

,,I;

ji'

in estimating the number of households that will use electricity as opposed to natural gas for space heating, relative fuel prices are considered.

Hydro argued that the conservation allowance in its forecasts are driven by (and therefore take account of) future price changes. Whether this approach adequately and fully takes price change into account is unclear.

In its

September 1982 forecast, Hydro attempted to quantify the implicit price effects, by relating the reductions in demand attributed to conservation in the residential and commercial sectors were related to the projected increase in

The Commission does not accept the concept of the "death spiral" mentioned at the hearings, whereby lower demand would cause a never-ending spiral of higher prices and further reductions in demand. As explained above, reduced growth will in fact reduce rates in the long term by deferring the need for new (expensive) capacity. 2

For further discussion, see Chapter XX.

260 72

electricity prices. On the basis of these calculations, Hydro argued that the implicit price effects in its forecast seemed reasonable. However, it is not clear how much of Hydro's conservation allowance should be attributed to B.C. prices when much of it clearly relates to appliance and other improvements resulting

from

North

American

price increases.

Hydro's

conservation

allowance declined from the September 1981 to September 1982 forecast even though its forecast of real electricity prices increased. The role that B.C. 1 prices in their own right have in the forecast was left uncertain (110: 18,083). For the bulk sector forecast, Hydro "asked the people responsible for the various sectoral analyses to [provide an estimate] of the impact of a change in the electricity prices on the electrical requirements" (108-17,705).

Hydro's

consultants indicated that the prices Hydro was forecasting would not have an effect. Indeed, in some sectors, despite the projected increases in price, the electrical use per unit of output was forecast to increase because of technological changes. The conclusions in the NERA report that price has a significant impact on industrial demand was, in Hydro's word's, "abandoned â&#x20AC;˘.. in this forecast" (108: 17,711). The Com mission concludes that the manner in which energy prices are taken into, account in

the

end-use/engineering

forecasts

not

completely

satisfactory. The Com mission concludes that it is not apparent that the rising real electricity prices which can be expected over the next decade have been fully reflected in Hydro's September 1982 forecast.

The role of price in the econometric models is much clearer than in the end-use/engineering

forecasts,

which

principal

reason

for

the

Commission's recommendation that Hydro include econometric techniques in its future forecasting procedures. However, the manner in which price effects are captured and the role they play depend on the way in which the econometric model is formulated.

For further discussion see Section 2.3.3 of this chapter.

261

The two models presented in evidence at the hearings have different structures and, consequently, the price effects they capture would likely be different. In the model presented by Drs. Helliwell and Margolick, energy prices are assumed to affect the type of equipment used to produce goods and services in the economy and impacts on energy demand are assumed to take up to five years to be fully realized. 1 In the Datametrics model filed by Hydro, energy prices in the nonresidential sectors are not assumed to affect the type of equipment, but rather the mix of energy and labour used to produce goods and service. The impacts captured here would likely be much more short run in nature (Ex 432: B-2). The

Com mission recognizes that using an econometric model does not

guarantee that price effects wm be adequately taken into account and that great care must be taken in formulating the model in order to capture both the short and long-term impacts of price.

For planning purposes, the long-run

effects are of central concern. The econometric model filed by Hydro does not appear to deal adequately with the long-run impacts of changing energy prices.

2.3

Other Forecasting Issues

, 'I

A number of specific forecast issues were explored extensively at the hearings, including industry outlooks, technological change, conservation, interfuel substitution, and self-generation of power. 2.3.1

Industry Outlooks

In the end-usejengineer:ing approaches of Hydro in its September 1982 forecast and the Ministry of Energy, Mines and Petroleum Resources in its 1981 forecast, the bulk and industrial sector forecasts were built up from individual forecasts for each of the major industries in British Columbia.

i!J

T~' I

HI'

l ' . '

The models reviewed by NERA indicated that price impacts would take up to 10 years to be fully realized (Ex 32: 2).

262

In cross-examination of the Ministry's forecast one major area of controversy related to the primary metals and mining industries---the number and timing of new copper, lead-zinc, ferro-silicon and aluminium smelters in particular. Projected growth in these industries was responsible for a significant increase in the Ministry's forecast of electricity requirements in its 1981 forecast as compared to its 1980 forecast. The Ministry panel agreed that some of the assumptions in these areas, for example, those with respect to ferro-silicon smelters, may have been overly optimistic (10: 1,602). In cross-examination of Hydro's September 1982 forecast, the overriding issue was whether, as with GPDP generally, the industry outlooks were overly optimistic. In the forestry industry, for example, Hydro's outlook anticipated strong recovery in 1983 and 1984, namely, real growth in value added of 20.2% and 32.0%, respectively, with major expansions in capacity from 1986 until the mid 1990's with seven new chemi-thermal mechanical pulp mills over that period. The strong short-term outlook in the forestry sector was questioned in view of soft markets in the U .5. and the threat of trade barriers. The timing of expansion in pulp and paper capacity from 1986 onwards was also questioned in view of the industry's current and near-term financial constraints. In the coal mining industry, Hydro anticipated that all existing mines and mines under construction would reach full capacity by 1990. The metal mining outlook used by Hydro included what its consultants termed tentative as well as firm prospects (Ex 429: 5-11;5-19).

For the petrochemical sector, Hydro's

industry outlook assumed that a liquefied natural gas plant, a natural gas liquids

extraction

ammonia/urea (110: 18,031-38).

plant,

plant

will

ethylene

all

come

and

derivatives

on-stream

between

plant, 1986

and and

an 1992

263

The Com mission concludes that the industry outlooks used by Hydro as the basis for its bulk sector and general industry load forecasts reflect maximum rather than "probable" forecasts.

This was also the case with some of the

outlooks used in the Ministry'sl98lforecast. These maximums may ultimately be realized in British Columbia, but given current conditions and the prospect

of a slDw recovery, the Com mission concludes that they are unlikely to be realized as fast as Hydro suggests.

2.3.2

Technological Change

In addition to assuming rapidly improving economic conditions, Hydro's September 1982

forecast

assumes

significant

shift

into

electricity-intensive processes. This is particularly pronounced in the forestry sector where Hydro, on the basis of its consultant's reports, is projecting a major shift into thermal and chemi-thermal mechanical pulping (TMP and CTMP). Hydro projects that new growth in TMP and CTMP will account for 2,400 GWh, or 73%, (Ex 429 :C-21;5-6).

of the

total load growth

in the

forestry sector

According to Hydro's consultant, the shift is pure technological change, which is prompted by shortages in fibre in Scandinavia, and it is becoming of interest to North American producers because of emerging fibre supply problems, and a desire to produce the maximum out of available wood supply (109: 17,900).

Hydro also anticipates a shift to more electric-intensive processes in coal mining. Though of far less significance to the electricity load forecast than the process shift in forestry, nonetheless a 20% increase in electricity requirements per unit of output is assumed (110: 18,020).

264

The central issue concerning these process changes is whether they will take place despite the rising electricity prices projected by Hydro. Hydro witnesses argued that they will because of the relatively small proportion of total costs accounted for by electricity. In forestry, for example, wood supply costs are a major concern; the economics of processes that reduce these costs by improving utilization will, according to Hydro's consultants, not be greatly affected by higher electricity prices. The

Corr. mission accepts that technological change, particularly in the

forestry sector, is potentially an important factor in the growth of the future electricity requirements in the province. However, the Com mission concludes that because of the economic outlook, current financial constraints and rising electricity prices, new capital investments into more electricity-intensive processes

may take place less extensively or less rapidly than Hydro has

forecast.

2.3.3

Conservation

In Hydro's September 1981 and September 1982 load forecasts, an allowance for conservation was factored into the estimates of residential and general sector requirements. The allowances were based on research undertaken by Hydro's Energy Conservation Division. Hydro stated that energy pricing plays a major role in determining the extent of energy conservation. "The amount that we deduct from our forecasts in conservation is really to a large extent price derived" (2: 164).

Hydro's

conservation allowances in its September 1981 and September 1982 forecasts, as shown in Table 7, appear to conflict with that statement since the allowances are lower in the September 1982 forecast though higher prices are now projected.

265

TABLE 7 Hydro Conservation Allowances Probable Forecastsa (GWh) September 1981

~ptember

1982

Residential Sector Allowance

1,700

1,150

2,300

525

General Sector Allowanceb

Allowance in 1991/92 for 1981 forecast; 1992/93 for 1982 forecast.

Conservation allowance for September 1982 is for commercial floor space only and therefore not directly comparable with that of 1981.

Source: Ex 4-16 and Ex 4-29

With respect to the residential sector conservation allowance in the September 1982 forecast, Hydro acknowledged that much of the conservation effect related to imported appliance efficiencies; it was not clear if Hydro allowed for any conservation due to B.C. prices and conditions (108: 17,567). Hydro also acknowledged a sharp increase in average use for the "other" appliance category (eg., hot tubs,

T.v. games,

etc.), which comprised a large share of the

residential load. Hydro testified that its estimates of average use for this "other" category were uncertain (109: 17 ,74-5-9). With respect to the general sector

conservation

allowance

the 1982 forecast,

Hydro

estimated

conservation only for electrical use in new buildings. (110: 18,058). Questions

were

raised

at the hearings about the future potential for

conservation, given the amount that has already taken place.

Hydro's

conservation specialist suggested that the potential for conservation was vast.

266

We found no indication yet of any limitation on energy conservation ... there is by no means anything close to even 50 percent of the houses in the Province that are insulated up to their maximum •.. [in] the industrial and particularly the commercial sector, there are very few enterprises which have yet to take substantial advantage of energy conservation... I see absolutely no reason to see any dampening in conservation until well after the turn of the century. (3: 362-3)

The Commission believes that it is important to distinguish two quite different aspects of conservation. One is the general effect of price on conservation. The other is the effect of regulatory standards, education programs, and other special measures on how quickly and to what extent economic conservation measures are adopted. The Commission believes that for forecasting purposes the effect of price on conservation should be treated as part of the explicit role of price. The second aspect could· be treated as a special conservation allowance insofar as special measures or programs are in place that will increase the responses to higher prices over and above what could normally be expected.

Hydro's present treatment of conservation does not adequately

separate these two phenomena and future forecasts should address this. The Com miss:km concludes that the methods employed by Hydro to derive conservation allowances, particularly since they are assumed to capture price as well as program-induced effects, are inadequate.

The· magnitude of the

allowance in both the residential and commercial sectors and the absence of any allowance in the industrial sector, suggest that conservation has not been fully

taken

into

RECOMMENDS

account THAT

the

HYDRO

1982 BE

forecast.

DIRECTED

THE TO

C 0 M MISSION IMPROVE

ITS

TREATMENT OF CONSERVATION BY BETTER INTEGRATING IT INTO ITS LOAD FORECASTING.

2.3.4

Interfuel Substitution

Interfuel substitution refers to the shift from one type of fuel to another in specific end uses, like space heating, where the basic energy requirement can be met by a variety of fuels.

267

In both Hydro's

and the

Ministry's forecasts,

the extent of interfuel

substitution is derived from assumptions concerning conversion rates of existing housing stock and fuel capture rates for new dwellings.

In the

econometric models, it is usually derived from explicit fuel share equations. In both types of approaches, relative fuel prices and fuel availability are the key determinants of shifts in fuel use. In Hydro's 1981 and 1982 forecasts, the price ratio of natural gas to electricity was assumed not to exceed the 75-80% level on an efficiency-adjusted basis. Consequently, the current price advantage of natural gas was assumed to continue.

No assumptions were made with regard to the timing and

implications of replacement cost pricing for all fuels. Hydro assumed natural gas would be extended to Vancouver Island in both its 1981 and 1982 forecasts resulting in a reduction of electricity's share of the provincial market. Hydro said that it will be able to do a better job on interfuel substitution when it develops a satisfactory procedure for making total energy forecasts (109: 17,829). In particular, the assumptions regarding competing use of electricity and natural gas will be more fully refined in the context of such q. forecast. The February 1980 provincial energy policy statement contained two important directions for energy pricing and supply that are relevant to Hydro's fuel share assumptions.

First, it indicated that energy prices should move toward

long-term replacement costs. Second, it indicated that natural gas should play a significant role in reducing our dependence on oil through the conversion from oil to natural gas and through the extension of natural gas service to parts of the province where it is economically viable.

268

The Corr. mission concl.J.ldes that the issue of interfuel substitution ought to be given

THE

C 0 M MISSION

POLICIES

REGARDING

rr. ore explicit consideration in future forecasts.

RECOMMENDS COMPETING

THAT

FUELS

RELATIVE BE

PRICES

CAREFULLY

AND

EXPLICITLY

ANALYSED

WITHIN THE CONTEXT OF A B.C. HYDRO TOTAL ENERGY FORECAST.

2.3.5

Self-generation

Self-generation of power is possible in a wide range of industries, including forestry,

metal

mining

and

smelting,

coal

mining

and

petrochemical

activities. Self-generation has a direct bearing on Hydro's requirements since the more power supplied by industry, the less need be supplied by Hydro. The issue raised at the hearings was whether the amount of self-generation in the province will be greater than that assumed by Hydro in its projections. In particular, questions were raised about whether self-generation is likely at new coal mining and petrochemical operations (no self-generation was forecast by Hydro), and how much self- or co-generation will occur in the forest industry. Wood wastes or hog fuel from forestry operations provide significant potential for thermal power production. Two types of hog fuel-fired thermal generation were identified :

single extraction condensing generation and noncondensing

or cogeneration. The former is similar to conventional utility-type thermal operations while the latter produces electricity as a by-product of the pulping process (Ex 85C: 2-3). Hydro's forestry consultants estimated that in 1982, some 2,300 GWh of electricity would be self-generated by the forestry industry. Hydro suggested that the potential for further increases is limited, and included only some 600 GWh of potential additional cogeneration in its September 1982 forecast (Ex 435).

Hydro's forestry consultants indicated that this limited potential

stemmed from three factors: (i) the trend to thermal mechanical pulp which,

269

if sold as market pulp, requires no steam and reduces hog fuel supply; (ii) the rapid increase in the price of turbogenerators and cost of construction and installation; and (iii) large increases in the cost of transporting hog fuel (Ex 430). Drs. Helliwell and Margolick testified that their studies suggest an additional 288 MW of cogeneration capacity, capable of generating 2,250 GWh per year in 1 the province is economic given Hydro's current purchase pricing policy . If prices were based on the marginal cost of new electricity in the province, they estimated that 411 MW, capable of generating 3,200 GWh, would be economic. <

In addition to economic considerations, certain institutional factors prevent the realization of this potential. These factors include Hydro's current rate structure and purchasing policy, and the financial advantages available to Hydro but not to private industry. Of particular concern were the following factors, which may inhibit the development of economic self-generation facilities (Ex 85C): Hydro's existing rate structure, featuring relatively high capacity or demand charges and significant stand-by charges, reduces the incentive to industry to produce electrical energy by cogeneration since such production does not diminish the requirement for 'standby' availability from Hydro. The low purchase price offered by Hydro reduces the incentive to install

cogeneration

capacity

excess

the

producer's

own

requirements. The much lower cost of capital available to Hydro, due in large part to the government's guarantee which allows Hydro to finance almost entirely by debt, provides a large cost advantage to Hydro compared to industrial suppliers of power.

Hydro currently will purchase surplus electrical energy from industry at the trailing block industrial rate.

270

The Com mission recognizes that these institutional factors may be important irr.pedim ents to the development of self-generation generally and cogeneration in the forestry industry specifically. To the extent additional cogeneration potential is realized, However,

the evidence

Hydro's load presented

forecast

could be further reduced.

at the hearings does not allow the

Com mission to determine how much additional cogeneration can be expected or is desirable.

3.0

ELECTRICITY EXPORTS

The Commission heard a considerable amount of evidence about export market conditions and electricity export policy in British Columbia. Witnesses for Hydro testified that the utility does not plan to export power but simply to meet the projected domestic load at all times, even if critical water conditions prevail. If water conditions are above the critical run-off level, or if load requirements fall short of forecast levels then an exportable surplus arises. In recent years, Hydro has had, on average, a substantial exportable surplus, which has been sold to the United States. Indeed, high water conditions plus relatively low provincial demand in 1981/1982 allowed Hydro to realize $24-9.3 million of electricity export sales, mainly to the California market (Ex 4-7: 3). In his appearance before the Commission, the Hon. R.H. McClelland, Minister of Energy, Mines and Petroleum Resources, confirmed that "the government policy and Hydro's are concurrent â&#x20AC;˘.â&#x20AC;˘ and that the government policy is that we do not build for firm export in British Columbia ... and it has been the opinion of the B.C. Hydro Board at this time -- that Hydro does not build for firm exports."

(24-: 4-,062).

The

Minister

also indicated

that

the

provincial

government's policy regarding interruptible export is the same as for firm exports (24-: 4-,064-).

271

Nevertheless, surplus electricity exports .have been very important in recent years and have an important bearing on the economic implications of overbuilding (see Chapter VIII, Section 3.2). At the request of the Commission, a Seattle-based consulting firm prepared a report on the market potential for power exports to the United States (Exhibit 13). Two market regions were identified :

the

Pacific

Northwest

(PNW)

and

the

Pacific

Southwest

(California). The consultant concluded that if both British Columbia and the PNW pursue a strategy of self-sufficiency in electricity even during low water years, then it is highly unlikely that Hydro will have either short- or long-term sales opportunities in the PNW: " ... utilities of the Northwest are not going to abandon or defer their own construction program on a hope that British Columbia is going to have surplus power on a day-to-day or month-to-month basis" (11: 1,826). Only if an imbalance between demand and supply occurs -- a planning failure -- might such a market exist. While Hydro suggested such might be the case because of the delays and cancellations of new projects, the consultant for the Commission indicated that, while new supply in the PNW is being deferred, "one of the most important reasons ... is because need is being deferred" (12: 1919). The consultant cautioned that "it's not clear what the combined impact of slowing demand growth and (delayed) construction schedules will be ... " (12: 1912). Export markets are relatively weak now and are expected to remain so until 1988/1989 (111: 18,151-2).

This is due in part to forecast weak demand in the

region: the most recent Bonneville Power Administration forecast projects an increase of only 1.6% per year over the next 20 years. This not only affects direct sales into the PNW, but is also likely to raise the level of competition in the California market.

272

Further complicating the export situation for B.C. Hydro is the effect of fluctuating water conditions in the PNW. Average and high water conditions can increase the PNW annual surplus by over 28,000 GWh and 50,000 GWh respectively (Ex 13: 30). Due to relatively low storage capability in the PNW as opposed to the much greater capability in the B.C. Hydro system, Hydro can adjust its export sales (i.e.: load shape) to periods when the intertie capacity between the PNW and California is not fully utilized (111: 18,153). However, Hydro indicated that the marketing of surpluses will be more complicated and competitive than in the past (111: 18,152). The long-term outlook, in Hydro's view, remains strong. By 1994, California will have an estimated 50,000 GWh of oil or gas-fired generation and will need, in addition, some 30,000 GWh of import or exchange power.

Under such

circumstances, the prospects for more attractive surplus sales or long-term firm contracts of lOyears or more will be ver)ÂŁ good.

Moreover, Hydro is

optimistic that the intertie capacity will be expanded over the long term with the removal of institutional and economic impediments (111: 18,165-172). This expansion will facilitate "potential mutual benefits management on the west coast is concerned" ( lll-18171).

far

as energy

The Com mission concludes that there is and will continue to be a market for surplus power in California, and that with Hydro's load shaping capability, intertie capacit.y should not impose too great a constraint on reasonable volumes of sales. But the value of these sales will depend on trends in world oil and gas prices and on the extent of electricity surpluses in other regions, both of which appear likely to constrain export prices at least through to the late 1980's.

273

4.0

OVERALL ASSESSMENT OF HYDRO'S DEMAND FORECAST

The Com miss:k:m concludes that t.~e growth in demand that Hydro is facing in British Columb:La and the potential demand in the relatively weak for the balance of the decade.

United States will be

As a result of any of the

following factors -lower GPDP growth than Hydro has projected; the effect of rising real

electriciJ:.y

prices; less rapid

shifts into

electric-intensive

processes; more consezvation or alternative energy substftution for electricity; greater realization of self-generation potential- a lower rate of growth than shown in Hydro's September 1982 10-year probable load forecast could very easily result.

The Com mission therefore concludes that Hydro's "probable"

load forecast should be considered as optimistic, and that offsetting export demand for surplus energy at attractive rates is not likely for the balance of the decade.

274

CHAPTER VIII- ELECTRICAL ENERGY SUPPLY

1.0

B.C. HYDRO'S SUPPLY POLICY AND ANALYSIS

Each year after the load forecast is prepared, Hydro develops an electrical system plan indicating the desired sequence and timing of new projects for the fo11owing 10-year period. The system plan is based on a review of the cost, feasibility and earliest in-service date of alternative hydroelectric, thermal and other energy projects. The timing and selection of projects is designed to ensure that the probable load projected in the latest forecast can be met by firm supply at the lowest, long-term cost (27: 4500). Hydro explained that supply has two aspects: the ability to meet the highest demand experienced at any time throughout the year (peak load) and the ability to meet total annual electrical energy requirements. Because Hydro's system consists largely of hydroelectric generating stations with capacity designed to take advantage of fluctuating water flows, new generating ...

facilities are not required to meet forecast peak requirements (27: 4,516). "The need for new power plants over the next decade will therefore be determined by the need for more firm energy [annual capability] rather than the need for additional peak generating capacity" (Ex 25: 8-7). Hydro defines firm energy capability as the sum of "hydroelectric plant output available during critical water conditions ... [plus] the Burrard Thermal Plant operating at about 40 percent annual capacity factor fueled by off-peak valley natural gas1... [plus] other thermal plants [that may become part of Hydro's system] operating at annual capacity factors of 60 to 80 percent, depending on type, size and maturity ... [plus] any firm purchase contract" (27: 4,513-15). When the probable forecast load exceeds the supply from these sources, Hydro's

critÂˇ~rion

indicates a new plant is required.

Off-peak valley gas refers to the supply available during the non-heating season when the transmission facilities are not fully utilized.

275

Hydro estimated that when Revelstoke is fully in service its annual firm energy capability will be 45,700GWh (Ex 103). Based on its September 1981 probable load forecast, Hydro stated 1 that "the optimum timing for another project [after Revelstoke] would be the fall of 1987" (27: 4,512). In the system plan which Hydro proposed at that time (summarized in Ex I 03), the Site C 1 project was scheduled for October 1988 because that was considered to be its earliest feasible in-service date (27: 4512). Hydro testified that Site C was selected over all other projects because it was "considered to be the lowest cost project with a significant energy capability that could be brought on line by 1988. The only major alternative to Peace Site C would be the Hat Creek thermal project" (27: 4,524). Hydro estimated that the total system costs of an expansion sequence that would produce an additional 1,000 megawatts out of Hat Creek instead of Peace Site C would entail a total discounted cash flow approximately one billion dollars greater than the recommended plan, based on a real discount rate of 3% (27: 4,525). (Hydro uses a 3% real discount rate in its system plan evaluations because 3% reflects the estimated real long-term cost of borrowing. In other words, it is the direct real cost of capital to Hydro.) Hydro did not submit a system plan based on its September 1982 load forecast.

During the re-opening of the demand phase at the end of the

hearings, Hydro indicated that the Site C project is still necessary and justified. However, because of the lower rate of growth in its later forecast, Hydro indicated Site C would not be needed until October 1990. As shown in Table 8, a deficit of 1,360 GWh is forecast in 1990/91 if no new sources of supply are made available.

Units Ill and 112 were scheduled for 1988; units 113 through 116 were scheduled for 1989.

276

Despite the later in-service date, Hydro suggested that the granting of the certificate and start-up of construction should not be delayed because, while Site C could be constructed over a six-year period, economies might be realized by extending the construction period (111: 18,190-2). Therefore, Hydro asked that a certificate be issued and construction be allowed to begin in the spring of 1983. TABLE 8 Energy Supply/Demand Balance Integrated System (GWh) September 1982 Probable Load

Firm Supply

Firm Surplus or (Deficit)

1982/83

32,4-00

4-0,020

7,620

1983/8'+

34-,150

4-2,020'

7,870

1984-/85a

36,130

4-5,700

9,570

1985/86

37,875

4-5,700

7,825

1986/87

4-0,100

4-5,700

5,600

1987/88

4-1,920

4-5,700

3,780

1988/89

'+ 3 ,'+'+ 0

4-5,700

2,260

1989/90

4-5,120

4-5,700

580

1990/91

4-7,060

4-5,700

(1,360)

1991/92

4-9,330

1+5,700

(3,630)

Assumes Revelstoke fully on-stream by 198'+/85.

Source: Ex'+ 16, Table E8; Ex 103, Table 2.

277

2.0

THE ISSUES

The principal issues with respect to electrical energy supply relate to when new generating capacity is required and whether Site C is the best source of new supply. 2.1

~ly

Assumptions

To determine when new supply is required, Hydro compared its "probable" load forecast with its estimate of firm supply. Questions were raised about the manner in which firm supply is defined and about the non-firm sources of supply that might be available to Hydro. The basic issue was whether the need for new facilities is exaggerated as a result of overly cautious or narrow assumptions regarding supply. 2.1.1

Definition of Firm Hydroelectricity Supply

Hydro defines firm hydroelectric capability as the amount of electricity it can produce from its hydroelectric plants under critical water conditions. Critical water conditions refer to a sequence of low water run-off years (specifically, those experienced between September 1942 and April 1946) which would reduce the capability of the hydroelectric plants by about 4,000 GWh per year from their capability under average water conditions (28: 4,705; 31: 5,382). This 4,000 G Wh is' approximately three times the 1990/91 deficit for which Hydro states new supply is needed. Hydro indicated

that the large, live storage capability of Williston to

supplement low water conditions is used in its critical water year assumptions (30: 5,24/t ). Hydro is not concerned with a single low water year, but with a sequence of low water years.

With respect to the probability of such an

occurrence, Hydro stated that "over a period of... about 50 years, we've experienced three, four to five year low flow conditions, and so on the basis of experiencing these in the last 50 years .â&#x20AC;˘â&#x20AC;˘ our estimate of the chance of that

278

recurring ... is about 15 percent" (29: 5,060). This probability is not based on a frequency distribution of water conditions, but rather is inferred from historical occurrences. Hydro stated that when looking at a series of years as opposed to one individual year "there is just really no way that we can see that you can accurately, through statistics, represent [the] kind of distribution [that has actually occurred]" (29: 5,059). Hydro plans on the basis of critical water conditions because at some point in the future such conditions will recur. Hydro agreed that only in the last year of a low water sequence do "you finally draft all your storage"; any time before that something more than the firm capability could be produced. However, Hydro stated this could only be done at the risk of a tremendous deficit if that low flow sequence continued. (31: 5,4-07-8). Thus, while one might reach the last year of a critical sequence in only three or four years out of 100, there may be "12 to 15 years out of 100 [when] you can only serve the [firm capability] load ... on a prudent basis" (27: 5,4-10). The Com mission concJJJ.des that the risk of critical water conditions is real and clearly should be taken into account in system planning. Hydro's planning criteria uses critical water conditions to determine when a new project is required.

While this results in surplus generating capability

most years, the Com mission concludes it is a necessary and prudent safeguard against supply shortfalls in low water years. This is specifically endorsed in the province's February 1980 statement on energy policy {Ex46:10). However, as the costs of new supply are very significant, other methods of dealing with critical water years warrant careful consideration.

One such

alternative method, .a planning agreement with Alberta, is discussed below. Whether such alternatives are feasible or economic is presently unclear. They

279

If they are shown to be feasible the need for a new

should be examined.

project could be deferred significantly. THAT THESE

HYDRO

DIRECTED

ALTERNATIVES

TO A

THE

GIVE

MEANS

COM MISSION

PRIORITY OF

RECOMMENDS

INVESTIGATING

MODERATING

ITS

FIRM

HYDROELECTRICITY SUPPLY CRITERIA.

2.1.2

Availability Of Burrard Thermal Plant

In calculating firm supply, Hydro limits the firm energy capability of the Burrard thermal plant to the amount it can produce with off-peak valley gas. This results in a firm load factor of approximately 40%. If Burrard were operated year round at its maximum load factor of 70%, it could produce 5,595 GWh per year, which would provide an additional 2,425 GWh more than

Hydro includes in its estimate of firm supply (Ex 25: 2-9). But Hydro claims that operating Burrard year round would be expensive and problematic. Year-round production would necessitate contracting for a large amount of gas, which the province might not want to dedicate to thermal generation (29: 5,044). Furthermore, Hydro would have to provide Westcoast Transmission Co. Ltd. at least 18 months notice and enter into a 1 take-or-pay contract for the additional gas Burrard would require. This could be a problem because Hydro's NEB export licence stipulates that exports of electrical energy generated at Burrard must realize a price equivalent to the gas export price.

At the time of the hearing this was approximately

60 mills per kWh, "which ..â&#x20AC;˘ would probably freeze us out of the export market" (31: 5,267). Finally, because Burrard has not been used recently as a base load plant, operating at a 70% load factor could be difficult, at least in the first year (32: 5,470-1).

A take-or-pay contract refers to an obligation to pay for the contracted volumes regardless of whether the gas is taken or not.

280

The economics of using Burrard depend on the discount rate (cost of capital) and the value of B.C. natural gas. In cross-examination, Hydro agreed that at an 8% real discount rate and with gas valued at its domestic price, additional electricity supply from Burrard would be less expensive than new supply from Site C (30: 5,212). Hydro pointed out, however, that Burrard would be a more expensive source of supply at a 3% discount rate or with natural gas valued at the export price. Hydro uses a 3% discount rate for its evaluation of direct costs and considers the export price as the appropriate measure of the value of gas from a social point of view (Ex 21: 2-3). The

Com mission recognizes the problems Hydro

Burrard year round.

would have in operating

At the same time, the Com mission is concerned that

ignoring the additional 2,425 G Wh of electricity that Burrard can produce might result in overstating the need for additional electricity supply in British Columbia.

Given the relatively small supply shortfall Hydro now forecasts for

1990/91, greater use of Burrard by itself could defer the need for a new project for about one year. Hydro itself noted the possibility of using Burrard to a greater extent when it discussed possible shortfalls in its December 1981 system plan (Ex 103: 1).

In two important respects, the issues governing the economic attractiveness of greater use of Burrard go beyond Hydro's area of responsibility.

The value of

capital (the discount rate) and the value of natural gas (its opportunity cost) from

a social point of view are

address.

THE

COMMISSION

PROVIDE SPECIFIC FACTORS

WHICH

POLICY

matters that only the

RECOMMENDS THAT DIRECTION

UNDERLY

THE

HYDRO

ECONOMICS

government can GOVERNMENT

THESE

KEY

OPERATING

BURRARD. Only with such direction can the role of Burrard in Hydro's supply planning be properly assessed.

281

2.1.3

Availability of Imports Through the Alberta Intertie

Questions were raised at the hearings about the possibility of acquiring electrical energy from

Alberta

through

the

recently approved

Alberta

(Cranbrook) Intertie. In support of its application for approval of the Intertie, Hydro officials stated that 5,000 GWh of Alberta supply might be available over a four to five year period in the late 1980's. While Hydro officials at the Intertie hearing stated that one advantage of the tie would be to "fill reservoirs during low flows", Hydro does not "consider the tie a credit in firming up our energy supply" (30: 5,183).

Under the now

existing Intertie agreement there is no commitment for firm power sales by any of the parties. The Commission heard evidence on the benefits that could be derived from inter-regional planning agreements (111: 18,164). It is important to determine whether such benefits could be realized from planning agreements with Alberta utilities. The well-known advantages of operating a hydroelectric system, which is constrained by the possibility of low water conditions, in conjunction with a thermal-oriented system, which is constrained by peak demand,

suggests

there

could

substantial

benefits.

With

planning

agreements, the energy supply capability and capacity of the existing facilities in both provinces would increase significantly. The Commission concludes that, while the current AJ.bertaintertie agreement does not provide for firm

power sales or purchases,

the Intertie

could

ultimately be important in providing a benefit that Hydro itself identified, that is, it could be a source of thermal power during years of low water flows. THE

COMMISSION

CONSIDER

AND

RECOMMENDS

PURSUE

THAT

PLANNING

HYDRO

AGREEMENT

DIRECTED WITH

ALBERTA

UTILITIES AS AN ALTERNATIVE METHOD OF DEALING WITH CRITICAL WATER YEARS.

282

2.1.4

Availability of Alcan Power

In cross-examination, Alcan was identified as a potential source of supply. Hydro currently purchases 1,200 GWh per year from Alcan, but the agreement runs out in 1983; consequently, no Alcan purchase is shown in Hydro's estimate of firm supply beyond that date (30: 5,218-9). Hydro is currently negotiating with Alcan for purchases beyond 1983. Hydro agreed that Alcan has no other potential buyer of its surplus power, but it pointed out that Alcan is considering modifying its existing pot lines which would use up its surplus power, and that Alcan appears to be willing to negotiate only on a year-by-year basis from 1983 (30: 5,220). The power under negotiation relates only to surplus from Alcan's existing plant; no assumptions have been made with respect to the proposed Kemano project (30: 5,220). The Com mission concludes that Alcan cannot be considered a firm source of supply at the present tim e.

2.2

Consequences and Costs of Overbuilding vs. Undersupply

When Hydro made its application for Site C in September 29, 1980, it estimated that new supply would be required by the fall of 1986. At the outset of the hearings, based on the September 1981 forecast, Hydro estimated that new supply would be required by the fall of 1987.

At the final stage of the

hearings, Hydro estimated that new supply would be required by the fall of 1990. Figure 4 shows

required

in-service dates for

alternative demand and supply scenarios.

a new project, based on

Given its existing firm supply,

Hydro's September 1982 high, probable and low projections would indicate required in-service dates of 1988, 1990 and 1994, respectively. Were Hydro able to increase its existing supply by 4,000 GWh as a result of a planning

283

agreement with Alberta, greater use of Burrard, extension of its purchase from Alcan, or some combination of those possibilities, its high, probable and low September 1982 projections would indicate required in-service dates of 1990, 1992 and 1998, respectively.

··--·

---.-------------

284

GWh (ooo's)

DEMAND PROBABLE

FIGURE4

DEMAND/SUPPLY BALANCE SUPPLY + 4000 GWh.

50-

DEMAND LOW .

4846441.0 0'1

424038363432-

82/83 83/84

84/85

85/86

86/87 87/88

88/89 89/90 90/91 Year

91/92

92/93 93/94

94/95

95/96

96/97

97/98 98/99

285

Clearly, the timing of the need for a new project has been and remains uncertain. The Com mission concludes that because of this uncertainty, the probabilities, consequences and costs of overbuilding and undersupply must be considered in assr=ssing Hydro's system plans.

Hydro filed a study on overbuilding and undersupply in relation to its September 1981 forecast (Ex 121). The study considered two Site C in-service dates -- 1988 and 1989 -- and two load-growth scenarios (Hydro's 1981 probable and the Ministry of Energy, Mines and Petroleum's 1981 base case). Depending on tile combination of in-service date and load growth, various shortfall (undersupply) and surplus (overbuilding) situations result. Shortfall and surplus management strategies were assumed, and their costs and benefits estimated. The purpose of the study was to determine which in-service date, in light of the uncertainties in load growth and water conditions, could be expected to produce the lowest supply cost (Ex 121: 1-3 to l-It). The study assumed that, in the event of a shortfall, Hydro could increase its supply by 3,000 G Wh per year by increasing its use of Burrard or importing from Alberta. Additionally, with average or above average water conditions, Hydro could draw on over 4-,000 G\Vh of nonfirm hydroelectric capability. When all of the nonfirm sources of supply are exhausted, the supply to existing users would be curtailed. Thus, the consequences of a shortfall depend on its magnitude and water conditions. In the shortfall scenarios described in the study, the supply to existing users would need to be curtailed only under critical but not average or above average water conditions. Under average or above average water conditions the cost of the shortfall entailed only the extraÂˇ costs borne by Hydro of having to import power or use Burrard. Under critical water conditions, the cost would also be borne by customers due to curtailments of supply.

286

The study assumed that, in the event of a surplus, Hydro could export the excess electricity. The amount available for export would depend on water conditions. The cost of the surplus was measured by the real cost of capital incurred by investing earlier than required, less the revenues derived from export sales and costs avoided by not having to burn gas at Burrard. The results of the over and under supply analysis filed by Hydro were shown for different discount rates and assumed export prices. With a 3% discount rate and 30 mill per kWh export price, they indicated that building for the 1988 in-service date (the earlier year) was better, not only if Hydro's requirements forecast was realized, but even if the lower MEMPR growth rate was realized (31: 5,320). The assumed ability to sell surplus power into the export market is an important factor.

Hydro acknowledged that if exports were impossible, '

undersupply would be preferable to oversupply, and Hydro might consequently modify its planning criteria (27: 4-,692-3).

The advantage of overbuilding

compared to undersupply varies directly with the export price (Ex 121: 1-5). For the analysis in Exhibit 121, Hydro recommended 30 mills per kWh as an appropriate export price, based on recent experience. During the hearing's supply phase, Hydro suggested that 30 mills per kWh may be conservative and that higher prices might be realized (31: 5,329-30). But, during the re-opened demand phase, Hydro indicated that over the past six months, export market conditions had deteriorated, and the average price it received was 25 mills per kWh. The discount rate is another critical factor. The study showed that building for 1988 would be preferable at a 3% discount rate, but that building for 1989 would be preferable at any rate over 6% (at the 30 mill per kWh export price) even if Hydro's growth rate were realized (31: 5,321). Thus the question of the appropriate discount rate is very important to optimal timing.

287

Hydro stated that from its customer's point of view a 3% discount rate is appropriate because that is its best estimate of its actual cost of capital. However, Hydro if!dicated that from

a social point of view with the

opportunity cost of capital taken into account, the discount rate should be 8% 1 (30: 5,208-9). With capital-intensive facilities like hydroelectric plants, the effect of a higher discount rate is to increase markedly one's perception of the cost of power.

For example, using a 3% real discount rate Hydro estimated the

marginal cost of Site C at 16.9 mills per kWh; using a 10% discount rate, it calculated the marginal cost at about 40 mills per kWh (31: 5,325-6). Thus, assuming a 30 mill per kWh export price, surpluses can be sold at a profit if the cost of capital is only 3%, but at a loss if the cost of capital is 10%. Hydro has taken the position that while it tries to time projects to accord with load growth, if it is to err, it is better to err on the overbuilding side. Given the ability to export surpluses and Hydro's relatively low borrowing costs, the consequences of overbuilding have been perceived by Hydro to be relatively minor, certainly less significant than the consequences of undersupply. The

Com mission

recognizes

that

undersupply

can

impose

consequences and therefore should be avoided i f possible.

serious

But it also

recognizes that, under current circum stances, overbuilding can entail the significant economic costs to the province associated investment.

with a

mistim ed

Given the softer export market conditions forecast to prevail

throughout the balance of the decade, overbuilding can result in the commitment of a large amount of capital yielding a relatively low rate of return. This return might be sufficient to cover Hydro's borrowing costs (i.e. 3% ), but it would not be sufficient to cover the social opportunity cost of

The issue of discount rates is discussed in detail in Part V of this report. See Chapter XIII, 1.3.

288 100

capit.al (i.e. 8% to 10% ). Overbuilding could also result pressure on dorr. estic customer rates, as discussed

m significant

m the next

upward

chapter. In light

of this, the Com mission concludes that overbuilding should be avoided. Because of the potential for further slippage

demand and the possibility of

access to other existing sources of supply, the Com mission believes that a situation of overbuilding in the early 1990's could arise if the decision to build new

generating capacity is taken too soon.

concludes that

Hydro and the

The Com mission therefore

government should review

the forecast

frequently and publicly, if appropriate, to ensure that construction on a new project does not start before it is required. Specific recommendations on this matter are made in ChapterX, where the Commission presents its position on the issuance of an Energy Project Certificate.

2.3

Alternatives to Site C

The justification of the Site C project depends not only on when a new source of supply is needed, but also on the availability and relative merits of alternatives. Evidence was presented and questions were raised at the hearings about conventional and non-conventional alternatives to Site C. 2.3.1

Conventional Alternatives

Given the required in-service date indicated by its September 1981 forecast, Hydro submitted that it had few alternatives to Site C. The Hat Creek project was the only major project that could be built within the same time period as Site C (27: 4,639). During the supply phase of the hearings Hydro presented Hat Creek as the one real alternative to Site C. By the end of the hearings, however, Hydro announced that Hat Creek was no longer considered an alternative to Site C and had been dropped from the system plan.

289

101

The issue of alternatives is interrelated with timing. While Hydro indicated that Hat Creek was the only major alternative to Site C if the target in-service date were the late 1980's, Murphy Creek/Keenleyside could be considered

alternatives

Stikine/Iskut,

Kootenay

the

target

date

were

October 1990;

and

Diversion and East Kootenay thermal could be

considered if it were 1993 (27: 4,639-44). Hydro provided some evidence on the relative economics of these projects. Because they are at an earlier stage of study than Site C, the data may be less reliable.

Nonetheless, Hydro's

evidence, presented in Table 9, shows that all the major alternatives are less costly than Hat Creek and some are slightly less costly than Site C (Ex 147).

290

102

TABLE 9 Unit Energy Costs of Potential New Power Projects (Cost in mills/kWh at Oct. 1981 prices) Direct Cost With Taxes Discount Rate (Net of Inflation)

Social Cost Without Taxes

10%

Revelstoke

15.1

8.4

15.5

21.2

27.5

Burrard Fuel Cost

25.5

53.6

Peace Site C

20.3

12.7

22.2

29.7

38.0

Hat Creek 2000M W

29.7

27.1

35.0

41.3

48.5

Murphy /Keenley side

24.9

16.6

28.2

37.2

46.8

Stikine/Iskut

19.9

12.4

21.4

28.6

36.7

Liard

19.1

11.9

20.7

27.9

36.0

Kootenay Diversion

20.2

13.7

21.8

27.8

34.1

East Kootenay

27.0

24.4

30.5

35.3

40.6

Nuclear

25.6

23.3

29.7

34.9

40.8

Source: Exl47 Notes: 1.

All costs are average energy costs at October 1981 price levels for the discount rate shown.

Direct cost with taxes includes property taxes and the new water licence fees scheduled for 1984, but deflated to October 1981 prices.

Social cost without taxes does not include property taxes, water licence fees or coal royalties because these are only social transfer payments rather than real social costs.

Burrard fuel price is based on domestic natural gas prices for the direct cost with taxes, and on export prices for the social cost without taxes.

'1 l

291

103

The Com mission notes that, as the need for a new project is deferred, the array of projects Hydro can consider increases.

The position which Hydro

presented on alternatives based on :it:.s September 1981 forecast is no longer relevant.

Given the current target date of October 1990 for a new project, it

would appear that Murphy

Creek may he a feasible alternative to follow

Revelstoke in the system plan. If the target date for a new project is delayed further, other alternatives such as East Kootenay Thermal or development of the Stikine might hecom e feasible, depending on the length of the delay of the in-service requirement.

2.3.2

Nonconventional Alternatives

Concern was expressed by some intervenors that Hydro is not emphasizing sufficiently nonconventional alternatives. In its 1982/83 fiscal year, Hydro indicated it will spend approximately $20 million (25-30% of its generation planning study budget) on nonconventional sources, over three-quarters of which will go to its geothermal program; it will spend $2 million on small hydro and other sources (27: 4,674). Several intervenors argued that in the U.S. Pacific Northwest much greater emphasis is placed on these sources. Hydro countered that the costs of conventional sources in that region are much higher than here. Some intervenors argued that Hydro should have considered an expansion plan incorporating small projects. It was suggested that, with shorter lead times, such a sequence might be more flexible and more attractive than the sequence Hydro considered (27: 4,587-9; 4,612-3). In response Hydro stated that, like other Canadian utilities, it is unwilling to pin hopes on small projects because they are more costly and are not likely to meet the load (27: 4,592). Also, it disagreed that such a sequence would be more flexible and have less impact considering the large number of projects that would be required to replace one project the size of Site C (27 : 4,587 -9; 4,612-3).

292

I j

)

104-

When

intervenor

witnesses

were

examined

their

evidence

nonconventional energy sources (including conservation), they acknowledged that such sources may entail greater costs than Site C. SPEC's witness on energy conservation, for example, agreed that, according to his evidence the 1 cost per annual petajoule saved through retrofitting and solar hot water is roughly $170 miHion as compared to the cost per annual petajoule of $74 miJJion that Hydro calculated for Site C (32: 5,529). Intervenors expressed concern that such comparisons do not take aH of the social costs into account, though they agreed that large scale energy production from any source would give rise to social costs (33: 5,684-). Intervenor witnesses also acknowledged that the potential contribution of nonconventiona1 energy sources might not be realized:

"obviously the actual

amount of energy saved would lie somewhere between zero and that potential" (32: 5,536-7).

However, their basic position is that "those (sources) are

available and they deserve far greater attention than they're getting in British Columbia at the present time" (33: 5,677). Hydro's position on the cost and potential of specific nonconventional energy sources and its program and policies respecting them are summarized below. Wind - Hydro stated that wind generation could be competitive with diesel in isolated areas (27: 4,594-). It also acknowledged that costs could come down with mass production, but with costs currently at some 60 to 80 mills per kWh (based on a 3% discount rate), they are unlikely to come down to the cost of Site C (16 mills per kWh based on a 3% discount rate) (27: 4,689; 4-,817). Solar - Hydro has examined solar projects, such as photovoltaics and the power tower, as alternative sources of utility-supplied power. Cost data are derived primarily from studies in Alberta. While photovoltaics may become less costly, Hydro maintains that it will be uneconomic until well beyond the 1990's (32: 5,4-74-).

(1)

One petajoule is the equivalent of 277.8 GWh.

293

105

Small Hydro - Small hydro is generally defined as less than 15 to 20 MW. In British Columbia most of the identified small hydro sites are in the

5 MW range. Hydro concentrates its search for small hydro sites on Vancouver Island and in diesel districts. Hydro noted that sites located far from the grid and with enough water could be economic (28: 4,819-21). Geothermal - A large part of Hydro's alternative energy program is devoted to its geothermal project at Meager Creek.

Hydro estimates that

geothermal electrical energy costs are about 1.2 times that of Site C (using a 3% discount rate) and it is now trying to prove up the resource to a 55 MW level. Hydro believes that the ultimate potential of Meager Creek might be 1,000 MW, but at present it is unsure of the size of the resource.

Hydro

maintains that it is too early to include geothermal in the system plan (28 : 4, 779-83).

Municipal Waste Generation - Hydro has considered the economics of generating power from municipal waste in the Greater Vancouver Regional District. Its cost data are based on California and Florida projects.

While

acknowledging that rising land fiU costs might improve the economics of this source of power, Hydro estimates that at present it would be about seven times as expensive as Site C (32: 5,446). Hog Fuel - Hydro is reluctant to undertake hog fuel-fired thermal power generation, not only because of its relatively high cost, but also because of the problem of assuring a long-term hog fuel supply. The concern is not that the hog fuel won't be available, but that it might be turned to another use (31: 5,270; 30: 5,117-8).

294

106

With respect to nonconventional energy sources -

wind, solar, small hydro,

geothermal, wood waste and others- the Com mission concludes that, in their present state of development, these alternatives are generally too small and too expensive to have a major impact on supply.

Nonetheless, the Com mission

believes that Hydro should continue its research on these nonconventi.onal sources so it can use them if technological advances significantly improve their relative costs.

The Com mission also believes that the government should review its research and development programs and :its policies regarding nonconventional sources. THE

C 0 M MISSIG N

WHETHER

R E C 0 M MENDS T H A T THE G 0 VE R N MEN T C 0 N SIDER

INSTITUTIONAL

. IMPEDIMENTS

THE

PRIVATE

DEVELOPMENT OF THESE SOURCES MIGHT BE REMOVED OR LESSENED. WhilE :ft may not appear profitablE for Hydro to develop these sources, interest by others might increase with appropriate financial, wheelinl and purchase pricing policies.

2.4

Evaluation Methods

Lowest long term system cost based on engineering economic analysis is the principal criterion which Hydro employs to select new projects. In engineering economic analysis, all of the costs facing Hydro are estimated over the planning period and then discounted at a rate which reflects Hydro's estimated real cost of borrowing.

It is, essentially, a long term private (corporate)

analysis. Hydro stated that it uses this criterion because "that's what we are directed to do by our Board ... it helps them to choose the [most economic] project that will meet the demand" (28: 4,713).

Wheeling refers to the transmission of power from the producer to a third party buyer.

295

107

Some intervenors expressed concern that projects are selected for technical study prior to detailed evaluation of environmental costs. suggested

that

environmental

costs

are

evaluated

The intervenors

only secondarily to

engineering cost (28 : 4,718). Hydro stated that the only costs which enter the engineering evaluations are the estimated mitigation costs which Hydro would have to pay. Impacts outside of those costs are not incorporated into the evaluations (27: 4,679). Concern was also expressed that cumulative environmental and social impacts are not taken into account in the evaluation of a whole sequence of projects. The basic issue underlying these concerns is whether engineering economic analysis as practiced by B.C. Hydro provides a sufficiently broad basis for ranking projects and developing system plans in terms of the general public interest. Engineering economic analysis evaluates projects from the point of view of Hydro and its customers. Social benefit-cost analysis, on the other hand, "analyzes the value of building the project from the provincial perspective ...

extends [the analysis] to the explicit evaluation of

environment effects and. the potential diversion of capital for other uses" (27: 4,503-4).

The issue is really what perspective Hydro should take in

developing its plans---a private or social one. Hydro undertakes social benefit-cost analyses for its licence and certificate applications, but not to determine its own preference for the next best source of supply. "If the social benefit-cost analysis would produce a different result from the engineering economic or corporate financial analysis, Hydro's preferred course of action would remain the same" (31: 5,276). The Com mission conc1lldes that evaluation of projects based on the lowest long-term system cost to B.C. Hydro is likely to yield different results than evaluation of the same projects taking full account of resource losses and other sociE.l as opposed to private (Hydro) costs.

296

108

Hydro's Board of Directors has traditionally interpreted the Corporation's mandate to be to minimize long-term costs to customers.

The Board has

instructed Hydro management to pursue policies to achieve this result. The evidence during the hearing made it clear that the Board's instructions to management

have

not

changed

and

still

encourage,

indeed

require,

management to evaluate projects based on the least cost to the customer. The Com mission concludes that, to avoid a basic inconsistency between the criteria Hydro uses to select and evaluate projects and the social benefit-cost which the government has indicated as appropriate for this review, either Hydro's evaluation policies or the government's criteria must be changed. THE COMMISSION

RECOMMENDS THAT

IMPORTANT

MATTER

AND

ADVISE

THE

GOVERNMENT

HYDRO

THE

RESOLVE POLICY

THIS BE

FOLLOWED FOR FUTURE PLANNING AND FACILITY APPLICATIONS.

2.5

Site C Benefit-Cost Analysis

While Hydro bases its project selection and system plan on its engineering economic criterion, it did undertake a social benefit-cost analysis of the Site C project to determine if it would be justified from a social point of view. The analysis, which is presented in Exhibit 106, entailed a comparison of the estimated full social costs of Hat Creek with the estimated full social costs of Site C. Hat Creek costs were used as the measure of the benefits of the Site C project, on the assumption that if Site C were not built Hat Creek would have to be in order to meet the incremental demand. The difference between the costs of the two projects served as the estimate of the net social benefits of Site C. Issues related to the social benefits and costs of Site C were raised throughout the hearings and were considered by many as a focal point for the whole question of project justification. Hydro argued, based on its analysis, that the

297

109

net benefits of Site C are positive and therefore the project is justified efficient - from a social as weH as its own private point of view. The validity of Hydro's analysis and conclusions, however, were questioned. Specific areas of concern were as follows. Method of Measuring Benefits - In its analysis, Hydro used what is termed in the province's Guidelines for Benefit-Cost Analysis, the â&#x20AC;˘most likely alternativeâ&#x20AC;˘ method of measuring benefits (Ex 122: 23-25). Under this method, the benefits of one project are measured by the costs avoided by not having to build another. The problem with this approach is that while it can be used to determine whether one project is better than another, it does not by itself indicate whether either project is beneficial on any absolute or stand-alone other words, it does not establish

basis~

that society values the project by an

amount which is at least as great as the cost of constructing it.11 (Ex 122: 24). Hydro argued that the existence of demand testifies to the social worth of electricity. Its benefit-cost analysis therefore takes the forecast of future consumption as given and tries to determine 11 the best way of serving that amount of consumption 11 (27: 4,662). A witness for SPEC submitted that, by using an estimate of consumersâ&#x20AC;˘ willingness to pay for additional power, he found that society does not value the output of Site C by as much as its cost (Ex 400). However, this conclusion was based on the assumption that the output of the project would not be required for five to eight years after it was built. If the output were required, his analysis shows that the value of the. output would exceed the costs at discount rates of just under 10%. 1

In Exhibit 400, the net benefits (in millions of dollars) of Site C were estimated at -383, -469, and -520 at discount rates of 6%, 8%, and 10%, respectively. If the output were purchased starting in the year the supply was first available (that is, the demand was correctly estimated), the net benefits (in millions of dollars) would be 493, 120, and -95 at the 6%, 8%, and 10% rates (Ex 400: Tab'le 1).

298

. 110

The provincial Guidelines suggest that the issue of the value of the output "focusses attention on demand estimation and forecasting". This, in effect, is what Hydro's benefit-cost witness and the findings of SPEC's witness indicated. Choice of Alternative - In order to use the alternative cost method of measuring benefits, the best feasible alternatives must be considered. During the supply phase, Hydro defended the use of Hat Creek as the "best alternative" to Site C on the grounds that it was the only major project that could be built in the same general time period as Site C. Hydro also claimed that Hat Creek could be considered representative of thermal alternatives to the Site C hydroelectric alternative, but they presented no evidence to substantiate that claim. At the re-opening of the demand phase at the end of the hearings, Hydro indicated that Hat Creek had been dropped from the system plan and could no longer be considered the "best alternative" to Site C. The only rationale left for using Hat Creek in a comparison was its status as a representative thermal alternative. Hydro did not do a benefit-cost analysis of Site C relative to other projects that might be feasible because of the later in-service requirement it is now forecasting. For example, it did not do one relative to Murphy Creek or to the installation of generating capacity at Keenleyside. Nor did Hydro undertake a benefit-cost analysis of Site C relative to nonstructural alternatives (use of existing sources like Burrard, planning alternatives, purchase of industry generated power, investment in conservation), as prescribed in the provincial guidelines, since it did not consider many of the nonstructural alternatives practical or reliable (31: 5,292).

299

111

Optimal System Plan - The system plan describes the proposed timing and sequence of new projects. In its engineering economic analysis, Hydro compares the total system costs associated with alternative system plans to determine which project should be constructed next. This is more appropriate than comparing individual project costs, since it is not a project in isolation that one must consider, but rather. how different projects fit into and affect the overall system. But for its social benefit-cost analysis, Hydro did not analyze and compare alternative system plans. Two problems arise from this. First, with regard to the sequence of projects, a project with the lowest unit energy costs will not necessarily be the best project to be constructed next in the system plan; this will depend in part on the size of the projects relative to the growth in requirements. Second, with regard to the timing of the project, the in-service date dictated by Hydro's planning criteria will not necessarily be optimal from a social benefit-cost point of view. The provincial Guidelines for Benefit-Cost Analysis indicate that a test of alternative in-service dates should be undertaken to determine the optimal timing of a project from the social point of view.

Hydro did not do this

because it times projects on the basis of its technical planning criteria. Those criteria plus the load forecast dictate specific in-service dates.

If the

technical planning criteria are relaxed, for example, taking into account non-firm sources of supply, then, according to Hydro's over and under supply analysis, "the [timing] results, using fairly conservative assumptions, are unequivocal when looked at from the point of view of Hydro's customers (i.e. at a 3% discount rate) ... it becomes somewhat more in doubt if you take the social cost or provincial point of view" (31: 5,360). Hydro recognized that the two perspectives do not necessarily produce the same results. Whether this is the CC1Se with respect to timing is still unclear (31: 5,360).

300

112

I l

Social Cost Estimate - Hydro's social cost estimate for Site C is based on its engineering estimates of facility construction and operating costs and on estimated resource losses.

Questions were raised about these estimates,

particularly resource losses. Their reliability directly affects the validity of the benefit-cost conclusions. All matters related to the estimated resource losses are discussed in Part Five of this report. The Com mission concludes that Hydro's social benefit-cost analysis suffers some deficiencies.

The Commission does not question, as some did at the

hearings, the benefil;s of new supply on a stand-alone basis.

Assuming it is

timed properly, the Com mission is convinced that the social benefits of new electricity supply exceed its present level of social costs. The Com mission is concerned, however, about the best means of providing new supply. The only measure of Site C's social benefits that Hydro provided- the costs avoided by not having to build Hat Creek -is no lt:Jnger relevant since, by Hydro's own admission, Hat Creek is no longer the best alternative to Site C. Its being a representative thermal alternative is irrelevant as well, for even i f Hat Creek were the best therm a1 option, all that would indicate is that Site c is better than therm a1.;

it;

would not indicate that it is better than other

hydroelectric projects or other power sources. The Com mission concludes that , from a provincial point of view, and with reduced growth rates, the optimal system expansion plan may be different from the one Hydro has proposed in which Site C is the next major project after R evelstoke. To satisfy the Com mission that the proposed Site C project is justified from a rocial benefit-cost point of view, Hydro would have to demonstrate that a system expansion plan with Site C constructed for an October 1990 in-service date is more economic, taking all social benefits and costs into account, than all other timing and sequences of feasible projects, given a reasonable range of

301 113

forecasts of demand.

This has not been done.

The Com mission therefore

concludes that, in effect, a comprehensive benefit-cost evaluation of the system plan is required, taking full account of the social and economic costs of the alternative projects, expected revenues from

surplus sales, and the

consequences and costs of over and under supply. 3.0

SUMMARY AND OVERALL ASSESSMENT OF SUPPLY AND PROJECT JUSTIFICATION

With respect to timing, the Com mission concludes that the government should ensure Hydro does not begin construction prematurely. This suggests to the Com mission that construction of Site C should not be authorized any earlier than required for an October 1990 in-service date.

Given a realistic

construction period of six years, the Com mission concludes that construction need not begin before the spring of 1985 and, therefore, an Energy Project Certificate need not be issued prior to the fall of 1984. Any earlier issuance and start-up of construction would, in the Com mission's view, reduce Hydro's flexibility in responding to further slippage in load growth or change in system plan. The Com mission further concludes that it:. has not been demonstrated that Site C is the best possible project from a provincial point of view.

Different

system expansion plans might be preferable particularly i f the in-service date for the next new project is deferred.

302

l JI

CHAPTER IX 1.0

FINANCIAL IMPACT OF SITE C

HYDRO'S POSITION

Hydro estimated the capital cost of the Site C project to be

$3~2

billion in

nominal (i.e. inflated) dollars (Ex 413), which is approximately equivalent to 1 These estimates are based on $1.5 billion in constant 1981 dollars (Ex 419). i

an October 1989 in-service date. Hydro did not reestimate costs and financial impacts for the 1990 in-service date indicated by its September 1982 load forecast, but it did estimate that each year's delay will increase the capital

costs by $290 million in nominal dollars (105: 17,144 ), most of which would be due to inflation as opposed to real cost increases. 2 Hydro submitted that its record with recent comparable projects demonstrates that it is capable of controlling the costs of Site C. In terms of financial feasibility, Hydro's underwriters indicated that the 10-year financial plan incorporating Site C is achievable: I [the underwriter from Salomon Bros.] am satisfied that B.C. Hydro has the ability to acquire the finances to satisfy such a plan (105: 17 ,209).

114

J I

The nominal estimate refers spent over the course of the calculated by deflating the rate of inflation between 1981 2

to the actual amount of dollars that will be construction period. The real estimate was nominal expenditures by Hydro's estimated and the year of expenditure.

Hydro estimated that the near two-year delay from December 1987 to October 1989 would raise Site C capital costs by $40 million in real (constant dollar) terms, due to a $50 million real increase in corporate overhead and $10 million real decrease in interest during construction (107: 17,392). Changes in real interest rates will further change these estimates.

303

115

Hydro estimated that the Site C cost of service per unit of energy delivered to the grid at Kelly Lake would be 20 mills per kWh on an equivalent uniform basis over the life of the project. 1 The 1992 (first full year of operation) cost of service would be 54 mills per kWh On constant 1981 dollars) and would decline thereafter, as shown in TablelO (Ex413: 1). The effect of Site C costs on the total Hydro system would be to raise rates initially by 3% in the first year and a maximum of 7% in the second year. Over time, this effect would decline and by the year 1997, Hydro estimated that the existence of Site C would reduce average customer rates (Ex 413A). This impact on electrical rates is based on a number of assumptions including inflation rates, interest rates and in-service dates. Hydro submitted that the assumptions

employed

are

justifiable

and

any

changes

resulting

from

reasonable variations in these assumptions would not alter the general magnitude of the impact on customers. 2.0

THE ISSUES

The financial aspects of the Site C project raise two main issues:

(1)

borrowing requirements and the ability of Hydro to finance the project; and (2) the cost of service and rate impacts on Hydro customers.

In other words, the annual costs of service per kWh for Site C over the assumed 70-year life of the project would be equivalent to a constant real charge of 20 mills per kWh at a 3% real discount rate.

304

_,~.,

···~

··-·-'·~--.~,-...,

...._.............

~.-..:.

~c.·

TABLE 10 B.C. HYDRO ESTIMATED COST OF SERVICE -FOR SITE C ELECTRICAL ENERGY DELIVERED TO KELLY LAKE ---------------------1990 Cost of Service ($ millions) (Schedule $ 172.5 $ 1.2)1 Energy Delivered (GWh)

1.247.0

Cost of Service Per Unit of Energy (mills per 138.3 kWh) Cost of Service per Unit of Energy (Constant (1981) Dollar mills per kWh) Equivalent Uniform NonInflated Unit Cost (Constant (1981) Dollar mills per kWh)

1991

1992

. 1993

517.1 $ 568.1 $

1994

1995

1996

1997

1998

554.3 $ 538.9 $ 524.8 $ 511.9 $ 500.4 $ 490.1 $

1999

481.1

4.171.0 4.390.0 4.39_0._Q _A_.390._Q 3.3_90._0_ __A_._2!Z_Q._D_ 3.220.0 _4.390.0 4.390.0

124.0

129.4

126.3

122.8

ll9.5

ll6.6

ll4.0

lll.6

109.6

I-' .I-' 0'1

67.8

.l2.:2.

56.0

l2.,J!

28.5

25.8

19.9

=-===-

First 10 years of operation - amounts are in inflated dollars. Cost of service refers to the cost of power from Peace Site C delivered to the Kelly Lake.Substation but does not include existing transmission facilities cost nor distribution system costs and losses.

305

II7

2. I

Borrowing Requirements and Financing

Hydro does not finance specific projects; its borrowing requirements and financing are based on the capital expenditure for its entire system plan. 1 calls· for total capital expenditures of Hydro's latest financial plan $17.3billion in nominal (i.e. inflated) dollars over the 1982 to 1992 period, of which $13.7 billion will have to be financed by debt. The Site C project will constitute approximately 18% of the total capital expenditures (Ex 412). Hydro's underwriters indicated that this financing requirement could be met. The underwriters agreed that they were not committed to lending or underwriting the sums Hydro projected it will require.

Rather, they were

simply indicating that "under the current set of conditions and the plan as it exists now ••• those resulting borrowing requirements would be feasible" (105i 17,210).

An important factor, which could affect the feasibility and cost of Hydro's borrowing, is the maintenance of Hydro's tripleA credit rating.

It was

estimated that, given the market conditions prevailing at the time of the hearings, a downgrading to double A would result in interest rates increasing in the order of 1/4% to 3/8%.

A further slide in the rating or even the

anticipation of such a prospect could result in a larger increase (105: 17,194). More significantly, the availability of funds would decline ( I 05: 17, 185). A critical factor underlying Hydro's current triple A rating, and perhaps the single most important factor contributing to the feasibility of its financing, is the 100% guarantee of Hydro's debt by the provincial government. The 1.3 interest coverage ratio 2 that Hydro currently attempts to achieve would be inadequate if the government guarantee did not exist.

Based on Hydro's May I 982 Interim Forecast. This plan excludes the Hat Creek project. 2

The interest coverage ratio refers to the amount by which net revenues exceed interest costs. A 1.3 interest coverage ratio means that net revenues (after all costs except for interest cost have been deducted) exceeds interest costs by a factor of 1.3.

306

118

A triple A U.S. utility has coverage in excess of four times. 1.3 without other support is extremely low and probably wouldn't even be a single A [rating] (105 :17247).

Hydro's financial performance also affects its ability to obtain the financing it requires.

A prolonged inability to realize its financial targets due to market

conditions, operating inefficiencies or legislative and regulatory constraints would raise concerns by lenders. "The regulatory climate is a very critical one for utilities and receives a very heavy focus by investors" (105:17212). The financial panel agreed that, in view of the province's 100% guarantee of Hydro's debt, lenders will regard the province to be as much the borrower of these funds as Hydro (105: 17,207). This not only means that Hydro's ability to obtain funding will be influenced by the financial performance of the province, but also that the terms and availability of ... credit for other potential, government-related borrowing will be affected by Hydro's financial situation and performance. A lender has, I believe, certain limits as to how much credit exposure we get in any one name and if B.C. Hydro had to in effect compete with other B.C. names for that limited supply of lender dollars that could be a crowding effect there (105: 17 ,215-216).

The Com mission concl11.des from the evidence submitted at the hearing that the financial plan for Site

is feasible.

Barring any change in the perceived

credit worthiness of Hydro or the province, the funds Hydro requires should be available. depends

However, given Hydro's current financial targets, this financing on

the

government's

100%

guarantee.

The

Commision

further

concludes that because of the 100% guarantee, borrowing by Hydro affects the borrowing capacfty for the province as a whole.

307

119

2.2

Cost of Service and Rate Impact of Site C

Because Hydro's corporate and financial planning are based on the entire system, the financial impact of one particular project is difficult to isolate. Hydro determined the rate impact of Site C by comparing the per unit costs of service for the entire system with Site C to the costs without Site C.

project was substituted for Site C in the 'without' case, although future projects were still assumed to come on stream; instead, per unit costs were calculated by reducing the system sales by the average energy output of Site C (delivered to Kelly Lake). Hydro used this calculation in its estimate that the initial impact of Site C would be to raise rates by 3% in the first year and a maximum of 7% in the second year. Hydro's last filing on rate impacts gave an increase of 5% in 1992 (the first full year of operation) (Ex 441). One problem with this approach is that the impact of Site C on rates is obscured by the impacts of the projects that follow it in the system plan (107: 17,455). A different method of isolating the financial impact of Site C is

to compare the per unit costs of service of the system frozen at the post-Revelstoke level of output with the per unit costs of service of the system

frozen

at post-Site C level of output.

Using this method and

incorporating line losses and estimated distribution costs in order to capture the full impact on the customer, Hydro calculated that Site C would result in rate increases of just under 8% instead of the 5% given by the first method (Ex 441). Regardless of methodology, the evidence shows clearly that Site C will initially cause some increase in customer rates.

Three important factors

affecting the extent of this increase will be the actual capital cost of the project, the real interest rate and the realization of forecast demand.

308

120

With respect to capital costs, Hydro's historical record shows that actual completed costs (in real terms) have ranged from as low as -8.3% to as high as +13.1% of preconstruction estimates (Ex 418). Comparable variation in Site C actual costs could cause the rate impact to be nearly half or double the initial 5% suggested by the projected costs estimate (Ex 4-41).

It is not just the total capital cost that would affect the rate, but also the real interest cost of that capital. Hydro agreed that increases in the real interest rate would significantly increase the rate impact of SiteC (107 :174-76).

should be noted that if inflation rates fall during the term of the loan real interest rates will increase to the extent that borrowed capital is locked in at fixed nominal rates. This is a basis for concern and is one reason why Hydro is moving toward shorter maturities (107: 17,478-9). respect

With

forecast

demand, Hydro

~greed

that

Site C were

underutilized, its impact on rates would increase. At 50% underutilization, and Hydro's projected capital cost of $3.2 billion, the initial effect of Site C would be to increase rates by 12%. At 100% underutilization its effect would be to raise rates by 14.6% (Ex 441). The problem here is comparable to that currently anticipated for Revelstoke.

If a plant is constructed, but the

forecast load does not materialize, the costs of the new plant must be recovered from a smaller volume of sales. Because of the fixed cost nature of hydroelectric facilities, this impact can be quite pronounced. The Com mission, is not completely satisfied that the evidence submitted by Hydro indicates clearly the full incremental rate impact of Site C on Hydro customers.

THE

COMMISSION

RECOMMENDS

THAT

FUTURE

A P PLICA TIO N S H Y DR 0 P R 0 VIDE D A T A 0 N THE R A T E IMP A C T 0 F THE PROPOSED PROJECT, ISOLATED FROM THE IMPACTS OF THE PROJECTS WHICH AND

MAY FOLLOW

DISTRIBUTION

HYDRO, WHEN ON

AND FULLY INCORPORATING COSTS

THE IMPACT

CUSTOMERS.

COMPARING PROJECTS, SHOULD ALSO PROVIDE DATA

THE DIFFERENT PATTERNS OF RATE IMPACTS ASSOCIATED WITH

THE VARIOUS ALTERNATIVES.

SHOW

ALL LINE LOSS

Â·~

309

121

Notwithstanding the foregoing, the Com mission believes that Site C is likely to have a moderate initial impact on customer rates. Only if capital costs or real interest rates are significantly higher than current projections or if the load forecast

does not

materialize (i.e. if the project is constructed

prematurely) will the rate impacts be very pronounced.

310

CHAPTER X

PROJECT JUSTIFICATION: CONCLUSIONS AND RECOMMENDATIONS

1.0

SUMMARY OF POSITION TAKEN BY HYDRO AND INTERVENORS

In its original application, Hydro took the position that: "A new source of [electrical] energy will be required in 1986 or as soon as possible thereafter ..â&#x20AC;˘ Other potential projects are not sufficiently advanced that they would become feasible alternatives to the Peace Site C project for a 1987 in-service date; ... provided appropriate mitigation and compensation measures are implemented the real project impacts can be kept to a minimum and the project can be made environmentally and socially acceptable to the people of British Columbia ... [and finally] ... a benefit-cost analysis carried out in accordance with the Guidelines for Benefit-Cost Analysis ... [serves to demonstrate] that even when all social impacts are taken into account ... the project still makes economic sense. The allocation of resources is economically efficient" (Ex 15:C-4-7).

During the course of the hearings, Hydro submitted updated demand load forecasts, the latest of which was dated September 1982. On this most recent basis, it concluded that a new source of electric energy will not be needed until October 1990. In all other respects, however, Hydro's position on project justification remained the same. As summarized in final argument, Hydro maintained1.

a new source of future power will be required by 1990 ;

Site Cis the best project available to meet this need;

from a technical point of view, the project is feasible and the design is well conceived and thoroughly investigated;

from a financial point of view, the projected costs are reasonable, within the capabilities of Hydro to finance and will result in only a 6% increase in rates; and

122

311

123

from a provincial perspective the. environmental and socio-economic impacts would not be very great and the proposed mitigation and compensation measures will offset impacts which would otherwise result in regional inequities, making the project acceptable to the Province as a whole (112:18,204-6).

In response to those who questioned whether it had proven the need, Hydro maintained that while demand can never be "proven" until it is manifest, its 1990 date is a reasonable planning target.

Regarding the question of net

benefits, Hydro maintained that its benefit-cost analysis was appropriate as one input into the justification issue and- was generally consistent with the provincial guidelines. Of the intervenors who addressed the broad issue of project justification, some supported Hydro's position, others argued against it. The Electrical and Electronic Manufacturers Association of Canada and the Mining Association of British Columbia submitted that the project was justified because of the economic growth potential in the Province.

The

Mining Association specifically referred to the need to allow for the expanding needs of the provincial mining and smelting industry. The B.C. Chamber of Commerce voiced its support for B.C. Hydro's application on the condition that the load forecast is correct. Mr. Nigel Hannaford of Ft. St. John argued that that project is justified because it is environmentally and economically the best supply option. Those who argued that the project was not justified focussed on the questions of timing, benefits and alternatives. The Society Promoting Environmental Conservation (SPEC), in its final argument, concluded that Hydro did not prove that the energy is required or that Site C is the best alternative, nor did it even attempt to "prove that the benefits from Site C outweigh its costs and that it is therefore in the Public Interest" (114:18,570).

312

124

The Peace Valley Environmental Association (PVEA), in its final argument likewise concludedEven if the Commission were to conclude that there was a demand for 900 MW of electrical energy in British Columbia by 1990, which, as [SPEC] has demonstrated cannot be concluded - B.C. Hydro has not provided the Commission with the evidence required under Regulation 388/80 and S.5l of the Act to show that: 1.

Site C provides any benefit;

Site C provides more benefit non-structural alternatives;

Maximum benefits would be obtained by commencing operation of Site C in 1990 (114:18,651-2).

than any of the structural or

Both SPEC and PVEA maintained that under the terms of reference and its obligations under the Utilities Commission Act, the Commission cannot conclude or recommend to the government that the project is justified. Mr. Leo Rutledge and Mr. Randal Hadland, both residents of the Peace Valley, also argued that the project is not justified. Mr. Rutledge maintained that Hydro has seriously underestimated the social values that would be lost as a result of the flooding of the valley. He concluded that "whether to dam or not to dam must, in the final analysis, rest with value judgment, made by those competent to judge values" (115:18,820). Mr. Had land stated that in his view Hydro has not justified the project and the Site C Commission has only two choices with respect to the application: â&#x20AC;˘â&#x20AC;˘â&#x20AC;˘ one, to deny the application on the grounds that Hydro has not proven its case; or two, to delay a judgment until better information is available, which amounts to a denial of the application (116:18,833).

Mr. Hadland also recommended the encouragement of small-scale alternatives.

313

125

During the Vancouver phase, several intervenors, including representatives from the New Democratic Party, and Messrs. Chessor, Charlton and Bartz argued that Hydro's rates should be restructured to encourage conservation and other alternatives to Site C should be explored. Others at the Vancouver phase, including Mr. Dever all and Ms. N itins and Messrs. Powell and Emerson, argued the project is not justified because of its agricultural land impacts. Mr. Maxey argued that Site C must be seen in a bigger development scheme, including flooding of Site E and the McGregor Diversion. Some intervenors, for example, Mr. Black and the Communist Party of Canada argued that Hydro should consider repatriating power under the Columbia River Treaty. Finally, some intervenors, such as Messrs. Wichlinski, McAllister, and Butterworth, simply argued against general adverse effects of development. 2.0

THE COMMISSION'S POSITION ON PROJECT JUSTIFICATION

The proposed Site C project has been subjected to an unprecedentedly thorough examination.

The Commission has carefully weighed the evidence and

arguments put forward by the Applicant and the Intervenors and has arrived at the following position: The Commission accepts Hydro's contention that, if its customers demand more electricity than its system can produce, creation of a new source of supply is in the provincial interest.

Moreover, on the basis of its detailed

review of design, financial and environmental and social impacts as presented in this report, the Commission has not found any overriding impediment which would dictate the abandonment of the Site C project, since many of the adverse impacts can be significantly reduced through mitigative measures or, in the case of resource losses, financial compensation can be made. On the basis of the evidence, however, the Commission is not satisfied that Hydro has demonstrated that a 1983 construction start-up date is justified or that Site C is the only

possibl~

source of supply to follow Revelstoke in the

system plan, or that it is preferable to all other sources.

314

126

Hydro has not shown that Site C is preferable to the Murphy-Keenlyside complex, planning agreements through the Alberta intertie, the East Kootenay thermal project or the Stikine-Iskut complex, or that any of these alternatives or a combination of them cannot be completed in time to meet forecast load requirements.

The Commission concludes that a full comparison of the

alternative system plans feasible in light of the forecast load requirements must be done in order to determine whether Site C is the best project to follow Revelstoke. The Commission emphasizes that alternative system plans, not individual projects must be compared.

Moreover, the comparisons must be

made in a manner consistent with the evaluation criteria government has established to ensure that new energy projects are in the provincial interest. THE

COMMISSION

ISSUING SrrE C

THEREFORE

ENERGY

PROJECT

RECOMMENDS THAT

PROJECT

UNTIL

THE

CERTIFICATE

FOR

FOLLOWING, TWO

CABINET THE

DEFER

PROPOSED

CONDrriONS

ARE

SATISFIED:

THAT

ACCEPTABLE

THAT CONSTRUCTION

LOAD

FORECAST

DEMONSTRATES

OF SITE C MUST BEGIN IMMEDIATELY

IN ORDER TO A VOID SUPPLY DEFICIENCIES; AND

THAT

COMPARISON

CONSTRUCTION, COSTS

WHICH

THE

CAN

THE

ENVIRONMENTAL

TOTAL AND

ALTERNATIVE SYSTEM MEET

THE

ENGINEERING, OTHER

EXPANSION

FORECAST

SOCIAL PLANS

REQUIREMENTS

DEMONSTRATES THAT SITEC IS THE BEST PROJECT TO MEET THE ANTICIPATED SUPPLY DEFICIENCY.

The Com mission has concluded that construction of a new project need not begin any earlier than the spring of 1985. THE COMMISSION RECOMMENDS THAT IN THE FALL OF 1984 CABINET DETERMINE IF THE ABOVE TWO CON DrriONS

ARE

MET.

KEEPING

WrrH

PROVINCIAL

ENERGY

POLICY, THE COM MISSION RECOMMENDS THAT CABINET DIRECT THE B.C. UTILITIES COM MISSION TO HOLD PUBLIC HEARINGS, STRICTLY

315 127

LIMITED TO THE ISSUES OF LOAD GROWTH AND ALTERNATIVE SYSTEM PLANS, TO ASSIST IT IN MAKING THESE DETERMINATIONS. IF, AT THAT TIME,

THE

ABOVE

TWO

RECOMMENDS

THAT

CERTIFICATE,

SUBJECT

CONDITIONS

THE

CABINET

THE

ARE

ISSUE

MET, AN

CONDITIONS

THE

COM MISSION

ENERGY

PROJECT

RECOMMENDED

PART V OF THIS REPORT. IF THE ABOVE TWO CONDITIONS ARE NOT MET,

THE

DEFERRED

APPLICATION OR

FOR

REJECTED,

A AS

CERTIFICATE SHOULD APPROPRIATE

BE FURTHER

LIGHT

THE

INFORMATION AVAILABLE AT THAT TIME.

The Com mission wishes to stress that, if future ~oad forecasts show further slippage

in the need for Site

energy, the issuance of an Energy Project

Certificate and the earlie<;t an.owable commencement date for construction should reflect the later in-service requirements.

The Com mission recognizes that during the period when a decision on Site C is being deferred, Hydro might apply for an Energy Project Certificate for a different project. TAKE

THE COMMISSION RECOMMENDS THAT IF THIS DOES

PLACE, ANY REVIEW

OF THE

APPLICATION

CONFINED TO

PROJECT-SPECIFIC ENGINEERING AND DESIGN, AND ENVIRONMENTAL AND SOCIAL IMPACT ISSUES,

THE MATTER OF PROJECT JUSTIFICATION

SHOULD BE DEALT WITH AT THE SAME TIME AS THE REVIEW OF THE SYSTEM PLAN IN RELATION TO SITE C.

If the Cabinet decides to direct the B.C. Utilities Commission to hold public hearings for the review of load growth and alternatives, the Commission believes that the terms of reference should be clearly restricted to 'ensure an efficient and speedy examination of material. A long and exhaustive hearing is not required. The purpose of the review would simply be to determine . i

whether construction on a new project should begin immediately in order to meet future requirements, and whether or not Site C is the most appropriate alternative to meet the requirements from the provincial point of view.

316

PART FOUR

PROJECT DESIGN

CHAPTER XI- ADEQUACY OF DESIGN AND PUBLIC SAFETY 1.0

INTRODUCTION

The terms of reference for the review of Site C directed the Commission to: review the adequacy and technical feasibility of the project, public works and ancillary undertakings including consideration of design, safety and timetable in the construction and operation phases.

The Commission appointed the consulting engineering firm of Surveyor, Nenninger, and Chenevert Inc. (SNC) to carry out a complete review of the design Hydro presented with its application. Ex 130-1~5.)

(TRe design is found in

This review was covered in a report filed as Ex 15~ and was

available to all the intervenors. Design adequacy and public safety were covered in Phase III of the hearings and are dealt with in this Chapter. 2.0 Hydro

HYDRO'S POSITION testified

that

only sound standard engineering

techniques

were

employed in preparing of the Site C project design. It also pointed out that, while engineering is commonly regarded as a relatively exact science, every aspect of the .design requires expert knowledge and experienced judgement; Hydro considers its staff and consultants to have the required knowledge and judgement.

128

317

129

To avoid human error insofar as is possible, Hydro maintains an internal and external system of checking throughout all phases of a project, from design to the post-construction stage (43: 6,901-5; 46:7,328-44: Ex 213). system of checking is provided by an

The external

independent Advisory Board of

recognized outside experts. Hydro's Chief Engineer explained the precautions taken to ensure an adequate design and public safety (43: 6,901-5; 46: 7,328-44) He assured the Commission that he had no reservations regarding the adequacy of the design. 3.0

THE ISSUES

Intervenors raised the following issues regarding safety and design: stability of the reservoir banks and reservoir management; powerhouse, dam and spillway design; seismic activity; downstream effects; location of transmission lines. Concerns were also expressed about the proposed construction schedule and management, and the operation of the completed project. 3.1

Reservoir Bank Stability and Reservoir Management

Reservoir bank stability was raised as a major concern by a number of intervenors.

Hydro and its consultants were cross-examined extensively by

intervenors and Commission counsel on the types of bank stability problems: the cause, location, timing, and extent of future slides, and the implications of seismic activity.

318

130

Hydro testified that it used a conservative approach in selecting a safeline around the reservoir within which no dwellings or commercial or public buildings would be allowed (34: 5,849). A program was proposed to monitor all indications of incipient slides, sloughing and subsidence. Treatment for low banks, where sloughing can occur, wlll be different from that for high banks where major slides are a long-term threat. Hydro indicated that sloughing would increase in the low bank areas as a result of reservoir fllling but that within five years stabilization would occur due to beaching (34: 5,851). Hydro testified that major high bank slides would not be affected by reservoir filling. Sites with major slide potential are situated just east of the 1973 Attachie slide, at Tea Creek, and on the Moberly River. Damage will occur in the area immediately surrounding a major slide as a result of physical impact and large waves (Ex 131: Sec. 4.4; Ex 138-9). A further major source of concern was the danger of over-topping the dam by slide-induced waves. Hydro testified that the Attachie area is much too far away for slides there to affect the dam, and that further simulations on a hydraulic model of the possible effects from Tea Creek and Moberly River slides have demonstrated conclusively that the size and velocity of movements at those locations cannot imperil the dam (42: 6,799-802; Ex 138; Ex 139). The potential for changes in the groundwater regime to reactivate slides was also raised as an issue.

Hydro's studies indicated that any changes in the

groundwater would not have this effect. Hydro did indicate that the overburden in the eastern part of Hudson's Hope, designated as Zone A in Hydro documents, was of particular concern (see Figure 5).

It testified

that this problem

will be specially treated by

construction of a berm prior to flooding in order to provide a stable shoreline and control sloughing. This solution will render unnecessary the relocation of any residences in the area.

"",..,.,1·;-.~!.7.1;'r.··,.-..··:, ,~,~··,;..:-:,;""'">l·'r--~.~':ITc;"·;·;'i';O,.-o:;:;~.-z.-to.;.:z..o.:-.:r...;;::-:~--(

319 510

Grtml

Approximoltt bttdroclt / overlntrdtM boundary~

- ? - - -?___]__

Bttdrock (sillsfontl)

Rttstuvoir lttvttl

£!46/8

--------~--

Approx. Rntttr lt!vttl (.....1/00m'lsec) £1453m

........ --?:

'"t.ow

---?--?HUDSON

RiveR

-------

~)<.

~;~·

\~o \~~

200

fF?

HOPE

,.,.

Scale' A

430

SECTION A-A Scola: B Sco/tl:Jl 200

400

600

BOO M•trtts

.......

....... Scale .. 8 10

GrovtJI

Silt /Cloy with lroctt sand ~Assumed

wolttr tobftt

!2"Pipe, as requirttd to drain major springs.

Coarse gro

withrttservoir

~A~-;e;;;;,,;;:.o-;;; ,;N,- -

(

JRip·ro; /

Reservo/r level

_ _ _ _ ____!_I 461.8_m_ _

(norma/max)

k/Oom"A.c; \1 \ Coarstt groVtf/ fill.

Silt/ Cloy wilh trace sand

FIGURE 5

HUDSON'S HOPE BANK STABILITY 410

SECTION B-B (Proposed Scale· B

berm protection zone A }

Mtttrtts

320

132

Hydro was questioned regarding possible downstream effects from any leakage (following reservoir filling) past the dam through the right bank via basal gravels in old river bed(s) within the preglacial or interglacial valley. Hydro indicated that because of the nearly flat gradient (low head of water and long path) it was likely that any leakage flow, if it did in fact occur, would be so low that the chance of any significant movement of material would be non-existent. Finally, Hydro testified that siltation of the Site C reservoir would not be significant as far as the main stem of the Peace River is concerned because the Williston impoundment forms a very effective long-term trap for sediment which will pass virtually no material. Furthermore, sedimentation from the Moberly and Halfway Rivers and other streams is relatively small and will not affect the reservoir's operation significantly for several hundred years (4-0: 6,527-4-3). The Com mission acknowledges the very real concerns of the intervenors with respect to reservoir bank stability and operating conditions in the reservoir. The Com mission concllldes, however, that the monftoring to be conducted by the Comptroller of Water Rights pursuant to the proposed

Water License,

together with Hydro's plans for further and ongoing studies during construction and early operation, will protect the public.

view

of Hydro's assessment of likely significant effects from

leakage

through the old river bed being essentially non-existent, and also recognizing Hydro's intentions regarding monftoring (and presumably to take any necessary remedial measures), the Com mission is satisfied that a reasonable approach to the matter has been taken and that public safety will. be adequately protected.

WITH

RESPECT

MANAGEMENT

TO THE

RESERVOIR COMMISSION

BANK

STABILITY

RECOMMENDS

AND THAT

CONDITIONS OF A WATER LICENCE, BE DIRECTED TO:

RESERVOIR HYDRO,

321

133

MAKE INSPECTIONS AS FREQUENTLY AS APPROPRIATE, BUT AT LEAST ONCE A YEAR, OF THE KNOWN POTENTIAL SLIDE AREAS AROUND THE RESERVOIR TO PROVIDE WARNING OF IMPENDING SLIDES;

MAKE AN ANNUAL GENERAL INSPECTION PERIMETER TO IDENTIFY NEW SLIDE AREAS;

REPORT ON THE ANNUAL INSPECTION TO THE WATER COMPTROLLER IN SUCH A MANNER AS TO GIVE WARNING OF ANY POTENTIAL SLIDES-THIS WILL HAVE THE ADDED ADVANTAGE OF ESTABLISHING A WELL-DEFINED SET OF PRE-CO NSTR UCTIO N C 0 N DITIO N S;

MAINTAIN, DURING THE PERIOD OF FLOODING, AN INTENSIVE M 0 NIT 0 RI N G P R 0 G R A M A R 0 U N D THE PERIMETER 0F THE RESERVOIR,INCLUDING THE BANKS AT HUDSON'S HOPE;

MONITOR, THEREAFTER, THE STABILITY OF THE BANKS IN SUCH A MANNER AS TO PROTECT THE PUBLIC.

THE

RESERVOIR

THE COM MISSION FURTHER RECOMMENDS THAT HYDRO BE DIRECTED TO DIFFERENTIATE BETWEEN TRULY DANGEROUS AREAS AND THOSE AREAS THAT CAN BE USED WITH SAFETY, BY THE POSTING OF SPECIFIC WARNINGS

PROHIBITIONS

USE

ALONG

THE

SHORELINE.

Chapter XIX contains further comments on this subject. 3.2

Powerhouse, Dam and Spillway Design

Hydro provided extensive evidence on the foundation design for Site C which it indicated will require great care. Hydro testified that problems of weakening and softening of bedrock would be solved by sealing the bedrock faces in foundation areas as soon as they are exposed (34-: 5793).

The· Water 1 Comptroller's consultants expressed concern about the effects of rebound in the deeper excavations, and the need for flexibility in the penstock

Prior to excavation, the material is under compression; after excavation, the compressive forces are released, the material expands, and fissuring and fracturing can occur.· This is referred to as a rebound.

322 13~

encasement between the powerhouse and the anchor block above. Hydro had parallel concerns and described its proposals to cope with the problem. The Commission's consultants pointed out the critical nature of the spillway and stilling basin design. Hydro indicated that it intended to do extensive model testing before finalizing the design (36: 6,090-1}. Hydro testified that dam failure would be highly unlikely but that, if it should occur, it would be gradual because of the nature of the design and materials. This would allow warning downstream to avert loss of life, although some property damage would be inevitable. The Com mission concludes that Hydro is aware of, and fully competent to deal with, the conditions that must be met to achieve an adequate design for the dam and spillway for the Site C project, and that Hydro will take the steps necessary to do so. The Com mission further concurs with Hydro's system of internal checks, and in particular, with the appointment of an independent external Advisory Board to review the design, construction and post-construction phases of the project.

3.3

Earthquakes

The possibility of earthquakes or other seismic activity, which might affect the Site C project was raised and the consequences examined. The possibility of seismic action arising from filling the reservoir was included. Hydro presented evidence indicating that earthquakes are rare in the Great Plains region. The largest recorded earthquake near Site C was 115 km away in the Rocky Mountains and had a magnitude of 3.7 on the Richter Scale (3~:

5,820). Hydro pointed out that filling the much larger Lake Williston did

not induce seismicity and that none is expected from Site C. Hydro testified

323

135

that no record exists anywhere in the world of an earthquake retriggering a previous slide and that an earthquake--induced liquefaction slide is impossible in

the

overburden

soils

Site C

because

the

material

has

been

. over-consolidated by natural geologic processes (42: 6,829-33). The Com mission

concludes, on the evidence presented, that significant

earthquake or other seismic activity is very unlikely and is being handled adequately in Hydro's design considerations for Site C.

3.4

Downstream Effects

Several intervenors expressed concerns about the effect of changing water flows and water quality changes, particularly temperature.

Hydro testified

that because Site C is a run-of-the-river plant with no significant storage, the same minimum water releases as are presently required will be maintained (37: 6,173). With respect to downstream effects, insofar as adequacy of design and public safety are concerned, the Com mission concludes that no new problems arise from Site C. The Com mission considers water flow and quality changes to be operational impacts rather than matters of design and they are dealt with in Chapters XIV and XV. I

The Com mission's recommendations regarding conditions for a Water Licence These are described in Chapter XIX and detailed in Appendix 9. recommendations re-establish the operating limits as measured at the Taylor gauge and make provision for negotiating improvements in fluctuations of flows.

324

136

3.5

Transmission

Intervenors expressed concerns about the location of the 500 kV transmission lines connecting Site C to the integrated system at Peace Canyon generating station,

and about

the additional 500 kV

line connecting the Williston

substation to Kelly Lake. Hydro testified that the line from Site C to Peace Canyon would replace the existing 138 kV line and will require little extra clearing. The line from Williston to Kelly Lake, required to reinforce the Peace River transmission system, would run parallel to the existing lines, and would, therefore, cause minimum environmental impact. Hydro testified that the new lines would improve system stability and reliability as well as reduce transmission system losses (Ex 134: 2). The Com mission concludes that the additional transmission lines are essential to the project. The Com mission has commented in Chapter XIV on the Jack of information respecting the impacts of their construction and has made specific recommendations concerning rectifying these deficiencies.

The Com mission

concllldes that, if the measures suggested in Chapter XIV are undertaken, the adverse impact of the transmission lines can be

mb.imized and, where '' '

unavoidable, compensated for.

3.6

Project Schedule, Project Management and Cost Estimate

Hydro indicated that the Site C project could be built in six years, including time for tendering (Ex 15, Fig. B-II-1}.

However, in the re-opened Demand

Phase, in November 1982, Hydro stated that it would prefer to start construction in 1983 to meet an in-service date of 1990. The Applicant agreed, however, that adequate.

with some qualification as to cost, a 1984 start would be

Hydro's

original

application

envisaged

commencement

construction in 1982, with an in-service date of October 1987, using six construction seasons.

325

137

The

Com mission

attaches

great

importance

the

construction

commencement date because of the uncertainties of load forecasting and the effect of these on the timing of the project (see Chapter X). The Com mission concludes that, for an in-service date of October 1990, an Energy Project Certificate should not be issued before the fall of 1984, and then only if a 1990 in-service date is supported at that time by an acceptable load forecast and comparis:m with alternative system plans. This would permit construction to start in 1985.

Hydro gave evidence that it is in the process of modifying its project management

system.

The

Commission's

consultant

remarked

the

importance of having experience in such matters and suggested that Hydro obtain outside advice before implementing a reorganization (Ex 154-: 53). The Com mission concludes that Hydro is thoroughly experienced in managing the design and construction of hydroelectric projects and will be able to carry Site C forward to a tim ely conclusion.

Evidence regarding capital cost estimates was brief. estimate filed with the Commission is set out in Table 11.

The most current

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138

TABLE 11 Peace Site C Project Generating Facilities Estimate of Construction Costs ($ millions)

At October 1980 Price Levels as Filed on July 20, 1981

October 1981 Price Levels

Direct Construction Costs 13.4 46.9 19.5 1.8 18.2 45.9 56.0 7.1 73.5 45.9 90.4 73.8

14.3 52.5 21.8 2.0 20.4 51.4 62.7 8.0 82.3 51.4 101.2 82.8

90.4 69.7 96.9 26.2

101.2 78.1 108.5 29.4

775.6

868.0

90.9

101.8

77.7 0.7 8.5

85.0 0.8 9.5

TOTAL INDIRECT CONSTRUCTION COST

177.8

197.1

TOTAL CONSTRUCTION COST5

953.4

1065.1

Land and Rights Flowage! Site Access Site Clearing Cofferdams Left Bank Stabilization Diversion Tunnels Low Level Out let Earthfill Dam Forebay Channel and Gravity Walls Spillway Power Intakes and Penstocks Powerhouse and Switchgear Building Civil Mechanical Electrical 14. Construction Services

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

TOTAL DIRECT CONSTRUCTION COST Indirect Construction Costs 15. Contingencies2 16. Engineering, Investigations and Supervision 3 17. Hearing Expenses 18. Construction Insurance and Bonds4

327 139

Notes to Table

Includes costs of reservoir clearing and the relocation of Highway 29 and existing utilities located within the reservoir.

Contingencies:

7.5 percent of all equipment costs. 10 percent of other direct construction costs. Allowance included for environmental and other social mitigation and compensation costs associated with the project. 3.

Engineering includes expenditures to date.

Construction Insurance and Bonds: 1 percent of Total Direct Construction Cost plus Engineering Contingencies.

Excluding Overheads.

Inflation,

Interest

during

Construction

and

Corporate

328

140

The

Commission's consultants indicated

that

they

had

some concerns

respecting the cost estimation procedures employed by Hydro.

They did,

however, indicate substantial agreement with the total construction cost figure within a 10% margin of error (Ex 154 :Sec.8.4). The Com mission notes that, in the past, actual dam construction costs have

differed from the engineering estimates. although

the

compensation/mitigation

The

Com mission concludes that,

allowance

in the cost estimate is

inadequate, the error is not large enough to significantly affect the economics of the project.

THE

COMMISSION

CABINET

NEVERTHELESS

DETERMINES

JUSTIFICATION

WHETHER

RECOMMENDS

HYDRO

PRECONDITIONS IDENTIFIED IN

SHOULD BE REQUIRED TO SUBMIT A FOLLOWING

HAS

PRESENT

DAY

THAT,

MET

THE

BEFORE PROJECT

CHAPTER X,

HYDRO

COST ESTIMATE DEVELOPED BY

BUDGET

ESTIMATE

PRACTICE

AND

DETAILED ENOUGH TO IDENTIFY COST ITEMS MORE PRECISELY THAN THE EVIDENCE FILED IN THE HEARINGS.

4.0

ASSESSMENT OF THE ADEQUACY OF DESIGN AND PROTECTION OF PUBLIC SAFETY

The Com mission conclJldes that Hydro's design for Site C is sound and reflects concern

for

public

safety.

further

concludes

that

the

capital

cost

estimating procedure is basically sound for this stage of development.

With respect to the schedule, the Com mission concludes that the project can be constructed over a six year period.

THE COMMISSION RECOMMENDS THAT THE COMPTROLLER OF WATER RIGHTS BE

DIRECTED

APPENDIX 9)

AND

TO ISSUE MONITOR

WATER

THE

LICENCE (AS SHOWN IN

DESIGN,

CONSTRUCTION

AND

OPERATION OF SITE C TO ENSURE THE RESERVOIR IS OPERATED IN THE BEST POSSIBLE MANNER.

329 329

330

PART FIVE

IMPACTS

CHAPTER XII INTRODUCTION TO PROJECT IMPACT ASSESSMENT . . 1.0

TERMS OF REFERENCE

With respect to environmental, land use, social and economic impacts, the terms of reference directed the Commission â&#x20AC;˘â&#x20AC;˘. to review the nature and extent of potential impacts by the project on the physical, biological, social and economic environments, and consider proposals to mitigate negative impacts and maximize benefits from positive impacts, and proposals to compensate for, or offset, unavoidable negative impacts. Particular consideration shall be given to short and long-term impacts, related mitigation and compensation proposals, and means for their implementation, regarding: (a)

local climate, including changes in humidity and air quality;

(b)

hydrology, including water quantity and quality, effects on downstream users and rights of prior licensees under the Water Act;

(c)

terrain resources, including mineral, hydrocarbon and aggregate resources, and land stability;

(d)

agriculture, including existing and potential agricultural land and industry;

(e)

outdoor recreation, including existing and potential recreational opportunities and scenic amenities;

(f)

forestry, including existing and potential merchantable timber, and reservoir preparation and debris control;

(g)

wildlife, including existing and potential habitats and populations, and hunting, viewing, trapping and guiding activities;

(h)

fisheries, including existing and potential habitats and populations, and fishing activities;

(i)

heritage sites, including known resources and areas of heritage potential; 141

331

142

(j)

present and future land alienation, including displacement of residents, land owners and resource users, and access alterations;

(k)

regiOnal and provincial labour markets, including magnitude, composition, timing, origin and training of the project's manpower requirements, and matters related to the work environment;

(1)

community and regional settlement and land use, including housing and building markets, rural land use, and local government corporate status;

(m)

community and regional social services;

(n)

community social structure, functioning and stability; and

(o)

regional and local economies.

These impact issues can be grouped into two classes: 1.

The impacts the project will have on the Peace River Valley bio-physical environment and, consequently, on the future exploitation of, and benefits derivable from, the natural resources in the area.

The social and economic impacts the project will have on the local communities -- urban, rural and native -- as a direct result of the project's construction and operation and as an indirect result of its natural resource impacts.

Evidence on these impacts and on the measures that can and should be taken to mitigate or compensate for them was submitted and examined in Phase IV of the formal hearings and in the general Vancouver sessions. In addition, a considerable amount of information on these matters was presented in the community hearings held in the region and in special hearings held on Indian reserves located near the project.

332

143

2.0

ORGANIZATION OF ENVIRONMENTAL AND SOCIO-ECONOMIC IMPACT REVIEW

This part of the report presents the evidence and the Commission's conclusions and recommendations regarding the project's impacts. Chapter XIII presents key

principles

compensation.

governing

general

resource

valuation,

mitigation

and

These principles had to be clarified before the Commission

could analyse the project's specific impacts. Chapter XIV contains the review of the land use and environmental impacts. Chapter XV contains the review of the regional economic and social impacts.

Chapter XVI develops in detail

proposals for a monitoring program. Finally, Chapter XVIT contains a summary of the Commission's conclusions on all these matters.

333 333

334

CHAPTER XIII PRINCIPLES FOR RESOURCE VALUATION, MITIGATION AND COMPENSATION

Formal resource valuation and guidelines for compensation and mitigation of environmental

and

socio-economic

impacts

are

relatively

new

the

evaluation of major energy projects in British Columbia, and consequently the principles that should apply are not well established. Before proceeding to the analysis of the project's environmental and socio-economic impacts, the Commission wishes to set out the evaluation principles it has adopted. 1.0

Resource Valuation

Hydro and intervenors presented evidence on the value of the natural resources in the area, both with and without the project.

Their findings

provided a measure of the project's resource impacts and, in some instances, served as a basis for developing and evaluating mitigation and compensation proposals. Some intervenors argued that the project's resource impacts cannot be measured quantitatively and that the significance of environmental impacts cannot be reduced to dollar terms. One intervenor, in final argument, stated that "to use a highly capricious variable such as the dollar to measure the real, constant and eternal (115: 18,819).

Such

values of the Peace Valley cannot make sense"

measurement could be

misleading because

the

uncertainty regarding future values and because the value of the Peace Valley as a whole might be significantly greater than the sum of the values of its parts. Clearly,

environmental

impacts cannot

always be

measured

purely

quantitative economic terms; some impacts can only be evaluated on a qua1itati ve basis. Thus, the Commission has taken qualitative considerations

144

335

145

into account in evaluating impacts.

Nevertheless, quantitative resource

evaluations are an important component when trying to measure the social costs of a project that affects or 'uses' natural resources.

And they are

equally important in providing a rational basis for mitigation and compensation decisions. So the Commission has assigned quantitative values to resources insofar as possible. For quantitative resource valuation to be useful, the forecasts of the demand and utilization variables, which establish the worth of each resource to society, must be as well founded and as accurate as possible. In addition, the procedures and principles used in the calculations must be consistently applied. The objective of resource valuation is to determine what a resource, in its best or most efficient use, could contribute to society, either in the production of goods, such as hydroelectric energy or agricultural or forest products, or as a final consumer good itself, such as a recreational resource. Economic rent and consumer surplus are accepted and appropriate measures for evaluating resources. 1 Problems arise, however, in their application. Three key issues arose at the hearings:

Should resources be valued on the basis of what they could be worth given their maximum potential or what they would be worth given their most likely future use?

For those resources that serve as an input to production, a measure of their contribution to society is the economic rent they provide. Economic rent refers to the value of the production made possible by the resource, less the costs of all of the inputs to production other than the resource itself. For those resources that constitute final consumer goods, a measure of their contribution to society is the consumer surplus they provide. Consumer surplus refers to the value that individuals attach to a particular good, service or opportunity less the amount they actually pay for it.

336

146

For those resources where loss estimates are based on values attached by users (eg. recreational opportunities), should user values be based on their willingness to pay for continued access to the resources or their willingneÂˇss to be compensated for giving up access to the resource?

What discount rate should be used for determining the present value (i.e. the value or significance today) of future resource losses?

1.1

'Maximum' vs. 'Realistic' Resource Use Valuation

Hydro submitted that resource values should be estimated on the basis of what they would be worth in the absence of the project (51: 8,177 -8).

Others,

including B.C. Government panels, argued that resource values should be calculated on the basis of maximum utilization, particularly in the context of long-term or irreversible impacts, since onc;e a resource is

lost, the

opportunity to take full advantage of its potential is also lost. They argued that it is the maximum potential that measures a resource's true value to society even if the full potential would likely never be realized. Some intervenors were concerned about the unknown potential of the resources that could be lost as a result of Site C. They argued that an option value (that is, provision for future changes in technology or resource availability or other factors that may enhance the value of the resource) should also be taken into account in resource valuation. The Com mission conc111.des that quantitative resource valuation should not be based on unknown possible future changes in resource use but rather on predictable potential uses. In accordance with the Province's Guidelines for Benefit-Cost Analysis, the Com mission concludes that an option value cannot

be incorporated into the quantitative valuation of the natural resources lost or adversely affected by Site C, but it; can be identified and assessed on a qualitative basis as appropriate.

337 147

The Corr. mission concludes that resource valuation should be based on the best estimate of what a resource would contribute to society in its most efficient, practical use. Care should be taken to ensure that the valuation is neither biased

upward by

unrealistic

utilization

scenarios,

nor biased

downwards by assumptions which imply that the most efficient, practical use would not be realized. Therefore, in Chapter XIV, the Com mission has valued resources on the basis of what it believes the resources would be worth in the

absence of the project if err.ployed in their most efficient, practical use.

1.2

Willingness to Pay vs. Willingness to be Compensated

In developing estimates of the value of various recreational opportunities in the area, Hydro relied on survey estimates of the maximum price that individuals said they would be willing to pay to be able to participate in the activity. The estimated price was taken to be the value of the resource in recreational use. The alternative approach, estimating what individuals would have to be compensated to forego the opportunity to participate in the activity, is more appropriate if one assumes that the recreational users have a right to continued access to the resource. B.C. Government witnesses argued that the willingness-to-be-compensated approach should be used by the Commission, and they estimated this would result in a doubling of the resource value as compared to that given by the willingness-to-pay approach (101: 16,573). Hydro recognized that this approach would result in higher values. In trying to resolve this issue, the Commission referred to the government's Guidelines for Benefit-Cost Analysis and to the Guidelines for Environmental and Social Impact Mitigation/Compensation.

The Benefit-Cost Guidelines

suggest that the willingness-to-be-compensated approach to resource valuation should be used in the context of resource loss (Ex 122: 37). The argument

338

148

seems to be that the loss suffered by existing users in giving up access to a particular resource is measured by the price at which they have to be compensated in order to remain no worse off, and that this price should be reflected in the cost of the project. The Mitigation/Compensation Guidelines (Ex 229), on the other hand, suggest that the willingness-to-pay approach is more appropriate.

They imply that

resources should be allocated and valued on the basis of the use in which they would be worth the most.

The measure of value in this context is what

alternative users would be willing to pay the province for access to the resource, not the amount one type of user would have to compensate another to forego use of the resource. The Com mission concludes that the willingness-to-pay approach is based on the premise that the rights to the resource lJelong to the province.

The

willingness-to-be compensated approach is based on the premise that one class of users have special rights to the resource.

The Com mission therefore

concludes that unless prior rights have been established through contractual or treaty arrangements, the willingness-to-pay approach for valuing public or crown-owned resources is appropriate. The issue is how much the resources are worth to the province as a whole, not how much they are worth to one

class of users. In the resource valuations that follow, the willingness-to-pay approach is used except in the case of impacts on native Indian rights under treaty.

1.3

Discount Rate: Social Opportunity Cost vs. Time Preference

Through the application of a discount rate, future values are reduced at a compounded annual rate to make them comparable to present values. The higher the discount rate employed, the less significant future effects will be relative to present effects.

339

149

The Com missian concludes that for purposes of valuation of resource loss, it is the social rate of discount, not a private rate, which is relevant. In the context of Hydro's capital expenditures this means applying the social 1

opportunity cost of capital in the evaluations â&#x20AC;˘

The question arises as to whether a discount rate based on the social opportunity cost of capital is appropriate for measuring future resource losses.

Hydro estimated that, in the context of its investments, the social

opportunity cost of capital is 8% net of inflation. The effect of this relatively high discount rate is to place a low weight on future values.

While the

Commission concluded that discounting on the basis of the relatively high social opportunity cost is appropriate for evaluating capital investment, it may not be appropriate for evaluating resource loss. Discounting at a rate based on the social opportunity cost of capital is appropriate for capital investment because it reflects the rate of return at which dollars today can be invested. It is because fewer dollars are needed today to accumulate to and therefore be equivalent to a given amount of dollars in the future that one discounts future values. Various witnesses before the Commission argued that for purposes of resource valuation, the social opportunity cost of capital is inappropriate and that a social time preference rate, or some similar principle, should be used instead. Social time preference refers to the relative weight that society places on the availability of goods or resources today and in the/ future.

It is usually

measured by the rate at which individuals will save (i.e. a measure of the trade-off between present and future consumption). Because it is lower than the rate based on the social opportunity cost of capital, it attaches greater present weight to future resource values or losses.

As stated by one

government witness:

For a discussion of the implications of the social opportunity cost of capital on Hydro's investment planning, see Chapter VIII, pp. 98-100).

340

150

when it comes to resource losses that don't involve capital expenditures such as loss of fish and wildlife, we've discussed before intrinsic rather than financial values, then some theories say that the more appropriate discount rate is the social time preference rate, which indicates the preference that,--well, that the present and future generations may place on that resource. And so there's a body of theory that says that the appropriate rate that should be applied in the context of the result of the loss of environmental resources, should be the social time preference rate (103: 16, 962).

Some intervenors argued that future values should not be discounted at all. They suggested that society should be just as vigilant in protecting future resources as it is in protecting present resources. This implies that the social time preference rate is equal to zero. Government witnesses testified that the province's current guideline for discounting in benefit-cost analyses is under: review and that a hybrid procedure incorporating elements of the social opportunity cost of capital and social time preference is being considered. Under this procedure all benefits and costs would be discounted at the lower time preference rate, but those relating to investment would be adjusted to reflect the social opportunity cost of capital. 1 The effect is to give greater weight to future resource losses or other consumption opportunities, including power benefits, while ensuring that the full investment potential of capital expenditures is taken into account.

More specifically there would be "an adjustment to the costs of a public sector investment to reflect the extent to which it displaces private sector investment" (Ex 277 : 17).

341

151

The Com mission recognizes the practical importance of the discount rate with respect to resource valuation, and that the rate ought to reflect the weight society attaches to the future availability of natural resources. The Com mission accepts Hydro's evidence (30: 5,208-9) that the real social opportunity cost of capital in the context of Hydro's investment is 8%. However, the Com mission is not satisfied that the social opportunity cost of capital rate by itself appropriately reflects the value that should be placed on future resource losses. The Com mission concludes that, for evaluating resources that will be affected or lost as a result of Site C, appropriate weight must be given to future resource

values.

The

Com mission

therefore

concludes that the hybrid

procedure should be used for resource evaluation. The hybrid procedure requires selecting the social time preference discount rate. The Com mission believes that society values present consumption more than an equivalent amount of future consumption and therefore concludes that the social time preferences rate does not equal zero. For purposes of applying the hybrid procedure, the Com mission has used a real, social time preference rate of 3% because this reflects the long-term rate at which individuals will save. 1 The Com mission recognizes that the existing provincial government guidelines call for a discount rate based on the social opportunity cost of capital. The Com mission, therefore, has also calculated resource losses using this 8% rate in case the Government concludes from its current review that the existing guidelines should stay in force.

While considerable evidence was presented on the social opportunity cost of capital, little specific evidence was presented on an appropriate social rate of time preference. One witness indicated it is anywhere between 2% and 10% (25:4286). The Commission has selected the rate of 3% because it is generally considered to be a good measure of the long term real rate of interest on relatively risk-free bonds. As such it is a measure of what society as a whole has indicated it is willing to trade off (forego) present for future consumption.

...

342

152

2.0

Mitigation and Compensation

The terms of reference require the Commission to consider and assess proposals for the mitigation and compensation of adverse environmental and social impacts of the project. Mitigation is defined in the Province's Environmental and Social Impact Compensation/Mitigation Guidelines as "measures taken in the planning, construction or operation of a project with the specific objective of avoiding or reducing adverse environmental or social impacts".

Compensation is

defined as "payments (in cash or in kind) which are made by the developers (or the party responsible for the impacts) with the objective of redressing or offsetting the losses which occur despite or in lieu of mitigation efforts" (Ex 229: 4). ' The Guidelines specify the principles that should be used in determining

appropriate levels of mitigation and compensation.

Mitigation, which is

essentially an investment in protecting the natural or social environment from adverse impacts, should be undertaken where the benefits of the measure (the value of the resources saved or the reduction in social costs) exceed the mitigation costs. In other words, mitigation should be undertaken where it is efficient to do so. _,

Compensation, which is essentially the price that must be paid for adversely affecting the natural or social environment, should be equal or equivalent to the value of the resources lost or to the cost of the social impact incurred. Its purpose, clearly stated in the Guidelines, is to ensure that environmental losses and social costs are fully incorporated into the costs of development. There was no disagreement at the hearings about the principles and purpose of mitigation.

There

was

disagreement,

however,

about

compensation.

Intervenors raised questions on the validity, purpose and the scope of compensation measures.

343

153

2.1

Validity and Purpose of Compensation

Many intervenors took the position that financial compensation cannot adequately offset resource losses because environmental impacts cannot be reduced to economic terms. Lost land, for example, cannot be replaced by dollars. Hydro took the position that compensation can offset resource losses and that it should be paid, but only where a regional interest has been affected. In its view, the purpose of compensation is to ensure that regional residents do not suffer a net loss as a result of the project. Hydro did not accept the position that compensation should be paid for resource losses of provincial, but not regional significance, purely for economic efficiency purposes. Payments for impacts of a provincial nature, it argued, are captured by water rentals. The Com missiDn believes that compensation is an important aspect of project approvals.

The Com mission recognizes that intrinsic environmental values

cannot be quantified; nevertheless, resource losses can and should be evaluated and compensated for to ensure that they are properly recognized and taken into account by project developers. compensation, the compensation

With respect to Hydro's position on

Com mission accepts the view to

offset negative impacts in

that one

function

the region.

Thus,

of it

acknowledges and accepts the recommendation in the provincial Guidelines that compensation funds should, where appropriate, be directed to programs in the region to reduce those losses. However, the Com mission does not accept Hydro's view that this is its only functiDn. The guidelines clearly indicate that the provincial government wants compensation to serve as an efficient control and payment for any resource loss

or incremental social cost.

determine

appropriate

levels

compensation for the resource losses and social costs resulting from Site the Com missiDn has followed the principle stated in the Guidelines, namely,

344

154-

that the magnftude of the payment should equal or be equivalent to the magnitude of the loss.

Whether the loss is of a purely regional or broader

provincial nature is irrelevant; the key point is that the full amount of the loss should be compensated for. The Com mission concludes that water rentals are not an appropriate measure of, or substitute for, compensation.

Their function must be seen as one of

more general taxation, much like royalties on other energy products, and not as payment for the resources that the project itself consumes.

2.2

Scope of Compensation

A number of intervenors made submissions regarding the need to monitor and compensate for private impacts, including damage to property and livestock . ...

The Com missiDn

concludes that ft. is important to distinguish between

matters of private and public concern.

Private issues are those involving

individuals who feel that the project has affected his or her personal property or rights. Public issues are thdse in which Crown resources, or communities as

whale, are affected by the project.

The Com mission concludes that

compensatiDn in relatiDn to private issues is a matter for private negotiation or litigation; ft. is not a matter to be dealt with under the conditions of the

certificate. Civil remedies exist for private impacts. The resource and socio-economic impact compensation and monftoring issues that the Com mission has addressed in the following chapters do not relate to private issues but rather to those of a public nature. The Com mission will make no recom mendatiDn regarding the appropriate level of compensation to be paid to individuals for private losses. For those public impacts where it is impossible to establish losses prior to construction, resolution through a m onftoring program will be recommended.

The structure and jurisdiction of

this monftoring program are discussed in Chapter X VI.

345 345

346

CHAPTER XIV LAND USE AND ENVIRONMENTAL IMPACTS 1.0

INTRODUCTION

The Site C project will have impacts on the land and aquatic environment in the Peace River Valley, thereby affecting present and potential resource activity in the area.

Agriculture, tourism, recreation, wildlife, fisheries,

water, heritage and terrain resources will all be affected to varying degrees. Table 12 summarizes Hydro's estimates of the direct impacts of the project on land as estimated by Hydro. In total, almost 6000 hectares (ha) of land will be directly affected by flooding, construction and transmission line clearing between the dam site, 7 km southwest of Fort St. John, and the existing Site One dam near Hudson's Hope. Flooding will result in the loss of 4600 ha of land -- 3560 ha of river banks and terraces and 1040 ha of islands. Construction of the dam and highway relocation work will affect 422 ha of land. Clearing

for the Site One - Site C - Fort St. John transmission line will affect 960 ha of land. TABLE 12 Direct Land Impacts of Site C Project (hectares) Reservoir Flooding - Terraces and River Banks - Islands

3560

1040 4600

Construction - Dam - Highway 29 and access roads

280 142 422

Transmission Line Clearing (Site One-Site-C-Fort St. John)

960

960 5982

Total

Source: Ex.206:22-3 155

347

156

In addition to these direct impacts, the project will affect the 840 ha of land immediately adjacent to the reservoir between the full supply level (FSL) and the safeline. Also, surrounding lands may be affected by reservoir-induced changes in the microclimate and by changes in land use patterns arising from the project as a whole. Outside the immediate area, clearing for the proposed transmission line between Williston and Kelly Lake will affect 1150 ha of land (Ex 242). With respect to the aquatic environment, the project will affect the habitat and water quality characteristics of over 100 kilometers of the Peace River and its tributaries (with a surface area of approximately 3,400 ha).

Water

quality downstream of the dam site might also be affected in terms of changes in temperature, turbidity and other characteristics. This chapter presents the evidence and the Commission's conclusions on the nature, extent and significance of the project's land use and environmental impacts.

Information developed on resource values is used to assess the

significance and magnitude of the resource losses.

In accordance with the

terms of reference, the Commission has assessed the opportunities and measures proposed for mitigation and compensation. 2.0

IMPACTS ON CLIMATE AND AGRICULTURE

2.1

Hydro's Position

Hydro's climate consultant indicated that the project would have some small impacts on air temperature and wind speed in the immediate vicinity of the reservoir and on fog and frost occurrence. The consultant indicated that: air temperature would be affected less than 1Â° C for the daily maximum and 0.5Â° C for the daily minimum and daily means;

348

157

the temperature impacts would become negligible beyond 600 meters from the reservoir (Exhibit 383B); wind speed would increase by about 10% over and near the reservoir; fog density would increase at nights from late summer to early winter; the number of days with fog might increase one or two days each month, with effects extending to all remaining terraces in the Valley; frost risk could increase in early spring and late fall in localized areas, but in fall increased fog might offset this effect; rainfall and snowfall would not be affected.

Regarding effects of the climatic changes on agriculture, Hydro's consultant 1 estimated that the number of growing degree days might be reduced by 4-8-80 (51: 8,223-5). Currently, the Canada Land Inventory data indicate that the Peace Valley has 1,310 to 1,504- growing degree . days (50: 8,0 13). . Hydro's agricultural consultant concluded that any reduction of less than 100 growing degree days would be insignificant for crops typically grown in the Site C area but that existing data is too imprecise to determine the impact on other crops (51: 8,209). Crop drying conditions would deteriorate slightly due to changes in fog density and occurrence (Ex 383B). However, Hydro's consultants concluded that these effects would not be significant (4-9: 7 ,953). Hydro's consultants agreed that higher humidity and wind and lower mean temperatures could adversely affect bee activity, and consequently, clover and alfalfa production (50: 8,105-6).

They also agreed that increased windchill

could result in additional cost to the producer for animal feed and shelter.

Growing degree days refer to an accumulated measure of the extent to which the average daily temperature exceeds a preset standard, in this case 5Â° C.

349

158

Hydro did not propose compensation measures for climatic impacts since it regards such impacts as negligible. However, Hydro agreed that compensation for any such impacts would be less costly than monitoring to determine Âˇ whether they in fact occur.

It also agreed in principle that crop drying

facilities might be an appropriate compensation measure (51: 8,311-3). The principal impacts on agriculture would result from the loss of land due to flooding and construction. Hydro estimated that: 262ft ha of land with agricultural significance! would be flooded, of which 16'+2 ha are suitable for vegetable cultivation, 333 ha for vegetables or alfalfa, 192 ha for alfalfa or grain and the remaining '+57 ha for pasture lands (110: 17,9 58-60); 2/tO ha of land with agricultural significance would be disturbed by the construction, of which ItO ha would be permanently alienated (110: 17 ,916-57);

80 ha of agricultural land would be affected by the relocation of Highway 29 (Ex 136 and Ex 137); 730 ha of agricultural land would be affected by the transmission line right-of-way from Site One to Fort St. John (Ex 19/t).

In addition, some secondary impacts around the reservoir would result from sloughing and erosion as well as from parcels being broken up by the reservoir or safeline. The sloughing impacts are expected to be small ('+7: 753ft-ItO). The breaking up

(fractioning) of parcels could affect over 2/tO ha of

agriculturally significant land, but is amenable to mitigation (Ex 195). Hydro indicated that the class 1-3 agricultural land that would be permanently lost as a result of Site C represents 18% of the class 1-3 lands of the Peace Valley, 0.6%

the Peace-Liard

Region,

and

0.2%

the

province

(Ex 195: Table S-1).

Hydro's agricultural consultant determined agricultural significance on the basis of soil class and parcel size for alluvial soils and on the basis of Canada Land Inventory maps for non-alluvial soils.

350 159

Hydro's consultants calculated that a medium-sized processing plant would need 2,200 ha of land; and the fresh vegetable market, given the most optimistic assumptions, would require 84-0 ha of land by 1996 (Ex 195). Hydro concluded that agricultural land remaining after Site C would be more than sufficient to meet the needs of both the vegetable processing plant and a fresh vegetable market (Ex 196). For purposes of the Site C benefit-cost analysis, Hydro's consultants estimated the economic value of the agricultural land that would be lost as a result of the project due to flooding, highway relocation, construction, and broken parcels. They also calculated a net return, or economic rent, on the basis of the assumed mix of crops that would be grown on the land, their costs of production and their selling prices.

The present value of all future rents

foregone as a result of the project provided the measure of the economic value of the land.

Hydro's consultant stated that, for this calculation, he chose crops that are either already being grown in the area or are highly suitable for the valley's soil and climate (4-7: 7,565). They included cabbage, cucumbers, potatoes, sweet corn, lettuce, turnips, silage corn, alfalfa, grain and pasture. He used these crops in three scenarios of future vegetable market demand. The first scenario assumed only local sales of vegetables, as is now the case, and 4-0 ha in vegetable production. The second scenario assumed expanded sales to the Peace River Region, Prince George, Fort McMurray and the northeast coal area and 80 ha in vegetable production.

The third scenario

contained no market constraint and assumed vegetable production in all suitable soils (over 2,000 ha) (4-4-: 7,123-4-). Because of transportation and other constraints, Hydro's consultant considered the second scenario to be the most realistic. On this basis, Hydro estimated that the value of the agricultural lands lost due to the project would be

351

160

$52.3 million at a 3% discount rate, $19.9 million at a 6% discount rate and

$8.2 million at a 10% discount (Ex 106, medium value). Hydro's consultants made a number of recommendations for mitigating the project's impacts on the regional agricultural resource.

With respect to

transmission line development, they recommended that new towers be placed close to existing rights-of-way, and on cultivated land, that they be placed in step with existing towers; construction activities be minimized during growing and harvesting seasons; and programs be maintained for seeding pasture grasses

and

controlling

weeds

rights-of-way

(Ex 194: 35-6).

was

recommended that highway segments made unusable by the relocation should be removed (45: 7 ,220-2). Hydro also suggested that broken parcels should be amalgamated wherever physically possible (Ex 48: 17-9). With respect to the suggestion that topsoil be removed, Hydro stated that, with the exception of a few areas, the cost would be too high to justify it (51: 8,305). Hydro indicated that all land temporarily affected by construction will be reclaimed and returned to its original use. The reclamation plan will be reviewed by various agencies including the Agricultural Land Commission (45:7,215-18).

Hydro recognized the importance of land use planning to

ensure the best use of agricultural land in the Peace Valley not required for the project. It agreed to fund any incremental project-induced cost of land use planning. With respect to compensation for lost agricultural land, Hydro is prepared to pay the market price for all private lands required for the project. But it is not prepared to pay compensation for undeveloped Crown lands; it argued that the market value for such lands is close to zero after costs for development are deducted (Ex 209). Hydro calculated that from a theoretical social point of view, the agricultural resource loss on Crown land would amount to $2.4 million, using an 8% discount rate (Ex 254). However, Hydro maintained that compensation of that amount is not warranted, since the loss is not of direct

regional

significance.

Hydro

did

not

compensation for strictly economic efficiency purposes.

the

principle

352

161

2.2

The Issues

2.2.1

Physical Impact Issues

Climate Both the Ministry of Environment and the Ministry of Agriculture and Food agreed with results of the climatic impact study done by Hydro's consultant (89: 14,479). The major area of controversy was not the impact of the project on climate, but rather the effect of the climatic impacts on agriculture, the dominant issue being the effect of the expected increase in fog on crop drying. Many intervenors expressed skepticism about Hydro's conclusion that the impacts on crop drying will be negligible. They argued that fog and increased humidity will cause longer drying time and may cause crop deterioration or even crop loss.

If crops do deteriorate, prices will decrease, resulting _in

economic loss (Ex 307, Ex 289L). Other climatic impact issues were raised.

The Ministry of Environment

pointed out that a decrease of 50 to 100 growing degree days would definitely lower

the

affected

(89: 14,479-80).

agricultural

land

from

Class 1 climate

Class 2

And the Peace Valley Environmental Association presented

evidence indicating that decreased temperature can affect yield and ripening time of many crops (95: 15,598-9). Some of the intervenors argued that increased wind will increase the cost of farm operations due to the need for additional food and shelter for domestic animals (75: 11,067). Evidence was also given that increased wind can reduce yields of many crops (95: 15,599-600). The Ministry of Agriculture and Food stated that there is no widely accepted method of determining and quantifying these climatic effects on agricultural production (Ex 215: 4).

353

162

The Com mission concludes that, while

the impacts of the project on climate

and the consequent effects on agriculture are uncertain, they are likely to be relatively

small

and

limited

extent.

Nevertheless,

the

Com mission

recognizes that they could be significant to some farmers in the Valley. COMMISSION

RECOMMENDS

THAT

THE

MINISTRY

THE

AGRICULTURE

AND FOOD GIVE THESE CONCERNS, PARTICULARLY THOSE RELATED TO CROP DRYING, HIGH PRIORITY WHEN DEVELOPING AGRICULTURAL COMPENSATION

PROGRAMS

FOR

THE

REGION.

THE

COM MISSION

RECOMMENDS THAT NO CLIMATE-RELATED CONDITIONS BE IMPOSED 0 N HYDRO OR BE REFERRED TO MONITORING.

Agricultural Land In estimating how much land affected by the project is of agricultural significance, Hydro's consultant excluded alluvial soils of class 4-7 and small land parcels (parcels of less than 10 ha on the north shore and parcels of less than 20 ha on the south shore, island and tributaries). In addition, he used unimproved capability ratings. Each of these assumptions was questioned at the hearings. Some intervenors, including the Ministry, pointed out that given the Class 1 climate, Class 4, 5 and even 6 lands are valuable and should not have been excluded from the estimate of the agricultural resource impact (86: 13,914-22). Some intervenors criticized Hydro's use of unimproved capability ratings. They. noted that improved ratings will affect not only the evaluation of productivity, but also the range of crops that can be grown (98: 16,136). But Hydro's consultants argued that very few acres would be improved by drainage and less than 80 ha would be improved by irrigation (48: 7 ,724-5).

354

163

The Ministry of Agriculture and Food considered Hydro's parcel size criteria to be reasonable. However, several other intervenors argued that due to the high productivity of the land, small parcels are significant for intensive cultivation (98: 16,119-20) and that viable market gardens near Taylor are only between 4.8 ha and 7.2 ha in size (79: 12,662-4). The adequacy of soils mapping and data interpretation were questioned, and the conclusions regarding soil quality drawn from the consultants' 1:12,000 mapping of alluvials were considered inadequately supported (96: 15,713-4). The Com mission believes that the assumptions

ana

criteria employed by

Hydro's consultants may understate somewhat the full potential of the agricultural resource in the area affected by SiteC, since some Class4 to 6 soils might be of agricultural significance.

Nevertheless, the Com mission

concludes that such exclusions are relatively small

ana

that thE 2960 ha of

potential agricultural land that Hydro's consultants identified provides a reasonable basis for estimating the agricultural resource loss.

The Ministry of Agriculture and Food agreed with Hydro that sufficient land would remain in the area after Site C to support a viable vegetable processing industry.

But it pointed out there would be extra costs as a result of the

project.

The alluvial soils downstream from Site C have poorer access to

transportation and are not as well serviced. Also parcels of land tend to be small and thus less amenable to mechanized development (86: 14,035-154). Intervenors argued that the flood reserve and the absence of large blocks of land downstream from Site C would make agricultural development difficult and that the loss of four major alluvial flats in the Site C area would effectively preclude a vegetable industry (77: 12,309-13).

355

164

Many intervenors held that lifting of the .flood reserve downstream of Site C was essential to protect and enhance the remaining agricultural and related processing industry potential in the region. If the flood reserve is to remain, they recommended that the cancellation clause be substantially extended. Hydro indicated it is in favour of lowering the flood reserve to the 419.1 m level, which is the maximum height required for Site E if Site C is built. But it opposed complete removal of the flood reserve below Site C until it has the opportunity to make further representations to Cabinet on the value of the Site E project for the production of power (40: 6,447-8). Some intervenors also argued that, after Site C, pressure on agricultural land for non-agricultural purposes would be intense and likely result in further losses (95: 15,591). The Com mission concludes that the Site C project will not in itself preclude the devel.opm ent of a vegetable processing industry in conjunction

with the

development

might

the region, but in

maintenance of the flood reserve below Site C, such well be

precluded.

THE

COM MISSION

THEREFORE

RECOMMENDS THAT THE FLOOD RESERVE BELOW SITE C BE REMOVED BY CABINET SINCE, WITHOUT SUCH A

MEASURE THE POSSIBILITY OF

FURTHER

LOSS IN

AGRICULTURAL

RESOURCE

THE

REGION

WOULD

REMAIN AND CONTINUE TO INHIBIT AGRICULTURAL AND RELATED PROCESSING DEVELOPMENT.

2.2.2

Agricultural Valuation Issues

Many intervenors expressed dissatisfaction with the assumptions Hydro used in estimating the value of the agricultural resource loss. It was pointed out that Highway 29, much of which is already developed, provides access to the Site C alluvial soils, and that the potential markets for vegetables grown in the area could expand substantially beyond what Hydro assumed in its "most likely" scenario (77: 12,309-22; 79: 12,663-98). In addition the consultant's choice of crop mix was considered limited (95: 15,602).

356

i! '

165

Intervenors also

argued

that, because of the flood reserve, long-term

investment in agricultural development has been severely inhibited (79: 12,64-0; 85: 13,969) and that since Hydro's evaluation was based in part on current patterns of development, its estimates understate the full potential value of the resource. While acknowledging that the flood reserve could have affected agricultural growth to some extent, Hydro argued that the main impediment was not the flood reserve but rather problems of access, and wildlife and. grazing reserves (4-7: 7,651-5). The Ministry of Agriculture and Food presented the only alternative estimates of the value of the agricultural resource loss.

Whereas Hydro's estimates

ranged from $8 million to $52 million, depending on the discount rate, the Ministry's estimates ranged from $17.5 million to $94-.5 million, using a similar range of discount rates.

The Ministry calculated that for just the Crown

agricultural land lost to flooding,

the value of the resource loss would

range, depending on the discount rate,

from $5.6 million to $38.5 million;

Hydro estimated the loss on Crown land would range from $1.5 million to $3.8 million (Ex 254-).

Neither the Ministry nor Hydro estimated the loss on

Crown land from construction, highway relocation and broken parcels. Hydro's and the Ministry's resource loss estimates differ because of the different assumptions they each adopted with respect to the key factors which underlie the value of the land. These factors are (1) the percentage of land

allocated to the high-valued vegetable production as opposed to other crops;

i!.

(2) the net annual return on the different types of agricultural production; and

Both the Ministry's and Hydro's low estimates are based on a 10% discount rate. Hydro's high estimate is based on a 3% rate, whereas the Ministry's is based on a hybrid procedure, which gives an effective rate of between 4-% and 5%. Had the Ministry used a 3% rate, its high estimate would have been greater than $94-.5 million.

(3) the rate of increase in crop prices and net economic return over time.

For its calculations, the Ministry assumed slightly over 1,000 ha of Crown land would be lost due to flooding (Ex 215A). The Ministry subsequently indicated that the loss of Crown land would amount to approximately 800 ha (113 : 18,394-).

357 166

The Ministry

assumed a

greater amount of vegetable production than

Hydro---4-00 ha on the total land base, and 133 ha to 200 ha on the Crown land, compared to Hydro's 80 ha on the total land base, none of which would be on Crown land. The Ministry assumed higher net returns of $3,337.5 and $262.5 per ha for vegetables and other crops, respectively, compared to Hydro's $1,089 per ha and $154- per ha, respectively. The Ministry's net return figures, it should be noted, do not incorporate capital costs, which were deducted separately. Nor do they include a 12.5% risk factor by which Hydro had reduced the net return. These differences, plus other adjustments that the Ministry considered necessary to capture social as opposed to private benefits and costs partly explain the differences between the Ministry's net return estimates and Hydro's. Both the Ministry and Hydro assumed that crop prices would increase at 1% per year, which would result in the net economic return increasing at a rate of 2.5% per year. But for its calculation of losses on Crown land, Hydro assumed

the net economic return would increase at only 1% per year. The

Com mission

recognizes

that it

difficult

determine

how

the

agricultural land in the area affected by Site C might develop in the absence of the project and what it would be worth.

Nevertheless, the Com mission

concludes that :fts worth must be estimated so it can be taken into account in project evaluation and compensation.

The Com mission concludes that in evaluating the agricultural land that would be lost as a result of Site C, the following assumptions are appropriate:

- that 2,960 ha of agricultural land would be lost and of this total 400 ha would go to vegetable production yielding a net average annual return of ~3,337.50 per ha , and the remaining 2,560 would go to other crop production yielding a net average annual return of ~262 .50 per ha;

358

167

- that BOO ha of Crown agricultural J.a.nd would be lost as a result of flooding, of which 133 ha would go to vegetable production and the remaining 664 ha would go to other crops, .with the same net average returns as for the total land base; - that the net average annual return would increase in real terms at a rate of 1% per year; - that capital and clearing costs, as estimated and described in the Ministry's submission, must be deducted in calcula.ting the net value of the J.a.nd.

On the basis of these assumptions, the Com mission calculates a total agricultural resource loss of ~59.8 million using the hybrid procedure discussed in Chapter

xm,

and ~24.0 million using an 8% discount rate.

The loss on

Crown land alone due to flooding would be ~18.6 million and ~7.4 million, using 1 the hybrid procedure and 8% discount rate respectively. The Commission cannot determine how much Crown agricultural J.a.nd would be lost due to other impacts since no data on their magnitude was presented at the hearings. While these figures appear rela.tively high, they are by no

means the

maximum â&#x20AC;˘ Not all of the a griculturalland loss is taken into account (at least with respect to Crown J.a.nds) and the assumed potential vegetable production is far less than its maximum potential. Also the real escalation is less than the rate both Hydro and the Ministry indicated was possible.

The estimates

reflect, in the Com mission's view, a measure of loss that takes the practical,

efficient potential of the resource into account.

In this report resource losses are calculated on the assumption of a 1985 issuance of an Energy Project Certificate. Losses are discounted back to that year, but are reported in 1981 dollars. If the issuance of an Energy Project Certificate is deferred beyond that date, the loss estimates would have to be recalculated to take into account real changes in resource values.

359

168

These loss estimates do not take into account transmission line effects. The Com mission concludes that as long as rights-of-way are not taken out of production and appropriate

mitigation

measures are taken, their overall

impacts should be minimal.

Many intervenors argued that the value of agricultural land cannot be measured solely in terms of the land's potential development. Some argued that the true value of that land may only become apparent in the future when food shortages are imminent, and that this potential future "option" value has not been appropriately considered and taken into account. Some intervenors stated that agricultural lands are shrinking due to urban development, erosion and deterioration of soils, and that foreign imports of food are not secure sources of food supply (79: 12,575-80; 95: 15,568-79). The Ministry's view is that it is difficult to estimate how the loss of Site C will affect future food supply. It was suggested that problems of food supply for B.C. probably will not occur until after the year 2000 (86: 13,955). Others, including Hydro and the local MLA, argued that there will be more than enough land left after Site C to provide for food needs as well as a viable vegetable industry (Ex 164). The uniqueness of the land in Site C for agricultural production was discussed at length. It was pointed out that the alluvial soils are ideal for vegetable production and that the SiteC valley is warmer, has a longer growing season, less wind, more productive soils and access to water year-round. The class 1 climate enhances all soils, including the lower capability land (79: 12,625-80; 98: 16,123-4-). The Ministry testified that the valley soils would not require liming for the next 30 years, and that the high productivity and microclimate of the lands are unique in northern B.C. and should be taken into account in the valuation (84: 13,942-7; 89: 14,464-77).

360

169

The Con: mission concludes that the unique qualities of the land affected by Site C cannot be meaningfully quantified in any theoretical calculation of its special value.

Nevertheless, the Com mission, in its valuation above, did give

credit to very significant development potential. Com mission

recognizes

that land

can

Moreover,

never be replaced,

while

the

agricultural

productivity on other lands can be increased. The Com mission concludes that compensation

programs

designed

improve

and intensify

agricultural

production on the remaining lands are important and should be undertaken to try to ensure that appropriate levels of food production are attained in the province.

2.2.3

Mitigation and Compensation Issues

Hydro recommended a number of mitigation measures to minimize the adverse agricultural resource impacts, but with respect to the major issue of compensation for lost agricultural land, it argued that none should be paid. Hydro argued that payment of market value was fair compensation for the privately held lands and that the regional loss on Crown lands would be zero because of the cost of development. The theoretical net social loss to the province, Hydro argued, did not warrant compensation. The Ministry of Agriculture and Food disagreed. The Ministry argued that in accordance with the province's Mitigation and Compensation Guidelines,Âˇ full compensation for the value of lost Crown agricultural land should be made. The Ministry did not argue for compensation of the social loss on privately held lands. Many intervenors questioned Hydro's position that there should be no compensation for Crown lands. They also argued that the market value is an inadequate measure of the value of privately-held agricultural land.

361

170

The Ministry presented a set of options on how compensation funds could be used to enhance the productivity of the lands remaining in the region after Site C to offset the loss of high capability lands. The options included: regional agriculture research and demonstration projects at a cost of $2.5 million; expansion and improvement of the agricultural land base at a cost of $2.6 million; assistance to farmers to purchase lime supplies at a cost of $7.9 million; assistance to farmers to purchase grain drying systems at a cost of $2.6 million; development of 2,000 ha of Crown land for pasture at a cost of $0.5 million;

rural electrification at a cost of $3.3 million; assistance to purchase power converters at a cost of $0.4 million; access to natural gas for Peace River farmers and rural residents at a cost of $7.1 million (Ex 215A).

The

Commission

was

asked

advise

the

general

direction

for

compensation, leaving the details to be worked out by the Ministry in cooperation with all relevant and interested parties (88: 14,400). The B.C. Federation of

Agricultur~,

in general agreement with the Ministry's

proposals, recommended that compensation payments be made and earmarked for enhancing regional agriculture development.

The B.C. Federation of

Agriculture recommended that an agricultural working group, consisting of local farming communities, be set up to work with the Regional Resource Management Committee, the Regional District and Hydro to discuss issues related to secondary impacts, mitigation, planning and management of compensation funds. (Exhibit 398A)

362 171

THE

COMMISSION

MEASURES

CONCLUDES

OUTUNED

THAT

THE

HYDRO

FOLLOWING

ARE

MITIGATION

APPROPRIATE

AND

RECOMMENDS THEY BE MADE CONDITIONS OF THE ENERGY PROJECT CERTIFICATE. FOR TRANSMISSION LINES,

PLACE TOWERS RIGHTS-OF-WAY;

ADJACENT

ROADS

EXISTING

PLACE TOWERS IN STEP WITH EXISTING TOWERS ON CULTIVATED LAND; SCHEDULE WORK TO MINIMIZE ACTIVITY DURING GROWING AND HARVESTING SEASON; MANAGE THE RIGHT-OF-WAY FOR GRAZING A G RIC U L T URAL USE IN CO NJU NCTIO N WITH A GRIC ULTU RAL USE; AND

OR OTHER ADJACENT

MAN AGE WEEDS, AND IN PARTICULAR K N APWEED, IN AREAS ADJACENT TO AGRICULTURAL LAND, MINIMIZING HERBICIDE USAGE.

REGARDING

MITIGATION

FOR

OTHER

AREAS,

THE

COM MISSION

RECOMMENDS THE FOLLOWING:

DISTURBED AGRICULTURAL LAND SHOULD BE RETURNED TO ITS ORIGINAL USE, WITH RECLAMATION PLANS REVIEWED BY VARIOUS AGENCIESINCLUDING THE AGRICULTURAL LAND COMMISSION; BE AMALGAMATED WITH FRACTION ED PARCELS SHOULD WHEREVER PHYSICALLY ADJACENT UNITS AGRICULTURAL POSSIBLE; AND AGRICULTURAL LAND 0 W NED BY HYDRO SHOULD BE MAINTAIN ED IN THAT USE.

The Com mission recognizes the importance of the development of a land use plan

minimize

COM MISSION

secondary

impacts

CONCLUDES THAT

THIS IS

remaining NOT

land.

WHILE

RESPONSIBILITY

HYDRO THE COMMISSION RECOMMENDS THAT THE APPROPRIATE

THE OF

172 363

GOVERNMENT

UNDERTAKE

MINISTRIES

DEVELOPMENT

LAND-USE PLAN AND THAT HYDRO, AS A CONDITION OF THE ENERGY PROJECT COSTS

CERTIFICATE, PAY FOR PROJECT-INDUCED INCREMENTAL

ITS

MOREOVER,

DEVELOPMENT.

RECOMMENDS

THAT

DEVELOPMENT

AND

PARTICIPATE

HYDRO BE

THE

SUBJECT

COMMISSION THE

PLAN'S

MANAGING

AND

MAINTAINING PROJECT

LANDS IT OWNS THAT ARE NOT REQUIRED FOR 1 OPERATION. THE COMMISSION ALSO RECOMMENDS THAT

IF THE LAND-USE PLAN IDENTIFIES AREAS WHERE TOPSOIL REMOVAL IS

APPROPRIATE

AND

COST

EFFECTIVE,

HYDRO

UNDERTAKE

THIS

MITIGATION MEASURE.

Wit.h

respect

compensation

for

the

agricultural resource loss, the

Com mission does not accept Hydro's argument that compensation for lost Crown

land

is not

warranted.

The

Com mission

concludes that

such

compensation is appropriate and indeed is essential to ensure that the full costs of the project are borne by Hydro's customers. It agrees with the Ministry ol Agriculture and Food that the funds should be used to enhance agricultural productivity in the region.

THE

COMMISSION

RECOMMENDS

THAT

CONSISTENT

WITH

ITS

VALUATION CALCULATIONS, B.C.HYDRO BE REQUIRED TO PAY TO THE GOVERNMENT ~18.6 MILLION (IN

CONSTANT ~1981} AS COMPENSATION 2 FOR THE LOSS OF CROWN AGRICULTURAL LAND FROM FLOODING. THE COM MISSION RECOMMENDS THAT THESE FUNDS BE DEDICATED TO AGRICULTURAL PROGRAMS IN THE REGION, AND THAT A PLANNING COMMITTEE, AGRICULTURE, A P P R 0 P RIA T E

AS BE MIX

RECOMMENDED ESTABLISHED 0F

P R 0 G R A MS

BY TO F0 R

FEDERATION

B.C. ADVISE THE

R E GIO N,

THE

OF MOST

ULTIMA T E

AUTHORITY SHOULD REST WITH THE MINISTRY OF AGRICULTURE AND FOOD.

It should be noted that the impacts which would result should Hydro not allow other land uses on their property have not been assessed, but could be substantial. 2

The actual payment should reflect the rate of inflation between 1981 and the year when the compensation is paid â&#x20AC;¢ ...

:. .,

364

173

t f

t ~

t I

I ~ f

I f

THE

RECOMMENDS

COMMISSION

THAT

HYDRO

NOT

COMPENSATION FOR SOCIAL LOSSES ON PRIVATELY HELD LAND. Com miss.ion recognizes that there

PAY The

is a social loss over ana above the private

loss on these lands ana sees the Agricultural Lana Reserve Act to be a result of concern over such losses.

However, because no guidelines exist regarding

compensation for the social loss on private lands transferred out of the agricultural land reserve, the Com mission concludes that compensation from Hydro should not be required.

With respect to mitigation of impacts resulting from the relocation of Highway 29, the Ministry of Highways agreed to fence the rights-of-way in

)

consultation with landowners, to rehabilitate unused old highway sections, to place rights-of-ways as close as possible to valley sides or the reservoir, to

preserve and

improve

drainage

patterns

and

rehabilitate

disturbed

agricultural land.

case-by-case basis.

underpasses and fencing were stressed by intervenors whose lands will be

affected

It also agreed to consider

cattle underpasses on a .

The Ministry of Agriculture and Food stated that it

assumed that its field staff will be consulted when the Ministry of Highways develops the various mitigative measures (86: 13,972-6). The issues of cattle by

the

relocation

Highway 29.

One

affected

intervenor

recommended that the new route be located along the existing rights-of-way (81: 13,024).

Others suggested that an independent agricultural review be

undertaken to ensure that problems of access, movement of livestock, drainage, fencing and parcel fragmentation are resolved before the new highway route is established (Ex 398A: 3). The Ministry of Highways indicated that it would complete the designs and route of the highway once it was clear that flooding of the existing highway was imminent.

365

174

The Com mission realizes that relocating High way 29 could have significant impacts

landowners

directly

in the path of the new highway.

The

Com mission notes, however, that the relocation will be undertaken by; and 'be the responsibility of, the Ministry of Highways. So it; does not recommend any conditions be imposed on Hydro respecting highway relocation.

THE

COMMISSION

THE

RECOMMENDS THAT THE

PROCEDURES AND

HEARINGS, EXCEPT

THAT

PRACTICES IT

FINAL

CONSTRUCTION IS IMMINENT.

MINISTRY

DESIGN

NOT

HIGHWAYS

DESCRIBED BE

DELAYED

THE

UNTIL

The potential relocation of Highway29 has

already been known for some time and has caused considerable concern to In light of the possibility for future delays of this

affected landowners.

project, the Com mission considers it; desirable to provide local residents with a definitive

plan

soon

possible.

THE

COM MISSION

THEREFORE

RECOMMENDS THAT IF AN ENERGY PROJECT CERTIFICATE IS ISSUED THE

MINISTRY

HIGHWAYS, IN

CONSULTATION

WITH

AFFECTED

LANDOWNERS AND OTHER GOVERNMENT AGENCIES, IN PARTICULAR THE

MINISTRY

OF AGRICULTURE AND FOOD, ESTABLISH A

DEFINITE

!;<OUTE FOR THE HIGHWAY AND MAKE THAT DETERMINATION PUBLIC AS SOON AS IT IS AVAILABLE.

3.0

IMPACTS ON FORESTRY

3.1

Hydro's Position

Hydro's

forestry

consultant

indicated

that

approximately

3,824 ha

productive forest land would be lost due to flooding (Ex 198: 14). An additional 1,150 ha of forest land would be cleared for the Williston-Kelly Lake line

(Ex 231) and 705 ha for the Site One-Fort St. John transmission line (Ex 194). He estimated that, because of the lost forest land due to flooding, the annual allowable cut would decrease by about 8,400 cubic meters per year (Ex 198). On the basis of an estimated average stumpage value of approximately $4 per cubic meter, the annual loss would be $32,560. The present value loss over the life of the project would be

$~56,420

rate and $1,024,000 at a 3% rate.

at a 10% discount rate; $480,690 at a 6%

366

175

Hydro indicated that the reservoir area will be cleared for aesthetic and

râ&#x20AC;˘

recreational

proportion that would be difficult to clear. Even in the areas that are difficult

reasons

below

elevation

4-61.8 meters

except

for

small

to get at, trees with tops protruding above an elevation of 457 meters will be cleared. Most of the estimated 274-,000 cubic meters of merchantable timber below this elevation will be salvaged; its value would offset a small part of total clearing cost (Ex 201: 10). All non-merchantable timber will be cleared. Along potential recreation sites stumps will be removed between elevations of 4-57 meters and 4-61.8 meters (Ex 198: Appendix lllB). While no breaks in forest

cover will be visible along the shoreline, provision will be made for additional

I t

clearing in areas where wind or sloughing may cause trees to fall (51: 8,296-8). Debris from clearing will be removed in the construction phase. Clean up of debris will require at least two seasons after flooding. An allowance of about $1 million has been made for this work (Ex 198: 22).

In later years, a

maintenance and clean-up program will be instituted to ensure that the use of the reservoir is not materially affected by debris (37: 6,742-3).

Hydro argued that the forestry loss need not be compensated because much of the forests are in non-marketable deciduous stands and the coniferous stands are scattered and uneconomical to harvest. Hydro noted that licensees in the region have not considered the area accessible and that, in any event, the total volume of wood that could be developed is insignificant in the regional context (Ex 198: 20-7). Hydro indicated that stumpage will be paid on merchantable timber removed from the reservoir and that this will be approximately equal to the present value of any social loss (Ex 209). 3.2

The Issues

3.2.1

Physical Impact Issues

While Hydro's forestry consultant identified over 3,800 ha of productive forest land in the reservoir area, the Ministry of Forests suggested that only 1,724- ha of this land could be expected to remain as part of the commercial forest land

367

176

base if there were no Site C project (Ex 226: 6). The Ministry pointed out, however, that the displacement of agriculture, wildlife, and human settlement will have secondary effects on other forest lands in the region (70: 11,360-3) and that spring and fall grazing on seven ranching operations will be affected by impacts on Crown range land (Ex 226: 8). The Ministry testified that the potential impact of the Williston-Kelly Lake transmission line on forest and range land remains unclear because the data supplied by Hydro is inadequate (70: 11,339-40). However, the Ministry did say that, if the transmission lines were located on productive growing sites, the forestry losses could be even greater than in the reservoir area (70: 11,353). Several intervenors expressed concerns over both Hydro's and the Ministry's impact estimates. The Association of Professional Foresters argued that the Ministry's estimate of 1,724 ha of forestry land base is low because much of the land on the north side is more valuable for forestry than present agricultural uses (Ex 405: 3-4) and because the isolated patches of timber on the south shore and islands could be accessible in the future from private lands (100: 16,423-4).

The

Association

also

expressed

concern

regarding

the

cumulative alienation of the forest base over time and the loss of any opportunity

increase

forest

harvests

and

values

through

intensive

management on the lost land (100: 16,412). The Com mission concludes that, for purposes of valuing the forestry resource loss due to flooding, the Ministry's estimate of 1724 ha is appropriate.

The

larger Hydro estimate includes land of agricultural significance that has already been taken into account in the estimate of the agricultural resource loss, so including it here would result in double-counting the potential resource losses.

368

177

[

The Com mission notes that the 1724 ha loss applies only to flooding; it does

not reflect the forestry resource loss due to transmission line development.

l l'

II ~

The

Com mission concludes that the absence of adequate data on the

transmission line impacts, particularly 'with respect to the W.illiston-Kelly Lake line, is a deficiency in the application, and should be rectified prior to the issuance of an Energy Project Certificate.

3.2.2

Valuation Issues

In calculating the forestry resource loss, Hydro assumed a reduction in the annual allowable cut of 8,400 per cubic meter and a stumpage value of approximately $4/per cubic meter. The Ministry of Forests used a different set of assumptions. Because it assumed a smaller forest land base would be affected, it calculated a smaller reduction in the annual allowable cut (4,736 per cubic meter). But it estimated the value of the timber at $6 per cubic meter, taking rent, corporate income and logging taxes into account. In addition, it assumed a one-time value for the loss of cutting rights at $25 per cubic meter. With these assumptions, the Ministry produced a slightly higher estimate of the forestry resource loss due to flooding than Hydro's consultants. According to the Ministry, the present value loss ranges from $414,000 to $1,072,000 depending on the discount rate, as compared to Hydro's $356,000 to $1,024,000 based on the same discount rate range. Although it was suggested that as many as 20 future jobs could be lost due to Site C and related transmission impacts (70: 11,365) the Ministry did not include these losses in its calculations. The Ministry stated that the estimated loss in annual allowable cut would not significantly disrupt sawmills in the region because it constitutes a minor proportion of the total cut available to them (Ex 226: 7).

369

178

The Association of B.C. Professional Forester's argued that the value of the compensation for lost forest land should be based on the cost of replacing its growing potential, not on its present worth (15,410-412).

Mr .Rutledge also

pointed out that the values of forest land for wildlife, recreation, fuel, and as a climate modifier have not been accounted for in any of the estimates (50: 8,063).

The Com mission concludes that the assumptions employed by the Ministry are appropriate for estimating the forestry resource loss due to flooding. Based on these

assumptions, the

.fn.o mfllion

Com mission

calculates a present value loss of

using the hybrid procedure and ~0.5 mfllion using an 8% discount

rate. The net loss to the province would be this amount less the present value of the stumpage collected from clearing. The Com mission emphasizes that this is the loss due to flooding alone; it does not include the loss resulting from the transmission rights-of-way.

3.2.3

Mitigation and Compensation Issues

Clearing is a major mitigation expense for Hydro, aimed at salvaging merchantable timber and at enhancing the recreational potential of the reservoir. Two primary issues were identified regarding clearing; first, the general cutting standards that should pertain for the reservoir as a whole; second, the extent and nature of shoreline clearing. Hydro acknowledged that its proposal to cut all accessible trees growing below the 461.8 meter level and all trees, whether readily accessible or not, whose tops extended above the 457 meter level might still allow the remaining trees to interfere with fishing lines. Hydro indicated that lowering the maximum height of the tops of the uncleared inaccessible growth to the 452 meter level would cost about $130,000.

370

179

Hydro indicated that it will clear the shoreline in a manner consistent with the Ministry

Forests'

specifications.

Hydro

anticipated

that

these

specifications will require it to leave all trees above the full supply level line as had been required for the Site One reservoir.

The Ministry of Forests

indicated that it had not yet determined specifications for Site C but indicated no reason that there will be a substantial difference from Site One.

The

Ministry of Lands, Parks and Housing and the Ministry of Environment both indicated that shoreline configuration was of interest to them but neither accepted direct responsibility for designing specifications for it. The Commission

concludes that the appropriate general reservoir clearing

standard :is to remove all accessible timber below 461.8 meters and all growth, whether readily accessible or not, extending above the 452 meter level of elevation.

The Com mission concludes that the recreational benefits to be

gained by this measure justify the expenditure of ~n additional

~130 ,000.

Respecting shoreline clearing, the

that,

Com mission

concludes

generally,

recreational potential can best be maximized by making the shoreline as much like that of a natural lake as possible.

This

will tend to be the

most

aesthetically pleasing and the most suitable for wildlife. This potential can be further enhanced by selective clearing to maximize access for recreational use.

Responsibility for standards governing the shoreline conditions is not and should not be the responsibility of Hydro.

While the Ministry of Forests has

direct responsibility for clearing standards, the Ministry of Lands, Parks and Housing and the

Ministry of Environment should

consulted regarding

appropriate clearing specifications around the reservoir edge.

Some of the

specific concerns of the Ministry of Environment have been incorporated into the Com mission's recommendations in Section 5.2 of this chapter respecting protection of wildlife.

Ongoing discussion between the Ministries may identify

more concerns. THE COMMISSION RECOMMENDS THAT THE MINISTRY

371

180

OF FORESTS CANVASS THE VIEWS OF THE MINISTRY OF ENVIRONMENT AND THE

MINISTRY

OF LANDS, PARKS AND

HOUSING

AND

DESIGN

AND ESTABLISH CLEARING STANDARDS THAT BEST SERVES THE GOALS OF FORESTRY, ENVIRONMENT AND RECREATION.

With respect to compensation, the Association of B.C. Professional Foresters, in its presentation, argued that intensive forestry and land management should be carried out at Hydro's expense to ensure that there is no net loss to the forestry resource in the region (100: 16,405). One intervenor suggested that, during clearing, firewood should be stockpiled for use by provincial parks, or sold to the public (Ex164: 10-11). The Ministry of Forests indicated that in the past it has received stumpage on merchantable timber harvested for clearing, but no compensation for lost growing capacity of forest land.

The Ministry did not argue for such

compensation in the case of Site C. The Com mission concludes that the principle of compensation for Crown losses should be applied consistently for all resources affected by the project. So, even though the forestry resource loss is relatively small, it should be compensated for.

THE

COMMISSION

THEREFORE

RECOMMENDS

THAT

HYDRO,

CONDITION OF THE ENERGY PROJECT CERTIFICATE, BE REQUIRED TO PAY COMPENSATION IN AN AMOUNT EQUAL TO THE PRESENT VALUE OF THE LOSS DUE TO FLOODING ftl.O million) LESS THE STUMPAGE FROM CLEARING OPERATIONS. IN ADDITION, THE COMMISSION RECOMMENDS THAT, PRIOR TO THE ISSUANCE OF A CERTIFICATE, THE VALUE OF THE FORESTRY

LOSSES

RESULTING

FROM

CLEARING

FOR

THE

TRANSMISSION LINES BE ESTABLISHED ON THE SAME BASIS AS THAT USED

CALCULATING

COMPENSATION

PAID

THE

RESERVOIR

FOR

THESE

LOSSES,

LOSSES

AND WELL.

THAT THE

COMMISSION RECOMMENDS THAT THESE PAYMENTS BE DIRECTED TO PROGRAMS MANAGED BY THE MINISTRY OF FORESTS THAT ARE AIMED AT ENHANCING FORESTRY ACTIVITY AND POTENTIALIN THE REGION.

372

181

4.0

IMPACTS ON GENERAL OUTDOOR RECREATION

4.1

Hydro's Position

Hydro estimated the impact of the project on recreation in terms of the reduction in the number of user days. Based on a 1981 survey of recreational activity in the area during the months of June through September, Hydro's consultants estimated that currently there are approximately 14,000 user 1 days of recreation in the Peace River Valley (Ex 191). The relative importance of the different types of recreational activities is shown in Table 13.

An earlier recreation study commissioned in 1976 indicated much higher recreational activity. The results were based on personal interviews and a creel census carried out by the fisheries consultants and on a mail-back questionnaire. Because of widely divergent estimates from the different sources, the Commission considered the estimates from this study unreliable.

373

182

TABLE 13

BREAKDOWN OF GENERAL OUTDOOR RECREATION ACTIVITIES, 1981

User Days

Boating

1,304

9.4

Canoeing

1,052

7.6

Camping

6,552

47.1

Picnicking

2,076

14.9

Sightseeing

2,037

14.6

Walking/Hiking

171

1.2

Swimming

206

1.5

Gold Panning

0.6

Other TOTAL

426 ---

3.1

13,906

100.0

Source: Based on Ex 191: 16-22; excluding fishing and hunting

374

183

Hydro's

consultants

indicated

that

Site C

would

eliminate

river-based

recreational opportunities, including many attractive activities on the islands (camping, picnicking, viewing). Creation of the reservoir, on the other hand, would offer new types of opportunities more suitable to families and would provide greater access to the shoreline (Ex 202). Hydro consultants reported that on completion of the project, although the water in the Valley would be visible from the highway for 35 km rather than the present 16 km, the visual diversity would be reduced so that the net change would be negative (Ex 202: 59). Hydro consultants also indicated that the river crossing of the 500 kv line at the bridge on Highway 29 would have an adverse visual impact, as would the transmission line crossing Highway 29 south of the Peace River.

The remainder of the 500 kv line from Site One to Site C

generally would have a low impact on aesthetic values. As shown in Table 14, Hydro's consultants estimated that by 1997 4,000 recreational user days would be lost due to the project. Applying estimated values per user day of reservoir-based and river-based recreational activity, the consultants calculated that the present value of the recreational resource loss would be $4.0 million at a 10% discount rate, $13.8 million at a 6% rate, and $51.6 million at a 3% rate (Ex 246: Table 2). TABLE 14 GENERAL RECREATIONAL USER DAYS Year 1982 1987 1992 1997

Without the Project 14,900 19,000 23,900 29,600 Source: Ex 243:6

With the Project 14,900 18,600 20,900 25,600

375

184

With respect to impacts on tourism, Hydro's consultants argued that the importance of the Site C area will actually decrease over time, regardless of whether or not the dam is built. They also argued that the region would not experience any loss of tourism during the construction period, because tourists would divert their activities from the Peace River area to other sites within the region (Ex 104: 8-11). To compensate for the estimated recreational resource losses, Hydro proposed funding: a 50-unit campground with an adjacent 50-vehicle picnic site and boat launch ramp in the vicinity of Bear Flats; a boat launch ramp at the dam site; two small day-use facilities at Silver Spring Point and Lynx Creek various primitive camp sites accessible by water only on the south shore of the reservoir ; a sum of $50,000 available to Hudson's Hope for parking, trails and other facilities in the Alwin Holland Park; a sum of $20,000 available to the local River Rats Club for the development of wilderness-type campsites on other rivers in the region (Ex 209).

Hydro estimated the capital cost of this program to be $2 million and the annual operating costs to be equivalent to a present value of $3 million. It stated that it should be given the responsibility for designing, constructing, and operating the recreation facilities except for Alwin Holland Park trails which should be Hudson's Hope's responsiblity and the wilderness campsites, which should be the River Rats Club's responsibility (58: 9,439).

376

185

Hydro argued that the proposed compensation package meets two basic concerns. First, the proposed facilities generaliy reflect local desires. (Hydro pointed out that many of the components of the proposed package are similar to recommendations made by local intervenors.) Second, the compensation package is sufficiently comprehensive in scope and magnitude to offset the expected impact of the project. Hydro acknowledged that the District of Hudson's Hope would prefer to see the camping facilities split between Bear Flats and Lynx Creek, but was confident that a satisfactory mix of facilities within the proposed budget can be arranged in conjunction with Hudson's Hope, Fort St. John and the Regional District. 4.2

The Issues

4.2.1

Physical Impact Issues

The impact on general opportunity---river-based

outdoor recreation is to replace one type of recr ea tion---w ith

another---

reservoir-based

recreation. The magnitude of the loss depends not only on relative access, but on the relative quality of these two types of opportunities. The Ministry of Lands, Parks and Housing testified that recreation safety would be reduced as a result of the reservoir because of debris on the water and a less stable shoreline. It also indicated that, despite assurances to the contrary, fluctuating water levels have consistently posed problems for reservoir recreation.

Moreover, the Ministry feared that the length of open

water would result in rough water conditions (Ex 208). Other intervenors commented on problems related to usability of the shoreline and to water fluctuations. The loss of the Peace River for canoeing was cited as a major concern, not only of local, but of provincial significance.

377

186

The Com mission conclJ.J.des that the creation of the reservoir will provide recreational opportunities of a significantly lower quality than the ones that will be lost. The reservoir can serve as an important recreational resource in

the region, but cannot adequately substitute for the river that will be lost.

The Ministry of Lands, Parks and Housing indicated that, in its view, Hydro's 1981 estimate of recreational activity in the area is probably low. However, it agreed with the methodology used and basica11y supported the results. Other intervenors indica ted that the survey approach used by Hydro's consultants could have missed individuals who did not park or remain at the survey centres. One intervenor pointed out that the survey missed the month of May, which in 1981, because of favourable weather conditions, could have been the best month for camping.

Hydro's consultant agreed that for a number of

reasons, the 1981 estimate of user days is likely low (61: 9,969-76). The Com mission concludes that, while Hydro's estimate of recreation activity is probably low, its methodology was sound and the results provide an

acceptable basis for estimating impacts.

While the Ministry accepted Hydro's base (1981) level of general outdoo.r recreational activity, it assumed a quite different pattern of growth in the future. Whereas as Hydro's consultants assumed recreational user days would grow rapidly (at a rate of over 4% without the project), the Ministry assumed a growth rate of 1% per year. The Ministry assumed the same rate with and without the project, except for an eight year period beginning four years prior to the completion of the project to four years after the filling of the reservoir when recreational activity would be severely impeded. The Com mission concludes that the Ministry's projections of user days with and without the project are more realistic than Hydro's and has adopted them in evaluating the recreational resource loss.

rrÂˇ

I L

378

187

4.2.2

Resource Valuation Issues

In calculating the value of the nef recreational resource loss, Hydro's consultants assumed: a value of $29 per day for general recreational; a ratio of 1.2 to 1.0 for

the value of river-based relative

reservoir-based recreation; a real increase in recreational values of 3% per year in the 'without project' case and 2% per year in the 'with project' case.

The Ministry, in calculating the net recreational loss, used quite different assumptions. For recreational values per day, 'the Ministry used $17.95 for Peace River residents and $16.60 for non-residents, much lower than Hydro's $29. And for the relative value of reservoir versus river-based recreation, the Ministry used a ratio of 1.5 to 1.0 instead of Hydro's 1.2 to 1.0. As a result of these differences and differences in the estimated magnitude and timing of the impacts on recreational activity, the Ministry calculated a much lower value of the resource loss than Hydro. Its estimated a $3.7 million loss at a 6% discount rate, $2.4 million at an 8% rate and $1.8 million at a 10% rate. The Com mission conclJJ.des that both the Ministry's and Hydro's evaluation assumptions have some validity.

Hydro'S estimated recreational value of ~29

per user day is better because it is a site specific estimate, based on a recent survey. The Ministry's estimates are based on surveys for the province as a whol..e.

But the Ministry'S estimates of the value of

relative to

reservo~based

rive~based

activity

activity are more appropriate than Hydro's, given

the type and quality of experiences each offers. Finally, the Com mission

379

188

concllldes that it is not appropriate to assume that the value of recreation

win increase in real terms over tim e. The significance of future losses should be taken into account through appropriate discounting procedures, not by

artificially escalating future values. On the basis of these assumptions and the Ministry's user day forecasts, the Com mission has calculated that the net loss in general outdoor recreational activity will be .$'6.9 million using the hybrid procedure and .$'3.0 million using a 8% discount rate. This is the measure (in constant 1981 dollars ) of the present value of foregone river-based recreation less the present -value of the resezvoir-based recreation created by the project.

The present values have

been calculated by discounting back to the assumed year of issuance of the

Energy Project Certificate.

4.2.3

Mitigation and Compensation Issues

The Ministry of Lands, Parks and Housing proposed compensation measures quite different from Hydro's. They include 170 day-use and campground units at five major sites both off and on the reservoir. These facilities would not be built at once,_ but would be phased in as warranted by recreational demand (Ex 258B: 23-4). The Ministry estimated that they would be phased in from 1985 to 1994 (Ex 369: 2).

The major off-reservoir sites were Peace Island Park, Clayhurst Ferry Landing and Peace River - Pine Nodes. The on-reservoir sites were Lynx Creek and Bear Flat. The present value of the capital and operating costs was estimated at $2.1 million using a 10% discount rate (Ex 370: 2). The major difference between the Ministry's and Hydro's proposals was the emphasis that the Ministry placed on the off-reservoir facilities, which it maintained would better offset the lost river-based opportunities.

Hydro

considered the program proposed by the Ministry to be a regional development plan, not a set of measures suitable for compensating losses due to Site C (112 : 18,317-9).

380

189

The Ministry also stated that, being the .custodian of Crown lands, it will be responsible for the development of a land use plan if Site C is to proceed. It expects that the plan to take two years to complete after the decision is made.

The Ministry argued that Hydro should pay some of the cost for

developing the plan (90: 14-,658). The Corporation of Hudson's Hope stated it would like to see a park developed east of Lynx Creek to compensate for the loss of recreational facilities at Hudson's Hope (Ex 256: 11-lJ.). The Regional District argued that the design of the compensation package should take into account the wishes of the local municipalities. THE

COMMISSION

ENERGY PROJECT

RECOMMENDS

THAT

CONDITION

THE

CERTIFICATE, HYDRO

BE REQUIRED TO PAY AN ... AMOUNT EQUAL TO THE PRESENT VALUE OF THE RECREATIONAL LOSS

(WHICH THE COMMISSION HAS ESTIMATED AT ~6.9 MILLION) AND THAT THESE FUNDS SHOULD BE USED TO DEVELOP PROGRAMS THAT WILL,IN PART, ENHANCE

RECREATION

BOTH

REMAINING RIVERS IN THE REGION.

THE

RESERVOIR

AND

THE COMMISSION RECOMMENDS

THAT THE MINISTRY DEVELOP SUCH A PROGRAM IN

CONSULTATION

WITH LOCAL AUTHORITIES; BUT THAT ~50,000 BE EARMARKED FOR THE DEVELOPMENT OF ALWIN

~20,000

EARMARKED

HOLLAND PARK BY FOR

THE

HUDSON'S HOPE AND

DEVELOPMENT

WILDERNESS

CAMPSITES BY THE RIVER RATS CLUB.

THESE SUMS ARE TO BE TAKEN

OUT

THE

TOTAL

PARKS AND HOUSING. CLUB

C A M P SITES. MINISTRY

COMPENSATION

RESERVOIR, WITH CO NT RIBUTIO N.

AND

C 0 M MISSIO N

APPROPRIATELY

RESPONSIBLE FOR

MINISTRY

OF LANDS,

THE MINISTRY SHOULD ASSIST THE RIVER RATS

IDENTIFYING THE

THE

NEGOTIATING FURTHER

LEASES

R E C 0 M MENDS

DESIGNATED

PUBLIC

FOR

THE

THA T

THE

BODIES

ALL NEW FACILITIES, INCLUDING THOSE

BE THE

HYDRO GIVEN PUBLIC CREDIT FOR ITS FINANCIAL

I II

381

190

recognil:ion

resource

(over

of the and

importance

above

its

specific

wildlife

importance

general recreational for

recreational

and

subsistence hunting), the Com mission concludes that some of the compensation for general recreational losses should be directed to wildlife programs in the regiDn, developed and administered by the Fish and Wildlife Branch.

THE

f6.9

THAT ~833,000 OF THE MILLION 1 C 0 M PEN SA TIO N BE SO DIRECTED â&#x20AC;˘ As discussed in the next section, this COM MISSION

RECOMMENDS

is the estimated non-consumptive, or general recreation wildlife loss which the Com mission has estimated on the basis of the

Ministry of Environment's

submission.

5.0

IMPACTS ON WILDLIFE AND RECREATIONAL HUNTING

5.1

Hydro's Position

The Site C region---wildlife management units 7-32, 7-34, 7-35, is about 0.8% of the land area of B.C., but supports about 8% of the province's moose harvest, 7% of sharp-tailed grouse harvest, and 4% of black bear, wolf and ruffed grouse harvest (52: 8,340-2).

The area that would be affected by

reservoir flooding provides critical winter habitat for moose, and for calving and fawning and rearing habitat for both moose and deer. This habitat is also of above average importance within the region for elk, coyote, grouse, Canada geese, bald eagles and possibly lynx and black bear (Ex 200: 35-59). The wildlife inventory carried out by Hydro's consultant assessed only the "standing crop", or present animal populations, of the study area. Although the consultant agreed that a biophysical mapping would suggest that higher wildlife populations could be supported, he argued that the standing crop approach is the correct measure of the project's impact since there are no specific plans for wildlife enhancement and no assured future demand for the increased stock (54: 8,792-93).

Based on the standing crop approach, the

number of animals that could be lost to flooding is estimated as follows:

( 1)

The $833,000 is approximately one-third of the recreational hunting loss which the Commission has estimated in section 6.2.

382

191

Moose

Deer

Elk

Bear

Grouse

Water Fowl

125-250

50-250

0-7

10-20

1500-3000

100-300

Sources: Ex 200:56-61; 56: 8, 980-85

Besides the direct flooding of the reservoir, the following project-related activities and factors would further affect wildlife: dam and transmission construction,

highway relocation,

bank

sloughing and shoreline erosion,

increased fog, windchill and hunting pressure.

Hydro's consultant indicated

that some of these impacts could account for additional habitat loss in the order of 10% of the flooding losses (Ex 200: 63-65). Impacts on non-game species, such as fur bearers, small mammals, aquatic birds, raptors, songbirds and reptiles, will also occur but no endangered species will be affected (53: 8,557).

A more accurate 'assessment of these impacts

would require a two-to-three-year study. Land loss and transmission line impacts on the three registered guide territories bordering the impact area were estimated at 0.8%, 1.1% and 2.6%. Increased access and hunting pressure could reduce the value of guiding services. Nine tr aplines would be affected by the project, but losses will not involve more than 6% of the land area of any line. The trappers whose lines will be most affected estimated that the production capacity of their lines will decline by no more than 10% (Ex 200: 71). Hydro's wildlife consultant based his estimate of the potential loss of hunter days attributable to the project on his inventory of the standing crop. First, he estimated a harvestable surplus based on the populations of the standing crop; then he established the number of hunter days per kill by species using the Ministry of Environment's data; and finally, he obtained the total potential

383 192

hunter days lost by multiplying the harvestable surplus by the hunter days per kill. The estimated loss ranged from 928 to 2,473 hunter days per year. Hydro, however, did not use these values to calculate the recreational hunting loss. Using other means, Hydro's recreational consultant estimated the loss to be about 600 hunting days per year (61: 9940-49).

Based on this and an

estimated value per hunter day of $32, escalating at a real rate of 2% per year, Hydro's consultant calculated that the present value of the recreational huntiDg loss would be $1.6 mlllion at a 3% discount rate, $518,400 at a 6% discount rate and $181,400 at a 10% discount rate (Ex 254). Regarding mitigation measures, Hydro indicated it would consider scheduling the clearing of specific reservoir areas as late as possible (through discussions with Ministry of Forestry) and leaving bald eagle nesting trees standing. Hydro indicated that clearing specifications would stipulate that habitat above the full supply level not be needlessly disturbed, and that areas affected during construction be rehabilitated (Ex 48). Hydro's consultant recommended several mitigation measures for transmission lines including: leaving as much low vegetation as possible; clearing on the north side of the Peace by hand; no clearing from mid-May to mid-July; minimizing disturbance of drainage patterns; minimizing herbicide applications Âˇ minimizing access road construction (Ex 194). Regarding control of hunting, Hydro will require a no-shooting zone around its construction site (Ex 48).

384

193

, With respect to compensation, Hydro proposed funding a wildlife management program at a present value cost of $0.7 million. Details of the program have not yet been worked out. Compensation for trappers was treated as a separate issue and was described in detail in Hydro's Registered Trapline Program (Ex 236).

The

nine

affected

registered

traplines

will

be eligible

for

compensation under the program (Ex 209: 3-4). 5.2 The Issues 5.2.1

Physical Impact Issues

The Commission heard a great deal of evidence from intervenors on the standing crop approach

used

Hydro's consultant.

The

Ministry

Environment and other intervenors indicated that the Site C region has a special significance for wildlife management because of its unusually high capabilities (Ex 152A: A31).

Furthermore, the Ministry testified that it did

have a plan to increase the populations of moose, deer and elk in the region. The proposed population objectives for the year 2,000, based on realistic criteria, were 750 moose, 1,000 deer and 100 elk (Ex 152A: A26). The Ministry agreed that while netting out the costs of achieving these goals is analytically correct, management costs in the Peace Valley would be insignificant (103: 16,948-9). Other intervenors also argued that a bio-physical capability approach is more appropriate for impact assessment than Hydro's approach (Ex 385; Ex 411A). The Ministry accepted Hydro's estimate of standing crop for moose and deer (101: 16,531) though both it and the Peace Valley Environmental Association expressed skepticism about the number of animals the consultant estimated he saw (101: 16,615-8).

The Ministry disagreed with Hydro's estimates of both

wildlife and hunting-day losses. The Ministry testified that the moose herd will decline sharply in size and no longer produce any harvestable surplus for hunters. It estimated that lost reproductive habitat will result initially in the

385

194

loss of 100-200 fawns annually, with the loss increasing as deer stocks build (Ex 152A: 31-3). Further, the Ministry and other intervenors argued that the regional loss of moose might be several times greater than that estimated by Hydro because Hydro's estimates were based on surveys done at a single point in time and did not take migration patterns into account (101: 16,532-6). The Ministry initially estimated that the annual loss of hunting days would vary from 50, five years prior to flooding, to 3,738 by the year 2000 (Ex 152A: 33). The Ministry said, and Hydro's wildlife consultant agreed, that demand has exceeded supply and will continue to do so for all species except grouse (102: 16,830-2). Netting out grouse from its loss estimates (102: 16,849) the Ministry estimated a loss of hunting days varying from a low of 50 prior to the project to 3,175 by the year 2000. These values are greater than Hydro's wildlife consultant's figures, and five times higher than the figures Hydro used to calculate recreational hunting resource loss. In addition to these losses, the Ministry expressed serious concerns about the effects of transmission lines, highway relocation and dam construction (101: 16,655-7; 16,664-5). Two intervenors suggested that increased fog may affect fur-bearing wildlife (Ex 289L; 75: 11,968); others suggested that, if Site C gives rise to access to the south shore, further wildlife losses will result due to disturbance,

collisions

with

vehicles

and

competing

land

uses

(102: 16,832-5). The Com mission accepts the arguments put forward by the Ministry and some intervenors that Hydro's consultants underestimated the m agnil:.ude of the impacts

wildlife

and

recreational

hunting.

And

iJ:.

accepts

the

appropriateness of considering the lost enhancement potential. For purposes of evaluating the recreational hunting loss, the Com mission has adopted the Ministry's estimates that recreational hunting will decline by 50 days just prior to the project and 3,175 days by the year 2000.

386

195

The Com mission notes that the data on which these esti.m ates were based is not entirely satisfactory. It was described by a Ministry representative as "inadequate, but the best available" (103 :17,042-5).

But the Com mission

believes the knowledge of the Ministry's local wildlife biologist and local residents is sufficient in this case to ensure a reasonable degree of reliability. However,

it;

would have been preferable for Hydro and the Ministry, prior to

the hearings, to develop a better da.ta base and an acceptable methodology for estimating

impacts.

Chapter X X,

the

Com mission

discusses

and

recommends such pre-hearing screening of the data for future Energy Project Certificate applications.

5.2.2

Wildlife Resource Valuation Issues

In calculating the value of the wildlife resource loss due to Site C, the Ministry of Environment not only used different (greater) impact estimates, but also different valuation assumptions. It assumed a recreational hunting value of $64- per day, based on a willingness-to-be-compensated as opposed to a

willingness-to-pay approach. It included in its loss estimate a non-consumptive value, assumed to equal one-third of the recreational hunting value. And, finally, it included an indirect loss of $500,000 to take account of possible highway relocation and transmission line impacts, land use pressure from agriculture and forestry, and other effects.

On the basis of these

assumptions, the Ministry calculated a present value loss ranging from $2.0 million to $3.7 million, for discount rates of 10% to 6% as compared to Hydro's range of $181,4-00 to $518,4-00 for the same discount rates. Hydro argued that non-consumptive use of wildlife is taken into account in its estimate of the general recreation loss and therefore it should not be counted here. The Com mission concludes that the value of the recreational hunting loss should be based on the w.illingness-to-pay not the w.illingness-to-be-compensated approach and, therefore, a value of ~32 per day, as recommended by Hydro, should be used.

387

196

Applying this value to the Ministry's estimated loss of hunter-days (with grouse hunting netted out), the Com mission concludes that the present value of the recreational hunting loss is ~2.8 million using the hybrid procedure ana

fz.l million using the 8% discount rate. The Com mission agreesÂˇ with Hydro that non-consumptive use should not be added to these figures, since doing so

would double count the general

recreational loss. Allowance has already been made for this loss (estimated at one-third the value of the recreational hunting loss) in the allocation of

general recreational compensation. With respect to losses from sources other than flooding, particularly highway relocation ana transmission line aevelopm ent, the Com mission concludes that these should be dealt with in the monitoring program.

Mitigation and Compensation

5.2.3

The Ministry agreed with the mitigative measures suggested by Hydro's consultant , but made several additional recommendations: 1)

camp garbage be incinerated or deeply buried within a fenced area;

access to roads on transmission line rights-of-way be restricted or controlled;

transmission line rights-of-way be managed to maximize browse;

appropriate animal control mechanisms be considered for preferred highway alignment at the Halfway Rover;

special efforts be made to avoid damage to island riparian habitat east of the dam site.

the

The Ministry also stated it is common practice to ban firearms in camp and hoped Hydro would impose such a restriction (16,837).

388

197

BASED

THE

CONSULTANT COMMISSION

RECOMMENDATIONS AND

THE

RECOMMENDS

MADE

MINISTRY THAT

THE

HYDRO'S

WILDLIFE

EN VIR 0 N MEN T,

FOLLOWING

THE

MITIGATION

MEASURES BE MADE CONDITIONS OF THE PROJECT:

HABITAT ABOVE THE FULL SUPPLY LEVEL NOT BE NEEDLESSLY DISTU REED DURING CLEARING, AND PARTICULAR EFFORT BE MADE TO AVOID DAMAGE TO ISLAND RIPARIAN HABITAT D 0 W N ST REA M 0 F THE D A M SITE; A CLEARING SCHEDULE BE DEVELOPED IN CONSULTATION WITH FISH AND WILDLIFE OFFICIALS TO MINIMIZE WILDLIFE IMPACTS; TREES IN STRATEGIC LOCATIONS, AS IDENTIFIED BY FISH AND WILDLIFE OFFICIALS, BE LEFT FOR BALD EAGLE NESTING; HABITAT DISTURBED DURING CONSTRUCTION BE REHABILITATED TO ITS ORIGINAL STATE UNLESS OTHERWISE DICTATED BY THE GOVERNMENT'S LAN.D USE PLAN; CONSTRUCTION CAMP GARBAGE BE INCINERATED OR DISPOSED OF BY DEEP BURIAL WITHIN A FENCED AREA; FIREARMS BE BANNEDIN CONSTRUCTION CAMPSITES; TRANSMISSION LINE CLEARING BE DONE BY HAND ON THE NORTH SIDE OF THE PEACE RIVER, N:J':' !)i\i.FR'l'AKEN BETWEEN MID-MAY AND MID-JULY, AND DISTURBANCE OF DRAINAGE PATTERNS MINIMIZED; TRANSMISSION LINE RIGHTS-OF-WAY BE MANAGED TO MAXIMIZE BROWSE WHERE NOT IN CONFLICT WITH AGRICULTURAL ACTIVITY OR OTHER USES UNDER THE GOVERN ME NT'S LAND USE PLAN; FOR TRANSMISSION LINE APPLICATIONS BE MINIMIZED, INDICATED BY THE MINISTRY CLEARED;

MAINTENANCE, HERBICIDE AND SENSITIVE AREAS AS OF ENVIRONMENT BE HAND

CONSTRUCTION OF ACCESS ROADS BE MINIMIZED AND PUBLIC ACCESS RESTRICTED OR CONTROLLED.

389

198

The Ministry's compensation proposal included the following measures:

(1) a

biophysical analysis of crown and private lands in management units 34 and 35; (2) radio

collaring

moose

determine

their

migration

pattern;

(3) acquisition of private land to increase the high capability habitat available for wildlife management; and (4) enhancement of habitats following the preparation of a comprehensive land use plan in and around the reservoir area. The Ministry also proposed that a surveillance and monitoring program be established and included as part of this program's personnel requirement in the compensation package (Ex 152A: A55; 103: 17 ,000-2). The present value of this program was estimated at $2.5 million at a 6% discount rate. In addition, the Ministry

recommended

$1 million

contingency

fund

established

(101: 16,524-5). Other intervenors also presented views on various mitigation and compensation issues. One recommended that no sports hunting be allowed on the south shore (Ex 164; Ex 300).

The B.C. Wildlife Federation urged that enhancement

opportunities be pursued as a compensation measure (Ex 411).

The North

Peace Rod and Gun Club recommended that an area equivalent to that which would be flooded and with similar wildlife potential, be developed and managed. This enhancement program should aim to compensate in kind losses to the hunters, trappers, guides, native people, and users of outdoor recreation resources. THE

COMMISSION

ENERGY

PROJECT

AMOUNT EQUAL

RECOMMENDS

THAT,

CERTIFICATE

HYDRO

THE

PRESENT

CONDITION

BE REQUIRED

VALUE

OF THE

THE

PAY

RECREATIONAL

HUNTING LOSS, WHICH THE COMMISSION ESTIMATES AT ~2.8MILLION. THE

COMMISSION

DIRECTED

ALSO

PROGRAMS

RECOMMENDS IN

THE

THAT

REGION,

THESE

FUNDS

DEVELOPED

BE THE

MINISTRY OF ENVIRONMENT IN CONSULTATION WITH LOCAL GROUPS, T 0 EN H A N C E WILD LIFE P R 0 D U C TIVIT Y.

390

199

6.0

IMPACTS ON FISHERIES RESOURCES

6.1

Hydro's Position

Hydro testified that the major impact of the Site C project on fisheries would arise from the present river system being changed into lake-type habitat. This would result in the loss of large areas of spawning habitat and in the reduction or elimination of fish species that are adapted only to flowing water conditions. Hydro's fishery consultant concluded that the species composition of the reservoir would be very different from its present composition. Rainbow trout numbers are expected to be low due in part to the effects of Site One; Arctic grayling and northern pike should increase; and mountain whitefish will occur in large numbers.

Dolly Varden may show a slight

increase initially but will decrease to a fairly low level later. Walleye will not likely become

established

without enhancement measures.

Fairly large

populations of suckers will develop (52: 8,331-7; Ex 153: 82). In order to evaluate quantitatively the impact on fisheries, Hydro's consultant estimated the maximum sustainable yield of the river and the reservoir. The reservoir's

maximum

sustainable

yield

was

estimated

using

Ryder's

Morphoedaphic Index, which was, in turn, used in a regression equation, also developed by Ryder, to predict potential angling yield 1. At an average of one fish per angling day, angling yield was estimated at a total of 14,000 angling days per year for the reservoir (Ex 153: 41). The river's maximum sustainable yield was arbitrarily assumed to be lower than the reservoir's, and was estimated at 12,000 fish, and hence 12,000 angling days per year (Ex 235). The reservoir shows greater long-run productivity than the river because of increases in aquatic habitat and plankton populations (Ex 153: 83; Ex 235).

391

200

However, Hydro did not use the above estimates to calculate the value of fishery losses. Based on 1981 survey results, angling days with and without the project

were

projected

follows,

based

changes

population,

participation and fishing attractiveness. TABLE 15 B.C. HYDRO'S ESTIMATES OF ANGLING DAYS

Without the Project

With the Project (1988 in-service date)

1982

4,100

1987

4,600

4,100

1992

4,800

6,200

1997

5,600

8,800

Source: Ex 243

On the basis of these activity levels and assuming a recreational fishing value of $27 per fishing day, increasing in real value at 4% per year without the project and 3% per year with the project, Hydro calculated a net loss of approximately $10 million at a 3% discount rate; $2.0 million at a 6% rate and $0.3 million at a 10% rate (Ex 246). With respect to mitigation, Hydro indicated that its construction contracts will require that sediment loads be minimized through appropriate measures and that contractors follow all legal hunting and fishing regulations in the project area. The construction area will be monitored to ensure that all waste material is suitably handled (Ex 48).

Ryder's Morphoedaphic Index and regression equation are defined in the Glossary. See also Ex 153.

392

201

Hydro's transmission line consultant recommended that uncleared forest buffer strips be left where the line parallels rivers, that access roads be kept to a minimum, that erosion be minimized through the use of vegetation or special techniques and that a sufficient number of well-designed culverts be used (Ex 194). With respect to compensation, Hydro indicated it is prepared to fund a yellow walleye enhancement program at a cost of approximately $2 million (Ex 209:3). 6.2 The Issues 6.2.1

Physical Impact

The Ministry of Environment disagreed with Hydro's estimates of maximum sustainable yield and angling yield for both the river and the reservoir. The Ministry estimated that the river would support approximately 18,000 angling days per year, based on the impressions gained by its field officers over the years. It felt that Hydro's 1977 survey which indicated that 18,000 fish were harvested that year, corroborates that estimate. The Ministry argued that this yield is sustainable because the survey underestimated potential and actual harvest, and because Site One impacts on trout will not be as severe as Hydro predicted (101: 16,698; 103: 16,915-8). The Ministry estimated that the reservoir's yield will be 75% of the river's yield, or 13,500 angling days per year. It predicted angling will decline because the strongly preferred sport species, rainbow trout, Arctic grayling and Dolly Varden, are predicted to decline by over 30%. The slight increase in overall fish productivity that the reservoir might experience will not offset this loss (Ex 152A: 16,749).

393

202

Furthermore, the Ministry and other intervenors pointed out that

the

Morphoedaphic Index and Ryder's equation, used by Hydro to calculate yield, were not developed for use on river reservoirs and are poor predictors of yield in lakes with species composition similar to that expected in Site C (Ex 152A; 102: 16,74-9). The Ministry of Environment estimated angling days with and without the project as follows, based on its yield estimates, and assuming that demand has, or will shortly, exceed supply.

TABLE 16 THE MINISTRY OF ENVIRONMENT'S ESTIMATES OF ANGLING DAYS

Without the Project

With the Project 0987 in-service date)

1977

11,4-00

1987

18,000

4-,300

1988

18,000

8,000

1989

18,000

11,300

1990

18,000

14-,300

1991

18,000

13,500

1992

18,000

13,500

1995

18,000

13,500

2000-2056

18,000

13,500

Source: Ex 152A

394

203

The Ministry claimed that Hydro's projections, based on its 1981 survey, underestimated fishing (102: 16,744-7) and that they were calculated on the basis of outdated water quality data (61: 9,873). Thus, whereas Hydro showed an increase in angling days as a result of the project, the Ministry showed a significant decline. The Com mission concludes that Hydro's estimate of maximum sustainable yield and angling days on the Peace River cannot be supported. 1t notes that Hydro's estimate of the existing river's capacity angling

was not

theoretical.

based

any

field

Respecting reservoirs,

work

Hydro

to produce fish and support

whatever,

but

was

entirely

made no attempt to study past

reservoirs it has created on the Peace River or elsewhere in British Columbia.

The Com mission concludes that the Ministry'S estimates cannot be relied upon either because

they

are not supported by hard data.

The

Com mission

therefore concludes that the fisheries impact estimates presented at the hearings must be considered unreliable; further study is required.

The Com mission has carefully considered the nature of the study program which should be undertaken.

The

Com mission concludes that the studies

required to obtain definitive estimates of maximum sustainable yield for the

Peace River are simply impractical.

So, the Com mission recommends that

Hydro undertake the following projects instead.

First, since both the 1977 and 1981 results are flawed, Hydro should obtain a reliable estimate of angling days on the Peace River. COMMISSION ANGLING

RECOMMENDS

AND

CREEL

THAT

SURVEY

HYDRO

ACCORDINGLY, THE

CONDUCT

RECOGNIZING

THE

DETAILED

CRITICISMS

PREVIOUS SURVEYS REGARDING EARLY MORNING AND LATE EVENING FISHING, FISHING BY LOCAL RESIDENTS AWAY FROM PUBLIC ACCESS POINTS AND AT SITE ONE, AND WINTER FISHING.

395

204

SECOND,

THE

COMMISSION

RECOMMENDS

THAT

HYDRO

GATHER

INFORMATION ON SPORT FISH MOVEMENTS IN THE PEACE RIVER AND TRIBUTARIES TO ASSISTIN DETERMINING THEIMPACTS OF FLOODING AND

THE

ADDITION,

PROSPECTS

FOR

INVESTIGATE

SHOULD

LIFE-HISTORY

PATTERNS

SURVIVAL

EXISTING

SPORT TO

FISH

HABITAT

STOCKS.

MIGRATION ASSOCIATIONS

IN AND TO

ASSIST IN IDENTIFYING CRITICAL LIMITING FACTORS AND DESIGNING APPROPRIATE ENHANCEMENT MEASURES TO PROVIDE COMPENSATION IN KIND.

THIRD,

THE

C 0 M MISSIO N

CONSULTATION

WITH

R E C 0 M MENDS

THE

MINISTRY,

T HA T

H Y DR 0,

CONDUCT

STUDIES

ASCERTAIN THE MOST EFFEC.TIVE MANNER IN WHICH SHORELINE AND TRIBUTARY

ENHANCEMENT

THE RESER VOIR.

PROGRAMS

MIGHT

DEVELOPED

FOR

Shoreline investigations should identify potential spawning

areas using existing maps and literature, and follow-up field studies should be conducted

determine

suitability

and

feasibility

of pre-impoundment

enhancement methods.

The study programs outlined above incorporate package suggested by the Ministry.

much of the compensation

The Com mission wishes to emphasize its

conclusion that programs of this sort are not appropriate components of a compensation package but rather are the responsibility of the Applicant for purposes

of determining

compensation,

THE

C 0 M MISSION

THEREFORE

RECOMMENDS THAT THE STUDIES BE SATISFACTORILY COMPLETED AS A

CONDITION

COM MISSION COMPLETED,

ALSO

ENERGY

RECOMMENDS

APPROPRIATE

PROJECT THAT

WHEN

COMPENSATION

CERTIFICATE. THE

STUDIES

MEASURES

THE ARE BE

DETERMINEDIN THE MONITORING PROGRAM, USING THE EVALUATION PARAMETERS ADOPTED BY THE COMMISSION.

396

205

The Com mission is also concerned about the lack of information

on the

productivity of reservoirs, particularly northern ones, already created by dam construction.

The

Com mission

considers

important

that

body

knowledge be developed on the biological impact of the conversion of rivers to reservoirs.

THE

GOVERNMENT

COMMISSION AGENCY

RECOMMENDS THAT

UNDERTAKE

THE APPROPRIATE

FORTHWITH

THE

STUDIES

NEEDED TO PROVIDE THIS INFORMATION SO THAT THIS SIGNIFICANT

INFORMATION GAP CAN BE CLOSED.

"~ r i~

The Peace Valley Environmental Association presented evidence on mercury accumulation in the food chain resulting from

reservoir flooding.

~'' ""

The

evidence strongly indicated that the creation of any reservoir in cool temperate North America is likely to result in predatory fish mercury levels in excess of the 0.5 ppm Canadian marketing standard (Ex 388A; 94: 15,389). Peace Valley Environmental Association's consultant expected that

this

conclusion will apply to Site C as the extent of flooding and soils are typical of reservoirs exhibiting this phenomenon.

The consultant did not expect,

however, any effect on drinking water quallty (94: 15,441-2). The

Ministry

Environment

recognizes

that

walleye

are

likely

bio-accumulate mercury. It will monitor fish mercury levels if Site C proceeds and would post warning signs around Site C if levels are found to be hazardous to health.

Posting the fishery would significantly reduce the value of the

fishery, though at this time the Ministry cannot say what the probability is that the fishery will be affected (102: 16,881-94). The Com mission concludes that the matter of mercury levels in reservoir fish will become clearer if studies of what has happened in other reservoirs in the province are made as the Com mission has recommended. In that way, by the time Site C is constructed, more inform at:ion will be available to assist the Ministry in designing the appropriate enhancement program.

397

206

6.2.2

Resource Valuation Issues

On the basis of its angling day impact estimates and on the assumption that river fishing values are 1.2 to 1.5 times greater than the value of reservoir fishing, the Ministry calculated a net fishery loss of $2.0 million to $4-.2 million for discount rates ranging from 10% to 6%. This compares to Hydro's estimate of approximately $0.3 million to $2.0 million over the same discount rate range. The Com mission concludes that the fishery resource loss cannot be estimated at this time because of inadeqate evidence on the However,

the

Com mission

accepts

that

the

magnitude of impacts. evaluation

parameters

recommended by the Ministry, except for willingness-to-be-compensated, are appropriate THAT

for

THESE

MONrfORING

evaluation

purposes.

VALUATION PROGRAM

THE

C 0 M MISSION

PARAMETERS

DETERMINE

BE THE

APPLIED

R E C 0 M MENDS UNDER

FISHERIES LOSS

HYDRO HAS PROVIDED ACCEPTABLE INFORMA._T.JON

THE ONCE

ON IMPACTS ON

ANGLING DAYS, AS RECOMMENDED IN THIS REPORT.

6.2.3 Compensation and Mitigation Issues The Ministry proposed a compensation program consisting of four components: (1) pre-impoundment

studies;

constructed

flooding;

after

(2) a

was

$1.9 million

enhancement facility

(3) post-impoundment

(4-) potential enhancement schemes. program

walleye

assessment

studies;

The estimated cost of the walleye

discounted at

10%.

A further

$2 million

contingency funding was requested for potential enhancement schemes and to allow flexibility should measures preclude enhancement of walleye. addition,

the Ministry recommended that a

pre- and post-construction

monitoring program be carried out to Ministry standards, funded by Hydro, and that

such

program

(Ex 152A: Ali-9-50).

requirement

the

energy

certificate

398

207

The Ministry pointed out that minimizing erosion and sedimentation is a legal obligation under Section 33(2) of the Federal Fisheries Act.

Several other

intervenors recommended that Hydro compensate for losses by funding fishery enhancement facilities or programs (Ex 164; Ex 300; Ex 411A). The

Com mission

concJudes that the

precise amount of compensation for

fisheries impacts cannot be made at this time since the magnitude of the loss has not been estimated. THE

LOSS

THE COMMISSION

ESTIMATED,

HYDRO

RECOMMENDS THAT REQUIRED

WHEN

PAY

THE

GOVERNMENT AN AMOUNT EQUAL TO THE MAGNITUDE OF THE LOSS AND THE FUNDS BE USED TO ENHANCE FISHERIESIN THE REGION.

ALTHOUGH ADDITIONAL DURING

THE

COURSE

MITIGATION OF

THE

MEASURES MAY BE DEVELOPED RECOMMENDED

STUDIES,

THE

FOLLOWING CONDITIONS ARE TO BE IMPOSED.

SEDIMENT LOADS TO MINIMIZED;

WATER BODIES DURING

WASTE MATERIAL BE SUITABLY PREVENTION OF WATER POLLUTION;

CONSTRUCTION

HANDLED

ENSURE

ALONG TRANSMISSION LINES: UNCLEARED FOREST BUFFER STRIPS BE LEFT PARALLELS THE RIVER;

WHERE THE LINE

VEGETATION CLEARING BE MINIMIZED; ACCESS ROADS BE MINIMIZED; ROAD CUTS AND STEEP GRADES BE STABILIZED TO MINIMIZE EROSION, USING SPECIAL TECHNIQUES WHERE NECESSARY; ADEQUATE CULVERTS BE PROVIDED.

399

208

7.0

IMPACTS ON WATER QUALITY AND DOWNSTREAM USERS

7.1

Hydro's Position

The effects of the creation of the Site C reservoir on water quality were estimated by Hydro's consultant as follows: the reservoir will stratify only transiently;! water temperatures near Taylor will rise in July by 2.5-3.2Â°C; suspended sediments and turbidity will be reduced; nutrients, dissolved oxygen, total dissolved solids, hardness and iron will all remain similar to the present condition (52: 8,350-8). Hydro is aware that warmer water temperatures may affect downstream cooling and process water use at Taylor, where maximum river temperatures will reach 15-17Â°C.

But Hydro held that these facilities were designed for

pre-Williston conditions when water temperatures were higher and therefore the impacts would be minimal (Ex 239). On the positive side, warmer water in the summer could provide a better source of irrigation water, and the reduction in suspended sediments should be beneficial to downstream users (52: 8,34-7-52).

Hydro stated that post-approval monitoring and data collection would be more detailed, that temperature monitoring is already underway and that Westcoast Transmission Company Limited data would provide an incentive to establish a baseline for relevant parameters (56: 9,010-3).

Thermal stratification occurs in water bodies when they are quiescent. In warm weather the surface waters are the warmest while in winter the coldest water comes to the top where it freezes into an ice cover. In a headpond or reservoir such as the Site C forebay where there is an appreciable current the water will usually be mixed and the temperature the same from top to bottom. Stratification then will only be a transient phenomenon.

. o~- -::---~

400

209

7.2

The Issues

7.2.1

Water Quality Impacts

The Ministry of Environment agreed with the results of Hydro's study of water quality except regarding the temperature increases, which it felt might be overstated

since

greater

evaporation

might

offset

the

heat

gain

(Ex 152A: B-26). Westcoast Transmission argued that a rise in water temperature of 2.5°C 3.2°C would have serious consequences for the operation of its plant. The highest temperature recorded near Taylor is 17.8°C, and the highest average monthly temperature is 16.7°C (Ex 402; Ex 404).

During cross-examination,

it was made clear to the Commission that the facilities that were completed prior to the W.A.C. Bennett Dam were designed tor intake water temperature of 15.6°C. Since then the plant has doubled its gas capacity and tripled its refinery capacity with its intake system unchanged. The expected impact may be even more severe since with Site C the Pine River water may reach the intake.

Pine River water has greater scale-forming characteristics and is

more turbid than the Peace (99: 16,375-84). The Com missmn concludes that Westcoast Transmission facilities might be affected but the exact nature and consequences cannot be identified at this time.

7 .2.2

Mitigation and Compensation Issues

Westcoast Transmission

argued

that, if

the

problem caused by

water

temperature increases is serious enough, it would have to be remedied by one of the following alternatives: (l) installing a water refrigeration system; (2) installing a larger heat exchanger; (3) installing a larger cooling system. Each of these alternatives would require the expenditure of several million dollars (Ex 402: 5).

Westcoast Transmission, therefore, recommended that

monitoring be carried out to collect the data needed to make a proper assessment of the impacts (99: 16,379-80).

)

401

210

The Com mission concludes that the identification of, and compensation for, impacts

Westcoast

Westcoast and

Hydro

Transmission should

constitute

negotiate

and

COMMISSION RECOMMENDS THAT, AS A PROJECT

CERTIFICATE,

PROGRAM

HYDRO

CONSULTATION

private

resolve.

HOWEVER,

which THE

CONDITION OF THE ENERGY REQUIRED

WITH

matter,

WESTCOAST

TO IN

INSTITUTE ORDER

A TO

IDENTIFY AND MEASURE IMPACTS.

Don

~eck

Holdings Ltd. indicated in a written submission that it holds a water

licence authorizing the diversion of water from the Peace River upstream of Site C. This diversion is for irrigation and is authorized to be accomplished by means of a hydraulic ram. Don Peck Holdings Ltd. is concerned that, if the River is converted to a reservoir, the hydraulic ram will no longer be an effective means of obtaining irrigation water. The Com mission notes that Don Peck Holdings Ltd. did not call a witness to speak to the part of the

its submission dealing with its water licence, so neither

Com mission nor other parties to

cross-examine on this issue.

the hearing had an opportunity to

The submission does not explain what steps Don

Peck Holdings Ltd. has taken to date to install facilities, whether the facilities would work, or what would have to be done if the river were converted to a reservoir. IN THESE CIR CU MSTA N CES, THE COMMISSION RECOMMENDS THAT HYDRO

NOT BE

PECK HOLDINGS LTD.

REQUIRED

PAY

COMPENSATION

DON

402

211

8.0

IMPACTS ON HERITAGE RESOURCES

8.1

Hydro's Position

On the basis of a number of investigations of heritage sites beginning in 1 1974-, B.C. Hydro estimated that 135 to 150 known heritage sites could be adversely affected by the project. On the basis of both prior experience and sampling surveys, approximately one-third of these sites have been identified or located. By far the majority of artifacts identified are stone tools and flakes or chips resulting from stone tool manufacture.

Sites dating back

11,000 years were found in the area (Ex 17: 6-9). Remains of the Euro-Canadian occupation of the region, such as trade goods and the Rocky Mountain Fort and Rocky Mountain Portage House have also been recorded. Seventy percent of the known archaelogical resources have been, or are subject to disturbance (Ex 207; Ex 208). Hydro's consultant acknowledged that the heritage resources in the Peace River Valley are unique for their density and variety. However, Hydro maintained that an acceptable method of evaluating archaeological resources in dollar terms has not been developed (60: 9,686). Hydro argued that no further funding for mitigation or compensation should be undertaken

unless

the

Heritage

Conservation

Branch

can

justify

the

expenditures in terms of the resulting benefits (Ex 209: 8-9). The basis for this position was that about $600,000 has already been spent by Hydro on the most comprehensive heritage impact study by any developer in the province to date.

Hydro commissioned the first impact study of Peace Valley heritage resources in 1974- in the reach between W.A. C. Bennett Dam and the Alberta border. In 1976, two more investigations took place in the Site C area. In 1977 and 1978, an intensive investigation was conducted which sampled 12% of the project area with systematic excavation of eight sites. Results of the latest two years of investigation are reported in Exhibits 207 and 208.

403

212

8.2

The Issues

8.2.1

Physical Impact Issues

The Heritage Conservation Branch of the Ministry of Provincial Secretary and Government

Services

agreed

that

Hydro

has

undertaken

the

most

comprehensive heritage impact study by any developer in the province to date (Ex 259: Section 1.1). In fact, of the heritage sites located, the most significant have been located by Hydro's consultant. These include those at Bear Flats, Farrell Creek, Site HBRH 17, just west of Cache Creek, and the two historic forts in the reservoir area.

The Branch expressed concern about potential

additional damage to, or losses of, heritage resources from post-construction development (Ex 259; 72: 11,586-9). The

Com mission

concludes

that

Hydro's

impact

study

sufficiently

comprehensive to provide the necessary base data for assess:irJ.g the potential loss of heritage resources.

8.2.2

Heritage Values

The Heritage Conservation Branch acknowledged that no acceptable method is currently available for evaluating the economic value of heritage resources, although the Branch is in the process of developing a willingness to pay study, which it hopes will provide the basis for such an evaluation (72: 11,571-2). The Branch's position was that the heritage resources in the project area are unique and have scientific, public, historic, ethnic and economic significance (Exhibit 259: 7).

404

213

Several other intervenors also emphasized the significance of the heritage resources in the Peace River Valley. The Canadian Archaelogical Association referred to these resources as the irreplaceable records of 9,000 years of traditional cultures and the early European intrusion period and indicated that they are an important part of the province's history and identity (Ex 283; Ex 281t). The Com mission recognizes that the heritage resources :iiJ. the Peace Valley have unique scientific, historic and cultural values; it also recognizes the difficult and controversial issues :involved in attempting to determine the economic value of these resources.

The Com mission concludes that the

heritage resource value can only be determined by subjective judgement of the historical and :intangible values of the resource.

8.2.3

Mitigation and Compensation Issues

Hydro's consultant recommended a ten year salvage excavation program. Its key elements include further survey, site assessment, historic and pre-historic site excavation or protection and the analysis and dissemination of the results of the

program.

The program would be designed to conform to the

development phases of the Site C project and provides for sufficient time following construction to monitor the reservoir shoreline for previously unidentified resources and to complete the analysis of the previous years' studies.

The total cost of the program was estimated to be between

$1.9 million and $9.1t million ($1981). The wide range in the estimate is due to

uncertainties concerning the real costs of data analysis, research and reporting (Ex 267). Based on the consultant's recommendations, the Branch drew up a mitigation program, which it estimated would cost $It million. Costs associated with the re-construction of Rocky Mountain Fort and Rocky Mountain Portage House have not yet been estimated (72: 11,568). During cross-examination, the

405

214

witness for the Branch indicated that it has an annual budget of $800,000, and if the Site C project were not to proceed, the Branch would likely not conduct excavation and studies in the Site C area (72: 11,596-8). Other intervenors, in pointing out the unique values of the Peace River VaHey heritage resources, recommended that Hydro be responsible for completing the mitigation program as recommended by Hydro's consultant (Ex 284; Ex 283). The Com mission does not recommend that Hydro be required to compensate for the value of the heritage resources in the region, first, because it is impossible to measure this value and second, because the project does not preclude the immediate excavation of heritage sites prior to the construction of Site

The Com.mission has examined the proposed program and estimated that the effect of an immediate as opposed to protracted program would be to increase the present value of capital cost by ~1.1 million using the hybrid procedure,

~1.0 million using an 8% rate. In view of the fact that Hydro has already spent ~600,000, the Com mission concludes that Hydro should be responsible for only ~0.5 million of this extra capital cost. The Com mission further concludes that Hydro only be required to pay ~0.5 million, if matched or exceeded by funds raised by the Branch through public subscriptions to implement the program â&#x20AC;¢

THE COMMISSION THEREFORE RECOMMENDS AS A CONDITION OF THE ENERGY PROJECT CERTIFICATE THAT HYDRO MATCH FUNDS RAISED BY

THE

EXTRA

GOVERNMENT CAPITAL

COST

THROUGH OF

PUBLIC

SUBSCRIPTIONS FOR

HERITAGE

RESOURCE

THE

RECOVERY

PROGRAM UP TO A MAXIMUM OF~0.5 MILLION DOLLARS.

406 215

9.0

IMPACTS ON TERRAIN AND MINERAL RESOURCES

9.1

Hydro's Position

Hydro in its Environmental Impact Statement (Ex 48) assessed the physical impacts of SiteC on mineral, hydrocarbon and aggregate resources in the area. Coal is known to be present in the Gates Formation, occurring at depths of over 200 meters below the Peace River. Future mining would be unaffected by the reservoir since the Peace River presently covers the deposit. The Wilder gas field is located near the Site C damsite but, except for the possible flooding of one well, it would be unaffected by the damsite. Future drilling would not be affected either. However an eight-inch gas line crossing the Peace River upstream from Site C could be affected by increased bank instability. No oil resources are known in the area; the extraction of future discoveries would not be hindered by Site C even after flooding. A survey of granular resources along the Peace River from the B.C.-Alberta border to Site One showed that large deposits in the area would not be flooded.

The reservoir would cover numerous gravel bars, but this would

represent only about 6% of the estimated total volume of sand and gravel (about 2.0 billion cubic meters) within the area. Hydro argued that both coal and aggregates have no economic significance since their extraction is currently uneconomic because more accessible deposits are available. For these reasons, Hydro argued that neither prior recovery or compensation is required for coal or granular resources. With respect to natural gas, Hydro has not estimated the costs of possible well flooding or pipeline disruption but is now considering detailed mitigation measures.

I I I,

407 216

9.2

The Issues

Virtua11y no presentation were made by intervenors on physical impact, resource value or mitigation and compensation. However, there appears to be general agreement with Hydro's position. The Ministry of Lands, Parks and Housing acknowledged that the large gravel resources remaining above the reservoir fuU supply level wi11 be more than sufficient for future demand. The Com mission concludes that the physical impact on terrain resources and associated economic losses resulting from Site C will be minor. The mining of the Gates Coal Formation is already uneconomic because of its location under the Peace River. Oil deposits are unknown in the area, and future exploitation would not likely be restricted in any case. Sand and gravel losses will occur, but they represent such a small proportion of total deposits in the area that foreseeable requirements could readily be met. The flooding of one gas well and stability problems for a proposed pipeline should be resolved by the parties involved. The Com mission concludes that no mitigation and compensation measures are warranted.

408

CHAPTER XV REGIONAL ECONOMIC AND SOCIAL IMPACTS 1.0

INTRODUCTION

The Site C project will have varying economic and social impacts on nearby towns, on rural residents and on the Indian communities in the region. These impacts will arise from two sources: the economic stimulus created by the construction of the project and the effects of reservoir flooding on physical and natural resources. The economic stimulus will derive from construction of the dam, powerhouse facilities, transmission facilities, relocation of Highway 29 and reservoir clearing.

These components of the project will

require an estimated

5,'+00 man-years of work over a seven-year period (Ex 205:111).

Not only will

this activity directly affect employment and income in the region, but in addition it will induce indirect 'mulitiplier' effects because of local purchases of material, equipment and services, and local re-spending of workers' income. The economic stimulus will also give rise to social impacts through the work force it will attract. The resulting population increase will have effects on housing needsÂˇ and related water, sewage and other municipal infrastructure requirements; on school, hospital, police and other social services; and on the general quality of the life in the area. The project's physical and natural resource effects will have specific regional economic and social consequences in addition to the resource loss implications discussed in Chapter XIV. An estimated 8'+0 ha of land around the reservoir

will be removed from residential use for public safety reasons, thus reducing municipal tax bases. This, together with possible increases in expenditures for

217

409

218

additional

infrastructure

requirements,

will

have

direct

impact

community finances. The flooding of ranching and homestead settlements on the north side of the Peace River will dislocate residents and disrupt their rural lifestyle. For native communities, the reservoir flooding will result in the loss of traditional hunting and trapping land. This, with the increased pressure on wildlife due to the

project-induced increase in

the

local

population, will adversely affect an important element of their economy and culture. The communities and groups most directly affected by the regional economic and social impacts are as follows: The City of Fort St. John - The population of Fort St. John was estimated at 17,000 in January 1980. Agriculture is the largest industry and has exhibited slow but steady growth. Forestry and oil and gas are the two other major industries

(Ex 298:7).

terms

employment,

transportation

and

communications are also significant contributors to the city's economy. The city is one of the focal points for air, rail and highway transportation from southern to northern Canada and Alaska. Significant quantities of raw or semi-processed products such as grain, lumber, veneer and petroleum products are shipped from the area on the B.C. Railway. The city's role in supplying material and equipment for northern industrial development has also been growing in importance (Ex 205:37-9). The Village of Taylor - The population of the Village of Taylor is about 1,200. It is located on the Alaska Highway 15 km southeast of Fort St. John and is also on the Peace River, about 12 km downstream of the proposed Site C dam (Ex 351:1). Petro-Canada's refinery, Westcoast Transmission's gas and sulphur recovery plant and South Peace Wood Products' mill are located in the village. The Village of Taylor operates a municipal water and sewerage system to serve its own population (Ex 205:46 and 68).

410

219

The District of Hudson's Hope - The District of Hudson's Hope is located about 65 km west of Fort St. John on Highway 29. The population was estimated to

be about 14-00 in 1979 and at that time included construction workers employed on the Peace Canyon Dam. The present population is lower because many of these workers left when the project was completed. Settlement is largely concentrated on a bench on the north side of the Peace River although other small concentrations occur at Beryle Prairie and Lynx Creek. Lynx Creek will be flooded by the Site C project. The main settlement of Hudson's Hope has a small selection of local businesses.

An ample supply of vacant land is

available for expansion (Ex 205:4-7). Rural Areas - The rural area surrounding Fort St. John is largely agricultural and is for the most part included in the Agricultural Land Reserve. The areas of extensive settlement are Charlie Lake, Grandhaven and Clairmont. None of these areas has municipal water supply or sewerage system. Charlie Lake, some lt km northwest of Fort St. John, consists of about 4-50 residential dwellings. The rural areas that will be most affected by the project are those along the north side of the Peace River stretching from the proposed dam site upstream to Lynx Creek. Most of the approximately 100 households consist of ranches and homesteads. No permanent residents live on the south side of the river, but the area is used for hunting and trapping (Ex 203:4-1-4-2). Native Communities -The native Indian bands in the regions that will be affected by the project are the Blueberry, Halfway, Doig, Saulteau and West Moberly. The Blueberry River Band is located about 57 km north of Fort St. John on the Blueberry River. There were 115 people on the band list in 1978. Hunting and trapping constitute the primary activities.

411

220

The Halfway River Band is located on the eastern bank of the Halfway Rive~

30 krn from its confluence with the Peace. There were 136 members in

the band in 1978. A ranching operation was begun on the reserve in the early 1960's. The reserve is now a very successful Indian cattle ranch. The Halfway Band also has a vigorous hunting economy largely because of the local abundance of moose. The reserve of the Doig River Band is located at the junction of the Doig and Osborn Rivers. There were 114 members in the band in 1978. Native students from this band attend high schools in Fort St. John despite the long travelling time involved. The band operates a ranch with between 80-90 cattle and 100 horses. The Saulteau Band is located at the eastern end of Moberly Lake. Chetwynd, which is the local service, shopping and employment centre, is_ some 17 km away. There were 186 members in the band in 1978. In addition to hunting moose and deer, the band fishes in Moberly Lake and other smaller lakes and ponds in the area. Ducks and geese are hunted on the smaller lakes and ponds during migration in the fall and spring (Ex 374A: Chapters 5-8). The West Moberly Band, which had 73 members in 1978, is located at the west end of the the lake and has an economy similar to the Saulteau. This chapter presents the evidence and the Commission's conclusions on the nature and significance of the economic and social impacts that will be felt by these urban, rural and native communities as a result of the construction of the project and its physical and natural resource effects.

412

221

2.0

REGIONAL ECONOMIC IMPACTS

2.1

Hydro's

Po~ition

Hydro estimated that the manpower

req~irements

directly associated with

Site C

Highway 29,

reservoir

construction,

relocation

clearing

and

transmission line construction will total about 5,400 man-years, generating a 1 gross income of some $206 million over a seven-year period. During the peak year of construction, an estimated 2,000 workers will be employed. The part of this activity and income that will accrue to regional residents is estimated at 2,400 man years and $128 million over the life of the project. In the peak construction year, about 800 regional residents will be employed (63:10,123-128).

Project-induced expansion in the local service and support sectors is expected to create approximately 200 new jobs in the region during the peak year of construction due to multiplier effects. (Ex 205:144) Total income retained in the region after federal and provincial taxes, taking into account both the direct and multiplier-induced indirect jobs created by the project, is estimated to increase by $121 million over the construction period (63:10,123-5). Hydro estimated that 55% of the total construction work force will come from outside the region.

In the peak year of construction, approximately 1,230

non-resident workers will move into the area. Of this total, Hydro estimated that 1,000 workers would be living in camps located at the project site. The remaining 230 will be living with their families in the nearby areas, principally Fort St. John. As a result of this influx of workers and their families, as well as persons attracted by jobs created in other sectors of the economy, the population of Fort St. John is expected to increase by 870 during the peak year of construction (63:10,124-7).

All values in this chapter are in constant 1981 dollars.

413

222

The operation of Site C when construction is complete will have only a minor economic and population impact. The power plant will be operated by a staff of about 25. This will result in direct income of about $825,000 annually, and a population increase in Fort St. John of about 80 people. Hydro submitted that, in view of current unemployment in northeast B.C., the employment and income generated by the construction of Site C will beÂˇ socially beneficial, but indicated that this has not been explicitly reflected in its benefit-cost analysis. Hydro noted that the general price level in Fort St. John would rise due to buoyant

economic

conditions

during

project

construction

except

for

accommodation, which is in surplus. This will result in a re-distribution of incomes in the region since certain segments of the local population such as those on fixed incomes and those dependent on various forms of social assistance and disability pensions, will experience a reduction in purchasing power. 2.2

The Issues

The following significant issues were addressed at the hearings with respect to the regional economic impact of the Site C project: (a)

The amount of employment accruing to residents as opposed to non-residents.

(b)

The social benefit of Site C-related employment.

(c)

The impact of reduced economic activity in the post-construction phase of Site C.

414 -"'-=

223

2.2.1

Resident vs. Non-resident Employment

An important factor governing the nature and significance of the regional economic impact is the number of jobs that will go to resident as compared to non-resident workers since this has a major bearing on the amount of income that will stay within the region. It also constitutes the primary assumption in projecting population growth and related social impacts. The present agreement between Hydro and the Allied Hydro Council provides the following priority in hiring workers: (I) registered union members in the local areas; (2) registered union members from outside the area; (3) non-union workers from the local area; (4) non-union workers from elsewhere (Ex 209:10). '

Hydro estimated that 39% of the employment for the components of the project covered by the master agreement (the dam and site services) will go to ' regional residents. This estimate was made on the basis of information derived from three sources: discussions with union business agents in the region; the Peace Canyon employment file survey; and a cursory assessment of the regional (Ex 205: 123).

construction

labour supply and demand balance for 1980

With respect to the components of the project outside the master agreement, Hydro's consultant assumed that 100% of the reservoir clearing employment and 50% of the non-construction union employment for highway relocation and transmission line development will go to regional residents. Overall,

Hydro

estimated

that 45%

of the Site C-related construction

employment will go to regional residents. During cross-examination, Hydro's socio-economic consultants agreed that this estimate was primarily based on their polling of local business agents in 1977 and 1980 (67: 10,985). They also agreed that this information is now out-dated because of the altered local economic situation and the increased time lag between the Peace Canyon project and the rescheduled Site C project.

415

224

In order to increase the employment benefits of Site C for regional residents, Hydro agreed in principle to participate in an affirmative employment program for Indians and to work with appropriate government agencies to encourage employment of local residents, hiring of local contractors and purchases from local suppliers. Hydro indicated, however, that the success of such initiatives relied entirely on the willingness of the unions to accept and encourage programs designed to assist and increase resident and native representation in local trade unions. Hydro indicated that such support was not provided at past projects. The Com mission recognizes that the percentage of jobs going to resident vs. non-resident workers essentially determines the regional share of employment benefiJ:.s from the project as well as the magnitude of the project's adverse population-related social impacts. The Com mission concludes that Hydro's estimates of the share of the work that will go to residents are probably no longer reliable, since labour market conditions have changed so much since those estimates were made.

The

Com mission believes, however, that more important and relevant than the Âˇ reliability of certain study estimates, is the development of an agreement to encourage hiring of local residents and purchasing from

local suppliers.

Respecting local hiring in particular, such an agreement will have to be reached by Hydro, the Ministry of Labour and union representatives. On the basis of the evidence at the hearing, the Com mission concludes that Hydro alone currently supports programs designed to encourage local hiring. The Ministry of Labour is supportive in some circumstances but does not appear to perceive a need to improve on the experience of past Hydro projects. The unions appear to be resistant to the idea of increasing non union local hiring.

416

225

Based on the current status of the regional labour market in the northeast of the province, the Com mission is convinced that lJ:Jcal hiring, to a greater

extent than was the case at Site One or the Bennett Darr., could well be the most significant contribution that can be

made towards compensating the

region for the adverse impacts of the construciton of Site C.

THE

COMMISSION

RECOMMENDS THAT

HYDRO

AND

THE

MINISTRY

CONSULT WITH RELEVANT TRADE UNIONS TO FACILITATE INCREASED LOCAL MEMBERSHIP IN THOSE UNIONS AT LEAST FOR THE DURATION OF THE PROJECT.

If the construction of the project were to proceed under such labour market conditions as exist currently, the Com mission would recommend that Hydro pay

for

and administer, in

consultation

with

the

appropriate

unions, an

aggressive program to train local residents and native people in the skills necessary to

participate in

the

construction

of Site C.

The

Com mission

recognizes, however, that labour market conditions may be very different when the project COMMISSION

CANNOT

CONDITION IN TRAINING

RECOMMENDS DETERMINED

is built from what they are today. FOR THIS REASON, THE AN

NOW

ENERGY

LOCAL THAT

RECOMMEND PROJECT

PEOPLE,

THE

IMMEDIATELY

NEED

THE

INCLUSION

CERTIFICATE REQUIRING THE RATHER

FOR

BEFORE

SUCH AN

THE A

COM MISSION

CONDITION

ENERGY

PROJECT

CERTIFICATE IS ISSUED.

2.2.2

The Social Benefit of Si_!:e C Employment and Income

The magnitude of the social benefit of the employment created by Site C will depend on the extent to which jobs .are created at a time of, and for occupations suffering from, unemployment. If persons hired for the project would otherwise be unemployed or underemployed, the social benefits will be consider able.

417

226

In 1980 when the Site C application was made, a number of large projects were scheduled for the same general time frame. It appeared that rather than hire persons who would otherwise be unemployed, the Site C project would in fact compete with other large employers for construction and trade labour. Under such conditions, there would be little regional social benefit from the Site C employment. By the time of the hearings, however, those conditions had changed. Witnesses from the Ministry of Labour indicated that Site C would not create any construction manpower problem. Because of the cancellation and rescheduling of a number of major projects, no labour shortages were anticipated. Indeed, the project would provide welcome relief from depressed labour market conditions in the province. The

Com missiDn

concludes

that

under present

economic

conditions

the

empkJym ent created by Site C would be beneficial to the region and to the province as a

whole.

The Com mission notes, however, that the extent of

social benefits depends very much on the timing of the project. conditions change, so project.

THE

PROJECT

will the magnitude of the social benefits from

COMMISSION

NOT

As economic

RECOMMENDS THAT THE TIMING

GOVERNED

THIS FACTOR,

the

OF THE

BUT STRESSES ITS

IMPORTANCE IN ASSESSING THE OVERALL BENEFITS OF THE PROJECT.

2.2.3

Post-Construction Impact of Site C

At the end of the Site C construction period, employment for the project itself and in businesses that have hired additional staff to cope with project-induced activity will decline sharply. Fort St. John residents expressed concern about the undesirable aspects of a short sharp increase in regional employment followed by a similar decrease, since it could aggravate the problems of what is already a highly cyclical economy. Concerns relating to post-construction impacts were cited with respect to the Revelstoke and Site One projects (Ex 331-2).

418

227

Hydro took the position that the post-construction decline in employment and population is the natural result of a large but temporary economic stimulus, and little can be done to mitigate it (Ex 205: 189-91). The Com mission concludes that, analogous to the issue of the social-benefits of the emplDyment opportunities created by the project, the magnitude of the impacts of the post-construction decline

will depend on the extent of

alternative employment opportunities available at the end of the project, both within and outside of the region. The Com mission does not recommend that the project's timing be determined by this, but that it be considered in assessing the overall impacts and benefits ofthe project. The Com mission concurs with Hydro that few mitigative measures can be taken with respect to any significant post-construction decline other than advising the manpower and employment services as early as possible about the downturn in order to facilitate relocation and rehiring of the workers in other pbs.

3.0

INFRASTRUCTURE AND FINANCIAL IMPACTS ON LOCAL MUNICIPALITIES AND REGIONAL DISTRICT

3.1

t!_xdro's Position

Hydro stated that the population impact of Site C will be felt primarily in Fort St. John. An estimated 280 housing units will be needed there to accommodate project personnel and service sector workers during the peak construction years (63: 10,128). Additional tax revenue will accrue to the City of Fort St. John during project construction due to an enlarged taxable assessment and increased sales of municipally provided services, such as water and sewer.

However, Hydro

expects that incremental revenues will not fully offset the extra operating costs of providing services to an expanded population and forecast a shortfall

419

228

in the general revenue and in the water and sewer utilities funds of approximately $150,800 over the construction period (63: 10,125). Hydro stated that it is prepared to pay $1.1 million toward the cost of developing a new water supply system in recognition of the negative financial impacts and the intangible social impacts caused by Site C. In addition, Hydro has budgeted $400,000 for any municipal administrative costs that can be identified as a charge to the project. Hydro estimated that the influx of Site C construction personnel to the Village of Taylor will be small and hence

p~pulation-related

effects on municipal

finances are likely to be minor (63: 10,125). Hydro did not accept the Village of Taylor's claim that Site C will cause problems at the municipal water intake and therefore accepts no responsibility for

the

additional

engineering

costs

associated

with

its

modification

(116: 18,874). Hydro took the position that population and related impacts of Site C on Hudson's Hope finances will be negligible.

However, based on prevailing

property assessments and mill rates, the flooding of properties in the Lynx Creek subdivision could result in a loss of tax revenue to the district. Hydro agreed that the pump house, water intake and initial part of the distribution system of the water system will have to be replaced because of inundation and will

negotiate

compensation

with

Hudson's

(84:13,519-20).

Hope Hydro

on did

details not

concerning

agree

that

costs

there

and any

uncertainty about the security of the sewage treatment lagoons due to slope stability problems (63: 10,125-8). However, it did agree that any problems that did develop because of the flooding would be its responsibility.

420

229

Hydro contended that no erosion would occur where the shoreline is bedrock (see Figure 5) and that flooding would slightly increase slope stability there (Ex 135). Hydro will construct a protective berm for the overburden bank through the residential area, monitor the slope regularly throughout the life of the project and compensate for any damage caused by bank instability (Ex 132 and Ex 135).

It indicated that all other outstanding issues between the

municipality and Hydro will be settled by negotiated agreements (116: 18,877). Hydro submitted that the construction of Site C will not likely have any significant fiscal impact on the Peace-Liard Regional District (Ex 205: 185). Hydro contended that compensation to the district for project-induced costs should be settled by negotiated agreements (116: 18,877). 3.2

The Issues

The major issues with respect to municipal infrastructure and financial impacts relate to the anticipated additional costs to be borne by local governments as a result of the population influx and reservoir flooding, Hydro's responsibilities in meeting these costs, and the role of negotiations in arriving at settlements. 3.2.1 Fort St. John The City of Fort St. John generally supported the project subject to adequate compensation for project-induced infrastructure costs. The city stated that Hydro's

offer of $400,000

will be sufficient to cover project-induced

administrative costs and that Hydro's proposed $1,100,000 compensation package is adequate, (75: 12,035). The city argued that Hydro should attempt to maximize local benefits from the project by, for example, providing recreational facilities on the reservoir. The council also requested that no

230 421

project-related

residential,

commercial

industrial

development

permitted outside the boundaries of Fort St. John. It felt that a monitoring program

will be necessary to identify unpredictable impacts (Ex 198: 10;

75: 12,116-20).

The City felt very strongly that a public road access should be built across the dam to allow the development potential of the south shore to be realized and to shorten the distance from Fort St. John to Chetwynd (75: 12,004-7). The city argued that such a road would not adversely affect traffic through Hudson's Hope because such traffic is presently largely concerned with recreation and tourism along Highway 29 (75: 12,007). Hydro contended that the decision about a highway across the dam is not one for Hydro to make and in any case the costs should be borne by those requiring the road and not by Hydro's customers (112: 18,257). The Ministry of Highways indicated that it had not yet determined whether a new road between Chetwynd and Fort St. John is required and, if it is, whether it should cross the Peace River at Site C. The Ministry did indicate that, based on preliminary estimates, a new crossing of the Pine River might cost about the same. The Com mission concludes that the City of Fort St. John will face temporary revenue shortfalls as a result of increased administration costs and the provision of additional water and sewage services the city.

However, the

Com mission

concludes

that

the

actual

impact

Site C

municipal

infrastructure and finances will depend in large part on the magnitude and patterns of in-migration into the area, which cannot be determined at this time.

THE

COMMISSION

IMPACTS AND

THEREFORE RECOMMENDS THAT THE

MITIGATION

AND COMPENSATION

FOR

MATTER

THE

FORT ST.JOHN BE REFERRED TO A M 0 NIT ORIN G PROGRAM. the

city

Com mission

satisfied cannot

with

Hydro's

proposed

compensation

CITY

OF OF

Although

package,

the

endorse. this package as a legitimate expense of the

project since it is uncll:ar that social impacts of such magnitude will in fact

422

231

occur.

THE

NEGOTIATED

COMMISSION AGREEMENT

THEREFORE NOT

RECOMMENDS

MADE

THAT

CONDfliON

THE THE

ENERGY PROJECT CERTIFICATE.

With respect to the city's request for a road across the dam, the Com mission concllldes that this is a matter to be raised with, and resolved by, the Ministry of Highways.

Construction of Site C merely provides an additional potential

route for the highway should it be constructed. The dam does not itself lessen

or increase the impacts or desirability of the highway.

The Com mission

concllldes therefore, that planning and costs in respect of such a road should neither be a responsibility of Hydro, nor a matter to be addressed in the Energy Project Certificate.

3.2.2 The Village of Taylor The Village of Taylor testified that it had modified its water intake system in anticipation of Site C. It argued that it should be compensated $50,000 for this. The Village of Taylor obtains its water from the Peace River. The system was built first in the late 1950's, and by the end of the 1970's, it was due for replacement.

During the design stage of the infiltration gallery, which is

located in the river, there was concern that construction of Site C could have adverse effects on the water supply. Therefore, when the new water intake system was built, it was set lower to take care of those anticipated problems (85: 13,786-88).

During cross-examination, the Village's engineering consultant acknowledged that he did not contact Hydro with regard to the intake design. Moreover, he could not identify the source of the minimum flow data on which his design was based (85: 13,804-9). It was further confirmed that the construction of Site One did not cause low flow problems for the Taylor water intake (85: 13,822).

423

232

The Com miss:ion concludes that the changes in the design of Taylor's water intake were not necessitated by the anticipated construction of Site C 0 M MISSIO N

THERE F 0 R E

R E C 0 M MENDS

THA T

H Y DR 0

N0 T

THE BE

REQUIRED TO PAY FOR INCREASED COSTS CLAIMED BY TAYLOR Wrl'H RESPECT TOrrs NEW WATER INTAKE.

3.2.3

The Corporation of the Municipal District of Hudson's Hope

River bank stability problems were cited as a major issue by Hudson's Hope and an association of riverside property owners.

Two distinct geological

conditions within Hudson's Hope had to be considered:

the bedrock bank in

the upstream of the community and the overburden banks further down (see Figure 5, p.l31). A consulting engineering firm hired by Hudson's Hope and the property owners examined both situations. With respect to the bedrock river bank, the consultants disagreed with Hydro's contention that the rate of erosion of the bedrock slopes will be unchanged or improved by the reservoir. On the contrary, they maintained that the effect of the reservoir would be to accelerate the natural weathering or erosion process (85: 13,707-708). It was recommended that (1) there be more detailed examinations of the bedrock strata be undertaken; (2) shotcreting 1 or similar protection of these zones be considered; (3) an ongoing monitoring program be instituted; (4) future drill holes should have their drill cores logged with piezometers sealed into specific strata for determining piezometric levels; (5) all future tests results and data collected be made available to the property owners for review (Ex 327: 11-15).

Shotcreting is a process of placing concrete by blowing it onto a surface to fill cracks and to keep the surface from flaking and cracking.

424

233

With respect to the overburden slopes (Protection Zone A), another five recommendations were made, specifically that: (1) the berm, as described by Hydro,

constructed

along

the

entire

length

of Protection

Zone A;

(2) construction take place prior to reservoir filling; (3) representatives of property owners be allowed to review construction progress; (4) detailed documentation of the existing state of overburden slopes followed by ongoing monitoring be carried out; and (5) additional piezometers be installed and sealed into specific strata between river and reservoir level (85: 13,715-717). Quite different issues with respect to impacts on Hudson's Hope are the loss of private land and related municipal tax base, and the loss of municipal properties and works from flooding in the Lynx Creek area. Hudson Hope submitted that it should be compensated by Hydro for these losses. Hudson's Hope opposed the building of a road across the dam and contended that this would hurt it financially because tourists would be diverted away from the town (84: 13,538). to the stability of the river banks formed by bedrock, the

Wfth respect

Com mission accepts Hydro's contentions and its proposals for monitoring.

The

Com mission concllldes that the program recorr. mended by the consultant for Hudson's Hope is not necessary at this tim e.

THE COMMISSION RECOMMENDS THAT A LICENCE BEDROCK

THAT

BANKS

COMPTROLLER.

HYDRO AS

CARRY

MAY

CONDITION

OUT

SUCH

DIRECTED

OF THE

WATER

MONITORING BY

THE

WATER

THE COMMISSION FURTHER RECOMMENDS THAT THE

MONITORING REPORTS BE MADE PUBLIC AND THAT ANY CORRECTIVE ACTION REQUIRED BE CARRIED OUT BY HYDRO.

Wfth respect to the stability of the overbunden banks, the Com mission found substantial agreement between Hydro and the intervenors.

The Com mission

accepts Hydro's design of the berm and proposals for monftoring.

425

234

THE COMMISSION RECOMMENDS THAT HYDRO COMPLETE THE DESIGN AS

PROPOSED

HUDSON'S

AND

HOPE

MONITOR PART

THE

OVERBURDEN

OF ITS

SLOPE

BANK

STABILITY

AREA

MONITORING

P R 0 G R A M U N DE R THE T E R MS 0 F THE WATER LICE N C E,

WITH

REGARD

THE

FLOODING

MUNICIPAL

LAND

PROPERTIES, THE COMMISSION RECOMMENDS THAT AS A

AND

CONDITION

OF THE ENERGY PROJECT CERTIFICATE, HYDRO PROVIDE FINANCIAL COMPENSATION

THE

CORPORATION

HUDSON'S

HOPE IN

AMOUNT EQUAL TO THE ESTIMATED NET DECLINE IN PROPERTY TAX REVENUE ATTRIBUTABLE TO

LOST LANDl PLUS THE REPLACEMENT

OR REPAIR COST OF MUNICIPAL WORKS, LAND AND FACILITIES THAT WILL BE LOST OR

DAMAGED.

THE COMMISSION

RECOMMENDS THAT

HYDRO AND THE CORPORATION OF HUDSON'S HOPE NEGOTIATE THIS A M 0 UN T

A ND

AGREEMENT

N0 T

REA C HE D

PRIOR

ISSUANCE OF AN ENERGY PROJECT CERTIFICATE, THE

THE

COMMISSION

RECOMMENDS THAT IT BE REFERRED TO THE MONITORING PROGRAM FOR RESOLUTION,

3.2.4 The Peace-Liard Regional District The Regional District, in its presentation to the Commission, raised the issue of its additional planning costs directly attributable to the Site C project. The district estimated the total cost impact would be $39,148 for 1982 and $26,400 for 1983 (Ex 350: 8-12). In addition to compensation for these impacts, the district also requested that other non-quantifiable costs be assessed by the monitoring program (84: 13,648).

In calculating this amount, increased tax revenues due to relocation should be taken into account: " ... to the extent that any residents will locate elsewhere in Hudson's Hope there would be no loss in net terms as taxes would be collected from the resettlement properties" (Ex 330: Sec. 2, p. 4).

426

235

During cross-examination, witnesses for the district acknowledged that a financial contribution will be made to the district through a levy on the camp and buildings used for the Site C project (84: 13,665).

They also found it

difficult to identify items that could be described as intangible impacts. The Com mission concludes that, altl1ough the Peace-Liard Regional District

will incur additional planning costs directly as a result of Site C, it may receive

revenues

COMMISSION

from

Je vy

RECOMMENDS

project

THAT

ANY

construction REMAINING

facilities. SHORTFALL

THE IN

REGIONAL DISTRICT REVENUES BE DEALT WITH BY THE MONITORING PROGRAM.

THE

COMMISSION

ALSO

RECOMMENDS THAT

HYDRO

RESPONSIBLE ONLY FOR THE NET COST TO THE DISTRICT AND NOT BE REQUIRED

PAY

COMPENSATION

FOR

UNDEFINED, INTANGIBLE

IMPACTS.

4.0

SOCIAL SERVICE IMPACTS

4.1

Hydro's Position

Hydro estimated that by 1985, the peak year of project construction and employment, the project-induced population growth in the Fort St. John area will create the need for one to two additional ambulance attendants, two doctors, seven hospital beds, one dentist, one public health nurse, one clerk at the Ministry of Human Resources. One part-time social worker, about nine teachers and seven classrooms, and at least one more probation officer will be needed, depending on the number of transients. In effect, the Site C project will require Fort St. John to provide services to meet the needs of a larger population about four years earlier than would be expected without the project. Hydro noted that there is presently a shortage of medical doctors and that this problem will become more acute with Site C (63: 10,107-10).

427

236

Hydro argued that many social service costs associated with Site C that are a provincial government responsibility, such as health services, would be incurred by the province regardless of where workers and their families would be living. Hydro therefore concluded that these costs cannot be .considered the direct result of Site C. 4.2

The Issues

The major issues with respect to social service impacts relate to the magnitude of the impact, the extent to which Site C would be responsible, the measures that should be undertaken, and who should undertake them. 4.2.1

Health and Hospital Service Impacts

The Fort St. John Hospital presented evidence on anticipated hospital and health service issues in relation to Site C. The Fort St. John Hospital has

10~

in-patient beds. At the present time 15 beds have been taken out of service. The Hospital expressed concern about (l) the 15 beds presently out of service being needed as a result of the project, (2) the general lack of funds for hospital services; and (3) possible future operating deficits attributable to Site C; and (4) the difficulty of recruiting medical doctors. It recommended that the monitoring program identify and respond to future project-induced impacts on hospital services. The Com mission concludes that while it is impossible to predict, in advance, the extent of the impacts on health and hospital services that will be caused by Site C, the project; will clearly have impacts on these services. While the Com mission notes that the provision of health and hospital services is a responsibility

of the

provincial

Com mission concludes that attributable to the project.

government and hospital districts, the

Hydro should be responsible

for the

costs

428

237

THE

C 0 M MISSIO N

RESPONSIBILJ:I'Y DETERMINED FURTHER

R E C 0 M M EN D S

FOR

HEALTH

THE

T HA T

AND

MONJ:I'ORING

RECOMMENDS

THAT

THE

EXT EN T

HOSPJ:I'AL

SERVICE

PROGRAM.

HYDRO'S

THE

H Y DR 0 'S COSTS

COMMISSION

RESPONSIBILJ:I'Y

THE

MATTER BE CAREFULLY LIMJ:I'ED TO REIMBURSEMENT FOR THE EXTRA HEALTH AND HOSPJ:I'AL SERVICES REQUIRED AS A RESULT OFSJ:I'E C.

4.2.1 Other Social Service Impacts Little specific evidence was presented on other social service impacts, such as human

resources and

education, except for

Hydro's

impact

estimates.

Intervenors were generally concerned that those impacts be monitored and dealt with. THE

COMMISSION

SOCIAL

SERVICE

PROGRAM. HYDRO'S

RECOMMENDS THAT IMPACTS

WHEN

MITIGATION

THE

REFERRED

ASSESSMENT TO

AND IF SUCH IMPACTS CAN OF

RESPONSIBILJ:I'Y

COMPENSATION

THE

OTHER

MON.ITORING

BE IDENTIFIED AND

DETERMINED,

MEASURES SHOULD

APPROPRIATE BE

TAKEN

H Y DR 0 'S EXPENSE.

5.0

SOCIAL IMPACTS ON THE RURAL COMMUNITY

The rural communities of Charlie Lake, Grandhaven and Clairmont might experience some social impacts. The Â·Site C project will more directly affect the approximately 100 households in the Peace River Valley from the dam site to Hudson's Hope.

About

17 families whose houses are inside the safeline, will have to leave their homes. For the others, either part or all of their land will be flooded, and they will have to make major accommodations.

Indeed, the viability of their

continuing in the same locations may be doubtful and will have to be determined on a case-by-case basis.

429 238

The Commission heard a good deal of evidence on these impacts, including the loss of homes and enforced changes in lifestyle, and believes that such disruption constitute the most significant direct social impact of the project. The social impact began in 1956 when the flood reserve was put on the valley from the Alberta border upstream to the head of Williston Lake. Insofar as the Site C reservoir is concerned, concerns were greatly intensified when actual investigations began in the early 1970's.

These concerns were not

limited to those living in the Site C area, but included those in the Site E area. It was apparent from evidence given at the hearings that some intervenors were unsettled by Hydro's Board of Directors' continuing unwillingness to relinquish the flood reserve on lands below the Site C area. The Com mission conc]J.ldes that the prospect of the construction of the Site C pro~ct has already had a disrupting social effect on the people Jiving in the

part of the Peace River Valley that would be flooded. The Com mission further conc]J.ldes that the retention of the flood reserve on the lands below Site C continues to be disruptive and an obstacle to agricultural development.

The Com mission recognizes that the disruptive social impacts in the Site C reservoir are inevitable and cannot be mitigated to any significant degree. The people affected must be compensated for their losses.

The Com mission

conc]J.ldes that this can only be done by Hydro in negotiating with each person

or family affected.

BECAUSE

OF THE

CONTINUING

DISRUPTIVE EFFECT OF THE FLOOD

RESERVE, THE COMMISSION HAS RECOMMENDED IN CHAPTERIX AND XIV THAT THE FLOOD RESERVE ON THE PEACE RIVER VALLEY FROM THE ALBERTA BORDER TO SITE C BE REMOVED.

430

239

5.1

B.C. Hydro's Land Acquisition Program for Site C

At the request of the Commission, Hydro submitted documents and files relevant to its land acquisition program for Site C (Ex 287). The Site C land acquisition program dates back to 1971 when Hydro's general manager requested the land department to estimate the cost of acquiring land between the proposed Site One dam and the Alberta border. In 1975, social consultants for Hydro held meetings with local .residents, offering information on Sites C and E. In the following year, Hydro began to ask property owners permission to enter their properties for drilling and exploratory work. At this time, Hydro had become aware of the unfortunate, unfavourable publicity that these activities had generated in the local communities due to misunderstanding and confusion. A public meeting was held in Fort St. John attended by representatives of Hydro management.

Subsequent to this

meeting, Hydro management approved, in principle, a general offer to purchase at fair market value all private lands below the safeline, with an offer to lease back the land to each rancher or farmer at an annual rent of about 3% of the sale price. In 1977, several property owners approached Hydro's Property Division with a request to be bought out. It was proposed that in addition to the lease-back arrangement, sellers be offered a right of first refusal to buy back the property at the original purchase price if the project were abandoned. Hydro's management approved these proposals. Unfortunately, Hydro's willingness to include this buy-back provision was not made known to all property owners until 1980 when Hydro's final land acquisition policy was made public. That policy was in turn withdrawn after the Utilities Commission Act was proclaimed, pending the issuance of an Energy Project Certificate for Site C.

431

240

5.2

The Issues

The timing of Hydro's land acquisition program as well as the terms they included were sources of major concern to many local residents, particularly those whose lands were directly at issue. The terms of reference do not allow the Commission to dictate either the timing of acquisitions or the amount of compensation to private land owners in the area. Both are matters for private resolution between Hydro and affected parties. Hydro frankly acknowledged that the system employed at Site C was not a success and created unnecessary apprehension in the community. The

Com missiDn

concludes that the

most important attributes of any

acquisition program is consistency and urges Hydro to make every effort to he fair in the way it acquires additional land if Site C goes ahead and in the way it disposes of land not ultimately required for the project.

6.0

SOCIAL AND ECONOMIC IMPACTS ON NATIVE COMMUNITIES

6.1

Hydro's Position

Hydro's social consultant identified the Blueberry, Doig, Halfway, Saulteau and West Moberly bands as the native communities most likely to be affected by the project. In 1978, their total population was 624. The consultant testified that there is a strong subsistence economy in the area, based largely on hunting and trapping activities, and that the native people are generally concerned about development in the region because of loss of wildlife habitat, increasing pressure on the wildlife resource from recreational hunters, and the social and community problems that arise from major development projects. The consultant concluded that the Site C project will not create new social problems for the Indians, but will exacerbate existing ones (Ex 203).

432

241

Hydro's general position was that while it recognizes the concerns of the native people, these concerns largely relate to matters beyond the scope of Site C, and that the impact of Site C in itself will be small. Hydro indicated that, in its view, the specific recommendations of the Treaty 8 Tribal Association to the Commission to protect their lifestyle are beyond its responsibility and outside the scope of these hearings (116: 18,948). 6.2

The Issues

Three basic issues were raised by the Treaty 8 Tribal Association on behalf of the Indian bands that could be affected by the project. The first was the survival of the native subsistence economy in light of Site C and other development projects in the region. The problem is not simply one of assessing the impacts of Site C, but whether and how one

~hould

assess these impacts in

the context of the cumulative effects of all development projects on Indian people.

The second was the substance and status of Treaty 8, and the

protection it affords to native hunting and trapping rights.

The third

concerned the proposed mitigation and compensation measures, including matters related to the protection of wildlife. 6.2.1

Survival of the Native Subsistence Economy and Role of Site C

Witnesses for the Treaty 8 Tribal Association testified that there is a strong traditional economy based on hunting and trapping. The major wildlife species hunted by the Indians is moose. An estimated one pound of meat per person a day is consumed (90: 14,732-3).

The witnesses argued that this traditional

subsistence economy is currently under a great deal of pressure as a result of development projects in northeastern B.C. Increased recreational hunting

433

242

pressure was cited as the greatest threat to the Indians resource base. It was argued that, despite the flexibllity of native hunting, the present situation is grave and the survival of the subsistence economy is in doubt. Three types of impacts that could affect native hunting were identified (91: 14,925-36). First, the flooding of the reservoir will result in the loss of some wildlife habitat. Second, the valley will be lost as a wintering and calving range for moose. Third, recreational hunters may move further into Indian hunting territories when they are displaced from the Site C area. This would be aggravated if there were a road across the dam, since that would give recreational hunters additional access to Indian hunting territories on the south side of the Peace River. Witnesses for the Tribal Association testified that the real significance of these Impacts can be appreciated only when the impacts of Site C are considered in the context of all the accumulated impacts on the native subsistence economy and their way of life. It is only from this point of view that the Indian's concerns can be properly understood (91: 14,914-6). The Com mission concludes that the historical conflict between the Indian subsistence economy and the developrr. ent plans for the provincial economy is not

within

the

Com mission's

terms

reference.

The

Com mission's

responsibilities are to assess the impacts of the Site C project.

The Com mission concludes that while the impacts of Site C will be relatively sm an. on a provincial scale, they win. be significant to the native population of theregiDn.

THE COMMISSION RECOMMENDS THAT THE SOCIAL IMPACTS

OF SITEC AS WELL AS THE IMPACTS ON NATIVE HUNTING, TRAPPING AND

FISHING

PROGRAM.

ACTIVITIES

DEALT

WITH

THE

MONITORING

434

243

The Com mission concludes that the question of the cumulative impacts of development projects on the native economy should not be addressed by a Site C monitoring program or by any specific conditions in the Energy Project Certificate.

Nevertheless,

while the

Com mission does not believe

Site C

should be used as a focal point for general native concerns, THE C 0 M MISSION R E C 0 M MENDS

THAT

THE

E VIDE N C E

SUBMITTED

THE

T REA T Y 8

TRIBAL ASSOCIATION BE CAREFULLY REVIEWED AND CONSIDERED BY THE

APPROPRIATE

FEDERAL

AND

PROVINCIAL

MINISTRIES.

The

Com mission concludes that consideration of the role of native groups in the protection and

management of wildlife resources in the region is vitally

important to the native people.

6.2.2

Role and Status of Treaty 8

' The Treaty 8 Tribal Association presented a panel of witnesses that addressed

the issue of the legal status of Treaty 8. They argued that the Indian people understood the signing of the treaty to have provided protection for their

â&#x20AC;˘

hunting and trapping, and fishing and gathering rights (91: 14,854). The testimony of a number of witnesses indicated that the text of the treaty does not reflect the understanding that many of today's Indian people obtained from their forefathers through oral tradition.

The Indian people today are not

rejecting the treaty itself, although they certainly reject it in terms of what is written in the text (91: 14,860-9). They maintain that the treaty should be read to embody the protection their forefathers thought they had obtained when the Treaty was signed. In a separate presentation, the United Native Nations, suggested that the land title and treaty status should be settled before any new development is allowed to proceed (100: 16,429-46; Ex 406).

)

435

244

The Com mission concludes that it is not the appropriate body to interpret the true meaning of Treaty B; that issue must be resolved in other forums. The meaning of Treaty 8 is of significance not just to energy projects but also to an competing uses of land in areas of the province covered by Treaty B. This Com mission clearly is not in a position to resolve such a broad issue and is not requh:ed to do so by its terms of reference. Treaty 8 recognizes that the Indian people had a unique relationship to the land.

The Com mission concludes that because of this relationship, Indians

should be compensated for adverse impacts arising from alternate land uses. Since they once enjoyed exclusive use of the land, the Com mission further conclJldes

that

such

compensation

willingness-to-be-compensated

basis

and

should not

based

wi11ingness-to-pay.

on 1

a With

respect to wildlife impacts, this suggests to the Com mission that for native people, wildlife losses must be compensated in kind; monetary payÂˇments alone will not suffice.

6.2.3

Mitigation and Compensation

The Tribal Association recommended a number of mitigation and compensation measures. To mitigate the impact of increased recreational hunting pressure, it recommended that vehicles should be prohibited from crossing the dam and gaining additional access to the hunting territories south of the Peace River. It also recommended that the government place severe restrictions on recreational hunting in the heartlands of the Indian hunting territories. The Association also recommended that Indian people be given the opportunity to participate actively in the management of the wildlife resources in the Treaty 8 area of northeastern B.C.

See pp. 147-8 for further discussion.

436

21+5

Finally, the native witnesses urged that mitigation and compensation programs and monitoring activities should be designed and implemented by the native communities themselves. The

Com mission

adequately

concludes that the native people should be compensated

where

impacts

can

identified.

With

respect

adequate

compensation, two matters need to be clarified.

First, with respect to the project's potential impacts on the Indians' hunting economy,

measures

compensated in kind.

should

taken

that

the

Native

Indians

are

The Com mission believes this can be achieved through

the Fish and Wildlife Branch of the Ministry of Environment.

The regional

wildlife biologist of the Branch testified that the nativesâ&#x20AC;¢ take of wildlife has been taken into account in regional wildlife management.

The method used

' and the results obtained were compatible with the data supplied by the Treaty 8 Tribal Association's witness. IN 0 R DE R T 0 MAKE SURE THAT THE INDIANS ARE COMPENSATED IN KIND, THE COMMISSION RECOMMENDS THAT

THE

COMPENSATION

DETERMINED

CONSULTATION

THE

PACKAGE

FISH

AND

FOR

WILDLIFE

IMPACTS

BRANCH

AFTER

WITH THE NATIVE PEOPLE AND THAT THE PACKAGE

PROVIDE FOR THE INDIAN'S CONSUMPTIVE USE OF WILDLIFE. relating to recreational hunting restrictions provincial

government

officials.

The

must be raised

issuance

Matters

Clixectly

Energy

with

Project

Certif:ir:ate for Site C should not be tied to such restrictions.

Second, the Com mission impacts of Site in the region.

is not persuaded that there are likely to be any social

that would justify Clixect monetary compensation to Indians

Their own testimony clearly suggests that mitigation programs

designed to reduce impacts are far more useful than monetary compensation payments after the impacts have been experienced.

ACCORDINGLY, THE

COMMISSION RECOMMENDS THAT HYDRO OR THE MINISTRIES NOT BE REQUIRED T 0 MAKE A N Y DIRECT P A Y MEN T S T 0 THE N A TIVE P E 0 P L E.

437

246

The Com mission tried

without success to obtain specifics from

the native

people regarding the nature and magnitude of potential social impacts.

The

Com mission concludes that it is not possible to determine these impacts in advance.

THE COMMISSION RECOMMENDS THAT THE INDIANS REPORT IMPACTS TO THE MONITORING PROGRAM AND SUGGEST REMEDIAL MEASURES. THIS IS IN

ACCORDANCE

DESIRE TO BE ALLOWED TO COMPENSATION

MEASURES

HYDRO THE

M 0 NIT 0 RING A U T H 0 RIT Y.

THE

NATIVE

DEVELOP THEIR

MEASURES.

RECOMMENDS THAT THESE

WITH

THE

BE DIRECTED EXTENT

THEY

PEOPLE'S

0 WN

EXPRESSED

MITIGATION

COM MISSION TO

AND

FURTHER

PROVIDE FUNDS FOR

ARE

APPROVED

THE

438

CHAPTER XVI MONITORING PROGRAM 1.0

INTRODUCTION

A monitoring program for the Site C project was recommended by Hydro and intervenors. The Commission concurs with this proposal. In Chapters XIV and XV, the Commission recommended that a number of matters be referred to such a program. In this chapter, recommendations are made regarding the scope, structure and responsibilities of a monitoring program. While many intervenors spoke about the role and importance of monitoring, only two provided comprehensive recommendations for a monitoring program. The Professional Development Advisory Committee, a group representing several social service agencies in Fort St. John, presented its proposals for a monitoring program.

This group's study on monitoring was funded and

endorsed by Hydro. A panel of experts called' on behalf of Hudson's Hope, Taylor, Dawson Creek and the Regional District presented its analysis of how a monitoring and impact management program could best be structured. 2.0

HYDRO'S POSITION

Hydro recommended that a socio-economic impact monitoring program be established in the City of Fort St. John and proposed that the details of the program

developed

consultation

with

the city

along

the lines

recommended by the Professional Development Advisory Committee (PDAC) in Exhibit 308.

Hydro pointed out that the city and PDAC proposals are

basically in agreement. The objectives of the monitoring program outlined in the PDAC submission include assessment of the community's needs, measurement and identification of actual impact, impact management, provision of information to the community, and verification of compliance with mitigation measures.

247

I''

439

248

The

monitoring

structure proposed

by the PDAC

would consist of a

three-person staff, a monitoring committee representing local services and communities, as well as Hydro, and an impact management board consisting of senior representatives of the City of Fort St. John, provincial government agencies, Hydro and the monitoring committee. The staff would report to the monitoring committee, who would be responsible for directing the program, including deciding on mitigation measures within specific expenditure limits. The impact management board would meet to resolve disagreements referred to it by the committee and would verify compliance with agreed-upon mitigation measures.

PDAC recommended an arbitration board be set up,

consisting of one to three top level Cabinet appointees or members of the Utilities Commission, who would have authority to issue binding orders to Hydro and provincial ministries. 3.0

SUMMARY OF ISSUES

Establishing an effective monitoring program requires the resolution of the following matters: purpose of monitoring; scope of program; structure and responsibilities; and funding. 3.1

Purpose of Monitoring

Hydro and intervenors identified a variety of objectives for a monitoring program. They generally agreed that it should try to resolve or mitigate impacts and investigate grievances, but they did not always identify the precise purpose of monitoring.

440

249

The Com mission believes that for a monitoring program to be successful, the rationale for specified.

monitoring and the purposes it can serve

First, a

mechanism

must be clearly

or process is required to deal with project

impacts that have not been resolved by specific terms and conditions of the Energy Project Certificate because they can be more appropriately dealt with as they arise during the course of the project.

Monitoring, in this case, serves

as an alternative to resolving impacts before the certificate is issued. It is a necessary or preferred alternative when

(1) the nature of the impact is

inherently uncertain and can only be assessed as the project is undertaken, or (2) the impact can, in principle, be assessed, but the data is insufficient to derive reasonable and well-informed conclusions on its nature and magnitude and, deferral is prudent because the costs of advance assessment would be large relative to the general magnitude and significance of the impacts, or (3} unanticipated impacts might arise that will be capable of resolJ.ltion once

they are identified.

Second, a process is required to verify compliance with conditions specified in the Energy Project Certificate.

Compliance can only be ascertained when the

conditions are implemented.

The Com mission has recommended in Chapter XIV that an additional function of the monftoring program be to determine the appropriD.te compensation for lost fishery resources.

The Com mission has done so because Hydro's evidence

on fishery impacts was deficient. WITH

THIS

DEFICIENCY

P R 0 G R A M,

THE

HEARINGS,

SUCH

WHILE THE

REFERRING

C 0 M MISSIO N EVIDENCE

COM MISSION IT

R E C 0 M MENDS

IMPACTS

THE T HA T

HAS DEALT MONITOR.ING IN

SUPPLIED

FUTURE WITH

THE

APPLICATION.

The Com mission believes it would be inappropriate to establish an open-ended monitoring program that could be used to serve a wide range of community or resource planning purposes. MONITORING

PROGRAM

THE BE

C 0 M MISSION

ESTABLISHED,

R E C 0 M MENDS THAT CLEARLY

DESIGNED

A TO

441

250

SERVE

THE

UNRESOLVED

TWO

PURPOSES

IMPACTS

OUT.LINED

THAT

HAVE

ABOVE BEEN

DEAL

WITH

DESIGNATED

FOR

M 0 N rr 0 RING 0 R WERE UN A N TICIP A TED A N D T 0 VERIFY C 0 M P LIA N C E WrrH THE CONDITIONS OF THE ENERGY PROJECT CERTIFICATE. COMMISSION

FURTHER

SUBJECT TO THE

RECOMMENDS

MONITORING

THAT

PROGRAM

HYDRO

AS A

FUND

CONDITION

THE

AND

OF THE

ENERGY PROJECT CERTIFICATE.

3.2

Scope of Program

Hydro recommended that the monitoring program's scope be limited to socio-economic

impacts

Fort

St. John.

Hydro

agreed

that

other

municipalities should have access to the monitoring programs if problems arise outside Fort St. John, but they should not assume that the cost of any ad hoc monitoring would be reimbursed by Hydro. The City of Fort St. John also recommended that the program be restricted to the Fort St. John and Taylor area. It expressed concern that, if the program is responsible for too wide an area, specific problems in the city may be overlooked. Hudson's Hope and Dawson Creek submitted that the monitoring program should have a broader scope so it could resolve whatever impacts might arise in their communities. Representatives from provincial government ministries did not comment on the geographical scope of monitoring, but did contend that the monitoring program should not be involved in matters about which a ministry and Hydro had reached agreement. Professor Andrew Thompson, an expert witness on monitoring called by the municipalities in the region, suggested that the scope of the program should include all areas and impacts as required.

442

251

The Com mission conclJ.ldes that, to accomplish the purposes outlined in Section 3 .1, the scope of the monitoring program m ust be sufficiently broad to deal with all impacts designated for monitoring.

The following specific

matters have been referred to the monitoring program for determination: 1.

identification of, and appropriate mitigation and compensation for, financial and infra-structure impacts of the construction on the City of Fort st. John;

identification of, and the appropriate mitigation and compensation for, the tax revenue foregone by the Corporation of Hudson's Hope arising from land use preclJ.lded by the project and for damage if any to property caused by the project if agreements cannot be reached prior to the issuance of Energy Project Certificate; '

identification of, and the appropriate amount of compensation, if any, for net increased planning costs of the Peace-Liard Regional District attributable to the project;

.identification of, and appropriate mitigation and compensation for, the impacts on health and hospital services in Fort St. John;

identification of, and appropriate mitigation and compensation for, impacts if any on other social services in the region;

identification of, and the appropriate compensation for, impacts of highway relacation and transmission line develapment on wildlife;

identification of, and appropriate mitigation and compensation for social impacts on the native people in the region;

443

252

determination of compensation for the project's impact on fisheries based on studies as recommended in section 6.2.1 of Chapter XIV.

Intervenors expressed considerable concern regarding impacts which are at

this time wholly unanticipated. The Com mission concludes that in the area of construction impacts, there are a number of unforeseeable effects that will undoubtedly arise.

Many of these can be dealt with on an individual basis as

they, occur and, consequently, are ideal for a COMMISSION

THEREFORE

CONSTRUCTION

PHASE

RECOMMENDS THE

PROJECT

monitoring program. THAT,

WHERE

CAUSES IMPACTS

THE THE NOT

ANTICIPATED IN THIS REPORT, AFFECTED PARTIES BE AT LIBERTY TO T A K E THE M A T T E R UP WITH THE M 0 NIT 0 RI N G P R 0 G R A M.

On the other hand, the Com mission does not believe that the long-term effects of fl.Doding the Site C reservoir should be subject to ongoing review under the monitoring program. The Com mission draws two distinctions between impacts which are caused by the construction phase of the project and impacts caused by flooding. First, the Comptroller of Water Rights has ongoing responsibility respecting many reservoir impacts, and the Com mission does not believe that another level of review is required or desirable. Second, even with the benefit of hindsight, the effects of flooding the lD.nds in the reservoir area will never be completely identified and the potential for further unanticipated effects in the future will always remain. m onitori.ng program

The Com mission does not believe that any

will be better able to determine the actual effects of

fl.Doding than the Com mission can now.

For these reasons, the Com mission

concludes that .it has the responsibility to provide certainty to all parties by determining the appropriate compensation measures wherever possible.

With

the exception of the few specific matters listed above, which are expressly referred to the

monitoring program, the

Com mission has determined the

appropriate compensation for impacts attributable to flooding.

444

253

The Com mission also concludes that the issues to be dealt with by monitoring should be matters of public rather than private concern.

Private disputes

should be dealt with through private negotiation and settlement. This is not to say that the monitoring program, with its information and communication resources, cannot assist individuals or Hydro in reaching private agreement. Nor is it to suggest that private individuals who are affected by impacts of a public or general nature should not be able to approach the monitoring program to seek corrective measures. Rather, it is simply to emphasize that private matters that cannot he demonstrated to he of public concern require private resolution. With respect to the compliance function of monitoring, the Com mission concludes that the scope of the program should include all conditions of the Energy Project Certificate.

The

Com mission, does not believe that the

monitoring program should serve an inspection function.

The Com mission

accepts the view that where a ministry or local government and Hydro are working together to implement a condition of the project, the monitoring program need not oversee their activities.

Nevertheless, the program should

he available to resolve disputes when a disagreement arises as to whether a condition has been properly im ple men ted. This could happen with respect to any condition of the Energy Project Certificate, and the m onitori.ng program should he broad enough to handle such eventualities. Finally, the Commission notes that most of the matters referred to the program arise out of the construction phase of the project. ACCORDINGLY, THE C 0 M MISSIO N R E C 0 M MENDS T H A T THE

M0 NIT 0 RIN G P R 0 G R A M

TERMINATE UPON COMPLETION OF THE PROJECT.

At that time, the

m onitori.ng com missioner will have to make a final determination regarding matters that have been referred to him that will have ongoing effects.

445

254

3.3

Structure and Responsibilities

Participants in the hearings emphasized that the structure and composition of the monitoring program is critically important in determining its success. In

his

submission

behalf

the

local

municipalities,

Professor

Andrew Thompson observed that: Perhaps the most damning criticism of the Revelstoke situation is that the institutional structures for impact mitigation and compensation which are required to justify postponing decisions were not adequately thought out ..â&#x20AC;˘ In particular, no satisfactory explanation has been advanced for placing the monitor within the hierarchy of the regional district and without access to the Water Comptroller. This isolated him from Hydro and from the provincial bureaucracy --the only bodies capable of taking prompt mitigative action ... Similarly the time consuming and inefficient treatment of complaints by the various communities shows how little attention was paid to the design of decision-making procedures (Ex 333:33-4).

The Professional Development Advisory Committee recognized the need for accessibility to the public, for close liaison with local and provincial social service agencies, and for direct contact with the major parties involved, including Hydro and the local and provincial government. In its proposal, the staff would provide accessibility to and from the public, the impact monitoring committee would provide the close liaison with local and provincial social service agencies, and the Impact Management Board would provide the direct contact with the major parties involved. The

Com mission

recommended

concludes the

bureaucratic structure.

PDA C

that can

the be

goals

of the

achieved

with

monitoring a

less

program

cumbersome

446

255

The Com mission concludes that the monitoring program should be structured so as to be readily accessible to the public and to local provincial ministries and agencies, in order to be well informed on all impact areas for which it is responsible; to be free of bureaucratic burden; and to have clear lines of communication and authority to enable it to discharge its responsibilities quickly and efficiently.

THESE

ENDS,

RESPONSIBILITIES

THE OF

COMMISSION

THE

RECOMMENDS

MONITORING

PROGRAM

THAT SHOULD

THE BE

CARRIED OUT BY A MONITORING COM MISSIONER (APPOINTED BY THE CABINET, PURSUANT TO SECTION 25.1 OF THE UTILITIES COMMISSION ACT, AS AMENDED TO JULY 11, 1982), AIDED BY A SMALL OFFICE STAFF.

man or

The

woman

appointed

will require

t!_Je

adjudicative rather than analytical function.

authority to perform

The monitoring com missioner

should have the authority to hire consultants to assist on technical matters as required.

The monitoring com missioner should establish an office in Fort St. John and make his presence known to the communities and government representatives in

the

area.

All

disputes

or concerns

with

respect

unanticipated

construction impacts or impacts designated for monitoring, and all disputes about

compliance

with

the

specific

conditions

of the

Energy

Project

Certificate, should be referred to the monitoring com missioner for resolution. Me m hers of the general public and representatives from local and provincial government agencies and departments or ministries should be able to refer such Âˇmatters to the com missioner.

.j\ Upon

receiving

monitoring

notice

of an

com miss.funer

must

apparent impact take

steps,

requiring

resolution,

consultation

with

the

.i/ if

the

complainant, Hydro and other interested parties, to assess(l) whether the impact is a matter within the purview of the monitoring program; (2)the

ÂˇII ,I !I

!'.ill

,!i

447

256

nature and magnitude of the impact; (3)the extent Site C is responsible for the impact and (4) mitigation or compensation measures, if any, that should be taken in respect of the impact.

Upon receiving nC?tice of a dispute over compliance with a condition of the Energy Project Certificate, the

monitoring commissioner

must take steps

(1} to assess the nature of the disagreement; {2) to determine

whether the

conditions had been satisified and ( 3) to decide what, if any, further measures are required for compliance.

The

Com mission

does

inter-agency committee assessments.

monitoring

bureaucracy

or large

is needed to assist the monitoring com missioner in his

AND SMALL STAFF DRAW, AS FAR

RESOURCES

COMMISSION

believe

THE COMMISSION RECOMMENDS THAT THE MONITORING

COMMISSIONER THE

not

EXISTING

RECOMMENDS

MINISTRIES

THAT

AS POSSIBLE,

AND

EACH

AGENCIES.

RELEVANT

ON THE

PROVINCIAL

MINISTRY DESIGNATE A PERSON, PREFERABLY LOCATED IN THE FORT ST.JOHN

AREA,

WHO

WOULD

BE AVAILABLE TO

RECEIVE REQUESTS

AND PROVIDE WHATEVER INFORMATION AND DATA IS REQUIRED BY THE

MONITORING

GOVERNMENTS

COM MISSIONER

AND

AGENCIES,

HIS

WELL

ASSESSMENTS. AS

HYDRO,

LOCAL

SHOULD

DIRECTED TO DO THE SAME. IF THE INFORMATION AVAILABLE FROM THESE

EXISTING SOURCES PROVES INSUFFICIENT, THE

COM MISSIONER

SHOULD

ABLE

COM MISSION

MONITORING STUDIES

EXAMINE SPECIFIC ISSUES.

THE

COM MISSION

C 0 M MISSIO N E R

RECOMMENDS

H A VE

THE

THAT

A U T H 0 RIT Y T 0

THE

0 R DE R

M 0 NITORING

H Y DR 0

TAKE

SUCH MEASURES AS ARE DETERMINED TO BE APPROPRIATE THROUGH HIS ASSESSMENTS AND TO ADVISE THE APPROPRIATE MINISTRIES OF THE

NECESSARY

COMPENSATION CONDITIONS

ACTION, PRINCIPLES THE

BASED

USED

ENERGY

THE

FOR

PROJECT

MITIGATION

AND

ESTABLISHING

THE

CERTIFICATE.

THE

M 0 NITORING COM MISSIONER'S DECISIONS SHOULD BE SUBJECT TO

448

257

APPEAL.

PROVIDE

APPROPRIATE

PROCEDURE,

THE

COMMISSION RECOMMENDS THAT THE MONITORING COMMISSIONER BE A

TEMPORARY

C 0 M MISSIO N. THEN

PERMANENT

THE

B.C.

UTILITIES

M 0 NIT 0 RIN G C 0 M MISSIO N E R '.S DE CISIO N S

THE

AUTOMATICALLY

SECTION ll4

MEMBER

THE

BE SUBJECT UTILITIES

RECONSIDERATION

COM MISSION

ACT.

W0 UL D UNDER

sue H

ARRANGEMENT WOULD ALSO HELP TO ENSURE CONSISTENCY IN THE PRINCIPLES APPLIED TO REGULATED UTILITIES AND PROJECTS UNDER THE C 0 M MISSIO N 'S A U T H 0 RIT Y.

3.4

Fundi_!!g

Participants in the hearing generally agreed that funding for the monitoring program should be provided by Hydro. However, the extent of Hydro's liability and control over program costs was raised as an issue. The

Com missiDn

conclJ.J.des that an

appropriate level of funding for the

monitoring program should come from Hydro as an expense of the project, but that the budgetary control for the program should be the responsibility of the B.C. Utilities Com mission.

THE

COMMISSION

RECOMMENDS THAT

HYDRO

REQUIRED, AS A

CONDITION OF THE ENERGY PROJECT CERTIFICATE, TO PROVIDE BASE FUNDING FOR OFFICE

THE

MONITORING

COSTS AND

STAFF IN

COMMISSIONER'S SALARY AND HIS

AMOUNT

DETERMINED

THE

B.C.UTILITIES COMMISSION, CONSISTENT WITH ITS NOR MAL PRACTICE. ADDITIONAL FUNDING SHOULD BE REVIEWED BY THE B.C. UTILITIES COM MISSION

BASED

THE

MONITORING

COM MISSIONER'S

RECO M MEN DATION S.

Over and above base funding, the m onitori.ng com missioner should have the authority to order Hydro to pay further amounts for (1) additional staff or special studies as required for impact assessment; (2) mitigation measures; and (3) compensation measures.

449

258

HYDRO SHOULD

HAVE,

REQUEST, THE RIGHT TO

THESE ORDERS REHEARD BY

THE

B.C. UTILITIES

COMMISSION

THEREFORE RECOMMENDS THAT

PER MANE NT

COMMISSION

RECONSIDER

HAVE ANY OF

COM MISSION.

THE

CABINET DIRECT THE

ANY

DECISION

THE

MONITORING COMMISSIONER WHICHISCHALLENGED BY HYDRO.

THE

COM MISSION

RECOMMENDS

THAT

COSTS

INCURRED

COMPLAINANTS IN BRINGING A

MATTER TO THE ATTENTION OF THE

MONITORING

BORNE

PROGRAM

THE

COMPLAINANTS

THEMSELVES, UNLESS THE MONITORING COMMISSIONER SPECIFICALLY ENGAGES

THE

COMPLAINANT

TECHNICAL

CONSULTANT

ASSESS A PARTICULAR IMPACT OR THE COMPLAINANT SUCCESSFULLY ARGUES THAT ITS COSTS SHOULD

MADE PART OF A SOCIAL

NATURAL RESOURCEIMPACT COMPENSATION AWARD.

i i:

450

CHAPTER XVII PROJECT IMPACTS: CONCLUSIONS AND RECOMMENDATIONS

l.O

SUMMARY OF POSITIONS TAKEN BY HYDRO AND INTERVENORS

1.1

Hydro's Position

In final

argument, Hydro stated that "from a provincial perspective the

environmental and socio-economic impacts would not be very great and the proposed mitigation and compensation measures will offset impacts which would otherwise result in regional inequities" (112: 18,206). More specifically, Hydro summarized its position on project impacts as follows: The

environmental

impact

studies

commissioned

were

sufficiently

comprehensive and detailed for the Site C decision, and met the requirements of the government, having been reviewed by government agencies in 1978 and 1979. Hydro argued that its consultants used realistic parameters to assess the significance of the agricultural lands affected or lost as a result of Site C, whereas the Ministry chose assumptions that inflated values to unreasonable levels. Hydro did not accept that compensation should be paid for Crown land or that the compensation options provided by the ministry were economic or justifiable. If compensation to the Crown is required on economic efficiency grounds, Hydro argued that the $1.2 million loss which it calculated for Crown lands would be the appropriate figure. Hydro argued that the project would not preclude a vegetable industry. With

respect

arguments

presented

Peace

Valley

Environmental

Association's witnesses, Hydro pointed out that, in retrospect, most of them were not in disagreement with Hydro's evidence.

Specifically, Dr. Manning

agreed that physical capability of land was only one of many factors that should be considered in resource allocation, and it is this one factor that Hydro had

259

1.'

451

260

emphasized; and Dr. Bentley stated that the land would not necessarily be lost forever

many

intervenors

suggested.

Finally,

Hydro

maintained

that

Dr. Warnock's evidence was further undermined by his admission that he has no expertise in economics and soil science. With respect to climate, Hydro argued that the impacts will generally be insignificant. The expected increase in wind speed will neutralize the effect of dense fog on crop drying. With respect to forestry, Hydro argued that the evidence shows that much of the forest resource is not presently economically recoverable and therefore no compensation should be paid.

Hydro argued its proposed clearing will be

adequate for future recreational use of the reservoir. With

respect

recreational

impacts,

Hydro

argued

that its

proposed

compensation program, at a cost of $5 million, would more than offset

t~e

project's adverse impacts and reflects local preferences. It argued it should be responsible for constructing and operating the facilities and noted the Ministry's witnesses agreed that Hydro could do this efficiently. With respect to wildlife and recreational hunting impacts, Hydro argued that its proposed $700,000 compensation program is adequate. Hydro contended that a number of assumptions used in the Ministry's analysis are unjustifiable and that the Ministry's proposed $3.5 million program is out of proportion to the value of the resource loss. With respect to fishery impacts Hydro noted that its evidence shows that, in the long run, the reservoir will be more productive than the river. Hydro argued that $1.9 million is the most appropriate figure for the compensation program. It was confident that details of the program could be worked out with the Ministry of Environment.

Hydro acknowledged that mercury levels in fish in the Site C

reservoir may increase, but stated that those increases would be temporary.

452

261

Based on information obtained in Williston Lake, Hydro did not believe that there would be a hazard to sports fishermen. With respect to downstream water quality, Hydro argued that the project would have little impact.

Regarding Westcoast's concern about impacts on water

quality, Hydro indicated it is prepared to install a monitoring system to collect adequate data, details of which will be negotiated with Westcoast. With respect to heritage resources, Hydro stated that the studies it has funded have cost more than $600,000 and are the most comprehensive undertaken by any developer in the province to date. Hydro argued that no further compensation is warranted. With respect to socio-economic impacts, Hydro acknowledged its responsibility and proposed to negotiate compensation details with local governments and the Regional District for

impacts caused by the project, and indicated that

monitoring should be used to identify such impacts. With respect to specific municipal issues, Hydro argued that it should not be responsible for Taylor's water intake design, since the design was based on erroneous assumptions made by Taylor's engineering consultants. Hydro agreed that a berm should be constructed along the overburden bank to protect Hudson's Hope property owners. With respect to labour and local economic impacts, Hydro argued that the hiring process used on past hydroelectric developments has been successful and should be used for Site C. With respect to rural impacts and its land acquisition policy, Hydro stated its decision to purchase lands prior to project certification was in response to land owners' requests.

It argued that while some land owners were upset by this

policy, the majority were apparently satisfied with their treatment.

453

262

With respect to impacts on Indians, Hydro acknowledged the active native hunting economy in northeast British Columbia, but argued that this would not be precluded by Site C. Hydro's proposed wildlife compensation package is aimed at maintaining existing levels of wildlife populations for both Indian and non-Indian hunters. Hydro argued that compensating Indians for cumulative impacts caused by development in the region is a matter of government policy, and far beyond Hydro's responsibility. Regarding charges that its data on native impacts were inadequate, Hydro argued that its consultant accurately identified areas of potential impact but could not quantify the impacts due to the Indian's reluctance to provide the necessary information. 1.2

Intervenor's Positions

Not all intervenors presented a final position on project impacts. The positions of those who did are summarized below. The Ministry of Agriculture and Food categorically denied that it chose assumptions simply to inflate the value of agricultural land in order to maximize its compensation request. It argued its approach was consistent with the benefit-cost guidelines. The Ministry of Environment denied that it endorsed Hydro's studies as adequate. It further argued that its estimates of the value of losses were more accurate than Hydro's. The PVEA (Peace Valley Environmental Association) stressed the inadequacy of Hydro's

resource

impact

studies.

PVEA

argued

that

Hydro

grossly

underestimated the value of the agricultural resource loss and failed to take the superior micro-climate of the valley into account; that the broader issue of security of food supply should be considered; that the fishery studies were inadequate because existing habitat and populations were not identified, angling activity was not properly assessed and the value of the river fishery was underestimated; that the mercury problem was not addressed; that Hydro's

454

263

wildlife study was an inappropriate assessment of the resource because the carrying capacity of the land was not addressed, the time frame of the study was too restricted and the impact of snowshoe hare cycle on furbearers was not considered; that Hydro's recreation impact study was deficient because of problems in survey methodology; and finally that Hydro's heritage resource inventory lacked sufficient base-line data. Finally, PVEA argued that Hydro did not make any serious attempts to assess impacts on the native economy. The City of Fort St. John indicated that it was not opposed to the project, but argued that, as conditions of the Energy Project Certificate ( 1) Hydro should be required to negotiate a mitigation and compensation agreement with the city, (2) an impact monitoring organization funded by Hydro should be set up with direct access to Cabinet and with authority to enforce its decisions, and (3) an arbitration procedure should be established for making final determinations where negotiated agreements cannot be reached.

The Fort St. John Hospital

stressed that existing difficulties will be aggravated by the construction of Site C. The other local governments and Regional District argued that, as a condition of the Energy Project

Certificate, the impact management and

monitoring

structure recommended by Professor Thompson should be established and be funded by Hydro.

They recommended that the Utilities Commission retain

continuing jurisdiction in the arbitration process. The Treaty 8 Tribal

Association

recommended

that

the

region's

wildlife

enhancement programs should be managed by Indians, that sports hunting in the heartlands of Indian hunting territories should be restricted, that the south shore of the Peace River should not be opened up, and finally, that socio-economic mitigative measures should be designed and implemented by Indians themselves.

,,il

455

264

Mr. L. Rutledge concluded that the intrinsic values of the Peace Valley cannot be broken down into individual resource components and cannot be assigned monetary values. Mr. Hadland argued

that

Hydro's

estimates

the

project's impacts on

agriculture, recreation and wildlife were inaccurate, and that Hydro's water quality, forestry and heritage resources studies were inadequate. The B.C. Federation of Agriculture argued that Hydro has no expertise in agricultural matters and that many of its assumptions were unjustified.

recommended that if Site C proceeds, the government should be compensated for lost Crown land and a special impact committee established. Flood reserves should be removed regardless of the Site C decision. The National Farmers Union argued that Hydro has no genuine understanding of the significance of flooding agricultural lands and that the value of agricultural land would become more important to society in the future. Westcoast Transmission argued that the evidence does not support Hydro's position that Site C is unlikely to affect downstream users. It argued that water-quality monitoring be made a condition of the Energy Project Certificate. It also indicated that, if any significant impacts do occur, Westcoast will pursue remedies under the Water Act and seek compensation. 2.0

THE COMMISSION'S POSITION ON PROJECT IMPACTS

The Commission recognizes that the SiteC project w111 have lasti.ng, profound effects on the Peace River Valley, and considered all the views and concerns of the ministries, agencies and local governments who have responsibilities in the area, and of the people and groups who reside in the area and will be directly affected.

456

265

The Commission has concluded that the project impacts can be managed in such a way as to render them acceptable from the regional and provincial point of view. This is not to say they will be acceptable to everyone. The Commission recognizes that, for some, the loss of the valley in its present state or the loss of a home and lifestyle cannot be offset or diminished in any way. It is simply a loss to be borne, if it can be clearly demonstrated to be in the interest of the 1 province as a whole. In concluding that the project's impacts can be rendered acceptable, the Commission believes that, with appropriate measures, the impacts in many respects can be minimized, quantifiable losses can be compensated, and monitoring can be undertaken to identify and resolve impacts arising during the course of the project. The valley cannot be replaced, but the region and the province can generally be left no worse off as a result of the project's effects. The Commission notes that considerable concern was expressed about the quality of the data and adequacy of the impact assessments presented at the hearings. While additional evidence would have been highly desirable, the Commission has concluded, based on the evidence presented by Hydro and its consultants, by provincial government ministries, by local governments and groups, and by private intervenor witnesses, that reasonable judgements in most instances can be made on the nature and magnitude of the project's impacts and on the measures that should be taken.

This the Commission has attempted to do.

Where evidence was inadequate the Commission has identified the steps to be taken prior to proceeding any further with the project.

The conditions which the Commission has recommended be satisifed prior to the issuance of an Energy Project Certificate (See Chapter X) are, in part, motivated by a concern that residents of the Peace River Valley not be asked to bear the brunt of the project's impacts until it can be demonstrated to be in the provincial interest.

457

266

The Commission's specific recommendations are outlined in Chapters XIV, XV and XVI and summarized in Chapter II.

They include an extensive list of

mitigation measures that the Commission recommends be made conditions of the Energy Project Certificate.

They include a

compensation package

totalling $29.8 million for the estimated economic value of the resources (excluding fisheries) that will be lost as a result of the project (see Table 17), and a presently undefined amount for cost impacts on local communities and social service agencies. The Commission also recommends that a monitoring program be established with the authority to identify and resolve those impacts most appropriately dealt with as they arise. The Commission concludes that full and proper impact management requires not only that conditions be imposed on Hydro but also that appropriate measures be taken by government.

The Commission has recommended a

number of measures that the government should take to minimize adverse effects of lts project-associated activities, for example, construction of Highway 29, to ensure that appropriate compensation programs are undertaken in order to enhance remaining resources in the region, and to respond quickly and efficiently to requirements such as health and hospital services needs which may arise during the construction of the project.

458

267

TABLE 17 The B.C. Utilities Commission's Recommended Compensation Packagel A.

Resource Compensation Agriculture

$18.6 million

Forestry

$1.0 million, less present value of stumpage plus transmission line impacts to be identified

General Recreation

$6.9 million

Wildlife

$2.8 million

Fisheries

to be estimated

Heritage Resources

a maximum of $0.5 million in matching funds raised by the Heritage Conservation Branch for implementing the program

TOTAL (known)

$29.8 million

Social Impact Compensation Local Governments

to be identified by the monitoring program

Social Service Agencies

to be identified by the monitoring program

Figures are based on the hybrid discounting procedure and are reported in constant 1981 dollars. A 1985 construction start-up date is assumed for the calculations.

459

268

In sum, while the Commission recognizes that major impacts will result from the Site C project, the Commission concludes that they are not so large as to make them unacceptable. Provided that appropriate conditions are placed on Hydro and that the government responds to the special needs created in the region, the impacts can be successfully and acceptably managed.

460

PART SIX COMMUNITY & SPECIAL HEARINGS CHAPTER XVIII BRIEF SUMMARY OF STATEMENTS AT COMMUNITY AND SPECIAL HEARINGS 1.0

INTRODUCTION

At an informal public meeting held in Fort St. John on July 30, 1981 as part of the pre-hearing proceedings, a number of intervenors voiced concerns about the intimidating aspect of appearing before the Commission during its formal daytime sessions. Among the problems cited were those of having time to appear during the day and fear of being closely cross-examined. It was also suggested that

allowing

people to voice

their

opinions in

their

own

communities would be fairer. To address these concerns, the Commission decided to hold less formal evening hearings at which Hydro would not present evidence or be cross-examined and where the intervenors,

registered or not, could express their opinions

informally. The Commission also ruled that no cross-examination would be allowed, although, if questions did arise, the chairman would consider them and if they were appropriate, would put them to the intervenor.

All

commissioners were, of course, free to question any witnesses. A verbatim record of these hearings was made and submitted briefs were entered as exhibits. Six such meetings were held in 1982 in Fort St. John (Feb.ll and June 22), Taylor (Feb.l8), Hudson's Hope (Feb. 25), Chetwynd (Mar. 3) and Dawson Creek (Aprill). Sixty-three witnesses were heard either on their own behalf or on behalf of various organizations at these less formal hearings.

269

461

270

The Indian bands comprising the Treaty No.8 Tribal Association invited the Commission to visit their reserves to hear the band members concerns. They felt that the members would be more at ease and therefore better able to express themselves. In addition, they felt that the commissioners would have a better appreciation of their concerns after visiting the reserves. The Commission accepted this invitation and held three daytime specialÂˇ hearings. The arrangements were the same as for the less formal hearings. The Tribal Association provided interpreters so that band members could speak in their own languages. Three such special hearings were held in 1982. On March 4, the West Moberly and Saulteau bands were heard near the West Moberly Reserve. On March 18, the Blueberry and Doig Bands appeared before the Commission on the Blueberry Reserve. And on March 25, the Halfway Band appeared before the Commission on their own reserve. Forty-seven band members spoke to the Commission at these special hearings. In the less formal hearings, intervenors expressed opinions on most aspects of the application. These opinions are grouped and summarized below in terms of the five phases of the formal hearings. Sections 2 through 4 summarize the demand,

supply

and

project

design

comments,

respectively.

Section 5

summarizes the socio-economic and environmental issues, which concerned a large majority of speakers.

Section 6 presents comments pertaining to

financial matters. 2.0

DEMAND-RELATED TOPICS

Several speakers opposed to Site C expressed their distrust of Hydro's demand forecast. Their skepticism was due, in part, to their view that Hydro had not incorporated price into its forecast. However, several speakers in favour of '

the project, particularly at the Fort St. John hearing strongly indicated that estimation of demand is best left to experts at Hydro. If Hydro's demand forecasts show Site C is necessary, then the project should proceed. Concern over the possibility of brownouts was also voiced â&#x20AC;˘.

462

271

One speaker stated that Site C will never pay for itself since demand is highly sensitive to price.

He noted that Hydro itself recognizes that industrial

demand, a major component of total demand, is highly price sensitive.

added that the current rate structure subsidizes large industrial users at the expense of the residential user. Another speaker suggested that, if price is an important variable in shaping demand, then the results of the B.C. Utilities Commission's hearings on Hydro's proposed rate increase should first be completed before attempting to evaluate the Site C application. A speaker at the Fort St. John hearing cited studies by Helliwell and Margolick, and Levelton indicating that the cogeneration of electricity is economic and that sawmills and plywood mills could become largely self sufficient if Hydro purchased their excess power at a rate more reflective of its own marginal cost. Participants at these hearings frequently commented on the need to increase energy conservation in the province.

Of the llOspeakers, 17, or 15%,

expressed the need for increased conservation to reduce the demand for electricity. Because B.C.'s industry is very energy intensive, it was argued that conservation measures could have great impact on reducing demand. Suggested conservation measures included discouraging the development of industries with large power requirements, such as aluminum smelters, and modifying building codes to induce energy-conserving measures (for example, proper insulation). One speaker noted that, in Oregon, the utility company makes planned expenditures to promote conservation.

He also noted that the Pacific

Northwest of the U.S.A. has already dammed all its major rivers and suggested that B.C. should start conserving before it finds itself in the same position. A speaker in favour of the dam pointed out that conservation is much talked about but not widely implemented.

463

272

3.0

SUPPLY-RELATED TOPICS

Most comments relating to the issue of supply focused on developing alternative energy sources. Several speakers felt that these alternatives, in conjunction

with conservation,

would not only reduce the demand for

electrical energy in total, but also the excess capacity required for periods of low water.

In other words, they felt that diversification of supply would

improve the system's flexibility and increase capacity utilization.

Others

mentioned the possibility of renegotiating the Columbia River Treaty and retrofitting the existing Duncan and Keenleyside dams to produce greater output. Several speakers felt that the available supply of electrical energy could be increased if Hydro would pay small-scale producers a rate equal to its marginal cost. This would encourage cogeneration by industry, small hydro and other power production by individuals. Several speakers cited various energy alternatives to hydroelectric power. One recommended greater use of natural gas. He questioned the practice of exporting natural gas to the U.S. while continuing to dam rivers. Another speaker described the process of mining metallurgical coal, which produces soft thermal coal that could be used to generate electricity. Finally, several speakers advocated that the possibilities of generating from solar and geothermal power be seriously explored. Those in favour of the project indicated that, if Hydro and the B.C. government felt the additional supply that Site C would provide is needed, then the project was justified. Several speakers in favour of Site C cited costs, adverse effects, potential dangers

and health

hazards

of conventional

alternative energy sources, such as nuclear, coal and oil-fired thermal plants, as justification for Site C or hydroelectric development generally.

,:;)

464

273

4.0

DESIGN

Because the design of Site C is inherently a highly technical issue, speakers at these hearings could only make general comments. Several voiced concerns over the flood lines established by Hydro. In particular, native speakers feared being flooded out. They stated that the flooding associated with the Bennett dam exceeded the preliminary floodlines. Others feared that heavy sloughing would result in mud slides that would burst the dam.

One speaker noted

Site C's susceptibility to being bombed. Another speaker suggested lowering the height of the dam so as not to flood Hudson's Hope. Many speakers raised the issue of bank stability and the problem of bank sloughing.

A speaker at the Hudson's Hope hearing complained that the

safeline was close to the school and library a.pd that sloughing beyond the safeline would imperil these structures.

To prevent this occurrence, he

suggested a barrier be built along the bank. Several individuals, citing the recent experience with bank instability at the WillistonÂˇ reservoir, felt that, ultimately, the road from Fort St. John to Hudson's Hope will have to be moved further and further back, thus impinging on available farm land. 5.0

SOCIO-ECONOMIC AND ENVIRONMENTAL IMPACTS

The majority of the speakers addressed the social and economic impacts of Site C. 5.1

Economic Impacts

Most speakers in favour of Site C mentioned the need for economic growth and development in the area. They felt that Site C would provide a welcome and needed "shot in the arm" for Fort St. John and vicinity. It would generate employment and increase local spending. The potential development of

465

274

secondary industry and increased tourism impacts.

were emphasized as positive

One speaker stated that Fort St. John would have no trouble

accommodating the influx of workers. Several supporters of the project felt that hydroelectric power is far superior to any of the currently available alternatives: coal is too dirty; atomic energy is too dangerous; and oil is too expensive. In addition, the project will ensure against brownouts and slow economic growth resulting from lack of power. Those opposing the dam noted that the construction phase of a megaproject, such as Site C, exacerbates the boom and bust cycle that commonly plagues community development in northern B.C. And while the employment impacts of construction are significant, they are nonetheless temporary. Long-term employment in Hudson's Hope from the Bennett and Site One dam amounted to 25 jobs. The social impacts experienced at Hudson's Hope and the Williston

Reservoir were described as ones to be avoided. Several speakers felt that employment opportunities during construction will not be great because of the lack of skilled local labour and the hiring practices of unions. Furthermore, some claimed that Hydro had not lived up to its promises to employ local labor during the construction phases of Site One and Bennett dams. A speaker at the Taylor meeting was sceptical about the distribution of any positive impacts. He felt that only the wealthy will benefit. Another pointed out that, since the workers are tentatively scheduled to be flown into the construction site for a 12-day shifts and then flown out for five days, local spending and re-spending will be minimal. Opponents also noted that industrial development had not resulted from the Site One or Bennett dams and that there is no reason to expect secondary industrial development to follow Site C.

Others referred to the adverse

impact of increases in local prices once workers arrive in Fort St. John. Those

466

275

on fixed incomes, particularly native people

who depend on hunting and

trapping, would suffer the most from local inflation. Finally, opponents stated that the reduction in Fort St. John's agricultural base would

reduce

the

agriculture-dependent

sales

local

industries

and

businesses. Thus, Site C would result in a lower level of local employment and spending once the dam is completed. To maximize local employment, some suggested that local training programs be set up before the project begins so that local workers will have the required skills.

Others suggested that lower power rates be offered to industries

locating in the Fort St. John area. 5.2

Native Impacts

The primary concern of the native speakers was the threat posed by Site C to their way of life and livelihood. The perception of this threat resulted in unanimous opposition by native speakers to the Site C project. Native speakers estimated that almost all of the income generated by natives in this region comes from hunting and trapping and that 90% of the natives trapped.

The bands complained that they were already suffering trapline

damage from Hydro's preliminary work. They feared that Site C would flood substantial reserve lands which are currently used by natives for their subsistence activities, as well as native burial grounds. Several speakers were worried that some of the best wildlife grazing lands, in particular grazing areas for moose, will be flooded, forcing game further back into the woods and drowning many animals as the dam comes into service. Some also claimed that fish stocks would be substantially depleted as a result of Site C, particularly from blasting during construction.

467

276

Some

speakers claimed

that

the

development

Site C

will

provide

recreational hunters with greater access to stocks that are now utilized almost exclusively by natives. Several speakers pointed out that local bands were experiencing trouble with poachers damaging and stealing from traplines, thieves breaking into their cabins and trophy hunters wasting

animal

resources. They also felt, that as the area is opened up, natives using horses for

transportation

while

hunting

would

have

trouble

competing

with

recreational hunters, who can afford all-terrain and four-wheel drive vehicles. Concern was also voiced about the reservoir backing up and silting and polluting Moberly Lake. Some speakers expressed resentment over their treatment by Hydro during construction of the Site One and Bennett dams.

The natives had signed

"Treaty 8" with the Federal government which they believed provided them hunting and trapping rights and ownership of the land in perpetuity, yet their land was confiscated without compensation by the provincial government. Several speakers noted the lack of native input into the planning of these projects to mitigate the adverse consequences. They also noted Hydro had not addressed native concerns in its compensation plan. They claimed that Hydro had not kept its promise to hire native labour for the construction of the Site One and Bennett dams. And while a native training program had been instituted when the project was about to begin, by the time the natives were ready to look for jobs, it was too late. They also pointed out that natives benefit the least from booms since they are last to get jobs and suffer from local inflation, and they suffer the most during the downturn as job opportunities dry up and social services are curtailed.

468

277

The native people are anxious about the large influx of workers into Fort St. John.

They anticipate increased discrimination and harassment when in

town buying necessities, increased levels of crime and violence, and reduced social services - education, health care, etc. -- as pressure on them increases. The Halfway Reserve, which has no electricity, expressed wonder that Hydro could build huge towers and transmission lines to supply the Lower Mainland and the U.S. yet could not provide a nearby reserve (which is bearing a large proportion of the project's adverse impacts) with power. The native people are most concerned about the threat to their way of life. All 37 native speakers focused on this concern. They feared that while Site C might provide some short-term employment for those fortunate enough to find work, the environmental impacts of the dam might prevent a return to subsistence

activities

after

construction

complete.

They

claimed,

furthermore, that the losses they would incur - wildlife, fish, medicinal herbs, berries, grazing land and so on -could not be compensated for. Any change in native lifestyle will have a substantial impact on the tribal elders who will not be able to adapt easily. Compensation cannot provide a way of life for future generations - the spiritual well-being of the native population is tied to living in harmony with their environment which they claimed would no longer be possible after Site C. In fact, Site C will increase the likelihood of increased assimilation into the white culture, making it even more difficult for the tribes to maintain and perpetuate their culture. Some native speakers did mention certain compensation measures that could improve their plight. They suggested that natives be given new hunting and trapping areas in conjunction with extensive restocking of fur-bearing species, and that natives work with provincial fish and wildlife officials to minimize the impact of poaching and recreational hunting.

469

278

They also suggested that job training . programs for natives begin well in advance of the project's start up date to increase the likelihood of native hiring.

This

could

incorporate

financial

assistance

from

the

federal

Department of Indian and Northern Affairs who, according to the tribes, have not been of much help in the past. 5.3

Agricultural Impacts

Many participants contended that Site C imposes unacceptable, long-term agricultural losses on the Peace region. They claimed that the agricultural land to be flooded is of such high quality and has such a unique microclimate that it is irreplaceable. Others disputed this claim : they said that a lot of comparable land was available and that soil enhancement would make even more nearby land available. They claimed, too, that the reservoir would have a tempering effect on the area's climate, which will prolong the growing season and thus make a lot of nearby land comparable to what will be flooded. This latter opinion was disputed by speakers opposed to the dam; one farmer

noted that the effect of the Bennett dam was detrimental to agriculture. Supporters stated that the reservoir will increase the number of frost-free days at higher elevations thus improving the productivity of potential alternative agricultural land. Many speakers noted that B.C. has a scarcity of agricultural land (less than 10% of total land is arable) and that the province currently imports about half its produce. Given that North America is rapidly losing farmland while its population is increasing, it was argued that B.C. cannot count on its ability to import produce in the long run. Even if imported produce is available, one speaker noted that its price is dependent on fuel and transpor;tation costs, which are likely to increase substantially over time, and on the exchange rate, which is impossible to predict. Others felt that, if the loss of agricultural land is a continuing trend,

470

279

Il J

l j

then the prime land in the Peace River Valley should not be flooded because its long-term value cannot be measured in terms of dollars. Several opponents of the dam thought that Hydro's estimate of the agricultural losses are

understated because the valley has been in the flood reserve since 1963, and

this has interfered with agricultural development.

I I

While alternative land would have to be part of a compensation package to farmers displaced by Site C, most speakers thought that comparable land was not available nearby. One participant proposed that B.C. Hydro provide large greenhouses to restore the ability of the region to grow its own produce. 5.lt

Recreational Impacts

Next to the loss of agricultural land, opponents of Site C mentioned most frequently impacts on the recreational opportunities of the Peace River Valley. They emphasized the potential loss of a unique and beautiful river valley.

Camping, picnicking, watching waterfowl and wildlife, hunting and

boating will all suffer. The flooding of winter range and grazing lands used by newborn moose, elk and deer will reduce wildlife stocks and thus the quality of hunting opportunities. Site C opponents argued that fishing will be diminished as blasting from construction kills off substantial stocks and the value of these recreational opportunities will increase over time as they become scarcer.

They also

claimed that such fishing values cannot be evaluated properly in quantitive terms. In addition, they felt that tourists coming to the area for recreation would decrease significantly.

Finally, they expressed doubts about Hydro's

assessment of the adverse recreational impacts.

471

280

Supporters of the project acknowledged the loss of certain recreational activities but felt that, with adequate compensation and mitigation, the losses would not be too great.

Also, several speakers commented that certain

recreational activities, such as canoeing and boating, had already been affected by the Bennett and Site One dams so that the further impact of Site C will be minimal. Suggested compensation included habitat enhancement for wildlife on a no-net-loss basis, restocking the reservoir with walleye, construction of a fish hatchery, new boat launches, picnic sites and camping areas. An important mitigation proposal called for clearing the reservoir of debris not only before flooding, but on an annual basis thereafter. One participant noted that, if Williston is an example of mitigation, recreation opportunities on the reservoir will be close to zero. Bank stability was felt to be a key factor in determining the suitability of the reservoir for recreation. 5.5

Archaelogical and Heritage Resources

The main point made by speakers addressing archaelogical concerns was that very little is known about the potential value of archaelogical findings in the region because so little work has been done. Certain heritage structures would be adversely affected, such as the Rocky Mountain Fort and Old Fort.

speaker complained that, during the construction of the first dam at Hudson's Hope, local historical archaelogical societies had no opportunity to examine fossils. Several speakers suggested as compensation that Hydro provide financial assistance

establishing

local

museum.

Another

reconstruction of Rocky Mountain Fort at another location.

suggested

the

472

281

5.6

Social and Cultural Impacts

Concerns about adverse social and cultural impacts were primarily related to the influx of population during the construction phase of the project. Opponents feared increased crime, overcrowded schools and overburdened medical and health related facilities.

Supporters, however, stated that the

Fort St. John area could easily accommodate the influx of workers and that the influx would benefit the area's development. Opponents of Site C stated that Hydro had shown a callous disregard for the residents of the valley by withholding information, dislocating long-time residents and downplaying adverse impacts. Others said that many residents of the Peace originally moved there to get away from development and thus cannot

be compensated for Site C.

Another adverse impact is Hydro's ' purchases of private lands which renders them tax-exempt thereby reducing the tax-base.

At the same time, the construction phase, with its influx of

population, requires additional expenditures to provide essential services. Hudson's Hope was cited as an example of this problem. 5.7

Other

Many speakers referred to the impact of Site C on the local climate. One felt Hydro was intentionally understating the adverse impacts. Several thought that fog in the winter would necessitate relocating the airport and wondered if Hydro would pay for the move. Another stated that the prospect of the dam has lowered property values and thus inflicted lossess on valley inhabitants. Several speakers stated that the decision to proceed with Site C had already been made in Victoria and that the Commission was appointed to approve the dam.

473

282

Finally, two speakers criticized Hydro's inflexibility regarding alternative routes for the new road to minimize agricultural losses.

One speaker

complained that highway paving interferes with livestock grazing and farmers' privacy. The province was criticized for the level of its participation in the analysis of the land and resource impacts of Site C. One speaker claimed that the B.C. Ministry of Lands, Parks and Housing had been instructed not to intervene in the Site C hearings. 6.0

FINANCIAL TOPICS

The concerns relating to the financial aspects of Site C included the cost of Site C, the amount of debt to be incurred by B.C. Hydro and the potential burden on Hydro's customers. Several speakers thought that Hydro had not examined the costs of the project carefully enough. Another doubted that the project would be cost effective, particularly if demand is highly price sensitive, and cited a B.C. Hydro study describing industrial demand as such. This speaker also doubted Hydro's ability to recoup its debt by selling power for export. On the other hand, several speakers at the Fort St. John hearings argued that hydroelectric power was the most cost efficient and that alternatives would impose even higher costs. Eight different speakers commented on the size of Hydro's debt and the increase in debt required to finance Site C. One speaker stated that Hydro has only been able to pay the interest on existing debt but none of the principal. Moreover, previous debt was incurred at lower interest rates and future debt would be more expensive. amortize

its

debt,

Several speakers doubted Hydro's ability to

particularly

the

debt

increases

planned

approximately $26 billion. One speaker in favour of the dam thought that the

474

283

project should be started immediately, since a delay would serve only to increase its costs. Another suggested that Hydro should not be permitted to finance new projects without the majority of capital on hand and that this capital be derived from revenues accruing on the basis of a balanced marginal cost rate structure. Several speakers stressed that B.C. electricity users will ultimately have to pay for Hydro's debt burden, and that if Hydro's timing of Site C is premature, the residents of the province will bear the costs. 7.0

ASSESSMENT OF THE LESS FORMAL AND SPECIAL HEARINGS

The Com mission concludes that the less formal and special hearings were essential to the Site C hearing process. the opinions of have appeared.

no intervenors,

They provided an opportunity to hear

many of whom

would otherwise probably not

The Com misskm believes that by holding these hearings it

avoided missing a segment of the public voice because of the formal and, to some, intimidating nature of the formal hearings.

Most of the matters brought out at these hearings were similar to concerns presented

evidence

and

cross-examined

the

formal

sessions.

Nevertheless, some new opinions were expressed. These have formed a part of the Commission's considerations. IN SUMMARY, THE EVIDENCE PRESENTED AT THE LESS FORMAL AND SPECIAL HEARINGS HAS BEEN IN

FORMING

RECOMMENDATIONS.

THE

GIVEN APPROPRIATE CONSIDERATION

COMMISSION'S

CONCLUSIONS

AND

475 475

476

PART SEVEN OTHER MATTERS CHAPTER XIX OTHER APPROVALS 1.0

INTRODUCTION

Hydro will be required to obtain a number of provincial permits and licences in addition to an Energy Project and an Energy Operating Certificate in order to construct and operate Site C. The terms of reference for this hearing specifically directed the Commission to hear and consider: "whether an approval, licence or permit should be made given, or issued under Sections, 4, 5, 7, 8, 9, or 10( 4) of the Pollution Control Act and under Sections 6, 7, 10 or 11 of the Water Act, including all matters regarding the Applicant's Water Licence Application filed in accordance with the Water Act"

At the time the terms of reference were issued, Section 20(2) of the Utilities Commission Act expressly provided for this direction to the Commission. 1 Since they were issued however, Section 20(2) has been amended â&#x20AC;˘ The reference to the Pollution Control Act, which has been repealed, has been replaced by a reference to the equivalent section of its successor act, the Waste Management Act. 2 The Commission has therefore interpr~ted its mandate to require it to consider whether appropriate authorizations should be issued to Hydro under the Waste Management Act.

284

1 2

Utilities Commission Amendment Act, 1982, S.B.C. 1982, c. 54. S.B.C. 1982 c. 41.

477

285

2.0

THE WATER ACT

2.1

Hydro's Position

Hydro submitted that it requires a Water Licence pursuant to Section 10 of the Water Act and a licence to flood Crown land pursuant to Section 23 of that Act (Ex 15: D-1). In the case of Site C, the granting of a Section 23 licence should be a matter of course if a Water Licence is granted pursuant to Section 10 of the Water Act.

Accordingly, the Commission's considerations

focus on Hydro's application for a Water Licence pursuant to Section 10. Hydro applied for a Water Licence on December 30, 1980. During the hearings Hydro did not suggest any conditions which it thought should be attached to the Licence but did indicate that it found acceptable a number of the conditions contained in the draft Water Licence prepared by the Ministry of Environment (Ex 152: A43-5). In final argument, Hydro indicated its general agreement with that form of Licence. 2.2

Ministry of Environment

The Ministry of the Environment filed a draft Water Licence for the Commission's consideration but emphasized that the conditions included in the draft might need to be reconsidered in light of any additional evidence and argument forthcoming during a public hearing. The Ministry therefore did not address the positions of existing licensees under the Water Act who might be affected by the Site C project.

The Commission did hear evidence from

existing licensees and its conclusions pertaining to them are presented in Chapter XIV, Section 7.2. The Ministry emphasized the ongoing nature of the review process particularly respecting engineering design matters. It recommends that its consultants conduct continuous review of the evolving design of Site C, as has been done on past dams.

478

286

The draft Water Licence submitted by the Ministry contained 16 separate conditions. subject

Some of these were merely administrative and were not the

of detailed

discussion

during the hearing.

Others were

contentious and are considered separately in the Issues section below. The Ministry observed that additional water licences, not included in Hydro's application, will be required during the project's construction phase.

The

Ministry suggested that if an Energy Project Certificate is issued for Site C, it require that the Ministry issue these licences as they become identified. 2.3

The Issues

Most of the issues arising out of the Water Licence can be considered in the context of the conditions attached to the draft Water Licence prepared by the

Ministry. 2.3.1

Date of Precedence

Subparagraph (c) in the draft Water Licence provided that: The date from which this Licence shall have precedence is 30 December, 1980 subject to Clause (k) hereof.

Subparagraph (k) provided that Hydro's Water Licence will be deemed to be subsequent to any licence issued for the consumptive use of water. These two conditions together would give Hydro priority over all Water Licences applied for after December 30, 1980, except for applications for licences for the consumptive use of water.

The Ministry chose December 30, 1980 as the

precedure date because Hydro applied for its Water Licence on that date. No party took serious issue with this date.

479

287

2.3.2

Date of Commencement and Completion of Construction

Subparagraph (i) of the draft Water Licence provided that: Construction of the said work shall be commenced on or before ---and shall be completed and the water beneficially used by or any such other date as may be directed by the Comptroller of Water Rights. The Ministry indicated that the purpose of this provision is to ensure that construction is not dragged out and operation of the dam is not delayed, with consequent loss of water rental fees (44:7,050). No evidence was presented relating to how the power vested in the Comptroller of Water Rights would be reconciled with the provisions of the Energy Project Certificate governing construction. 2.3.3

Notification and Approval of Commencement of Construction

Subparagraph (j) of the draft Water Licences provided that: The Licencee shall not commence construction of the authorized works, or the portions thereof until plans for same have been submitted to the Comptroller of Water Rights and approved by him in writing.

The purpose of this provision is to allow the Comptroller of Water Rights to maintain his ongoing review and monitoring of project design and safety (43: 6,900-6,902). Hydro did not take issue with this provision. 2.3.4

Water Levels

Subparagraph (1) of the Water Licence provided that: the normal full pool elevation of the dam is 461.8 metres (1515 feet) and may fluctuate below this level by metres.

480

288

The Ministry suggested this provision in order to place a restriction on the allowable amount of drawdown in the reservoir. No upper limit was prescribed because Hydro proposed to operate the reservoir as a run-of-the-river facility as opposed to a storage facility. Thus the normal full pool elevation will not rise above 461.8 metres. Hydro indicated that while the one thousand year flood 1 could be passed by the spillway without exceeding the 461.8 meter pool elevation, the operating instructions at the spillway would be to allow the reservoir to rise about 0.6 metres under severe floods and for the thousand year flood by as much as 1.5 metres.

While no final upper limit has been determined, Hydro indicated

that the worst recorded flood, which occurred in 1948, would have resulted in water levels of 462.4 metres at Site C (40 :6,465). Respecting the lower pool elevation limit, Hydro indicated that the reservoir level would drop only as much as 0.6 metres below normal pool elevation 10% of the time and would never drop more than 0.8 metres, unless there were an emergency in the system. 2.3.5

Warning System for Sudden Changes in Water Levels

Subparagraph (m) of the conditions to the draft Water Licence provided that: The licencee shall as directed by the Comptroller of Water Rights, establish and maintain a warning system to alert the public to sudden changes of water level occasioned by operation of the works.

One thousand year flood refers to a hypothetical flood the size of which has been statistically estimated to occur once every thousand years.

481 289

The purpose of this condition is to warn the public about deliberately-induced water level fluctuations. The Ministry indicated during cross-examination that it had no inherent objection to this provision being expanded to include a warning system for major natural fluctuations that Hydro can predict in advance. Hydro concurred in this but indicated that the final warning system had not yet been designed and should be designed only once the operating characteristics of Site C have been learned from actual experience. In this way, post-flooding reservoir conditions, particularly bank stability, could be taken into account in the design of the warning system (41: 6,734-6,737). 2.3.6

Clearing

Subparagraph (n) of the draft Water Licence provided that: The Licencee shall clear the land to be flooded by the reservoir as directed by the Comptroller of Water Rights in consultation with the Ministry of Forests.

The

Ministry

did

not

give

direct

evidence

regarding

this

condition.

Chapter XIV, Sections 3.1 and 3.3, address the evidence on clearing presented by Hydro and the Ministry of Forests. 2.3.7

Clean Up of Debris

Subparagraph (o) of the draft Water Licence provided that: The Licencee shall endeavour to maintain the lake created by the dam free of debris. Hydro indicated that it would undertake an intensive clean-up program in the initial period after flooding and conduct annual clean-up of the reservoir annually thereafter to ensure that the reservoir's use was not materially affected by debris floating on the surface.

The Ministry Jed no evidence

482

290

respecting this matter but numerous intervenors expressed doubts about the feasibility of maintaining the reservoir clear enough of debris to render it safe and suitable for recreation.

The Williston experience was cited although

Hydro testified that preclearing of that reservoir had not been undertaken, but would be at Site C. 2.3.8

Water Flows

Subparagraph (p) of the draft Water Licence provided that: The Licencee shall not cause the instantaneous flow in the Peace River at Taylor to be less than unless otherwise authorized by the Comptroller of Water Rights.

While downstream water flows were the concern of a number of intervenors, none of the evidence presented related directly to the appropriate minimum flow at Taylor. The evidence did indicate that the Water Licence for the Bennett Dam currently provides for a minimum flow at Taylor, although it is extremely rare for flows to fall to this level. 2.4

The Commission's Position

THE

COMMISSION

RECOMMENDS

THAT,

HYDRO

ISSUED

ENERGY PROJECT CERTIFICATE,IT ALSO BE ISSUED A WATER LICENCE AND

THAT

SUGGESTED

THE BY

concurs with the

LICENCE THE

CONTAIN

MINISTRY

THE

KINDS

ENVIRONMENT.

OF The

COND:r!'IONS Commission

Ministry's suggestion that the Energy Project Certificate

require the Comptroller of Water Rights to issue whatever additional licences are required during construction construction ofthe facility.

for water uses necessarily incidental to the

483

291

2.4.1 The

Date of Precedence Com mission's

conditions

conc]Jlsions contained

and in

recom mendati.ons

the

Water

regarding

Licence

are

specific

follows:

Subparagraph (c), which deals with the precedence date of the Water Licence,

is appropriate if Site

proceeds.

Although Site C will not he in operation for

some time, other parties have had formal notice of Hydro's intention since it applied

its

for

Water

Licence.

THE

COMMISSION

THEREFORE

RECOMMENDS THAT HYDRO'S RIGHTS BE BASED ON THE DATE OF THAT APPLICATION.

2.4.2

Date of Commencement and Completion of Construction

Subparagraph (i) leaves the timing of construction Comptroller of

Water

Rights.

The

to the discretion of the

Com mission believes the

Comptroller

should not have such discretion since the project in question has already been the suhj=et of a comprehensive hearing. RECOMMENDS THAT

THEREFORE, THE

TIMING PROVISION BE A

COMMISSION

CONDITION

OF THE

ENERGY PROJECT CERTIFICATE, NOT THE WATER LICENCE.

2.4.3 Â·Notification and Approval of Commencement of Construction Subparagraph (j) requires that the final design he approved by the Comptroller before construction hegins. consistent

with the

This

Comptroller's

is a standard term of a mandate

under the

Water Licence,

Water Act.

SINCE

HYDRO'S PRELIMINARY DESIGN HAS BEEN SUBJECTED TO EXHAUSTIVE SCRUTINY

THROUGH

THE

HEARING

PROCESS,

THE

COMMISSION

RECOMMENDS THAT THE WATER LICENCE, WHEN ISSUED, CONTAIN A PROVISION SIMILAR TO SUBPARAGRAPH(j) RELATING TO APPROVAL OF THE FINAL DESIGN. IN

CONDUCTING

THE COMMISSION FURTHER RECOMMENDS THAT HIS

REVIEW,

THE

COMPTROLLER

LIMIT

HIS

EXAMINATION OF THE FINAL DESIGN, PARTICULARLY FOCUSING ON ANY

DEPARTURES FROM

HY DR 0

AND

NOT

THE PRELIMINARY

CONDUCT

SEPARATE

DESIGN SUBMITTED ASSESSMENT

BY THE

PRELIMINARY DESIGN PRESENTED AT THESE HEARINGS.

484

292

2.4.4

Water Levels

Regarding subparagraph (1), the Com mission conc]J.ldes that the Water Licence should contain a provision governing maximum fluctuations above normal full pool elevation to provifle more certainty for shoreline users regarding water levels.

Based on the evidence, the Com mission concludes that almost all

reasonably anticipated conditions can be accommodated within a maximum pool

elevation

462.4 metres.

deal

with

unanticipated

extreme

conditions, the Comptroller should maintain the discretion to alJ.ow higher water levels where unavoiflable.

Regarding minimum reservoir levels, the Com mission concmdes that the Water Licence should provide for drawdown of up to 0.8 metres at Hydro's discretion, but any further drawdown should require the approval of the Comptroller of Water Rights.

2.4.5

Warning System for Sudden Changes in Water Levels, Clearing and Clean-up

The Com mission conc]J.ldes that details of a warning system should be left until

the

characteristics

the

reservoir

are

known.

However,

the

Com mission can identify two important features which such a system should pro viii e. 1t should provifle for posting of areas which are made particularly dangerous by sudden

changes in

water flows.

.It also should be closely

coordinated with the bank stability monitoring which will. be conducted by Hydro as described in Chapters XI and XV. In this way, the areas preclJlded from public use for safety reasons can be minimized while at the same time, the safe use of the reservoir and the river downstream can be ensured.

THE

COMMISSION

RECOMMENDS

THAT

ADMINISTRATION

THIS

WARNING SYSTEM BE THE RESPONSIBILITY OF HYDRO SUBJECT TO THE DIRECTION OF THE COMPTROLLER.

485 293

The Com mission concllldes that subparagraphs {n) and {o) should be deleted from

the

Water

Licence.

The

Com mission

futher

concludes

that

subparagraph (m) is appropriate subject to an amendment to require Hydro to warn of aJ1 significant anticipated changes of water level however caused. Multidisciplinary or multidepartm ental issues, such as clearing standards for the resezvoir and debris collection after flooding, can best be dealt with through the conditions in the Energy Project Certificate. recommendations

regarding

the

appropriate

The Com mission's

provisions

are

found

Chapter XIV in Section 7.2.

2.4.6

Water Flows

Regarding

subparagraph (p)

which

concerns

water

flows

Taylor,

the

Com mission concludes that operation of the Bennett Dam, not the Site C Dam,

will continue to control water levels at Tayk;r during norm a1 operating conditions. Hydro testified that it could at aJ1 times operate Site C within the minimum flow limitations imposed on it by the Water Licence for the Bennett Dam.

Accordingly, the Com mission concludes that the Site C Licence should

simply require the same flows as the Water Licence for the Bennett Dam.

The Com mission concludes that aJ1 other parts of the draft Water Licence submitted

COMMISSION

the

Comptroller

RECOMMENDS

are

THAT

reasonable THE

and

appropriate.

COMPTROLLER

THE

WATER

RIGHTS ISSUE A WATER LICENCE REFLECTING THE MINISTRY'S DRAFT AS AMENDED IN THE FOREGOING AND INCLUDED IN THIS REPORT AS APPENDIX9.

3.0

THE POLLUTION CONTROL ACT AND WASTE MANAGEMENT ACT

The Waste Management Act repealed and replaced the Pollution Control Act. Like its predecessor, the Waste Management Act governs all waste disposal and pollution in the province by providing for a system of prohibitions and permits under the control of Crown managers, and ultimately the Minister of

I j

486

294

the Environment. In the context of Site C, permits would be required for various types of activities undertaken during construction of both the dam and the transmission line. 3.1

Hydro's Position

Hydro contended that the activities requiring permits under the Pollution Control

Act

were

too

numerous

identification at this time.

and

site

specific

allow

precise

Hydro made no comment regarding the Waste

Management Act. 3.2

The Issues

No evidence was presented on the specific permits that would be required under the Waste Management Act.

The general question to be addressed,

however, is how the permits under the Waste Management Act should be administered as the specific requirements are identified. The Com missit:m concludes that

it is not possible at this time to identify the

precise nature of construction-related activities that might require perm its under

the

Waste

RECOMMENDS

Management THAT

Act.

CABINET

THE

DIRECT

ENVIRO,NMENT AND, THROUGH

HIM,

MANAGEMENT

SUCH

REQUIRE

FOR

ACT THE

ISSUE

CONSTRUCTION

COM MISSION THE

THEREFORE

MINISTER

MANAGERS UNDER THE PERMITS

OF SITE C

HYDRO

WASTE SHALL

AND ITS ASSOCIATED

WORKS AND UNDERTAKINGS, PROVIDED THAT HYDRO DEMONSTRATES THAT IT WILL EMPLOY THE TECHNIQUES AND METHODS MOST LIKELY TO MINIMIZE POLLUTION.

4.0

AGRICULTURAL LAND COMMISSION ACT, RSBC 1979, C. 9

Much of the land to be flooded as a result of Site C is currently in the Agricultural Land Reserve as defined in the Agricultural Land Commission Act. Some of this land is currently owned by Hydro, some of it is privately owned and some is held by the Crown. Section 15 (2) of the Agricultural Land )

487

295

Commission Act prohibits land within a reserve from being used for anything other than farming.

So long as the reserve remains therefore, it bars

absolutely any hydroelectric

development at

Section 11 of the

Site C.

Agricultural Land Commission Act permits Cabinet to exclude land from the reserve. Extensive

evidence

was

presented

during these

hearings relating to

the

agricultural potential of the Site C lands and their pli!J.ce in the province's agricultural industry. question

THEREFORE

The Com mission concludes that further hearings on the

agricultural

use

RECOMMENDS

are THAT

not

warranted.

CABINET

THE ITS

COMMISSION OWN

MOTION

EXCLUDE THE AFFECTED LAND FROM THE RESERVE IF AND WHEN IT ISSUES AN ENERGY PROJECT CERTIFICATE FOR SITE C.

488

CHAPTER XX OTHER MATTERS 1.0

INTRODUCTION

The terms of reference directed the Commission to hear and consider... any other issues deemed by the Commission to be relevant to its review of the Application, including matters related to the issuance of a Certificate of Public Convenience and Necessity.

This chapter presents the evidence and submissions and the Commission's conclusions on the issuance of a Certificate of Public Convenience and Necessity and on other matters not dealt with in earlier chapters. 2.0

CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY

Section 51(1) of the Utilities Commission Act prohibits construction of public utility plant or system by anyone who has not first obtained a Certificate of Public

Convenience

and

Necessity.

Since

Site C

and

its

associated

transmission lines fall within the definition of a public utility plant or system, Hydro requires a Certificate of Public Convenience and Necessity before starting construction. Section 51 (7) of the Utilities Commission Act providesWhere an Energy Project Certificate is issued to a public utility in respect of a regulated project, a Certificate of Public Convenience and Necessity authorizing the construction of the project shall be deemed to have been issued under this Section.

i \

Thus, issuance of an Energy Project Certificate will amount to issuance of a Certificate of Public Convenience and Necessity.

I 296

489

297

It was in part in recognftion of Hydro's status as a public utility that the Com mission has conc11lded that an Energy Project Certificate should not be issued for Site C unt:il the justification conditions outlined in Chapter X have been met, specifically, (1) that Hydro demonstrate that future electricity requirements warrant immediate commencement of construction and (2) that a compa:r:ison of system expansion alternatives indicates that Site C is the best available project. If and when such conditions are satisfied, Site C will indeed be necessary and it will be entirely appropriate for Hydro to be given a Certificate of Public Convenience and Necessity.

3.0

PROVINCIAL ENERGY POLICY

The Site C terms of reference do not ask recommendations on provincial energy policies.

the Commission

to make

Rather, they refer the

Commission to the existing policy framework outlined in the Province's Energy Policy Statement of February, 1980. During the course of the hearings, however, a number of issues were raised with respect to provincial energy policy, which the Commission wishes to bring to the attention of the government for its on-going policy review. 3.1

Energy

Prici~olicy

The Commission has concluded in Chapter VII that energy prices have an important effect on future energy demand. Policy governing energy prices is therefore a critical factor underlying the need for new supply. The provincial energy policy statement of February 1980 states that "the price of energy commodities must continue to be adjusted to reflect long-term replacement costs and the value of the resource." However, no evidence was

490 298

presented at the hearings by the Ministry of Energy, Mines and Petroleum Resources as to what that statement specifically means for electricity prices in B.C. For this review the Commission therefore had to assume no departure Âˇ from traditional rate setting procedures for its review. To facilitate future reviews, specific policy direction or decisions are required with respect to the following questions: If electricity prices are to be based on long-term replacement costs, how are such costs to be defined? To what extent will social, particularly social costs of capital, as opposed to private costs be taken into account in long-term replacement costs? Over what time period does the government intend this pricing policy to be implemented? To what extent will water rentals be related to long-term replacement cost of electricity or used as a means of implementing replacement cost pricing; specifically, how will water rentals be determined?

With such policy direction, more meaningful price forecasts can be made and taken into account in the forecasts of future electricity load requirements. 3.2

The Role of Government and Hydro in Forecasting Future Load Growth and Requirements

For a number of years the government or its agencies have prepared energy requirements forecasts that have differed from Hydro's.

The question

therefore arose as to which forecast Hydro should be directed to meet, the government's or its own.

To deal with the problem, some participants

proposed creation of a separate government planning body part of whose role would be energy forecasting.

Others raised the possibility of closer liason

between Hydro and the government to reconcile or develop a common forecast.

491

299

The Com mission conc11ldes that Hydro must continue to develop fts plans on the

basis

its

own

best

forecast,

since

any

other

approach

would

inappropriately detract from its independence and integrity. However, Hydro's forecasts should continue to be scrutinized by public review in order to assess their validity and reliability, taking into account information made available by others including the provincial government.

WITH RESPECT TO FORECASTS MADE BY HYDRO AND THE MINISTRY OF ENERGY,

MINES

AND

PETROLEUM

RESOURCES,

THE

RECOMMENDS THAT STEPS BE TAKEN TO EMPLOY A

COMMISSION

COMMON DATA

BASE WHEREVER POSSIBLE, AND COMMON DEFINITIONS OF SECTORS AND YEARS.

Hydro's and the Ministry's forecasts may continue to differ, but

at least the underlying reasons would become more clear.

3.3

Electricity Export Policy

Both Hydro witnesses and the Minister of Energy, Mines and Petroluem Resources enunciated the existing government policy regarding electricity exports; namely, that facilities are not constructed for the purpose of exporting electrical energy. Exports do occur, but mainly as a result of the availablility of non-firm hydroelectric energy or as a result of inadvertent excess supply.

With respect to justification of the Site C project the

Commission has assumed this policy. Hydro implicitly considers the potential for surplus spot sales in evaluating the appropriate timing of new supply aimed at meeting domestic requirements. As described in Chapter VIII, surplus export market conditions have a major bearing on the consequences and costs of excess supply, and therefore on the logic or prudence of Hydro's planning criteria. THE

COMMISSION

CONSIDERATION

RECOMMENDS

THAT

EXPLICIT

OF SURPLUS SALES PROSPECTS BE INCORPORATED

INTO SYSTEM PLAN EVALUATIONS.

492 300

THE COMMISSION FURTHER RECOMMENDS THAT THE POTENTIAL FOR FIRM SALES OF SHORT OR INTERMEDIATE TERMS BE CONSIDERED IN EVALUATING THE PREBUILDING OF NEW FACILITIES AND PARTIALLY AMORTIZING THEIR

COSTS WITH EXPORT REVENUES.

This is currently

preclJ.lded by provincial policy and has not been considered in this review.

The

Com mission recognizes that suchÂ· a change in policy would result in facilities being built earlier than required by domestic load.

Clearly, such an approach

may have economic m eriJ:., if not in the present circum stances, then possibly

the future.

THE COMMISSION ALSO RECOMMENDS THAT THE POTENTIAL FOR FIRM SALES WITH LONG-TERM CONTRACTS BE CONSIDERED IN EVALUATING THE

MERITS

OF DEDICATING

EXPORT MARKET. and

that

future

PART

OF A

NEW

FACILITY

THE

Provided all social costs are properly taken into account domestic

needs

are

protected,

such

sales

could

advantageous to the province.

3.4

Development Policy

The evidence showed clearly that a major difficulty Hydro faces in developing load growth forecasts and hence system plans is in estimating future new industrial loads. On the one hand, Hydro feels obligated to make provisions for such loads so that electricity supply does not constrain new economic development. On the other hand, since these loads are not committed, it is not clear to what extent they should be taken into account since new facilities might be built in anticipation of loads that never materialize. This problem relates directly to provincial industrial policy and the extent to which

the

province

wishes

encourage

the

development

electricity-intensive industry and to gear Hydro's planning to accommodate such development whenever it occurs.

493

301

THE

COMMISSION

POLICY

HAS

THESE

RECOMMENDATIONS

MATTERS.

THE

COMMISSION

GOVERNMENT RECOMMENDS,

HOWEVER, THAT GOVERNMENT POLICY WITH RESPECT TO BOTH THE TYPE OF INDUSTRIAL DEVELOPMENT IT IS SEEKING AND THE ROLE OF HYDRO IN FACILITATING ITS DEVELOPMENT SHOULD BE CLARIFIED TO ASSIST FUTURE

HYDRO IN

DEVELOPING

COMMISSION

ITS

PANELS IN

PLANS,

ASSESSING

AND THE

ALSO NEED

TO FOR

ASSIST NEW

SUPPLY.

4.0

OTHER MATTERS

Various matters and issues were raised at the hearings that did not fall directly under any specific heading of the terms of reference or that have not been fully addressed in other parts of this report. The most important of these issues are considered in the balance of this chapter. 4.1

Future Land Acquisition and Disposition Policy

Hydro's evidence on land acquisition was discussed in detail in Chapter XIV. In summary, Hydro indicated that it had undertaken a passive land acquisition program until the Utilities Commission Act was passed in 1980. Since then, it had neither acquired nor disposed of land and it did not intend to do so until its Energy Project Certificate Application had been disposed of. Hydro did not indicate what its policy regarding land acquisition or disposition would be if the project were deferred significantly. Regarding the amount of land ultimately required for the project, Hydro indicated that it employed a conservative approach to ensure that it controlled all land needed to operate the reservoir safely plus all the private land that might be unstable after reservoir filling. To this end, Hydro has acquired or intends to acquire all private land between the present river bank and the safe line. Hydro agreed that this policy could result in its owning or controlling more land than ultimately required, but emphasized the importance of erring on the side of safety.

494 302

Hydro also indicated that it would dispose of lands no longer required either because the project is abandoned or because post-project bank monitoring indicates the land is stable. With this in mind, Hydro entered into a buy-back '" agreement with some of those whose land it had already acquired under which the original owner had a right of first refusal on lands Hydro no longer required. Hydro's past policy on land acquisition was criticized by a number of intervenors. The nature of these criticisms varied, but most felt that they had been treated unfairly.

None addressed the question of what should be done

respecting land acquisition if the project is deferred significantly. Some intervenors criticized Hydro's approach to determining the project's land requirements. They suggested that Hydro's existing and proposed acquisitions between the full supply level and the safe line were excessive and needlessly disrupted the operations of existing landowners. The Com miss:iJ:Jn has concluded :in Chapter X that the Site C project should be The Com mission does not

deferred.

wish the

uncertainty caused by that

deferral to prejudice residents of the region any necessary.

FOR

THIS REASON, THE

more than is absolutely

COMMISSION

RECOMMENDS THAT

HYDRO REINSTITUTE ITS PASSIVE LAND ACQUISITION PROGRAM UNTIL AN ENERGY PROJECT CERTIFICATE IS ISSUED. program

The application of this

must be consistent and even handed and must simply amount to a

public declaratwn that Hydro is willing to pay fair market value for any land that current owners wish to sell. In this way, a market will exist for those who wish to sell but those who wish to hold on as long as possible can do so.

THE COMMISSION CONCLUDES THAT HYDRO IS IN THE BEST POSITION TO DETERMINE WHAT LAND

WILL, IN FACT, BE REQUIRED FOR THE

PROJECT, BUT RECOMMENDS THAT HYDRO

MAKE EVERY EFFORT TO

MINIMIZE THE DISRUPTION CAUSED BY THE PROJECT BY ACQUIRING

495

303

AS LITTLE LAND AS POSSIBLE.

THE COMMISSION RECOMMENDS THAT

HYDRO

THAT

ACQUIRE

ACQUISITION, SUCH

INTERESTS

AS EASEMENTS,

FALL

SHORT

WHEREVER

OUTRIGHT

POSSIBLE SO

AS TO

ALLOW CURRENT LAND USE TO CONTINUE TO THE MAXIMUM EXTENT POSSIBLE.

OUTRIGHT

PURCHASE

AGAINST

THE

EXISTING

OWNER'S

WISHES SHOULD ALWAYS BE A LAST RESORT.

FINALLY, THE B U Y- BA C K

COMMISSION

P R 0 VISIO N

ACQUISITIONS

AND

RECOMMENDS THAT HYDRO INCLUDE A

F0R

ALSO

A NY

OFFERS

FUTURE THE

SAME

P RIV A T E PROVISION

P R 0 PERT Y TO

PAST

VENDORS AT SITE C WHERE THIS HAS NOT BEEN DONE. Such a provision allows the original land owner to re-acquire his land if it:. is not required for the project.

This will be of particular importance when only part of his land

was purchased in the first place.

4.2

Data Requirements

Hydro took the position throughout the hearings that it had provided sufficient information in all areas to allow the Commission to determine whether the Site C project is in the public interest and, if it is, under what conditions it should proceed.

Hydro acknowledged information gaps in some areas but

maintained that the information it had provided was sufficient for this hearing. Numerous intervenors argued that Hydro was obligated to provide all the information reasonably obtainable to give as sound a basis as possible for predicting the impacts of the project. They argued that Hydro had failed to do this in many areas. Some Ministries of the provincial government concurred in this view. In several instances, however, the Ministries did not formally advise Hydro that they perceived data deficiencies until they filed their submissions to the Site C hearing in November of 1981.

496

304

The Com mission believes that the applicant is ultimately responsible for providing sufficient information to allow the Com mission to make an informed decision

regarding

the

issues raised

by its terms of reference.

The

Commission has found the evidence produced by Hydro in support of its application to be

wanting in several signiicant respects and has

made

recommendations designed to remedy these deficiencies. The Com mission is confident that much of the information Hydro has failed to produce can be provided to the satisfaction of Cabinet through cooperation between Hydro and the appropriate Ministries of government. In these areas, the Com mission urges as fun an exchange of information as possible. The Com mission believes that a dialogue of the sort recommended could and should have occurred long before the Site C hearings began. In particular, time could have been saved if, before the hearing began Hydro and the

Ministry of Agriculture and Food had resolved their dispute on the amount and classification of agricultural land that would be lost to the project. The Com mission strongly endorses public consultation as an integral part of the

energy

project

review

process in the

province.

The

Com mission

encourages government Ministries, applicants and other interested parties to make fuller use of it in the future. If all parties work together to identify the major issues in advance of the hearings, the quality of evidence adduced by the applicant and intervenors can be expected to be improved and less time spent exploring areas ultimately determined to be of little consequence.

4.3

Equity Considerations

The Guidelines for Benefit-Cost Analysis make explicit reference to equity considerations in the discussion of appropriate levels of compensation. The principle, when applied to a project such as Site C, recognizes that those

497

305

individuals and communities upon whom the costs of the project are imposed may not be the ones who benefit the most. Thus, while the project may be in the interests of the province as a whole, it may have adverse consequences for partie ular groups or individuals. The Com mission has concluded that Site

built at the appropriate time, can

be in the best interests of the province even though it may not be in the best interests of some individuals.

The compensation payments recommended in

this report are in part designed to redress this imbalance and to be successful they must reach the affected groups. The Com mission has recommended that various compensation payments be paid directly to the account of particular Ministries. The Com mission is aware that in practice, the payments will simply be made by Hydro to the province's general account. It is therefore important that individual Ministers ensure that the moniEs, once paid into general revenue, find their way into the appropriate

departments

and

into

the

appropriate

regions.

the

recom m endations in this report are to result in an equitable distribution of the costs and benefits of Site C, the enhancement programs and compensation payments recom mended in this report must be undertaken and made for the benefit of the citizens of the Peace River area.

4.4

Cumulative Impacts

A number of intervenors, expressed concern about the cumulative impacts of developments and they criticized what they viewed as a piecemeal approach to development of the Peace River, which has increased those impacts. The cumulative impact of unrelated projects in frontier areas is well beyond the scope of this report.

However, the Commission is concerned about the

cumulative impacts of hydro development on a particular river basin.

498

306

The Com mission concludes that where development of an entire river system

anticipated,

should

only

undertaken

after the

impact

of full

development has been considered. In the case of the Peace River Basin and Site C, much of the develDp m ent has already occurred and consequently only an incremental approach is possible.

In the context of Hydro's northern river developments however, a cumulative

analysis is still possible.

THE

COMMISSION

RECOMMENDS THAT ANY

INQUIRY INTO THOSE RIVER BASINS SHOULD LOOK AT THE IMPACT OF THE ENTIRE DEVELOPMENT OF EACH BASIN AND NOT JUST THE FIRST STEP OF THE DEVELOP ME NT.

4.5

Onsite Power

A number of intervenors sought to raise the question of preferential rates for onsite power as an issue during the hearings. On July 13, 1982, the Commission ruled that this issue was outside its terms of reference and no recommendation would be made concerning it. The

Com mission notes that preferential pricing of power in communities

affected by a major energy project could appear to be an attractive form of compensation to those communities.

The Com mission concludes, however,

that reg:iDnal impacts can best be managed by compensat:iDn and mitigat:iDn programs such as those recommended in this report.

499

307

This is the majority report of the Site C Division of the British Columbia Utilities Commission, dated May 3, 1983, in response to the Lieutenant Governor's Order-in-Council Number 961 approved and ordered April 23, 1981.

DATED at the City of Vancouver, in the Province of British Columbia, this 3rd day of May, 1983.

KEITH A. HENRY, P. Eng. Commissioner and Chairma.!J._

Commissioner

LORNE E. RYAN, P. Eng. Commissioner

500

DISSENT BY COMMISSIONER D.B. KILPATRICK The position of the Site C Division of the B.C. Utilities Commission with respect to justification of the project has been summarized on page 125 in Chapter X of the Site C Report as follows: "On the basis of the evidence, however, the Commission is not satisfied that Hydro has demonstrated that a 1983 start-up date is justified or that Site C is the only possible source to follow Revelstoke in the system plant, or that it is preferable to all other sources."

These conclusions, which I fully support, clearly indicate that, in the judgment of the Commission, B.C. Hydro has failed to meet the three most fundamental and essential requirements for approval of an Energy Project Certificate. Under the circumstances, I do not concur with the majority recommendation of the Site C Division that the issuance of an Energy Project Certificate be -Âˇ merely deferred until the essential evidence is provided by the Applicant. ~-

In my opinion, rejection of an Application is the only appropriate result where crucial evidence is missing. To simply defer issuing the required Certificate in such circumstances will not provide sufficient incentive to the Applicant to provide adequate evidence in future applications, or to refrain from applying for the Certificate until the circumstances warrant the application. Rejection of the present Application for cause need not be viewed or treated as unusual or unexpected, since it flows directly from the unanimous conclusions of the Commission on the evidence presented. The Applicant is free to re-apply under terms of reference which can be confined to the missing Âˇ evidence, the evidence on all other issues having already been heard and accepted by the Commission as both useful and adequate for a final decision.

308

501

309

For

the

foregoing

reasons,

therefore

dissent

from

the

majority

recommendation of the Site C Division of the Commission and submit my personal recommendations as follows:

That the Site C Application by B.C. Hydro in its present state be rejected.

That the Applicant be invited by the Government to re-apply when justified by new evidence confined entirely to:

'3.

(a)

Demand/supply - magnitude of need and project timing.

(b)

System Planning studies confirming Site C as first choice.

That the new evidence be referred to and reviewed by the B.C. Utilities Commission in an abbreviated public hearing, under terms ofÂˇ reference confined to the foregoing, and that the appropriate recommendations be directed to the Lieutenant Governor-in-Council, as prescribed by the Act.

all

other

respects,

concur

with

the

findings,

recommendations contained in the Site C report.

D. B. Kilpatrick Commissioner

May 3, 1983

conclusions

and

502

GLOSSARY

TERMS Base Load Cabinet/Lieutenant Governor-in-Council

Credit Ratings

Compensation for Environmental and Social Impacts

The level of electrical energy demand which occurs at off-peak as well as peak periods. These two terms have been used interchangably in this report. Pursuant to Section 21 of the Utilities Commission Act, the Lieutenant Governor-in-Council has the authority to issue an Energy Project Certificate and to attach to it any conditions which he considers to be in the public interest. A system of rating securities used to indicate investment security. There are nine symbols as shown below, with the first indicating highest investment security and the last indicating lowest investment security: Aaa Aa A Baa Ba B Caa Ca C.

Payments, in cash or in kind, which are made by developers or parties responsible for the impacts, with the objective of redressing or offsetting the losses which occur despite or in lieu of mitigation.

Consumer Surplus

The value that individuals attach to a particular good, service or opportunity less the amount they actually pay for it.

Critical Water Years

A series of low water years defined in the B.C. Hydro system by the period September 1942 to Aprill946.

Cross Elasticity of Demand

The ratio of the percentage change of the demand for one commodity (or input) to a given percentage change of the price of a different commodity (or input).

Discount Rate

The rate at which future values are reduced to comparable present value.

310

503

311

Draw down

Firm Hydroelectric Capablllty

The lowering of the water level of a reservoir by spilling or otherwise withdrawing more water from it than is coming in. The annual amount of hydroelectric energy that can be produced by B.C. Hydro's system while in a critical water year sequence.

Full Supply Level

The elevation of the water surface in a reservoir when it is full.

Geothermal Energy

Heat produced by natural processes such as hot springs and geysers.

Gross Provincial Domestic Product (GPDP)

Interest Coverage Ratio

Income Elasticity of Demand

Mitigation of Environmental and Social Impacts

The total value added of all final goods and services produced in a province in a given period of time (usually measured yearly). The ratio between the funds available to service debt (revenue less expenses) and interest costs. The ratio of the percentage of change of the demand for a particular commodity to a given percentage change of income.

Measures taken in the design, construction or operation of a project specifically aimed at reducing adverse impacts.

Morphoedaphic Index

An index which is a function of the mean depth and total dissolved solids in a water body (usually a lake) used to predict potential fish yields.

Overburden Bank

The portion of riverbank formed by clays, silts, sands or gravels or any mixture of them.

Penstock Encasement

The concrete protective cover over a steel penstock.

504

312

Petajoule

One quadrillion or l x wl5 joules, a measure of energy equal to 277.8 gigawatt hours (G Wh) or 277.8 miliion kilowatt hours (KWh).

Pot Lines

The electrical aluminum.

Price Elasticity of Demand (or Own Price Elasticity)

furnaces

used

refining

The ratio of the percentage change in the demand for a particular commodity to a given percentage change in its price.

Rebound

The expansion of a foundation material which has been compressed by a mass of overlying material when the overlying material is removed.

Resource Economic Rent

The value of production made possible by a resource, less the costs of all the inputs to production other than the costs of that resource itself.

Retrofitting

The installation of new facilities or equipment to existing plants or structures.

Ryder's Equation

A statistically derived formula used for estimating potential fish yields utilizing the morphoedaphic index.

Sa feline

A line on the banks of a reservoir above or outside of which is considered safe from bank sliding or sloughing.

Site C and Site E Flood Reserves

Sloughing

The Lieutenant Governor-in-Council may for any purpose that he considers to be in the public interest reserves Crown land from disposition and has done so for large areas which would be flooded if Site C or Site E are to be constructed. Once established these reserves may be cancelled in whole or in part by the Lieutenant Governor-in-Council. Relatively gradual erosion and subsidence of an overburden bank as it adjusts to a new water level regime.

313 505

Social Benefit-Cost Analysis

Social Opportunity Cost of Capital

Social Time Preference Rate

A method of evaluating alternative investments or projects from society's point of view. The pre-tax rate of return of obtainable in its best alternative use.

capital

The rate which measures society's preference for present consumption versus saving (future consumption).

Spillway

A device by which significant quantities of water can be spilled from a reservoir without going through the generators.

Stilling Basin

A basin or pool of water at the lower end of a spillway where the kinetic energy of the falling water is dissipated under conditions controlled to prevent erosion.

Subsidence

Sinking

Surplus Electrical Energy

Hydroelectric energy available when greater than critical water conditions prevail, plus firm energy not required to meet domestic or export load.

System

The generation, transmission and distribution facilities of an electrical utility.

System Expansion PIan

The plan describing the increase in generation, transmission and distribution facilities to allow the production and use of more electrical energy.

Thermal Energy

Energy produced from heat, usually from the burning of fossil fuels, (oil, coal, gas) or by nuclear reactors.

Thousand Year Flood

A hypothetical flood the size of which has been statistically estimated to occur once every thousand years.

Willingness-to-beCompensated

Willingness-to-Pay

The amount of compensation needed to induce individuals to forego the use of a particular good or service. The price that individuals would be willing to pay for a particular good or service.

506

314

UNITS USED IN THE SITE C REPORT

The system of units called SI, or systeme internationale, has a series of abbreviations, most of which, but not all, are single letters, either lower case or capitals. Some basic units and their abbreviations are: metre

watt

v w

grams

joule

ampere

hour

liter

volt

These basic units can be combined to obtain derived units such as: watt hour

In order to handle larger and small quantities, a number of prefixes are used to indicate that the basic or derived unit is to be multiplied or divided by a number such as ten or a thousand or a trillion. For example,

w-3 w-2

milli

divide by 1,000

centi

divide by 100

dec a

multiply by 10

kilo

multiply by 1,000

one thousand

10 103

multiply by 1,000,000

one million

106

mega gig a

multiply by 1,000,000,000

one billion

pet a

multiply by l,OOO,OOO,OOO,OOO

one quadrillion

109 1015

507

315 Using these prefixes with the basic and derlved units, the two dozen or so expressions used most commonly can be written: volt

kilovolt

kilowatt hour

kWh

watt

kilowatt

gigawatt hour

G Wh

megawatt

joule

petajoule

metre

centimetre

millimetre

kilometre

kilogram

milligram

gram

In order to cope with areas and volumes it is necessary to use indices to indicate, for instance: square metres cubic metres

hectare

2 is 10,000 m

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Tom A. Loski Chief Regulatory Officer Phone: 604-623-4046 Fax: 604-623-4407 bchydroregulatorygroup@bchydro.com

June 10, 2016 Ms. Laurel Ross Acting Commission Secretary British Columbia Utilities Commission Sixth Floor â&#x20AC;&#x201C; 900 Howe Street Vancouver, BC V6Z 2N3 Dear Ms. Ross: RE:

British Columbia Utilities Commission (BCUC or Commission) British Columbia Hydro and Power Authority (BC Hydro) PUBLIC Site C Clean Energy Project â&#x20AC;&#x201C; Progress Report No. 3 F2016 Q4 - January to March 2016

BC Hydro writes provide its confidential Site C Clean Energy Project Progress Report No. 3. Commercially sensitive and contractor-specific information has been redacted. A confidential version of the Report is being filed with the Commission only under separate cover. For further information, please contact Geoff Higgins at 604-623-4121 or by email at bchydroregulatorygroup@bchydro.com. Yours sincerely,

Tom Loski Chief Regulatory Officer st/ma

Enclosure (1)

British Columbia Hydro and Power Authority, 333 Dunsmuir Street, Vancouver BC V6B 5R3 www.bchydro.com

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Site C Clean Energy Project

Quarterly Progress Report No. 3

F2016 Fourth Quarter

January 2016 to March 2016

PUBLIC

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PUBLIC Quarterly Progress Report No. 3 F2016 Fourth Quarter â&#x20AC;&#x201C; January 2016 to March 2016

Table of Contents 1

2 3

Project Status ..................................................................................................... 1 1.1 Overview and General Project Status ....................................................... 1 1.2 Major Accomplishments, Work Completed, Key Decisions and Key Issues........................................................................................................ 3 1.2.1 Aboriginal Consultation ............................................................... 3 1.2.2 Litigation ..................................................................................... 4 1.2.3 Permits and Government Agency Approvals .............................. 6 1.2.4 Engineering and Construction .................................................... 9 1.2.5 Safety ....................................................................................... 12 1.2.6 Environment ............................................................................. 13 1.2.7 Employment .............................................................................. 15 1.2.8 Community Engagement & Communication ............................. 16 1.3 Key Procurement and Contract Developments ....................................... 21 1.3.1 List of Major Contracts Awarded (Excess of $50 million) .......... 22 1.3.2 Large Contracts to Date (Excess of $10 million) ....................... 22 1.3.3 Contract Management .............................................................. 22 1.4 Plans During Next Six Months ................................................................ 23 1.5 Impacts on Other BC Hydro Operations.................................................. 23 1.6 Site Photographs .................................................................................... 23 Project Schedule .............................................................................................. 24 2.1 Project In Service Dates.......................................................................... 24 Project Costs and Financing............................................................................. 24 3.1 Project Budget Summary ........................................................................ 24 3.2 Project Expenditure Summary ................................................................ 25 3.3 Internal Project Financing versus External Borrowings to Date .............. 26 Material Project Risks ....................................................................................... 27

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List of Tables Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Table 14 Table 15 Table 16 Table 17 Table 18

Project Status Dashboard .................................................................. 3 Litigation Status Summary ................................................................. 4 Site Prep Works Permits and Authorizations ...................................... 6 General List of Future Permit Requirements ...................................... 8 Scope of Main Civil Works Contract ................................................. 11 Quality Management Non-Conformity Report Metrics ...................... 12 Safety Metrics................................................................................... 12 Site C Jobs Snapshot ....................................................................... 15 Site C Job Fairs and Business Networking Sessions ....................... 17 Public Enquiries Breakdown ............................................................. 18 Major Project Contracts and Delivery Models .................................. 21 Major Project Contracts Awarded ..................................................... 22 Key Milestones ................................................................................. 23 Project In Service Dates ................................................................... 24 Project Budget Summary ................................................................. 25 Total Project Expenditure Summary ($ million Nominal) Compared to Final Investment Decision ........................................... 25 Total Project Expenditure Summary ($ million Nominal) Compared to F2017-F2019 Service Plan ......................................... 26 Material Project Risks....................................................................... 27

Appendices Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F

Site Photographs Summary of Individual Contracts Exceeding $10 million Project Progression Detailed Project Expenditures Workforce Overview Preliminary Construction Schedule

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PUBLIC Quarterly Progress Report No. 3 F2016 Fourth Quarter â&#x20AC;&#x201C; January 2016 to March 2016

Project Status

This Quarterly Progress Report No. 3 (Report No. 3) provides information concerning the Site C Clean Energy Project (Project) covering the period from January 1, 2016 to March 31, 2016.

1.1

Overview and General Project Status

The Project will construct a third dam and hydroelectric generating station on the Peace River in northeast B.C. to provide 1,100 megawatts of capacity, and produce about 5,100 gigawatt hours per year. In December 2014, the Project received approval from the provincial government to proceed to construction. The Project is in Implementation Phase and construction commenced July 27, 2015. Construction activity for the Site C Project reduced slightly through the winter season, as expected, but has increased in the spring with approximately 650 workers on site in March. The Peace River Construction Bridge was completed on schedule and on budget on March 31, 2016. On the north bank of the dam site, construction of the North Bank Access and River Roads are still in progress. A design revision to the gully embankment section of the North Bank Access Road was required to support the existing east gully slope due to movement. Embankment construction work was resumed in February 2016. River Road, which provides access to the Peace River Construction Bridgeâ&#x20AC;&#x2122;s North Approach, has been completed sufficiently and is being used to provide access to the bridge. Final completion of River Road is scheduled for late July. Left (north) bank excavation works is under way. Over 900 hectares of clearing has been completed between the north and south bank of the dam site and the lower reservoir. Merchantable logs harvested from the North Bank have been delivered to local mills in Fort St. John and logs from the South Bank will be delivered to local mills now that the Peace River Construction Bridge is complete.

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Construction of the Worker Accommodation Camp continues with the Phase 1 opening of 300 rooms and the onsite Construction Management Site Office infrastructure completed in time for occupation on March 1, 2016. Work remains on track for completion of Phase 2 (an additional 900 rooms) by the end of June. Peace River Hydro Partners mobilized to site on March 22, 2016. Recruitment for administration of this major contract has progressed and all efforts are focused on providing substantial opportunities for local candidates. Acceptance of submittals to start physical work at site is behind and starting to impact the schedule to start the right (south) bank drainage tunnel. Overall, the progression of work is on track to achieve the BC Hydro Board of Directors (Board) approved in-service dates; the first unit is expected to come on line in December 2023 and the final in-service date is expected in November 2024. Costs are forecast to come within the Board approved P50 amount ($8.335 billion). Table 1 provides a dashboard based on the Project status as at March 31, 2016.

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Table 1

Project Status Dashboard

 Green: No Concerns;  Amber: Some Concerns but in Control;  Red: Serious Concerns Status as of:

March 31, 2016

Overall:



Overall Assessment



The Project is on track for overall scope and schedule. The Project is on track with the Project completion date of November 2024.1

Schedule ISDs



The Main Civil Works contractor is currently one month behind, however the overall schedule and progress remains on track to achieve the planned In-Service Dates.

Cost

 The project is monitoring and evaluating some specific cost pressures and is conducting detailed budget reviews to identify opportunities for savings. Overall cost forecast remains on track and total project cost is forecast to be within budget. There have been no draws on Treasury Board reserve.

Permits and Environmental

 Provincial Permits: Some permit applications are currently under review by Forest, Lands and Natural Resource Operation, but have not yet been issued. It is anticipated that these permits will be issued in time for the specific construction activities to commence as scheduled. The Water License was issued in February 2016. Federal Authorizations: Applications for Main Civil Works and operations were submitted to both Transport Canada and Fisheries and Ocean Canada for review. Anticipated in May 2016.  Identified risks are being managed and treatments are in place or planned. For details refer to section 4 Material Project Risks below.

Risks Aboriginal Relations

 Impact Benefit Agreement offers have been made to all Treaty 8 First Nations significantly affected by the Project.

Regulatory and Litigation

 Decisions made by the Crown may be subject to additional judicial reviews by First Nations and others who may oppose the project.

Safety

 There was one Level 1 safety incident and three Level 2 injuries at the construction site in this quarter.

1.2

Major Accomplishments, Work Completed, Key Decisions and Key Issues

1.2.1

Aboriginal Consultation

The Board approved In Service Dates for total Project completion November 2024.

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PUBLIC Quarterly Progress Report No. 3 F2016 Fourth Quarter – January 2016 to March 2016

Efforts are ongoing to conclude impact benefit agreements with ten Aboriginal groups. 1.2.2

Litigation

Of seven legal challenges of major environmental approvals and permits, two were discontinued, four were dismissed by the courts, one decision is pending, three appeals were filed and one appeal was heard by the B.C. Court of Appeal and a decision on that appeal is pending. In addition, two appeals of BC Hydro’s water licence have been filed with the Environmental Appeal Board. The details of the various proceedings are summarized in Table 2 below. Table 2

Litigation Status Summary Outcome

Date

Federal Court: Federal Environmental Approval Mikisew Cree Athabasca Chipewyan

Two judicial reviews were discontinued after agreements were reached with BC Hydro and the federal government

July 16, 2015

Peace Valley Landowner Assoc.

Dismissed; no appeal filed

August 28, 2015

Prophet River First Nation West Moberly First Nations

Dismissed Appeal filed No hearing date yet

August 28, 2015 September 30, 2015 TBD: September/October 2016

B.C. Supreme Court: Provincial Environmental Assessment Certificate Peace Valley Landowner Assoc.

Dismissed Appeal filed Hearing held Decision pending

July 2, 2015 July 30, 2015 April 4 – 5, 2016

Prophet River First Nation West Moberly First Nations

Dismissed Appeal filed No hearing date yet

September 18, 2015 October 19, 2015

B.C. Supreme Court: Provincial Permits Prophet River First Nation West Moberly First Nations

Injunction application dismissed Hearing of Petition complete Decision pending

August 28, 2015 November 17 to 23, 2015 and February 2, 2016

Environmental Appeal Board

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Outcome West Moberly and Prophet River First Nations

Date

Water Licence Appeals filed No hearing date yet

March 29, 2016

BC Hydro v Boon et al. (Rocky Mountain Fort)

Civil Claim filed Injunction decision

January 29, 2016 February 29, 2016

Building Trades v BC Hydro

Civil claim filed Response to claim filed

March 2, 2015 April 10, 2015

Other Proceedings

Status as of March 31, 2016.

1.2.2.1

Rocky Mountain Fort Protest

From January to February 2016, a group of individual protestors prevented BC Hydro and its contractor from safely clearing an area known as “Rocky Mountain Fort”, upstream of the confluence of the Moberly and Peace Rivers. BC Hydro filed a civil claim and applied to B.C. Supreme Court for an injunction to remove the protestors from the area. The Court granted the injunction order on February 29, 2016; the protestors respected the order and left the area; and clearing proceeded in March 2016. There have been no further steps in the civil claim. 1.2.2.2

Building Trades Claim

In 2015, Building Trades representatives filed a claim in B.C. Supreme Court alleging that certain labour provisions in BC Hydro’s contracts, such as “no organizing” at site, were contrary to the Charter. In May 2015, BC Hydro signed the “Poly-Party” memorandum of understanding and, although settlement of the claim was not a condition of the MOU, no further steps have been taken in the litigation since the MOU was signed.

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1.2.3

Permits and Government Agency Approvals

1.2.3.1

Background

In addition to the Environmental Assessment Certificate and the Federal Decision Statement, provincial permits and federal authorizations are required to construct the Project. Timing of the application for these permits and authorizations is staged and aligned with the construction schedule, availability of detailed design information, and by Project component. 1.2.3.2

Provincial Permits:

The strategy for Site C provincial permits involves a phased approach to the submission of applications to the Ministry of Forests, Lands and Natural Resource Operations based on Project components and construction schedule. Table 3 below provides a list of permits and authorizations that have been issued for site preparation works at the dam site, for vegetation clearing and quarries/pits. The project received three authorizations in this reporting period. Additional permits were issued in February 2016. Table 3

Site Prep Works Permits and Authorizations

Required Permit/Approval B.C. Environmental Assessment Certificate Federal Decision Statement (revised date) Crown Land tenures Water Act (sections 8 and 9) Occupant Licence to Cut Mines Act (Notice of Works) Wildlife Act Heritage Conservation Act – Alteration Permit Amendment Fisheries Act Authorization – Site Preparation Navigation Protection Act – Site Preparation Removal of land from Agricultural Land Reserve Floating Dock Installation – Notification Peace River Safety Buoys – Notification Amendment

Process Initiation/ Application Date Submitted EIS Jan 2013 April 2014 April 2014 April 2014 April 2014 April 2014 November 2014 November 2015 October 2014 October 2014 December 2014 October 2015 November 2015

Approval Date/ Forecast Decision Date October 14, 2014 – EAC November 25, 2014 – FDS July 7, 2015 July 7, 2015 July 7, 2015 July 7, 2015 July 7, 2015 July 14, 2015 March 31, 2016 September 30, 2015 September 29, 2015 April 2015 October 30, 2015 November 3, 2015

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Required Permit/Approval Water Licence - Diversion & Storage Fisheries Act – Main Civil Works and Operations Navigation Protection Act – Main Civil Works and Operations 1st Leaves to Commence 34 Permit applications currently under review with Forests, Lands and Natural Resource Operations Renewal and Future permit applications (Years 2 to 3) Renewal and Future permit applications (Years 3 to 8)

Process Initiation/ Application Date 2008 December 2015 October 2014

Approval Date/ Forecast Decision Date February 29, 2016 Forecast: May 2016 Forecast: May 2016

February 2016 Various dates in 2015

April 1, 2016 Forecast: December 2015 to May 2016 Forecast: September 2016 TBD

February 2016 TBD

The Water Licence for diversion and storage has been approved by the Water Comptroller’s office. The review included a written hearing with two rounds of comments and responses as well as First Nations consultation. The hearing portion of the process was completed in December 2015 and the Water Comptroller made a decision on February 29, 2016. Two appeals were filed with the Environmental Appeal Board. The first Leave to Commence Construction was issued on April 1, 2016. 1.2.3.3

Future Provincial Permits:

Table 4 below lists the general categories of future provincial permit requirements for the different Project components.

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Table 4 Project Component Main Civil Works

Highway 29 Re-alignment (Cache Creek and Halfway River sections) Other sections Transmission Quarries/Pits (West Pine) Mitigation Works (e.g., Fish and Wildlife)

General List of Future Permit Requirements

Key Permit Requirements Leave to Commence Construction 3rd Leave to Commence Construction Wildlife Act (fish, amphibian salvage) Water Act (section 8 – short term use) Land, Water, Wildlife, Heritage Conservation, Forest Acts

Forecast Date Estimated: May 2016 Estimated: July 2016 Estimated: June 2016 Estimated: June 2017 June 2016

Land, Water, Wildlife, Heritage Conservation, Forest Acts

Spring 2017 and beyond

Land, Water, Wildlife, Heritage Conservation, Forest Acts Land, Water, Wildlife, Heritage Conservation, Forest, Mines Acts Water Act, Wildlife Act

August 2016 Spring 2017

2nd

TBD

Assumptions  Permit requirements listed are general in nature. Additional permits may be identified and required under the various acts as detail design and construction proceeds for the different Project components. The date required is subject to change based on changes to the construction design, methods and/or  schedule and the consultation process currently being discussed with the Province, DFO and Transport Canada.

Future applications include Land, Water, Wildlife, Forest, Mines, and Heritage Conservation Act permits for the Main Civil Works, transmission line, Highway 29 re-alignment, quarries and pits and the mitigation and monitoring works (e.g., fish contouring for minimizing the risk of fish stranding). Weekly meetings with the Ministry of Forests, Land and Natural Resource Operations are continuing to ensure that these future applications meet the scheduling needs of the Project. 1.2.3.4

Future Federal Authorizations:

The Navigation Protection Act application for construction and reservoir filling is complete and Transport Canada is consulting on components in preparation for authorization issue. A Fisheries Act authorization is also required and BC Hydro submitted the application in December 2015. The application includes the authorization for reservoir filling as well as operations. The consultation is being conducted simultaneously for these two permits and began in late December 2015.

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1.2.4

Engineering and Construction

1.2.4.1

Engineering

The implementation design of the Power Intakes, Penstocks and Spillways is progressing with tender specifications and drawings targeted to be complete by mid-May 2016 for the Intakes and Penstocks, and end of June 2016 for the Spillways. The tender design schedule for the powerhouse has been updated based on the award date for the turbine generator contract with completion by end of August 2016. Main Civil Works implementation design is continuing. The issuing of the construction drawings commenced following contract award, and as of the end of March, 55 per cent of the drawings have been issued. Implementation design is underway for the 500 kV transmission lines, Peace Canyon 500 kV Gas Insulated Substation and Site C substation. A Technical Advisory Board meeting was held during the week of April 25, 2016. 1.2.4.2

Construction

Refer to Appendix F for the full preliminary construction schedule. North (Left) Bank Site Preparation Key contract scope for North Bank Site Preparation includes constructing approximately 7 km of access roads and excavation of approximately 2 million cubic metres of material. 

North Bank embankment construction commenced in February 2016 and 82 per cent of excavation is now completed;



Approximately 29 per cent of the River Road subgrade is completed, and the road is in usable condition. Final grade of the River Road is expected to be completed in July 2016;



The North Bridge Approach was completed in February 2016; and

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PUBLIC Quarterly Progress Report No. 3 F2016 Fourth Quarter – January 2016 to March 2016



Clearing on the North Bank has now been completed (approximately 220 hectares).

South (Right) Bank Site Preparation South Bank site preparation work commenced in September 2015 and includes vegetation clearing, construction of new access roads, a temporary sub-station pad, and a new rail siding. 

All 620 hectares have now been cleared on the South Bank;



The Peace River Construction Bridge was completed on schedule and on budget on March 31, 2016;



Work on the Septimus rail siding will resume in Q1 of F2017 and there is currently no anticipated consequence of delay to the Main Civil Works Contractor at this time; and



Construction of temporary substation pad access roads to final grade will continue in 2016. In-service date for the Temporary Substation is anticipated for July 2016 and is progressing according to plan.

Worker Accommodation 

Phase 1 of the Worker Accommodation camp (300 beds) was completed on February 29, 2016, on schedule;



All of the modules for the Phase 2 Core and 90 per cent of the modules for the Phase 2 dormitories have been delivered and set in place (1,200 beds); and



Additional work such as electrical, plumbing, mechanical, telecommunications, etc. is in progress for the scheduled Phase 2 In-Service date of June 25, 2016.

Ministry of Transportation and Infrastructure Public Road Upgrades The Ministry of Transportation and Infrastructure’s contractor, Al Simms and Sons, was able to complete the upgrading of 269 Road (0.9 km) including paving prior to

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winter shutdown. The Contractor has also commenced work on 240 Road (1.5 km), with widening and embankment work now complete. Paving and finishing work on 240 Road is scheduled to be completed in June 2016. Main Civil Works The Main Civil Works contract was signed on December 18, 2015 with Peace River Hydro Partners, a partnership between ACCIONA Infrastructure Canada Inc., Samsung C&T Canada Ltd, and Petrowest Corporation. Peace River Hydro Partners mobilized to site on March 22, 2016. The scope of the Main Civil Works contract is described in Table 5. Table 5 Component

Scope of Main Civil Works Contract Description

Diversion works

Two approximately 11 metre diameter concrete-lined tunnels approximately 750 metres in length

Excavation and bank stabilization

Approximately 26 million cubic metres of overburden and rock excavation

Relocation

Relocation of surplus excavated material (including management of discharges)

Dams and Cofferdams

A zoned earth embankment 1,050 metres long and 60 metres above the present riverbed and stages 1 and 2 cofferdams

Roller-Compacted Concrete

Buttress â&#x20AC;&#x201C; 800 metres long with 2 million cubic metres of concrete

Quality Management Implementation and monitoring of Quality Control and Quality Assurance Plans are required of all contractors. Table 6 below identifies quality management non-conformity instances during the quarter ending March 31, 2016.

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Table 6

Contract

Quality Management Non-Conformity Report Metrics Reported this period

Contractor

North Bank Site Preparation

Morgan Construction & Environmental

South Bank Site Preparation

Duz Cho Construction

Peace River Construction Bridge

Saulteau Ruskin **

Main Civil Works

Closed this period

Reported to date

Closed to date

N/A

10**

N/A

Peace River Hydro Partners

The two non-conformity incidences reported were concrete anchor block installation (closed) and commencement of work prior to authorization (closed). ** The bridge is in service and all Non-Conforming Reports are closed.

1.2.5

Safety

There was one Level 1 safety incident and three Level 2 injuries at the construction site in this quarter. Table 7 below identifies the project safety metrics during the quarter ending March 31, 2016. Table 7

Safety Metrics Reported this Period

Reported since Inception

Fatality & Serious Injury2

Severity (number of calendar days lost due to injury per 200,000 hours worked)

Lost Time Injury Frequency (number of injuries resulting in lost time per 200,000 hours worked)

Contractor, employee, public near miss reports

Lost time incidents

Equipment/property damage reports**

* Complete information not provided by the contractors ** Types of equipment and property damage include vehicle damage, minor electrical fire damage, etc.

One Level 3 employee injury was reported and 40 contractor injuries were reported of which 39 were Level 3 injuries and one was a Level 2 injury. None resulted in lost 2

Excludes health events unrelated to work standards.

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time. Of the near miss reports, 95 per cent were Level 3 type (lowest severity). The Level 1 Contractor Near Miss involved a contract employee falling into the Peace River while attempting to access a boat. Of the near misses reported, two were Public Near Misses, involving a member of the public accessing the construction site and rip rap rock falling onto a public road off a haul truck. 1.2.6

Environment

1.2.6.1

Mitigation, Monitoring and Management Plans

In accordance with Environmental Assessment Certificate conditions, environmental management, mitigation and monitoring plans have been developed. Draft plans were submitted to regulators, local governments and potentially affected Aboriginal groups. Comments were incorporated into the final plans and submitted in accordance with required timelines. In accordance with EAC conditions, during the reporting period the Recreation Program was submitted (January 28, 2016). In accordance with the mitigation and management plans the following program reports were submitted: 

Housing Plan and Housing Monitoring and Follow-Up Program: Rental Apartments – Interim Monitoring Report (January 22, 2016);



Traffic and Pavement Monitoring Report (January 22, 2016); and



Vegetation and Wildlife Mitigation and Monitoring Plan 2015 Annual Report (January 2016).

1.2.6.2

Environmental Compliance Inspections

Inspectors from Environmental Assessment Office, Canadian Environmental Assessment Agency and Forest, Land and Natural Resource Operations attended a two day inspection of Site C construction in December 2015. Reports were received and responded to in March 2016.

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In late March 2016, the Environmental Assessment Office attended another inspection. Following that inspection, an Order was issued that focused on sediment and erosion control. Some corrective actions were put in place prior to the order being issued. Secondary actions that had longer timelines associated with them are in progress and timelines are being met. Ongoing inspections will be taking place frequently. In addition, independent environmental monitors, contractor and BC Hydro monitors are conducting compliance checks on an ongoing basis. 1.2.6.3

Heritage

In accordance with a number of Environmental Assessment Conditions and the Federal Decision Statement, the Site C Heritage Management Resource Plan addresses the measures that will be used to mitigate the adverse effects of the Project on heritage resources. During the reporting period, which is predominantly during winter conditions, heritage mitigation work was focused on compliance with construction environmental protection plans in active work areas. This included ensuring communication about the status of heritage sites to contractors, flagging and marking of heritage sites within work areas as required, as well as concurrent monitoring or surface inspections of known archaeology sites was performed. 1.2.6.4

Stakeholder Consultation for Agricultural Mitigation and Compensation Plan:

Agricultural stakeholder consultation undertaken to address Environmental Assessment Certificate Condition 30 requirements and to support the development of the Agriculture Mitigation and Compensation Plan concluded during the reporting period. Working with a Consultation Steering Committee comprised of staff from BC Hydro, the Ministry of Agriculture, and the Ministry of Energy and Mines to guide

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consultation, a Consultation Summary Report and meeting summaries were prepared and are available on the project website. In accordance with the requirements of the condition, the Framework for an Agricultural Mitigation and Compensation Plan will be submitted to the Peace River Regional District and the District of Hudson’s Hope for review by July 2016. A draft Agricultural Mitigation and Compensation Plan will be provided for review in January 2017, and a final plan filed with the B.C. Environmental Assessment Office, Peace River Regional District, District of Hudson’s Hope, the Ministry of Agriculture and the Ministry of Forests, Lands and Natural Resource Operations by July 2017. In addition, the Framework, draft Plan and final Plan will be posted on the Site C website for review, and notification will be provided to affected land owners, tenure holders, agricultural stakeholders, and consultation participants. 1.2.7

Employment

Contractors submit monthly workforce data electronically to BC Hydro. Table 8 shows a snapshot of the number of workers for this quarter by month. Table 8 Month

Site C Jobs Snapshot # B.C. Workers*

# Total Workers*

January 2016

381

564

February 2016

492

691

March 2016

490

666

Data is subject to change based on revisions received from the contractors.

Refer to Appendix E for additional workforce information. The number of workers continues to vary as the construction work progresses. For example, it is expected that the number of workers will increase overall following the Main Civil Works contractor’s mobilization to site in March 2016. The Main Civil Works contractor, Peace River Hydro Partners, has indicated that approximately 1,500 workers will be working at the peak of construction. As these job opportunities become available,

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they will be posted on the WorkBC website as well as on the local Fort St. John’s WorkBC Employment Centre’s website (Employment Connections). BC Hydro will continue to work with the contractors on site to facilitate reporting of workforce information such as the types of jobs, number of apprentices, and the diversity of their workforce. Some preliminary data is available but we anticipate being in a position to more thoroughly report on these additional categories of information as the construction progresses and the size of the work force increases. 1.2.8

Community Engagement & Communication

1.2.8.1

Local Government Liaison

BC Hydro concluded community measures agreements with the District of Taylor (January 2014) and the District of Chetwynd (January 2013). BC Hydro continues to meet and communicate with senior staff from the District of Taylor and the District of Chetwynd to review the status of implementation of the measures in their respective community measures agreements and to provide each community with a regular status update. BC Hydro concluded a final community measures agreement with the City of Fort St. John, and a joint news release was issued on February 3, 2016. The formal signing of the legal agreement is expected to take place on April 22, 2016, and BC Hydro and the City will establish a regular committee to oversee implementation of the agreement. Negotiations are also continuing with the District of Hudson’s Hope and the Peace River Regional District with respect to a Site C community measures agreement focused on mitigation. A separate Legacy Benefit Agreement was reached with the Peace River Regional District in 2014 that will provide legacy benefit payments to the Peace River Regional District and its member municipalities for 70 years once the Project is operational.

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A Regional Community Liaison Committee has been established which includes the local MLAâ&#x20AC;&#x2122;s, elected community officials and Aboriginal leadership. BC Hydro hosted the first meeting in March with the second to follow in April. It is anticipated that the frequency may reduce over time but will occur no less than four times annually. Participants expressed an interest in participating to ensure they receive information about the Project and have a timely opportunity to raise issues directly to BC Hydro during Project construction. 1.2.8.2

Business Liaison and Outreach:

BC Hydro along with the B.C. Chamber of Commerce jointly hosted job fairs and business-to-business networking sessions in the January to March period of 2016. Sessions were held in Chetwynd, Dawson Creek, Fort Nelson, Fort St. John, Prince George, Mackenzie, Quesnel and Tumbler Ridge. Contractors attending included Peace River Hydro Partners, ATCO Two Rivers Lodging and Duz Cho Construction. There was a large interest in the region, as over 5,100 job seekers attended the job fairs and more than 700 businesses participated in the business-to-business networking sessions. Table 9 shows the breakdown of the number of job fair attendees and business participants by location. Table 9 Community Chetwynd

Site C Job Fairs and Business Networking Sessions Job Fair Attendance (# of people)

Business Participation (# of businesses)

499

1,040

178

184

1,484

240

129

1,018

141

Quesnel

442

Tumbler Ridge

364

5,160

742

Dawson Creek Fort Nelson Fort St. John Mackenzie Prince George

TOTAL

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1.2.8.3

Community Relations and Consultation:

BC Hydro continued to implement its construction communications program during the quarter. Bi-weekly Construction Bulletins were issued throughout this period. With construction activities increasing, there was an increase in public enquiries during the quarter. In total, BC Hydro received 1,642 public enquiries between January and March 2016, up from 996 the previous quarter. The majority of these enquiries continued to be about business and job opportunities, although there were also some construction impact concerns from local residents. Table 10 shows the breakdown of some of the most common enquiry types: Table 10

Public Enquiries Breakdown

Enquiry Type

January

February

March

Job Opportunities

457

482

283

Business Opportunities

150

118

Construction Impact *

This table is a sample of enquiry types and does not include all enquiry types received.

1.2.8.4

Communications and Government Relations:

Based on a search using the media database Infomart, there were a total of 405 media stories in the January to March 2016 period on the Site C Project, compared to 277 stories in the previous quarter. Key communications activities that contributed to this media attention included: 

On January 7, 2016, BC Hydro issued a news release announcing the first phase of business-to-business networking sessions and job fairs;



On February 3, 2016, BC Hydro issued a news release announcing the second phase of business-to-business networking sessions and job fairs;



On February 4, 2016, BC Hydro and the City of Fort St. John announced that they have reached an agreement-in-principle for a community measures agreement related to Site C;

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

On February 15, 2016, BC Hydro issued a news release announcing $50,000 in funding for emergency and transitional housing programs in Fort St. John;



On February 25, 2016, BC Hydro provided a technical briefing to the B.C. Press Gallery in Victoria;



On March 14, 2016, BC Hydro issued a news release summarizing the attendance at the business networking sessions and job fairs and provided information about how to learn more about jobs and business opportunities;



On March 30, 2016, BC Hydro announced that the temporary Peace River Construction Bridge had been completed on time and on budget; and



On March 31, 2016, BC Hydro issued an Information Bulletin detailing the latest job statistics at the Site C construction site.

1.2.8.5

Housing Plan and Housing Monitoring and Follow-Up Program:

BC Hydro has established Memorandum of Understanding agreements with the following three organisations to support the provision of emergency or transitional housing: 

$25,000 to Sky’s Place, a second stage housing program for women with children who are leaving abusive relationships;



$25,000 to the Meaope Transition House for Women that provides a 24-hour safe and secure shelter for women who are victims of violence or abuse, and their children; and



$200,000 to the Salvation Army Northern Centre of Hope to support shelter and transitional beds.

These agreements commit a total of $250,000 to support emergency or transitional housing providers in the City of Fort St. John. Once funds are transferred, BC Hydro will have addressed Measure 5 of the Housing Plan: Emergency or Transitional

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Housing Provider Contribution and Condition 48 of the Environmental Assessment Certificate. In accordance with Environmental Assessment Certificate Condition 48, BC Hydro will expand affordable rental housing supply in Fort St John by building 50 rental units to be owned and operated by BC Housing and with 40 units to be used by Site C workers until the project construction is complete. Upon completion of Site C, the 40 worker housing units will be made available to low and moderate income households. In April 2015, BC Housing completed a Request for Information seeking to understand market capacity for construction of energy efficient housing and availability of a suitable site for 50 units. BC Housing reviewed the findings of the Request for Information with BC Hydro and stated they were satisfied that there is sufficient capacity in the market for construction of an R2000 energy efficient building and adequate available sites. 1.2.8.6

Labour and Training Plan:

In accordance with Environmental Assessment Condition 53, BC Hydro is to provide additional day-care spaces in Fort St. John to increase spousal participation in the labour market. BC Hydro and School District 60 have agreed to pursue negotiations toward a contribution agreement for BC Hydro to provide capital funding for a new child care facility in the new elementary school to be built in Fort St John. As of March 31, 2016, negotiations continue to be on track. 1.2.8.7

Health Care Services Plan and Emergency Service Plan:

A Project Health Clinic opened on March 1, 2016, in conjunction with the opening of Phase 1 of the Worker Accommodation facility. In addition, the Project team has met with B.C. Ambulance Service local staff to provide information about the Projectâ&#x20AC;&#x2122;s plan for first aid and emergency transport of workers.

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1.2.8.8

Properties Acquisitions:

In this reporting period, BC Hydro continued discussions with land owners including those who own land in Cache Creek/Bear Flat area and lands impacted by the conveyor dam site area (three land holdings) and the transmission line (two land holdings). BC Hydro concluded arrangements to allow access to private properties in the Cache Creek/Bear Flat area for activities such as site investigation, wildlife and forestry studies and appraisals and those activities are now underway.

1.3

Key Procurement and Contract Developments

The Project procurement approach was approved by the Board of Directors in June 2012 for the construction of the Project. The procurement approach defined the scope of the major contracts and their delivery models, as summarized in Table 11 below. Table 11 Component

Major Project Contracts and Delivery Models Contract

Procurement Model

Anticipated Timing

Worker Accommodation

Worker Accommodation and site services contract

Design-Build-Finance-O perate-Maintain

Completed

Earthworks

Site Preparation contracts

Predominantly Design Bid Build

Various, through F2017

Main Civil Works contract

Design-Bid-Build

Completed

Reservoir Clearing

Multiple reservoir clearing contracts to be awarded over 7 to 8 years

Design-Bid-Build

One Agreement awarded for the Lower Reservoir

Generating Station and Spillways

Turbines and Generators contract

Design-Build

Completed

Generating Station and Spillways Civil contract

Design-Bid-Build/ Design-Build

Commence: Q1 F2017

Hydro-mechanical Equipment contract

Supply Contract

Commence: Q1 F2017

Powertrain Balance of Plant Equipment Supply

Supply Contracts

Commence: 2017 - 2018

Completion Contract (Powertrain Balance of Plant Equipment Installation)

Install Contract

Commence: 2017

Transmission Lines contract

Design-Bid-Build

Various, through F2017

Site C substation contract

Design-Bid-Build

F2017

Electrical and Transmission

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Component Infrastructure Highway 29 Realignment

1.3.1

Contract

Procurement Model

Peace Canyon Substation upgrade contract

Design-Build

Anticipated Timing Contract Award: Q2 F2017

Design-Bid-Build in partnership with B.C. Ministry of Transportation and Infrastructure with anticipated award of the first contracts in 2017 with subsequent contract being awarded through 2018 - 2019.

List of Major Contracts Awarded (Excess of $50 million)

Since inception of the Project, four major contracts (i.e., greater than $50 million in value) have been awarded: Worker Accommodation, Site Preparation: North Bank, Main Civil Works and Turbine-Generator. The contracts were procured through a public competitive process and awarded based on a rigorous evaluation process within the budget established for each contract. A list of contracts in excess of $50 million is shown in Table 12 below. Table 12 Work Package

Major Project Contracts Awarded Contract Value

Current Status

Site Preparation: North Bank ($ million)

Contract executed July 2015.

Worker Accommodation ($ million)

464

Contract executed September 2015

Main Civil Works ($ billion)

1.75

Contract executed December 2015

Turbine-Generator ($ million)

464

Contract executed March 2016

In 2016, procurement of two major work packages will commence: Generating Station and Spillways Civil contract and Hydro-mechanical equipment. Preparations for the procurement of these work packages are currently on track. 1.3.2

Large Contracts to Date (Excess of $10 million)

BC Hydro has provided a table in Appendix B which shows the breakdown to date of the contracts awarded in excess of $10 million and cumulative variances. 1.3.3

Contract Management

1.3.3.1

Material Changes to the Major Contracts

There have been no material changes to the Major contracts to date.

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1.3.3.2

Contingency and Project Reserve Draws

The project is on track to manage budget within the approved amounts including contingency. The project budget includes contingency of $794 million in nominal dollars. There have been no draws on project reserve to date. Refer to Appendix D for more detailed information regarding contingency and project reserve draws.

1.4

Plans During Next Six Months

The key milestones for the next six months are listed in Table 13. Table 13

Milestone Ministry of Transportation & Infrastructure: North Bank Roads (240) Work Site Prep North Bank Complete North Bank Road Gully Section to River Road complete Phase 2 – Worker Accommodation Phase 3 – Worker Accommodation North Bank (271) Road complete Main Civil Works Commence North Bank Excavations

1.5

Key Milestones Final Investment Decision Plan Date3 October 2015

Revised October 2015

February 2016 January 2016

Forecast Date June 2016

Variance5 (months) -8

Status6 Late7

June 2016 February 2016

July 2016 July 2016

-1 -5

At Risk Late

May 2016

June 2016

On Track

July 2016

August 2016

On Track

July 2016 January 2017

June 2016 April 2016

September 2016 May 2016

-3 -1

Late Late

Plan4

Impacts on Other BC Hydro Operations

For the reporting period, there were no material impacts on the generation operation at the GM Shrum and Peace Canyon Dams or on water management at the Williston and Dinosaur reservoirs.

1.6

3 4 5 6 7

Site Photographs

Plan based on plan at Final Investment Decision, December 2014. Revised Plan updated as of December 2015 to reflect start of construction activities and award of contracts. Variance based on comparison of Forecast to Revised Plan. Status based on comparison of Forecast to Revised Plan. Work on North Bank Roads (240) rescheduled (not on critical path).

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Refer to Appendix A for site construction photographs.

Project Schedule

2.1

Project In Service Dates

BC Hydro currently shows all in service dates on track per Table 14. Table 14 Description/Status

Project In Service Dates Financial Investment Decision Planned ISD8

F2017-F2019 Service Plan9

October 2020

September 2020

On Track

November 2020

October 2020

On Track

July 2023

September 2023

On Track

Unit 1 (First Power)

December 2023

On Track

Unit 2

February 2024

On Track

Unit 3

May 2024

On Track

Unit 4

July 2024

On Track

Unit 5

September 2024

On Track

Unit 6

November 2024

On Track

5L5 500kV Transmission Line Site C Substation 5L6 500kV Transmission Line

Status10 and Comments (e.g., complete, on schedule, delayed, possibly delayed, probable delayed)

The approved Final Investment Decision schedule involved the first unit coming into service in December 2023. The Project has advanced implementation phase activities to mitigate schedule risk.

Project Costs and Financing

3.1

Project Budget Summary

Table 15 below presents the overall Project Budget, based on the Final Investment Decision (December 2014), represented in nominal dollars. 8 9 10

Based on plan at Final Investment Decision, December 2014. Based on BC Hydro F2017-F2019 Service Plan approved in January 2016. Status based on comparison to BC Hydro F2017-F2019 Service Plan.

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Table 15

Project Budget Summary

Description

Capital Amount (Nominal $ million) *

Dam, Power Facilities, and Associated Structures

4,120

Offsite Works, Management and Services

1,575

Total Direct Construction Cost

5,695

Indirect Costs

1,235

Total Construction and Development Cost

6,930

Interest During Construction

1,405

Project Cost, before Treasury Board Reserve

8,335

Treasury Board Reserve

440

Total Project Cost *

8,775

Budget values are rounded to the nearest $5 million and include allocations of contingency.

3.2

Project Expenditure Summary

Table 16 provides a summary of the Final Investment Decision approved total Project cost, the current forecast total Project cost and the variance between the two; and the plan to date amounts, the actual costs to date and the variance between the two. Table 16

Description

Total Project Costs1 Treasury Board Reserve Authorized Project Cost

Total Project Expenditure Summary ($ million Nominal) Compared to Final Investment Decision

Final investment Decision

Forecast

Forecast vs Final Investment Decision Approved Budget

8,335

440

8,775

Final Investment Decision Plan to Date

Actuals to Date

Variance

636

950

(314)

636

950

(314)

Table 17 provides a summary of the F2017-F2019 Service Plan total Project cost, the current forecast total Project cost and the variance between the two; and the plan to date amounts, the actual costs to date and the variance between the two.

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Table 17

Description

F2017-F2019 Service Plan

Total Project Costs1 Treasury Board Reserve Authorized Project Cost

Total Project Expenditure Summary ($ million Nominal) Compared to F2017-F2019 Service Plan Forecast

Forecast vs F2017-F2019 Service Plan

8,335

440

8,775

F2017-F2019 Service Plan to Date

Actuals to Date

Variance

845

950

(105)

845

950

(105)

There is no variance between the total project costs approved in the Final Investment Decision and the total project costs approved in the F2017-F2019 Service Plan. Variances between the plan to date amounts occur due to differences in the timing of project implementation activities. Variances are primarily due to earlier than planned expenditures related to Worker Accommodation and Main Civil Works. Further explanations are in Appendix D.

3.3

Internal Project Financing versus External Borrowings to Date

To date, all project funding has been from internal borrowings. In March 2016, the British Columbia Utilities Commission approved a Debt Hedging Regulatory Account that will capture the gains and losses related to the hedging of future debt issuance (which includes financing of expenditures related to Site C) over a ten-year period. In addition to portfolio adjustments that are currently being implemented whereby BC Hydro is reducing its exposure to variable rate debt and increasing its issuance of fixed rate debt, a strategy has been developed that recommends hedging 50 per cent of BC Hydroâ&#x20AC;&#x2122;s future forecasted borrowing requirements from F2017 to F2024 through the use of derivative contracts.

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Material Project Risks

This section describes the material Project risks that have high residual exposure to BC Hydro. Commercially sensitive numbers and content, and/or content that could be seen to prejudice BC Hydro’s negotiating position, are redacted in the public version. Note that the residual consequence and residual probability levels are qualitative assessments. Refer to Table 18 for a list of risks. Table 18 Risk Event / Description Delay to Permitting

Material Project Risks Risk and Response Summary

Trend in Risk Exposure11



The issue of the Site C Water License in February 2016 results in a decrease to BC Hydro’s permitting risk exposure. Litigation

Refer to section 1.2.2 and Table 2 for status of judicial reviews related to environmental approvals and permits. Two appeals of the Water License have been filed by West Moberly and Prophet River First Nations and an individual with the Environmental Appeal Board.



There is a potential for additional legal proceedings. If any are successful, there may be delays. First Nations

BC Hydro has made progress on negotiating agreements with First Nations and has reached substantive agreement with several First Nations. The status of specific negotiations is confidential at this time.



Impact Benefit Agreements with First Nations provide First Nations with Project benefits and mitigate the risk of legal challenges.

Arrow direction represents the change since the last Quarterly Progress Update report.

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Risk Event / Description Market response to procurement

Labour Relations & Stability

Risk and Response Summary There is a risk that strong competition does not occur during procurement, which may result in higher premiums, mark ups and overall prices on labour and materials. Risk has been mitigated via market soundings, robust RFQ process, honorariums for successful bidders, and other engagement activities. All three major procurement processes completed to date (Worker Accommodation, Main Civil Works, Turbine and Generators) have had positive responses. Market response risk will continue to be monitored and could be impacted if the project construction schedule is delayed significantly.



BC Hydro is using an inclusive labour approach with a managed open site. This allows for participation by all union and non-union labour groups and allows access to the largest pool of skilled and experienced labour. BC Hydro entered into a Memorandum of Understanding with certain B.C. Building Trades unions to achieve labour stability and a mix of labour representation on site, including building trades unions. All major contracts contain no strike, no lockout, and no raiding provisions. BC Hydro has noted active organization attempts by several labour organizations regarding work underway at the project site. This activity creates a risk of a work disruption or complaints to the Labour Relations Board. BC Hydro is managing this risk through consistent treatment of all labour organizations and ensuring that organization activities do not occur on the project site itself except as provided for under the Labour Relations Code.

Geotechnical risks

Trend in Risk Exposure11



Key Geotechnical risks include unexpected shears encountered during construction; deeper than expected relaxation joints; bedding planes worse than expected; larger than expected deterioration of shale bedrock once exposed during construction; and Rock Rebound/Swell. Current strategies to mitigate geotechnical risks include:  

Transfer some degree of ground condition risks to the Contractor; Design contracts which allow the contractor to respond to unexpected ground conditions (potentially through pre-agreed pricing); and  Conduct field-scale trials to determine the response when shale bedrock is exposed to the elements. Events associated with this risk have occurred on the North Bank gulley crossing, where unexpected slope failure occurred. BC Hydro has been working with the contractor to provide an engineered solution, and expects to address this issue within available funds. Once the MCW contract is beginning excavation BC Hydro will have additional information about this risk.



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Risk Event / Description Construction cost – labour

Risk and Response Summary

Trend in Risk Exposure11

Potential cost increases could arise if there is competition with other projects for labour resources, labour instability, or changing workforce demographics. BC Hydro is partially mitigating this risk through regional job fairs to increase local participation and investments in skills training ($1.5 million invested to date). This risk is also partially mitigated by consideration of labour stability during contractor selection. BC Hydro has now awarded the Main Civil Works contract, which fixes labour rates for the first two years. BC Hydro has also awarded the contract for the Turbines & Generators, which fixes labour costs for manufacturing activities. Labour costs under these contracts are consistent with BC Hydro estimating expectations.



Based on current market conditions in the infrastructure and energy sector BC Hydro believes that the risk of unexpectedly high labour prices has decreased since the Final Investment Decision. There remains the potential for market conditions to shift in the future and this risk to increase. Construction cost – commodities and equipment

Potential cost increases could arise if market prices for key commodities and equipment increase, or if overall market activity results in higher contractor profit margins. BC Hydro has completed procurement for several contracts associated with early works, Worker Accommodation, Main Civil Works and Turbines and Generators and it does not see early indications on market price pressures at this point. More information will be available upon conclusion of other major contracts such as Generating Stations and Spillways. BC Hydro retains exposure to fuel prices (generally diesel), which have decreased compared to prices in the budget. Fuel prices may increase in the future due to global market forces. BC Hydro will consider the potential to hedge these prices, where appropriate.



Based on current market conditions in the infrastructure and energy sector BC Hydro believes that the risk of unexpectedly high market prices has decreased since the Final Investment Decision. There remains the potential for market conditions to shift in the future and this risk to increase.

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Risk Event / Description Construction execution.

Risk and Response Summary

Trend in Risk Exposure11

Contractors may be unable to execute successfully on scope of contract with resulting costs to BC Hydro. Mitigation is via:   

Robust procurement processes to determine whether contractors have the capability to undertake their scope of work; A cross-functional construction readiness review to confirm contractor and BC Hydro readiness before authorizing the start on any specific scope of work; and BC Hydro increased on site supervision to address recent environmental compliance issues.



BC Hydro step-in rights under contracts to allow for correction in the case of contractor failure. BC Hydro has encountered challenges in the early stages of mobilization of the Main Civil Works contractor, resulting in an increase to this risk. BC Hydro is actively working to resolve the mobilization issues, and will have more information on this risk once the contractor’s mobilization to site is fully complete. Foreign exchange



The impact on future procurements may be larger than BC Hydro has seen to date, depending on future movement in foreign exchange markets, future movement in commodity and equipment markets, and the ability of the proponents to source from a range of foreign markets. Residual risk on contracts yet to be procured is partially mitigated through contractor flexibility around sourcing of material, resulting in an exposure to a basket of currencies rather than solely the US dollar. Interest rate variability

Interest during construction costs will be affected by fluctuations in market interest rates. Currently market interest rates are expected to be lower than assumed in BC Hydro’s budget at the Final Investment Decision. In addition to portfolio adjustments that are currently being implemented whereby BC Hydro is reducing its exposure to variable rate debt and increasing its issuance of fixed rate debt, a strategy has been developed that recommends hedging 50% of BC Hydro’s future forecasted borrowing requirements from F2017 to F2024 through the use of derivative contracts. An application to the BCUC for a new Debt Hedging Regulatory Account that will capture the gains and losses related to the hedging of future debt issuance was approved by the BCUC in March 2016. Once this hedging program begins implementation BC Hydro expects interest rate risk to decline.



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Risk Event / Description Change in Tax Rates

Risk and Response Summary There is the potential for a change in tax rates that apply to Site C (e.g., PST, carbon tax) as well as the potential for a portion of GST to be unrecoverable. BC Hydro is monitoring potential changes to federal and provincial taxes and their potential effects. Where appropriate, BC Hydro will secure advance rulings on tax applicability to reduce uncertainty in treatment.

Trend in Risk Exposure11

ď&#x192;¨

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Appendix A Site Photographs

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Figure A-1

Construction of the L3 Gully Buttress

Figure A2

Contractor Backfilling the Approach to the Peace River Construction Bridge

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Figure A3

Maintenance of Erosion and Sediment Control along Storm Ditch West of Worker Accommodation Camp

Figure A4

Peace River Construction Bridge in Service

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Figure A5

Bridge Test Run and Open on April 1, 2016

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Appendix B Summary of Individual Contracts Exceeding $10 million

PUBLIC

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Appendix C Project Progression

PUBLIC

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Appendix D Detailed Project Expenditures

PUBLIC

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Appendix E Workforce Overview

PUBLIC

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Appendix F Preliminary Construction Schedule

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Table F1

Preliminary Construction Schedule

Schedule as of July 2015.

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559

Fred James Acting Chief Regulatory Officer Phone: 604-623-4046 Fax: 604-623-4407 bchydroregulatorygroup@bchydro.com

December 21, 2016 Ms. Laurel Ross Acting Commission Secretary British Columbia Utilities Commission Sixth Floor â&#x20AC;&#x201C; 900 Howe Street Vancouver, BC V6Z 2N3 Dear Ms. Ross: RE:

British Columbia Utilities Commission (BCUC or Commission) British Columbia Hydro and Power Authority (BC Hydro) Site C Clean Energy Project PUBLIC Quarterly Progress Report No. 5 â&#x20AC;&#x201C; July to September 2016 (Report)

BC Hydro writes to provide its public Report. Commercially sensitive and contractor-specific information has been redacted. A confidential version of the Report is being filed with the Commission only under separate cover. For further information, please contact Geoff Higgins at 604-623-4121 or by email at bchydroregulatorygroup@bchydro.com. Yours sincerely,

Fred James Acting Chief Regulatory Officer st/ma

Enclosure (1)

British Columbia Hydro and Power Authority, 333 Dunsmuir Street, Vancouver BC V6B 5R3 www.bchydro.com

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Site C Clean Energy Project

Quarterly Progress Report No. 5

F2017 Second Quarter

July 2016 to September 2016

PUBLIC

561 PUBLIC Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016

Table of Contents 1

2 3

Project Status ..................................................................................................... 1 1.1 Overview and General Project Status ....................................................... 1 1.2 Major Accomplishments, Work Completed, Key Decisions and Key Issues........................................................................................................ 4 1.2.1 Aboriginal Consultation ............................................................... 4 1.2.2 Litigation ..................................................................................... 4 1.2.3 Permits and Government Agency Approvals .............................. 6 1.2.4 Engineering and Construction................................................... 11 1.2.5 Safety ....................................................................................... 16 1.2.6 Environment.............................................................................. 16 1.2.7 Employment and Training Initiatives ......................................... 19 1.2.8 Community Engagement & Communication ............................. 21 1.3 Key Procurement and Contract Developments ....................................... 26 1.3.1 List of Major Contracts Awarded (Excess of $50 million) .......... 27 1.3.2 Large Contracts to Date (Excess of $10 million) ....................... 28 1.3.3 Contract Management .............................................................. 28 1.4 Plans During Next Six Months ................................................................ 29 1.5 Impacts on Other BC Hydro Operations.................................................. 29 1.6 Site Photographs..................................................................................... 29 Project Schedule .............................................................................................. 30 2.1 Project In Service Dates .......................................................................... 30 Project Costs and Financing ............................................................................ 30 3.1 Project Budget Summary ........................................................................ 30 3.2 Project Expenditure Summary ................................................................ 31 3.3 Internal Project Financing versus External Borrowings to Date .............. 32 Material Project Risks....................................................................................... 33

List of Figures Figure 1

Map of Main Civil Works Work Areas ............................................... 14

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List of Tables Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13 Table 14 Table 15 Table 16 Table 17

Project Status Dashboard .................................................................. 3 Litigation Status Summary ................................................................. 5 Provincial Permits and Approvals Issued to Date ............................... 7 General List of Pending and Future Permit Requirements ................. 9 Scope of Main Civil Works Contract ................................................. 15 Quality Management Non-Conformity Report Metrics ...................... 15 Safety Metrics .................................................................................. 16 Site C Jobs Snapshot ....................................................................... 19 Public Enquiries Breakdown ............................................................. 23 Major Project Contracts and Delivery Models .................................. 27 Major Project Contracts Awarded ..................................................... 28 Key Milestones ................................................................................. 29 Project In-Service Dates................................................................... 30 Project Budget Summary ................................................................. 31 Total Project Expenditure Summary ($ million Nominal) Compared to Final Investment Decision ........................................... 31 Total Project Expenditure Summary ($ million Nominal) Compared to F2017-F2019 Service Plan ......................................... 32 Material Project Risks....................................................................... 33

Appendices Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F

Site Photographs Summary of Individual Contracts Exceeding $10 million Project Progression Detailed Project Expenditure Workforce Overview Site C Construction Schedule

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563 PUBLIC Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016

Project Status

This Quarterly Progress Report No. 5 (Report No. 5) provides information

concerning the Site C Clean Energy Project (Project) covering the period from

July 1, 2016 to September 30, 2016.

1.1

The Project will construct a third dam and hydroelectric generating station on the

Peace River in northeast B.C. to provide 1,100 megawatts of capacity, and produce

about 5,100 gigawatt hours per year. In December 2014, the Project received

approval from the provincial government to proceed with construction. The Project is

Overview and General Project Status

in Implementation Phase and construction commenced July 27, 2015.

Construction activity for the Project remained relatively constant through the summer

season, with 1,345 construction and environmental workers on site and a total

workforce of 1,750 working on the project in September 2016, as reported by

contractors. On the North Bank of the dam site, construction of the North Bank

Access and River Roads are nearing completion. River Road, which provides

access to the Peace River Construction Bridgeâ&#x20AC;&#x2122;s North Approach, has been

substantially completed and is being used to provide access to the bridge. Final

completion of River Road is scheduled for November 2016. North Bank excavation

works are substantially complete. The North Bank Road gully crossing embankment

is scheduled for completion in October 2016. Timing for completion has changed

due to unforeseen ground conditions that require a redesign of the gully

embankment.

Construction of the Worker Accommodation Camp is now complete with the

completion of Phase 3, providing a total of 1,600 rooms as well as expanded kitchen

and dining facilities, mudrooms, luggage storage, recreation and fitness facilities and

a 500 vehicle parking lot. Phase 3 was completed on August 31, 2016 on time and

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Work on both the North Bank excavations and the South Bank permanent work

started in early June 2016 and July 2016 respectively. Peace River Hydro Partners

and BC Hydro worked collaboratively to re-sequence planned work over the fall and

winter to ensure the schedule milestones are maintained. Some activities between

project milestones related to the Main Civil Works scope were behind schedule, due

to a combination of factors including the late issuance of Federal permits, the

delayed Provincial Leave to Commence approval, delays in submissions of approval

documents and slower than planned mobilization.

Therefore, certain work that was to be performed this summer will shift into this

winter. Peace River Hydro Partners are ramping up their construction activities to

meet the re-sequenced work plan. Weekly reviews are being completed with Peace

River Hydro Partners to identify areas of construction which require additional focus.

Any cost impacts to BC Hydro associated with rescheduling activities can be

managed from existing contingency budgets.

The start of construction of the Site C 500 kV transmission line, 5L005, will be

moved back due a change in the tower design and layout. This resulted in

transmission line clearing and transmission lattice tower steel procurement being

completed later than originally planned, which delays the award of the transmission

line construction contract. However, BC Hydro expects the in-service date of

October 2020 will still be met.

The Generating Station and Spillway Request for Proposals was issued to four

proponents in September 2016, with the initial draft contract. All four proponents

attended a site inspection in September 2016.

Overall, the progression of work is on track to achieve the BC Hydro Board of

Directors (Board) approved in-service dates; the first unit is expected to come on

line in December 2023 and the final in-service date is expected in November 2024.

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Costs are forecast to come within the Board approved budget amount, excluding

reserve subject to Treasury Board control ($8.335 billion).

Table 1 provides a dashboard based on the Project status as at

September 30, 2016.

5 6

Table 1

Project Status Dashboard

 Green: No Concerns;  Amber: Some Concerns but in Control;  Red: Serious Concerns Status as of:

September 2016

Overall:

Overall Assessment



The Project is on track for overall scope and schedule. The Project is on track with the Project completion date of November 2024.1

Schedule ISDs



The overall schedule and progress remains on track to achieve the planned In-Service Dates.

Cost



 The Project is monitoring and evaluating specific cost pressures as well as potential cost savings. Overall cost forecast remains on track and total project cost is forecast to be within budget. There have been no draws on Treasury Board reserve.

Permits and Environmental

 Provincial Permits: The project received nine permits this reporting period. Leave to Commence Construction 3 was issued on July 20, 2016. Leave to Commence Construction 3 includes works for right bank stage 1 cofferdam, right bank overburden excavation, right bank bedrock excavation, inlet cofferdam and outlet cofferdam. BC Hydro, the Independent Engineer, Independent Environmental Monitor, and Peace River Hydro Partners attended a WorkSmart workshop from September 12 to 16, 2016 to streamline the submittal, review and decision-making process for sub-component authorizations (Leaves to Construct). Results from the workshop are being implemented immediately. Federal Authorizations: Transport Canada and Fisheries and Oceans Canada authorizations for Main Civil Works were received July 27, 2016. A Notice of Application has been filed in federal court challenging the Fisheries Act Authorization.

Risks

 Identified risks are being managed and treatments are in place or planned. For details refer to section 4 Material Project Risks below.

Aboriginal Relations

 Impact Benefit Agreement offers have been made to all Treaty 8 First Nations significantly affected by the Project.

Regulatory and Litigation

 Decisions made by the Crown may be subject to additional judicial reviews by First Nations and others who may oppose the project.

Safety

 There were zero Level 1 safety incidents and one medical aid injury at the construction site this quarter.

The Board approved In Service Dates for total Project completion November 2024.

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1.2

Major Accomplishments, Work Completed, Key Decisions and Key Issues

1.2.1

Aboriginal Consultation

Pursuant to the Environmental Assessment Certificate and Federal Decision

Statement, BC Hydro is required to consult with 13 Aboriginal groups with respect to

the construction stage of the Project. This consultation includes provision of

information on construction activities, support for the permit review process, and

review and implementation of mitigation, monitoring and management plans, and

permit conditions.

1 2

Efforts are ongoing to conclude impact benefit agreements with ten Aboriginal

groups.

1.2.2

Of eight legal challenges of major environmental approvals and permits, two were

discontinued, five were dismissed by the courts, one is yet to be heard, and

three appeals were filed. One appeal was dismissed by the B.C. Court of Appeal,

the second appeal will be heard by the B.C. Court of Appeal in December 2016 and

the third appeal was heard by the Federal Court of Appeal and a decision on that

appeal is pending. In addition, two appeals of BC Hydroâ&#x20AC;&#x2122;s water licence have been

filed with the Environmental Appeal Board. The details of the various proceedings

are summarized in Table 2 below.

On September 19, 2016, the BC Hydro Ratepayers Association filed a notice of

application with the Federal Court seeking, among other things, an injunction and to

set aside the Fisheries Act authorization issued on July 27, 2016.

On October 31, 2016, the B.C. Supreme Court dismissed the 2015 judicial review

filed by the West Moberly and Prophet River First Nations in which the two First

Nations had challenged provincial permits for Site C that were issued in the

summer of 2015. This information is outside of the reporting period for this report.

Litigation

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Table 2

Litigation Status Summary Outcome

Date

Federal Court: Federal Environmental Approval Mikisew Cree Athabasca Chipewyan

Two judicial reviews were discontinued after agreements were reached with BC Hydro and the federal government

July 16, 2015

Peace Valley Landowner Association

Dismissed; no appeal filed

August 28, 2015

Prophet River First Nation West Moberly First Nations

Dismissed Appeal filed Hearing date Decision pending

August 28, 2015 September 30, 2015 September 12, 2016

Federal Court: Federal Permits BC Hydro Ratepayers Association

Notice of Application filed Hearing date

September 19, 2016 TBD

B.C. Supreme Court: Provincial Environmental Assessment Certificate Peace Valley Landowner Association

Dismissed Appeal filed Appeal hearing held Appeal Dismissed

July 2, 2015 July 30, 2015 April 4 to April 5, 2016 September 15, 2016

Prophet River First Nation West Moberly First Nations

Dismissed Appeal filed Hearing date

September 18, 2015 October 19, 2015 December 5 to December 8, 2016

B.C. Supreme Court: Provincial Permits Prophet River First Nation West Moberly First Nations

Injunction application dismissed Hearing of Petition complete Petition Dismissed

August 28, 2015 November 17 to 23, 2015 and February 2, 2016 October 31, 2016

Water Licence appeals filed Hearing date

March 29, 2016 To Be Determined

BC Hydro v. Boon et al. (Rocky Mountain Fort)

Civil claim filed Injunction decision

January 29, 2016 February 29, 2016

Building Trades v. BC Hydro

Civil claim filed Response to claim filed

March 2, 2015 April 10, 2015

Sierra Club of British Columbia

Judicial review filed Hearing date

July 20, 2016 January 27, 2017

Environmental Appeal Board West Moberly and Prophet River First Nations Other Proceedings

Status as of October 31, 2016.

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1.2.3

Permits and Government Agency Approvals

1.2.3.1

Background

In addition to the Environmental Assessment Certificate and the Federal Decision

Statement, provincial permits and federal authorizations are required to construct the

Project. Timing of the application for these permits and authorizations is staged and

aligned with the construction schedule, availability of detailed design information,

and by project component.

1.2.3.2

The plan for obtaining Site C provincial permits involves a phased approach to the

submission of applications to the Ministry of Forests, Lands and Natural Resource

Operations based on project components and construction schedule. Coordination

with Peace River Hydro Partners has commenced and is ongoing. Peace River

Hydro Partners has submitted a comprehensive list of all permits (a “permitting

plan”) so that contractor, BC Hydro, regulator and First Nations resources can be

planned.

Table 3 below provides a list of permits and authorizations that have been issued for

site preparation works at the dam site, for vegetation clearing and quarries/pits to

date. During this reporting period, the project received nine provincial permits under

the Land Act, Forest Act, Water Sustainability Act and Mines Act for the Halfway

River Debris Boom Facility, Highway 29 geotechnical investigations at Halfway

River, Reservoir Slope Geotechnical Monitoring and Area A Mining. Leave to

Commence Construction 3 was issued for works on the right bank stage 1

cofferdam, right bank overburden excavation, right bank bedrock excavation, inlet

cofferdam and outlet cofferdam.

Provincial Permits

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1 2

Table 3 Project Component Dam Site Area and Moberly River

Highway 29 Realignment

Quarries/Pits

Reservoir

Transmission Line

Act/Permit

Provincial Permits and Approvals Issued to Date Tenure Type/Purpose

Approval Dates

Land Act

Licence of Occupation for Dam Site Area, Area A, RSEM L3, Wilder Road Extension, Public Safety Booms

July 7, 2015

Forest Act

Occupant Licences to Cut for North Bank, RSEM L3, South Bank, Wilder Road, Public Safety Booms

July 7, 2015

Mines Act

Mines Act Notices of Work for Area A, 2015 and 2015-2022

July 24, 2015 & January 1, 2016

Water Act/Water Sustainability Act

Short Term Use of Water for Dam Site / Moberly River Area and Instream Works for River Road, Peace River Construction Bridge, instream contouring, Septimus Siding, Moberly Clearing Bridge, Worker Camp Water Supply Intake, and various Notifications for stream crossings

July 7, 2015 to July 25, 2016

Wildlife Act

Capture and relocation of fish, Peace River Fish Community Monitoring, Amphibian Salvage, Scientific Fish Collection

July 7, 2015 to June 30, 2016

Agricultural Land Act

Order in Council for Highway 29 between Hudson's Hope and Charlie Lake

December 16, 2015

Land Act

Temporary Licence of Occupation for geotechnical investigations at Cache Creek and Halfway River

June 20, 2016 & September 8, 2016

Forest Act

S. 52 and Occupant Licence to Cut to harvest crown timber at Cache Creek and Halfway River for geotechnical investigations

June 20, 2016 and September 8, 2016

Water Sustainability Act

Approval for instream works at Cache Creek and Halfway River for geotechnical investigations

June 20, 2016 and September 6, 2016

Land Act

Licences of Occupation for Del Rio Pit, Portage Mountain Quarry, West Pine Quarry

July 7, 2015 to March 11, 2016 to

Forest Act

Occupant Licence to Cut for Portage Mountain Quarry

March 11, 2016

Water Act/ Water Sustainability Act

Short Term Use of Water for Portage Mountain Quarry, West Pine Quarry

July 7, 2015 and March 11, 2016

Mines Act

Mines Permit and Notices of Work for West Pine Quarry, Wuthrich Quarry

July 7, 2015 to March 29, 2016

Land Act

Licences of Occupation for Halfway River Debris Boom and Reservoir Slope Geotechnical Monitoring

August 25, 2016

Forest Act

Occupant Licence to Cut for Halfway River Debris Boom

August 25, 2016

Water Sustainability Act

Notification for temporary crossings of streams

April 29, 2016

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Project Component

Project Wide

Act/Permit

Tenure Type/Purpose

Approval Dates

Water Sustainability Act

Conditional Water Licences 132990 and 132991. Leaves to Commence Construction 1-3

February 26, 2016; April 1, 2016 to July 20, 2016

Agricultural Land Commission Act

Temporary and permanent removal of agricultural lands from the Agricultural Land Reserve

April 8, 2016

Heritage Conservation Act

S12 Alteration and S14 Inspection Permits and amendments

July 15, 2016 to March 31, 2016

Wildlife Act

Removal of Beaver Dams (Construction) and Eagle Nests

July 7, 2016

Capture, Herd and Sample Animals for Monitoring of Project Effects

March 1, 2016

Amphibian and Reptile Salvage

June 30, 2016

1.2.3.3

Pending and Future Provincial Permits

Table 4 below lists the general categories of pending and future provincial permit

requirements for the different Project components. Pending permits are those for

which applications have been submitted and are awaiting regulatory decision.

Applications are yet to be submitted for future permits.

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1 2

Table 4 Project Component

General List of Pending and Future Permit Requirements Act/Permit

Tenure Type/Purpose

Forecast Date

Pending Permits – Applications Submitted, Decision Pending Transmission Line

Forest Act, Land Act

Occupancy and clearing of transmission line

October 2016

Reservoir

Land Act, Forest & Range Practices Act, Water Sustainability Act

Reservoir clearing for Moberly River and eastern reservoir

November 2016 (Moberly River) & December 2016 (Eastern Reservoir)

Quarries/Pits

Forest Act, Land Act, Mines Act, Water Sustainability Act

Occupancy, clearing and mining of West Pine Quarry

December 2016

Highway 29 Realignment

Land Act Water Sustainability Act

Construction of Highway 29 realignment at Cache Creek

February 2017 & July 2017

Fish Passage

Water Sustainability Act

Construction of fish passage facility

December 2017

Future Permits – Applications to be Submitted Project Wide

Water Sustainability Act Leaves to Commence Construction and Operation (and related sub-leaves, or Leaves to Construct)

Leave to Commence Construction and subcomponent approvals currently being confirmed in consultation with contractors, Independent Engineer, Independent Environmental Monitor and Comptroller of Water Rights

November 2016 to 2023

Highway 29 Realignment

Forest Act Water Sustainability Act

Cache Creek Construction

February 2017 July 2017

Forest Act, Land Act, Water Sustainability Act

Investigations – Dry Creek, Lynx Creek, Farrell Creek (east)

Spring 2017 and beyond

Forest Act, Land Act, Water Sustainability Act

Construction – all remaining segments

Fall 2017 and beyond

Main Civil Works

Water Sustainability Act

Short Term use of Water

June 2017

Generating Station and Spillways

Water Sustainability Act

Short Term Use of Water

June 2017

Transmission Line

Water Sustainability Act

Approval for stream crossings

August 2017

Quarries/Pits

Mines Act, Water Sustainability Act

Mining at Portage Mountain Quarry for Highway 29 works

December 2017

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Project Component Reservoir

Act/Permit Forest Act, Land Act, Water Sustainability Act, Wildlife Act

Tenure Type/Purpose Clearing of central and western reservoirs; construction of Hudson’s Hope Shoreline Protection; installation of debris booms; capture and salvage of wildlife during reservoir filling

Forecast Date August 2018 and beyond

4 5 6

Assumptions  Permit requirements listed are general in nature. Additional permits may be identified and required under the various acts as detail design and construction proceeds for the different Project components.  The date required is subject to change based on changes to the construction design, methods and/or schedule and the consultation process currently being discussed with the Province, Department of Fisheries and Oceans and Transport Canada.

Decisions on permits for the transmission line, lower and eastern reservoir clearing,

West Pine Quarry, and Highway 29 realignment at Cache Creek are pending. Future

applications for Land, Water Sustainability Act, Wildlife, Forest, Mines, and Heritage

1 2 3

Conservation Act permits and approvals will be submitted for Highway 29

investigations and construction, Main Civil Works and Generating Station and

Spillways (water licence approvals/sub-approvals and short term use of water),

transmission line works, and mining at Portage Mountain Quarry.

1.2.3.4

BC Hydro continues to work with regulators and contractors to mitigate potential

delays to permits that may result in construction schedule delays. Aboriginal Groups

have also contributed by providing feedback on permitting processes. Current

process improvements include the following:



Process Improvements

BC Hydro is facilitating meetings with the Comptroller of Water Rights and

Peace River Hydro Partners to ensure submissions are coordinated and

efficient;



BC Hydro communicates regularly with the Ministry of Forest, Lands and

Natural Resources Operations, including the Comptroller of Water Rights, about

the status of permits and approvals and the Project schedule; and

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ď&#x201A;ˇ

Permitting forums are being held with Aboriginal Groups to share information on

permit applications and to seek feedback before they are submitted to

regulators. BC Hydro also continues to support the Ministry of Forests, Lands

and Natural Resource Operations during the First Nations consultation process

by attending consultation meetings when invited to do so, and responding to

First Nations questions on permit applications.

1.2.3.5

Federal Authorizations

Navigation Protection Act approvals for Main Civil Works were issued by Transport

Canada on July 27, 2016. Authorization for Main Civil Works under the Fisheries Act

was issued by Fisheries and Oceans Canada on July 27, 2016.

1.2.4

Engineering and Construction

1.2.4.1

Engineering

The technical specifications for the Spillway, Power Intakes and Powerhouse have

been issued in draft to the shortlisted respondents to the Generating Station and

Spillways Request for Qualification. Main Civil Works implementation design is

continuing; the issuing of the construction drawings commenced following contract

award. The Roller-Compacted Concrete Buttress Issue for Construction Drawings

have been completed based on the Turbine and Generators and Powerhouse

dimensions and these have been issued to Peace River Hydro Partners for

preparation of Roller-Compacted Concrete placement in 2017. The technical

specifications for the Hydro Mechanical Contract Completions Contract and

Protection and Control specifications are progressing to meet project schedule.

Implementation design is underway for the 500 kV transmission lines, Peace

Canyon 500 kV Gas Insulated Substation and Site C Substation. The next Technical

Advisory Board is scheduled for November 22 to 24, 2016 at the Site C construction

site. The focus of the next Technical Advisory Board meeting will be reviewing the

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cold weather construction activities of Roller-Compacted Concrete trial placement

and cofferdam construction.

1.2.4.2

Refer to Appendix F for the full construction schedule.

North (Left) Bank Site Preparation

Key contract scope for North Bank Site Preparation includes constructing

approximately 7 km of access roads and excavation of approximately 2 million cubic

metres of material. North Bank Road gully embankment construction commenced in

February 2016 and 95 per cent of embankment fill is now completed. River Road

Construction

final grade is completed and the road is in use by others. Installation of cross

drainage (culverts) and lock block debris catches have been completed. Underlying

embankment movement on River Road near ‘Blind Corner’ requires stabilization. BC

Hydro is working with the contractor to implement the remedial measures.

South (Right) Bank Site Preparation

South Bank site preparation work commenced in September 2015 and includes

vegetation clearing, construction of new access roads, a temporary substation pad,

and a new rail siding.



Work on the Septimus rail siding resumed this quarter. The rail siding is

forecast to be completed in October 2016. There is currently no anticipated

consequence of delay to the Main Civil Works Contractor at this time; and

21 22



Construction of temporary substation pad access roads to final grade is complete. In-service date for the temporary substation was in July 2016.

Worker Accommodation

All modules for the Phase 3 scope were installed and commissioned, providing a

total of 1,600 rooms as well as expanded kitchen and dining facilities, mudrooms,

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luggage storage, recreation and fitness facilities and a 500 vehicle parking lot.

Phase 3 was completed on August 31, 2016 and deficiencies are being completed

with anticipated full completion at the end of October 2016. Notable deficiencies

include required re-design and construction of raw water intake, completion of waste

water pipeline to disposal field, and seal coat applied to access roads and parking

lots.

Ministry of Transportation and Infrastructure Public Road Upgrades

The Ministry of Transportation and Infrastructure’s contractor, Al Simms and Sons,

has substantially completed 269 Road and 240 Road. Both components are now

paved and require minor work to finish. Old Fort Road re-alignment is under

construction near the Gate B entrance to Site C dam site. Shoulder widening is also

being carried out on Old Fort Road from the re-alignment section north to

Highway 97. Work is scheduled to be completed by the end of June 2017.

BC Hydro has entered into a contract with a designated business partner of an

Aboriginal group for the shoulder widening of 271 Road which is under Ministry of

Transportation and Infrastructure jurisdiction. Work commenced in late August 2016

and is scheduled to be completed by the end of October 2016.

Main Civil Works



the Left Bank Excavation;

20 21

Peace River Hydro Partners started the permanent work on June 10, 2016 on



The Right Bank Drainage Tunnel received all permits in June 2016; work on the

tunnel portal is substantially complete and tunnelling is targeted to start in early

November 2016;

24 25



The first Relocated Surplus Excavated Material site is expected to be operational in early October 2016;

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576 PUBLIC Quarterly Progress Report No. 5 F2017 Second Quarter – July 2016 to September 2016



completion in December 2016;

2 3



The Right Bank Coffer Dam is at full height and ready for foundation grouting and cut-off wall installation; and

4 5

Work on the Moberly River Construction Bridge has started and is targeted for



The Roller-Compacted Concrete Batch Plant construction has started and is

targeted to be completed in time for the Roller-Compacted Concrete trial

placement in late October 2016.

Figure 1

Map of Main Civil Works Work Areas

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Table 5

Scope of Main Civil Works Contract

Component

Description

Diversion works

Two approximately 11 metre diameter concrete-lined tunnels approximately 750 metres in length

Excavation and bank stabilization

Approximately 26 million cubic metres of overburden and rock excavation

Relocation

Relocation of surplus excavated material (including management of discharges)

Dams and Cofferdams

A zoned earth embankment 1,050 metres long and 60 metres above the present riverbed and stages 1 and 2 cofferdams

Roller-Compacted Concrete

Buttress â&#x20AC;&#x201C; 800 metres long with 2 million cubic metres of concrete

Quality Management

Implementation and monitoring of Quality Control and Quality Assurance Plans are

required of all contractors. Table 6 below identifies quality management

non-conformity instances during the quarter ending September 30, 2016.

6 7

Table 6 Contract

Quality Management Non-Conformity Report Metrics

Contractor

Reported this Period

Closed this Period

Reported to Date

Closed to Date

North Bank Site Preparation

Morgan Construction & Environmental

South Bank Site Preparation

Duz Cho Construction

Main Civil Works

Peace River Hydro Partners

The majority of quality non-conformities are related to instrumentation. Progress has

been made outside of the reporting period to correct the non-conformances

identified. Peace River Hydro Partners are transitioning to a web-based electronic

tracking system in December 2016 which is expected to improve efficiency,

accuracy, resolution and transparency of the non-conformances.

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1.2.5

Safety

There were zero Level 1 safety incidents and one medical aid injury at the

construction site in this quarter. Table 7 below identifies the project safety metrics

during the quarter ending September 30, 2016.

Table 7

Safety Metrics Reported this Period

Reported since Inception (July 27, 2015)

Severity (number of calendar days lost due to injury per 200,000 hours worked)

Lost Time Injury Frequency (number of injuries resulting in lost time per 200,000 hours worked)

Contractor, employee, public near miss reports

194

Fatality & Serious Injury

Lost time incidents Equipment/property damage reports**

9 10

There have been challenges receiving data from contractors in a timely fashion. BC Hydro is collaborating with contractors to improve submission of timely data. It is expected reporting will improve over the next quarter. ** Types of equipment and property damage include vehicle damage, minor electrical fire damage, etc. Equipment damage data is collected through contractor monthly reports not the BC Hydro IMS system.

One Level 3 employee injury was reported and 47 contractor injuries were reported

of which 46 were Level 3 injuries and one was a Level 2 injury. One resulted in lost

time. Of the near miss reports, 96 per cent were Level 3 type (lowest severity),

whereas four per cent were Level 2.

1.2.6

Environment

1.2.6.1

Mitigation, Monitoring and Management Plans

The Environmental Assessment Certificate and Decision Statement conditions

require the development of draft and final environmental management, mitigation

and monitoring plans, as well as the submission of annual reports on some of these

plans.

6 7 8

Excludes health events unrelated to work standards.

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As of the end of this quarter, all required submissions have been made in

accordance with the schedule and requirements of the conditions.

During the reporting period, twelve annual reports were submitted in accordance

with the conditions. Two draft plans and one framework (on Agricultural Mitigation

and Compensation) were submitted to regulators, local governments and potentially

affected Aboriginal groups for review as set out in the conditions. Comments

received on these plans will be incorporated into the final plans, and submitted in

accordance with required timelines.

1.2.6.2

Technical Committees Required under Schedule A of the Conditional Water Licence

Schedule A of the Conditional Water Licence requires that BC Hydro establish with

Provincial and Federal Regulators two Technical Committees to provide oversight

and guidance to the refinement and implementation of BC Hydroâ&#x20AC;&#x2122;s Mitigation,

Monitoring and Management Plans. The two Committees are: the Fisheries and

Aquatic Habitat Mitigation and Monitoring Technical Committee and the Vegetation

and Wildlife Mitigation and Monitoring Technical Committee. Schedule A outlines a

delivery schedule linked to Site C Project Construction Component for when the

Technical Committees must review and revise various Mitigation and Monitoring

Plans. The Technical Committees have been meeting regularly to meet this

schedule.

1.2.6.3

Inspectors from the Environmental Assessment Office and Forest, Land and Natural

Resources attended inspections of Site C Construction on the weeks of

June 20, 2016 and August 29, 2016. Following the first inspection, two Orders were

issued, one for hydrocarbon storage and handling and one for waste management

and recycling, and both were limited to one of the Contractors at site. The affected

Contractor put in place a number of corrective actions both before and after the

Orders were issued and they were found to be compliant in a subsequent inspection.

Environmental Compliance Inspections

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1.2.6.4

Heritage

In accordance with a number of Environmental Assessment conditions and the

Federal Decision Statement, the Site C Heritage Management Resource Plan

addresses the measures that will be used to mitigate the adverse effects of the

Project on heritage resources.

During the reporting period, archaeological work continued. Of the field work

planned for the 2016 season, which is subject to refinement based on findings,

weather conditions and property access permissions, about 85 per cent is complete.

The field work includes regulatory requirements for pre-construction archaeological

impact assessments in areas not accessible until now, systematic data recovery at

selected archaeological sites, investigation of chance finds as required, and

inspections of archaeological sites post-ground disturbance in construction. In

addition, heritage reporting, and heritage compliance reviews of contract documents,

contractor environmental plans and construction readiness plans were performed.

1.2.6.5

BC Hydro worked with the Consultation Steering Committee comprised of staff from

BC Hydro, the Ministry of Agriculture, and the Ministry of Energy and Mines, to

develop the Framework for the Agricultural Mitigation and Compensation Plan. In

developing the Framework, the Consultation Steering Committee considered the

requirements of the Environmental Assessment Certificate condition (30);

consultation feedback from regional agricultural stakeholders including land owners,

tenure holders, Peace Region agricultural associations and local stakeholders; legal

and financial advice; and background information including the Environmental

Impact Statement and the Joint Review Panel Hearing report.

In accordance with the requirements of the condition, BC Hydro submitted the

Framework on July 27, 2016 to the Peace River Regional District, the District of

Hudson’s Hope, and provided notification to affected landowners, tenure holders,

Agricultural Mitigation and Compensation Plan – Framework

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and consultation participants of the framework being available on the Site C website.

On August 12, 2016 an event was held at the Dawson Creek Agricultural Exhibition

and Stampede to release the Framework and thank the agricultural sector for its

participation to date, and requested feedback on the Framework during a 60-day

comment period. The comment period closed at the end of September 2016, and

feedback will be considered in development of the draft Agricultural Mitigation and

Compensation Plan. The draft Plan is due in January 2017, and a final Plan must be

filed by July 2017 with the B.C. Environmental Assessment Office, Peace River

Regional District, District of Hudsonâ&#x20AC;&#x2122;s Hope, the Ministry of Agriculture, the Ministry

of Forests, Lands and Natural Resource Operations and affected landowners and

tenure holders.

1.2.7

Employment

Contractors submit monthly workforce data electronically to BC Hydro. Table 8

shows a snapshot of the number of workers for this quarter by month.

Employment and Training Initiatives

Table 8 Month

Site C Jobs Snapshot Number of B.C. Workers*

Number of Total Workers*

July 2016

1,411

1,721

August 2016

1,580

1,816

September 2016

1,392

1,750

17 18 19

Refer to Appendix E for additional workforce information. The number of workers

continues to vary as the construction work progresses. For example, it is expected

that the number of workers will increase as main civil works ramps up. Peace River

Hydro Partners has indicated that approximately 1,500 workers will be working at the

peak of construction. As these job opportunities become available, they will be

Employment numbers provided by Site C contractors and consultants are subject to revision. Data not received by project deadline may not be included in the above numbers. Employment numbers are direct only and do not capture indirect or induced employment.

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posted on the WorkBC website as well as on the local Fort St. John’s WorkBC

Employment Centre’s website (Employment Connections).

Training Programs and Initiatives

The Christian Labour Association of Canada has proposed an initiative to explore

the establishment of an onsite training facility on the Site C project, for the training of

the project workforce. This facility would be accessible to all contractors regardless

of union affiliation or status and would be housed in a double wide construction

trailer. This facility would be able to deliver theory portions of Construction Craft

Worker training, and other relevant apprenticeship programs at the site. Currently

the Christian Labour Association of Canada is working with their signatory

contractor, Peace River Hydro Partners Construction and training institutions

(including Northern Lights College) to explore the feasibility of this training, as well

as potential funding arrangements.

The Christian Labour Association of Canada is also working on an initiative with the

Saulteau First Nations to provide Aboriginal Construction Craft Worker training via

video conference (virtual classroom) in the First Nation’s community. Peace River

Hydro Partners has committed to hiring up to 12 individuals who graduate from the

program for Site C work (provided they pass all standard Peace River Hydro

Partners pre-employment tests). The program is projected to start in the fall of 2016,

and run for six weeks. BC Hydro is providing input and assisting in coordinating

discussions between stakeholders.

BC Hydro, ATCO Two Rivers Lodging, North East Native Advancing Society and the

BC Construction Association partnered to offer training to the employment kitchen

skills program. The program included five days of pre-employment and kitchen skills

training with ATCO’s Red Seal Chefs, and was offered to Treaty 8 members

interested in pursuing a career in culinary arts. The program was completed in

July 2016.

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1.2.8

Community Engagement & Communication

1.2.8.1

Local Government Liaison

BC Hydro and the District of Hudson’s Hope have renewed discussions toward a

community agreement that would include both Site C and existing operations in the

vicinity of Hudson’s Hope. The District has identified its key interests with respect to

a potential agreement. BC Hydro and the Peace River Regional District have also

renewed discussions toward a community agreement to address direct impacts on

their infrastructure and services.

BC Hydro and the City of Fort St. John have established a Community Agreement

Monitoring Committee to oversee implementation of the Community Agreement.

BC Hydro continues to work cooperatively with the District of Taylor and the District

of Chetwynd to oversee implementation of their respective agreements.

A Regional Community Liaison Committee continues to meet approximately every

eight weeks. Recent meetings have included site tours. The Committee agreed to a

Terms of Reference which established that the Committee will meet no less than

four times annually and that they will receive information about the Project and have

a timely opportunity to raise issues directly to BC Hydro during Project construction.

The last meeting was held in September 2016 and the next meeting is scheduled for

late fall 2016.

1.2.8.2

On September 26, 2016 BC Hydro issued the Request for Proposals for the

Generating Station and Spillways Civil Works contract to four shortlisted proponent

teams. Notification of the issuance of the Request for Proposals was provided to the

Site C business directory along with business stakeholders such as local chambers

of commerce, construction associations and economic development commissions.

Additionally, notification of the following Requests for Proposals was provided to the

Site C business directory:

Business Liaison and Outreach

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

Analysis (July 7, 2016);

2 3

Request for Proposals for Traffic Forecasting, Monitoring, Mitigation and



Request for Proposals for a Consultant for the District of Hudson’s Hope

Shoreline Protection Berm, Reconstruction of DA Thomas Road and Boat

Launch and Day-Use Recreation Site (August 16, 2016);



Site C Project (August 16, 2016); and

7 8 9

Request for Proposals for the Design and Supply of Shunt Reactor for the



Request for Proposals for Supply of Lattice Towers for Site C (September 27, 2016).

On July 14, 2016, a site tour was provided to the Chetwynd Chamber of Commerce.

1.2.8.3

BC Hydro continued to implement its construction communications program during

the quarter. This program includes maintaining the project website

www.sitecproject.com with current information.

Construction Bulletins:

Bi-weekly Construction Bulletins were issued throughout this period. These bulletins

are posted on the project website and sent by email to the web-subscriber list.

Public Enquiries:

In total, BC Hydro received 805 public enquiries between July and September 2016,

down from 960 the previous quarter. The majority of these enquiries continued to be

about business and job opportunities, although there were also some construction

impact concerns from local residents. Table 9 shows the breakdown of some of the

most common enquiry types:

Community Relations and Consultation

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Table 9 Enquiry Type

Public Enquiries Breakdown July

August

September

Job Opportunities

209

180

193

Business Opportunities

Construction Impact

2 3

1.2.8.4

Based on a search using the media database Infomart, there were 401 media stories

in the July to September 2016 period on the Site C Project, compared to 242 stories

in the previous quarter.

Key communications activities in the quarter included:



On July 4, 2016, BC Hydro issued a media statement correcting an inaccurate

On July 5, 2016, BC Hydro announced that it had reached agreements with McLeod Lake Indian Band on Site C;

12 13

Communications Activities

story on the Site C construction schedule and budget;

10 11

This table is a sample of enquiry types and does not include all enquiry types received. The nature of the construction impact inquiries is primarily air quality, noise and traffic conditions.



On July 6, 2016, BC Hydro announced that it had reached an employment

milestone on the project by surpassing 1,000 B.C. workers on the project. A

media event was held at the site to recognize the milestone;



On July 18, 2016, BC Hydro announced the completion of the second phase of

the Site C worker lodge. The addition of 900 rooms in the second phase (for a

total of 1,200 rooms) included a media tour of the lodge at the dam site;



Dene Tha’ First Nation on Site C;

20 21 22

On July 20, 2016, BC Hydro announced that it had come to an agreement with



On August 3, 2016, BC Hydro announced that it had reached its one-year construction milestone (on July 27, 2016);

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

report by Amnesty International.

2 3



On September 13, 2016, BC Hydro announced that it had established an $800,000 fund to support non-profits in the Peace Region; and

6 7

On August 12, 2016, BC Hydro announced that it had released a framework for the Project’s Agricultural Mitigation and Compensation Plan.

4 5

On August 10, 2016, BC Hydro issued a media statement responding to a



On September 26, 2016, BC Hydro announced a shortlist for the Generating

Station and Spillways Civil Works contract and released a Request for

Proposals to the shortlisted teams.

We have accommodated a number of site tour requests during the quarter for

external groups. Examples include the Regional Community Liaison Committee,

Ministry of Transportation and Infrastructure, Blueberry River First Nations Youth,

and the Chetwynd Chamber of Commerce.

1.2.8.5

BC Hydro and BC Housing signed a Contribution Agreement on July 19, 2016

related to the development, construction and operation of a building in Fort St. John

comprised of 50 residential rental units. This Agreement is the outcome of detailed

discussions between the two partners to find the most appropriate approach to

meeting Condition 48 and the housing terms of the Community Measures

Agreement with the City of Fort St. John. The Agreement structured the financial

contribution from BC Hydro to enable financially viable operation of the ten

affordable housing units in the near-term and financially viable operation of all

50 units of affordable housing in the longer term.

The Agreement sets out the terms of the housing project, and has a target

completion date for occupancy of October 31, 2018. The housing will be designed

and constructed to meet the R-2000 standard, Natural Resources Canada’s

Housing Plan and Housing Monitoring and Follow-Up Program

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best-in-class energy efficiency standard that includes high levels of insulation, clean

air features and measures for a healthy home environment. The building will be

showcased as a demonstration project for energy efficient building techniques.

Of the 50 units, ten will be available during the Project construction phase for

BC Housing or their designated operator to manage for low or moderate income

households. The remaining 40 units will be managed for use by the Project

workforce, as required, until completion of Site C Project construction, at which time

the 40 units will be transitioned to permanent non-market, affordable housing in

partnership with BC Housing or their designated operator. Access to the units for low

or moderate income households will be managed in accordance with BC Housing

policies and in accordance with any agreement BC Housing may have with a

designated operator.

1.2.8.6

In accordance with Environmental Assessment Condition 53, a Labour and Training

Plan was developed and submitted to the Environmental Assessment Office on

June 5, 2015.

This plan includes reporting requirements to support educational institutions in

planning their training programs to support potential workers in obtaining Project

jobs in the future. This report was issued to the appropriate training institutions in the

Northeast Region of B.C., in July 2016.

1.2.8.7

The Project Health Clinic is contracted by BC Hydro with Halfway River International

SOS Medical Ltd., a partnership between Halfway River First Nation and

International SOS. The Clinic is operating in its permanent location within the Two

Rivers Lodge and was staffed during this period with a Nurse Practitioner and

Advanced Care Paramedics.

Labour and Training Plan

Health Care Services Plan and Emergency Service Plan

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The Clinic provides workers with access to primary and preventative health care and

work-related injury evaluation and treatment services and is currently open

seven days a week, 24 hours a day. Since opening the Project health clinic there

have been a total of 963 patient interactions. During the reporting period there were

602 patient interactions, of which 130 were occupational and 472 non-occupational.

1.2.8.8

In the second quarter of F2017, BC Hydro completed the acquisition of temporary

rights over lands impacted by the conveyor from the 85th Avenue industrial site to the

dam site area (three land holdings) and continued discussions with land owners

whose lands are impacted by the project. This includes owners whose lands are

impacted by the transmission line construction and Highway 29 realignment.

1.3

The Project procurement approach was approved by the Board of Directors in

June 2012 for the construction of the Project. The procurement approach defined the

scope of the major contracts and their delivery models, as summarized in Table 10

below.

Properties Acquisitions

Key Procurement and Contract Developments

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1 2

Table 10

Major Project Contracts and Delivery Models

Component

Contract

Procurement Model

Worker Accommodation

Worker Accommodation and site services contract

Design-Build-FinanceOperate-Maintain

Completed

Earthworks

Site Preparation contracts

Predominantly Design-Bid-Build

Various, through F2017

Main Civil Works contract

Design-Bid-Build

Completed

Reservoir Clearing

Multiple reservoir clearing contracts to be awarded over seven to eight years

Design-Bid-Build

One Agreement awarded for the Lower Reservoir

Generating Station and Spillways

Turbines and Generators contract

Design-Build

Completed

Generating Station and Spillways Civil Works contract

Design-Bid-Build

Request for Proposals issued September 2016.

Hydro-Mechanical Equipment contract

Supply Contract

Commence: Quarter 3 F2017

Powertrain Balance of Plant Equipment Supply

Supply Contracts

Commence: 2017 to 2018

Completion Contract (Powertrain Balance of Plant Equipment Installation)

Install Contract

Commence: 2017

Transmission Lines contract

Design-Bid-Build

Various, through F2017 to F2018

Site C substation contract

Design-Bid-Build

Commence: F2017

Peace Canyon Substation upgrade contract

Design-Build

Contract Award: Quarter 3 F2017

Electrical and Transmission Infrastructure

Highway 29 Realignment

Anticipated Timing

1.3.1

List of Major Contracts Awarded (Excess of $50 million)

Since inception of the Project, four major contracts (i.e., greater than $50 million in

value) have been awarded: Worker Accommodation, Site Preparation: North Bank,

Main Civil Works and Turbine-Generator. The contracts were procured through a

public competitive process and awarded based on a rigorous evaluation process

within the budget established for each contract. A list of contracts in excess of

$50 million is shown in Table 11 below.

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Table 11 Work Package

Major Project Contracts Awarded Contract Value

Current Status

Site Preparation: North Bank ($ million)

Contract executed July 2015 and amended in June 2016

Worker Accommodation ($ million)

464

Contract executed September 2015

Main Civil Works ($ billion)

1.75

Contract executed December 2015

Turbine-Generator ($ million)

464

Contract executed March 2016

In 2016, procurement of two major work packages will commence: Generating

Station and Spillways Civil Contract and Hydro-mechanical equipment. Procurement

of these work packages is currently on track.

1.3.2

BC Hydro has provided a table in Appendix B which shows the breakdown to date of

the contracts awarded in excess of $10 million and cumulative variances.

1.3.3

Contract Management

1.3.3.1

Material Changes to the Major Contracts

Large Contracts to Date (Excess of $10 million)

There have been no material changes to the Major contracts to date.

1.3.3.2

The project is on track to manage budget within the approved amounts including

contingency. The project budget includes contingency of $794 million in nominal

dollars. There have been no draws on project reserve to date. Refer to Appendix D

for more detailed information regarding contingency and project reserve draws.

Contingency and Project Reserve Draws

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1.4

The key milestones for the next six months are listed in Table 12.

Plans During Next Six Months

Table 12

Key Milestones

Milestone

Plan Date

Forecast/ Actual Date

Variance (months)

Ministry of Transportation & Infrastructure: North Bank Roads (240) Work

October 2015

October 2016

-12

Complete

Site Prep North Bank Complete

June 2016

October 2016

-4

Complete

North Bank Road Gully Section to River Road Complete

February 2016

November 2016

-9

Complete

Phase 3 â&#x20AC;&#x201C; Worker Accommodation

August 2016

Complete

North Bank (271) Road complete

June 2016

July 2017

South Bank Stage 1 Cofferdam Complete

April 2017

December 2016

On Track

Tender Design for 5L5 Complete

February 2017

On Track

Moberly Bridge Complete

November 2016

December 2016

Transmission Peace Canyon Gas Insulated Switchgear Contract Award

February 2017

On Track

Transmission 5L5 & 5L6 Tower Contract Award

February 2017

On Track

-13

-1

Status

Late 3

Late

1.5

For the reporting period, there were no material impacts on the generation operation

at the GM Shrum and Peace Canyon Dams or on water management at the Williston

and Dinosaur reservoirs.

1.6

Refer to Appendix A for site construction photographs.

Impacts on Other BC Hydro Operations

Site Photographs

The plan date for this milestone assumed a later date than the date submitted by Peace River Hydro Partners on contract award.

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Project Schedule

2.1

Project In Service Dates

BC Hydro currently shows all in service dates on track per Table 13.

Table 13 Description/Status

Project In-Service Dates Final Investment Decision Planned 4 ISD

F2017-F2019 5 Service Plan

Status and Comments

5L5 500kV Transmission Line

October 2020

September 2020

On Track

Site C Substation

November 2020

October 2020

On Track

5L6 500kV Transmission Line

July 2023

September 2023

On Track

Unit 1 (First Power)

December 2023

On Track

Unit 2

February 2024

On Track

Unit 3

May 2024

On Track

Unit 4

July 2024

On Track

Unit 5

September 2024

On Track

Unit 6

November 2024

On Track

The approved Final Investment Decision schedule involved the first unit coming into

service in December 2023. The Project has advanced implementation phase

activities to mitigate schedule risk.

Project Costs and Financing

3.1

Project Budget Summary

Table 14 below presents the overall Project Budget, based on the Final Investment

Decision (December 2014), represented in nominal dollars.

4 5 6

Based on plan at Final Investment Decision, December 2014. Based on BC Hydro F2017-F2019 Service Plan approved in January 2016. Status based on comparison to BC Hydro F2017-F2019 Service Plan.

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Table 14

Project Budget Summary

Description

Capital Amount (Nominal $ million) *

Dam, Power Facilities, and Associated Structures

4,120

Offsite Works, Management and Services

1,575

Total Direct Construction Cost

5,695

Indirect Costs

1,235

Total Construction and Development Cost

6,930

Interest During Construction

1,405

Project Cost, before Treasury Board Reserve

8,335

Treasury Board Reserve

440

Total Project Cost

8,775

Budget values are rounded to the nearest $5 million and include allocations of contingency.

3.2

Table 15 provides a summary of the Final Investment Decision approved total

Project cost, the current forecast total Project cost and the variance between the

two; and the plan to date amounts, the actual costs to date and the variance

between the two.

Project Expenditure Summary

8 9 10

Table 15

Description

Total Project Costs Treasury Board Reserve Authorized Project Cost

Final Investment Decision

Total Project Expenditure Summary ($ million Nominal) Compared to Final Investment Decision Forecast

Final Investment Decision Plan to Date

Actuals to Date

8,335

908

1,284

440

8,775

908

1,284

Variance

(376) 0 (376)

Table 16 provides a summary of the F2017-F2019 Service Plan total Project cost,

the current forecast total Project cost and the variance between the two; and the

plan to date amounts, the actual costs to date and the variance between the two.

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1 2 3

Table 16

Description

Total Project Costs Treasury Board Reserve Authorized Project Cost

F2017-F2019 Service Plan

Total Project Expenditure Summary ($ million Nominal) Compared to F2017-F2019 Service Plan Forecast

F2017-F2019 Service Plan to Date

Actuals to Date

8,335

1,218

1,284

440

8,775

1,218

1,284

Variance

(66) 0 (66)

There is no variance between the total project costs approved in the Final

Investment Decision and the total project costs approved in the

F2017-F2019 Service Plan. Variances between the plan to date amounts occur due

to differences in the timing of project implementation activities.

Variances are primarily due to earlier than planned expenditures related to Worker

Accommodation and Main Civil Works. Further explanations are in Appendix D.

3.3

Internal Project Financing versus External Borrowings to Date

To date, all project funding has been from internal borrowings. In March 2016, the

British Columbia Utilities Commission approved a Debt Hedging Regulatory Account

that will capture the gains and losses related to the hedging of future debt issuance

(which includes financing of expenditures related to Site C) over a ten-year period. In

addition to portfolio adjustments that are currently being implemented whereby

BC Hydro is reducing its exposure to variable rate debt and increasing its issuance

of fixed rate debt, a strategy has been developed that recommends hedging

50 per cent of BC Hydroâ&#x20AC;&#x2122;s future forecasted borrowing requirements from F2017 to

F2024 through the use of derivative contracts.

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Material Project Risks

This section describes the material Project risks that have high residual exposure to

BC Hydro. Commercially sensitive numbers and content, and/or content that could

be seen to prejudice BC Hydro’s negotiating position, are redacted in the public

version. Note that the residual consequence and residual probability levels are

qualitative assessments. Refer to Table 17 for a list of risks.

Table 17 Risk Event/ Description Delay to Permitting

Litigation

First Nations

Material Project Risks Risk and Response Summary

Trend in Risk 7 Exposure

Permits and licences are still required for several portions of construction activity. Delays to these permits and licences will result in delays to the associated construction work. BC Hydro continues to consult with federal and provincial authorities, local government and First Nations to mitigate this risk. BC Hydro is awaiting the outcome of a judicial review of permits as described below. If BC Hydro is unsuccessful, this could result in a delay to the work underway and claims arising. The federal Fisheries Act Authorization and Navigation Protection Act approvals were issued on July 27, 2016. This has decreased the risk exposure for the reporting period. A Notice of Application has been filed in the federal court, challenging the Fisheries Act Authorization.



Refer to section 1.2.2 and Table 2 for status of judicial reviews related to environmental approvals and permits. On September 15, 2016 the BC Court of Appeal dismissed the Peace Valley Landowners Associations’ (PVLA) appeal to reverse Site C approval of the earlier BC Supreme Court decision (July 2015 Supreme Court granting Site C the Environmental Assessment Certificate).



BC Hydro has made progress on negotiating agreements with First Nations and has reached substantive agreement with several First Nations. The status of other specific negotiations is confidential at this time. Impact Benefit Agreements with First Nations provide First Nations with Project benefits and mitigate the risk of legal challenges.



Arrow direction represents the change since the last Quarterly Progress Update report.

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Risk Event/ Description Market response to procurement

Labour Relations & Stability

Risk and Response Summary

Trend in Risk 7 Exposure

There is a risk that strong competition does not occur during procurement, which may result in higher premiums, mark ups and overall prices on labour and materials. This risk has been mitigated via market soundings, robust Request for Qualifications processes, honorariums for un-successful short-listed proponents that submitted a bona fide proposal, and other engagement activities. All three major procurement processes completed to date (Worker Accommodation, Main Civil Works, Turbine and Generators) have had positive responses. BC Hydro completed the Request for Qualifications process for the Generating Station and Spillways Civil Works Contractor and short-listed four qualified proponents to receive the Generating Station and Spillways Request for Proposal. Market response risks will continue to be monitored and could be impacted if the project construction schedule is delayed significantly.

ď&#x192;Ş

BC Hydro is using an inclusive labour approach with a managed open site. This allows for participation by all union and non-union labour groups and allows access to the largest pool of skilled and experienced labour. BC Hydro entered into a memorandum of understanding with certain B.C. Building Trades unions to achieve labour stability and a mix of labour representation on site, including building trades unions. All major contracts contain no strike, no lockout, and no raiding provisions. BC Hydro has implemented a site-wide Labour Relations Contractor Committee. The purpose of this committee is to support labour stability on the site through communication, consultation, coordination and cooperation among contractors on the project.

ď&#x192;¨

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Risk Event/ Description Geotechnical risks

Construction cost – labour

Risk and Response Summary

Trend in Risk 7 Exposure

The key geotechnical risks include unexpected shears encountered during construction; deeper than expected relaxation joints; bedding planes worse than expected; larger than expected deterioration of shale bedrock once exposed during construction; and Rock Rebound/Swell. Current strategies to mitigate geotechnical risks include: Transfer some degree of ground condition risks to the Contractor; Design contracts that allow the contractor to respond to unexpected ground conditions (potentially through pre-agreed pricing); and, conduct field-scale trials to determine the response when shale bedrock is exposed to the elements. Events associated with geotechnical risks have occurred on the North Bank gully crossing, where unexpected slope failure occurred. BC Hydro has resolved the issue by working with the contractor to provide an engineered solution, and addressed it within available project funds. Geotechnical monitoring is underway for the Roller-Compacted Concrete Buttress excavations.



Potential cost increases could arise if there is competition with other projects for labour resources, labour instability, or changing workforce demographics. BC Hydro is partially mitigating this risk through regional job fairs to increase local participation and investments in skills training ($1.5 million invested to date). This risk is also partially mitigated by consideration of labour stability during contractor selection. Based on current market conditions in the infrastructure and energy sector, BC Hydro believes the risk of unexpectedly high labour prices has decreased since the Final Investment Decision. There remains the potential for market conditions to shift in the future and this risk to increase.



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Risk Event/ Description Construction cost – commodities and equipment

Construction execution

Risk and Response Summary

Trend in Risk 7 Exposure

Potential cost increases could arise if market prices for key commodities and equipment increase, or if overall market activity results in higher contractor profit margins. BC Hydro continues to review pricing for commodity cost for which it retains risk, and does not see early indications on market price pressures at this point. For example, BC Hydro retains exposure to fuel prices (generally diesel), which have decreased compared to prices in the budget. Fuel prices may increase in the future due to global market forces. BC Hydro will consider the potential to hedge these prices, where appropriate. Based on current market conditions in the infrastructure and energy sector BC Hydro believes that the risk of unexpectedly high market prices has decreased since the Final Investment Decision. There remains the potential for market conditions to shift and this risk to increase in the future. More information will be available upon conclusion of other major contracts such as the Generating Station and Spillways civil works contract.



Contractors may be unable to execute successfully the contracted scope resulting in additional costs to BC Hydro. Risk mitigation activities include: robust procurement processes to determine whether contractors have the capability to undertake their scope of work; cross-functional construction readiness review to confirm contractor and BC Hydro readiness before authorizing the start on any specific scope of work; BC Hydro increased on-site supervision to address environmental compliance issues; and BC Hydro contracts include step-in rights to allow for BC Hydro correction in the case of contractor failure.



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599 PUBLIC Quarterly Progress Report No. 5 F2017 Second Quarter – July 2016 to September 2016

Risk Event/ Description Foreign exchange

Interest rate variability

Change in Tax Rates

Risk and Response Summary

Trend in Risk 7 Exposure

Some of Site C project costs are in foreign currency, and will be affected by fluctuations in the exchange rate between the Canadian Dollar and these foreign currencies. Approximately 20 per cent of the Site C capital costs are based on foreign currency. The Canadian dollar has weakened significantly compared to the US dollar since the 2014 capital cost estimate was developed. However, the award of major contracts (particularly the Turbine Generator contract) has reduced BC Hydro’s exposure to currency fluctuations by transferring the risk to the contractor after award. The impact on future procurements may be larger than BC Hydro has seen to date, depending on future movement in foreign exchange markets, future movement in commodity and equipment markets, and the ability of the proponents to source from a range of foreign markets. Residual risk on contracts yet to be procured is partially mitigated through contractor flexibility around sourcing of material, resulting in an exposure to a basket of currencies rather than solely the US dollar.



Interest during construction costs will be affected by fluctuations in market interest rates. Currently, market interest rates are expected to be lower than assumed in BC Hydro’s budget at the Final Investment Decision. In addition to portfolio adjustments that are currently being implemented whereby BC Hydro is reducing its exposure to variable rate debt and increasing its issuance of fixed rate debt, a strategy was developed to hedge approximately 50 per cent of BC Hydro’s future forecasted borrowing requirements from F2017 to F2024 through the use of derivative contracts. An application to the Commission for a new Debt Hedging Regulatory Account that will capture the gains and losses related to the hedging of future debt issuance was approved by the British Columbia Utilities Commission in March 2016. BC Hydro began implementation of this hedging program early in F2017 and expects interest rate risk to decline over time



There is the potential for a change in tax rates that apply to Site C (e.g., PST, carbon tax) as well as the potential for a portion of GST to be unrecoverable. BC Hydro is monitoring potential changes to federal and provincial taxes and their potential effects. Where appropriate, BC Hydro will secure advance rulings on tax applicability to reduce uncertainty in treatment.



Site C Clean Energy Project Page 37

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Quarterly Progress Report No. 5

Appendix A Site Photographs

601 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 Appendix A

Figure A-1

Installing 138 kV Drops into Site C Temporary Substation. Photo taken July 2016

Figure A-2

Left Bank Excavation. Photo taken July 1, 2016

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602 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 Appendix A

Figure A-3

Crew Installing Air Handling Unit for the Gymnasium. Photo taken July 25, 2016

Figure A-4

North Foundation for Roller-Compacted Concrete Batch Plant. Photo taken July 29, 2016

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603 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 Appendix A

Figure A 5

Worker Accommodation Lobby. Photo taken August 3, 2016

Figure A-5

Looking Easterly on River Road. Working on Road Maintenance. Photo taken August 3, 2016

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604 Quarterly Progress Report No. 5 F2017 Second Quarter – July 2016 to September 2016 Appendix A

Figure A-6

Right Bank Adit No. 5 – In progress Drilling for Instrumentation. Photo taken August 4, 2016

Figure A-8

Right River Bank – Erosion Protection On-going Works between Right Bank Cofferdam Sta. 0+900 and Sta. 1+000 (4Evergreen). Photo taken August 7, 2016

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605 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 Appendix A

Figure A-9

Right Bank Cofferdam. Photo taken August 16, 2016

Figure A-10

Looking East at North Bank River Gully. Photo taken September 25, 2016

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606 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 Appendix A

Figure A-11

Pier 1 Girders Complete for Moberly River Construction Bridge

Figure A-12

Installing Bridge Deck Panels on the Moberly River Construction Bridge

Site C Clean Energy Project Page 6 of 6

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Quarterly Progress Report No. 5

Appendix B Summary of Individual Contracts Exceeding $10 million

PUBLIC

608 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 PUBLIC Appendix B

CONFIDENTIAL ATTACHMENT FILED WITH BCUC ONLY

Site C Clean Energy Project Page 1 of 1

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Site C Clean Energy Project

Quarterly Progress Report No. 5

Appendix C Project Progression

PUBLIC

610 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 PUBLIC Appendix C

CONFIDENTIAL ATTACHMENT FILED WITH BCUC ONLY

Site C Clean Energy Project Page 1 of 1

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Quarterly Progress Report No. 5

Appendix D Detailed Project Expenditure

PUBLIC

612 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 PUBLIC Appendix D

CONFIDENTIAL ATTACHMENT FILED WITH BCUC ONLY

Site C Clean Energy Project Page 1 of 1

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Quarterly Progress Report No. 5

Appendix E Workforce Overview

614 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 Appendix E

Table E-1

Current Site C Jobs Snapshot (July to 8 September 2016)

July 2016 Type of Work

Construction and Environmental and Non- Construction Contractors9 (including some subcontractors). Excludes work performed outside of B.C. (e.g., Manufacturing) Engineers and Project Team10 TOTAL

Number of B.C. Workers

August 2016 Number of Total Workers

Number of B.C. Workers

September 2016

Number of Total Workers

1,035

1,345

406

1,066

1,345

1,200

345

376

380

415

357

1,580 (87%)

1,816

1,392 (80%)

1,411 (82%)

1,721

1,401

Number of B.C. Workers

1,750

Employment numbers provided by Site C contractors and consultants are subject to revision. Data not received by project deadline may not be included in the above numbers. During the month of September 2016, there were no workers working under the federal Temporary Foreign Worker Program from Construction and Environmental Contractors. BC Hydro has contracted companies for major contracts, such as main civil works, who have substantial global expertise. In September 2016, there were 22 management and professionals working on the project through the federal International Mobility Program.

8 9

Employment numbers are direct only and do not capture indirect or induced employment. Construction and Environmental and Non- Construction Contractors includes work performed on Site C dam site, transmission corridor, reservoir clearing area, public roadwork, worker accommodation and services. Project Team includes consultants, BC Hydro Construction Management and other offsite Site C project staff. An estimate is provided where possible if primary residence is not given.

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615 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 Appendix E

Table E-2

Preliminary Site C Apprentices Snapshot (July to September 2016)

Month

Number of Apprentices

July 2016

August 2016

September 2016

Data is subject to change based on revisions received from the contractors.

Table E-3

Current Site C Job Classification Groupings

Carpenters

Construction and Environmental Inspectors

Construction Managers/ Supervisors

Crane Operators

Electricians

Engineers

Biologists & Laboratory

Health Care Workers

Heavy Equipment Operators

Housing Staff

Kitchen Staff

Labourers

Mechanics

Welders

Office Staff

Pipefitters

Plumbers

Security Guards

Surveyors

Truck Drivers

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Quarterly Progress Report No. 5

Appendix F Site C Construction Schedule

617 Quarterly Progress Report No. 5 F2017 Second Quarter â&#x20AC;&#x201C; July 2016 to September 2016 Appendix F

Table F-1

Site C Construction Schedule

Site C Clean Energy Project Page 1 of 1

618

Fred James Chief Regulatory Officer Phone: 604-623-4046 Fax: 604-623-4407 bchydroregulatorygroup@bchydro.com

March 14, 2017 Ms. Erica Hamilton Acting Commission Secretary British Columbia Utilities Commission Sixth Floor â&#x20AC;&#x201C; 900 Howe Street Vancouver, BC V6Z 2N3 Dear Ms. Hamilton: RE:

British Columbia Utilities Commission (BCUC or Commission) British Columbia Hydro and Power Authority (BC Hydro) Site C Clean Energy Project PUBLIC Quarterly Progress Report No. 6 â&#x20AC;&#x201C; October to December 2016 (Report)

Fred James Chief Regulatory Officer st/ma

Enclosure (1)

British Columbia Hydro and Power Authority, 333 Dunsmuir Street, Vancouver BC V6B 5R3 www.bchydro.com

619

Site C Clean Energy Project

Quarterly Progress Report No. 6

F2017 Third Quarter

October 2016 to December 2016

PUBLIC

620 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter â&#x20AC;&#x201C; October 2016 to December 2016

Table of Contents 1

2 3

Project Status ..................................................................................................... 1 1.1 Overview and General Project Status ....................................................... 1 1.2 Major Accomplishments, Work Completed, Key Decisions and Key Issues........................................................................................................ 5 1.2.1 Aboriginal Consultation ............................................................... 5 1.2.2 Litigation ..................................................................................... 5 1.2.3 Permits and Government Agency Approvals .............................. 7 1.2.4 Engineering and Construction..................................................... 9 1.2.5 Safety ....................................................................................... 13 1.2.6 Environment.............................................................................. 14 1.2.7 Employment and Training Initiatives ......................................... 18 1.2.8 Community Engagement & Communication ............................. 21 1.3 Key Procurement and Contract Developments ....................................... 27 1.3.1 List of Major Contracts Awarded (Excess of $50 million) .......... 28 1.3.2 Large Contracts to Date (Excess of $10 million) ....................... 29 1.3.3 Contract Management .............................................................. 29 1.4 Plans During Next Six Months ................................................................ 31 1.5 Impacts on Other BC Hydro Operations.................................................. 32 1.6 Site Photographs..................................................................................... 32 Project Schedule .............................................................................................. 33 2.1 Project In Service Dates .......................................................................... 33 Project Costs and Financing ............................................................................ 33 3.1 Project Budget Summary ........................................................................ 33 3.2 Project Expenditure Summary ................................................................ 34 3.3 Internal Project Financing versus External Borrowings to Date .............. 35 Material Project Risks....................................................................................... 36

List of Figures Figure 1

Map of Main Civil Works Work Areas ............................................... 12

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List of Tables Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Table 13

Project Status Dashboard .................................................................. 4 Summary of Proceedings with Hearings or Decisions Pending .......... 6 Scope of Main Civil Works Contract ................................................. 12 Quality Management Non-Conformity Report Metrics ...................... 13 Safety Metrics .................................................................................. 14 Site C Jobs Snapshot ....................................................................... 20 Public Enquiries Breakdown ............................................................. 24 Major Project Contracts and Delivery Models .................................. 28 Major Project Contracts Awarded ..................................................... 29 Key Milestones ................................................................................. 31 Project In-Service Dates................................................................... 33 Project Budget Summary ................................................................. 34 Total Project Expenditure Summary ($ million Nominal) Compared to Final Investment Decision ........................................... 34 Total Project Expenditure Summary ($ million Nominal) Compared to F2017-F2019 Service Plan ......................................... 35 Material Project Risks....................................................................... 36

Table 14 Table 15

Appendices Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F

Site Photographs Summary of Individual Contracts Exceeding $10 million Project Progression Detailed Project Expenditure Workforce Overview Site C Construction Schedule

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622 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter â&#x20AC;&#x201C; October 2016 to December 2016

Project Status

This Quarterly Progress Report No. 6 (Report No. 6) provides information

concerning the Site C Clean Energy Project (Project) covering the period from

September 1, 2016 to December 31, 2016.

1.1

The Project will construct a third dam and hydroelectric generating station on the

Peace River in northeast B.C. to provide 1,100 megawatts of capacity, and produce

about 5,100 gigawatt hours per year. In December 2014, the Project received

approval from the Provincial Government to proceed to construction. The Project is

Overview and General Project Status

in Implementation Phase and construction commenced July 27, 2015.

Construction activity for the Project remained relatively constant through the fall

season, with 1,531 construction and environmental workers on site and a total

workforce of 1,916 working on the project in December 2016, as reported by

contractors. On the North Bank of the dam site, Early Works is complete and the

contractor has demobilized from site. South Bank site preparation work was

completed this quarter with the exception of clearing work in the Lower Reservoir

area. The contractor re-mobilized to site in December 2016 and clearing work is

planned to be completed in March 2017.

Peace River Hydro Partners and BC Hydro worked collaboratively to re-sequence

planned work over the fall and winter to ensure the key schedule milestones are

maintained. Peace River Hydro Partners has re-scheduled the work on the left bank

into two phases. The first phase is to advance the excavation at the diversion tunnel

inlet portal so they meet the schedule for the planned river diversion in 2019. The

second phase of excavation will be completed over a longer duration as it is not

required to be advanced for the river diversion. On the right bank, the contractor has

re-sequenced their work on the drainage tunnel so that they can complete the

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623 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter â&#x20AC;&#x201C; October 2016 to December 2016

powerhouse excavation in parallel. As part of the re-sequenced work, Peace River

Hydro Partners is planning additional equipment for the excavation.

Construction on the Moberly Bridge was completed in December 2016. BC Hydro

continues to have weekly meetings with Peace River Hydro Partners to review

construction performance and productivity. Any cost impacts to BC Hydro associated

with rescheduling activities can be managed from existing allocated contingency

budgets.

As part of Site C construction, excavation work has been underway for the past

19 months to stabilize the slopes of the left bank for eventual dam construction. The

need to stabilize the left bank was identified through geotechnical studies during the

planning and regulatory phases of the project. Outside of the reporting period, in

mid-February 2017, a tension crack appeared on the left bank of the dam site

upstream of the future location of the dam. While tension cracks are not unexpected

in this area, this particular crack was significant due to its 400-metre length. While

there was some initial movement of soil, the tension crack has stabilized.

BC Hydro and its contractor installed instruments to measure and monitor stability

around the tension crack. In addition, the project's independent engineer and

technical experts in slope stability were brought in to assess the tension crack.

These investigations will inform a remediation plan.

Safety is a top priority and no construction activities in the area of the tension crack

are taking place until a plan is in place to safely remove the soil from the area. This

area of unstable soil is slated to be removed as part of left bank slope stabilization.

During the environmental assessment process, Natural Resources Canada

concluded that BC Hydro had adopted best practices related to slope stability for the

project.

The start of construction of the Site C 500 kV transmission line, 5L005, will be

moved back due to the final decision to use the delta tower design and layout. This

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624 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter â&#x20AC;&#x201C; October 2016 to December 2016

resulted in transmission line clearing and transmission lattice tower steel

procurement being completed later than originally planned, which delays the award

of the transmission line construction contract. A new alignment is being implemented

within the right of way which will allow the 500 kilo-volt transmission lines to be

safely constructed while the 138 kilo-volt lines are still energized which reduces the

duration of construction. It is expected the in-service date of October 2020 will still

be met.

BC Hydro announced a shortlist of four proponent teams for the Generating Station

and Spillways contract in September 2016. Since that time, Peace River Hydro

Partners 2 has withdrawn from the procurement. It is not uncommon to have a team

withdraw from a procurement process. We continue to have three very strong teams

in the procurement and we look forward to selecting a preferred proponent in 2017.

During the first week of November 2016, a Collaborative Meeting was held with each

of the three Generating Station and Spillways Civil Works proponents. At these

meetings, proponents had the opportunity to discuss provisions of the draft contract,

and to discuss details of the specifications. BC Hydro is now making adjustments to

the contract and the specifications based upon these comments. The final draft

contract will be issued to the proponents in April 2017.

Overall, the progression of work is on track to achieve the BC Hydro Board of

Directors (Board) approved in-service dates; the first unit is expected to come on

line in December 2023 and the final in-service date is expected in November 2024.

Costs are forecast to come within the Board approved budget amount, excluding

reserve subject to Treasury Board control ($8.335 billion).

Table 1 provides a dashboard based on the Project status as at December 31, 2016.

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625 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter – October 2016 to December 2016

1 2

Table 1

Project Status Dashboard

 Green: No Concerns;  Amber: Some Concerns but in Control;  Red: Serious Concerns Status as of:

December 2016

Overall:

Overall Assessment



The Project is on track for overall scope and schedule. The Project is on track with the Project completion date of November 2024.1

Schedule ISDs



The overall schedule and progress remains on track to achieve the planned In-Service Dates.

Cost



Permits, Regulatory and Environmental

 Permits are on track and meeting schedule requirements. The large volume of permits continues to be managed by engaging with regulators, Aboriginal groups, and contractors to share information, seek feedback, and identify process improvements. Three orders were received from the Provincial Environmental Assessment Office and Canadian Environmental Assessment Office following site inspections in December. For details refer to section 1.2.6.3 Environmental Compliance Inspection and Enforcement.

Risks

 Identified risks are being managed and treatments are in place or planned. For details refer to section 4 Material Project Risks below.

Aboriginal Relations

 Impact Benefit Agreement offers have been made to First Nations significantly affected by the Project.

Litigation

 Decisions made by the Crown may be subject to additional judicial reviews by First Nations and others who may oppose the project.

Safety

 There was one Level 1 safety incident and four Level 2 safety incidents at the construction site this quarter.

The Board approved In Service Dates for total Project completion November 2024.

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626 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter – October 2016 to December 2016

1.2

Major Accomplishments, Work Completed, Key Decisions and Key Issues

1.2.1

Aboriginal Consultation

Pursuant to the Environmental Assessment Certificate and Federal Decision

Statement, BC Hydro is required to consult with 13 Aboriginal groups with respect to

the construction stage of the Project. This consultation includes provision of

information on construction activities, support for the permit review process, and

review and implementation of mitigation, monitoring and management plans, and

permit conditions.

1 2

Efforts are ongoing to conclude impact benefit agreements with ten Aboriginal

groups. To date, an Impact Benefit Agreement with McLeod Lake Indian Band and a

Project Agreement with Dene Tha’ First Nation have been publically announced.

1.2.2

Of nine court challenges of environmental approvals and permits, four were

discontinued, and five were dismissed by the courts. Four of the court decisions

dismissing the legal challenges were appealed and three appeals were dismissed

with one still pending. In addition, two appeals of BC Hydro’s water licence have

been filed with the Environmental Appeal Board and those appeals are currently in

abeyance pending the outcome of the Court of Appeal decisions.

There were several developments in court proceedings in January 2017 and

February 2017 which are outside the reporting period including:



Litigation

The Federal Court of Appeal dismissed the West Moberly and Prophet River

First Nations appeal of the August 2015 Federal Court decision in which the

Federal Court denied a legal challenge of the major Federal environmental

approvals for Site C;

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627 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter – October 2016 to December 2016



The B.C. Court of Appeal dismissed the West Moberly and Prophet River First

Nations appeal of the September 2015 B.C. Supreme Court decision in which

the court denied a legal challenge of the major Provincial environmental

approval for Site C;



Fisheries Act Authorization; and

6 7 8

9 10

The BC Hydro Ratepayers Association discontinued its legal challenge of the



The Sierra Club has since decided not to proceed with its judicial review of a Wildlife Act permit.

The details of the various proceedings and hearings with decisions pending are summarized in Table 2 below.

11 12

Table 2

Summary of Proceedings with Hearings or Decisions Pending

Outcome

Date

Federal Court: Federal Environmental Approval Prophet River First Nation West Moberly First Nations

Dismissed Appeal filed Hearing date Appeal Dismissed

August 28, 2015 September 30, 2015 September 12, 2016 January 23, 2017

Notice of Application filed Discontinued

September 19, 2016 January 23, 2017

Federal Court: Federal Permits BC Hydro Ratepayers Association

B.C. Court: Provincial Environmental Assessment Certificate Prophet River First Nation West Moberly First Nations

Dismissed Appeal filed Hearing date Appeal Dismissed

September 18, 2015 October 19, 2015 December 5 to December 8, 2016 February 2, 2017

Injunction application Dismissed Hearing of Petition complete Petition Dismissed Appeal filed Hearing date

August 28, 2015 November 17 to November 23, 2015 and February 2, 2016 October 31, 2016 November 30, 2016 To Be Determined

B.C. Court: Provincial Permits Prophet River First Nation West Moberly First Nations

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628 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter â&#x20AC;&#x201C; October 2016 to December 2016

Outcome

Date

Environmental Appeal Board Prophet River First Nation West Moberly First Nations C. London

Water Licence appeals filed Hearing date

March 29, 2016 To Be Determined

Building Trades v. BC Hydro

Civil claim filed Response to claim filed

March 2, 2015 April 10, 2015

Sierra Club of British Columbia

Judicial review filed Discontinued

July 20, 2016 January 27, 2017

Other Proceedings

Status as of February 2, 2017.

1.2.3

Permits and Government Agency Approvals

1.2.3.1

Background

In addition to the Environmental Assessment Certificate and the Federal Decision

Statement, provincial permits and federal authorizations are required to construct the

Project. Timing of the application for these permits and authorizations is staged and

aligned with the construction schedule, availability of detailed design information,

and by project component. Approximately 310 permits will be required throughout

the life of the project. Prior to the reporting period (Q3), 142 permits had been

received and are being actively managed. During the reporting period (Q3), 25 new

permits were received in accordance with the schedule.

1.2.3.2

Federal authorizations are required under the Fisheries Act (Fisheries and Oceans

Canada) and the Navigation Protection Act (Transport Canada). All major Federal

authorizations for construction and operation of the Site C dam and reservoir were

received in July 2016. At this time, no further Fisheries Act authorizations are

anticipated. Additional Navigation Protection Act approvals for discrete works in the

reservoir (e.g., shoreline works, debris booms and Highway 29 bridges), are

anticipated to be issued at the regional level and are on schedule.

Federal Authorizations

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629 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter – October 2016 to December 2016

1.2.3.3

Provincial Permits

The plan for obtaining Site C provincial permits involves a phased approach to the

submission of applications to the Ministry of Forests, Lands and Natural Resource

Operations based on project components and construction schedule.

Provincial permits are required primarily under the Land Act, Water Sustainability

Act, Forest Act, Heritage Conservation Act, and Mines Act. The majority of the

permits are administered by the Ministry of Forests, Lands and Natural Resource

Operations and the Ministry of Energy and Mines.

Approximately 275 Provincial permits and approvals will be required throughout the

life of the project. Prior to reporting period (Q3), 120 Provincial permits and

approvals were received and are being actively managed. During this quarter,

25 new Provincial permits and approvals were received in accordance with the

schedule.

1.2.3.4

In order to efficiently and effectively manage the large volume of permits required for

the project, BC Hydro continues to engage with regulators, Aboriginal groups and

contractors to share information, seek feedback, and identify process improvements.

Process improvements include the following:



Permitting Improvement

BC Hydro continues to facilitate meetings with the Comptroller of Water Rights

and contractors to ensure permit applications are coordinated, timely and

sufficient;



Regular permitting forums are being held with Aboriginal Groups to share

information on upcoming permit applications and to seek feedback before

applications are submitted to regulators; and

25 26



BC Hydro continues to support the Ministry of Forests, Lands and Natural Resource Operations during the First Nations consultation process by attending

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630 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter â&#x20AC;&#x201C; October 2016 to December 2016

consultation meetings when invited to do so, and responding to First Nations

questions on permit applications.

1.2.4

Engineering and Construction

1.2.4.1

Engineering

The technical specifications for the Spillway, Power Intakes and Powerhouse have

been issued in draft to the shortlisted respondents to the Generating Station and

Spillways Request for Qualifications. Main Civil Works implementation design is

continuing; the issuing of the construction drawings commenced following contract

award. The Roller-Compacted Concrete Buttress Issue for Construction Drawings

have been completed based on the Turbine and Generators and Powerhouse

dimensions and these have been issued to Peace River Hydro Partners for

preparation of Roller-Compacted Concrete placement in 2017. The technical

specifications for the Hydro-Mechanical Contract Completions Contract and

Protection and Control specifications are progressing to meet project schedule.

Implementation design is underway for the 500 kV transmission lines, Peace

Canyon 500 kV Gas Insulated Substation and Site C Substation. The next Technical

Advisory Board is scheduled for June 5 to 9, 2017. A one day workshop is

scheduled for February 20, 2017 with the Technical Advisory Board in Vancouver to

provide an update on the Roller-Compacted Concrete excavations on the Right

Bank and the additional analysis, which was requested by the Technical Advisory

Board.

1.2.4.2

Refer to Appendix F for the full construction schedule.

North (Left) Bank Site Preparation

Work is completed and the contractor has demobilized from site. Key contract scope

for North Bank Site Preparation included constructing approximately 7 km of access

roads and excavation of approximately 2 million cubic metres of material. The last

Construction

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631 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter – October 2016 to December 2016

construction component was the North Bank Road gully embankment, which was

completed on November 4, 2016. Embankment movement on River Road (Blind

Corner) still requires stabilization. A contractor has been selected to implement the

remedial measures developed by BC Hydro.

South (Right) Bank Site Preparation

South Bank site preparation work, including Septimus rail siding, was completed this

quarter with the exception of clearing work in the Lower Reservoir area including the

Moberly River Valley. This clearing work was delayed due to protests in late 2015 to

early 2016. The contractor re-mobilized in December 2016 and clearing work is

planned to be completed in March 2017.

Ministry of Transportation and Infrastructure Public Road Upgrades

The Ministry of Transportation and Infrastructure’s contractor, Al Simms and Sons,

has substantially completed 269 Road and 240 Road. Both components are now

paved and require minor work to finish. Old Fort Road re-alignment was completed

near the Gate B entrance to Site C dam site with bottom left paving and is open to

traffic. The final paving will be completed in spring 2017. Shoulder widening is also

being carried out on Old Fort Road from the re-alignment section north to

Highway 97. Work is scheduled to be completed by the end of June 2017.

BC Hydro has entered into a contract with a designated business partner of an

Aboriginal group for the shoulder widening of 271 Road, which is under Ministry of

Transportation and Infrastructure jurisdiction. Work commenced in late August 2016

but was stopped due to winter weather conditions. It is now scheduled to be

completed by July 2017, which does not affect the critical path.

Main Civil Works



Peace River Hydro Partners started the permanent work in June 2016 on the Left Bank Excavation;

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632 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter – October 2016 to December 2016



The Right Bank Drainage Tunnel received all permits in June 2016; work on the

tunnel portal is complete and tunnelling is targeted to start in February 2017;

Peace River Hydro Partners have been working this last quarter to obtain

approvals for their water discharge management, shotcrete design and safety

management plan from WorksafeBC;



October 2016;

7 8



Work on the Moberly River Construction Bridge started in September and was completed in December 2016;

9 10

The first Relocated Surplus Excavated Material site was operational in early



The Right Bank Coffer Dam is at full height and cut-off installation started in late

October 2016 and is targeted for completion in March 2017. There were some

delays to completing this work due to the cold weather that was experienced at

site in December 2016; and

14 15



The Roller-Compacted Concrete Batch Plant construction was completed in time for the Roller-Compacted Concrete trial placement in December 2016.

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633 PUBLIC Quarterly Progress Report No. 6 F2017 Third Quarter â&#x20AC;&#x201C; October 2016 to December 2016

Figure 1

Map of Main Civil Works Work Areas

Table 3

Scope of Main Civil Works Contract

Component

Description

Diversion works

Two approximately 11 metre diameter concrete-lined tunnels approximately 750 metres in length

Excavation and bank stabilization

Approximately 26 million cubic metres of overburden and rock excavation

Relocation

Relocation of surplus excavated material (including management of discharges)

Dams and Cofferdams

A zoned earth embankment 1,050 metres long and 60 metres above the present riverbed and stages 1 and 2 cofferdams

Roller-Compacted Concrete

Buttress â&#x20AC;&#x201C; 800 metres long with 2 million cubic metres of concrete

Quality Management

Implementation and monitoring of Quality Control and Quality Assurance Plans are

required of all contractors. Table 4 below identifies quality management

non-conformity instances during the quarter ending December 31, 2016.

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1 2

Table 4 Contract

Quality Management Non-Conformity Report Metrics

Contractor

Reported this Period

Closed this Period

Reported to Date

Closed to Date

North Bank Site Preparation

Morgan Construction & Environmental

South Bank Site Preparation

Duz Cho Construction

Main Civil Works

Peace River Hydro Partners

136

The majority of quality non-conformities are related to the installation of the

surface-mounted instrumentation for the right bank drainage tunnel. The

surface-mounted instrumentation needed to be protected from damage from moving

equipment. The surface-mounted instrumentation has now been protected. Other

outstanding non-conformities are being resolved and reviewed weekly through

face-to-face meeting with management from Peace River Hydro Partners and

BC Hydro.

1.2.5

Safety

There was one Level 1 safety near miss and four Level 2 near misses at the

construction site in this quarter. The Level 1 incident was related to an excavator

that had tipped towards the river. The four Level 2 incidents included: back pain;

foreign body to eye; property damage to excavator by large rock; and fractured

ankle. The one Public Near Miss reported this quarter involved an employee

observing a low hanging line over Old Fort Road, which could have impacted traffic

flow. The line was reported to BC Hydro and Telus and Telus dispatched a crew to

repaired their telephone line.

Table 5 below identifies the project safety metrics during the quarter ending

December 31, 2016.

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Table 5

Safety Metrics Reported this Period

Fatality & Serious Injury

Reported since Inception (July 27, 2015)

Severity (number of calendar days lost due to 3 injury per 200,000 hours worked)

Lost Time Injury Frequency (number of injuries 3 resulting in lost time per 200,000 hours worked)

291

175

Contractor, employee, public near miss reports Lost time incidents Equipment/property damage reports

1.2.6

Environment

1.2.6.1

Mitigation, Monitoring and Management Plans

The Environmental Assessment Certificate and Decision Statement conditions

require the development of draft and final environmental management, mitigation

and monitoring plans, as well as the submission of annual reports on some of these

plans.

As of the end of this quarter, all required submissions have been made in

accordance with the schedule and requirements of the conditions.

During the reporting period (Q3), four annual reports were submitted in accordance

with the conditions.

1.2.6.2

Technical Committees Required under Schedule A of the Conditional Water Licence

Schedule A of the Conditional Water Licence requires that BC Hydro establish with

Provincial and Federal Regulators two Technical Committees to provide oversight 2 3

Excludes health events unrelated to work standards. BC Hydro is now capturing safety metrics data each week from our two Prime Contractors which includes man-hours worked. Although submissions have improved, BC Hydro continues to work with the Prime Contractors to improve the timeliness and accuracy of their reports. Types of equipment and property damage include vehicle damage, minor electrical fire damage, etc. Equipment damage data is collected through contractor monthly reports not the BC Hydro Incident Management System.

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and guidance to the refinement and implementation of BC Hydroâ&#x20AC;&#x2122;s Mitigation,

Monitoring and Management Plans. The two Committees are: the Fisheries and

Aquatic Habitat Mitigation and Monitoring Technical Committee; and the Vegetation

and Wildlife Mitigation and Monitoring Technical Committee. Schedule A outlines a

delivery schedule linked to Site C Project Construction Component for when the

Technical Committees must review and revise various Mitigation and Monitoring

Plans.

The Fish and Aquatic Technical Committee has met a total of 20 times to date,

including two meetings in Q3 of this fiscal year. The Vegetation and Wildlife

Technical Committee has met a total of 15 times to date, including three meetings in

Q3 of this fiscal year. Both committees are meeting the timelines outlined in

Schedule A of the Water License.

1.2.6.3

Inspectors from the BC Environmental Assessment Office and Forests, Lands and

Natural Resource Operations, Fisheries and Oceans Canada and from the Canadian

Environmental Assessment Agency Office are expected to regularly inspect the

Project to assess its compliance with Provincial Environmental Assessment

Certificate conditions, Provincial permits and the Federal Decision Statement

Conditions, respectively. In some quarters regulators may not inspect the project

while other quarters may experience multiple inspections and potentially

enforcement. The following summary provides context on regulatory agency

inspections and enforcement that occurred prior to this quarter.

Forests, Lands and Natural Resource Operations inspected the project on three

separate occasions and to date has not issued any inspection reports or orders.

In this reporting period, three agencies (BC Environmental Assessment Office,

Forests, Lands and Natural Resource Operations and the Canadian Environmental

Assessment Agency Office) completed a single coordinated inspection from

Environmental Compliance Inspections and Enforcement

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November 28, 2016 to December 2, 2016. They have not yet issued a final

inspection report. On December 2, 2016, the Canadian Environmental Assessment

Agency issued a stop work order pursuant to section 94 of the Canadian

Environmental Assessment Act to BC Hydro related to work on the Moberly River

Construction Bridge. The stop work was issued because the Contractor did not have

the spill response kit and spill containment boom in the location prescribed in its

Environmental Protection Plan. This stop work order was lifted on December 3, 2016

following provision of satisfactory evidence that the work is compliant with the

Federal Decision Statement Conditions. On December 19, 2016, this Agency also

issued a Notice of Intent to issue an Order pursuant to section 94 of the Canadian

Environmental Assessment Act related to not having contingency supplies of erosion

and sediment control materials available onsite as per the Contractorâ&#x20AC;&#x2122;s

Environmental Protection Plans. On January 9, 2017 the Agency determined that an

Order would not be issued following a satisfactory review of evidence of corrective

actions, including evidence that contingency supplies are now in place. This is

outside of the reporting period for this report. On December 22, 2016 the BC

Environmental Assessment Office issued two Orders for non-compliance related to

Environmental Assessment Certificate Conditions 56, 16 and 19; the monitoring of

water wells and measures to protect amphibians. BC Hydro commenced monitoring

of water wells in October 2016 and is providing the Environmental Assessment

Office with the required documentation. Our Construction Environmental

Management Plan includes measures to protect amphibians and BC Hydro is

working with our contractor to ensure the work is in full compliance.

1.2.6.4

In accordance with a number of Environmental Assessment conditions and the

Federal Decision Statement, the Site C Heritage Resources Management Plan

addresses the measures that will be used to mitigate the adverse effects of the

Project on heritage resources.

Heritage

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The Heritage field work includes regulatory requirements for pre-construction

archaeological impact assessments in areas not accessible until now, systematic

data recovery at selected archaeological sites, investigation of chance finds as

required, and inspections of archaeological sites post-ground disturbance in

construction. In addition, heritage reporting, and heritage compliance reviews of

contract documents, contractor environmental plans and construction readiness

plans were performed.

In this reporting period (Q3), 20 reports compiling the heritage data were completed,

submitted and shared with First Nations.

1.2.6.5

Agriculture Mitigation and Compensation Plan - Framework