British Columbia is bound by a federal agreement to extend the electrical grid far deeper into the northwest corner of the province than announced back in 2009. The resulting extra costs so far are unclear but could be millions more dollars. And the official reason -- to shift a remote native village off dirty diesel-generated electricity -- has only recently come to light, a surprise even to some who have been watching the proposed project closely.
A spokesman for the B.C. Ministry of Energy confirmed in June that the province is obligated to "electrify" the Tahltan village of Iskut within one year of the Northwest Transmission Line's (NTL) in-service date of 2013 -- as a condition of a Canada-B.C. agreement that will see federal taxpayers contribute $130 million to the project.
"There was no public announcement about the proposed Iskut extension in a press release at the time the NTL funding was announced [in 2009]," says ministry spokesman Jake Jacobs. He confirmed that the extension is not included in the original $404 million NTL cost estimate, and that the price tag of the extension has yet to be determined.
This despite the legal obligation to extend the NTL (see map here) more than 100 kilometres further north through rough, mountainous terrain as early as 2014 -- a plan that could trigger a separate environmental assessment.
The B.C. electrical grid will now extend far deeper into the mineral-rich Stikine River watershed, within reach of a cluster of promising copper and gold deposits, and to about 20 km of Imperial Metals proposed Red Chris open pit copper/gold mine, the most advanced mineral prospect in the entire northwest.
"The federal government [is] spending $130 million of your tax money... on the excuse that this power line is going to get the community of Iskut, a town of 300 people, off its diesel-run generators," says author Wade Davis, National Geographic explorer in residence and seasonal resident of northwest B.C. "How would Canadians feel to know their green funds, that have at great fanfare been announced as the government's commitment to weaning the country from carbon, have actually been used to grind up the most beautiful mountain in B.C.?"
Positioning of the line
It was the federal government's $130 million contribution, drawn from its Green Infrastructure Fund, that pushed the NTL from mining industry wish-list to reality in September of 2009.
A copy of the draft federal-provincial agreement acquired by The Tyee shows that the $130 million is conditional on the province "ensuring… a reliable and clean source of energy to Eddontenajon and Iskut and results in reduced greenhouse gas emissions."
The planned terminus for the Iskut extension will be Tatogga Lake -- the current site of an off-grid tourist and hunting lodge; from there, a 25-kilovolt distribution line will run to Iskut. It's around Tatogga Lake that the road accessing Red Chris veers off the Stewart Cassiar highway towards Todagin mountain.
The federal government has focused on the green benefits of taking native communities off diesel, although some of the details appear confused: the Infrastructure Canada website specifically refers to the "335-km transmission line" taking the native communities of Iskut and Eddontenajon off diesel, but this same 335-km power line will only reach to Bob Quinn -- more than 100 km south of those locations.
Meanwhile the province has positioned the NTL as critical infrastructure for mining and energy development, relying on the 2008 findings of a Mining Association of B.C.-led industry report that predicted the power line would draw $15 billion in capital and 30,000 jobs to the northwest of B.C. over the coming decades.
Carbon reduction or increase?
On paper, there are strict criteria for getting federal Green Infrastructure Fund cash: a project "should improve the quality of the environment and lead to a more sustainable economy over the longer term... Sustainable energy infrastructure, such as modern energy transmission lines, will contribute to improved air quality and lower carbon emissions."
But an unpublished internal 2008 Pembina Institute memo predicts the NTL will cause a spike in B.C.'s greenhouse gas emissions -- caused by the five mines the NTL has the capacity to power.
Pembina calculated that five grid-powered northwest mines could collectively emit 890,000 tonnes of "greenhouse gas pollution" each year; taking Iskut off diesel is estimated by government to save 2,800 tonnes of emitted CO2 a year.
The small Tahltan communities of Iskut and Telegraph Creek are today served by B.C. Hydro-owned diesel generators, delivering electricity at subsidized rates comparable to residential grid customers. Dease Lake already has its own small hydro project, relying on diesel only for back-up.
And while the NTL will deliver clean hydro, the actual operation of the proposed mines would steeply increase carbon emissions lasting decades. If the most promising mines go ahead, daily diesel trucks up and down the remote Stewart Cassiar highway will deliver raw minerals to deep sea ports; tankers burning bottom-of-the-barrel "bunker fuel" will sail to Asian smelters powered by high sulphur coal. These same ships and trucks will then bring processed metals back to Canada.
First Nations support for extension
On May 17, the Tahltan Nation (see map of Tahltan territory and NTL here) signed two NTL agreements: one with BC Hydro to dictate benefits during the construction of the line, and a second that will see the Tahltan share in decision-making and economic opportunities with the province once it is operational.
A month earlier, 82 per cent of voting Tahltan Nation members supported the agreements; this is in addition to at least three other BC First Nations signing agreements with the province this year. Yet the Tahltan Nation press release announcing the pro-NTL ratification vote clearly defines the project as the original 334-km route terminating at Bob Quinn -- covering "approximately 70 kilometres of transmission line within Tahltan territory," with no mention of the extension.
The framework agreement with the province includes a provision for future discussions on "an extension of NTL to Tatogga Lake and Iskut," but nothing more specific. It also states the possibility of a Tahltan Nation loan to BC Hydro to fund future NTL construction costs -- earning a rate of return that would "not exceed commercial rates" the utility currently pays to "other lenders."
Will the Tahltan loan BC Hydro the money needed to build the extension? Will a separate impact benefit agreement be needed to extend the line up into Talhtan territory by 2014? Annita McPhee, tribal chair of the Talhtan Central Council representing about 5,000 Tahltan people on and off reserve, did not respond to Tyee emails and phone calls.
Effect on Hydro rate payers questioned
Beyond saying the green benefits of the NTL extension are exaggerated, critics of the NTL are warning that B.C. Hydro will soon be forced to supply and sell massive new quantities of electricity to northwest mining companies at loss, driving up electricity rates for everyone else.
Marvin Shaffer, an economist and public policy professor at Simon Fraser University, says B.C. Hydro will have to go out and acquire all that new electricity for the NTL-powered mines, and none of it will be from low-cost W.A.C. Bennett-era heritage sources. It will come from run-of-river or even Site C, but no matter what, B.C. Hydro will be paying at least $100/megawatt hour (mWh) for this additional supply, and therein lies a big problem, says Shaffer.
Under B.C.'s current industrial rate structure, B.C. Hydro will only get about $45-50/mWh for this electricity from mining companies, even with the coming rate increases and the "two-tiered" rate the companies pay.
Shaffer provides a hypothetical example. Under business-as-usual, a huge open pit mine consuming 1,000 gigawatt hours will pay B.C. Hydro about $40 million a year for electricity, while the cost to B.C. Hydro to supply it will be closer to $100 million.
"We've built into our whole business model a loss on new sales," says Shaffer. "And what does that mean? It makes the system grow more rapidly because you're attracting new loads both with your low prices and subsidized transmission lines -- and that drives rates up for everybody else."
This analysis applies to more than NTL-powered northwest mines. In 2009, Shaffer scrutinized the costs and benefits of Taseko Mines' Prosperity Mine, and concluded that the project would "generate significant net costs for British Columbians and Canadians as a whole." In particular, he found B.C. Hydro and its customers would pay at least $35 million a year in "net subsidy" for electricity.
Cam Matheson, B.C. Hydro's executive director of energy planning, says it would be a "misrepresentation" to say B.C. Hydro is losing money on the new mines that will be connected as a result of the NTL. "The cost of obtaining new supply needed to serve new demand is borne by all ratepayers as these costs are non-discriminatory," he told The Tyee. "We have an obligation to serve them."
BC Liberal support based on industry claims
As noted earlier, B.C.'s business case for building the NTL has been based on an industry report -- updated as a "high level review" in 2009 -- that predicted $15 billion in investment and 30,000 new jobs to come from the NTL. But on closer inspection, the study is little more than a survey of the mining and energy companies with development ambitions in the region.
That did not prevent former premier Gordon Campbell from quoting these very stats when he revived the NTL in 2008. In May of 2011, when the NTL received federal environmental approval, B.C.'s new minister of energy, Rich Coleman, suggested the NTL would even surpass these industry predictions: "Families in B.C.'s Northwest can benefit from the over 10,000 jobs and $15-billion investment," he said.
Both the ministry of energy and B.C. Hydro could not refer The Tyee to any cost-benefit analyses for the NTL, although a B.C. Hydro spokesman did send a link to the coalition report mentioned above. And like the smart meter initiative moving forward this month, the NTL is exempted from the usual B.C. Utilities Commission scrutiny by the Liberals' Clean Energy Act of 2010.
Has there been any B.C. Hydro analysis of how the electricity demands of big mines would affect hydro rates or the utility's revenue requirements? "We took a number of steps to minimize potential rate impacts, including working with a number of the companies that benefit directly from the NTL's power," said Doug Little, B.C. Hydro VP of economic and business development. He cites a $180 million NTL contribution from Alberta's AltaGas to connect its Forrest Kerr hydro project to the NTL, as well as B.C.'s "securing a $130 million contribution from the federal government."
'We are prepared to go it alone'
As of this writing, much uncertainty remains about how the mandatory NTL extension to Iskut will proceed. If it costs $404 million to build the line 335 km between near Terrace to Bob Quinn, what will it cost to extend it another 107 km up to Tatogga Lake and Iskut? Who will pay for it, and will a separate environmental assessment be required?
According to B.C. Hydro's NTL project manager, Tim Jennings, no decisions have been made on the design, service requirements or timing of the extension. "We are unable to provide any detailed information on an extension to Iskut or its cost," he added. B.C. Hydro also did not know whether an additional environmental assessment will be needed.
No agreement currently exists with Imperial Metals either. At present the company has not committed funds to pay for the extended NTL, which will be built to their front door to take Iskut off dirty diesel.
But Imperial is aware of the provincial commitment to extend the line to Tatogga Lake, says the Ministry of Energy, and this comes as a surprise. Since 2009, this reporter has interviewed two Imperial Metals executives -- including VP Gordon Keevil just this May -- and both repeated the same phrase when asked if they would pay to bring grid power to their mines.
"We are prepared to go it alone."