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All The Little White Lies They Told Us About Site C

It's becoming more and more apparent that BC Hydro has been playing a bit loose with telling the truth, the whole truth.

10/26/2017 11:33 EDT | Updated 10/26/2017 11:38 EDT

The hissing sound you may hear is the unmistakable sound of the air coming out of Site C's tires. As the B.C. Utilities Commission continues its inquiry on the project, it's becoming more and more apparent that B.C. Hydro has been playing a bit loose with telling the truth, the whole truth when it comes to Site C.

Case in point: back in December 2014, when the B.C. government announced its decision to move ahead with Site C, B.C. Hydro boasted that an independent analyst had reviewed its methodologies for future demand forecasts and found them to be "state-of-the-art methods." Which is true, but not entirely the whole truth.

THE CANADIAN PRESS
The Site C Dam location is seen along the Peace River in Fort St. John, B.C. on April 18, 2017.

From the analyst's report: "The process will produce accurate forecasts about 10 years out. However, the process of producing peak forecasts and sales forecasts are not linked as directly as they could be, and could impact the second 10 years of the 20 year forecast."

He also underlined that he had not been given a mandate to verify any of B.C. Hydro's "underlying input numbers" and, therefore could make "no representation or warranty as to the accuracy, reliability or completeness of the information."

Due diligence was certainly in short supply when it came to awarding some Site C contracts.

In November 2015, B.C. Hydro announced that its preferred proponent for the Site C main civil works contract was Peace River Hydro Partners (PRHP), comprised of Acciona Infrastructure, Petrowest Corp. and Samsung C&T. First raised in this space more than a year ago, all three were facing some problems of their own at the time.

Samsung Group was under investigation for bid-rigging and corruption in South Korea and Brazil; Acciona was under investigation for corruption in Spain (two executives were arrested by Spanish authorities less than a month after the Site C deal was signed); and Petrowest was "living on borrowed time" from its lenders.

There have been a few developments since.

How did Site C get off the rails so quickly?

In May, Samsung settled a $1-billion dispute with Australian miner Roy Hill Holdings. Another contractor on the same project, Australian Emanuel Dillon found a "novel" way to get the $191,457 he was owed by Samsung. He applied to the courts to have Samsung wound up on "grounds of insolvency." He was paid.

In August, the head of Samsung, Jay Y. Lee, was sentenced to five years in prison for bribery after being found guilty of "offering bribes to the country's former president and other crimes."

Petrowest finally succumbed to borrowed time and went into receivership in August.

All three partners are now being sued for wrongful dismissal by Kent Peyton who was hired away from another construction firm, Flatiron, "to get construction of the (Site C) dam on schedule and on budget, as a new earthworks and dam construction director."

As for "on time and on budget," Site C is neither and likely never was, even when B.C. Hydro was claiming otherwise. Here's what then-president and CEO Jessica McDonald told B.C. Business Magazine in a July 2016 interview: "The first six to 12 months are critical for any project when you're mobilizing. We can look at our estimates and see where we are, and that's the best gauge on why we say that the project is very solidly on time and on budget."

According to court documents filed in the Supreme Court of B.C., "Shortly after work commenced on the Site C project, it became apparent that various project components, including the dam, were over budget and behind schedule."

Last month, PRHP told the utility that it wouldn't meet the 2019 river diversion deadline, adding an additional $610 million to the project's costs.

It's always been a bit of a puzzle how the former government managed to defy the odds by bringing its infrastructure projects in on time and on budget, when few jurisdictions do. According to a report this year by accounting firm Ernst & Young: "Historically, North America has been among the worst at controlling schedules and costs of capital projects." Ernst & Young found that Canadian infrastructure megaprojects on average run 39 per cent over budget and behind schedule by 12 months.

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How did Site C get off the rails so quickly? No one seems to have been entrusted with looking after the taxpayers' interest, just each other's interest.

In 2007, the utility looked to its boardroom for a consultant — former MLA and then-B.C. Hydro director Jack Weisgerber — to lead community consultations on Site C. Catana Advisory Services was engaged "to negotiate (Site C) legacy agreements with municipal and regional district governments in northeast B.C." You won't find it in any official biography, but as late as Dec. 16, 2013, McDonald was a partner at Catana. McDonald was appointed BC Hydro CEO in May 2014.

In 2014, another board member — former Partnerships B.C. CEO Larry Blain — left the utility and landed at KPMG as the senior director of its global infrastructure advisory where he joined Gary Webster, a partner at the accounting firm, who was "advising" B.C. Hydro on Site C (advice some might better characterize as "cheer leading.")

None of this bodes well for an on-time and on-budget finish of Site C, if there is a Site C to finish after the B.C. Utilities Commission sends its final report to the government. But no matter how it plays out, there are some tough questions that need to be asked.

First among them: how did an $8.8-billion project get so far down the road without any independent oversight?

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