Premier Christy Clark’s vow to push work at the $9-billion Site C dam “past the point of no return” may be music to the ears of some construction contractors, but not to all pulp and paper firms.
In a great irony, as the costs soar into the billions to build infrastructure to supply “clean” electricity to natural gas companies and a hoped-for liquefied natural gas industry, the province and BC Hydro are imposing costs that are pushing existing industries to boost their reliance on fossil fuels. One pulp mill near Quesnel is a case in point. To defray rapidly rising hydro costs, the company plans to spend millions of dollars to produce its own power using natural gas.
Well before logging contractors began levelling old-growth forest beside the Peace River last summer in preparation for building Site C, four pulp company executives warned Victoria that mounting hydro costs threatened the economic viability of their operations. The companies operate mills that grind wood into pulp mechanically, a very energy-intensive form of pulping compared to mills that rely more on chemicals to do the job.
“We estimate that the six mechanical pulp mills purchased eight per cent of the electricity sold domestically by BC Hydro last year,” the presidents and CEOs of Canfor, West Fraser, Catalyst Paper and Paper Excellence told Finance Minister Mike de Jong in June 2014.
Two months earlier, hydro rates jumped nine per cent across the board. The increases marked the first of five annual rate hikes that would see hydro bills climb 28 per cent. The news sent shock waves through the mechanical pulp industry, where some mills consume up to 70,000 households-worth of electricity per year.
Adding further to industry woes, de Jong was told, the reintroduced provincial sales tax of the year before effectively pushed the industry’s hydro bills up another seven per cent, because under the previous harmonized sales tax, taxes paid on electricity were largely refundable.
Because of these hikes, Energy Minister Bill Bennett and BC Hydro unveiled a $100-million fund that let qualifying mechanical pulp companies underwrite the costs of new energy conservation projects.
“Here’s the kicker,” Bennett said after making the announcement. “By incentivizing this conservation by these big [power] users, BC Hydro is going to avoid spending $265 million to acquire new sources of power generation.”
But the companies, including Quesnel River Pulp owner West Fraser, said the $100-million fund wasn’t enough. They have continued to lobby for PST exemption.
In the meantime, a presentation by West Fraser executives at a public meeting in Quesnel in early January underscored what Quesnel River Pulp is up against.
By 2018, QRP’s hydro payments will be 80 per cent higher than they were 10 years earlier, meaning the company will pay $16 million more per year than it did in 2008.
To address the problem, the company is considering a $25-million investment in needed energy-conservation measures, of which
$15 million may be subsidized under the fund announced by Bennett.
QRP has also applied under a call for power from BC Hydro to install a $25-million gas-fired turbine to produce power at the mill. The investment would allow QRP to lower its hydro bills by about 15 per cent.
QRP originally wanted to install two turbines, but Hydro’s call effectively capped the gas-fired power it would take to one turbine’s worth.
Why the cap? BC Hydro doesn’t need the power. In fact, its own projections show it has excess power through 2028. Only with the increasingly unlikely arrival of an LNG industry in BC is there any possible need for a whole bunch more power. Hence the premier’s new-found interest in sending Site C power to Alberta.
In the meantime, the race continues to advance construction at Site C. With major power users severely challenged to pay today’s hydro bills, it’s anybody’s guess how much worse things will be if the most expensive megaproject in BC history is completed and the costs are recouped through even higher Hydro bills.
Despite repeated calls to subject the megaproject to independent review by the BC Utilities Commission, the provincial government refuses to do so. Much as it champions impounding a wall of water behind a giant dam, our government also appears content to let the contradictions pile up at Site C.
Ben Parfitt is a resource policy analyst with the CCPA-BC.