Tuesday, December 16, 2014

Quick thoughts on Site C half an hour before the annoucement

My hope is that the government passes on the project

Give the track record of large dam projects in the last decade, it would see that cost overruns seem to be almost inevitable.    The Muskrat Falls project in Labrador looks like it will come in at $10.5 billion instead of the initial $6.9 billion.   Recent Manitoba Hydro dam projects have risen dramatically in capital costs  

I have very little faith the cost of Site C will remain at $8.5 billion, I think it would be prudent to assume the final capital cost will be more like $11 to $13 billion.   Using BC Hydro's math, this higher capital cost would result in a cost of around $100/MWh for Site C power.  

When it comes to the price of Site C power, I am not very comfortable with how BC Hydro has amortized the costs of the project.   They have chosen to consider it over a very long time, 70 years.    I think it is not right to look at the cost of the project of 70 years and should limit it to 25 or 30 years.  Doing this dramatically increases the cost of power.  

It is realistic to expect significant capital costs for the Site C dam in 40 to 50 years for replacement and upgrades to the dam.   Currently BC Hydro is suggesting $10 million a year would be enough to meet these costs.   That seems low to me and should be more like $25 million a year, doing this would add around $3/MWh to the cost of the power.

BC Hydro has suggested an annual operations and maintenance cost of $7.5 million.   This seems very low and out sync with other similar projects.   The Muskrat Falls project in Labrador is projected to have an annual operations cost of $32 million or so.    I do not have access to any good figures to what it should be, but if it were $20 million a year, this would add an extra $3/MWh to the cost of the power.

I think a more realistic cost of power from Site C will be $110 to $140/MWh.   This higher cost for power makes a number of other power sources look like better choices for BC.

Do We Even Need Site C?

Forecasting power use more than a decade into the future is no easy task at all.  We have seen power use in BC stagnate for the last five or more years, the assumed 1.5% to 2.0% forecast annual increases has not been happening.   We are getting the near term wrong, getting the long term right is going to be very hard.

With more demand side management BC Hydro can keep the increased power demand down.   The higher rates for electricity in BC is changing the habits of the public and people are acting to reduce power use.  Finally, once the smart grid is fully in operation, BC Hydro will have less line loss.   At the moment around 10% of the power generated is lost.  The smart grid will allow BC Hydro to know where the loss is and to better control the flow of power.  

We have other sources of power possible.  

According to BC Hydro's own work, there is significant affordable wind power resources in the Peace and run of the river hydro on Vancouver Island.   I mention both because the flow of power from each compliments the other very nicely - when there is little wind there is a lot of water on the Island, when the water flows drop the winds the in Peace rise.    Using a price of around $100/MWh these two sources provide the same amount of power as Site C would.

BC Hydro is currently building Units 5 and 6 on the Mica dam and could build Unit 6 on the Revelstoke dam.   These additions to existing dams would add 1,500 MW generating capacity for BC Hydro, though they can not provide the same scale of firm power that Site C can.   I do not see how the Mica Units 5 and 6 are currently captured in BC Hydro's forecasts.

There are a couple of other significant power sources that are competitive at $100 to $120/MW/h - geothermal on the south coast and biomass burning in the interior.  

I do not think we need Site C.   The risk is too high for BC.


Monday, December 15, 2014

Justin Trudeau seems to be against consdering electoral reform

On December 3rd 2014 the House of Commons had vote on a motion from Craig Scott of the NDP about proportional representation and the Liberal leader Justin Trudeau voted against it.   Here is the text of what Trudeau is opposed to:
That, in the opinion of the House: (a) the next federal election should be the last conducted under the current first-past-the-post electoral system which has repeatedly delivered a majority of seats to parties supported by a minority of voters, or under any other winner-take-all electoral system; and (b) a form of mixed-member proportional representation would be the best electoral system for Canada.
In total 276 out of 307 current MPs voted.  All the MPs for the NDP, Greens, Bloc and Forces et Démocratie voted for the motion, all of the Conservative MPs voted against.   The Liberals split with the leader voting against the motion.

What should concern people is that the leader of the Liberals, Justin Trudeau voted against the motion.   It does not give much hope to seeing any change to the electoral system if there are more members of "Team Trudeau" elected.

In total 16 Liberal MPs voted for improving the voting system  14 voted against and five chose not to vote.   Interestingly, three of the five Liberal MPs elected in by-elections sicne 2011 voted against, one did not vote and only one voted for.

Here is how all the Liberal MPs voted: (the year is the first year they were elected)
Liberals Voting for Proportional Representation - 16 MPs 

  • Mauril Bélanger (Ottawa—Vanier) 1995
  • Carolyn Bennett (St. Paul's) 1997
  • Scott Brison (Kings—Hants) 1997 (Lib since 2003)
  • Rodger Cuzner (Cape Breton—Canso) 2000
  • Stéphane Dion (Saint-Laurent—Cartierville) 1996
  • Kirsty Duncan (Etobicoke North) 2008
  • Wayne Easter (Malpeque) 1993
  • Mark Eyking (Sydney—Victoria) 2000
  • Hedy Fry (Vancouver Centre) 1993
  • Ted Hsu (Kingston and the Islands) 2011
  • John McCallum (Markham—Unionville) 2000
  • David McGuinty (Ottawa South) 2004
  • John McKay (Scarborough—Guildwood) 1997
  • Joyce Murray (Vancouver Quadra) 2008
  • Frank Valeriote (Guelph) 2008
  • Adam Vaughan (Trinity—Spadina) 2014

Liberals Voting against  Proportional Representation - 14 MPs 

  • Gerry Byrne (Humber—St. Barbe—Baie Verte) 1996
  • Emmanuel Dubourg (Bourassa) 2013
  • Judy Foote (Random—Burin—St. George's) 2008
  • Chrystia Freeland  (Toronto Centre) 2013
  • Marc Garneau (Westmount—Ville-Marie)2008
  • Ralph Goodale (Wascana) 1993 (was also MP 1974-79)
  • Yvonne Jones (Labrador) 2013
  • Kevin Lamoureux (Winnipeg North) 2010
  • Dominic LeBlanc (Beauséjour) 2000
  • Lawrence MacAulay (Cardigan) 1988
  • Geoff Regan (Halifax West) 2000 (was also MP 1997-00)
  • Francis Scarpaleggia (Lac-Saint-Louis) 2004
  • Judy Sgro (York West) 1999
  • Justin Trudeau (Papineau) 2008

Liberal MPs that did not vote
  • Sean Casey (Charlottetown) 2011
  • Arnold Chan (Scarborough—Agincourt) 2014
  • Irwin Colter (Mount Royal) 1999
  • Scott Simms (Bonavista—Gander—Grand Falls—Windsor) 2004
  • Lise St-Denis (Saint-Maurice—Champlain) 2011 (Lib since 2012)
For the record, here is how the independents voted
Independents Voting For

  • Maria Mourani (Ahuntsic) (former Bloc, now close to the NDP)
  • Manon Perreault (Montcalm) (former NDP)
  • Brent Rathgeber (Edmonton—St. Albert) (former Conservative)

Independents Voting Against

  • Scott Andrews (Avalon) (former Liberal)
  • Massimo Pacetti (Saint-Léonard—Saint-Michel) (former Liberal)
Did not vote
  • André Bellavance (Richmond—Arthabaska) (former Bloc)
  • Sana Hassainia (Verchères—Les Patriotes) (former NDP)

Wednesday, December 10, 2014

2014 AFN Election Results

Perry Bellegarde won on the first ballot, which given that the AFN rules require 60% to win is an achievement.    He is the fourth National Chief to come from Saskatchewan and the sixth Cree.

December 10th 2014 AFN Election Results
Perry Bellegarde 291 62.9%
Ghislain Picard  136 29.4%
Leon Jourdaine    35 7.6%
Spoiled            1
TOTAL            463 

I am surprised the vote turnout was so low.   There are 636 eligible First Nation Chiefs that could vote in the election, though some of them do not take part in the elections.   I was expecting 550 or so votes to be cast but only 463 were cast.  With Perry Bellegarde and Ghislain Picard campaigning seriously I would have expected them to get more Chiefs to the AFN convention or at least managed to get more proxies.  I guess the better question is why Ghislain Picard, the interim National Chief, did so badly.

Here is the total number of votes cast in the last six AFN elections:
2014 463 - 1 ballot
2012 540 - 3 ballots
2009 552 - 8 ballots
2006 496 - 1 ballot - (there was no serious race this year)
2003 566 - 2 ballots
2000 494 - 2 ballots

So what does this low turnout out mean?    I think it speaks to the decreasing importance of the AFN nationally and I think highlights the fundamental divisions among the chiefs of the country.

Perry Bellegarde ran in 2009 where after the first ballot only he and Sean Atleo remained on the ballot but it took seven more ballots before Bellegarde conceded defeat.    The election highlighted the very divided nature of the AFN at the moment.   Shawn Atleo won easily in 2012 but that was mainly because there was no strong serious challenger, still there was a lot of Chiefs in the country with no love for Atleo.    Atleo resigned suddenly a year early which I understand happened because he effectively lost the confidence of too many of the Chiefs.

The AFN is very heavily dominated by the Cree and First Nations with close ties to the Cree, 160 or so in total.   This is a very large portion of the possible AFN voters.   The election of Perry Bellegarde puts the Cree back into the power position within the AFN, but the Cree interests are not the same as the interests of BC First Nations.   The Cree are more or less all Treaty First Nations whereas BC has very few First Nations that have settled a Treaty.  This difference fundamentally changes the way the First Nations and the Crown interact and will always cause an internal friction within the AFN.

Chiefs of the National Indian Brotherhood/Assembly of First Nations

  • 1968–1970 – Walter Dieter - Cree - Saskatchewan
  • 1970–1976 – George Manuel - Secwempec - BC
  • 1976–1980 – Noel Starblanket - Cree - Saskatchewan
  • 1980–1982 – Delbert Riley - Chippewa - Ontario
    • Name changed in 1982 to Assembly of First Nations
  • 1982–1985 – David Ahenakew - Cree  - Saskatchewan
  • 1985–1991 – Georges Erasmus - Dene - NWT
  • 1991–1997 – Ovide Mercredi - Cree - Manitoba
  • 1997–2000 – Phil Fontaine - Nakawē - Manitoba
  • 2000–2003 – Matthew Coon Come - Cree - Quebec
  • 2003–2009 – Phil Fontaine -  Nakawē  - Manitoba
  • 2009–2014 – Shawn Atleo - Nuu-Chah-Nulth - BC
  • 2014 - Ghislain Picard interim National Chief for 5 months - Innu - Quebec
  • 2014-current - Perry Bellegarde - Cree - Saskatchewan

Saturday, October 4, 2014

Current Stage of LNG Projects in BC

The timelines for LNG in BC have been slipping and the government is going out of their way to try and show a huge interest in BC by listing every flight of fancy project out there.   Somehow by giving equal weight to serious projects and total pie in the sky projects the government thinks the public will be more sold on the LNG idea.

Here is my take on the 17 LNG projects in BC

Projects in operation 

Projects Under Construction - this means any approved project with an investment decision made

Probable Projects - These projects are far enough along that they likely will go ahead

  • WesPac - This is a small project next to an existing LNG plant owned by FortisBC.  3 mmtpa
  • Woodfibre LNG - a small project located in Woodfibre near Squamish.   The final investment decision was supposed to be before July 1st this year but we are now just over three months after that date with no decision.  Opposition is rising to this project.  2.1 mmtpa
Not only do I think there are only two probable projects, they also happen to be among the smallest ones proposed,   These two projects total 5.1 mmtpa, less than one feed train for a large LNG project.

Possible projects - the projects seem to be actively being worked on but by no means close to a final investment decision

  • Aurora LNG - It is still some years before a final investment is made but this projects has some Asian partners with markets and with deep pockets.  24 mmpta
  • LNG Canada - The project has four large companies are partners so the capital is not an issue.   Originally 2015 was stated as the date for a final investment decision, but the dates for everything to do with the project beyond the end of the environmental assessment process have been dropped   24 mmpta 
  • Pacific Northwest LNG - A final investment decision is supposed to come before the end of 2014 but with the noises from Petronas I have to wonder if the decision date will be significantly delayer - 19.2 mmpta
  • Prince Rupert LNG - British Gas is the propoent of this project but I suspect that without a partner they will not move forward.   21 mmtpa
These four possible projects are all large ones.  They are big enough that the partners could spend $200,000,000 on their project and easily walk away because this is only 1% of the project cost. These projects will be entirely tied to long term prices for LNG in Asia.   Everything depends on the price differential between BC and Asia being large enough in 2025.   If one of these four is built this is 20 mmtpa of LNG.

Speculative Projects - they have at least something done but not much

  • Kitimat LNG - A project partnership between Chevron and Apache.   The project has gone rather quiet.   I suspect that the partners need more partners with a lot of capital
  • WCC LNG Ltd - this project is very early days with the most optimistic final investment decision date still four years away.  They do have an export permit.  20 mmtpa 

Very Speculative Projects - I do not believe these projects will happen

  • Discovery LNG - The project is proposed by Quicksilver Resources.  As a project it makes no sense to me because it is not near any natural gas.   The cost of going to the island makes this unrealistic.
  • Grassy Point LNG - this is a project by Woodside Energy of Australia.    There are no dates for when they might make an investment decision or when it might be built.  Without some partners with deep pockets I can not see how this goes forward given the large cost overruns and delays of the Pluto LNG project.
  • Kitsault Energy - The owners of Kitsault are looking for another use for their town site and I think are trying to interest one of the LNG projects to locate there.   This in my opinion is not a serious LNG proposal
  • Steelhead LNG Corp - A partnership with one of the local First Nations.   It is very early stage for this project and there is no money to build anything.  No timelines exist for this project.  The capital costs of a pipeline to Vancouver Island makes it an uncompetitive location.
  • Canada Stewart Energy Project - This is one of the newer projects and seems to be primarily connected to Chinese State enterprises.   The project timelines are fantasies.  They are suggesting building the pipeline and facility starting in 2015

Unknown - I can not find out enough about these projects to understand where they are at

  • Douglas Channel Energy - This project is one of the smallest ones and one of the few that I thought was realistically going to be in operation.   It ran into major financial problems October 2013.  AltaGas was supposed to be stepping in but as of August this had not happened.  I do not know the current state of the project
  • Triton LNG - This is a project between AltaGas and Idemitsu to build a floating LNG facility.   It would be a small plant but no site has been chosen
  • Watson Island LNG - this is a small proposed to redevelop Watson Island as a LNG export terminal in Prince Rupert, but beyond that I know nothing about it

Thursday, October 2, 2014

What the Canadian Military's Next Mission Should Be

Canada does not have the armed forces needed to make a difference in the Middle East.   It is too late to intervene in Ukraine.   But there is something our military could do.

Canada could open bases in Lativia, Lithuania and Estonia.    All three of these countries are small democracies neighbouring Russia.   They are very much under a potential threat from Russia.

The Russian government still does not seem to really respect them as being independent.  A good example of this is that Russia forced Estonia to surrender Ivangorod and Petseri even the two countries had an existing treaty recognizing both areas as being part of Estonia.   The Russian government treats the ethnic Russians in the three countries as their people to defend.  

Canada could permanently base 15 CF18s in the Baltics and a small army presence.  Maybe even a frigate.  These are not large enough numbers to stop a Russian invasion like in Crimea, Georgia or Ukraine but they serve different purpose, they are an effective shield for the countries.

Russia gets away with invading and occupying places like Ukranie and Georgia because the west sees the people in those countries as a bunch of poor foreigners.  If there are Canadian troops in the line of fire the Russians are going to think twice before trying to annex them.   One dead Canadian soldier would be a global PR disaster for the Russians.  Everyone in the world thinks Canadians are nice people, killing nice people is a media disaster.

Another important factor why this would work now and not have worked as well 20 years ago is because the reputation of the Canadian military had changed.   Back during the Bosnian civil war the Canadian military was seen as a body that would not intervene to save anyone ever.  After Afghanistan it is clear that the Canadian military knows how to defend civilians and will shoot and kill the bad guys.  

The Russians know Afghanistan and know how tough the territory the Canadian military was in.  They also know that the Canadians were popular with the population and suffered many times fewer causalities than the Soviets had because of that.

The Russians know the Canadian troops would shoot back and are the best snipers in the world.   With Canadians in the Baltics a Russian invasion would have to kill them to advance and this would destroy Putin's standing in all of the world.

The Canadian military can be an effective shield for the Baltics.  The mission is also one Canada could do without any other country.  Canada would not be a minor US partner in their latest adventure but setting our independent course in the defense of democracy and freedom.

If you are young and do not vote, this is for you

This is from Rock the Vote in the US, but the message applies here just as well.

Those that show up get to make the decisions, if you do not vote you give more voting power to those that do vote.   Politicians will do what the people that voted for them want.   It that means it is older home owners do not be surprised if that is what your town is governed in a way to benefit that.

Tuesday, September 30, 2014

Another funding problem arising from the Teachers' strike

The government has already said they want the money back from the school districts for the first three weeks of the school year but I suspect that will rivaled in impact on finances from another factor, the loss of students to independent schools.   It seems a lot of parents chose to take their kids out of the public system and enrolled them in independent schools this year.  My best guess is that this will result in a loss of $30,000,000 to $60,000,000 in funding for public schools this year.

All school districts are funded based on total enrollment in the schools, if that number is down the funding for the school district will be down.   For many years now the enrollment in public schools has been falling while at the same time rising for independent schools.   Total enrollment in all schools should be about 635,000 this year of which I would have expected about 87.7% to be in public schools but I suspect the strike has impacted this.

I suspect that the move to independent schools will have been done by parents who have already been considering and the strike just pushed them over the edge.   So how many will that likely have been?My best guess is that 1-2% of public school students are likely to have shifted to independent schools.   This is about 5,000 to 10,000 and would be the biggest increase in enrollment for independent schools in any one year.  It will be hard to accurately quantify the drop in students because there are many factors and trends in school enrollment that impact the numbers.

 I think the 10,000 number is likely too high and something around 6,000 is the ballpark we are talking about.   The amount of money a district gets for each student is different because is based on many factors so we have use a provincial estimate and $7,000 per student is a good starting point.  Using these numbers gives us a value of $42,000,000 - which is only a ballpark to understand the possible impact.

Adding this on top of the other costs and lost funding for the school districts will cause more pain for the public education system.