Flogging our water

There is a nasty political battle going in the Squamish-Lillooet region. It pits local citizens, kayakers, environmentalists, and the Squamish-Lillooet Regional District (SLRD) against some extremely powerful forces. The dispute revolves around a plan to build a "run-of-the-river" hydroelectric facility on the Ashlu River, just north of Squamish.

The 49-megawatt Ashlu River power proposal gives some insight into much larger forces at play. The entire North American electricity industry is being restructured to serve the U.S. market, and the people in the Squamish district are caught in the middle. The fight should set off alarm bells for all British Columbians concerned about the blatant giveaway of B.C.'s water resource and the increasing privatization of electricity generation. Why? Because there have been 469 applications for run-of-the-river water licences across B.C.

SFU adjunct professor John Calvert, a BC Citizens for Public Power representative on BC Hydro's 2005 integrated electricity planning committee, told the Georgia Straight that for a corporation, a B.C. water licence costs little more than lunch money. "These sites may generate millions or tens of millions of revenue annually," Calvert said. "Yet the water-licence fee for the largest-capacity run-of-the-river project-one that generates more than 20 megawatts-is capped at $10,000. Smaller facilities of less than 20 megawatts pay $5,000."

These power projects usually involve diverting part of a river to a generating facility, and then returning water to the streambed. Unlike large hydroelectric dams, run-of-the-river projects do not involve flooding areas to create large reservoirs. The province charges licence holders separately for the water actually used, based on the amount of energy generated. "But the charge is not based on the price of that energy," Calvert explained. "For smaller projects, the rate is $1.086 per megawatt-hour. Larger projects pay $5.069 per megawatt-hour-regardless of the price" of energy.

The Gordon Campbell Liberals support the creation of a continental energy market, and they're using BC Hydro (already broken up to facilitate energy exports) as a vehicle to help accomplish this. The Independent Power Producers Association of BC represents private-power developers who have been handed a virtual monopoly on the creation of new electricity in B.C. through the provincial government's 2002 energy plan. IPPBC members stand to make billions over the next couple of decades selling power-not just to BC Hydro and to the province, but to American buyers who may pay more for it. BC Hydro is already paying almost $450 million a year in energy purchases from the private sector.

The Squamish battle represents the last line of defence of a rational approach to managing public water rights and electricity markets. The community believes that the area's pristine beauty has enormous potential as a tourist area. The SLRD board of directors is standing up against the Campbell government and the Ledcor Group, a huge transnational corporation and Canada's second-largest construction company.

Ledcor, which donated $5,000 to the B.C. Liberals in 2005 before last year's election, has seven other water licences or applications in the Ashlu drainage area. And while the dispute to date seems to be at a standoff, overshadowing it is the provincial government's "hammer": the Significant Projects Steamlining Act. The act gives Victoria the power to overrule any municipal authority or regional district on any issue it deems of "significant" importance to the province.

Ledcor's proposal has cleared all provincial regulatory hurdles. However, it requires rezoning from the regional district, and that is where the fight is centred. The district has said no-so far. But it's not just this one project. The opposition points out that it's the impact of so many projects that makes them unacceptable.

Stuart Smith is spokesperson on the issue for the Squamish Whitewater Paddlers kayak club, and has been deeply involved in local land-use planning. "You have to look at the cumulative impact of seven or eight projects just in this area," Smith told the Straight. "You have to add up the number of kilometres of streams that are diverted, the pipes diverting the water, all sorts of access roads and power lines crisscrossing the valley, and the substations that will have to be built."

Smith said that the Ashlu River project would divert 40 to 50 percent of the flow of the river through a seven-kilometre pipe to the generating facility. This would leave an area of the river between the intake and return pipes with a significantly reduced water flow. The implications for recreational use are obvious, especially when one considers that Ledcor can increase the water taken in the future without further reviews.

Smith noted that this has already happened with two existing projects. "The Furry Creek plant went from 6.2 megawatts to 10 with no consultation, and Culliton Creek went from 4.5 megawatts to 12 megawatts with no review," he said.

Yet for B.C. as a whole, the implications of these projects go beyond local environment and tourist-development concerns to the core of the B.C. Liberal government's kowtowing to corporate interests. Calvert, an energy specialist in the previous NDP government's Crown-corporations secretariat, claimed that the Campbell Liberals are handing over one of the province's most valuable resources. And at the same time, he added, they are undermining B.C.'s future energy security by opening the door to private energy exports to the U.S., regardless of the province's future electricity needs.

"It's really quite outrageous, given how valuable this water resource is, that we get almost nothing for it," Calvert said. "Down the road we will pay a huge price, because these power companies will eventually be able to sell to the highest bidder-in other words, into the U.S. market."

The private investors who get in early on these deals can make millions after putting up almost no money of their own. This is because most projects are effectively funded by the public through long-term energy-purchase agreements with BC Hydro.

"I think many of the local investors will flip the ownership of the most lucrative sites, capitalizing on their enormous financial windfall by selling them to energy multinationals," Calvert predicted.

How did this corporate giveaway come to pass? Governments of all stripes have messed with BC Hydro's mandate, but the election of the pro-business Liberal government of Gordon Campbell brought bigger changes. "If one looks at the policy decisions that have been made, it seems clear that the government is moving incrementally to privatize the electricity system," Calvert said.

Campbell first privatized most of the nongenerating services, handing them over to the transnational Accenture. The rest of BC Hydro he "restructured"-away from being a Crown corporation producing cheap, reliable power for B.C. into a purchaser of private energy at market prices. The newly spun-off BC Transmission Corporation is transforming the grid into a "common carrier" to enable private energy interests to ship electricity to the highest (read U.S.) bidder. Higher prices for B.C. energy are seen as vital to providing the incentive for more private power investment in the province.

If you thought we already had a reliable investor-BC Hydro itself-you would be right. But allowing a Crown corporation to become even more successful went against the grain for the Campbell Liberals. So they added a twist to the restructuring to guarantee that any new electricity generation would be done by private companies. The energy plan, in effect, barred BC Hydro-one of the most efficient power companies in the world-from generating any new power.

If Campbell is eager to punish the jewel of B.C.'s Crown corporations, he is even more eager to reward private investors. The money is so easy, it's hard to know where to start. But a useful comparison might be with the oil-and-gas companies. At least they actually have to look for those energy resources. Not so the private power producers. In 1983 (and again in 2000 and 2002), the provincial government funded major studies of small hydro sites across the province, listing the locations, the amount of energy that could likely be produced, and various other critical data. All this is available for free to applicants. All they have to do is show up at a government office, pick a location, and apply for a water licence. These permits are given out on a first-come, first-serve basis.

Calvert pointed out that as the price of energy increases, the percentage return to government will decrease with the run-of-the-river projects. At $55 per megawatt-hour, B.C. citizens get about two percent of the revenue. But if energy prices increase to $100 per megawatt-hour (quite possible in the future), the public does not get a dime more and the percentage return drops to one percent. With oil and gas, on the other hand, there is a royalty rate applied to the selling price, so as prices go up, so does government revenue.

The legislation specifies that the normal term of a new water licence is 40 years. However, Calvert said that the existing licence holder can apply for the extension before the initial term has expired. He said this can transform the 40-year period into "what is, in effect, a permanent entitlement".

The B.C. Liberal government has placed no effective restrictions on foreign ownership of water licences. Any investor can pay $351.51 to register as a B.C. company, regardless of their nationality, and is thus qualified to acquire a water licence. That brings NAFTA into the picture. Any attempt to moderate these projects' windfall profits in the future could cause a U.S. or Mexican power producer to launch a challenge under NAFTA's investment provisions, which prohibit "unequal" treatment of foreign investors.

The easy-money game plays out something like this. Developers, putting up virtually no capital except what's necessary to pay for the licence and a few other expenses, obtain a water licence and keep bidding on energy-purchase agreements from BC Hydro. (About 40 of these have been signed since 2002.) Until they win a bid, they put their project on hold. When they do win a bid, they have in hand a 15- to 40-year contract to sell energy to BC Hydro. Then they go to their banker and present him with this long-term, guaranteed cash flow-a virtual shoo-in for a loan. And because BC Hydro is effectively backing the loan through the purchase agreement, the interest rate is very low. When the loan is paid down, the company owns the asset. The public, which has financed the arrangement, gets no assets, no protection from future price increases, and no guarantee that the energy will not be exported.

Who are these companies? One of them is Eaton Hydro. It boasts that its team has "over 100 years of energy and electricity experience". What is interesting is where that experience came from. Dan Eaton is a financier, but his list of partners reads like a description of BC Hydro's former executive suite. Don Swodoba is a partner. The company says: "Don has held senior positions at BC Hydro, including Senior Vice President Power Supply, VP Production and VP Operations." Jim Gemmell hails from BC Hydro, too. Two other board members were also BC Hydro executives.

Run-of-the-river power generation is just part of the privatization of power production in B.C., but it reveals a feature common to the whole scheme: a rush to develop these for-profit projects with almost no oversight, and little public input. Gwen Barlee of the Western Canada Wilderness Committee expressed alarm at the process. "At the moment, there are hundreds of proposals across B.C. to access our rivers and streams for run-of-the-river hydro projects with no analysis of the cumulative impacts," Barlee told the Straight. "Each one is approached as a 'one off'. This gold-rush mentality ignores important questions relating to overall environmental impact."

There are few legal options available to those who want these projects stopped or even slowed down. The only public-hearing process available is at the local level regarding rezoning, and even there the province holds the trump card if it chooses to play it. The NDP's environment critic, Shane Simpson, admitted that at the moment the best strategy is simply making the public aware of this situation.

"We need to remove the shackles placed on BC Hydro with respect to renewable-energy projects," Simpson told the Straight. "BC Hydro should be allowed to fully compete in the process, which would mean more scrutiny, more public input, and better management of a public resource."

Right now, the critics are focusing on the Ashlu decision, which could influence how the B.C. government proceeds. In January 2005, the SLRD voted 8-1 to deny Ledcor's rezoning application, but the company resubmitted a very similar proposal this past January. The SLRD, under enormous pressure from the province, deferred the decision, unleashing an intense campaign of threats and promises to get the rezoning approved.

Tom Rankin, a Squamish resident and a vocal critic of the project, told the Straight: "There are under-the-radar threats against the SLRD, such as: the province will remove the zoning authority; the province will give the Ashlu area to the Squamish Nation; the Squamish nation saying it will make life difficult for the SLRD-a threat heard several times at public hearings, and again at the January 2006 SLRD meeting."

Squamish Chief Gibby Jacob is a key Ledcor ally. "The order of the day now is consultation and accommodation, and the [revenue-sharing] agreement with the company is very satisfactory to the Squamish Nation," Jacob told the Straight. He said that the band has the option of purchasing the project outright at the end of Ledcor's 40-year contract with BC Hydro.

The province's pressure tactics even included an offer to put on hold the granting of new water licences in return for the region granting the rezoning. The offer was made in a letter to the regional district from Greg Reimer, deputy minister of the Ministry of Energy, Mines and Petroleum Resources. It reads, in part: "the Ministry is prepared to make a recommendation to Government that water reserves be placed on 10 of the 12 streams identified as a high priority for analysis by the SLRD Board....[but] Should the re-zoning not be approved, our recommendation regarding the water reserves will not proceed." Nothing in the letter suggests the other licences won't eventually be approved-only that there will be a "comprehensive review process".

For its part, Ledcor has mounted a public-relations blitz, hiring a local firm, Cascadia Consulting, to lobby for the deal. Stuart Smith claimed that Cascadia is calling local kayakers. And, of course, the province has the ultimate weapon that it can use at any time. The Significant Projects Steamlining Act allows Victoria to nullify any local government decision if it deems a project important enough to the province. The SLRD is slated to decide the issue in June. All eyes will be on the council's decision, which could reveal just how determined Campbell Liberals are to force through this key piece of the privatization of power in B.C.