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British Columbia B.C. estimates additional cost of $600-million for Site C dam project

The area of the Peace River where the proposed Site C Hydro Development Dam would be built near Fort St. John on January 17, 2013.

Deborah Baic/The Globe and Mail

With a decision expected within a week on whether to build the Site C dam, the B.C. government is now preparing taxpayers to brace for a bigger price tag.

For three years, the B.C. government has insisted the project will cost no more than $7.9-billion, which would make it the country's biggest infrastructure project of 2014. But this week, the government revealed it expects the cost to be at least $600-million more.

One of the biggest changes is that the government has only just included the $200-million provincial sales tax – something it has known it would have to add for more than two years.

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The proposed dam on the Peace River in the northeast of British Columbia has been in the planning stages for decades, and until now Christy Clark's government has insisted that BC Hydro's cost estimate was solid, with a hefty contingency allowance to cover any unforeseen fiscal pressures.

But the cabinet is now effectively treating Hydro's $7.9-billion figure as a low-ball estimate: Premier Christy Clark, during an investor tour in New York City this week, described Site C as an $8.5-billion project.

And Energy Minister Bill Bennett said Thursday the figure may jump even higher.

"She is in the range and what I'm saying to you is that it could end up being more," he said in an interview. He maintains that BC Hydro's budget is solid, but said the cabinet needed to look at a broader range of scenarios. "This was nervous politicians trying to imagine every possible thing that could go wrong over eight years of construction."

Mr. Bennett also said Thursday in an interview that he doesn't know what the "upper range is yet."

"I'm determined to assess the risk of unforeseen costs with this project. We have a big contingency in, is it big enough? I'm not sure that it is … When and if we announce this thing, don't be surprised if the number is higher than $8.5-billion."

He said the figure cited by the Premier includes a larger contingency fund to allow for higher-than-forecast inflation rates and interest rates over the span of the eight-year construction phase. As well, he said, it includes a tax adjustment from the return to the provincial sales tax after B.C.'s failed attempt to introduce the harmonized sales tax.

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The government has known the PST would apply to the project since 2012, but Mr. Bennett said there was no intent to hide the fact when he repeatedly, until this week, defended Hydro's cost estimate.

"I wish we had our you-know-what together a month ago and been able to talk the sales tax at that point. But it really did slip by us. I just never thought about it until recently and neither did anybody else, frankly."

The Site C dam would provide enough energy to power the equivalent of about 450,000 homes a year, but it would also flood 55 square kilometres of river valley. An environmental review panel concluded the dam would have negative impacts to wildlife and to First Nations' rights. However, both the federal and provincial governments granted environmental certificates, arguing that those downsides are justified because Site C would generate clean, renewable energy for the next 100 years.

Critics, including environmentalists, farmers in the Peace River and First Nations communities in the region, continue to call for an independent review to assess the costs and alternative power sources.

Mr. Bennett has rejected those calls for a review and repeated on Thursday that the budget process has been rigorous. "Our own Ministry of Finance looked really hard for holes in the budget, and couldn't find anything."

Adrian Dix, the New Democratic Party critic for B.C. Hydro, said the government has not instilled confidence in the project by adding a bigger cushion for inflation.

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"Just months ago, Bennett said $7.9-billion was the number … They don't have any credibility on this," he said. "The number is still low and will continue to rise. The Premier has just acknowledged a $600-million rounding error."

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