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Dermod Travis: Close look at Site C shows cosy relationships

The B.C. government has placed two bets on the Site C project: One, that B.C. Hydro can keep construction costs to $8.8 billion, and, two, that it can find customers for the power. Left to cover the ante? Taxpayers.

The B.C. government has placed two bets on the Site C project: One, that B.C. Hydro can keep construction costs to $8.8 billion, and, two, that it can find customers for the power.

Left to cover the ante? Taxpayers.

The government relied on two news releases and a host of backgrounders to win over the public.

The first — “Site C to provide more than 100 years of affordable, reliable clean power” — was released on Dec. 16, 2014, and the second — “Growing demand for electricity” — two days later. They’re chock-full of feel-good terms such as affordable, due diligence, third-party reviews.

Short on names, though.

Scratch beneath the buzzwords and six key individuals are behind all that due diligence.

Only one was identified at the time — Oklahoma resident Mark P. Gilbert — a former director of economic forecasting with American Electric Power.

Gilbert — “an independent energy consultant with over 30 years of experience” — was hired to review the utility’s “load forecast methodology.” His consulting company, Mark P. Gilbert, LLC, was incorporated 36 days before B.C. Hydro’s deadline for his report.

Gilbert is cited in the government’s release stating that: “B.C. Hydro utilizes several methodologies to produce peak forecast methods, all of which are among state-of-the-art methods.”

Not highlighted was his concern over one aspect of B.C. Hydro’s peak-demand forecast process.

“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.”

Something was also left out of scope: Validating B.C. Hydro’s numbers. The report had a qualifier: “Gilbert has not independently verified any of the underlying input numbers themselves.

“Accordingly, [he] makes no representation or warranty as to the accuracy, reliability or completeness of the information.”

Two other major players were Frank Margitan and Gary Webster.

B.C. Hydro asked Margitan — a former vice-president of construction firm Kiewit & Sons — “to engage a panel of industry experts, to undertake an independent review of the direct cost estimate, and provide an opinion regarding its completeness, sufficiency and accuracy.”

Margitan was Kiewit’s point man on the Sea-to-Sky Highway and Port Mann Highway 1 projects.

For the B.C. Hydro review, he retained three individuals who “have 35 to 50 years of experience [each] in management and construction of major projects.”

He didn’t go far to find two: David Imper and Carl Jonasson. Together with Margitan they share a combined 80 years of construction experience at Kiewit.

While Margitan and Imper’s Kiewit connection was noted in the panel’s report, Jonasson’s was not. The third member was Bev Trautman.

The panel concluded that: “The direct cost estimate appears to be sufficiently complete and adequate to cover all anticipated costs associated” and “has sufficient allowances/contingency to cover any reasonable increase in cost resulting from design development or cost-estimate uncertainty.”

B.C. Hydro puts the “contingency and project reserve” at more than $1 billion on the $8.8-billion project. The Sea-to-Sky and Port Mann projects were first estimated at $2.1 billion. Final price tag? $4.1 billion.

B.C. Hydro then turned to KPMG for a third-party review of Margitan’s third-party review.

KPMG’s two-page December letter is signed by Gary Webster. It’s generously sprinkled with high praise.

Webster noted: “The expert panel of construction estimators that independently reviewed the major components of the estimate was again a level of diligence that increases the confidence of the estimate compared with other capital projects.”

Left out of his letter was the fact that for a good chunk of his 30 years in the construction industry, he had more than a nodding relationship with Margitan. Webster was the province’s representative (boss of the bosses) on the Sea-to-Sky project, and Margitan was Kiewit’s point man.

When terms like “independent external peer reviews” are bandied about, the public might be less skeptical if the peers were independent of each other, too.

It smacks of the old-boys’ network in action.

Four of the Site C six are U.S. residents. Why is that relevant? They don’t have to pay the bill.

Dermod Travis is the executive director of IntegrityBC.

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