BC Hydro has pushed the price tag of its Northwest Transmission Line past what was regarded as an upper-end cost just over a year ago.
The new figure of $561 million is listed in the provincial crown corporation’s service plan for the years 2012 to 2015 and was posted to its website in February.
It’s more than the range of prices provided in late 2010 – from $364 million to $525 million – and substantially more than the $404 million that was being commonly used in press releases and other government pronouncements for several years.
“As you get further along in detail and in understanding [costs can rise],” said BC Hydro official Greg Reimer of the project to run a 287 kV transmission line 344 km from BC Hydro’s Skeena Substation south of Terrace to Bob Quinn on Hwy 37 North.
He said final details of purchase contracts and regulatory requirements for fish and wildlife compensation contributed to the increased cost figure.
“BC Hydro has refined … project costs as we concluded procurement and contract negotiations and finalized key aspects of the project, including regulatory requirements for fish and wildlife compensation; as a result we are confident of this figure,” said Reimer of the new $561 million total.
Despite the new cost figure, Reimer said the transmission line will benefit the area and province.
“This particular project is a good project for British Columbia,” he said of its ability to provide stable and cost efficient power to mining companies and others in the northwestern portion of the province and to carry power from hydro-electric projects to the BC Hydro system.
BC Hydro has tendered the largest contract tied to the transmission line, that of the design and building of the line itself.
This went to the partnership of Valard Construction and Burns and McDonnell. Valard is the contractor and Burns McDonnell is the designer.
BC Hydro has also signed financial impact benefits agreements with the First Nations in recognition of the line that will go over their traditional territory and the Nisga’a Lisims Government for the portion of the line that will go over land covered by the Nisga’a land claims treaty.
And while BC Hydro now says it is confident of its final cost, it has not tendered all of its contracts for the project.
Still to come, for instance, is the contract to build a substation at Bob Quinn and to make improvements at the Skeena Substation.
Companies either buying power from BC Hydro or selling power will connect at Bob Quinn while the connection at the Skeena Substation ties the transmission line into BC Hydro’s provincial grid.
The more the line costs, the more financial exposure there is for BC Hydro customers and taxpayers.
So far BC Hydro has covered off $310 million of its now-stated $561 million cost.
The largest revenue deal so far is for $180 million from Calgary-based AltaGas which is building the $700 million 195 megawatt Forest Kerr run-of-river hydro-electric project on the Iskut River.
It also has plans to build two smaller run of river projects totalling 111 megawatts on the Iskut and that would take its total spending to $1 billion.
Half of the $180 million AltaGas contribution is for the construction of the line. The other $90 million is being paid out in installments for 20 years once the line is completed in return for using the transmission line.
The second largest contribution to date is $130 million from a $1 billion federal government green infrastructure fund. It’s part of the federal government’s capital spending campaign to pull the country out of its current recession.
The $130 million commitment, made in 2009, will be paid in stages. It is the largest payment from the infrastructure fund and is the largest single federal spending commitment in the history of the northwest.
Still, BC Hydro will need more than $250 million from other sources if it wants to completely close the gap between construction cost and contributions.
“Our expectation is that future industrial and [independent power producers] users … will be required to pay capital contributions to offset a portion of the initial capital costs of the project,” said Reimer.
“This will reduce and possibly eliminate the ultimate impact on ratepayers and at this time we are still working on these details,” he said.
Topping the list of future contributors is Imperial Metals which is working on final permitting and financing for its Red Chris copper property north of Bob Quinn. The project already has provincial and federal environmental approval.
Imperial would need to build its own line from its ore body down to the Bob Quinn substation.
And while it has said it wants to be BC Hydro’s first customer by having its mine ready to open when the Northwest Transmission Line is finished in early 2014, a connection deal has yet to be announced.
Another active mineral property is the Kerr–Sulphurets-Mitchell property west and to the south of Bob Quinn, owned by Seabridge Gold, and being marketed as one of the largest undeveloped gold deposits in Canada and one of the largest copper properties in the world.
Seabridge has been gathering environment and technical information for years and plans to apply for environmental approval this fall.
Its project plan does call for it to use power from the Northwest Transmission Line.
Given that the company is focussed now on environmental approval, a company official said it was premature to talk about any kind of financial agreement with BC Hydro.
A third property, Galore Creek which is to the west of Bob Quinn and which is also a major copper ore body, is also a potential customer but its future is uncertain.
Owned equally by junior NovaGold and major Teck Resources, Galore Creek became the focus for the northwest in the middle part of the last decade when both companies began developing a large mine at the location.
Part of the construction program involved paying for a portion of the transmission line.
But mine development costs soared in late 2007 and the mine project was put on hold.
That also put the brakes on the transmission line until the federal government came up with its $130 million.
NovaGold did release a new and optimistic mine plan in 2011 but late last year announced it was spinning its copper holdings off to a new company, NovaCopper so it could concentrate on an Alaskan gold property. It also announced it was putting its share of Galore Creek up for sale.