Galore Creek Suspension May See Plug Pulled on Power Extension Plan

Tuesday, November 27, 2007 04:36 AM

The Minister of Energy, Mines and Petroleum Resources, Richard Neufeld says the 335 km extension of a 287 kilovolt power line that would extend power from Terrace to Bob Quinn Lake costing $400 million dollars may not proceed given the announcement Monday that the Galore Creek mine has been put on hold.

Under the deal Nopva Gold and Teck Cominco, partners in the development of the Galore Creek mine, were to put up $158 million dollars of the $400 million dollar project.

The development of Galore Creek is on hold because of escalating construction costs. The partnersip says the price for the project has risen from $2.5 billion dollars to $5 billion making the project uneconomical.

Mines Minister Neufeld says the increase in costs to develop the mine seemed to be, "One hell of a jump”.

The Minister of Mines says the power extension is under review "If there is no buyer at the end of the line for the electricity we have to review whether we should extend the line. Galore Creek was the corner stone of the deal . They would take all of the power at the end of the line, and throw in $158 million besides, I can’t see spending that kind of money when there is no return at the end of the line. "

When the power extension announcement was first made Premier Gordon Campbell said that the line would be operated by BC Hydro’s Transmission System and would not only serve Galore Creek but also the various native bands in the region along with any potential development.

It is not known just what effect cancellation of the hydro extension would have on the region.

Prince George Mayor Colin Kinsley is optimistic "I wouldn't jump to conclusions that the project is dead because there may be other opportunities in other spots, who knows what people are working on, there's been so much exploration going on up there." He's hopeful there is some other project which is in a more cost effective area. "We've got to hope that after all these years of crying for electrical power up Highway 37 that is doesn't go away."

The decision to suspend Galore Creek will impact companies in Prince George (see previous story), but the Mayor says although this is a set back, we have to stay the course "This may be more than a hiccup, I don't know, but we need to go one like mining is still going to be that next step in our diversification. "

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Posted on Tuesday, November 27, 2007 04:36 AM in News by 250 News

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Comments

Posted by: Chadermando on November 27 2007 6:02 AM

Lots of pie in the sky economic planning� putting all hopes in a few baskets of mega projects IMO.

Problem is the credit markets have melted down. Billion dollar projects are not paid for with cash on hand. A small change in what they assumed the discount rate would be for their project 6-months ago surely has changed considering the credit market problems, and as such surely the risk premium for any credit has changed with that.

It only takes a small change in the risk premium to have a huge effect on the discount rate required to make the returns that would see construction profitable as the ripple effect runs throughout the project going years down the road.

This decision would then have really nothing to do with the actual mine operations, regulations, world markets, or even the work of the contractors, but every thing to do with high finance and the new reality the world is about to realize in the next year when the credit markets will see lots of projects having to reassess the discount rate required to base their go forward decisions on. Blame the banksters IMO and their past irrational uncontrolled exuberance - to coin a phrase from the man responsible for it.

That is why I do not see how a politician can claim this is limited to the single mine, and still expect others are not also having to make the same reassessments based on their ability to borrow at planned rates. It�s a head in the sand wish full thinking IMO.

Its also why economic development should aim to provide enabling infrastructure and grass roots development rather then spending all energies on mega projects. Pipelines could be next, forestry you name it. Credit effects everyone and all sectors in the economy.

Posted by: Chadermando on November 27 2007 6:08 AM

I don't think the hydro extension shuld be canceled at this time. It is enabling infrastructure that should be put in place regardless so that this bumb in the road isn't as large as it could become.

Posted by: YamaDooPolCat on November 27 2007 7:38 AM

It's not that there are no customers for the hydro line extension, it's just that the ones up there are the ones that we all ready spend too much money on. The reserve system.

Posted by: socredible on November 27 2007 8:34 AM

All true, the whole 'boom' cycle that engenders projects of this nature is driven by the ebb and flow of international credit. Over which we have very little, if any, overall control.

Lets go back to basics. 'Finance' of any kind is supposed to be a numerical way of expressing reality. No financial system has any 'stand alone' ability without an industrial system behind it. Now considering those two FACTS, and they are facts, the sole reason we do anything in any 'economic' sense whatsoever should be to provide first needed, and then desired, goods and services.

But if a Province like BC, or a country like Canada, or even a trading bloc like NAFTA, CANNOT buy ALL the goods and services it produces within its own borders in TOTAL, with the Incomes paid out in TOTAL in the course of making those products over the same time period in which they were made, how then CAN they be bought?

The answer, of course, is that they can only be bought through an increase in overall indebtedness. But all debt is issued with the expectation that it will be repaid. The whole systems continuance relies totally on that 'belief', that 'credit', remaining unshaken.

If we have, as we do have at present, a system where, through continual 'improvements of process', the overall costs of production being impressed to the point of retail sale are increasing in ratio to the amount of overall incomes distributed in the same time period, there is bound to be a continual increase in debt which will never be able to be repaid. At some point, it will have to be written off. And that's what's happening right now. With consequences that aren't going to be very pleasant.

The ONLY solution is to periodically 'credit' each citizen with an equal division of the difference between ongoing total production costs and total incomes that are distributed. This 'credit' does NOT come from any redistribution of existing money, i.e. through taxation. But would be new credit created by the Bank of Canada debt-free, (as a 'grant', not a 'loan'). It would allow existing bank loans to be fully amortized, something under the current set-up, they can never be.

Posted by: lmorg on November 27 2007 8:43 AM

"I can�t see spending that kind of money when there is no return at the end of the line. "

Obviously that way of thinking doesn't apply to the olympics.

Posted by: Andyfreeze on November 27 2007 9:23 AM

Build the power line anyway,someone will find a use for it if it is already there.
That's how remote areas are developed.
Infrastructure is what it as all about over the long term and beside,if they don't spend it on something that could benefit people and commerce down the road,they will just waste it on something like a grossly expensive and miss-managed convention center!(or yes,the Olympics!)

Posted by: Bridge on November 27 2007 10:30 AM

I have to agee with you Andyfreeze. BC Hydro makes a good profit as it is and should be able to build the power line. It was one of old Wacky Bennets ideas when all the dams were built to provide power for major industry. It was a good case of "build it and they will come".

It would also be interesting to know how much money is being spend on diesel fuel and maintenance to provide the highways operations and the residents along Highway 37 over tyhe years to the present time. Most of these deisel plants started to operate in the mid 70's by BC Hydro.

Cheers

Posted by: Zar on November 27 2007 12:23 PM

The issue was and remains, a supposedly reputable engineering firm, somehow missed an additional $3 billion dollars in cost for the tailings impoundment plan. Pretty embarrassing to say the least.

It seems premature to foreclose on the power line just now. Let Teck/Novagold see where they can cut costs, there are other ways to lower them. Also, there are other mining prospects in the region, so options for energy shouldn't be foreclosed immediately.

Heard on CBC Whitehorse this morning that Kutcho Creek, east of Dease Lake is experiencing some activity with a new owner. It's too soon to pull the plug on planning.

Posted by: Andyfreeze on November 27 2007 12:26 PM

When I lived in Bella Bella about 33 years ago,we had diesel generators for hydro and that included the native reserve across the channel.
Not all that many years ago,they ran a powerline from Ocean Falls to Bella Bella by island hopping with the towers and laying cable under the water as well,as the hydro was there anyway in the Falls.
It really made a difference in peoples lives, so I think it really should go ahead.
There is only about 1200-1500 people in the entire area of Ocean Falls/Bella Bella so it is not like it makes hydro a whole bunch of money!
Your right Chester...build it and they WILL come!
Trust me,I am sure Hydro can afford it!

Posted by: seamutt on November 27 2007 4:32 PM

Hydro has nothing to do with Ocean Falls generation except for buying power from Central Coast Power Inc at the delivery point on Denny Island. The diesels are still in place for backup.

Posted by: Andyfreeze on November 27 2007 7:57 PM

Thanks seamutt!You are correct.
It is not a B.C. Hydro line as such.
I had forgotten that as it all was done after I left.
Anyway, the principal remains the same,they need to build the damn line and I hope they do!
Cheers!