Tuesday, October 21, 2014

Restraint, BC Government style

Nearly half a million children are missing school days this year because government believes that spending restraint is imperative. Restraint in collecting taxes, at least from ordinary citizens, is not as vital.

The Transportation Investment Corporation (TIC) annual report provides a view of what lies ahead for commuters crossing the Fraser River on the new Port Mann bridge. When Gordon Campbell announced the structure and associated roadworks, it was to cost $1.5 billion and the toll was to be $2.50. The final tab, at $3.319 billion, is 121% higher but, at $3.00, the small vehicle toll is up only 20%.

Before long, the present toll will look like a bargain. TIC's revenue forecast in fiscal year 2014 was 29% higher than actual receipts but the agency counts on raising those amounts by 85% in three years. Since traffic levels are below expectations, most of TIC's additional income will result from higher prices. That suggests we're headed toward a single small vehicle crossing fee of $6.00 and a monthly pass of $300.

Non-commercial tolls might rise even more if government moderates increases for businesses or if higher prices result in still lower traffic levels.

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Liberal estimates and guesstimates

BC's Minister of Energy and Mines says the $7.9 billion budget for Site C is "reliable" and the estimate of "direct construction costs" of $3.8 billion has "an 18% contingency." Bill Bennett's words are imprecise but if $3.8 billion includes the contingency, the allowance for known unknowns and unknown unknowns would be $580 million, 8% of the entire project cost. Compare that to two much smaller Liberal projects that are $2¼ billion, or 98% over budget.

In 2006, Vancouver Sun's Miro Cernetig wrote $3-billion plan to end gridlock:
"VICTORIA -- A $3-billion plan aimed at staving off gridlock in the Lower Mainland will be revealed today, with plans for more and bigger bridges, wider and longer highways and more green-friendly bicycle lanes for the next decade and beyond..."
The plan included $1.5 billion for a new Port Mann Bridge and two additional lanes on Highway 1 as well as $800 million for the South Fraser River Perimeter road. According to the Transportation Investment Corporation Annual Report 2014, the final cost of the first project is $3.319 billion. The truck highway from Roberts Bank to Port Mann cost $1.235 billion. The cost overrun for the two recent capital works is 98% of original estimates.

In his public statement last week, Bennett assured listeners that cost estimates for the Peace River project were accurate because they were reviewed by external engineers, including SNC-Lavalin, a company that Liberals enjoy working with but one that has admitted winning contracts through corruption. Even when the participants are not ethically challenged and/or incompetent, processes to establish budgets for large capital projects are problematic.

Scientists associated with Oxford University conducted a study of 245 dam construction projects across five continents. From the abstract of their paper:¹
"A brisk building boom of hydropower mega-dams is underway from China to Brazil. Whether benefits of new dams will outweigh costs remains unresolved despite contentious debates. ...We find overwhelming evidence that budgets are systematically biased below actual costs of large hydropower dams — excluding inflation, substantial debt servicing, environmental, and social costs. ...The outside view suggests that in most countries large hydropower dams will be too costly in absolute terms and take too long to build to deliver a positive risk-adjusted return unless suitable risk management measures outlined in this paper can be affordably provided. Policymakers, particularly in developing countries, are advised to prefer agile energy alternatives that can be built over shorter time horizons to energy megaprojects.
Commenting about the paper in The Guardian, two of the paper's authors said,
"With an average cost overrun of over 90%, large dams have one of the highest cost overruns among all infrastructure asset classes. This result is before accounting for negative impacts on human society and environment, and without including the effects of inflation and debt servicing.

"What's worse, planners do not seem to learn. Forecasts are likely to be as wrong as they were between 1934-2007. Dam budgets today are as wrong as at any time during the 70 years for which data exist."
Another paper worth noting is Cost Underestimation in Public Works Projects: Error or Lie? It,
"found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying. The policy implications are clear: legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts."


¹Full reference: Ansar, Atif, Bent Flyvbjerg, Alexander Budzier, and Daniel
Lunn, 2014, "Should We Build More Large Dams? The Actual Costs of Hydropower
Megaproject Development," Energy Policy, March, pp. 1-14,
DOI: 10.1016/j.enpol.2013.10.069, URL: http://bit.ly/1ekyL7Q.

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Friday, October 17, 2014

Ready, fire, aim

Andrew MacLeod provided the title above in a Thursday Tweet linking to his column in The Tyee. Slots on Ferries a Complicated Bet, Warned Finance Ministry:
"After Transportation Minister Todd Stone announced BC Ferries' proposal to put slot machines on its vessels last year, the finance ministry began compiling a list of concerns that ranged from the need to rewrite provincial gambling laws to the likely violation of the federal criminal code.

"Records released to The Tyee in response to a freedom of information request show the finance ministry had a dozen "considerations" about the Nov. 2013 proposal, and that Stone had already taken the idea to cabinet without consulting the branch of the finance ministry that regulates gambling in the province..."
This is evidence that thoughtful government planning in British Columbia is rare. So too, it seems, is competence. BC Liberals have wrestled or pretended to wrestle with the issue of money laundering in casinos for some years. When it comes to finding effective solutions, either they lack the needed savvy or the commitment.

Casinos saw $27M in suspicious transactions, CBC News, October 16, 2014
"A CBC News investigation has discovered a rush of suspicious money totalling almost $27 million flowed through two B.C. casinos this spring. Most of the mystery money that came in from mid-March to mid-June arrived in bundles of $20 bills — a common currency used to buy street drugs..."
A new issue? No, in August 2011, this blog first published Gangsters love dealing cash. It is repeated here with minor editing.

News item: Catherine Pope, reporting for Global News, August 25, 2011:
"It's not clear how big of a problem money laundering is in BC casinos but the government admits it's not uncommon for people to walk into casinos with suitcases filled with tens of thousands of dollars in small bills."
You can bet that Global News and their corporate media colleagues are not about to do any detailed investigation to find the extent of the problem. However, they will dutifully trumpet memos and reports issued from Victoria.

Money laundering is the subject of an August 24 government press release. BC Liberal minions pulled out the stops to assure us that, having been told by critics about the possibility of money laundering at gaming facilities, they are thinking of "...appointing a task force to report on the types and magnitude of any criminal activity..."

This is an example of governing by press release. The actual report "Anti-Money Laundering Measures at BC Gaming Facilities" was produced by the Solicitor General's office in February, six months ago. It was not a considered and expert view of illegal cash transactions at casinos, it was an internal political response to heavy criticism in the media following reports the month before of suspicious gamblers entering facilities with massive sums of cash in small denominations.

Douglas Scott, Assistant Deputy Minister for Gaming, Solicitor General, Province of BC had this revelation while posing for the cameras at a Victoria news conference:
"The casinos of today are bringing in significantly more revenue than in the past so as a result that now makes them a target for money launderers where they would not have been previously."
That is a foolish statement because any person with an ear to the ground knows that money laundering has long been a prevalent activity at casinos. It didn't suddenly begin in the last few years. Additionally, gambling revenues are down all over. Recession weary Las Vegas is now the foreclosure capital of the USA and Atlantic City gaming revenue has declined on the monthly year-over-year basis for 35 straight months. BC has not been immune and, according to Sun writer Pete McMartin,
"B.C. Lottery Corporation has paid out more than $400 million in gambling revenues to B.C. casino operators so that they can recoup their capital costs.
Perhaps Scott and his colleagues in Victoria had not been much concerned about money laundering because the BCLC had looked carefully at itself in 2010 and determined,
"BCLC, in terms of policies and procedures, has a robust anti-money laundering regime in place. Further, it was determined that GPEB has the required level of anti-money laundering expertise and is capable of discharging its responsibility to provide oversight as it relates to anti-money laundering and associated criminal activities at gaming facilities."
Katie Derosa at the Times Colonist wrote this,
"Currently, customers are given a cheque for their winnings and cash for the remaining amount of their original buy-in. Casinos will now encourage people to take a cheque that states the amount is for the original buy-in, which creates a paper trail for auditors and prevents people from claiming funds to be gaming wins.

"However, Scott admitted there is nothing to compel gamblers to accept a cheque or use electronic transfer.

"NDP gaming critic Shane Simpson said the review had failed to recommend limits on how much cash a person can take into a casino. For example, a gambler can still take in $400,000 in $20 bills and cash it in for chips, a practice which sounded the alarm for Mounties and sparked the review."
There you have it fellow citizens. We will fight money laundering by encouraging, but not compelling, crooks to accept a cheque from casinos when they are laundering proceeds of drug crime.

And, if that doesn't work, we'll consider STRONGLY encouraging crooks to do the right thing.

Also read Money laundering and casinos, who knew? from April 2014.

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Wednesday, October 15, 2014


This week, radio Station CKNW played commercials aimed at promoting public confidence in the absolute safety of Trans Mountain pipeline operations and marine shipments of petroleum products on the west coast. The spots end with this tagline:
"Trans Mountain, operating safely in your community since 1953."

News report, October 2011
"Three companies pleaded guilty Monday, Oct. 3, 2011 for their part in a 2007 oil spill in Burnaby that damaged nearby homes and leaked into Burrard Inlet. Trans Mountain Pipeline, which owns the pipeline, and two contractors, B. Cusano Contracting and R.F. Binnie and Associates, each pleaded guilty to one count of polluting the environment under the Environmental Management Act. A total of 26 charges were laid after work on a sewer project ruptured the pipeline in July 2007, setting off a 12-metre geyser of crude oil that showered 11 nearby houses and led to the evacuation of 250 residents."
The Canadian Code of Advertising Standards contains this clause:
1. (a) Advertisements must not contain inaccurate, deceptive or otherwise misleading claims, statements, illustrations or representations, either direct or implied, with regard to any identified or identifiable product(s) or service(s).
Anyone who believes Trans Mountain advertising noted above is inaccurate or deceptive is entitled to lodge a complaint with Advertising Standards Canada.

Filing a complaint is a relatively simple process.

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Tuesday, October 14, 2014

Official opposition on resource development

John Horgan in the Legislature, October 8, 2014:
"...Three years ago the Premier told B.C. families that she would make B.C. a leader in private sector job creation. Three years later we're No. 9. When it comes to LNG, three years ago she said we'd create 100,000 jobs, we'd eliminate the debt and we'd eliminate the sales tax. And where are we today? A throne speech two days ago that made no mention of the debt, made no mention of a prosperity fund, made no mention of eliminating the sales tax.

"So when it comes to LNG — to the Premier — how can families take her seriously when she's put British Columbians right where Petronas wants us? What can she say to British Columbians when she can't deliver a tax bill to this House because Petronas hasn't written it yet?

"...The Premier also talked about opening up new mines. When I became Leader of the Official Opposition, I travelled to Tumbler Ridge. I don't know if the Premier has been up there lately, but 750 workers — operating engineers and steelworkers — are no longer working in the mining sector in Tumbler Ridge. In fact, by the end of this year the only people working in the mining sector in Tumbler Ridge will be temporary foreign workers that the Premier supported in coming here.

"It's not just the mining sector. The Premier took the photo opportunity to be at a mill in Nanaimo to talk about jobs in the forest sector just before the last election. That very same mill in Nanaimo where the Premier stood and talked about growing the forest economy is shutting down. It's closing.

"...I asked her a question about mining and forestry, as mining executives and forestry executives and mine workers and forest workers have been doing for the past 18 months. What did they get back? Liquefied natural gas. There's something else in British Columbia that's driving the economy. It's traditional industries that you've ignored at the expense of just one — just one pipedream."
Mike Farnworth in the Legislature, October 9, 2014:
"We have four key points to support the development of LNG in this province, and that's number one: ensuring jobs and training opportunities for British Columbians.

"We want to ensure that development that takes place benefits the people in this province, that they get the skills and training they need to take advantage of those opportunities. That's crucial, and that was missing in the throne speech.

"In the throne speech it talked about the burgeoning middle class in China. You know what, Hon. Speaker? I couldn't care less about the burgeoning middle class in China. What I care about is the declining middle class here in British Columbia. We need to stem that decline, and we do that by creating opportunities for British Columbians with the wealth that exists in this province. That's what we need to be doing.

"The second point that I want to raise in terms of the development of LNG and resources in general in this province is that we want to receive a fair return for those resources that belong to us, the people of British Columbia. A fair return for our resources...

"We need to be realistic with British Columbians that LNG is not the be-all and end-all, but it can be part of a comprehensive strategy, not just in terms of a local industry but in terms of an industry that does export to parts of the world where our product is in demand.

"...The other two points that, we believe, need to be important in terms of our development of LNG ...are that First Nations are clearly respected and are partners and that we recognize their right to share in any benefits that flow from the resource.

"...We want to see First Nations participate. But there are too many examples of First Nations who feel — not just feel, but who have found — that their rights, through court cases, have been ignored. Too many cases where they continue to not be consulted. Too many cases where they're not partners. That must change...

"The final point, I think. This part is also absolutely critical. That is: ...all resource development protects our land, air and water...

"One only has to look to the record of the government over the last several years in terms of deregulation and, where there is regulation, the lack of resources to enforce those regulations.

"We've had the issues around Mount Polley, Lemon Creek and other rivers and streams in this province that have been impacted — in the case of Mount Polley, by a tailings dam collapse; in the case of other areas, significant spills that have caused significant environmental damage — issues relating to the state of our forests and our ability to even understand the nature of the inventory that we have in this province — the inspection of mines and how often they're inspected.

"We have not seen the necessary investments in those areas to do what either the government talks about..."
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Leadership with courage to be honest

Andrew Weaver, MLA for Oak Bay Gordon Head, spoke to the Legislature on October 9, 2014. This is an excerpt, with emphasis added:

"The undeniable truth is that British Columbians have been sold a bill of goods that is not based in reality. In an election where the government was set to fall, a Hail Mary pass was thrown. It was packaged in a message of hope and opportunity, so compelling it couldn’t be ignored: 100,000 jobs; $1 trillion dollars to the GDP; a $100 billion prosperity fund; the elimination of our provincial deficit; thriving hospitals and schools. And the end of our provincial sales tax.

"As we all know, that pass was caught and we now have a government that is trying to deliver on its political promises — whatever the cost and whatever the risk to our province.

"The problem is, the economics simply aren’t there to support an LNG industry on the scale of what was promised...

"We have seen Talisman sell its assets in BC, we’ve witnessed Apache pull out of Kitimat LNG and just this week we saw Petronas threaten to pull out of the Pacific NorthWest LNG project.

"...If we are to speak of leadership, as the Throne Speech does, then we cannot ignore one of the most essential qualities of any leader: Having the courage to be honest. Honest with British Columbians about the risks and consequences of government decisions, and honest about the reckless hype of government promises.

"Unfortunately, as the economics underpinning the government’s LNG promises continue to crumble, that courage—that leadership—is absent. And it is British Columbians who will ultimately pay the price.

"Petronas’ announcement this week is perhaps the best example of this. The announcement makes it clear that the only way we will land this industry is if we agree to their demands of lower taxes and minimal regulations. It is truly shocking to see a state-owned company try to pressure our government to give away our natural gas resources. Even more worrisome is to know that the real negotiations are all occurring behind closed doors. We will only know what has been given away as a cost of landing this political promise when it is too late to change course.

"Yet, the government’s gamble goes further than this. While our government doubles down on LNG, it is leaving other industries by the wayside. Our film industry, our high tech industry, our tourism and our forestry and fishing industries, are all being ignored by a government that is dead-set on its LNG ambitions.

"The fact is, this government has no back-up plan. We have staked our jobs, our health care, our education, our debt repayment and so much more, all on the gamble of an LNG windfall...

"Our challenges are too big, and the consequences too profound, to ignore the evidence. We need a new vision for B.C.—one that begins with true leadership—leadership that is grounded on the courage to be honest with British Columbians, to recognize our overzealous promises and to move forward responsibly..."
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Saturday, October 11, 2014

Words and meanings

BC Liberal Throne Speech:
“The core services this government provides need to be protected, and the inescapable truth is that they can only be protected if we can afford them.”
The core services this government provides [ like subsidizing business, funding the Premier's trips and photo ops, employing hundreds of spinmeisters, paying extravagant executive salaries and pensions and giving away natural resources ] need to be protected, and the inescapable truth is that they can only be protected if we can afford them, [ so that requires higher MSP & ICBC premiums and increased BC Hydro rates, ferry fares, carbon taxes, transit taxes, fuel taxes, municipal taxes and cuts to Pharmacare benefits. ]

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Friday, October 10, 2014

Repeaters, not reporters

Ever notice that corporate media seems to speak with one voice? On balance - or rather, on lack-of-balance - they do. It is the voice of big business.

Vaughn Palmer, with American shale gas boom a major threat to B.C. exports, is the latest columnist lobbing fat pitches into the wheelhouse of natural gas promoters. Given the headline, for a moment I hoped Palmer would note that technology responsible for North America's gas glut is being applied in Eurasia, meaning growing supply and declining prices there too, something that should be a caution to custodians of BC's gas resource who are negotiating financial agreements with foreign companies. Not quite. The Explainer had a different purpose.

Palmer heard the Throne Speech say that the U.S. gas market "has dried up and is never coming back." Testing the claim, he asked the Ministry of Natural Gas Development. They told him it was "entirely realistic." Seeking independent confirmation, Palmer asked the Liberal Minister most responsible for gas, Rich Coleman.

After this in-depth examination, the Sun columnist concludes the gone-and-never-coming-back scenario "would be disastrous for British Columbia" because,
"the province realizes hundreds of millions of dollars in royalties in a good year, plus it can count on hundreds of millions more in the sale of leases for future exploration and development."
Mind you, had Palmer relied on facts instead of the Liberal spin machine, he might have avoided egregious inaccuracy. The natural gas industry is not a contributor of many hundreds of millions of dollars a year for royalties and hundreds of millions more from rights purchases. Palmer is plain wrong and he should know better since he has access to audited accounts that reveal a different picture. He would be better informed on natural resources if he read the archives of this blog.

Net of the increase in unrecorded credits owed producers, gas royalties in fiscal year 2013 were $9 million. The net was $130 million in fiscal year 2014. Additionally, the government has been spending more than $400 million a year promoting and not-regulating the gas industry.

Ministry of Energy, Mines and Natural Gas reports reveal that the sale of leases for future exploration and development is not any longer a major contributor to provincial accounts. In the first seven months of the current fiscal year, crown petroleum and natural gas rights tenders brought in a monthly average of less than $12 million, down a third from the previous fiscal year.

A Hidden Cost
Additionally, Palmer repeats gas dependent employment claims that are fictions of the BC Liberals, despite reports from BC Stats and Statistics Canada that reveal much lower numbers. Even if the jobs number quoted in the Sun were true, each position would come at a cost to government of more than $60,000 a year.

Palmer and others in media, including Globe and Mail columnist Gary Mason, aim to lower expectations created by pre-election lies of the BC Liberals. However, the pro-media scribes go further. They're now selling the idea that, even if there are no riches to be gained from LNG, the proposed projects must proceed or a huge part of the BC economy will die. The real certainty is that any ride conducted by untrustworthy and incompetent guides is headed for catastrophe.

Uncertain gas markets mean price instability. As a result, potential exporters aim to protect their own fortunes from risk. That means guaranteeing little or nothing for the actual commodity, demanding subsidies for capital costs, provision of publicly funded transport infrastructure, relief from import barriers affecting machinery and personnel and exemption from property taxes, carbon levies and local imposts. The objectives are to minimize up-front and fixed costs and to ensure amounts due government are paid through profit sharing, which multinational gas companies will commit to if they can make the calculations.

The Guardian described tricks of high finance that were refined by but not confined to the movie business,
"through the miracle of Hollywood accounting, a studio may fairly claim that a huge hit hasn't actually turned a profit, lest they be forced to pay the stars, director or writers the percentage of the earnings to which they may be contractually entitled."
Only people outside the entertainment business are surprised to learn examples of Hollywood accounting.
  • Despite making over $938 million at the global box office, 'Harry Potter And The Order Of The Phoenix' was adjudged to have actually lost $167 million.
  • The third Star Wars movie, Return Of The Jedi, despite earning over half a billion dollars in revenue, is not in profit.
Last year, investigative news agency ProPublica published a report titled, How Oil and Gas Drillers Avoid Paying Royalties
Chesapeake Energy, the company that drilled [dairy farmer Don Feusner's] wells, was withholding almost 90 percent of Feusner’s share of the income to cover unspecified “gathering” expenses and it wasn’t explaining why.

“They said you’re going to be a millionaire in a couple of years, but none of that has happened,” Feusner said. “I guess we’re expected to just take whatever they want to give us.”
At hearings in Pennsylvania, landowners complained they’re being cheated out of royalty payments. A legislator asked where the specific point of sale is for natural gas. The industry's answer,
"It's complicated. It could be the wellhead. It could be downstream. It’s an intricate and complicated structure of contractual arrangements.”
Palmer repeats another Liberal falsehood about natural gas, quoting Rich Coleman,
"You have a resource that is so large that you could supply the North American market for 200-plus years, all your customers, and still have gas left."
Three months ago, when the government was still promising 100,000 LNG jobs, the Premier's Office published a press release that included,
"British Columbia’s natural gas potential exceeds 2,900 trillion cubic feet. This potential supply could support domestic and international project operations for over 150 years."
However, the BC Oil and Gas Commission, in the most recent report on Hydrocarbon and By-Product Reserves in British Columbia, sets remaining reserves at 40.2 TCF. A knowledgeable person provided this information to me,
"Potential reserves are no where near what is ever recovered. Not even close.

"The figure quoted in the press release is 72x the amount of proven reserves.

"It's about P1, P2 and P3 reserves. P1 is proven. P2 is proven plus probable and the most likely amount to be actually recovered. P3 is all the stuff that's under the ground and is a figure everyone in industry knows will never come close to being recovered (you cannot recover 100% of the stuff under the ground, not ever."
I believe it inexcusable that political columnists act as uncritical promoters of the fossil fuel industry and apologists for a government that is devious and untrustworthy. Doing so is an abdication of professional obligations.

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