A thing called Keeyask

A belated follow-up to the earlier post $1.1 Billion deficit might not be our biggest problem. In that post I discussed some of the enormous risks facing Manitoba Hydro:

• over 11 billion dollars in investments in northern Hydro megaprojects, almost exclusively to sell power to a very weak export market in the US
• a track record of escalating costs
• a development with the Cree Nations partners that, fairly or not, places the entire burden of risk on Hydro while sharing potential profits of the Keeyask project.

I'm going to dive a little deeper into this Keeyask thing here. In addition to the Joint Keeyask Development Agreement that I talked about last time, there are Adverse Effects Agreements that layout the process for compensating ... hey ... wait! Where are you going? It's not that boring. Really. Stick around!

Okay. As I was saying ... there are these agreements. There are four of them -- one for each of Tataskweyak Cree Nation, War Lake First Nation, Fox Lake Cree Nation, and York Factory First Nation. Their purpose is "to provide appropriate replacements, substitutions or opportunities to offset unavoidable Keeyask Adverse Effects on practices, customs and traditions integral to the distinctive cultural identity" of the First Nations.

I don't want to lose your attention again so let's get straight to the money: how much will these replacements, substitutions and opportunities cost Manitoba rate payers? Well, it's complicated, but let's start with $7 million. That's not compensation. That's the cost of constructing and furnishing buildings to administer the compensation.

There are two buildings: the TCN Keeyask Centre, and the Fox Lake Gathering Centre in Gillam. Both serve purposes other than administration, for example storage, displaying artifacts, conducting educational seminars, etc..

The Keeyask Centre looks something like this, and is budgeted for $4 million:

I believe this beauty, designed by Friesen Tokar Architects, might be the Fox Lake Gathering Centre that was agreed to in the plan, except that its cost is $7.5 million, not the $3 million that was budgeted:

Okay, moving on ...

There are numerous "offsetting programs" funded under these Adverse Effects Agreements: language programs, educational programs, grave site restoration programs, youth wilderness traditions programs, etc...  There is an access program for TCN that funds up to 52,000 miles of air transportation for hunting, fishing and trapping each year.

There are budgets for this. On an annual basis for the life of the project, Tataskweyak Cree Nation is funded for $2,124,000 in 2008 dollars, indexed for inflation, with any unspent amounts carried forward.War Lake gets $266,000 each year. Fox Lake gets $710,000 per year, decreasing over time to $100,000 per year. York Factory First Nation gets total funding that adds up to $8,520,000 discounted present value.

In addition to all this there are other aspects to these agreements, including lump sum amounts for Residual Compensation:

Tataskweyak Cree Nation: $3,000,000

War Lake First Nation: $255,000

Fox Lake Cree Nation: $1,581,000

York Factory First Nation: $490,000

There are other clauses that allow for additional losses from traditional activities, other amounts for water levels above or below normal levels ($4,500 per foot per day, adjusted for inflation) and so on.

So what to make of all this? Certainly if you were adding up the costs of lost revenue from hunting and trapping on the 45 square kilometers of flooded land, it would be a miniscule amount by comparison. However intangibles are extremely hard to place a value on -- I know because I've done it in a previous life -- but also there is value in building willing partners with the First Nations.

Whether you feel this is way over the top or fair compensation, it is a cost to Hydro. These tens of millions of dollars will add to the burden, and represent thousands more megawatts of power to be exported to a weak US energy market.