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B.C. Hydro is a major institutional force in extending and intensifying staples dependence Froschauer, Karl 1986

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B.C.HYDRO IS A MAJOR INSTITUTIONAL FORCE IN EXTENDING AND INTENSIFYING STAPLES DEPENDENCE By KARL FROSCHAUER B.A., U n i v e r s i t y of B r i t i s h Columbia, 1984 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF MASTER OF ARTS i n THE FACULTY OF GRADUATE STUDIES (Depar tment , Of A n t h r o p o l o g y a n d - S o c i o l o g y ) We accept t h i s t h e s i s as conforming the r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA September 1986 © K a r l Johann Froschauer, 1986 I n p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f t h e r e q u i r e m e n t s f o r an a d v a n c e d d e g r e e a t t h e U n i v e r s i t y o f B r i t i s h C o l u m b i a , I a g r e e t h a t t h e L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and s t u d y . I f u r t h e r a g r e e t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s may be g r a n t e d by t h e h e a d o f my d e p a r t m e n t o r by h i s o r h e r r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l n o t be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . D e p a r t m e n t o f The U n i v e r s i t y o f B r i t i s h C o l u m b i a 1956 Main Mall V a n c o u v e r , Canada V6T 1Y3 D a t e c f i ^ / / / /PSS ABSTRACT D i v e r s i f i e d i n d u s t r i a l d e v e l o p m e n t was e x p e c t e d i n B r i t i s h C o l u m b i a w i t h t h e e x p a n s i o n o f t h e p u b l i c p ower s u p p l y . B u t B . C . H y d r o , u n d e r t h e d i r e c t i o n o f t h e p r o v i n c i a l g o v e r n m e n t ' s i n d u s t r i a l p o l i c y , p r o d u c e d a n " u n p l a n n e d s u r p l u s " o f power a n d i n t e n s i f i e d B r i t i s h C o l u m b i a ' s d e p e n d e n c e on n a t u r a l r e s o u r c e p r o c e s s i n g ( s t a p l e s p r o d u c t i o n ) . F o u r a s p e c t s o f t h i s p r o b l e m a r e i n v e s t i g a t e d : t h e p r o v i n c i a l s t a t e ' s i n t e r v e n t i o n i n t h e d e v e l o p m e n t o f h y d r o p o w e r , t h e u s e o f t h e h y d r o e l e c t r i c i n f r a s t r u c t u r e t o e x t e n d s t a p l e s p r o d u c t i o n , t h e p l a n n i n g f o r i n d u s t r i a l p ower n e e d s , a n d t h e s u r p l u s - i n d u c e d i n t e n s i f i c a t i o n o f s t a p l e s d e p e n d e n c e . G o v e r n m e n t , B . C . H y d r o , a n d r e l a t e d d o c u m e n t s r e v e a l a n i n c r e a s e d i n t e r v e n t i o n i n t h e r e l a t i o n s h i p b e t w e e n t h e s u p p l y o f p u b l i c h y d r o power a n d s t a p l e s p r o d u c t i o n ( f r o m 1945 t o 1 9 8 6 ) . The f i r s t i n t e r v e n t i o n e m p h a s i z e d b u i l d i n g r u r a l p ower p l a n t s a n d i n d u s t r i a l e l e c t r i f i c a t i o n , t h e s e c o n d , mega-dams a n d " i n d u s t r i a l i z a t i o n - b y - i n v i t a t i o n , " a n d t h e t h i r d , p l a n n i n g t o b u i l d f o r e x p o r t a n d s u r p l u s d i s c o u n t s t o i n d u s t r y . E x p a n d i n g t h e h y d r o e l e c t r i c i n f r a s t r u c t u r e became i t s e l f a n i n d u s t r y w h i c h b r o u g h t t e m p o r a r y r e g i o n a l , e c o n o m i c , a n d p o l i t i c a l b e n e f i t s . D u r i n g t h i s p e r i o d , t h e i n f r a s t r u c t u r e p r o v i d e d a c c e s s t o n a t u r a l r e s o u r c e s a n d e x p a n d e d s t a p l e s p r o d u c t i o n . B.C.Hydro a n d t h e p r o v i n c i a l g o v e r n m e n t w e r e u n a b l e t o p l a n i n d u s t r i a l l o a d s c o m p r e h e n s i v e l y , b e c a u s e o f t h e u n r e l i a b l e c o m m i t m e n t s by s t a p l e s p r o d u c e r s . N e v e r t h e l e s s , t h e " s u r p l u s a n d d e b t - l o a d s h o c k " o f t h e 1 9 8 0 s r e s u l t e d i n d i s c o u n t e d e l e c t r i c i t y t o s t a p l e s p r o d u c e r s a n d a n i n c r e a s e d d e p e n d e n c e on t h e u n s t a b l e U.S. e l e c t r i c i t y m a r k e t . The e x p l a n a t o r y f r a m e w o r k o f t h i s t h e s i s d r a w s on s t a p l e s t h e o r y ( I n n i s , W a t k i n s , M a r c h a k ) a n d O f f e ' s t h e o r y o f s t a t e i n t e r v e n t i o n . T h i s t h e s i s i s a c o n t r i b u t i o n t o u n d e r s t a n d i n g t h e r e p e t i t i o n o f t h e h i s t o r i c a l s t a p l e s - d e p e n d e n t p a t t e r n s w h i c h r e s u r f a c e i n t h e i n t e r v e n t i o n s by t h e p r o v i n c i a l s t a t e , a s w e l l a s a d e - m y s t i f i c a t i o n o f t h e dreams t h a t t h e d e v e l o p m e n t o f p u b l i c h y d r o power d i v e r s i f i e s t h e i n d u s t r i a l b a s e . i v TABLE OF CONTENTS CHAPTER PAGE I . INTRODUCTION 1 History of the Problem 2 Argument: B r i e f Statement 8 Theore t i ca l Analys i s 9 Methods 10 The Boundaries of t h i s Study 12 Def in i t i ons and Concepts 14 Other Studies of Hydro 16 Chapter Content Summary 20 I I . THEORY The Central Question 22 Staples Theory (Innis , Watkins, Marchak) 22 S truc tura l Condit ions 25 Theory of the C a p i t a l i s t State (Offe) State Interventionism 27 A l l o c a t i o n and Production 28 A l l oca t ive Mode of Intervention 29 Productive Mode of I n t e r v e n t i o n . . . . . 30 Concept of the C a p i t a l i s t State 32 Po l i cy Formation 33 Perception of the Problem by the State 36 Contradic t ion (Planning) 39 A p p l i c a t i o n 40 I I I . STATE INTERVENTION Introduct ion 44 A l l o c a t i o n of Resources 44 Production of E l e c t r i c i t y 51 ( F i r s t Intervent ion, 1945) Rural E l e c t r i f i c a t i o n Po l i cy The B . C . Power Commission 53 Production of E l e c t r i c i t y 56 (Second Intervent ion, 1962) Recession and Infras tructure 56 Dual River Po l i cy 58 B . C . Hydro 59 B.C.Hydro's I n s t i t u t i o n a l Force 62 Conclusion 69 V TABLE OF CONTENTS ( cont inued) I V . B .C .HYDRO'S LINK TO THE EXTENSION OF STAPLES DEPENDENCE I n f r a s t r u c t u r e 71 M a n u f a c t u r i n g 75 Wood, P u l p , C h e m i c a l , P r i m . M e t a l s 79 D i v e r s i f i c a t i o n 92 E x t e n s i o n o f the S t a p l e s Economy 93 C o n c l u s i o n 97 V . PLANNING THE "UNPLANNED SURPLUS" 100 Government and B . C . H y d r o S o l u t i o n s 102 F o r e c a s t i n g 102 S i z e o f the H y d r o e l e c t r i c I n f r a s t r u c t u r e . . . 105 T i m i n g and the S i z e o f the P r o j e c t s 106 F i n a n c i n g P r o j e c t s 107 P r i c e o f E l e c t r i c i t y 108 S o l u t i o n s 110 C l e a r G o a l Requirement I l l S t a b i l i t y Requirement . 113 The P l a n n i n g Denied i n S t a p l e s - D e p e n d e n t E c o n . . 146 I n d u s t r i a l Customers i n B . C . . . . 119 S i z e o f the S u r p l u s 124 C o n c l u s i o n . 126 V I . INTENSIFICATION (CAUSED BY THE "UNPLANNED SURPLUS") 127 T h i r d I n t e r v e n t i o n (1980s) 130 Government and B . C . H y d r o 134 ( R e s t r u c t u r i n g and P o l i c i e s ) Backward P l a n n i n g 136 D i s c o u n t P o w e r . ( M i n i n g , C h e m i c . , Pu lp) 137 S tand-by S t a p l e 141 Forward P l a n n i n g (Expor t Power) 142 B u i l d i n g Dams f o r E x p o r t . . . 1 4 5 F o r e i g n Environment A n a l y s i s 149 F u t u r e s 154 C o n c l u s i o n 164 VII.CONCLUSION S u m m a r y . ( A d d i t i o n , E x t e n s i o n , S u r p l u s , I n t e n s . ) 166 New M a t e r i a l 172 U t i l i t y o f R e s u l t s 172 L i m i t a t i o n 173 V I I . BIBLIOGRAPHY 176 APPENDIX 187 v i LIST OF TABLES I Comparison of Average Annual Unemployment 5 7 II Actual E l e c t r i c a l Sales for 1 9 8 4 / 8 5 by Standard Industrial C l a s s i f i c a t i o n 7 7 III Wood and E l e c t r i c i t y Requirement 8 4 IV The Increase i n 'Purchased' versus 9 6 'Self-generated' E l e c t r i c i t y V The Consumption of Purchased Fuel by the Mining, Logging, and Manufacturing Industries i n B.C. i n 1 9 7 5 - 1 9 8 2 1 1 3 VI B.C.Hydro Sales, C l a s s i f i e d i n Industrial Analysis, 1 9 6 5 - 1 9 7 6 1 9 0 VII Composition of Transmission Rate Sales, H i s t o r i c & Probable Projections, "Pulp & Paper," "Wood Manufacturing," "Chemicals," 1 9 7 4 / 7 5 - 1 9 8 4 / 8 5 , 1 9 8 5 / 8 6 - 1 9 9 5 / 9 6 1 9 1 VIII Composition of Transmission Rate Sales, H i s t o r i c & Probable Projections, "Metal Mining," Mineral Fuels," "Other Ind.," 1 9 7 4 / 7 5 - 1 9 8 4 / 8 5 , 1 9 8 5 / 8 6 - 1 9 9 5 / 9 6 1 9 2 IX Composition of Transmission Rate Sales, H i s t o r i c & Probable Projections, "Commercial," "Total Sales" 1 9 3 X Prov i n c i a l Summary, Total E l e c t r i c i t y Generated within B.C, 1 9 4 5 - 1 9 6 5 1 9 4 XI Pr o v i n c i a l Summary, Total E l e c t r i c i t y Generated within B.C., 1 9 6 6 - 1 9 8 4 1 9 5 XII Manufacturing Industry i n B.C., Largest Purchasers of E l e c t r i c i t y , 1 9 6 2 - 1 9 8 3 1 9 6 v i i LIST OF FIGURES PAGE 1. D e v e l o p m e n t a l S c e n a r i o , Dream, E x t e n s i o n , I n t e n s i f i c a t i o n 187 2. G l o s s a r y o f E l e c t r i c a l Terms 188 3. I m p o r t e d G e n e r a t o r s , T u r b i n e s , and E l e c t r i c a l G e a r 189 1 Chapter I INTRODUCTION B r i t i s h Columbia has ample energy r e s o u r c e s , such as hydro-power s i t e s i n mountainous v a l l e y s , and n a t u r a l r e s o u r c e s , such as timber and m i n e r a l s . One would t h e r e f o r e expect t h a t over 100 years of i t s s e t t l e m e n t , i t s people would have developed a s t r o n g d i v e r s i f i e d economy. However, the economy of B r i t i s h Columbia has remained a staples-dependent (semi-processed resource dependent) e x p o r t i n g economy. Most n a t u r a l resources are a l l o c a t e d by the p r o v i n c i a l s t a t e to p r i v a t e i n d u s t r y f o r primary p r o c e s s i n g , and the l a r g e hydro power s i t e s a t v a r i o u s r i v e r s are developed by the s m e l t i n g i n d u s t r i e s and by B.C.Hydro. T h i s t h e s i s focuses on B.C.Hydro, a c e n t r a l agency i n B r i t i s h Columbia s i n c e the 1960s when i t became a Crown c o r p o r a t i o n . I t s h i s t o r y and p r a c t i c e s are p i v o t a l t o the development of the p r o v i n c i a l economy. The B r i t i s h Columbia Hydro and Power A u t h o r i t y ("B.C.Hydro") i s the f i f t h l a r g e s t c o r p o r a t i o n i n Canada i n terms of net a s s e t s . I t was c r e a t e d as a Crown c o r p o r a t i o n by an Act of the P r o v i n c i a l L e g i s l a t u r e on March 30, 1962, as the s u c c e s s o r , by amalgamation, of the B r i t i s h Columbia E l e c t r i c Company L i m i t e d and the B r i t i s h Columbia Power Commission which had been the two major s u p p l i e r s of e l e c t r i c i t y i n the P r o v i n c e of B r i t i s h Columbia p r i o r t o t h a t t i m e . 1 1 The B.C. U t i l i t i e s Commission, In the Matter of Applications by British Columbia Hydro and Power Authority: Decision, May 9, 1986, p. 1. I n t r o d u c t i o n 2 T h i s t h e s i s i s concerned w i t h how the development of t h i s c o r p o r a t i o n has c o n t r i b u t e d t o the s t r e n g t h e n i n g of a s t a p l e s economy and the l a c k of economic d i v e r s i f i c a t i o n . T h i s chapter p r o v i d e s the h i s t o r i c a l background and the a n a l y t i c a l approach taken to the problem. History of the Problem During the 1940s and 50s, the B.C. Power Commission had a p p r o p r i a t e d the a s s e t s of s m a l l e r p r i v a t e u t i l i t i e s t o expand i t s s e r v i c e areas i n r u r a l B r i t i s h Columbia and t o promote the use of e l e c t r i c i t y by l a r g e n a t u r a l resource p r o c e s s i n g companies. During the 1960s and 1970s, the course of h y d r o e l e c t r i c development was mapped out by B.C.Hydro and the p r o v i n c i a l government f o l l o w i n g the dual r i v e r p o l i c y , 2 which proposed the b u i l d i n g of a s e r i e s of dams on the Columbia and the Peace R i v e r s . As a r e s u l t of the completion of the e l e c t r i c a l i n f r a s t r u c t u r e , B r i t i s h Columbians expected the development of secondary i n d u s t r y t o d i v e r s i f y t h e i r s t a p l e s economy. Ray W i l l i s t o n , the Education M i n i s t e r of the S o c i a l C r e d i t government, p r e d i c t e d " . . . t h a t a dramatic e x p l o s i o n i n power development d u r i n g the 1960s would draw the a t t e n t i o n of the 2 Gordon M. Shrum, Report on the Columbia and Peace Power Projects, B r i t i s h Columbia Energy Board ( V i c t o r i a : J u l y 31, 1961), p. 28. Introduct ion 3 ent i re i n d u s t r i a l i z e d world to B . C . " 3 Premier W.A.C. Bennett, himself , was s i m i l a r l y convinced of the dual r i v e r p o l i c y ' s b e n e f i c i a l economic inf luence . He predic ted: "If the two are developed together, i t w i l l catch the imagination of enterpr i sers everywhere. I t would open an era of expansion unr iva led i n North America's dynamic his tory" (Sherman 1966:245). In a d d i t i o n , the p r o v i n c i a l government p u b l i c a t i o n , Facts and Statistics (1956), predic ted the development of secondary industry as a consequence of hydro development by concluding that " B . C . has many r i v e r s which o f fer opportunity for power development and consequent secondary industry ." Expectations of prosper i ty and substant ia l economic d i v e r s i f i c a t i o n had also captured the minds of many engineers and publ i c o f f i c i a l s at the c lose of the nineteenth century i n Ontar io . The profess ional engineer T . C . Keefer, i n h i s address to the Royal Society of Canada on May 23, 1899, e n t i t l e d "Canadian Water Power and Its E l e c t r i c a l Product i n Re la t ion to the Undeveloped Resources of the Dominion," i l l u s t r a t e d the creat ion of value through e l e c t r i c i t y - a i d e d manufacturing of resources and h is v i s i o n of independence of Canadian industry i n the fo l lowing way: 'Heretofore we have cut our spruce into deals and exported i t to Europe, and more recent ly into pulp wood and exported that to the United States; but manufactured by our water power into paper, the raw materia l would y i e l d t h i s country ten times the 3 Paddy Sherman, Bennett (Toronto: McClel land and Stewart, 1966), p . 226. I n t r o d u c t i o n 4 v a l u e i t i s now e x p o r t e d f o r . ' I n t h e f u t u r e Canada's own " w h i t e c o a l " o f f a l l i n g w a t e r w o u l d d e l i v e r t h e d o m i n i o n f r o m i t s "hewer o f wood" s e r v i t u d e t o A m e r i c a n i n d u s t r y and i t s bondage t o A m e r i c a n c o a l ; i t w o u l d s p e e d s m o k e l e s s , s i l e n t t r a i n s o v e r v a s t d i s t a n c e s ; mine and e l e c t r o l y t i c a l l y r e f i n e t h e complex o r e s o f t h e S h i e l d . . . . The a p p l i c a t i o n o f modern e l e c t r i c a l s c i e n c e t o Canada's u n i q u e c o m b i n a t i o n o f n a t u r a l r e s o u r c e s p r a c t i c a l l y g u a r a n t e e d t h e c o m i n g , K e e f e r p r o c l a i m e d , o f a s e c o n d i n d u s t r i a l r e v o l u t i o n . 4 Reefer's v i s i o n t y p i c a l l y d e s c r i b e d the dreams of many B r i t i s h Columbians d u r i n g the 1960s and 1970s. In h i s view, the a d d i t i o n of a steady supply of cheap e l e c t r i c i t y from B r i t i s h Columbia's f l o o d e d v a l l e y s would p r o v i d e them with an i n d u s t r i a l energy advantage to develop d i v e r s i f i e d i n d u s t r i e s which produce value-added goods f o r export and consumer goods f o r domestic consumption. Furthermore, such h y d r o e l e c t r i c developments were expected t o b r i n g r e g i o n a l independence from c e n t r a l Canada. To o v e r s e e t h e o r d e r l y d e v e l o p m e n t o f t h e h y d r o e l e c t r i c a l i n f r a s t r u c t u r e i n t h e p r o v i n c e , t h e B r i t i s h C o l u m b i a E n e r g y B o a r d was c r e a t e d by t h e S o c i a l C r e d i t g o v e r n m e n t . I t s f i r s t c h a i r m a n , D r . G o r d o n Shrum, was a s k e d t o p u r s u e an i n d e p e n d e n t 4 T.C. K e e f e r , " C a n a d i a n Water Power and I t s E l e c t r i c a l P r o d u c t i n R e l a t i o n t o t h e U n d e v e l o p e d R e s o u r c e s o f t h e D o m i n i o n , " May 2 3 , 1 8 9 9 , R o y a l S o c i e t y o f Canada, Proceedings and Transactions, 2nd S e r i e s , V o l . V., 1 8 9 9 , pp. 3 - 4 0 . T h i s s p e e c h was r e p r i n t e d i n c o n s e c u t i v e i s s u e s o f t h e Canadian Engineer, A u g u s t 1 8 9 9 , pp. 9 1 - 4 , and September, pp. 1 2 4 - 7 . F o r a b r i e f s u r v e y o f h i s i d e a s and c a r e e r , s e e N e l l e s ' i n t r o d u c t i o n t o T.C. K e e f e r , The Philosophy of Railroads ( T o r o n t o , 1 9 7 2 ) . As q u o t e d by H.V. N e l l e s , The Politics of Development: Forests, Mines & Hydro-Electric Power in Ontario, 1849-1941 ( T o r o n t o : M a c m i l l a n Company o f Canada L t d . , 1 9 7 4 ) , p . 2 1 6 . I n t r o d u c t i o n 5 a d v i s o r y r o l e "on a l l m a t t e r s o f p o l i c y p e r t a i n i n g t o power d e v e l o p m e n t , g e n e r a t i o n o f t r a n s m i s s i o n , and d i s t r i b u t i o n , a nd o t h e r u s e s o f w a t e r r e s o u r c e s " ( S w a i n s o n 1979:196-197). Shrum f o r e s a w s e v e r a l t h i n g s : t h e r e s o u r c e - a c c e s s b e n e f i t s , t h e eco n o m i c b e n e f i t s , and employment b e n e f i t s a s a r e s u l t o f h y d r o e l e c t r i c d e v e l o p m e n t -- b u t he saw a l s o t h e p o s s i b i l i t y o f a t e m p o r a r y s u r p l u s w h i c h , i n t h e i n t e r i m , c o u l d n e i t h e r be a b s o r b e d by t h e r e s o u r c e i n d u s t r y n o r by t h e p o p u l a t i o n o f B r i t i s h C o l u m b i a . T h i s f o r e s i g h t i s e v i d e n t i n h i s Report on the Columbia and Peace Power Projects w h i c h d e s c r i b e d t h e c o s t s , b e n e f i t s , a nd power e x p o r t p o t e n t i a l o f t h e d u a l r i v e r p o l i c y . H i s r e p o r t was s u b m i t t e d t o t h e P r o v i n c i a l S e c r e t a r y on J u l y 31, 1961 and i n c l u d e d t h e f o l l o w i n g c o n s i d e r a t i o n s : The Peace R i v e r p r o j e c t i s i n a r e g i o n o f low ec o n o m i c d e v e l o p m e n t . . . . The r e s e r v o i r a r e a w i l l a c t as an i n l a n d waterway w h i c h w i l l open up t h e T r e n c h a r e a f o r t i m b e r r e m o v a l , m i n e r a l e x p l o r a t i o n , a nd p e r h a p s c r e a t e a r e c r e a t i o n a l o p p o r t u n i t y i n t i m e . (Shrum 1961:28) Under f a v o r a b l e c i r c u m s t a n c e s , e c o n o m i c and employment c o n d i t i o n s i n B r i t i s h C o l u m b i a w o u l d be g r e a t l y i m p r o v e d by t h e d e v e l o p m e n t o f b o t h t h e Pea c e and C o l u m b i a p r o j e c t s more o r l e s s s i m u l t a n e o u s l y , b u t s i n c e t h e minimum e f f i c i e n t d e v e l o p m e n t o f e i t h e r t h e Peace o r C o l u m b i a w i l l p r o v i d e more power t h a n B r i t i s h C o l u m b i a c a n a b s o r b i n t h e e a r l y y e a r s o f t h e p r o j e c t , i t i s n o t ec o n o m i c t o d e v e l o p t h e two s i m u l t a n e o u s l y w i t h o u t f i n d i n g a v e r y l a r g e m a r k e t a t r e n u m e r a t i v e p r i c e s o u t s i d e t h e P r o v i n c e f o r t h i s a d d i t i o n a l power. The o n l y p o t e n t i a l m a r k e t s f o r B r i t i s h C o l u m b i a s u r p l u s power a r e i n t h e U n i t e d S t a t e s P a c i f i c N o r t h w e s t , C a l i f o r n i a , a nd p o s s i b l y A l b e r t a . (Shrum 1961:6) S i n c e 1961, n o t o n l y t h e Pe a c e R i v e r dams ( t h e W.A.C. B e n n e t t dam and t h e Pe a c e Canyon dam), b u t a l s o t h e C o l u m b i a R i v e r T r e a t y dams (Duncan, K e e n l e y s i d e , and M i c a ) have been I n t r o d u c t i o n 6 b u i l t . Other e l e c t r i c i t y - g e n e r a t i n g p r o j e c t s were added: the Burrard Thermal P l a n t , the Seven M i l e Dam, the Kootenay D i v e r s i o n P r o j e c t , and the Revelstoke Dam. Even before the a d d i t i o n of the Revelstoke dam i n August 1985, i t became evident t h a t the B r i t i s h Columbia p o p u l a t i o n and i t s resource economy could not absorb the mounting surplus of power. B.C.Hydro's name-plate c a p a c i t y on March 31, 1985 was 10,503 Megawatts, i t s highest one-hour demand ever recorded t o the end of 1985 (on Hydro's i n t e g r a t e d system) was 6,816 Megawatts. This demand peak occurred on November 26, 1985 under extremely c o l d weather and represents a 35% over- c a p a c i t y . 5 In 1983 the "unplanned s u r p l u s " was a n t i c i p a t e d by the p r e s i d e n t of B.C.Hydro, Norman Olson, as the e n t i r e c a p a c i t y of Revelstoke dam (plus the surplus which already e x i s t e d before t h i s dam) came on l i n e : The surplus represents about 15 per cent of c u r r e n t load, Mr. Olson [the president of B.C.Hydro] s a i d . More imp o r t a n t l y , at c u r r e n t load l e v e l s , the entire capacity of the [$2 billion] Revelstoke hydro- electric project, set t o s t a r t coming on l i n e next year, will be surplus. [About the companies t h a t made f i r m i n q u i r i e s t o use the e l e c t r i c i t y , Mr. Olson asks:] ..."Where are they now?" 6 By 1986 B r i t i s h Columbia had not a t t r a c t e d f o r e i g n c a p i t a l as a n t i c i p a t e d even w i t h cheap e l e c t r i c i t y , nor has 5 Sources; B.C.Hydro Annual Report 1984/85, p.5; and the 1986 B.C.Hydro informa t i o n pamphlet, B.C.Hydro: The Background, p. 3. 6 Globe & Mail, "B.C. Hydro Foresees Further Cuts i n C a p i t a l P r o j e c t s as Growth Slows," by A l b e r t Sigurdson, September 26, 1983, p. B l , emphasis added and $2 b i l l i o n replaced f o r 1.6 b i l l i o n . I n t r o d u c t i o n 7 t h e p r e d i c t e d e l e c t r i c a l "power h u n g e r " o f t h e U.S. N o r t h w e s t a n d C a l i f o r n i a a l l o w e d B r i t i s h C o l u m b i a t o t r a n s m i t e l e c t r i c i t y a t r e n u m e r a t i v e f i r m p r i c e s a c r o s s t h e B o n n e v i l l e Power A u t h o r i t y ' s t r a n s m i s s i o n l i n e s . 7 B.C.Hydro i s a l l o w e d t o e x p o r t o n l y on a l o w p r i o r i t y b a s i s a t t h e e n d o f t h e l i n e u p w i t h o t h e r U.S. N o r t h w e s t u t i l i t i e s . The " u n p l a n n e d s u r p l u s " i s t h e r e f o r e p u t t i n g p r e s s u r e on B.C.Hydro t o m a r k e t d i s c o u n t - e l e c t r i c i t y t o u n c o m p e t i t i v e m i n e s a n d r e t o o l e d f o r e s t c o m p a n i e s . From t h e e x p o s i t i o n o f t h e p r o b l e m s o f a r , t h r e e d e v e l o p m e n t a l s c e n a r i o s c a n be d i s t i n g u i s h e d : 1. The "Dream S c e n a r i o " ( K e e f e r 1 8 9 9 ) , w h e r e b y t h e p r e - h y d r o e l e c t r i c s t a p l e s p r o d u c t i o n i s e n h a n c e d by a w e l l e n g i n e e r e d C a n a d i a n e l e c t r i c a l i n f r a s t r u c t u r e . I n a d d i t i o n , t h e s c i e n t i f i c a p p l i c a t i o n o f e l e c t r i c i t y t o s t a p l e s p r o d u c t i o n r e s u l t s i n new m a n u f a c t u r i n g i n d u s t r i e s . C o n s e q u e n t l y , a s K e e f e r p r e d i c t e d , t h i s f o r w a r d d e v e l o p m e n t w o u l d d e l i v e r t h e D o m i n i o n f r o m i t s 'hewer o f wood' s e r v i t u d e t o A m e r i c a n i n d u s t r y . 2. The " E x t e n s i o n S c e n a r i o " (Shrum 1 9 6 1 ) , w h e r e b y t h e p r e - h y d r o e l e c t r i c s t a p l e s p r o d u c t i o n e n h a n c e d by t h e d u a l r i v e r e l e c t r i c a l i n f r a s t r u c t u r e ( t h e b u i l d i n g o f dams on t h e 7 The B o n n e v i l l e Power A d m i n i s t r a t i o n i s a n a g e n c y o f t h e U.S. D e p a r t m e n t o f E n e r g y . B o n n e v i l l e m a r k e t s a n d g e n e r a t e s e l e c t r i c i t y i n t h e n o r t h w e s t e r n U n i t e d S t a t e s . Introduction 8 Columbia and Peace River) would open a new staples region v i a the re servo i r and provide economic growth and employment benef i t s ; the temporary surplus , however, would be exported to the U.S. and l a t e r recovered for use i n B r i t i s h Columbia's industry . I t i s assumed i n t h i s scenario that staples production may continue. 3. The " I n t e n s i f i c a t i o n Scenario" (1986), whereby continued staples product ion, c losed mines, and an o v e r - b u i l t e l e c t r i c a l in f ra s t ruc ture ex i s t along with plans to b u i l d more dams so le ly for export. Under these condit ions e l e c t r i c i t y i t s e l f becomes an exportable energy product (a staple) and the need to s e l l i t the export market increases . This export dependence coincides with the need to finance future power- exporting dams. They would be paid for through the long-term income of var i ab le U.S . e l e c t r i c i t y revenues and the payment for var i ab le s ize debt loads (induced by U.S. currency f l u c t u a t i o n s ) . This thes i s w i l l examine these scenarios with p a r t i c u l a r a t tent ion to the ro les of the p r o v i n c i a l government and the Crown corporat ion , B.C.Hydro (see Appendix, F i g . l ) . Argument: B r i e f Statement I argue here that (1) the p r o v i n c i a l state has a l loca ted resources and intervened i n such a way as to susta in a staples rather than a d i v e r s i f i e d economy, (2) B.C.Hydro, a Crown corporat ion , has been an instrument by which staples production has been i n t e n s i f i e d , (3) the state has been I n t r o d u c t i o n 9 c o n s t r a i n e d i n i t s c a p a c i t y to induce g r e a t e r d i v e r s i f i c a t i o n by the a l r e a d y e s t a b l i s h e d resource i n d u s t r i e s . T h e o r e t i c a l A n a l y s i s Since the p r o v i n c i a l s t a t e has the a u t h o r i t y t o develop hydro power and i n t e r v e n e d i n the p r o d u c t i o n of e l e c t r i c i t y through B.C.Hydro, O f f e ' s theory of s t a t e i n t e r v e n t i o n i s r o (extended t o the s t a p l e s economy) i s a p p l i e d t o the a s p e c t s of the problem under study. These aspects are , the s t a t e ' s p r o d u c t i v e i n t e r v e n t i o n i s t r o l e i n B r i t i s h Columbia's h y d r o e l e c t r i c over-development, and the c ontinued s t a p l e s dependence. I n t e r v e n t i o n s by the s t a t e occur by way of a l l o c a t i v e and p r o d u c t i v e a c t i v i t y . T h e r e f o r e , the a d d i t i o n of B.C.Hydro to the p r o v i n c i a l s t a t e , the b u i l d i n g of dams, and the p r o d u c t i o n of e l e c t r i c i t y are t r e a t e d as a p r o d u c t i v e s t a t e a c t i v i t y . The p r o v i n c i a l s t a t e i s regarded as a resource-dependent p e r i p h e r a l s t a t e w i t h i n c a p i t a l i s t s o c i e t y . The "unplanned s u r p l u s " of power i s a n a lyzed w i t h r e s p e c t to the l i m i t s of p l a n n i n g i n a staples-dependent p e r i p h e r y . T h e o r i e s of the p e r i p h e r a l s t a t e i n Canada are i n t h e i r developmental stages and European t h e o r i e s cannot be e a s i l y used t o e x p l a i n s t a t e p o l i c y f o r m a t i o n and resource development i n B r i t i s h Columbia. Consequently, the use of a blended t h e o r e t i c a l approach which draws on s t a p l e s theory ( I n n i s , Watkins, Marchak) and Claus I n t r o d u c t i o n 10 O f f e ' s i n t e r v e n t i o n i s t "Theory of the C a p i t a l i s t S t a t e and the Problem of P o l i c y Formation" was e x p l o r e d . 8 Methods The r e s e a r c h method employed i s one of reviewing and c o l l e c t i n g r e l e v a n t h i s t o r i c a l evidence from books, r e p o r t s , l e g i s l a t i v e a c t s , government p o l i c y statements and p u b l i c a t i o n s , B.C. U t i l i t i e s Commission testimony, B.C.Hydro documents, and s e l e c t i n f o r m a l i n t e r v i e w s with r e l e v a n t persons. The s e l e c t i o n and examination i s guided by the working h y p o t h e s i s t h a t B.C.Hydro i s a major i n s t i t u t i o n a l f o r c e i n extending and i n t e n s i f y i n g s t a p l e s dependence. A blended theory of the s t a t e and s t a p l e s theory i s used t o examine the assumed r e l a t i o n s h i p s ( i m p l i c i t i n the working hypo t h e s i s ) between government p o l i c y , B.C.Hydro's c o n t r i b u t i o n t o the accumulation process, the development of h y d r o e l e c t r i c power, and the d i v e r s i f i c a t i o n of s t a p l e s p r o d u c t i o n . A v a r i e t y of h i s t o r i c a l data sources has t o be examined t o e s t a b l i s h these r e l a t i o n s h i p s , because the 8 H a r o l d I n n i s , The Fur Trade in Canada (Toronto: Toronto U n i v e r s i t y Press [1930], 1956). Mel H. Watkins, "A S t a p l e s Theory of Economic Growth." Approaches to Canadian Economic History: A Selection of Essays ed. M.H. Watkins & W.T. Easterbrook (Toronto: M c C l e l l a n d and Stewart, 1967) pp. 49-79. P a t r i c i a Marchak, Green Gold (Vancouver: U n i v e r s i t y of B r i t i s h Columbia, 1983). Claus O f f e , "The Theory of the C a p i t a l i s t S t a t e and the Problem of P o l i c y Formation," Stress and Contradictions in Modern Capitalism: Public Policy and the Theory of the State, ed. L i n d b e r g , A l f o r d , Crouch, and O f f e (Lexington, Massachussets; Toronto: Lexington Books, D.C. Heath and Company, 1975). I n t r o d u c t i o n 11 agencies of the p r o v i n c i a l and f e d e r a l s t a t e , such as departments and m i n i s t r i e s , a d v i s o r y bodies on p o l i c y , r e g u l a t o r y agencies, and Crown c o r p o r a t i o n s are f r e q u e n t l y undergoing i n t e r n a l r e o r g a n i z a t i o n to a d j u s t t o changing p o l i t i c a l and economic c o n d i t i o n s . As they r e o r g a n i z e , the q u a l i t y and r e l e v a n c e of i n f o r m a t i o n h e l d i n these agencies changes and i n f o r m a t i o n may a l s o be moved to other a g e n c i e s . The h i s t o r i c a l evidence f o r p r o v i n c i a l s t a t e i n t e r v e n t i o n i n the a l l o c a t i o n of n a t u r a l resources and p r o d u c t i o n of e l e c t r i c i t y o r i g i n a t e s from government p o l i c i e s as e v i d e n t i n l e g i s l a t i v e a c t s , m i n i s t e r i a l p u b l i c a t i o n s , s c h o l a r l y p u b l i c a t i o n s , the B.C. Power Commission and B.C.Hydro. The r e s e a r c h data t o analyze the r o l e which B.C.Hydro p l a y e d i n the e x t e n s i o n of the s t a p l e s economy o r i g i n a t e s p r i m a r i l y from B.C.Hydro's I n d u s t r i a l Development Department r e p o r t s which are h e l d i n the B.C.Hydro l i b r a r y . The s t a t i s t i c a l i n f o r m a t i o n was o b t a i n e d from t h r e e sources: B.C.Hydro's Department of Marketing and P l a n n i n g , B r i t i s h Columbia government p u b l i c a t i o n s , and S t a t i s t i c s Canada. The v e r i f i c a t i o n of p r i n t e d m a t e r i a l and supplementary i n f o r m a t i o n i s d e r i v e d from i n f o r m a l i n t e r v i e w s with s e l e c t e d department p e r s o n n e l . To u n r a v e l the i n d u s t r i a l l i n k t o the "unplanned s u r p l u s , " r e l e v a n t p l a n n i n g submissions and testimony by B.C.Hydro and p r o v i n c i a l government r e p r e s e n t a t i v e s to the B.C. U t i l i t i e s Commission are examined. In a d d i t i o n , B.C.Hydro r e p o r t s , and p r e s s r e p o r t s are c o n s u l t e d . The r e s e a r c h data which document the i n t e n s i f i c a t i o n of dependence (on s t a p l e s p r o d u c t i o n and I n t r o d u c t i o n 12 power p r o d u c t i o n f o r export) are o b t a i n e d from a v a r i e t y of sources: the testimony of B.C.Hydro e x e c u t i v e s b e f o r e the B.C. U t i l i t i e s Commission (BCUC), the summary r e p o r t s prepared by the BCUC, the r e p o r t s by the the N a t i o n a l Energy Board (a f e d e r a l agency of Canada), and the p r e s s r e l e a s e s of the B o n n e v i l l e Power A u t h o r i t y ( r e l e a s e d by the U.S. Energy Department). Because the " s u r p l u s shock" i s a phenomenon of the 1980's and (much of the i n f o r m a t i o n i s not y e t o f f i c i a l l y documented) c i r c u m s t a n t i a l accounts are taken from numerous U.S. and Canadian press accounts. Because the e m p i r i c a l u n i t s and terminology which d e s c r i b e s B r i t i s h Columbia's h y d r o e l e c t r i c development may be u n f a m i l i a r t o the reader, a "Gl o s s a r y " of terms has been added t o the Appendix ( F i g . 2 ) . The B o u n d a r i e s o f t h i s S t u d y F i v e major assumptions u n d e r l i e the approach t o the problem: 1) the assumption t h a t the m a j o r i t y of B r i t i s h Columbians thought B.C.Hydro p o l i c i e s would b r i n g about a d i v e r s i f i e d economy, 2) t h a t the motor of development i n B r i t i s h Columbia i s not consumer goods m a n u f a c t u r i n g , 9 but an export and f o r e i g n investment-dependent s t a p l e s economy which develops no s u b s t a n t i a l "backward" and "forward" l i n k a g e s , 3) t h a t the p r o v i n c i a l s t a t e p o l i c i e s developed out of the i n s t a b i l i t i e s of the s t a p l e s economy which p e r i o d i c a l l y needs 9 In the Canadian r e g i o n a l p e r i p h e r y , " . . . u n l i k e European c o u n t r i e s the motor of growth i s not manufacturing but the export l e d s e c t o r s : f u r s , f i s h , timber, wheat, i n d u s t r i a l m i n e r a l s and energy p r o d u c t s . " D a n i e l Drache, " R e d i s c o v e r i n g Canadian P o l i t i c a l Economy" Journal of Canadian Studies (August 1976) 7. Introduct ion 13 s ta te -entrepreneur ia l in tervent ion to be re-balanced, 4 ) that B r i t i s h Columbia i s not governed by an instrumental state which operates so l e ly for the benef i ts of a p a r t i c u l a r p a r t i c u l a r in teres t although, the s tate , as Offe maintains, has b u i l t into i t s functions a s e l ec t ive process which favors the upper c l a s s , and 5) that hydroe lec tr i c development plans for B r i t i s h Columbia were not just the r e s u l t of one man (W.A.C. Bennett) , but rather the combined r e s u l t of the act ions by planners i n the state apparatus, B .C.Hydro , and indus try . Excluded from t h i s approach are: the domestic and commercial consumption of e l e c t r i c i t y (used i n houses, o f f i c e b u i l d i n g s , or r e t a i l s tores ) , the environmental benefi ts (such as f lood c o n t r o l ) , and the environmental des truct ion ( loss of v a l l e y s , t rap l i n e s , f i s h and f o r e s t s ) . Rather, B .C.Hydro's ro le i s examined for i t s developmental influences on the staples economy and, therefore company planning, government p o l i c y adherence, and i n d u s t r i a l development are emphasized. The Columbia River Treaty has been extensively examined by other scho lars , and therefore i s only a per iphera l part of t h i s t h e s i s . The t h e o r e t i c a l approach excludes a c lass a n a l y s i s , s ince the analys i s stresses the use of B.C.Hydro by the state i n pursu i t of b u i l d i n g dams for industry , not i n pursu i t of d i r e c t c lass i n t e r e s t s . The approach i s l i m i t e d to the examination of B.C.Hydro as a ca ta ly s t and i n t e n s i f i e r of developments i n the staples economy. I n t r o d u c t i o n 14 My own v a l u e s a r e i m p l i c i t i n t h e a p p r o a c h t o t h e a n a l y s i s , t h e y a r e : t h a t s e c o n d a r y i n d u s t r y s h o u l d h a v e b e e n d e v e l o p e d by B r i t i s h C o l u m b i a ' s c o r p o r a t i o n s s i n c e t h e y r e c e i v e d g e n e r o u s r e s o u r c e a l l o c a t i o n s a n d l o w - c o s t s t a t e - p r o d u c e d e l e c t r i c a l p o w e r . I n s t e a d , b o t h B r i t i s h C o l u m b i a ' s r e s o u r c e a d v a n t a g e s a n d h y d r o power a d v a n t a g e s o v e r o t h e r r e g i o n s a p p e a r t o h a v e b e e n s q u a n d e r e d . I t h e r e f o r e a p p r o a c h t h i s s t u d y f r o m a c r i t i c a l p e r s p e c t i v e . D e f i n i t i o n s a n d C o n c e p t s The p r o v i n c i a l s t a t e : T h i s s t a t e i s a n a u t h o r i t a t i v e e n t i t y w h i c h h a s t h e power t o i n t e r v e n e . I t s a p p a r a t u s i n c l u d e s m i n i s t r i e s , d e p a r t m e n t s , r e g u l a t o r y a g e n c i e s , a d v i s o r y c o m m i s s i o n s , Crown c o r p o r a t i o n s e t c . , a n d i s g i v e n t h e p o l i t i c a l a u t h o r i t y t o a d m i n i s t e r t h e f o r e s t s , m i n e r a l s , a n d w a t e r power r e s o u r c e s . When a p p r o a c h i n g t h e s t a t e ' s r e l a t i o n s h i p t o t h e s t a p l e s economy, f o r p u r p o s e s o f a n a l y s i s , t h e c o n c e p t o f t h e p r o v i n c i a l s t a t e i s e m p l o y e d i n a more a b s t r a c t way. The p r o v i n c i a l s t a t e a p p a r a t u s : As d e s c r i b e d by O f f e i n a somewhat a b s t r a c t way, i s a h i s t o r i c a l l y a c c u m u l a t e d n e t w o r k o f l e g a l a n d i n s t i t u t i o n a l f o r m a l i s m s c o v e r i n g a n d c o n d i t i o n i n g ( a l m o s t ) a l l o f t h e p r o c e s s e s a n d i n t e r a c t i o n s t h a t go on i n a s o c i e t y . A c a p i t a l i s t s t a p l e s s t a t e i s t h e s t r u c t u r e o f t h o s e h i s t o r i c a l s o c i e t i e s w h i c h r e p r o d u c e I n t r o d u c t i o n 15 t h e m s e l v e s t h r o u g h c o m p e t i t i o n a n d e x p l o i t a t i v e s t a p l e s c o m m o d i t y p r o d u c t i o n . 1 0 The accumulation process: R e f e r s t o t h e p r o c e s s o f r e o r g a n i z i n g , m a i n t a i n i n g , a n d g e n e r a l i z i n g t h e e x c h a n g e r e l a t i o n s h i p s . T h i s p r o c e s s i s f r e q u e n t l y m a i n t a i n e d by u s e o f t h e " . . . l a r g e c a t e g o r y o f public i n f r a s t r u c t u r e investment w h i c h i s d e s i g n e d t o h e l p b r o a d c a t e g o r i e s o f c o m m o d i t y o w n e r s ( a g a i n b o t h l a b o r a n d c a p i t a l ) t o e n g a g e i n e x c h a n g e r e l a t i o n s h i p s . " x x "Unplanned surplus": T h i s i s t h e e l e c t r i c i t y s u r p l u s w h i c h r e s u l t e d d e s p i t e e x t e n s i v e p l a n n i n g by B.C.Hydro u n d e r t h e g u i d a n c e o f p r o v i n c i a l g o v e r n m e n t d e v e l o p m e n t p o l i c i e s . ( B i l l B e s t , v i c e p r e s i d e n t , E l e c t r i c a l O p e r a t i o n s , a s k e d w h e t h e r H y d r o i s b u i l d i n g f o r e x p o r t , a n s w e r e d : "Our l o a d f o r e c a s t s , on w h i c h p l a n n i n g f o r o u r s y s t e m i s b a s e d , do n o t i n c l u d e a n y p r o v i s i o n f o r s u p p l y f o r e x p o r t . The c o n s t r u c t i o n a n d s c h e d u l i n g o f a d d i t i o n a l g e n e r a t i n g f a c i l i t i e s i s b a s e d e n t i r e l y o n s e r v i c i n g f o r e c a s t r e q u i r e m e n t s i n t h i s p r o v i n c e " . . . t h e N a t i o n a l E n e r g y B o a r d o f Canada r u l e d i n s u p p o r t o f 10 T h i s i s a r e s t a t e m e n t o f O f f e ' s c o n c e p t o f t h e c a p i t a l i s t s t a t e t o f i t t h e s t a p l e s s t a t e . C l a u s O f f e , "Laws o f M o t i o n o f R e f o r m i s t S t a t e P o l i c i e s " Mimeo. O i l m a n , B e r t e l l , a n d E d w a r d V e r n o f f , The Left Academy (New Y o r k : McGraw H i l l , 1 9 8 2 ) , p.4; a l s o i n "The German D e b a t e , " The State and P o l i t i c a l Thought ( P r i n c e t o n : P r i n c e t o n U n i v e r s i t y P r e s s , 1984) p.133. 11 C l a u s O f f e a n d V o l k e r Ronge, " N o t e s : T h e s e s o n t h e T h e o r y o f t h e S t a t e " New German C r i t i q u e , 6 ( F a l l 1976) 143,144. I n t r o d u c t i o n 16 o u r c o n t e n t i o n t h a t we h a v e p l a n n e d a n d c o n s t r u c t e d o u r s y s t e m o n l y f o r d o m e s t i c n e e d s . " 1 2 ) S t a p l e : A s t a p l e i s a raw o r s e m i - p r o c e s s e d n a t u r a l r e s o u r c e ( e . g . e x p o r t l o g s , p u l p , m e t a l i n g o t s , e n e r g y p r o d u c t s , l u m b e r . . . ) p r o d u c e d l a r g e l y f o r e x p o r t and c o m p r i s i n g a l e a d i n g s e c t o r o f t h e economy. S e c o n d a r y i n d u s t r y : T h i s t e r m i s u s e d w i t h r e f e r e n c e t o a n i n d u s t r y w h i c h d e v e l o p s o u t o f t h e s t a p l e s economy b e c a u s e o f d i v e r s i f i c a t i o n a n d p r o d u c t i n n o v a t i o n . W a t k i n s o u t l i n e s i t s d e v e l o p m e n t a l s e q u e n c e : " I f t h e s t a p l e o r s t a p l e s g e n e r a t e s t r o n g l i n k a g e e f f e c t s w h i c h a r e a d e q u a t e l y e x p l o i t e d - t h e n e v e n t u a l l y t h e economy w i l l grow a n d d i v e r s i f y t o t h e p o i n t w h e r e a p p e l a t i o n " s t a p l e s economy" w i l l no l o n g e r s u f f i c e . . . . A w e l l d e v e l o p e d s e c o n d a r y m a n u f a c t u r i n g s e c t o r s e r v i n g d o m e s t i c a n d p o s s i b l y e v e n f o r e i g n m a r k e t s w i l l e m erge." 3- 3 O t h e r S t u d i e s o f H y d r o Few p r e c e d i n g i n v e s t i g a t i o n s h a v e s t u d i e d t h e d e v e l o p m e n t p r o b l e m s o f e n e r g y p r o j e c t s i n B r i t i s h C o l u m b i a f r o m a p o l i t i c a l economy p e r s p e c t i v e b u t s e v e r a l r e l a t e d w o r k s w e r e p r o d u c e d i n O n t a r i o . 12 R e p r i n t f r o m t h e May 16, 1980 i s s u e o f B . C . H y d r o ' s e m p l o y e e n e w s p a p e r . Intercom, p r i n t e d by B . C . H y d r o . 13 M e l H. W a t k i n s , "A S t a p l e s T h e o r y o f E c o n o m i c G r o w t h , " i n Approaches to Canadian Economic History, e d . W.T. E a s t e r b r o o k a n d M e l W a t k i n s ( T o r o n t o : M c C l e l l a n d a n d S t e w a r t , 1967) p . 6 4 . I n t r o d u c t i o n 17 H.V. N e l l e s i n "Hydro as Myth," a r e l a t e d study, i n v e s t i g a t e s the romanticism surrounding the h a r n e s s i n g of mighty r i v e r s , the dreams of i n d u s t r i a l e v o l u t i o n from steam- powered manufacturing, and the e x p e c t a t i o n s of independence a s s o c i a t e d with h y d r o e l e c t r i c developments i n O n t a r i o . 1 4 The "Hydro as Myth" approach captures the "economically i r r a t i o n a l " (e.g. the i r r a t i o n a l over-investment) which g i v e s shape (e.g. mega p r o j e c t s ) t o the uneven development. G a t t - F l y (a s p e c i a l i n t e r e s t group) examines energy i s s u e s w i t h r e s p e c t t o p r o v i n c i a l l y - o w n e d power companies i n the book, Power to Chose: Canada's Energy Options. S e v e r a l developmental c h a r a c t e r i s t i c s are i d e n t i f i e d i n G a t t - F l y ' s book: the p r e f e r e n c e f o r l a r g e s i n g l e u n i t power sources, the development of low-cost e l e c t r i c power f o r p r o v i n c i a l needs, the U.S. export market as j u s t i f i c a t i o n f o r s u r p l u s c a p a c i t y , the "unplanned oversupply" which i s not e l i m i n a t e d u n t i l 1995 ( i n O n t a r i o ) , the environmental damage, the unending s p i r a l of i n t e r n a t i o n a l debt, and the t r a n s i t i o n from merging p r o v i n c i a l with i n t e r n a t i o n a l i n t e r e s t s . 1 5 In Western Canada, L a r r y P r a t t documents i n h i s essay "The S t a t e and P r o v i n c e B u i l d i n g : A l b e r t a ' s Development S t r a t e g y , " how the A l b e r t a government through resource p o l i c i e s used p r o v i n c i a l i n s t i t u t i o n s as an instrument t o 14 H.V. N e l l e s , The Politics of Development: Forests, Mines & Hydro-Electric Power in Ontario, 1849-1941 (Toronto: Macmillan Company of Canada L t d . , 1974). 15 G a t t - F l y , Power to Choose (Toronto: Between The L i n e s , 1981). I n t r o d u c t i o n 18 i n c r e a s e i t s c o n t r o l o v e r t h e a c c u m u l a t i o n p r o c e s s . The b e n e f i t s w e r e t o a c c r u e t o l o c a l r e s o u r c e a n d g o v e r n m e n t e l i t e s a n d t h e g r o w i n g u r b a n m i d d l e c l a s s . B e f o r e t h e r e s o u r c e a d v a n t a g e w o u l d be d e p l e t e d , a t r a n s i t i o n t o p e t r o c h e m i c a l , a g r i c u l t u r a l , a n d i n d u s t r i a l d i v e r s i f i c a t i o n was t o o c c u r . I n t h i s a p p r o a c h t h e r a t e o f a c c u m u l a t i o n f r o m t h e r e s o u r c e r o y a l t i e s d e t e r m i n e s c l a s s f o r m a t i o n a n d t h e d e g r e e o f r e g i o n a l e c o n o m i c autonomy o f t h e p r o v i n c e . 1 6 When a p p l i e d t o B.C.Hydro t h i s a p p r o a c h w o u l d be l i m i t e d t o t h e f o l l o w i n g : t h e c o l l e c t i o n o f r e s o u r c e r e n t s f r o m v a l l e y s ( e . g . t h e C o l u m b i a R i v e r V a l l e y ) , r i v e r r e g u l a t i o n b e n e f i t s , p r o v i n c i a l s t a t e w a t e r t a x e s , t h e c l a s s f o r m a t i o n a r o u n d t h e b u i l d i n g o f e n e r g y - p r o d u c i n g dams, a n d t h e t a x a n d r o y a l t y - r e l a t i o n s h i p t o b u i l d i n g t h e p r o v i n c e . P r a t t f o c u s e s o n g r o w i n g r e g i o n a l i n d e p e n d e n c e , w h e r e a s B r i t i s h C o l u m b i a ' s h y d r o - d e v e l o p m e n t i n t h e 1980's i s c h a r a c t e r i z e d by i n c r e a s i n g d e p e n d e n c e . I n B r i t i s h C o l u m b i a , two a c a d e m i c b o o k s w e r e w r i t t e n a b o u t t h e C o l u m b i a R i v e r d e v e l o p m e n t . N e i l S w a i n s o n ' s c o m p r e h e n s i v e h i s t o r i c a l c a s e s t u d y , Conflict over the Columbia: the Canadian Background to an H i s t o r i c Treaty, d e s c r i b e s t h e c o m p l e x p r o c e s s o f n e g o t i a t i o n s b e t w e e n t h e p r o v i n c i a l , f e d e r a l a n d U.S. g o v e r n m e n t . S i m i l a r l y s e t i n t h e C o l u m b i a r e g i o n i s t h e c a s e s t u d y f o r s t u d e n t s i n f i e l d s s u c h 16 L a r r y P r a t t , "The S t a t e a n d P r o v i n c e - B u i l d i n g : A l b e r t a ' s D e v e l o p m e n t S t r a t e g y , " i n The Canadian State: P o l i t i c a l Economy and P o l i t i c a l Power, e d . L e o P a n i t c h ( T o r o n t o : U n i v e r s i t y o f T o r o n t o P r e s s , 1 9 7 7 ) , p. 133-162. I n t r o d u c t i o n 19 as e n g i n e e r i n g , p l a n n i n g , geography and p u b l i c a d m i n i s t r a t i o n by J.W. Wilson, People in the Way: The Human Aspects of the Columbia River Project. Wilson examines the p e r s o n a l , compensation, and r e s e t t l e m e n t i s s u e s of the people of the Arrow Lakes who were a f f e c t e d by Hydro's development of the t r e a t y dams. Sev e r a l r e l e v a n t academic s t u d i e s have analyzed the development of B.C.Hydro, such as the t h e s i s , "Development of the E l e c t r i c i t y I n d u s t r y i n B r i t i s h Columbia," (1965) by Mary T a y l o r . She documents the geographic expansion of the e l e c t r i c i t y i n d u s t r y from 1883 to 1961. In a d d i t i o n , W i l l i a m Tieleman, i n h i s t h e s i s " P o l i t i c a l Economy of N a t i o n a l i z a t i o n : S o c i a l C r e d i t and the Takeover of B r i t i s h Columbia E l e c t r i c Company" approaches the takeover as an "example of a p r o v i n c i a l s t a t e ' s r e l a t i v e autonomy being e x e r c i s e d i n a dynamic s i t u a t i o n . " He a n a l y s e s the h i s t o r i c a l developments with r e f e r e n c e t o c l a s s , the j u d i c i a r y and the s t a t e l e a d e r s h i p . Marvin S h a f f e r , on the other hand, i n the paper, "The B e n e f i t s and Costs of B.C. Hydro C o n s t r u c t i o n P r o j e c t s , " p r o v i d e s a c o s t b e n e f i t a n a l y s i s of S i t e C and the Cheekeye- Dunsmuir p r o j e c t s . 1 7 The primary concern of t h i s t h e s i s i s with B.C.Hydro's r e l a t i o n s h i p t o the resource economy and the use of 17 Marvin S h a f f e r , The Benefits and Costs of B.C.Hydro Construction Projects, a p u b l i c a t i o n from the B r i t i s h Columbia Economic P o l i c y I n s t i t u t e , Paper No. P-86-01 (Vancouver: U n i v e r s i t y of B r i t i s h Columbia, January 1986). Introduction 20 e l e c t r i c i t y i n B r i t i s h Columbia's manufacturing industry . Beside the r e s i d e n t i a l use (9,793 GW.h), and commercial use (8,313 GW.h) of e l e c t r i c i t y , the i n d u s t r i a l use (13,568 GW.h) represents the largest category of consumption (see Table I I ) . Previous studies have not s u f f i c i e n t l y separated for whom the e l e c t r i c i t y i s a c t u a l l y produced. Therefore, i n t h i s thes i s the focus i s narrowed to the production of e l e c t r i c i t y for B r i t i s h staples industry and the ant i c ipated secondary industry . Chapter Content Summary Chapter two contains a d iscuss ion and framework of staples theory (Innis , Watkins, Marchak) and Offe ' s "Theory of the C a p i t a l i s t State and Po l i cy Formation." The theories provide a framework to understand the functions of state in tervent ion i n order to maintain the accumulation process i n a staples-dependent reg ion. Chapter three provides the documentation of state intervent ion i n the a l l o c a t i o n of natural resources, the formation of p o l i c y , and two intervent ions i n the production of e l e c t r i c i t y (by the B . C . Power Commission 1945 and B.C.Hydro 1962). In Chapter four , the r e l a t i o n s h i p between B.C.Hydro and the staples economy w i l l be documented and analyzed. The primary focus w i l l be on B.C.Hydro ' s promotion of staples product ion, the use of B .C.Hydro's i n f r a s t r u c t u r e by staples producers, and the lack of inf luence of e l e c t r i c i t y on product innovat ion. In chapter f i v e , the contradic t ions between state planning (the I n t r o d u c t i o n 21 g o v e r n m e n t ' s a n d B . C . H y d r o ' s ) a n d t h e p l a n n i n g d i s a l l o w e d by s t a p l e s p r o d u c e r s ( a n d t h e s t a p l e s economy) a r e a n a l y z e d . The d y n a m i c i n f l u e n c e s o f t h e "power t r a p , " s u c h a s t h e r e s t r u c t u r i n g o f B . C . H y d r o , t h e r i s i n g r a t e o f u n e m p l o y m e n t , a n d t h e f o r m a t i o n o f " b a c k w a r d " a n d " f o r w a r d " p o l i c i e s ( i . e . d i s c o u n t a n d e x p o r t p o l i c i e s ) w i l l be e x a m i n e d i n c h a p t e r s i x . The A p p e n d i x c o n t a i n s a g l o s s a r y o f e l e c t r i c a l t e r m s a n d p r i m a r i l y h i s t o r i c a l i n d u s t r i a l s t a t i s t i c s o f power p u r c h a s e s . T h e o r y 22 CHAPTER I I THEORY The C e n t r a l Q uestion Why d i d t h e p r o v i n c i a l s t a t e ' s i n t e r v e n t i o n i n d e v e l o p i n g p u b l i c h y d r o p o w e r , i n t e n d e d t o d i v e r s i f y t h e i n d u s t r i a l b a s e , a c t u a l l y i n t e n s i f y B r i t i s h C o l u m b i a ' s s t a p l e s d e p e n d e n c e ? To a p p r o a c h t h i s q u e s t i o n , we n e e d t o d e v e l o p some i n s i g h t i n t o t h e n a t u r e o f t h e s t a t e i n c a p i t a l i s t s o c i e t y , a n d more s p e c i f i c a l l y i n t o t h e n a t u r e o f t h e s t a t e i n a r e s o u r c e - d e p e n d e n t ( s t a p l e s ) economy. T h i s c h a p t e r p r o v i d e s a d i s c u s s i o n o f t h e t h e o r e t i c a l f r a m e w o r k u s e d t h r o u g h o u t t h e t h e s i s . The f i r s t p a r t i s c o n c e r n e d w i t h t h e s t a p l e s t h e o r y , t h e s e c o n d w i t h t h e t h e o r y o f t h e s t a t e a s p r o p o s e d by C l a u s O f f e . 1 S t a p l e s Theory A s t a p l e i s a raw o r s e m i - p r o c e s s e d m a t e r i a l e x t r a c t e d p r i m a r i l y f o r e x p o r t a n d c o n s t i t u t e s t h e l e a d i n g e dge o f a r e g i o n a l economy. A s t a p l e s economy t h e r e f o r e i s by d e f i n i t i o n n o t a d i v e r s i f i e d m a n u f a c t u r i n g economy. S t a p l e s t h e o r y a s d e v e l o p e d by H a r o l d I n n i s i s c o n c e r n e d w i t h t h e g e n e r a l i m p a c t o n t h e economy a n d s o c i e t y o f s t a p l e s 1 C l a u s O f f e , "The T h e o r y o f t h e C a p i t a l i s t S t a t e a n d t h e P r o b l e m o f P o l i c y F o r m a t i o n , " i n Stress and Contradictions in Modern Capitalism, e d . L e o n N. L i n d b e r g , R o b e r t A l f o r d , C o l i n C r o u c h , a n d C l a u s O f f e ( L e x i n g t o n : L e x i n g t o n B o o k s , 1 9 7 5 ) , p p. 125-44. Theory 23 p r o d u c t i o n . 2 Mel Watkins restated staples theory to explain i t s d i s t i n c t kind of economic growth character ized by an overconcentration on resources i n the export sector and poss ib le development of the "staples t r a p . " 3 Pat Marchak i d e n t i f i e d the pers i s tent i n s t a b i l i t y caused by the staples production process which i s c o n t r o l l e d by corporate d i r e c t i v e s from outside the resource p e r i p h e r y . 4 The major emphasis on the use of staples theory i n t h i s thes i s w i l l be on the r e l a t i o n s h i p between the p r o v i n c i a l state and the i n f r a s t r u c t u r e development for staples product ion. In staples theory, as Watkins restated i t , the state i s almost a by-product of the requirements of staples production (Watkins 1977:89). Harold Innis i d e n t i f i e d the c o l o n i a l roots of the s ta te ' s subordinate r e l a t i o n s h i p : Energy i n the Colony was drawn into the production of the staple commodity both d i r e c t l y and i n d i r e c t l y i n the production f a c i l i t i e s promoting product ion . A g r i c u l t u r e , industry , t ranspor ta t ion , trade , f inance, and government a c t i v i t i e s tend to become subordinate to the production of the staple for a more highly s p e c i a l i z e d manufacturing community. (Innis [1930] 1954:385) He points out two leve l s of involvement by the government, the d i r e c t promotion of s taples production and the i n d i r e c t 2 Harold Innis , The Fur Trade in Canada [1930] (Toronto: Univers i ty of Toronto Press , 1954) 3 M.H. Watkins, W.T. Easterbrook, "A Staples Theory of Economic Growth," Approaches to Canadian Economic History: A Selection of Essays (Toronto: McClel land and Stewart, 1967), pp. 49-73. 4 Pat Marchak, Green Gold: The Forest Industry in British Columbia (Vancouver: Univers i ty of B . C . , 1983) Theory 24 government a c t i v i t i e s . The development of i n f r a s t r u c t u r e , such as t ranspor ta t ion , was subordinated to the production of the staple for a more s p e c i a l i z e d manufacturing community. In recent decades, the hydroe lec tr i c in fras truc tures have been expanded by the p r o v i n c i a l states to serve such staples product ion . Hydroe lec tr ic f a c i l i t i e s promote staples production by providing water transport access to remove timber or minerals and by providing a source of energy ( e l e c t r i c i t y ) for staples product ion. Watkins argues that p o l i c i e s to develop i n f r a s t r u c t u r e can ease the development of staples production and fore ign ownership. The National Po l i cy was a p o l i c y of i n d u s t r i a l i z a t i o n - b y - i n v i t a t i o n and a t trac ted fore ign c a p i t a l and thus fore ign ownership under the aegis of the mul t inat iona l corporat ion , rather than encouraging domestic c a p i t a l . . . . Railways were b u i l t to f a c i l i t a t e s taples production and only i n c i d e n t a l l y to create i n d u s t r i a l i z a t i o n . . . 5 In a s i m i l a r way, the development of the hydroe l ec tr i c i n f r a s t r u c t u r e i n B r i t i s h Columbia was promoted together with the development of forest resources by the p r o v i n c i a l s ta te . The q u a l i t y of the accompanying i n d u s t r i a l development was p r i m a r i l y confined to e s tab l i sh ing saw m i l l s , pulp m i l l s , and t h e i r chemical s u p p l i e r s . Various species of trees have been sequent ia l ly explo i ted during the expansion of forest process ing . 5 Mel Watkins, "The Staples Theory Revis i ted" Journal of Canadian Studies 12 (Winter 1977), p. 88. T h e o r y 25 S t r u c t u r a l C o n d i t i o n s Two p r o m i n e n t c o n d i t i o n s d e v e l o p a r o u n d t h e c a p i t a l i s t e x p a n s i o n o f s t a p l e s p r o d u c t i o n : t h e o v e r p r o d u c t i o n o r l a c k o f demand f o r t h e s t a p l e , a n d t h e l a c k o f s e c o n d a r y i n d u s t r y o r p r o d u c t i n n o v a t i o n . U n d e r c o n d i t i o n s o f o v e r p r o d u c t i o n o f a s t a p l e ( s u c h a s t i m b e r , c o a l , a n d o t h e r e n e r g y p r o d u c t s ) t h e r e g i o n a l p o p u l a t i o n c a n w a i t o u t t h e " b u s t " u n t i l t h e m a n u f a c t u r i n g c e n t e r i n d i c a t e s r e n e w e d demand, o r i t c a n t r y t o c o n v i n c e t h e m a n u f a c t u r i n g c e n t e r t o o b t a i n l o w - c o s t s u p p l i e s f r o m t h e o v e r p r o d u c i n g r e g i o n a n d n o t f r o m a n o t h e r c o m p e t i n g r e g i o n . W a t k i n s i d e n t i f i e s one p o s s i b l e c a u s e o f o v e r p r o d u c t i o n , n a m e l y , t h a t a n e x c e s s i v e o p t i m i s m l e a d s t o o v e r e x p a n s i o n a n d a 'boom a n d b u s t ' p s y c h o l o g y . " B u t M a r c h a k p o i n t s o u t , i t i s i n t h e i n t e r e s t o f t h e m a n u f a c t u r i n g c e n t e r t o d i r e c t w o r l d w i d e r e s o u r c e r e g i o n s t o o v e r d e v e l o p t h e i r r e s o u r c e s i n o r d e r t o a s s u r e a l o w - c o s t s u p p l y r e l a t i o n s h i p b e t w e e n f o r e i g n m a n u f a c t u r i n g i n t e r e s t s a n d o v e r p r o d u c t i o n . E q u a l l y , i t i s i n t h e i n t e r e s t o f p e r i p h e r i e s t o d e v e l o p t h e i r r e s o u r c e s i n a c o m p e t i t i v e g l o b a l m a r k e t . Y e t i n a r e g i o n w h i c h e x p e r i e n c e s c o n d i t i o n s o f o v e r p r o d u c t i o n , t h e i m p l i c a t i o n s c a n be v e r y s e r i o u s . O f t e n p o l i t i c a l l e a d e r s a c c o r d much e m p h a s i s t o t h e d e v e l o p m e n t o f p a r t i c u l a r s t a p l e s . A t t i m e s t h i s a d v a n c e s t h e Theory 26 overdevelopment i n one export product at the expense of developing the domestic economy. As argued by Watkins: Staples exporters - s p e c i f i c a l l y those exerc i s ing p o l i t i c a l contro l - w i l l develop an i n h i b i t i n g 'export m e n t a l i t y , ' r e s u l t i n g i n an overconcentration of resources i n the export sector and a reluctance to promote domestic development (Watkins 1967:62). Such a mental ity has a substant ia l inf luence on planning for domestic economic development and does not generate f l e x i b i l i t y . Instead, i t overemphasizes the production of a dominant staple which reduces the p o s s i b i l i t y to s h i f t e a s i l y with the needs of new markets. Watkins indicates the c h a r a c t e r i s t i c s of such an event i n an underdeveloped region: The serious p i t f a l l i s that the economy may get caught i n a "staples t r a p . " Sustained growth requires the capacity to s h i f t a t tent ion to new fore ign or domestic markets. . . . Both [markets] require i n s t i t u t i o n s and values consistent with transformation, and that requires the good fortune of having avoided s p e c i a l i z a t i o n i n the wrong kind of s taple . . . i f stagnation p e r s i s t s for any extended period because of a weak resource base, the staple economy can take on the character of the t r a d i t i o n a l underdeveloped country. F i r s t l y , i n s t i t u t i o n s and values can emerge which are i n i m i c a l to sustained growth . . . Pers i s tent unemployment and underemployment w i l l become c h a r a c t e r i s t i c of the economy. Immigration may be replaced by emigration . . . In any event i n i t i a l opportunit ies for easy growth w i l l no longer ex i s t (Watkins 1967:63). Such a p i t f a l l can be avoided by d i v e r s i f i c a t i o n , innovat ion, and strong l inkage e f f e c t s . Watkins has i d e n t i f i e d three such e f fec t s : backward l inkage, forward l inkage , and f i n a l demand l inkage . Backward l inkage i s a measure to assess the development of resources and technologies which can increase Theory 27 home-production. Forward l inkages develop when indus tr i e s evolve which add value by way of further process ing . F i n a l demand l inkages are character ized by the development of the domestic production of consumer goods (Watkins 1967:55). The staples-dependent region, however, i s less l i k e l y to develop consumer goods production and technologica l innovation than expand the development of i n f r a s t r u c t u r e needed to help produce the s tap le . Theory of the C a p i t a l i s t State - State Interventionism (Offe) Offe ' s theory does not address the problem of the staples-dependent s ta te . But i t can be appl ied to the development of i n f r a s t r u c t u r e i n such a s ta te . I t provides an enriched explanation of p o l i c y formation and the c o n t r a d i c t i o n i n planning for a staples-dependent economy. In a d d i t i o n , Offe ' s theory allows us to view the s ta te ' s i n t e r v e n t i o n i s t ro le i n maintaining exchange r e l a t i o n s h i p s . I t does t h i s by a l l o c a t i n g resources and developing publ ic i n f r a s t r u c t u r e designed to help broad categories of commodity owners. 6 -State Interventionism Offe argues the state i n advanced c a p i t a l i s t soc i e t i e s has become increas ing ly interventionist. Since few per iphera l regions produce t h e i r own consumer goods, having remained staples producing resource per ipher i e s , the nature of the 6 Claus Offe and Volker Ronge, "Notes: Theses on the Theory of the State ," New German Critique, Number 6, F a l l 1976, pp. 137- 147. T h e o r y 28 i n t e r v e n t i o n by t h e p r o v i n c i a l s t a t e i s f r e q u e n t l y by means o f i n t e n s i f i c a t i o n o f i n f r a s t r u c t u r e d e v e l o p m e n t . The b u i l d i n g o f i n f r a s t r u c t u r e , t o g e t h e r w i t h t h e a l l o c a t i o n o f r e s o u r c e s , i s r e q u i r e d t o c o n t i n u e s t a p l e s p r o d u c t i o n . As O f f e c l a i m s , t h e s c o p e o f s t a t e i n t e r v e n t i o n h a s i n c r e a s e d , s i n c e s t a t e s n e e d t o i n t e r v e n e more t h a n i n t h e p r e v i o u s c e n t u r y , i n o r d e r t o r e - b a l a n c e t h e a c c u m u l a t i o n p r o c e s s i n a d v a n c e d s t a g e s o f c a p i t a l i s t d e v e l o p m e n t . - A l l o c a t i o n and Production The s t a t e i n t e r v e n e s p r i m a r i l y by u s i n g two modes o f i n t e r v e n t i o n . O f f e c a t e g o r i z e s t h e m a s t h e " a l l o c a t i v e " a n d t h e " p r o d u c t i v e " mode o f s t a t e i n t e r v e n t i o n . B o t h modes a r e i n t e r v e n t i o n i s t "... s o f a r a s t h e y i m p o s e a c e r t a i n o r d e r c r e a t e d by t h e s t a t e o n a n a r e a o f s o c i a l a n d e c o n o m i c a c t i v i t y . " B o t h a r e l i n k e d t o a c h a n g i n g p a t t e r n o f threats, p e r c e i v e d t h r e a t s , o r s t r u c t u r a l p r o b l e m s , t h a t emerge o u t o f t h e a c c u m u l a t i o n p r o c e s s a n d t o w h i c h t h e s e modes o f s t a t e a c t i v i t y c a n be s e e n a s r e s p o n s e s ( O f f e 1 9 7 5 : 1 2 8 ) . - A l l o c a t i v e Mode of intervention S t a t e i n t e r v e n t i o n by means o f t h e a l l o c a t i v e mode i m p o s e s a c e r t a i n a u t h o r i t a t i v e o r d e r c r e a t e d by t h e s t a t e on an a r e a o f s o c i a l a n d e c o n o m i c a c t i v i t y . When a s t a p l e s economy u s e s i n p u t p r o d u c t s s u c h a s n a t u r a l r e s o u r c e s w h i c h a r e a l r e a d y s t a t e p r o p e r t y a n d do n o t n e e d t o be p r o d u c e d , t h e n t h e s t a t e o n l y n e e d s t o a l l o c a t e them. As O f f e T h e o r y 29 i n d i c a t e s , t h e method by w h i c h s u c h s t a t e a c t i v i t y i s d e s i g n e d i s a u t h o r i t y . T h i s a u t h o r i t y c a n be b a s e d on a c o n s t i t u t i o n , o n a s y s t e m o f l e g a l n o r m s , s u c h a s l e g i s l a t i v e A c t s o f v a r i o u s k i n d s , o r on c o n s i d e r a t i o n o f p o l i t i c a l m a j o r i t i e s a n d p o l i t i c a l a f f i l i a t i o n s ( O f f e 1 9 7 5 : 1 2 8 ) . O f f e o u t l i n e s t h e f o l l o w i n g t h r e e d i s t i n c t i v e c o n d i t i o n s u n d e r w h i c h t h e a l l o c a t i v e mode o f s t a t e a c t i o n t a k e s p l a c e : 1) e c o n o m i c c o n d i t i o n s u n d e r w h i c h a s u i t a b l e e n v i r o n m e n t f o r a c c u m u l a t i o n c a n be c r e a t e d a n d m a i n t a i n e d m e r e l y b y a u t h o r i t a t i v e a l l o c a t i o n o f r e s o u r c e s a n d " t h i n g s " t h a t a r e a l r e a d y " s t a t e p r o p e r t y " ; 2) t h e e l e m e n t s o f t h i s e n v i r o n m e n t do not h a v e t o be p r o d u c e d t h e m s e l v e s , b u t m e r e l y allocated; 3) p o l i t i c a l p o w e r , o r power i n a n d o v e r t h e s t a t e a p p a r a t u s a n d i t s p a r t s i s t h e s o l e c r i t e r i o n a n d d e t e r m i n a n t o f a l l o c a t i o n , t h a t i s , t h e r e i s no met h o d o f p o l i c y m a k i n g o t h e r t h a n p o l i t i c s n e e d e d ( O f f e 1 9 7 5 : 1 2 9 ) . When a p p l i e d t o t h e s t a p l e s economy, t h e a l l o c a t i v e mode o f s t a t e a c t i o n i s c h a r a c t e r i z e d by n a t u r a l r e s o u r c e a l l o c a t i o n . S u c h r e s o u r c e s a r e p r o v i d e d by n a t u r e , a n d do n o t ha v e t o be p r o d u c e d by t h e s t a t e . The d e c i s i o n s , a s t o who s h o u l d r e c e i v e t h e m, c a n be made by p o l i t i c a l d i r e c t i o n o f t h e b u r e a u c r a c y o r by l e g i s l a t i o n . I f c o n d i t i o n s o f a c c u m u l a t i o n c a n be m a i n t a i n e d w i t h o u t p r o d u c t i v e i n t e r v e n t i o n , t h e n a l l t h a t i s r e q u i r e d o f t h e s t a t e i s i n t e r v e n t i o n by means o f a l l o c a t i o n . T h e o r y 30 - P r o d u c t i v e Mode of I n t e r v e n t i o n O f f e p o i n t s o u t , i f t h e a c c u m u l a t i v e p r o c e s s becomes t o o f r a g i l e , a n d t h e a l l o c a t i v e mode o f i n t e r v e n t i o n i s i n s u f f i c i e n t t o d e a l w i t h t h e t h r e a t t o a c c u m u l a t i o n , t h e n " t h e productive mode o f a c t i v i t y o f t h e c a p i t a l i s t s t a t e becomes p r e e m i n e n t . " He i d e n t i f i e s f o u r e l e m e n t s w h i c h make up s u c h a s i t u a t i o n : 1. I n o r d e r t o k e e p t h e a c c u m u l a t i o n p r o c e s s a l i v e ( e i t h e r o n [ s i c ] a f i r m , i n d u s t r y , r e g i o n a l , o r n a t i o n a l l e v e l ) , t h e r e i s more a n d s o m e t h i n g d i f f e r e n t r e q u i r e d t h a n t h e a l l o c a t i o n o f r e s o u r c e s a n d t h i n g s t h a t t h e s t a t e h a s a l r e a d y u n d e r i t s c o n t r o l . I n a d d i t i o n t o t h e s t a t e - o r g a n i z e d framework o f p r o d u c t i o n / a c c u m u l a t i o n , some p h y s i c a l i n p u t i n t o p r o d u c t i o n i s r e q u i r e d i n o r d e r t o m a i n t a i n a c c u m u l a t i o n ( O f f e 1975:129). S u c h p r o d u c t i v e i n p u t s by t h e s t a t e a r e r e q u i r e d i n t h e s t a p l e s economy a t t i m e s when i t i s n o t p e r f o r m i n g t h e a c c u m u l a t i o n p r o c e s s w e l l . U n d e r s u c h c i r c u m s t a n c e s , b e s i d e s t h e m a i n t e n a n c e o f t h e economy o r g a n i z e d a r o u n d s t a p l e s p r o d u c t i o n a n d c a p i t a l i s t a c c u m u l a t i o n , some p h y s i c a l i n p u t i s n e e d e d . A t s u c h t i m e s t h e p r o d u c t i o n o f t h e m i s s i n g i n g r e d i e n t , e i t h e r t h e p r o d u c t i o n o f i n f r a s t r u c t u r e , o r a m i s s i n g c o m m o d i t y i s r e q u i r e d t o m a i n t a i n a c c u m u l a t i o n a t d i f f e r e n t l e v e l s ( i n a f i r m , i n d u s t r y , a r e g i o n o r n a t i o n ) . O f f e a r g u e s t h a t u s u a l l y s u c h i n p u t s a r e p r o v i d e d by t h e m a r k e t . 2. U n d e r n o r m a l c i r c u m s t a n c e s , t h o s e i n p u t s a r e p r o v i d e d by m a r k e t s on w h i c h t h e y a p p e a r a s c o m m o d i t i e s : L a b o r , o r v a r i a b l e c a p i t a l , i s t o be f o u n d on t h e l a b o r m a r k e t , a n d raw m a t e r i a l s a n d m a c h i n e r y , o r c o n s t a n t c a p i t a l i s t o be f o u n d o n t h e m a r k e t o f i n v e s t m e n t g o o d s , p r o d u c e d f o r Theory 31 t h i s market by c a p i t a l i s t s who s p e c i a l i z e i n investment goods i n d u s t r i e s . In the p a r t i c u l a r s i t u a t i o n that we are descr ib ing . . . t h e q u a n t i t a t i v e l y and q u a l i t a t i v e l y s u f f i c i e n t supply of c a p i t a l f a i l s to appear on the market. 3 . . . . [ T h e t h i r d element i s ] the failure of some c a p i t a l i s t s to produce input commodities on which the accumulation of other c a p i t a l i s t s d e p e n d . . . . This f a i l u r e can be due to e i ther of three fac t s : E i ther the input commodities are so costly . . . or there are risks and uncertainties involved i n the buying of such input commodities (Offe 1975:130). The costs , r i s k s , and uncerta int ies of producing an i n f r a s t r u c t u r e , or an input commodity which does not appear on the market are often absorbed by the s ta te . In such cases the state needs to intervene and produce the missing input commodity to maintain the accumulation process . But why should a f i r m , industry , reg ion, or nation become dependent on a state-produced i n f r a s t r u c t u r e or input commodity? P a r t i c u l a r l y , i f such productive inputs tend to be permanently too cos t l y for them? Offe proposes the fol lowing answer: 4. . . . accumulat ion can only take place i f and to the extent that i n d i v i d u a l accumulating uni ts f i n d ways to protect themselves against the constant competitive pressure coming from other accumulating uni t s . . . . If accumulation i n an i n d i v i d u a l enterprise i s going to continue at any given point i n time, there must be c e r t a i n defensive mechanisms ava i l ab l e to the enterprise that allow i t to protect i t s e l f (Offe 1975:130). Offe discusses two kinds of defense mechanisms to deal with competitive pressures: 1) product innovat ion, 2) implementing of s trateg ies at a "meta-level," namely at a l eve l where "accumulating uni t s gain a r e l a t i v e l y superior p o s i t i o n v i s - a - v i s other accumulating units" such as a f i r m , Theory 32 an industry a region, or nation (Offe 1975:131). In per iphera l s ta tes , product innovation i s r a r e l y used as a defensive mechanism against competitive pressure. On the contrary , the "meta-level" response i s chosen, such as the development of ' i n f r a s t r u c t u r e as i n d u s t r y , ' or subsidized s ta t e -a l l oca ted and state-produced inputs , so the staples producer can compete with other regions and obtain maximum value . Offe argues the main reason for state intervent ion i s to maintain the o v e r a l l accumulation process i n c a p i t a l i s t soc ie ty . In def in ing the s tate , he stresses the funct ional r e l a t i o n s h i p of the state to the accumulation process . -The Concept o f the C a p i t a l i s t S t a t e Offe ' s concept of the c a p i t a l i s t state i s derived from the " . . . r e l a t i o n s h i p between the state and the accumulation process" (Offe 1975:125). He underl ines t h i s point by saying that " . . . c e n t r a l to our d e f i n i t i o n [ i s ] . . . t h e way i t i s f u n c t i o n a l l y re la ted to and dependent upon the accumulation process" (Offe 1975:125). In the staples-dependent per iphera l s tate , the accumulation process i s subs tant ia l l y based on exchange re la t ionsh ips (between c a p i t a l and labour) , and revenues from i t s staples product ion. Offe defines the state i n terms of i t s r e l a t i o n s h i p to such an accumulation process . The four funct ional elements of Offe ' s d e f i n i t i o n of the c a p i t a l i s t state are: 1. The state has no authori ty to order production or to control it. Production/accumulation takes place in [private] enterprises that are sa id to be free i n the Theory 33 sense of "exempt from state control." 2. The s t a t e does not o n l y have the a u t h o r i t y , but the mandate to c r e a t e and s u s t a i n conditions of accumulation. 3. The [ c a p i t a l i s t s t a t e ' s ] power r e l a t i o n s h i p s , i t s very decision-making power depends ... upon the presence and c o n t i n u i t y of the accumulation p r o c e s s . In the absence of accumulation, e v e r y t h i n g , and e s p e c i a l l y the power of the s t a t e , tends t o d i s i n t e g r a t e . We can c a l l these t h r e e elements of the concept of the c a p i t a l i s t s t a t e the p r i n c i p l e s of "exclusion, maintenance and dependency," r e s p e c t i v e l y . Exclusion means ... t h a t the s t a t e i s not a c a p i t a l i s t i t s e l f , t h a t i s , something t h a t has i t s e x i s t e n c e o u t s i d e the accumulation p r o c e s s . Maintenance i m p l i e s t h a t t h i s p r ocess cannot perpetuate i t s e l f i n the absence of t h i s e x t e r n a l being, t h a t t h e r e are t h r e a t s and p o s s i b l e d i s t u r b a n c e s t o the process of accumulation t h a t r e q u i r e some s t a t e - o r g a n i z e d p r o t e c t i o n of the p r o c e s s . And dependency means t h a t t h i s p r o t e c t i v e d e v i c e i t s e l f would be threatened i f i t engaged i n p o l i c i e s i n c o n s i s t e n t w i t h i t s p r o t e c t i v e f u n c t i o n s . 4. L e g i t i m a t i o n , or the need f o r l e g i t i m a c y , adds an important fourth element t o the concept of the c a p i t a l i s t s t a t e . ...the s t a t e can o n l y function as a c a p i t a l i s t s t a t e by a p p e a l i n g t o symbols and and sources of support t h a t conceal i t s nature as a c a p i t a l i s t s t a t e (Offe 1975:126,127). When a p p l y i n g the f i r s t element (namely t h a t p r o d u c t i o n / a c c u m u l a t i o n takes p l a c e i n p r i v a t e e n t e r p r i s e s ) t o s t a p l e s p r o d u c t i o n , i t i s g e n e r a l l y the case t h a t s t a p l e s producing companies (pulp producers, metal r e f i n e r s , wood p r o c e s s o r s , chemical supply companies) are owned p r i v a t e l y , although p r o d u c t i o n / a c c u m u l a t i o n s t r u c t u r e s are i n c r e a s i n g l y o v e r l a p p i n g w i t h s t a t e s t r u c t u r e s (e.g. i n Crown c o r p o r a t i o n s ) . The staples-dependent s t a t e has l i m i t e d c o n t r o l over s t a p l e s producing companies. For i n s t a n c e , i t has l i t t l e c o n t r o l over when they produce, how they produce, and what Theory 34 they produce. It has no power to make them innovate or produce consumer goods. The second element, the mandate to "create and susta in conditions of accumulation" i s p a r t i c u l a r l y important at times when the state faces threats to the cont inuat ion of the accumulation process . Such threats in the state can be deal t with by the state at d i f f e r e n t l eve l s of accumulation: at the l eve l of i n d i v i d u a l accumulation uni t s (e .g . companies, f i r m s ) , at the l eve l of industr ie s (e .g . fores try or mining) , or at the regional l eve l (e .g . northern B r i t i s h Columbia). In t h i s way, the state f u l f i l l s i t s mandate to create and susta in condit ions of accumulation which are e s sent ia l to maintain i t s power. The s ta te ' s power r e l a t i o n s h i p depends upon a t h i r d element i n Offe ' s theory - - the cont inuat ion of the accumulation process . The accumulation of r o y a l t i e s from natural resources, of taxes from wages, and of p r o f i t s from the resource industr ie s accumulate c a p i t a l and power for the s ta te . P o l i t i c a l power i n the per iphera l s tate , therefore , i s s u b s t a n t i a l l y dependent upon the accumulation process generated by the staples product ion. The state needs to protect and maintain the process of accumulation at the pr iva te sector and state l e v e l , s ince i t i s i t s e l f dependent on t h i s process for i t s s u r v i v a l . T h e o r y 3 5 The s t a t e p r o v i d e s t h e c o n d i t i o n f o r h a r m o n i o u s c o e x i s t e n c e between t h e s e f u n c t i o n a l e l e m e n t s o f a c c u m u l a t i o n t h r o u g h t h e f o u r t h e l e m e n t , t h e l e g i t i m a t i o n by sym b o l s and o t h e r s o u r c e s o f s u p p o r t t o conceal i t s c a p i t a l i s t and s t a p l e s - d e p e n d e n t n a t u r e . To do t h i s , t h e s t a t e needs t o p r o j e c t " . . . t h e image o f an o r g a n i z a t i o n o f power t h a t p u r s u e s common and g e n e r a l i n t e r e s t s o f s o c i e t y a s a w h o l e . . . " ( O f f e 1 9 7 5 : 1 2 7 ) . S t a t e - g e n e r a t e d i n f r a s t r u c t u r e , f o r i n s t a n c e , c a n be p o r t r a y e d a s a m i r a c u l o u s e c o n o m i c and i n d u s t r i a l d i v e r s i f i c a t i o n c a t a l y s t w h i c h i s b e n e f i c i a l t o a l l o f s o c i e t y . P o l i c y Formation P r o d u c t i v e s t a t e a c t i v i t i e s r e q u i r e t h e f o r m a t i o n o f p o l i c i e s . I n s t a p l e s - d e p e n d e n t e c o n o m i e s , t h e a c c u m u l a t i o n f r o m s t a p l e s p r o d u c t i o n g e n e r a t e s i n s u f f i c i e n t c a p i t a l d u r i n g t i m e s o f a c u t e c o m p e t i t i o n w i t h o t h e r r e g i o n s . O f f e a r g u e s , t h e r e a s o n t h e s t a t e n e e d s t o d e v e l o p r e m e d i a l p o l i c i e s i s i n r e s p o n s e t o "a t w o f o l d weakness o f c o m p e t i t i v e a c c u m u l a t i o n i t s e l f " : . . . f i r s t , t h e e c o n o m i c weakness o f b e i n g u n a b l e t o p r o d u c e t h e n e c e s s a r y i n p u t s o f a c c u m u l a t i o n t h r o u g h a c c u m u l a t i o n i t s e l f ; a nd, s e c o n d , t h e weakness t h a t t h e r u l i n g c l a s s , b e i n g made up o f e s s e n t i a l l y competitive a c c u m u l a t i n g u n i t s , i s u n a b l e t o d e v e l o p a c l a s s c o n s c i o u s n e s s c o n t a i n i n g c o n s e n t e d and w o r k a b l e d i r e c t i v e s a s t o how t h e s t a t e s h o u l d o p e r a t e . ( O f f e 1 9 7 5 : 1 3 4 ) He m a i n t a i n s t h a t i n an e f f o r t t o overcome t h i s t w o f o l d d e f i c i e n c y , t h e s t a t e d e v e l o p s t h e p r o d u c t i v e a c t i v i t y w h i c h s u p p l e m e n t s t h e m a t e r i a l i n p u t t h a t i s needed f o r a c c u m u l a t i o n T h e o r y 36 ( O f f e 1 9 7 5 : 1 3 4 ) . To overcome t h o s e w e a k n e s s e s , t h e s t a t e o f f e r s i n c e n t i v e s and t h e r e q u i r e d i n p u t t o c o n t i n u e g a i n i n g r e v e n u e s f r o m t h e s t a p l e s economy. S p e c i a l p o l i c y c o n c e s s i o n s a r e made f o r t h e r u l i n g c l a s s ( e . g . s t a p l e s p r o d u c e r s , s h a r e h o l d e r s ) i n c a s e o f r u l i n g c l a s s c o n f l i c t . O b v i o u s l y t h e s t a t e c a n n o t a l w a y s be i n a c c o r d w i t h t h e r u l i n g c l a s s , s i n c e i t i s more i m p o r t a n t f o r t h e s u r v i v a l o f t h e s t a t e t o m a i n t a i n t h e o v e r a l l a c c u m u l a t i o n p r o c e s s t h a n i t i s t o a c h i e v e c o n s e n t among t h e r u l i n g c l a s s . -Perception of the Problem (by the State) O f f e s t r e s s e s t h e i m p o r t a n c e o f n o t s e e i n g t h e s t a t e o n l y a s a " p r o b l e m s o l v e r " , b u t a l s o a s a " p e r c e i v e r o f p r o b l e m s " . S o c i a l and e c o n o m i c p r o b l e m s t r i g g e r c h a n g e s i n t h e f o r m a l s t r a t e g i e s w h i c h t h e s t a t e a d o p t s . To d e a l w i t h them ( e . g . f o r m i n g s t a p l e s b u r e a u c r a c i e s o r t e c h n o c r a t i c p l a n n i n g i n Crown c o r p o r a t i o n s ) , t h e s e f o r m a l s t r a t e g i e s a l s o d e t e r m i n e how t h e s t a t e p e r c e i v e s t h e p r o b l e m s ( e . g . l a c k o f i n f r a s t r u c t u r e , o r e x p a n s i o n o f s t a p l e s d e v e l o p m e n t ) and f o r m u l a t e s p o l i c i e s . F o r what t h e s t a t e d o e s i f i t works on a p r o b l e m i s a dual process: I t o r g a n i z e s c e r t a i n a c t i v i t i e s and m e a s u r e s d i r e c t e d t o w a r d s t h e environment and i t a d o p t s f o r itself a c e r t a i n o r g a n i z a t i o n a l p r o c e d u r e l e g . a l l o c a t i v e s t a p l e s b u r e a u c r a c y t e c h n o c r a t i c p l a n n i n g , o r a d v i s o r y b o d i e s ] f r o m w h i c h t h e p r o d u c t i o n and i m p l e m e n t a t i o n o f p o l i c y emerges. S o c i a l and e c o n o m i c p r o b l e m s , a s i t e m s on t h e s t a t e a genda may t r i g g e r o f f c h a n g e s i n t h e f o r m a l s t r a t e g i e s a c c o r d i n g t o w h i c h t h e s t a t e o p e r a t e s , and c o n v e r s e l y t h e s e s t r a t e g i e s may s u b s t a n t i a l l y d e t e r m i n e b o t h t h e a b i l i t y o f t h e s t a t e t o p e r c e i v e p r o b l e m s and t h e n a t u r e o f t h e e n s u i n g p o l i c i e s ( O f f e 1 9 7 5 : 1 3 5 ) Theory 37 When a n a t u r a l resource r e g i o n develops an i n t e r v e n t i o n i s t s t a t e subordinate t o i t s s t a p l e s p r o d u c t i o n , i t s s t a t e employs a "dual p r o c e s s " when working on a problem: " I t o r g a n i z e s c e r t a i n a c t i v i t i e s and measures d i r e c t e d toward the environment [the n a t u r a l , s o c i a l , economic, and p o l i t i c a l ] and i t adopts f o r itself a c e r t a i n o r g a n i z a t i o n a l procedure (e.g. Crown c o r p o r a t e s t r u c t u r e , a d v i s o r y bodies, new departments, Commissions) from which the p r o d u c t i o n and implementation of p o l i c y emerges" (Offe 1975:135). O f f e d e l i n e a t e s t h r e e " l o g i c s " used i n the formal d e c i s i o n making process which operate i n p u b l i c a d m i n i s t r a t i o n . These t h r e e " l o g i c s " of p o l i c y p r o d u c t i o n are consensus, bureaucracy, and p u r p o s i v e a c t i o n (Offe 1975:136). O f f e argues t h a t n e i t h e r p o l i c y p r o d u c t i o n by consensus, nor bureaucracy are s u f f i c i e n t t o "decide upon p r o d u c t i v e s t a t e a c t i v i t y " (Offe 1975:136,140). Consensus becomes s u b v e r s i v e t o the a d m i n i s t r a t i o n s t r u c t u r e , and bureaucracy i s i n e f f i c i e n t or i n c a p a b l e . P r o d u c t i v e s t a t e a c t i v i t y r e q u i r e s p u r p o s i v e - r a t i o n a l a c t i o n (such as i n p l a n n i n g ) . Such s t a t e a c t i v i t y i s c o n t r o l l e d by a d i f f e r e n t impetus and d i f f e r e n t outcomes than b u r e a u c r a t i c a c t i v i t y : A bureaucracy i s c o n t r o l l e d by inputs - be i t w i l l of a r u l e r or the law. T h i s input i s t o be a p p l i e d s t r i c t l y , f a i t h f u l l y , and without e x c e p t i o n , and the r e s u l t i s supposed t o be "order." In c o n t r a s t , what p r o d u c t i v e s t a t e a c t i v i t y presupposes i s c o n t r o l by output: An a c t i v i t y i s "adequate" not i f i t conforms Theory 38 t o c e r t a i n e s t a b l i s h e d r u l e s and procedure, but mainly i f i t leads t o c e r t a i n r e s u l t s (Offe 1975:136) . Before p r o d u c t i v e s t a t e a c t i v i t y can begin, q u e s t i o n s about the outcome of the p r o d u c t i v e input (not r a i s e d i n a l l o c a t i v e s t a t e a c t i v i t i e s ) have to be asked. For i n s t a n c e , O f f e i n d i c a t e s , some of the f o l l o w i n g q u e s t i o n s need t o be c o n s i d e r e d b e f o r e s t a r t i n g p r o d u c t i o n . : What i s the f i n a l product, or purpose of s t a t e p r o d u c t i o n ? How much i s needed i n a p a r t i c u l a r s i t u a t i o n ? What i s the most e f f i c i e n t way of producing i t ? Who should r e c e i v e i t ? At what p o i n t i n time and f o r what l e n g t h of time? How should i t be f i n a n c e d , and what p r i o r i t i e s should be f o l l o w e d i n case of c o s t i n c r e a s e s and/or revenue decreases? (Offe 1975:136) I f the r e s u l t i s t o be b u i l d i n g an i n f r a s t r u c t u r e or producing a commodity, the output determines the type of i n s t i t u t i o n needed t o c a r r y out the completion of such a p r o j e c t . Since p r o d u c t i o n u s u a l l y occurs i n p r i v a t e s e c t o r o r g a n i z a t i o n s , the o r g a n i z a t i o n a l s t r u c t u r e chosen by the s t a t e needs t o resemble a p r i v a t e s e c t o r o r g a n i z a t i o n (as Crown c o r p o r a t i o n s p a r t l y do). When seen from the purpo s i v e a c t i o n p e r s p e c t i v e ( c h a r a c t e r i z e d by p l a n n i n g ) , the output (e.g. the b u i l d i n g of dams) i s of primary importance i n shaping the s t r u c t u r e . Whether t h i s output c o n t r i b u t e s t o a more s t a b l e p r o v i n c i a l economy, o f t e n , becomes secondary and i s o v e r r i d d e n by p o l i t i c a l g o a l s . O f f e s p e c i f i e s t h r e e c o n d i t i o n s f o r p o l i t i c a l g o a l s t o be implemented s u c c e s s f u l l y i n a p u r p o s i v e - r a t i o n a l manner: 1) Theory 39 t h e r e must be " c l e a r - c u t g o a l s , " 2) "...there must be r e l a t i v e s t a b i l i t y of c o n d i t i o n s a t l e a s t f o r the l e n g t h of the p r o d u c t i o n c y c l e , " and 3) "...the p u r p o s i v e - r a t i o n a l type of a c t i o n i s a p p l i c a b l e o n l y where s i d e - e f f e c t s of the p r o d u c t i o n process can be s a f e l y ignored (or compensated f o r ) by the o r g a n i z a t i o n " (Offe 1975:138,139). For the s t a t e t o s e t " c l e a r - c u t g o a l s " f o r a s t a p l e s producing r e g i o n i m p l i e s t h a t courses of a c t i o n i n the r e g i o n are p r e d i c t a b l e . However, growth i n s t a p l e s p r o d u c t i o n i s s u b s t a n t i a l l y dependent on the economic, s o c i a l , and p o l i t i c a l environment of manufacturing c e n t e r s (e.g. i n North America, A s i a , and Europe). T h i s dependence, combined with the l a c k of incremental development of secondary i n d u s t r y are very u n l i k e l y t o p r o v i d e " r e l a t i v e s t a b i l i t y " d u r i n g the p l a n n i n g or p r o d u c t i o n c y c l e of s t a t e i n p u t s . -Contradiction (Planning) Because of the l a c k of d i v e r s i f i c a t i o n combined with p e r s i s t e n c e of s t a p l e s dependence, i n other words the l a c k of incremental growth or products i n n o v a t i o n , " . . . e x t e n s i v e p r o d u c t i v e i n p u t s o r g a n i z e d by the s t a t e are an i n d i s p e n s a b l e p r e r e q u i s i t e f o r the accumulation process i n advanced c a p i t a l i s t s o c i e t i e s to take p l a c e . . . " ( O f f e , 1975, p. 142). The t e c h n o c r a t i c approach does not work, because t e c h n o c r a t i c p l a n n i n g i n a staples-dependent economy and m a i n t a i n i n g t h i s economy through " i n d u s t r i a l i z a t i o n - b y - T h e o r y 40 i n v i t a t i o n , " r e s u l t s i n s u b s t a n t i a l d e c i s i o n c o n t r o l b e i n g h e l d o u t s i d e t h e p r o v i n c e . P l a n n i n g p r o d u c t i v e i n p u t s f o r f o r e i g n c o n t r o l l e d s t a p l e s p r o d u c e r s by means o f "...an i n s t r u m e n t a l - r a t i o n a l mode o f o p e r a t i o n p r e s u p p o s e s ... a d e g r e e o f c o n t r o l o v e r t h e r e l e v a n t v a r i a b l e s t h a t i s a t y p i c a l o f t h e c a p i t a l i s t [ s t a p l e s ] s t a t e " ( O f f e 1975:143). "...The amount o f s t a t e power r e q u i r e d f o r c o m p r e h e n s i v e p l a n n i n g o f t h e p r o d u c t i o n p r o c e s s i s d e n i e d t o t h e s t a t e by t h e a c c u m u l a t i n g u n i t s t h e m s e l v e s " ( O f f e 1975:143). O f f e c l o s e s w i t h t h e q u e s t i o n : "what e n t i t l e s us t o t a l k a b o u t t h e c a p i t a l i s t s t a t e a s i f i t were p a r t o f s o c i a l r e a l i t y " ? He g i v e s t h e f o l l o w i n g answer: What i s r e a l a b o u t i t [ t h e s t a t e ] i s t h e c o n s t a n t a t t e m p t t o r e c o n c i l e and make c o m p a t i b l e t h e s e v a r i o u s f u n c t i o n s [ r e l a t e d t o a c c u m u l a t i o n ] w i t h i t s i n t e r n a l s t r u c t u r e o r mode o f o p e r a t i o n . B u t what i s e q u a l l y r e a l i s t h e f a c t t h a t t h e r e i s n e i t h e r v i s i b l e n o r t o be a n t i c i p a t e d a s t r a t e g y t h a t a c t u a l l y does r e c o n c i l e t h e s e f u n c t i o n s a nd t h u s a c h i e v e a b a l a n c e d i n t e g r a t i o n o f t h e s t a t e a nd t h e a c c u m u l a t i o n p r o c e s s , t h a t i s , a r e l i a b l e and w o r k a b l e s t r a t e g y o f " s y s t e m s m a i n t e n a n c e " ( a s many r a d i c a l s b e l i e v e ) ( O f f e 1975:144). -Application The t h e o r y o f t h e s t a t e i n Canada i s i n i t s d e v e l o p m e n t a l s t a g e s , l i n k a g e s between t h e s t a t e complex o f i n s t i t u t i o n s , g o v e r n m e n t , i t s a c c u m u l a t i o n and l e g i t i m a t i o n f u n c t i o n s a r e s t i l l b e i n g e s t a b l i s h e d . 7 The u s e o f a b l e n d e d t h e o r y , a s i n t r o d u c e d a b o v e , c a n be s e e n a s an e x p l o r a t i o n o f i n s i g h t s 7 Leo P a n i t c h , "The r o l e a nd n a t u r e o f t h e C a n a d i a n s t a t e , " The Canadian State ( T o r o n t o : U n i v e r s i t y o f T o r o n t o P r e s s , 1983) pp. 3-27. Theory 41 i n t o the f u n c t i o n s of the p e r i p h e r a l s t a t e . The purpose i n the a p p l i c a t i o n of the theory i s t o understand both c o n t i n u i t y and change of f u n c t i o n of the resource dependent s t a t e and t o ex p l o r e the c o n t r a d i c t i o n s i n i t s mode of o p e r a t i o n . The mode of o p e r a t i o n ( a l l o c a t i v e and p r o d u c t i v e ) by which the s t a t e i n t e r v e n e s w i l l . b e a p p l i e d t o the a l l o c a t i o n of n a t u r a l r e s o u r c e s , and the i n t e r v e n t i o n by means of s t a t e - p r o d u c t i o n w i l l be a p p l i e d t o the p r o d u c t i o n of energy r e s o u r c e s . B.C.Hydro i s approached as the p u r p o s i v e - r a t i o n a l ( p l a n n i n g , and b u i l d i n g ) agency which b r i n g s the energy re s o u r c e i n t o p r o d u c t i o n f o r the development of primary and secondary i n d u s t r y . The c o n t i n u i t y of s t a t e f u n c t i o n s with r e s p e c t t o the pr o d u c t i o n of s t a p l e s w i l l be examined i n c o n t r a s t t o i n n o v a t i o n (the development of secondary i n d u s t r y and consumer goods manufacturing). In p a r t i c u l a r , the government's and B.C.Hydro's r o l e i n the p r o d u c t i o n of energy f o r s t a p l e s producers w i l l be c o n t r a s t e d with the e x p e c t a t i o n s of d i v e r s i f i e d i n d u s t r i a l development. O f f e ' s concept of the c a p i t a l i s t s t a t e ( d e r i v e d from i t s r e l a t i o n s h i p t o the accumulation process) and the f o u r p r i n c i p l e s ( e x c l u s i o n , maintenance, dependency, and l e g i t i m a t i o n ) w i l l be employed t o analyze the i n s t i t u t i o n a l f o r c e of B.C.Hydro. I f B.C.Hydro i s t o be a major Theory 42 i n s t i t u t i o n a l force within the state and the instrument (means) of the state of productive intervention, then Hydro must f u l f i l l the accumulation functions well. B.C.Hydro and the government need to plan t h e i r productive interventions. However, such planning i s subject to a major contradiction. The contradiction, as i d e n t i f i e d by Offe, i s between the a b i l i t y to plan and the planning denied by the accumulating units . The "unplanned surplus" w i l l be examined with reference to the government's and B.C.Hydro's a b i l i t y to plan and the planning denied by the staples producers. The dynamic of change i n Offe's theory originates from the perceived and real threats (competition, recession, lack of development) i n the environment of the state. Seen from such a perspective, the surplus and "power trap" conditions lead to the change of internal mode of operation of B.C.Hydro (production planning to a l l o c a t i o n planning) and the i n t e n s i f i c a t i o n of staples dependence. Hydro's i n s t i t u t i o n a l force which stems from maintaining the functions of accumulation through productive intervention, (production for export) w i l l be re-analyzed i n i t s larger foreign environment. What an application of t h i s t h e o r e t i c a l approach reveals i s the extension of the staples dependence, despite the i n t e r n a l changes and approaches the state takes to overcome T h e o r y 43 t h i s d e p e n d e n c e . The p e r i p h e r a l r e s o u r c e s t a t e a p p e a r s t o a d o p t a n 'autonomous l o g i c ' ( E i g e n g e s e t z l i c h k e i t s ) o f r e p e a t e d s t a p l e s d e p e n d e n c y w i t h i n i t s s t r u c t u r e s . 8 Weber, Economy and Society, V o l u m e 2, e d . G u e n t h e r R o t h a n d C l a u s W i t t i c h ( B e r k e l e y : U n i v e r s i t y o f C a l i f o r n i a P r e s s , 1978), p.1002. State Intervention 44 CHAPTER I I I STATE INTERVENTION IN THE ALLOCATION OF NATURAL RESOURCES AND IN THE PRODUCTION OF HYDROELECTRIC POWER I n t r o d u c t i o n In B r i t i s h Columbia staples producers need natural resources which are a l l oca ted by the state and energy resources which are e i ther sel f -generated or state-produced. This chapter w i l l describe and analyze the development of B.C.Hydro i n the context of the s t r u c t u r a l condit ions (for example, lack of economic development, or need for natural resource supply expansion) during the expansionary period i n B r i t i s h Columbia's staples-dependent economy. I t w i l l be argued that state a c t i v i t y occurs p r i m a r i l y by two modes of in tervent ion: the a l l o c a t i v e and the productive mode of in t ervent ion . Both are employed to maintain the accumulation process i n i t s staples-dependent order . The a l l o c a t i v e mode of in tervent ion i s used to a l l o c a t e the s tate ' s natural resources to staples producers and thereby a staples-dependent order i s maintained. The productive mode of in tervent ion occurs by way of producing the hydroe lec tr i c i n f r a s t r u c t u r e (and generating e l e c t r i c i t y ) . Such productive intervent ions are preceded by p o l i c y formation. A l l o c a t i o n o f R e s o u r c e s B r i t i s h Columbia has the r i g h t to a l l o c a t e i t s own r e - sources, having j u r i s d i c t i o n over the development of i t s minerals , f ore s t s , and flowing water. Two of the m i n i s t r i e s S t a t e I n t e r v e n t i o n 45 w h i c h a l l o c a t e B r i t i s h C o l u m b i a ' s n a t u r a l r e s o u r c e s a r e t h e M i n i s t r y o f F o r e s t s and t h e M i n i s t r y o f E n e r g y , M i n e s and P e t r o l e u m R e s o u r c e s . The v i r g i n f o r e s t s o f B r i t i s h C o l u m b i a d i d n o t need t o be p r o d u c e d by t h e s t a t e . They a r e a l l o c a t e d t o s t a p l e s p r o d u c e r s by way o f l e g i s l a t i v e a c t s , government l e a s e s , s p e c i a l r i g h t s , and t h e management o f t h e M i n i s t r y o f F o r e s t s . The way t h e y a r e a l l o c a t e d i mposes a c e r t a i n o r d e r on s o c i e t y and t h e economy, s u c h a s t h e s t a p l e s p r o d u c t i o n , t h e a c c u m u l a t i o n p r o c e s s , t h e e n e r g y r e q u i r e m e n t s , and t h e own- e r s h i p s t r u c t u r e o f t h e f o r e s t i n d u s t r y . C u r r e n t l y 94 p e r c e n t o f t h e f o r e s t l a n d i n B r i t i s h C o l u m b i a i s owned and a d m i n i s t e r e d by t h e p r o v i n c i a l g o v e r n m e n t . R e t e n t i o n o f p u b l i c o w n e r s h i p o f f o r e s t l a n d began w i t h t h e L a n d O r d i n a n c e o f 1865. T h i s a l - l owed t h e government t o s e l l t i m b e r w h i l e r e t a i n i n g o w n e r s h i p o f t h e l a n d . 1 The s a l i e n t c o n s i d e r a t i o n s w i t h r e s p e c t t o s e l l i n g t h e t i m b e r f o r i n d u s t r i a l u s e a r e c o n t a i n e d i n t h e M i n i s t r y o f F o r e s t s A c t o f 1978 w h i c h gave t h e M i n i s t r y t h e c l e a r l y d e f i n e d mandate t o do t h e f o l l o w i n g : e n c o u r a g e maximum p r o d u c t i v i t y o f t h e f o r e s t r e s o u r c e ; manage, p r o t e c t , and c o n s e r v e t h e f o r e s t ; e s t a b l i s h a v i g o r o u s , e f f i c i e n t a nd w o r l d - c o m p e t i t i v e t i m b e r p r o c e s s i n g i n d u s t r y ; and a s s e r t t h e f i n a n c i a l i n t e r e s t of t h e Crown i n i t s F o r e s t . 2 I n l i n e w i t h 1 M i n i s t r y o f I n d u s t r y and S m a l l B u s i n e s s D e v e l o p m e n t , British Columbia Facts and Statistics ( V i c t o r i a , 1984), p . 47. 2 P r o v i n c e o f B r i t i s h C o l u m b i a , M i n i s t r y o f P r o v i n c i a l S e c r e t a r y and Government S e r v i c e s Organization of the B.C. Public Service ( V i c t o r i a : Queen's P r i n t e r , 1982), p . 119. S t a t e I n t e r v e n t i o n 46 t h i s m a n d a t e t h e " p r i v a t e o p e r a t o r s " c a n t i m e t h e c u t t i n g a n d r e p l a n t i n g o f t h e t r e e s s u b j e c t t o M i n i s t r y r e g u l a t i o n s a n d l i c e n s e s . 3 O v e r t h e y e a r s t h e number o f p r i v a t e o p e r a t o r s h o l d i n g l i c e n s e s a n d m a n a g i n g t h e f o r e s t h a v e d e c l i n e d . M a r c h a k f o u n d t h a t t h e B.C. F o r e s t S e r v i c e s u p p o r t e d a r g u m e n t s by l a r g e f o r e s t c o m p a n i e s on t h e b a s i s " . . . t h a t l a r g e r t i m b e r h o l d i n g s a n d l o n g e r - t e r m h a r v e s t i n g r i g h t s w o u l d a l l o w t h e m t o p l a n a n d t h e r e f o r e t o i m p l e m e n t s u s t a i n e d y i e l d p r i n c i p l e s . " 4 I n s t e a d , some f o r e s t z o n e s w e r e h e a v i l y o v e r c u t , o t h e r s u n d e r c u t , a n d y i e l d s f r o m f o r e s t l a n d s w e r e n o t s u s t a i n e d . The u s e o f t h e a l l o c a t i v e a u t h o r i t y o f t h e s t a t e was i n a d e q u a t e t o p r e v e n t s u c h p r a c t i c e s . O v e r t h e y e a r s a s m a l l e r number o f f o r e s t p r o c e s s i n g c o m p a n i e s , many f r o m o u t s i d e t h e p r o v i n c e , h a v e o b t a i n e d t h e r i g h t t o c u t B r i t i s h C o l u m b i a ' s t r e e s a n d h a v e c o n t r o l l e d t h e c h o i c e o f t h e wood e nd p r o d u c t . By 1975, o f t h e c o m m i t t e d a l l o w a b l e c u t 71.2 p e r c e n t o f t h e p r o v i n c i a l t o t a l w ent t o t h e 17 l a r g e s t c o m p a n i e s . They h a d g a i n e d s u b s t a n t i a l c o n t r o l o v e r 3 F o r management p u r p o s e s , t h e f o r e s t r e s o u r c e , i s d i v i d e d i n t o s u s t a i n e d y i e l d u n i t s known a s t i m b e r s u p p l y a r e a s ( TSAs) a n d t r e e f a r m l i c e n s e s ( T F L s ) . T i m b e r h a r v e s t i n g i n t h e s e u n i t s i s d e l e g a t e d t o p r i v a t e o p e r a t o r s u n d e r a v a r i e t y o f l i c e n s i n g a g r e e m e n t s . F o r e s t r y management r e s p o n s i b i l i t i e s i n TSAs a r e s h a r e d b e t w e e n t h e M i n i s t r y o f F o r e s t s a n d p r i v a t e o p e r a t o r s , w h i l e i n T F L s t h e y a r e t h e r e s p o n s i b i l i t y o f p r i v a t e o p e r a t o r s . M i n i s t r y o f F i n a n c e , Financial and Economic Review ( V i c t o r i a : Queen's P r i n t e r , A u g u s t 1985), p . 73. 4 P a t r i c i a M a r c h a k Green Gold ( V a n c o u v e r : UBC P r e s s , 1983), p. 37. State Intervention 47 r ights to fores t land. These large companies had an overwhelming percentage of the manufacturing capaci ty: lumber 47.6 per cent, pulp 99.6, paper 94.0, and Plywood and Veneer 7 1 . 1 . 5 By the end of 1981, only two of the pulp and paper companies operating i n B r i t i s h Columbia were owned by res idents , one by the B . C . Resource Investment Corporation (assuming i t s shareholders resided i n B . C . ) , and the other by the Prent ice and Bentley f a m i l i e s . Nearly a l l twenty-two ( in 1980 B . C . had 24 pulp m i l l s ) were owned by "private operators" elsewhere. Marchak found the fol lowing ownership s tructure: MacMillan Bloedel and Northwood are owned by Brascan-Noranda of Toronto. Weyerhaeuser, Scot t , Weldwood, and West Fraser have American parents . Crown Zel lerbach sold i t s B . C . holdings to a New Zealand f irm i n 1982. Tahsis i s co-owned by Canadian P a c i f i c Investments of Toronto and the East A s i a t i c Company of Denmark. B . C . Forest Products i s co-owned by the Alber ta Government's Energy corporat ion . Mead and Scott of the United States . Eurocan i s co-owned by Enzo-Gutzeit of Finland and West Fraser of the United States . Quesnel River Pulp i s co-owned by West Fraser and Daishowa-Marubeni of Japan. Cariboo Pulp and Paper i s co-owned by Weldwood and Daishowa- Marubeni. Crestbrook Forest Industries i s co-owned by Mi t sub i sh i and Honshu of Japan. The major t imber- holders are the pulp and paper companies. 6 The c o l o n i a l e x p l o i t a t i o n of f ore s t s , and i n d u s t r i a l i z a t i o n by fore ign staples producers has a long t r a d i t i o n with in the staples-dependent s ta te . In the 1980s the s o l i c i t i n g of fore ign investment includes the a v a i l a b i l i t y of f i n a n c i a l ass istance for t r a v e l ($2000 grants , and help while i n B . C . ) to those firms and associat ions whose 5 Marchak 1983, p . 84. 6 Marchak 1983, pp. 82,83. State I n t e r v e n t i o n 48 "products or s e r v i c e s c o n t a i n s i g n i f i c a n t B r i t i s h Columbia content." The M i n i s t r y of Industry and Small Business Development extends s p e c i a l a s s i s t a n c e t o those who want to s e l l t h e i r f i r m s t o a company which may want t o v e r t i c a l l y i n t e g r a t e i t s operation i n B r i t i s h Columbia. 7 The same M i n i s t r y i ssues an annual update on the p u b l i c a t i o n , British Columbia Facts and Statistics (1956, 1964, 1983) which i n d i c a t e s t h a t wood products are l a r g e l y shipped to the United S t a t e s , the United Kingdom, Europe and Japan ( i n 1956 71% U.S., 17% U.K.; i n 1964 70% U.S., 12% U.K; and i n 1983 57% U.S., 16.6% EEC, Japan 14%). The s t a p l e s products are shipped f o r processing elsewhere. The f a s t consumption of timber by f o r e s t companies r e q u i r e s the workers, h i r e d t o process the timber, t o adjust t o the changes caused by the processing of a sequence of t r e e s whose q u a l i t y i s d e c l i n i n g . The p r o v i n c i a l s t a t e not only a l l o c a t e s f o r e s t resources, but through i t s s t r a t e g y of c o n t i n u i n g " i n d u s t r i a l i z a t i o n - b y - i n v i t a t i o n " helps to impose a f o r e i g n dependency order on the economy. 7 The Program i s c a l l e d "Incoming Buyers" and i s described as f o i l o w s : 1. Designed t o a s s i s t f i r m s i n a t t r a c t i n g p o t e n t i a l buyers from outside the province. Often b r i n g i n g p o t e n t i a l purchasers t o view a p l a n t i s a va l u a b l e s a l e s t o o l f o r the f i r m concerned. 2. F i n a n c i a l support o f f e r e d c o n s i s t s of r e t u r n economy excursion a i r f a r e f o r the p o t e n t i a l buyer, to a maximum of $ 2 , 0 0 0 . 3. The m i n i s t r y r e t a i n s the r i g h t to encourage and a s s i s t the p r o s p e c t i v e purchaser i n v i s i t i n g as many l o c a l companies as i s deemed a p p r o p r i a t e . M i n i s t r y of Industry and Small Business Development, "Incoming Buyers," Program Directory, V o l . 10 ( V i c t o r i a : Province of B.C., A p r i l 1 9 8 1 ) , p. 10 . State Intervention 49 The B r i t i s h Columbia government indicates that i t s " . . . s tewardship ro le includes providing a healthy cl imate for growth i n the mining sector while maintaining s t r i c t contro l s on when, where and how such development i s conducted." 8 Many p o l i t i c a l l y d irec ted dec is ions are made to d i r e c t the bureaucracy i n the mineral a l l o c a t i o n process . The routine a l l o c a t i v e decis ions about minerals are made i n the Mineral Resources D i v i s i o n . This D i v i s i o n supervises the T i t l e s Branch which records the locat ion and work on mineral claims and leases (OBCPS 1982:82). 9 Since the state depends on accumulation to maintain i t s var ied funct ions , the Mineral Revenue Branch follows es tabl i shed legal norms to assess, c o l l e c t , and audit mineral revenue as prescr ibed by the fol lowing statutes: the Mineral Resource Tax Act, the Mineral Land Tax Act, the Coal Act, and the Petrol euro and Natural Gas ActlPart XI) (OBCPS 1982:84). The M i n i s t r y of Mines i s p r i m a r i l y preoccupied with the keeping of order ly reg i s tered c la ims, much as the Land Registry Of f i ce does for pr iva te property . The M i n i s t r y of Forests extends timber l icenses and scales the stands. I t i s l arge ly preoccupied with the smooth funct ioning of forest e x p l o i t a t i o n , not necessar i ly i n the publ i c i n t e r e s t . This i s more l i k e l y to serve pr iva te i n t e r e s t s . The contrad ic t i on i s 8 The Province of B r i t i s h Columbia, Organization of the B.C. Public Service ( V i c t o r i a : Queen's Pr in ter for B r i t i s h Columbia, 1982), p. 81. 9 OBCPS stands for the manual Organization of the B.C. Public Service, see footnote above. S t a t e I n t e r v e n t i o n 50 t h a t p r i v a t e i n t e r e s t s i n t u r n a r e t o d e v e l o p t h e p r o v i n c i a l f o r e s t s a n d m i n e r a l economy a c c o r d i n g t o p u b l i c i n t e r e s t s . M i n i s t r i e s h a v e t r a d i t i o n a l l y h a n d e d o v e r t h e e x t r a c t i o n o f n a t u r a l r e s o u r c e s t o p r i v a t e a c c u m u l a t i n g u n i t s i n r e t u r n f o r r o y a l t i e s a n d t a x b e n e f i t s . B r i t i s h C o l u m b i a ' s g o v e r n m e n t o b t a i n s a s u b s t a n t i a l p o r t i o n o f i t s r e v e n u e d i r e c t l y o r i n d i r e c t l y f r o m t h i s p r o c e s s . I n t h e f i s c a l y e a r 1 9 8 4 / 8 5 n a t u r a l r e s o u r c e r e v e n u e s ( $ 7 2 6 . 5 m i l l i o n ) , m i n e r a l r e v e n u e s ( $ 5 5 . 7 m i l l i o n ) , a n d f o r e s t r e v e n u e s ( 1 3 1 . 4 m i l l i o n ) ; i n a d d i t i o n , t a x e d e m p l o y m e n t i n p r i v a t e a d m i n i s t r a t i o n s o f t h e r e s o u r c e e x t r a c t i o n c o r p o r a t i o n s f o r m a s u b s t a n t i a l p o r t i o n o f t h e p r o v i n c i a l b u d g e t . 3 - 0 I n summary, t h e B r i t i s h C o l u m b i a p r o v i n c i a l s t a t e i s owner a n d s u p p l i e r o f t h e n a t u r a l r e s o u r c e s a n d t h e r e f o r e r e q u i r e d , by t h e n a t u r e o f t h i s d u a l r o l e , t o i n t e r v e n e i n t h e s t a p l e s economy i n o r d e r t o a l l o c a t e t h e n a t u r a l r e s o u r c e s . I n t h e f o r e s t i n d u s t r y , t h i s a l l o c a t i o n p r o c e s s h a s f a v o r e d t h e c o n c e n t r a t i o n o f o w n e r s h i p by s t a t e s u p p o r t o f l a r g e , e x t e r n a l l y - o w n e d c o r p o r a t i o n s . Many o f them a r e v e r t i c a l l y i n t e g r a t e d ( e . g . p u l p m i l l c o m p a n i e s w h i c h own t h e i r p a p e r - m a k i n g i n d u s t r i e s ) e l s e w h e r e a n d u n l i k e l y t o d e v e l o p s e c o n d a r y i n d u s t r y i n B r i t i s h C o l u m b i a , b u t c o n t i n u e s t a p l e s p r o d u c t i o n . The power o f t h e s t a t e h a s n o t b e e n u s e d t o a v o i d t h e r e c u r r i n g p r o b l e m s o f t h e s t a p l e s - d e p e n d e n t economy. 10 The P r o v i n c e o f B r i t i s h C o l u m b i a Financial and Economic Review F o r t y - f i f t h E d i t i o n , A u g u s t 1 9 8 5 , p. 1 1 . S t a t e I n t e r v e n t i o n 51 P r o d u c t i o n o f E l e c t r i c i t y ( F i r s t I n t e r v e n t i o n 1945) -Rural E l e c t r i f i c a t i o n P o l i c y E a r l y i n t h i s c entury, many s m a l l e r communities o b t a i n e d t h e i r e l e c t r i c i t y from m u n i c i p a l u t i l i t i e s and some remote se t t l e m e n t s would use e l e c t r i c i t y which was generated by the nearby i n d u s t r y . 1 1 The number of agencies s u p p l y i n g e l e c t r i c i t y t o communities and m u n i c i p a l i t i e s grew. "In 1 9 0 9 , 23 agencies s u p p l i e d e l e c t r i c power. By 1930 t h i s had i n c r e a s e d t o 4 1 , and by 1944 t o 6 5 . Many of these agencies were s m a l l , s e r v i n g o n l y a few customers and as a r e s u l t some r a t e s were h i g h . . . " 1 2 The r a t e s v a r i e d w i d e l y , and subsequent t o a Commission being appointed i n 1 9 3 8 , the r a t e s were r e a p p r a i s e d and r e d u c t i o n s f o l l o w e d . Afterward, the government i n d i c a t e d i t s i n t e n t i o n t o improve r u r a l s e r v i c e . Mary T a y l o r , i n her geographic study of the e l e c t r i c a l i n d u s t r y i n B r i t i s h Columbia, i n d i c a t e s t h a t no p r e f e r e n c e s f o r government ownership was s t a t e d i n the Progress Report of the Rural E l e c t r i f i c a t i o n Committee. However, these o b j e c t i v e s were formulated i n t h i s r e p o r t : There are i n Canada, the United S t a t e s , and other c o u n t r i e s examples of s e l f - s u s t a i n i n g e l e c t r i c u t i l i t i e s , d i s t i n g u i s h e d by p r o g r e s s i v e expansion of f a c i l i t i e s , i n c r e a s e d per customer use of e l e c t r i c i t y and reduced average c o s t t o the p u b l i c . 11 Mary D. T a y l o r , "Development of the E l e c t r i c i t y I n d u s t r y i n B r i t i s h Columbia," M.A. T h e s i s (Vancouver: UBC Geography A p r i l 1 9 6 5 ) , p. 1 7 4 . 12 T a y l o r 1 9 6 5 , p. 1 6 8 . S t a t e I n t e r v e n t i o n 52 . . . t h e s u c c e s s o f a u t i l i t y d o e s n o t d e p e n d u p o n a n y i n h e r e n t q u a l i t i e s o f p u b l i c o r p r i v a t e c o n t r o l . The s u c c e s s o f a u t i l i t y d e p e n d s upon t h e e f f i c i e n c y o f t h e a d m i n i s t r a t i o n a n d t h e z e a l o f c o m p e t e n t management,... . . . A l l r u r a l e l e c t r i f i c a t i o n i s i n some d e g r e e a n e x p a n s i o n o f t h e e s t a b l i s h e d c e n t r a l s t a t i o n i n d u s t r y [ p r o f i t a b l e e f f i c i e n c y ] a n d i s made p o s s i b l e o n l y by t h e i n t e r n a l s u b s i d y e l e m e n t o p e r a t i n g w i t h i n t h e u t i l i t y e n t e r p r i s e , s u p p l e m e n t e d i n some c a s e s by g o v e r n m e n t . 1 3 From t h i s r e p o r t , t h r e e m a j o r p o l i c y o b j e c t i v e s c a n be i d e n t i f i e d : 1) a c o m b i n a t i o n o f p r o g r e s s i v e e x p a n s i o n , i n c r e a s e d p e r c a p i t a c u s t o m e r u s e , a n d r e d u c e d a v e r a g e c o s t o f e l e c t r i c i t y ; 2) a s t r i v i n g f o r e f f i c i e n c y o f a d m i n i s t r a t i o n a n d z e a l o f c o m p e t e n t management; a n d 3) a ne e d f o r e s t a b l i s h e d u t i l i t i e s t o o p e r a t e t h e u n p r o f i t a b l e r u r a l e l e c t r i f i c a t i o n p r o c e s s . One way t o i n c r e a s e t h e p e r c u s t o m e r u s e o f e l e c t r i c i t y was t o a t t r a c t l a r g e i n d u s t r i a l c u s t o m e r s . A l t h o u g h n o t i n d i c a t i n g a p r e f e r e n c e f o r p u b l i c o r p r i v a t e a d m i n i s t r a t i o n , t h e g o v e r n m e n t d e c i d e d on p u b l i c c o n t r o l o v e r t h e r u r a l p r o d u c t i o n o f e l e c t r i c i t y . The e f f i c i e n c y o f a d m i n i s t r a t i o n a n d c o m p e t e n t management i s n o t r e a d i l y a c c o m p l i s h e d i n a n a d m i n i s t r a t i v e b u r e a u c r a c y b u t i s u n d e r s t o o d t o o c c u r i n f i r m s managed a s i n t h e p r i v a t e s e c t o r , w i t h i n t h e Crown c o r p o r a t e f o r m . 13 The B.C. R u r a l E l e c t r i f i c a t i o n C o m m i t t e e , Progress Report ( V i c t o r i a : K i n g ' s P r i n t e r , 1944) , p p . 19 ,20 , c i t e d by T a y l o r 1965, p p . 170, 89. State Intervention 53 -The B . C . Power Commission The B.C. Power Commission, a p r o v i n c i a l Crown corporate u t i l i t y , came into existence on A p r i l 17, 1945 as a r e s u l t of the " E l e c t r i c Power Act." 1 -* This was an Act to provide f o r improving the a v a i l a b i l i t y and supply of e l e c t r i c a l power. It also empowered the government to expropriate any power s i t e , or power plant needed i n order to generate and supply power. This Act brought about the f i r s t major productive intervention by the p r o v i n c i a l state i n the generation and d i s t r i b u t i o n of e l e c t r i c i t y . The main purpose of the act was to make e l e c t r i c i t y available at low prices i n most regions of the province where such service was not p r o f i t a b l e for the private sector. The government of the day appropriated the properties of many small u t i l i t i e s -- they served as bases to expand service into rural areas. As a r e s u l t , the Power Commission's capacity increased from 14,700 to 324,735 Kilowatts between March 1948 and March 31, 1958. At the same time i t s service range expanded and by 1956 i t served most of the rural areas of the province. However, the lucrat i v e urban markets of the more populated areas, namely the lower part of Vancouver Island, Greater Vancouver, the west and southwest Kootenay areas, and Prince Rupert were shared by the larger u t i l i t i e s . B.C. E l e c t r i c , the largest, served the metropolitan areas of 14 B.C. Government, " E l e c t r i c Power: An Act to Provide for Improving the A v a i l a b i l i t y and Supply of E l e c t r i c a l Power" [Assented to 28th March, 1945.], B.C. Statutes 1945, Chapter 27, p. 45. S t a t e I n t e r v e n t i o n 54 t h e s o u t h w e s t e r n m a i n l a n d a n d V a n c o u v e r I s l a n d ; t h e West a n d E a s t K o o t e n a y Power c o m p a n i e s s e r v e d t h e S o u t h O k anagan a n d t h e E a s t K o o t e n a y s . 1 5 W h i l e s h a r i n g t h e m a r k e t w i t h t h e s e u t i l i t i e s , t h e B.C. Power C o m m i s s i o n c o n t i n u e d t o e x p a n d i t s a c q u i s i t i o n a n d b u i l d i n g o f g e n e r a t i n g f a c i l i t i e s , n o t o n l y f o r r e s i d e n t i a l , b u t a l s o f o r i n c r e a s e d i n d u s t r i a l u s e . F o r i n s t a n c e , w i t h r e f e r e n c e t o t h e B.C. Power C o m m i s s i o n ' s W h a t s h a n dam d e v e l o p m e n t , on t h e W h a t s h a n R i v e r , a s s u m p t i o n s o f a n a u t o m a t i c l i n k b e t w e e n c h e a p e l e c t r i c i t y a n d i n d u s t r i a l i z a t i o n by means o f f o r e s t r e s o u r c e s w e r e p r o m o t e d . I n t h e Power C o m m i s s i o n ' s m a g a z i n e Progress, t h e a u t h o r o f t h e 1951 a r t i c l e , "New I n d u s t r y a l r e a d y p r o m i s e d A r r o w L a k e s , " b o o s t s t h i s l i n k by c l a i m i n g t h a t : ... a $75,000,000 i n d u s t r y u s i n g W h a t s h a n power a n d t h e f o r e s t r e s o u r c e s o f t h e A r r o w L a k e s , s h a r p l y p o i n t e d [ s i c ] t h e c o n t e n t i o n t h a t p o w e r , w h e r e v e r i t i s d e v e l o p e d a n d made a v a i l a b l e a t r e a s o n a b l e c o s t , w o u l d be u t i l i z e d by i n d u s t r y f o r t h e a d v a n t a g e o f t h e c o u n t r y a s a w h o l e . 1 6 C o r r e s p o n d i n g l y , t h e C o m m i s s i o n - b e g a n s e t t i n g l o w r a t e s f o r p u l p m i l l s , m i n e s , a n d o t h e r b u l k u s e r s w h i l e a b s o r b i n g t h e c o s t s f o r p l a n t i n s t a l l a t i o n a n d o p e r a t i o n . The h i g h demand by t h e p u l p a n d p a p e r i n d u s t r y on V a n c o u v e r I s l a n d g a v e 15 N e i l S w a i n s o n , Conflict over the Columbia ( M o n t r e a l : M c G i 1 1 - Q u e e n ' s U n i v e r s i t y P r e s s , 1 9 7 9 ) , p. 33. 16 B.C. Power C o m m i s s i o n , Progress, "New I n d u s t r y A l r e a d y P r o m i s e d A r r o w L a k e s , " J u l y 1951, p. 10. O t h e r r e f e r e n c e s : "Power Means P r o g r e s s " - d o m e s t i c f l o a t ( A u g . 1 9 5 2 ) ; E l k F a l l s Co. L t d news p r i n t m i l l , A l b e r n i P l y w o o d , ( A u g . 1 9 5 2 : 3 ) . State Intervention 55 r i s e to further hydroe lec tr i c developments. 1" 7 I t was, nevertheless , soon noticed that while the costs to i n d u s t r i a l customers dropped, the operating costs of the Power Commission c l i m b e d . 1 8 In fact many m i l l s gave up generating t h e i r own e l e c t r i c i t y because i t was no longer p r o f i t a b l e for them to produce t h e i r own e l e c t r i c a l input . Furthermore, the Power Commission increas ing ly es tabl i shed the l inkages between production of staples from timber and the ready a v a i l a b i l i t y of power to continue the process of such staples product ion . By 1956 the Commission developed r u r a l e l e c t r i f i c a t i o n and i n d u s t r i a l loads on Vancouver Island and promoted expansion into the centra l i n t e r i o r of the province . C.W. Nash, the d i r e c t o r of load development wrote i n the opening remarks of the promotional study Pulp and Paper Opportunities in Central British Columbia: "The Central I n t e r i o r of B r i t i s h Columbia contains the elements of t imber, power, water, and transportat ion to support the p r o f i t a b l e operation of the pulp and paper industry ." The wastes of 450 small m i l l s operating around Prince George and the 160 small m i l l s near Quesnel would support a 300 ton unbleached kra f t pulp m i l l . In order to assure prospective investors the add i t i ona l timber source for pulp product ion, the promotional study indicated the general opinion " . . . t h a t the P r o v i n c i a l Government i s anxious to grant a l i cense i n t h i s area to pulp and paper i n t e r e s t s . " The report went on to p r e d i c t , as loads would outgrow thermal 17 B . C . Power Commission, Annual Report, 1956, p . 63. 18 Progress, August 1957, pp. 7,8. S t a t e I n t e r v e n t i o n 56 p l a n t s and enormous water power r e s o u r c e s , combined with a growing economy, would i n c r e a s e the demand f o r power, i t would not be long before the f i r s t hydro p r o j e c t i s c o n s t r u c t e d . The study then i t e m i z e d the advantages of s t a t e - g e n e r a t e d e l e c t r i c i t y f o r p r i v a t e companies: The c o n s t r u c t i o n a n d m a i n t e n a n c e o f h y d r o p r o j e c t s by t h e C o m m i s s i o n i s t o t h e a d v a n t a g e o f p r i v a t e e n t e r p r i s e . When t h i s i s d o n e , t h e p r i v a t e company w i l l r e a l i z e , t h r o u g h t h e C o m m i s s i o n , t h e a d v a n t a g e o f l o w i n t e r e s t r a t e s , l o w d e p r e c i a t i o n r a t e s , a n d n o n - l i a b i l i t y f o r c o r p o r a t i o n i n c o m e t a x . A l s o t h e f a c t t h a t t h e company's i n v e s t m e n t i s h e l d t o a minimum i s a n a d d e d a d v a n t a g e . . . . i t i s s u g g e s t e d t h a t p o t e n t i a l power i s a t r e m e n d o u s a s s e t t h a t c a n be d e v e l o p e d f o r i n d u s t r y i n t o l o w c o s t e l e c t r i c a l e n e r g y . T h i s c a n be done a n d w i l l be d o n e . When? Depends o n i n d u s t r y . 1 9 Promoting the a b s o r p t i o n of u n p r o f i t a b l e g e n e r a t i o n of e l e c t r i c i t y by the p r o v i n c i a l s t a t e i n order t o a t t r a c t l a r g e i n d u s t r y t o the northern and c e n t r a l B r i t i s h Columbia c o i n c i d e d w i t h the downturn i n the economy P r o d u c t i o n o f E l e c t r i c i t y (Second I n t e r v e n t i o n 1962) -Recession and I n f r a s t r u c t u r e D u r i n g t h e l a t e 1 9 5 0 s t h e f o r e s t i n d u s t r y i n B r i t i s h C o l u m b i a e x p e r i e n c e d a r e c e s s i o n . As T a b l e I i n d i c a t e s t h e u n e m p l o y m e n t r a t e r e a c h e d 8.58 % i n 1958 w h i c h was t h e h i g h e s t s i n c e 1 9 46. A t t h e same t i m e R o b e r t B o n n e r , t h e M i n i s t e r r e s p o n s i b l e f o r t h e D e p a r t m e n t o f I n d u s t r i a l D e v e l o p m e n t , 19 B r i t i s h C o l u m b i a Power C o m m i s s i o n Pulp and paper Opportunities in Central British Columbia, J u n e 1 9 5 6 , by C.W. N a s h , a n d H.L. B r i g g s , p p . 1,14,15,16,17. State Intervention 57 published that Mineral production i n 1959 had, at the same time, sunk below the l eve l s of ten years e a r l i e r . 2 0 Such periods of economic i n s t a b i l i t y are times when the state organized framework of production and accumulation i n the staples producing region becomes i n s u f f i c i e n t to maintain accumulation. Therefore, add i t i ona l input ( in B . C . i t i s often i n form of in fras truc ture ) into the staples economy i s required . TABLE I Comparison of Average Annual Unemployment As % of Labour Force Year B. C. Canada % % 1957 5.04 4.61 1958 8.58 7.03 1959 6.47 5.95 1960 8.50 6.95 1961 8.52 7.15 1962 6.61 5.90 1963 6.39 5.53 Average 7.16 6.16 Source: S t a t i s t i c a l Analys i s Department Commercial Services D i v i s i o n , B .C.Hydro , Economic Goals for B r i t i s h Columbia a P a r a l l e l Study to the Economic Council of Canada's Economic Goals For Canada to 1970, 6 J u l y , 1965, p . 6. When the state i s confronted with such uncer ta int i e s i n the accumulation process and plans to solve them through substant ia l productive in tervent ion , new p o l i c i e s need to be 20 Hon. R.W. Bonner ( M i n i s t e r ) , T . L . Sturgess (Deputy M i n i s t e r ) , 1959 Summary of Business A c t i v i t y in B r i t i s h Columbia ( V i c t o r i a : Department of I n d u s t r i a l Development, Trade, Commerce; Jan. 1960), S t a t i s t i c a l Supplement, p . XII . S t a t e I n t e r v e n t i o n 58 d e v e l o p e d . Shrum, t h e c h a i r m a n o f t h e B r i t i s h C o l u m b i a E n e r g y B o a r d (1961), t o g e t h e r w i t h t h e g o v e r n m e n t o f B r i t i s h C o l u m b i a , s u b m i t t e d s u c h a p o l i c y . -Dual R i v e r P o l i c y G o r d o n Shrum, i n h i s Report on the Columbia and Peace Power Projects (1961), a r g u e d t h a t t h e s o l u t i o n t o s t a g n a n t d e v e l o p m e n t , p a r t i c u l a r l y i n t h e n o r t h e r n 2 1 p a r t o f t h e p r o v i n c e ( t h e B.C. Power C o m m i s s i o n h a d a l r e a d y d e v e l o p e d t h e i n d u s t r i a l c a p a c i t y t o s e r v e t h e r e s o u r c e i n d u s t r y o n V a n c o u v e r I s l a n d ) was t o b u i l d t h e P e a c e R i v e r dam. He p o i n t e d t o t h e f o l l o w i n g b e n e f i t s : The P e a c e R i v e r p r o j e c t i s i n a r e g i o n o f l o w e c o n o m i c d e v e l o p m e n t . ... The r e s e r v o i r a r e a w i l l a c t a s a n i n l a n d w a t e r w a y w h i c h w i l l o p e n u p t h e T r e n c h a r e a f o r t i m b e r r e m o v a l , [ a n d ] m i n e r a l e x p l o r a t i o n ... i t i s f e l t by t h e B o a r d t h a t a n e a r l y s t a r t o n e i t h e r p r o j e c t [ t h e C o l u m b i a o r P e a c e ] w i l l p r o v i d e t h e P r o v i n c e w i t h a much-needed e c o n o m i c s t i m u l u s a n d c o n t r i b u t e t o c u r b i n g u n e m p l o y m e n t . 2 2 The p e r c e p t i o n o f t h e p r o b l e m was one o f n e e d e d i n t e r v e n t i o n t o b u i l d e x t r a i n f r a s t r u c t u r e , p r o v i d e c o n s t r u c t i o n e m p l o y m e n t a n d a d d e d g r o w t h i n t h e B r i t i s h C o l u m b i a r e s o u r c e economy. To r e s p o n d by way o f p r o d u c t i o n 21 M a r c h a k c i t e s P r e m i e r W.A.C. B e n n e t t ' s a i m s i n " o p e n i n g t h e N o r t h " : " I f t h e r e i s a n y t h i n g t h a t i s o f b a s i c i m p o r t a n c e t o t h e f u r t h e r d e v e l o p m e n t o f B r i t i s h C o l u m b i a . . . . i t i s t h e d e v e l o p m e n t o f t h e r i c h r e s o u r c e s o f t h e n o r t h e r n a n d c e n t r a l r e g i o n s " ( B u d g e t S p e e c h , 17, 1954), Green Gold, p. 39. 22 G o r d o n M. Shrum, Report on the Columbia and Peace Power Projects, ( V i c t o r i a : B r i t i s h C o l u m b i a E n e r g y B o a r d , J u l y 31, 1961), p. 28. S t a t e I n t e r v e n t i o n 59 i n t e r v e n t i o n , the p r o v i n c i a l s t a t e i n c r e a s e d i t s involvement i n extending the resource economy i n both modes ( a l l o c a t i v e and p r o d u c t i v e ) . I t needed t o pr o v i d e the s u b s t a n t i a l l y e x t r a p h y s i c a l i n p u t i n a d d i t i o n t o the i n t e r v e n t i o n i n an a l l o c a t i v e way. To pr o v i d e the l a r g e s c a l e p l a n n i n g and op e r a t i n g s k i l l s the p r o v i n c i a l government i n t e g r a t e d the B.C. E l e c t r i c Company i n t o the s t a t e apparatus. The p r o v i n c i a l s t a t e has by t h i s a c t i o n taken on an extended r o l e as producer of e l e c t r i c i t y and developer of a r e g i o n . -B.C.Hydro The B r i t i s h Columbia l e g i s l a t u r e met on August 1, and gave unanimous approval t o the Power Development A c t , 1 9 6 1 . 2 3 The Act p r o v i d e d f o r the a c q u i s i t i o n of the B.C. E l e c t r i c Company by the Prov i n c e of B r i t i s h Columbia, as w e l l as the Peace Power Power Development Company.2"* Shrum became the chairman of the board of B.C. E l e c t r i c . An i s s u e of 100 m i l l i o n p a r i t y bonds a t 5% were bought f o r $38 and the newspapers responded f a v o r a b l y (Worley 1971:235). The Sun (August 5, 1961) wrote o p t i m i s t i c a l l y : "by t a k i n g over the whole e l e c t r i c works, l o c k stock and b a r r e l , Premier Bennett's government has done more than r e v e r s e i t s e a r l i e r mistake i n the Wenner-Gren f r a n c h i s e . " (Worley 1971:235). The 23 B.C. Laws, s t a t u t e s , e t c . An a c t t o p r o v i d e f o r the r e o r g a n i z a t i o n of of the B r i t i s h Columbia E l e c t r i c Company L i m i t e d and the development of power r e s o u r c e s . Statutes of B.C. 1961, 2nd s e s s i o n , chapter' 4 . An a c t t o amend the Power Development Act, 1961. Statutes of B.C. 1962, chapter 50. 24 Ronald Worley, The Wonderful World of JV.A.tT. Bennett (Toronto: M c C l e l l a n d and Stewart L t d . , 1971), ps. 233. S t a t e I n t e r v e n t i o n 60 g o v e r n m e n t h a d r e s e r v e d m i n e r a l a n d f o r e s t r y r i g h t s f o r t h e S w e d i s h d e v e l o p e r A x e l W e n n e r - G r e n ( i n November 1956) d e f i n e d a s t h e " w a t e r s h e d o f t h e P e a c e R i v e r a n d t r i b u t a r i e s a b o v e H u d s o n Hope" p l u s t h e " W a t e r s h e d o f t h e K i t c h e k a R i v e r , " a n d a p a r t i a l w a t e r s h e d o f t h e P a r s n i p R i v e r . T h e s e r i g h t s w e r e c o n d i t i o n a l o n m a k i n g t i m b e r s u r v e y s , r a i l w a y s u r v e y s , a n d t o " s u r v e y t h e w a t e r s o u r c e s o f t h e p r o p o s e d a r e a o f d e v e l o p m e n t w i t h t h e o b j e c t o f h y d r o d e v e l o p m e n t . " 2 5 W e n n e r - G r e n ' s P e a c e Power D e v e l o p m e n t Company p r o d u c e d a r e p o r t w h i c h i d e n t i f i e d t h e o u t l e t f o r power a s B r i t i s h C o l u m b i a a n d t h e P a c i f i c N o r t h w e s t , y e t n o t e d a p o s s i b l e e x p o r t d i f f i c u l t y , n a m e l y , t h e t r a n s m i s s i o n p r e f e r e n c e g i v e n t o U.S. p u b l i c a g e n c i e s by B o n n e v i l l e (U.S. f e d e r a l u t i l i t y ) . 2 6 A t t h e t i m e o f t h e B . C . E l e c t r i c t a k e o v e r , t h e s h a r e s o f t h e P e a c e Power D e v e l o p m e n t Company w e r e b o u g h t by t h e g o v e r n m e n t o f B r i t i s h C o l u m b i a . A l t h o u g h B r i t i s h C o l u m b i a n s may s u p p o r t e c o n o m i c d e v e l o p m e n t , s u b s t a n t i a l o p p o s i t i o n t o t h e i n t e r v e n t i o n ( t h e t a k e - o v e r o f B.C. E l e c t r i c ) by t h e g o v e r n m e n t came f r o m a f r a c t i o n o f t h e b u s i n e s s c o m m u n i t y . A t t h e t i m e o f t h e t a k e o v e r , when c o n t r o v e r s y s u r r o u n d e d t h e f a i r n e s s o f payment f o r t h e B.C. E l e c t r i c s h a r e s , Howard T. M i t c h e l l , n e w l y 25 " T e x t o f Wenner G r e n Memorandum o f I n t e n t " Western Business and Industry V o l . 3 1 , M a r c h 1 9 5 7 , p p . 71, 7 2 . 26 P e a c e R i v e r D e v e l o p m e n t Company Power Capabilities and Operating Aspects of the Peace River Project and a Pacific International Power Pool ( V a n c o u v e r , May 1960) p p . i , 2 5 , 2 7 . State Intervention 61 e lected nat ional v ice -pres ident of the Canadian Chamber of Commerce, t o l d the Chamber [on September 21, 1961]: 'You see a s t i l l - d a z e d B r i t i s h Columbian p u b l i c l y on view t r y i n g to c o l l e c t h i s thoughts a f ter d iscovering that h i s beloved f ree -enterpr i se province , without even a vote to favor such a course, has a r r i v e d at the p o s i t i o n of being the most h i g h l y - s o c i a l i z e d society i n Canada, c l e a r l y well i n the lead of s o c i a l i s t i c a l l y b a c k s l i d Saskatchewan i n t h i s respect . 'He t i cked o f f the things that dis turbed him: the government was the biggest employer, ran i t s own rai lway, a g iant power system, a t r a n s i t system, bought and so ld natural gas, c o n t r o l l e d the operating p o l i c i e s of fores try and mining companies to a c r u c i a l degree, and could punish and reward by patronage on a scale prev ious ly unknown i n Canada. 'And remember,' he s a i d , ' a l l t h i s has happened i n a decade i n the name of free enterpr ise . '"27 M i t c h e l l d id not see that the "free-enterprise" corporations themselves needed an a l l o c a t i o n process to stave of f the chaotic scramble for resources which would have occurred. Furthermore, he f a i l e d to mention the generous a l l o c a t i o n of resources which were extended to the pr iva te sector , as well as the underwriting of a substant ia l por t ion of the generating cost for e l e c t r i c i t y which had been extended to industry . M i t c h e l l ' s perspect ive on the takeover i s i n contrast to the government's. The government perceived the need for increased productive intervent ion as a response to the uncertain ant i c ipa ted dangers of economic downturn i n the staples economy and lack of expansion of t h i s economy i n 27 Paddy Sherman, Bennett (Toronto: McClel land and Stewart L i m i t e d , 1966), p . 255. S t a t e I n t e r v e n t i o n 62 northern B r i t i s h Columbia and wanted to a v o i d f u t u r e economic s t a g n a t i o n . In the t r a n s i t i o n from p r i v a t e t o government h y d r o e l e c t r i c development, the nature of t h i s development i n B r i t i s h Columbia was changed from an investor-owned market- o r i e n t e d approach t o a p a r t i c u l a r government p l a n n i n g approach. During the expansion phase of h y d r o e l e c t r i c i n f r a s t r u c t u r a l development and the expansion of p u l p and m i n e r a l p r o d u c t i o n , B.C.Hydro c o n t r i b u t e d s u b s t a n t i a l l y t o the economic a c t i v i t y i n the p r o v i n c e . B.C.Hydro's I n s t i t u t i o n a l Force B.C.Hydro a Crown c o r p o r a t i o n of a staples-dependent c a p i t a l i s t s t a t e was s u b j e c t t o c e r t a i n e x c l u s i o n s , but became a major i n s t i t u t i o n a l f o r c e w h ile i n t e r v e n i n g t o m a i n t a i n the o v e r a l l accumulation process i n B r i t i s h Columbia. I w i l l argue t h a t B.C.Hydro 1) was excluded from e x t r a c t i n g p r o f i t from p r i v a t e i n d u s t r y and from d i r e c t i n g i n d u s t r i a l p r o d u c t i o n , 2) has f u l f i l l e d the p r o v i n c i a l s t a t e ' s mandate t o c r e a t e exchange r e l a t i o n s h i p s between labour and c a p i t a l , 3) has maintained the power of the s t a t e which depends on the accumulation process, and 4 ) has l e g i t i m i z e d the c o n t i n u a t i o n of the staples-dependent s t a t e by a p p e a l i n g t o d e s i r e s of r e g i o n a l autonomy and showing images of monumental t e c h n o l o g i c a l achievements which suggest impending i n d u s t r i a l i z a t i o n . State Intervention 63 B.C.Hydro i n r e l a t i o n to the staples industry i s a Crown corporat ion and not a pro f i t - s eek ing pr ivate corporat ion . In other words, B . C . Hydro as an agency of the state i s not expected to make p r o f i t s from industry . I t engaged i n production but remains outside the creat ion of surplus value and p r o f i t . Rather, i t s production of e l e c t r i c i t y becomes a meta-level input to gain a competitive edge i n the in t erna t iona l staples commodities t rade . As the Acres report ind ica tes : The low p r i c e of e l e c t r i c i t y r e l a t i v e to the i n t e r n a t i o n a l l y determined commodity pr i ce s of a l t e r n a t i v e sources of energy w i l l be of p a r t i c u l a r s ign i f i cance i n the future i f the export or iented industr ie s of B . C . , p a r t i c u l a r l y those which are c a p i t a l in tens ive , are to remain competit ive i n world m a r k e t s . 2 8 B.C.Hydro was planning part of i t s capacity for increased production i n the staples industry . But other then producing e l e c t r i c i t y , i t was not to produce e l e c t r i c a l and mechanical equipment for i t s own use, or have a s i g n i f i c a n t ro le i n the development of machinery used i n the staples production process . As a u t i l i t y , B.C.Hydro i s expected to stay outside the production process (besides producing e l e c t r i c i t y ) and therefore has no contro l over the type of product manufactured with i t s e l e c t r i c i t y . The l i n k between B.C.Hydro's e l e c t r i c i t y and the development of d i v e r s i f i e d production i s not d i r e c t . What i t can do i s plan for consumption of 28 Acres 1974, p . 2-10. State Intervention 64 e l e c t r i c i t y i n the already establ i shed staples production process , but i t cannot make others develop secondary industry . During i t s expanding phase B.C.Hydro became a government instrument to a t t r a c t investment c a p i t a l and employ labour. The giant investment projects (e .g . Revelstoke $2 b i l l i o n ) a t t rac ted large amounts of c a p i t a l and created employment. By 1977 the company employed 12,557 urban and migrating workers. In the c i t i e s t h i s work force consisted of executives, planners , engineers, t echnica l and adminis trat ive s t a f f . In the i n t e r i o r of the province , a large work force of migrating construct ion workers moved from dam s i t e to dam s i t e . To secure these investments, the Crown corporat ion used the p r o v i n c i a l c r e d i t ra t ing (backed by government guarantees) and by 1985 i t had accumulated debts t o t a l i n g $9,649 m i l l i o n . Another of the government's uses of the Crown corporat ion for mul t ip le object ives was the contr ibut ion i t was to make to the general wel l -being of the p r o v i n c i a l economy. During the "province-bui lding" phase i n B r i t i s h Columbia, B.C.Hydro became more than a mere Crown corporate u t i l i t y . I t became a s tate-organized entrepreneuria l protection-mechanism i n response to the recess ion and per iod ic s t r u c t u r a l problems i n the staples economy (of dep le t ion , overproduction and chronic absence of secondary i n d u s t r y ) . State Intervention 65 As a state-owned corporat ion B.C.Hydro , much l i k e a pr iva te corporat ion , accumulated assets and c o l l e c t e d an increas ing amount of taxes . I t accumulated assets i n the form of e l e c t r i c i t y - p r o d u c i n g large dams, transmission l i n e s , and other i n s t a l l a t i o n s . The ir value had r i s en to $10.6 b i l l i o n by 1985. The c o l l e c t i o n and retent ion of taxes i n B r i t i s h Columbia became part of the regional power strategy of the p r o v i n c i a l government. Premier W.A.C. Bennett warned the federa l government i n the B . C . l e g i s l a t u r e before the takeover: "I want to serve not ice to the federal government and everybody else that unless we get f a i r treatment we w i l l have to take over the B . C . E l e c t r i c . I can' t be l ieve that out of a l l the m i l l i o n s of p r o f i t s of the B . C . E l e c t r i c and other e l e c t r i c companies i n B . C . $ 350,000 i s ha l f the corporat ion tax . This government estimates i t s should receive $1.4 m i l l i o n . " 2 9 The former tax revenues of B . C . E l e c t r i c were paid both to the p r o v i n c i a l and federal government. By 1985, the B r i t i s h Columbia government alone (Hydro pays no federal income taxes) c o l l e c t e d $299 m i l l i o n (from B.C.Hydro's revenues of $1,953 m i l l i o n ) . 3 0 But t h i s i s not the only tax revenue generated as a part of b u i l d i n g and operating hydroe lec tr i c p r o j e c t s . The consul t ing company, Acres , i n i t s report , British Columbia Industrial Growth and Electricity Consumption, i temizes further p o t e n t i a l tax benef i t s , as a re su l t of hydroe l ec tr i c 29 Ronald Worley The Wonderful World of W.A.C. Bennett (Toronto: McClel land and Stewart L t d . , 1971), p . 231. 30 B.C.Hydro Annual Report 1984/85, pp. 2,3. S t a t e I n t e r v e n t i o n 66 or thermal g e n e r a t i n g p r o j e c t s , which would accrue t o government: "1. F e d e r a l d i r e c t and i n d i r e c t taxes [B.C.Hydro does pay f e d e r a l s a l e s t a x ] , 2. P r o v i n c i a l and M u n i c i p a l t a x e s , 3. S o c i a l s e c u r i t y payments, 4. S o c i a l s e c u r i t y b e n e f i t s , [and] 5. S u b s i d i e s [normally p a i d to the p r i v a t e s e c t o r ] . " 3 1 B.C.Hydro payments t o the government now i n c l u d e , under the category "tax" i n i t s annual r e p o r t s , "water r a t e s " which are payments f o r the use of r i v e r water i n order t o generate e l e c t r i c i t y . I t can be argued t h a t tax b e n e f i t s c o l l e c t e d d u r i n g the b u i l d i n g of h y d r o e l e c t r i c p r o j e c t s and the c o l l e c t i o n of a s s e t s enhance the power of B.C.Hydro w i t h i n the p r o v i n c i a l s t a t e . The Crown c o r p o r a t i o n , B.C.Hydro, and the B.C. Power Commission were at times s u b j e c t t o abuse by the governing p o l i t i c a l p a r t y . For i n s t a n c e , such i n s t i t u t i o n s become p o l i t i c a l instruments i n p r e p a r a t i o n f o r e l e c t i o n s and t h e i r t e c h n o l o g i c a l achievements are lauded t o produce v o t e s . The B r i t i s h Columbia Hydro and Power A u t h o r i t y was promoted as a p r o v i d e r of "cheap power" f o r the people by the S o c i a l C r e d i t P a r t y . Another example of p o l i t i c a l abuse was the B r i g g s a f f a i r which s e t a precedent i n u s i n g Crown c o r p o r a t i o n s to hide d i r e c t d e b t , 3 2 manipulate power r a t e s (which otherwise 31 Acres C o n s u l t i n g S e r v i c e s L t d . British Columbia Industrial Growth and Electricity Consumption, a r e p o r t prepared f o r B.C.Hydro, September 1974, p. 2-13. 32 Hydro's $9.5 b i l l i o n d o l l a r debt would be seen as d i r e c t government debt i f i t was run as a government department of h y d r o e l e c t r i c development. S t a t e I n t e r v e n t i o n 67 m i g h t r e f l e c t t r u e c o s t s ) , a n d e x t e n d n a t u r a l r e s o u r c e a c c e s s t o s e m i - g o v e r n m e n t c o r p o r a t i o n s . 3 3 A t t h e same t i m e , a d e s i r e f o r r e g i o n a l autonomy became v e r y s t r o n g d u r i n g t h e 19 6 0 s a n d 1 9 7 0 s . The W.A.C. B e n n e t t g o v e r n m e n t a i m e d t o b u i l d a s t r o n g p r o v i n c e a n d d e c r e a s e d e p e n d e n c e on C e n t r a l C a n a d a . The b u i l d i n g o f dams a n d s u b s e q u e n t i n d u s t r i a l d e v e l o p m e n t became p a r t o f t h e s t r a t e g y t o a c h i e v i n g t h i s i n d e p e n d e n c e . 3 4 A f t e r t h e t a k e o v e r o f B.C. E l e c t r i c , t h e B r i t i s h C o l u m b i a g o v e r n m e n t , f o l l o w i n g t h e p a t t e r n o f t h e s t a p l e s t r a d i t i o n , e x p a n d e d i n t o a r e a s more d i s t a n t f r o m t h e u r b a n c e n t e r s t o u s e r e s o u r c e s i n v a l l e y s , c a n y o n s , a n d r i v e r s f o r h y d r o e l e c t r i c p o w e r . The d y n a m i c i m p e t u s t o u n d e r t a k e l a r g e h y d r o e l e c t r i c p r o j e c t s came f r o m t h e s m a l l b u s i n e s s l e a d e r s a n d t h e i r a i m t o a g g r a n d i z e " t h e i r " p r o v i n c e . 33 "The g e n e r a l manager o f t h e B.C. Power C o m m i s s i o n , Mr. L e e B r i g g s , i s s u e d a t h r e e t h o u s a n d w o r d s t a t e m e n t i n w h i c h he d e c l a r e d t h a t he w o u l d n o t s t a n d i d l y by ' w h i l e t h o s e c h a r g e d w i t h t h e f i s c a l a f f a i r s o f t h i s p r o v i n c e p r o s t i t u t e t h e 80,000 c u s t o m e r s o f t h e B.C. Power C o m m i s s i o n t o f u l f i l l e l e c t i o n p r o m i s e s . ' The i s s u e s ... t h e g o v e r n m e n t w i s h e d t o r e f i n a n c e some i t s b o r r o w i n g on b e h a l f o f t h e Power C o m m i s s i o n i n i t s e f f o r t t o e l i m i n a t e a l l d i r e c t d e b t - m a k i n g t h e m i n s t e a d t h e o b l i g a t i o n s o f t h e power u t i l i t y , ... t h e r e q u e s t e d r a t e i n c r e a s e ... be h e l d u p , ... t h e t r e a s u r e i n n a t u r a l r e s o u r c e s i n t h e n o r t h i n t h e n o r t h ' w o r t h more t h a n K i n g S o l o m o n ' s m i n e s ' a l l e g e d l y b e i n g g i v e n t o t h e Wen n e r - G r e n i n t e r e s t s . " N e i l A. S w a i n s o n , Conflict over the Columbia ( M o n t r e a l : M c G i l l - Q u e e n s U n i v e r s i t y P r e s s , 1 9 7 9 ) , p. 96. 34 R i c h a r d s a n d P r a t t a r g u e t h a t i n t e r v e n i n g i n t h e economy f o r s u c h a n o b j e c t i v e , a s t a t e a d m i n i s t r a t i o n t a k e s p o w e r t o u t i l i z e r e s o u r c e s by e m p l o y i n g " e n t r e p r e n e u r i a l d e v e l o p m e n t s t r a t e g i e s . " J o h n R i c h a r d s a n d L a r r y P r a t t Prairie Capitalism ( T o r o n t o : M c C l e l l a n d a n d S t e w a r t L t d . , 1 9 7 9 ) , p p . 32 7 , 8 . S t a t e I n t e r v e n t i o n 68 B.C.Hydro , i n i t s ro le as a Crown corporate development company, can be used by the p r o v i n c i a l state to conceal the reg ion's nature as a an economically unstable staples producing per iphery . Images of successful i n d u s t r i a l developments, such as of monumental dams, c i r c u i t breaker g a l l e r i e s , penstocks, sp i l lways , hydraul ic gates, underground powerhouses, generators, turb ines , and push-button consoles of powerhouse contro l rooms are impressive. The W.A.C. Bennett dam i s two kilometres long and 183 metres h igh , 850 metres at the base and 9 metres t h i c k at the top; the G.M. Shrum Generating Stat ion (Powerhouse) b u i l t ins ide the bedrock of Portage Mountain i s 272 metres long, 20 metres wide and 47 meters high; and W i l l i s t o n Lake covers an area of 164 600 hectares (mostly drowned f o r e s t ) . 3 5 At the time of b u i l d i n g these dams during the 1960s and 1970s, super lat ive a t t r i b u t e s of "largest s ing le development," "biggest," "mightiest i n the world" f i t t e d with a c u l t u r a l period where houses, boats, appl iances , and cars grew bigger every year. The former chairman of Ontario Hydro S i r Adam Beck i d e n t i f i e d the thought behind g igant ic hydroe lec tr i c projec t s : "Nothing i s too big for us. Nothing i s too expensive. Nothing i s v i s i o n a r y . " 3 6 Mega-dams give the appearance of an already e x i s t i n g industry which bu i lds and produces mechanical equipment and e l e c t r i c a l instrumentat ion. The idea of the existence of a secondary 35 B . C . Hydro, ff .A.C.Bennett Dam & G.M.Shrum Generating Station: Peace River Power, a 4-page pamphlet ava i l ab l e i n 1986. 36 Paul McKay, Electric Empire: The Inside Story of Ontario Hydro (Toronto: Between The L ines , 1983), p . 15. S t a t e I n t e r v e n t i o n 69 i n d u s t r y o r a t l e a s t t h e l i n k t o a n i m p e n d i n g f o r m a t i o n o f c o n s u m e r g o o d s m a n u f a c t u r i n g a p p e a r s v e r y l o g i c a l . S u c h e n g i n e e r i n g a c c o m p l i s h m e n t s , g a v e s u p p o r t t o t h e o p t i m i s t i c a c c o u n t s o f a n i m p e n d i n g B r i t i s h C o l u m b i a i n d u s t r i a l e v o l u t i o n . C o n c l u s i o n A m a j o r c h a n g e h a s t a k e n p l a c e i n t h e way t h e p r o v i n c i a l s t a t e i n t e r v e n e d t o m a i n t a i n s t a p l e s - d e p e n d e n t a c c u m u l a t i o n . T h r o u g h i t s a l l o c a t i o n o f n a t u r a l r e s o u r c e s , i t h a s s u b s t a n t i a l l y c o n t r i b u t e d t o t h e c r e a t i o n o f a s t a p l e s - d e p e n d e n t o r d e r i n t h e economy. I n a d d i t i o n , t h e p r o v i n c i a l s t a t e i n t e r v e n e d by means o f p r o d u c t i o n o f e l e c t r i c i t y w h i c h was g e n e r a t e d a n d s o l d c h e a p l y t o t h e s t a p l e s p r o d u c e r s t h r o u g h t h e B.C. Power C o m m i s s i o n . T h e r e a f t e r , i t s l a r g e r s u c c e s s o r , B.C.Hydro b e g a n t o i n t e r v e n e i n t h e economy o f B r i t i s h C o l u m b i a i n a much b i g g e r way. I t r e t a i n e d i t s i n s t i t u t i o n a l f o r c e w h i l e b e i n g p e r c e i v e d a s a r e g i o n a l a n d a n i n t e r n a t i o n a l d e f e n s e m e c h a n i s m f o r c o m p e t i t i v e p r i c i n g o f s t a p l e s p r o d u c t s , a n d a s a means o f i n d u c i n g t h e d e v e l o p m e n t o f s e c o n d a r y i n d u s t r y . T h a t w h i c h h a s c o n t i n u e d by way o f p r o d u c t i v e a n d a l l o c a t i v e i n t e r v e n t i o n i s t h e m a i n t e n a n c e o f B r i t i s h C o l u m b i a ' s s t a p l e s d e p e n d e n c e . What h a s c h a n g e d by way o f t h e t w o i n t e r v e n t i o n s i s t h e f o l l o w i n g : w i t h i n t h e s t a t e a p p a r a t u s a n d i n t h e p r o v i n c i a l economy, B.C.Hydro h a s become an i n s t i t u t i o n a l f o r c e by c o o r d i n a t i n g t h e o b j e c t i v e s o f t h e S t a t e I n t e r v e n t i o n g o v e r n m e n t t h r o u g h p r o d u c t i v e i n t e r v e n t i o n i n t h e s t a p l economy. E x t e n s i o n 71 Chapter IV B.C.HYDRO'S LINK TO THE EXTENSION OF STAPLES DEPENDENCE I n t r o d u c t i o n In t h i s chapter the p e r c e p t i o n s and r a t i o n a l e s e v i d e n t i n r e p o r t s by B.C.Hydro economists, c o n s u l t a n t s , p l a n n e r s , and p o l i t i c i a n s about the use of the expanding i n f r a s t r u c t u r e and i n d u s t r i a l development w i l l be examined. These views are c o n t r a s t e d and compared wi t h the a c t u a l use of the r e s e r v o i r s by, f o r e s t companies and the use of e l e c t r i c i t y by B r i t i s h Columbia's manufacturing i n d u s t r y . In p a r t i c u l a r , i t s r e c e n t use by the Wood, Pulp & Paper, Chemical, and Primary Metals i n d u s t r y i s examined. I n f r a s t r u c t u r e Some i n f r a s t r u c t u r e was a l r e a d y i n p l a c e i n Northern B r i t i s h Columbia by the l a t e 1950s, f o r example: the A l a s k a Highway; some developed o i l and gas f i e l d s ; the Westcoast T r a n s m i s s i o n p i p e l i n e extending from the Peace R i v e r area t o the U.S. border (1957); and the B.C. Railway e x t e n s i o n i n 1958 (to Peace R i v e r , Chetwynd, F o r t S t . John, and Dawson Cr e e k ) . To c o n t i n u e the a d d i t i o n of i n f r a s t r u c t u r e and to improve the North's f u t u r e , hydro-power p i o n e e r s i n the government and i n the p r i v a t e s e c t o r planned t o develop the b i g g e s t e a r t h - f i l l power-dam. One of those p i o n e e r s , Dr. Gordon Shrum s e t h i s " p r o g r e s s i v e i d e a s " i n c o n t r a s t t o those of Alexander Mackenzie (who t r a v e l l e d upstream on the Peace R i v e r i n 1793). Shrum r e f l e c t e d : E x t e n s i o n 72 Mackenzie wrote i n t h i s j o u r n a l about the foaming r i v e r but i t i s d o u b t f u l t h a t he had any ide a o f the important r o l e t h a t power would one day p l a y i n the development of B r i t i s h Columbia. 1 Shrum foresaw the developmental r o l e of power and saw the i n f r a s t r u c t u r e i t s e l f promising c o l l a t e r a l b e n e f i t s . He po i n t e d t o the timber removal and p o s s i b l e m i n e r a l e x p l o r a t i o n made a c c e s s i b l e v i a the r e s e r v o i r (Shrum 1961:28), the r e s e r v o i r i t s e l f would become a n a t u r a l t r a n s p o r t i n f r a s t r u c t u r e t o remove f o r m e r l y i n a c c e s s i b l e timber. Twenty-five years a f t e r Shrum i n d i c a t e d the storage l a k e ' s t r a n s p o r t p o t e n t i a l , the manager of F i n l a y F o r e s t I n d u s t r i e s i n Mackenzie (an i n s t a n t f o r e s t company town of 6500 near the W i l l i s t o n Lake) s t r e s s e s the importance of towing l o g booms ac r o s s the la k e : " I f i t was to go dry i t would be q u i t e a c r i s i s around here." F i n l a y F o r e s t I n d u s t r i e s operates one saw m i l l and one e n e r g y - i n t e n s i v e groundwood pulp m i l l (the p u l p i s shipped t o the C r o f t o n m i l l i n B.C., t o Japan, I n d i a , and Mexico). The company i s the l a r g e s t bulk power customer of B.C.Hydro e l e c t r i c i t y i n the C e n t r a l I n t e r i o r D i v i s i o n ( a c t u a l consumption 239 GW.h i n 1981/82, expected consumption 330 GW.h i n 1982/83) . 2 In 1964, 1 Shrum comments on the e x p l o r e r s j o u r n a l i n the "Foreword" of the book The Big Dam Country, by Bruce Ramsey and Dan Murray, A P i c t o r i a l Record of the Development of the Peace R i v e r Country, (North Vancouver: In Focus P u b l i c a t i o n s L t d . , 1969). Dr. Gordon Shrum was the chairman of B.C.Hydro a t the time. 2 B.C.Hydro, Table 1, "Bulk Power," E x h i b i t 97, B.C. U t i l i t i e s Commission, S i t e C Hearings, 10 Feb. 1982, Sheet 2 of 4. Extension 73 i t obtained extensive timber l icenses i n the Trench ( in the Peace River region) and now uses the r e s e r v o i r ' s water surface provided by B.C.Hydro , rather than expensive logging roads, to transport the logs ( in the summer by log boom or barge, i n the winter by ice bridge) to i t s m i l l s . The transportat ion distances from the timber supply to the m i l l s are at present up to 75 and 100 miles across the water surface and within 3 years (by about 1989) w i l l encompass the f u l l length of the lake . In a d d i t i o n , logging roads are being b u i l t to the timber i n higher e levat ions to truck the logs to the the lake . The reservo ir has indeed become an important t ransporta t ion i n f r a s t r u c t u r e for both F in lay Forest Products and the company which owns 43.7% of the company's shares, B r i t i s h Columbia Forest P r o d u c t s . 3 B r i t i s h Columbia Forest Products uses the re servo ir i n much the same way. I t transports 1.7 m i l l i o n cubic meters of timber by water per year — i t s en t i re 1986 cut . In the summer, the timber i s transported by booming and towing; i n the winter , by low l eve l bridge (across the r e s e r v o i r ) , i ce br idge , or ice-breaking barge. From the fores t resource i t produces kraf t pulp and dimensional lumber i n i t s three saw m i l l s (the lumber i s so ld to the U.S . railway market). This company uses the reservo ir for t ransport . But instead of using the Peace River power as a primary source of energy, i t s e l f - 3 The information was obtained from Mr. B. Crooks (Manager of F in lay Forest Products i n Mackenzie) and Mr. Kar l Baker (logging manager of B . C . Forest Products i n Mackenzie) on Ju ly 22, 1986. Extension 74 generates 80 - 90% of i t s power from hog fue l (usual ly wood residue such as sawdust, shavings, bark, e tc . generated from processing raw timber) and i s s t r i v i n g towards energy s e l f - s u f f i c i e n c y . The answer given, by a spokesmen i n the corporate communications department of B . C . Forest Products, of whether b u i l d i n g the dam and providing the re servo ir made any d i f ference to the forest industry was that i t probably "speeded up the process" of tapping the fores t resource i n the Peace River area . Both companies agreed that the increased a c c e s s i b i l i t y to the fores t resource made a d i f ference to the development of the town of Mackenzie. Its instant development was analyzed by Marchak, i n Green Gold, i n terms of c las s s tructure and populat ion trans ience . Its inhabitants are employed i n producing p r i m a r i l y fores t s tap les , s ince both companies are s t i l l "looking at" the development of a secondary paper production i n d u s t r y . * Pulp and dimensional lumber have continued to be the end products made from the lumber a r r i v i n g at the shores of B .C.Hydro's a r t i f i c i a l lake . They are processed by use of se l f -generated e l e c t r i c i t y (by use of hog fuel) and the e l e c t r i c i t y from the head of the lake - - - the W.A.C. Bennett dam ( b u i l t across the Peace R i v e r ) . B.C.Hydro has played a dual r o l e , one, as a provider of i n f r a s t r u c t u r e , two as provider of power for the forest processing industry . 4 Information from Mr. W. Hurt of the Corporate Communications Department of B . C . Forest Product's Vancouver O f f i c e , and the company's logging manager i n Mackenzie, Mr. Kar l Baker, and Murray i n the Accounting Department Ju ly and August 14, 1986. Pat Marchak's ana lys i s of Mackenzie i s i n "The Instant Town," Green Gold, pp. 303-322. E x t e n s i o n 75 The i d e a o f t h e i m p o r t a n t r o l e t h a t P e a c e R i v e r power a s s u m e d i n t h e i n d u s t r i a l d e v e l o p m e n t o f t h e p r o v i n c e was p e r v a s i v e i n many p u b l i c a t i o n s . B . C . H y d r o ' s p u b l i c a t i o n , A Utility in an Expanding Economy, d e s c r i b e s i t s g r o w i n g p r o v i n c i a l p o w e r n e t w o r k : " T h i s l a r g e power s y s t e m i s g r a d u a l l y b e i n g l i n k e d t o more a n d more r e s o u r c e a r e a s o f t h e p r o v i n c e , e n s u r i n g a n a d e q u a t e s u p p l y o f power t o s u p p o r t i n d u s t r i a l d e v e l o p m e n t . " 3 S u c h e x p a n s i o n was b a s e d o n t h e p e r c e p t i o n t h a t " H y d r o must k e e p p a c e w i t h a n t i c i p a t e d i n d u s t r i a l d e v e l o p m e n t " 6 a n d p r e p a r e t o be a l o w - c o s t s u p p l i e r o f e l e c t r i c i t y t o m a n u f a c t u r i n g . S i n c e i n d u s t r i a l d e v e l o p m e n t i n B r i t i s h C o l u m b i a i s l a r g e l y d i r e c t e d t o w a r d s t h e e x p o r t o f s e m i - p r o c e s s e d m a t e r i a l s , much o f t h e m a n u f a c t u r i n g done i n B.C. i s p r i m a r i l y s t a p l e s p r o d u c t i o n . Manufacturing The t e r m " M a n u f a c t u r i n g " a s i t i s g e n e r a l l y r e f e r r e d t o i n p r o v i n c i a l g o v e r n m e n t p u b l i c a t i o n s d o e s n o t mean B r i t i s h C o l u m b i a n s m a n u f a c t u r e c o n s u m e r g o o d s , b u t r a t h e r , m a n u f a c t u r i n g d e s c r i b e s t h e k i n d o f " . . . p r o d u c t i o n p r i m a r i l y d e s t i n e d f o r t h e w h o l e s a l e m a r k e t , f o r i n t e r p l a n t t r a n s f e r , o r t o o r d e r f o r i n d u s t r i a l u s e r s , r a t h e r t h a n d i r e c t s a l e t o d o m e s t i c c o n s u m e r s . " 7 On t h e o t h e r h a n d , S t a t i s t i c s C a n a d a 5 B.C.Hydro I n f o r m a t i o n S e r v i c e s A Utility in an Expanding Economy, M a r c h , 1 9 7 0 , p. 18. 6 B.C.Hydro (BCH Energy Blueprint 1981:Introduction) 7 M i n i s t r y o f I n d u s t r y a n d S m a l l B u s i n e s s D e v e l o p m e n t , " I n t r o d u c t i o n , " British Columbia Manufacturers' Directory E x t e n s i o n 76 uses a more comprehensive c l a s s i f i c a t i o n of twenty manufacturing i n d u s t r i e s which i n c l u d e s the manufacture of consumer goods. To assess the use of e l e c t r i c i t y i n manufacturing, the f o u r major i n d u s t r i a l manufacturing c a t e g o r i e s out of the twenty c a t e g o r i e s (some of these 20 are i n B.C.Hydro's Table I I , a b b r e v i a t i o n "Man.") are examined. 8 The major purchasers of e l e c t r i c i t y i n B r i t i s h Columbia's manufacturing i n d u s t r i e s a r e : the "Wood I n d u s t r i e s , " "Paper and A l l i e d I n d u s t r i e s " (pulp and paper), the "Chemical & Chemical Products I n d u s t r i e s , " and the "Primary Metal I n d u s t r i e s " ( f o r the 1985/86 purchases, see Table I I ) . These are mostly s t a p l e s i n d u s t r i e s or s u p p l i e r s t o s t a p l e s i n d u s t r i e s . In B.C.Hydro's Annual Reports, the r a t e s charged f o r e l e c t r i c i t y t o many such i n d u s t r i e s appear under the categor y 1985: A Directory of Manufacturing Activity in British Columbia ( V i c t o r i a : P r o v i n c e of B r i t i s h Columbia, 1985). 8 The 1970 R e v i s i o n of the Standard I n d u s t r i a l C l a s s i f i c a t i o n i n c l u d e s : 1. Food and Beverage I n d u s t r i e s , 2. Tobacco Products I n d u s t r i e s , 3. Rubber and P l a s t i c Products I n d u s t r i e s , 4. Leather I n d u s t r i e s , 5. T e x t i l e I n d u s t r i e s , 6. K n i t t i n g M i l l s , 7. C l o t h i n g I n d u s t r i e s , 8. Wood I n d u s t r i e s , 9. F u r n i t u r e and F i x t u r e I n d u s t r i e s , 10. Paper and A l l i e d I n d u s t r i e s , 11. P r i n t i n g and P u b l i s h i n g I n d u s t r i e s , 12. Primary Metal I n d u s t r i e s , 13. Metal F a b r i c a t i n g I n d u s t r i e s , 14. Machinery I n d u s t r i e s , 15. T r a n s p o r t a t i o n Equipment I n d u s t r i e s , 16. E l e c t r i c a l Products I n d u s t r i e s , 17. N o n - M e t a l l i c M i n e r a l Products I n d u s t r i e s , 18. Petroleum and Coal Products I n d u s t r i e s , 19. Chemical and Chemical Products I n d u s t r i e s , and 20. M i s c e l l a n e o u s Manufacturing I n d u s t r i e s . S t a t i s t i c s Canada Consumption of Purchased Fuel and Electricity, c a t a l o g u e 57-208, 1982, pp. 62-68. Extension 77 TABLE II ACTUAL ELECTRICAL SALES FOR 1985/86 and GROWTH OVER 1984/85 BY STANDARD INDUSTRIAL CLASSIFICATION (SIC) ( B i l l e d Bas is , No Adjustments for Accruals) 1985/86 1984/85 Growth (GWh) (GWh) % Residenta l : 9,793 9,577 2 .3 Commercia1-Tota1 8,313 7,970 4 .3 -Transp, Comm. & Ut 1,282 1,221 5.0 -Wholesale & R e t a i l 1,918 1,805 6.3 -Finance , Ins, Real Es . 1,563 1,467 6.5 -Coram, Bus, Pers . Serv. 2,850 2,712 5.1 - P u b l i c Admin. & Def • 614 602 2.0 - U n c l a s s i f i e d 86 163 -47.5 I n d u s t r i a l 13,568 13,221 2 .6 (Excluding Marketing) -Metal Mines 1,930 2,170 -11.1 -Mineral Fuels 670 632 6.0 -Other Primary Ind. 229 189 21.2 -Food & Beverage Man 364 345 5.5 -Wood Manuf. 1,871 1,751 6.9 -Paper & A l l i e d Man. 5,791 5,477 5.7 -Primary Metal Man. (Smelting) 139 131 6.3 -Non-Meta l l i c Min. 310 311 -0.3 -Petroleum & Coal 362 343 5.6 -Chemical & Chera. Man. 1,267 1,290 -1,8 -Other Manufact. 458 434 5.5 -Construct ion 176 148 18.9 Inter U t i l i t y 263 247 6 .6 (New West & Can. Ut . ) Firm Export (Point Roberts/Hyder) 14 14 1 .4 Seat t le C i t y Light 134 0 W.K.P. & L . 41 6 583 .3 Domestic Marketing 1,011 446 126 .7 -Metal Mines 230 34 576.5 -Paper & A l l i e d 749 372 101.3 -Chem. & Chem. Prod. 31 40 -22.5 -Other 1 1 33,138 31,481 5 .3 Source: B .C.Hydro , Load Forecast Department, May 6, 1986. Extension 78 of "Transmission," since staples producers i n general receive t h e i r e l e c t r i c i t y r i g h t o f f the transmission l i n e (the customer transforms i t to the proper vo l tage) . "Transmission" rate customers are p r i m a r i l y pulp and paper producers, wood manufacturers, chemical producers. Table VI (see Appendix) indicates the sales made to these industr ie s by B.C.Hydro , from 1965 to 1976 (calendar years ) , and Tables V I , and VII (see Appendix) include the h i s t o r i c sales s t a t i s t i c s from 1974 to 1985 ( f i s c a l years ) . Added to the h i s t o r i c Tables V I I , V I I I , and IX (see Appendix) are probable project ions of the number of B.C.Hydro accounts i n these i n d u s t r i e s . The low rate p o l i c y for purchasers of e l e c t r i c i t y at "Transmission" rates i s usua l ly defended as a necess i ty to promote i n d u s t r i a l development, p a r t i c u l a r l y i n l i g h t of in t erna t iona l competition among staples i n d u s t r i e s . An . ana lys i s done by the consul t ing f irm Acres for B.C.Hydro i s r evea l ing . I t states that " . . . the low p r i c e of e l e c t r i c i t y r e l a t i v e to the i n t e r n a t i o n a l l y determined commodity pr ices of a l t e r n a t i v e sources of energy w i l l be of p a r t i c u l a r s ign i f i cance i n the future , i f the export or iented industr ie s of B . C . , p a r t i c u l a r l y those which are c a p i t a l in tens ive , are to remain competitive i n world markets ." 9 This perception of necessity of a competitive in t erna t iona l advantage has been 9 Acres Consult ing Services L t d . , prepared for B.C.Hydro , B r i t i s h Columbia I n d u s t r i a l Growth and E l e c t r i c i t y Consumption, (Vancouver: Acres , Sept. 1974), p. 2 - 9,10. E x t e n s i o n 79 m a i n t a i n e d by b o t h t h e p r o v i n c i a l g o v e r n m e n t a n d B.C.Hydro a s a p o w e r f u l a r g u m e n t . The e l e c t r i c i t y c o s t p o r t i o n o f t o t a l m a n u f a c t u r i n g c o s t s ( i n 1970) f o r p u l p p r o d u c t i o n a n d t h e n e e d e d c h e m i c a l s was h i g h : f o r t h e " C h e m i c a l a n d C h e m i c a l P r o d u c t s " (8.51%), " P a p e r a n d A l l i e d P r o d u c t s " ( p u l p a n d p a p e r ) (3.75%), " P r i m a r y M e t a l s " (1.96%), a n d p r i m a r y "Wood" m a n u f a c t u r i n g (1.16%). 1 0 B . C . H y d r o ' s s a l e s o f e l e c t r i c i t y t o t h e p u l p a n d p a p e r i n d u s t r y d o u b l e d f r o m 1,985 GW.h i n 1965 t o 4,209.9 GW.h i n 1973 ( s e e T a b l e V I , A p p e n d i x ) . B u c h a n a n d e s c r i b e d i t by s t a t i n g t h a t " . . . t h e A u t h o r i t y ' s [ B . C . H y d r o ' s ] s t a k e i n t h e f o r t u n e s o f t h e i n d u s t r y i s t h e r e f o r e e n o r m o u s . . . . " 1 1 -Wood I n d u s t r i e s Wood I n d u s t r i e s ( s a w m i l l s , p l y w o o d p l a n t s , a n d s h i n g l e m i l l s e t c . ) a r e d e s c r i b e d i n B.C.Hydro r e p o r t s w i t h r e f e r e n c e t o t h e i r t i m b e r s h a r i n g w i t h t h e t h e p u l p a n d p a p e r i n d u s t r y . A s a l r e a d y i n d i c a t e d i n t h e p r e v i o u s c h a p t e r , t h e r e d u c t i o n i n t h e number o f s a w m i l l s , t h e c o o r d i n a t i o n o f t i m b e r u s e by l a r g e r s a w m i l l s a n d p u l p m i l l s , t o g e t h e r w i t h t h e e x p a n s i o n o f t h e i n d u s t r y i n t o t h e N o r t h , c o i n c i d e d w i t h t h e g r o w t h i n t h e p u r c h a s e o f e l e c t r i c i t y by wood i n d u s t r i e s . T h e r e a f t e r , w i t h t h e i n s t a l l a t i o n o f more c a p i t a l i n t e n s i v e m a c h i n e r y t o 10 A c r e s , 1974, T a b l e 2.3, p. 16. 11 B . C . H y d r o , S t a t i s t i c a l A n a l y s i s D e p a r t m e n t , Pulp and Paper Prospects in B.C. by T.D. B u c h a n a n , B.C. H y d r o S e n i o r E c o n o m i s t , 21 December, 1964, I n t r o d u c t i o n p a g e . E x t e n s i o n 80 p r o c e s s t h e wood, t h e e l e c t r i c i t y c o n s u m p t i o n o f t h i s i n d u s t r y i n c r e a s e d f u r t h e r . 1 2 - P u l p a n d P a p e r D u r i n g t h e 1 9 6 0 s , B . C . H y d r o ' s I n d u s t r i a l D e v e l o p m e n t D e p a r t m e n t p r o m o t e d t h e e x p a n s i o n o f c a p i t a l - i n t e n s i v e p u l p a n d p a p e r i n d u s t r i e s . I n r e f e r e n c e t o i t s own i n d u s t r y s u r v e y , "The P u l p a n d P a p e r i n d u s t r y o f B r i t i s h C o l u m b i a , " by J o h n R a y b o u l d , t h e B.C.Hydro m a g a z i n e , Progress, m e a s u r e s t h e a d v a n c e o f a n a t i o n by i t s c o n s u m p t i o n o f p a p e r . N o t C a n a d a ' s c o n s u m p t i o n , b u t t h e U.S. c o n s u m p t i o n i n 1965 i s c i t e d : 500 l b s p e r c a p i t a a n n u a l l y . W h i l e , t h e p u b l i c a t i o n d o e s n o t s p e a k o f t h e m a n u f a c t u r e o f f i n e - g r a d e p a p e r i n B r i t i s h C o l u m b i a , i t s a u t h o r i s mos t i m p r e s s e d w i t h i n c r e a s i n g t h e p r o d u c t i o n c a p a c i t y o f p u l p m i l l s a n d w i t h t h e i d e a o f " i n d u s t r i a l i z a t i o n - b y - i n v i t a t i o n " ( a c o n t i n u a t i o n f r o m t h e B.C. Power C o m m i s s i o n p r a c t i c e ) . I n a d m i r a t i o n o f t h e p r o c e s s i n g o f B.C. f o r e s t s by f o r e i g n c o m p a n i e s t h e a r t i c l e l a u d s t h e f o l l o w i n g : The l i s t o f m a j o r w o r l d c o m p a n i e s now o p e r a t i n g h e r e , o r w i t h m i l l s p l a n n e d o r b e i n g b u i l t , i s i m p r e s s i v e . Among t h e s e c o m p a n i e s a r e t h e Reed G r o u p o f E n g l a n d , S v e n s k a C e l l u l o s a o f Sweden, Unso G u t z e i t o f F i n l a n d , F e l d m u e h l o f Germany, E a s t A s i a t i c o f Denmark, W e y e r h a e u s e r a n d Mead o f t h e U.S., a n d M i t s u b i s h i a n d Honshu o f J a p a n . 12 A c r e s , 1974, p. 2-8; a n d T.D. B u c h a n a n , B . C . H y d r o , S t a t i s t i c a l A n a l y s i s D e p a r t m e n t , C o m m e r c i a l S e r v i c e s D i v i s i o n Industrial Classification of KW.h Sold to Primary Potentials in the B.C.Hydro Service Area For Fiscal 1964/65, p.3. E x t e n s i o n 81 A l l t h e new p u l p m i l l s i n B.C. w i l l h a v e an i n i t i a l o p e r a t i n g c a p a c i t y r a n g i n g f r o m 250,000 - 350,000 t o n s p e r y e a r . E a c h m i l l r e p r e s e n t s a c a p i t a l i n v e s t m e n t f r o m $50 m i l l i o n t o $100 m i l l i o n , [ o r i g i n a l e m p h a s i s ] [The a u t h o r o f t h e a r t i c l e c o n t i n u e s w i t h an i n d u s t r i a l i n v i t a t i o n r e m i n d e r : ] B . C . H y d r o ' s I n d u s t r i a l D e v e l o p m e n t D e p a r t m e n t , t h r o u g h s u c h i n d u s t r y s t u d i e s , h e l p s t o show a n d r e m i n d t h e b u s i n e s s c o m m u n i t y b o t h i n C a n a d a a n d a b r o a d o f t h e u n i q u e o p p o r t u n i t i e s e x i s t i n g i n B.C. f o r e x p a n d i n g o r e s t a b l i s h i n g d i s t r i b u t i o n f a c i l i t i e s a n d m a n u f a c t u r i n g p l a n t s t o s e r v e r e s o u r c e i n d u s t r i e s . 1 3 Y e t , t h e s t a p l e s p r o d u c e r s i n v i t e d f r o m o u t s i d e t h e p r o v i n c e w e r e l e s s i n t e r e s t e d i n b u i l d i n g t h e m a c h i n e r y f o r r e s o u r c e i n d u s t r i e s , t h a n t h e y w e r e i n a l o w c o s t n a t u r a l r e s o u r c e s u p p l y . A s t u d y by B . C . H y d r o ' s I n d u s t r i a l D e v e l o p m e n t D e p a r t m e n t c o n c l u d e d t h a t " R e s o u r c e i n d u s t r i e s s u c h a s p u l p a n d p a p e r m i l l s , p r o c e s s o r s o f l o c a l m i n e r a l s , e t c . w i l l l o c a t e i n t h e a r e a p r i m a r i l y b e c a u s e o f t h e r e s o u r c e a n d n o t , p r i m a r i l y b e c a u s e o f l o w c o s t p o w e r . " 1 4 The d i s c o u n t e d e l e c t r i c i t y g e n e r a t e d by t h e p r o v i n c e p r o v i d e s a n a d d e d b o n u s f o r t h o s e who i n v e s t i n B r i t i s h C o l u m b i a . The e f f e c t s o f t h e s e p o l i c i e s w e r e known by some B.C.Hydro e c o n o m i s t s s u c h a s t h e c o n t i n u e d e x p l o i t a t i o n o f t h e f o r e s t . T.D. B u c h a n a n , was a w a r e o f t h e t h e s h i f t f r o m one s p e c i e s o f t r e e t o a n o t h e r . He i n t e r p r e t e d t h e s e c h a n g e s w i t h 13 J o h n R a y b o u l d , " P a p e r f o r t h e W o r l d , " a t w o - p a g e r e p r i n t f r o m t h e m a g a z i n e Progress ( V a n c o u v e r : B . C . H y d r o , F a l l i s s u e , 1 9 6 6 ) . 14 B . C . H y d r o , I n d u s t r i a l D e v e l o p m e n t D e p a r t m e n t , Power Intensive Industries for Peace River at - S i t e Power ( V a n c o u v e r : B . C . H y d r o , A u g u s t 1 9 6 3 ) . E x t e n s i o n 82 r e f e r e n c e t o t h e S l o a n r e p o r t ( 1 9 5 7 ) : "The C o a s t z o n e w i l l move away f r o m an i n t e g r a t e d f o r e s t economy p r o d u c i n g saw l o g s , p e e l e r l o g s a n d p u l p l o g s t o w a r d s one i n w h i c h t h e p r o - d u c t i o n o f p u l p l o g s w i l l p r e d o m i n a t e . " 1 5 From t h i s he c o n c l u d e d t h a t " t h e C o a s t z o n e i t s e l f i s m o v i n g f r o m " t h e age o f f i r " ( s a w m i l l economy) t o " t h e age o f h e m l o c k " ( p u l p e c o n o m y ) . " From 1946 t o 1963 t h e p u l p i n d u s t r y ' s c o n s u m p t i o n o f C o a s t l o g p r o d u c t i o n i n c r e a s e d f r o m 1 2 % t o 22%.' S i n c e t h e n , t h e number o f t r e e s consumed by p u l p m i l l s i n c r e a s e d t h r o u g h o u t t h e p r o v i n c e . I n t h e i n t e r i o r , p u l p m i l l c o m p a n i e s " . . . p u r c h a s e d s m a l l s a w m i l l s t o o b t a i n t h e i r h a r v e s t i n g r i g h t s a n d r e d u c e c o m p e t i t i o n f o r t h e r e s o u r c e s , . . . " t h e r e a f t e r f o l l o w e d t h e " . . . c o n s t r u c t i o n o f l u m b e r a n d p u l p m i l l s i n c o m b i n e d o p e r a t i o n s i n c e n t r a l l o c a t i o n s ; " a t t h e same t i m e t h e number o f s a w m i l l s d e c r e a s e d f r o m o v e r 2000 i n t h e 1 9 5 0 s t o 330 i n 1 9 7 8 . 1 S The p u r s u i t o f s t a t e p o l i c i e s w h i c h f a v o r l a r g e c o r p o r a - t i o n s t o d i r e c t t h e s t a p l e s p r o d u c t i o n f r o m o u t s i d e t h e p r o v i n c e h a s i m p l i c a t i o n s f o r t h e d i v e r s i f i c a t i o n o f f o r e s t p r o d u c t s a n d s e c o n d a r y i n d u s t r y . The c o m p e t i t i o n f r o m t h e m a n u f a c t u r e o f B.C. f i n i s h e d p r o d u c t s w o u l d n o t b e , a s B u c h a n a n s u g g e s t s i n t h e i n t e r e s t o f v e r t i c a l l y i n t e g r a t e d c o m p a n i e s ( i n s u c h a company t h e p r o d u c e r o f t h e f i n i s h e d p r o d u c t , b u y e r o f t h e p u l p , a n d t h e pup m i l l owner a r e t h e 15 T.D. B u c h a n a n , S e n i o r E c o n o m i s t , B . C . H y d r o , Pulp and Paper Prospects in B.C. ( V a n c o u v e r : B . C . H y d r o , December 2 1 , 1964) p . 7. 16 M a r c h a k 1 9 8 3 , p. 40. Extension 83 same) who manufacture t h e i r own f in i shed products elsewhere. He concluded that d i v e r s i f i c a t i o n of forest products i s af fected by patterns of t rade . Foreign trade p o l i c i e s have hindered the development of a d i v e r s i f i e d fores t products export industry i n B . C . Recent announcements of new "captive pulp" capac i t i e s are a manifestation of these p o l i c i e s . The pulp customer has every reason to r e s i s t B . C . competition i n overseas markets for h i s f in i shed product. He i s i n a strong p o s i t i o n to do so because he already c o n t r o l s , i n p a r t , h i s B . C . source of supply. (Buchanan 1964:2) He was well aware that decis ions about end products are made outside B r i t i s h Columbia. He argued that a lack of d i v e r s i f i c a t i o n i n h i b i t s the best use of the wood. There i s i n s u f f i c i e n t value added and most important to an expanding e l e c t r i c a l u t i l i t y , the most b e n e f i c i a l future market for B .C.Hydro's e l e c t r i c i t y i s not created . He found the fo l lowing: " . . .Mos t of the present ly [December 1964] announced developments - whether l inked with fore ign c a p i t a l or not - w i l l r e s u l t i n products requ ir ing maximum amounts of wood usage per ton of output, y i e l d i n g minimum values , and requ ir ing minimum amounts of e l e c t r i c a l energy." (Buchanan 1964:2) To i l l u s t r a t e his point numerical ly he prepared Table I I I . As h i s tabula t ion shows, the d i v e r s i f i e d paper products , such as "Print paper," "Fibre board," and "Other paper boards," use subs tant ia l l y higher amounts of e l e c t r i c i t y and lower amounts of roundwood. Meanwhile, the Peace River area , surrounded by substant ia l fores t lands, was developed to Extension 84 generate a hydroe lec tr i c capacity of 3,425,000 KW (this i s the combined capacity of the W.A.C. Bennett Dam and the Peace Canyon Dam). No a p p l i c a t i o n of t h i s e l e c t r i c a l power to higher grade paper products i s apparent to t h i s day i n Mackenzie, the instant forest processing community near the Bennett dam r e s e r v o i r . This power source could be absorbed to a greater degree within t h i s region i f i t would be used to produce more sophis t icated end products . Although the contro l over production i s now large ly out of the hands of the p r o v i n c i a l s tate , i t has the property r ights over forest resources and water power and can make i n i t i a l choices over TABLE III WOOD AND ELECTRICITY REQUIREMENT Product Feet Wood pulp Mechanical A** Chemical unbleached P r i n t paper Other paper Fibreboards Other paper boards Unit KWH Short Ton Round- wood E l e c . Equiv. Req. Wood-Pulp Content Cu (a ir dry) bleached 161 unbleached 98 117 51 57 82* 850 520 470 920 300 r300 N/ * U . B . C : "Forestry Handbook of B r i t i s h Columbia," 1957, p. 159. ** John G. Harvey (Sandwell and Company): "Stream and Power for Pulp and Paper M i l l s ; " Pulp and Paper Magazine of Canada, July 1963, p. 348. (assumes wood requirement to be 1/3 chips and a 500 ton a day m i l l . ) Source: T . D . Buchanan (Senior Economist), B . C . Hydro, S t a t i s t i c a l Analys i s Department, Commercial Services D i v i s i o n Pulp and Paper Prospects in B.C., p . 7. Extension 85 t h e i r development. Contribut ions to i n i t i a l choices of the development of water power can also be made by the chairmen of B .C.Hydro . Two recent chairmen had executive experience i n the fores t processing industry . The former chairman, Robert Bonner, became a senior v i c e - president of MacMillan Bloedel i n 1968, then the largest fores t company i n Canada. E f f e c t i v e January 1, 1976, he became chairman of B .C.Hydro . The current chairman of B .C.Hydro , Chester Johnson, formerly headed the Whonnok Industries L t d . and West Fraser Timber Company Co. L t d . Both chairmen therefore knew the important re la t ionsh ips between the fores t processing industry and the production of e l e c t r i c i t y , 1 7 but nei ther had been able to develop a substant ia l market for e l e c t r i c i t y i n d i v e r s i f i e d paper products . Rather, pulp and the required chemical supply industry remain dominant i n fores t process ing . - C h e m i c a l s a n d C h e m i c a l P r o d u c t s To produce kra f t pulp , chemical ingredients such as sodium sulphate, caust ic soda, c h l o r i n e , and other chemicals are needed. The producers of these chemicals are among the four major purchasers of B .C.Hydro's e l e c t r i c i t y . In a recent report prepared for B.C.Hydro's Corporate Economist O f f i c e , by DBA Consult ing L imi ted , the r e l a t i o n s h i p between the forecast 17 Canadian Press , "Bonner P r o f i l e , " January 12, 1985. Rod Nut, "Changes at Hydro Spark Questions," The Vancouver Sun, March 29, 1986. Extension 86 of purchases i n the chemical industry was d i r e c t l y corre la ted with the pulp and paper industry . "Nearly a l l of the purchased e l e c t r i c i t y used i n B . C . ' s chemical industry i s used to make products for use i n the fores try industry and, i n p a r t i c u l a r i n the pulp and paper i n d u s t r y . " 1 8 One such chemical company has two plants i n Southern B r i t i s h Columbia. Hooker Chemicals, a subs id iary of Occidental Petroleum, has chemical plants i n Nanaimo and i n North Vancouver. By 1974, i t s North Vancouver production has quadrupled for ch lor ine and caust ic soda. The Nanaimo plant suppl ies most of i t s production to the adjacent McMillan Bloedel pulp m i l l . "Over 90% of production of the two B . C . plants i s so ld as bleaching chemicals to major pulp m i l l companies i n B . C . . " 1 9 The e l e c t r i c i t y purchase h i s tory of the chemical industry can be seen on Table II above, and Table VI & VII (Appendix). Another industry which uses very large amounts of e l e c t r i c i t y i s the primary metals industry . -Primary Metals Industr ies (mining, m i l l i n g , smelting) In the la te f i f t i e s , the development of the Peace r i v e r was a puzzle to experts , s ince the Peace River Power Development Co. and the p r o v i n c i a l government claimed: ". . .much of the power w i l l be used at s i t e by industry 18 DPA Consult ing Limited A Forecast of Purchased Electricity Requirements of B.C.Hydro's Industrial Customers 1981-91, a report prepared for B.C.Hydro (Vancouver, August, 1981) p . 24. 19 Canadian Occidental Petroleum, Annual Report 1974, p . 15. Extension 87 ' f l o c k i n g ' i n . " 2 0 To assess the p o s s i b i l i t i e s of primary metal indus tr i e s using power at s i t e , B .C.Hydro's I n d u s t r i a l Development Department prepared a study of "Power Intensive Industr ies for Peace River at S i te Power" (August 13, 1963). I ts f indings were that "i t i s very doubtful that any of the power intens ive indus tr i e s studied (e .g . aluminum, heavy water, s i l i c o n carb ide , z irconium, t i tanium, hydrogen peroxide, ammonia e tc . ) can be induced to take "at s i te" Peace power i n blocks of 10 MW or more, i f a saving of only two m i l l s i s offered by the Authori ty over rates [of 4 m i l l s ] appl i cab le at t idewater. "It i s general ly cheaper to move power from Portage Mountain (the s i t e of the Gordon Shrum powerhouse next to the W.A.C. Bennett dam b u i l t across the Peace River) to Vancouver than to move materials twice that d i s t a n c e . " 2 X In case of aluminum, Ivan Bloch and Associates of Port land , Oregon, prepared a de ta i l ed study for the B . C . E l e c t r i c Co. L t d . i n 1961 i n which i t was concluded that i n order to a t t r a c t new aluminum producers to B . C . i t would be necessary to o f f er 2 1/2 m i l l power at t idewater, and concessions such as tax hol iday [s ic ] and subsidized s i t e s . Power would have to given away free at Portage Mountain i f a saving i n power cost had to be used to o f f se t extra transportat ion costs r e s u l t i n g from a s i t e at Portage Mountain. Estimated r a i l f r e i g h t costs of one cent [appl icable only to bulk commodities] per ton mile were used i n t h i s study; t h i s f igure was obtained from a d i scuss ion with Messrs. J . Broadbent and V. Paul of the P. G. E . Railway. 20 The Vancouver Sun, "Peace River i s a Puzzle to Experts ," Electric Power in British Columbia, a ser ies of a r t i c l e s publ ished i n a spec ia l pamphlet form, (Vancouver, June 1959), p. 7. 21 Power Intensive Industries, 1963, "Conclusion" E x t e n s i o n 88 In a c t u a l p r a c t i c e the t r a n s p o r t a t i o n c o s t s of moving m a t e r i a l i n and out of Portage Mountain would no doubt be h i g h e r because Mr. Broadbent s a i d the r a i l w a y has no plans of p r o v i d i n g r a i l s e r v i c e t o Portage Mountain, and t h i s being the case, m a t e r i a l would then have t o move some of the d i s t a n c e by t r u c k which i n a l l l i k e l i h o o d would c o s t c o n s i d e r a b l y more than one cent per ton m i l e . 2 2 The low c o s t of on s i t e power and s u b s i d i z e d r a i l t r a n s p o r t a t i o n would not be enough a t t r a c t i o n t o l o c a t e aluminum and other metal smelters i n the Peace R i v e r a r e a . Leaving a s i d e the c o n s i d e r a t i o n of p o p u l a t i o n , the l o c a t i o n of the r e s o u r c e , t r a n s p o r t a t i o n , and the a v a i l a b i l i t y of low c o s t power i n the r i g h t combination are of g r e a t e s t importance t o the primary metal i n d u s t r y . A s u i t a b l e h y d r o e l e c t r i c s i t e was of g r e a t importance i n the development of the s t a p l e s p r o d u c t i o n i n the s m e l t i n g r e f i n i n g and f o r e s t products i n d u s t r i e s . M.D. T a y l o r sums up the r e l a t i o n s h i p between the growth i n g e n e r a t i n g c a p a c i t y and growth i n p r o d u c t i o n i n the f o l l o w i n g way: The e a r l y s e t t l e r s of B r i t i s h Columbia were i n t e r e s t e d i n the f u r t r a d e . F o l l o w i n g these came those seeking m i n e r a l wealth; the r a i l r o a d b u i l d e r s ; the l o g g e r s ; the fishermen and farmers; and f i n a l l y the manufacturers [ p r i m a r i l y s t a p l e s p r o d u c e r s ] . There had always been manufacturing i n B r i t i s h Columbia, but i t was c a r r i e d on on a small s c a l e u n t i l the t w e n t i e s . During the d e p r e s s i o n a l l i n d u s t r y s u f f e r e d . I t recovered d u r i n g the war and s i n c e t h a t time has gone forward a t a g r e a t l y i n c r e a s e d r a t e . There i s no doubt t h a t the a v a i l a b i l i t y of e l e c t r i c power has p l a y e d a p a r t i n t h i s 22 Power Intensive Industries, 1963, p . l , 3 . Extension 89 development. J . V . Rogers i n his paper "Power, the Pathway to Progress" out l ines the part played by e l e c t r i c power i n the development of the large smelting and r e f i n i n g complex at T r a i l . The a v a i l a b i l i t y of l arge - sca l e , low-cost h y d r o - e l e c t r i c power motivated the establishment of the aluminum smelter at Ki t imat . Also the a v a i l a b i l i t y of power has been important i n the growth of the pulp and paper industry . In other industr ie s too, the use of power i s important but not as important as i n the smelt ing, r e f i n i n g , and forest products i n d u s t r i e s . Because i t i s these l a t t e r indus tr i e s which are important to the general economic development of B r i t i s h Columbia, i t i s evident that e l e c t r i c power has had an important part to play i n the economic growth of the p r o v i n c e . 2 3 Both the Aluminum Company of Canada (Alcan) i n Kit imat and the Consolidated Mining and Smelting Company (Cominco) i n T r a i l own t h e i r hydroe lec tr i c generating f a c i l i t i e s . A lcan ' s Kemano projec t generated e l e c t r i c i t y since 1955, and Cominco bought out a l l but one plant of the West Kootenay and Light Company i n 1 9 4 7 . 2 4 Both Cominco and Alcan have dominated the smelting industry i n B r i t i s h Columbia. The Alcan smelter has no demand for u t i l i t y supplied e l e c t r i c i t y , because such v e r t i c a l l y integrated companies supply t h e i r energy needs by means of what Acres c a l l s "industry-owned generation" (see Appendix Table X, X I ) . In a d d i t i o n , "Alcan has the water r ight s to the Nechako and Nanika Rivers u n t i l 1999, and add i t i ona l KWh would be a v a i l a b l e each year i f these r i v e r s are developed for hydro 23 Mary Doreen Taylor Development of the E l e c t r i c i t y I n d u s t r y i n B r i t i s h Columbia, a M.A. Thes i s , Univers i ty of B r i t i s h Columbia, Department of Geography, A p r i l , 1965, pp. 176,177. 24 T a y l o r , 1965, p . 13. Extension 90 power ." 2 5 Besides having secured the r ight to further development of hydro power, Alcan has located i t s aluminum smelter near t i d e water i n Ki t imat . Besides i t s smelting operat ion , the company had (by 1954) integrated i t s power supply, the Kemano p r o j e c t , and the supply of bauxite i n Jamaica. I ts 1954 annual report ind ica te s , the company ships i t s bauxite from Jamaica to Ki t imat , processes, the bauxite and alumina with the use of Kemano power into aluminum ingots , and ships these for manufacturing e l s e w h e r e . 2 6 In keeping with company t r a d i t i o n , Alcan picks the most su i tab le s i t e s , and owns i t s hydroe lec tr i c projects (dams, powerhouses). Since e l e c t r i c i t y i s such a large component of aluminum product ion, Alcan can ship i t s natural resource to the smelter and can ship out i t s staples such as aluminum ingots from Kit imat v i a t i d e water. Cominco, i n T r a i l , the other primary metal manufacturer, owns i t s hydroe lec tr i c f a c i l i t i e s (Waneta, Corra Linn and o thers ) . Some f a c i l i t i e s were d i r e c t l y owned by Cominco, others were held by i t s subs id iary , West Kootenay Power and L i g h t . Cominco has recent ly sold a l l i t s hydroe lec tr i c assets to i t s u t i l i t y and i s current ly t r y i n g to s e l l West Kootenay Power and L i g h t . However, Cominco d id not require B.C.Hydro's 25 The B r i t i s h Columbia Energy Commission, B r i t i s h Columbia Energy Supply and Demand Forecast 1974-2006 ( V i c t o r i a : Lieutenant-governor i n C o u n c i l , 29 November 1973), p.181. The Commission prepares annual reviews of supply, demand, and p r i c i n g of energy. 26 [Alcan] Aluminum Ltd. Annual Report 1953/1954 Extension 91 power to produce i t s various grades of lead, go ld , s i l v e r , bismuth, Idium and to process i t s phosphate and s u l f a t e . 2 7 Despite the resu l t s of various f e a s i b i l i t y assessments 2 8 which y ie lded no, or few p o t e n t i a l consumers of large volumes of e l e c t r i c i t y i n the mining and smelting industry , promoters i n the B .C.Hydro's I n d u s t r i a l Development Department saw t h e i r ro le i n encouraging new investment and e n t e r p r i s e . 2 9 This was done by way of providing "detai led information on the mining indus try ," and "offering c o n f i d e n t i a l service without o b l i g a t i o n to i n d u s t r i a l i s t s seeking information on plant s i t e s i n the Greater Vancouver a r e a . " 3 0 Part of the I n d u s t r i a l Development Department during the 1970s has been absorbed into the Propert ies D i v i s i o n . This D i v i s i o n developed i n d u s t r i a l land along the B.C.Hydro railway and other s t r a t e g i c loca t ion i n order to s e l l these propert ies to i n d u s t r i a l users . The primary purpose of these land banking operations i s for promoting the use of the B.C.Hydro railway s y s t e m . 3 1 27 The F i n a n c i a l Post Corporation Cominco Ltd. (Toronto: Maclean Hunter, Nov. 27, 1985), p . 4. 28 Another study was done by B.C.Hydro's S t a t i s t i c a l Analys i s Department E l e c t r i c Consumption in the B.C. Mining Industry, June 1964. 29 T . D . Buchanan, B.C.Hydro S t a t i s t i c a l Analys i s Department, Commercial Services D i v i s i o n B r i t i s h Columbia as an Investment Prospect, 26 June 1967. 30 J . C . Dawson, I n d u s t r i a l Development Department, B .C.Hydro , The Mining Industry of B r i t i s h Columbia and the Yukon (Vancouver: B.C.Hydro , January 1968), in troduct ion page. 31 John R. Bodnar, I n d u s t r i a l Development O f f i c e r indicated t h i s i s the extent of Hydro's present i n d u s t r i a l development. Informal interview (May 6, 1986). E x t e n s i o n 92 D i v e r s i f i c a t i o n A l t h o u g h B.C.Hydro b u i l t o r p l a n n e d t o b u i l d many dams o n t h e C o l u m b i a , P e a c e , K o o t e n a y , a n d Pend O r e i l l e R i v e r s , t h e p e r c e p t i o n o f e s t a b l i s h i n g a h y d r o e l e c t r i c m a c h i n e r y i n d u s t r y was a b s e n t i n i t s i n d u s t r i a l d e v e l o p m e n t s t r a t e g y . I n t h e l a s t t w e n t y y e a r s , t u r b i n e s , g e n e r a t o r s , e l e c t r i c a l s w i t c h g e a r , a n d c i r c u i t b r e a k e r s w e r e b o u g h t i n J a p a n , t h e S o v i e t U n i o n , E u r o p e a n d t h e U n i t e d S t a t e s , ( s e e A p p e n d i x , F i g . 3 ) . A l t h o u g h B.C.Hydro a l l o w s a 1 0 % p r e f e r e n c e p r o v i s i o n f o r t e n d e r s ( u n d e r $ 1 0 0 , 000) f r o m B r i t i s h C o l u m b i a b i d s , a n d 5% i f t h e y a r e C a n a d i a n b i d s , a r e c e n t t r a n s m i s s i o n t o w e r s t e e l c o n t r a c t was a w a r d e d t o K o r e a . A t t i m e s , c u s t o m s t e e l f a b r i c a t i n g w o r k h a s b e e n a w a r d e d t o some l o c a l L o w e r M a i n l a n d c o m p a n i e s , s u c h a s C a n r o n L t d . W e s t e r n B r i d g e D i v i s i o n a n d E b c o I n d u s t r i e s L t d . , s m a l l c r a n e s ( l e s s t h a n 25-50 t o n s ) w e r e b u i l t by m a n u f a c t u r e r s l i k e N o r e l c o I n d u s t r i e s L t d . i n S u r r e y . C o n t r o l p a n e l h o u s i n g s a r e m a n u f a c t u r e d i n t h e L o w e r M a i n l a n d by W e s t i n g h o u s e a n d F e d e r a l P i o n e e r , p r i n t e d c i r c u i t b o a r d s a n d b a t t e r y c h a r g e r s a r e made l o c a l l y . Y e t , when a l l i t e m s m a n u f a c t u r e d i n B.C. a r e a d d e d u p , S t e p h e n T a n g , t h e S e n i o r E l e c t r i c a l E q u i p m e n t I n s p e c t i o n E n g i n e e r ( o f B . C . H y d r o ' s Q u a l i t y C o n t r o l & I n s p e c t i o n D e p a r t m e n t ) s u m m a r i z e s : l e s s t h a n f i v e p e r c e n t o f a l l m e c h a n i c a l a n d e l e c t r i c a l e q u i p m e n t u s e d a t dams i n B r i t i s h C o l u m b i a o r i g i n a t e s f r o m B r i t i s h C o l u m b i a . He c o n f i r m s t h a t no l o c a l s p i n - o f f i n d u s t r i e s i n c o m m u n i t i e s n e a r dam s i t e s h a v e d e v e l o p e d a s a r e s u l t o f B r i t i s h C o l u m b i a ' s d e c a d e s o f b u i l d i n g h y d r o e l e c t r i c dams. Extension 93 B.C.Hydro's Research and Development Department lends operat ional support i n case a mechanical or e l e c t r i c a l f a i l u r e occurs , evaluates products used i n B.C.Hydro i n s t a l l a t i o n s , and provides suggestions for improving ex i s t ing equipment. Although the department occas iona l ly develops technology for which i t obtains patents , the impact on the development of mechanical or e l e c t r i c a l gear i n the Province i s smal l . E x t e n s i o n o f the S t a p l e s Economy Development of secondary industry continues to be ant i c ipated i n many government p u b l i c a t i o n s . The annual report , British Columbia Facts and Statistics (1956), opens with the statement: B r i t i s h Columbia, traversed by three d i s t i n c t mountain ranges and with , on the whole, a high rate of p r e c i p i t a t i o n , has many mountain r i v e r s which o f fer opportunity for power development and consequent secondary i n d u s t r i a l g r o w t h . 3 2 (page twenty-five) In the same p u b l i c a t i o n , the "Manufacturing" Sect ion's opening paragraph s tarted for seven consecutive years (1956-1962) with the same c la im: "Secondary industr ie s are r a p i d l y accounting for a large port ion of B r i t i s h Columbia's t o t a l production values ." 32 T . L . Sturgess & R.W. Bonner, Department of I n d u s t r i a l Development, Trade, and Commerce, Bureau of Economics and S t a t i s t i c s , The Government of B r i t i s h Columbia, British Columbia Facts and Statistics, Volume X, 1956, pp. twenty- f i v e , twenty-s ix . R.W. Bonner l a t e r became chairman of B .C.Hydro . Extension 94 Thereafter , the leading production sectors of manufactured goods were introduced i n order of gross product values . Some of the categories have been renamed and some give the impression of the apparent development of secondary industry . Year: 1956 1983 1. Sawmills 1. Wood 2. Pulp and Paper 2. Paper and A l l i e d 3. Petroleum Products 3. Food and Beverage 4. F ish-Process ing 4. Petroleum & Coal P r . 5. Vaneers and Plywoods 5. Primary Metals 6. Slaughtering and 6. Metal Fabr ica t ing Meat-Packing 7. Sash, Door, and 7. Transportat ion Planing M i l l s Equipment 8. Miscellaneous Foods 8. Chemical and Preparations Chemical Products 9. Ship Bui ld ing 9. Non-metal l ic Mineral Products 10. F e r t i l i z e r s 10. Other Industr ies However, the d iscuss ion i n the 1984 e d i t i o n of B r i t i s h Columbia Facts and Statistics i s less o p t i m i s t i c i n i t s d e s c r i p t i o n of the rapid development of secondary indus try . I t states the fo l lowing: The provinces manufacturing indus tr i e s are l arge ly resource based: namely fores t products, re f ined non- ferrous metals, f i s h products , and processed a g r i c u l t u r a l p r o d u c t s . . . . The Wood and Paper and A l l i e d Industries accounted for 45 percent of the value of p r o v i n c i a l fac tory shipments i n 1983. This domination i s expected to continue i n the near future although further processing of other resources and an expansion i n higher technology products such as e l e c t r i c a l equipment, i n d u s t r i a l equipment, chemicals, and p l a s t i c s i s a n t i c i p a t e d . 3 3 33 Don P h i l l i p s (min i s ter ) , M i n i s t r y of Industry and Small Business Development British Columbia Facts and Statistics, 1983, p . 67. Extension 95 The argument that a d i v e r s i f i e d manufacturing industry depends upon abundant supplies of e l e c t r i c i t y at a moderate cost does not mean that the abundance of low cost e l e c t r i c i t y brought about the d i v e r s i f i c a t i o n of the the manufacturing indus try . Out of the twenty manufacturing industr ie s categorized by S t a t i s t i c s Canada, three — "Wood Industr ies ," "Paper and A l l i e d Industr ies ," and "Chemical and Chemical Products Industries" - - purchase on the average 85% of the t o t a l e l e c t r i c i t y used i n manufacturing i n B r i t i s h Columbia. A h i s t o r i c a l review of the purchase s t a t i s t i c s of the three major indus tr i e s for the per iod from 1962 to 1983 indicates that the v a r i a t i o n of purchases, as a percentage of the t o t a l manufacturing, has stayed within the range of 81% to 87% throughout the growth of B .C.Hydro's production of e l e c t r i c i t y (see Appendix, Table X I I ) . In summary, the addi t ion of B .C.Hydro's e l e c t r i c i t y has not brought about d i v e r s i f i e d indus try . With the expansion of B.C.Hydro into the i n t e r i o r of the province , the p r o v i n c i a l s ta te ' s in tervent ion i n the production of e l e c t r i c i t y becomes evident . The "Wood," "Paper & A l l i e d " (pulp and paper) , and "Chemical" i n d u s t r i e s ' show the s ta te ' s increas ing share of production of low cost e l e c t r i c i t y . Forest products industr ie s purchased increas ing Extension 96 amounts o f l o w c o s t e l e c t r i c i t y f r o m B.C.Hydro a n d r e d u c e d t h e i r s e l f - g e n e r a t i o n o f e l e c t r i c i t y ( s e e T a b l e I V ) . On t h e c o n t r a r y , t h e s m e l t i n g i n d u s t r i e s , r e p r e s e n t e d by t h e c a t e g o r y o f " P r i m a r y M e t a l s " ( d o m i n a t e d by A l c a n a n d C o m i n c o ) , h a v e p u r c h a s e d l i t t l e e l e c t r i c i t y f r o m B . C . H y d r o , b u t i n c r e a s e d t h e i r own g e n e r a t i o n . I n c o n t r a s t , s m a l l e r c o n s u m e r s i n t h e "wood m a n u f a c t u r i n g " s e c t o r do n o t h a v e TABLE I V THE INCREASE IN 'PURCHASED' VERSUS 'SELF-GENERATED' E L E C T R I C I T Y ( T h o u s a n d s o f KW.h) M a n u f a c t u r i n g I n d u s t r y 1965 1 9 7 1 * -Wood Purchased: 595,972 1,091,457 Self-generated: 393,297 249,878 -Paper & A l l i e d Purchased: 2,023,077 3,702,397 Self-generated: 1,094,774 1,585,324 -Chemical & Chem. Purchased: 460,829 1,106,056 Products Self-generated: 1,130,562 1,002,238 -Primary Metals Purchased: 131,636 233,735 Self-generated: 5,493,595 6,491,173 S o u r c e : B . C . H y d r o , A c r e s C o n s u l t i n g S e r v i c e s L t d . , British Columbia Industrial Growth and Electricity Consumption, ( S e p t e m b e r , 1 9 7 4 ) , T a b l e 2.2, p . 2-13, c o n s t r u c t e d f r o m u n p u b l i s h e d S t a t i s t i c s C a n ada d a t a . * B . C . H y d r o ' s D e p a r t m e n t o f M a r k e t i n g a n d P l a n n i n g h a s n o t c o m p i l e d t h e s e c o m p a r i s o n s f o r t h e 1 9 8 0 s . the f i n a n c i a l , water, or energy resources to generate t h e i r own power. They are more dependent on B.C.Hydro and pay higher rates than the major users . Extension 97 B.C.Hydro's rate s tructure i s a poss ib le d i s incen t ive to the development of a more d i v e r s i f i e d manufacturing industry wi th in the fores t products sector . The "Transmission" rate i s extended to 88% of the "Pulp and Paper" industry and to 80% of the "Chemicals" industry (see year 1983, Table V I I , V I I I , t o t a l B r i t i s h Columbia purchase: 1,270 GW.h, B.C.Hydro sales 1,018, approx. 80%). On the other hand, i n the more d i v e r s i f i e d "Wood Manufacturing" sector (the production of lumber, plywood, doors, hardwood, f l o o r s , p a r t i c l e board, c o f f i n s , e tc . ) only nine accounts (or 256 GW.h), out of the t o t a l purchase of 1,979 GW.h i n 1983, receive B.C.Hydro's Transmission rate (see Tables V I I , X I I ) . This means that approximately 87% of the purchases by customers i n the "Wood Manufacturing" category are paying the higher General rate ( in 1983, 4 cents/KW.h versus 2.5 cents/KW.h). Although the t o t a l purchase of e l e c t r i c i t y i n manufacturing increased from 3,808 (GW.h) to 9,780.4 (GW.h), the larger supply of e l e c t r i c i t y was appl ied to the processing of timber and chemicals used i n pulp product ion. Since fores t production cons is ts large ly of export s taples , the increased a v a i l a b i l i t y of e l e c t r i c i t y d id not d i v e r s i f y the staples economy. Conclusion B.C.Hydro consul tants , engineers, and planners perceived the so lu t ion to the lack of primary and secondary industry i n E x t e n s i o n 98 B r i t i s h Columbia as one of of b u i l d i n g the h y d r o e l e c t r i c i n f r a s t r u c t u r e and l i n k i n g i t t o B r i t i s h Columbia's mi n e r a l and f o r e s t wealth. The Crown c o r p o r a t i o n ' s r e p o r t s on i n d u s t r i a l development show a p r e f e r e n c e f o r c a p i t a l i n t e n s i v e , i n t e r n a t i o n a l , and l a r g e volume consumers of e l e c t r i c i t y . These p e r c e p t i o n s c o n t r i b u t e d t o b u i l d i n g power c a p a c i t y f o r the s t a p l e s i n d u s t r y . The Crown c o r p o r a t i o n developed access to n o r t h e r n resources and l i n k e d them with B.C.Hydro's power g r i d . The u t i l i t y promoted and s o l i c i t e d consumption of low c o s t e l e c t r i c i t y i n the s t a p l e s i n d u s t r y (pulp and paper, wood products, chemical products, s m e l t i n g ) . Contrary t o the "Keefer s c e n a r i o , " the supply of e l e c t r i c i t y d i d not d i v e r s i f y manufacturing, but 85% of the purchased e l e c t r i c i t y f o r manufacturing was used i n the p r o d u c t i o n p rocesses of the p u l p and paper i n d u s t r y , i t s s u p p l i e r the chemical products i n d u s t r y , and the wood i n d u s t r y . Most of "Wood Manufacturing," a more d i v e r s i f i e d form of p r o c e s s i n g timber, does not q u a l i f y f o r low-rate e l e c t r i c i t y purchases and does not b e n e f i t from the abundant supply of e l e c t r i c i t y i n the same way as other f o r e s t p r o c e s s o r s . At the community l e v e l , the b u i l d i n g of many h y d r o e l e c t r i c s t r u c t u r e s d i d not l e a d t o a d i v e r s i f i e d h y d r o e l e c t r i c equipment i n d u s t r y , but t o the promotion of t o u r i s m as a secondary i n d u s t r y around hydro dams. J u s t as i n many segments of the s t a p l e s economy, no forward and backward l i n k a g e s were developed. B.C.Hydro E x t e n s i o n 99 e x t e n d e d t h e s t a p l e s economy by r e p r o d u c i n g t h e i d e a s a l r e a d y s t e r e o t y p e d w i t h i n t h e c o l o n i a l t r a d i t i o n s o f t h e s t a p l e s economy ( " i n d u s t r i a l i z a t i o n by i n v i t a t i o n , " " d e v e l o p m e n t d e p e n d e n t on t h e m a n u f a c t u r i n g c e n t e r s " ) . I n o t h e r words, B.C.Hydro d i d v e r y l i t t l e t o c hange t h e p e r c e p t i o n and r e a l i t y t h a t s t a p l e s e x p o r t s a r e t h e l e a d i n g s e c t o r o f t h e economy. I t s p r o m o t i o n o f " i n d u s t r i a l i z a t i o n by i n v i t a t i o n " was e x t e n d e d t o C a n a d i a n and f o r e i g n c o r p o r a t i o n s . I t s h y d r o e l e c t r i c i n f r a s t r u c t u r e was e xpanded t o f a c i l i t a t e s t a p l e s p r o d u c t i o n . B.C.Hydro went b e y o n d t h e r o l e o f a u t i l i t y i n t h e way i t a c t i v e l y p u r s u e d government p o l i c y w h i c h e x t e n d e d t h e p r o v i n c e ' s s t a p l e s - d e p e n d e n t economy. The government o f B r i t i s h C o l u m b i a ' s " E n e r g y P o l i c y S t a t e m e n t S t a t e m e n t o f F e b r u a r y 1980," c o n t a i n s a g a i n t h e same i n d u s t r i a l d e v e l o p m e n t a s s u m p t i o n s o f t h e 1960s and 1970s, d e s p i t e e v i d e n c e t o t h e c o n t r a r y t h a t t h e r e s o u r c e s a r e t h e p r i m a r y a t t r a c t i o n t o i n d u s t r y i n B r i t i s h C o l u m b i a , t h e s t a t e m e n t r e p e a t s : The p r o v i n c e ' s h y d r o e l e c t r i c p o t e n t i a l i s p e r h a p s t h e s t r o n g e s t a t t r a c t i o n f o r f i r m s c o n s i d e r i n g where t o l o c a t e and expand . . . . 3 4 34 The B r i t i s h C o l u m b i a U t i l i t i e s C o m m i s s i o n , Site C Report, V a n c o u v e r , May 1983, p . 41. P l a n n i n g 1 0 0 Chapter V PLANNING THE "UNPLANNED SURPLUS" I n t r o d u c t i o n The c o n t r a d i c t i o n s i n h e r e n t i n t h e e x p a n d e d p r o d u c t i o n o f e l e c t r i c i t y by B.C.Hydro a r e e x a m i n e d i n t h i s c h a p t e r . F i r s t t h e m a j o r p l a n n i n g p r a c t i c e s a r e i n t r o d u c e d . Then, t h e y a r e c o n t r a s t e d w i t h t h e p l a n n i n g r e q u i r e m e n t s o f a t e c h n o c r a t i c a p p r o a c h t o h y d r o d e v e l o p m e n t v e r s u s t h e e c o n o m i c c o n d i t i o n s and q u a l i t y o f i n f o r m a t i o n a v a i l a b l e i n a "boom and b u s t " s t a p l e s economy. I n t h e a b s e n c e o f a c l e a r i n d u s t r i a l p o l i c y by t h e g overnment, t h e i n h e r e n t c o n t r a d i c t i o n s a r e a t t h e r o o t o f t h e " u n p l a n n e d s u r p l u s . " On t h e one hand, t h e s t a t e a t t e m p t s t o p l a n an economy u s i n g e l e c t r i c i t y a s i n f r a s t r u c t u r e f o r s t a p l e s i n d u s t r i e s ; on t h e o t h e r , f o r e i g n c o n t r o l l e d s t a p l e s p r o d u c e r s t h w a r t t h i s p r o c e s s . W i t h i n t h e p r o v i n c i a l s t a t e , t h e g o v ernment i s " . . . e n t r u s t e d w i t h t h e management o f o u r e n e r g y r e s o u r c e s . " 1 The 1 9 6 2 Hydro and Power A u t h o r i t y A c t a l l o w s B.C.Hydro s u b s t a n t i a l autonomy i n p l a n n i n g t h e h y d r o e l e c t r i c p r o j e c t s : I t g i v e s Hydro b r o a d power r e g a r d i n g t h e g e n e r a t i o n and s u p p l y o f power i n t h e p r o v i n c e and t h e a d d i t i o n a l a u t h o r i t y t o c a r r y o u t i t s w o r k . 2 1 From t h e " E n e r g y P o l i c y S t a t e m e n t ( F e b r u a r y 1 9 8 0 ) , " s u b m i t t e d a s E x h i b i t 4 6 t o t h e B r i t i s h C o l u m b i a U t i l i t i e s C o m m i s s i o n and c i t e d i n i t s Site C Report, May 1 9 8 3 , p . 4 1 . 2 The 1 9 6 2 Power A u t h o r i t y A c t and t h e s u b s e q u e n t amended and c u r r e n t l y R . S . B . C . 1 7 9 , c . 1 8 8 g i v e t h i s power. Site C Report, p . 4 2 . Planning 101 In a d d i t i o n , o t h e r government i n s t i t u t i o n s such as the M i n i s t r y of Energy, the Water R i g h t s Branch, A d v i s o r y Commissions, and the Cabinet c o n t r i b u t e to the f i n a l d e c i s i o n to b u i l d dams. The broad powers gi v e n t o B.C.Hydro are a t the same time t o a c c o r d with government p o l i c y d i r e c t i o n s . Two prominent p o l i c y d i r e c t i o n s are g i v e n to B.C.Hydro i n the p r o v i n c i a l government's Energy Statement on February 1980: 1) "We s t i l l have c o n s i d e r a b l e untapped hydro- e l e c t r i c p o t e n t i a l " [and B.C.Hydro should i n v e s t i g a t e t h i s p o t e n t i a l ] . 2) That "the p r o v i n c e ' s h y d r o - e l e c t r i c p o t e n t i a l i s perhaps the s t r o n g e s t a t t r a c t i o n f o r f i r m s c o n s i d e r i n g where t o l o c a t e and expand." "...That a secure and r e l i a b l e source of e l e c t r i c i t y i s a v a i l a b l e t o meet the P r o v i n c e ' s normal growth; and t h a t e l e c t r i c a l energy i s a v a i l a b l e t o a l l i n d u s t r i e s on a f a i r and e q u i t a b l e b a s i s . " 3 The p l a n n i n g , d e s i g n i n g , and b u i l d i n g of dams r e q u i r e more than j u s t a p o l i t i c a l approach to p l a n n i n g . O f f e argues t h a t the t e c h n o c r a t i c p l a n n i n g approach ( p u r p o s i v e - r a t i o n a l approach used by experts) i s c o n f r o n t e d by many o b s t a c l e s because of the c h o i c e of ends (such as b u i l d i n g dams, where t e c h n i c a l success may be e a s i e r t o achieve than economic and s o c i a l r a t i o n a l e ) . For the t e c h n o c r a t i c approach t o be s u c c e s s f u l , t h e r e must be c l e a r - c u t g o a l s , r e l a t i v e s t a b i l i t y d u r i n g the p r o d u c t i o n c y c l e , and an a b i l i t y t o ignore the s i d e - e f f e c t s . When a p p l y i n g O f f e ' s theory t o the c o n d i t i o n s i n a staples-dependent economic environment, i t becomes e v i d e n t t h a t d u r i n g the 1980s the comprehensive p l a n n i n g 3 B.C. U t i l i t i e s Commission, Site C Report, pp. 40,41. Planning 102 approach encounters numerous obstac les . Responses by the major staples producers themselves deny the a b i l i t y to plan comprehensively. The major problem for B.C.Hydro and the p r o v i n c i a l government i n planning the e l e c t r i c a l load requirements for a staples producing industry , i s the i n a b i l i t y to obtain r e l i a b l e information from staples producers. Government and B.C.Hydro Solutions to Complex Planning Problems B.C.Hydro and other p r o v i n c i a l state i n s t i t u t i o n s planned the pub l i c hydroe lec tr i c i n f r a s t r u c t u r e for the expected i n d u s t r i a l growth. The major assumptions were that the best so lut ions to complex planning problems can be found by: 1) accurate forecas t ing , 2) e f f i c i e n t development of the i n f r a s t r u c t u r e , 3) bu i ld ing the projects at the r i g h t time and of the appropriate s i z e , 4) determining the needs of purchasers, 5) c r e d i t f inancing of pro jec t s , and 6) the appropriate p r i c e of e l e c t r i c i t y . Forecasting In order to forecast the needs of i n d u s t r i a l customers, d i s t r i c t managers and the Specia l Contracts Department i n B.C.Hydro asked planners i n various mul t inat ional staples producing companies and l o c a l governmental agencies what they needed. B.C.Hydro described t h i s process: D i s t r i c t managers consult l o c a l governments, business and industry representat ives . The data i s Planning 103 compiled and ana l y z e d . In a d d i t i o n expansion p l a n s of e x i s t i n g l a r g e i n d u s t r i a l customers are ana l y z e d . I n q u i r i e s r e l a t e d t o p o s s i b l e new i n d u s t r i a l development are e v a l u a t e d . 4 The f o r e c a s t s f o r i n d u s t r i a l e l e c t r i c i t y requirements under c o n d i t i o n s of a staples-dependent economy are d i f f i c u l t t o p r e d i c t . Consequently, the developmental l o g i c of " i n d u s t r i a l i z a t i o n - b y - i n v i t a t i o n " was f o l l o w e d , and e x t r a allowances f o r i n d u s t r i a l purchases of e l e c t r i c i t y were made f o r i n d u s t r i e s coming i n t o the p r o v i n c e . The B r i t i s h Columbia Energy Board (a S o c i a l C r e d i t government a d v i s o r y committee) i n i t s f o r e c a s t r e p o r t , Electric Power Requirements (to 1 9 9 0 ) , r e f e r s t o t h i s p r a c t i c e of e x t r a allowances: In 1961 "...a l a r g e allowance was added t o the base p r o v i n c i a l f o r e c a s t f o r new power i n t e n s i v e loads coming i n t o the p r o v i n c e . There was no attempt made i n 1961 t o a l l o c a t e the new loa d t o any p a r t i c u l a r a r e a . " In 1970 " . . . s u b s t a n t i a l allowances were made f o r i n d u s t r i a l loads i n i n d i v i d u a l E.A.S.'s [ E l e c t r i c S e r v i c e Areas, B.C. i s d i v i d e d i n t o 18 such areas] over and above those a l r e a d y i n c l u d e d i n B.C.Hydro, A l c a n , and Cominco p r o j e c t i o n s . " 5 The p r a c t i c e of adding e x t r a allowances f o r i n d u s t r i a l loads c o n t i n u e d i n 1981. As a r e s u l t of an ". . . u n u s u a l l y high number of i n q u i r i e s from i n d u s t r i a l customers, B.C.Hydro r e t a i n e d DPA C o n s u l t i n g L i m i t e d t o c o n s t r u c t a f o r e c a s t of the 4 B.C.Hydro, "What you need," Energy Blueprint 1981. 5 B r i t i s h Columbia Energy Board (an Ad v i s o r y Committee on the Power Market) Electric Power Requirements: in British Columbia Projection to 1990, Government of B r i t i s h Columbia, May 1, 1971, p. 11. Planning 104 requirement of t h i s group of customers through [to] 1 9 9 1 . " ° Percent per annum f o r e c a s t s were c o n s t r u c t e d by adding the combined purchased e l e c t r i c i t y requirements of s m e l t i n g , mining, chemical and p e t r o - c h e m i c a l i n d u s t r i e s . W i t h i n these s e c t o r s , the s m e l t i n g and p e t r o - c h e m i c a l s e c t o r f o r e c a s t s were based on i n d i v i d u a l company p r o j e c t i o n s . " 7 DPA's r e p o r t p r e d i c t e d low ( 2 . 2 % per y e a r ) , probable ( 4 . 5 % per y e a r ) , and h i g h ( 7 . 1 % per year) i n c r e a s e s i n i n d u s t r i a l consumption. In the same year t h i s r e p o r t was w r i t t e n , B.C.Hydro's Energy Blueprint 1981, urged i n c r e a s e d h y d r o e l e c t r i c development: The growth r a t e of e l e c t r i c demand i s f o r e c a s t t o i n c r e a s e by 6.1 per cent a n n u a l l y i n the 11 years from A p r i l 1, 1980 t o March 31, 1991. Hydro must keep pace with a n t i c i p a t e d i n d u s t r i a l development • • • I t i s v i t a l t o i n d u s t r y , t o government and t o the p u b l i c t h a t we p l a n today t o meet customer requirements 10 or more years hence. a B.C.Hydro f o r e c a s t s d i f f e r e d from these of the B.C. Energy Commission's (the former name of the B.C. U t i l i t i e s Commission). Before the M i n i s t r y of Energy, Mines and Petroleum Resources made a d e c i s i o n about g r a n t i n g an energy p r o j e c t c e r t i f i c a t e t o b u i l d " S i t e C" (on the Peace R i v e r ) , i t r e f e r r e d B.C.Hydro's a p p l i c a t i o n back t o the B r i t i s h Columbia U t i l i t i e s Commission f o r a review. 6 DPA C o n s u l t i n g L i m i t e d Vancouver, prepared f o r B.C.Hydro A Forecast of Purchased Electricity Requirements of B.C.Hydro Industrial Customers 1981-90 (Vancouver: DPA, August, 19 8 1 ) , p. 1. 7 DPA c o n s u l t a n t s , 1981, p. 1. 8 B.C.Hydro, Energy Blueprint 1981, " I n t r o d u c t i o n . " P l a n n i n g 105 The Commission heard considerable evidence regarding Hydro's forecasting record. In presenting the September 1981 forecasts, Hydro acknowledged that: "Quite frankly, our forecasting record, l i k e that of other energy forecasts, has deteriorated during the energy troubled seventies." (1:46) A review of i t s past forecasts indicated that during the 1970's Hydro overestimated demand by an average of 11% i n the fourth year and by 37% i n the eighth year following the year of the forecast. Hydro's estimates for the largest component of demand, the bulk [ i n d u s t r i a l ] sector, have been the poorest (Ex 12:C14). 9 Size of the Hydroe lec t r ic Infras tructure To s o l v e t h e p r o b l e m o f f i n d i n g t h e most e f f i c i e n t way o f p r o d u c i n g t h e h y d r o e l e c t r i c i n f r a s t r u c t u r e , B.C.Hydro assumed t h a t t h e most e f f i c i e n t way o f b u i l d i n g t h e h y d r o e l e c t r i c i n f r a s t r u c t u r e was t o b u i l d c a p a c i t y b e f o r e i t was n e e d e d by i t s r e s i d e n t i a l , c o m m e r c i a l , and i n d u s t r i a l c u s t o m e r s . T h i s was t h e d u a l r i v e r p o l i c y . The r a t i o n a l e w i t h r e s p e c t t o i n d u s t r y was -- i f e l e c t r i c i t y c a n be assumed t o be "an a u t o m a t i c c a t a l y s t f o r j o b s and i n d u s t r i a l g r o w t h , " 1 0 t h e n t h e s u r p l u s c a n be e x p o r t e d u n t i l t h e a n t i c i p a t e d i n d u s t r i a l g r o w t h comes a b o u t . Shrum a r g u e d i n t h e f o l l o w i n g way: F o r t h e e c o n o m i c p r o d u c t i o n o f power t h e r e i s a minimum l i m i t t o t h e s i z e o f t h e i n i t i a l g e n e r a t i n g i n s t a l l a t i o n s f o r b o t h t h e Pe a c e and C o l u m b i a p r o j e c t s . T h i s minimum i n e a c h c a s e p r o v i d e s more power t h a n t h e P r o v i n c e c a n u s e i n t h e e a r l y y e a r s o f t h e p r o j e c t s . 9 BCUC, Site C Report, 1 9 8 3 , p. 5 8 . 10 Paul McKay, Electric Empire: the Inside Story of Ontario Hydro. (Toronto: Between the Lines, 1 9 8 3 ) , p. 1 8 6 . Planning 106 I f any market c o u l d be c r e a t e d f o r the unused p o r t i o n of the g e n e r a t i o n i t would, even i f s o l d a t a lower p r i c e , b r i n g e x t r a income t o the p r o j e c t and so b e n e f i t B r i t i s h Columbia consumers. I f t h i s a d d i t i o n a l power c o u l d be exported a t a r e c o v e r a b l e b a s i s , the r e c e i p t s would reduce the c o s t s of power to B r i t i s h Columbia consumers." 1 1 The b e n e f i t s to the P r o v i n c e of such o v e r - i n s t a l l a t i o n were seen t o be the c r e a t i o n of e x t r a revenue, and p r o v i s i o n of an i n c r e a s e i n r e l i a b i l i t y and f l e x i b i l i t y i n the s y s t e m . 1 2 Timing and Size of Projects Rushed development was the c h a r a c t e r i s t i c response to the problem as t o when the h y d r o e l e c t r i c i n f r a s t r u c t u r e should be b u i l t . P r e d i c t i o n s of energy shortages were abundant. For i n s t a n c e , P h i l G a g l i a r d i , the M i n i s t e r of Highways, p r e d i c t e d i n the e a r l y 1960s: By 1970 we w i l l be walking around with candles on our hats t o see your way i f the Peace as w e l l as the Columbia doesn't go ahead. I would l i k e t o know how we are going to s i t around q u i b b l i n g about i t . We are not i n t e r e s t e d i n the p o l i t i c s of power. We want to be a b l e t o t u r n on a switch and see the l i g h t s go o n . 1 3 A c t i o n and b u i l d i n g d u r i n g a booming economy were the p r i o r i t i e s . C o n s i d e r a t i o n as t o when the p r o j e c t s were needed were supported with e x t r a p o l a t e d curves of r i s i n g power consumption and incremental/per annum percentages. 11 Shrum 1961, p. 27. 12 B r i t i s h Columbia U t i l i t i e s Commission, "In the Matter of B r i t i s h Columbia Hydro and Power A u t h o r i t y A p p l i c a t i o n s f o r Rate R e l i e f , " Decision, February 28, 1983, p. 93. 13 Sherman, 1966, p. 225. P l a n n i n g 107 Purchasers' Requirements B.C.Hydro c l a i m s t h a t i t p l a n n e d and c o n s t r u c t e d i t s s y s t e m so t h e s t a t e - p r o d u c e d end p r o d u c t ( e l e c t r i c i t y ) w o u l d be u s e d f o r d o m e s t i c n e e d s . T h a t means h y d r o e l e c t r i c p r o j e c t s were b u i l t t o g e n e r a t e e l e c t r i c i t y t o be p u r c h a s e d by c u s t o m e r s l i v i n g i n r e s i d e n t i a l and c o m m e r c i a l b u i l d i n g s and f o r B r i t i s h C o l u m b i a ' s i n d u s t r y . Y e t , i n t h e e a r l y 1960s, Paddy Sherman d e s c r i b e s W.A.C. B e n n e t t ' s r e a s o n i n g f o r b r e a k i n g t h e e x p o r t b a r r i e r by means o f t h e C o l u m b i a R i v e r T r e a t y . " I f he c o u l d g e t t h e Pe a c e g o i n g , Canada c o u l d s t i l l k e e p t h e w h i p hand i n n e g o t i a t i o n s . C e r t a i n l y t h e two r i v e r s w o u l d p r o d u c e a s u r p l u s o f power. T h e r e f o r e i t must be s o l d i n t h e U.S. S i n c e O ttawa and W a s h i n g t o n b o t h wanted t h e t r e a t y , i t w o u l d become t h e implement t o b r e a k t h e e x p o r t b a r r i e r . " 1 4 A r e a d y m a r k e t f o r t h i s power was w i d e l y assumed, and, s i n c e h y d r o e l e c t r i c p r o j e c t s were good v e h i c l e s f o r c a p i t a l i n v e s t m e n t and g u a r a n t e e d by t h e p r o v i n c i a l s t a t e ' s t a x p a y e r , t h e f i n a n c i n g f o r t h e s e p r o j e c t s was r e a d i l y a v a i l a b l e . The F i n a n c i n g o f P r o j e c t s The f i n a n c i n g o f t h e h y d r o e l e c t r i c dams drew on C a n a d i a n and A m e r i c a n c a p i t a l and f o l l o w e d e s t a b l i s h e d b o r r o w i n g p r o c e d u r e s . B . C . H y d r o ' s Energy Blueprint 1981 i n d i c a t e s t h a t " f u n d s a r e r a i s e d t h r o u g h b o r r o w i n g and t h r o u g h r a t e s p a i d by c u s t o m e r s . " "Most b o r r o w i n g t a k e s t h e f o r m o f l o n g - t e r m bonds 14 Paddy Sherman, Bennett ( T o r o n t o : M c C l e l l a n d S t e w a r t , 1966), p . 246. Planning 108 (20 t o 30 y e a r s ) , through government t r u s t e e d funds i s s u e d t o the p u b l i c , or through p r i v a t e placements arranged by brok e r s . " The o r i g i n of funds v a r i e s . "Hydro u s u a l l y looks f i r s t t o Canada as a source of funds, but on o c c a s i o n we [ s i c ] must go elsewhere - u s u a l l y t o the United S t a t e s , but a l s o t o Europe. Hydro's c r e d i t i s a v i t a l f a c t o r i n a t t r a c t i n g investments from these sources." The P r i c e o f E l e c t r i c i t y Under the new B.C. U t i l i t i e s Commission A c t , the Commission r e g u l a t e s the r a t e s charged by B.C.Hydro under the new p r o v i n c i a l energy p o l i c y . 1 5 Because p r i c e s f o r export of sur p l u s power have been d e c r e a s i n g s i n c e 1980 (from 4.1 c e n t s per KW.h i n 1980 to 2.9 i n 1985) , 1 6 the response by B.C.Hydro has been t o n e g o t i a t e and hope f o r f i r m export c o n t r a c t s . 1 - 7 In order t o i n c r e a s e i t s e l e c t r i c i t y r a t e s , the u t i l i t y i s r e q u i r e d t o appear b e f o r e the B.C. U t i l i t i e s Commission. In i t s power t o set r a t e s , the Commission can request m i s s i n g 15 Two Acts are of importance: "The B.C. U t i l i t i e s Act" B.C. St a t u t e s (1980), Chapter 60; "Hydro and Power A u t h o r i t y A c t " B.C. S t a t u t e s (1979), Chapter 188. 16 B.C.Hydro Annual Report 1984/85, p. 11. 17 "Firm power i s now being s o l d i n the southern U.S. f o r l e s s than f o u r cents a kwh and s u r p l u s power from the Northwest i s going i n t o the Southern C a l i f o r n i a market f o r l e s s than two cents a kwh. To g i v e you some a p p r e c i a t i o n of the r e l a t i v e meaning of those v a l u e s , B.C. s o l d i t s downstream b e n e f i t s t o the U.S. under the 1964 Columbia R i v e r T r e a t y f o r 5.3 c e n t s a kwh [the" Columbia River Treaty Protocol and Related Documents s t a t e s 5.3 m i l l s per kwh, p. 178, i n other words .53 c e n t s a kwh], an amount t h a t c r i t i c s s a i d a t the time was a b l a t a n t give-away." M a r j o r i e N i c h o l s , The Vancouver Sun, A p r i l 3, 1986. P l a n n i n g 109 e v i d e n c e , b o t h f r o m o p p o n e n t s a n d p r o p o n e n t s o f t h e r a t e i n c r e a s e s . I n a d d i t i o n , t h e C o m m i s s i o n c a n c r o s s - e x a m i n e t h o s e who p r e s e n t e v i d e n c e . W i t h r e s p e c t t o r a t e s , i t h a s a s s u m e d a q u a s i - j u d i c i a l r o l e . A f t e r t h r e e v e r y t h o r o u g h h e a r i n g s i n t h e 1980s a n d f e a r f u l o f a n t i c i p a t e d c o n s u m e r r e s i s t a n c e ( b u t a l s o c o n s e r v a t i o n , o r t h e f e a r o f i n c r e a s i n g s e l f - g e n e r a t i o n o f e l e c t r i c i t y by i n d u s t r y ) , B.C.Hydro d e c l a r e d i t s " . . . o b j e c t i v e o f a v o i d i n g r a t e i n c r e a s e s f o r a p e r i o d o f f i v e y e a r s . " 1 8 D u r i n g t h e C o m m i s s i o n h e a r i n g s , g o v e r n m e n t a g e n c i e s , o t h e r t h a n B . C . H y d r o , w e r e r e q u e s t e d t o s u b m i t i n f o r m a t i o n . The M i n i s t r y o f E n e r g y , M i n e s , a n d P e t r o l e u m R e s o u r c e s s u b m i t t e d t h e Blue Paper No.3: Energy Considerations (October 1981) t o t h e S i t e C h e a r i n g s . I n t h i s p a p e r t h e a s s u m p t i o n s w e r e r e p e a t e d t h a t l o w e l e c t r i c i t y p r i c e s w i l l a t t r a c t s m e l t e r i n d u s t r i e s t o t h e p r o v i n c e : The p r i c e s a n d a v a i l a b i l i t y o f e l e c t r i c i t y i n B r i t i s h C o l u m b i a h a s r e s u l t e d i n c o n s i d e r a b l e i n t e r e s t among f i r m s i n t h i s i n d u s t r y [ t h e p r i m a r y m e t a l s i n d u s t r y ] i n l o c a t i n g o p e r a t i o n s w i t h i n t h e p r o v i n c e . 1 9 S e v e r a l d e v e l o p m e n t s w e r e g i v e n a s e x a m p l e s : A l c a n ' s e x p a n s i o n ( b y a d d i n g a n o t h e r s m e l t e r ) , C o m i n c o ' s z i n c s m e l t e r , two c o p p e r s m e l t e r s , a n d two o r t h r e e f e r r o - s i l i c o n s m e l t e r s . 18 B.C. U t i l i t i e s C o m m i s s i o n , " I n t h e M a t t e r o f A p p l i c a t i o n by B r i t i s h C o l u m b i a H y d r o a n d Power A u t h o r i t y , " Decision, May 9, 1986, p. 42. 19 B.C. M i n i s t r y o f E n e r g y , Mines and Petroleum Resources, Blue Paper No. 3 Energy Considerations, O c t o b e r 1981, p. 21. Planning 110 B.C.Hydro has sold on average less than 200 GW.h to the smelting industry since 1962. Alcan produces about 5000 Gw.h and Cominco about 3000 GW.h to supply t h e i r own operat ions . Both have taken advantage of the idea l hydro s i t e s (which allowed them to produce cheap e l e c t r i c i t y ) they already owned when B.C.Hydro came into existence. Neither B .C.Hydro's p r i c e , nor a v a i l a b i l i t y of power has been an incent ive to any major smelting industry . In 1985 and 1986, B.C.Hydro so ld 131 and 139 GW.h, re spec t ive ly , to "Primary Metal" Manufacturers (see Table I I , above). The S o l u t i o n s From the above i t can.be concluded that f i v e major so lut ions to the planning problems of the hydroe lec tr i c i n f r a s t r u c t u r e emerged: 1) to make large allowances for new power-intensive industr ie s during the 1960s, 1970s, and 1980s for indus tr i e s coming into the province; 2) to b u i l d ahead of p r o v i n c i a l i n d u s t r i a l consumption requirements and plan for the export of the surplus e l e c t r i c i t y u n t i l the economy grows; 3) to finance the bu i ld ing of dams with U . S . , Canadian, and European c a p i t a l - - about ha l f i n U.S . funds; 4) to include the commitments of large i n d u s t r i a l investors i n planning the s i ze of dams, transmission f a c i l i t i e s , and e l e c t r i c i t y purchases; and 5) to solve the problem of large amounts of power (which come suddenly on l i n e when big dams are f in i shed and the i n d u s t r i a l purchasers are not yet ready to buy) by temporary power exports into a "power hungry" United States P l a n n i n g 111 m a r k e t . A l l t h e s e s o l u t i o n s t o t h e d e v e l o p m e n t o f h y d r o e l e c t r i c power s y s t e m h a r b o r a s u b s t a n t i a l d e g r e e o f u n c e r t a i n t y . The S o l u t i o n s and the "Unplanned S u r p l u s " C l e a r Goal Requirement I n o r d e r f o r t h e t e c h n o c r a t i c a p p r o a c h t o be s u c c e s s f u l , C l a u s O f f e a r g u e s , t h e s t a t e a p p a r a t u s a s d i r e c t e d by i t s g o v e r n m e n t n e e d s c l e a r , c o n v e n t i o n a l a n d o p e r a t i o n a l c u e s a s t o what t h e g o a l s o f p r o d u c t i o n s h o u l d b e . B.C.Hydro d i d n o t r e c e i v e s u c h c l e a r p o l i c y d i r e c t i o n s . The B.C. U t i l i t i e s C o m m i s s i o n p o i n t e d o u t t h a t H y d r o was n o t g i v e n c l e a r d i r e c t i o n a s t o what i t s r o l e i n t h e i n d u s t r i a l d e v e l o p m e n t by means o f e l e c t r i c i t y - i n t e n s i v e i n d u s t r y i n t h e p r o v i n c e s h o u l d b e . THE COMMISSION HAS NO RECOMMENDATION ON GOVERNMENT POLICY IN THESE MATTERS. THE COMMISSION RECOMMENDS, HOWEVER, THAT GOVERNMENT POLICY WITH RESPECT TO BOTH THE TYPE OF INDUSTRIAL DEVELOPMENT IT IS SEEKING AND THE ROLE OF HYDRO IN FACILITATING ITS DEVELOPMENT SHOULD BE CLARIFIED TO ASSIST HYDRO IN DEVELOPING ITS PLANS, AND ALSO TO ASSIST FUTURE COMMISSION PANELS IN ASSESSING THE NEED FOR NEW SUPPLY. (Original Emphasis)zo As i n d i c a t e d a b o v e , r e p e a t e d l y , l a r g e i n d u s t r i a l a l l o w a n c e s w e r e i n c l u d e d i n t h e f o r e c a s t . P r e c i s e l y i n t h i s c a t e g o r y o f i n d u s t r i a l demand, B . C . H y d r o ' s f o r e c a s t i n g h a d be e n t h e p o o r e s t . " F o r e x a m p l e t h e 1973 b u l k [ i n d u s t r i a l ] s e c t o r f o r e c a s t o v e r e s t i m a t e d a c t u a l 1980 r e q u i r e m e n t s by some 20 BCUC, Site C Report, May 1 9 8 3 , p . 3 0 1 . Planning 112 64.5 percent. The 1976 requirements f o r e c a s t overestimated a c t u a l 1980 requirements i n the bulk [ i n d u s t r i a l ] sector by 25.8 p e r c e n t . " 2 1 Such f o r e c a s t s are used to make planning and engineering d e c i s i o n s , and th e r e f o r e have se r i o u s i m p l i c a t i o n s f o r g e o l o g i s t s , h y d r o l o g i s t s , corporate planners, the co n s t r u c t i o n work f o r c e , and other t e c h n i c a l s t a f f . I t takes 10 to 15 years t o p l a n , design, l i c e n s e , and b u i l d a major h y d r o e l e c t r i c p r o j e c t . S i t e i n f o r m a t i o n , planning analyses, engineering s t u d i e s , drawings, c o n t r a c t s , and many other c o s t l y preparations are req u i r e d years before c o n s t r u c t i o n begins. When a p r o j e c t i s postponed, some of the work has t o be redone. I f p r o j e c t s are canceled, m i l l i o n s of d o l l a r s need t o be w r i t t e n o f f . The Site C Report i n d i c a t e s expenditures on the "Peace S i t e C [ p r o j e c t ] are $35,000,000" and "approximately $160,000,000 has been spent on a l l major planned hydro, thermal and tra n s m i s s i o n developments, t h a t are c u r r e n t l y i n the planning stage up t o March 1982." Despite the i n d u s t r i a l optimism expressed f o r growth i n the B r i t i s h Columbia i n d u s t r y , o f f i c i a l S t a t i s t i c s Canada p u b l i c a t i o n s of purchased e l e c t r i c i t y by major i n d u s t r i e s show l i t t l e growth. As Table V i n d i c a t e s , the t o t a l purchases of e l e c t r i c i t y reported t o S t a t i s t i c s Canada by the s t a p l e s producers i n the 21 Columbia-Resources Group L t d . i n the report prepared f o r the B.C. U t i l i t i e s Commission, Assessment of B.C. Hydro Electric Load Forecasts Including Comparisons with B.C. Government Forecasts, 5 November 1981, p. C-13. This report was submitted to the Hearings on S i t e C as E x h i b i t 12 (Nov. 24, 1981) P l a n n i n g 113 M i n i n g , L o g g i n g a n d M a n u f a c t u r i n g s e c t o r s o f B r i t i s h C o l u m b i a h a v e d e c l i n e d s u b s e q u e n t t o 1976. TABLE V C o n s u m p t i o n o f P u r c h a s e d E l e c t r i c i t y by t h e M i n i n g , L o g g i n g a n d M a n u f a c t u r i n g I n d u s t r i e s i n B r i t i s h C o l u m b i a 1975-1982 N o t e : A l l v a l u e s a r e e x p r e s s e d i n t h o u s a n d MW.h INDUSTRIES YEAR MINING LOGGING MANUFACTURING TOTAL 1982 2 967. 41.6 8 963.6 11 972.2 1981 3 002. 40.5 9 076.1 12 118.6 1980 2 693. 38.8 10 042.2 12 774.0 1979 2 537. 3 7 . I r 10 008.4 12 582.5 1978 2 459.5 31.1 9 371.9 11 862.5 1977 2 373.1 32.0 8 915.5 11 320.6 1976 2 103.6 29.8 10 717.1 12 850.5 1975 2 131.6 29.4 8 162.5 10 325.5 S o u r c e : S t a t i s t i c s C a n a d a , Consumption oif Purchased Fuel and Electricity: by the Manufacturing, Mining, Logging, and Electric Power Industries ( O t t a w a : M i n i s t e r o f S u p p l y a n d S e r v i c e s C a n a d a ) , c a t a l o g u e 57-208, V o l u m e s 1975, 1976, 1977, 1978, 1979, 1980, 1981, 1982. N o t e : " C o n s u m p t i o n o f p u r c h a s e d e n e r g y by t h e i n d u s t r i e s n o t e d d o e s n o t r e p r e s e n t t h e i r t o t a l c o n s u m p t i o n , i n t h a t t h e d a t a e x c l u d e c o n s u m p t i o n o f a n y s e l f - p r o d u c e d f u e l o r e l e c t r i c i t y . " MW.h = MEGAWATT-HOURS: 1 x 1 0 3 k i l o w a t t - h o u r s . *" = r e v i s e d f i g u r e * The h i g h e s t t o t a l i s c a u s e d by s t i l l u n r e s o l v e d a c c u r a c y i n t h e S t a t i s t i c s C a n a d a f i g u r e s i n t h e " P r i m a r y M e t a l I n d u s t r i e s " l i n e 12 c a t e g o r y i n M a n u f a c t u r i n g ( C o m i n c o h a s l i k e l y r e p o r t e d s e l f - g e n e r a t e d power b e t w e e n 1962 t o 1976) S t a t i s t i c s C a n a d a i n O t t a w a c a n n o t r e v e a l t h e r e p o r t i n g p a r t y . C o m i n c o p u r c h a s e d power f r o m i t s s u b s i d i a r y West K o o t e n a y Power a n d L i g h t . Planning 114 S t a b i l i t y Requirement Since br inging a hydroe lec tr i c i n f r a s t r u c t u r e (planning and bu i ld ing a dam) into production takes 10 to 15 years and the subsequent production cyc le i s 50 to 100 years , the implementation of a hydroe l ec tr i c development program i s p a r t i c u l a r l y vulnerable to the s t r u c t u r a l condit ions of a staples-dependent economy. They are: the deplet ion of the natural resource, the overproduction or lack of demand of the s tap le , and the lack of secondary industry or product innovat ion. The l i m i t s to natural fores t resources are s ingled out as the most important factor inf luenc ing future growth i n the fores t products industry . The Min i s t ry of Energy i n i t s "Industr ia l Sector Energy Requirement Forecast" (October 1981) found that logging and sawmill a c t i v i t y l eve l s have been reduced to conform with l i m i t s of maximum harvests of 75 m i l l i o n cubic meters per year to 1995, or 75 m i l l i o n to 1985, and 85 m i l l i o n to 1990. Poss ible shortages of chips were i d e n t i f i e d along with a low increase of energy requirements i n the forest industry of 1.15 percent annually u n t i l 1 9 9 5 . 2 2 As the fores t processing industry stops growing - - the e l e c t r i c i t y requirement for t h i s industry (85% of Hydro's manufacturing industry consumption) dec l ines . Such reductions 22 The M i n i s t r y of Energy, Mines and Petroleum Resources, Blue Paper No. 3 Energy Considerations, October 1981, p . 20. This paper was submitted to the S i te C Hearings. Planning 115 can a lso be caused by overproduction or lack of demand for the s tap le . The "boom and bust" c y c l e , so much part of the staples economy, does not provide s u f f i c i e n t s t a b i l i t y for the long term planning process which i s required to plan major hydroe lec tr i c f a c i l i t i e s . During periods of prolonged recess ions , the o r i g i n a l demand requested by the industry may no longer be needed, and during periods of sustained expansion, over -opt imis t i c demand ind ica t ions are given by the industry . B .C.Hydro's forecast ing methods, used up u n t i l 1981, d id not take into account such changes i n economic c o n d i t i o n s . 2 3 Furthermore, p o l i t i c a l leaders and B r i t i s h Columbia developers often assume that exports and the economy would fol low a pattern of incremental growth. On the contrary , B r i t i s h Columbia's dependent c o l o n i a l pattern of economic development d id not fol low the c a p i t a l i s t growth pattern of the B r i t i s h I n d u s t r i a l Revolut ion, such as indicated by Karl Marx i n Capital, where small master handicraf t shops, producing consumer commodities, develop into manufactures and subsequently into large scale i n d u s t r i e s . 2 4 In B r i t i s h Columbia, indus tr i e s developed from a mix of small s taples producers and large staples producers to increas ing ly large staples producers (characterized by the a c a p i t a l i s t expansion of the staples economy). Continuous improvements 23 BCUC, Site C Report, p . 89. 24 K a r l Marx Capital, chapters 13, 14, 15. Planning 116 (productive technology) i n the primary processing of the same end products (pulp, paper, lumber, minerals) continues to t h i s day. This i s not what T . D . Buchanan, a B.C.Hydro senior economist, expected. In h i s report , British Columbia as an Investment Prospect, he l i s t e d " . . . t h e reasons why a long term investor can r e a l i s t i c a l l y take an op t imi s t i c view of B . C . ' s prospects for continued rapid growth: B. C. has an expanding and vigorous populat ion which assures a growing domestic market for secondary indus tr i e s and the economic stimulus of expanding expenditures i n s o c i a l f a c i l i t i e s , housing and publ i c u t i l i t i e s . " 2 5 Yet, the investors who would use substant ia l amounts of e l e c t r i c i t y were the staples producers. For example, pulp producers and t h e i r chemical suppl iers d id not e s t a b l i s h secondary industry by way of diverse grade paper product ion . The investors i n staples production have l i t t l e confidence i n producing diverse products for the domestic B r i t i s h Columbia market. Because they are overly dependent on fore ign markets, the need for e l e c t r i c i t y remains subs tant ia l l y determined by staples products markets outside the province . The P l a n n i n g Power Denied i n a Staples-Dependent Economy With respect to Offe ' s theory, the fol lowing question a r i s e s : Is the power and knowledge for comprehensive planning 25 T . D . Buchanan, B.C.Hydro , S t a t i s t i c a l Analys i s Department Commercial Services D i v i s i o n , British Columbia as an Investment Prospect, 26 June 1967, Introduct ion: "Summary and H i g h l i g h t s , " 7 . (e ) . Planning 117 of the e l e c t r i c a l i n f r a s t r u c t u r e f o r i n d u s t r y a v a i l a b l e t o the p e r i p h e r a l s t a t e i n which p r o d u c t i o n i s l a r g e l y determined by f o r c e s o u t s i d e the region? When combined wi t h o t h e r f a c t o r s of p r o d u c t i o n ( c a p i t a l equipment, labour, m a t e r i a l s , f u e l and managerial e x p e r t i s e , e t c . ) , e l e c t r i c i t y , as one i n d i v i d u a l f a c t o r of p r o d u c t i o n , c o n t r i b u t e s t o the e x t r a c t i o n of n a t u r a l r e s o u r c e s and the p r o d u c t i o n of goods and s e r v i c e s , and thus t o the g e n e r a t i o n of value-added i n B r i t i s h Columbia. However, the demands f o r these goods (and i m p l i c i t l y , t h e i r value-added) are determined by exogenous market f o r c e s , p a r t i c u l a r l y those of e x t e r n a l export markets, i n which the major p o r t i o n of B.C. primary resources are s o l d . 2 6 The power t o p l a n f o r e l e c t r i c i t y consumption i n the resource s e c t o r f a c e s a b a r r i e r t o p l a n n i n g i n t h r e e a r e a s . 1) The f o r e i g n ownership, whereby d i r e c t i v e s and d e c i s i o n s are made i n l i g h t of i n t e r e s t s o u t s i d e B r i t i s h Columbia; 2) the va l u e and demand of s t a p l e s products i s determined o u t s i d e the r e g i o n , the resource i t s e l f i s s u b j e c t t o d e p l e t i o n ; and 3) the q u a l i t y of i n f o r m a t i o n necessary f o r comprehensive p l a n n i n g i s denied by s t a p l e s producers. To p l a n a h y d r o e l e c t r i c i n f r a s t r u c t u r e f o r a staples-dependent economy, where most of the important d e c i s i o n s are made o u t s i d e the r e g i o n , i s d i f f i c u l t . In the pu l p and paper i n d u s t r y the f o r e i g n ownership i s s u b s t a n t i a l (Marchak 1983:87). Corporate head o f f i c e s i n 26 Acres, 1974, p. 2-8, 2-9. P l a n n i n g 118 e a s t e r n C a n a d a , t h e U.S.A., E u r o p e a n d J a p a n d e c i d e o n t e c h n o l o g y , p r i o r i t y o f p r o d u c t s p r o d u c e d , l a b o u r r e l a t i o n s , how l o n g t o p r o d u c e e t c . . A l l a r e f a c t o r s i n t h e d e t e r m i n a t i o n o f how much i n d u s t r i a l e l e c t r i c i t y i s r e q u i r e d f o r t h e i r p r o d u c t i o n i n B r i t i s h C o l u m b i a . F o r e i g n s t a p l e s p r o d u c e r s a r e i n t e r e s t e d i n m a n u f a c t u r i n g f i n i s h e d g o o d s i n t h e i r own c o u n t r i e s ( e s p e c i a l l y when t h e y a r e v e r t i c a l l y i n t e g r a t e d a n d h a v e t h e i r own m a n u f a c t u r i n g p l a n t s ) . T h e i r r e s o u r c e p r o c e s s i n g f a c i l i t i e s t e n d t o e x p a n d by way o f u s i n g more o f t h e same n a t u r a l r e s o u r c e s . T h e r e f o r e , t h e i r g r o w t h i n B r i t i s h C o l u m b i a i s l i m i t e d by t h e a v a i l a b l e n a t u r a l r e s o u r c e s a l l o c a t e d t o them by t h e g o v e r n m e n t . As a r e s u l t , p l a n n i n g a h y d r o e l e c t r i c i n f r a s t r u c t u r e f o r t h e s t a p l e s p r o d u c t i o n , i n t h e a b s e n c e o f d i v e r s i f i c a t i o n , c a n become o v e r p l a n n e d due t o t h e l i m i t s o f n o n - r e n e w a b l e r e s o u r c e s . The m a r k e t s e l s e w h e r e a r e b e y o n d t h e c o n t r o l o f t h e r e g i o n a l g o v e r n m e n t . O v e r - d e p e n d e n c e on s u c h m a r k e t s s u b s t a n t i a l l y r e d u c e s t h e c o n t r o l o f t h e p r o v i n c i a l s t a t e o v e r i t s a c c u m u l a t i o n p r o c e s s . The i n s t a b i l i t y o f s u c h p r o d u c t i o n c y c l e s a f f e c t s t h e p l a n n i n g o f an e l e c t r i c a l s y s t e m ' s c a p a c i t y . I t c a n p r o d u c e a s u b s t a n t i a l s u r p l u s o f power i n t i m e s o f v e r y l o w g r o w t h a n d d u r i n g t h e s a t u r a t i o n o f s u p p l y i n t h e s t a p l e s p r o d u c t i o n m a r k e t . Planning 119 I n d u s t r i a l Customers i n B r i t i s h Columbia In response to the "unplanned surplus" of e l e c t r i c i t y , former B.C.Hydro chairman Robert Bonner sa id: Hydro was merely responding to what i t s corporate customers thought they would need. He sa id those industr ie s could not have forecast plant c los ings and the general slump i n the economy that resul ted i n a drop i n the demand of e l e c t r i c i t y . 2 7 Norman Olson, the president of B r i t i s h Columbia Hydro and Power Author i ty , acknowledging i n a s i m i l a r response the lack of demand for power from the $2 b i l l i o n Revelstoke dam, ind ica ted , " . . . the e a r l i e r forecast was based at l eas t i n part on f irm i n q u i r i e s from companies wishing to set up or expand t h e i r businesses and t h e i r use of e l e c t r i c i t y i n B r i t i s h Columbia. He asks r h e t o r i c a l l y : "Where are they now?" 2 8 The lack of promised i n d u s t r i a l consumption and subsequent non-purchase was advanced by both the chairman and the former president of B.C.Hydro as a cause of the "unplanned surplus ." This issue became a major focus at the B . C . U t i l i t y Commission Hearings. J . R . Brassington i n charge of B .C.Hydro's Specia l Power Contracts Department, which deals with bulk i n q u i r i e s s ince 27 Russel K e l l y , " B . C . Has Too Much Dam Power," February 14 1984. Photocopied a r t i c l e . 28 A lber t Sigurdson, "B.C.Hydro foresees further cuts i n c a p i t a l projects as growth slows," The Globe and Mail September 26, 1983, p . B l . Planning 120 1970, presented t a b l e s of 34 companies which were p l a n n i n g to expand t h e i r e x i s t i n g o p e r a t i o n s or s t a r t new accounts. To v e r i f y these t a b l e s , R. O v e r s t a l l , a g e o l o g i s t and r e s e a r c h e r on b e h a l f of the S o c i e t y f o r the Promotion of Environmental C o n s e r v a t i o n (SPEC), independently surveyed the i n q u i r i n g companies. Both O v e r s t a l l and B r a s s i n g t o n concurred on many of t h e i r f i n d i n g s because the companies reduced t h e i r requirements w i t h i n a f o u r month p e r i o d (October 1981 to February 1982). During these surveys, p l a n s f o r e s t a b l i s h i n g new i n d u s t r i a l p l a n t s , or expansions of e x i s t i n g f a c i l i t i e s , had e i t h e r been c a n c e l e d or were reduced by the f o l l o w i n g Canadian and f o r e i g n c o n t r o l l e d companies: F e r r o - S i l i c o n Smelter: Sumitomo/SKW Canada L t d . , M i t s u b i s h i Canada L t d . , M i t s u i & Co. (Canada) L t d . ; Coal Mining Expansion: Fording Coal L t d . , B.P. Canada L t d . , Petro-Canada Coal D i v i s i o n ; Lead and Zink: Cyprus A n v i l Mining C o r p o r a t i o n ; S t i k i n e & S c h a f t Creek Copper: Teck C o r p o r a t i o n , Kennco E x p l o r a t i o n ; Pulp and Paper: Eurocan Pulp & Paper L t d . , Canadian C e l l u l o s e Company L t d . , Doman I n d u s t r i e s L t d , and f o r p u l p m i l l Chemicals: Canadian O c c i d e n t a l P e t r o l e u m . 2 9 There i s no evidence t h a t they were h e l d r e s p o n s i b l e f o r not purchasing the e l e c t r i c i t y they had made f i r m i n q u i r i e s f o r . O v e r s t a l l (from SPEC) checked 85% of the c a p a c i t y (1349 MW) of the companies which B.C.Hydro had i n d i c a t e d as 29 E x h i b i t 97: Table 1, t i t l e d "B.C. Hydro Bulk Power (1800 S e r i e s ) Accounts D e t a i l - Probable E l e c t r i c a l P r o j e c t e d S a l e s ; " E x h i b i t 98: Table 2, B.C. Hydro 1981 Bulk Load P r o j e c t i o n s - "Other" Assumed S t a g i n g ; " and E x h i b i t 96: Statement of Evidence of R i c h a r d O v e r s t a l l (S.P.E.C.); these e x h i b i t s were presented t o and f i l e d by the B.C. U t i l i t i e s Commission d u r i n g the S i t e C Hearings on February 10, 1982, p. 4421. P l a n n i n g 121 i n q u i r i e s ( r e q u e s t s ) by t h e c o m p a n i e s , b u t f o u n d , 4 9 % o f t h o s e d i d n o t c o n f i r m (667 M W ) . 3 ° Mr. B r a s s i n g t o n ( B . C . H y d r o ) s a i d i n r e f e r e n c e t o t h e f o r e c a s t s a n d r e v i s i o n s : "...some o f t h e c h a n g e s t h a t SPEC made we w o u l d s t i l l t a k e i s s u e w i t h . " H o w e v e r , i n g e n e r a l he c o n c u r r e d , s i n c e h i s r e v i s e d f o r e c a s t was e v e n b e l o w S P E C ' S . He t e s t i f i e d : " I w o u l d e x p e c t t h a t H y d r o w o u l d h a v e t o s e r v e 561 [MW] w i t h i n t h e d e c a d e . " 3 1 Upon r e v i s i n g a n d r e c o n f i r m i n g w i t h p o t e n t i a l i n d u s t r i a l c u s t o m e r s , H y d r o e s t i m a t e s w e r e l e s s t h a n h a l f t h e o r i g i n a l f o r e c a s t . H y d r o ' s o u t l o o k i n t h e f o r e s t i n d u s t r y was a l s o f o u n d t o be o v e r l y o p t i m i s t i c . I t h a d assumed a s t r o n g r e c o v e r y " . . . i n 1983 a n d 1984, n a m e l y w i t h r e a l g r o w t h i n v a l u e a d d e d o f 2 0 . 2 % and 3 2 . 0 % r e s p e c t i v e l y , w i t h m a j o r e x p a n s i o n i n c a p a c i t y f r o m 1986 u n t i l t h e m i d 19 9 0 s w i t h s e v e n new c h e m i - t h e r m a l m e c h a n i c a l p u l p m i l l s o v e r t h a t p e r i o d . " 3 2 I n c o n t r a s t t o t h e a r g u m e n t t h a t p r i c e i s v e r y s i g n i f i c a n t t o i n d u s t r i a l u s e r s , o t h e r H y d r o w i t n e s s e s a r g u e d t h a t t h e h i g h e r p r i c e s o f e l e c t r i c i t y w i l l n o t be s i g n i f i c a n t i n t h e t e c h n o l o g i c a l c h a n g e t o " t h e r m a l a n d c h e m i - t h e r m a l m e c h a n i c a l p u l p i n g " ( 2 , 4 0 0 GW.h o r 7 3 % o f l o a d g r o w t h i n t h e f o r e s t r y ) , s i n c e n o t e l e c t r i c i t y b u t "wood s u p p l y c o s t s a r e a m a j o r c o n c e r n . " 3 3 T h i s c o n t r a d i c t s t o some d e g r e e t h e g o v e r n m e n t ' s ' e l e c t r i c i t y a s a l o w - c o s t i n c e n t i v e t o i n d u s t r y p r o g r a m . ' When o v e r l y 30 BCUC Site C Hearings, F e b r u a r y 1 0 , 1 9 8 2 , F o r t S t . J o h n , Mr. O v e r s t a l l , V o l . 26, p. 4 3 3 9 . 31 BCUC Site C Hearings, V o l . 26, p p . 4 4 2 1 , 4 4 8 1 . 32 BCUC Site C Report, May 1 9 8 3 , p. 74. 33 BCUC Site C Report, May 1 9 8 3 , p p . 75,76. P l a n n i n g 122 o p t i m i s t i c i n d u s t r i a l f o r e c a s t s c o n t r i b u t e t o t h e o v e r - b u i l d i n g o f i n f r a s t r u c t u r e , t h e n t h e c o s t s a r e s p r e a d by way o f r a t e i n c r e a s e s o v e r a l l c o n s u m e r s . The B.C. U t i l i t i e s C o m m i s s i o n , n o t o n l y q u e s t i o n e d t h e B .C.Hydro f o r e c a s t s , b u t a l s o t h o s e o f t h e M i n i s t r y o f E n e r g y , M i n e s a n d P e t r o l e u m R e s o u r c e s . I n c r o s s - e x a m i n a t i o n o f t h e M i n i s t r y ' s f o r e c a s t s one m a j o r a r e a o f c o n t r o v e r s y r e l a t e d t o t h e p r i m a r y m e t a l s a n d m i n i n g i n d u s t r i e s -- t h e number a n d t i m i n g o f new c o p p e r , l e a d - z i n c , f e r r o - s i l i c o n a n d a l u m i n u m s m e l t e r s i n p a r t i c u l a r . . . . The M i n i s t r y p a n e l a g r e e d t h a t some o f t h e a s s u m p t i o n s i n t h e s e a r e a s , f o r e x a m p l e , t h o s e w i t h r e s p e c t t o f e r r o - s i l i c o n s m e l t e r s , may h a v e b e e n o v e r l y o p t i m i s t i c ( 1 0 : 1 , 6 0 2 ) . 3 4 The i n a b i l i t y o f t h e p r o v i n c i a l s t a t e t o p l a n a n d p r o d u c e t h e a p p r o p r i a t e s i z e o f i t s h y d r o e l e c t r i c s y s t e m , when b a s e d on p l a n n i n g i n f o r m a t i o n e x t e n d e d by t h e i n d u s t r y , becomes a p p a r e n t . C o r p o r a t i o n s i n t h e m a j o r s e c t o r s o f B r i t i s h C o l u m b i a ' s s t a p l e s - d e p e n d e n t economy ( e . g . f o r e s t p r o d u c t s a n d m i n i n g ) d e n y B . C . H y d r o , t h e M i n i s t r y o f E n e r g y , a n d t h e g o v e r n m e n t , t h e power t o c o m p r e h e n s i v e l y p l a n f o r f u t u r e c o n s u m p t i o n . The m a j o r c o n t r a d i c t i o n b e t w e e n p l a n n i n g f o r t h e i n d u s t r y a n d t h e i n a b i l i t y t o s u p p l y a d e q u a t e p l a n n i n g i n f o r m a t i o n a r e b r o u g h t f o r w a r d i n t h e c o n c l u s i o n s o f t h e B.C. U t i l i t i e s C o m m i s s i o n . The C o m m i s s i o n came t o t h e f o l l o w i n g c o n c l u s i o n s w i t h r e s p e c t t o d e v e l o p m e n t p o l i c y i n B r i t i s h C o l u m b i a : 34 BCUC Site C Report, May 1983, p. 74. Planning 123 The evidence showed c l e a r l y t h a t a major d i f f i c u l t y Hydro f a c e s i n dev e l o p i n g l o a d growth f o r e c a s t s and hence system plans i s i n e s t i m a t i n g the f u t u r e new i n d u s t r i a l l o a d s . On the one hand, Hydro f e e l s o b l i g e d t o make p r o v i s i o n s f o r such loads so t h a t e l e c t r i c i t y supply does not c o n s t r a i n new economic development. On the other hand, s i n c e these loads are not committed, i t i s not c l e a r t o what extent they should be taken i n t o account s i n c e new f a c i l i t i e s might be b u i l t i n a n t i c i p a t i o n of loads t h a t never m a t e r i a l i z e . T h i s problem r e l a t e s d i r e c t l y t o p r o v i n c i a l i n d u s t r i a l p o l i c y and the extent t o which the pr o v i n c e wishes t o encourage the development of e l e c t r i c i t y - i n t e n s i v e i n d u s t r y and t o gear Hydro's p l a n n i n g t o accommodate such development whenever i t o c c u r s . 3 5 The u n d e r u t i l i z a t i o n of hydro f a c i l i t i e s , such as the Cheekeye-Dunsmuir p r o j e c t s ($ 838 m i l l i o n ) and the Revelstoke dam ($ 1,921 m i l l i o n ) which were b u i l t t o a l a r g e p a r t t o accommodate i n d u s t r y , are very c o s t l y f o r B r i t i s h Columbians. Mr. Sheehan (B.C.Hydro's E x e c u t i v e V i c e - P r e s i d e n t , Finance of Ad m i n i s t r a t i o n ) t e s t i f i e d t h a t c u r r e n t r a t e i n c r e a s e s are p r i m a r i l y d r i v e n by the c o s t of those two p r o j e c t s . By adding the Cheekeye-Dunsmuir t r a n s m i s s i o n l i n e s t o Vancouver I s l a n d , B.C.Hydro added 2400 MW t r a n s m i s s i o n c a p a c i t y t o handle a load f o r e c a s t t o be on l y 260 MW i n f i s c a l year 1986/87 — a u t i l i z a t i o n of only 10%. B.C.Hydro t e s t i f i e d t h a t " . . . t h i s t r a n s m i s s i o n c a p a c i t y was based on load p r o j e c t i o n s by the major i n d u s t r i a l customers on the I s l a n d . . . . " 3 6 The u t i l i t y i n d i c a t e s , a l s o , t h a t the Revelstoke Dam ( c a p a c i t y 1843. MW) w i l l not be f u l l y used u n t i l 1992 f o r domestic purposes. In 35 BCUC Site C Report, May 1983, p. 300. 36 BCUC Decision May 9, 1986, p. 19. T h i s f a c t was confirmed i n a per s o n a l i n t e r v i e w w i t h B r a s s i n g t o n on J u l y 21, 1986. Planning 124 the meantime, the dam's use i s dependent on the export market i n the U.S . S i z e o f the Sur p l u s The s ize of the surplus can be gauged by Hydro's a p p l i c a t i o n to the National Energy Board (the federal agency approving the export of e l e c t r i c i t y ) i n 1983 to export capacity and e l e c t r i c i t y for the years from 1 October 1984, to 30 September 1990. Since B r i t i s h Columbians do not need the Revelstoke dam for t h i s per iod , B.C.Hydro appl ied for the t o t a l amount of f irm export not exceeding 2,000 MW (a capacity greater than Revelstoke dam) and 6,000 GW.h (equivalent to the purchase of Hydro's e l e c t r i c i t y i n a l l of B r i t i s h Columbia's pulp m i l l s ) . Since B.C.Hydro could not pred ic t i f i t s competitors i n the United States would have f irm or in terruptable power or energy to s e l l , the company appl ied for l icenses to exchange, s tore , s e l l or t rans fer in terruptable energy i n the amount of not exceeding 15,000 GW.h (Nearly ha l f of B .C.Hydro's t o t a l sa les , f i rm sales would be deducted) and to loop, i . e . c i r c u l a t e (simultaneous import and export arrangement), the flow of power not exceeding 3,000 G W . h . 3 7 This requires increased in ter l inkage with the U . S . , and A lber ta g r i d system. 37 The National Energy Board of Canada, In the Matter of the National Energy Board Act and in the Matter of an Application of British Columbia Hydro and Power Authority: To renew, with modifications. License No. El-128; El-130; El-127. 1983, Volume 1, pp. 7 ,8 ,9 . Planning 125 The s ize of the hydroe lec tr i c system i s usual ly described by i t s capacity to produce power. B .C.Hydro's operating capacity has grown to "a t o t a l name plate capacity of some 10,483 MW [Megawatt = 1000 K i l o w a t t s ] . As already indicated above, the highest one-hour demand ever recorded to the end of 1985 on Hydro's integrated system - - 6 , 8 1 6 MW - - occurred on 26 November 1985." 3 8 (under extreme co ld and export condit ions) Despite adjusted forecasts and supposed planning according to "customer sovereignty" condit ions (where customers set the demand), the capacity i s 35% above the highest peak ever recorded. This indicates not just a safety margin, but a substant ia l surplus capac i ty . The Burrard Thermal Plant (912 MW, replacement value $1.4 b i l l i o n ) was to serve as an emergency power source i n case low spring r i v e r flows would not f i l l the reservo irs or i f B r i t i s h Columbia were faced with a draught. I t has hardly been used. The Energy M i n i s t e r , Stephen Rogers, commented on Hydro's surplus and the idleness of t h i s p lant : "Other u t i l i t i e s can' t be l ieve we have a plant l i k e t h i s just s i t t i n g there just i n case we need i t someday. I t ' s l i k e wearing a b e l t and suspenders ." 3 9 38 B.C.Hydro , B.C.Hydro: The Background, "History," 1983, p . 3 . Shrum (1961: 27) indicated the estimated po tent ia l capacity of both r i v e r s . " C a p a c i t y - During the period from 1968 to 1979 the Peace projec t could add 3,084 mw. of capacity to the B r i t i s h Columbia power-supply. During the per iod from 1967 to 1983 the Columbia project could add 4,220 mw. of capac i ty ." The t o t a l capacity of the two r i v e r s which was added to the system i s very c lose to the capacity which has a c t u a l l y has been added by 1986. Shrum*s pred ic t ions under condit ions of continued staples production were close to the actual events. 39 Vaughn Palmer, The Sun, Vancouver, November 6 1985. P l a n n i n g 126 C o n c l u s i o n I n summary, p l a n n e r s , e x p e r t s , p o l i t i c i a n s , i n d u s t r i a l d e v e l o p m e n t o f f i c e r s , w i t h i n B . C . H y d r o , t h e p r o v i n c i a l g o v e r n m e n t , a n d i n d u s t r y h a v e s h a p e d t h e h y d r o e l e c t r i c i n f r a s t r u c t u r e o f B r i t i s h C o l u m b i a . The b u i l d i n g o f s u c h dams an d t h e p r o d u c t i o n o f e l e c t r i c i t y r e q u i r e s s o l u t i o n s t o c o m p l e x p l a n n i n g p r o b l e m s . B o t h , u n r e l i a b l e i n f o r m a t i o n p r o v i d e d by i n d u s t r y a n d t h e a b s e n c e o f a c l e a r g o v e r n m e n t i n d u s t r i a l p o l i c y d i r e c t i o n l e d t o s u b s t a n t i a l o v e r e s t i m a t e s o f i n d u s t r i a l n e e d s a n d c o n t r i b u t e d s u b s t a n t i a l l y t o t h e o v e r a l l s u r p l u s o f p o w e r . The c o n t r a d i c t i o n b e t w e e n t h e o u t p u t - o r i e n t e d p l a n n i n g g o a l s a n d t h e p l a n n i n g d e n i e d i n a s t a p l e s - d e p e n d e n t economy c o n t r i b u t e d s u b s t a n t i a l l y t o t h e " u n p l a n n e d s u r p l u s . " I n t e n s i f i c a t i o n 1 2 7 Chapter VI B.C.HYDRO AND THE INTENSIFICATION OF STAPLES DEPENDENCE I n t r o d u c t i o n Before d e s c r i b i n g the 1980s s t a t e i n t e r v e n t i o n i n the development of hydro power, i t w i l l h e l p t o r e c a l l the i n t e r v e n t i o n s covered i n p r e v i o u s c h a p t e r s . I t was argued t h a t i n rec e n t decades the q u a n t i t y and scope of p r o v i n c i a l s t a t e i n t e r v e n t i o n i n the p r o d u c t i o n of e l e c t r i c i t y has i n c r e a s e d . I t has done so i n two ways, one, the s t a t e has in t e r v e n e d t o expand the i n d u s t r y of b u i l d i n g h y d r o e l e c t r i c p r o j e c t s , two, i t has expanded the p r o d u c t i o n and d i s t r i b u t i o n of e l e c t r i c i t y s i n c e the 1940s. During the f i r s t t h r e e decades, two major i n t e r v e n t i o n s stand out. In the f i r s t , the B.C. Power Commission (1945) s t a r t e d t a k i n g over s m a l l e r u t i l i t i e s t o proceed w i t h the u n p r o f i t a b l e r u r a l e l e c t r i f i c a t i o n and the promotion of e l e c t r i c i t y f o r f o r e s t p r o c e s s i n g . The second i n t e r v e n t i o n was c h a r a c t e r i z e d by s e v e r a l a s p e c t s : t a k i n g over the B.C. E l e c t r i c Company, a l l o w i n g the U.S. t o r e g u l a t e the Columbia R i v e r , d e v e l o p i n g the Peace River, t o open the North, p r o v i d i n g a dam-building i n d u s t r y as a r e l i e f f o r unemployment of the l a t e 50s, and the promises of i n f l o w of i n d u s t r i a l and dam- b u i l d i n g c a p i t a l . Both i n t e r v e n t i o n s d i f f e r e d from the p r o v i n c i a l s t a t e ' s a l l o c a t i v e i n t e r v e n t i o n s (such as the a l l o c a t i o n of f o r e s t s , m i n e r a l s , or dam s i t e s ) . When a l l o c a t i n g the p r o v i n c i a l n a t u r a l r e s o u r c e s , the s t a t e d i d not I n t e n s i f i c a t i o n 1 2 8 h a v e t o p r o d u c e t h e f o r e s t a r e a s , m i n e r a l d e p o s i t s , o r dam s i t e s , b u t i n o r d e r t o b u i l d h y d r o e l e c t r i c p r o j e c t s ( t h e dams t h e power h o u s e s , a n d s w i t c h y a r d s ) , t h e s t a t e h a d t o p r o d u c e o b j e c t s ( b u i l d a d a m s ) . T h e r e f o r e , t h e a l l o c a t i v e b u r e a u c r a c y was i n s u f f i c i e n t a n d a t e c h n o c r a t i c p l a n n i n g s t r u c t u r e was r e q u i r e d . A l l o c a t i o n s c o u l d be b a s e d on p o l i t i c a l c o n s i d e r a t i o n s o n l y , b u t i n o r d e r t o p r o d u c e s o m e t h i n g , r e l y i n g s o l e l y o n p o l i t i c s was no l o n g e r s u f f i c i e n t . D e c i s i o n s h a d t o be i n f o r m e d by t h e a c t u a l o u t p u t p r o d u c e d ( t h e dam s i t e , t h e s i z o f dams, t h e m a r k e t ) . Once t h e s t a t e became i n v o l v e d i n p r o d u c t i o n , t h e c o n t r a d i c t i o n s b e t w e e n p l a n n i n g v e r s u s t h e m a r k e t grew. A m a r k e t f o r t h e s t a t e - p r o d u c e d e l e c t r i c i t y c o n s i s t e d o f t h e s t a p l e s p r o d u c e r s , b u t t h e y d i s a l l o w e d c o m p r e h e n s i v e e l e c t r i c a l l o a d p l a n n i n g by t h e s t a t e , b e c a u s e t h e i r own p r o d u c t i o n i s d i r e c t e d f r o m o u t s i d e B r i t i s h C o l u m b i a , a n d b e c a u s e t h e y h a d no o b l i g a t i o n s t o u s e t h e e l e c t r i c i t y f o r w h i c h t h e y made " f i r m i n q u i r i e s " ( a t e r m u s e d by B.C.Hydro f o r e c a s t e r s w h i c h means f i r m r e q u e s t s ) . The " s u r p l u s s h o c k " a n d t h e r e c e s s i o n i n t h e 1 9 8 0 s p r e s e n t e d a r e n e w e d t h r e a t t o t h e a c c u m u l a t i o n p r o c e s s . U n employment, l a c k o f new i n d u s t r i a l d e v e l o p m e n t , a s u r p l u s o p o w e r , a n d a p r o l o n g e d r e c e s s i o n p u t s p r e s s u r e o n t o r e p r e s e n t a t i v e s o f t h e s t a t e t o r e s p o n d . To r e c o n c i l e t h e s e new c o n d i t i o n s , t h e s t a t e i n t e r v e n e d f o r t h e t h i r d t i m e i n a I n t e n s i f i c a t i o n 129 m a j o r way. A q u a l i t a t i v e c h a n g e h a s t a k e n p l a c e i n t h e s t a t e ' s mode o f o p e r a t i o n . S i n c e m a j o r p r o j e c t s a r e a l r e a d y p r o d u c e d , p a r t o f t h e s t a t e ' s i n t e r n a l t e c h n o c r a t i c s t r u c t u r e ( B . C . H y d r o ) h a s b e e n t r a n s f o r m e d t o a l l o c a t e a n d g e n e r a t e e l e c t r i c i t y . I n t h e i n t e r i m , t h e s t a t e d o e s n e e d t o b u i l d more i n f r a s t r u c t u r e , b e c a u s e u n d e r c o n d i t i o n s o f o v e r p r o d u c t i o n t h e n e c e s s a r y mode o f i n t e r v e n t i o n r e s e m b l e s a l l o c a t i o n , n a m e l y , t h e a l l o c a t i o n o f d i s c o u n t e d s u r p l u s e l e c t r i c i t y t o s t a p l e s p r o d u c e r s a n d p u r c h a s e r s i n t h e U n i t e d S t a t e s . I n t h i s f o r e i g n e n v i r o n m e n t , B.C.Hydro a s a n a g e n c y o f t h e s t a t e , e x p e r i e n c e s new c o m p l e x i t i e s i n f u l f i l l i n g t h e s t a t e ' s a c c u m u l a t i v e f u n c t i o n s . U n l i k e a v e r t i c a l l y i n t e g r a t e d m u l t i n a t i o n a l c o r p o r a t i o n ( e . g . A l c a n ) w h i c h h a s c o n t r o l o v e r r e s o u r c e s , p r o d u c t i o n ( p r i m a r y i n p u t p r o d u c t s a n d c o n s u m e r g o o d s ) , a n d m a r k e t s h a r e , t h e p r o v i n c i a l s t a t e h a s d e l e g a t e d i t s c o n t r o l o v e r r e s o u r c e s . I t h a s c o n t r o l o n l y o v e r a n i n p u t p r o d u c t , a n d i s u n c e r t a i n how much i t s Crown c o r p o r a t i o n s h o u l d p r o d u c e f o r a f o r e i g n m a r k e t . The q u e s t i o n s a b o u t p r o d u c t i o n a r i s e i n a new way. S h o u l d t h e s t a t e p r o c e e d w i t h a n i n t e r v e n t i o n i n a b i g g e r way ( e . g . b u i l d S i t e C f o r e x p o r t ) , g i v e n i t s u n r e l i a b l e m a r k e t s h a r e i n t h e i n d u s t r i a l c o n s u m p t i o n ? The c o m p l e x i t i e s o f b u i l d i n g dams a n d d e v e l o p i n g e l e c t r i c i t y a s a n e x p o r t a b l e r e s o u r c e p r o d u c t a r e h i s t o r i c a l l y e v i d e n t . Some o f them a r e : c o m p e t i t i o n f r o m U.S. u t i l i t i e s , t r a n s m i s s i o n p r o b l e m s o f e l e c t r i c i t y , u n c e r t a i n I n t e n s i f i c a t i o n 130 revenues to pay state debts, and uncertain i n d u s t r i a l consumption on a larger sca le . T h i r d I n t e r v e n t i o n In the 1980s a changing pattern of threats to the production of e l e c t r i c i t y has emerged i n B r i t i s h Columbia: the surplus "power t r a p . " This condi t ion can be compared to what Watkins c a l l s the "staples t r a p . " Its c h a r a c t e r i s t i c s are: s p e c i a l i z a t i o n i n the wrong kind of staple ( e l e c t r i c i t y - the energy resource product); a weakening of the natural resource base; unemployment and underemployment; and the loss of i n i t i a l opportunit ies for easy growth (Watkins 1967:64,63). The events leading up to the power surplus and the weakening resource base (described i n previous chapters) , combined with unemployment and underemployment, are c h a r a c t e r i s t i c of the s i t u a t i o n i n the 1980s. The average annual unemployment rate i n B r i t i s h Columbia has dramat ica l ly increased i n the 1980s (1980, 6.8%; 1981, 6.1%; 1982, 12.1%; 1983, 13.8; 1984, 14.7%; and 1985, 14.2%), 1 not only i n the general populat ion , but p a r t i c u l a r l y among the employees and workers who planned and b u i l t hydroe lec tr i c dams. Since the beginning of the Peace and Columbia hydroe lec tr i c projects more than 20 years ago, Hydro's construct ion a c t i v i t y has provided a s i g n i f i c a n t share of t o t a l construct ion employment i n B . C . - about 10 percent on average . 2 1 S t a t i s t i c Canada, 12 months calendar year average annual unemployment ra te , catalogue No. 71-201. 2 B.C.Hydro , Revelstoke Dam & Generating Station: Columbia River Power, c i t e d i n the sect ion "Economic Impact" on t h i s promotional pamphlet, ISBN 0-7719-9914-3. I n t e n s i f i c a t i o n 131 As the p r o v i n c i a l staples producers required s u b s t a n t i a l l y less e l e c t r i c i t y , the industry of b u i l d i n g dams came to a stop. Not only i s the migrating construct ion force which moved from dam s i t e to dam s i t e within the province no longer required to b u i l d dams, but the employment of substant ia l numbers of hydroe lec tr i c experts, engineers, des igners , draftsmen, and adminis trat ive s ta f f comes to an end. This was the r e s u l t of the t h i r d major in tervent ion by the p r o v i n c i a l state into the production of e l e c t r i c i t y i n B r i t i s h Columbia. The stopping of 10% of the construct ion a c t i v i t y i n B r i t i s h Columbia, a f ter s o c i a l i z i n g a work force around the b u i l d i n g of dams, has had a severe ef fect on the construct ion labour force . The labour force estimates for the Revelstoke dam v a r i e d : While 790 workers were employed at the s t a r t of construct ion i n 1977, t h i s work force rose to a peak i n 1981 of 3220 workers; upon completion of the dam i n 1985, only 40 workers were r e q u i r e d . 3 This work force i s only needed during the construct ion phase, thereafter 25 - 40 persons can operate and maintain a hydroe lec tr i c dam. The age d i s t r i b u t i o n of t h i s construct ion work force showed 70% were 31 to 55 years old."* The family o r i e n t a t i o n of the workers was high, 74% were 3 Revelstoke Demonstration Housing Project "Labour Force Estimates - Revelstoke Dam," p.39, source: Canadian Resourcecon L t d . . 4 Nicholas Vincent , " F i e l d A c t u a l i t i e s of an Impact Monitoring Program," Figure 1 : Construct ion Work force age D i s t r i b u t i o n , Social Impact Assessment, ed i tors : Frank J. Tes ter , Wi l l iam Mykes (Calgary: D e t s e l i g , 1981), p . 255. I n t e n s i f i c a t i o n 132 married, and 38% had f a m i l i e s . 5 They were no longer a work force of s ing le men, but a f ter 20 years of bu i ld ing dams, B.C.Hydro had created a middle aged family or iented work f o r c e . Their l i v e l i h o o d i s subs tant ia l l y affected by the stoppage of cons truc t ion . Many other employees, not only engineers and construct ion workers, but, construct ion managers, designers, white c o l l a r o f f i c e r workers, equipment operators were part of an e l i t e work force b u i l t up over the l a s t twenty years who do not know what to do next. In f i v e years , since 1980, the number of employees i n B.C.Hydro has dec l ined by 5,593 employees from 12,195 i n 1980 to 6,602 by 1986. 6 In 1977, the wages paid to employees made up 21% of B .C.Hydro's cos ts , whereas by 1986 they were forecast to be only 11% of cos t s . Finance charges have increased from cons t i tu t ing 35% of the costs i n 1977 to a forecast by Hydro to be 45% of budget costs i n 1986. 7 These f inance charges were an add i t i ona l cause of the layof f s besides the primary cause of the layof fs which was Hydro's excess capac i ty . 5 Vincent , 1981, p.256. 6 B.C.Hydro Annual Report 1984/85, p . 15; the number of employees for 1986 i s from exh ib i t 22, Hearing No. 5, January 10, 1986 submitted to the B . C . U t i l i t i e s Commission by B.C.Hydro . 7 J . P . Sheehan (Executive Vice -Pres ident , Finance and Admin i s tra t ion) , 1984 Rate Application Volume 2 - Part2, Supplementary Testimony 12 August 1985, a submission to the B . C . U t i l i t i e s Commission as exh ib i t 2 (2), (entered January 6, 1986), Table , e n t i t l e d "Dis tr ibut ion of Tota l Costs %," p. 12. I n t e n s i f i c a t i o n 133 The over -bu i ld ing of hydroe lec tr i c projects had a severe e f fect on B r i t i s h Columbia's engineers. The Assoc ia t ion of Profess ional Engineers of B . C . sa id "almost 15% of the assoc iat ions 11,000 members - about 1500 people, inc luding almost 500 former Hydro employees - remain out of work." 8 The engineers have set up a char i tab l e fund to help those fac ing economic d i s a s t e r . Many former B.C.Hydro engineers have sued t h e i r employer for wrongful d i smissa l and won t h e i r cases. B .C.Hydro's Bob Mart in , president of the Assoc ia t ion of Profess ional Engineers of B . C . , indicated i n November 1985 that out "of 1,200 un ivers i ty of B . C . engineering graduates over the l a s t three years , only about 400 are working f u l l t ime." "We are advis ing them to go back East , or to go South. We t e l l them, 'You are Canadian engineers, you are respected with an accredi ted degree. Go and get some experience elsewhere and then when things s tar t booming here you can come back. '" Martin then i d e n t i f i e d the in ter l inkage between trades and profess ions . "Unless B . C . ' s engineers are busy there i s l i t t l e hope of a resurgence among the trades and he added: ' I f we don't move soon, t h i s province i s i n rea l t roub le . We have got to develop more secondary industry i n order to i n j e c t a better balance into the economy.'" But as he noted, the "smart money" i s going into Lower Mainland o f f i c e b u i l d i n g s . 9 B .C.Hydro's chairman, Chester Johnson, on the other hand, would l i k e to advance the b u i l d i n g 8 Kim Bolan and Dave Margoshes, The Vancouver Sun, "Dismissal cost at Hydro to r i s e , " February 5, 1986. 9 Alan Danie l s , The Vancouver Sun, "Engineers have l i t t l e to ce lebrate ," November 15, 1985. I n t e n s i f i c a t i o n 134 of another dam. In his address to the Management and Profess ional Employment Soc ie ty ' s General Meeting, he wanted to give engineers and other profess ional employees some hope. He pointed to the di f ferences between the government's and B.C.Hydro forecast estimates by saying: "the new forecast by the Energy Min i s t ry has advanced domestic need for S i te C by three to four years , they are more op t imi s t i c than us." About the layof f s he notes: "No one has enjoyed t h i s process - - not me, the members of the task force , the consultants or the managers, but i t had to be done as Hydro changed from a b u i l d i n g to an operat ional mode." 1 0 However t h i s new "operational mode" goes beyond operating a u t i l i t y - - marketing and a l l o c a t i o n of e l e c t r i c i t y to various indus tr i e s have taken on a new emphasis. The Government and B.C.Hydro ( R e s t r u c t u r i n g and New P o l i c i e s ) In the in ter im, the government and B.C.Hydro changed the mode of in tervent ion from a productive mode to a marketing a l l o c a t i v e mode. In May of 1984, e ight members on the 15 member board of B.C.Hydro d i r e c t o r s were replaced by f i v e corporate p e r s o n a l i t i e s and the permanent d i r e c t o r s h i p of the Energy Min i s t er Stephen Rogers. "Mr. Rogers sa id the new appointments are the f i r s t step i n a "new d i r e c t i o n " being taken by Hydro, a Crown corporat ion set up i n 1962 by former Premier W.A.C. Bennett. "As we are a n t i c i p a t i n g changes i n 10 Chester A. Johnson, Speech Notes Mapes Annual Meeting 18 February 1986. (To forecas t , the M i n i s t r y uses a industry sec tora l approach to forecast ing and Hydro maintains an "end- user" approach, i . e . asks i n d u s t r i a l representat ives ) . I n t e n s i f i c a t i o n 135 the mandate and pract i ces of B .C.Hydro ," Mr. Rogers s a i d , "the time i s appropriate for a corresponding adjustment i n corporate s t ruc ture ." "Obviously we are gett ing away from being an engineering f i rm to being a corporate , f i n a n c i a l i n s t i t u t i o n . " x x The change i n d i r e c t i o n , 1 2 given by means of p o l i t i c a l power over the Crown corporat ion , has s u b s t a n t i a l l y a l t ered the i n t e r n a l mode of operation of B . C . H y d r o . 3 - 3 In the words of Hydro spokesman Peter McMullan: "We've changed from being a production company to an operating company." He also sa id that "layoffs are a part of 'an ongoing process' of r e s t ruc tur ing the Crown u t i l i t y . 3 - * Chester Johnson who became chairman i n January 1985, (formerly heading Whonnok Industries L t d . and West Fraser Timber Co. L t d . ) i s quoted as being "committed to a lean and e f f i c i e n t Hydro run along pr ivate sector l i n e s . " In h i s opinion t h i s could be achieved "despite Hydro's status as a Crown corpora t ion ." 3 - 5 Before the B . C . U t i l i t i e s Commission he " . . . t e s t i f i e d on the t r a n s i t i o n of the u t i l i t y from a development and operating company to simply an operating company," but "subsequently modified his statement to include i n "operating," the requirement that the u t i l i t y be prepared to b u i l d and grow with the economic needs of the 11 The Globe & Mail, "Howe Street taking over Hydro, NDP charges," May 18, 1984, p . B C l . 12 Max Weber, Economy and Society (Berkeley: Univers i ty of C a l i f o r n i a , 1978 edi t ion) p. 989. 13 The purposive r a t i o n a l mode of operation which i s character ized by planning and engineering i s transformed to a p o l i t i c a l input -or iented bureaucrat ic marketing. The output (bui ld ing dams) does no longer determine the i n t e r n a l s t r u c t u r e . 14 The Vancouver Sun, "B.C.Hydro cuts 40 head o f f i c e p o s i t i o n s , " June 26, 1985. 15 Rod Nut, The Vancouver Sun, "Changes at Hydro spark quest ions," March 29, 1986. I n t e n s i f i c a t i o n 136 P r o v i n c e . " 1 6 This i s u n l i k e l y during the 1980s, because there i s l i t t l e domestic need for more power. Backward P l a n n i n g Hydro "ends up planning backwards, attempting to create a demand for overcapacity i t has b u i l t and doesn't know what to do with" 1" 7 The "unplanned surplus" of e l e c t r i c i t y i n a staples economy i s in tens ive ly marketed to staples producers. As the Energy Min i s ter announced i t to B r i t i s h Columbians: "We w i l l use the ex i s t ing surplus of e l e c t r i c i t y to power the government's economic renewal p r o g r a m . " 1 8 (Stephen Rogers) Hydro's Executive Vice -Pres ident B i l l Best has introduced a new marketing p o l i c y which weds conservation to s e l ec t ive marketing opportun i t i e s . "Under the new p o l i c y Hydro t r i e s to inf luence customers (pr imar i ly i n d u s t r i a l and commercial) to convert to e f f i c i e n t use of e l e c t r i c i t y and gas where t h i s w i l l meet t h e i r energy requirements at lower longterm c o s t . " 1 9 Mr. Best then j u s t i f i e s the v a l i d i t y of t h i s program by arguing that i t spreads the p o t e n t i a l rate increases over a larger base of sa les . 16 B . C . U t i l i t i e s Commission, In the Matter of Application by British Columbia Hydro and Power Authority Decision, May 9, 1986, p . 9 . 17 " F i r s t the Power then the Demand" Energy Futures V o l , No 5, June 1985, p . 4. 18 The Honorable Bob McCle l land , Min i s ter of the Min i s t ry of Industry and Small Business Development, "Hydro Discounts to A t t r a c t Jobs" BC Economic Bulletin, V i c t o r i a , Spring 1985, p . 8 . 19 B.C.Hydro Service Digest, a B.C.Hydro information pamphlet mailed with the monthly b i l l s , 16 October - 16 December 1985, p. 4. I n t e n s i f i c a t i o n 137 The r a t i o n a l e i n t h e " e f f i c i e n t " u s e o f e l e c t r i c i t y c o i n c i d e s w i t h t h e i n t r o d u c t i o n o f l a b o u r d i s p l a c i n g a u t o m a t i c t e c h n o l o g y i n p u l p m i l l s a n d saw m i l l s . The e f f i c i e n t u s e o f e l e c t r i c i t y i s c a l c u l a t e d on a p e r c e n t a g e o f e n d p r o d u c t c o s t b a s i s . T h a t i s , B . C . H y d r o ' s i n t e r e s t i s i n more s a l e s t o e x i s t i n g s t a p l e s p r o d u c e r s . The m a i n a r g u m e n t p u t f o r w a r d i s t h a t t h e i n t r o d u c t i o n o f new t e c h n o l o g y w h i c h u s e s more e l e c t r i c i t y w i l l be more p r o d u c t i v e , b e c a u s e o f t h e i n c r e a s e d o u t p u t . S i n c e t h e new t e c h n o l o g y p r o d u c e s more s t a p l e s -- e l e c t r i c i t y i n t h e l o n g r u n becomes a s m a l l e r c o m p o n e n t o f t h e c o s t Of t h e end p r o d u c t . S i d e e f f e c t s , s u c h a s t h e d i s p l a c e m e n t o f w o r k e r s , t h e s p e e d o f d e p l e t i o n o f t h e f o r e s t r e s o u r c e , a n d d i v e r s i f i c a t i o n o f t h e p r o d u c t ( r a t h e r t h a n t h e o v e r e m p h a s i s o f p r o d u c i n g t h e same s t a p l e ) a r e n o t p a r t o f t h i s r a t i o n a l e . To i m p l e m e n t t h i s new c o n v e r s i o n p o l i c y , e n g i n e e r s a r e t u r n e d i n t o s a l e s m e n . I n s t e a d o f a p p l y i n g e l e c t r i c i t y t o t h e d e v e l o p m e n t o f s e c o n d a r y i n d u s t r y , e n g i n e e r s become s a l e s m e n t o t h e m a j o r u s e r s a n d f i b e r - p e r - a c r e c o n s u m e r s o f f o r e s t s . D i s c o u n t Power One way t o r e d u c e t h e s u r p l u s i s t o o f f e r s p e c i a l d i s c o u n t i n c e n t i v e s . The p r o v i n c i a l g o v e r n m e n t p a s s e d two a c t s : one t h e Critical Industries Act, w h e r e b y w i t h t h e h e l p o f d i s c o u n t s , e l e c t r i c i t y c r i t i c a l i n d u s t r i e s ( c l o s e d s a w m i l l s , m i n e s , e t c . ) w e r e r e i n s t i t u t e d ( t h i s a c t h a s no f i x e d l e v e l o f d i s c o u n t s ) ; t w o , t h e Industrial Electricity I n t e n s i f i c a t i o n 138 Discount Act, whereby discounted e l e c t r i c i t y i s used to a t t r a c t new industr ie s to B r i t i s h Columbia and expansions of e x i s t i n g indus tr i e s are encouraged . 2 0 The e l i g i b i l i t y of the Discount Act i s l imi t ed to customers who are or w i l l be large consumers of e l e c t r i c i t y (served at voltages of 60 kV and h igher ) . A Hydro program c a l l e d "Turbine Turndown" was " . . . i n i t i a t e d [ in] February 1985 to provide a rate of 1.3 cents/kWh (about 55% discount) where t h i s would be used to d i sp lace turbogenerators using o i l . " 2 1 These new p o l i c i e s t r y to replace se l f -generat ion by saw m i l l s , pulp m i l l s , and other i n d u s t r i e s . In general , these discount programs do not include small innovative companies. Rather these p o l i c i e s show a preference for ex i s t ing staples production i n the chemical , pulp , and mining industry . B .C.Hydro's p o l i t i c a l l i a son o f f i c e r expla ins: The discounts are only aimed at exporting i n d u s t r i e s , because i f discounts were a v a i l a b l e to indus tr i e s supplying the p r o v i n c i a l domestic market, t h i s would create product p r i c i n g inequa l i ty and an economic imbalance wi th in B r i t i s h C o l u m b i a . 2 2 20 The C r i t i c a l Industries Ac t , Statutes of B.C. 1985, chapter 47, June 28, 1985. I n d u s t r i a l E l e c t r i c i t y Discount Ac t , Statutes of B.C. 1985, chapter 49, Ju ly 11, 1985.B.C.Hydro; reference to the acts was a lso made i n the submission to the B r i t i s h Columbia U t i l i t i e s Commission, 1984 Rate Application, Volume 2 - Part , Supplementary Testimony of J.P.Sheehan, 12 August 1985, p . 6,7, Sheehan i s the Executive Vice Pres ident , Finance and Admini s tra t ion . 21 W.A. B i l l Best, Senior Vice -Pres ident , System Development and Research, Address to: "Industrial Customers of Northwest Utilities (ICNU) at Portland Airport Sheraton, 11 February 1986." This document was c i r c u l a t e d as a B.C.Hydro in t erna l memo. 22 Personal conversation between myself and the the p o l i t i c a l l i a son o f f i c e r of B .C.Hydro , August 14, 1986. I n t e n s i f i c a t i o n 139 - M i n i n g In the mining industry , Lornex Mining C o r p . ' s Logan Lake mine-mil l complex near Kamloops was the f i r s t to obtain 25% percent discounted e l e c t r i c i t y under the "Industr ia l E l e c t r i c i t y Discount Act" to enable "Lornex to pump add i t i ona l water to improve mineral recovery at the mine. The extra water w i l l be used to process lower grade copper and molybdenum ore ." The use of e l e c t r i c i t y , i t i s argued, keeps jobs longer, extends the ore body, accumulates extra revenue for B.C.Hydro ($800 000), brings the mine discount savings, and money to the government ($300 000). A l l t h i s extra accumulation (employment of c a p i t a l , labour and return i n government revenue) i s claimed to be the r e s u l t of using discount e l e c t r i c i t y to pump water. Not only mineral s taples producers but a lso North Vancouver chemical companies which supply pulp m i l l s found uses for the discounted e l e c t r i c i t y . 2 3 C h e m i c a l c o m p a n i e s The Energy Min i s ter Stephen Rogers announced that deals were signed with the government so "B.C.Hydro w i l l supply ERCO, a d i v i s i o n of Tennaco Canada I n c . , with 10 megawatts of e l e c t r i c i t y a discount of 25% for two years . . . to increase production of sodium c h l o r a t e , used mainly i n pulp m i l l s as a bleaching agent;" the extra product w i l l be exported, and four to s ix jobs w i l l be created . Likewise, the Canadian Occidental Petroleum L t d . w i l l get s ix megawatts of 23 The Vancouver Sun, "Lornex gets break i n e l e c t r i c i t y ra tes ," (October 4, 1985) p . C8. I n t e n s i f i c a t i o n 140 e l e c t r i c i t y f o r .three years a t a d i s c o u n t averaging 25 per cent "... t o step up p r o d u c t i o n of c h l o r i n e and c a u s t i c soda, a l s o used as b l e a c h i n g agents i n the pu l p i n d u s t r y . The e x t r a p r o d u c t i o n w i l l go t o Crestbrook F o r e s t I n d u s t r i e s L t d . " I t i claimed by Rogers t h a t the two d e a l s w i l l accumulate $5.8 m i l l i o n f o r Hydro, and "1.2 m i l l i o n t o p r o v i n c i a l c o f f e r s . " 2 " * -Pulp m i l l s The 25 per cent e l e c t r i c i t y d i s c o u n t s were a l s o extended t o l a r g e and small p u l p m i l l s , "the move w i l l h e l p the m i l l s seek new export markets" s a i d Rogers. The d i s c o u n t s f o r Western Pulp's m i l l i n Port A l i c e exceeded 25%; Hydro spokesman Peter McMullan s a i d ; "the d i s c o u n t a l l o w s P o r t A l i c t o pay 1.3 cents per k i l o w a t t hour, r a t h e r than the r e g u l a r r a t e of f o u r cents per k i l o w a t t hour." He continued, " t h i s i s a f a i r l y common t h i n g " ... adding t h a t o t h e r companies t h a t have used the d i s c o u n t i n c l u d e the B.C. F o r e s t Products m i l l a t C r o f t e n , the Canadian F o r e s t I n d u s t r i e s o p e r a t i o n a t E l k F a l l s and McMillan B l o e d e l m i l l s a t Harmac, Port A l b e r n i and Powell R i v e r . ... McMullan s a i d t h a t Hydro has c o l l e c t e d $5.6 m i l l i o n i n revenue. Western Pulp p r e s i d e n t Ron Rogstad s a i d the m i l l s have a l s o a p p l i e d f o r another e l e c t r i c i t y d i s c o u n t from B.C.Hydro, s i m i l a r t o the ones g i v e n l a s t November t o a MacMillan B l o e d e l paper m i l l i n Powell R i v e r and t o a Crown F o r e s t I n d u s t r i e s m i l l a t Campbell R i v e r . 2 5 24 Vancouver Sun, "Two Chemical Companies Sign up Cheap Power Deal," 15 November 1985. 25 K e i t h Baldrey and Gary Mason, The Vancouver Sun, "Hydro m i l l d e a l c i t e d as c o n f l i c t " January 21, 1986. I n t e n s i f i c a t i o n 141 There was l i t t l e evidence that the discounts d i v e r s i f i e d any part of the pulp and other staples production or a t t rac ted subs tant ia l i n d u s t r i a l users of e l e c t r i c i t y to the p r o v i n c e . 2 6 The surplus of e l e c t r i c i t y of the 1980s has been marketed within the province as i n e a r l i e r periods with the lowest rates paid by the staples producers. The p r o v i n c i a l s ta te , i n conjunction with i t s new a l l o c a t i o n of low cost e l e c t r i c i t y to already ex i s t ing production of the s taples , i s l i k e l y contr ibut ing to the fas ter consumption of the natural resources for which i t has a mandate to be steward i n the publ i c i n t e r e s t . Increasing fores try production by means of discount e l e c t r i c i t y only i n t e n s i f i e s the p r o v i n c i a l s taples dependence. As B .C.Hydro's own forecasts ind icate ("Transmission Rate Sales ," Appendix, Tables V I I I , IX) recent i n d u s t r i a l sales i n the area of pulp & paper, wood manufacturing, and chemicals are growing s lowly. Since loans for b u i l d i n g the extra capacity cannot be paid with hope, the a l t e r n a t i v e for sales of the s tate ' s "unplanned surplus" i s to market the e l e c t r i c i t y i t s e l f . - S t a n d - b y S t a p l e E l e c t r i c i t y i s a v e r s a t i l e source of energy, but const i tutes a captured resource. A market of staples products 26 The discount program, when coupled with staples product ion, appears to have been very accumulative since both, the Forest Min i s t er Tom Waterland and The Energy Min i s ter Stephen Rogers held shares i n Western Pulp L t d . Because of t h i s c o n f l i c t of i n t e r e s t , Waterland and Rogers needed to res ign t h e i r m i n i s t e r i a l pos i t ions (Keith Baldrey, January 21, 1986). I n t e n s i f i c a t i o n 142 can be developed overseas, but new markets for e l e c t r i c i t y are confined to transmission v i a power l ines within the province , or to locat ions outside the province . In a d d i t i o n , such an i n d u s t r i a l staple has no f irm buyers, i s subject to unpredictable p r i c e drops, i s landlocked and therefore can only be so ld to other Canadian Provinces or the United States . The p r o v i n c i a l state i s faced with threats of l i m i t s to growth of i t s present staples economy, while debts have to be repaid for dams and transmission l i n e s . Their planning and construct ion had temporari ly helped to continue the accumulation process i n the staples economy. Because the state i s f u n c t i o n a l l y re la ted to t h i s process, i t needs to e i ther intervene to d i v e r s i f y production i n order to improve the accumulation process, or opt for an even larger productive in tervent ion , namely, to transform hydroe lec tr i c development and the generation of e l e c t r i c i t y into an export industry . Forward P l a n n i n g (Export power) Previous export contracts have been signed with respect to hydroe lec tr i c developments on the Columbia and Skagit R i v e r s . Such agreements are made between the p r o v i n c i a l government, and the federal governments i n Canada and the U . S . . For example, the U.S . made a lump sum payment for using the Canadian Columbia River Va l l ey to hold water behind two storage dams (Keenleyside, Duncan) and the r ight to exercise contro l over the release of water from the Mica and Revelstoke dams so i t can be routed with maximum generation benef i t and I n t e n s i f i c a t i o n 143 f lood contro l through the American Columbia r iverbed and storage r e s e r v o i r s . 2 7 Another B r i t i s h Columbia v a l l e y was to be flooded by the C i t y of Sea t t l e . The p r o v i n c i a l government agreed to have the Skagit Va l l ey flooded by r a i s i n g the Ross dam 37 meters i n 1967. However, due to popular pressure the v a l l e y was not flooded and an agreement was announced by the in t erna t iona l Jo in t Commission, which adjudicates Canada-U.S. boundary disputes . This agreement "involves unspeci f ied f i n a n c i a l commitments by B . C . to supply the power that Seatt le would have received had a hydro project south of the American border gone a h e a d . " 2 8 These were spec ia l agreements and do not help to reduce the current surplus . The power surplus and fore ign export considerat ions were ra i sed very ear ly i n the B . C . Energy Board's Report on the Columbia Peace Power Projects on July 31, 1961. More than 25 years ago the chairman of the B . C . Energy Board, Gordon Shrum predic ted: . . . s i n c e the minimum e f f i c i e n t development of e i ther the Peace or Columbia w i l l provide more power than B r i t i s h Columbia can absorb i n the ear ly years of the pro jec t , i t i s not economic to develop the two simultaneously without f ind ing a very large market at renumerative pr i ce s outside the Province for t h i s a d d i t i o n a l power, (p. 6) 27 Departments of External A f f a i r s and Northern A f f a i r s and National Resources, The Columbia River Treaty Protocol and Related Documents (Ottawa: Queen's P r i n t e r , February 1984) "It complicates the water-management task that one of Hydro's two r i v e r systems, the Columbia, i s shared with the U . S . . "Vaughn Palmer "A Green Bundle For 'Blue G o l d ' , " The Vancouver Sun, November 7, 1985. 28 Canadian Press (CP), V i c t o r i a "Skagit, Bgt", March 31, 1983. I n t e n s i f i c a t i o n 144 During the 1980s recess ion, the employment condit ions and economic circumstances and the need to develop hydroe lec tr i c po ten t ia l are again used by the Soc ia l Cred i t government and B.C.Hydro as reasons to expand the hydroe lec tr i c i n f r a s t r u c t u r e . Although o f f i c i a l l y , the hydro system was to have been b u i l t for the province , i n 1983 the B . C . U t i l i t i e s Commission found the e f f i c i e n c y c r i t e r i a (optimum hydraul ic production capacity) used by B.C.Hydro i n the development of i t s system can u l t imate ly only be j u s t i f i e d " . . . b y contemplating sales into the export market." Yet the Commission noted Hydro has not i t s e l f provided a forecast of probable export revenues. The organizat ions representing industry i n B r i t i s h Columbia have taken a p o s i t i o n consistent with t h e i r own economic i n t e r e s t s , but incons is tent toward B.C.Hydro . During the S i t e C Hearings (1981/1982), " . . . t h e Mining Assoc ia t ion s p e c i f i c a l l y re ferred to the need to allow for the expanding needs of the p r o v i n c i a l mining and smelting industry" i n i t s submission j u s t i f y i n g the project on grounds of the economic potent ia l of B r i t i s h C o l u m b i a . 2 9 In preparat ion of the Rate R e l i e f Hearings, the Counci l of Forest Industr ies , the Mining Assoc ia t ion , and the Electro-Chemical Interveners h i red a forecast ing consultant to prepare "a forecast of export surplus revenues of $135 m i l l i o n i n f i s c a l 1983 and $146 m i l l i o n i n f i s c a l 1984" i n order to have export revenues 29 BCUC Site C Report, 1983, p.123. 29 BCUC Decision, February 1983, p . 105. I n t e n s i f i c a t i o n 145 r e c o g n i z e d as Hydro revenues and thereby reduce the i n d u s t r i a l r a t e i n c r e a s e s . 3 0 On the one hand, spokesmen f o r i n d u s t r y support expansion of B.C.Hydro t o have ample e l e c t r i c i t y f o r t h e i r own i n d u s t r i e s ; on the other hand, they want r e l i e f from p r i c e s through export e l e c t r i c i t y revenues which B.C.Hydro has t o export s i n c e i n d u s t r i e s d i d not grow as p r e d i c t e d . B u i l d i n g Dams f o r E x p o r t In August, 1985 the p r o v i n c i a l government announced t h a t i t would permit Hydro t o b u i l d a new dam on the Peace R i v e r , near F o r t S t . John i n n o r t h e r n B.C., i f s u i t a b l e f i r m c o n t r a c t s c o u l d be arranged t o export the power t o C a l i f o r n i a on a long-term b a s i s , perhaps 20 t o 25 y e a r s . 3 1 The focus of development i s no longer p r o v i n c i a l , but the development of h y d r o e l e c t r i c power i s determined d i r e c t l y i n a f o r e i g n country, as i s the case i n many s t a p l e s i n d u s t r i e s . Although, "Johnson s a i d Hydro has enough s u r p l u s e l e c t r i c i t y now from i t s Revelstoke dam on the Columbia R i v e r to supply C a l i f o r n i a ' s need f o r the next d e c a d e , " 3 2 the r a t i o n a l e f o r b u i l d i n g another dam i s the same as forwarded b e f o r e , the need t o p r e - b u i l d f o r eventual p r o v i n c i a l demand. The i d e a of supply expansion f o r export, r a t h e r than domestic need, u n d e r l i e s the argument forwarded i n Premier B i l l Bennett's TV address i n February 1986. He s a i d : "B.C.Hydro i s working hard t o p e n e t r a t e new markets. With the r i g h t k i n d of long-term UC Decision, February 1983, p. 105. 31 B.C.Hydro, B.C. Hydro: The Background, a handout prepared f o r the p u b l i c , March 31, 1986, 32 Peter C o m p a r e l l i , "Fast A c t i o n Sought on Power Pact," The Vancouver Sun, September 17, 1985. I n t e n s i f i c a t i o n 146 deal i n C a l i f o r n i a - and a f a i r p r i c e for our power - w e ' l l be able to speed up the S i te C pro jec t , which w i l l have to [be] b u i l t some day i n any c a s e . " 3 3 But before B.C.Hydro can plan i t s system for such markets, i t needs to negotiate with U.S . u t i l i t i e s and agencies of the U.S government such as the Bonnevi l le Power Admini s tra t ion . The Bonnevi l le Power Adminis trat ion was formed i n 1937 to market the energy from the Grand Coulee Project and a l l other f e d e r a l l y constructed projects i n the reg ion. The establishment of BPA was i n part a recogni t ion of the po tent ia l energy from the Columbia River and the need to secure markets i n the expanding region for that e n e r g y . 3 4 In a trade seminar held on the Expo grounds between Bonnevi l le Power Adminis trat ion , Southern C a l i f o r n i a Edison, and B.C.Hydro representat ives , Michael Peevey, executive v i c e - president of Southern C a l i f o r n i a Edison sa id: "We want more trade with B . C . , " and about S i t e C, he commented, "as long as the economies of S i te C pan out we would buy more e l e c t r i c i t y from B . C . " Even Bonnev i l l e ' s administrator Peter Johnson appeared warm towards S i te C: "BPA and the u t i l i t i e s i n the P a c i f i c Northwest are very interested i n Premier B i l l Bennett's proposal to b u i l d S i t e C before i t i s needed i n C a n a d a , . . . but . . . marketing of S i te C power would necessi tate even more capacity [the a b i l i t y to transmit 7,900 megawatts]. One way to get i t would be to complete the t h i r d AC l i n e to 33 Doug Ward, "BCGEU President Halts Talks a f ter Bennett's TV address" Vancouver Sun February 6, 1986. 34 Power Planning Committee, Review of Power Planning in the Pacific Northwest 1981, p . 29. I n t e n s i f i c a t i o n 147 C a l i f o r n i a . . . . " "Hydro chairman Chester Johnson has s a i d , he would l i k e f irm contracts with C a l i f o r n i a . . . so work on S i te C could begin i n ear ly 1987." 3 5 C a l i f o r n i a has enjoyed substant ia l savings by buying interruptable power without f i rm contrac t s . "Southern C a l i f o r n i a Edison has estimated i t saved about $900 M i l l i o n i n 1983 by such purchases from the U.S . P a c i f i c Northwest, Southwest and B . C . Hydro representing about 37% of t h e i r annual requirements ." 3 6 The Press Release of the Bonnevi l le Power Adminis trat ion i n Oregon (June 12, 1986) states whose in teres t s are to be served i n the S i t e C development study: "For BPA, a p r i n c i p a l fac tor i n the study w i l l be insur ing that any sale of S i te C power be i n the in teres t s of Northwest ra tepayers ." 3 - 7 But, why would the United States customers be interested i n having B r i t i s h Columbia develop S i te C without granting long-term permission to transmit the power? One reason i s that governments and businesses l i k e to reduce t h e i r f i n a n c i a l r i s k s . The p r i c e of b u i l d i n g S i t e C, was indicated before the B . C . U t i l i t i e s Commission. I t "would cost 14 to 16 cents [per ki lowatt hour] to produce S i t e C power ." 3 8 This i s very h igh , when compared with export rates 35 Rod Nutt , "U.S. prepared to back S i te C dam on Peace," The Vancouver Sun, May 12, 1986. 36 B i l l Best , Address to I n d u s t r i a l Customers, 1986 p . 8 . 37 Department of Energy Information of the United States of America, Bonneville Power Administration, released by BPA's Media Re la t ions , Port land, Oregon June 12, 1986. 38 Marjor ie Nichols indicates Hydro made those f igures publ i c before the B . C . U t i l i t i e s Commission on October 31, 1984, The Vancouver Sun, A p r i l 5, 1986. Attempts to v e r i f y these f igures with the B.C.Hydro Finance Department were met with a d e c l i n i n g response, on the grounds that such information might I n t e n s i f i c a t i o n 148 indicated by the 1985 B.C.Hydro Annual Report. They were 2.9 cents per KWh. The t o t a l cost of S i te C i s estimated to be $3 b i l l i o n . The United States and large corporations do not mind i f somebody else w i l l carry the f i n a n c i a l and environmental burden for developing the cos t l y generation of power. B i l l Best, Senior Vice -Pres ident responsible for B .C.Hydro's System Development and Research, gave another very important reason why the United States would be interested i n seeing S i te C b u i l t . In h i s address to the I n d u s t r i a l Customers of Northwest U t i l i t i e s at Port land A i r p o r t Sheraton on February 11, 1986, he sa id : One of your as soc ia t ion ' s Energy Planning P r i n c i p l e s i s that you ' . . . advocate p o l i c i e s which promote an adequate and f l e x i b l e supply able to support and encourage a growing economy, yet able to adjust for changing economic condit ions or supply d i s r u p t i o n s . ' 3 9 In other words the i n d u s t r i a l users i n the northwestern United States enjoy the p l e n t i f u l supply of e l e c t r i c i t y of the P a c i f i c Northwest U t i l i t i e s and B.C.Hydro . The p o l i c y d i r e c t i o n adopted by the i n d u s t r i a l customers ind ica te s , they are not interested i n f irm contracts , since competition between o v e r b u i l t u t i l i t i e s assures low rates . Some already receive discounted rates from the Bonnevi l le Power Author i ty . BPA has i d e n t i f i e d t h i s condi t ion i n terms of the s i t u a t i o n of i t s d i r e c t - s e r v i c e i n d u s t r i a l customers. "The precarious s i t u a t i o n of some of BPA's d i r e c t - s e r v i c e i n d u s t r i a l be used against the company (August 14, 1986). 39 B i l l Best, Address to: I n d u s t r i a l Customers of Northwest U t i l i t i e s at Port land A i r p o r t Sheraton, 11 February 1986, p . 10. I n t e n s i f i c a t i o n 149 customers, p r i m a r i l y the aluminum industry that buys about one t h i r d of BPA's power, could have a big impact on BPA's o v e r a l l load forecast [medium 1.3 % annual increase for 1 9 8 4 - 2 0 0 4 ] . ' " * ° In order to keep up the demand for e l e c t r i c i t y from i n d u s t r i a l customers, and to avoid i n d u s t r i a l customers just dropping of f the g r i d (by c lo s ing t h e i r accounts) , i f economic condit ions change, BPA appl ied to the Federal Energy Regulatory Commission for rates that " . . . c o u l d be as low as 1.5 cents per ki lowatt-hour or as high as 2.86 cents per kwh - - based on the p r i c e of a luminum." 4 1 F o r e i g n E n v i r o n m e n t A n a l y s i s In t h i s sec t ion , the production of e l e c t r i c i t y i s approached as a semi-processed natural resource, in other words, l i k e a s tap le . Succeeding p r o v i n c i a l government p o l i c i e s have perceived r i v e r va l l eys as natural resources, which can be progress ive ly depleted. Rivers are i n t h i s way seen as energy resources and the e l e c t r i c i t y they generate, when harnessed, becomes an " i n d u s t r i a l s tap le ." The 1980 energy p o l i c y statement indicates how the government sees i t s r o l e : We - the government on behalf of the people of B . C . - are entrusted with the management of our energy resources. We s t i l l have considerable untapped h y d r o - e l e c t r i c p o t e n t i a l , and B r i t i s h Columbia i s current ly 40 Department of Energy Information of the United States of America, Bonneville Power Administration, Port land , Oregon, Media Relat ions O f f i c e , June 16, 1986. 41 BPA Press Release May 13, 1985. I n t e n s i f i c a t i o n 150 i n v e s t i g a t i n g remote s i t e s which c o u l d be used to meet the c o n t i n u i n g growth i n demand f o r e l e c t r i c i t y . 4 2 T h i s i s a k i n t o the development t r a d i t i o n i d e n t i f i e d i n the s t a p l e s t h e o r y . I t i s s i m i l a r t o e x p l o i t a t i o n of n a t u r a l r e s o u r c e s whereby the h y d r o e l e c t r i c p o t e n t i a l of r i v e r s i s e x p l o i t e d by moving f a r t h e r away from urban areas t o b u i l d a t the b e s t power s i t e s . In a d d i t i o n , with e x p e c t a t i o n s of c o n t i n u i n g growth, an overemphasis on the importance of the p r o d u c t i o n of e l e c t r i c i t y t o g e t h e r with what Watkins i d e n t i f i e s as an " i n h i b i t i n g export m e n t a l i t y " develops. Although B.C.Hydro i s a major i n s t i t u t i o n a l f o r c e i n the p r o v i n c e of B r i t i s h Columbia, i t s f o r c e i s s e v e r e l y c u r t a i l e d when i t attempts to c a r r y out the p r o v i n c i a l s t a t e ' s accumulative f u n c t i o n s (by means of l a n d - l o c k e d i n d u s t r i a l s t a p l e ) i n a l a r g e r f o r e i g n environment. Although Shrum i d e n t i f i e d the i s s u e s surrounding the o v e r - b u i l d i n g of the hydro system t w e n t y - f i v e years ago, s i m i l a r u n c e r t a i n t i e s about the export market have remained. The on l y p o t e n t i a l markets f o r B r i t i s h Columbia s u r p l u s power are i n the United S t a t e s P a c i f i c Northwest, C a l i f o r n i a , and p o s s i b l y A l b e r t a . The board has not conducted a d e t a i l e d study of these p o t e n t i a l export markets f o r s u r p l u s power from B r i t i s h Columbia, and hence no d e c i s i o n as t o the economic f e a s i b i l i t y of such export can be made at t h i s time (Shrum 1961:6). 42 From.the "Government of B r i t i s h Columbia's Energy P o l i c y Statement of February 1980" c i t e d i n the B.C. U t i l i t i e s Commission Site C Report, Vancouver, May 1983, p. 41. I n t e n s i f i c a t i o n 151 The major issues of export revenue i n s t a b i l i t y and the i n t e r - l i n k a g e problem p e r s i s t , although p e r i o d i c a l l y substant ia l sales are made to the United States (from $ 5 - $250 m i l l i o n annual ly , from 1975 to 1986). Despite pub l i c pronouncements that exports keep rates i n the province low, the B . C . U t i l i t i e s Commission concluded the fo l lowing from B.C.Hydro e laborat ion and the testimony of Mr. Sheehan: Export surplus revenues are not forecast or considered i n se t t ing rates and the A u t h o r i t y ' s Board of D i r e c t o r s , inc luding Min i s ters of the Crown, have annually approved se t t ing rates on t h i s b a s i s . B.C.Hydro does not bel ieve that e i ther pr ices or volumes of poss ib le export sales can be predic ted with s u f f i c i e n t accuracy to allow them to be taken into account i n e s tab l i sh ing domestic ra te s . Plac ing re l i ance on highly uncertain and p o t e n t i a l v o l a t i l e export surplus revenue i n se t t ing revenue requirements would introduce an unacceptably high l e v e l of f i n a n c i a l r i s k . . . 4 3 The r i s k of p r o v i n c i a l state production of stand-by power for a fore ign environment s tarted with the in tegrat ion of the transmission network. In order to export stand-by e l e c t r i c a l power and provide a 5% reserve pool of power for the United States (which i s to be r e c i p r o c a l i n case of f a i l u r e s ) , the B r i t i s h Columbia power g r i d i s integrated with the U.S . Northwestern power g r i d to a f ford maximum coord inat ion . The export rates vary according to the Northwest u t i l i t y market and weather condi t ions . Binding sales agreements are made between dispatchers i n the B .C.Hydro ' s Burnaby Mountain 43 B . C . U t i l i t i e s Commission, Decision, pp. 101-102, February 28, 1983. I n t e n s i f i c a t i o n 152 C o n t r o l Center and the d i s p a t c h e r s of U.S. u t i l i t i e s , the b i l l i s mailed next d a y . 4 4 In the 1980s, surplus power continues to be exported on a stand-by basis and shows great f l u c t u a t i o n s . "Export earnings are unpredictable . . . swings i n export earnings can be $150 m i l l i o n from one year to the n e x t . " 4 5 This i s l arge ly due to U.S . demands and r e s t r i c t e d access. The " inter- l inkage" to the C a l i f o r n i a BPA transmission l ines was indicated as an o p t i m i s t i c p o s s i b i l i t y by Shrum in 1961: ...the r a p i d growth and s i z e of the power loads i n C a l i f o r n i a and the p l a n t o c o n s t r u c t a power i n t e r - l i n k a g e between the P a c i f i c Northwest and C a l i f o r n i a suggest t h a t t h e r e i s a good p o s s i b i l i t y t h a t export of s u r p l u s B r i t i s h Columbia power t o C a l i f o r n i a would be f e a s i b l e . (Shrum 1961:6) T h i s p o s s i b i l i t y has remained an unr e s o l v e d problem. B.C.Hydro chairman, Chester Johnson, f i n d s t h a t the t r a n s m i s s i o n l i n e a ccess i s a t times s e v e r e l y c u r t a i l e d . He noted i n 1986, t h a t " s a l e s i n February have t o t a l e d o n l y $5 m i l l i o n . " 4 6 The 44 Information o b t a i n e d d u r i n g a v i s i t t o B.C.Hydro's Burnaby Mountain C o n t r o l Centre on February 7, 1986. 45 Hydro counsel Ken McKenzie's argument b e f o r e the B.C. U t i l i t i e s Commission i n defense of keeping the i n t e r i m r a t e i n c r e a s e , c i t e d by Rod Nutt, "Major users demand r o l l b a c k on i n t e r i m r a t e f o r e l e c t r i c i t y , " The Vancouver Sun, January 24, 1986. 46 The more e x t e n s i v e notes by Chester Johnson i n d i c a t e under the heading of ex p o r t s , t h a t "revenue from the s a l e of s u r p l u s e l e c t r i c i t y t o the U.S. reached $248 m i l l i o n by 16 February, would have bottom l i n e problems without t h i s . Dry weather helped. T r a n s m i s s i o n l i n e access now s e v e r e l y c u r t a i l e d by BPA [ B o n n e v i l l e Power A u t h o r i t y ] . S a l e s i n February have t o t a l e d o n l y $ 5 m i l l i o n . " Speech Notes Mapes Annual Meeting 18 February 1986. I n t e n s i f i c a t i o n 153 export of s u r p l u s e l e c t r i c i t y has o n l y been allowed on a stand-by b a s i s by the BPA. I t s E x t r a r e g i o n a l Access p o l i c y s t a t e s : BPA w i l l not p r o v i d e Assured D e l i v e r y t o e x t r a r e g i o n a l u t i l i t i e s . BPA may, by c o n t r a c t , p r o v i d e e x t r a r e g i o n a l u t i l i t i e s l i m i t e d access t o I n t e r t i e C a p a c i t y . Such ac c e s s , however, would be c o n d i t i o n e d on such u t i l i t i e s ' p a r t i c i p a t i o n i n the P a c i f i c Northwest's c o o r d i n a t e d p l a n n i n g and o p e r a t i o n t o a g r e a t e r extent t h a t i n the p a s t or agreement t o p r o v i d e other a p p r o p r i a t e c o n s i d e r a t i o n of val u e t o the P a c i f i c Northwest. [Oregon, Washington, Idaho, a p o r t i o n of Nevada, Utah, and Wyoming] 4 - 7 Since e l e c t r i c i t y i s a captured r e s o u r c e , a l a n d - l o c k e d s t a p l e , B.C.Hydro and the p r o v i n c i a l government are i n c r e a s i n g l y dependent on other complex p o l i c i e s t o t r a n s p o r t such r e s o u r c e s . B r i t i s h Columbia's S o c i a l C r e d i t government c u r r e n t l y s t r e s s e s the "Commitment t o the concept of a t r u e north-south e l e c t r i c i t y g r i d " and supports t h i s by p o i n t i n g t o $250 m i l l i o n i n export s a l e s i n the year ending March 31,1986. T h i s s a l e was due to un u s u a l l y dry weather. BPA e x p l a i n s why i t was importing t h i s power i n 1985. "Only f o u r times i n the past 60 years has the flow of the Columbia been lower d u r i n g the month of J u l y . " "Last January, u s u a l l y the w e t t e s t month of the year, was the d r i e s t January ever r e c o r d e d . " 4 8 BPA cut o f f s u p p l y i n g the nonfirm power s a l e s t o C a l i f o r n i a , brought 47 U.S. Department of Energy, B o n n e v i l l e Power A d m i n i s t r a t i o n , Near Term Intertie Access Policy, (June 1, 1985) p. 10. A copy of t h i s p o l i c y was ob t a i n e d from the B.C. U t i l i t i e s Commission, E x h i b i t 21, Hearing No. 4, entered by B.C.Hydro on January 9, 1986. 48 U.S. Energy Department, Bonneville Power Administration, Press Release, J u l y 31, 1985. I n t e n s i f i c a t i o n 154 a l l the water i t can down from the Columbia River i n B r i t i s h Columbia, thereby B.C.Hydro was able to obtain extra revenues from storage and export of power. To make up i t s own s h o r t f a l l , B.C.Hydro imported some of A l b e r t a ' s cheap c o a l - generated p o w e r . 4 9 This temporary power demand and access to power l ines during 1985 was due to dry weather condit ions rather than demand growth i n the United States . F u t u r e s Because B .C.Hydro's production capacity i n the inter im has outgrown the p r o v i n c i a l environment, the only way i t can expand i s within the Alber ta or the United States environment. So far B.C.Hydro can be seen as having helped maintain the funct ion of accumulation by productive in tervent ion i n the p r o v i n c i a l environment. But how well w i l l i t perform the funct ion of accumulation i n the U.S environment? To answer t h i s question and gain some ins ight i t w i l l help to use the t h i s funct ion ' s four basic p r i n c i p l e s and analyze B .C.Hydro's (that i s an agency of the s tate ' s ) performance i n the United States environment with reference to exc lus ion , maintenance, dependency and l e g i t i m a t i o n . 49 U.S . Energy Department, Bonneville Power Administration, Press Releases Ju ly 12, 1986. "The appl icant [B.C.Hydro] t e s t i f i e d ( t ranscr ip t pages 938 and 982) that surplus energy i s being purchased from Alber ta to replenish i t re servo irs which have been drawn down below normal l eve l s by the increased export sa les ." "The B . C . Hydro/Alberta 500 kv i n t e r t i e which was placed i n service i n ear ly 1986 with a capaci ty of about 800 MW, has the po tent ia l to y i e l d substant ia l benefi ts to both provinces ." B . C . U t i l i t i e s Commission, Decision, May 9, 1986. I n t e n s i f i c a t i o n 155 Once B.C.Hydro expands into the fore ign environment several obstacles can be noted: B.C.Hydro and the p r o v i n c i a l government are excluded from the dec i s ion making process to a greater degree ( i n t e r - l i n k a g e ) ; B.C.Hydro i s unable to maintain a pred ic tab le source of income; the corporat ion and the government stake t h e i r dependence on becoming powerful through accumulation outside t h e i r environment; and they run into increas ing d i f f i c u l t i e s i n l e g i t i m i z i n g the process . In sp i te of having adopted a new mode ( a l l o c a t i v e marketing) of operat ion, they w i l l require an increased productive in tervent ion to be maintained (e.g bu i ld ing S i te C dam) i n the new environment. Exc lus ion ( p r o v i n c i a l / i n t e r n a t i o n a l ) The p r o v i n c i a l state has no authori ty to order production or to contro l i t i n pr iva te fore ign enterprises (U.S. enterprises) and has no r i g h t to supply i t s energy product ( e l e c t r i c i t y ) without permission of fore ign state energy producers. In the meantime, the P a c i f i c Northwest has become a competitor for sales to C a l i f o r n i a . The Bonnevi l le Power corporat ion i t s e l f has a serious surplus of power. In i t s p u b l i c a t i o n Issue Alert "Se l l ing South: BPA Seeks Ways of Marketing Surplus Power to the P a c i f i c Southwest" i t reveals a h i s tory of surplus power and increased current surplus . Two decades ago, BPA made long-term surplus capacity sales contracts with C a l i f o r n i a which are due for renewal i n 1987 I n t e n s i f i c a t i o n 156 and 1988. BPA has developed add i t i ona l power surpluses and became aware of t h i s s i t u a t i o n i n 1982 and i s s ince t r y i n g to negotiate contracts with C a l i f o r n i a . BPA would s e l l up to 2,000 megawatts of surplus capacity for the 20-year term, and would s e l l f i rm energy (based on forecasted BPA surpluses) on a r o l l i n g f ive -year b a s i s . Current ly i t looks as though 1,000 megawatts of surplus f i rm energy might be ava i l ab l e for the f i r s t f i ve years . 5 0 The development of poss ib le U .S . Northwest surpluses were not evident i n p r o v i n c i a l government and B.C.Hydro cons iderat ions . The development of a "surplus c o n f l i c t " puts add i t i ona l s t r a i n on the access and i n t e r - l i n k a g e to C a l i f o r n i a . Although the i n t e r - l i n k a g e problem has a twenty- f i v e year h i s t o r y , B .C.Hydro's surplus export continues to occupy a "backseat to a c c e s s . " 5 1 In 1986, B.C.Hydro i s excluded from the export (except to Point Roberts and Hyder) of f i rm e l e c t r i c i t y . Bonnev i l l e ' s i n t e r t i e access p o l i c y , adopted September 7, [1984] provides that under c e r t a i n condit ions access to the i n t e r t i e i s a l l oca ted among Bonnevi l le and P a c i f i c Northwest u t i l i t i e s based on t h e i r dec larat ions of ava i l ab l e surplus power, and that no other u t i l i t i e s may use the l i n e s . 5 2 This p o l i c y was challenged by " . . . t h e Los Angeles Department of Water and Power, which i s a major buyer of 50 U.S . Department of Energy, Bonnevi l le Power Admini s tra t ion , Issue Alert "Se l l ing South: BPA Seeks Ways of Marketing Surplus Power to the P a c i f i c Southwest" B . C . U t i l i t i e s Commission, F i l e No. 14, no date. 51 Brian Lewis, business reporter for the Sun, on CBC AM Radio, 12:50 h, September 3, 1985. 52 American Press (AP) "Bonnevi l le ," Port land, Oregon, January 17, 1985. I n t e n s i f i c a t i o n 157 s u r p l u s power t r a n s m i t t e d f r o m t h e C o l u m b i a R i v e r t o C a l i f o r n i a o v e r t h r e e P a c i f i c N o r t h w e s t - P a c i f i c S o u t h w e s t power i n t e r - l i n k a g e l i n e s . " 5 3 B r i t i s h C o l u m b i a i s i n e f f e c t c o m p e t i n g w i t h U.S. N o r t h w e s t a n d S o u t h w e s t u t i l i t i e s who h a v e s u r p l u s c a p a c i t y f o r a c c e s s t o C a l i f o r n i a v i a t h e P a c i f i c N o r t h w e s t i n t e r - l i n k a g e . The r e a s o n L o s A n g e l e s c h a l l e n g e d t h i s p o l i c y i s t h a t B o n n e v i l l e ' s p o l i c y p r e v e n t s p u r c h a s e o f power f r o m B.C. H y d r o a t r a t e s p o s s i b l y c h e a p e r t h a n t h o s e c h a r g e d by U.S. u t i l i t i e s . B r i t i s h C o l u m b i a ' s h y d r o e l e c t r i c a d v a n t a g e w h i c h h a s b e e n d e v e l o p e d t o b e n e f i t B r i t i s h C o l u m b i a ' s i n d u s t r y i s t h e r e b y b e i n g u s e d by L o s A n g e l e s . H o w e v e r , t h e a c c e s s t o B r i t i s h C o l u m b i a ' s c h e a p s o u r c e o f e n e r g y i s r e s t r i c t e d by B o n n e v i l l e ' s a c c e s s p o l i c y a n d a r g u m e n t s t o g a i n maximum b e n e f i t s f o r i t s c o n s t i t u e n t s . B o n n e v i l l e c o n t e n d s t h a t t h e p o l i c y i s l e g a l a n d n e c e s s a r y b e c a u s e t h e i n t e r - l i n k a g e was b u i l t w i t h t a x p a y e r s money t o be r e p a i d by B o n n e v i l l e t h r o u g h s a l e s o f power a n d o t h e r r e v e n u e . B o n n e v i l l e s h o u l d , t h e r e f o r e , g i v e a p r i o r i t y o f a c c e s s t o i t s e l f a n d P a c i f i c N o r t h w e s t u t i l i t i e s t o a c c o m p l i s h t h a t . 5 4 S i n c e B.C.Hydro i s r e p o r t e d t o h a v e s i g n e d "a t h r e e - y e a r c o n t r a c t w i t h L o s A n g e l e s w o r t h $190 m i l l i o n t o s e l l 3,000 g i g a w a t t - h r s o f power a n n u a l l y — a b o u t h a l f o f t h e a n n u a l p r o d u c t i o n o f B.C.'s new $2 b i l l i o n R e v e l s t o k e d a m , " 5 5 B o n n e v i l l e i s i n e f f e c t a t o l l g a t e k e e p e r f o r B.C. 53 A t h r e e - j u d g e p a n e l was c o n s i d e r i n g t h i s c h a l l e n g e , r e p o r t e d by t h e A m e r i c a n P r e s s (AP) " B o n n e v i l l e , " P o r t l a n d , O r e g o n , J a n u a r y 17, 1985. 54 A m e r i c a n P r e s s (AP) " B o n n e v i l l e , " P o r t l a n d , O r e g o n , J a n u a r y 17, 1985. 55 A m e r i c a n P r e s s (AP) " B o n n e v i l l e , " P o r t l a n d , O r e g o n , J a n u a r y 17, 1985. I n t e n s i f i c a t i o n 158 e l e c t r i c i t y : i t charges B.C.Hydro f o r the t r a n s m i s s i o n when such e l e c t r i c i t y i s allowed t o be exported t o C a l i f o r n i a . Chester Johnson agreed "other U.S. s t a t e s are a l s o c h a s i n g the C a l i f o r n i a market, p a r t i c u l a r l y A r i z o n a and New Mexico. He s a i d , although t h e r e has been "a l o t of r h e t o r i c " about BPA's i n t e r - l i n k a g e p o l i c y , " t h i n g s are not bad. We are j u s t working out the bumps." 3 6 But the i n s t a b i l i t y of exports p e r s i s t s . A f t e r the "export boom" of 1985, the s p r i n g of 1986 r e p r e s e n t s a "power bust." The exports f o r the f i r s t q u a r t e r of f i s c a l 1986/87 from A p r i l 1, t o June 1, 1986 were Zero; no power has been exported f o r the e n t i r e t h r e e month p e r i o d . 5 7 Ma intenance (functiona1) In B r i t i s h Columbia, power r a t e s charged t o i n d u s t r y are very low. "According t o an i n t e r n a t i o n a l survey by O n t a r i o Hydro, [B.C.] Hydro i s an e f f i c i e n t low-cost producer of e l e c t r i c i t y ... the r a t e B.C.Hydro charges i t s i n d u s t r i a l customers i s the f i f t h lowest i n the world a f t e r Sweden, South A f r i c a , Hydro Quebec and O n t a r i o Hydro. But U n i v e r s i t y of B.C. energy economist John H e l l i w e l l c a u t i o n s , ... 'the c o s t t o the consumer i s the wrong way t o measure the e f f i c i e n c y of Hydro. ... Power should be p r i c e d a t what i t c o s t s t o b u i l d new dams to generate e l e c t r i c i t y . " s a B.C.Hydro's Crown c o r p o r a t e 56 Jes Odam, The Vancouver Sun, "Bennett h a i l s power breakthrough", September 18, 1985. 57 The response g i v e n t o an i n q u i r y about the c u r r e n t volume from the B.C.Hydro chairman's o f f i c e on August 20, 1986. The Department of Marketing, Research and Planning a t B.C.Hydro i n d i c a t e d , a l s o , the l a c k of export s a l e s : "we can't move a t h i n g " (August 14, 1986). 58 Rod Nutt, The Vancouver Sun, "Changes a t Hydro spark q u e s t i o n s , " March 29, 1986. I n t e n s i f i c a t i o n 159 growth o r i e n t e d p o l i c y however emphasizes c a p a c i t y expansion and low c o s t supply. The debt of the Crown c o r p o r a t i o n accumulated d u r i n g the b u i l d i n g of h y d r o e l e c t r i c system 5 5* grew and "as a t March 31, 1985, B.C.Hydro's o u t s t a n d i n g long-term debt t o t a l e d $9,469 m i l l i o n ; of t h i s amount $4,666 m i l l i o n was payable i n Canadian c u r r e n c y and 5,103 m i l l i o n was payable i n U.S. c u r r e n c y (U.S. $3,742). The e f f e c t i v e i n t e r e s t c o s t on debt o u t s t a n d i n g as a t March 31, 1985, was 12.04%."eo P a r t i c u l a r l y the export of money t o the United S t a t e s , such as the $5,103 m i l l i o n t o pay f o r the U.S. p o r t i o n of which an i n c r e a s i n g amount was used t o pay f o r the excess c a p a c i t y , c o n s t i t u t e s the growing t r e n d of r e g i o n a l d i s a c c u m u l a t i o n . The dependence on U.S. loans i s seen as a necessary o b l i g a t i o n by the chairman of B.C.Hydro, who s a i d : "When you've a Crown c o r p o r a t i o n , you have very heavy borrowing from f o r e i g n c o u n t r i e s , l i k e out of New York [ s i c ] ." e 3- As a r e s u l t of p r o v i n c i a l government guarantees f o r B.C.Hydro loans and a d e c l i n e i n tax revenue, the AAA c r e d i t r a t i n g c o u l d no longer be maintained. What determines the l e v e l of c r e d i t r a t i n g ? As Timothy Crowell of Moody's I n v e s t o r s S e r v i c e s Inc., New York i n d i c a t e s , "'market c o n d i t i o n s and the e f f e c t s of the r e c e s s i o n ' w i l l be taken 59 Since 1961 the f o l l o w i n g dams were b u i l t : W.A.C.Bennett ($.5 b i l l i o n ) , the Peace Canyon Dam ($.5 b i l l i o n ) , Seven M i l e , Kootenay Canal, Mica, Revelstoke ($2 b i l l i o n ) . 60 B.C.Hydro Annual Report 1984/85, p.14. 61 Canadian Press (CP), "Bonner P r o f i l e , " January 12, 1985. I n t e n s i f i c a t i o n 160 i n t o account when Hydro's s i t u a t i o n i s reviewed. 'We tend t o look ahead,' he s a i d . 'But we remain concerned w i t h the pr o v i n c e s f i n a n c i a l s i t u a t i o n ; w i t h f a l l i n g tax r e c e i p t s , and e f f e c t t h a t i t had on the need t o borrow.'" 6 2 The Moody's I n v e s t o r ' s S e r v i c e lowered B.C.Hydro's c r e d i t r a t i n g t o A a l , which i m p l i e s higher i n t e r e s t r a t e s . 6 3 Very expensive and h e a v i l y mortgaged dams have r e s u l t e d i n the export of l a r g e i n t e r e s t payments. The hope t h a t buying excess e l e c t r i c a l c a p a c i t y with exported money ( i n t e r e s t r a t e s ) would strengthen the p r o v i n c e r e g i o n a l l y a c h i eved the o p p o s i t e : i t weakened the p r o v i n c e ' s c r e d i t r a t i n g and brought about an export dependence on the Un i t e d S t a t e s . Dependence ( functional) The p r o v i n c i a l s t a t e ' s "power r e l a t i o n s h i p s , i t s very decision-making power depends ( l i k e every other s o c i a l r e l a t i o n s h i p i n c a p i t a l i s t s o c i e t y ) upon the presence and c o n t i n u i t y of the accumulation p r o c e s s " (Offe 1975:126). The p r o v i n c i a l s t a t e i t s e l f was i n c r e a s i n g l y r e l i a n t on the d i r e c t accumulation process from B.C.Hydro i n the e a r l y 1980s. B.C.Hydro's Annual 1984/58 Report i n d i c a t e s t h a t water r a t e s and taxes climbed from $71 m i l l i o n i n 1980, t o $299 m i l l i o n i n 1985. At t h i s time the s t a t e i s attempting t o continue the p r o v i n c i a l accumulation process by r e l y i n g on 62 Canadian Press (CP), "Hydro," A p r i l 12, 1983. 63 B.C.Hydro Annual Report 1984/85, p. 14. I n t e n s i f i c a t i o n 161 e l e c t r i c i t y exports t o h e l p pay f o r the debts i t i n c u r r e d . In the flow of i n t e r e s t payments, th e r e i s no i n t e r - l i n k a g e problem t o t r a n s m i t (B.C.Hydro i n t e r e s t payments) r e g i o n a l c a p i t a l o u t s i d e of the c o u n t r y . The power of the p r o v i n c i a l s t a t e i s i n c r e a s i n g l y dependent upon h e l p i n g C a l i f o r n i a i n d u s t r i e s and p o s s i b l y U.S. s t a p l e s producers which compete with Canada by way of cheap power s a l e s which are lower than p r o v i n c i a l r a t e s . T h i s process undermines the u t i l i t y ' s p r o v i n c i a l accumulation. Large purchasers of e l e c t r i c i t y i n the p r o v i n c e s t r i v e t o o b t a i n the same r a t e s as the f o r e i g n u t i l i t i e s . West Kootenay Power and L i g h t , one of the remaining p r i v a t e p r o v i n c i a l u t i l i t i e s , owned by Cominco, has s u c c e s s f u l l y sued B.C.Hydro to buy s u r p l u s e l e c t r i c i t y a t the same r a t e as C a l i f o r n i a u t i l i t i e s . Legitimation The s t a t e can o n l y function as a c a p i t a l i s t s t a t e by a p p e a l i n g t o symbols and sources of support t h a t conceal i t s nature as a [staples-dependent] capitalist s t a t e (Offe 1975:127). P o l i t i c i a n s and B.C.Hydro r e p r e s e n t a t i v e s appeal t o symbols of i n d u s t r i a l p rogress and adverse e f f e c t s are m i t i g a t e d by impact e x p e r t s . Development a f t e r t h o u g h t s , such as the c r e a t i o n of a new category of d i s c o u n t e d s u r p l u s e l e c t r i c i t y , are p o r t r a y e d as a t t r a c t i n g i n d u s t r y . Promises by the government are made f o r jobs i n those i n d u s t r i e s a t t r a c t e d by cheap power, and the i n c r e a s e i n c o n s t r u c t i o n I n t e n s i f i c a t i o n 162 jobs i s p o i n t e d out while dams are being b u i l t . The environmental and s o c i a l impact i s m i t i g a t e d by resource c o n s u l t a n t s who study a q u a t i c , f o r e s t r y , f i s h e r y , and s o c i a l s e r v i c e concerns. The imported technology of B.C.Hydro i t s e l f i s used as an example of i n d u s t r i a l development and pr o g r e s s , whereas l i t t l e has changed. The k i t c h e n hardware i n the B r i t i s h Columbia hardware s t o r e s i s as imported as the mega- hardware used on the W.A.C. Bennett Dam and i n the Gordon Shrum Generating S t a t i o n (on the Peace R i v e r ) . The "power hunger" of C a l i f o r n i a has o f t e n been c i t e d as an absorber of any temporary i n d u s t r i a l s u r p l u s of e l e c t r i c i t y . The o f f e r s t o C a l i f o r n i a of our power were made even be f o r e the. major dams were b u i l t by W.A.C. Bennett d u r i n g the opening ceremonies of B.C.'s new t r a d e and t r a v e l c e n t r e i n San F r a n c i s c o ( i n August 1961). Gordon B e l l , the V i c t o r i a Times Business e d i t o r , i n h i s a r t i c l e "'Power Hunger' Claims f o r U.S. M i s l e a d i n g " r a i s e d the q u e s t i o n s , t o whether C a l i f o r n i a and the P a c i f i c Northwest r e a l l y needed t o import e l e c t r i c i t y from B r i t i s h Columbia. He found t h a t i t was r a t h e r the p o l i t i c a l reasoning of the Kennedy A d m i n i s t r a t i o n which f a v o r e d p u b l i c power p r o j e c t s , o f t e n without enough a t t e n t i o n t o t h e i r economic r a t i o n a l e . He c i t e s the f o l l o w i n g f a c t s t w e n t y - f i v e years ago: Even witnesses from the B o n n e v i l l e Power A d m i n i s t r a t i o n , an i n t e g r a l p a r t of the v a s t U.S. p u b l i c power system, were f o r c e d t o concede i n hearin g s b e f o r e a House committee t h a t , even under the most adverse weather c o n d i t i o n s on r e c o r d , power gen e r a t i n g c a p a c i t y of the northwest r e g i o n would I n t e n s i f i c a t i o n 163 f a l l short of estimated demand by no more than 1 per cent over the next ha l f d e c a d e . . . . This was a tough point for Bonnevi l le to concede because i t has been, p r i m a r i l y , on the evidence of U.S . federal power spokesmen that the "power hungry" northwest and C a l i f o r n i a image was b u i l t up. This i s p o l i t i c s and not economics . . . . B e l l then describes the plans of the giant g r i d being planned during the 1960s by Mr. Udal l which was to l i n k the large Northwestern and Southwestern u t i l i t i e s into a giant g r i d . In r e l a t i o n to future needs for B . C . power, B e l l ra i sed the big quest ion: Is i t not poss ib le that the claims of "power hunger" have been misleading i n other than purely economic terms? Is i t not poss ib le that any power 'vacuum'- f i c t i t i o u s or rea l - w i l l be f i l l e d by the U.S . pub l i c power, leaving no room for import of fore ign power? C e r t a i n l y i t seems doubtful that I n t e r i o r Secretary and h is cohorts have done a l l t h e i r propagandizing on the need for power for the benefit of B . C . Mr. Udal l i s pushing hard for a m u l t i - m i l l i o n d o l l a r western U.S . g r i d s y s t e m . . . . 6 4 Twenty-five years l a t e r i n March 1986, Premier B i l l Bennett upon the return of one of many v i s i t to s e l l B .C.Hydro ' s surplus power to C a l i f o r n i a found the fo l lowing: . . . that the C a l i f o r n i a n s 'have become very very in teres ted ' i n buying export e l e c t r i c i t y from B . C . He sa id the C a l i f o r n i a n s have recognized that one of the best options for t h e i r future energy needs i s the 'safe , c lean a f fordable ' power from B . C . He contrasted t h i s perception with the r e l a t i v e ignorance about B . C . e l e c t r i c i t y when he f i r s t v i s i t e d C a l i f o r n i a to t a l k about i t two years ago: 'There's been a remarkable change of v i e w . ' 6 5 64 Gordon B e l l , Victoria Times, "'Power Hunger' Claims for U.S . Misleading?" August 12, 1961. 65 The Vancouver Sun, "Bennett f inds C a l i f o r n i a n s with fresh savvy - a n d . . . POWER HUNGRY," (March 8,1986). I n t e n s i f i c a t i o n 164 Conc lus ions I n r e s p o n s e t o t h e t h r e a t o f a 1980s power t r a p , c h a r a c t e r i z e d by t h e s p e c i a l i z a t i o n i n t h e wrong e n e r g y p r o d u c t , a w e a k e n i n g r e s o u r c e b a s e , unemployment and t h e l o s s o f i n i t i a l e a s y g r o w t h ; t h e government and B.C.Hydro a r e i n t e r v e n i n g i n t h e p r o d u c t i o n o f e l e c t r i c i t y i n a m a j o r way. The b u i l d i n g o f dams has come t o a h a l t , s t o p p i n g 10% o f B r i t i s h C o l u m b i a ' s c o n s t r u c t i o n , and more t h a n 5000 e m p l o y e e s were l a i d o f f . T h i s t h i r d m a j o r i n t e r v e n t i o n c o n s i s t s o f a t r a n s f o r m a t i o n o f t h e i n t e r n a l o p e r a t i o n s o f B.C.Hydro and a r e f o r m u l a t i o n o f p o l i c y by t h e government and B.C.Hydro. The m a j o r d i r e c t i o n o f t h e p o l i c i e s w i t h r e s p e c t t o t h e p r o d u c t i o n o f e l e c t r i c i t y a r e a c o m b i n a t i o n o f " f o r w a r d " and "backward" p l a n n i n g . The "backward" a p p r o a c h i s due t o h a v i n g p r o d u c e d t h e power f i r s t ( s u r p l u s ) w h i c h now i s d i s c o u n t - m a r k e t e d t o s t a p l e s p r o d u c e r s ( p u l p m i l l s , c h e m i c a l c o m p a n i e s and m i n e s ) . T h i s i s an a p p r o a c h w h i c h i n t e n s i f i e s s t a p l e s d e p e n d e n c e . The " f o r w a r d " p o l i c y t o e s c a p e t h e t h r e a t o f t h e "power t r a p " a d v o c a t e s f i n d i n g new e x p o r t m a r k e t s f o r t h e s u r p l u s and c o m b i n e s w i t h t h a t s o l u t i o n t h e d e v e l o p m e n t a l l o g i c o f v i e w i n g e l e c t r i c i t y a s an e n e r g y r e s o u r c e ( s t a p l e ) t o be e x p l o i t e d f o r e x p o r t . T h i s i s s e e n t o r e s t a r t t h e i n d u s t r y o f b u i l d i n g dams, b u t e x t e n d s and i n t e n s i f i e s B r i t i s h C o l u m b i a ' s d e p e n d e n c e . I t d o e s s o , by way o f d e v e l o p m e n t o f i n c r e a s i n g l y r e mote r i v e r r e s o u r c e s , i n o r d e r t o p r o d u c e an i n d u s t r i a l s t a p l e t o be u s e d i n t h e m a n u f a c t u r i n g c e n t e r s o f C a l i f o r n i a . I n t e n s i f i c a t i o n 165 When e x a m i n i n g t h e p r o v i n c i a l s t a t e ' s f u n c t i o n s o f a c c u m u l a t i o n ( e x c l u s i o n , m a i n t e n a n c e , d e p e n d e n c e and l e g i t i m a c y ) i n a f o r e i g n e n v i r o n m e n t t h e u n c e r t a i n t i e s w h i c h a r i s e a r e i n t e n s i f i e d . B.C.Hydro and t h e government a r e e x c l u d e d f r o m t h e d e c i s i o n making p r o c e s s t o a g r e a t e r d e g r e e ( t r a n s m i s s i o n o f power, c o m p e t i t i o n f r o m U.S. u t i l i t i e s ) ; t h e y a r e s u b j e c t t o a l e s s p r e d i c t a b l e s o u r c e o f income ( i n t e r r u p t a b l e s a l e s i n a f l u c t u a t i n g c u r r e n c y ) ; an e f f o r t t o m a i n t a i n t h i s p r o c e s s o f a c c u m u l a t i o n becomes e r o d e d by f o r e i g n d e b t payments and a l r e a d y l o s t e n g i n e e r i n g and l a b o u r s k i l l s ; t h e p o l i t i c a l power d e p e n d e n c e on a p p r o p r i a t i n g e x p o r t r e v e n u e s a s w a t e r t a x e s becomes u n d e r m i n e d by l o c a l u t i l i t i e s a nd i n d u s t r i e s demanding t h e same r a t e s as C a l i f o r n i a , and t h e l e g i t i m a c y o f t h i s p r o c e s s ("power-hungry" C a l i f o r n i a , c h e a p r e s i d e n t i a l e l e c t r i c i t y ) becomes i n c r e a s i n g l y q u e s t i o n a b l e . 166 Chapter VII CONCLUSION Summary Out of the c o n t e x t of e x p e c t a t i o n s t h a t h y d r o e l e c t r i c development would b r i n g about a d i v e r s i f i e d secondary i n d u s t r y arose the q u e s t i o n which was c e n t r a l t o t h i s t h e s i s : Why d i d the p r o v i n c i a l s t a t e ' s i n t e r v e n t i o n i n d e v e l o p i n g p u b l i c hydro power, intended t o d i v e r s i f y the i n d u s t r i a l base, a c t u a l l y i n t e n s i f y B r i t i s h Columbia's s t a p l e s dependence? T h i s q u e s t i o n was answered by way of f o u r p o i n t s of a n a l y s i s : s t a t e i n t e r v e n t i o n , the e x t e n s i o n of the s t a p l e s dependence, the p l a n n i n g f o r i n d u s t r i a l power needs, and the i n t e n s i f i c a t i o n of s t a p l e s dependence. I t has been argued, t h a t r a t h e r than c o n t r i b u t i n g s u b s t a n t i a l l y to the development of secondary i n d u s t r y , B.C.Hydro, an agency of the p r o v i n c i a l s t a t e , has become a major i n s t i t u t i o n a l f o r c e i n extending and i n t e n s i f y i n g the p r o d u c t i o n i n the s t a p l e s i n d u s t r i e s . To e l u c i d a t e the problem and f i n d a p a r t i a l answer a t h e o r e t i c a l blend of s t a p l e s theory ( I n n i s , Watkins, Marchak) and key concepts of O f f e ' s "Theory of the C a p i t a l i s t S t a t e and the Problem of P o l i c y Formation" were a p p l i e d t o understand the nature of p r o d u c t i v e s t a t e i n t e r v e n t i o n ( i . e . the b u i l d i n g of dams) i n a resource dependent c a p i t a l i s t s o c i e t y . S t a p l e s t heory helps i d e n t i f y s e v e r a l developmental p a t t e r n s of dependent s t a p l e s p r o d u c t i o n : i t s c o l o n i a l o r i g i n , i t s s t a t e - supported c o n t i n u a t i o n , and i t s r e c u r r i n g s t r u c t u r a l Conclusion 167 condi t ions . In per iphera l s tates , the accumulation process i s s u b s t a n t i a l l y based on revenues from staples product ion. Offe ' s concept of the state i s derived from the opportuni t ies of accumulation the state needs to provide i n order to maintain the economic system. To do so, i t was argued, the state needs to intervene, not only by a l l o c a t i n g resources, but a lso by turning water power into an e l e c t r i c a l product . This development continued during the l a s t twenty years and helped maintain the accumulation process . The p r o v i n c i a l s ta te ' s intervent ions i n the production of e l e c t r i c i t y s tarted i n 1945 with the B . C . Power Commission's purchase of small u t i l i t i e s to supply the r u r a l areas with uniformly pr iced e l e c t r i c i t y and promote the i n d u s t r i a l use of e l e c t r i c i t y i n areas found unprof i table to serve by the larger pr iva te u t i l i t i e s . At the same time, the a l l o c a t i o n of natural resources by the p r o v i n c i a l state and the a c q u i s i t i o n of large natural resource areas by large mul t inat ional corporat ions continued. Subsequent to the second in tervent ion , the take-over of the B . C . E l e c t r i c (1961), the planning emphasis changed. B .C.Hydro ' s expansionary period was character ized by: mega- dams, cheap bulk rates , b u i l d i n g before demand, opening the North, p o l i t i c i z i n g hydroe lec tr i c development, and bu i ld ing dams as an industry . During t h i s per iod , the state had became increas ing ly involved i n br inging hydroe lec tr i c projects into production and formulating p o l i c y to continue t h i s Conclusion 168 development. The "dual r i v e r po l i cy" came to define the course of hydroe lec tr i c development during the 1960s, 1970s, and 1980s. By bu i ld ing dams B.C.Hydro became an i n s t i t u t i o n a l force which brought investment money into the province , created jobs during the construct ion and planning phase, promised i n d u s t r i a l d i v e r s i f i c a t i o n , and improved ree l ec t ion chances of the government. Instead of fos ter ing competition with other regions by increased product innovat ion, the intervent ions ( in the production of e l e c t r i c i t y and a l l o c a t i o n of natural resources) served as a meta-level in t erreg iona l competitive device for making staples products compet i t ive . B.C.Hydro was not merely a u t i l i t y which supplied e l e c t r i c i t y . I t was also the Crown corporat ion advancing the government's i n d u s t r i a l development p o l i c y . B .C.Hydro's i n t e r n a l reports show several emphases: l i n k i n g the natural resources to the e l e c t r i c a l i n f r a s t r u c t u r e , expanding the supply of e l e c t r i c i t y for fores t process ing, continuing the p r a c t i c e of " i n d u s t r i a l i z a t i o n - b y - i n v i t a t i o n " ( p a r t i c u l a r l y i n the promotion of mining and f o r e s t r y ) , developing low cost e l e c t r i c i t y as an incent ive to power intens ive i n d u s t r i e s , and disseminating the notion that d i v e r s i f i e d manufacturing depends on large amounts of low cost e l e c t r i c i t y . B.C.Hydro b u i l t large dams on the Columbia and Peace River with a n t i c i p a t i o n of a t t r a c t i n g i n d u s t r i e s . No large smelting indus tr i e s were a t trac ted by the abundance of C o n c l u s i o n 169 e l e c t r i c i t y . A l c a n and Cominco had developed t h e i r own dam s i t e s f o r t h e i r s m e l t i n g o p e r a t i o n s . The major remaining users of i n d u s t r i a l e l e c t r i c i t y were the f o r e s t p r o c e s s i n g companies. During the expanding phase of B.C.Hydro, t h r e e major i n d u s t r i e s , "Wood I n d u s t r i e s " (saw m i l l s ) , "Paper and A l l i e d I n d u s t r i e s " (pulp and low grade paper), and "Chemical and Chemical Products I n d u s t r i e s " ( s u p p l i e r s of p u l p m i l l s ) c o n s t i t u t e d between 81% t o 86% of the Crown c o r p o r a t i o n ' s manufacturing i n d u s t r y s a l e s from 1961 t o 1983. The purchasers i n the remaining 17 i n d u s t r i a l manufacturing c a t e g o r i e s c o n s t i t u t e d o n l y 15% of Hydro's remaining s a l e s to manufacturing i n d u s t r i e s i n B r i t i s h Columbia. In other words, B.C.Hydro's i n d u s t r i a l l o a d was u t i l i z e d p r i m a r i l y by the expanding f o r e s t p r o c e s s i n g i n d u s t r i e s . The a v a i l a b i l i t y of e l e c t r i c i t y d i d not b r i n g about a major d i v e r s i f i c a t i o n i n the p r o d u c t i o n of goods s i n c e the s t a r t of the major expansion of h y d r o e l e c t r i c development i n the 1960s. The dreams t h a t e l e c t r i c i t y would become a c a t a l y s t t o b r i n g about secondary i n d u s t r y and consumer goods manufacturing has not become a r e a l i t y . S p i n - o f f i n d u s t r i e s from dam c o n s t r u c t i o n have not developed, except f o r government promoted t o u r i s t v i s i t s t o the dam s i t e s . D e s p i t e g r a n t i n g low e l e c t r i c i t y r a t e s and resource r o y a l t i e s t o s t a p l e s producers, they d i d not use such i n c e n t i v e s t o s u b s t a n t i a l l y d i v e r s i f y t h e i r p r o d u c t s . Conclusion 170 Planners, e x p e r t s , p o l i t i c i a n s , and i n d u s t r i a l development o f f i c e r s w i t h i n B.C.Hydro, the p r o v i n c i a l government, and i n d u s t r y have shaped the h y d r o e l e c t r i c i n f r a s t r u c t u r e of B r i t i s h Columbia. Despite s u b s t a n t i a l e f f o r t s t o p l a n the hydro-system, an "unplanned s u r p l u s " became apparent. Evidence was presented which i n d i c a t e s t h a t the f o l l o w i n g c o n t r i b u t e d t o t h i s s u r p l u s : the u n r e l i a b i l i t y of the i n d u s t r i a l customers' f i r m commitments t o expand t h e i r s t a p l e s p r o d u c t i o n , B.C.Hydro's i n a b i l i t y t o p r e d i c t markets f o r i n d u s t r i a l consumption, the treatment of e l e c t r i c i t y as a s t a p l e ( e x p o r t a b l e energy p r o d u c t ) , i n d u s t r i a l optimism a s s o c i a t e d w i t h b i g p r o j e c t s , and the absence of a c l e a r government i n d u s t r i a l p o l i c y d i r e c t i o n . The 1980s "power t r a p " i s c h a r a c t e r i z e d by unexpected s i d e - e f f e c t s : the " s u r p l u s shock" due to the l a c k of p r e d i c t e d expansion by i n d u s t r y , the weakening resource base, unemployment and underemployment, the reduced growth i n the consumption of e l e c t r i c i t y , and the s t a g g e r i n g debt l o a d were u n a n t i c i p a t e d by the t e c h n o c r a t i c p l a n n i n g approach. As a r e s u l t of t h i s 1980s "power t r a p , " B.C.Hydro and the p r o v i n c i a l government responded with the t h i r d major i n t e r v e n t i o n , whereby the p r o v i n c i a l government reduced B.C.Hydro's c o n t r i b u t i o n t o the p r o v i n c i a l economy. T h i s t h i r d major i n t e r v e n t i o n c o n s i s t e d of t r a n s f o r m a t i o n of the i n t e r n a l o p e r a t i o n s of B.C.Hydro from a p r o d u c t i o n t o an o p e r a t i n g company and a r e f o r m u l a t i o n of p o l i c y by the C o n c l u s i o n 171 government and B.C.Hydro. The major d i r e c t i o n of the p o l i c i e s w i t h r e s p e c t t o p r o d u c t i o n of e l e c t r i c i t y are a combination of "backward" and "forward" p l a n n i n g . The "backward" approach stems from having produced the power f i r s t ( s u r p l u s ) which now i s d i s c o u n t marketed t o s t a p l e s producers (pulp m i l l s , chemical companies, and mines) f o r a d d i t i o n a l p r o d u c t i o n . I t thereby i n t e n s i f i e s s t a p l e s dependence. The "forward" p o l i c y i n v o l v e s seeking new export markets f o r the s u r p l u s and the development of remote hydro s i t e s t o produce e l e c t r i c i t y f o r export. The p r o v i n c i a l s t a t e ' s r o l e i n f a c i l i t a t i n g accumulation ( e x c l u s i o n , maintenance, dependence, and l e g i t i m a c y ) i n a f o r e i g n environment are l e s s c e r t a i n than i n a r e l a t i v e l y simple domestic environment. B.C.Hydro and the p r o v i n c i a l government are excluded from the d e c i s i o n making process t o a g r e a t e r degree. I n t e r r u p t a b l e and stand-by s a l e s are l e s s p r e d i c t a b l e sources of income. The process of accumulation can be eroded by f o r e i g n debt payments. The p o l i t i c a l dependence on a p p r o p r i a t i n g export revenues c a r r i e s a high degree of u n c e r t a i n t y , and i t becomes more d i f f i c u l t t o persuade the p o p u l a t i o n t h a t the process i s l e g i t i m a t e . I f dams are b u i l t s o l e l y f o r export, the p r i c e f o r e l e c t r i c i t y , the number of jobs, the i n t e r e s t r a t e s , and export c o n d i t i o n s ( t r a n s m i s s i o n l i n e access) w i l l be determined i n the United S t a t e s . In p u r s u i t of such a p o l i c y the p r o v i n c e i n t e n s i f i e s C o n c l u s i o n 172 i t s dependency. When examining the 1980s "power trap" i t becomes evident that the p r o v i n c i a l state was unable, as Offe (1975:144) ind ica te s , to carry out the functions of accumulation by means of productive in tervent ion without para lyz ing s i d e - e f f e c t s . New Material This thes i s makes new mater ia l gathered i n the B.C.Hydro l i b r a r y (e .g . reports and studies by the no longer ex i s t ing I n d u s t r i a l Development Department) and other i n t e r n a l B.C.Hydro documents ava i l ab l e to the general reader; for example, excerpts from reports which l i n k B.C.Hydro to the promotion of the consumption of e l e c t r i c i t y i n primary resource processing indus tr i e s and the promotion of " i n d u s t r i a l i z a t i o n - b y - i n v i t a t i o n . " In a d d i t i o n , wri t ten materia l and new information was gathered by way of informal interviews with se lect B.C.Hydro employees i n several departments: i n the research department, Burnaby Mountain Control Center, marketing engineers, and q u a l i t y contro l o f f i c e r s who buy B.C.Hydro equipment. My own personal experience i n the planning process of hydroe lec tr i c projects (1966 - 1982), and very recent cross-examinations of B.C.Hydro executives before the B . C . U t i l i t i e s Commission are part of the empir ica l information. U t i l i t y of Result This thes i s i s a contr ibut ion to understanding the r e p e t i t i o n of h i s t o r i c a l staples-dependent development C o n c l u s i o n 1 7 3 p a t t e r n s which are repeated i n the p r o d u c t i v e i n t e r v e n t i o n s by the s t a t e , as w e l l as a d e - m y s t i f i c a t i o n of the dreams t h a t the development of e l e c t r i c i t y produces s u b s t a n t i a l secondary i n d u s t r y . The approach used may be a p p l i c a b l e t o the a n a l y s i s of other p r o v i n c i a l power u t i l i t i e s , such as On t a r i o Hydro, Hydro Quebec, and Manitoba Hydro. Or, i t may be u s e f u l i n other s t u d i e s which i n v e s t i g a t e the p r o d u c t i v e i n t e r v e n t i o n s by the p e r i p h e r a l s t a t e (e.g. Expo 86, the p r o d u c t i v e i n p u t which was produced and operated by the s t a t e p r i m a r i l y f o r the t o u r i s t i n d u s t r y t o keep the accumulation process g o i n g ) . L i m i t a t i o n s The s t a t e i n Canada has had a h i s t o r y of p r o d u c t i v e i n t e r v e n t i o n i n Crown c o r p o r a t i o n s . T h e r e f o r e , O f f e ' s argument t h a t "the q u a n t i t y and scope of s t a t e i n t e r v e n t i o n has i n c r e a s e d t o an extent t h a t makes i t j u s t i f i a b l e t o speak of a new phase of c a p i t a l i s t development i n r e c e n t decades" (Offe 1975:125) needs t o be reexamined i n the context of Canadian Crown c o r p o r a t i o n s which were e s t a b l i s h e d d u r i n g the war and then s o l d o f f t o the p r i v a t e s e c t o r . O f f e ' s theory s t r e s s e s t h a t "under c o n d i t i o n s of advanced c a p i t a l i s m - the need f o r p r o d u c t i v e s t a t e a c t i v i t i e s " (Offe 1975:144) i s a necessary f u n c t i o n f o r accumulation, and t h a t the scope of such p r o d u c t i v e i n t e r v e n t i o n s i s i n c r e a s i n g . However, the theory does not adequately cover the case of the s t a t e ' s o v e r - p r o d u c t i o n and subsequent need f o r a l l o c a t i o n of C o n c l u s i o n 174 t h i s s u r p l u s (the " s t a p l e s t r a p " f i t s b e t t e r i n t h i s c a s e ) . Such an event r e q u i r e s the s t a t e , i n the i n t e r i m , t o stop i t s p r o d u c t i v e a c t i v i t i e s (e.g. t o stop b u i l d i n g more dams). In order t o cover such c o n d i t i o n s O f f e i n d i c a t e s two f u n c t i o n a l r e a l i t i e s : one, the constant attempt t o r e c o n c i l e and make compatible the v a r i o u s f u n c t i o n s of the s t a t e with i t s i n t e r n a l s t r u c t u r e (e.g. change of departments and s t r a t e g i e s ) , and two, t h a t t h e r e " i s n e i t h e r v i s i b l e nor t o be a n t i c i p a t e d a s t r a t e g y t h a t a c t u a l l y does r e c o n c i l e these f u n c t i o n s and thus achieve a balanced i n t e g r a t i o n of the s t a t e and the accumulation p r o c e s s " (Offe 1975:144). The s t a t e t h e r e f o r e i s seen by O f f e t o c o n t i n u o u s l y r e a d j u s t t o new c o n d i t i o n s . Only i n t h a t way does O f f e ' s theory a l l o w the adjustment from a p r o d u c t i v e mode t o an a l l o c a t i v e mode of i n t e r v e n t i o n i n an over-producing s t a t e (e.g. "backward p l a n n i n g " by d i s c o u n t - s e l l i n g the s u r p l u s p r o d u c t i o n ) . In other words, O f f e does not o f f e r a " r e l i a b l e and workable s t r a t e g y of 'system maintenance'" (Offe 1975:144). Beside l i m i t s i n the a p p l i c a t i o n of theory i n t h i s t h e s i s , the e m p i r i c a l c a t e g o r i z a t i o n of i n d u s t r y w i t h i n v a r i o u s l e v e l s of government made s t a t i s t i c a l comparisons d i f f i c u l t . 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Toronto: McCle l land, 1966. 186 Shrum, Gordon. Report of the Royal Commission on the Matter of British Columbia Power Commission, 1959. (Controversies surrounding Sommer's charges against the government). Shrum, Gordon. See above: BC Energy Board Report 1961. Stebbings, E l i s a b e t h . Energy. A Bibliography of Books and Reports held in the Library of B . C . Hydro, Feb. 1976. Swainson, N e i l . Conflict over the Columbia: The Canadian Background to a Historic Treaty. Montreal: M c G i l l , 1969. Taylor G.W. Builders of British Columbia. An I n d u s t r i a l H i s t o r y . V i c t o r i a : Morris Publ i sh ing , 1982. The Vancouver Board of Trade. Export of E l e c t r i c a l Power from British Columbia. Vancouver: November 1960. The Vancouver Sun. "Peace River i s a Puzzle to Experts ." Electric Power in British Columbia: A Special Series. Vancouver: Vancouver Sun, June 1959. Vincent , Nicholas . 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Toronto: Univers i ty of Toronto Press , 1973. Worley, B. Ronald. The Wonderful World of W.A.C. Bennett. Toronto: McCle l land , 1971. 187 APPENDIX FIGURE 1 DEVELOPMENTAL SCENARIOS T h i s schematic d i s p l a y s the t h r e e h y d r o e l e c t r i c and s t a p l e s economy development s c e n a r i o s t o i l l u s t r a t e more r e a d i l y the nature of the problem under study. DREAM SCENARIO (KEEFER 1899) PRE-HYDRO DEVELOPMENT CONSIDERATIONS EFFECT ON PRODUCT ECONOMIC RELATIONSHIP Present s t a p l e s product p l u s e l e c . i n f r a s t r . p l a n n i n g steady supply of cheap e l e c - t r i c i t y EXTENSION SCENARIO (SHRUM 1961) d i v e r s i f i - c a t i o n of s t a p l e s s t a p l e s independence through i n d u s t r i a l e v o l u t i o n PRE-HYDRO DEVELOPMENT CONSIDERATIONS EFFECT ON PRODUCT ECONOMIC RELATIONSHIP Present s t a p l e s product p l u s dual r i v e r e l e c t r i c a l i n f r a s t r u c t u r e p o l i c y more access t o r esources (roads, r e s e r v o i r s ) , s p i n - o f f s , e l e c t r i c i t y as s t a p l e c o ntinued s t a p l e s p r o d u c t i o n s t a p l e s dependence, temporary s u r p l u s e l e c t r i c i t y export INTENSIFICATION (1986) SCENARIO PRE-HYDRO DEVELOPMENT CONSIDERATIONS EFFECT ON PRODUCT ECONOMIC RELATIONSHIP S t a p l e s product "unplanned ove r s u p p l y , " b u i l d i n g f o r export f o r e i g n c a p i t a l debts, domestic, i n d u s t r i a l power s a l e s push, temp, jobs, e l e c t r i c i t y as s t a p l e c o n t i n u e d s t a p l e s p r o d u c t i o n i n t e n s i f i - c a t i o n : resource & e l e c t r i c a l s t a p l e s dependence, long-term export of v a r i a b l e U.S. revenue f o r c onstant debt payment, s u r p l u s induced dependence 188 FIGURE 2 GLOSSARY E l e c t r i c a l Terms HYDROELECTRIC POWER STATION: a power s t a t i o n which generates e l e c t r i c i t y from h y d r a u l i c sources. The water r o t a t e s t u r b i n e s connected t o ge n e r a t o r s . CAPACITY: For example, a generator has a c e r t a i n c a p a c i t y (measured i n watts) t o produce power. In an e l e c t r i c a l system the a d d i t i o n of these name-plate generator c a p a c i t i e s i s r e f e r r e d t o as the t o t a l c a p a c i t y . POWER: P o t e n t i a l c a p a c i t y . ENERGY: a v a i l a b l e heat i n e l e c t r i c i t y measured i n k i l o w a t t - h o u r s , where one k i l o w a t t - h o u r i s e q u i v a l e n t t o 3412.97 Btu. WATT: the b a s i c u n i t f o r measuring power. WATT-HOUR: the b a s i c u n i t f o r measuring energy. KILOWATT (kW): 1000 watts. KILOWATT-HOUR (kW.h): 1000 watt-hours. MEGAWATTS (MW): 1 x 10 3 k i l o w a t t s MEGAWATT-HOUR (MW.h): 1 x 10 3 k i l o w a t t - h o u r s . GIGAWATT (GW): 1 x 10 6 k i l o w a t t s . GIGAWATT-HOUR (GW.h): 1 x 10 6 k i l o w a t t - h o u r s . MILL: one-tenth of a ce n t . LOAD: the amount of e l e c t r i c a l power d e l i v e r e d a t any s p e c i f i e d p o i n t on a system. PEAK LOAD: the maximum average load d u r i n g a time i n t e r v a l of s p e c i f i e d d u r a t i o n (e.g., 20 minutes) o c c u r i n g d u r i n g a given p e r i o d o f time (e.g., a day). DEMAND: the power (measured i n watts) or energy (measured i n watt-hours) r e q u i r e d t o supply the system l o a d a t any giv e n time. Source: Potential Benefits and Costs of Canadian Electricity- Exports by B a t t l e , G i s l a s o n , Douglas. 189 FIGURE 3 IMPORTED GENERATORS, TURBINES, AND ELECTRICAL GEAR USED IN BRITISH COLUMBIA HYDROELECTRIC PROJECTS MANUFACTURERS OR COMPANY OF ORIGIN DAM SITE Peace Canyon Dam ( S i t e 1) EQUIPMENT Generators Turbines (No.) & COMPANY (4) M i t s u b i s h i (4) Leningradsky M e t a l l i c h e s k y Zavod (Emec T r a d i n g Ltd.) Portage Mountain (Bennet Dam, Shrum Gener. S t a t i o n ) Generators Turbines Switch Gear Gi a n t C i r c . Breakers (5) CGE (3) (5) F u j i (3) Brown B o v e r i Brown B o v e r i Toshiba Toshiba (2) (2) F u j i F u j i Seven M i l e Dam Turbines Generators Switch Gear G i a n t C i r c . Breakers (4) M i t s u b i s h i (4) H i t a c h i ITE (Brown B o v e r i ) F u j i Mica Dam Turbines Generators Switch Gear (2) H i t a c h i (2) Leningradsky M e t a l l i c h e s k i (4) Can. General E l e c t r i c ITE (Brown B o v e r i ) Kootenay Canal Turbines (4) Generators (4) M i t s u b i s h i Can. General E l e c t r i c R evelstoke Turbines Generators Switch Gear (4) F u j i (4) F u j i M i t s u b i s h i Source: 1986. B.C.Hydro, Q u a l i t y C o n t r o l & I n s p e c t i o n Dept., J u l y 21, TABLE VI B.C.Hydro Sales C l a s s i f i e d i n I n d u s t r i a l Analys i s 1965-1976 Manufacturing (GW.h) Pulp & Other Tota l Year ] Paper Chemicals Wood Mfg. Mfg. 1965 1 985.2 463.4 472.6 579.5 3 500.6 1966 2 441.7 692.5 535.7 643.9 4 313.7 1967 2 737.4 738.7 573.6 675.9 4 725.6 1968 2 994.1 891.4 627.6 715.2 5 228.2 1969 3 353.7 945.8 688.2 782.1 5 769.8 1970 3 288.7 968.1 739.5 810.4 5 806.7 1971 3 765.5 1 016.0 839.9 876.7 6 498.1 1972 3 846.6 1 078.4 985.3 920.8 6 831.1 1973 4 209.9 1 317.0 1 131.1 971.9 7 629.9 1974 4 173.9 1 277.0 1 124.5 1 016.0 7 591.4 1975 3 448.9 1 013.9 1 038.9 1 017.7 6 519.4 1976 4 489.4 1 376.3 1 274.7 1 051.5 8 191.9 Source: B .C.Hydro , Department of Marketing, Research, and Planning, (obtained i n June 1986). 191 TABLE VII Composition of Tra n s m i s s i o n Rate S a l e s H i s t o r i c & Probable P r o j e c t i o n s 14:27 F r i d a y , January 31, 1986 Pulp & Wood Chemicals Paper Manufacturing* Avg Energy Avg Energy Avg Energy No. Sales %of No. Sales %of No. S a l e s %of Acc. GW.h T o t a l Acc. GW.h T o t a l Acc. GW.h T o t a l H i s t o r i c 1974/75 18 4,141 53.7 3 144 1.8 6 1,237 16.0 1975/76 18 3,398 49.9 3 129 1.9 6 975 14.3 1976/77 18 4,360 53.4 3 146 1.7 6 1,254 15.4 1977/78 18 4,336 51.1 3 154 1.8 6 1,349 15.9 1978/79 18 4,768 52.2 5 194 2.2 6 1,419 15.5 1979/80 18 4,693 50.9 6 205 2.2 6 1,372 14.9 1980/81 18 4,738 49.4 7 234 2.4 6 1,427 14.9 1981/82 20 4,271 45.7 7 223 2.5 6 1,241 13.3 1982/83 20 4,465 49.4 9 256 2.7 6 1,018 11.3 1983/84 20 4,604 49.7 9 293 3.1 6 986 10.6 1984/85 20 5,766 52.7 10 292 2.6 6 1,258 11.5 Avg. Annual Growth (%) 10 Years 74/75-84/85 3.4 7.3 0.2 P r o j e c t i o n s 1985/86 21 6,150 54.4 10 325 3.0 6 1,295 11.4 1986/87 21 6,625 53.9 13 370 3.0 7 1,370 11.1 1987/88 21 5,850 50.0 13 410 3.5 7 1,350 11.5 1988/89 22 6,125 49.5 13 410 3.4 7 1,385 11.2 1989/90 22 6,205 49.2 13 410 3.3 8 1,435 11.4 1990/91 22 6,205 47.2 13 410 3.1 8 1,555 11.8 1991/92 22 6,540 47.4 13 410 2.9 8 1.625 11.8 1992/93 22 6,815 47.4 13 410 2.8 8 1,695 11.8 1993/94 22 6,715 47.1 13 410 2.8 8 1,735 12.2 1994/95 22 6,990 47.4 13 410 2.8 8 1,775 12.0 1995/96 22 7,115 47.5 13 410 2.9 8 1,795 12.0 Avg. Annual Growth (%) 11 Years 84/85-95/96 1.9 3.1 3.3 * Most Wood Man. s a l e s are i n the General Rate c a t e g o r y Source: B.C.Hydro, Dep. of Marketing, Research and P l a n n i n g . 192 TABLE V I I I C o m p o s i t i o n o f T r a n s m i s s i o n R a t e S a l e s H i s t o r i c & P r o b a b l e P r o j e c t i o n s 14:27 F r i d a y , J a n u a r y 31, 1986 M e t a l M i n e r a l O t h e r M i n i n g F u e l s I n d u s t r i a l s A v g E n e r g y A v g E n e r g y A v g E n e r g y No. S a l e s % o f No. S a l e s % o f No. S a l e s % o f A c c . GW.h T o t a l A c c . GW.h T o t a l A c c . GW.h T o t a l H i s t o r i c 1974/75 11 1,695 22 .0 2 199 2 .6 4 278 3 .6 1975/76 11 1,715 25 .2 2 211 3 .1 4 282 4 .2 1976/77 11 1,786 21 .9 2 165 2 .0 5 317 3 .9 1977/78 12 1,947 23 .0 2 227 2 .7 5 331 3 .9 1978/79 12 1,963 21 .5 2 265 2 .9 6 377 4 .1 1979/80 12 2,085 22 .6 2 259 2 .8 7 430 4 .7 1980/81 14 2,264 23 .6 2 302 3 .1 8 423 4 .4 1981/82 15 2,637 28 .2 2 326 2 .5 9 443 4 .7 1982/83 13 2,340 25 .9 3 294 3 .3 10 452 5 .0 1983/84 14 2,279 24 .6 5 367 4 .0 10 468 5 .1 1984/85 13 2,169 19 .8 6 619 5 .7 10 506 4 .6 A v g . A n n u a l G r o w t h (%) 10 Y e a r s 74/75-84/85 2.5 12.0 6.2 P r o j e c t i o n s 1985/86 10 2,040 18 .0 7 660 5 .8 9 500 4 .4 1986/87 11 2,325 18 .9 8 745 6 .1 9 505 4 .1 1987/88 11 2,345 20 .0 8 795 6 .8 11 580 5 .0 1988/89 12 2,340 18 .9 8 805 6 .5 11 920 7 .4 1989/90 11 2,325 18 .4 8 805 6 .4 11 1,040 8 .2 1990/91 12 2,585 19 .7 9 825 6 .3 11 1,140 8 .7 1991/92 12 2,835 20 .6 9 825 6 .0 11 1,140 8 .3 1992/93 12 2,995 20 .8 10 855 5 .9 12 1,190 8 .3 1993/94 11 2,885 20 .2 10 855 6 .0 12 1,240 8 .7 1994/95 11 2,885 19 .6 10 860 5 .8 15 1,390 9 .4 1995/96 10 2,575 17 .2 10 860 5 .7 16 1,770 11 .8 A v g . A n n u a l G r o w t h (%) 11 Y e a r s 84/85-95/96 1.6 3.0 12.1 S o u r c e : B . C . H y d r o , Dep. o f M a r k e t i n g , R e s e a r c h a n d P l a n n i n g . 193 TABLE I X C o m p o s i t i o n o f T r a n s m i s s i o n R a t e S a l e s H i s t o r i c & P r o b a b l e P r o j e c t i o n s 14:27 F r i d a y , J a n u a r y 31, 1986 C o m m e r c i a l T o t a l S a l e s A v g No. E n e r g y A v g No. E n e r g y A c c o u n t s S a l e s % o f A c c o u n t s S a l e s GW.h T o t a l GW.h H i s t o r i c 1974/75 1 20 .3 45 7,714 1975/76 2 96 1 .4 46 6,808 1976/77 1 138 1 .7 46 8,166 1977/78 1 135 1 .6 47 8,479 1978/79 2 147 1 .6 51 9,133 1979/80 3 173 1 .9 54 9,217 1980/81 3 209 2 .2 58 9,597 1981/82 3 198 2 .1 62 9,339 1982/83 4 221 2 .4 65 9,046 1983/84 7 267 2 .9 71 9,264 1984/85 8 334 3 .1 73 10,944 A v g . A n n u a l G r o w t h (%) 10 Y e a r s 74/75-84/85 32.5 3.6 P r o j e c t i o n s 1985/86 8 345 3 .0 71 11,315 1986/87 9 360 2 .9 78 12,300 1987/88 11 375 3 .2 82 11,705 1988/89 11 385 3 .1 84 12,370 1989/90 11 395 3 .1 84 12,615 1990/91 11 420 3 .2 86 13,140 1991/92 11 420 3 .0 86 13,795 1992/93 11 425 3 .0 88 14,385 1993/94 11 425 3 .0 87 14,265 1994/95 11 435 3 .0 90 14,745 1995/96 11 440 2 .9 90 14,965 A v g . A n n u a l G r o w t h (%) 11 Y e a r s 84/85-95/96 2.5 2.9 S o u r c e : B . C . H y d r o , Dep. o f M a r k e t i n g , R e s e a r c h a n d P l a n n i n g . TABLE X 1 9 4 PROVINCIAL .SUMMARY 1945-1965 TOTAL ELECTRICITY GENERATED WITHIN B.C. (excludes e x p o r t s , f i r m & s u r p l u s ) ENERGY (KW.h m i l l i o n s ) U t i l i t i e s I ndustry T o t a l Own Gen. %Inc. Year 1945 3,277.1 0.6 1946 3,319.1 5.2 1947 3,491.2 13.0 1948 3,946.6 9.9 1949 4,335.6 12.2 1950 4,866.2 5.7 1951 5,143.3 5.5 1952 5,424.3 12.9 1953 6,122.2 13.6 1954 6,953.5 22.1 1955 3,899 .2 4,588 .8 8,488.0 18.5 1956 4,279 .5 5,775 .7 10,055.2 11.9 1957 4,843 .1 6,404 .8 11,247,9 6.0 1958 5,468 .1 6,454 .7 11,922.8 5.1 1959 6,089 .9 6,440 .3 12,530.2 9.3 1960 6,431 .8 7,258 .1 13,689.9 -2.0 1961 6,801 .7 6,619 .4 13,421.1 10.1 1962 7,352 .5 7,427 .9 14,780.4 5.7 1963 7,872 .5 7,752 .7 15,625.2 10.6 1964 8,706 .7 8,570 .3 17,277.0 9.7 1965 9,969 .4 8,982 .6 18,952.0 Industry's Own Generation Breakdown * PEAK-MW Al c a n Cominco Other B.C. 545 .5 577 .8 593 .3 674 .0 792 .9 879 .0 942 .1 1,050 .0 1,151 .3 1,301 .0 1,370 .8 2,172 .9 1,045 .1 1,502 .7 2,513 .5 2,207 .4 1,054 .8 1,880 .1 3,365 .1 2,117 .7 922 .0 1,872 .6 3,314 .8 2,180 .5 959 .4 1,981 .8 3,164 .2 2,167 .3 1,108 .8 2,085 .0 3,706 .3 2,315 .8 1,236 .0 2,229 .9 2,773 .0 2,543 .4 1,303 .0 2,399 .3 3,496 .8 2,631 .3 1,299 .8 2,423 .7 3,593 .1 2,696 .4 1,463 .2 2,633 .9 4,071 .0 2,764 .0 1,735 .3 2,974 .7 4,189 .6 3,087 .8 1,705 .2 3,137 .7 Source: B.C.Hydro, Dep. of Marketing, Research and Plan n i n g , (Obtained, June 1986). * E x c l u d i n g S a l e s t o U t i l i t i e s TABLE XI 195 PROVINCIAL SUMMARY 1966-1984 TOTAL ELECTRICITY GENERATED WITHIN B.C. (excludes e x p o r t s , f i r m & su r p l u s ) ENERGY (KW. h m i l l i o n s ) U t i l i - I n d ustry T o t a l t i e s Own Gen. %Inc. Year 11.4 1966 11,499. 2 9,609.9 21,109.1 7.2 1967 12,640. 5 9,994.9 22,635.4 7.9 1968 14,071. 9 10,357.9 24,429.8 8.9 1969 15,580. 9 11,024.7 26,605.6 -3.5 1970 16,527. 7 9,156.9 25,684.6 11.8 1971 18,238. 7 10,468.5 28,707.2 7.3 1972 20,700. 0 10,100.0 30,800.0 7.8 1973 23,300. 0 9,900.0 33,200.0 2.4 1974 34,000.0 -2.1 1975 33,300.0 9.3 1976 36,400.0 5.5 1977 38,400.0 4.2 1978 40,000.0 3.3 1979 41,300.0 3.4 1980 42,700.0 1.2 1981 43,200.0 1.9 1982 44,000.0 1.7 1983 44,750.0 1.9 1984 45,615.0 I n d u s t r y ' s Own Generation Breakdown * PEAK-MW Alc a n Cominco Other B.C. 4,492 .6 3,322 .4 1,794. 9 3,474 .2 4,892 .6 3,193 .1 1,909. 2 3,781 .1 5,062 .4 3,034 .4 2,261. 1 4,194 .9 5,550 .5 3,096 .3 2,377. 9 4,340 .5 3,741 .8 3,206 .1 2,209. 0 4,548 .0 5,324 .0 2,830 .3 2,314. 2 4,831 .0 5,400 .0 3,000 .0 1,700. 0 5,700 .0 2,080 .0 2,120. 0 Source: B.C.Hydro, Dep. of Marketing, Research and Pl a n n i n g . A handwritten note on the data sheet i n d i c a t e d the data from 1972-1982 are from S t a t i s t i c s Canada, Catalogue 57-204. * E x c l u d i n g S a l e s t o U t i l i t i e s 196 TABLE X I I MANUFACTURING INDUSTRY I N B R I T I S H COLUMBIA (1975-1983) B.C., YUKON & N.W. TERRITORIES (1962-1974) LARGEST PURCHASERS OF E L E C T R I C I T Y (GW.h) M a n u f a c t u r i n g C a t e g o r i e s P u l p & C h e m i c . & T o t a l T o t a l Y e a r Wood I n d . P a p e r Ch. P r o d . 3 C a t e g . 20 C a t e g . 1962 469 1,411 1,315 3,195 3,808 84 1963 521 1,362 1,336 3,219 3,866 83 1964 521 1,536 1,497 3,554 4,105* 86 1965 595 2,023 1,601 4,219 4,950 85 1966 667 2,435 1,908 5,010 5,830 86 1967 734 2,743 1,919 5,396 6,288 86 1968 773 3,020 2,100 5,893 6,852 86 1969 875 3,394 2,080 6,349 7,381 86 1970 934 4,093 2,013 7,040 8,105 86 1971 1,091 3,702 2,158 6,951 8,093 85 1972 1,245 4,248 1,188 6,681 7,857 85 1973 1,466 3,705 1,374 6,545 7,794 84 1974 1,410 3,561 1,362 6,333 7,564 84 1975! 1,404 3,319 884 5,607 6,910 81 1976 1,648 4,317 1,634 7,599 8,900 85 1977 1,868 4,339 1,416 7,603 8,916* 86 1978 1,982 4,492 1,464 7,938 9,372 85 1979 2,059 4,947 1,497 8,503 10,008 85 1980 2,061 4,801 1,575 8,437 10,042 84 1981 1,840 4,216 1,420 7,476 9,076 82 1982 1,776 4,453 1,202 7,431 8,964 83 1983 1,979 5,056 1,270 8,305 9,780 85 S o u r c e : S t a t i s t i c s C a n a d a , M a n u f a c t u r i n g a n d P r i m a r y I n d u s t r i e s D i v i s i o n , " C o n s u m p t i o n o f P u r c h a s e d F u e l a n d E l e c t r i c i t y 1962-1974," C a t a l o g u e 5-3301-508, t h e d a t a f o r t h i s p e r i o d i n c l u d e B.C., Y u k o n a n d N o r t h w e s t T e r r i t o r i e s ; ! t h e p e r i o d o f 1975-1983 o r i g i n a t e s f r o m C a t a t o g u e 57-208 w h i c h i s f o r B.C. p u r c h a s e s o n l y . * N o t e : The T o t a l s f o r t h e 20 M a n u f a c t u r i n g C a t e g o r i e s h a d t o be a d j u s t e d f o r r e p o r t i n g o f h i g h a n o m a l o u s p u r c h a s e s (1964-1975) i n t h e " P r i m a r y M e t a l s I n d u s t r y . " The a n o m a l y i s l i k e l y due t o C o m i n c o r e p o r t i n g t h e p u r c h a s e o f power f r o m i t s own u t i l i t y West K o o t e n a y Power & L i g h t . T h e r e f o r e , t h e " T o t a l " was a d j u s t e d by a l l o w i n g o n l y 200 (GW.h) f o r t h e " P r i m a r y M e t a l s I n d u s t r y . "

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