REGINA - The provincial government's planned $1.4-billion "clean coal" pilot project will face significant cost overruns if current trends continue, Crown Corporations Minister Ken Cheveldayoff acknowledged Wednesday.
Inflation of construction costs is an increasing concern, with the Saskatchewan Party government last week announcing an additional $100 million for the new D wing of the Health Sciences Centre at the University of Saskatchewan as projected costs have grown by at least $45 million.
The Sask. Party made infrastructure spending the centrepiece of the spring provincial budget but the largest project on tap is SaskPower's clean coal carbon capture and sequestration retrofit near Estevan, with construction slated to begin in 2011 and the plant fully operational by 2015.
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Cheveldayoff said escalating construction costs are the "reality of the moment."
"If what's been happening continues on, that's the logical thing to expect. But for now, it's too early to tell. We're at the pre-design, pre-fee design stage and no dollars are attached to that design. A big thing will be what comes back with the request for proposal on the technology and how that impacts on the design," he said outside a meeting of the provincial cabinet.
SaskPower issued a request for proposals to 10 companies Wednesday, with a shortlist by the end of the year and a technology selected in 2009.
If the costs do go up, said Cheveldayoff, the province will seek additional funding from the federal government despite Prime Minister Stephen Harper's avowal that there will be no additional federal dollars for the project beyond the initial grant of $240 million.
Cheveldayoff said there would be "a negotiation."
"They're a partner in it. It's an important project to Saskatchewan and Canada and I think at that time all partners would have to sit down and look at the costs and see how they are shared," he said.
The prospect of a coal-fired power plant with near-zero greenhouse gas emissions has been an attractive one for governments with an abundance of coal and pending carbon reduction commitments. But the technology is as of yet unproved.
The previous NDP government had its own greenfield SaskPower clean-coal project, but shelved it just before last fall's provincial election because of load growth, tight timelines and the skyrocketing cost of the project. Capital costs initially estimated at about $1.5 billion had soared to $3.8 billion.
Opposition NDP deputy leader Pat Atkinson said Wednesday she has no doubt the cost for the new project will be higher than the current price tag.
"(Cheveldayoff) says, as I understand it, the government doesn't have any idea how large cost overruns might be until they've gone through their process. But I think they do have some understanding of the market . . . so we need to understand now, before it's too late, what this is going to cost each of us each month when it comes to our electricity bills," she said in a telephone interview.
Atkinson, who was part of an NDP government involved in a bare-knuckle political brawl with Harper's Conservatives over equalization, scoffed at the prospect of more federal dollars.
"When the prime minister of Canada makes it crystal clear on any issue, he makes it crystal clear," she said.
Meanwhile, the government is grappling with the prospect of rising costs around other projects.
While spending of the $1-billion "ready for growth" fund for roads, schools, hospitals and other infrastructure isn't being cut, inflation is an issue affecting the government's actions now and in the future.
"We're not scaling back projects but we're being very careful about what projects we're moving forward . . . we have to make a plan for next year and decide whether that number is a level that is appropriate or if we can increase that number somewhat," said Finance Minister Rod Gantefoer.
He said there was a "balance" to be struck between investing in infrastructure and actually receiving good value for the investment "as opposed to investing to such a degree that you push inflation up and while it's costing more dollars you're actually not getting a lot more work done."
However, Gantefoer said government investment is less than 20 per cent of the infrastructure spending in the province and the private sector is a greater driver of costs.
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