NRPP, Magic Asterisk
10 May 2016Economist Paul Krugman loves to coin phrases, and a favourite of mine is the “magic asterisk”, referring to a footnoted extra calculation that is both
- critical to the financial credibility of a piece of public policy, and
- completely made up.
The NRPP Business Case doesn’t really hide its magic asterisk, it puts it right in the executive summary.
See it? That little stack of green bars? The NRPP business case would have you believe that the lion’s share of project benefit is going to come from “economic growth and job creation” as a result of this technology and business process realignment project.
Please stop laughing.
Please stop.
The leap of faith you must make is to think that not only will an improved system speed up the time between natural resource project conception and delivery (I can buy that) but also it will result in a permanent and persistent rise in the rate of resource extraction in the province (that one is harder). That’s where the green bars marching to the right come from.
So, pop quiz, what is more likely to result in a lasting rise in rates of resource extraction:
- A new IT and business process system in the Ministry of Natural Resources; or,
- An increase in the price of copper (or natural gas, or lumber, etc).
Like all good magic asterisks, the NRPP plan involves real mathematics, applied to nonsensical inputs. In this case net present value calculations applied to unrealistic projections about likely upcoming major project investments in BC:
- Calculation based on approval of 8 new mines and 3 LNG facilities after NRPP is implemented
- 12-month acceleration of decision timelines for major mines and LNG facilities will create a present value benefit from faster revenue realization
- Conservative estimate which excludes any impact on other revenue streams
- Data for calculations was sourced from the BC Jobs Plan and LNG Strategy
- Present value calculations assume a 4.5% discount rate and a 30-year timeframe
NRPP Business Case, Key Revenue Assumptions, Page 59
See it? In order to make millions through faster approvals of major projects, only two things have to happen:
- We need 8 new mines and 3 LNG projects to go through.
- The new process actually has to make them go through faster.
So, no problem.
Stop laughing.
Please stop it.
It will be on time, on budget. Guaranteed.