(Corrects conversion in 4th paragraph to 19 square miles, not 19,000 square miles)
By Nicole Mordant
Dec 11 (Reuters) - British Columbia said on Monday it would push ahead with a C$10.7 billion ($8.32 billion) hydroelectric dam project approved by the western Canadian province's previous government, provoking an angry response from a political partner and threats of court cases from indigenous groups.
New Democratic premier John Horgan said he was continuing with the Site C project with "a heavy heart" but that cancelling it would cause electricity rates to rise and cost C$4 billion ($3 billion) due to money already spent and remediation costs, reducing funds to invest in schools and hospitals.
"This is not a project that we favor, or a project that we would have started," Horgan told reporters.
The project, which would provide enough electricity for about 450,000 homes a year, would flood more than 5,000 hectares (12,355 acres or about 19 square miles) of land in northeast British Columbia, spurring opposition from local farmers and indigenous groups.
Moving forward with Site C is a "major setback to reconciliation," Assembly of First Nations national chief Perry Bellegarde said in a statement, adding that the "next step will be legal challenges".
Andrew Weaver, the leader of the BC Greens, which is helping prop up the minority NDP government, said it was "fiscally reckless" to continue with the project.
Horgan said that the C$10.7 billion, a new cost estimate revealed on Monday and up on a previous C$9 billion, could be paid back over many years from electricity payments. By comparison, the C$4 billion cancellation cost would have to be written off immediately, hurting provincial finances.
Monday's decision follows a review by the British Columbia Utilities Commission that found the massive project was already over budget and a year behind schedule. NDP government, which came to power in July, had requested the review to help it decide whether the project should go ahead.
British Columbia's former Liberal government approved Site C in 2014, saying it would help meet a surge in electricity needs over the next 20 years.
Companies from around the world are involved in the construction. Peace River Hydro Partners, jointly owned by Acciona SA ANA.MC and Samsung (KS:005930) C&T Corp 028260.KS , was awarded a civil works contract, and is bidding for another contract. Aecon Group ARE.TO is part of a venture bidding on a contract.
Atco Ltd ACOx.TO was awarded a contract for worker accommodations, while privately held German company Voith Hydro won a contract for turbines and generators.
($1 = 1.2854 Canadian dollars)