Robert C. McLeod: The Canadian Council for Public-Private Partnerships P3 Hub Canada Conference
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Good morning. Thank you for the opportunity to speak today about the importance of infrastructure investment to the growth of the Northwest Territories.
The Government of the Northwest Territories has recognized the opportunities public-private partnerships (P3s) can bring to help the government address its current infrastructure deficit, which is currently around $3 billion, and other key strategic infrastructure projects that would help stimulate our economy and improve services to our residents.
In 2011, the GNWT approved a Public-Private Partnership Policy to start advancing the use of P3s for large infrastructure projects in the NWT. Because the GNWT has a consensus government, the Policy has a robust Process Convention that requires a meaningful and formal consultation to take place between the Government and the Regular Members of the Legislative Assembly to ensure political support is obtained prior to advancing a project to the procurement process. The principles of the Policy are however the same as one would expect to ensure the successful delivery of any P3 project. These include: a fair, transparent, and accountable process; a high value for money is achieved over the life of the agreement with appropriate consideration of risk transfer, opportunities for innovation, revenue generation and community issues; and of course, that the private sector partner receives a fair return on investment.
I am happy to report that we have successfully used this Policy to advance two P3 projects in the NWT.
Mackenzie Valley Fibre Optic Line
On November 3, 2014 the GNWT signed an agreement with Northern Lights General Partnership to design, build, finance, operate and maintain a 1,300 kilometer fibre line through the Mackenzie Valley.
The construction and operation of the Mackenzie Valley Fibre Line will help support economic growth and diversification in the NWT and as Inuvik is geographically gifted to transmit and receive data from satellites in geo-synchronous orbits, it will facilitate expansion of the Inuvik Satellite Station Facility. It will also provide innovative program and service delivery opportunities to the communities of the NWT. The project will provide a key opportunity for NWT businesses seeking to participate in the global marketplace.
The Mackenzie Valley Fibre Line route is within an areas of discontinuous permafrost in the southern part of the NWT and areas of continuous permafrost in the northern part of the NWT. In addition to the over 450 water crossings, the route also has to be mindful of areas that provide habitat for a wide range of wildlife, fish and vegetation species.
Stanton Territorial Hospital Renewal Project
On September 24, 2015 the GNWT signed its second P3 agreement with Boreal Health Partnership to design, build, finance and maintain a new 280,000 square feet Territorial Hospital, double the size of the existing facility, that will offer outpatient and inpatient services including emergency, medical imaging, dialysis, obstetrics, pediatric, cardio and mental health departments as well as day procedure and surgery suites.
The construction on the new hospital started last fall, and will see the current facility replaced by a new purpose-designed facility that will address patient needs and provide high-quality health care delivery for NWT residents.
Why P3s
Why did the GNWT advance these projects as P3s beyond the positive Value for Money considerations?
As a small jurisdiction, the GNWT has limited capacity to initiate a number of very large complex projects at any time and therefore does not maintain, on a full time basis, the core project management and technical capacity to undertake this kind of high risk work. The P3 approach allowed the GNWT to access the project management resources and expertise required for these complex projects.
Building in the North
Let me now turn to some of the challenges of planning for and constructing infrastructure in the North.
The foremost issue that a P3 proponent has to consider is the cost of building on the North.
The NWT is an extremely large land mass, roughly the size of France and Germany combined, with many small dispersed communities which challenge our infrastructure system. Our thirty thee communities require their own supporting infrastructure, such as affordable housing, water treatment plants, waste disposal systems and recreational facilities. There are only five communities connected to hydro-generated power and all of the rest rely on power generation plants in the community.
Many of our communities are not connected to an all-weather road system. These communities rely on marine, rail, aircraft and winter roads for annual resupply of bulk commodities including fuel. This isolation directly contributes to higher costs to develop and maintain infrastructure.
The NWT, in general, also faces unique challenges when it comes to the development of infrastructure due to the scarcity of trades and skilled labour, short construction season, and transportation and energy costs result in overall construction costs that are significantly higher than those experienced in southern jurisdictions.
Being a small market means our construction costs continue to fluctuate due to linkages to the economic outlook in southern jurisdictions, particularly Alberta. Specifically, labour and products and their associated supply and demand within the construction industry, directly affect construction costs for northern projects. If it is booming in Alberta it is difficult to get a large project underway in the NWT.
These challenges have led some of our best northern-based general contractors relocate their primary workforce to southern jurisdictions where they enjoy less market-driven risks and longer construction seasons.
As we have seen with Stanton Territorial Hospital Renewal Project, P3s can be used mitigate these challenges by leveraging the buying power, financial capacity, project management expertise and project delivery capacity of the private sector to transfer appropriate risks and achieve value-for-money for key public infrastructure in the North.
Looking Ahead
April 1, 2014 was a very significant event in the history of the NWT, the GNWT finally assumed responsibility for resource development in our great territory, where decisions formerly made in Ottawa are now be made by the territorial government that is accountable to NWT residents.
Our economic future depends on our ability to develop the infrastructure necessary to support today’s and tomorrow’s industries. This includes energy infrastructure that lowers costs, improves system reliability, and reduces environmental impacts; communications infrastructure, like the Mackenzie Valley Fibre Line, that changes the way we transmit and use information and allows the NWT to diversify our economy into knowledge-based industries; all- weather roads to make it easier for people and goods to travel between communities and reduce the costs of doing business. We also need to work with our communities to improve the quality of community infrastructure, particularly housing.
Now is the time to invest in the great potential of our Territory.
We have diamond mines both in operation and under construction. We have mineral and base metal projects in various stages of development. We have hydro potential; and world class proven oil and gas reserves. But with the downturns in the price of oil and gas and other commodities, governments have to promote and foster this growth more than ever to keep our economies strong. We must also take advantage of technology made available through investments such as the MVFL to diversify our territorial economy to better deal with the fluctuations that ultimately come with non-renewable resource development.
In the NWT, we have an opportunity to grow our economy through infrastructure investment, and the development of strategic transportation corridors. We can do this through innovative financing and partnerships, such as P3s.
As both the Minister of Finance and the Minister Responsible for Infrastructure, I very much appreciate the strong contribution that transportation makes to Northern economic development in every aspect. I also appreciate the power of public private partnerships to achieve these strategic investment goals of our government. Transportation has always been at the forefront of enabling Northerners to grow and develop our economy. Never has the role that transportation plays been more important to guaranteeing our future growth and prosperity than it is today.
Today, I’d like to provide you with some details about a few strategic infrastructure projects being considered to help achieve the NWT’s full potential.
If constructed, the Mackenzie Valley Highway will run all the way from Alberta to Tuktoyaktuk, and will be the first all-weather road to the Arctic Ocean. The Mackenzie Valley all-weather highway project will enable our territory to grow stronger and become more self-sustaining. The highway will strengthen connections between our communities and significantly reduce the cost of doing business in the Mackenzie Valley where much of our world class reserves of oil and gas are located.
The Mackenzie Valley Highway is gaining momentum through innovative partnerships with Aboriginal community governments and the federal government. The most northern section of the Mackenzie Valley Highway, between Inuvik to Tuktoyaktuk is almost complete, through a funding partnership with the federal government. The federal government described it as ‘a project of national significance’ recognizing it’s importance to the country’s position on security, sovereignty, and economic development. The next priority segment between Wrigley and Norman Wells has the potential to unlock more than 200 billion barrels of oil and connect communities to the all-weather road system. We will, however, need the federal government to partner with us on this next segment, estimated at $700 million, which has been submitted for consideration under the federal government’s National Infrastructure Fund. A P3 business case is also underway.
The second strategic corridor I would like to highlight is the Tlicho All Season Road. The GNWT and the Tłįchǫ Government have been working together on studies related to the development of an all-weather road to Whatì. The road would provide several benefits including eliminating the existing winter road and the problems we have had with warmer winters and limited access into the region. Increased access to mineral potential will increase investor confidence, exploration and development to continue developing the region’s economic potential. Work continues on the project to secure federal funding and advance environmental approvals for the project. This $150 million project is currently being reviewed for consideration under Canada’s P3 fund.
The third corridor I would like to highlight spans the NWT to Nunavut’s Arctic Coast. The mineral-rich region of the Slave Geological Province and connection to a deep water port in western Nunavut holds significant possibilities for a strengthened, sustainable partnership with industry and our government partners. The region holds world-class deposits of base metals, precious metals, and diamonds and is a significant contributor to the NWT economy. Increased all-weather access would improve industry’s ability to operate successfully in the North.
We have heard about the slowing forecasts in resource development activity over the next five to fifteen years and its possible effect on the NWT economy. With a flat revenue outlook, the GNWT will be challenged to sustain programs and services or make capital investments in future years. Continuing to make strategic investments in infrastructure to support responsible development is one way our government can promote economic growth and prosperity for all residents. To accomplish this, we will need to continue to embrace innovative funding partnerships such as P3s.
Thank you