Robert C. McLeod: The Canadian Council for Public-Private Partnerships

Delivered on November 7, 2017

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, or the GNWT, 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.

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.

Since reaching service commencement in August 2017,  we have two local Internet Service Providers utilizing the system and between the federally owned Inuvik Satellite Facility and the privately owned Canada Satellite Ground Station Inuvik, agreements are in place with 3 international space customers and two research companies. The project continues to show great local, national and international interest, and we anticipate to have new customers in the near future.

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 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. 

We face a number of challenges when it comes to the planning and constructing of 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 -three 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, air and winter roads for annual resupply, including supply of bulk commodities such as fuel. This isolation directly contributes to higher costs of living, as well as higher costs to develop and maintain critical 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 seasons, and transportation and energy costs, resulting 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 to relocate their primary workforce to southern jurisdictions where they enjoy fewer 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.

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.

The resource development sector accounts for nearly 40% of our GDP. By comparison, tourism accounts for 3.5% and fishing .01%. Diversifying our economy is critical to providing opportunities for our residents and we have begun that work in agriculture, fisheries, manufacturing and knowledge economy to improve the possibility of economic prosperity.

However, for the foreseeable future, resource development will continue to be our path to stability and resource prosperity is blocked by a lack of infrastructure. Nowhere is the economic link between infrastructure and mining prosperity as obvious as it is in the Northwest Territories.

Long distances and challenging landscapes mean more expensive projects. We struggle to get our resources to market economically and our infrastructure deficit is among the largest of Canada’s sub-national jurisdictions.

Last week, our Premier spoke publicly about the fading dreams of the North as we see a re-emergence of colonialism, as reconciliation was a fact of life for our government before it gained national prominence. From our perspective, real reconciliation requires that Indigenous people have both political and economic self-determination. This means that northerners, through their democratically elected government, need to have the power to determine their own fates and the practice of decisions being made by bureaucrats and governments in Ottawa must come to an end. Decisions about the North should be made in the North.

Northerners are innovative, self-sufficient and resilient, and want to do their part to contribute to a strong country. We need the kind of well-paying, long term jobs that come with sustainable economic development to achieve this. One of the ways we hope to continue to work towards this goal is through partnership, a key element of how we operate.

Government-to-government collaboration and partnership is an integral part of the North’s foundation. All levels of government have an important role in ensuring future generations can thrive, and Indigenous governments are essential partners in shaping that future and creating opportunities and prosperity in their communities and regions.

The Prime Minister talks about wanting to grow the middle class by making sure people have access to good jobs that pay them well. Northerners want the same thing for themselves. We want an opportunity to grow the middle class that will create good sustainable jobs for Northerners. And we have an opportunity to grow our economy, and Canada’s, through the development of strategic transportation corridors.  We can do this through innovative financing and partnerships, such as P3s.

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.

The GNWT and the Tłįchǫ Government worked together on studies related to the development of an all-weather road to Whatì.  The Tłı̨cho All-Season 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, and drive exploration to continue developing the region’s economic potential. The project was referred to environmental assessment on July 27, 2016, which is still ongoing. 

On January 11, 2017, the federal government provided conditional approval of federal funding for the construction of the Tłı̨cho All-Season Road. The federal government will provide up to 25 per cent of the eligible project costs through the P3 Canada Fund. A Request for Qualifications (RFQ) was released earlier this year and the Government of the Northwest Territories has since reviewed responses to the RFQ and identified the three successful proponents who will be invited to participate in the next stage of the competitive selection process, the Request for Proposal (RFP) stage. The timing of the RFP stage will be subject to progress on the environmental assessment process.

The Mackenzie Valley all-weather highway project, if built, would run all the way from Alberta to Tuktoyaktuk and 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 complete. This project will be the first all-weather road to the Arctic Ocean.  It was funded in partnership with the federal government, and is described as “a project of national significance,” recognizing its importance to the country’s position on security, sovereignty, and economic development.   The Inuvik to Tuktoyaktuk Highway will open to the public next week.

The next priority segment of the Mackenzie Valley Highway is between Wrigley and Norman Wells, which has the potential to unlock vast petroleum reserves and connect communities to the all-weather road system.  The Government of the Northwest Territories recently submitted an Expression of Interest to Transport Canada for funding to advance this project, including its individual components, under the National Trade Corridors Fund. This Expression of Interest was accepted, and the Government of the Northwest Territories was invited to submit a comprehensive project proposal to Transport Canada in early November. A P3 business case is also underway.

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.

An assessment of the economic feasibility and P3 potential of the construction of the Slave Geological Province Access Corridor is currently underway. Similar to the second project I highlighted, the Government of the Northwest Territories has submitted an Expression of Interest to Transport Canada for funding for this project under the National Trade Corridors Fund. This Expression of Interest was accepted, and we were invited to submit a comprehensive project proposal in early November.

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