Foreign Affairs Committee on Feb. 28th, 2013

[Kells Boland]

What I can tell you is we have very skinny infrastructure, basically two deepwater ports: Churchill, which really isn't in the Arctic, and at Nanisivik. Beyond that, we don't have any deepwater ports. At some point we will require more.

My message to your committee is that for both private sector community resupply, and government—including military—requirements, take a close look at where they can be met in common so that we're not planning in silos here.

I showed you that in the central Arctic and the Coronation Gulf area there are three mining companies, each one with their own ports and roads, each one having to deal with the cost of that. You say, why don't they build just one to serve all three, and perhaps the diamond mines in the Northwest Territories as well? The answer is very simply that when they go with their bankable feasibility study to get financing for their particular project, the banks want to know, what can you do without being reliant on someone else? How can you assure us, as the financiers, that you can completely control the logistics supply chain for your project? They have to go out and do it as an independent, stand-alone project.

You look at that slide I showed you. To me it looks ridiculous. There you have three ports within the same general area and any one of those could serve all three resource development projects.

Then you have the requirement for deepwater ports, say, in the central or western Arctic, from a government perspective for the coast guard or navy. Why couldn't that be one of those ports instead of looking at developing separate deepwater ports for different purposes, all of which are too expensive for us to afford under the current financial regime?

The message I hope I concluded with was take a close look at where we can have common user facilities from a financial feasibility perspective.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

With greater use of Canada's north and the potential use of the Northwest Passage, Canada faces new defence considerations. In what ways will the opening of the northern transportation routes affect our defence strategies?

[Kells Boland]

Again, I think there are some opportunities to piggyback defence requirements, in terms of shore-based infrastructure, on resource development projects. Resource development projects provide the financing that government currently has a hard time doing in the north. Witness the fact that we have no deepwater ports there. If some or all of these projects go ahead, we will have deepwater ports, which could well become shared facilities for defence, for the military.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

The isolation of much of the north really makes it a very difficult place to do business and to travel. What kinds of challenges do firms building infrastructure and expanding operations face when working in the north? What measures does the government take to make this easier in the north? What steps could our government take?

[Kells Boland]

The challenge is coming up with the money to develop the infrastructure to provide the resource exports that are beneficial to this country.

My answer to your question is, impose a sense of coordination as part of the terms and conditions of some of these projects when they're being approved. It's not just doing business in the north, it's living in the north, which is very expensive.

Take for example the Mary River mine project. Those large ships that I showed going back and forth to Europe are empty coming in this direction. They will be carrying resupply for the mines year-round. They will be carrying fuel for the mines year-round. Should they not also be carrying community resupply year-round? They could provide a load centre of some sort right in the north, as opposed to having to wait until summer, and most of these communities get a single sealift delivery once a year.

There are ways that the governments could come in—not just the federal government, but the territorial governments as well—to take a broader look at what some of these infrastructure projects that are going to be privately financed might do to improve exactly what you're talking about, the cost of doing business and living in the north, on a broader perspective than just the resource development project itself.

[The Chair, Conservative, Dean Allison]

Thank you very much. There are some good suggestions there.

Mr. Eyking, you have seven minutes, sir.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Chair.

Thank you, Mr. Boland, for coming. It was a very informative presentation. We appreciate that.

I have a couple of questions. In your slide, you mentioned the Alaska-Canada rail link. When you look at the map on the following page, when you look at Fort McMurray and take a straight line across, you go north of Prince Rupert and Prince George and end in U.S. territory.

Is that where you're talking about the potential of a railroad that would go right straight across and kind of land at the U.S. destination? Is that what you're thinking? Is that what you're talking about with the Alaska-Canada rail link?

[Kells Boland]

The project that I managed, the Alaska-Canada rail link project for the State of Alaska and the Government of Yukon, was to look at linking the Alaska railroad, which will shortly terminate at Delta Junction in Alaska, near Fairbanks, and to tie that all the way into the continental rail system. Over the course of our study, we decided that the best place to tie in with the Canadian National Railway was at Hazelton in northern British Columbia.

The impetus at that time for that railway was to move resources to ports. That's to say mineral resources, not oil and gas resources. The issue of how you get Athabasca oil bitumen to market, not just to U.S. markets but to offshore markets, has recently shone the light back on the Alaska-Canada rail link project.

I had the sad duty of telling the Governor of Alaska and the Premier of Yukon that they could not afford to build the Alaska-Canada rail link with the revenues that the mining resource industry would provide. The oil and gas industry has enough revenue to support that.

To answer your question specifically, the route is from Fort McMurray through Canada to that same Delta Junction, but not to tie in with the Alaska railroad, to tie in with the Alyeska pipeline to go to the port of Valdez, where there's an existing oil terminal.

That's the concept, to take advantage of an existing Pacific coast oil terminal that's already there and tie it in with a rail link to the Athabasca oil sands. It would basically be along the same route that we looked at for mineral resources, but now with oil resources.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

You talked about icebreaking capacity and potential container ship traffic in the Arctic. Would your comment be that probably the head office of Maersk in Copenhagen is looking at their future ships having icebreaking capacity more so than a lot of them now? Would it be a bigger percentage of their ships?

If we don't have the capacity as a country to keep the lanes open all the time, an icebreaking container ship could just go through it. What's your sense on what these companies are thinking of doing? Are they going to be building more container ships with icebreaking capacity?

[Kells Boland]

There are two things. First, if you talk to any container ship operator right now, shipowners will tell you that we're not going to use any Arctic route for our container ships as long as it's a seasonal operation; we have scheduled services set up, with time-specific departures and arrivals, and we're not going to change that system as long as it's a seasonal access to the Arctic.

The other point of view is that maybe it makes sense to have transfer points: for example, conventional container ships would operate to Iceland, transfer to an icebreaking container ship that would go across the pole, and then transfer again at, say, Dutch Harbor, Alaska, to a conventional container ship.

So there are two different points of view as to how container ships might react to this opportunity, but the conventional wisdom right now is that it will not happen with the container ship operators that are operating right now.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

[Inaudible--Editor]....a bit about the U.S. and the defence system. As you're well aware, the U.S. is our number one trading partner, and we have very close ties with them on defence issues.

Should we be looking at a special navigational arrangement with the U.S. on this whole Northwest Passage dealing with defence, dealing with container ships, similar to the St. Lawrence Seaway and some of our free trade agreements?

[Kells Boland]

I'd like to pick up on your point. Just as I said that we should be looking at common user capability, at private sector resource development with Canadian governments, territorial and federal, we should also be looking internationally with the U.S. for the same opportunities.

The U.S. has a mandate right now for a deepwater port off the north coast of Alaska. The north coast of Alaska is very shallow. We actually have several deepwater locations on the Canadian side of the Beaufort. One of them is King Point. Another one is McKinley Bay. Actually, Tuktoyaktuk Harbour is a decent harbour, it's just a very shallow channel to get into it.

The point is that there are some opportunities there—even with the icebreaking requirements, because those are very expensive ships to build—for joint cooperation. Now, as to whether that can actually happen from a sovereignty point of view and those sorts of things, who knows? But when we're talking about limited capabilities to do exactly what you're talking about, to protect the U.S. and Canadian Arctic, it seems to me there are some real opportunities for cooperation there in terms of port infrastructure and maybe in terms of icebreaker ship construction as well.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

That's it for me, Chair. Thank you very much.

Thanks, Mr. Boland.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We'll start our second round.

Mr. Van Kesteren, five minutes, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Chair.

Thank you for being here, Mr. Boland. The things you're talking about are most interesting.

I don't have the exact historical...but I had a conversation with somebody yesterday about the British and their position in Quebec after 1763 and subsequent years, when they really wanted to trade the whole thing for Trinidad and Tobago, I think it was. You know, when we think about that today, we think they were crazy, but back then, rum was more important than all this land. There were lots of trees there, I suppose, for ships, but....

I guess I know the answer to this question, but if I look at the map, more of Canada lies north of 60 than it does the south. If we had thought about the north even 25 years ago, for sure 50 years ago, we kind of looked at it as a wasteland. What are we going to with that? But today I think it's becoming more and more apparent that there is huge potential, and for the 21st century this is where Canada should be putting its energy.

I would like your comment on this. You mentioned natural gas and liquefied natural gas. If we are going to do things in cooperation, I don't think government should determine...and I think you've reflected these views as well. I think industry will show us where we need to set up, and government needs to work alongside industry.

If we did that, wouldn't it make sense for industry and government to start laying down some gas pipelines to supply those? We're now talking about natural gas in trucks. It's becoming a reality in the States. Some of the communities in the Yukon, I know, and most of the northern communities are using diesel. We all know the challenges with diesel and the pollution issues.

Wouldn't it make good sense to start to cooperate with industry and government to start laying down some natural gas pipelines to different areas? That's aside from the fact that we need to start shipping this stuff to the...or the opportunity we have to ship it to Asia. What about just for our own infrastructure?

[Kells Boland]

Your point is well taken. Specifically in the Mackenzie Delta, there's an awful lot of gas, and the community of Inuvik is out of gas, which is kind of ironic because they're sitting right there next to a huge gas field. The problem, of course, is it's a very small rate base, a very small community, and to build pipelines and to drill the wells to supply those pipelines is a pricey proposition for a very small population. However, again, the gas is there. The two wells that they did build are watered out. They have a distribution system already in place. Those LNG trucks I showed you are going to be feeding the same gas distribution system with LNG, even though you don't normally think of trucks as being cheaper than pipeline transportation, at least in the short run, because of the prohibitive cost of that pipeline transportation.

It's a chicken-or-egg thing. We have a north with a very small population, highly dependent at this point, as you point out, on diesel-fired generation and the opportunity to use natural gas, but the link there is expensive. Yes, government and private sector cooperation...but who's actually going to pay for it? The answer to that, again, could well be the mining industry in Yukon. Most of the rest of the mines will be off the grid in Yukon. They will have to provide their own power generation. It may be that a pipeline south from the delta to Yukon could make sense once enough of a requirement was in place. I wouldn't see gas pipelines going to every mine or every community, but they could be going to a central LNG facility, for example, where you could liquefy the natural gas and then truck it out to the smaller requirements, be they resource developments or communities.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're going to finish up with Madame Laverdière. You have five minutes, please.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you, Mr. Chair.

Thank you very much for your very interesting presentations and for all this discussion about breaking the silos and piggybacking on what the private sector is doing. In fact, in your last response you talked about what was about to be my first question, which is, who is going to pay for that?

I have maybe two questions with respect to this.

How can we proceed? How can we establish some sort of mechanism to oversee that, to create partnerships with the government and the private sector, ensuring, of course, that the private sector pays its full share?

Right now, also, maybe just give us a better picture of the situation. I understand from your presentation that it's the private sector, basically, that is building ports right now, and roads and rail are all governments' or territories' projects.

I may be oversimplifying, but could you expand on those two issues?

[Kells Boland]

I think you're exactly right. That's a positive. We are getting infrastructure in the north, courtesy of the private sector, where they see a return on investment in mineral extraction that requires them to develop transportation infrastructure that can be used for the public as well as the private. That gets into some problems sometimes because there are issues about access. First nations are concerned about increased access to areas that didn't have public access before. The fact of the matter is, we are getting privately financed northern infrastructure that we otherwise could not afford.

How do we coordinate that? Every territory has a permitting process for resource developments and in those there are impact and benefit agreements. That's the first avenue to take a look, at least at where there are some legacy opportunities from resource development infrastructure for the rest of the public. I'm not convinced this gets the right review in that whole permitting process. It's usually in terms of how we actually remove all this infrastructure so it's never there after the mine is done. Sometimes that can backfire on us a bit. For example, the Nanisivik mine is now our only deepwater port in the north. If that had been removed in accordance with the original permitting procedures or requirements, it wouldn't be there.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you very much.

It raised the whole issue of environmental assessment and things like that. I won't get into too much detail about that, but I still have a question about building infrastructure. I'm sorry, my question is probably quite naive, but right now with the effect of climate change, with potentially sea level rising, with the permafrost disappearing, it seems to be a very quickly evolving situation. What kinds of challenges does that present for infrastructure development?

[Kells Boland]

Again, you hit the nail on the head there. We have opportunities and problems that are created by a warming north.

I think I'd probably hit more on the positive side in terms of an extended marine season, a marine transportation season that has extended way beyond what we were used to having even a few years ago, and looks like it's going to be extended even further. At the same time, the highway system in the north is typically extended by winter roads, whose season is being shortened. So we have this: on the one hand, the marine season is extended, but the truck transportation system, to the extent it relies on winter roads, is going to be reduced. How you deal with that raises the requirement, or at least the desire, to see more all-weather roads extended further north. That is the interim solution: you build out the southern portions of winter roads so that the northern portions would still have a reasonable season length and can be accessed during that season with an all-weather road extension from the existing highway network.

I think it's a combination of those two things. It's going to require more all-weather road construction, not all at once, but incrementally as we actually see the results of the warming north, and at the same time, from a positive point of view, we're getting an ability to increase it maybe ultimately into—who knows—a year-round basis, even.

Then what that tells you is that we might want the roads we build to be more from northern ports going south, whether they're all-weather roads or even winter roads, which will still have a decent season in the wintertime further north, rather than pushing them from the south. So it's a combination of those two things: increasing the access with the highway system where we don't have winter roads anymore, but also taking advantage of the extended marine transportation system in the Arctic.

[The Chair, Conservative, Dean Allison]

Thank you.

Mr. Boland, thank you very much for your interventions. You've provided a unique perspective for us and we appreciate you taking the time to do that for us.

[Kells Boland]

Thank you very much.

[The Chair, Conservative, Dean Allison]

To the committee, I just want to mention that the UN Under-Secretary-General Helen Clark has invited us to lunch on Monday, March 4, and so could you just RSVP whether you would like to attend or not, and either way is fine. If you could just let Miriam know that would be fantastic. That's for Monday at noon in the parliamentary restaurant. Her name is Helen Clark, the UN Under-Secretary-General, administrator for the UN Development Programme. Everyone has received an invitation, so could we just get that back?

Thank you very much.

The meeting is adjourned.