Thank you and good morning. It's a lovely morning here in Whitehorse. I think I saw some of you shovelling slush last night on the news, but we have a nice day here.
This morning I would like to go through about 10 slides or pages with you. I want to give you a sense of what is actually happening in the Arctic in terms of Canadian transportation to and within the Arctic. That's in two major areas. One is inbound resupply, and that's actually the only commercial transportation activity taking place in the Canadian north right now. Second, I want to give you a sense of the impending resource development international export traffic that will be taking place in the near to mid-future within the next 10 years or so. Finally, I want to give you a bit of a look at the transportation changes that are taking place to facilitate that resource development and the transportation it will entail.
Before I do that, I'll just give you a little bit of a background on PROLOG. PROLOG was established over 30 years ago in Calgary initially to look at logistics planning for large pipeline projects in the north. Since that time we've branched out a bit. Half our businesses is private sector projects and half is government policy and planning studies in the north. In fact, in 1985 we did our first Arctic transportation study, and we've done a similar study to update that about every 13 years, the most recent one, a northern transportations system assessment, being completed about a year and a half ago.
In 2005, I was asked, on behalf of the State of Alaska and the Government of Yukon, to manage the feasibility study for an Alaska-Canada rail link project. To do that, I was told to set up an office in Whitehorse, and that's the office I still manage today, although we completed that specific project about two years ago.
The next 10 pages I'm going to go through are based on what we're currently doing and have done recently in transportation-related projects in the north. It will give you some sense, from the practical perspective of what we've done, of what transportation is like in the north.
The next page shows you what Canadian Arctic resupply and infrastructure that supports it look like today. You'll see there are six ports. I hesitate to call them ports, because they're very rudimentary. Three of them are deepwater docks and three of them are barge terminals. You will notice two of those are actually in Alaska.
I'll start with Skagway, Alaska, which is Yukon's port for exporting Yukon minerals to a tidewater export position. It is all of 18 miles from the Canadian border, but that is the port for exporting minerals from Yukon. Next is Prudhoe Bay in Alaska. That's a former and future receiving port for barge resupply, again through Canada into Alaska. Then of course there's the Alaska Highway, which is Alaska's highway through Canada.
So that gives you a little sense of how this moves quickly, at least in a bilateral sense for international transportation. In my neck of the woods, there is a close relationship between infrastructure and transportation across the border.
I'll move down from the west here through the highway system that is in place. The Dempster Highway connects the port at Skagway all the way up to the western Arctic at Inuvik, with a winter ice road and summer barge service into Tuk on the Arctic coast.
Further south is the Mackenzie Highway, which provides a resupply link to the Hay River barge terminal for the Mackenzie River barge operations, again to Tuk and into the western Arctic. Then basically the rest of Arctic resupply in Canada is a sealift deep draft ship operation and the ports are sealift beaches. Cargo is lightered from a ship to a sealift beach in the case of dry cargo, and in the case of bulk fuel, using floater hoses from tankers.
The other dots shown on this map are docks that really aren't related to Arctic resupply. One is Churchill. In terms of resupply, it does provide a barge service into the Kivalliq region of Nunavut, but it doesn't get into the Arctic. The other one is Nanisivik, which previously was a lead-zinc mine with a deep draft dock that's now a fuelling facility for coast guard and navy ships.
It's skinny infrastructure, but we have a resupply system that works. What does it move? The sealift system itself moves about 400,000 tonnes a year. The highway system, which is relatively limited in the Northwest Territories, moves 500,000 tonnes a year. In Yukon, there's a fairly extensive highway system for a northern territory, and it moves 600,000 tonnes a year.
That's the traffic taking place in the north right now. I exclude aviation. I'm just talking about surface transportation, basically truck and marine. I want to give you a sense of how resource export development may change the scale of both the Arctic transportation and the infrastructure that is going to support it over the near future, within the next 10 years.
In the Western Arctic, it's iron ore. If you look at both the Baffinland Mary River iron mine prospect and Roche Bay, you'll see that 24 million tonnes a year would be exported from those two mines. If you look at the central Arctic, you'll see that it's base metal mines, and that totals in the range of a million tonnes of lead-zinc that would be exported from the Coronation Gulf region. Over in the far western Arctic are Beaufort Sea oil and gas and Mackenzie Delta oil and gas. Those are the sorts of resource developments that will require and will have to develop primarily port infrastructure, but also some roads, in order for the resource development exports to take place.
For the rest of this presentation, I want to give you a sense of how those resource-development-driven changes in Arctic transportation will be taking place. This next page shows it in the broadest circumpolar context. We've all heard about the warming in the north and what that means in terms of an extended navigation system in the Arctic. The shortcut between north Asia and northern Europe, which everybody talks about, is ultimately the polar passage, but between now and when that happens, it's the Russian northern sea route or the Northeast Passage, not the Canadian Northwest Passage. The Canadian Northwest Passage between north Asia and northern Europe is about 1,000 kilometres longer, so it just isn't in play as a shortcut between north Asia and Europe.
What it is in play for, as I talked about previously, is as an origin-destination, both for the origination of large-scale mineral exports to foreign countries—international trade—and a destination port for the resupply of those very resource developments that will be generating those exports.
That gives you a context for how the Canadian Arctic transportation system fits into the circumpolar transportation system, and for what we have to be concerned with and, quite frankly, what we don't, in terms of many container ships going back and forth between north Asia and northern Europe. It's going to happen ultimately across the pole but between now and then on the northeastern sea route, the Russian sea route.
I'll get to some of the specifics of infrastructure development that should happen with respect to those projects. The 800-pound gorilla in the room, or the $700-million port, is the Baffinland Mary River mine. It's obviously a very large mine. It already has a 100-kilometre road to Milne Inlet at the north end of Baffin Island, and it envisions a 143-kilometre railway to Steensby Inlet, which will be a large $700-million port south of the mine site.
What I've tried to show is a comparison of where we were about 15 years ago with the Nanisivik mine. That's the port that's now a naval port but was a mine and a deep draft export port. It exported about 110,000 tonnes of lead-zinc every year. Then we have the Mary River mine, as shown in the graph at the bottom of the page, at 18 million tonnes a year.
You can appreciate the difference taking place there, or that will take place there, just in terms of the marine activity. The ship that's in the inset there; that's about a 50,000-tonne vessel. It will actually be a capesize vessel, which is about 100,000 to 125,000 tonnes. These icebreaking ore carriers have not been built yet, and there will about two or three a week. You can appreciate the huge change in the scale of Arctic transportation, marine transportation, activity year-round that will be taking place as a result of that project.
The next slide gives you a little sense, moving further west, of how the warming north and extending the Arctic shipping season is already changing the shipping service provided for resupply in the north and also for the export that will be taking place. I will explain how the changes are taking place in the Coronation Gulf region.
Ships coming in from Montreal that normally serve the eastern sealift are now entering the western sealift market, which is the Coronation Gulf—the exclusive realm of Mackenzie River barges out of Hay River for as long as we've been providing resupply services to the north. This is a recent phenomenon, a result of both the warming north and the extended navigation system, allowing eastern sealift ships to enter the western Arctic, but stimulated by resource development—in this case, the Newmont mining project, which is currently in abeyance. That opportunity to support that mine gave those ships the ability to come in and provide an alternative service to the Mackenzie River service. At the same time, that Mackenzie River barging operation has been supplemented by west coast sealift deep draft barges coming in from Vancouver. So all of a sudden, we've moved from a single-supply source, which is Edmonton, the Mackenzie River into the western Arctic to sealift ships from Montreal and sealift barges from Vancouver, as well as Mackenzie River barging.
That gives you a sense of fairly dramatic changes taking place in this area. So in that Coronation Gulf area—just to give you a feeling for the resource development projects—three relatively large-scaled projects are all taking place in the same general area, each with its own port and road. Roberts Bay is the port for Newmont mining projects, and Bathurst Inlet is the port for Xstrata Zinc’s Hackett River project and Grays Bay is the port and the road extension south for China Minmetals Izok Lake project, and those are lead zinc.
In turn, they're all getting into the same neighbourhood as the Northwest Territories’ diamond mines. So you can see there's a convergence of transportation capabilities, and maybe better opportunities to cooperate and not build three ports when you could probably do the same thing with one—I'll speak to that at the end here—in the area of Tuktoyaktuk, supporting oil and gas activity into the future.
I'll give you a sense of what's taking place in the Mackenzie Valley. It is in transition, with a proposal for the Mackenzie Valley Highway to replace the current two-season operation, which is summer barges and the winter ice road connection, right up to Tuktoyaktuk. That gives you a sense of the sort of transition taking place in the Mackenzie Valley corridor.
On the Yukon, I mentioned the Alaska port of Skagway, the Yukon port to tidewater export position for Yukon mines. That is expanding now, as we speak, from about less than 100,000 tonnes a year to, probably within the next three years, up to half a million tonnes a year. The Ore dock at Skagway, that’s being built out, about a $75 million expansion of that is going to take place courtesy of the State of Alaska to support Canadian exports through that Alaskan port.
Moving into an entirely different area that is equally important in terms of northern resource development, the two problems in the north are the lack of infrastructure in terms of resource development and the lack of transportation infrastructure and energy. We're currently working with a number of clients on the introduction of LNG as a low-cost substitute for diesel-fired generation in the north. The trade-off is it costs a lot more because it takes a lot more trucks to move LNG. It's about 60% of the density of diesel. Even though it costs a lot less to get the natural gas than it does to get the diesel, it's a trick to figure out how to move it. The length of time you can store it is somewhat limited.
This is a picture of the trucking operation; basically two large thermos bottles. It'll be moving LNG for Yukon Energy hopefully within a year from right now. That'll be about five trucks a day for the Casino mine in the next 10 years. They're off the grid, so they need their own source of energy. They can't afford diesel, so LNG is a solution. Inuvik is out of gas at the Ikhil gas field there; the two wells are out of production right now. They would have to go to diesel if they cannot get LNG.
That gives you a sense of some of the changes that are taking place. Some final wild cards may still come into play. These are things we've been working on from time to time: oil sands modules to the Athabasca oil sands, literally over the top of Alaska and the western Arctic and then north, up the Mackenzie River ultimately to the Athabasca oil sands. The Mackenzie Valley pipeline and the Alaska gas pipeline—in abeyance—may well come back into play.
In airships, we're doing some work for Northrop Grumman looking at what the airship market may be for resource development projects in the Canadian north. As I mentioned, the Alaska-Canada rail link seems to be regaining some political traction now in Alberta as a way to move Athabasca oil sands bitumen to a Pacific port.
Finally, building Arctic transportation infrastructure is often prohibitively expensive. Some of the suggestions that came out of our last northern transportation systems assessment with respect to how you can afford infrastructure in the north: Consider all options for cost-sharing partnerships, for multiple private and public sector needs can be met with a single multi-use facility. You may have gotten the sense in my presentation that there are several places where we've got multiple facilities that could all be providing the same service without being replicated expensively over and over.
Resource development projects increase the prospects for Arctic infrastructure investment. Private sector infrastructure investment viability increases with shared use solutions that lower costs. Piggybacking public sector needs onto private sector solutions may warrant public-private partnerships.
That's my presentation to you.
Thank you.
