Transport Committee on June 4th, 2019

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call the meeting to order of the Standing Committee on Transport, Infrastructure and Communities, 42nd Parliament. Pursuant to Standing Order 108(2), we are continuing a study of the national trade corridors fund.

With us as witnesses today, we have from the Hamilton Port Authority, Ian Hamilton, President and Chief Executive Officer, by video conference. Welcome, Mr. Hamilton.

From Kitikmeot Inuit Association, we have Stanley Anablak, President. Welcome.

From the Nunavut Resources Corporation, we have Scott Northey, Chief Operating Officer; and Patrick Duxbury, Northern Affairs Adviser.

Mr. Hamilton, if you would you like to lead off, you have five minutes.

[Ian Hamilton, President and Chief Executive Officer, Hamilton Port Authority]

Okay, perfect. Thank you very much.

Good afternoon, Madam Chair, and members of the committee. It's a great honour to address the committee today.

As you mentioned, my name is Ian Hamilton. I'm the President and CEO of the Hamilton Port Authority. It's nice to see so many of you again. We were delighted to be able to tour you around the port last year when you were in Niagara and you could see first-hand some of the industries we serve and the outstanding growth we are experiencing.

As a brief refresher, Hamilton is the seventh-largest port authority in Canada and the largest in Ontario. In 2018, we had our best year in a decade. We shipped over 11.4 million tonnes of cargo, which was valued at more than $3 billion. That's a big change from a decade ago when we had a similar cargo volume, in 2008. At that time, 76% of our cargo was related to the steel-making industry, and today that number is closer to 54%.

One of the big key drivers to that success story has been the growth in the agricultural products, corn, wheat, soybeans, which are all exported from Hamilton to destinations throughout the world.

Saying all of that, we're still a key transportation infrastructure for Hamilton's nationally important steel sector, allowing the steel companies to receive raw materials like iron ore and coal and finished steel products. The port of Hamilton is also the key gateway for commodities that are critical for the southern Ontario market, such as road fuel, road salt, asphalt and construction materials, making us a truly diversified entity today.

In Hamilton, we have seen a progressive shift towards more diversified overseas cargoes, including exports. The number of vessels making overseas trips has grown by over 60% in 2018, and one of the key factors behind that is the infrastructure investments made in the facilities to handle these materials.

Hamilton now has three grain export terminals and southern Ontario's largest grain export gateway. Our biggest challenge continues to be building new capacity to meet these market demands, and the national trade corridors fund has been an extremely valuable tool in helping the port of Hamilton create this capacity.

In 2018, we were extremely proud to receive $17.7 million through the national trade corridors fund. HPA will match that amount, and then some, with our funds, in support of a $40-million project here in Hamilton, the westport modernization project. In addition to the $40 million between ourselves and the NTCF that will be invested, we anticipate $100 million in leveraged investment attraction from third parties.

It is focused on the oldest section of the port of Hamilton, an area that was assembled piece by piece over many years, with infrastructure that in some cases exceeds 80 years old. The project will allow us to upgrade our dock walls to current standards, increasing the amount of cargo handled at westport piers. It allows us to bring rail service to all of the piers, giving port users modal choice and flexibility. It has also allowed us to realign the rail and to reconfigure some of the buildings, which will allow us to increase our capacity by over 30 acres.

With the co-operation of Transport Canada's staff, which has been fantastic, we completed our contribution agreement very quickly and got our shovels in the ground in January of this year. We hope to finish the entire project by the end of 2020.

Just this week, we announced our first business growth outcome for the westport project, a new food-grade warehouse of 56,000 square feet, in partnership with Fluke Transportation. This will help to serve the $1-billion food industry in Hamilton in creating more capacity for food-grade storage.

The structure of the NTCF program has allowed us to customize a project that addresses a unique aspect to the port of Hamilton and its role in the national transportation corridors system. I think one of the reasons it has worked so well is that the objective of the funds is closely aligned with our mandate as a Canadian port authority: to facilitate trade and to act as an economic driver. Enabling trade in proven transportation efficiency is the work that we do every day.

The other thing that sets the NTCF program apart from previous infrastructure investment programs, like the gateway funds, is that it accounts for the unique trade flows that take place in the Great Lakes region. Unlike the coastal ports where cargo transits through the ports, the cargo for the Hamilton Port Authority and the inland ports is used within about 100 kilometres of the port itself. This really serves the manufacturing heartland of the Great Lakes area and the farmers who bring all of their produce through Hamilton.

The NTCF program allowed us to design a project that delivers value to the national transportation system in a way that makes most sense for the Great Lakes region.

As part of the next round, the Hamilton Port Authority has identified and submitted another project. It is smaller in scope but one that is fairly in line with the government's focus on diversifying Canada's export opportunities. This project will dredge a new slip adjacent to one of the port's grain export terminals, allowing us to reduce the vessel turnaround times. This will allow us to export more Ontario grain to overseas markets. This is a market where we continue to see terrific growth opportunity.

CETA has opened new markets for Canadian projects, and Canada enjoys one of the best global brands for safe, reliable food commodities. New storage capacity for sugar will also—

[The Chair, Liberal, Judy Sgro]

Mr. Hamilton, I'm sorry. I have to cut you off. I'm sure you can get in your last comments through questioning.

I'll move on to Mr. Anablak, president of the Kitikmeot Inuit Association.

[Stanley Anablak, President, Kitikmeot Inuit Association]

Thank you very much, Madam.

Good morning, ladies and gentlemen. Thank you for giving us your time and the opportunity to present to you this morning.

My name is Stanley Anablak, and I am the President of the Kitikmeot Inuit Association, also known as KIA. KIA is a regional Inuit association in western Nunavut. I am here with my colleagues to talk about our views on the national trade corridors fund, especially as it relates to Kitikmeot Inuit Association's Grays Bay road and port project.

I represent more than 6,000 Inuit beneficiaries in the Nunavut agreement who live in the five Kitikmeot communities. The Kitikmeot region is the least populated region in Nunavut. Unfortunately, it is also the poorest region and desperately in need of trade corridor infrastructure that can help to transform our economy. While we have not been granted any project funding, the national trade corridors fund program could present a useful and appropriate avenue for us, and the team administering the fund has been professional and helpful.

We will identify the program's positive features in our presentation. However, as nothing is perfect, we will also use this opportunity to offer some suggestions that could improve the program, especially for remote regions such as the one I come from.

ln late March of this year KIA submitted an application to the NTCF. This application is currently being reviewed by Transport Canada officials. KIA is seeking $22 million from the fund to support activities that would get the Grays Bay road and port project completely shovel-ready within the next two to three years. The Grays Bay road and port is the most advanced trade corridor opportunity in the territorial north. I refer you to the maps that we have provided to the committee.

ln summary, KIA proposes to build a new deepwater port on the Coronation Gulf in the Northwest Passage. The port would connect to a new 230-kilometre all-season gravel road that itself would connect to the existing Tibbett to Contwoyto winter road, an annual ice road, mostly built over frozen lakes, that runs from near Yellowknife in the Northwest Territories to the Jericho mine site in western Nunavut.

Grays Bay road would provide the first permanent land-based transportation link between Canada and any part of Nunavut. The Government of the Northwest Territories is working closely with us because they want to convert their winter road to an all-season road. They welcome and would benefit from the opportunity to access a port on the Northwest Passage. We think our project is a nation-building project, just like Canada's railway development of the late 1800s.

The road and port present an opportunity to fundamentally improve the economic and social conditions of the population of our region. An all-season transportation corridor between Yellowknife and a port on the Northwest Passage would greatly enhance the economic feasibility of known mineral deposits being developed for the benefit of northerners and Canada, and would promote mineral exploration by lowering the cost of accessing a mineral-rich but greatly under-explored region. It would substantially improve quality of life for the region's residents by significantly lowering the cost of community resupply, thereby increasing food security and lowering the high cost of goods in our communities. It would significantly reduce the cost of resupplying the NWT's diamond mines, which could help to extend the mine life of these important drivers of the northern economy. It would also create a significant presence in the central Arctic to promote Canada's sovereignty and security and improve safety for travellers.

In terms of what we like about the national trade corridors fund, we like that indigenous groups, including Inuit, are able to apply directly without having to go through our respective provincial or territorial governments. This provides indigenous people greater autonomy to pursue projects that focus on regional priorities.

We like that a funding envelope was set up within the NTCF to exclusively fund territorial projects. This helps to ensure that northerners are not directly competing for scarce dollars against mega urban projects in vote-rich southern Canada.

[The Chair, Liberal, Judy Sgro]

Mr. Anablak, I have to cut you off. Your last-minute comments were in response to the committee, I'm sure.

We'll go on to the Nunavut Resources Corporation, with Mr. Northey or Mr. Duxbury, whoever wants to go forward.

[Scott Northey, Chief Operating Officer, Nunavut Resources Corporation]

Thank you, Madame Chair. I'm going to continue on with Stanley's remarks; we work on an integrated basis.

We like that the second call from the national trade corridors fund was exclusively for territorial projects. This is a recognition by Transport Canada that basic trade infrastructure in the north lags well behind the rest of the country.

We like that remote airport projects are eligible projects. These facilities are our lifeline, and many have rundown buildings, inadequate support systems and gravel runways that are increasingly making jet access difficult.

We like that the NTCF will fund activities that lead to construction instead of requiring that projects already be shovel-ready. Permitting and engineering design of major infrastructure in remote northern regions can cost significantly more than equivalent projects in southern Canada. Due to the scarce financial resources of our territorial governments and indigenous organizations, very few projects would be able to advance to shovel-ready status.

On a side note, we've all been very impressed with the government officials from Transport Canada we have met with and who are assessing our applications. They have been very nice, helpful, constructive and thoughtful in their dealings with us.

Nunavut Resources Corporation is a wholly owned subsidiary of the Kitikmeot Inuit Association. Along with other business lines we pursue, we have been charged by KIA to execute its role as the proponent of the Grays Bay project. In this capacity, we have developed the business model leading to two applications to the NTCF and have been the primary liaison between KIA and NTCF staff.

As President Anablak laid out, there is a lot that's good about the NTCF. One other feature, which is not included in the remarks, is that the willingness of the NTCF to fund up to 75% of the capital cost of territorial projects is crucial. It recognizes and reflects the high cost of operating in the north and the fiscal challenges that all the territorial governments face, so we view that as being a very positive feature.

There are also many ways to make this program better or more effective. Number one, from our perspective, the total funding envelope is far too small and needs to be dramatically increased. This became abundantly clear in a debrief we had with the NTCF adjudicators last year when they explained that our initial application for $415 million in funding was one of more than 70 applications seeking more than $20 billion in support on projects totalling more than $70 billion.

There is clearly a need for more support of trade corridors in Canada than monies available. Equally true is the inadequacy of NTCF's funding of $400 million for territorial projects. The concept of a separate carve-out for northern projects is sound and is a good start. However, comparing this allocation for northern trade corridors in Canada against the billions in infrastructure investments that other Arctic nations have made in recent years, especially Russia, demonstrates that we're simply not in the same league.

Two, given its existing budget, the NTCF seems to be somewhat misnamed as it suggests it can significantly support trade corridor development. This is not entirely accurate. Transformational trade infrastructure is very expensive, and the NTCF is not large enough, in its current form, to do any more than support—

[The Chair, Liberal, Judy Sgro]

Mr. Northey, could I just stop you for a second?

A vote has been called. Do we have unanimous consent to continue on until the seven-minute mark prior to the vote?

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Madam Chair, I would suggest that we try to ensure that every party gets one opportunity to ask questions and then leave.

[The Chair, Liberal, Judy Sgro]

Absolutely.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

[The Chair, Liberal, Judy Sgro]

I have asked the witnesses if they want to stay for the second hour and join the other witnesses, so that we make sure we get full opportunity for everybody to get their questions out as well, and they've agreed.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Great.

[The Chair, Liberal, Judy Sgro]

Mr. Hamilton, if you would like to stay on for the full two hours of our meeting, you're more than welcome to, if your time allows for that.

[Ian Hamilton]

Okay. Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you.

Okay, back to Mr. Northey.

[Scott Northey]

Thank you, Madam Chair.

Continuing on the second point, our view is the NTCF is not large enough in its current form to do any more than to support small components of larger projects. The NTCF can help to remove bottlenecks within existing corridors, but cannot fund wholesale transformation or development of new trade corridors.

Three, the NTCF's efficacy as a potential source of funding for nation-building projects appears to have been eliminated by the federal government allocating too much capital to the Canada Infrastructure Bank. This is an entity that presently seems unable to do much for nation-building projects in remote regions. As a former banker, I know that hiring bankers to oversee investments in nation-building projects with strong public policy benefits but meagre commercial returns is unlikely to work, and doubly so for the territorial north. This may be part of the reason that the Infrastructure Bank appears to have had such a hard time getting money out the door. Perhaps it's time to reduce monies under the bank's program and reallocate to the NTCF.

Four, another point worth noting is the NTCF currently does not fund legal fees, period. In isolation, the ineligibility of legal fees makes some sense in that the federal government probably does not want to pay third party lawyers to fight Canada on permitting matters. However, this suggests an unfamiliarity of how northern permitting processes work, especially in environmental assessments. In Nunavut, the process is managed under the Nunavut Planning and Project Assessment Act, through the Nunavut Impact Review Board. Environmental assessments of major projects in Nunavut have a significant legal component to them. Proponents require legal counsel to help guide their projects through the legislative and land claims-based permitting processes. An unwillingness to fund legal fees puts a real strain on the limited resources of indigenous groups, such as KIA, which seek to be proponents of trade corridor projects. We recommend that reasonable legal fees for territorial proponents be included as eligible NTCF expenses going forward.

Five, we understand that the territory allocation for NTCF has been refined to include northern and remote regions of provinces. This, too, strikes us as being counterproductive. We understood the intent of the territorial northern allocation was to give the territories a leg up given their challenging fiscal situations. For territorial governments, own-sourced revenues are lower than provinces and their financial capacity is further restricted by both a low population base and a federally imposed limit on the amount of borrowing a territorial government can do.

[The Chair, Liberal, Judy Sgro]

I'm sorry, Mr. Northey, I'm going to have to interrupt you at that point. Thank you very much.

We move to Ms. Block for six minutes.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you so much, Madam Chair.

I want to thank our witnesses for joining us today. I appreciate the opportunity to talk about the national trade corridors fund and to hear your perspectives on it.

I know the Emerson report contemplated a number of recommendations with multiple subsections in its report in chapter 4, with the first recommendation being 1(b)(iii), which addressed the project that you, Mr. Anablak, were talking about. I know you mentioned that you had a proposal before the NTCF right now for $22 million to ensure that the larger project would be shovel-ready when the opportunity came to apply.

It's my understanding that your project was denied funding initially through this fund. Is that correct?

[Stanley Anablak]

Yes, that's correct, Madam. In the first round there was just not enough funding for it. At the first go-round, we applied for the full amount. We weren't sure about the staggering after the first round, and we met with Transport Canada again and they said staggering would help. So that's what we did, and dropped it down to $22 million. We're waiting for an answer now.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Great. Thank you.

I appreciate the comments around the fact that there is a significant infrastructure deficit in the north. At this point in time I believe it's $400 million that has been put towards infrastructure in the north, out of a $2-billion fund that's supposed to stretch over the next 10 years. When you tell us that the total funding envelope in the north...the number of applications...would have added up to about $70 billion—I think that's what you said—it's obvious that we have completely underestimated the needs for infrastructure development in the north.

I'm wondering, Mr. Anablak, if you could tell me this. What would such a project as yours do to fulfill the fund's priorities in terms of what was outlined as priorities for the fund? How did your project measure up to those priorities?

[Stanley Anablak]

I'll get Patrick to answer that question for me.

[Patrick Duxbury, Northern Affairs Advisor, Nunavut Resources Corporation]

In terms of our project and how it lines up with the various criteria, it lines up very well. Fundamentally, the Grays Bay road and port project is expressly a trade corridor project. It meets all the criteria in the sense that it creates new opportunities to diversify an economic region—in our case, northern Canada, and specifically the Slave geological province, which has proven to be a mineral-rich area but one that is facing enormous challenges because of the lack of infrastructure that promotes economic development. In that case, it has a very strong alignment with the national-level criteria.

Specific to the northern criteria, in which there's a subset of the criteria, it's also very good. Part of it is that economic development will benefit the people of the Kitikmeot region and adjacent regions first and foremost. It also responds to issues around security, safety and improving transport generally in an area that has so few services available to it. There are no deepwater ports in this area. The search and rescue facilities are extremely limited. There are very few opportunities to deliver services regionally at this time, except for at a community level, which won't be effective, going forward, when you have, say, cruise ships with 1,000 people plying these waters and with no ability to respond to any sort of contingency. That already happened a couple years ago. We expect that as more people start to travel in these areas, we will need to have that response capability in place. This project, in addition to the trade corridor, would be maximizing the economic opportunities of regional development here.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

I have only one minute left, so just very quickly, I appreciate the observation you made about the Infrastructure Bank and the potential to redirect some of the funding there to the NTCF. I'm wondering if you would be willing to provide us with the recommendations you have. If you could provide those to the committee, we would be able to have them in hand and take a look at them.

[Scott Northey]

I'd be happy to.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.