NATIONAL INFRASTRUCTURE AND MARKET ACCESS: THE CANADIAN NORTHERN - - PowerPoint PPT Presentation

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NATIONAL INFRASTRUCTURE AND MARKET ACCESS: THE CANADIAN NORTHERN CORRIDOR CONCEPT

• DR. KENT FELLOWS

RESEARCH ASSOCIATE, ENERGY AND ENVIRONMENTAL POLICY RESEARCH DIVISION THE SCHOOL OF PUBLIC POLICY E: GKFELLOW@UCALGARY.CA TWITTER: @GK_FELLOWS

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• Canada faces policy fragmentation in developing new infrastructure
• Consequences of this policy environment:
• Lost investment, economic activity and government revenues
• Our recent research estimates annual gains of $6.5 billion from improving transportation

infrastructure in the territories alone

• Increased attention from the public has led to an erosion of confidence in

established procedures and processes

• Congestion in existing transportation corridors, limiting internal and external

trade

• Transportation of dangerous goods through population centres

THE POLICY PROBLEM

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• The Canadian Pacific Railway(1872-1884)
• The TransCanada Highway System (1950-1971)
• The St. Lawrence Seaway (1954-1959)

These projects have facilitated economic and social development within their respective regions.

CANADIAN HISTORY IS PUNCTUATED BY BOLD NATIONAL PROJECTS

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“Here is a country of

• nly three and a half

million people, not yet four years old, pledged to construct the greatest of all railways.”*

• Pierre Berton 1974

(Writing about Canada as it existed in 1872.)

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• The establishment of permissible corridors: multi-modal rights-of-way

through Canada’s north and near-north with an accompanying regulatory and governance structure.

• A solution to geographic, political and economic challenges, providing

growth and diversification

• Access to rapidly expanding international markets
• Reduces interregional trade barriers
• Enhances Indigenous and northern development opportunities
• Supports northern security objectives.
• Detailed and extensive studies to address the physical, financial, public

policy and governance dimensions as well as strategic implications and the socio-economic and environmental impacts

CANADIAN NORTHERN CORRIDOR: THE CONCEPT

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• What Infrastructure?
• Electrical and other

utilities

• Telecommunications
• Rail
• Road
• Pipelines
• Future Proofing

(to the extent possible)

CANADIAN NORTHERN CORRIDOR: THE CONCEPT

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POTENTIAL ROUTING

Approximately 7000 km in length.

• Generally following the boreal forest

in the Northwest

• Southeast from the Churchill area to

northern Ontario and the “Ring of Fire” area.

• Across Northern Quebec to Labrador,

with augmented ports.

This routing will allow Canadian Communities access to inter- regional and international markets.

• For both export and import,

enhancing the benefits of trade.

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• A defined right of way to facilitate infrastructure development.
• A multi-modal (road, rail, electrical, communications etc.) transportation

right-of-way supporting development objectives.

• A defined right of way to facilitate infrastructure development.
• To improve transportation:
• Between regions within Canada and
• Between land locked regions and Canada’s existing and alternative international trading

partners.

• To support economic development and job creation

DEFINING A PAN-CANADIAN NORTHERN CORRIDOR

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Compared to the current piecemeal, non-integrated approach the Corridor would:

• Be closer to the location of known resources and would facilitate new exploration and

development

• Create economies of scale and scope through multi-modal bundling
• Minimize the overall environmental footprint
• Ease congestion on southern infrastructure and promote overall system rationalization
• Enhance safety and security

WHY PURSUE THE CORRIDOR CONCEPT?

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• The corridor concept supports northern and Indigenous economic and

social development goals

• Reducing the cost of living in northern Canada
• Improving quality of life for individuals in this region.
• Attracting investment to the region to supports improved infrastructure, economic

development opportunities and job creation.

• An historic opportunity to fully associate Indigenous Peoples with the

benefits of developing Mid-Canada, Northern and Arctic resources

• Affirming Indigenous Peoples’ traditional stewardship of the land and the

environment.

WHY PURSUE THE CORRIDOR CONCEPT?

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• Canadian infrastructure development faces fragmentation and paralysis:
• Erosion of trust in public institutions
• This has resulted in huge lost opportunities and revenues.
• Renewed Government of Canada focus on infrastructure
• The governments of Northwest Territories, Yukon and Nunavut are prioritizing

infrastructure corridors.

• The GNWT’s 25-year Transportation Strategy identifies the development of three new corridors.
• The concept supports the Federal Government’s regulatory reform agenda,
• Regulation of transportation and infrastructure,
• Motivating regulatory certainty and de-risking the regulatory process for infrastructure investment,
• Preparing the way for privately-funded and economically driven projects.

THE CANADIAN NORTHERN CORRIDOR: WHY NOW?

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• There is a renewed Government of Canada focus on infrastructure:
• The Government of Canada acknowledges its responsibility to ensure significant new

investments in key strategic infrastructure that will increase trade and economic growth;

• Budget 2017 allocated $2.1 billion to the Trade and Transportation Corridor Initiative, to

contribute to achieving the Transportation 2030 objectives of modernizing transportation infrastructure; and

• Budget 2018 devoted $618 million to the National Trade Corridors Fund over five years to

strengthen the efficiency and reliability of national trade corridors.

THE CANADIAN NORTHERN CORRIDOR: WHY NOW?

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• Similar but distinct from Mid-Canada Corridor proposed by Richard Rohmer

in 1970.

• International Examples
• Pilbara, Australia Corridor
• The Scandinavian-Mediterranean corridor
• The Kenyan Lamu Port-Southern Sudan-Ethiopia Transport Corridor (LAPSSET)
• Callide infrastructure corridor in Australia
• A Canadian example: The Slave Geological Province Access Corridor,

promoted by the governments of Northwest Territories and Nunavut, is under development.

THE PRECEDENT FOR MULTI-MODAL CORRIDORS

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• Mitigate environmental risks through monitoring and surveillance within a contained footprint
• Reduce the emissions intensity of transportation in Canada’s north and near-north.
• Poor road conditions (like those in Canada’s north) have been estimated to increase fuel consumption

by up to 50% with an implied increase in vehicle emissions per mile.*

ENVIRONMENTAL BENEFITS OF A NORTHERN CORRIDOR

* Michaelis, Laurie, et al. "Mitigation options in the transportation sector. "Climate Change 1995: Impacts, Adaptations and Mitigation of Climate Change: Scientific- Technical Analyses (1996): 679-712.

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THE CANADIAN NORTHERN CORRIDOR: WHY NOW?

• Canada’s competitiveness is

declining:

• Deterioration of Canada’s

international investment position

• Canadian investment abroad has
• utgrown foreign investment in

Canada.

• The corridor concept offers

a coordinated and integrated plan to invest in national transportation infrastructure to reverse this decline.

Source: CANSIM 376-0051. International investment position, Canadian direct investment abroad and foreign direct investment in Canada, by country.

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• Canada’s leading policy school
• Independent, peer-reviewed research based on hard data
• Broad network of academic researchers and policy practitioners across Canada
• Most cited policy school, within both traditional media and academic publications
• Influence: wide dissemination among policy makers, business leaders, and the media
• Existing partnerships to support the Canadian Northern Corridor program
• Centre for Interuniversity Research and Analysis of Organizations (CIRANO; comprises several

Montreal-based universities)

• Government of NWT
• Denendeh Investments
• University of Calgary
• Endorsement by the Senate of Canada and Transport Canada

WHY THE SCHOOL OF PUBLIC POLICY?

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A Quote from Senator David Tkachuck (chair of the Senate Standing Committee on Banking, Trade and Commerce) : “Not since Sir John A. Macdonald’s National Policy in the 1870s has Canada had such an opportunity to build such a monumental infrastructure project with the potential to transform the country’s economy.”

RESPONSE FROM THE SENATE

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The Senate of Canada (2017) report on the corridor concept also states: “In the committee’s opinion, the development of an east-west corridor through Canada’s North and near-North would unlock significant economic opportunities for our country. A national, large- scale project that would transform Canada’s transportation infrastructure would enable the federal government to address a range of pressing issues with Canada’s transportation systems, and to articulate a vision for the country’s long-term development. The federal government must seize this opportunity.”

RESPONSE FROM THE SENATE

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• The School of Public Policy’s research is public and shared widely.
• Our reports are unique in that they are written for, and disseminated to, the widest possible

range of interested individuals (academic, industry and the general public).

• The strength of our research and communication strategy means our researchers are often

asked to discuss results through traditional media at a rate considerably higher than other academic institutions.

• The first two Northern Corridor studies have already generated significant media attention,

including (but not limited to) articles and interview requests from:

• The Globe and Mail, CBC, The Huffington Post, Global News, Maclean’s, The Ottawa Citizen, The

National Post, CTV, and The Hill Times.

KNOW LEDGE PLATFORM SUPPORTI NG EFFECTI VE PUBLI C POLI CY

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CANADA’S TRADE FOCUS IS SHIFTING FROM: A NORTH-SOUTH PERSPECTIVE TO: AN EAST-WEST PERSPECTIVE

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• 1,500
• 1,000
• 500

500 1,000 1,500 2,000 1995 2005 2015 2025 2035 M illions of Tonnes of Oil Equivelent Forecast Asia Pacific North America Europe & Eurasia South and Central America Africa Middle East

• 300
• 200
• 100

100 200 300 400 500 1995 2005 2015 2025 2035 M illions of Tonnes of Oil Equivalent Forecast Asia Pacific North America Europe & Eurasia South and Central America Africa Middle East

Net Imports of Natural Gas by Region Net Imports of Oil by Region

THE U.S. IS A SHRINKING ENERGY IMPORT MARKET AND ASIA PACIFIC IS A GROWING ONE

Source: Source: BP (2015) Energy Outlook 2035 Summary Tables and authors' calculations

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FOR OIL AND GAS, CANADA IS RELIANT ON THE US AS AN EXPORT PARTNER

Source: Industry Canada “Trade Data Online” (August 31, 2015) https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home NAICS codes: Crop Production 111; Forestry and Logging 113; Oil and Gas 211; Coal 2121; Metal Ore 2122 *“Other” is calculated as the sum total of all Canadian exports less; exports to the U.S.A., exports to Asia and exports to the European Union. Asia 0.23% European Union 2.21% USA 97.07% Other 0.50%

OI L AND GAS (EXPORT DI STRI BUTI ON 2014)

From: Sulzenko and Fellows (2016)

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FOR MANY EXPORT COMMODITIES, NON-US MARKETS HAVE BECOME CRITICAL

Asia 38.13% Europea n Union 10.81% USA 24.67% Other 26.38%

CROP PRODUCTI ON (EXPORT DI STRI BUTI ON 2014)

Asia 85.19% European Union 0.24% USA 14.53% Other 0.04%

FORESTRY AND LOGGI NG (EXPORT DI STRI BUTI ON 2014)

Source: Industry Canada “Trade Data Online” (August 31, 2015) https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home NAICS codes: Crop Production 111; Forestry and Logging 113; Oil and Gas 211; Coal 2121; Metal Ore 2122 *“Other” is calculated as the sum total of all Canadian exports less; exports to the U.S.A., exports to Asia and exports to the European Union.

From: Sulzenko and Fellows (2016)

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FOR MANY EXPORT COMMODITIES, NON-US MARKETS HAVE BECOME CRITICAL

Source: Industry Canada “Trade Data Online” (August 31, 2015) https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home NAICS codes: Crop Production 111; Forestry and Logging 113; Oil and Gas 211; Coal 2121; Metal Ore 2122 *“Other” is calculated as the sum total of all Canadian exports less; exports to the U.S.A., exports to Asia and exports to the European Union.

Asia 75.53% European Union 10.19% USA 3.63% Other 10.64%

COAL (EXPORT DI STRI BUTI ON 2014)

Asia 33.26% European Union 43.60% USA 17.78% Other 5.36%

M ETAL ORE (EXPORT DI STRI BUTI ON 2014)

From: Sulzenko and Fellows (2016)

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UNTAPPED SOURCES OF CANADIAN WEALTH (AGRICULTURAL)

Asia 38.13% European Union 10.81% USA 24.67% Other 26.38%

Crop Production (export distribution 2014)

Source: Industry Canada “Trade Data Online” (August 31, 2015) https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home NAICS codes: Crop Production 111; Forestry and Logging 113; Oil and Gas 211; Coal 2121; Metal Ore 2122 *“Other” is calculated as the sum total of all Canadian exports less; exports to the U.S.A., exports to Asia and exports to the European Union.

The “Great Clay Belt”

• Northern Ontario and Northwestern Quebec
• potential for additional agricultural production

if transportation access to the rest of Canada can be constructed and maintained.

From: Sulzenko and Fellows (2016)

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MARKETS FOR CANADIAN RESOURCES (MINERAL ORE)

Source: Industry Canada “Trade Data Online” (August 31, 2015) https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/home And Statistics Canada Input-Output Tables (Catalogue # 15-211-XCE) NAICS codes: Crop Production 111; Forestry and Logging 113; Oil and Gas 211; Coal 2121; Metal Ore 2122 *“Other” is calculated as the sum total of all Canadian exports less; exports to the U.S.A., exports to Asia and exports to the European Union.

Asia 33.26% European Union 43.60% USA 17.78% Other 5.36%

Metal Ore (export distribution 2014)

Northern Canada and Newfoundland and Labrador

• Already players in this market.
• Natural resource extraction directly contributed

~40% to NFLD provincial GDP in 2011.

• But: development costs in these regions are still high

relative to more southern development.

The “Ring of Fire”

• Northern Ontario
• Potential for additional mineral production if

transportation access to tidewater can be constructed and maintained.

From: Sulzenko and Fellows (2016)

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PORT ACTIVITY

• Halifax and Port of Metro Vancouver handle a

substantial proportion of Canada’s international shipping.

• Expansion of the port of Metro Vancouver has

proven difficult given land constraints.

• Effective Ports need inland transportation.
• High quality and high capacity.
• Inland congestion is a problem on the existing

Southern transportation corridor.

Source: Statistics Canada (2011), Shipping in Canada. Statistics Canada Catalog No. 54-204-x. Ottawa http://www.statcan.gc.ca/pub/54-205-x/54- 205-x2011000-eng.htm (August 2015).

St. Lawrence 25% Great Lakes Region 6% Atlantic Region 21% Pacific Region 48%

Total: Cargo Tonnage Shipped Internationally (% by weight)

From: Sulzenko and Fellows (2016)

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• This makes transportation infrastructure and trade costs important

concerns as well.

• The issue goes beyond pipelines.
• The economy is an integrated network:
• Input suppliers need low cost market access as much as exporters need low cost market

access.

• Import and export costs also matter for local cost of living.

TRADE IS CRITICAL TO CANADIAN BUSINESSES AND CONSUMERS

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Weighted-average import share of spending across the provinces and territories.

From: Fellows and Tombe (2018)

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Weighted-average export share of spending across the provinces and territories.

From: Fellows and Tombe (2018)

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• In 2006 northern goods and services costs were more than 28% above the rest of Canada.
• A typical box of Corn Flakes is nearly $10 in Baffin Island but well below $5 in the rest of Canada.
• For remote mines (>500 km from a supply route):
• Capital costs are on average 180% higher,
• Operating costs are 30% to 60% higher.

COST OF LIVING AND COST OF DOING BUSINESS IN THE NORTH

Sources:

• Emmanuel Preville, Northern Residents Face High Cost of Living, Library of Parliament Research Publications, September 11, 2008, http://www.parl.gc.ca/Content/LOP/ResearchPublications/prb0866-e.htm
• Nunavut Bureau of Statistics, Prices: http://www.stats.gov.nu.ca/en/Economic%20prices.aspx
• Levelling the Playing Field: Supporting Mineral Exploration and Mining in Remote and Northern Canada, April 2015.

From: Fellows and Tombe (2018)

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• Population density and trade costs.
• Trade costs are anything that makes a traded good more expensive than a domestic
• ne.
• A large proportion of trade costs are related to the quality of transportation

infrastructure, not just geographic distance.

• Road, rail, pipelines and utility lines for goods.
• Telecom connectivity for services.

WHAT DRIVES THESE COST DIFFERENCES?

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QUANTIFYING THE DIFFERENCES IN TRADE COSTS

• This figure shows that trade involving the

territories has a roughly 45% higher trade cost per mile than other interprovincial trade.

• Territorial distances are longer
• (blue dots skewed to the right)
• But even adjusting for distance,

territorial trade costs are higher

• (blue dots skewed upwards)
• These higher costs are attributed to poor

quality northern transportation infrastructure.

• Roads, rail, telecom, electricity

transmission, etc.

From: Fellows and Tombe (2018)

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• We use a detailed computer model of the Canadian economy to simulate the economic response

that would occur if territorial trade costs were reduced via improvement in infrastructure quality.

• The model represents Canada as a set of consumers in each province and territory, an available

set of capital, labour and resources, and several different productive sectors.

• The results are indicative of the economic impact new northern infrastructure would have.

WHAT WOULD THE CANADIAN ECONOMY LOOK LIKE WITH BETTER QUALITY TRANSPORTATION INFRASTRUCTURE IN THE NORTH?

From: Fellows and Tombe (2018)

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WHAT WOULD THE CANADIAN ECONOMY LOOK LIKE WITH BETTER QUALITY TRANSPORTATION INFRASTRUCTURE IN THE NORTH?

• Improved quality infrastructure in Northern Canada (so that territories’ trade cost look like provinces’

trade costs) would have an annual GDP impact betw een $4.4 and $6.5 Billion.

• This simulation doesn’t account for potential improvements in southern infrastructure or congestion.

From: Fellows and Tombe (2018)

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• The School of Public Policy has published two major papers on the Northern Corridor Concept to

Date:

• Sulzenko, A. and G.K. Fellows. 2016. “Planning for Infrastructure to Realize Canada’s Potential: The Corridor Concept,”

The School of Public Policy Publications, 9.22

• Fellows, G.K. and T. Tombe. 2018. “Gains from Trade for Canada’s North: The Case for a Northern Infrastructure

Corridor,” The School of Public Policy Publications 10.2

• Future Canadian economic and social development should be predicated on a more inclusive

focus on Mid and Northern Canada.

• In large part, this means a more focused examination of transportation infrastructure in the north and

near north.

• Strategic planning for new Canadian transportation infrastructure should focus on East-West

routes to accommodate future expected shifts in Canadian commerce, resource development and trade patterns.

KEY CONCLUSIONS

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MUCH WORK STILL TO DO

Strategic and Trade Dimensions 1. Arctic sovereignty and national purpose benefits 2. The case for transportation systems in Northern development 3. International trade and investment implications Geography and Engineering 1. Mapping and visualization of corridor dimensions 2. Engineering challenges and routing options 3. The potential for transportation system rationalization 4. Potential construction timelines and costs Funding and Financing Dimensions 1. Private- and public-sector business cases 2. Equity and debt financing options 3. Potential private sector, government and Indigenous participation Legal and Regulatory Dimensions 1. Federal, provincial and territorial legislative and regulatory approaches 2. Land ownership and right-of-way issues 3. The case for project-specific expenditure programs Organization and Governance 1. Oversight and accountability 2. Community consultation and engagement mechanisms 3. The case for inclusive project-specific institutional arrangements Economic Outcomes 1. Potential overall impact on the Canadian economy 2. Potential regional economic impacts 3. Potential industrial impacts by sector Social Benefits and Costs 1. Potential impact on life in the north – jobs, cost of living, social amenities 2. Potential impact on Indigenous groups and communities 3. Potential impact on life in the south from transportation system rationalization Environmental Impacts 1. Potential net overall environmental impact 2. Policy options for mitigating impacts 3. Policy options for environmental assessment