This is part of a series looking at infrastructure projects designed to create economic opportunities in the North.
In developing Canada’s North, the challenges often begin with the wall sockets.
Consider the case of Fortune Minerals Ltd., a resource company behind a proposed Northwest Territories mining project for gold and other minerals. In addition to navigating environmental approvals and development permits for the project, dubbed NICO, Fortune faces another issue – how do you power the thing?
Large-scale NWT industrial projects typically lie far off the patchwork power grid, so they run on diesel, which is expensive and emissions-intensive. In talks with the territory, Fortune hopes to avoid that. That means the NWT could need a new power plant, new transmission lines or both. And soon.
“Power is always a significant issue,” Julian Kemp, Fortune’s CFO and vice-president of finance, says in a telephone interview. Diesel power forces mines to pay high upfront costs and high operating costs, threatening a project’s viability. “That can be a significant deterrent to advancing any project,” he says.
It’s a problem northern leaders are looking to address – revamping the power grid to spur resource development that the federal government has signalled is a priority. In the NWT, officials are asking Ottawa to raise the territory’s borrowing limit so they can take on debt to build new power facilities, likely a hydro generator, and transmission lines, which could link existing facilities to the projects that need power.
“That would allow us to make some of these revenue-generating, blue-chip economic development opportunities,” Finance Minister Michael Miltenberger said during a recent visit to Ottawa, where his delegation pushed for new borrowing rights. “Basically, give us the wherewithal to use our own tools. Untie our hands, as it were.” Without the extra debt, he added, “these resource projects will always be stuck, at this point, relying on diesel.”
The NWT isn’t the only territory in a power crunch. The Yukon government is mounting a similar push, though the circumstances are different. While the NWT is asking permission to borrow, the Yukon is asking for funding. Its government has transmission lines in place, as well as highway systems and other infrastructure it says sets the stage for growth. What it wants is a new dam.
“Really that piece that we seek going forward is the energy piece. And there are a lot of projects we believe would become viable, if we could provide this renewable, lower-cost energy, because these are the challenges,” Yukon Premier Darrell Pasloski says in an interview at his Whitehorse office.
Yukon Energy says it’s considering a new hydro dam and other options, including wind and biomass, but that they’d all need some federal support in a territory with 37,000 people.
“To expect that small number of people to alone pay for a large hydro project is not realistic,” Janet Patterson, a spokeswoman for Yukon Energy, said in a written statement. The territory isn’t connected to the continental grid, leaving it unable to sell excess power to raise revenue or to buy it to meet a shortfall, she added. “Bottom line, we can’t do it alone.”
The territory expanded its power generation and transmission capacity in 2011, but is now relying on diesel backup in some cases due to growth in demand from all sectors – residential, small business, government and industrial.
“All these things are adding to the demand for electricity, so essentially, we’ve run out of hydro electricity, so we’ve got to come up with new ways of finding power, or else we’re just going to burn more diesel and nobody wants that. We don’t want to do that. It’s expensive and it’s bad for the environment,” Ms. Patterson said in an interview.
The federal Conservative government has put an emphasis on Northern development. It was a priority outlined in October’s Speech from the Throne. How it will handle the territories’ requests is unclear. It’s up to the Finance Department to raise the NWT debt limit, and an official said the department “will engage and discuss any such request from the NWT.”
The Yukon request is in early stages, but the federal government says power generation is an important issue. Ottawa this year gave $124,000 in research funding to the Yukon’s Kaska First Nation to explore the potential of geothermal power.
Canada is working “to develop an approach that will protect the environment while addressing the future power needs in the North to support resource development, business development, and the long-term sustainability of northern communities,” said Jennifer Kennedy, a spokeswoman for Leona Aglukkaq, the Nunavut MP and minister responsible for the Canadian Northern Economic Development Agency.
In the NWT, diesel power for industry currently averages about 30 cents per kilowatt hour, five or six times what it costs in some provinces. Some mining companies expect hydro power could cut that in half.
“If we had power like the cost of power in Quebec, our rate of return on our project would change significantly, and that would make financing easier. There’s no question about that,” said William Mercer, vice-president of exploration for Avalon Rare Metals Inc., whose flagship project is the development of the Nechalacho Rare Earth Elements mine in Thor Lake, NWT.
He called on governments to partner with industry to help build infrastructure, such as transmission lines, saying that was the standard in the past. “In those days, the government played a role in infrastructure development … now there’s a tendency of government to say, ‘No, you do it,’ ” Dr. Mercer said.
There’s no shortage of demand. Dr. Mercer figures his NWT mine alone could take 20 megawatts – by comparison, the peak demand across all of the Yukon last year was 83 megawatts – while Fortune Minerals considers itself as something of an “anchor tenant” for new power capacity that could then make other projects viable.
“Sometimes you need that base consumer, that corner tenant in your plaza or whatever you need, that’s going to give you that foundation,” Fortune’s CFO, Mr. Kemp, says. “That’s where we see ourselves, as a catalyst to be able to move forward.”