Mackenzie Valley Highway: Wrigley to Norman Wells Business Case Submitted to Infrastructure Canada Government of the Northwest Territories July 2015 Table of Contents Executive Summary ....................................................................................................... 2 Project Description .......................................................................................................... 3 Minimum Federal Requirements ..................................................................................... 6 Project Outcomes and Benefits/ Strategic Alignment ...................................................... 6 Eligible Recipient ........................................................................................................... 13 Project Governance....................................................................................................... 14 Financial Requirements ................................................................................................. 14 Legal Requirements ...................................................................................................... 15 Project Risks and Mitigation Measures ......................................................................... 16 P3 Requirements .......................................................................................................... 17 Appendices ................................................................................................................... 18 1 Executive Summary The Government of the Northwest Territories (GNWT) Department of Transportation (DOT) has set a priority to construct the Mackenzie Valley Highway (MVH), an all- weather road beginning where the existing all-weather National Highway System ends in Wrigley and extending down the Mackenzie Valley to the Arctic Coast. Construction of the northernmost section of the MVH, the Inuvik to Tuktoyaktuk Highway is already underway through a funding partnership between Canada and the GNWT. In addition both governments have already placed 38 permanent bridges along the existing Mackenzie valley Winter Road which closely follows the proposed all-weather highway alignment. The following business case presents an opportunity for Canada and the GNWT to further collaborate in the construction of a 321 kilometre section of highway from Wrigley to Norman Wells in the Central Mackenzie Valley. The Project would further assert Canadian sovereignty in the North by providing reliable access into a relatively isolated region of the territory, incentivizing resource exploration and development of the rich petroleum reserves of the region, and promoting social and economic opportunities for residents of the NWT and Canada. It is estimated that 14,082 jobs within the NWT and the rest of Canada will be created during the construction phase of the project, while 161 long-term jobs are expected to be created for the operation and maintenance phase. The proposed highway section is 321 kilometres in length and will cost of an estimated $700 million to construct. This project costs can be broken down into four components: 1. Wrigley to Sahtu/Deh Cho Boundary – 102km (31% of the MVH,) general cost estimate- $198m 2. Sahtu/Deh Cho Boundary to Tulita – 144km (45% of the MVH), general cost estimate - $281m 3. Bear River Bridge – 1km bridge plus approaches, cost estimate - $72m 4. Tulita to Norman Wells - 74km (24% of the MVH) general cost – $149m 2 Project Description Completing an all-weather highway connecting the Mackenzie Valley in the Northwest Territories (NWT) with the National Highway System has been a longstanding priority of the Government of Canada and the Government of the NWT (GNWT). Over the past 20 years, Canada and the GNWT have co-sponsored significant improvements to the existing Mackenzie Valley winter road system, which serves communities and industrial activities in the Sahtu Region of the NWT, through the construction of several permanent bridges and are currently collaborating on the northernmost section of the envisioned Mackenzie Valley Highway between Inuvik and Tuktoyaktuk, scheduled for opening in Fall 2017. Constructing the 321 kilometer all-weather section from Wrigley to Norman Wells (the Project) is an immediate priority for Canada to maintain its position as a world class oil and gas producer into the future. The Project will cost $700 million to construct, producing much needed employment, training and business opportunities to Northerners, and will return significant resource-related revenues to Public and Aboriginal Governments over its design life. The highway is integral to the development of a transportation, energy, and communications corridor, which will eventually extend down the entire Mackenzie Valley. In addition, this project will improve the quality of life and lower the cost of living in the remote communities of Tulita and Norman Wells, and will substantially extend winter road access to the neighbouring communities of Fort Good Hope, Délįnę, and Colville Lake. The Project fully meets the criteria for consideration under the Highways and Major Roads category, and the Highways Related to Major Natural Resource Development Opportunities sub-category, of the New Building Canada Plan - National Infrastructure Component. Currently, the winter road system is vulnerable to the effects of climate change and must be upgraded to an all-weather highway to effectively support regional oil & gas development activities and communities in the Sahtu Region. Sustainable economic development will increase long-term employment opportunities for Northerners during the construction phase and through expansion of the resource and tourism sectors and the development of other businesses in the region. Linking Norman Wells to the all-weather transportation system is critical to embracing the opportunity for resource development and associated resource revenues, the 3 majority of which will flow to the Government of Canada. This is particularly true in light of the significant discovery of an increased level of shale oil resources in the Central Mackenzie Valley by major oil companies Husky and ConocoPhillips and the eventual development of the natural gas reserves in the Sahtu Region, the Mackenzie Delta and Beaufort Delta. As discussed in greater detail in the following section (“Minimum Federal Requirements”), resource extraction from the Central Mackenzie Valley will provide significant economic and employment benefits for NWT residents and to all Canadians. The Project will extend from Wrigley, NWT (63°13′41″N 123°28′12″W) at km 693 of the existing Mackenzie Valley Highway and extend northward to Norman Wells, NWT (65°16′52″N 126°49′53″W), ending at what will become km 1026 of the Mackenzie Valley Highway. The highway design parameters for the Project are based on published and accepted guidelines and best practices for developing infrastructure in the NWT, including best practices for permafrost management. The highway design would site the road within a 60 metre wide right-of-way, except where large cut and fill sections will be required. The design is for a 321 km Rural Arterial Undivided (RAU-90) road. Typical activities proposed over the project‟s 7-year construction period include: embankment construction; development of borrow sources construction of remaining water course crossings access road development fuel and material storage camp operations waste management The $700 million project consists of four key components: 1. A highway section from Wrigley to Sahtu/Deh Cho Boundary – 102km (31% of the MVH,) general cost estimate - $198m 2. A highway section from the Sahtu/Deh Cho Boundary to Tulita – 144km (45% of the MVH), general cost estimate - $281m 5. Bear River Bridge – 1km bridge plus approaches, cost estimate - $72m 6. A highway section from Tulita to Norman Wells - 74km (24% of the MVH) general cost – $149m The GNWT does not anticipate that it will have to secure additional land for the Project, 4 although this will be confirmed during the selection of the final highway alignment. The proposed alignment, defined by Public Works Canada in the 1970‟s, is anticipated to be completed predominantly within the footprint already established for the Mackenzie Valley public winter road and incorporates the existing permanent bridges at the majority of the water crossing locations. The Project is proposed as a ten-year project, to be conducted in three phases: finalizing funding arrangements in 2015/16; completing the environmental assessment and design by 2018/19; and constructing the Mackenzie Valley Highway between 2019/20 through to 2024/25. The project timeframe included in the March 2014 Proposal has not been adjusted. However, the final project plan will be adjusted based on the timing of final project approval. The proposal submitted to Infrastructure Canada in March 2014, the Project Description Report, and Design Criteria are included in respectively in Appendices 1, 2 and 3. 2015/ 16 2016/ 17 — 2018/ 19 2019/ 20 — 2024/ 25 Timing to Extend the Mackenzie Valley Highway - Wrigley to Norman Wells Canada-NWT Funding Environmental Highway Construction Partnership Assessment and Design 5 The majority of the funding ($600M, or 86% of the total proposal) would be loaded in the third phase – Highway Construction ( 2019/20 through to 2024/25) as shown below. Canada/ Total Total NWT 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 Ineligible Eligible Funding Costs Costs Partnership Proposed 10