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Proposal Template THE CASE FOR THE NUNAVUT- MANITOBA HIGHWAY (NUNAVUT-MANITOBA ALL-WEATHER ROAD BUSINESS CASE) BUILDING LASTING INFRASTRUCTURE Submitted to: Nunavut Department of Economic Development and Transportation & Manitoba Infrastructure and Transportation FINAL REPORT FEBRUARY 2010 NISHI-KHON/SNC LAVALIN BUSINESS CASE STUDY Date: February 26, 2010 NISHI-KHON/SNCLAVALIN REPORT DOCUMENT NO.: Revision No.: 0 016259-0000-30RA-0007 NUNAVUT DEPARTMENT OF ECONOMIC DEVELOPMENT AND TRANSPORTATION CLIENT: MANITOBA INFRASTRUCTURE AND TRANSPORTATION THE CASE FOR THE NUNAVUT-MANITOBA HIGHWAY PROJECT: (NUNAVUT-MANITOBA ALL-WEATHER ROAD BUSINESS CASE STUDY) Name Title Signature Prepared Tim Stevens, P.Eng. Project Manager by: Phoebe Cheung, P.Eng. Project Engineer Peter Lyall, P.Eng. Transportation Economist Reviewed & Approved Tony Wachmann, P. Eng. Corporate Sponsor/ by: Director REVISION INDEX Revision Prepared Reviewed Approved Pages Remarks No. Date Date Date Revised PA Oct 30, 09 Oct 30, 09 Oct 30, 09 N/A 1st Client Submission 0 Feb 26, 10 Feb 26, 10 Feb 26, 10 All Issued as Final NISHI-KHON/SNCLAVALIN THE CASE FOR THE NUNAVUT-MANITOBA HIGHWAY (NUNAVUT-MANITOBA ALL-WEATHER ROAD BUSINESS CASE STUDY) TABLE OF CONTENTS 1.0 INTRODUCTION................................................................................................................... 1 1.1 BACKGROUND......................................................................................................... 1 1.2 STUDY OBJECTIVES............................................................................................... 2 1.3 STUDY METHODOLOGY......................................................................................... 4 2.0 PROBLEM DEFINITION....................................................................................................... 5 3.0 MULTIPLE ACCOUNT EVALUATION (MAE): ROUTE ALTERNATIVES .......................... 6 4.0 SOCIAL AND ECONOMIC IMPACTS................................................................................ 10 4.1 SPIN-OFF ECONOMIC BENEFITS ........................................................................ 10 4.2 MINING EXPLORATION AND DEVELOPMENT IN STUDY AREA........................ 12 4.3 TOURISM, COMMERCIAL FISHING AND HYDRO DEVELOPMENT ................... 15 4.4 PORT OF CHURCHILL........................................................................................... 15 4.5 STAKEHOLDER CONSULTATION......................................................................... 16 4.6 GAP ANALYSIS ...................................................................................................... 19 4.7 ECONOMIC IMPACT ASSESSMENT..................................................................... 22 5.0 LOW AND HIGH DEVELOPMENT SCENARIOS AND BENEFIT-COST ANALYSIS....... 24 5.1 LOW AND HIGH DEVELOPMENT SCENARIOS ................................................... 24 5.2 BENEFIT-COST ANALYSIS ................................................................................... 25 5.2.1 General Approach........................................................................................ 25 5.2.2 Cost Assumptions........................................................................................ 26 5.2.3 Benefits........................................................................................................ 27 5.2.4 Benefit Cost Analysis................................................................................... 30 5.2.5 GDP Effects................................................................................................. 32 5.2.6 Corporate Taxes.......................................................................................... 33 6.0 RISKS AND OPPORTUNITIES ANALYSIS....................................................................... 34 7.0 PROJECT IMPLEMENTATION.......................................................................................... 43 8.0 CONCLUSIONS AND RECOMMENDATIONS .................................................................. 48 February 26, 2010 i Nunavut-Manitoba All-Weather Road Project No. 016259 BUSINESS CASE REPORT NISHI-KHON/SNCLAVALIN List of Figures: Figure 1.1 Nunavut-Manitoba All-Weather Road - Preferred Route and Timing Figure 1.2 Study Flowchart and Milestones Figure 4.1 Selected Mining / Exploration Projects in Kivalliq and Northern Manitoba Figure 4.2 Regions and Road Network in Northwest Territories Figure 5.1 Nunavut GDP Figure 5.2 Corporate Tax Contribution List of Tables: Existing Public Transportation Services - Selected Manitoba and Nunavut Table 2.1 Communities Table 3.1 Multiple Account Evaluation – Nunavut-Manitoba Route Selection Table 3.2 MAE – Account Description and Route Evaluation Table 4.1 Selected Mining / Exploration Projects in Study Area Table 4.2 Stakeholder Consultation Schedule and Agenda Table 4.3 Social-economic Indicators in Selected NWT and NU Communities Table 4.4 Impact on Local Residents of the Three Hamlets 2027 through 2043 Table 4.5 Impact on Real GDP by Component for Nunavut measured in 2027 Dollars Table 5.1 Unit and Total Cost Assumptions Table 5.2 Construction and Maintenance Life Cycle Costs Table 5.3 Portion of Road Expenditures Contributing to New Employment Table 5.4 Portion of Resource Development Expenditures Going to New Wage Benefits Table 5.5 Transportation Cost Savings Assumptions Table 5.6 Accident Cost Assumptions Table 5.7 Benefit Cost Analysis Nunavut Manitoba Road Table 5.8 Corporate Taxes Table 6.1 Risks and Opportunities Analysis Table 6.2 Qualitative Risks and Benefits Appendices Technical Memo 1: Review of Literature Research and Commencement of Appendix 1 Stakeholder Consultation (NKSL, July 22, 2008) Appendix 2 Summary of Stakeholder Consultation (NKSL, July to September, 2008) The Economic Impact of the Nunavut Manitoba All Weather Road (Eric Howe, Appendix 3 October 2008) Appendix 4 Present Value Calculations February 26, 2010 ii Nunavut-Manitoba All-Weather Road Project No. 016259 BUSINESS CASE REPORT NISHI-KHON/SNCLAVALIN Notice to Readers This document contains an expression of the professional opinion of Nishi-Khon SNC-Lavalin Limited (NKSL) as to the matters set out herein, using its professional judgment and reasonable care. It is to be read in the context of the agreement (the “Agreement”) between NKSL and KIA (the “Client”) on behalf of the Project Working Group, the methodology, procedures and techniques used, NKSL’s assumptions, and the circumstances and constrains under which its mandate was performed. This document is written solely for the purpose stated in the Agreement, and for the sole and exclusive benefit of the Client, whose remedies are limited to those set out in the Agreement. This document is meant to be read as a whole, thus sections or parts thereof should not be read or relied upon out of context. Unless expressly stated otherwise, assumptions, data and information supplied by, or gathered from other sources (including the Client, other consultants, testing laboratories and equipment suppliers, etc.) upon which NKSL’s opinion as set out herein is based has not been verified by NKSL; NKSL makes no representation as to its accuracy and disclaims all liability with respect thereto. To the extent permitted by law, NKSL disclaims any liability to the Client and to third parties in respect of the publication, reference, quoting, or distribution of this report or any of its contents to and reliance thereon by any third party. February 26, 2010 iii Nunavut-Manitoba All-Weather Road Project No. 016259 BUSINESS CASE REPORT NISHI-KHON/SNCLAVALIN 1.0 INTRODUCTION 1.1 Background In 2005, the Kivalliq Inuit Association (KIA), together with the governments of Nunavut (NU) and Manitoba (MB), commissioned Nishi-Khon/SNC-Lavalin (NKSL) to carry out a two-year multidisciplinary study to determine the best location for a road route linking the community of Rankin Inlet to the Port of Churchill and the existing all-weather road transportation network in Manitoba, and thence to Canada’s National Highway System. The study was completed in November 2007 with the recommendation of a preferred route connecting Rankin Inlet to Manitoba PR 290 at Sundance. Links from the main stem of the preferred route provide connections with Whale Cove and Arviat in Nunavut, and Churchill in Manitoba (see Figure 1.1). The preferred route will have a total length of 1,100 km, to be constructed initially to an all- weather two-lane pioneer arterial gravel road standard. The study concluded that the all- weather road (AWR) could reasonably be completed in 20 years, including five years of road development from feasibility study, environmental assessment, functional and detailed engineering, financial modelling, and land assembly, to permit application. Key study conclusions include: • The preferred route will provide the most effective, safe and reliable route from Rankin Inlet, Whale Cove, Arviat, Churchill to Manitoba’s all-weather road network in light of its length, terrain, lowest construction and maintenance costs, and ease of staging. • The new road can bring significant social and economic benefits to the northern communities in Manitoba and Nunavut. Because considerable efforts have been made in the routing to avoid where possible parks, protected areas and wetlands, and to cross rivers where they are narrow, the natural environmental impacts of an AWR can be minimized and mitigated. Construction activities associated with a new road would respect requirements of the caribou protection area. • The
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