ECONOMIC PROFILEPROPOSAL OF TITLE THE ALASKA HIGHWAY Submitted to: Government of Yukon Department of Economic Development Prepared by: InterGroup Consultants Ltd. in association with PROLOG Canada February 2016 PRO LOG CANADA Economic Profile of the Alaska Highway February 2016 EXECUTIVE SUMMARY This economic profile report examines how the Alaska Highway's traffic flows and ongoing operation make a difference today, and are expected to make a difference in the future, to valued economic and social components in those areas where the Highway is located, including public and private businesses, resource use, government, tourism, security and emergency response, and communities. The Alaska Highway (the “Highway”) is a key interjurisdictional corridor built during World War II as a secure inland military supply route. It extends from Dawson Creek in northeastern British Columbia to Fairbanks in Alaska, passing through Fort Nelson, B.C. and the southern areas of Yukon (including Watson Lake, Whitehorse and Haines Junction) as well as Tok and Delta Junction in Alaska. It includes the Haines Road connecting Haines Junction to the port of Haines, Alaska. The economic profile of the Highway is examined by considering the difference between economic and social effects of traffic flows and highway operation (1) “with the Highway” and (2) “without the Highway”, i.e., a scenario assuming an alternative transportation regime absent the key features of the Highway. Heavy commercial traffic activity entering and exiting Yukon through the Highway and other gateways was estimated in this study for 2014. Other Highway traffic and related Highway maintenance and capital costs were also examined. Scenario without the Highway - Alternative Transportation Regime Long before the Alaska Highway, "Inside Passage" or marine access was well developed for passengers and freight through the Alaska ports of Skagway (for access to and from Yukon) and Anchorage as well as Valdez (for access to and from interior Alaska). Absent the Alaska Highway, it is expected that the Inside Passage gateway would have supported almost all of the transportation infrastructure that exists today in Alaska as well as in central and western Yukon. Similarly, within northeastern B.C. it is expected that highway and rail infrastructure between Dawson Creek and Fort Nelson would have developed by today absent the Alaska Highway Accordingly, the key features of the current transportation infrastructure that would not exist without the Alaska Highway are focused in three areas: • Southwestern Alaska: o Alaska Highway from Delta Junction to the Yukon Border (Beaver Creek); and o Top of the World Highway from Alaska to Dawson. • Southern Yukon: o Alaska Highway from Beaver Creek to Haines Junction, and from Johnson’s Crossing to Watson Lake and the B.C. border; o Robert Campbell Highway from Ross River/ Canol Road to Watson Lake; and o Nahanni Range Road from Robert Campbell Highway into the Northwest Territories. ES-1 Economic Profile of the Alaska Highway February 2016 • Northeastern British Columbia: o Alaska Highway from Yukon Border to Fort Nelson; and o Stewart Cassiar Highway between the Cassiar region in northeastern B.C. and Yukon or other areas in northeastern or northwestern (e.g., Stewart) B.C. Alaska Highway Traffic Compared with Other Gateways in 2014 The Alaska Highway accounted for 70% (slightly over 300,000 tonnes) of the heavy commercial traffic tonnage inbound for use in Yukon in 2014, an increase from 60% in 2009 (217,000 tonnes), with almost all of this Highway traffic arriving through the Watson Lake gateway. Most of this Highway traffic in 2014 was community resupply (only 15% of community resupply tonnage entered Yukon via the Inside Passage). The balance of this Highway heavy commercial inbound traffic was development freight for resource activities or bulk fuel (about 45% of the bulk fuel tonnage entered Yukon via the Inside Passage). The Highway's Watson Lake gateway also accounted for 70% (119,000 tonnes) of the heavy commercial tonnage outbound from Yukon in 2014, reflecting shipments from the Wolverine and Cantung mine projects (the balance of heavy commercial outbound shipments went through the Inside Passage, reflecting shipments from the Minto mine project). The Alaska Highway in 2014 accounted for about 168,200 tonnes of additional heavy commercial "through traffic", a decrease of 39% from this tonnage in 2009 (272,000 tonnes), moving through Yukon between BC/Alberta and Interior Alaska or Inuvik, Northwest Territories (NWT) via the Dempster Highway. Slightly over half of this traffic in 2014 entered Yukon through Watson Lake for shipment mainly to interior Alaska, with some traffic (including LNG bulk fuel) going to Inuvik, NWT. The balance of this traffic entered Yukon through the interior Alaska gateway for shipment mainly to the continental United States. This information indicates that the vast majority of heavy commercial freight inbound or outbound from Alaska moves through marine ports in Alaska. The Alaska Highway in 2014 accounted for 45% of the 366,500 summer visitors to Yukon, with about 24% of these visitors entering at Beaver Creek (from Alaska) and about 76% entering at Watson Lake (from British Columbia). In contrast, about 38% of summer visitors in 2014 entered Yukon from Skagway (Inside Passage), 12% entered by air, and 4% entered from Alaska though Haines or Little Gold (Top of the World highway). Alaska Highway Summary Economic Profile Economic impacts of the Alaska Highway's traffic and operation are focused mainly in Yukon, but also affect Alaska, northern British Columbia, and parts of NWT (e.g., Inuvik and resource projects in western NWT on the border with Yukon). These impacts reflect the extent to which the Highway's existence alters economic and social conditions from what would likely have occurred under the alternative transportation regime absent the key features of the Highway. Key impacts of the Highway on valued economic and social components are summarized in Table ES-1 below. ES-2 Economic Profile of the Alaska Highway February 2016 Table ES-1: Key Impacts of Alaska Highway on Valued Components Impact Today (2014) Potential Change in 2025 Private and Public Businesses Community Re-Supply, Most of resupply inbound tonnage to Yukon comes No material change, other than Bulk Fuel via the Highway vs Inside Passage: Highway access benefits re: • Faster delivery (2 vs 8 days). enhanced LNG supply options • Greater flexibility for smaller (ability for road access suited to shipments/partial loads. small volumes and northern • Highway sets competitive market cap BC/Alberta supply options; avoid (monopoly access issues without added regulatory issues re import Highway). through US port). • Inuvik, NWT LNG supply option facilitated. Local Community Access and service to highway traffic for No material change. Businesses communities in southeastern Yukon and north- west of Haines Junction, as well as in Tok, AK and northeastern BC; Avoids added transportation costs if community is isolated and had to be supplied by winter road/ air. Resource Sector Regional Impact Highway provides infrastructure needed for Mines and related exploration and resource activity and mine development in pre-development work in eastern southeastern Yukon, NWT border with Yukon, and Yukon and on border with NWT Cassiar region of northern B.C. (needed for (that require access via Nahanni Wolverine, Cantung and past Cassiar mine Range Road) can potentially developments). develop or resume operation; includes Selwyn, Kudz Ze Kayah, and Mactung projects. Development Freight, Enhanced transport options and cost savings Potentially much greater benefits; bulk fuel offered by Highway for resource activity LNG supply for mines from developments in all Yukon regions. northern B.C./Alberta options. Governments Yukon Highway Costs Increased maintenance and capital costs for No material change, subject to portions that exist only due to Alaska Highway renewal of Skakwak funding. ($13.8 million maintenance, $21.9 million capital). Offsets available from Skakwak Agreement funding from the United States. Employment Increase in size of dept. for Energy, Mines and No material change. Resources, Highways and Public Works, and potentially other departments or bodies addressing assessment and licensing of development projects. Location of highway maintenance camps and related employment and spending in communities such as Burwash Landing, Beaver Creek, and Destruction Bay. Revenues Increased resource revenues, including taxes and Potential material change from new royalties from mining activities in eastern Yukon. mines in eastern Yukon. Services Increase in services outside of Whitehorse. No material change. ES-1 Economic Profile of the Alaska Highway February 2016 Tourism Yukon Visitors Up to 197,000 visitors enter Yukon via Highway No material change. (44% of 2014 Yukon visitors). • Total Yukon GDP impact of up to $63.6 million. • Total Yukon employment impact of up to 890 FTEs. Diversity Visitor options enhanced to include driving from No material change. southern Canada/ Lower 48 States or Alaska (in addition to cruise ships and air). Enhanced tourist visits in southeastern Yukon. Security & Emergency Response Security Flexibility for transportation of goods/ personnel No material change. between Alaska/ Yukon and southern Canada/ Lower 48 States. For Yukon, secure access to external markets through multiple gateways. Emergency Response Greater resiliency for