Debates of March 11, 2013 (day 22)

I call Committee of the Whole to order. What is the wish of committee today? Mr. Menicoche.

Kevin A. Menicoche

Nahendeh

Thank you, Madam Chair. Sorry, Madam Chair, I was just getting clarification. The committee wishes to consider Tabled Document 49-17(4), Supplementary Estimates, No. 1, 2013-2014, and Tabled Document 50-17(4), Supplementary Estimates, No. 3, 2012-2013.

Is committee agreed?

Agreed.

We will take a short break – short break – so we can get some paper to the Members.

---SHORT RECESS

Members, I’d like to call Committee of the Whole back to order. We’re going to begin with Supplementary Estimates (Infrastructure Expenditures), No. 3, 2012-2013. I’d like to ask the Minister if he would like to bring his opening remarks. Minister Miltenberger.

Thank you, Madam Chair. I’m here to present Supplementary Estimates (Infrastructure Expenditures), No. 3, 2012-2013. This document provides for an increase of $11.390 million for capital investment expenditures in the 2012-2013 fiscal year. Major items in this supplementary estimate include:

$1 million to report a special warrant approved on December 14, 2012, for the Department of Transportation to complete reconstruction of the Nahanni Butte access road that was damaged during the flood in June 2012;

a transfer of $5.3 million from operations expenditures for the Department of Transportation to capitalize the debt servicing costs associated with the Deh Cho Bridge debt;

$5 million for the Department of Transportation for activities related to the Inuvik to Tuktoyaktuk Highway Project, such as upgrade of the Source 177 access road, additional geotechnical investigations, and the continuation of environmental and engineering work. These costs will be partially offset by funding from the federal government.

I am prepared to review the details on the supplementary estimates document. Thank you, Madam Chair.

Thank you, Minister Miltenberger. I’d like to ask the Minister if he would like to bring witnesses into the Chamber.

Yes, Madam Chair.

Thank you, Mr. Miltenberger. Is committee agreed?

Agreed.

Agreed. Thank you. I will ask the Sergeant-at-Arms to please escort the witnesses to the table.

For the record, Mr. Miltenberger, could you please introduce your witnesses?

Thank you, Madam Chair. Mr. Mike Aumond, deputy minister of Finance; Mr. Russ Neudorf, deputy minister of Transportation; Mr. Sandy Kalgutkar, deputy secretary of the FMB. Thank you.

Thank you, Minister Miltenberger. Are there general comments on the Supplementary Appropriation, No. 3?

Detail.

Okay. Thank you. Please refer to your document. Turn to page 5, please, 2012-2013 Supplementary Appropriation No. 3, (Infrastructure Expenditures). Transportation, capital investment expenditures, highways, special warrants, $1.028 million. Mr. Dolynny.

Daryl Dolynny

Range Lake

Thank you, Madam Chair. With respect to the $5 million for the Inuvik-Tuk Highway Project for the Source 177 access road, the bullet point and what also is mentioned in the opening comments was that these costly parts should be covered from the federal government for this cost-shared project. I wonder if the Minister or department can indicate as to where would that be classified in the cost-sharing estimate in terms of a descriptor. Thank you.

Thank you, Mr. Dolynny. Minister Miltenberger.

Thank you, Madam Chair. I’m not sure I’m clear on the question. We have a project that costs $299 million. We know the federal government is putting in $200 million, 67 percent of the project, and we’re putting in $100 million. I’m not sure that is the issue that the Member was wanting me to address. Thank you.

Daryl Dolynny

Range Lake

No, I’m fully aware, and I appreciate the Minister for again reassuring the people in the House of the breakdown. The question I have is will this show up in the appropriate cost-estimate breakdown at a moment in time when we do have that tabled in the House. Will that actually show up as a line entry, as a supp line within the budget? Thank you.

Madam Chair, it will be a line item. It will be amortized over the life of the project. That’s how it will be delineated in the budget documents. Thank you.

Just before we proceed, I’d like to recognize in the visitors gallery today a former Premier of the Northwest Territories, Nellie Cournoyea; a former colleague, Member of the Legislative Assembly for Range Lake, Ms. Sandy Lee; and, of course, our federal Minister of Health, Leona Aglukkaq; and Mayor Gruben from Tuktoyaktuk as well. Welcome.

---Applause

Back, then, folks, to page 5, 2012-2013 Supplementary Appropriation No. 3, (Infrastructure Expenditures). Transportation, capital investment expenditures, highways, special warrants, $1.028 million.

Agreed.

Highways, not previously authorized, $10.3 million. Mr. Bromley.

Just for clarity, Madam Chair, are you including here now the $5 million for the Inuvik-Tuk highway 177?

Thank you, Mr. Bromley. Minister Miltenberger.

Yes, Madam Chair, the $5 million is dedicated towards the Tuk-Inuvik highway as laid out in the supplementary document. Thank you.

I think obviously we have been throwing a lot of money out on this project into last minute year-end activities on good faith, and obviously we haven’t had the questions that resolved or that they were meant to resolve. Is the intent to keep nickel and diming here, or is this essentially part of a go/no go decision that we’re discussing? Thank you.

This supplementary document and the one supplementary document No. 1, 2013-14, are both related to Inuvik. This particular line item is related to the Inuvik-Tuk highway, and as we approve this amount and the one in the subsequent supplementary appropriation, we will be affirming the proceeding of the Tuk-Inuvik Highway Project. Thank you.

Thank you. On that basis I appreciate the Minister’s comments there. I want to be sure that everybody realizes and I’m getting it right when I discuss this as a go/no go decision point. So I do have a number of comments.

There have been a lot of changes to this project over a very short period of time. Every one of them have pointed at increasing costs to the GNWT and also mounting costs to the total project. So just to review those, the original agreement that the federal government dangled in front of our noses was 75/25 at a cost of $200 million. That was going to cost this government $50 million and we thought that was affordable. In fact, we put it on our priority list at that time. It seemed like an awfully good deal. Subsequent to that we came up with a cost estimate for the project at $311 million to $341 million and we hoped for a 75/25 funding arrangement. That would mean GNWT costs had all of a sudden bumped up to $86 million to $93 million. Now I understand that, in fact, the split on the project is 67/33 and so if that’s the case, then I’ll ask the Minister to confirm that the cost to the GNWT is now up to $111 million to $147 million, if in fact we can stay within the costs indicated by the work done to date. Thank you.

Thank you. What we know is we have about $12 million in sunk costs that we’ve put in, preparatory work as governments do for big projects that are of critical importance to them. We have a project that has cost $299 million. We have a $200 million federal contribution and our cost will be the $99 million. I will point out, as well, that when we did our fiscal framework as we started a number of weeks ago now and we didn’t have the federal number, we had booked this project at $150 million of territorial investment just so that we had the costs covered off out of our fiscal framework. Now that we have the federal number of $200 million, we will readjust our fiscal framework and that will, in fact, reduce that commitment that we have from $150 million to $100 million. Thank you.

Thank you. That may have been the Minister’s thinking, but there was certainly no commitment from this House for $150 million for this project that I’m aware of. Now we’re being asked to approve another $5 million because we still have not proved up the gravel resources that, in fact, we’ve come back to the government trough on before, without getting what we need. So at what point do we say enough is enough and let’s put our dollars where we should be putting them rather than throwing them into a sinkhole?

When we do our fiscal forecasting, we make, I think, very good, appropriate decisions to make sure the money that we have is allocated to cover what has been identified as priorities of this government and this Legislature. The Tuk-Inuvik highway is one of those priorities. We will say enough is enough when we are all up on the Inuvik-Tuk highway cutting a ribbon that says we are now open for business and we will have a major northernmost chunk of the northernmost piece of the Mackenzie Valley Highway complete.

I don’t think there will be a big crowd there. In fact, the economic analysis done by this government has shown that because of the efficiency of the road, we will lose something in the order of 1,500 or 1,600 person years of employment, which is typical of the oil and gas industry. It’s a very low ratio of person jobs per invest, $1 million investment, and the loss will be very large here according to our studies. So the record we have is $7 million. We’re going to go find the gravel. We didn’t. The government came back, we need another $5 million, we got a few weeks left in the fiscal year and we’re going to spend that very effectively and we’re going to find the gravel. We approved that $5 million, they went out and they didn’t find the gravel. They found some but not enough to go to the bank with. Now we’re asking for another $5 million with two weeks left in the fiscal year. Obviously, some serious concerns on that record.

Let’s just review. We’ve gone from $200 million to $299 and that’s sort of a “trust me” figure. Obviously, $299, that sounds like I’m buying a shirt at a bargain price. I’m not sure how much trust we can put in it.

How much of the design for this project have we completed? Obviously, we know what happens in the past when we proceeded without a complete design. We had to toss out that design and come up with a brand new one and with tens of millions of dollars in extra cost. Recognizing that we’re dealing with taxpayers’ dollars here, where are we with the design?

The money that we’re asking for will be properly invested in this project to do the front-end work that we need to not just identify gravel sources but to do the geotechnical work. We’re at 85 percent in terms of the design and we will have that concluded over the coming months so that we have a full, approved plan as we look to start the construction this coming fall.

I do have quite a list of questions, so I will let my colleagues have a chance to speak here. I would note, in any projects that I’ve undertaken, it’s always the easy part that gets done first. It’s the last 10 or 15 percent that’s the most difficult. I’ve found that to be true, in fact, with our pricing of infrastructure. There is no way this bridge is only going to cost $299 million but – sorry, this road will cost that much, but I will be asking more questions and looking for more details on which to base a decision.

I’d just note the Member’s sharing of his experience in terms of projects and I look forward to his questions later.

Thank you, Mr. Miltenberger. Next I have Mr. Yakeleya.

Norman Yakeleya

Sahtu

Thank you, Madam Chair. I want to ask the Minister, with the recent government commitment to add another $50 million to the Inuvik-Tuk portion of the highway, making it $200 million, with the formula we were hoping for 75/25, and now it’s at 67 percent of the federal government’s commitment. Is that something that we as a government, in the future, are going to bank a formula with the federal government of the day? Because we are going to be pushing strong for the Mackenzie Valley all-weather road from Wrigley up to the Dempster Highway.

Thank you, Mr. Yakeleya. Minister Miltenberger.

Thank you, Madam Chair. We will look at the politics of the day. The reality is if when we move from Wrigley up north to Norman Wells on the assumption that we’re going to have a robust oil play that is proved out, then there will be, I suggest, a whole different dynamic that is different than what is currently in play for the Inuvik-Tuk highway, and we would be looking to see if there was an interest from the federal government, but I would think that we would have an even greater interest from industry in some type of partnership arrangement to build that critical piece of infrastructure, which, as we’ve pointed out clearly now, is our next step. Once this road gets underway, we will be turning our attention to the Wrigley-Norman Wells portion of the Mackenzie Highway.

Norman Yakeleya

Sahtu

The politics of the day is going to, I guess, as the Minister put it, determine how we fund the second portion of the all-weather road up the Mackenzie Valley. I would hope that I’m still in government by then and that we would have some discussion on that.

I’ve noted that in 1958 the Mackenzie Valley Highway was talked about. The portion of Tuk was also talked about at that time and more recently, in 2011. I do want to say that this money that we are giving them is something that certainly would support them to begin putting that road together, and good for them. They worked hard and long in that region. People have supported them. They did their lobbying and they did what they had to do to get this project off the ground. I think that for us Assembly Members who are around this table here, we need to reward the hard work and we need to know that there is a great North that needs to be built infrastructure-wise.

I’ve done some research on the infrastructure in the Northwest Territories with Transportation, the highway infrastructure from 2003 to 2013-14, and I looked at the sections of roads that we’ve put a lot of money into: Highways No. 1, 3, 4, the bridges and culverts. We put close to $200 million in that infrastructure. I have no issue with us building outside of this area. We need to look beyond that and I have no issue of supporting this $5 million. I know it’s going to certainly help with many other issues that they talk about so, once we look at it from the Sahtu, that we can get some support.

As the Minister noted, there is oil and gas happening in the Sahtu. International companies don’t sign a cheque for $700 million for nothing, especially if they know there’s something there. The Minister of ITI and I had some discussions with the oil companies, and all they can say it’s encouraging results and the results are very, very, very good, so good that Husky is putting in a $40 million $45 million all-weather road. That tells us something, that the play is happening. We may be a little slow waking up to it, but it’s happening. It’s over $100 million this year and last year it was close to $100 million spent. We know that we’re ready.

I also see in the paper that the highway is going into an environmental assessment. With this portion of the road, we certainly have a lot of questions. However, the key factor for me was the federal government putting in $200 million into this portion of the road that makes it okay. We have a couple of supporters here. That was the key for me to determine on this road here and I’m hoping that the department along with the partners are going to come to a conclusion that this is what we need to build it on.

The Minister talked about our roads into the Sahtu, of course, that we’re going to have another partner that might be interested, which is the oil companies. Of course, again he’s right, that the politics of the day would determine what kind of partnerships we’re going to form. But from ourselves in the Sahtu, we want to support the people up in Nunakput and the Inuvik area and reward them with the hard work they have done, and hopefully they would give us a hand.

With the federal government coming through, that it makes it easier for me to sleep at night now that the funding is going to be there. I think my only question was with the Minister on the formula of the funding. That’s all I have to say. Thank you.

Thank you, Mr. Yakeleya. I take that more as a comment but, Minister Miltenberger, would you like to respond in any way?

Thank you, Madam Chair. I appreciate the Member’s comments and support for the work we’re doing in terms of building the territory. Moving south to north is one that people have been dreaming about, that are landlocked, of an opportunity to have road access that many of us in the southern part of the territory take for granted and is a very fundamental type of service. Far from being a sinkhole, it’s a critical, beautiful part of the Northwest Territories and deserves the same type of attempts and basic service that the southern territory takes for granted.

Thank you, Minister Miltenberger. Next I have Mr. Bouchard.

Robert Bouchard

Hay River North

Thank you, Madam Chair. I have a few questions for the Minister concerning the $5 million for the Tuk to Inuvik highway. Can he confirm that we have the gravel sources confirmed for the construction of this highway?