The NWT government is hiring consultants to rush a draft business case for the Mackenzie Valley Highway to completion before funding talks with Ottawa this winter.
A business case is a formal document setting out the benefits of a project, using evidence to explain why it will be worthwhile.
The Mackenzie Valley Highway would be a vast new road stretching for more than 300 km from the existing end of Highway 1, in Wrigley, up through the Sahtu. It would connect multiple communities that haven’t previously had year-round road access to the rest of Canada.
The territorial government is expected to need more than $1 billion to build the highway, which is why a rock-solid business case is a necessity. The federal government is likely to be the only available source of that kind of cash.
People in the Sahtu have been calling for years for the GNWT to get on with making that case. In August, Sahtu MLA Danny McNeely urged cabinet to “immediately develop a business case and submit that to Ottawa and start lobbying.”
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The GNWT prepared what it calls a “preliminary business case” in 2015 and has talked multiple times since about updating it. In 2018, for example, the territory said it was working on the document as it raised the possibility of turning the road into a public-private partnership.
Now, the territorial government has issued a request for proposals asking consultants to bid for the right to create the business case.
As of Tuesday, 17 companies had shown interest. The deadline to bid is September 17.
The winning bidder will have a tight timeline. The GNWT wants to award the contract on October 7 and expects a draft business case to be written by October 31 “if not sooner.”
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The business case will be “used to support funding-related discussions with the federal government in late 2024,” the GNWT states in its request for proposals.
Meanwhile, the same consultants will also be asked to come up with an updated overall cost estimate for the highway. The GNWT says regulators carrying out the project’s environmental assessment – which is ongoing – have asked for “updated economic modelling” that features a more accurate cost estimate, making the work “urgently needed.”
The cost estimate will also, of course, be a big factor in discussions with Ottawa.
The GNWT’s cost estimate in 2015 was $700 million. (At the time, the territory was hoping to have the whole thing built by 2024-25.) The costs of construction and supplies have skyrocketed since.
“Due to the significant systematic cost escalations experienced in recent years, the project cost is anticipated to be significantly higher than originally estimated,” the GNWT acknowledged this month in a summary provided to bidders.
The GNWT added preliminary design work on the highway is “about 30-percent complete.”
Cost per kilometre
Some aspects of the business case appear obvious.
This summer, low water on Great Slave Lake and the Mackenzie River meant an entire summer barge resupply season had to be scrapped.
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Sahtu communities that would have year-round road connections if the Mackenzie Valley Highway existed are instead reliant on costly air freight or the narrow winter road window, six months from now, to bring in goods, fuel and other necessities.
It’s not clear that water levels will be any better next summer or afterward. Hydrologists have said extended periods of above-average precipitation are needed to ease the current drought.
Other pointers provided by the GNWT in its request for proposals include the highway’s role in insulating communities from the effects of climate change (such as on the winter road network), and its ability to support Arctic security initiatives such as those recently announced by Canada.
In 2015, the GNWT estimated construction of the road would create 14,000 short-term jobs and 161 long-term ones. At the time, the business case placed emphasis on the road’s ability to unlock oil and gas resources, a sector that has since struggled to gain any momentum.
At $700 million for a 321-km road, the GNWT was essentially estimating a construction cost of $2 million per kilometre.
More recently, a 6.7-km stretch of all-season road south of Norman Wells – along part of the Mackenzie Valley Highway’s proposed route – took two years to build and cost $25.5 million, a cost that’s equivalent to just under $4 million per kilometre.
If those costs remain the same along the rest of the route (there’s no certainty that is the case), that would make the entire highway more like a $1.2-billion project in today’s economic conditions.
