The University of Manitoba’s Transport Institute held a conference this March looking at Arctic Transportation, supply chain management and economic development. Here are the highlights.
Arctic Infrastructure-Realities and challenges
Offering a Yukon Perspective on Arctic infrastructure at the conference, Allan Nixon, Assistant Deputy Minister, Highways and Public Works, with the Yukon Government, said that economic growth in the region is driven in large part by the mineral sector and public sector infrastructure expenditures. A small tax base in the Yukon accounts for 11% of revenues – with heavy dependence on federal government transfers.
With a population of 37,000, of which 28,000 are centered in the Whitehorse area, some 22% of the Yukon government’s capital budget is spent on transportation infrastructure.
“As the Yukon is driven by commodity costs, there are many shifting demands. It’s also driven by exploration, with changing needs. There’s a general lack of last mile infrastructure in the Yukon,” Nixon said.
“We have a reasonably well developed network in the North but there are not a lot of go-around options in the event of emergencies or incidents,” he added.
The Yukon maintains a 4,800 km highway of which 2,800 km are gravel and 350 km asphalt-the only all season highway crossing the Arctic Circle.
Noting there are some seasonal changes in weather patterns, Nixon also discussed the challenges of permafrost construction: it has to be constructed under freezing conditions and there are frequently settlement issues.
“Deformations can become water traps, causing increased maintenance costs,” he said.
Additional maintenance/rehabilitation costs in permafrost sections costs from $22,000-36,000/km/year.
Research is underway at the Beaver Creek Permafrost research site, looking into reducing the rapid melting of the permafrost, under the combined efforts of Transport Canada and Laval University.
The expansion of the system can’t be done by one government alone, however. “Mining is no certainty, tourism is no certainty, traffic is no certainty,” Nixon noted.
The Yukon government is examining, among other things, dedicated resource access funding, infrastructure banks, and public private partnerships as part of its strategic planning/business modernization.
The Railway perspective
Merv Tweed is President of OmniTrax Canada, which owns and operates 19 different railways across North America. In Canada the company operates Hudson Bay rail and the Carlton Trail, a small 8-mile track into British Columbia out of the U.S.
“The importance in the Hudson Bay trade line is that it provides a link from domestic to international sites. The Bay line is the only line for both freight and passengers for the smaller communities in Manitoba,” he said.
To sustain the Bay line into the future will require some changes, Tweed said.
“The cost is tremendous and varies annually. There are three different rates of permafrost. Last summer we shut the rail service for 22 days. It took us eight days to get people out there to fix a derailment,” he said.
Some $10 million was spent on infrastructure in 2014, which Tweed noted was not even a capital expenditure because it’s essentially infrastructure that is now gone (i.e. ballast, that disappears and crushed rock.)
Ballast replacement, including the lifting of track to build up the ballast, which sinks into the tundra, took place almost daily.
“I believe that we are a utility-providing a service to the community, often at a loss. We are hoping grain will offset the loss. The government’s role is to help northern Canada develop the way the rest of Canada has developed. We have to look at transportation as the essential for growth and development. We have discussed P2s and P3s, but we cannot get an investment unless we see a return,” Tweed said.
OmniTrax partners with universities across North America and in other countries on permafrost issues and solutions that have worked for them.
“For me, we’ve studied it to death-we just need to find the solution,” said Tweed.
Lifeblood of the North
In her opening remarks at the Warming of the North Conference, Esther Nagtegaal, ADM, Manitoba Infrastructure and Transportation, said that the transportation network forms the lifeblood of the northern economy.
“In Manitoba we are working very closely with Nunavut to build a Manitoba-Nunavut road. Something like this really is nation-building,” she commented.
Nagtegaal also discussed the Arctic Marine Shipping Assessment.
The first-ever database of all the ships in the Arctic, but not including military vessels, was developed, but Nagtegaal noted the difficulty in getting information out of Russia about its cargo ships.
(At press time the Russian Coast Guard had announced a polar fleet renewal with new ice-going vessels, to include smaller, fast patrol boats and a new vessel of the long-time proven Svetlyak-class vessel, to be ready for service in 2019.) On a visit to Alaska in early September US President Barack Obama proposed speeding the acquisition and building of US Coast Guard icebreakers that can operate year round in polar regions. (The Canadian Coast Guard’s next icebreaker, CCGS Diefenbaker, will not be in the water until 2021 and the fleet currently stands at two icebreakers for the whole Arctic Coast.)
Supply Chain and Implications for Arctic Transportation
David Porter, President of Newfoundland and Labrador’s McKeil Marine Ltd. , which offers transportation and project cargo services for a wide range of customers and industry sectors, and which has about 10-15% of its annual sales component in the Arctic, said that Arctic trade involves balancing business cases and being innovative when it comes to remote projects.
“The lack of infrastructure creates a unique need for gear and project support. It’s a short season, so timing sometimes conflicts with high utilization time in the Southern trade regions. We are a support company, but as mining and government infrastructure increase we will have opportunities to support them. We’re working on a day to day basis, not planning around an extended operating season,” he said.
McKeil has a skilled sailing crew and shore-based crew and its fleet investment in the last three years totals more than $80 million.
While charting of the Arctic’s southern waters probably started about 200 years ago, it’s still not perfect, noted Michel Goguen, Director, CHS Central and Arctic, Canadian Hydrographic Service, who provided a status update on Arctic bathymetry and charting.
“Charts are the roadmap to the Arctic but the big dilemma we have is that there is limited bathymetric info in the Arctic-it takes 5-10 years to get good data,” he said.
The CHS does not have access to dedicated survey ships, or a budget or program for the Arctic.
“The Central and Arctic capacity for surveys is currently limited to three survey teams of 5-8 persons each to cover demands on both the Great Lakes and Arctic waters,” Goguen said, noting the Arctic survey season runs approximately 2.5 months from mid -July to the end of September.
The way forward envisions equipping strategic federal vessels with modern hydrographic technology and capabilities, he noted.
Arctic shipping-the potential?
The Northwest Passage is considered a shorter route to transit through the Arctic, but the more southern the origin of the passage the longer the route is. Also, even if the route is shorter, the speeds are slower and insurance premiums much more expensive at around 25%, noted Dr. Frédéric Lasserre, of Laval University.
Drifting ice remains a hazard at all season changes and even in the summer, he added.
While there is a strong incentive for navigation opportunities from industries like mining, it’s related to destination, not transit, traffic.
“Bulk carriers are looking for long-term contracts and higher charter rates,” he noted.
There were 17 Northwest Passage transits in 2014 vs. 22 in 2013 of which one was a commercial cargo transit. Most transits are actually by pleasure craft.
In 2014 there were 108 Canadian cargo ships or barges in the Arctic, and 119 fishing vessels. Arctic shipping is expanding, but it’s driven by destination traffic.
“Shipping firms transporting containers are not interested in Arctic routes. They are too complex, uncertain, there’s no port along the route, and there are low load factors. There is a little more interest for bulk shipping, but with prudence around ice, insurance, the need for longer term contracts and high charter rates, and the need for ice-strengthened ships,” Lasserre said.
“Arctic shipping is a niche market, not a future competitor to the Suez or Panama, and certainly there is much more potential in destination traffic over transit,” he noted.
Arctic Stewardship: priorities
The chairmanship of the Arctic Council was handed over this April from Canada to the U.S.
Lucy K. Abbott, Counselor for Energy and the Environment at the U.S. Embassy in Ottawa, said that the U.S. intends to increase its engagement with industry and the environment.
The U.S. has been an Arctic nation since purchasing Alaska in 1867.
“Now communities in Alaska are being threatened by rapid changes to the ecosystem. Our upcoming chairmanship is a good time to take stock of changes in the Arctic. We also want to highlight the shared challenges and opportunities the Arctic presents. Overall Arctic policy has been guided by our May 2013 Strategy for the Arctic Region. Although we are focusing on the Arctic because of our chairmanship, our focus is nothing new,” Abbott said.
President Obama has issued an executive order focusing on enhancing coordination between an Arctic Executive Steering Committee and over a dozen federal agencies, state and local authorities.
“We propose building on existing programs. We emphasize safe, secure, and environmentally safe shipping. Priorities include marine environmental protection, ocean acidification, and improving economic conditions in the North, with renewable energy options, improved sanitation, and community resilience. Transportation and supply chain developments are also a key imperative as is addressing climate change,” Abbott said.
“Our work at the Embassy focuses on the smooth transition of the Arctic Council. We will identify areas in which our two countries can increase coordination. We look forward to continuing to work with Canada on the sustained stewardship of the Arctic,” she said.