The Top 100 Canadian Infrastructure Projects of 2012

Date: January, 2012
Filed Under: Canadian Industry Expertise, Featured Articles & News

This year’s Top 100 list has the biggest-ever total: $114.2 billion in infrastructure projects. This isn’t all new investment—it includes 71 projects that were on last year’s Top 100. A project remains on this list until it is completed, which means some will continue to rank for a few years, maybe even a decade.

Even so, the 29 new projects added to the list this year represent an additional $30 billion in infrastructure investment in Canada. To put that into perspective, the federal government’s Building Canada plan to help fund infrastructure will invest ?$33 billion over six years.

The sectors in which that new $30 billion is being spent—and the types of projects within those sectors—may provide insight into current and future industry trends.

P3s and high security

New to the list this year, the Communications Security Establishment Canada (CSEC) is responsible for the collection of electronic intelligence to support the defence and foreign policy of the Canadian government, as well as the protection of electronic information and communication.

The project highlights a trend already prevalent in Ontario: the use of public-private partnerships (P3s) to fund high-security projects. In Ontario, every new courthouse is being constructed through a P3 model, usually a design-build-finance-maintain contract. Five of these justice P3s are currently featured on the Top 100. Together, the projects represent $1.8 billion in federal infrastructure spending. In Ontario, secure facilities have a total contract value of $1.6 billion.

The new facility for CSEC (number 35 on the Top 100), a federal project, is being developed using a P3 model, as is the new RCMP E Division Headquarters project (number 32). The new facility will act as the hub for the collection of electronic intelligence by the Canadian government. As such, building security is paramount for ensuring the CSEC can successfully fulfill its role. The use of private contractors for running many of the facilities operations after construction marks the first time that operations and maintenance work will be handled by a private company within a high-security federal facility. The use of private contractors for this project has prompted some CSEC personnel to voice their concerns publicly.

Concerns have mostly been around allowing staff from private companies into high-security sections of the facility. CSEC employees worry that allowing employees from private companies into secure rooms represents a security risk because these people will not have taken the same oaths as CSEC’s full members.

Bidding wars

The replacement of the Montreal subway’s rolling stock, number 11 on this year’s list, has seen its share of problems associated with the procurement process, including an international scandal, the introduction of specific legislation, and a letter from a foreign head of state. The issue began when the Government of Quebec decided that the City of Montreal and the Province did not have to tender this project internationally. This was based on a belief that because Bombardier, who now holds the contract with partner Alstom, are the unique supplier of these types of rail cars in Canada, they are exempt from the requirement to use a bidding process.

While this may be true, it appears that Spain’s Construcciones y Auxiliar de Ferrocarriles and China’s ZhuZhou Locamotive had both expressed interest in bidding on the project. They have repeatedly stated that $2.6 million per car is extraordinarily high—an argument supported by the fact that Bombardier reportedly built subway cars for Chicago’s subway system at $1.5 million per car and has given no justification for the difference in price. Spain’s Prime Minister José Luis Rodríguez Zapatero even wrote a letter to Quebec Premier Jean Charest expressing his displeasure.

The deal has resulted in a new law in Quebec’s National Assembly awarding the contract to the consortium, but there is still the threat of a legal challenge from the two foreign companies seeking access. An interesting aspect of this contract has been the shift in perspective on the part of the Charest government. In the past, Charest has been a proponent for developing new trade agreements to facilitate this type of contract, but now seems to be taking a more protectionist stance in his own province. Despite ZhuZhou’s purchase of industrial land and commitment to building the cars in Canada for almost $1 million less per unit, the Charest government remained committed to purchasing from Bombardier. Whether this decision will result in future problems for Bombardier internationally has yet to be seen.

This issue highlights an important question: how can governments create transparent, independent, and effective bidding processes for large projects? While the process for procuring the subway cars for this project has been seen by many observers as a fumbled approach not to be repeated, other governments, notably the Government of Canada, have recently made transparency a cornerstone of the procurement process.

Recently, the federal government announced the winners of two shipbuilding contracts worth more than $30 billion. The process the government used to facilitate the bidding process drew as much attention as the announcement itself. With three main shipyards (in British Columbia, Nova Scotia, and Quebec) bidding on the contracts, regional politics was set to be a staple of the contracting process.

Hoping to avoid any perception of political interference, the Harper government charged several high-level bureaucrats, along with consulting firm KPMG, with establishing a system free of federal and regional political interference. It involved retaining tight control over the bids submitted and the evaluation system for determining the winners, Nova Scotia and British Columbia, and the loser, Quebec. In structuring the process, the government ensured that ministers would not be allowed to lobby for one bid over another. Moreover, within the system itself, only a very small group of individuals knew which bids were submitted by the three shipyards. During the review process of the bids, most bureaucrats and consultants were unaware of which bid they were reviewing because the bid papers were titled with numbers and not the name of the company involved. This extra step in the process made it easier for the bureaucrats in charge of the process to focus on the merits of the bids without being distracted by political stakeholders.

Pulling rank

The Scarborough-Eglinton Crosstown Light Rail Transit (LRT) Project, once number four on the Top 100, was bumped to number one after an administration change for the City of Toronto led to the cancelation of the Transit City plan. Initially the project was going to cost $4.6 billion. Now, it will cost $8.2 billion. This decision had the added effect of cancelling the other three planned light rail lines under Transit City, which allowed the province to reallocate the funds for these lines to the Eglinton project.

Regional transit authority Metrolinx originally bought four tunnel boring machines (TBMs) for this project, but may need another two to four now that an additional 10 km will be tunnelled. Spacing columnist John Lorinc calls the decision to bury the entire Eglinton line “the single most expensive infrastructure mistake in Toronto history.”

A less obvious consequence of this change is its effect on the engineering associated with a project of this scale. Burying the Eglinton line has one major hurdle to cross before it will be completed: how will the LRT cross the Don Valley? Prior to the change, the Transit City plan had the Eglinton line emerging from a tunnel in the east end of Toronto and continuing on a dedicated right-of-way along Eglinton Avenue and over the Don Valley. But now that all new transit must be tunnelled, the TTC and Metrolinx are confronted with a complex, and potentially very expensive, engineering challenge. Essentially, without a right-of-way there are two options available for this project: bridge or tunnel.

Tunnelling under the Don Valley presents a challenge because of the grade associated with the Valley’s geography, while a bridge could be a potentially very expensive option depending on the outcome of an EA.

More tunnelling also means more soil to dispose of—potentially unsellable soil if it has been contaminated. ReNew Canada met with chief project manager, the Toronto Transit Commission’s (TTC’s) Peter Allibone, and Jack Collins, VP of rapid transit implementation for Metrolinx, at the corner of Black Creek and Eglinton where contractors are already on site, working on the tunnel’s first launch shaft. Collins said the soil at those depths should be clean, and said it’s actually quite easy to find a buyer for excess soil on these types of projects. In fact, they are already in talks with the Toronto and Region Conservation Authority, which may buy a portion of the soil for a special project.

While both Allibone and Collins said the original EAs completed for the bulk of the project will remain valid—new EAs will only be done for the additional sections—it’s clear that changes to a project that diverge from a long-term plan create a host of challenges, some of them unforeseen.

Toronto’s decision to change a project that was part of a larger plan for the city raises a complex issue: what effect can local politics have on project development, engineering, and cost? Due to the nature of the Top 100 list (projects remain on the list until they are completed), over the years, other long-term projects have moved up in the ranking due to changes in scope or cost overruns. Still more projects have been removed from the list because funding fell through due, at times, to a change in political administration.

Carbon capture

The Boundary Dam Integrated Carbon Capture and Sequestration (CCS) Demonstration Project will refurbish Unit 3 at the Boundary Dam coal power station. This will be the world’s largest project to use CCS for enhanced oil recovery, with the potential to capture an estimated one million tonnes of carbon dioxide (CO2) annually.

The largest source of CO2 in Alberta comes from burning coal for energy generation. Sitting on about 1,000 years worth of cheap energy, Alberta has a pressing desire to develop its coal resources without significantly increasing the resulting CO2 emissions.

CCS projects are becoming increasingly popular in the prairie provinces. The Top 100 list for 2011 included one CCS pilot—Alberta’s Project Pioneer, the first-ever CCS project to make it onto the Top 100. This year, two more projects made the list.

An abundance of oil in the west, but criticism of the resulting environmental damage, has prompted this surge in investments in the developing technology.

The federal government allocated funding to CCS in its 2008 budget, Alberta has created a $2 billion fund for CCS projects, and SaskPower is investing $1 billion in Boundary Bay (the project cost in total is $1.24 billion, putting it at number 28 on the Top 100).

Saskatchewan sits on about 300 years’ worth of coal reserves. That, along with the low cost of energy produced by coal, is pushing the Province to find new ways to develop this resource without the resulting environmental impact. Adding to their challenge, the federal government recently introduced new regulations surrounding coal power plants. The new regulations mandate that any new facility completed after 2015 must have emissions comparable to a high-efficiency natural gas plant. To meet these regulations, Alberta and Saskatchewan are focusing on developing cost-effective CCS systems.

Money from Alberta’s CCS Fund ($285 million) is being invested in the Swan Hills In-Situ Coal Gasification project (number 19 on this year’s list). The project turns underground coal into gas. Emissions from the project will be captured and piped to nearby oil projects for use in enhanced oil recovery operations.

CCS technology currently remains economically unfeasible, which is why government funding is necessary to move these types of projects forward. Aside from the benefit of sequestering more carbon, projects of this nature are incredibly important for building up the engineering, research, and experience levels of Canadian companies.

The winds of change

At a cost of between $750 million and $900 million, the K2 Wind Project is the first of its kind to break into the top 40. Wind projects of this scale are becoming increasingly common (see “Wind Development in the Top 100”, page 18).

Across Canada, individual provinces are pursuing renewable energy through different mechanisms. Ontario is using a Feed-in Tariff program to encourage the development of renewable energy sources, such as wind. In Alberta, where the energy market is unregulated, wind companies are using innovative methods to ensure their projects are economically viable. Greengate Power Corporation is bringing additional revenue for its project, Blackspring Ridge I (number 55 on the Top 100), by providing renewable energy credits to a California-based utility, Pacific Gas & Electric.

Many new wind projects grace this year’s Top 100 list, and even more such as the 366-megawatt Seigneurie de Beaupre Wind Farm in Quebec, are expected to be on next year’s list.

Nuclear: beyond generation

The Port Hope Area Initiative (PHAI) may have only narrowly made the list this year (at $260 million, it’s number 97 on the Top 100) but it is no less significant. The first project of its kind to appear in this report, it is dedicated to the clean-up and long-term management of historic low-level radioactive waste in the Ontario municipalities of Port Hope and Clarington. The project is a joint effort led by Natural Resources Canada in partnership with Atomic Energy of Canada and Public Works and Government Services Canada.

Low-level radioactive waste in Canada is an ongoing, expensive issue. Canada has a long history of mining and refining radioactive minerals. But, similar to the history of most mining industries in Canada, safety and environmental monitoring practices have changed substantially over the decades. The Port Hope and Port Granby projects reflect the increased awareness of the public risks from a long history of refining radioactive products in the area.

The Port Hope area has been managing low-level radioactive waste since radium was first refined in the area in 1932, followed by uranium refinement in the 1940s and 1950s. Removing contaminated waste from the area began in the mid-1970s with the transfer of over 100,000 tonnes of contaminated soil from Port Hope to Chalk River Laboratories. It wasn’t until the federal government established the Low Level Radioactive Waste Management Office (LLRWMO) in 1982 that a national long-term clean-up plan was put into motion.

As part of that plan, the LLRWMO tried to find a community willing to host a waste management facility. When that didn’t happen, the Township of Hope agreed to store the waste locally and the PHAI was born. There are two distinct projects under the initiative: the Port Hope Project and Port Granby Project. Long-term waste storage facilities will be built at each location and will be designed to contain the waste for hundreds of years. To hold the waste, a mound consisting of more than twenty above- and below-ground layers will be constructed, with the contaminated soil housed in the centre of the mound.

In nuclear energy generation, facility owners typically deal with radioactive waste, paying to store it on site, or at another facility’s site. In this situation, the company responsible for refining the mined uranium from the 1930s to 1970s, Eldorado, is no longer in operation. “You can’t get blood from a stone,” says Mark Giles with the PHAI. “Those responsible for waste are normally held accountable for cleaning it up, unless that company no longer exists. The Government of Canada took on the responsibility—it was, after all, a crown corporation.” The company was originally privately owned, but the federal government purchased it in the 1970s.

Projects to manage low-level radioactive waste have been conducted since the 1980s in locations across Canada, mostly in the west and northwest. But this is the largest such operation ever to be undertaken.

Record investment

These are just a few of the trends and notable projects based on almost a year of research and interviews on the part of a team dedicated to Canada’s infrastructure industry. A more thorough breakdown, by sector and sub-sector, including details on funding sources, can be found in this year’s Top 100 report, which was circulated with this issue.

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