Mining News

Power shortage limiting mining development in the North

Posted by Alana Wilson on 11/20/2013 4:32:54 PM

By Alana Wilson

The Globe and Mail recently published an article on how access to power is creating a significant barrier to development in Canada’s territories, particularly resource development projects. It is part of a series looking at infrastructure projects designed to create economic opportunities in Canada’s North.

In the Northwest Territories, mining projects are often far off the power grid resulting in the use of diesel power. Diesel is not only is emissions-intensive, presenting environmental concerns, but also very expensive. In the NWT, diesel power currently costs industry around 30 cents per kilowatt hour which is five to six times what it costs in some other provinces. This presents a deterrent to mining projects such as Fortune Minerals Ltd. who propose to mine gold and other minerals in the Northwest Territories:

“Power is always a significant issue,” Julian Kemp, Fortune’s CFO and vice-president of finance, says in a telephone interview. Diesel power forces mines to pay high upfront costs and high operating costs, threatening a project’s viability. “That can be a significant deterrent to advancing any project,” he says.

The Finance Minister of the NWT, Michael Miltenberger, recently led a delegation to Ottawa to push for new borrowing rights so that the territory can take on debt to build new power facilities. According to Miltenburger “[t]hat would allow us to make some of these revenue-generating, blue chip economic development opportunities”.

The Yukon government is also asking for federal assistance in meeting its energy needs although it is requesting funding for new energy sources. The Yukon already has transmission lines as well as a highway system and other infrastructure in place but—despite expanding power generation and transmissions capacity in 2011—it is now relying on diesel power to back up growth in demand. According to Yukon Energy, they are considering a new hydro dam and other options such as wind and biomass however the population of 37,000 is too small to pay for it.

“To expect that small number of people to alone pay for a large hydro project is not realistic,” Janet Patterson, a spokeswoman for Yukon Energy, said in a written statement. The territory isn’t connected to the continental grid, leaving it unable to sell excess power to raise revenue or to buy it to meet a shortfall, she added. “Bottom line, we can’t do it alone.”

While it is unclear how the federal government will handle these requests, the federal conservative government made Northern development a priority in October’s Speech from the Throne. A spokeswoman for Leona Aglukkaq, the Nunavut MP and minister responsible for the Canadian Northern Economic Development Agency, has said that Canada is working “to develop an approach that will protect the environment while addressing the future power needs in the North to support resource development, business development, and the long-term sustainability of northern communities”.

What is clear is infrastructure limitations are currently seen as a barrier to investment in the territories. The 2012/2013 Survey of Mining Companies found that Nunavut, Northwest Territories, and Yukon have the greatest percentage of respondents reporting being deterred due to infrastructure of all Canadian jurisdictions. Nunavut is amongst the bottom 10 jurisdictions surveyed for infrastructure, ranking 87th of 96 global jurisdictions in terms of investment deterred. 83% of survey respondents indicated that they were mildly or strongly deterred or not pursuing investment as a result. The NWT was ranked 68th, with 65% of respondents reporting being deterred due to infrastructure while the Yukon was ranked 65th with 61% of respondents deterred. These results suggest that if the territories and Canada want to increase resource development in the North, it will need to improve infrastructure and power availability for both environmental as well as economic reasons.

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