Q and A with Canada’s Territorial Leaders on Energy in the North

Canada’s three territories represent approximately 40 per cent of the nation’s land mass and some of our most challenging climate and geography. Most importantly though they are home to just over 100,000 Canadians. Living in small numbers in such conditions means you have a deeper sense of the critical role of energy for our well-being than do most other citizens of this country. Over a two week period, I had the opportunity to meet with Brad Cathers, Yukon’s minister responsible for the Yukon Development Corporation and the Yukon Energy Corporation; Bob McLeod, premier of the Northwest Territories; J. Michael Miltenberger, Northwest Territories minister of Environment and Natural Resources and minister Responsible for the Northwest Territories Power Corporation; and Peter Taptuna, premier of Nunavut to discuss energy in Canada’s North – the challenges and the opportunities. Here are some highlights from those conversations.

Economic development in the North is a huge priority for all the territorial governments, and that likely means development of the incredible resource wealth in all three. Resource development is energy intensive – looking forward, what is the energy demand picture like?

Minister Cathers, Yukon: Most of today’s energy demand is met by the existing electricity grid and we are looking at next generation hydro to expand the grid to meet the needs of a growing population. But for future industrial development, we are going to need reliable off-grid energy sources – and it is liquefied natural gas (LNG) that companies seem most interested in. For example, the Casino Mine project, which is the largest of the potential mining projects that is in progress, has a total expected energy consumption that is about the same size as our current existing grid. LNG is seen as an economic and environmentally sound off-grid energy solution to meet this large demand.

Premier McLeod, NWT: Demand in the Northwest Territories will also grow as our population and industrial demand grows. Today we use hydro, diesel and biomass. We are in the process of developing a new energy plan for the Territory that will look at the ideal future energy mix to meet this demand. LNG comes in considerably less expensive than diesel and so we see that as a significant opportunity to provide more affordable and clean energy, particularly for resource development projects.

Premier Taptuna, Nunavut: Nunavut is on the cusp of economic prosperity. With mining activity growing at its current pace, we will see an increased demand for energy consumption. This is something that Nunavut needs to consider planning for now, as some of this industrial activity may take place closer to our communities. Currently, Nunavut is solely dependent on diesel generation. Many of our power plants are or have exceeded their useful lifespan. Reducing this dependency is a priority in the long-term. Where there are current mining projects, the location tends to be not connected to our communities and in fact become almost a self-sustaining village in itself with its own energy infrastructure.

“Energy demand in the Northwest Territories will also grow as our population and industrial demand grows.”

“Energy demand in the Northwest Territories will also grow as our population and industrial demand grows.”

Diesel generators are pretty standard energy infrastructure across the North and a lot of this infrastructure is reaching the end of its useful life. Do you see significant investment to replace this ageing infrastructure? Will the fuel change?

Minister Cathers, Yukon: We have diesel generators in Yukon that were originally intended to supplement hydro generation during periods of peak electricity demand. However, now we are at the limits of our hydro capacity and are starting to rely on these diesel generators more, particularly in the winter, to help meet demand. The Yukon Development Corporation has done some work to identify what would be the most appropriate replacement for diesel generators and, while we are looking at the next generation of renewables, LNG has been identified as the most reliable and cost-effective option at this point.

Premier McLeod, NWT: We use and rely on diesel. But the costs are high and the systems are getting old. While we are sitting on enormous natural gas resources, we are dealing with an economies of scale issue: without an export market, we just don’t have the industrial demand or population to justify developing the resource here. Instead, we have to look at alternative supply options for natural gas – like LNG as the most affordable energy option to diesel.

Minister Miltenberger, NWT: In fact, we already have LNG being delivered by truck from Delta, B.C. to Inuvik. Even when factoring in the costs of that considerable supply chain distance – 3,500 km one way – LNG is considerably less expensive than diesel. If LNG infrastructure were to be built further North, it would cut the supply chain costs and be even more reliable and affordable. There are mines and other communities on the diesel system that could benefit from this kind of move to LNG for central heat and power generation.

Premier Taptuna, Nunavut: There are opportunities to reduce our dependency on diesel, especially considering the high costs associated with generating energy. What we need to look at moving forward are opportunities for partnership with some of our key stakeholders. This could mean, working with Canada, our Inuit beneficiary organizations and big business. We also have to balance that with economies of scale, as many of our communities are very small and they wouldn’t be in a position to support such a capital infrastructure project on their own.

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Minister Brad Cathers, Yukon

Several of you note LNG as an important energy choice going forward – have you challenges/concerns around natural gas or its use?

Minister Cathers, Yukon: We do hear some concerns around fugitive emissions, safety, and (still) using fossil fuels for generation. For all governments in all jurisdictions any choices around energy, hydro or fossil fuels or anything else, come with concerns around their costs and environmental and social impact. Government and industry need to address the current and future energy needs of our citizens while ensuring that these concerns are addressed. People want reliable, affordable, and clean energy.

Premier McLeod, NWT: Our analysis indicates that LNG is cheaper and the emissions are less than diesel but these are the kinds of things that need to be better described and communicated. External communities hooked up to their own system present a big opportunity, in our view, for LNG. These communities sometimes see low water levels – as is the case this year – reducing the amount of hydro power that can be generated and requiring us to make sure there are reliable backups. To date, the back-up has been diesel but those systems are old and present other problems.

Minister Miltenberger, NWT: What we hear most is concern about the cost of living and how we can reduce the cost of living for families and industry in our communities. As part of the energy plan that we are working on, we will look at all energy options and assess what the alternatives are to diesel for our local communities and industry from a reliability, affordability, and environmental perspective.

Premier Peter Taptuna, Nunavut

Premier Peter Taptuna, Nunavut

Premier Taptuna, Nunavut: Right now, Nunavut doesn’t currently hold any jurisdiction over the seabed or resources located on Crown land or seabed in Nunavut. This is something we are looking to change with a final devolution agreement between Canada and Nunavut. If we just look at natural gas in the high arctic there is an estimated 27 trillion cubic feet of natural gas located in Sverdup Basin.

Does the decline in oil prices affect how you make decisions about energy?

Minister Cathers, Yukon: The drop in oil prices does have an impact on Canada’s economy and that’s being assessed to see what this means for market trends and the cost of energy down the road in Yukon. In the meantime, we are proceeding with our plan to add LNG generators, investing in our hydro grid, and looking at IPP power production and the opportunity for that both in terms of large industry selling excess energy to the public grid and directly to energy consumers. For example, a mining company could potentially build an off-grid natural gas plant and sell excess energy to other industrial customers. We are working with the private sector and First Nations to identify opportunities for investment.

Premier McLeod, NWT: Certainly we are all watching the changing oil markets right now given the impact it has on the Canadian economy. Lower oil prices result in declining revenues for many governments. For us in the NWT, oil price declines will hopefully translate to more affordable energy – this is a huge priority because a key part of the cost of living in the North is the cost of energy. This is why we are looking to alternatives like LNG – to reduce our energy costs. Eventually of course, we would like to be able to produce and export some of the gas we have within the territory that is yet to be tapped.

Premier Taptuna, Nunavut: The drop in oil price doesn’t affect Nunavut as immediately as it does in southern jurisdictions. Nunavut, unlike its neighbouring territories, does not have any roads that connect us to any other jurisdiction or support a connection between communities within Nunavut. This means, every year Nunavut purchases its total fuel consumption needs in advance to be shipped during the summer months and stored in tankers in each of our 25 communities. From a fuel purchasing perspective, over the next few months the government might be able to capitalize on the lower oil prices for delivery to Nunavut in the fall of 2015. That potential for cost savings also needs to be balanced with financing the purchase and a place for storage until it is shipped in the fall.

“Nunavut, unlike its neighbouring territories, does not have any roads that connect us to any other jurisdiction or support a connection between communities within Nunavut.”

“Nunavut, unlike its neighbouring territories, does not have any roads that connect us to any other jurisdiction or support a connection between communities within Nunavut.”

What do you think the role of the federal government and the energy industry is in all of this?

“There is a federal role in helping us build our energy infrastructure.”

“There is a federal role in helping us build our energy infrastructure.”

Minister Cathers, Yukon: There is a federal role in helping us build our energy infrastructure. Our legacy energy infrastructure was built largely by the federal government because it was seen to be in the national interest, and that investment helped create and strengthen our economy in the Yukon. The national interest continues and we do believe that federal government investment in next generation energy infrastructure should also continue – it is needed to help us create long-term opportunity and a strong economy in the Yukon for decades to come.

Premier McLeod, NWT: We have to take a very long term view on all of this – on the opportunity for northern development.   I think that industry and government need to have a much focused message to generate awareness and understanding around the energy supply and use questions facing the North. We need to do a lot more work together to make sure Canadians understand the challenges, and the opportunities, we face.

Minister Miltenberger, NWT: There is an opportunity for the natural gas distribution industry to tell the LNG story around efficiency and innovation, the energy cost advantages, and the role natural gas can play to support industrial development.

Premier Taptuna, Nunavut: When we look at the legacy of federal energy infrastructure across the north, Nunavut did inherit one federal diesel power plant, which has long been replaced. At the time, Nunavut wasn’t fortunate enough to have hydro development, and did not inherit such infrastructure compared to our neighbouring jurisdictions. In fact, Nunavut’s overall infrastructure is in a deficit position by comparison. We’ve made progress with our federal counterparts over the last decade and have seen more attention paid to Nunavut’s infrastructure needs. The key is continued relations with the federal government to invest in long-term energy infrastructure as our territory grows. As a government, we also need to continue to ensure Canadians understand the complexities of the North.

Any final thoughts for our readers?

“In partnership with First Nations, industry and Canada, we want to make sure that Yukon will continue to be a great place to live with a strong economy for future generations.”

“In partnership with First Nations, industry and Canada, we want to make sure that Yukon will continue to be a great place to live with a strong economy for future generations.”

Minister Cathers, Yukon: Access to affordable and reliable energy infrastructure has been identified by industry in Yukon as one of the most important influences of future development. That is one of the reasons why we are focused on doing the planning for the next stage of hydro development in the territory, micro-generation improvements, and IPP policy development. We also recognize Yukoners are concerned about the environmental impact of energy choices, reliability, and the cost of energy. We are informing those discussions and making sure that there is a public understanding of energy options, efficiency, and conservation. In partnership with First Nations, industry and Canada, we want to make sure that we go down the right path to ensure that Yukon will continue to be a great place to live with a strong economy for future generations.

Premier McLeod, NWT: No one ever imagined that the price of oil would be less than $50 per barrel this year. A year ago, we weren’t worried about low water levels and their effect on hydro-electric generation. We don’t know what the next big change is. We do know we need to plan for the long term and have the ability to adapt to changes, and have choices.

Clockwise: Minister J. Michael Miltenberger, NWT, Premier Bob McLeod, NWT and Timothy M. Egan, President and CEO of the Canadian Gas Association.

Minister Miltenberger, NWT: We are developing a long-term plan for the future as we believe that Northwest Territories has an opportunity to carefully and sustainably develop our resources. That plan will include natural gas, biomass, and take us in other directions where we haven’t gone before.

Premier Taptuna, Nunavut: Nunavut may be the newest member of Confederation and the smallest in terms of population, but we have a lot to offer. We are making strides in all areas of development and there are many southern jurisdictions that benefit from our industry growth across all sectors. We want to be a contributing member of the Canadian economy, and eventually that will mean in the areas of our energy sector as well. Nunavut’s potential in oil and gas is enormous. Estimates tell us that Nunavut has approximately a third of Canada’s total petroleum resource endowment with undiscovered conventional resources ranging from 25 to 267 billion barrels of oil and 285 to 1,228 trillion cubic feet of natural gas.

Timothy M. Egan is President and CEO of the Canadian Gas Association.