Monday, 12 December 2016

Tunnel Vision

Tunnel Vision

By: Ryan Young

Danny Dumaresque was in Ottawa last week, and according to his twitter account he is coming home with big news. For those who don’t know Mr. Dumaresque, he is a former Liberal MHA from the old Eagle River district in Labrador, serving during the Clyde Wells era from 1989-1996. He most recently ran again in 2015, but lost to David Brazil for the Conception Bay – Bell Island seat in the House of Assembly. If you are not a follower of politics, however, you might know Dumaresque as “The Tunnel Guy.” He has been the driving force behind the recent push to build a fixed-link tunnel between Labrador and the Northern Peninsula.

The tunnel question is a tough one to crack. In our current financial situation, another mega-project would be a tough sell to the public. Even the $750 000 earmarked by Ball for a tunnel feasibility study has garnered considerable criticism when so many are being asked to tighten their belt for the greater good. But is the tunnel a good idea? Let’s take a closer look.

In 2004, government commissioned a pre-feasibility study of a fixed-link. The study looked at bridges, causeways, and tunnels and ultimately concluded that the best option would be a bored tunnel with a railway shuttle. The estimated cost with financing was quoted at $1.7 Billion. With inflation factored in, the price tag in 2016 dollars would be just over $2 Billion. The study also looked at the business case for the tunnel option and that is where the idea loses a little steam. Even with projected revenues from running HDVC cables through the tunnel, the net benefit will be slightly less than that of an upgraded ferry, as is shown in this figure from the study.

The study does suggest that the project could be done as a private-public partnership, but with the nominal business case, it would likely require a large influx of public money. One of Danny Dumaresque’s arguments has always been that the project could be done privately, without costing taxpayers a cent, pointing to the Confederation Bridge between N.B. and P.E.I as an example. The major difference is that P.E.I needed a fixed link because of the high volume of traffic, and that high traffic flow and predicted increase in tourism traffic made the bridge idea attractive to private developers.

The development consortium put up the capital costs for the P.E.I project, and it receives what is essentially a $44 Million dollar mortgage payment from the federal government each year. This is the same amount that it was previously funding the Marine Atlantic link under P.E.I's terms of confederation. These payments will cover the cost of construction, and the development consortium gets to keep the revenue from tolls, which averages between $25-$30 Million each year. After 33 years, when the construction costs are paid, ownership of the bridge will revert to the federal government.

In comparison, bridge traffic is just under 1.5 Million per year, while Marine Atlantic traffic is significantly less at 320 000. Also, it is not reasonable to expect a fixed-link to Labrador to replace the ferry service as it did in P.E.I (*note the current P.E.I ferry is a private operation) and as such the feds would have no incentive to offer up the cash for the same type of long-term mortgage deal with a private developer. So basically, if either level of government wanted to get involved in funding the project, there would be very little chance of ever seeing a return on their investment. It would be just dead money, spent to create infrastructure jobs.

Danny’s other argument is that the long-term costs of providing the Labrador ferry service will be higher than a fixed-link. Unfortunately, those numbers don’t quite add up either. As outlined in the 2004 study, the economic case to upgrade and maintain the ferry service would be slightly better than the tunnel option. In a CBC story from last May, he states that the Straight of Belle Isle ferry service will cost the province up to $2.4 Billion over the next 40 years. If you average that down to the 30-35 year life of the tunnel the number is much closer than the $2 Billion price tag for the tunnel. That of course also assumes that there will be no significant delays and cost overruns with the project, which, as we should have learned from Muskrat Falls, is not a good way to plan a project. At the end of the day when you crunch the numbers, the cost/benefit analysis is essentially the same.

Another consideration that I have put forth to Mr. Dumeresque is the cost to upgrade the roads that the tunnel will connect. The Viking Trail, which runs the length of the Northern Peninsula will require major improvements to handle the increased traffic loads, and I am sure that most people in Labrador would tell you that they would rather see the Trans Labrador Highway properly finished and paved before there is any talk at all of a fixed-link. Danny suggested to me that the Northern Peninsula highway is in fine condition, and will receive regular upgrades, but if you are going to increase the volume of trucks and recreational vehicles on that highway, it will need to be significantly upgraded. The same goes for the other side. How can you justify building the link until the highway in Labrador is good enough to handle the traffic?

Despite the obvious costs, a fixed-link would certainly bring some benefits to the province. We all know the issues that come with the ferry system and our predictably unpredictable weather, and a fixed-link would bring some much-needed employment for years to come. Increased tourism numbers and a better system of delivering goods between the island and the mainland are definite advantages, not to mention that the tunnel would be really cool. But is being a cool idea enough?

As much as I like the idea of the tunnel, the questions we need to ask is do we really need it and can we afford it. Unfortunately for Mr. Dumaresque and his grand vision, the answer to both questions is no. We can’t afford to fund another mega-project in the province right now, and despite claims to the contrary by Dumaresque, the numbers show that it is very unlikely that a private developer would take the project on without a significant amount of public money invested. I’m not saying that the tunnel idea is dead in the water, but based on the current conversation, it is very hard to connect the dots in a way that justifies the project.

There is, however, one other scenario that could possibly come to pass. If Dumaresque was able to win over the right people on his recent trip up-along, the federal government could step in and provide funding through their infrastructure spending plan. It doesn’t really make sense that they would, but perhaps after looking at the projected unemployment numbers in the province over the next few years, they may see it as a necessary investment to keep us from slipping over the edge. The project would certainly create thousands of good jobs and provide a short-term economic boom for the province. If the feds are willing to step in and foot the bill, maybe it wont be such a bad idea after all. We need the jobs, and the tunnel would be our connection to the world that we have dreamed about for time out of mind. Whatever happened in Ottawa last week, Dumaresque has promised to fill us in soon. Unless he calls a press conference with Judy Foote standing by his side, I wouldn’t expect to much, but with the way the federal Liberals are sending money, you just never know. I guess we will all have to stay tuned and see what happens. It might not be long before we are all seeing in tunnel vision.

The 2004 Pre-Feasibility Study can be found here:

1 comment:

  1. Spin it how they may. I see it as another boondoggle project by a man and a party desperate for some form of new "juice" to win public appeal. (imo) the project won't work financially, the appeal won't work to the public, and this twittish (silly and annoying) concept just needs to die a quick death. The costs outweigh any conceivable benefit by about 20 to 1. Money would be better spent by hiring Tina Turner to sing "We don't need another Danny".