February 28, 2005
Government of Newfoundland and Labrador releases Fixed Link Pre-Feasibility Report
Premier Danny Williams today released the final report on the Fixed Link Pre-Feasibility study, which was undertaken by the Leslie Harris Centre of Regional Policy and Development (formerly the Public Policy Research Centre of Memorial University). The objective of the study was to provide an independent examination of the economic and technical implications, and viability of construction of a fixed transportation link across the Strait of Belle Isle.
Premier Williams said he is pleased that the report has been completed and that government has fulfilled its commitment to undertake an examination of a fixed link across the Strait of Belle Isle, in the context of a process to address the transportation challenges facing the province. "Cabinet has reviewed the document and I am pleased to be able to release the report to the public," said Premier Williams. "I have always believed that this project was feasible and could result in significant benefit to the people of Newfoundland and Labrador. The study clearly shows that the fixed link is technically feasible, however, it is a long-term proposition and a national project that will need a significant infusion of financing from the federal government.
"While government support is not unusual for public transportation infrastructure, the level of government assistance required must be considered in the context of the broader transportation needs of the province. Though not an immediate priority of government, the possibility remains that a fixed link could be constructed during the completion of projects such as the Lower Churchill hydro development or Highway 138 in Quebec." The premier added the study was invaluable in that it provided some critical information that can be used if a fixed link fits with our transportation priorities in the future.
The study included a review of three basic fixed link concepts: bridge, causeway/bridge and tunnel. The tunnel options included bored, drill and blast, and immersed tube tunnels. Road and rail modes for transport of vehicles through a tunnel were assessed. The report concludes that a tunnel bored using tunnel boring machines, with an electric train shuttle to transport vehicles is the most technically and economically attractive alternative. The estimated construction cost of the fixed link would be $1.2 billion (2004$) and total development cost of about $1.7 billion, including escalation and interest during construction. The development would take an estimated 11 years to complete. The economic and business case analysis showed that a fixed link could not be financed privately under normal economic and business case criteria. An infusion of approximately $1.4 billion from public sources would be required to make the proposition attractive to the private sector. The study also compared the economic results of a fixed link to those of upgrading the ferry service across the Straits, and the consultants concluded that an upgraded service would be significantly less costly than a fixed link.
The study was undertaken by the Leslie Harris Centre of Regional Policy and Development last year at the request of the Government of Newfoundland and Labrador, and was jointly funded by the provincial and federal governments. Hatch Mott MacDonald in association with SGE Acres and IBI Group were engaged by the Harris Centre to complete the study. Copies of the report may be found at http://www.gov.nl.ca/publicat/fixedlink.
Fixed Link Pre-Feasibility Study
The Fixed Link Pre-feasibility Study is an independent assessment of the economic and technical implications and viability of constructing a fixed transportation link across the Strait of Belle Isle. Hatch Mott MacDonald, in association with SGE Acres and IBI, were engaged to complete the study by the Leslie Harris Centre of Regional Policy and Development (formerly MUN Public Policy Research Centre) at the request of the Government of Newfoundland and Labrador.
The study included four phases. Phase 1 involved research of previous studies of the Belle Isle crossing to assess the environment and geology of the area and research of other relevant fixed link and tunnel projects throughout the world. Phase 2 was engineering and technical feasibility analysis of alternate fixed link options. Phase 3 included the economic and business case analysis. Phase 4 involved a review of financing considerations.
Technical Feasibility and Engineering Analysis
Three basic fixed link concepts were studied: bridge, causeway/bridge and tunnel. The tunnel options included bored, drill and blast, and immersed tube tunnels. Road and rail modes for transport of vehicles through a tunnel were assessed. For each of these options the shortest route across the Strait, between Pointe Amour and Yankee Point, was used as the basis for the cost estimates and technical review. Factors such as icebergs, shipping, water depths and ventilation were all considered in assessing the options (C-Core provided input on marine aspects and iceberg movements). It was concluded that a fixed link across the Strait of Belle Isle is technically feasible.
The consultants compared the cost estimates, estimated annual operating costs, risk level and preliminary construction times for each of the options. A tunnel bored using modern tunnel boring machines is the most technically and economically attractive option. Based on traffic projections for the 30 year study period, an electric train shuttle (single track) to carry vehicles would be the best configuration. The estimated construction cost would be approximately $1.2 billion (2004$). Total development cost is estimated to be $1.7 billion, including escalation and interest during construction.
Summary Comparison of Fixed Link Options
Source: Fixed Link Pre-feasibility Report, Table 1, page 3
Economic and Business Case Analysis and Financing Considerations
Economic and business case analysis was prepared for three scenarios: a bored tunnel; a bored tunnel including the costs and revenues associated with installing high voltage direct current transmission cables; and, for comparative purposes, an upgraded ferry link.
Transportation demand projections were prepared based on existing markets and analysis of future potential demand for a fixed link. The traffic projections contained in the study were based on the assumption that there would be a continuous road link from Quebec City to the tunnel along the Quebec North Shore. The consultants concluded that it is unlikely that there would be significant growth in long-distance travel from central Canada to the fixed link crossing if Quebec Highway 138 was not completed.
The economic analysis was undertaken from three perspectives: the stand-alone project; the direct impacts of the fixed link on the province's economy - including changes to the costs and revenues of existing ferries in the Cabot and Belle Isle Straits; and, socio-economic impacts - including consequential stimulation of GDP growth resulting from the construction activity and subsequent tourism activities. The economic and business case analysis showed that a fixed link could not be financed privately under normal economic and business case criteria. The economic results (on a project stand-alone basis and including economic and socio-economic impacts) measured in net present value for all three scenarios were negative. In addition to net present values, the consultants also considered other economic measures such as internal rate of return and benefit cost ratio. An infusion of approximately $1.4 billion of government funding would be required to make the bored tunnel an attractive proposition to the private sector.
Sensitivity analysis indicated that the economic results were highly sensitive to the capital costs, but not sensitive to traffic growth or operating costs. Inflation and social discount rate were also factors affecting the results.
Employment projections from the fixed link development were estimated as follows:
construction phase: 350 -500 full time equivalent (FTE) jobs over six years;
40 new permanent jobs for operations and maintenance;
spin-off impacts: 1,000 FTE (approx.) during construction, 350 FTE on start up, growing to 550 FTE over 30 year study period;
net present value of all wages $400 million.
The scenario including a high voltage direct current (HVDC) transmission line in the fixed link showed a small potential to improve the economic results, from revenues to be charged to an electricity HVDC proponent for the use of the cables. The terms of such an arrangement would have to negotiated. Incorporating the cables into the fixed link instead of building a dedicated submarine cable may reduce the capital cost to an HVDC proponent by approximately $390 million (including the cost of the cables which would then be financed by the fixed link proponent and included in rental cost charged to the HVDC proponent). For purposes of the analysis it was assumed that the fixed link proponent would also charge a rental for the use of the cables and therefore share in a portion of the cost savings. It is important to note however, that the Strait Crossing is only a portion of the total route for an HVDC line from the proposed Gull Island hydroelectric development in Labrador to Soldiers Pond, near St. John's, and the cost savings are therefore only a portion of the total estimated HVDC construction costs (in excess of $1.5 billion in 2004$).
The cost of upgrading the Strait of Belle Isle ferry service is significantly less than the fixed link, but still a negative net present value because of increases in annual subsidies for the annual operating costs for the ferry, the cost of ship replacement and revenue diversion from Marine Atlantic. The consultants noted that an upgraded ferry service would not give the same level of service as a fixed link.
Based on the results of the economic analysis the consultants concluded that any financing arrangements would require an infusion of public funds, but that is not unusual for public transportation infrastructure. Some form of public private partnership was considered to be most applicable.
For further details refer to the Fixed Link Pre-feasibility Report at http://www.gov.nl.ca/publicat/fixedlink or contact Brian Garrod, project leader Hatch Mott Mac Donald at 905-403-4007.
2005 02 28 10:15 a.m.