Powering the Far North – by Bryan Phelan (Onotassiniik Magazine – Winter 2013/2014)

http://onotassiniik.com

Hydro transmission plans for remote First Nations and mines

An Ontario Power Authority (OPA) plan, to be finalized by the end of this year, shows there is a “strong economic case” for connecting 21 remote First Nations in northwestern Ontario to the province’s hydro grid.

The First Nations, including the five Matawa tribal council communities closest to the Ring of Fire mining development, currently rely on diesel generators for their electricity – generally described as an expensive, unreliable, dirty, and growth restricting source.

While co-ordinated efforts between remote communities and mining companies could reduce power costs for both groups, OPA draft plans show it makes economic sense to build hydro transmission lines to the First Nations even without connection to future mines in the Ring of Fire. OPA, which plans Ontario’s electricity system for the long term, figures hydro grid connection to the 21 remote communities would eliminate about half a billion dollars in diesel generation costs over 40 years, while providing a cleaner and more reliable electrical supply.

Left out of the equation are four First Nations in the region that use diesel – Fort Severn and Peawanuck near Hudson Bay, and Gull Bay and Whitesand north of Thunder Bay – because OPA found it wouldn’t be economically feasible to extend transmission to them.

In a directive to OPA in 2011, the Ontario energy minister identified a new line to the township of Pickle Lake as one of five priority transmission projects for the province. The minister also instructed OPA to develop a plan to connect remote First Nations north of Pickle Lake, where the provincial grid currently ends. OPA has been developing such a plan with the Northwestern Ontario First Nation Transmission Planning Committee.

In a technical report for that committee, OPA projected that capital costs for connecting the 21 remote communities could reach $1.3 billion.

First Nations, meanwhile, are positioning themselves to own and operate some of the proposed transmission lines.

Connection points

OPA recommended in August, in a draft of its regional plan for areas north of Dryden, that a new transmission line be built from the Dryden-Ignace area to Pickle Lake by 2016. It also proposes upgrading existing transmission lines from Dryden to Ear Falls and Ear Falls to Red Lake by then, to meet short-term mining and community load growth.

The proposed line to Pickle Lake would provide more reliable power to the township, three First Nations already connected to the grid – Cat Lake, Slate Falls and Mishkeegogamang – and Goldcorp’s Musselwhite mine.

The current supply of electricity to Pickle Lake is provided by Hyrdo One Networks through a 115-kilovolt transmission line from Ear Falls. It has been unreliable, likely due to the design, condition, length and age of the line – more than 70 years old. “Customers in the Pickle Lake subsystem have experienced, on average, 14 unplanned outages per year over the past 10 years,” OPA reports.

With a new line and improved capacity, Pickle Lake would become a hydro connection point for some remote First Nations farther north.

OPA is planning for remote communities and potentially new mines to connect to the transmission system between 2017 and 2022.

It determined that six remote First Nations north of Red Lake – Pikangikum, Poplar Hill, North Spirit Lake, Deer Lake, Keewaywin, and Sandy Lake – could be served by a single, radial 115 kV line from Red Lake.

Expected to connect from Pickle Lake through several 115 kV lines are 10 remote First Nations now served by diesel systems: Sachigo Lake, Bearskin Lake, Kingfisher Lake, Wawakapewin, Kasabonika Lake, Wunnumin Lake, Wapekeka, Kitchenuhmaykoosib Inninuwug, Weagamow Lake, and Muskrat Dam. Five of these First Nations in the Pickle Lake subsystem are at capacity with their diesel generators and therefore have restricted local connections, blocking community development and growth.

Pickle Lake could also be the connection point for the five remote Matawa First Nations in what OPA refers to as the “Ring of Fire subsystem” – Webequie, Nibinamik, Neskantaga, Eabametoong, and Marten Falls. If the transmission line to Pickle Lake is built at 230 kV rather than 115 kV, future mines in the Ring of Fire could also connect via Pickle Lake.

At one point, OPA estimated capital costs would increase by $50 million for infrastructure that would accommodate mines in the Ring of Fire, about 370 kilometres from Pickle Lake, but suggested that could be more than offset by cost sharing with the mines.

Another option, not included in OPA’s draft plan last year but added in 2013, would instead connect those five communities, plus future Ring of Fire mines, with a new 230 kV transmission line originating 550 kilometres away in Marathon. That line would follow a proposed transportation corridor – for an all-weather road or a railway – starting near Nakina. “The OPA estimates that a transmission line of this scope and magnitude would take at least five years to complete,” from project development to construction, said an OPA spokesman, John Cannella.

OPA considers both options technically feasible from an electrical supply point of view, and based on preliminary analysis expects they would incur similar capital costs of roughly $350-400 million.

However, OPA also determined the line from Marathon would only make economic sense if mine operators agreed to connect to it.

“To date, no Ring of Fire mining companies have come forward with a firm commitment to pursue transmission connection,” Cannella said in late September.

Larry Doran, a former senior manager with Ontario Hydro and Ontario Power Generation, suggested to Onotassiniik the best transmission route to the Ring of Fire would follow a future south-north transportation corridor but start at Nipigon, rather than Marathon. Starting at Nipigon would make that route 100 kilometres shorter and $45 million cheaper, he said, but that option wasn’t presented in OPA’s draft plan in August.

“The OPA believes that it will ultimately be the beneficiaries – mining customers, First Nations communities and other beneficiaries – that will decide on the connection option and route,” said Cannella, “given that the transmission options for connecting the Ring of Fire must be funded by the benefitting parties.”

As with other new transmission lines proposed for the region, the chosen option would be subject to the necessary approvals, most notably from the ministry of environment and the Ontario Energy Board.

Ring of Fire uncertainty

Two mining companies, Cliffs Natural Resources and Noront Resources, have plans to start mines in the Ring of Fire by 2017, although Cliffs suspended environmental assessment of its Black Thor chromite project this summer and so far has been unable to secure land access for construction of a south-north, all-weather road to the Ring.

Cliffs and Noront, which is working toward a nickel-copper-platinum mine, issued environmental assessment reports for their projects, which outlined their initial plans for electricity. Cliffs indicated a preference for on-site generation fueled by either diesel or natural gas. Noront noted a preference for connection to the transmission system, but specified diesel generation as its “base case” in the absence of concrete plans for development of and industrial access to a Ring of Fire line.

As for the five remote communities in the area, “Matawa First Nations have made it very clear they do not support diesel generation to power the project, and will only support a transmission grid so that the First Nations can also hook onto the grid,” Raymond Ferris, Matawa’s Ring of Fire co-ordinator, told Onotassiniik. “The priority for the Matawa First Nations is to minimize any environmental impacts, which includes (diesel) emissions.”

Diesel generation is the highest cost method of producing electricity to supply customers in Ontario, according to OPA, “typically costing three to 10 times more than the average cost of the provincial supply mix.” And for the Ring of Fire, Doran says the cost of generating electricity from compressed natural gas – if a supply station was built first – would be comparable to diesel, given the transportation that would be involved.

Some estimates suggest that by using grid power instead of diesel, mining companies in the Ring of Fire could save up to $60 million a year, based on projected energy needs over the next decade.

Substantial investment in transmission infrastructure has to come first, though. As OPA puts it, “In order to implement the project, the remote community funding parties,” – the federal government, Ontario electricity customers and the provincial government – “as well as any industrial customers who wish to make use of the transmission assets, will need to come to agreement on the allocation of project costs among them.”

OPA expects the connection of remote communities in the Ring of Fire subsystem to proceed separately unless mine developers come forward to participate in a joint connection project.

Despite the “enormous” annual savings that mining companies in the Ring of Fire would realize by connecting to the grid, Doran understands their reluctance to lead the charge for grid power. “They’re afraid they have to pay for it and then get it back slowly over time,” he explains. “That’s a big capital outlay right off the bat when you’re trying to start a project. So, everybody tries to avoid being the first guy to pay for it.”

Doran, now head of the consulting firm Imperium Energy, prefers infrastructure models he sees in B.C. and Quebec. “They say ‘Let’s build the infrastructure, then let the companies develop around it.’ That’s what Ontario should be doing for the Ring of Fire. In B.C., they’re building their power and their roads so they can develop northern B.C., not waiting for that (development) – the other way around.”

Goldcorp-First Nations partnership

A mining company has stepped forward to support development of a new transmission line to Pickle Lake, and more lines to some remote First Nations.

Goldcorp teamed with the Central Corridor Energy Group (CCEG), a partnership of 13 First Nations – including the 10 remote First Nations in the Pickle Lake subsystem – to form Wataynikaneyap Power. The other three CCEG First Nation partners are Lac Seul, Cat Lake and Slate Falls. Five more remote First Nations – the Keewaytinook Okimakanak (KO) First Nations Council communities of Deer Lake, Keewaywin, McDowell Lake, North Spirit Lake and Poplar Hill, in the Red Lake subsystem – joined Wataynikaneyap as partners in October.

Wataynikaneyap is working to design, permit, construct, own and operate transmission lines in a two-phase project. It proposed building a new 230 kV transmission line from Dinorwic, east of Dryden, to Pickle Lake by 2016, and then extend lines to its 10 original remote First Nation partners by the end of the next year. Plans will now be updated to include connection to the new KO partners.

Goldcorp is a 50 per cent partner in Wataynikaneyap, with each participating First Nation an equal ownership partner in the other half of the company. Goldcorp funded the setup of Wataynikaneyap and its transmission planning work but will withdraw from the partnership when Wataynikaneyap secures a transmission partner, which will partly own and operate the line.

The mining company is eager to have better electricity supply to Pickle Lake and its Musselwhite gold mine. Musselwhite currently gets electricity from Pickle Lake through Goldcorp’s private 190-kilometre line but that supply is insufficient, so diesel power is used as well. Additional grid capacity at Pickle Lake could also benefit mining developments by Cadillac Resources, Rockex, Gold Canyon Resources, and Northern Iron.

In October, Wataynikaneyap signed a memorandum of understanding with AECOM Technology Corporation, in association with PowerTel and Deutsche Bank, for the AECOM team to provide design, construction and financial services to the transmission project.

Wataynikaneyap puts the capital cost of a 300-kilometre Dinorwic-Pickle Lake line at $150-200 million. While exact routing from Pickle Lake to the 10 central corridor First Nations has yet to be determined, Wataynikaneyap estimates those lines will cost about $680 million.

But a recent financial feasibility study commissioned by Wataynikaneyap also found that continuing with diesel generation for the next 40 years would cost $296 million more than building and operating transmission lines to the 10 First Nations. “The communities expect that any cost savings achieved by connecting to the grid be directed towards Wataynikaneyap Power,” the company stated when it incorporated in April.

Hydro One Remote Communities and independent power authorities operate diesel systems in the 10 First Nations, but according to Wataynikaneyap about 90 per cent of diesel generation costs are subsidized by Ontario electricity ratepayers and the federal government. Given the long-term savings these parties should realize from the switch to grid power, it would seem to be in their economic interest to fund construction of the transmission lines to the First Nations.

The First Nation partners in Wataynikaneyap have a goal of “First Nations eventually owning 100 per cent of this important infrastructure that will better serve our communities,” Margaret Kenequanash, executive director of Shibogama First Nations Council, said last spring.

Best chance

Another company, Sagatay Transmission, is competing with Wataynikaneyap for the right to build, own and operate the new transmission line to Pickle Lake. Its partners are Mishkeegogamang First Nation; the Ojibway Nation of Saugeen; Morgan Geare, a Toronto-based private merchant banking and advisory firm; and Algonquin Power and Utilities.

Sagatay proposes a different route for a 230 kV line to Pickle Lake, up Highway 599 from Ignace. The company notes on its website that under the Far North Act, the northern terminus of any transmission line to Pickle Lake and the municipality itself fall within the land use planning area of Mishkeegogamang. “The construction of any transmission line must be incorporated into the community land use plan or be supported by the local First Nations,” it states. OPA notes that for the Far North in general, the act “requires that all communities conduct land use planning prior to commencing the development of new transmission facilities.”

Sagatay forecasts construction starting in 2015 and its transmission line being in service the following year, said the company’s project manager, Tri Luu.

Both Sagatay and Wataynikaneyap are engaged in environmental assessment processes for their projects. In addition to requiring environmental assessment approval, “Before a company can start construction, the Ontario Energy Board must provide permission by approving the company’s ‘leave to construct’ application,” explained OPA’s Cannella. “These approval processes will be used to assess their filings,” he said, and ultimately to decide which project proceeds.
As for a proponent to provide transmission to the remote First Nations in the Ring of Fire subsystem, OPA wasn’t aware of any as of Sept. 20, Cannella said.

Matawa First Nations are “looking at all options” for a transmission line that would serve their communities in the Ring of Fire area, said Ferris, but lacked resources needed to conduct detailed feasibility studies.

Wataynikaneyap indicates on its website that it would consider expansion of its project to serve additional customers if requested. It specifies potential expansion to remote communities to the east, near the Ring of Fire, and to the Ring of Fire itself.

Ferris said Matawa hasn’t ruled out joining the Wataynikaneyap partnership to develop transmission to its communities from Pickle Lake. “Matawa First Nations are looking into the potential of this partnership and must not cross out any options at this time,” he said in October. “Again, it goes back to conducting the feasibility studies so that the First Nations can make good, informed decisions.”

As for the big picture potential of providing clean, reliable hydro power to remote First Nations and mines, “I do believe this is the best we’ve seen for electrifying the North in years or decades … ever,” Doran says.

Comments are closed.