Public-private partnerships, also known as P3s, will be considered as a mechanism for building the power supply, roads and other assets needed to enable mining development in the Ring of Fire. Dale Booth, who has held senior positions with the Assembly of First Nations (AFN) and the department of Aboriginal Affairs and Northern Development (AANDC), is sure of it.
“I can guarantee it, P3s are going to be … looked at very closely for the Ring of Fire, and not only for the power transmission, not only the transportation,” Booth predicted during a presentation on the topic at the Ontario Mining Forum in June.
The P3 model should also be considered for building infrastructure in First Nations near the Ring of Fire and elsewhere, said Booth, president of Tiree Innovation, a First Nations company located in the Mohawk community of Akwesasne.
“It allows communities access to external capital for their infrastructure and … it’s an effective model to get things done on time and on budget,” he said.
How does the P3 model work? Essentially, federal and provincial governments fund and finance the infrastructure, along with private equity sources, Booth explained, and a private sector partner builds and maintains it.
The P3 model has been applied to more than 200 projects across Canada, from roads to schools to hospitals, although the approach is relatively new to First Nations, said Mark Romoff, president and CEO of the Canadian Council for Public-Private Partnerships. He sat as a panelist alongside Booth at the Mining Forum in Thunder Bay. “First Nations are facing infrastructure deficits at a time of fiscal challenge, so it’s now increasingly attractive to look at,” Romoff said.
Added Booth, formerly chief executive officer of the Assembly of First Nations: “In First Nations … there’s a huge infrastructure gap. The chiefs and the councillors and community members who are here, they know what that looks like.” In Webequie First Nation near the Ring of Fire, for example, results of a study made public last year indicated it would take $28 million to bring the First Nation’s infrastructure – roads, housing, garbage disposal, and water and sewage treatment – up to the Canadian standard.
Mining development in the Ring of Fire could further stress infrastructure in surrounding First Nations, Booth suggested. “There are going to be lots and lots of people coming up into the communities, and your community may need new water and wastewater facilities, may need new schools, may need new housing, may need new infrastructure assets, to be able to accept all of those new people.”
P3s aren’t the only solution, he said. “It’s a tool in the toolkit.”
Once a P3 is in place, it’s private contractors who troubleshoot infrastructure problems.
“Chiefs have told me assets are not lasting for their intended life cycle; they’re rusting out early,” said Booth. “Central to this P3 model is … if the asset doesn’t perform for that period of time, it is the responsibility of the contractor, the private sector, to fix that problem. For example with a school, you have a contractor responsible for the operation and maintenance, and if the heat goes out or there’s a water leak, that’s not your responsibility.”
Community support for a P3 project is especially important before proceeding because you’re getting into a long-term relationship with the private sector, for 20-30 years, depending on the asset, Booth said. One important question to ask up front, he added: “Is the community ready for possible user fees in order to pay for the asset?”
P3s also require a different way of looking at infrastructure assets. “You’re buying a service,” Booth explained. “When you’re getting a water treatment facility built … you’re buying so many cubic metres of fresh water. That’s what you’re getting.”
Bundling Projects
To attract an experienced private sector provider to a P3 project, the target value of the project should be about $100 million, said Booth, and will likely require “bundling” as one smaller projects from several First Nations. “You need to explore doing this at the regional and tribal council level.” Matawa First Nations already working together on regional issues around the Ring of Fire may be well positioned to do this, he observed.
As for federal funding for P3 projects of up to 30 years, Aboriginal Affairs would have to deviate from its existing funding mechanisms that only cover up to five years, Booth added. “They are starting to do it now. There are two projects that they are currently backing and they are looking at how they can make these projects happen.”
He described the projects.
In one case, there are four First Nations in Manitoba that are in the “conceptualization stage” of bundling construction of schools together under one P3 contract.
The other case involves the Atlantic Policy Congress of Chiefs bundling 33 community water and wastewater facilities under a single P3 contract. “They’ve been resourced by AANDC, both regional and headquarters, to put together their project team and it’s moving forward,” Booth said. “This is one that if you’re a First Nations chief, councillor or member, you should be watching very closely to see and to learn how this project is going.”
To close the infrastructure gap, “Really, in the First Nations community, it’s new sources of capital that we’re looking for,” Booth said.