Canada: Dealing With Challenges In Northern Mine-Related Constructions Projects

The boom in exploration and mining activity in the North has resulted in an increase in the demand for infrastructure. Projects underway or in development include those designed to efficiently transport product, equipment, and labour to and from various remote mining sites.

One of the more ambitious projects in the works is the construction of a 150-km railway on northern Baffin Island which will facilitate the transport of iron ore from the Mary River iron mine project to a port at Steensby Inlet 300 days a year. Construction is expected to take three to four years and may begin as early as next year, depending on environmental hearings and the permitting processes.

Another proposed project is for the construction of a 1,300 km all-weather road to connect Rankin Inlet with northern Manitoba, estimated to cost $1.2 billion for which a cost benefit analysis has been performed. If this project proceeds, it would be the first highway connecting Nunavut to the provinces.

Various other infrastructure construction projects, including ports and airport expansions, are also being considered or are in the works. Whatever the nature of the project, construction can be challenging in Canada's North. Recognition of these challenges and the need to allocate the resulting risks appropriately are critical elements of negotiating construction agreements on northern projects.

By way of example, designers on northern projects must ensure that specified building materials can withstand the northern freeze-thaw cycle. The thaw of permafrost must also be taken into consideration. Historically, construction projects were designed on the assumption that the permafrost would stay frozen and act as an adequate foundation. However, given current climatic conditions, structures built on permafrost with insufficient supports can become unstable, settle, and crack, when the permafrost thaws. Construction design in the North must therefore take potential climate change issues into consideration and adopt practices and technologies that will limit the thaw of permafrost and the subsequent movement of structures. The failure to account for northern conditions can result in claims for faulty design. In the process of drafting contracts with designers on northern projects, the applicable standard of care must be clearly described so that the parties appropriately allocate the risk of design errors and ensure that adequate insurance coverage is put in place.

The availability of skilled trades people and a trained workforce in northern Canada is also a significant issue to be addressed when embarking on a northern construction project. A 2011 Conference Board of Canada report concluded that the increase in government infrastructure spending will require either importing labourers from other regions and/ or training skilled labour. The Canadian Northern Economic Development Agency announced in early 2012 that it would partner with Skills Canada to build capacity in the North by providing youth with a low-risk, low-cost opportunity to explore skilled trades and the technology sector. The experience and capacity of the local construction industry continues to grow, but the current training programs in place may not be able to meet the growing demand for skilled labour such that labour shortages may result. At the same time, bid preferences for the use of local businesses and labour are applied in the tendering of many construction projects. It is important that in the course of negotiating the terms and conditions of a construction project in the North, parties understand their contractual obligations with respect to labour requirements.

In addition, ensuring that construction projects stay on schedule in the North can be a difficult task.

The timely shipping of materials and equipment may be difficult, particularly given the short sealift shipping season which typically runs from August to September. Shipments must be planned well in advance of when the materials or equipment are actually needed on site. It is also important to ensure that shipments contain all necessary materials and equipment required because it may not be possible to rectify a shipment error if the shipping season is near its end. Winter ice roads can also be used to transport materials, equipment, and labour but the reliability and operating times of winter roads and ice bridges have decreased in recent years due to climate change. Construction contracts and supply contracts to the project must take into account these challenges.

Of course, challenges related to design, workmanship, and delay exist on any construction project no matter where it is located, but these challenges are exacerbated in the North given logistical and climate conditions. Many of these risks can be anticipated and minimized to the extent possible during a project's planning stages and risks can be appropriately allocated in construction contracts.

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