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Yellowknifers to vote on energy system
City asking permission to borrow up to $49 million to move forward with Con Mine community energy system Monday

Nicole Veerman
Northern News Services
Published Friday, March 11, 2011

SOMBA K'E/YELLOWKNIFE - Yellowknifers have a few days left to pick a side in the Con Mine community energy system debate.

In a referendum Monday, the city will ask residents for permission to borrow up to $49 million to move forward with the proposed energy system.

Voting details

Who: Canadian citizens over 18 years of age, who have lived in Yellowknife for at least a year.

When: March 14 from 10 a.m. to 7 p.m.

Where: Residents living in Great Slave, Weledeh and Yk Centre vote at City Hall.

Residents living in Frame Lake, Range Lake and Kam Lake vote at the Multiplex Gym.

The question:

Do you approve of the city enacting Bylaw No. 4620, a bylaw authorizing the city to acquire debt on the security of which may be borrowed sums not exceeding $49 million for the purpose of financing the city's capital investment in a district energy system?

Funds spent to date on project

Since 2008, $555,366 has been spent on the Con Mine community energy system.

Of that, $274,600 was spent between 2008 and 2009, mostly on a feasibility study that was completed by the Science Applications International Corporation, said Carl Bird, the city's director of corporate services.

Since then, from 2010 to now, the city has spent $280,766 on developing a business case and financial analysis for the project, he said.

"It also includes the work that we're doing right now in following up on the financial analysis that was done and the work that we're doing now with public information sessions and stuff like that," Bird said.

Also included is the cost of hiring consultants, like University of Alberta Professor Richard Dixon, who has been working with the city doing scenario-based thinking to ensure the project is economically feasible.

In the 2011 budget, there is $250,000 allotted to the project.

"Most of that is available because most of the money that was spent so far was spent in 2010 and was covered by our 2010 budget," said Bird, who also pointed out all of the money spent to date has come from the territorial and federal government.

Bird said the city won't spend any borrowed funds or the $14.1 million grant promised by the federal government - pending the vote comes out 'yes' - until it reaches the stage where the city has committed to putting shovels in the ground, which is supposed to happen in fall 2011.

Borrowed funds incurred by the project will be repaid by energy revenues from the system.

If residents vote yes, the city will receive a $14.1-million grant from the federal government for the geothermal portion of the project. The grant depends on the city's ability to prove it has the funds to move forward with the $60.4 million system.

Although the city acknowledged that all of the assumptions in its investment analysis, which the project is being based on, haven't been answered - including what the price of the utility will be, what the agreement with a private partner will look like and how much of the system will be geothermal and how much will be wood pellet boilers - it is asking residents to cast a yes vote, so those questions can be answered.

"If enough people vote yes, we can then proceed to the next step of our due diligence to see if this Con Mine community energy system project is right for the people of Yellowknife," said city councillor Bob Brooks at a public debate on Tuesday. "I truly hope that you allow us to try."

The system being proposed will heat 39 downtown buildings with a mixture of heat from wood-pellet boilers and geothermal energy.

This involves pumping hot water - warmed by the earth's geothermal energy - from within the mine shaft to the surface where it will be further warmed by heat pumps and wood pellet boilers.

The hot water would then be sent through a series of pipes to heat the city's largest downtown buildings before it is returned to the mine to be reheated.

In the investment analysis for the project, written by Vancouver-based Compass Resource Management, it says the project is viable if water temperatures are 20 C or higher.

"From the business case point of view, we've assumed some very low temperatures," said Bob Long, the city's senior administrator. "So the business case is extremely conservative."

The higher the water temperature, the more mine energy there is and the fewer wood-pellets would have to be used. This will affect the design of the system, including the size of the heat pumps and boilers.

The mine water temperature hasn't yet been verified by further testing.

Long said testing will be part of the city's next steps towards proving the project and will likely take place this summer, after a private partner has been selected.

If Monday's vote is to come out in favour of the project, the city's will then sign a memorandum of understanding with one of the three private sector firms that have submitted proposals to partner with the city in the project. The names of the interested parties have not yet been released.

The city hopes to share the risk and cost of the project with a partner. The chosen partner would be responsible for designing, building and operating the system for a number of years.

Mark Henry, the city's energy co-ordinator, said the city can either share ownership and operations with a private sector partner or it can sell the resource to a private company that will own and operate the system.

"Our preferred option: the city would be the owner of the distribution assets - the pipes in the ground - and the partner would be responsible for the generation (of energy)," Henry said.

The pipes the city intends to install will stretch from Con Mine to downtown, connecting 39 of the buildings with the largest energy needs. This includes Yk Centre Mall, Anderson Thomson Tower, the Greenstone Building, Explorer Hotel and City Hall.

The city hasn't yet signed contracts with any of the building owners, but have been out gauging interest. Three building owners in the proposed service area told Yellowknifer they're interested, but on the condition that the city ensures the utility is cheaper than oil, pays for hook up - as it has promised - and gives building owners the opportunity to sign short-term contracts.

Long said the city is looking at signing long-term contracts with the building owners, but the agreement might be similar to a mortgage, where you sign on in pieces.

"The mortgage is calculated for the whole 20-year period, and in fact you have an obligation for that long a period, but you get to renegotiate the rate at certain junctions in that mortgage."

The revenue from energy sales is intended to pay back any interest and principal on a potential loan, as well as administration costs incurred by the project.

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