March 30, 2016 by Sara Tatelman
The 137-kilometre highway running north from Inuvik to Tuktoyaktuk, N.W.T. will cost the federal and territorial governments at least $299 million to build. But the price tag should be a lot higher, says Gray Taylor, an environmental lawyer and principal at Gray Taylor Law in Toronto. Like many projects in the Canadian North, the highway is being built on permafrost. Should that melt, the road will crack and buckle. Any money saved from not preventing the damage, Taylor points out, will simply be spent to maintain and repair it.
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“To protect the permafrost… the ground will not be cut into,” the territorial government says on its Department of Transportation website. “Instead, to reinforce the road, geotextile fabric will be placed between the existing ground and the construction materials along the entire highway.”
But permafrost can thaw even without construction interference— the Arctic has been warming twice as fast as the rest of the planet, the U.S. National Oceanic and Atmospheric Administration reported in 2014, and that will eventually hit the permafrost on which homes, roads and airports are built. So in the territories, “you get freeze and thaw cycles,” says Carl Spensieri, an environment underwriter at Berkley Canada in Toronto. “And so when permafrost thaws, you typically see it settle, and of course… the structure becomes unstable.” For a road, that means the risk of developing sinkholes and becoming impossible to drive on (and, if it was built as part of a public-private partnership, charging tolls).
“The international goal is to keep the increase in temperature at two degrees centigrade from preindustrial times,” says Taylor. “I don’t think there’s anybody who thinks that we’re going to do much better than that. But there are a lot of people, including me, who think the chances of us limiting the increase in temperature to two degrees are actually quite small.” So all new infrastructure projects—not just roads—should be built to withstand at least a 2°C temperature increase.
Moreover, roads, pipelines and wastewater treatment plants are often used for longer than they’re intended to. “It’s not unreasonable to say that something that’s designed for 25 years actually operates for 35 or 50,” says Spensieri. “As a best practice, you may actually want to look beyond the design life.”
And that’s where insurance kicks in. “If you are asking someone for more money so that you can build something to be more resilient,” says Spensieri, “usually the conversation at some point comes back to insurance, where someone will say, ‘well okay, if you’re spending this additional money, can you at least now get insurance to cover that risk, that you supposedly mitigated against?’”
Oftentimes, to get insurance, a developer must take numerous preventative measures. Before insuring a pipeline, for example, Spensieri and his team ask “how is that pipeline built and if it is travelling anywhere in Canada that’s subject to more severe flooding events, which could cause mudslides [and] slope stability issues.”
Even if an insurer chooses not to cover a pipeline, its breakdown could affect the company’s finances “because people’s basements are going to get flooded and highways are going to sink,” says Taylor. And the insurer may very well have underwritten some of those structures.
He foresees insurers and governments pressuring pipeline companies to build to “a higher standard” and eliminate imperfectly sealed joints that would allow methane to leak out, especially since one ton of methane in the atmosphere is the equivalent to 21 tons of carbon dioxide. “The damage is being caused by your emissions so… you should pay. If you’re not going to spend the money to stop those small amounts of fugitive emissions that have a big impact, we’re going to charge you for them.”
Copyright © 2016 Transcontinental Media G.P. This article first appeared in the March 2016 edition of Canadian Insurance Top Broker magazine
This story was originally published by Canadian Insurance Top Broker.