03 May 2016

Province to spend $750K to study feasibility of hole in the ground #nlpoli

At a time when the provincial government does not have any money to spend foolishly, it is hard to fathom why cabinet is taxing books to raise $1.0 million and yet spending $750,000 through the Environment and Conservation department to update a feasibility study done in 2004 into building a tunnel to connect the Great Northern Peninsula to Labrador.

It is putting a tax on knowledge to pay for stupidity.

We are talking about the Stunnel, or Stunned Tunnel. Regular readers will recall the Stunnel idea got some powerful support in 2003.  You'll find a post in 2005 that described the project as it stood a year or two earlier:
The Stunnel "would cost $1.3 billion or thereabouts. It would need an average of 1400 cars travelling across it per day, with a peak of 3, 000 per day, in order to be viable. Proponents also claim it would produce upwards of 40, 000 direct and indirect job during construction, although this would last for a total of three years. Using the ever popular argument, proponents say the Stunnel would be an engineering marvel and attract tourists from around the world. "
The original feasibility study cost only $100,000. As SRBP summarised in early 2005,  the study concluded you could build the cheapest option - a bored tunnel that ran an electric train back and forth - for about $1.7 billion. The government would have to put in pretty much all of that and it would take 11 years to finish.

We don't need to spend seven and a half times that much to figure out how crazy the Stunnel idea still is.
Go back and check the original feasibility study.  It looked at a 17 kilometre fixed link.

The cheapest options were a bored road tunnel at a cost of  $1.559 billion, exclusive of interest cost, and a bored train tunnel at a cost of about $1.2 billion, not including interest.  That's a cost of $92 million per kilometre for the road tunnel and $71 million per kilometre for the rail tunnel.

If you did a straight inflation escalation, that would give us $1.477 billion for the rail tunnel and $1.919 for the road tunnel.  Experience with Muskrat Falls, though, suggests that might not be enough.  Even if the revised feasibility study comes back with that kind of rate, we'd be safer applying the experienced engineer's rule from Muskrat Falls and multiply that figure by 2.5 to get a more likely price.

Now we are talking $3.75 billion for the rail tunnel and $4.75 billion for the road.

Worst case for our purposes:  a 2011 cost per kilometre estimate for Toronto's new subway lines at $300 million a kilometre.  That would give you a cost of around $5.0 billion for 17 kilometres of tunnel.   That's actually not far off the inflation plus 2.5 times we got for the road tunnel.

Before you go any further,  and regardless of anything else, understand that you would have to borrow all that money in order to build this new tunnel. On top of the $15 billion we currently owe and the $8 billion the government will add over the next decade, and with whatever Muskrat Falls would add on top of that again,  you would be adding at least $ 4 billion to the total public debt on top of that.

That would be at least $27 billion.  And that's assuming the government is able to hold their planned addition to the public debt for the next decade at a mere eight billion.

Financially, the Stunnel is just not feasible on the face of it.

Then there's the question of traffic. The Stunnel wouldn't go anywhere,  well, not unless Quebec finishes Route 138 along the north shore of the St. Lawrence.  Even if that Route was complete, you would be diverting surface traffic from the island away from the Maritimes through the sparsely populated stretch of southern Labrador and Quebec until you get to Quebec City.

All of that wouldn't be driven by the economics of finding the most efficient way to get goods to the market in Newfoundland.  It would be driven by lunatic politics of the sort that built Muskrat Falls and got the province into its current financial mess in the first place.

If all of that doesn't convince you this is a ridiculous idea, imagine for a moment that we might be ultimately looking at a project that will escalate in cost like the feasibility study.  That would make the Stunnel a $9 billion project, precisely on par with Muskrat Fall both in the stupidity behind it and the devastation it would bring to the public treasury.

Budgets are about choices.  This one reveals a lot.  The politicians decided to close a bunch of libraries because they couldn't afford them.  The politicians could find the money, though, to investigate a gigantic hole in the ground.

We are spending good money for nothing and the politicians will get even harder kicks from their opponents for free.