Environmental and Supply Chain Considerations in Planning Large Scale Construction Projects

1. Environmental and Supply Chain Considerations in Planning Large Scale Construction Projects 10 June 2008

2. What’s driving the change agenda? What can we do now? What’s the business context? Structure of Today’s presentation

3. Project Complexity Technology Geography Fixed Schedule Modal Energy and GHG Impact Supply Chain Costs Marine Rail Truck Air What’s driving the change agenda? Considerations Drivers

4. But Large Scale Construction Projects Have a Life of Their Own • Time Definite • economic value of coming on stream on schedule • supply constraints – mix of long-lead items (ETO), JIT/off-the-shelf, • opportunity cost of failing to meet schedule, which • affects technology decisions (tried & true vs new, leading edge) • Processing Technology selection • impacts construction strategy - whether constructed on site or modularized off-site • affects sourcing decisions, which • affects transportation decisions • Geographic Specific – ie. Where resources are • infrastructure access to site governs modal choice both for finished/processed goods and inbound equipment and materials • E.g. upgraders located in Fort McMurray area or in Edmonton area

5. And Companies Have to Consider the Business Context CONTEXT MAP “Competition” “Public Policy” Many No. of Projects Underway in Region Competition for infrastructure “Conventional” “Proprietary!” Few 1-2 5-50 No. of Years of Project Activity Learning curve, develop support infrastructure

6. “Better” Then recognize that our transport mode choices affect the environment Source: Energy Use Data Handbook, 1990-2005, Transportation Tables 8 and 9.

7. Road Ocean-Rail-Road Via east coast ports /St Lawrence Seaway Ocean-Rail-Road Via west coast ports Air-Road Ocean-Rail-Road via Gulf Coast Rail-Road For the most part – projects are concerned with modal combinations • Sourcing decisions: • AsiaPac • Europe and Baltic States • The Americas

8. But it Does Boil Down to the Last Mile – Rail vs Road?

9. And, Road Infrastructure Needs Upgrading

10. Total Logistics Cost Warehousing & Handling Add in Environmental Costs Transportation We need to remember what costs we are talking about…. $ Cost Air Truck Rail Marine Pipeline Volume/Shipment Size

11. Add in Environmental Costs Cost = either truck or rail+handling Vs portfolio of direct and staged deliveries Consider alternatives - direct delivery vs a staged delivery…. $ Cost Air Truck Rail Volume/Shipment Size

12. What can we do now? • Improve logistics planning early in the project management cycle to reflect effect of environmental issues on mode choice and direct delivery vs staged deliveries decisions. • Increase use of the Athabaska Northern Railway Ltd. (CN Rail) line – use domestic containers operating in a closed loop between Edmonton and construction sites in Fort McMurray area. • Adapt carrier selection criteria to include environmental considerations on fuel management and GHG emission controls. • Watch use of bio-fuels (“good” and “bad” sources) • Go paperless – electronic invoices and EFT • Select terminal/warehouse operators considering their “green” programs. • Facility design • Energy management • Water management • Waste management