If one word sticks out in any discussion of government – federal, provincial, or municipal – priorities these days, it would be “infrastructure.”
But the scope and scale of what that word encompasses has expanded monumentally, lawyers who practise in this area say. While infrastructure’s role in government policy has traditionally involved financing large-scale projects such as roads, hospitals, and public transit, public discussion on infrastructure now includes much-needed development in areas like housing, internet broadband for isolated communities, and whatever is needed to transition to a “clean, green” economy.
Importantly, it’s about how these elements come together to develop a vibrant economy, says Bruce Reynolds, co-managing partner at Singleton Urquhart Reynolds Vogel LLP. He makes the analogy with the city-building video game SimCity that his children introduced to him as they were growing up.
“I was absolutely fascinated with SimCity,” he says. “You can see the effect of, say, building a bridge across a river that separates two sides of a city or the impact of extending a road into an area that is ripe for suburban development. What you immediately appreciate in the SimCity environment is the profound effect of the additional elements of connectivity that empower the flow of commerce and the growth of housing and related services for the public.”
Reynolds adds that governments at all levels have come to appreciate the significance of making public money available to “facilitate this type of economic growth and activity.”
He notes that electricity is one of the most significant infrastructure needs for developing a vibrant economy today, keeping the climate in mind. “You need to have a very strong, stable, and continuous source of energy to accommodate the types of development we’re talking about.”
Infrastructure as part of larger socioeconomic strategy
Reynolds’ colleague Sharon Vogel points out that infrastructure is now part of an overarching socioeconomic strategy. “Our conception of what is public infrastructure has changed. As society has developed and grown, there’s increasing importance placed on how infrastructure can meet larger objectives.”
She says one of the best examples is the role of public transit in achieving economic growth goals while addressing human impact on the climate.
“If you have better public transit, people may not need to drive their cars,” which helps the environment, she says. However, better public transit – such as adding an LRT line and a rail station – achieves other “social infrastructure” goals, such as housing, especially as Canada and its major cities experience a growing crisis in affordable rents, home prices, and mortgage costs.
Infrastructure enhancements are also seen as a way of growing and expanding the economy. For example, Vogel says a mining project to develop Canada’s supply of critical minerals – part of the energy transition – is typically private. However, constructing a mine can “involve much-needed public infrastructure” – access roads, airstrips, electricity, and even housing, even if the location is remote.
All levels of government trying to work together
Ted Betts, head of the infrastructure and construction group at Gowling WLG, notes that large cities – Toronto, Vancouver, Montreal, Edmonton, and Calgary – are increasing their public transit network.
He notes that there have also been more announcements on dealing with the affordable housing crisis, as the federal government puts itself front and centre with pledges of billions of dollars in new money for infrastructure despite putting caveats on how provinces and municipalities will access that funding.
Announced before the federal budget was presented in Parliament in mid-April, the new $6billion Canada Housing Infrastructure Fund includes $1 billion toward the construction and upgrading of water, wastewater, stormwater, and solid waste infrastructure, projects that cities say are critical to building more housing.
The other $5 billion pledged will be set aside for provinces and territories – but they can only access the money if they agree to specific commitments, such as allowing more “missing middle” homes such as duplexes, triplexes, townhouses, and multi-unit buildings.
While about $1 billion is set aside for “shovel-ready” projects, the rest will be spread over a more extended period and subject to negotiations with the provinces and territories, some of which are already balking against the strings attached.
For example, Ontario Premier Doug Ford has rejected allowing fourplexes to be built automatically across the provinces. At the same time, Ottawa wants such structures to be built “as of right.” Quebec has also long maintained that municipalities fall under provincial jurisdiction, and any money destined for cities and towns must flow through the Quebec government.
On the other hand, British Columbia Premier David Eby welcomed the prospect of money and called on the federal government to hold firm to the conditions it has set.
Betts, however, says he’s generally optimistic that this housing infrastructure money will flow and the various levels of government will come to agreements with Ottawa. “There’s always posturing,” he says. “But in the end, the priorities of governments are generally aligned.”
With housing, especially, there is pressure to deal with skyrocketing rents and home prices, which can dramatically impact a city’s economy if people don’t think they can live there. Betts says there needs to be incentives to build homes as quickly and efficiently as possible.
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He also notes that infrastructure projects are “getting bigger and bigger.” This often means firms coming together as a consortium to meet the scale of needed construction and higher levels of government getting more involved in projects previously seen as a municipal responsibility.
The importance of affordable housing and public transit
Jason Annibale, partner and co-leader of McMillan LLP’s construction and infrastructure group, also notes that “there is a recognition that there is a housing and an infrastructure deficit – and both have reached critical levels where governments need to co-operate” despite philosophical differences if they want to access the federal money being made available.
But creating more affordable housing isn’t just about building more homes or rental units, Annibale says. Solving that problem means increasing density in larger cities, which means there will be a need for other infrastructure – schools, sewage systems, hospitals, and public transit.
In particular, building more transit-oriented communities that rely on LRT or subways connected to the larger metropolitan area is vital. However, creating these large transit projects will also mean “some pain when it comes to moving around,” as people in Toronto are experiencing as the new Ontario Line is being built.
“This vision of transit-oriented communities effectively connecting everywhere is challenging,” he says, “but the priorities of housing and transit are important.”
Annibale adds that while there may be differences in the details, “Pretty much everyone, on the left or right, believes that building public transit is a central tenant, and it will still be 20 years from now and beyond.”
Brian Kelsall, partner with Fasken Martineau DuMoulin LLP in Toronto, with a practice focused on project finance and infrastructure development, agrees that jurisdictional issues can complicate infrastructure projects, especially as Ottawa wants to insert itself more into how these developments are funded, designed, and built.
“There is no doubt that the feds are focused on infrastructure,” he says, which has often been under the purview of provincial governments. “The federal government recognizes a massive need for infrastructure in all areas and has taken some concrete steps.”Kelsall adds that while the Canadian Infrastructure Bank, created in 2017 to support revenue-generating projects in the public interest with public and private money, got off to a slow start, it has since made progress.
The infrastructure bank has “been more and more successful” in identifying needs, solving problems, and taking on risk while broadening the sectors it will support. These include projects such as electric vehicle charging stations, a terminal at the Port of Montreal, and investment in “enabling infrastructure” to develop critical minerals, such as access roads, clean power generation and transmission, and wastewater management facilities.
A ‘golden age’ for infrastructure as we try to catch up
While there is a lot to be done to catch up on infrastructure, the very fact that its importance is recognized can’t be underestimated.
“We’re in a bit of what I might call a ‘golden age,’” says Brad Nicpon, a partner in McCarthy Tétrault LLP’s real property and planning group in Toronto. He notes that over the years, “there were times when things weren’t getting built, but there now is an absolute explosion of new infrastructure projects.” This is not only to catch up on what wasn’t done in the past but to deal with the impact of Canada’s increasing population, much of it through immigration.
He adds that one of the most significant needs is more electric power “as we enter a phase of energy transition and meeting climate goals.” For example, a network of electric vehicle charging stations is a type of infrastructure that will need to be encouraged as we move away from fossil-fueled vehicles.
Other infrastructure goals that governments feel the need to include, along with priorities such as housing, are elements of “digital infrastructure,” such as broadband, fibre optics, and satellites. This will be especially important in remote areas and northern Canada, as energy and mining projects, for instance, will need better connectivity.
Doing these projects cost-effectively and efficiently can pose challenges, says Doug Sanders, partner at Borden Ladner Gervais LLP. Public and private sector owners “want price certainty,” he says, “but the construction world is increasingly uncertain. Contractors are facing skilled labour shortages and supply chain challenges, and increasing project size and complexity is adding risk.” This “drives up their contingencies and increases overall project costs.”
Participants in infrastructure projects joining forces
As the scale of infrastructure projects grows, Sanders says various players are joining forces. The Canadian market is such that a $5 billion project is unlikely to be done by one major participant, he notes. Working as partners lowers the risk profile but also means fewer individual bids as different groups team up. A realistically costed project on track to completion is preferable to a single bidder that can’t complete the job.
Sanders notes that governments and participants are dramatically changing how they deliver projects to meet these challenges. For instance, the use of “collaborative models” to accelerate projects is growing, which requires “sophisticated teams” – including lawyers – to move infrastructure projects more efficiently.
Sanders’ colleague Patricia Morrison adds that lawyers can help project owners and contractors better understand risk profiles and the best delivery models.
It’s essential that all parties – owners, contractor, other participants – “understand the models that they’re using, and are fully informed and have the right people involved to assist them,” she says. “We really need to educate the industry on this – it’s improving, but there’s still work to be done.”
Morrison says lawyers in the practice of infrastructure law and its subset, construction law, are an integral part of keeping projects going smoothly, negotiating contracts, and finding ways to resolve disputes when they arise. But she adds that the larger realm of infrastructure law encompasses much more.
“Our role can come at the very beginning of project development, and all the way through to the end of the project,” she says. “That could include permitting and development, project finance, procurement and the delivery model, project execution and tendering, and advising clients on how to avoid disputes and settle them if they arise.”