Study questions benefits of Kinder Morgan’s proposed Trans Mountain expansion

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CALGARY – Kinder Morgan is overplaying the economic benefits and downplaying the costs of its proposed Trans Mountain pipeline expansion, according to a report released Monday.

Simon Fraser University’s Centre for Public Policy Research teamed with The Goodman Group Ltd., a California-based consulting firm, to examine the estimated impacts of the project.

The report “strongly recommends that the citizens and decision-makers of B.C. and Metro Vancouver reject this pipeline, which is neither in the economic nor public interest of B.C. and Metro Vancouver.”

The Trans Mountain pipeline currently ships 300,000 barrels of petroleum products per day from the Edmonton area to the West Coast. The $5.4-billion expansion would nearly triple its capacity to 890,000 barrels a day, enabling crude exports to Asia via the Vancouver area.

In its regulatory application to the National Energy Board late last year, Kinder Morgan included an analysis by the Conference Board of Canada, an economic think-tank based in Ottawa. The conference board estimated 36,000 person-years of employment in B.C. while the pipeline was being built.

Monday’s report disputes those numbers, saying expected employment during construction would be about a third of that — 12,000 person years, tops. That’s less than less than 0.2 per cent of total provincial employment.

The number of long-term jobs is also overstated, according to the SFU-Goodman report.

Kinder Morgan has projected 50 direct full-time jobs once the pipeline is up and running, with 2,000 resulting from the project’s spinoff benefits. The report pegs the spinoff jobs at closer to 800.

The report’s authors say B.C. government coffers will get a “tiny” benefit from the Trans Mountain expansion, with Alberta and oilsands producers the main beneficiaries. Property tax benefits for B.C. communities along the route would average less than one per cent of current total municipal revenues.

“B.C. is not getting its fair share of benefits from this project,” said Ian Goodman, president of The Goodman Group.

On the cost side, the report also takes issue with Kinder Morgan’s numbers. The company’s most expensive spill scenario puts the cost at $100 million to $300 million. Brigid Rowan, senior energy economist with the Goodman Group, said a large spill in a highly populated area like Metro Vancouver could cost up to $5 billion.

“Putting it all together, the benefits are not as good as we’ve been told, but the costs are much worse,” she said.

Past research by The Goodman Group has taken aim at other projects’ stated economic benefits, such as Enbridge Inc.’s (TSX:ENB) Line 9 reversal between southern Ontario and Montreal and TransCanada Corp.’s (TSX:TRP) Keystone XL pipeline to the U.S.

The study’s authors hope their findings make their way to key decision-makers weighing Kinder Morgan’s proposal, whether that’s the B.C. government or the National Energy Board. They welcome anyone participating in the NEB process, currently underway, to include the report as evidence in their filings.

“It’s important to have this report entered into the public debate and become a part of the review that goes on with respect to this project and also be something that decision-makers, as this moves forward, have available to them,” said Doug McArthur, director of the graduate school of public policy at SFU

“In all cases, we believe the findings will lead people to believe this project is really questionable.”

Kinder Morgan referred inquiries to the Conference Board.

Michael Burt, director of the think-tank’s industrial economic trends group, said it used a “very well established methodology” — Statistics Canada’s input-output model — to come up with its figures.

“This is the established tool for doing these sorts of analyses,” he said, adding the SFU-Goodman Group report uses a methodology “that we just wouldn’t agree is appropriate.”

“Broadly, I would say our numbers use a good methodology, a sound methodology and broadly speaking the assumptions underneath are conservative assumptions.”

University of Alberta economist Andrew Leach said he takes issue with how pipeline firms have been touting the jobs their projects would create as a means to justify them to the public.

Many economic analyses he’s seen assume pipelines are built “in a vacuum,” but that doesn’t reflect reality. For instance, if a particular project doesn’t go ahead, it doesn’t necessarily follow that throngs of pipefitters and engineers will be out of work. Rather, they may find jobs elsewhere in the oilpatch, or related to an alternative means of transport, such as rail.

More and more, people have been thinking of pipelines as stimulus projects, said Leach. But unlike a refurbished highway, pipelines are being paid for with private, not taxpayer, dollars.

The point in building a pipeline is to move crude oil to its destination in the most cost-effective way possible. So to brag about how much will be spent on labour defies logic, he said.

“You essentially create this situation where the pipeline companies is arguing that their pipeline is going to be more expensive than their opponents are arguing it is going to be, which doesn’t really make sense,” he said.

“It’s just backwards to me.”

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