WHAT’S FUELLING OUR ECONOMY: Is Kinder Morgan’s Proposed Pipeline Inconsistent with New Economic Trends and Realities?

Report Compiled by Liz McDowell, Tarah Stafford and Felicity Lawong

Conversations for Responsible Economic Development (CRED)

November 2016

Executive Summary

British Columbia is leading economic growth in Canada, largely due to a diverse and thriving economy. Extractive industries, including oil and gas, play a surprisingly small role. The biggest sectors are real estate, construction and wholesale and retail trade.

Despite regional variation, Canada’s economy has some clear parallels to BC. Wholesale and retail trade and construction are thriving nationally, and the majority of the country’s jobs are found in wholesale and retail trade and the health sector, like in BC. Even before the price of oil began its steep decline in 2014, this sector was responsible for just 1% of employment across Canada, and provided very low tax contributions. It is the finance and insurance industries, as well as the manufacturing sector, that contribute the largest tax revenues toward social services.

The federal government has been faced with a difficult decision on whether or not to invest in the Kinder Morgan pipeline. Our analysis shows that the pipeline would create few jobs, minimal tax revenues and would not impact energy security or guarantee a long-term solution to Alberta’s ailing economy. The pipeline also comes with the additional concerns (and costs) of an oil spill. Beyond the direct clean-up costs, the indirect economic impacts would be long lasting, impacting sectors from tourism to agriculture.

It’s crucial that the federal government reject the KM pipeline and instead support sectors in BC that create family- sustaining jobs, make significant tax contributions, insulate the regional economy from boom-and-bust cycles, and promote economic growth compatible with Canada’s national climate commitments.

Our key findings:

  • BC Jobs: Technology, tourism, construction, film and television each create more jobs than oil, gas, and mining combined.
  • National trends are similar to BC: Oil and gas have a bigger role in Canada as a whole than in BC, but real estate, finance and manufacturing contribute more in federal corporate tax.
  • More people across Canada work in the beer economy than in the oil sands.
  • The proposed Kinder Morgan pipeline would only create 50 permanent jobs and generate an insignificantamount of taxes federally and provincially in BC.
  • A large oil spill could have a $1.2 billion impact on BC’s economy.
  • Canada’s emissions growth between 1990 and 2014 was driven primarily by increased emissions from mining and upstream oil and gas production and transport. Now that Canada has committed to a national climate plan, emissions from extractive sectors must be taken into consideration when considering project approvals.
  • Labour market outlook: Neither activity nor employment in Canada’s oil and gas industry will recover to levels prior to 2014’s steep decline in the industry.

Read more: http://credbc.ca/wp-content/uploads/2016/11/Whats-Fuelling-Our-Economy_KM_WEB.pdf

TAR SANDS: The Myth of Tidewater Access

The idea that greater pipeline capacity and access to tidewater would maximize the value Alberta receives for its tar sands crude is a standard talking point for industry, politicians, and other commentators in the ongoing oil price-induced recession in Alberta. With the province bearing significant consequences of the collapse of global oil prices, attention is rightfully focused on what can and should be done to support Alberta through, and out of, its economic rut.

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Crude Awakening: How the Keystone Veto Dashes Canada’s ‘Superpower’ Dreams

Oil prices are crashing and Obama has vetoed Keystone XL. Will Canada double down on its dirty tar sands?

Canada's-Economic-ImplosionBarack Obama’s veto of Keystone XL has placed the export pipeline for Canadian tar-sands crude on its deathbed. Earlier in February, the Environmental Protection Agency revealed that Keystone could spur 1.37 billion tons of excess carbon emissions — providing the State Department with all the scientific evidence required to spike the project, permanently. If the news has cheered climate activists across the globe, it also underscored the folly of Canada’s catastrophic quest, in recent years, to transform itself into a dirty-energy “superpower.”

Big Oil’s Big Lies About Alternative Energy »

In the minds of many American right-wingers, Canada may be a socialist hell-scape of universal health care and quasi-European welfare policies. But it is also home to 168 billion barrels of proven oil reserves, the third-largest in the world. Since ultraconservative Prime Minister Stephen Harper — famously described by one Canadian columnist as “our version of George W. Bush, minus the warmth and intellect” — took power in 2006, he’s quietly set his country on a course that seems to be straight from the Koch brothers’ road map. Harper, 55, has gutted environmental regulation and fast-tracked colossal projects to bring new oil to market. Under his leadership, Canada has also slashed corporate taxes and is eliminating 30,000 public-sector jobs.

Riding record-high oil prices,–$107 a barrel as recently as last June,–Harper’s big bet on Canadian crude appeared savvy. The oil boom had driven a seven percent surge in national income, helping Canada ride out the Great Recession with less anguish than most developed nations. And with fossil fuels swelling to nearly 40 percent of net exports, Harper’s Conservative government was on track to deliver a Tea Party twofer in advance of federal elections this fall: a budget surplus and a deep tax cut for the country’s richest earners.

But today, with the price of oil cut in half, the Canadian economy is staggering. Tar-sands producers have clawed back billions in planned investments and begun axing jobs by the thousands. The Canadian dollar, recently at parity with the U.S. dollar, has dipped to about 80 cents. Instead of a federal budget surplus, economists are now projecting a C$2.3 billion deficit. “The drop in oil prices,” said Stephen Poloz, the nation’s central banker, in January, “is unambiguously negative for the Canadian economy.”

If low oil prices hold, the pain will get worse. Most of Canada’s reserves are locked up in tar sands. The industrial operations required to get the oil from the ground to your gas tank are not only filthy and energy-intensive — generating up to double the greenhouse emissions of conventional oil — they also take years of construction to bring online. Because of investment decisions made during the boom years, tar-sands production is projected to expand by seven percent this year, exacerbating the glut. The collapse of crude is threatening to take Harper’s nearly decade-long rule down with it. Canada’s Liberal party, headed by 43-year-old Justin Trudeau (son of legendary Canadian PM Pierre), is running neck and neck in the polls, and bashing Harper where he used to be strongest — his management of the economy. “It’s not fiscally responsible,” said Trudeau in January, “to pin all your hopes on oil prices remaining high, and when they fall, being forced to make it up as they go along.”

As we, in the United States, consider the fate of our own massive oil reserves and confront the specter of yet another Bush presidency, Stephen Harper’s Canada offers a cautionary tale — about the economic and political havoc that can be unleashed when a first-world nation yokes itself to Tea Party economics and to the boom and bust of Big Oil.

Stephen Harper came of age in Alberta, a land of cowboys and oil rigs sometimes referred to as “Texas of the North.” He began his career in the mailroom of Imperial Oil (today an offshoot of Exxon). He rose through Parliament promising a revolution in federal affairs under the battle cry “The West wants in!” Following his election to prime minister in 2006, he wasted little time unveiling his plan to open up his nation’s vast oil reserves.

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The Impact of Tar Sands Pipeline Spills on Employment and the Economy

The Impact of Tar Sands Pipeline Spills on Employment and the Economy

Report Overview

In debates over proposed tar sands pipelines such as the TransCanada corporation’s Keystone XL, little attention has been given to the potentially negative impacts of pipeline spills on employment and the economy. The proposed route for the 1,700-mile Keystone XL pipeline cuts through America’s agricultural heartland, where farming, ranching, and tourism are major employers and economic engines. Ground or surface water contamination from a tar sands oil spill in this region could inflict significant economic damage, causing workers to lose jobs, businesses to close, and residents to relocate. Such a spill could also negatively impact the health of residents and their communities.

A Closer Look at Keystone XL’s Threat to Existing Jobs and Economic Sectors:

» The negative impacts on employment and the economy of tar sands pipelines like the Keystone XL have largely been ignored. To date, a comprehensive risk assessment for the proposed Keystone XL pipeline oil spill has not been conducted. Such an assessment would provide an independent review of the risk of spills and their economic consequences. Since the first Keystone pipeline began operation in June 2010, at least 35 spills have occurred in the U.S. and Canada. In its first year, the spill frequency for Keystone’s U.S. segment was 100 times higher than TransCanada forecast.

» The Keystone XL pipeline would cut through America’s breadbasket. Agricultural land and rangeland comprise 79 percent of the land that would be affected by the proposed Keystone XL pipeline. It would cross more than 1,700 bodies of water, including the Missouri and Yellowstone rivers and the Ogallala and Carrizo-Wilcox aquifers. The Ogallala Aquifer alone supplies 30 percent of the groundwater used for irrigation in the U.S. It also supplies two million people with drinking water.

» Farming, ranching, and tourism are major sources of employment along the Keystone XL pipeline’s proposed route. Water contamination resulting from a Keystone XL spill, or the cumulative effect of spills over the lifetime of the pipeline, would have significant economic costs and could result in job loss in these sectors. Approximately 571,000 workers are directly employed in the agricultural sector in the six states along the Keystone XL corridor. Total agricultural output for these states is about $76 billion annually.

» Many of the land areas and bodies of water that Keystone XL will cross provide recreational opportunities vital to the tourism industry. Keystone XL would traverse 90.5 miles of recreation and special interest areas, including federal public lands, state
parks and forests, and national historic trails. About 780,000 workers are employed in the tourism sector in the states along the Keystone XL pipeline. Tourism spending in these states totaled more than $67 billion in 2009.

» Recent experience has demonstrated that tar sands spills pose additional dangers to the public and present special challenges in terms of clean up. There is strong evidence that tar sands pipeline spills occur more frequently than spills from pipelines carrying conventional crude oil because of the diluted bitumen’s toxic, corrosive, and heavy composition. Tar sands oil spills have the potential to be more damaging than conventional crude oil spills because they are more difficult and more costly to clean up, and because they have the potential to pose more serious health risks. Therefore both the frequency and particular nature of the spills have negative economic implications.

» The Kalamazoo River tar sands spill affected the health of hundreds of residents, displaced residents, hurt businesses, and caused a loss of jobs. The largest tar sands oil spill in the U.S. occurred on the Kalamazoo River in Michigan in 2010. This spill is the most expensive tar sands pipeline oil spill in U.S. history, with overall costs estimated at $725 million.

» The public debate around Keystone XL has focused almost exclusively on job creation from the project, yet existing jobs and economic sectors could suffer significantly from one or more spills from Keystone XL. According to the U.S. State Department, the six states along the pipeline route are expected to gain a total of 20 permanent pipeline operation jobs. Meanwhile, the agricultural and tourism sectors are already a major employer in these states. Potential job losses to these sectors resulting from one or more spills from Keystone XL could be considerable.

» Renewable energy provides a safer route to creating new jobs and a sustainable environment. The U.S. is leading the world in renewable energy investments, and employment in this sector has expanded in recent years. For every $1 million invested in renewable and clean energy, 16.7 jobs are created. By contrast, $1 million invested in fossil fuels generates 5.3 jobs.

The full report can be downloaded here:http://www.ilr.cornell.edu/globallaborinstitute/research/upload/GLI_Impact-of-Tar-Sands-Pipeline-Spills.pdf

Pipelines & tankers | Conversations for Responsible Economic Development

Link to download the report: http://credbc.ca/pipelines/

Participating organizations | Conversations for Responsible Economic Development


Conversations for Responsible Economic Development highlights risks of Trans Mountain pipeline expansion | Georgia Straight


‘Canada Is Being Outplayed’ at Oil Wealth Game

[Editor’s note: The Tyee sent veteran energy issues journalist Mitchell Anderson to Norway to learn how it amassed a $600 billion oil savings fund for its population of under 5 million, a stark contrast to Canada. To finish the series we invited him to share his views on how those lessons could be applied here. With input from economist Robyn Allan, here they are.]

Why do we tolerate homelessness and poverty in Canada? Underfunding for our schools and health care system? Why is our government eliminating 20,000 public sector jobs in a supposed effort to balance the books?

Imagine instead if Canada was a country capable of developing a national oil strategy similar to what has been achieved in Norway. This tiny nation enjoys full employment and enviable social programs, has no public debt, $600 billion in the bank, and remarkable public buy-in about their petroleum industry. Could we do it here? Do we have the guts to seize our economic destiny?

Such a system might seek to maximize employment, tax revenues and environmental protection — exactly the opposite motivations of most extractive industries. There is another public policy goal that is of no interest to private companies: the energy security of our nation.

Seen through this lens, how is Canada doing? Abysmally, by four measures:

1. Dependency. Even with our vast oil wealth, Canada currently relies on other countries for about 50 per cent of our supply — so-called “unethical oil” from the volatile Middle East. Proposals to pipe unrefined bitumen from western Canada to Asia will increase this dangerous dependence since Alberta will have to import vast amounts of condensate from the Middle East to dilute thick bitumen enough for pipeline transport.

2. Staying in the red. Alberta has been unable to balance the books since 2007, burning through $17.7 billion of past oil wealth, with another $3 billion deficit forecast for the coming budget.

3. Draining at full tilt. Labour and production costs are through the roof, at least until the next employment bust. Both the Alberta Federation of Labour and the late premier Peter Lougheed have both called for slower the pace of oil sands growth. Ten proposed upgraders have been cancelled since the 2007 recession, replaced instead with pipeline proposals for unprocessed diluted bitumen. With resource values rising relative to global currencies, what’s the rush?

4. Getting global black eye. The oil sands have such a credibility problem the Alberta government spends $25 million a year countering “baseless” criticism from environmental groups.

Robyn Allan’s prescriptions

Robyn Allan thinks we can do better. She is a British Columbia economist, former CEO of the provincial insurance corporation and outspoken critic of the Northern Gateway proposal to pipe diluted bitumen to Kitimat. She also believes the recent retreat from value-added processing in Alberta is not only a threat to the B.C. coastline, but to the entire Canadian economy. In an interview for this series she told The Tyee:

“Canada has an energy strategy, but it is being developed in a handful of boardrooms of multinational oil companies and national oil companies of foreign governments. And that strategy seems to be to extract oil sands bitumen as quickly as possible, mix it with distillate imported in increasing amounts from the Middle East, and move it down pipelines to Asia and the U.S. Gulf Coast. And that strategy is going to hollow out Canada’s oil sector, move us away from creating jobs and value-added refining, and increase pressures on our exchange rate and the non-oil sectors of our economy. And when the boom becomes a bust, we won’t have a strong economic fabric to fall back on.”

So why does she feel so many state-owned oil companies now clamouring for a piece of the oil sands?

“More than 80 per cent of global oil reserves are controlled by state own oil companies, and there’s good reason for that. Canada is the only major oil-exporting country in the world without a national oil company. Of the remaining global oil resources open for private sector investment, Canada has the majority. That’s why national oil companies from China, Korea and Norway, and now maybe Kuwait and India, are coming here to buy up our resources — it’s the last big game in town.”

Allan believes our country is becoming dangerously exposed in a world increasingly short of energy, especially as we allow state-owned interests from other nations to snap up our globally-strategic resources.

“Canada is being outplayed. We are losing control of our natural resources. We’re losing control of our environmental standards. And we’re losing the ability to upgrade and add value in Canada. We’re not even beginning to use the leverage in this country that we have to control and manage the pace of our development and ensure that oil resource returns come to the people of Canada.”

So what can we do about it? Allan feels one of the key problems is that our petroleum continues to be sold in American, not Canadian currency.

“When the price of oil goes up, the value of our dollar goes up and this creates problems not only for the manufacturing sector but for our oil industry as well. Because we trade our oil in U.S. dollars, any Canadian oil producer finds that their profits fall when they sell their product in U.S. dollars and have to repatriate those revenues into Canadian dollars. The ability of the oil industry to expand and grow is hamstrung by an appreciation of the Canadian dollar. The oil sector itself hurts, it not just manufacturing, tourism, forestry and other sectors.”

She also sees a linkage between our inflated currency and the cancelled upgrading facilities in Alberta.

“We need to address the issue that maybe because our currency has appreciated in value, it’s not as economic to build upgraders in Canada. We have a natural resource in Canada that’s traded in U.S. dollars. Why? When Russia decided to trade their oil with China they elected not to do it in U.S. dollars, but their own currencies. We have to start thinking about what is in the long-term interest of Canada, not what is in the best interests of a handful of oil companies.”

Upgrade here first, then ship

By choosing Canada instead of China, Allan believes Albertans would benefit from higher prices and greater economic stability. Nation building through such mutually profitable arrangements might prove far more productive than past interprovincial posturing.

“One of reasons that bitumen is not capturing the value that western producers want is that its not good enough quality. So if we upgraded it in Alberta into a product that North America wants, we might solve so many problems. Everybody in Canada could win if less expensive western Canadian crude got to eastern Canada.

“At the recent Northern Gateway Hearings in Edmonton, the Joint Review Panel was told by Enbridge’s expert witnesses that right now Eastern Canada is buying imported crude at $20 to $30 more than the price of western Canadian crude. If that’s the case, that works out to about 15 cents a litre at the pump. Western producers could get a price premium of five cents a litre over what they are getting now, the refiners in eastern Canada could save five cents a litre on their crude supply and consumers could save five cents a litre when they fill up at the pump.

“So if that happened, producers and refiners would make more money and consumers would spend less money. That’s got to have a stimulative effect on our Canadian economy.”

Allan points out that shipping upgraded crude rather than bitumen would also require half as much pipeline capacity since we would not need to build supply lines for imported condensate. And most importantly, upgraded Alberta crude should be moving east rather than unrefined bitumen moving west.

“TransCanada Pipelines have said they are looking at converting one of their natural gas pipelines to ship Western Canadian crude to eastern Canada. That could be up to 800,000 barrels a day and would be a tremendous boost to the Canadian economy. We should be focusing everything we can to get that to happen. And the way to get that to happen is to say no to the Northern Gateway pipeline. The best thing that British Columbia could do is restrict bitumen from coming into this province, period. That would essentially be a little bit of tough love to Alberta.”

The late premier Peter Lougheed urged Albertans to “think like an owner.” That determination to do what’s in the interest of Canadians rather than companies is what Allan seems to be championing as well.

“I would hope that the real issue here is what can we do to support and develop the future health and long-term growth of the Canadian economy. We need to stop responding to the preferences of corporations that don’t have the Canadian national interest at heart. They don’t. They’re not meant to.

“Every single time issues are raised such as energy security in Canada, value-added and upgrading, concerns over the appreciation of our dollar — the oil industry goes crazy. And the reason they do is because these are serious issues that need to be addressed and they could be addressed relatively easily for our long-term benefit. What the oil industry doesn’t yet understand is that many of these changes would be for their long-term benefit as well.”

A challenging question

The Enbridge and Kinder Morgan pipelines will obviously benefit China and the shareholders of private oil companies, but what is in Canada’s interest? Are we even asking that question?

At the end of this series I’m left reflecting on the blunt advice of Norwegian petroleum engineer Rolf Wiborg: “You have to leave the feudal thinking and leave the idea that people coming to exploit you have the right to tell you what to do…. It can be done, but do the Canadian people have the power and the will? Do they have the collectiveness and guts to do it?”

How about it Canada? Do we?

Mitchell Anderson is a Vancouver-based journalist and frequent contributor to The Tyee. This article is one in a series on Norway’s Petro-Wealth Prudence which is part of a larger project, “Canada’s Transition to a Better Energy Future,” produced by The Tyee in collaboration with Tides Canada Initiatives Society.