Employment and Job loss experience of Canada’s oil and gas, coal workers

In September 2020, Canada’s oil and gas industry employed approximately 160,100 workers –a 0.9% increase from August 2020, but a 14% drop from September 2019.  In that same one-year period, employment in the services sub-sector decreased by 29%;  the pipelines sub-sector decreased by  30% and the exploration and production sub-sector increased by 3%.  These statistics are based on Statistics Canada’s Labour Force Survey (LFS) data,  made available on the  Employment and Labour Force Data Dashboard provided by PetroLMI, a labour market agency specializing in the oil and gas industry, jointly funded by government-industry.  Their September 2020 blog is here, summarizing the current trends ; an archive of PetroLMI reports re the trends and forecasts is here – most recently, The LNG Opportunity in Canada: Employment Prospects and Requirements (June 2020).

In addition to providing regular labour force data by industry, on September 22 Statistics Canada released two studies in its Economic Insights series:  How Do Workers Displaced from Energy producing Sectors Fare after Job Loss? Evidence from the Oil and Gas”  Industry    and How Do Workers Displaced from Energy producing Sectors Fare after Job Loss? Evidence from coal mining. Both studies use data, (including age),  from Statistics Canada’s Longitudinal Worker File, covering the period 1995 to 2016, for  workers permanently laid off from those industries..  

Job loss experience for oil and gas workers

How Do Workers Displaced from Energy producing Sectors Fare after Job Loss? Evidence from the Oil and Gas” Industry reports that “job loss leads to substantial and persistent earnings declines”, although “three years or five years after being displaced, a significant fraction of workers displaced from this sector earn more than they did in the year prior to job loss.”  Data show that re-employment has become progressively more difficult, and for workers laid-off in 2015 or 2016, less than two-thirds found paid employment in the following year, with most moving outside the oil and gas industry – construction being the most common sector for re-employment. CBC produced a summary of the Statistics Canada report in an article here , augmenting it with personal stories and commentary from economists.

Coal workers’ job loss experience

Similar analysis (the reports are authored by the same Statistics Canada economists) appears in  How Do Workers Displaced from Energy producing Sectors Fare after Job Loss? Evidence from coal mining . Contrary to the trend for oil and gas workers, finding employment within a year of lay-off became easier for coal workers more recently: 67% for workers laid-off in 1995 compared to 89% for those laid-off in 2005 . However, regarding earnings loss, the report compares coal data with all industries, and states: “These numbers imply that about half of workers laid-off from coal mining and from other industries during the 2004-to-2011 period saw their annual wages and salaries drop by at least 30% in the short term. Since coal miners are paid higher-than-average wages …. the median declines in annual wages and salaries of coal miners displaced from 2004 to 2011 amounted to roughly $14,800 (in 2016 dollars) in the short term, more than twice the median declines (of about $6,100) experienced by other laid-off workers.” Conclusions are similar to those in the report on oil and gas workers: a  transition to “green jobs” has not materialized, and “ for many coal miners and other workers, job loss leads to substantial and persistent earnings declines”, but, “the financial consequences of job loss are not uniform for all displaced workers. …. Three years after job loss or five years after job loss, a significant fraction of displaced workers earn more than they did in the year prior to job loss.”

Saskatchewan respondents rank comparable salary and preserving home equity as most important factors in a Just Transition

A provincial election campaign is underway in Saskatchewan – a province with a strong oil and gas production industry, and where 72% of electricity comes from coal and gas.  Although the conservative-leaning Saskatchewan Party led by Scott Moe is favoured to win the election on October 26th, a new report published by the Saskatchewan Office of the Canadian Centre for Policy Analysis on October 14 reveals that there is strong concern about climate change, and surprising support for a shift to renewable energy in the province. Transition Time? Energy Attitudes in Southern Saskatchewan  was written by professors from University of Toronto, in collaboration with Emily Eaton,  Associate Professor at the University of Regina in Saskatchewan. It reviews the energy politics of the province briefly, and reports the responses of over 500 residents to a survey of five broad issues: climate change, transition, regional differences, energy production, and SaskPower.

While over 40% of respondents were worried about climate change, 50% disagreed that “it is necessary for Canada to phase out oil and gas production as our contribution to mitigating climate change”.  65% of respondents agreed that “Canada can continue to develop fossil fuels such as oil sands in Alberta and still meet its climate commitments” (only 18% disagreed).  Regarding carbon pricing, 47% strongly disagreed that Saskatchewan needs a price on carbon emissions. (Saskatchewan is one of the provinces currently fighting the federal carbon tax in the Supreme Court ).

Yet in a contradictory way, 60% of respondents supported a phase out of oil, gas and coal production in Saskatchewan – with 23% favouring a 10-year timetable for such a phase out. Even in oil-producing areas, half of the population agreed with phasing out fossil fuels, and 30% within 10 years or less. Respondents rated comparable salary and benefits, and maintaining equity in house/property values as the most important considerations in a Just Transition- more important than support and training to transition to new roles, and employment opportunities in your current community.  Saskatchewan was one of the provinces visited by the federal Task Force on Just Transition for Canadian Coal Power Workers and Communities, and the views of Saskatchewan citizens were reported in the Task Force’s 2019 report, What we Heard.   

The discussion which concludes the paper states that “it is clear that there is an urgent need for honest climate change leadership in the province. The fossil fuel industries have attempted to obstruct a transition to zero-carbon economies by suggesting that climate change can be tackled while continuing to produce fossil fuels, a belief widely held in Saskatchewan and propagated by both the government and the official opposition.”

Updating carbon pricing in Canada: PBO Report , Supreme Court case, and provincial opt-outs

On October 8, the Office of Canada’s Parliamentary Budget Officer (PBO) released its latest report on carbon pricing, Carbon pricing for the Paris target: Closing the gap with output-based pricing . The report concludes that the government’s existing and announced policies and measures – including a carbon tax which rises to $50 per tonne in 2022 and an Output-Based Pricing System (OBPS) will not be sufficient to allow Canada to meet its emissions target under the Paris Agreement – 30 per cent below 2005 levels by 2030. The PBO models three complex scenarios to estimate that the level of the carbon price necessary to achieve the Paris target ranges from $67 per tonne to between $81 and $239 per tonne.

A critique by Clean Prosperity , a Toronto NGO focused on carbon tax research and education,  finds two of the PBO scenarios “unrealistic” and calls for a fourth approach, which transitions the industrial output-based pricing system to economy-wide pricing plus a border carbon adjustment. Clean Prosperity concludes:  “The bottom line is that carbon pricing works and should continue to increase after 2022 at roughly the same level as today in order to help us meet our Paris targets.”  Clean Prosperity promises to  release its own modelling of such an approach “in the near future”.

The report was released while a constitutional challenge to the federal carbon pricing system is still before the Supreme Court, and does not reflect the September 20 announcement that “The Government of Canada will stand down the federal carbon pricing system for industry in Ontario and New Brunswick as of a date in the future.” (that date and formal change to the systems to be determined in consultation with each province.) 

Smart Prosperity (a University of Ottawa research centre)  posted a blog and a report Ontario’s Options: Evaluating How Provincial Carbon Pricing Revenues Can Improve Affordability on October 8 .  Smart Prosperity has published a number of relevant working papers, including : Environmental Taxes and Productivity: Lessons from Canadian Manufacturing  (April 2020);  Border Carbon Adjustments in Support of Domestic Climate Policies: Explaining the Gap Between Theory and Practice (Oct. 2019) and Do Carbon Taxes Kill Jobs? Firm-Level Evidence from British Columbia in March 2019.  Canada’s Ecofiscal Commission also researched and published numerous reports (archived here ) before it closed its doors in November 2019.

Covid recovery clouds World Energy Outlook, but IEA calls for unprecedented changes to avoid lock-in to 1.65 degree temperatures

The IEA World Energy Outlook 2020 , the flagship publication of the International Energy Agency, was released on October 12, stating, “The Covid-19 pandemic has caused more disruption to the energy sector than any other event in recent history, leaving impacts that will be felt for years to come.” The report is a comprehensive discussion and  analysis of those impacts, and attempts to model the crucial next  10 years of recovery. Modelling is provided for all energy sources – fossil fuels, renewables, nuclear –  under four different scenarios, including a longer-than-expected Covid recovery and a Sustainable Development Scenario. Key highlights:

Solar is “king”: In 2020,  global energy demand is forecast to fall by 5% overall:  8% in oil, 7% in coal and 3% in natural gas demand. Under the heading “Solar becomes the new King of electricity” , the report states: “Renewables grow rapidly in all our scenarios, with solar at the centre of this new constellation of electricity generation technologies. Supportive policies and maturing technologies are enabling very cheap access to capital in leading markets. With sharp cost reductions over the past decade, solar PV is consistently cheaper than new coal- or gasfired power plants in most countries, and solar projects now offer some of the lowest cost electricity ever seen.”  

Questionable future for new Liquified Natural Gas projects: For natural gas, “different policy contexts produce strong variations”. For the first time, the business as usual scenario for advanced economies shows a slight decline in gas demand by 2040. And “An uncertain economic recovery also raises questions about the future prospects of the record amount of new liquefied natural gas export facilities approved in 2019.”  In certain scenarios, “the challenge for the gas industry is to retool itself for a different energy future. This can come via demonstrable progress with methane abatement, via alternative gases such as biomethane and low-carbon hydrogen, and technologies like carbon capture, utilisation and storage (CCUS).”

Peak oil within sight despite growing importance of plastics manufacturing: The era of growth in global oil demand comes to an end within ten years, but the shape of the economic recovery is a key uncertainty. The report notes “The longer the  (Covid) disruption, the more some changes that eat into oil consumption become engrained, such as working from home or avoiding air travel. However, not all the shifts in consumer behaviour disadvantage oil. It benefits from a near-term aversion to public transport, the continued popularity of SUVs and the delayed replacement of older, inefficient vehicles.”  The analysis also considers the impact of plastics manufacturing on oil demand.

Inequities will persist or be made worse.  “Reversing several years of progress, our analysis shows that the number of people without access to electricity in sub-Saharan Africa is set to rise in 2020. Around 580 million people in sub-Saharan Africa lacked access to electricity in 2019….and in addition, “a rise in poverty levels worldwide in 2020 may have made basic electricity services unaffordable for more than 100 million people who already had electricity connections”.

Structural change, not Covid, will bring lasting CO2 emissions decline: The economic downturn related to Covid has brought a temporary decline of 2.4 gigatonnes in annual CO2 emissions, although an accompanying decline in methane emissions is not clear.  And emissions are expected to rebound. “The pandemic and its aftermath can suppress emissions, but low economic growth is not a low-emissions strategy. Only an acceleration in structural changes to the way the world produces and consumes energy can break the emissions trend for good.”….  “ if today’s energy infrastructure continues to operate as it has in the past, it would lock in by itself a temperature rise of 1.65 °C.”

Finally, the report concludes by advocating a future path built on its Sustainable Development Scenario  , calling for “unprecedented” actions, not just from government and business, but from individuals.

“Reaching net zero globally by 2050…. would demand a set of dramatic additional actions over the next ten years. Bringing about a 40% reduction in emissions by 2030 requires, for example, that low-emissions sources provide nearly 75% of global electricity generation in 2030 (up from less than 40% in 2019), and that more than 50% of passenger cars sold worldwide in 2030 are electric (from 2.5% in 2019). Electrification, massive efficiency gains and behavioural changes all play roles, as does accelerated innovation across a wide range of technologies from hydrogen electrolysers to small modular nuclear reactors. No part of the energy economy can lag behind, as it is unlikely that any other part would be able to move at an even faster rate to make up the difference.

To reach net-zero emissions, governments, energy companies, investors and citizens all need to be on board – and will all have unprecedented contributions to make. The changes that deliver the emissions reduction in the SDS are far greater than many realise and need to happen at a time when the world is trying to recover from Covid-19.”

The full World Energy Outlook 2020 is only available for purchase. An overview, FAQ’s, and related reports including modelling details and a methane tracker are all available here .

$320 million federal aid to Newfoundland oil and gas industry, yet layoffs continue

On October 8, both Suncor and Husky Energy announced new layoffs in their Newfoundland oil and gas operations. A week earlier, there was an announcement by Irving Oil that it would not proceed with the purchase of the Come by Chance oil refinery -yet another blow to the floundering Newfoundland industry.  “Here’s what could happen if the Come By Chance refinery shuts its doors” (CBC, Oct 8) estimates potential job losses of 1,400 jobs when spin-off impacts are considered, if the plant is closed.  TradesNL, an umbrella organization of 16 building and construction trades unions in the province, which released this reaction to the news.  

Unifor has been lobbying for government aid for months – and on September 16, the union organized a public rally calling for government support. On September 25, the federal minister of Natural Resources answered the calls for help by announcing a $320 million aid package, to be targeted at safety, maintenance and upgrades, and at stimulating employment.  In a press release, Unifor states: “Unifor expects to see some of the funding be directed at long-overdue maintenance onboard the Terra Nova and Hibernia offshore facilities where 750 members of Unifor Local 2121 work.”  The decisions on how the $320 million will be spent will be guided by a new  Oil and Gas Industry Recovery Task Force, appointed by the provincial government on September 25 to “focus on immediate actions required to sustain the offshore industry in Newfoundland and Labrador and provide suggestions for how best to utilize the $320 million in funding from the Federal Government to maximize value for all Newfoundlanders and Labradorians.”  To date, only the two co-Chairs have been appointed.

On September 24, the provincial government also announced “the establishment of a new offshore exploration initiative to provide companies with the incentive to drill more wells in the best prospects. This is a policy measure that will allow all future bid deposit forfeitures to be reinvested as received, resulting in an injection of hundreds of millions of dollars in support of growth in our offshore petroleum industry. “ The press release was accompanied by this statement from Siobhan Coady, Minister of Finance:

 “The value of the oil and gas industry to our province cannot be overstated, nor can it be replaced by any other sector in our economy. Upwards to 30 per cent of our GDP, 13 per cent of our labour compensation and 10 per cent of all employment is attributed to this industry. We will support this industry in any way that we can, because it supports our province.” 

The ends to which the government and industry are prepared to go are hinted at in a recent blog by WWF on October 1: Canada Provides Funding for Oil And Gas Development In Newfoundland and Labrador amidst Federal Scientists’ Critique of Flawed Environmental Assessment.