Oil Sands Economics: The Latest Facts and Some New Recommendations

A new report released by the Pembina Institute and Equiterre focuses on economic debate surrounding the oil sands, updating In the Shadow of the Boom, published by Pembina in May 2012.The new report,Booms, Busts, and Bitumen examines several economic risks associated with natural resource booms, including the decline of the manufacturing sector, known as Dutch disease, and GDP instability caused by Alberta’s overreliance on the oil sands. The report questions the benefits accrued outside of Alberta, stating that only 14% of the employment opportunities created by oil sands development will be outside Alberta, and citing a CERI analysis that indicates the U.S. may stand to gain more than the rest of Canada. It also points to increasing worldwide pressure to reduce greenhouse gas emissions and the uncertainty of future oil sands markets. Finally, the report calls for better government management to ensure long-term gain from the one-time exploitation of non-renewable resources, for example through capital investment that focuses on reducing fossil fuel dependency in Canada, elimination of preferential tax treatment for the fossil fuel industry, and a mandate for the House of Commons Standing Committee on Industry, Science and Technology to study the current restructuring of the Canadian economy, and the associated regional disparities, with an aim to identify a course of action to diversify economic growth and aid competitiveness across the whole country.

LINK

Booms, Busts, And Bitumen: The Economic Implications of Canadian Oilsands Development is available in French and English versions from: http://www.pembina.org/pub/2494  

Pipeline Politics from Ontario’s Point of View

The Politics of Pipelines: Ontario’s Stake in Canada’s Pipeline Debate, was released on November 12 by University of Toronto-based Mowat Centre, taking a climate change policy perspective on the issue of pipeline development and its impact on Ontario. It says that provinces who don’t necessarily receive adequate economic benefit from the oil sands are obligated to contribute to the nationwide effort to reduce greenhouse gases, and recommends either a national carbon tax or a cap and trade policy to satisfy the “polluter pays” principle. The report does note that local and First Nations communities across Canada will likely benefit from an increase in construction, maintenance, and management jobs, as well spin-off projects near pipeline routes. However, manufacturing sectors may suffer from inflated exchange rates and Dutch Disease. In Ontario, the conversion of the Line 9 gas pipeline to oil sands bitumen would decrease the capacity of the natural gas sector and may increase the consumer cost, while taxpayers would be forced to fund equalization payments.

LINK

The Politics of Pipelines: Ontario’s Stake in Canada’s Pipeline Debate is at: http://mowatcentre.ca/research-topic-mowat.php?mowatResearchID=96

CEP & CAW Statements to the House of Commons Committee: Pipelines and Dutch Disease

The federal House of Commons Committee on Natural Resources began hearings on “Market Diversification in the Energy Sector” on April 18th. (Previous hearings were on “Innovation in the Energy Sector”).   On April 23, the Communications Energy and Paperworkers Union submitted its position paper to the Committee, opposing pipeline development such as Northern Gateway and Keystone XL.  However, “CEP endorses that decision (i.e. approval of Enbridge’s Line 9A pipeline) and supports Enbridge’s current application for Line 9A to extend supply to the Montreal Suncor and Quebec City Ultramar refineries. CEP supports Line 9B on the basis that its 300,000 bbl/d capacity will provide just 75% of the capacity of the two Quebec refineries. CEP does not support a further expansion or a revival of the “Trailblazer” project which would have transformed Line 9 into an export line to Portland, Maine.”

In the Canadian Auto Workers submission by Jim Stanford, also submitted on April 23, the focus is on reviewing the economic debate about “Dutch disease”, or what Stanford calls “resource-driven deindustrialization”.  The paper summarizes the arguments and reviews 7 previous studies, concluding that resource-driven deindustrialization does exist. He then raises (but does not answer) the questions: how large has the effect been, have the costs to manufacturing been offset by the benefits of resource expansion, and should the government and the Bank of Canada intervene?

Many others have appeared before the Committee, including representatives from the Fraser Institute, Conference Board of Canada, and Macdonald Laurier Institute. Unions have been represented by:  Christopher Smillie (Building and Construction Trades Department, AFL-CIO) on April 25; Gil McGowan (President, Alberta Federation of Labour) on April 30.

LINKS

CEP submission is at http://www.cep.ca/sites/cep.ca/files/docs/en/130424-Fred-NatResCmttee.pdf

CAW submission, Resource-driven Deindustrialization   is at http://www.cep.ca/sites/cep.ca/files/docs/en/130424-Jim-NatResCmttee.pdf

Transcripts are available at the Committee website, by date, (in English)  at http://www.parl.gc.ca/committeebusiness/CommitteeMeetings.aspx?Cmte=RNNR&Language=E&Mode=1&Parl=41&Ses=1  and (in French) at http://www.parl.gc.ca/committeebusiness/CommitteeMeetings.aspx?Cmte=RNNR&Mode=1&Parl=41&Ses=1&Language=F

Canada Caught in a “Staples Trap” and a “Carbon Trap” by Current Pace of Oil Development

The authors of a new report released jointly by the Canadian Centre for Policy Alternatives and the Polaris Institute reject the polarizing framework of “economic interests vs. environmental interests”, or “East vs. West”, and call for a public debate of the social, economic and environmental complexities of Canada’s current “bitumen path”. They argue that Canada’s current “gold rush” approach is creating a double threat to the country: a “staples trap,” which is making our economy less diversified, productive and resilient, and a “carbon trap,” which will make the inevitable day of reckoning for climate adaptation much more expensive and difficult. The report discusses employment impacts, income distribution, international trade, currency effects, and “Dutch Disease” and the Canadian manufacturing sector. An alternate policy approach is recommended, which uses tighter regulation to slow the pace of bitumen extraction and to boost Canadian content in the upstream and downstream supply chains. At the same time, Canada’s economy needs to encourage more balanced, innovative and low-carbon industries.

 

LINK

The Bitumen Cliff: Lessons and Challenges of Bitumen Mega-Developments for Canada’s Economy in an Age of Climate Change by Tony Clarke, Jim Stanford, Diana Gibson, and Brendan Haleyis available at: http://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2013/02/Bitumen%20Cliff.pdf