Compared to Ontario and Alberta, BC won't reap the tax benefits of Northern Gateway.
August 1, 2012
by The Canadian Press
VANCOUVER: Based on straight math, British Columbians shouldn’t be surprised to learn they will draw far fewer economic benefits than Alberta—or even Ontario—from the Northern Gateway pipeline, says a new report.
BC Premier Christy Clark has argued her province has taken on 100% of the marine risk while receiving not much more of the economic benefit than provinces that have no risk at all.
But a research report released Tuesday by the Canadian Energy Research Institute concludes BC’s what-if concerns aside, Ontario stands to gain much more because of its position as Canada’s manufacturing heartland.
The report examined only the forecasted value of ongoing upstream oil sands development.
“Ontario services the oil sands projects with steel and materials and equipment more so than British Columbia does,” said Dinara Millington, senior research director with the institute. “The outputs of one sector … would become inputs in the oil sands industry sector.”
The new report calculates the value of several key economic indicators around current and future oil production if Enbridge’s Northern Gateway and two other major pipeline projects go ahead as proposed.
Including the expansions by Kinder Morgan and Keystone XL, the report predicts Alberta alone will collect half a trillion dollars in taxes over 25 years but BC will only reap $9 billion. Ontario would garner $28 billion.
BC gains its taxation revenue from oil development mainly due to geography—its proximity to Alberta—and via a gas plant that exports gas to northern Alberta for oil sands projects’ use, Millington said.
Spotlighting only the Northern Gateway project, researchers concluded BC will make $1 billion in tax revenues, as opposed to Alberta at $73 billion and Ontario at $4 billion.
Over the same period, the report found the project will boost BC’s gross domestic product by 5.1%, as opposed to 352.3% for Alberta and 11.4% for Ontario.
The project equates to 76,000 person-years of employment for British Columbians, in contrast with 1,853,000 for Alberta and 155,00 for Ontario.
The institute is a Calgary-based organization jointly funded by Ottawa, Alberta and the Canadian Association of Petroleum Producers, an industry lobby group. It utilized a well-known economic model, along with Statistics Canada data and its own forecasts to make the predictions.
The organization plans to release a second report Aug. 9 that specifically looks at the economic benefits related to construction of the Northern Gateway pipeline. Millington said she expects the analysis to show most of those benefits accrue to BC.
The new analysis builds on other research recently submitted by BC.
Data from Wright Mansell, which looks at both oil sands production and pipeline construction, contends the province would gain about eight per cent in projected provincial tax revenues over 30 years, while Alberta would get about 40%.
Despite the economic sense in the numbers, Prof. Douglas Macdonald, with the University of Toronto’s environment school, said BC’s is “completely understandable.”
His current research, in conjunction with Carleton University, is aimed at devising a national energy strategy that puts a cost on environmental risk and the effects of carbon emissions.
His research aims at creating a formula for sharing the costs and benefits of such projects.
He said it would begin by looking at, say, the tax owed to Ontario.
“But it will also include, what are the costs that different provinces are incurring by reducing emissions, what are the benefits they’re getting from a green energy manufacturing strategy, and a whole bunch of things,” he said.
But he acknowledged the political difficulty, saying the federal government would be required to spearhead the task and it’s likely some provinces might try to stall its progress.
“But if you don’t do that, then you’re just going to be locked into things like the Alberta-BC feud, which ultimately is going to prevent us from moving forward on either the energy side or the climate change side,” he said.