Oil sands boom brings economic risks: Pembina report

Governments need to mitigate risks and regional disparities associated with rapid oilsands expansion, institute says.

CALGARY – The rapid pace of oil sands development is creating economic risks and regional disparities that need to be addressed, according to a report by the Pembina Institute and Équiterre.

Booms, Busts and Bitumen: The economic implications of Canadian oil sands development looks at the side effects of the oil sands boom in uncertain economic times and presents a counterpoint to the frequently overstated economic benefits of expansion.

“Oil sands production is projected to grow significantly in the years ahead. That carries risks for our environment and, as today’s report shows, for our economy as well. We need responsible policies for oilsands development to protect Canadians’ long-term prosperity,” said Sarah Dobson, oil sands program economist at the Pembina Institute.

The report indicates that the overwhelming majority of those economic benefits — both direct and indirect — are limited to Alberta. Other provinces will benefit less: even the US would gain more employment opportunities from the oil sands than the rest of Canada if development goes ahead as projected. Meanwhile, the economic side effects of the boom, such as a high dollar that makes it harder for manufacturers to compete globally, are being felt across the country.

“The manufacturing sectors of Ontario and Quebec have been, and still are, suffering greatly from the rapid increase in the value of the Canadian dollar. Unfortunately, this doesn’t seem to register with the federal government. A truly national economic and energy plan would benefit communities and industries across the country, not just in one region,” said Steven Guilbeault, co-founder and senior director of Equiterre, a Montreal-based consultancy that focuses on environmental issues.

The report notes:

  • In Canada, only 14% of the employment opportunities created by oilsands development will be in provinces outside of Alberta.
  • According to the Bank of Canada, one-third of the Canadian manufacturing sector’s decline is due to a more expensive dollar. Rising commodity prices account for anywhere from 40 to 75% of the loonie’s recent rise.
  • Previous research has shown that a $1-million investment in clean energy creates 15 jobs, compared to just two jobs from investing in oil and gas.

These unintended consequences we’re seeing today should serve as warning signs, given the rapid projected growth of the oilsands. By favouring oil and gas over other economic sectors with longer-term growth potential, the federal government is putting the prosperity of all Canadians at risk.

The report provides pragmatic recommendations to address these concerns, such as improving the management of one-time resource wealth and eliminating preferential tax treatment for the oil and gas sector.

Download a copy of the full report here.