A two-year delay to a single hypothetical pipeline project would cost British Columbian over $7 billion, according to a recent study. Apply that to two controversial pipeline projects being proposed and the result is truly mind-boggling.
British Columbians could lose out on $46.6 billion in benefits over two decades if the $5.5 billion Northern Gateway Pipeline (NGP) in northern British Columbia, and the $4.1 billion Trans Mountain Pipeline (TMP) to the Lower Mainland, are pushed back by just two years.
That’s equal to three full years of provincial health spending at current levels, or 14 new Port Mann bridges.
If one proposal or the other – or both – are never built, that’s a figure nobody has even thought to estimate.
We know plenty about the environmental risks that would have to be managed superbly for NGP or TMP to make any sense for B.C. But have we given thought to the economic risks? This aspect is too often overlooked, maybe in part because the numbers are impossibly large and abstract even though they are intimately connected to how we are able to fund the everyday necessities of society.
This admittedly off-the-cuff projection of $47 billion in lost economic opportunity was arrived at by B.C. Political Reports using just basic math. The original formula is found in a pipeline study that looks at a hypothetical example that will sound small in comparison to NGP and TMP, with a cost of just $1.52 billion. But bear in mind the study was conducted in 2005, back when you could consider building a project like that for what sounds like peanuts today.
The example used was a make-believe 1,000-km pipeline located half in B.C., half in Alberta, and it was constructed as an economic model for a pipeline industry association study. (The Canadian Energy Pipeline Association – CEPA – was totally upfront about its interest in the matter and did employ rigorous statistical techniques and verified data to build the scenarios.)
The report finds a combination of losses and higher consumer costs would ding B.C. for $7.4 billion and the nation overall for $58 billion. Here is how much each Canadian province loses in the scenario:
If you apply the bottom-line findings of the study to the controversial Enbridge and Kinder Morgan concepts in play at the moment, and assume that they too will face two-year delays, the resulting hit for B.C. alone is $46.6 billion. A staggering sum. The economic cost of not having either or both of them at all is a totally different, and assuredly much greater, effect.
Regardless of whether you are in the 60 per cent of British Columbians who opposed NGP in December 2012, or among its supporters, it has to be acknowledged that pipelines are incredibly complex projects with all kinds of social, environmental and economic issues to consider.
But how often do we make the connection between major resource projects located in remote locations and the economic benefits (hospitals, schools, colleges) that are made possible by them? That’s why the CEPA report is interesting.
In the economic model, these are some of the economic effects that would arise if the $1.52 billion project went ahead:
- $1 billion in gross domestic product impact in host provinces B.C. and Alberta, including employment benefits
- $42 million in taxes
- $85 million in indirect employment creation
- The downside of delay was counted this way
- 15 per cent higher natural gas costs for consumers (this factor may not be as big now given the natural-gas glut in the U.S.; and bear in mind that the two B.C. pipelines now on the table will carry oil, not natural gas.)
See these other recent B. C. Political Reports posts on the crisis facing resource development in British Columbia: