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BC Cuts Off Oil to Spite its Country

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On the last day of May, the government of British Columbia gave the back of its hand to Alberta and indirectly to the rest of Canada, which benefits -- and could benefit more -- from continued development of Alberta's oilsands. Claiming insufficient environmental protections, the B.C. government rejected the proposed Northern Gateway pipeline project that would bring bitumen from Alberta's oilsands to Kitimat, where it could be exported to markets in Asia.

Getting new coastal export capability is important to the future of Alberta, and to Canada as a whole. With developments in the U.S. in shale gas and shale oil production, Canada's oil export market faces a serious challenge in coming years. Only 30 per cent of Canadian oil production is consumed internally; the other 70 per cent is exported to the United States. In 2009, all but 0.8 per cent of Canada's petroleum exports were shipped to hubs in the United States. That's a problem, because the International Energy Agency recently estimated that the United States will be almost self-sufficient in energy by 2035. That means Canada's sole market for oil will likely need less in the near future.

As the Conference Board of Canada observes in Fuel for Thought: The Economic Benefits of Oil Sands Investment for Canada's Regions, production of Alberta's oilsands is projected to generate vast revenues in coming decades:

Between 2012 and 2035, we expect $364 billion in price-adjusted investment to take place to support oil sands development. In addition to the 880,000 person-years of employment directly supported by these expenditures, we expect domestic supply chain effects of 1.45 million person-years of employment. This is equivalent to 3,970 person-years of employment for every billion dollars of investment.

And it's not only Alberta that stands to profit. The Conference Board estimates that 25 per cent of the spending on the oilsands supply chain will happen in other Canadian provinces: about 15 per cent in Ontario, seven per cent in BC, four per cent in Quebec and the prairies, and about one per cent in Atlantic Canada.

The Conference Board found knock-on benefits across Canada as well:

The direct and supply chain employment effects are expected to generate $172 billion in wages and salaries. When spent, this money will support an additional 880,000 person-years of employment; this is known as the income effect. The three combined employment effects mean that oil sands investment will support 3.2 million person-years of employment, or 8,800 for every $1 billion in price-adjusted investment. By region, Alberta will experience the largest effects (74.2 per cent), followed by Ontario (11.7 per cent), British Columbia (6.9 per cent), Quebec (3.4 per cent), the Prairies (3.1 per cent), and Atlantic Canada (0.7 per cent).

B.C.'s decision doesn't mean that the oilsands won't be developed -- there are still other options for moving Alberta's oilsands products to ports in the east and west, even if they have to go north to do so. And expansion of rail transport (riskier and costlier) continues rapidly. But B.C.'s decision is clearly an obstacle along the way.

The shame of it is, B.C. will still reap economic benefits as the oilsands are developed, they just won't accept their fair share of the risk involved in generating the gains. And by driving oil transport over longer distances, and by riskier (and more polluting) transport modes, they may well cause more environmental harm rather than less. The greatest irony? As Jennifer Winter of the University of Calgary's School of Public Policy calculates, moving the same quantity of oil by rail would release three times as much greenhouse gases into the atmosphere.

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