Alberta’s oil sands fail Canadians on economic benefits

by Felix von Geyer

Canada’s oil sands is a curse to its economy and not the boon Stephen Harper’s Conservative government claim it to, according to a new report released Wednesday.

The report: ‘Booms, Busts and Bitumen: The economic implications of Canadian oilsands development’ revealed the impact of the rise of the Canadian dollar – or Loonie – is proportional to the increased demand for Canada’s oil sands and other resource commodities. There is a variation in estimates however; the IMF indicated as much as 75 percent of the Loonie’s rise over the past decade is due to increased commodity prices while the Bank of Canada estimated this impact to be 50 percent. Academics such as Serge Coulombe, Professor of Economics at the University of Ottawa and author of the report’s foreword estimate have indicated the increase is 42 percent.

Sarah Dobson an economist in the oil sands programme at environmental think-tank the Pembina Institute who produced the report in conjunction with Montreal-based environmental NGO Equiterre, said that oil was behind 20 percent of the Loonie’s value in 2002 and by 2013 75 percent of its value was attributable to oil.

While the increased dollar strength has harmed the rest of Canada’s economy, particularly the manufacturing industries of Ontario and Quebec; elsewhere the supposedly positive impacts of the oil sands again fall short of government and industry hype, according to the report.

Dobson said that 94 percent of the GDP economic benefits remain within Alberta while as much as 86 percent of jobs are confined to Alberta, she said.

Indeed the United States benefits more than the rest of Canada, added Dobson with a GDP impact of 220 percent greater than the rest of Canada and job creation worth 190 percent of job creation in the rest of Canada outside of Alberta. Furthermore, outsourcing for the industry was increasingly assigned outside of Canada, she said.

Even Albertans are not receiving the gains expected with the Provincial government racking up a C$6.2 billion shortfall in the resource revenues budgeted for 2013. Despite the warnings, more of the same has been called for by the government. President of the Board of Trade, Tony Clement has stated that if healthcare and schools are wanted, “We need these resources out of the ground,” said Dobson.

The report also sought to explode the myth that Alberta’s oil sands are a driver of so-called ‘equalization’ payments between Canada’s provinces and Territories, where receipts from richer jurisdictions are distributed by the federal government in Ottawa to poorer jurisdictions.

Ottawa only receives 1 percent of its total revenues from the oil sands, according to Dobson, mostly stemming from corporate taxes. Professor Coulombe stressed that financial disparity between provinces had increased in the decade 2001-2011 and that after taking equalization payments into consideration, a 10 percent fiscal disparity remained.

Federal Finance Minister Jim Flaherty’s cap on equalization caps in 2009 has exacerbated the trend, said Coulombe who called for the cap’s removal.

Steve Guilbeault, Co-founder and Senior Director of Equiterre called for the elimination of the $1.3 billion preferential tax treatment the industry receives from Ottawa, pointing out that Canada had signed up to the elimination of fossil-fuel subsidies at the 2009 Pittsburg meeting of the G20.

Guilbeault called for Canada to manage its one-time resource wealth and find other sources of revenue and to abandon its short-termism, especially considering the environmental degradation of the oil sands. He singled out the expansion of Shell Canada’s Jackpine oil sands mine which was given the green light for the short-term economic benefits through supposed jobs, taxes and royalties.

Guilbeault also pointed to Environment Canada’s own recent report that stated Canada would miss its 2020 emissions reduction target pledged under the 2009 Copenhagen Accord at the UN Climate Change Conference of that year by 112 million metric tons. Guilbeault reinterpreted former Environment Minister Peter Kent’s statements that Canada was halfway to meeting its 2020 target of 17 percent below 2005 levels. What he meant is that by 2020 we will be halfway towards meeting our 2020 target,” said Guilbeault.

 

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