Letter to the editor

Re. “Maintaining momentum in oil and gas,” May 7.

The oil and gas industry should stop its political mischief-making, and obfuscating the numbers about the industry’s contribution to BC’s greenhouse gas (GHG) emissions.

The estimate that flaring, fugitive gas leaks and other waste gas sources account for approximately 13 per cent of BC’s GHGs is based on our research, derived from data from the Ministry of Energy, Mines and Petroleum Resources. We stand by this research.

The industry’s David Collyer claims emissions from these sources account for between one and two per cent of BC’s GHG emissions, and cites the BC Oil and Gas Commission as his source. He is wrong. The Commission itself has made clear that this figure refers only to flaring, not the far more damaging (from a GHG perspective) venting and pipeline leaks.

Applying a royalty on this wasted gas, as the NDP proposes, is good public policy. Collyer notes that the BC Liberals are proposing to extend the carbon tax to some of these fugitive emissions. This would be an improvement to the tax, although the Liberals propose taxing only a portion of all flared gas.

Not only would financial penalties like royalties capture revenues for the public, but more importantly, they would create an incentive for the industry to quickly make the capital investments needed to capture these flared and fugitive emissions, and ensure this gas goes to market, rather than being let loose into the atmosphere.

Signed,

Seth Klein and Ben Parfitt, Canadian Centre for Policy Alternatives.

In today’s Vancouver Sun, David Collyer of the Canadian Association of Petroleum Producers makes the case for expanding the industry based on some dubious facts. First there is this gem:

The industry has invested almost $30 billion dollars in British Columbia over the last eight years, resulting in 34,000 direct and indirect jobs.

According to BC Stats, the oil and gas industry contributed only 2,200 direct jobs to the provincial economy in 2008. In addition, there are perhaps the same amount of jobs in the various support services for oil and gas (it is hard to tell because there are 9,300 jobs listed but they are lumped in with support services for mining; the latter had 14,300 direct jobs, so if we take the same proportions for the support services as for direct jobs, we are looking at 1,000 to 2,000 jobs). Sum it up and you get maybe 4,000 jobs in oil and gas, or about 0.2% of total employment in the province.

Indirect jobs are trickier to assess as they include retail and service jobs unrelated to the industry but that would not be there if the income from oil and gas workers did not exist. But in general, input-output models put indirect jobs at one-for-one with direct jobs. So doubling the 4,000 above to 8,000 to account for indirect jobs, we have a generous estimate of the employment impact of the industry that is nowhere close to what is claimed by CAPP. At most, about half of one percent of BC employment has some roots in oil and gas exploration.

Here is another claim:

Emissions from [flaring and other fugitive sources associated with oil and gas extraction] accounted for between one and two per cent of B.C.’s GHG emissions, rather than the 13 per cent noted in the platform (according to statistics from the B.C. Oil and Gas Commission).

According to the most recent National Inventory Report on greenhouse gas emissions, fugitive emissions in BC accounted for 8.7% of BC’s emissions in 2007 (this lumps in coal mining, which historically contributes about one-tenth of the total). The estimate of 13% comes from my colleague Ben Parfitt, who drew on data from the BC Ministry of Energy, Mines and Petroleum Resources, and is an average over a decade (see this post). If there is a discrepancy in the data, it is whether the real percentage is 9% or 13%; neither number is close to the 1-2% claimed by CAPP and the Oil and Gas Commission.

That is not the end of the story, either. Fossil fuels burned to extract oil and gas are higher than that, another 11% of BC’s 2007 emissions. And none of this captures the emissions associated with end use by the consumer, whether in BC or in the US (emissions are counted where the fossil fuels are burned).

At the end of the day, the oil and gas industry contributes few jobs but causes a very large share of our total emissions. It is hard to imagine BC meeting its legislated target of a 33% reduction in greenhouse gas emissions by 2020 without some major action that hits oil and gas.

UPDATE: The online version has now been fixed.

Can the NDP deal with B.C.’s economic challenges?

By Marc Lee

In BC’s 2009 election, parties must respond to two fundamental challenges: first, a crashing provincial economy with rapidly rising unemployment; and second, the global climate crisis, which demands that BC dramatically reduce its greenhouse gas emissions.

Rather than pit these objectives against each other, good policy choices should instead link them together: our efforts to boost employment through stimulus packages should be strategic investments that put BC on a sustainable path, not just a return to old patterns of development.

While the NDP platform takes some important steps on both fronts, it does not offer the bold new direction and vision many might expect with global capitalism on its knees. The NDP attacks head-on some of the most egregious and controversial policies of the Liberals, like run-of-the-river power projects and the flawed P3 infrastructure model. But ultimately, the platform is cautious and lands very much in the middle of the road.

This is problematic in that the NDP platform accepts both the culture of fiscal conservatism that has come to dominate Canadian politics (manifested in an over-emphasis on tax cuts and balancing the budget), and an overly rosy view of the state of the economy. It takes as given the Liberals’ February budget, which describes an alternative universe in which unemployment averages 6.2% for 2009, and BC weathers a small storm just in time for the opening ceremonies of the Olympics.

But the provincial unemployment rate hit 7.4% in March, up from 4.3% a year before. Since last summer, 83,000 jobs have been lost. With new housing starts down 70% compared to last year, construction employment will plummet even further as current projects are completed, meaning an unemployment rate that could hit double digits by year-end.

This inevitably means the half-billion dollar budget deficit tabled by the Liberals is a work of fiction. Both parties need to come clean about how they would amend their plans given higher-than-budgeted deficits in the $1-2 billion range.

Moreover, falling consumer spending and business investment mean government must lean even harder against these adverse economic winds. In terms of stimulus, the 2009 budget package will do little to curb rapidly rising unemployment. BC is in an excellent fiscal position, and should err on the side of doing too much, not too little.

The NDP platform adds more stimulus, with a modestly larger deficit and higher capital spending. Together, these provide additional stimulus of 1 to 1.5% of GDP if we count the multiplier effects. How the stimulus is spent is also important, and the NDP’s plan is focused on green infrastructure and social investments.

The NDP platform also takes aim at the climate change file. Its program would cap emissions from large industrial sources starting in 2010, and will harmonize those efforts with a North American cap-and-trade system. They also propose major public transit investments, low-interest loans for building retrofits for energy efficiency, and a royalty on “flaring” in the oil and gas sector (the source of 13% of BC’s GHG emissions).

Unfortunately, most of the attention of climate policy has been on the BC carbon tax, which is neither as horrible as the NDP paints it, nor as potent as advocates make it out to be. Given BC’s fiscal challenges, the NDP would do better by fixing some of the problems with the tax (like ensuring it covers all GHG emissions), using the revenues to fund climate action (rather than borrowing), and shoring up a low-income credit that fails to protect low-income households as of 2010.

The incrementalist approach of the NDP platform also shows on social policy. Even during the recent boom, many British Columbians were left out. The Liberals have overseen the shredding of social assistance, the gutting of social housing construction, and the dubious distinction of BC having the lowest minimum wage in Canada.

The NDP platform would reverse some of this damage. It would raise the minimum wage to $10. It aspires to create 2,400 new social housing units this year, and 1,200 per year after that – a move aimed at a major reduction in homelessness. The NDP have said they would bring in a poverty reduction plan with targets and timelines, but do not say what those targets should be. And the new money for social assistance in their platform is inadequate given this goal and the economic situation.

Now that BC’s housing and commodity booms are over, and the recession is getting worse each week, structural weaknesses in BC’s economy have been revealed that were not cured with a tax cut. BC needs a bold new vision that combines social justice principles with a sustainable economy. By this yardstick, the NDP makes some progress, but by pandering to tax cuts falls short in its ambition.

“Let me tell you what’s happened in the energy industry in British Columbia in the last eight years: thirteen billion dollars of investment,” Campbell told a crowd of about 60 at Sudeten Hall.

… “We’re not just going to build a great new northern energy corridor, we’re going to build a great opportunity with the Asia-Pacific; we’re going to open new opportunities for British Columbians,” he said. He also outlined unconventional natural gas reserves in the Horn River Basin that he said could power 650 million homes for 15 years.

So this is the dark side of the green agenda: more oil and gas expansion. Given the street cred of Premier Campbell on the climate change file, one might expect the opposite: an end to new oil and gas extraction, perhaps even a wind-down of existing projects. After all, extracting oil and gas emits huge greenhouse gases, accounting for a big slice of our provincial total emissions. And that is just the extraction, as we only count burning of those fossil fuels if done in BC. Once they cross the US border, they count in the emission totals of some other jurisdiction. In other words, we only sell the crack.

For some perspective on that $13 billion of new investment that is “keeping BC strong”, BC’s greenhouse gas emissions from this sector in 2001 were equivalent to 3.7 million tonnes (Mt) of CO2 in their production and extraction plus another 5.7 Mt from “fugitive sources”: pipeline leaks, venting and flaring (in both of these I have added in coal, which accounts for a smaller portion but is hard to cleave off in the data). This was 15.5% of BC’s total emissions that year, and the number goes up to 20.4% if also count fossil fuel burning to generate electricity.

Fast forward to 2006, the last year for which we have data, and emissions from production and extraction more than doubled to 8.1 Mt. Another 6.5 Mt came from fugitive sources. So fossil fuel production writ large amounted to 23.4% of BC’s emissions, up from 15.5%. One bit of good news is less use of fossil fuels in generating electricity, dropping to 1.5 Mt, although our total rises to 25.8% if we count those, too. Because these data are already three years out of date, it is reasonable to assume that they have continued to grow in 2007 and 2008, alongside major increases in energy prices.

In the big picture, BC emissions in 2006 were a total of 1.5 Mt higher than in 2001, an increase of 2.5%. That means other sectors of the economy stayed flat or even decreased their emissions slightly, while fossil fuel emissions surged. So yes, the carbon tax is nice and deserves applause, alongside other good initiatives. But the notion that the BC government is green is a large stretch, and new emissions from planned expansion will dwarf any beneficial impacts of the carbon tax. For example, Mark Jaccard (the only economist in Canada who models these things) estimates that the carbon tax will reduce BC’s emissions by 3 Mt in 2020 relative to “business as usual” whereas additional emissions from oil and gas were more than that over five-year period between 2001 and 2006.

And it is not like the oil and gas patch is a huge employer. Oil and gas extraction employed 3,600 workers in 2006, although that had dropped to 2,200 in 2008. Both are up from 1,800 in 2001. There may be a 1-2,000 other jobs on top of these in “support activities” for oil and gas, although it is hard to tell from the stats (both mining, which directly employed 14,300 in 2008, and oil and gas are included, and these support activities amounted to 9,300 jobs in 2008, so most of that is probably mining-related). But BC had 2.3 million jobs in 2008, so at best, the sector employs 0.1-0.2% of our workforce.

To accept an expansion of oil and gas, given its share of total emissions, would appear to be fundamentally undermine BC’s ability to meet its GHG reduction targets. Only if all other sectors of the economy delivered larger reductions as an “offset” could BC’s climate plan be realized.