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The Progressive Economics Forum

What are we going to do with the oil and gas industry?

We all know about Alberta, but BC’s green image is increasingly, um, tarred by the expansion of the oil and gas industry, with tens of billions of dollars in new investment in the past eight years. And according to some, the best is yet to come.

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.

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Comment from Dave
Time: May 8, 2009, 2:04 pm

What about the government jobs paid for with the royalties the province gets from the oil and gas industry?

Comment from Erin Weir
Time: May 8, 2009, 6:46 pm

This discussion reminds me of a letter to the editor that I wrote five years ago debunking inflated figures on oil and gas employment in Saskatchewan, but noting that higher oil and gas royalties could create more jobs.

The standard argument against higher royalty rates has been that, while they collect more public revenue, they could reduce the volume of resource production. However, if we need to limit resource extraction anyway for environmental reasons, then the case for higher royalties becomes almost incontrovertible.

Comment from Other Dave
Time: May 11, 2009, 7:26 am

Comparing apples to apples, in terms of jobs per dollar invested, the oil and gas extraction industry is one of the worst in Canada at creating jobs.

In Alberta, it actually ranks dead last – 56th out of 56 industries. Every other industry creates more jobs per dollar invested.

Public sector fields like health care, education and public transit create five to eight times as many jobs per dollar invested.

So yes, if we’re interested in jobs, we should be collecting maximum rents from oil and gas extraction, and investing the money into social infrastructure.

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