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Enbridge Northern Gateway pipeline: former ICBC CEO weighs projects' risks

When economist Robyn Allan’s son visited her in the autumn of 2011, he was preoccupied by the Northern Gateway pipeline.

Allan was generally aware of the issues but his concern spurred her to look more closely. She found that Enbirdge’s application misrepresented the impact of the project.

She applied for intervenor status so that she could raise these issues before the JRP in a more substantive manner than public comment provides for.

Her reports belie Enbridge’s rosy assertions about the benefits of the proposed Northern Gateway pipeline.

“The economic issues were presented purely as a benefit to Canada as if there were no economic costs,” Allan told the Vancouver Observer. “And that clearly wasn’t the case.”

As former CEO of ICBC, Allan views the project from the perspective of business insurance risks. Even where those risks are described in related reports on the Northern Gateway proposal, Allan has found a pattern of bite sized headlines that aren’t true to the content of the reports.

“I’m consistently seeing information provided by headlines, titles, bumper-sticker type statements and tweets that give one story,” Allan said. “But when I look at the details, there’s a completely different story being presented in the depth of the analysis.....”

She’s particularly concerned by the public statements by Prime Minister Harper, Minister Joe Oliver, Premier Redford and Premier Clark that seem to be “marketing slogans to deliver the solution they’ve already decided.”

Dutch disease and name calling

For instance, the Institute for Research on Public Policy’s study on the Dutch disease was used as an opportunity to criticize opposition leader Thomas Mulcair, who brought the issue to national prominence.

When the study came out, the spokeswoman for Industry Minister Christian Paradis stated that it did not reflect the views of the Harper government (it was commissioned by the Harper government but carried out by an independent institution).

Without addressing the study’s content, she asserted that “Mr. Mulcair’s politics of division, pitting one region of the country against others, and his ill-informed remarks show that his foolish economic policy will raise prices and cost Canadian jobs.” (Peter Jarrett of the Organization for Economic Co-operation and Development recently confirmed that concerns about the Dutch disease in Canada are based on fact.)

To Allan, name calling instead of debate is a bad sign. “Name-calling is a propaganda technique to try to sway opinion to a point you want to make,” she notes. “It’s used as a shield to deflect away the real issues that have to be addressed. As soon as I see name-calling or denigration, I ask, ‘What are they trying to hide?’”

Allan explains Dutch disease in simple terms. If oil rises from $50 in 2006 to $100 a barrel now, there is double the amount of currency coming into the economy for the same amount of output.

It’s a windfall gain known in economics as “rent.”

The increase of money in the economy makes the exchange rate for the dollar rise even though the productive capacity of the economy has not expanded. It’s a very weak model of economic growth because the value of the dollar appreciates without any increase to the economic strength of society.

“When you talk about inflated dollars, it’s kind of like an inflated ego,” Allan said. “You’re getting a lot of benefit in terms of dollars, but the strength of the economy has not changed.”

Raw exports inflate the dollar without strengthening the economy

According to Allan, Canada’s Dutch disease is not only hollowing out the manufacturing sector, it is hollowing out the oil industry itself.

In 2008 Alberta had plans to build upgraders and refineries in Canada, as well as expanding output.

That would have resulted in manufacturing jobs to refine raw bitumen into products like gasoline and jet fuel for export.

Adding value to the raw resource creates a more valuable product for export.

Allan describes how the US financial crisis of 2008 resulted in a structural shift in Canada’s oil industry. First, everything slowed down or stopped. “All the upgrading and refining plans went off the table,” Allan explained, “along with expanded production plans.”

In 2009, the production plans came back on line but the plans for upgraders or refineries did not. As a result, the exported raw bitumen creates jobs in the United States and China rather than in Canada.

“One reason it doesn’t make economic sense [to export the raw resource] is because we’re paying our workers the standard of living that existed in 2007,” Allan said.

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