Tar sands companies win, BC loses, if Kinder Morgan pipeline goes through, report says

 BC won't get benefit from Kinder Morgan pipeline, despite company hype, a study released today says.

Photo of Kinder Morgan's Trans Mountain Pipeline terminal in Burnaby by Caelie_Frampton via Flickr

A newly released report says the economic benefits from Kinder Morgan’s pipeline are very small and “substantially overstated” by the company.

The collaborative report, created by Simon Fraser University's Centre for Public Policy Research and The Goodman Group consulting firm, demonstrates tiny returns to BC and states that the Trans Mountain Expansion project exaggerated the short-term jobs associated with building the pipeline by a factor of three.

“Moreover, BC is not getting its fair share of the benefits,” said Goodman Group’s President Ian Goodman in a phone conference. “We looked at benefits of the Trans Mountain project in terms of tax revenues. For building and operating the project, even by Kinder Morgan’s own numbers, the benefits to BC are very small.”

In Kinder Morgan's estimates of the increased revenues to tar sand producers from expansion of the pipeline project, BC gets less than 2 per cent of the revenues, Tar sands producers retain 68 per cent, and 31 per cent goes to Alberta and other provinces in royalties and corporate income taxes, according to the report.

The oil company stated the expansion project would be transporting 890,000 barrels of bitumen daily from northern Alberta to Burnaby and would create 12,000 short-term jobs over three years, but  the new report says that number is closer to 4,000 jobs.

“Now, our report shows that not only are the benefits for BC and Metro Vancouver very small, but the risks are very large,” said the report’s co-author Brigid Rowan. “Our major area of disagreement with the company is the cost of a bad to worse case scenario (of an oil spill).”

Kinder Morgan previously said an oil cleanup could cost $100-300 million for a bad to worse case scenario of a spill. SFU and Goodman looked at other oil disasters and found that the costs would be closer to $1-5 billion.

“We’re not dealing with hypotheticals here,” added Rowan. “Major oil spills have happened and have been happening with alarming frequency since 2010.”

“I might emphasize that this report is dealing only with the economic side,” sayid director of the graduate school of public policy at SFU Doug McArthur. “it does not go into what some people might call the non-monetary environmental costs, when you add them into the costs they have been explained to you, it does really make this project quite questionable from a public policy point of view.”

It’s important to make this report available for interveners and for public debate, he added, because the overall findings from this report raise fundamental questions whether this project is in the public interests at all.

Goodman was surprised by the discrepancy between the numbers of this new report and Trans Mountain’s, he said.

“Any of these estimates are based on economic models which are very simplified and stylized version of the economy. You need to look at your results and say ‘is it telling me things that make sense?’ When I looked at the numbers it didn’t make sense.”

Michael Burt is director of the think-tank's industrial economic trends group and told The Vancouver Observer the figures came from Statistic Canada’s input-output model, a well-established methodology used for many years. He said that the SFU study compares Trans Mountain’s project with others and come up with estimates.

“It’s a very different methodology, and we believe that ours is the more appropriate one for taking a proper economical impact analysis,” said Burt.

“What we did is a very well established practice. The model we used is widely used by federal government, provincial government and very many private sector economists…so, this project is not unique in regards to how we estimated the economic impacts. That’s why we believe it’s the appropriate way to do this."

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