Employment benefits concentrated in British Columbia
OTTAWA, June 26, 2014 /CNW/ - The Trans Mountain Pipeline Expansion Project would generate revenues for federal and provincial governments of more than $18.5 billion ($ 2012) between 2012 and 2037, and support over 108,300 person years of employment across the country.
The project, which would triple the capacity of the existing pipeline that runs from Edmonton to Burnaby, B.C., would also contribute to a Canadian strategic objective — getting oil resources to markets beyond the United States. A Conference Board of Canada report issued today indicates that $14.7 billion or 80 per cent of fiscal revenues generated by the project would result from the higher prices or "netbacks" that oil producers would receive.
The report, Seeking Tidewater: Understanding the Economic Impacts of the Trans Mountain Expansion Project, assesses three economic dimensions of the project:
- construction of the pipeline and related infrastructure;
- pipeline operations; and
- the higher prices for oil producers once the pipeline is operational.
The analysis did not examine environmental impacts, nor did it assess alternative transportation options.
- Trans Mountain Pipeline Expansion Project construction and operations would generate a combined 108,300 person-years of employment over 25 years. A person year is defined as the amount of work done by one person in one year—it is not equivalent to a single job.
- The federal and provincial governments would earn an estimated $18.5 billion in revenue over 25 years, with $14.7 billion in revenues coming from being able to obtain higher oil prices on the world market.
- Pipeline development would help end the current situation where oil is landlocked in a stagnant North American market.
"The employment impacts of the Trans Mountain Expansion Project would be concentrated in British Columbia, and, to a lesser extent, in Alberta," said Michael Burt, Director, Industrial Economic Trends. "The revenues flowing into government coffers, however, would be spread across the country."
Employment impacts are measured in person-years of employment. A person-year of employment is the equivalent of one year of work by one person (i.e. one job held by one person for five years is five person-years of employment). Based on the analysis, the project would generate 108,300 person-years of employment.
The project was assessed in three phases.
Investment in the pipeline would generate direct impacts in the construction sector, supply chain impacts associated with the inputs such as materials and services needed for the project, and induced effects brought on by project workers spending their earnings.
Combined, the development phase would support 58,037 person-years of employment over seven years, with the peak years of employment estimated to be 2016 and 2017. About 62 per cent of the employment would be in British Columbia, with about 25 per cent located in Alberta.
Development of the pipeline would generate an estimated $1.2 billion in government revenue, divided between the federal ($646 million) and provincial ($568 million) governments.
Operations, would support 50,273 person-years of employment at a minimum, over 20 years. Most of the employment gains would continue to be in British Columbia (60 per cent) and Alberta (21 per cent), but more than 15 per cent of the employment would be generated in Central Canada, where many industry-related professional services firms and manufacturers are located.
In terms of fiscal effects, pipeline operations would be expected to generate between $2.5 and $3.3 billion over the first 20 years of operations. More than 60 per cent of the revenue would come from taxes on corporate profits, followed by personal income taxes at 19.7 per cent and indirect taxes (such as sales taxes and taxes on fuel) at 12.5 per cent.
Higher Netbacks for Producers
Canadian benchmark prices have lagged considerably behind those of their global peers in recent years. A study by IHS Global Canada indicated that the project has the potential to raise the prices that Canadian producers of heavy oil receive (known as "netbacks"). These netbacks would lead to higher business revenues and higher profits, which would in turn generate $14.7 billion for federal and provincial governments over 20 years.
"This reality makes the pipeline a strategic issue that will have an impact on Canada's overall prosperity. Ultimately, pipelines that facilitate sales to global buyers are one way for Canada to maximize the value it receives for its non-renewable oil resources," said Glen Hodgson, Senior Vice-President and Chief Economist, The Conference Board of Canada.
The report was commissioned by Trans Mountain Pipeline Expansion Project and has been submitted to the National Energy Board as part of the application process.
SOURCE: Conference Board of Canada
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