Gateway Pipeline pros and cons

An interview with retired economist Reimar Kroecher

by Joseph Roberts

• At press time on February 24, the Calgary Herald published an article by Rebecca Penty entitled “Transport Canada approves Enbridge’s supertanker routes.” Penty notes: “The federal department determined three shipping routes proposed by Enbridge are ‘appropriate’ and contain no obstructions for the 250 oil tankers the company expects would frequent the terminal each year, to take away some 30 million tonnes of crude annually. A quarter of those tankers would weigh 320,000 tonnes, three times larger than any vessels to have visited Kitimat Harbour since the 1950s.”

Joseph Roberts: Both Enbridge and the federal government are strong proponents of this pipeline, claiming that it is essential for Canada’s economic future. How many jobs will this pipeline create?

Reimar Kroecher: This pipeline will create new jobs and it will destroy old jobs. According to estimates, it will create approximately 3,000 temporary jobs during the construction phase and 100 permanent jobs after construction is completed. However, the increased oil exports will appreciate the Canadian dollar and there will be job losses in both the manufacturing and retail sectors. A good example of this is the Canadian film industry, which is already on the decline because of our strong petro dollar. A five-cent premium on the Canadian dollar would finish off our film industry.

JR: When exports of hydrocarbons appreciate a country’s currency, isn’t that referred to as the Dutch disease?

RK: That is correct. When the Dutch increased their export of hydrocarbons, the guilder appreciated, leading to substantial job losses in Dutch manufacturing. In addition, the Dutch travelled to neighbouring Germany and did their shopping there. Norway’s experience was similar. The Norwegians travelled to Sweden and Denmark.

JR: With a three or four-cent premium on the Canadian dollar, Canadians will head south to do their shopping – with job losses in Canadian retailing.

RK: Ironically, there will be job gains in all the US border states. In a 2009 study, Michel Beine, Charles S. Bos and Serge Coulombe of Luxembourg, Amsterdam and Ottawa universities, respectively, estimated that 42% of the 340,000 Canadian manufacturing jobs lost during the last decade were due to our rising petro currency. To my knowledge, there are no studies about job losses in the Canadian retail industry. These studies are badly needed, but they would have to be peer reviewed. And we would have to know who paid for these studies because, unfortunately, in today’s world the results of studies often depend on who paid for them.

JR: Do we know by how much the loonie would rise if the Northern Gateway pipeline were built?

RK: That is a very complex question. We need studies on that as well. We also must bear in mind that Kinder Morgan has applied for permission to more than double the capacity of its Alberta Tar Sands pipeline to Burnaby, BC. Most of this oil is supposed to be exported in large Suez type tankers. The Second Narrows channel would have to be dredged to accommodate these huge tankers. This pipeline would deliver almost as much oil to the west coast as the Northern Gateway pipeline is proposed to deliver to Kitimat. In addition, the Keystone pipeline to the US will likely be back on the table after the US election. Most analysts agree that we already have a petro currency, which rises and falls with the price of oil and the volume of oil exported. If these pipelines are built, we will definitely have a petro currency par excellence, and the rise in the loonie will be substantial.

JR: Does eastern Canada still import most of its oil from the Middle East and Venezuela?

RK: Yes, although it gets some from its own wells and some from the pipeline from Alberta to Sarnia. Twenty-years-ago, Canada imported about as much oil as it exported, but with the rise of the Tar Sands, exports have taken off and we now export about two barrels for every one barrel imported. This surge in exports is largely responsible for the rise in the Canadian dollar.

JR: It would seem to make sense to increase the capacity of the pipeline to Sarnia and to free eastern Canada from its dependence on imported oil. This would probably create more jobs, especially if the oil were refined in Canada. So why is this not on the table?

RK: I fully agree, especially since this would provide Eastern Canada with energy security. I suspect it is not on the table because the oil companies can make more money faster by exporting unprocessed bitumen to Asia.

JR: Do you agree with the environmental groups who have labelled the Northern Gateway pipeline an environmental disaster of epic proportions waiting to happen?

RK: I certainly agree – not only an environmental disaster, but also an economic disaster. The BC portion of the pipeline runs through earthquake country. It crosses hundreds of streams including the Fraser and the Stikine, two of the world’s great salmon rivers. Even without earthquakes, between 1999 and 2008 Enbridge had 610 leaks, spilling 21 million litres of oil. Some of these spills were quite large, like the recent three-million-litre spill into the Kalama River in the US. In Kitimat, the bitumen would be loaded on to tankers much larger than the Exxon Valdez. These vessels then move along narrow channels known for strong winds, strong tides and dense fog, with many sharp turns, for a distance of 140 kilometres to open water. This would be two-way traffic: tankers going in with natural gas condensate and tankers going out with tar sand oil. In addition, there will be all the marine traffic going to and from the smelter in Kitimat.

Once in the Queen Charlotte basin, these tankers have to cope with severe winter storms. According to the Royal Society of Canada, “Winter wind speeds average 35 kilometre per hour with gusts up to 200 kilometres. Monster waves of more than 25 meters may occur during severe winter storms.” In l949, Canada’s largest historic earthquake occurred here (8.1 on the Richter scale) According to Natural Resources Canada, “On Queen Charlotte Island, the shaking was so severe that cows were knocked off their feet and a geologist working there could not stand up. In nearby Terrace, cars were bounced around and walking on the street was described like being on a heaving deck of a ship at sea. Further south, the Juan de Fuca and North American Plates are currently locked. There is good evidence that some time in the future these plates will snap loose generating a huge subsuction quake similar to the 1964 Alaska Quake. During that quake, the docks in Valdez harbour collapsed.” Port Alberni was hit by a tidal wave, depositing ships in the downtown core.

JR: Sounds like we have learned nothing from Japan’s Fukushima experience, where Japanese industry and government were assuring the public that nuclear plants would be safe and secure in severe earthquake zones.

RK: That seems to be true. I would like to make a final point. What is good for the ecology is also good for the economy. What is bad for the ecology is also bad for the economy. We do not have to choose between something that is good for the economy and bad for the ecology. To argue that these pipelines are good for the economy and bad for the ecology is missing the point. Even if, by the grace of God, there were no spills, burning these hydrocarbons accelerates global warming. Ocean levels rise and millions of acres of fertile, productive land are lost. The cost of rebuilding entire cities, port facilities, highways and railways, etc. will be astronomical. It is much less expensive to prevent global warming than to deal with its consequences.

As Susan Riley, columnist for the Ottawa Citizen, so poignantly put it: “Pipeline opponents will win only if Canadians, en masse, rally to defend their beautiful, blessed country rather than stepping politely aside while it is plundered again for short-term gain.”

Canadians are waking up; an unprecedented 4,500 of them have signed up as official interveners at the NEB hearings on the Northern Gateway pipeline. It is a classic David vs. Goliath battle – citizens against big oil; citizens against their own government.

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Reimar Kroecher taught Economics at Langara College for over 30 years. For more information, visit the website: www.dogwoodinitiative.org