Missing the argument
Seeing pipeline projects merely as job creators overlooks the bigger issue of their economic benefits
In its Energy East project filing to the National Energy Board last month,
TransCanada Corp. identified employment as a primary economic benefit in building its Alberta- to- New Brunswick Energy East pipeline.
“The Energy East Pipeline will deliver significant benefits to the western Canadian oil industry and to the Canadian, provincial and local economies,” the company said in the economic benefits section of its executive summary. “Specifically, the project is expected to result in employment of approximately 217,000 full- time equivalents during the development and operations phases.”
But do pipeline projects really create thousands of jobs and is job creation the best argument to put forward when pipeline companies and their advocates attempt to gain social licence, let alone regulatory approval?
Indeed, many analysts and observers, including some high- profile politicians, say pipeline companies are pushing the argument of job creation to the fore in a bid to secure public acceptance at the expense of distracting from the greater discussion of the pipeline’s wider economic benefits.
“The jobs are incidentally important, but the bigger game is the net economic benefit to Canada of having competitive markets, of making sure of the viability of Eastern refineries and even the potential for valued- added investments,” Frank McKenna, the former premier of New Brunswick who is a major pipeline supporter, said of the $ 12- billion Energy East plan.
Of course, pipelines do create jobs. Shovel- ready pipeline projects can see people gainfully employed for the two to three years during the project’s construction phase.
“We put 9,000 Americans to work building the first two phases of the pipeline back in 2009/ 2010,” TransCanada chief executive Russ Girling said about the Keystone XL pipeline recently. “We hired another 5,000 to build the southern leg of the project two years ago, and we want to put 9,000 more Americans to work to finish what we started.”
But once built, it’s a different story. Operations from all crude oil pipelines in Canada generated 2,263 direct jobs, according to latest data from Canadian Energy Pipeline Association. In contrast, the refining sector, say, employs 17,500.
“Pipelines do create jobs … but it is almost immaterial compared to the big picture,” said CEPA head Brenda Kenny.
Brian Crowley, managing director of the Macdonald- Laurier Institute argues that pipeline companies put themselves in “a weak position by promoting reasons that, on analysis, don’t stand up.”
U. S. President Barack Obama may have been off base to label Keystone XL as an export pipeline, but he is not far off the mark when he is says it is not a “massive job bill.” The U. S. State Department notes that the project will result in a mere 50 permanent jobs.
Mr. McKenna, who also served as Canada’s ambassador to the U. S., argues that the president was “dead wrong” on the pipeline’s benefits.
“We are talking about the energy security of a continent. And it’s a much bigger issue than the way it is being framed.”
Mr. Crowley also disputes the notion popular among certain quarters that Energy East will create new processing jobs in Central Canada, noting that Western Alberta crude will merely displace imported crude.
“The point that’s terribly important to make is the ability to get oil to world markets and get a world price for it, that would unlock investment and get people to work developing the oilsands and drilling. Jobs are a second- order effect; it’s not a first- order effect which a lot of people want to claim.”
The Alberta and federal government lost $ 6 billion alone in forgone taxes and royalties due to the discount on Canadian oil last year, according to Alberta Premier Jim Prentice.
Pipelines demand a lot of capital investment upfront and companies get a return as it’s a low cost and safer way of moving oil than any other method of transportation, said Steve Paget, director at institutional research at First Energy Capital Corp.
“Rail employs more people, but the safest way to move things from A to B is to put it in a pipeline. I am not sure I see the jobs argument. … It’s not a strong argument,” he told the Financial Post in mid- November. Pipeline companies insist that job creation is a central thesis of pipeline building.
TransCanada spokesman Timothy Duboyce said Energy East will create 14,000 direct and indirect jobs over a sevenyear period, which is “not negligible.”
Enbridge Inc., which is looking to build the Northern Gateway oil pipeline to the West Coast, employs more than 11,000 people on its North American network.
“I think you are also forgetting what is at either end of the pipelines: producers and refiners who themselves are amongst Canada’s largest employers of high- paying, skilled jobs, especially when you consider the many other related industries that rely on their vital services and products,” Enbridge spokesman Graham White said in an email exchange.
The greater, perhaps less tangible, argument to make is that pipelines are an important part of the infrastructure and can help access greater economic benefits.
One in every four Canadian dollars earned by trade is via a pipeline, said CEPA’s Ms. Kenny.
“People overlook the fact that pipelines are some of the largest property tax payers in the country. There is almost no other industrial complex that deploys that scale of capital investment in communities coupled with a near- zero call on municipal services.”
Gaeton Caron, former head of the National Energy Board, said that farmers across the country allow pipelines to cross their lands with no benefits to themselves, which is part of the citizens’ acceptance and tolerance in the interest of greater economic benefits.
But that goodwill of acceptance and tolerance is fraying at the edges.
“Leaving the issue up to the project proponents is exposing us to some important economic risk that we could overcome by tackling it as a major public policy question, rather than looking at it on a projectby- project basis,” Mr. Crowley says.
He believes the country needs a project similar to the Macdonald Commission that tackled the prickly issue of free trade with the United States.
“That idea was off the table for a 100 years, and the Macdonald Commission singlehandedly brought it back, rehabilitated it, explained why it is in the national interest in a way that was above partisan politics.”
Mr. Caron, who oversaw TransCanada’s original Keystone application in 2007, says when the Alberta Federation of Labour argued that the original pipeline should not be built on the grounds that it would take away Canadian resources and jobs south of the border, the regulator disagreed.
“The National Energy Board did not accept this argument because, a bit like climate change, to not approve a specific pipeline does not all of a sudden make the province of Alberta think differently about its resource strategy,” said Mr. Caron, who is now an executive fellow at the School of Public Policy at the University of Calgary.
The regulator’s point was this: pipelines served a greater function of connecting resources to markets, and other alternatives that offered greater job opportunity were not always the clinching argument.