Alex Carrick: B.C. is Home to the Conflict between Greater or Lesser Visions for Canada
Western Canada is the place to be. At least that’s the conclusion to be drawn from the 2011 census results, as recently compiled and disseminated by Statistics Canada.
Over the past five years, only three provinces in the country have experienced population growth greater than for the country as a whole — Alberta, B.C. and Saskatchewan.
Canada’s increase in population between 2006 and 2011 was a cumulative 5.9 per cent. Alberta rode point at +10.8 per cent, followed by B.C., +7.0 per cent, and Saskatchewan, +6.7 per cent.
We know why Alberta’s such a magnet. There’s the work in the oil sands, which is about to enter a second boom phase. Alberta’s recent pre-election budget is counting on the energy patch to deliver another burst of prosperity. Unlike almost every other province, there is nary a mention of austerity.
Saskatchewan’s surge is no mystery either. The province is a resource wonder, with potash, uranium, diamonds, oil and agricultural products in abundance.
B.C. is also rich in raw materials, including the forestry sector, precious and base metals mining and natural gas. The latter is mainly in the northeast of the province and will figure more prominently further along in this article.
But it’s another feature of B.C. that makes that province so interesting at this time. It’s on account of B.C.’s strategic location as Canada’s gateway to Asia-Pacific that makes it so pivotal to the future of the nation. There are projects being considered and reviewed in B.C. at this time that define and highlight many of the natural strengths and shortcomings we possess as a nation in an increasingly competitive world economy.
The proposed project with the highest profile is Enbridge’s Northern Gateway natural gas pipeline. If approved, this will ship 500,000 barrels of oil per day from Alberta to storage tanks in Kitimat. From there, the crude will be transported by ship to customers in China, Vietnam and South Korea.
Environmental hearings were recently initiated under the joint stewardship of the Canadian Environmental Assessment Agency and the National Energy Board. They are expected to last two years.
Consider some of the elements at play in the decision whether or not to proceed with this project.
There’s geography. Northern B.C. is situated a couple of days closer by ship to Asia than ports along the U.S. Pacific Coast. That gives us a tremendous cost advantage when asked to supply raw materials to the surging economies of the Orient.
There are native land claim issues. B.C. has a history of difficult dealings with indigenous peoples. Local bands are saying they don’t want this oil pipeline due to concerns about possible damage to their traditional habitats.
On the other hand, revenue sharing from such a project would certainly come in handy and precedents have been set with respect to many other resource projects in the province.
What about environmentalists? They aren’t likely to find this project acceptable under any circumstances. They want to stick with the status quo. The excuse is to preserve things as they are for our children. But that may deny our offspring the best job opportunities, some of which include protecting and restoring nature while also harvesting its bounty.
The party that has been elected to a majority government in Ottawa is the one most likely to support tanker traffic near the Queen Charlotte Islands. This will be a necessary pre-condition if Alberta’s oil is to find its way to ports on the other side of the Pacific.
There are other alternatives — expansion of Kinder Morgan’s existing pipeline and CN and CP railroad proposals — to ship oil from Alberta to the coast. Each of these also has its positive talking points and its flaws. Nor is shipping oil from Alberta to Asia the only prize in the energy treasure chest. There are several liquefied natural gas (LNG) proposals as well, also planned for the region around Kitimat.
Some of the product would come from opening up shale gas deposits in northeastern B.C.
Access to reserves of shale natural gas has become a game changer for the energy sector in North America. Prices on this continent are considerably lower than in Asia. Of course, that’s why our energy companies want access to customers overseas.
There has been a big increase in the gas reserves being developed in the U.S.
Hydraulic fracturing, combined with horizontal drilling, has opened up vast new reservoirs of natural gas in shale rock. Such gas now accounts for about 30 per cent of U.S. supply, up from a negligible level in 2000.
On account of the surprising increase in natural gas availability, domestic sources are now accounting for over 80 per cent of U.S. total energy demand. In 2005, the figure was 70 per cent.
The U.S. is thought to have enough natural gas to last another 100 years. An important next phase will be to build natural gas distribution centres along the nation’s highway systems. This will be needed to encourage passenger car owners and trucking companies to make the switchover.
The benefits to the U.S. from greater self-sufficiency in energy will be enormous.
There are the gains in jobs and incomes. For example, the boom in North Dakota’s Bakken shale gas play has lowered that state’s unemployment rate to the lowest in the country, at 3.3 per cent.
It will provide a boost to manufacturing. Chemicals and plastics manufacturers that use gas as a feedstock will see particular benefits. Some of the nation’s largest petrochemical producers are already repatriating investment dollars from the Middle East.
On that score, there will be tremendous advantages from a world geo-political standpoint. Future U.S. engagement in the Middle East can be governed by issues other than dependency on foreign energy.
Finally, the U.S. trade deficit will be lowered, offering support for the value of the U.S. dollar and helping to keep a lid on interest rates.
How does this affect Canada?
We’ve already seen that U.S. politics can take precedence over our economic concerns. The Keystone XL pipeline was put on hold until after the Presidential election for political reasons. U.S. President Obama didn’t want to upset the environmental wing of the Democratic Party.
One counter argument to shipping our energy to Asia, or the U.S. for that matter, runs as follows.
More of the upgrading and refining should be done in Canada. That’s how to create the greatest value-added. If we don’t get our pipelines, we’ll be better off anyway, so the argument goes.
So what’s holding us back right now?
Economies of scale combined with transportation costs. Canada is a nation of 34 billion. The population of the U.S. is 313 million. China is home to 1.3 billion.
When is the bonanza from greater processing at home supposed to materialize? Someday, when government comes through with sufficient taxpayer subsidized funding. And we’ll still have to find customers beyond our own borders.
No thanks. This smacks of a consolation prize, a fall-back position, a work-around.
B.C. is alive with prospects in many other areas as well. For example, B.C. Hydro has long been planning a Site C hydroelectric project on the Peace River. The electricity will be needed to supply resource and energy projects near Prince George and Fort St. John.
Rio Tinto Alcan is planning a major aluminum smelter expansion at Kitimat. The potash and coal industries are looking for more port improvements at Prince Rupert so they can ship product to Asia. And the forestry sector has adapted to weak U.S. home-building activity by turning to markets in the Far East.
Finally, in the urbanized southwest of the province, construction is now underway on the Evergreen rapid transit line to connect Coquitlam to Vancouver by way of Port Moody. This is more proof of the forward thinking that is occurring in the province.
Contrast Vancouver’s initiatives with what is transpiring in the nation’s most populous centre. Toronto City Council has been unable to make a firm commitment to a transit vision for the metropolis. Mayor Rob Ford and his supporters want new facilities built underground, where the life-cycle of the capital expenditure will be longer, the disruption to surface traffic during the construction phase will be minimized and discomfort to passengers from inclement weather will be reduced. The case is also made that world-class cities usually opt for subways.
The opposition wants to save money and not so incidentally embarrass Mr. Ford, who very publicly rejected the former Mayor’s transit city plan, which called for LRTs on several routes.
In various locations across the country and on different industrial and socio-political levels, conflict is arising over grander visions for the country versus more mundane let’s-plod-along-as-usual inclinations.
It will be fascinating to see where Canada ends up in 10 years’ time.
Alex Carrick is Chief Economist with CanaData, a division of Reed Construction Data (RCD). CanaData is the leading supplier of statistics and forecasting information for the Canadian construction industry. RCD is a division of the global publishing firm, Reed Elsevier. For more economic insight from RCD, please visit www.dailycommercialnews.com/features/economy. Mr. Carrick’s lifestyle blog is at www.alexcarrick.com and he would welcome a follow on Twitter (Alex_Carrick) or Facebook.