Wednesday, July 31, 2013

How the Alberta Government Views Oil Sands Development

Updated January 2014

The approval of Shell Canada's Jackpine Project in Northern Alberta by the Alberta Energy Regulator provides us with some interesting insights into how the Alberta and Federal governments view the impact of continually growing oil sands development.

The 413 page report authored by the Joint Review Panel established by the Federal Minister of the Environment and Alberta's Energy Resources Conservation Board reviewed Shell Canada's request to increase its oil sands production at its Jackpine Mine by 15,900 cubic metres per day (100,000 barrels of oil per day).  This would require the building of additional processing facilities, other infrastructure and would increase the area mined.  Shell expects that it will recover 325 million cubic metres of dry bitumen (2.044 billion barrels of oil) over the mine's 40 year life 

Here is the Panel's final decision:

"The Panel notes that the Project is in an area that is nearly surrounded by other oil sands mines and in which the government of Alberta has identified bitumen extraction as a priority use. The Panel further notes that Shell’s application is for an expansion of an existing oil sands mine project. The Project would provide significant economic benefits for the region, Alberta, and Canada. Although the Panel finds that there would be significant adverse project effects on certain wildlife and vegetation, under its authority as the AER, the Panel considers these effects to be justified and that the Project is in the public interest."

"The municipal, provincial, and federal governments will all receive significant financial benefits as a result of the Project. The Project will provide major and long-term economic opportunities to individuals in Alberta and throughout Canada, and will generate a large number of construction and operational jobs."

Now, that they've given their approval, here are a few details about the environmental impact of Shell Canada's proposed expansion:

"The Panel finds that the Project would likely have significant adverse environmental effects on wetlands, traditional plant potential areas, wetland-reliant species at risk, migratory birds that are wetland-reliant or species at risk, and biodiversity. There is also a lack of proposed mitigation measures that have been proven to be effective. The Panel also concludes that the Project, in combination with other existing, approved, and planned projects, would likely have significant adverse cumulative environmental effects on wetlands; traditional plant potential areas; old-growth forests; wetland-reliant species at risk and migratory birds; old-growth forest- reliant species at risk and migratory birds; caribou; biodiversity; and Aboriginal traditional land use (TLU), rights, and culture. Further, there is a lack of proposed mitigation measures that have proven to be effective with respect to identified significant adverse cumulative environmental effects." (my bold)

In addition, the Panel noted that, while Shell will ultimately attempt to reclaim the lands involved, they admit that this eventual reclamation will not mitigate all of the effects of the mining process, particularly in the case of peatlands which take centuries to develop.  Over 10,000 hectares of unreclaimable wetlands will be destroyed, the home for many migratory birds and species at risk.  Even the Panel admits that the impact on these species could be "potentially irreversible".  Of these 10,000 hectares at risk, approximately 85 percent are peatlands.    Interestingly, the destruction of peatlands can release massive volumes of greenhouse gasses; peatlands are extremely carbon-rich and contain twice as much carbon as the entire forest biomass of the world.  Currently, the destruction of peatlands releases about two billion tonnes of carbon dioxide annually out of the global total of 31.6 gigatonnes (2011 data) or 6 percent of the world's annual total.  For your illumination, here is a map showing how widespread peatlands are throughout Northern Alberta with the areas in red having the greatest areal coverage of peat, suggesting that this will be an ongoing issue as oil companies look to expand oil sands production:

The Panel notes that the new project area will not support traditional plants (including old growth forest) for several generations after they are destroyed and that traditional plants may never re-establish because they occur on wetlands that cannot be reclaimed.

The Panel noted that setting aside other lands (conservation offsets) would help mitigate the impact of Shell's mining and processing activities, however, Shell Canada and oil other companies did not propose and historically have not supported the use of conservation offsets.  As such, the Panel tossed this idea into the laps of the Alberta and Canadian governments and will leave it up to them to determine whether or not conservation offsets are necessary.

In my opinion, here is one of the most interesting paragraphs in the report:

"With regard to the prediction of significant cumulative effects for several key indicator resources and species at risk, the Panel has determined that the Project itself only contributes incrementally to some of these effects and that most of these effects result from projects and disturbances that either currently exist or have already been approved."

I guess if there are already environmental problems related to oil sands mining, what's the point of stopping now!

Once again, economic benefits trump the long-term, widespread and irreversible negative impact on the environment.  While it is interesting to read some of the more candid findings of the Panel, their ultimate decision was pretty much a foregone conclusion.

Welcome to the world's newest petrostate.  We're open for business.

Monday, July 29, 2013

Putting Canada's Employment Rate Recovery Into Perspective

The Harper government through its rather worn out and tiresome Economic Action Plan is constantly touting Canada's employment and job creation record since the end of the Great Recession, stating that Canada's economy is a stellar performer largely because it is one of the few, lucky nations that  has recovered all of the jobs lost since 2008.  While, on the surface, things look pretty good for Canada's working population, a recent report by the OECD actually shows that things aren't quite as rosy as Steve would like to have us believe.

As background information and to put things into perspective, Canada's working-age population has increased by 1.75 million since 2008 or just under 1.5 percent annually.  What this means is that just recovering all of the jobs lost during the Great Recession is insufficient to cure Canada's employment problems, an additional 1.75 million jobs actually had to be created to break even.

A more accurate way of measuring Canada's jobs performance is to look at Canada's employment rate measured as a percentage of the working age population rather than the traditional and generally quoted unemployment rate.  Fortunately, the OECD provides this data for us and it looks like this for Canada:

2005 Employment Rate: 72.4 percent
2006 Employment Rate: 72.8 percent
2007 Employment Rate: 73.5 percent
2008 Employment Rate: 73.6 percent
2009 Employment Rate: 71.5 percent
2010 Employment Rate: 71.5 percent
2011 Employment Rate: 72.0 percent
2012 Employment Rate: 72.2 percent

In fact, Statistics Canada provides us with a much longer employment data time frame as shown on this graph:

Note that while the trend looks the same as the OECD data suggests, the actual employment numbers are different because the OECD uses a different definition of working-age population.

Between 2008 and last year, the employment rate dropped by 1.4 percentage points.  While that doesn't sound like much, it is actually quite a significant decline compared to the majority of Canada's OECD peers.

Here is a chart from the OECD showing the employment rate for all 34 OECD nations:

On average, the employment rate for all 34 nations fell by 1.4 percentage points between 2008 and 2012, the same as Canada.  Apparently, when it comes to employment growth levels, Canada's performance just average no matter what the Harper government would have us believe.

Now, let's take the data and put it in order from greatest increase in the employment rate to the greatest decrease in the employment rate, again from 2008 to 2012:

Out of all OECD nations, Canada's growth in employment comes in just below the middle of the pack in 20th place out of 34.  This puts us below Germany, Korea, Japan, Australia, France and even Italy.  Out of the 34 OECD nations, nine have managed to increase their employment rate and an additional four have either no gain or a very insignificant loss in employment.

So, the next time you read about Canada's great job performance or hear one of the bobbing heads in Ottawa talk about the success of the government's Economic Action Plan, keep this data in mind.  The only way Canada's employment market would have improved would be if, like Germany and Japan, our population growth level was near zero.

Friday, July 26, 2013

Spending Your Tax Dollars One Piano at a Time

According to the Federal Business Opportunities website, a sole source contract has been awarded to the Piano Gallery, Inc. of 1961 Chain Bridge Road in McLean, Virginia for the purchase of a Steinway Model B 6'11" Ebony Satin grand piano for the United States Marine Corps Band.

As background information, sole source contracts are issued when there is only one contractor that can meet the government's exacting requirements.  These contracts must be justified for one of two reasons:

(1)  If the contractor has a unique capability, whether it be an item or service, it is insufficient to simply say that the contractor is unique.  If the item is unique to the contractor, the unique characteristics must be set forth.  If the contractor has unique expertise, that expertise must be described.  If the contractor has unique equipment or facilities or he has proprietary data, it must be explained.

(2)  If only one contractor can perform within the required timeframe, the timeframe must be explained:

(a)   provide the date by which the supplies or services must be delivered.

(b)   Indicate how that date was determined and its significance.

(c) Indicate the impact of delay beyond that date in terms of program schedules, milestones, etc.

(d) State how long it would take another contractor to acquire the capability to perform (learning period), how much it would cost another contractor to get up to speed, and if appropriate, what it would cost the Government in terms of dollars and manhours to get another contractor up to speed.  State the bases for the above estimates.

Here is a copy of the guidelines for justifying sole source contracts for the United States Marine Corps:

As further background, here is some information on taxpayers' “new” piano:

According to Steinway's website, a Model B built between the years 2000 and 2010 retailed for between $51,200 and $86,990.

The Steinway now owned by American taxpayers and being used by the United States Marine Corps. is scheduled for delivery on September 1, 2013.

Oh yes, and the cost to taxpayers? A mere $78,100 for a used model.  What a deal!