CEO and labour leader agree: Canada should upgrade bitumen rather than send value-added jobs to China and U.S.

Building a pipeline to send millions of barrels of raw bitumen from Alberta’s oil sands to refineries in China will make some oil companies richer – but those riches will come at the expense of consumers and non-energy businesses across Canada.

That’s the main conclusion of a detailed report prepared by Robyn Allan, an economist and prominent businesswoman who was once named one of Canada’s top 200 CEOs.

The report was filed this week as evidence to the federal panel currently considering Enbridge Inc.’s application to build the controversial Northern Gateway pipeline.

In her report Allan projects that the Northern Gateway pipeline, if approved, will reduce Canada’s GDP, increase unemployment and put downward pressure on personal incomes because it will impose a two-to-three-dollar per-barrel increase in the price of oil – something she describes as a “price shock” that the Canadian economy can ill afford at this time.

“Somehow this project is being presented as ‘nation building’“ by people like Prime Minister Stephen Harper, writes Allan.

But “all available research, as well as the experience of most Canadians, points to just the opposite. Higher oil prices mean a decrease in family purchasing power, higher prices for industries who use oil as an input into their production process, higher rates of unemployment in non-oil industry related sectors, a decline in real GDP, a decline in government revenues, an increase in inflation, an increase in interest rates and further appreciation of the Canadian dollar.”

Allan’s report concludes that industry predictions that the pipeline will add $270 billion to the Canadian economy over the next 30 years are fatally flawed because they don’t factor in the depressing effect of an across-the-board increase in oil prices.

Allan’s report almost didn’t see the light of day because the National Energy Board (NEB) refused to grant her status as an intervenor in the hearings. But the Alberta Federation of Labour (AFL) did have status and chose to submit Allan’s report as part of its evidence.

“Both Robyn and I agree that the oil sands should be developed,” says AFL president Gil McGowan. “But that development should not come at the expense of the rest of the Canadian economy.

“The good news is that there is a way to avoid the price shock that Robyn talks about. By doing more upgrading and refining in Canada, we can make sure that Canadians keep much more of the value created by development within the country. And, by developing markets in eastern Canada instead of Asia, we can ensure that Alberta’s growth isn’t coming at the expense of growth in other provinces.”

In addition to Allan’s report, the AFL submitted its own 42-page analysis which argues that the Northern Gateway pipeline, if approved, would close Canada’s window of opportunity for “moving up the value ladder” for at least another generation.

“By increasing bitumen prices, the pipeline will remove the major competitive advantage that had traditionally been enjoyed by Canadian upgraders: access to cheap feedstock,” says McGowan.

“In essence, the pipeline will dramatically undermine the economics of Canadian-based upgrading and refining. In the process, we’ll be forced, again, into the role of ‘hewers of wood and drawers of water.’ Other nations will take the jobs and profits associated with adding value to our resources, and we’ll be left with pollution and inflation. It may even drive existing Canadian refineries out of business. I fail to see how Stephen Harper and other boosters of the Northern Gateway pipeline can argue that this approach is in the public interest. The evidence clearly suggests that we will seriously regret opening the door to bitumen exports to China.”

A copy of Allan’s report, entitled “An Economic Assessment of Northern Gateway” can be found here. A copy of the AFL’s brief on the same subject can be found here. Allan’s bio can be seen here.

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For more information call:

• Gil McGowan, President, Alberta Federation of Labour @ 780-218-9888 (cell)
• To arrange interviews with Robyn Allan, please call Terry Inigo-Jones, AFL Communications @ 780-483-3021 (office) or 780-910-1137 (cell)