Evidence of meeting #18 for Natural Resources in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was sands.
A recording is available from Parliament.
4:45 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
You're saying such as the banking industry in Toronto--
4:45 p.m.
Vice-President, Research, Canadian Energy Research Institute
Yes, that's one of the largest, actually. Impacts would be on that sector. And I can quickly look up here the other sectors that would be positively impacted.
4:45 p.m.
Conservative
4:45 p.m.
Vice-President, Business Development & External Relations, Canadian Energy Research Institute
The other thing is that when you have a four-to-one ratio of a multiplier effect, you also affect very mundane things like the number of teachers required to support schools, the number of health care workers to support the hospitals. If you're going to put that many jobs into the oil sands, it has a spinoff effect on those individuals needing to be supported, not simply in the province where the jobs are located but across the country.
We did make a slight underestimation of the impact on other provinces, because we assumed, for example, that all those salaries of the jobs in Alberta were spent in Alberta. But the fact is that a lot of that gets repatriated to places like Nova Scotia, Newfoundland, Quebec, Ontario, and B.C., where the workers come from. And Saskatchewan, of course.
4:45 p.m.
Vice-President, Business Development & External Relations, Canadian Energy Research Institute
So the impact is very, very broad on a large number of sectors. I'm not being very specific for you, I know.
October 24th, 2006 / 4:45 p.m.
Vice-President, Research, Canadian Energy Research Institute
Specifically, we have 19 sectors that we traced the effect on, any increase in economic activity, really, whether it be from the oil sands or anywhere else.
4:45 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
The reason I'm asking the question is to try to relate it to the rest of the country, how it impacts them, because this committee doesn't only represent Fort McMurray. We're trying to explain to places like Montreal and Toronto how the oil sands impact them. So if one could have more specific examples, it would be helpful.
4:50 p.m.
Vice-President, Research, Canadian Energy Research Institute
Yes, we can do that. Again, manufacturing and the financial sector would be the largest recipients of the economic stimulus. Gas utility would be one of the larger ones. Again, all 19 sectors experience some kind of economic stimulus, but to varying degrees, some more than others.
4:50 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
With all economic models there are variables, some with considerably more degrees of sensitivity than others. I'm particularly interested in what are the most sensitive variables because I'm trying to find out, number one, what they are, and then what we can do from a government policy perspective to lower the downsides on those highly sensitive variables, be it for labour and so forth. The more sensitive they are, the more risk-prone.
What are the most sensitive variables in your models?
4:50 p.m.
Vice-President, Research, Canadian Energy Research Institute
Obviously, as I mentioned earlier, there's a direct impact of dollars--for example, that's how we did the sensitivities on the price of oil--and that directly translates into higher value of output and investment. Keep in mind that the economic injection into any economy, regardless of where it comes from, will result in a multiple of itself, so that's very sensitive.
The input-output model has limitations that are used; there's no question about that. Interactions among different sectors that create these ripple effects of economic stimulus are based on established relationships of how much input each industry provides to the others. We have what we call coefficients that tell us, for instance, that one-tenth of the output of crude oil comes from manufacturing, just to throw that out. Those coefficients change over time, so the input-output analysis is more accurate in a shorter range of time, since those coefficients can be assumed to be stable and unchanging, but to the extent there's technological change over time, those relationships among different sectors will change, and therefore distributional impacts will also change. In other words, they're static coefficients, not dynamic ones; they don't take into account that the farther you go into the future, the less accurate it's going to be.
4:50 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
Maybe the National Energy Board might want to answer on this too; what are in many ways the most sensitive factors for how many projects will get built? The price of oil is the obvious. I think you used $50 a barrel in one of your case scenarios, and you used $40, which will actually come up with some other things.
I know I'm asking for the obvious, but can you state again the variables that will most likely slow down the potential projects?
4:50 p.m.
Technical Specialist, Oil, National Energy Board
I think we've identified them and talked about them already. They include escalating costs, potential labour shortages, and perhaps to some extent environmental issues. The price of oil is another important variable. If prices fall into the $35 to $40 range, it'll result in a significant slowdown.
4:50 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
If the labour shortage was taken care of, and the two factors of energy and water could be handled through technology or policy or whatever--because it's highly energy intensive to produce more energy, ironically enough--then wouldn't the likelihood of all those projects going forward greatly increase, or am I missing another major factor?
4:50 p.m.
Technical Specialist, Oil, National Energy Board
No, you're probably fair in what you're saying.
4:50 p.m.
Technical Leader, Oil, National Energy Board
I think slide 18 that Mr. Donihee presented captures most of the issues, both on the downside and the upside. To take it one step further, in addition to labour and to what Mr. Wall said, you also have the issue of pipeline capacity. We don't have enough pipelines leaving Alberta at the moment. We're expecting a number of them to come in, so--
4:50 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
That brings me to my next question: what other projects that are not directly related may be impacted by oil sands development?
I've heard some fanciful things from the Northwest Territories. Even nuclear people talk about it. I'm not sure how many of these are even realistic, but what other major projects could be impacted as we see the development go forward? Are there any comments?
4:50 p.m.
Technical Leader, Oil, National Energy Board
The pipelines are one, and then further downstream are the markets--where will this oil go? Will it continue to go into the United States and farther down? Will it go off the west coast? Mr. Bevington mentioned the gateway project earlier--will it go off there to California?
Markets have to be found. If you're going to bring two million barrels a day more than today, where's it going to go? The existing markets are near saturation--or you add upgraders in Alberta or the United States to process that bitumen. Those refineries can't handle it today.
4:55 p.m.
Conservative
The Chair Conservative Lee Richardson
Mr. Trost, we're running out of time. We'll catch you on the next round. Let's try to do five-minute rounds here if we can.
Mr. Tonks is next.
4:55 p.m.
Liberal
Alan Tonks Liberal York South—Weston, ON
Thank you, Mr. Chairman.
Thank you very much. I'm sure on its visit to Fort McMurray the committee is going to have the benefit of another perspective brought through your two deputations.
I want to follow up, just for a moment, on Mr. Trost's questions.
I would take it that the capital incentives that have been created through programs like the accelerated capital cost allowance would be an incentive, along with all the other variables that you suggested, to the production and the acceleration of production, or even the retarding, if you will, of production. Those incentives exist and are creating this kind of activity. We also have been aware that the technology can mitigate some of the spinoff effects that are occurring as a result of the production.
What would you recommend as the kinds of incentives that would also bring into balance, in that equation of sustainability, new technologies that you then would take into consideration in analyzing the sustainability of production at various levels--in addition to what you have mentioned? What incentives on those technologies would you suggest to this committee that we could pursue as a matter of public policy?
Would you take that under advisement?
4:55 p.m.
Vice-President, Business Development & External Relations, Canadian Energy Research Institute
I'd first comment that CERI's role is to analyze alternatives and to inform public policy, not to recommend. We try, because we're an independent agency, to provide analyses of different situations, but we steer clear of recommendations because we want to retain our objectivity. We can analyze any number of things. Increasing by a percentage here or decreasing by a percentage there is something we can analyze as a sensitivity, but we are not mandated to provide policy opinion on it, sir.
4:55 p.m.
Liberal
Alan Tonks Liberal York South—Weston, ON
Mr. Chairman, that takes me just one step over toward the National Energy Board, then.
What levers exist within your mandate to act in the public interest with respect to sustainability—I think Mr. Bevington was trying to get to this—if you were to feel that certain technological innovations would mitigate the harmful impact on the environment and impact on the economic development of the tar sands? What levers do you have that you could kick into that process?