Good morning Mr. Benoit, Chair, and members of the Standing Committee on Natural Resources.
Thank you for the opportunity to address this committee and assist in supplying information on the benefits of developing the oil and gas sectors specifically as it applies to Atlantic Canada.
The Atlantica Centre for Energy serves as a bridge for governments, the education and research sectors, the community at large, and we foster partnerships to engage in energy-related issues. I'd like to point out that we represent a cross-section of organizations involved in the energy sector, not just users or producers of energy.
I'd like to put the Atlantic Canadian economy in context. The Bank of Canada stated last month that the Atlantic economy is still moving sideways from the 2008 recession. Five years later the gap between Atlantic Canada and the rest of Canada remains significant. Interprovincial migration across and the loss from Atlantic Canada to other parts of Canada is still the worst in history, and interprovincial employees, i.e. those who remain in one province and work in another, for example, the two weeks on/two weeks off, remain at over 400,000 people. In a country with our relatively small population, this number is staggering.
The Atlantic Provinces Economic Council reported that New Brunswick in particular had zero economic growth in 2013, and the 2014 forecast is a mere 0.9%. The development of key oil and gas projects that are identified here have the potential to reverse these economic trends.
First is the west-east crude oil pipeline, also known as the energy east project. There exists an infrastructure challenge, where eastern Canadian refineries right now rely on imported foreign crude oil, which is inaccessible because of western Canadian crude oil. Western Canadian crude oil cannot realize the full potential of its value due to infrastructure, as has been mentioned, because it cannot be transported to refineries. TransCanada Pipeline has proposed to connect this stranded crude oil to eastern refineries. That will add $35.3 billion in GDP, which will economically benefit the entire country. This project is of such significance that if it proceeds to completion it will have a profound impact on the Atlantic region.
A study by Deloitte estimates the economic impact to New Brunswick alone at $2.8 billion GDP. Tax revenue to the New Brunswick government would include $266 million during the development and construction and an additional $428 million during operations. The long-term stable supply of domestic crude oil to eastern refineries saves up to $11.50 per barrel, which is $377 million per 100,000 barrels per day. Eastern refineries also invest to increase flexibility for processing this crude oil. For example, $2 billion is the low-end estimate required for coking capacity at 100,000 barrels per day. This region has the potential to become a global centre for energy, as it will have a supply source, production, movement, value added, regional use, and the opportunity to export.
With respect to natural gas production, it has been brought back to New Brunswick over the past decade. We have proven and probable reserves at 70 trillion cubic feet, which is 10% of Canadian proven resources. The province has recently renewed activity. One of the reasons for this is due to increased related infrastructure and pipelines. While early results have been encouraging, current production remains insignificant by national standards. There's a great opportunity here for developing it.
The benefits include creating a stable, long-term supply of natural gas and lowering tolling fees to local manufacturing, industry, and residential users. It creates an opportunity for export, balances the Atlantic energy requirements, and provides a significant source of royalty and taxation revenues to the government.
Nova Scotia has foreign investment potential for a proposed export terminal for natural gas. The New Brunswick Repsol/Irving Oil-owned LNG import terminal now has an export permit, but requires a source of supply. The economic impact of having an indigenous supply of natural gas in New Brunswick includes $21 million in direct, indirect, and induced investments and a direct GDP of $4.5 million.
As an example, the royalties that Saskatchewan receives from the oil and gas sector roughly equate to New Brunswick's equalization payments. Once developed, natural gas royalties in New Brunswick could transform the balance sheet of the province.
With respect to regional competitiveness, industry located in Atlantic Canada must be able to operate in a cost-competitive structure. This is important for the suppliers of energy as well as the users of energy. Industry cannot continue to absorb price spikes or shortages of supply and bottlenecks in the New England market. The current situation is not sustainable. A stable supply of cost-competitive natural gas benefits large and small businesses, electric utilities, residential customers and, of course, government revenue streams.
In summary, oil and gas have a major influence on this region directly impacting GDP. Nova Scotia and Newfoundland have strong oil and gas offshore developments. New Brunswick has flat GDP growth, with the potential for growth on the horizon if these initiatives can get off the ground, mainly the energy east project and the development of its own domestic natural gas reserves. Canada's oil and gas sector can continue to be a major source of economic benefit to the country. To maximize the price of our oil and gas reserves, Canada needs to have the infrastructure in place, so that we can use it domestically and for foreign markets.
Thank you.