When economist Robyn Allan decided to retire to Whistler, it was partly because her kids were likely to visit her there. The kid magnet plan worked. Except that when one of her sons came to visit, he was despondent about the future of our province, in particular Enbridge’s Northern Gateway Pipeline proposal.
So Allan, no doubt calling on her extensive training as a Business in Vancouver columnist in the early 1990s – before she became CEO of ICBC – decided to use her spare time and financial experience to check out the economics of the pipeline. After all, it’s the federal government’s choice as the best bet for Canadian prosperity. Benefits ranging from $270 billion (Enbridge) to $132 billion (University of Calgary) to $72 billion (Alberta government) have been promised, depending on who’s counting and what they’re counting. And jobs: “35,000 person-years of total employment (on-site, purchases, indirect, induced) in B.C. alone,” according to Enbridge.
So she went online and downloaded the voluminous documents filed at the National Energy Board (NEB).
What she saw shocked her.
“Once I began to dig, it became clear it’s a house of cards,” she said. “The emperor has no clothes. The economic case is a fraud.”
Since then, Allan has become a talk show magnet because her conclusions are so radically different from those of the project’s proponents. Remember, this is the largest private investment of capital in B.C.’s history. It will create potentially catastrophic risks for coastal First Nations, fisheries, the ecology of the world’s largest intact temperate rainforest and coastal jobs.
You would think the economics, the whole reason for it, would be getting a lot of scrutiny. Yet it seems everyone is taking Enbridge’s claims at face value, with the $270 billion benefit number repeated as gospel by everyone from the prime minister down. Allan’s analysis shreds the credibility of that number. Using information supplied by Enbridge, Allan points out that the company’s case depends on using the Asian price premium to raise the price of a barrel of crude oil by at least $2 to $3 a year. That’s at the low end. Other studies assume the per-barrel price lift will be between US$7 and US$13. But once a new, higher export price is established, Canadians will also have to pay more at the pump. That’s where most of the purported $270 billion benefit will come from, according to Allan – one of the many costs that were never factored in.
Never mind the “Dutch disease” impact on Ontario manufacturing from a high petro-dollar. What about the impact on the wider Canadian economy – B.C.’s tourism and forestry industries, to cite one example – from oil prices presumed to rise by as much as $13 a barrel just because of this pipeline? The downside costs of that are not in any of these studies, and the upside benefits assume an $0.85 Canadian dollar for 30 years. What?
Because it doesn’t count costs to the rest of the economy, allows for no fluctuation in the dollar or volatility in demand, and does no sensitivity analysis, Enbridge’s overly simplistic input-output case for this project amounts to the “economics of deception”, according to Allan. “You would lose your job if you took this to a corporate executive committee.”
If Allan is getting something wrong, nobody has challenged her directly. Enbridge says it don’t want to jeopardize its case before the NEB by getting into specifics, although it’s just launched a $5 million ad campaign to push the bogus figures.
Allan, meanwhile, has been showered with speaking requests, with three standing-room-only presentations in Vancouver in recent months. So much for retirement. •
