“Half of those 15,000 jobs would be directly in construction, the rest would be indirect and induced impact.” – Michael Burt
Alberta Premier Rachel Notley announced Tuesday that she is embarking on a “cross-country tour” to convince Canadians that Kinder Morgan’s West Coast project must be completed, despite ferocious opposition from opponents. But the announcement got off on the wrong foot when the Premier’s office grossly inflated the number of jobs Trans Mountain Expansion will create. Notley won’t be taken seriously in Ontario and British Columbia if she can’t get her math right.
“The Conference Board of Canada estimates the Trans Mountain pipeline expansion project will create 15,000 construction jobs and 37,000 operational jobs per year,” the Alberta government press release reads.
This is factually incorrect, according to Michael Burt, the Conference Board economist who supervised the economic impact study for Kinder Morgan.
“The numbers themselves are fine, but the label that is being used to describe them is overly simplified,” he said in an interview. “I can see how some people might misconstrue that because you are really talking about a lot of secondary impacts beyond just running the pipeline and building the pipeline.”
Astute readers will understand that it doesn’t take 37,000 people to operate a pipeline. The entire Alberta oil and gas upstream (extraction) sector employed 135,000 workers in 2016, according to Alberta government data.
The actual number of employees required to keep the pipeline running will be 400 to 450, says Burt.
What about those 15,000 construction jobs? Turns out only half of that number will be “working in the construction industry” and a smaller number yet will be directly employed welding pipe or digging the trench in which to bury it.
What’s going on here? Is Notley trying to “scam” British Columbians by inflating the job numbers, as economist Robyn Allan alleged in an Aug. 28 op-ed in The Province?
The answer is much more prosaic than Allan – an economist with no experience in energy economics and a conspiracy theory streak a mile wide – would have us believe.
Whoever wrote the press release simply misconstrued, to use Burt’s word, this information from the Trans Mountain Expansion website: “According to Conference Board of Canada estimates, the Project would create the equivalent of 15,000 construction jobs and the equivalent of 37,000 direct, indirect and induced jobs per year of operations.”
The confusion was caused by not understanding what is meant by “indirect and induced jobs,” the secondary impacts Burt talks about.
A direct job is the welder joining the sections of pipe together.
An indirect job is the salesman from the welding supply store who delivers welding rods to the site every week.
An induced job is the wait staff at the nearby restaurant who takes their order when the salesman buys the welder lunch once a month.
Economic impact studies measure the effect of a dollar spent as it works its way through the economy until that effect finally peters out or leaks outside the regional or national economy. Not all dollars have the same impact.
The Conference Board’s model calculates a number of person years of employment, then that figure is divided by the years it will take to build the pipeline or, in the case of operations, 20 years.
But Kinder Morgan sometimes stretches the construction jobs over three or four years instead of the original two used in the impact study, says Burt, which results in a different set of numbers and leads to further confusion.
In this case, 7,500 construction jobs per year support about the same number of indirect and induced jobs. But the 400 or 450 direct pipeline operating jobs support about 36,500 indirect and induced jobs.
The much higher operations job numbers are based upon the assumption that producers get higher prices in Asia than the heavily discounted Western Canada Select their oil fetches in the United States. Burt’s study assumed that extra income would be spent in Alberta to create jobs, and some of it would flow back to investors, who would also spend it, creating additional secondary impacts.
No wonder the poor press release writer made a mistake. I’ve interviewed Burt three times about the study – and the smaller studies undertaken to measure additional impacts like those created by 30 oil tankers visits each month to Kinder Morgan’s Westridge Terminal in Burnaby – and still have questions about the exact nature of some of the impacts.
But I’m not the one trying to sell the benefits of Trans Mountain Expansion to the Empire Club of Canada in Toronto or the Economic Club of Canada in Ottawa or the Greater Vancouver Board of Trade. Canadian movers and shakers – business leaders who can influence governments and public opinion – will be sitting in those audiences.
“There is not a school, hospital, road or bike lane anywhere in the country that doesn’t owe something to oil and gas. Pipelines are just as critical for jobs and economies across the country as they are for Alberta, and to stifle the oil and gas industry would be economically negligent,” Notley said in the release.
If Notley wants influential Canadians to buy her message, she can’t be negligent with the data that underpins that message, especially easy ones that any government staff economist would have caught.
Let’s hope the Premier’s team tightens up the execution before her first speech on Nov. 20 in Toronto.