Northern Gateway a must?

[Argus]

How does the pipeline get a higher price for our oil? As far as I can tell, the idea is for China to get their oil cheaper, not to get us a higher price for it.

I have to say that if someone as generally knowledgeable and intelligent as Kimmy doesn't understand this it certainly sheds light on the opposition to the pipeline in BC.

The problem is that right now the major pipelines from Alberta run to the American midwest refineries. Those refineries are already overloaded with oil. Because of this they're paying us a heavily discounted price for the oil we export. The discount earlier this year was something like $31 a barrel off the actual world price of heavy oil. BNN estimated the cost to Canada's economy is about $15-20 billion per year. However, as oil development continues in AB production is expected to grow quite a bit over the coming years. This was why there was the big push for the Keystone pipeline to take that oil south to the Gulf Coast refineries. When Obama stopped/delayed that, for political reasons, as everyone knows the government vowed to find other ways to move the oil so we wouldn't be at the mercy of American politicians. Thus there is a move to ship the oil east to central Canada markets, and to move it west to the coast to ship overseas.

Vancouver Sun

[Wilber]

I have to say that if someone as generally knowledgeable and intelligent as Kimmy doesn't understand this it certainly sheds light on the opposition to the pipeline in BC.

The problem is that right now the major pipelines from Alberta run to the American midwest refineries. Those refineries are already overloaded with oil. Because of this they're paying us a heavily discounted price for the oil we export. The discount earlier this year was something like $31 a barrel off the actual world price of heavy oil. BNN estimated the cost to Canada's economy is about $15-20 billion per year. However, as oil development continues in AB production is expected to grow quite a bit over the coming years. This was why there was the big push for the Keystone pipeline to take that oil south to the Gulf Coast refineries. When Obama stopped/delayed that, for political reasons, as everyone knows the government vowed to find other ways to move the oil so we wouldn't be at the mercy of American politicians. Thus there is a move to ship the oil east to central Canada markets, and to move it west to the coast to ship overseas.

Vancouver Sun

And yet in 2010 we spent over 23 billion on imported oil. That is every nickel of 23 billion leaving the country. Why is that never factored into the cost to the economy? Because it isn't in the interests of the oil producers, that's why.

[Marcanadian]

I have mixed feelings on the pipeline. I know the economic benefits are huge, but I don't think it's worth risking a massive environmental disaster, which due to its sensitive location, could be catastrophic. The record of Enbridge doesn't console me in the slightest. That being said, I was reading a CBC article today and I'll quote an intriguing part:

Friday's notice from the federal assessment agency confirmed the changes implemented in the government's budget bill, which came into force on July 6. The changes to the joint review panel's mandate set a maximum time limit for the panel's work, concluding at the end of 2013 without further extensions.

Under the changes, the joint review panel can't reject the pipeline project for only environmental reasons.

Once the review panel submits its report, the federal government will make the final decision on the pipeline within 180 days (approximately six months), before the end of June 2014.

http://www.cbc.ca/news/politics/story/2012/08/03/pol-pipeline-moore-gateway.html

The bold part worries me. What's the purpose of conducting an environmental assessment on a project if environmental reasons are not enough to reject it? Does anyone know where I can find the legislation or regulations that describe for what reasons a project can be rejected, and by whom? I was reading through the new 2012 CEAA, but it only referred to a 'decision-maker' (the Minister) releasing his/her decision on whether a project would have environmental risks, based on the review panel's report. Simply put, on what grounds can a review panel outright reject project approval; do they even have that power, or is it now up to Cabinet?

[TimG]

I have mixed feelings on the pipeline. I know the economic benefits are huge, but I don't think it's worth risking a massive environmental disaster, which due to its sensitive location, could be catastrophic.

I think the fears of damage are overblown. On the other hand, the oil does not need to go this route. It makes more sense to expand the existing pipe to Vancouver where it could be use to feed Vancouver based refineries. The trouble is the negative press over the northern route has made people completely irrational when it comes to this topic.

The bold part worries me. What's the purpose of conducting an environmental assessment on a project if environmental reasons are not enough to reject it?

It makes no sense. I suspect CBC is politicing not reporting the facts properly.

[TimG]

And yet in 2010 we spent over 23 billion on imported oil. That is every nickel of 23 billion leaving the country. Why is that never factored into the cost to the economy? Because it isn't in the interests of the oil producers, that's why.

You should acquaint yourself with the economics of trade. Importing oil or coffee or chocolate or bananas is not a "cost" to the economy if Canadians are exporting enough of other things to make up that cost. Edited August 4, 2012 by TimG

[Wilber]

You should acquaint yourself with the economics of trade. Importing oil or coffee or chocolate or bananas is not a "cost" to the economy if Canadians are exporting enough of other things to make up that cost.

But if we were supplying our own needs, there would be no "cost" to make up. Without increasing our exports at all, there would be a 23 billion trade surplus instead of just breaking even.

[Marcanadian]

It makes no sense. I suspect CBC is politicing not reporting the facts properly.

I'm not sure whether what the CBC said is true or not, but it is true at least that Cabinet will now have final approval powers for projects undergoing federal assessments, rather than the agency/board that carried out the assessment.

[CPCFTW]

I did a little bit of quick research on the big oil companies in Canada, and took a shot at estimating the tax revenues they directly contribute to governments (these are multinationals, so not all tax revenue will go to Canada):

ECA - Encana

Employees: 3800.

2011 Tax Expense: -126M.

Annual dividends: 589M.

ENB - Enbridge

Employees: 6000.

2011 Tax Expense: 51M.

Annual dividends: 879M.

TRP - TransCanada

Employees: 4200.

2011 Tax Expense: 211M.

Annual dividends: 1182M.

CVE - Cenovus Energy

Employees: 3000.

2011 Tax Expense: 150M.

Annual dividends: 605M.

SU - Suncor

Employees: 13000.

2011 Tax Expense: 1103M.

Annual dividends: 682M.

HSE - Husky

Employees: 4700.

2011 Tax Expense: 334M.

Annual dividends: 1100M.

NXY - Nexen - Employees: 3000.

2011 Tax Expense: 1328M.

Annual dividends: 105M.

Total: 37,700 employees, 3.051B tax expense, 5.142B dividends.

Assuming the average employee gets paid 60k (imo a conservative assumption for the oil industry), and assuming these employees pay 40% taxes on average (income taxes, sales taxes, property taxes, etc.), 904M of taxes are also generated through employee income taxes.

Assuming dividends are taxed at an effective rate of 5% on average, dividends generate another 257M of tax revenue.

In total, 4.2B of tax revenue is generated by the above 7 companies given these assumptions. Lets not forget that these companies also create significant additional employment in the financial sector. Also their employees create domestic demand resulting in more employment in services, etc.

I'm considering doing a similar review of the big financial services companies, the other most hated industry of the left. Seeking comments/suggestions before I do any more research. My sources so far have only been SEDAR for tax information, google finance for the quarterly dividends, and wikipedia for employees.

Edited August 4, 2012 by CPCFTW

[Topaz]

Since the pipeline to the US is still being debated , I heard a woman on the radio program I was listening to, say the Harper County, Kansas is booming in oil since the spring and I have found an article that states its also booming in wind turbines and the jobs are up and the wages. So I'm wondering will the US want our product if they have found their own? http://money.cnn.com/2012/06/06/pf/kansas-wind-energy-america-boomtown/index.htm

[blueblood]

Since the pipeline to the US is still being debated , I heard a woman on the radio program I was listening to, say the Harper County, Kansas is booming in oil since the spring and I have found an article that states its also booming in wind turbines and the jobs are up and the wages. So I'm wondering will the US want our product if they have found their own? http://money.cnn.com/2012/06/06/pf/kansas-wind-energy-america-boomtown/index.htm

Yes, because why pay 3+ dollars a gallon for gasoline when it could be 2+ dollars.

Then there is all the tax revenue, jobs, and expanded economic activity.

[madmax]

I did a little bit of quick research on the big oil companies in Canada, and took a shot at estimating the tax revenues they directly contribute to governments (these are multinationals, so not all tax revenue will go to Canada):

ECA - Encana

Employees: 3800.

2011 Tax Expense: -126M.

Annual dividends: 589M.

ENB - Enbridge

Employees: 6000.

2011 Tax Expense: 51M.

Annual dividends: 879M.

TRP - TransCanada

Employees: 4200.

2011 Tax Expense: 211M.

Annual dividends: 1182M.

CVE - Cenovus Energy

Employees: 3000.

2011 Tax Expense: 150M.

Annual dividends: 605M.

SU - Suncor

Employees: 13000.

2011 Tax Expense: 1103M.

Annual dividends: 682M.

HSE - Husky

Employees: 4700.

2011 Tax Expense: 334M.

Annual dividends: 1100M.

NXY - Nexen - Employees: 3000.

2011 Tax Expense: 1328M.

Annual dividends: 105M.

Total: 37,700 employees, 3.051B tax expense, 5.142B dividends.

Assuming the average employee gets paid 60k (imo a conservative assumption for the oil industry), and assuming these employees pay 40% taxes on average (income taxes, sales taxes, property taxes, etc.), 904M of taxes are also generated through employee income taxes.

Assuming dividends are taxed at an effective rate of 5% on average, dividends generate another 257M of tax revenue.

In total, 4.2B of tax revenue is generated by the above 7 companies given these assumptions. Lets not forget that these companies also create significant additional employment in the financial sector. Also their employees create domestic demand resulting in more employment in services, etc.

I'm considering doing a similar review of the big financial services companies, the other most hated industry of the left. Seeking comments/suggestions before I do any more research. My sources so far have only been SEDAR for tax information, google finance for the quarterly dividends, and wikipedia for employees.

Considering your methodoly is pure guess and speculation based on a garbage in , garbage out , I still commend you on your attempt.

However.....

If you use the same methodology for the financial sector as a comparision, at least you can compare your both sectors using the same methodology regardless of its accuracy the difference between two things will be of interest.

Right now, it looks like peanuts ...compared to the sectors I am most familiar with, so perhaps something is wrong in your calculations...

Edited August 4, 2012 by madmax

[madmax]

But if we were supplying our own needs, there would be no "cost" to make up. Without increasing our exports at all, there would be a 23 billion trade surplus instead of just breaking even.

Either you have a trade deficit, trade surplus or balanced trade (Breaking even)...

[Argus]

And yet in 2010 we spent over 23 billion on imported oil. That is every nickel of 23 billion leaving the country. Why is that never factored into the cost to the economy? Because it isn't in the interests of the oil producers, that's why.

It is factored in. One of the issues is that we haven't been shipping oil east since the pipelines weren't designed for that. Why weren't they? Because there weren't refineries to ship them to. It was easier to ship the oil south and then import other oil. The cost really wasn't an issue as long as we were getting world price for our own oil anyway. Ie, why build a network of pipelines and refineries so we can ship oil east, when we can import oil without that?

Things have only changed now because of the growing amount of oil coming out of AB and SK, and the fact there's no way to send it anywhere but the US midwest - where it's priced at a steep discount because of oversupply.

[Argus]

A relevant commentary in the Globe today on the southern route.

The precautions used at Vancouver seem to make it extremely unlikely there would be an oil spill from the tankers. Ie, three tugs have to be hooked up to each tanker by steel lines, and there have to be 2 pilots aboard. The ship has to be new, double hulled, and inspected and approved beforehand.

Trans Mountain Route

[Wilber]

Either you have a trade deficit, trade surplus or balanced trade (Breaking even)...

So? A trade surplus means the value of goods you are selling is more than that which you have to buy. In business they call that a profit.

[Wilber]

It is factored in. One of the issues is that we haven't been shipping oil east since the pipelines weren't designed for that. Why weren't they? Because there weren't refineries to ship them to. It was easier to ship the oil south and then import other oil. The cost really wasn't an issue as long as we were getting world price for our own oil anyway. Ie, why build a network of pipelines and refineries so we can ship oil east, when we can import oil without that?

Things have only changed now because of the growing amount of oil coming out of AB and SK, and the fact there's no way to send it anywhere but the US midwest - where it's priced at a steep discount because of oversupply.

We import crude oil, the refineries are already there. If we are selling oil at a steep discount to the Americans, why don't we use it ourselves at somewhere closer to the price we are already paying for foreign oil? It's a win win for Canada. Instead you want to build pipelines west to supply other markets and keep us dependent on foreign oil just so oil companies can maximize their profits. That is what all this is really about.

[blueblood]

We import crude oil, the refineries are already there. If we are selling oil at a steep discount to the Americans, why don't we use it ourselves at somewhere closer to the price we are already paying for foreign oil? It's a win win for Canada. Instead you want to build pipelines west to supply other markets and keep us dependent on foreign oil just so oil companies can maximize their profits. That is what all this is really about.

And who's fault is it that we don't refine oil in eastern canada? Maybe if they cut out the red tape and taxes, it might be feasible to refine oil there.

China paying world price for oil is a good thing, they can pay through the nose. What's wrong with oil companies having profits, that means more tax revenue and more jobs.

This is like those neanderthals that pissed and moaned about railways getting built. Was canada better off with a railway yes or no?

[Wilber]

And who's fault is it that we don't refine oil in eastern canada? Maybe if they cut out the red tape and taxes, it might be feasible to refine oil there.

China paying world price for oil is a good thing, they can pay through the nose. What's wrong with oil companies having profits, that means more tax revenue and more jobs.

This is like those neanderthals that pissed and moaned about railways getting built. Was canada better off with a railway yes or no?

Canada importing oil goes back to when imported oil was 2 bucks a barrel and Alberta oil was more expensive to get to eastern markets.

You don't refine oil in Eastern Canada? What the hell are you doing with all that imported crude then?

Yes the railway was good for Canada, first and foremost it was built to serve Canadian needs. It was not built for the sole purpose of shipping one commodity overseas.

Maybe the Neanderthals who insist that we should continue importing expensive oil should take another look.

[blueblood]

Canada importing oil goes back to when imported oil was 2 bucks a barrel and Alberta oil was more expensive to get to eastern markets.

You don't refine oil in Eastern Canada? What the hell are you doing with all that imported crude then?

Yes the railway was good for Canada, first and foremost it was built to serve Canadian needs. It was not built for the sole purpose of shipping one commodity overseas.

Maybe the Neanderthals who insist that we should continue importing expensive oil should take another look.

Pipeline 1 goes south and severs 300 million people

Pipeline 2 goes west and serves 1-2 billion people

Pipeline 3 goes east and serves 20 million people

Guess who's at the bottom of the list.

The railway facilitated export of our products to coastal ports. In the late 1800s canadas big industry was agriculture and all that grain wasn't going to stay in canada. Now its oils turn. Oil is what is holding our economy up in this downturn, why not facilitate production of what we're good at.

[Wild Bill]

Since the pipeline to the US is still being debated , I heard a woman on the radio program I was listening to, say the Harper County, Kansas is booming in oil since the spring and I have found an article that states its also booming in wind turbines and the jobs are up and the wages. So I'm wondering will the US want our product if they have found their own? http://money.cnn.com/2012/06/06/pf/kansas-wind-energy-america-boomtown/index.htm

Topaz, you need to do a little math. The oil found in Kansas is a lot of money but the amount is mice nuts compared to how much the entire USA uses every year!

The US has always had oil wells. That's what built Texas, after all. They still have a lot of wells. Perhaps a third of their consumption comes from wells within their country.

Here's a link with a graph: http://www.indexmundi.com/energy.aspx?country=us

They also cannot possibly supply all their electricity from one wind farm in Kansas. Your own link, assuming you read it, says enough for 125,000 homes. That's worthwhile but there are just a few more homes than that in the USA! Most of them are in cities, where electricity must be sent in over a grid from power stations far away. They would need FAR more wind turbines, plus something to give power when the wind isn't blowing!

The States will need our product for a long time to come. Even if every car was electric tomorrow, people would still need a LOT of oil for diesel fuel for trucks (we won't see electric 18 wheelers for a few decades yet. The batteries would be bigger than the rig!) And what about fertilizers? That is a HUGE chunk of the oil market! That's where fertilizers come from! If they don't buy enough crude oil they will starve. Period and end of story.

[Wilber]

Pipeline 1 goes south and severs 300 million people

Pipeline 2 goes west and serves 1-2 billion people

Pipeline 3 goes east and serves 20 million people

Guess who's at the bottom of the list.

The railway facilitated export of our products to coastal ports. In the late 1800s canadas big industry was agriculture and all that grain wasn't going to stay in canada. Now its oils turn. Oil is what is holding our economy up in this downturn, why not facilitate production of what we're good at.

The comparison is stupid. The railways travel both ways and carry a variety of goods. Yes, grain traveled east but eastern manufactured goods traveled west. You can bet eastern companies and governments took their pound of flesh from western goods headed for Europe as well. This oil won't see the light of day between Alberta and Shanghai. Nothing at all in it for BC except a huge environmental risk. Pipelines are one way and export pipelines benefit one party only.

[Wild Bill]

The comparison is stupid. The railways travel both ways and carry a variety of goods. Yes, grain traveled east but eastern manufactured goods traveled west. You can bet eastern companies and governments took their pound of flesh from western goods headed for Europe as well. This oil won't see the light of day between Alberta and Shanghai. Nothing at all in it for BC except a huge environmental risk. Pipelines are one way and export pipelines benefit one party only.

Well, BC does stand to get a considerable amount of steady money!

Of course, BC doesn't need any money. Their governments are always excellent fiscal managers!

Silly me.

Nevermind.

[Wilber]

Well, BC does stand to get a considerable amount of steady money!

Of course, BC doesn't need any money. Their governments are always excellent fiscal managers!

Silly me.

Nevermind.

6.7 billion over 30 years or 8.2% of the tax revenue generated by this thing. Peanuts when you consider we get 100% of the environmental risk of both the pipeline and tankers operating in constricted areas on one of the most dangerous coasts in the world..

[blueblood]

The comparison is stupid. The railways travel both ways and carry a variety of goods. Yes, grain traveled east but eastern manufactured goods traveled west. You can bet eastern companies and governments took their pound of flesh from western goods headed for Europe as well. This oil won't see the light of day between Alberta and Shanghai. Nothing at all in it for BC except a huge environmental risk. Pipelines are one way and export pipelines benefit one party only.

I can think of 8 billion reasons why. Is 8 billion dollars better than zero dollars.

That railway saw more grain head east than goods shipped west. Its a population thing, hence the prefered route going west than east.

And does alberta and saskatchewan not take an environmental risk when it comes to resource development. As they always say no guts no glory.

I always find it amusing that the biggest opponents to projects like this are elitists who already have their money, but when someone comes up with an idea to make money, they strike it down in the name of the environment, sad.

As for oil going to china, its going there like it or not, if the pipeline gets stopped this affects more than oil producers, potash and ag exports are going to feel higher transportation costs which will infuriarate saskatchewan. Those rail lines to bc are going to be plugged and the railways safety record isn't anything to write home about either.

[blueblood]

6.7 billion over 30 years or 8.2% of the tax revenue generated by this thing. Peanuts when you consider we get 100% of the environmental risk of both the pipeline and tankers operating in constricted areas on one of the most dangerous coasts in the world..

Which is better than what most landowners get when they negotiate surface rights for oil companies.