The Economic Benefits of Energy East for New Brunswick are Mostly Lies
The language used to describe the benefits of the Energy East pipeline to New Brunswick is — intentionally or not — grossly misleading. I’m going to cover three of the topics whose facts have been misrepresented the most in its coverage so far: the long-term job numbers, the short-term job numbers, and the overall impact to our province’s finances.
There will be about 240 long-term jobs created by Energy East in New Brunswick. Maximum.
TransCanada commissioned a report from the Conference Board of Canada that outlines the economic benefits of the pipeline. If you read an article mentioning the pipeline’s jobs or financial figures, there’s a good chance it comes from this report.
While it’s often claimed that the pipeline will create thousands of jobs in NB, the reality is much different. Regarding long-term jobs, what the report actually says is that it will create about 4812 direct and indirect person-years of work, maximum, over the course of 20 years for the province. That is, if they create 1 job, it counts as 20. So those 4812 “jobs” are actually 241 jobs for 20 years.
Let me also clarify what’s meant by the jobs that are created:
- Direct Jobs: A job that is directly related to the project. E.g. You’re hired to work at the refinery that processes the bitumen.
- Indirect Jobs: A job that is created to support the pipeline in some way. E.g. A law office hires an extra lawyer because of the extra work coming from the refinery.
- Induced Jobs: A job created as a side-effect to people that received direct and indirect jobs. E.g. A local restaurant hires a new server because they see an uptick in customers.
With these definitions in mind, the above 241 jobs breaks down into about 105 direct, 103 indirect and 33 induced jobs (mind the rounding error). Again, this is the maximum estimate. More realistically, the numbers would be closer to 180 total, with 78 directly-employed people that could confidently say they have a job because of the pipeline.
We likely cannot supply the construction jobs, and they vanish in 3 years.
They claim in the report that in 2018 the pipeline will be supporting 6,300 jobs in New Brunswick, but that is being extremely generous with the numbers. What they mean is that the total of direct, indirect and induced jobs will peak in 2018 around 6,300, before dropping back to almost zero in 2019. Here is their own chart, taken directly from their report, showing that trend for the Canada as a whole.
What the numbers really say is that construction will take about 3 years, and the peak number of direct construction jobs in NB is about 4,500.
But there’s a problem here: there are currently only about 24,600 construction jobs total in the province, and of those, a small fraction work in types of construction whose skills would allow them to be trained to work on it quickly. Plus, you have to assume that those that could work on it will not be working on some other construction project in the province — a hard assumption to make.
In other words, there will be a labour shortage.
That shortage will be made up by bringing people in from elsewhere. That’s fine — people everywhere need work — but even if they move back from Alberta or are brought in from neighbouring provinces, the jobs will exist until 2018 and then vanish the following year. It’s not exactly long-term stable employment. Certainly nothing to high-five about.
The tax benefit to the province will be less than half of 1% of our annual budget.
How about the claim that the economic benefit to the province will be nearly 900 Million dollars? Let’s look at that up close.
The report claims that there will be three main sources of economic benefit from the pipeline: income tax, corporate tax, and indirect taxes through HST and fuel taxes.
For New Brunswick, if you assume that every employee working on the pipeline is a NB resident (even though they won’t be), that they would otherwise not be working at all (not true in the vast majority of cases) and you account for all forms of tax revenue we receive directly to the province and through the federal government, on average we’ll receive $53.1M per year from 2013–2019, and then $31.1M per year until 2038.
That sounds like a lot of money, until you realize that the 2016–2017 provincial budget is $8.9 Billion.
This means the tax revenue from Energy East will have an impact worth less than 0.6% of our total budget for the first few years, and half that for the rest of its lifetime. That won’t even start to address our broader financial issues, let alone be an economic windfall. (These numbers are similar if you look at GDP growth instead of tax base growth as well.)
Yet, for all this lack of real economic benefit, this project seems to be all that the New Brunswick government wants to talk about. That the government has spent so much time promoting this economic non-starter across the country will be looked back on with pity as another example of a government hoodwinked by a strong oil lobby. The end result will be a provincial economy no closer to balancing its books, and another government term wasted searching for a quick-fix to our troubles.