A. Nation-Wide Benefits of the Oil and Gas Industry

1. Benefits to Gross Domestic Product and Jobs

During the course of the study, the Committee heard from Bryan McCrae, Chief Executive Officer of 3twenty Modular, that the oil and gas industry “without doubt has a profound impact on the economy.”[50] This impact is felt across numerous aspects of our lives from affordable transportation to efficient food production to higher life expectancy. Mr. Desrochers stated that:

We benefit from petroleum products in general in our daily lives to an extent that we don't even realize. How many of you drove in this morning? What was the seat of your car made of? The food that you ate this morning was probably produced using fertilizers that were produced with natural gas. The food was probably produced in Ontario and the fuel might have come from Alberta. The food you bought this morning was probably packaged in plastic. Again, there's a reason we're so much better off than our ancestors.[51]

According to a document provided by representatives of Natural Resources Canada, in 2012, the industry’s contribution to Canada’s gross domestic product (GDP) was $112.4 billion[52] or 6.4% of the Canadian total.[53] Direct GDP contributions from the energy pipeline industry and the Canadian refineries were $8.8 billion and $2.5 billion, respectively.[54]

The Committee also learned about the direct[55] and indirect[56] effects of the oil and gas resource development on Canada’s employment. Estimated direct employment for the overall oil and gas sector ranges between 100,000 and 200,000 jobs.[57] Approximately 17,500 people are employed by Canadian refineries, and more than 9,000 people are employed by energy transmission pipelines from across Canada.[58] Speaking about the context of Canada’s overall labour force, Ms. Dobson pointed out that the oil and gas industry accounted for approximately 1.4% of Canada’s full-time workforce in 2012.[59]

While some witnesses[60] observed that direct oil and gas employment may appear relatively modest when compared to manufacturing and construction sectors, Trevor Harrison, Professor at the University of Lethbridge and Director of Parkland Institute, pointed out that much of the employment involved in oil and gas production is indirect.[61] It is estimated that each well involves $13 million of direct investment and creates direct and indirect employment for 40 to 50 individuals.[62] In total, the oil and gas sector creates between 150,000 and 300,000 indirect jobs.[63] During his presentation, Mr. Khosla observed that:

A lot of people think about these jobs as direct jobs within the industry, construction or operations jobs, but when you look across the country, we are talking about an energy resource boom, which has secondary and tertiary effects—engineering jobs, manufacturing jobs, financial and technical jobs, scientific jobs, and on you go. Those jobs impact every part of the country.[64]

Similarly, Christopher Smillie, Senior Advisor at the Building and Construction Trades Department, AFL-CIO, told the Committee that “these aren’t just jobs in oil and gas; these are jobs that create jobs,” and that “The more we invest in resource development and the infrastructure that comes with that, the more jobs in skilled trades we create.”[65] In his view:

This means paycheques, good paycheques coming home to Canadian families. This means dollars going into the consumer economy. This means dollars going back into the economy. This means a solid quality of life for middle-class Canadians, the engine of our economy.[66]

Committee members were also interested in knowing about the type of jobs and expertise that the oil and gas sector creates across Canada. Mr. Khosla described the industry as highly technical, and remarked that it creates scientific and high-paying jobs.[67] For example, in Fort McMurray, “the average household income is in the neighbourhood of $150,000 and upwards for a family.”[68] Similarly, in northeastern B.C., Mr. Streeper said that, “The average person involved in the oil and gas industry … is quite common to have an income in excess of $100,000 a year.”[69] Mr. Boag told the Committee that:

Refinery workers earn well above average wages and salaries, two-thirds more than the overall Canadian average, and even 50% more than workers in the overall manufacturing sector. Nearly 75% of refinery workers have some form of post-secondary education. They're scientists, engineers, technologists, technicians. They're highly skilled, highly valued workers who get paid good salaries and wages, and obviously then contribute to the communities in which they live.[70]

Ms. Annesley also underlined that the oil and gas industry plays an important role in Canada’s skilled trades training and education. According to her, “increasingly, the average oil and gas worker is a graduate from a technical college or institute.” She described the oil sands industry as a “skilled trades training powerhouse,” where in some cases, the project labour agreements have up to 20% of the labour force as apprentices. In her view, this provides training and opportunities for people to move quickly through their apprentice rankings.[71] Similarly, Jayson Myers, President and Chief Executive Officer of the Canadian Manufacturers and Exporters, noted that “The oil sands, in providing energy and resource development generally, are providing a tremendous opportunity to develop those skills that are really in need right across the country.”[72]

Despite this, several witnesses noted that labour mobility and access to a skilled workforce remain a key challenge facing the oil and gas sector as well as the supply-chain industries, such as construction and manufacturing.[73] Roger Larson, President of the Canadian Fertilizer Institute, observed that “skills shortage is a challenge for all regions of the country, but is especially felt in rural areas of Canada where resource-based industries are usually centered.”[74]

In their discussion about the government’s role in addressing the issue of skilled labour shortage, several witnesses acknowledged the value of the recently announced government program, the Canada Job Grant.[75] Mr. Smillie and Ms. Annesley told the Committee that the Canada Job Grant program is a step in the right direction. Mr. Smillie elaborated that “the key part that [industry members] like about the Job Grant is that it is aligned with what employers are willing to do.”[76] According to him and Mr. Myers, the program encourages companies to hire apprentices.[77] In line with this statement, Mr. Myers pointed out that the Canada Job Grant program “alleviates some of the upfront risk of doing some training and incorporating new hires into the company.”[78]

With respect to the issue of labour mobility, Mr. Smillie explained to Committee members that credentials recognition across jurisdictions is not a problem because of the Red Seal program, which has been in place for nearly 50 years. Rather, it is the financial requirements involved in moving for work that impede workforce mobility. For this reason, his organization has been advocating for the introduction of a labour mobility tax credit that workers could use to reduce their work-related travel expenses.[79]

2. Benefits through Government Revenues

The oil and gas industry is also a large contributor to Canada’s critical social programs such as health, pensions, and education through taxes and royalties paid to provincial and federal governments. According to Natural Resources Canada, “The oil and gas sector provided Canadian governments with an average of $23.6 billion per year from 2007–2011, of which $22 billion was from the upstream oil and gas extraction industry, including its support activities.” Nearly 90% of that revenue was paid to provincial governments.[80] Speaking specifically about Canada’s energy pipelines, Ms. Kenny told the Committee that the industry pays “… both directly and indirectly to the communities [it] operate[s] in, over $1 billion in municipal, provincial, and federal taxes, and [that] this can be used by local governments to support services such as health care, infrastructure, and education.”[81]

Furthermore, health care and social programs across Canada are being funded by the oil and gas industry through equalization payments from the “have” provinces (i.e., Alberta, British Columbia, and Saskatchewan) to the “have not” provinces.[82] For example, Colleen Mitchell, President of Atlantica Centre for Energy, told the Committee that “the royalties that Saskatchewan receives from the oil and gas sector roughly equate to New Brunswick’s equalization payments,” and that “once developed, natural gas royalties in New Brunswick could transform the balance sheet of the province.”[83] Similarly, Mel Norton, Mayor of the City of Saint John in New Brunswick, asserted that the province wants to become a “have” province and not a “have-not.”[84] He stated that “We look at Saskatchewan and how the economy has completely evolved there over the last 10 years. It's a complete 360…. More than 20% of Saskatchewan's revenues come from natural resources, oil and gas. In New Brunswick, it's 1%.”[85]

B. Benefits of the Oil and Gas Industry at the Regional and Municipal Levels

While the majority of the oil and gas exploration and development activity is concentrated in western Canada and Newfoundland and Labrador, the industry’s value chain extends across the country and thus generates economic benefits in terms of GDP and employment in every Canadian region (see Appendix A). Investment in oil and gas production in one Canadian region creates demand for labour as well as for goods and services from other regions. This demand translates into the supply chain effects or indirect effects (e.g., indirect jobs) as well as other economic spin-offs. For instance, Michael Burt, Director at the Conference Board of Canada, told the Committee that:

When we talk about the oil and gas industry it's also important to look at the other impacts, the secondary impacts in the economy. These take a variety of forms. For example, the investments that these businesses undertake, their supply chains and … the induced effects or the income effects; the money people earn in their jobs creates additional economic impacts when they spend it.[86]

During the course of the study, the Committee learned that the oil and gas industry has a significant influence on the socio-economic development of communities, small towns, regional municipalities, and their local businesses. Specifically, the industry contributes to family life and the social fabric through its investment in local recreational infrastructure, job creation and social programs. For example, Ms. Kennedy pointed out that “operating means reaching out and working with other businesses and being part of the community and local suppliers and communities who are impacted by our energy development.”[87] According to her, “… Suncor currently supports 1,300 charitable and non-profit organizations across Canada and has invested $22 million in communities in 2013 alone.”[88] In northeastern B.C., “family life has excelled” because of the development of natural gas.[89] Mr. Streeper stated that “We have fresh water, we have a large community centre for recreation, we have large outdoor recreation facilities, we have all kinds of ball diamonds and soccer fields for families….”[90]

Speaking about Canada’s energy transmission pipelines, Ms. Kenny observed that “from over 60 years of practice and growth, [the industry] touched virtually all kinds of communities and regions….”^[91] According to her, the pipeline industry directly invests $20 million in communities across Canada, in areas such as in education and arts.[92] Mr. Streeper stated that “[he] could go on all day about the benefits of pipelines. For one, every pipeline that exists is taxed. The Northern Rockies Regional Municipality gains from this taxation and so does the provincial government.”[93]

Refineries have had a similar effect and are considered “a major, if not the major, economic anchor in communities like Come by Chance, Saint John, New Brunswick, Levis, Quebec, Sarnia, Regina, Edmonton,” Mr. Boag told the Committee.[94] The Committee also learned that thousands of workers commute from across Canada to work in western Canada’s oil and gas production sites, which results in significant income remittance effects.[95] The following discussion illustrates some of the social and economic benefits that the oil and gas industry generates for Canadian communities and local businesses.

1. Benefits to Western Canada

While hearing from witnesses from western Canada, the Committee learned that the oil and gas industry has been beneficial for communities and business owners in British Columbia, Alberta, and Saskatchewan.[96] For example, Mr. Streeper told the Committee members that the community of Fort Nelson is completely reliant on oil and gas exploration and development. According to him, “employment in [NRRM] is 100% oil and gas related,” whether it be direct or indirect.[97] He also stated that:

... If it wasn’t for the activity of the oil and gas industry companies, many communities, especially in the north, would have very restricted income to support [their] citizens…. We are very much in favour of the oil and gas industry, the things they do, the employment they created, and the jobs they supply to our communities.[98]

Mr. Streeper added that “All industrial development in Fort Nelson basically relies on the oil and gas industry. We have created industrial subdivisions that are the backbone of our taxation. This taxation offsets the amount paid by private individuals, so the oil companies are contributing quite extensively to our tax base.”[99]

The Committee also learned about the benefits of the industry on community infrastructure development. Mr. Streeper recounted that oil and gas industry has made significant contributions to the construction and improvement of NRRM’s road, water, and communication systems, which the local residents and businesses now enjoy.[100] Specifically, he noted “Our oil and gas industry has contributed extensively to a lot of our rural aspects such as road use, road development, and advancement of roads to the point of being paved. Most of it is to service the oil and gas industry.”[101] Mr. Streeper also
added that:

It has allowed the community to advance quite extensively, especially in the communications aspect, where we now have cell service in the northeast corner of B.C. that extends to the Northwest Territories and the Alberta border. These stations were all installed because of the oil and gas industry, and many citizens rely on all these services that are put in because every service that the oil and gas industry establishes also has a component in there for private use.[102]

Similarly, Mr. McCrea observed that there is notable infrastructure development in Estevan, Weyburn, and other communities in Saskatchewan because of oil and gas resource extraction.[103]

Looking at the industry’s benefits from a social standpoint, Mr. Streeper asserted that the oil and gas industry benefits families and the social fabric of his community. According to him, “It has made communities like Fort Nelson more whole; the younger people are not leaving to seek employment in other communities…. It has aided in school, it has aided in development of the town, but the biggest thing about all this … is the family life.”[104] In reference to rural and semi-urban areas of Saskatchewan, Mr. McCrea made a similar point by stating that “no longer do young families need to move to the city to prosper. Now, thanks to the oil and gas industry, they can be employed, start a business, and raise a family in a town where they were born and raised.”[105]

In a document presented to the Committee, Dave Turchanski, President of Energy Services BC, indicated that a decline of the oil and gas sector would have a major impact on the people of northeastern B.C. According to him, “in the 80s when there was a recession in the industry, we watched people go bankrupt, offices were closed, and the streets just about rolled up in the North. So today, if the same thing were to happen we would be in trouble.”[106] Mr. Harrison told the Committee that “greater long-term benefits would accrue to Alberta, and Canada as a whole, through a slower pace of oil and gas development.”[107] In contrast, other witnesses explained that slower oil and gas development can result in significant lost opportunity, and that Canada has a limited time-window to access new energy export markets to remain competitive. According to Mr. Burt, because of a lack of pipeline capacity and access to market, the oil industry lost an estimated $25 billion in unrealized income in 2012. This translates to $8 billion in lost government revenue paid by the industry through income taxes and royalties. In his view “it is something we need to address if we’re going to maximize the benefit of our
non-renewable resources.”[108] Mr. Khosla pointed out that :

Many forecasters, the International Energy Agency, CERA, and a few others, are saying they'll [U.S] be self-sufficient by the year 2035. You combine that with the fact that we're increasing our production and that they're our biggest customer, and you can imagine what we need to do between 2020 and 2035. We need to diversify our markets. That's one of the timelines on this. Another one is that when you look at B.C., a lot of forecasters on the LNG play are saying there's a race across the world. But B.C. is not the only area within the world that's chasing liquefied natural gas.[109]

2. Benefits to Eastern Canada

Committee members were interested in knowing how oil and gas production in western Canada is benefiting the provinces in eastern Canada and the Atlantic region. According to Mr. Burt, “30% of supply chain impacts associated with oil sands development occurs in provinces outside Alberta.”[110] Among these provinces, Ontario was recognized as the biggest beneficiary of the oil sands development, with approximately $600 million invested in oil sands-related activity.[111] Mr. Burt elaborated that Ontario’s industries including financial services, professional services, transportation and manufacturing, have all benefited from investments in oil sands projects. Ms. Annesley also observed that “oil sands development has become such a major market for Ontario goods that projected sales for Ontario’s goods and services to the oil sands sector could potentially surpass Ontario sales to traditional markets such as China or Hong Kong.”[112] Speaking about the economic benefits of the pipeline industry, Ms. Kenny told the Committee that in 2012, the pipeline industry’s contribution to the province amounted to 5,300 jobs, $1.4 billion in GDP, and more than $85 million in procurement to over 350 local suppliers.[113]

In Quebec, the Montréal oil refinery and the larger petrochemical complex employ up to 6,000 people, but this does not include all the indirect benefits that are generated by the industry’s demand for goods and services.[114] For example, Ms. Kennedy told Committee members that Suncor has invested $241 million in Quebec’s goods and services.[115] Among some of the companies in Quebec that service Suncor and other industry players, are Prevost, which supplies 25 to 45 buses to the oil sands every year, and, Ezeflow, which manufactures pipefittings for oil, gas, and steam. The Committee learned that Quebec’s financial sector is also heavily investing in oil sands development.[116]

3. Benefits to Atlantic Canada

Atlantic Canada experiences direct and indirect economic benefits generated by oil and gas companies operating in the region and in other Canadian provinces. According to Barbara Pike, Chief Executive Officer of the Maritimes Energy Association, the oil and gas industry “directly employs 5,600 people, and thousands more indirectly.” She also noted that more than 800 local supply and service companies support the region’s offshore oil and gas development.[117] Additionally, oil production accounts for 30% of Newfoundland and Labrador’s GDP, and approximately 2% of Nova Scotia’s GDP.[118]

Speaking about Newfoundland and Labrador, Anthony Patterson, President and Chief Executive Officer of Virtual Marine Technology Inc., told the Committee that the province’s “GDP growth rate is higher than India’s…” and that its “unemployment rate is the lowest since 1973,” largely because of its growing oil and gas industry.[119] Furthermore, Mr. Patterson commented on the industry’s contribution to Newfoundland and Labrador’s high-technology sector and innovation. Up to 2011, the oil and gas industry had invested $205 million in the province’s high-technology R&D, mostly concentrated on Artic operations and improving health, safety, and environmental performance of industry operations.[120] Ms. Pike also discussed the numerous engineering companies that are emerging in Atlantic Canada in response to industry’s demand for innovative technologies. As an example, she mentioned a Nova Scotia-based company, Encanex, which has grown significantly in a span of two years because of the offshore oil and gas industry, and is now expanding its operations to Alberta.[121]

Residents and local businesses in New Brunswick benefit from supplying western Canada’s demand for labour, goods and services, and innovative technologies. In 2011, the oil sands contributed $19 million to the province’s GDP.[122] New Brunswick also benefits directly from its small natural gas production, and from hosting Canada’s largest refinery, which employs directly and indirectly 2,000 people, and accounts for 64% of Canada’s refined petroleum exports to the United States.[123] Mr. Norton told the Committed that “the region serves as an increasingly important and diverse energy gateway including links to eastern Canada, New England, the Atlantic basin, and beyond. [The] city [of Saint John] supported in excess of $10 billion in energy exports in 2012, accounting for approximately two-thirds of New Brunswick's entire export portfolio.”[124]

Certain economic benefits are accrued directly from Atlantic’s offshore oil and gas production and eastern refineries. For example, Mr. Norton remarked that “the sector has created many innovative spinoffs, including the University of New Brunswick's new energy certificate program offered by Saint John College, and industry partnerships with the Saint John fire department that allow the department to provide expertise and training to enable them to better respond to incidents across the city and to generate revenue through training programs.”[125]

Several witnesses pointed out that the recent economic downturn in the region prompted local businesses and individuals to look for economic opportunities elsewhere.[126] According to Ms. Mitchell, overall interprovincial migration from Atlantic Canada to other parts of Canada remains at over 400,000 people.[127] Speaking about the oil and gas labour supply, Ms. Pike explained that “a few thousand workers commute back and forth to work in the oil patch in the West. They maintain their homes [in Atlantic Canada], their families are [in Atlantic Canada], [and] so the wages paid by the oil and gas industry in western Canada make their way to communities around Atlantic Canada.”[128] The Committee also learned that an estimated 5,000 residents of Atlantic Canada commute to Alberta to work in the oil sands. According to Mr. Burt, the resulting income effects in the Atlantic Provinces may actually be larger than the supply chain effect in other Canadian regions.[129]

Despite these income benefits, several witnesses acknowledged that the above-mentioned interprovincial migration has had a visible impact on families and on the social fabric of Atlantic communities.[130] Speaking about his own city, Mr. Norton explained that “it is very difficult for families who are in Saint John, not only for the parents and the children who are separated from their spouses for weeks at a time, but also difficult for the grandparents.”[131] William Teed, Chair of the board of Directors at Enterprise Saint John, agreed that “The impact that [worker migration has] had on families has been tremendous. Everybody wants to make a good living, but … most of the people who are going out
west for a job to earn an income really would prefer to do that in their home province.”[132]

In this context, Mr. Norton and Mr. Teed voiced their support for further development of New Brunswick’s oil and gas resources. Mr. Norton asserted that:

We really do want to play a role, as Mr. Teed said. We look to other provinces and we see what it's done for them. We recognize that we are still a have-not province. That is unacceptable to Saint John and to New Brunswickers. This is providing real opportunity…. It's a very real-life impact that we can have for people in Saint John, in New Brunswick, and for the Atlantic Canadian economy generally.[133]

Similarly, Ms. Mitchell observed that “The toll it takes on the families is significant. The longer-term initiative would be to develop the oil and gas sector here in Atlantic Canada.” She also added that “Nova Scotia, with its offshore program on the natural gas side, has created more than 1,000 jobs. In Newfoundland and Labrador there are 6,000 jobs. We'd like to see New Brunswick share in part of that.”[134]

4. Benefits to Aboriginal Economic Development

The Committee learned that the oil and gas industry has made considerable effort in engaging Aboriginal peoples, and on delivering benefits to Aboriginal communities, as well as Aboriginal businesses across Canada. For example, Peter Turner, President of the Yukon Chamber of Commerce, reported that:

Beneficiaries of the energy industry in the Yukon are primarily First Nations, who have received approximately $30 million in royalties from the Kotaneelee gas fields over the course of their operation [of 25 years], and, Yukon businesses supporting oil and gas exploration in areas like Eagle Plains with all manner of supplies from helicopter charters to groceries to logistical support.[135]

Ms. Annesley discussed the industry’s influence on Aboriginal entrepreneurism. According to her, “Aboriginal companies have earned more than $8 billion in revenue through working relationships with the oil sands industries.”[136] On the same subject, Peter Howard, President and Chief Executive Officer of the Canadian Energy Research Institute (CERI), noted that according to the CERI’s research, collaboration between First Nations groups and oil sands producers, as well as pipeline companies, is continuously improving.[137]

Additionally, the Committee heard that Suncor and other major oil and gas producers are investing in Aboriginal communities to promote economic development and facilitate training for in-demand trades.[138] Ms. Kennedy elaborated that “[Suncor] think[s] it is important to have a targeted approach to hiring Aboriginal people...” and that “community investment in Aboriginal communities promotes diversity, and provides training for in-demand trades including female focused programs like Women Building Futures.”[139] In his view, Mr. Myers stated that “the platform that oil and gas or other resource development provides for Aboriginal skills development is really the platform for overall economic development and social development.”[140]

While discussing the socio-economic benefits of the oil sands industry, Chief Allan Adam of the Athabasca Chipewyan First Nation (ACFN), emphasized the importance of impact and benefits agreements (IBAs) for the economic development of Aboriginal communities. According to him, these agreements provide legal grounds for protecting the traditional lands of Aboriginal people, and ensuring that economic benefits are maximized for First Nation communities. He also noted that while some First Nation groups, like Fort McKay, were successful in reaching IBA with oil sands producers, the ACFN have experienced some challenges in maximizing benefits from this resource sector.[141]