SFU's School of Public Policy put out a report Monday that's been making the rounds in the media. The report maintains Kinder Morgan's economic argument for the Trans Mountain pipeline expansion has been exaggerated, while the clean up costs of a spill have been downplayed. The report was done in collaboration with the Goodman Group, a U.S. consulting firm specializing in energy projects.
Two key factors in SFU's report:
- Kinder Morgan says the Trans Mountain pipeline expansion would create 36,000-person years of employment, but the SFU study says 12,000.
- Kinder Morgan estimates a worst-case scenario spill would cost between $100 million to $300 million, the SFU study puts that figure at $2 billion to $5 billion in a densely populated area.
I talked with Michael Burt at the Conference Board of Canada, the non-profit think-tank that was responsible for crunching Kinder Morgan's job numbers. (He couldn't help with the cleanup costs.) Burt says his group used an input-output analysis, which he says is pretty standard practice in the industry. (I asked about this because I was at an event last night where Robyn Allan, an economist and former ICBC CEO, said input-output methodology was the wrong application for Kinder Morgan's study, and that the numbers were also exagerrated.)
Here's the rest of his comments, in addition to the article we're running in tomorrow's paper.
"The big difference between what we did and SFU did, … they basically looked at a couple of other projects that have been proposed. In this case, they are using the Energy East filing and the Northern Gateway filing. For construction, they used the Northern Gateway project – for that project, the ratio of investment to employment that came out of the economic impact from that study, and they take that investment and apply it to investment for Trans Mountain to come up with their economic impact. There are multiple problems with that. First of all, … there's no such thing as one multiplier. Each project has a project-specific multiplier," Burt says.
(The multiplier is the ratio of investment to employment. For example: For every $1 million you spend on construction, you create seven jobs.)
"They take the ratio that was determined in Northern Gateway and apply it to Trans Mountain to come up with their job number. On top of that, they adjust that ratio down further, assuming a certain portion of employment impact in B.C. would be filled by non-B.C. residents. The rationale for that is those aren't B.C. jobs, but a job in B.C. is a job in B.C. in the model. … They did two things. First, they (SFU and Goodman) take a multiplier from another project and apply it To Trans Mountain, which is in our opinion, not the proper way to do an economic analysis, and then they do further downward adjustments to that multiplier. … So that's how they come up with their number, which is roughly a third of the number we came up with."
Burt went on to explain how the operating benefits (ie: the benefits from when the pipeline is actually up and running) were based on the job numbers from the Energy East filing in Quebec, which is a different province with different supply-chain implications.
"This is not, again, what we would consider best practices when you are doing economic analysis," he added.
