Deliberately or not, Allan confuses direct (construction jobs) with indirect economic impacts (not construction jobs) of Trans Mountain Expansion
Robyn Allan – darling of the Trans Mountain Expansion opponents – is arguing these days that “Trans Mountain’s 15,000 construction workforce jobs are a scam.” She’s a little bit right, but mostly wrong, which seems to be the norm for British Columbia energy “experts.”
When it comes to debates about pipelines or LNG projects, BC has a curious habit of listening to commentators who claim to be experts but aren’t experts at all. They may be experts in a related field, but they don’t have specific expertise that is relevant to the subject at hand.
Today’s example is Allan’s Aug. 28 The Province op-ed, The search for Trans Mountain’s mythical 15,000 construction jobs, in which she tries unsuccessfully to debunk pipeline job numbers.
Allan holds a master’s degree in economics from UBC, was once the president and CEO of ICBC, and has held a variety of professional positions, such as chief economist for BC Central Credit Union. She is a bona fide economist.
She is also a staunch adversary of the Trans Mountain Expansion pipeline, appearing before the National Energy Board as an “expert intervenor” (her words) to argue against the project. Allan has also written many op-eds criticizing Kinder Morgan, the NEB, and the Canadian government over plans to twin the existing pipeline and increase the Trans Mountain system from 300,000 b/d to 890,000 b/d.
Allan did not respond to my request to be interviewed for this column.
Here are the basics of her argument: Kinder Morgan estimated 2,500 construction jobs a year for two years for Trans Mountain Expansion. Politicians like former Liberal Premier Christy Clark claimed 15,000 construction jobs a year. Why the discrepancy?
The one part of this issue Allan gets right is that the 15,000 jobs a year are not construction positions and politicians who support the project should not have called them construction and trades jobs, etc. We know politicians shade the truth sometimes and where they have done so in this case, Allan is right to call them out.
But Allan is disingenuous, too.
For instance, she quotes Clark, Alberta Premier Rachel Notley, and Canadian Natural Resources Minister Jim Carr using the 15,000 jobs figure in a variety of ways, not one of them related specifically to construction jobs, but then conflates them in the next sentence: “When the figure of “15,000” for new construction jobs emerged, I was confused.”
There will never be 15,000 new construction jobs annually. But there could be 15,000 new jobs of all kinds in a wide variety of industries created as a result of Kinder Morgan spending $7.4 billion in BC and Alberta to build the pipeline.
The estimate comes from a Conference Board of Canada report commissioned by Kinder Morgan and the numbers are arrived at using sophisticated input/output analysis commonly used by the economics profession (which, astute readers will remember, Allan is a card carrying member of).
Allan dismisses this type of modelling, “which — because of its many design flaws — delivers highly exaggerated results.” She fails, however, to provide a citation or reference for that claim.
Michael Burt is the director, industrial economic trends for the Conference Board and a co-author of the original Trans Mountain Expansion study back in 2013. Not surprisingly, he disagrees with Allan.
“We employ a fairly standard technique for doing economic impact analyses and input/output analysis. Our reports are quite clear about how we did it and about the limitations of that modelling technique,” said Burt in an interview.
“We do probably a couple hundred thousand economic impact reports a year and that’s the methodology we use.”
Input/output analysis basically measures the “multliplier effect” of a dollar as it is spent and re-spent in an economy, creating indirect and “induced” jobs in retail, banking, manufacturing – and many other industries – until the effect of that dollar finally peters out.
For instance, the Conference Board undertook a supplemental impact study of the 348 extra Aframax tankers that will be docking at the Westridge Marine Terminal each year. Each vessel was estimated to spend an average of $366,000 per visit ($127 million per year or $2.5 billion over the first 20 years of Trans Mountain Expansion operations).
In this case, spending $127 million by the tanker companies is estimated to create 22,263 jobs over 20 years, 83 per cent of them in British Columbia. The provincial government would enjoy an additional $283 million of tax revenue over that period and the total impact on the BC economy would be about $1.8 billion.
Calculating the direct, indirect, and induced impacts on an annual basis gives us $127 million of $90 million of GDP impacts, 1,300 jobs, and 14 million of tax revenue.
Are these numbers exact? Of course not. They’re meant to provide a rough idea based on a reasonable set of assumptions.
Just as the Conference Board’s original estimate of 15,000 direct, indirect, and induced jobs a year over the four years of Trans Mountain Expansion construction aren’t exact, either.
But they do help British Columbians understand the difference between the 2,500 construction workers who will be engineering, digging, and welding the pipeline and those who will be serving lunches or selling trucks or providing loans to those workers.
Or the next order of effects, which includes selling sandwich meat, bread, and lettuce to the restaurants; parts, tools, and barrels of grease to the auto dealerships; and hiring loans officers and paying rent on a bank building.
Allan is “not really comparing apples to apples because one is a direct number [2,500 workers] and one includes secondary impact [15,000 workers],” said Burt. “So I would say that that’s not really a valid criticism.”
It sure isn’t.
And because Allan is a real economist who in her op-ed demonstrates at least a rudimentary grasp of how input/output analysis works, one has to wonder if her confusion is bogus and if she deliberately set out to confuse British Columbians?
The answer seems obvious to me.