Introduction

A large percentage of Canada’s bitumen sources are derived from Athabasca oil sands in Alberta. Located in the northeastern side of Alberta province, oil fields have been a source of income not only to the federal government but also to the local people residing around the area. Apart from bitumen, the oil fields contain clay minerals, silica sand, and crude oil. According to the federal government reports, the area covered by these oil fields is approximated to be 140,000 square kilometers, and it contains close to 1.8 trillion barrels of crude bitumen. Therefore, the extensive area of coverage and the more substantial deposits of oil makes the Alberta fields the largest bitumen deposits in the world. Over the years, private companies have been exploring the oil fields, among them being the Syncrude Company that was licensed to begin mining the bitumen in 1978 (Zmuda 335). However, due to changes in the prices of oil in the regions, different companies have access to the oil fields, including the Royal Dutch Shell Company. Expansion of the oil mining exercise has taken place over the years.  The use of modern technology and an increase in the quantity of output accompany the development of the mining territories.

Primarily, the transportation of the Canadian oil has beenprimarily directed to the USA, which is the major importer of Canadian bitumen. Close to 1.1million barrels of oil are transported daily from Alberta oil sands to the US. However, transportation has been majorly done through road transport. Due to the rise in the amount of crude oil to be transported, the federal government has proposed the construction of a pipeline from Alberta oil sands. Disagreements have arisen about the development of a pipeline to distribute the oil from the fields. Political leaders are divided on whether to construct the pipeline or to implement other methods of transporting bitumen. Some leaders support the state’s move to lay the pipes. They argue that the expansion of the oilfields will improve the economic potential of the country. Critics on the same issue also exist. The latter group claims that the pipeline will distract the existing homesteads in the mountainous regions (Zmuda 335). They also argue that transporting large amounts of oil in pipes might cause spillage and lead to massive accidents. Despite their claims, the government is still persistent in ensuring that it constructs the pipeline. Viewed from an economic perspective, the benefits drawn from the construction of the pipeline outweigh the downside of the idea. For example, the commercial scale of the country will rise, and more mining activities will take place. Accordingly, this paper discusses the economic benefits that can be drawn from the construction of the Alberta pipeline. Therefore, the federal government should support the building of a pipeline to distribute oil from Alberta oil sands.

Background

To understand the economic potential of the Alberta area better, Hein, conducted a historical review of the city and discovered the context of the oil fields (456). For over 200 years, scientists, government, and private entrepreneurs have invested in the mining industry of the region. The government has been actively participating in investing in oil fields over the years. Among the earliest government investments traces back to 1871 when the federal administration purchased a mining field from the Hudson’s Bay Company (Hein 456). That move created an opportunity for the state to exploit the oil economically to retain resources and minimize wastage. As mining continued, the federal government proposed the construction of the first pipeline to transport oil from Athabasca to the Hudson’s Bay. Mostly, this plan was based on the broad global market for Canadian crude. However, some parts obuildf the population did not support the plan to build the pipeline. The decision was presented before the Senate committee, which was tasked to implement the idea.

Among the arguments presented before the committee included the expansiveness of the oil fields which would improve the economic potential of the country and the enormous value that locals within the province could extract. The implementation of the idea was achieved, and the pipeline was built (Kooten 130). Therefore, criticism of Alberta pipeline projects in the fields has been in existence for a long time.

The current proposal is that the government should build a pipeline from the Alberta oil sands to Vancouver. Indeed, the state’s motion is objective in achieving the full economic potential of the oil fields. However, the influential private energy industry in the area has criticized this proposal. Notably, more than 114 aboriginal groups do not support the move by the government. A leader in one of the groups argues, “It just boggles my mind that people are willing to risk Vancouver to a catastrophic oil spill” (Jeremy Hainsworth and Rob Gillies). Like the rest of the criticizers, the validity of the leader’s claim cannot be substantiated, and there are no facts to back up their criticism, which is the root of the controversy. The leaders might be right in some sense, leaving a dilemma of whether the government should support the project. The main argument passed on by the opposing leader is that their native land will be misused. A similar case was witnessed in the USA whereby the native Americans opposed the construction of the Keystone XL project. Echoing the same concern raised in the US, the aboriginal Canadians are keen on preventing the commencement of the project. The leaders of the 114 groups are naïve about the economic potential of the project. According to Zmuda, the pipeline will transform the lives of people, improve the purchasing power of the nation, and create access to global markets (334).

Why Should the Government Support the Project?

Firstly, the project will open up the international market to other continents. Oil from the fields will be transported through the pipes, and the strategic position of Vancouver will provide access to the global market to Canadian oil. As per MacMillan, the global demand for oil is expected to rise in the future. With an estimated increase in the worldwide population of 9.8 billion people, the need for energy is bound to grow by 2050. A growth of 30% demand for power by the middle class is also expected to rise by the year 2040. Based on these figures, the federal government should have a strategic position of oil delivery within the globe. Within the world of the growing demand for energy, the Canadian government has the task of supplying future energy sustainably. By 2030, Canadian oil will have increased in the global market by 5.1 million barrels per day (MacMillan). These are impressive figures, which the current weak market penetration potential of Canadian oil, challenge. For example, the access of Canadian oil to the Chinese and the Indian market is shallow. Since 2007, the demand for oil from the eastern countries has increased while the supply has decreased. The primary factor attributed to the reduced supply is the poor transport of crude oil from the provinces to the ports.

In 2017, the PETRONAS, a Malaysian-owned company canceled its transport project in the northern region. It cited that poor market conditions contributed to the low demand for oil in the global market. Moreover, the government’s Oil Tanker Moratorium Act, which prevented oil tankers from accessing the northern part of Alberta reduced the transportation of bitumen. The factors discussed above necessitated the use of a pipeline to transport oil. The project will create a regular supply of oil to the global market.

Secondly, the installation of the pipeline project will create 123,000 more employment opportunities for Canadian people (Goodman and Rowman). The construction of a pipeline will require the government to hire different specialist. These experts include engineers, electrical workers, environmentalist, manual labor workers, and supervisors. Employment of all the people will improve the living standards and boost the economic potential of the region. According to Morgan, with the completion of the project, a total of 432 regular staff will be employed permanently at the three stations of the pipeline (232). In addition, the government has proposed that it will give the locals a chance to apply for these opportunities in the project. The proposal implies that the Canadian people will benefit from the project by having a source of income. The government should support the pipeline project to improve the per capita income of the Canadian.

Thirdly, the pipeline project will reduce the wastage of oil in the Alberta fields by increasing the transport of mined oil. According to UNICEF, the wastage of untransformed crude is a significant challenge that Canadian mining activities face. Thirteen companies have been mandated to transport oil to the West Coast. Despite this number, each company has been overwhelmed with the need to carry over 700,000 barrels per day. The number of barrels is less than the amount of mined oil. As a result,  the Alberta region has experienced more wastage. To counter this challenge, the federal government should support the construction of the pipeline project, which is estimated to carry over 15 million barrels per day.

Moreover, the pipeline project will generate an extra $23.7 billion in government tax revenue annually. PETROLMI conducted interviews to assess the views of citizens on the economic potential of the pipeline project. The study documented some of the responses by the people. Some of the participants reported that “This is an important project for all Canadians and will provide business opportunities not only for the oil and gas industry but also other industries such as transportation, shipbuilders, engineering among others.” In another prospective study, Nielsen assessed the possible economic impact of the project in three ways. During the period of construction of the pipeline, the government will generate $394 million per year gained from taxation of construction materials and companies. Moreover, the operations of the pipeline project will enable the government to make $46-60 billion per year from taxing the operational costs. The government will also accrue revenues from the crude oil producers totaling $27-40 million per year (Zmuda 335). Therefore, the government will generate more revenue from the pipeline project.

Conclusion and Recommendations

I recommend that project proponents have an excellent compensation plan that will attract local communities to build the pipeline through their lands. The federal government should carry out a risk assessment plan to monitor the sections prone to damage and which parties are eligible for compensation. Through this approach, the opposing sides of the objects will receive payment for their land and accidents such as oil spillages. Moreover, the operating and construction companies should sign a document that shows they accept full liability of any damages and prove their capability to compensate. If these approaches are implemented, the local community will support the building and operation of the pipeline.

Furthermore, the federal government should conduct an impact assessment analysis through a private company to improve planning strategies. The impact protocol should be regular, and it should inform the decision to start the project. The feasibility of the project depends on the impact that the government assesses. The state should do more research on other means of transport that have a higher effect.

Public consultation and agreement are key to creating a peaceful environment for the construction process. Despite the presence of the opposing sides, the government should ensure that all parties participate in the project. Convincing proposals should be forwarded to the local leader, and the economic gains of the project explained to them. Through this approach, every citizen will support the pipeline project. Overall, the federal government should endorse the building of the Alberta project because of its enormous economic benefits to the country.

Works Cited

Goodman, Ian, and Bridgid Rowman. “Economic Costs and Benefits of the Trans Mountain Expansion Project (TMX) for BC and Metro Vancouver.” The Goodman Group Home, 2017, www.thegoodman.com/pdf/TGG20150204_SFU_EconCostBen_TMX.pdf.

Hein, Frances. “Historical Overview of the Fort McMurray Area and Oil Sands Industry in Northeast Alberta.” Earth Sciences Journal, vol. 32, no. 4, 2005, pp. 455-459, ags.aer.ca/document/ESR/ESR_2000_05.pdf.

Jeremy Hainsworth and Rob Gillies. “Canada Divided over Oil Pipeline from Tar Sands to Pacific.” CTVNews, 11 May 2018, www.ctvnews.ca/business/canada-divided-over-oil-pipeline-from-tar-sands-to-pacific-1.3925239.

Kooten, Cornelis. “Pipelines and Canada’s Oil Sands.” Department of Economics, University of Victoria, vol. 12, no. 2, 2016, pp. 123-132, web.uvic.ca/~kooten/Commentary/OilPipelines.pdf.

MacMillan, Tim. “A GLOBAL VISION FOR THE FUTURE OF CANADIAN OIL AND NATURAL GAS.” OSCA, 2018, www.oscaalberta.ca/wp-content/uploads/2015/08/CAPP-2018-Economic-Report-Series-A-Global-Vision-of-Canadian-Oil-and-Natural-Gas.pdf.

Morgan, Kinder. “Trans Mountain Expansion Project An Application Pursuant to Section 52 of the National Energy Board Act.” Journal of Trans-mountain Transport, vol. 12, no. 4, 2013, pp. 223-255, www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=2ahUKEwiZ55WZrPDgAhWZD2MBHSM4AzoQFjAAegQIARAC&url=https%3A%2F%2Fapps.neb-one.gc.ca%2FREGDOCS%2FFile%2FDownload%2F2392781&usg=AOvVaw0aJJLGjLUDQUOf82tJ8czQ.

Nielsen. “TRANS-MOUNTAIN EXPANSION PROJECT.” Language Selection – Natural Resources Canada / Sélection De La Langue – Ressources Naturelles Canada, 2016, www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/pdf/Questionnaire-Nielsen_reportTMX_en.pdf.

PETROLMI. “CANADA’S OIL AND GAS EMPLOYMENT AND LABOUR MARKET DATA Q2 2017.” Labour Market Analysis, 2018, careers-oil-gas.s3.amazonaws.com/publications/22/en/LFS_Q2_2017_FINAL.pdf?1508163499.

UNICEF. “Canada Divided over Oil Pipeline from Tar Sands to Pacific.” AP NEWS, 11 May 2018, www.apnews.com/284bbacf585147ba9c1843cc48813beb.

Zmuda, Katherine. “Evaluation of the Regulatory Review Process for Pipeline Expansion in Canada: A Case Study of the Trans Mountain Expansion Project.” JOURNAL OF CANADIAN ECONOMICS, vol. 22, no. 4, 2015, pp. 333-336, Evaluation of the Regulatory Review Process for Pipeline Expansion in Canada: A Case Study of the Trans Mountain Expansion Project.