Potential economic impact of a tanker spill on ocean-based industries in British Columbia

TitlePotential economic impact of a tanker spill on ocean-based industries in British Columbia
Publication TypeFisheries Centre Research Report (FCRR)
AuthorsHotte, Ngaio, and Ussif Rashid Sumaila
Secondary TitleFisheries Centre Research Reports
Year of Publication2012
Volume20
Number7
Pagination45pp
Abstract

Ocean-based industries are estimated to directly employ about 10% of the population in the North Coast region. When indirect and induced values are considered, ocean-based industries provide employment for an equivalent of nearly 30% of the regional population. The comparatively high regional unemployment rate of 9.3%, in contrast to the provincial rate of 6.6%, suggests that ocean-based industries are critical to the regional economy and wellbeing of communities. This is one reason why there has been considerable concern by British Columbians about the possible impacts of a tanker spill. The Enbridge Northern Gateway pipeline and tanker route, proposed by Enbridge Northern Gateway Pipelines Limited Partnership, would transport 525,000 barrels (bbls) per day of conventional light and heavy oil, synthetic oil and blended bitumen from Bruderheim, Alberta to Kitimat, British Columbia, for export via tankers. While the economic benefits of the project have been quantified by the proponents and the potential biophysical impacts of a hydrocarbon spill within the confined channel area (CCAA) of the Douglas Channel and open water area (OWA) of the Pacific Ocean have been assessed, the potential economic costs of a hydrocarbon spill from a tanker along the proposed shipping routes have not yet been quantified. In this study, economic values are expressed in terms of the value of total (i.e., direct, indirect and induced) economic effects on total output, employment and the contribution to gross domestic product (GDP). Ocean-based industries are estimated to currently contribute $1.1-$1.2 billion (2011 CAD) in total output value, 8,983-10,216 person-years (PYs) of employment and $667-$743 million to GDP each year. The proposed Enbridge Northern Gateway project could produce total economic effects of $628 million in output, 5,717-8,369 PYs in employment and $293 million in GDP on the regional economy, in present value terms, over a 50-year period. Three potential spill scenarios are considered: no impact (no hydrocarbon spill), medium impact (a 10,000 m3/63,000 bbl hydrocarbon spill at Ness Rock) and high impact (a 41,000 m3/257,000 bbl hydrocarbon spill at Grenville Rock). In the event of a medium impact tanker spill of 10,000 m3 of hydrocarbons, the regional economy could suffer total losses of $41-$189 million in output, 399-1,314 PYs of employment and $23-$98 million in GDP over 50 years. This means that when the higher ends of the ranges of estimates are considered, under this scenario, 30%, 16% and 33% of the projected output value, employment and contribution to GDP of the Enbridge Northern Gateway Project would be lost to the spill. If a high impact spill of 41,000 m3 of hydrocarbons occurs, the North Coast region could experience total losses of $87-$308 million in output, 1,652-4,379 PYs of employment and $72-$205 million in GDP. Here, the percentages of the projected benefits from the Enbridge Northern Gateway project that would be lost to the spill are 49%, 52% and 70%, respectively. The above projected percentage losses are high given the narrowness of the scope of the current valuation exercise and the conservative nature of our assumptions and estimates. Estimated losses are limited to market values of four ocean-based industries and do not include the cost of spill response, clean-up and litigation activities (estimated to be $2.4 billion CAD for a medium impact spill and $9.6 billion CAD for a high impact spill) as well as the economic value of social, cultural and environmental damages. If these costs are accounted for, all of the projected economic gains from the Enbridge Northern Gateway project could quickly turn into losses in the event of a tanker spill.

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