With the hearing on the Northern Gateway pipeline having just begun, the oil industry is already on the offensive, pushing several reports that are proclaiming over a hundred billion in economic activity for the country as a result of the project. To the layman, hearing that one pipeline could bring in such a huge amount of money almost makes the environmental risks seem negligible. In an era of fiscal tightening, the pipeline seems to be an obvious economic boon. As I soon learnt, when things sound too good to be true, it’s because they are.

To get to the bottom of this, I went straight to the main source: a report from the University of Calgary’s School of Public Policy released late December. Here’s a blurb from the press release:

“With better access and new pipeline capacity, oil producers will see more efficient access to international markets which can add up to $131 billion to Canada’s GDP between 2016 and 2030,” the authors write. “This amounts to over $27 billion in federal, provincial and municipal tax receipts, along with an estimated 649,000 person-years of employment.”

Not surprisingly, Alberta, with its robust oil reserves, will be the principal beneficiary, but the authors stress that “most every single province and territory will realize fiscal and economic gains.”

“These are impressive figures,” concluded co-author Michal Moore. “The rewards of additional pipelines for all of Canada are too great to ignore.  Pipelines must be a national priority.”

The final paragraph is perhaps the most revealing in how dedicated the authors are to spin their meagre results. A real look at the numbers shows that, while the figures may be impressive to Alberta, there is a negligible benefit to the rest of the country. My analysis would argue vehemently with the conclusion that this project is in the national interest.

Another interesting element, hidden between the lines, is that these calculations are based not just on the Northern Gateway pipeline, but on the construction and expansion of several others, including the Keystone XL project currently on hold in the USA. Also, while the revenue windfall sounds large, it is important to acknowledge that this is on a 14 year time horizon.

Let’s take a look at the details.

The report is predicated on the realities of the existing market: world oil demand remains robust, but our main source for export is America, which has become saturated. In addition, oil sands bitumen faces bottlenecks in the mid-west, where current pipelines end, a ways from the large refineries in the Gulf Coast.

The report calls for the Keystone XL pipeline, which would directly connect the oil sands to the refineries in the Gulf, eliminating the production bottlenecks and opening up the resource to a larger market quicker. It also calls for expansion of pipelines down to California, where there is an excess of refinery space for the oil sands and ports for export. Finally, the Northern Gateway pipeline is deemed necessary to export the bitumen to Asian refineries, which would ultimately help the Albertan industry escape the captive American market and command higher prices. The financial conclusions assume that all three of these expansions are completed on schedule.

The report says that, from 2016 to 2030, the projects would create $131 billion in economic activity in Canada – let’s deconstruct that a bit. 87% of that figure results from the Keystone XL pipeline, while only 8% is derived from the Northern Gateway project. At eight percent, the economic boon drops down to $10 billion for the Gateway pipeline; over 14 years, that brings us to $750 million in economic activity annually.

That’s not the whole story though. 95% of that economic activity is destined for Alberta, with 2.7% for Ontario, 1.2% for BC, and the remaining going to the rest of the country. One of the most prominent narratives put forth by the oil industry and reinforced by the federal government is that Northern Gateway is in the ‘national interest’. Poppycock.

This project clearly benefits Alberta, and Alberta only. Considering BC is taking on the majority of the risk with regards to oil spills, the benefits are grossly in favour of the producer province rather than the coastal one. Additionally, if 95% of the economic activity of this pipeline remains in Alberta, how can one argue that this will improve the life of Canadians in Nova Scotia, Nunavut, or Quebec?

The answer to that question is often parlayed into the government royalties and tax revenues that will result from the project. The report collated the increased government revenues that will head into municipal, provincial, and federal coffers, and sorted those monies down by province. Let’s take a look.

In the media, one will see the figure of $27 billion dollars destined for our governments, money that presumably would help fund healthcare and education. Once again, that figure is for all three projects, one of which, Keystone, is expected to bring in $23 billion. The Northern Gateway pipeline actually only contributes $2.17 billion to that figure – over 14 years.

Again, the ‘windfall’, if it can be called that at this point, is not distributed fairly. 92% of the government revenues head to Alberta. 4.3% are destined for Ontario, 1.6% for BC, 1% for Quebec, and a pittance for the rest of the country. To BC, that means an additional $350 million over 14 years, or $25 million annually in government revenue. To put that into perspective, out of BC’s 2011 budget of $41.9 billion, $25 million amounts to 0.005% of the total provincial coffers. $25 million can buy 50 buses or one recreation centre or high school.

For argument’s sake, let’s assume all three projects went ahead, and that the government revenues were in fact in the national interest; how much of a windfall is $27 billion over 14 years. That equals almost $2 billion a year – sounds like a fair chunk of change, eh? However, within the context of Canada’s 2009 federal budget of $237 billion, it amounts to just 0.82% of annual federal spending. But, that’s irrelevant, as 92% will go to Alberta anyways.

Add it all together, and the promise of a multi-billion dollar boon that will propel our economy and fund our social programs, well, it doesn’t sound all that valid anymore. Would there be economic opportunities? Absolutely. But when over 90% goes to one province, it’s hardly in the ‘national interest’.

So let’s not pretend that by approving the Northern Gateway pipeline, our deficits will just disappear, our taxes can be lowered, and we can properly fund healthcare and education, because the numbers just don’t add up.