Last Friday, a paper that I prepared on the BC economy was released. I hope readers will find it of interest. The paper can be found at:

http://www.scribd.com/doc/30728436/Looking-Forward-The-BC-Economy-at-a-Crossroads

The paper was prepared at the request of the Leader of the BC Official Opposition, who wanted a background study and analysis of the economy. My only conditions in agreeing to do so were that I have sole control over the content and that it be made publicly available. It was also used as a background paper for a conference convened by her on Friday.
The paper is largely a diagnostic. I want it to contribute to to a better understanding of the BC economy, as a necessary prerequisite for having a literate discussion about policy. I thus deliberately do not address specific policy measures to any significant degree.

I hope that readers will come away from reading the paper seeing that there are real concerns about the BC economy and the way that it has developed over the past few years. I also hope that it acts as a cautionary tale to those who hold many of the conventional wisdoms about what contributes to improved productivity, investment in research and development, and a transition to higher value activity. The proponents of the favourite themes of the last few years in BC – lower taxes and de-regulation – appear to have paid little or no attention to what has actually been happening. If they had, one would think they would show a bit more modesty in their claims. The truth is that BC has been a laboratory for their favourite ideas, but is lagging badly in all of the referenced measures. By way of interest, the problems I identify are substantiated by a paper just released by the BC Business Council, which for instance shows BC (shockingly) to be the only province in Canada for which business productivity dropped from 2003 and 2009.

I hope the paper will encourage some good discussion. And I hope that reading it and other papers will incline the academic and other purveyors of established ideas to be at least a bit more modest and to develop bit more of the healthy skepticism required of a good analyst.

The ink is hardly dry on Stephen Harper’s press release setting up the Salmon Inquiry. Now we have the news that the BC Government (you know, the one that keeps telling us how green it is) will be removing gravel from the lower Fraser River this winter, even though all the experts know this will kill salmon. The Federal Government will go along. Not very long ago, the federal government prosecuted people for doing this unless it was done on the basis of no net loss to fish stocks. Not very long ago BC had a Fish Protection Act that prohibited such a thing.

Not any more. But what really hurts is the audacity of this so soon after setting up the Salmon Inquiry. The damage done by gravel removal is well known. Just a few months ago, the Commissioner of Environment and Sustainable Development and the federal Auditor General found that a 2006 removal killed over 2.5 million salmon in the Fraser River. Their report also found that there has been inadequate information to approve the removals that have been done by the BC Government over the last five years and that the removals have been excessive and have been destroying salmon habitat Yesterday the highly respected Chair of the Fraser River Gravel Stewardship Committee asked that no gravel removals proceed until the Salmon Inquiry report is received. An expert, he knows very well the damage done to salmon by most of the removals.

None of this matters to the Government of BC. It is going ahead with its plans for gravel removals this winter. It says it is doing so to control flooding. Which would be fine if it were true. But once again we have one of those clever lies that this government has become so adept at producing. Some removals are needed to protect against dangers of flooding and with proper procedures can proceed with minimal damage. But in fact most of the removals are to supply gravel for the massive construction needs of contractors in the lower mainland and the Fraser River Valley. And most directly or indirectly kill large amounts of salmon.

It is sad that the Government of BC is doing this while at the same time claiming it wants to save salmon from destruction. It is also sad the the Government of Canada is letting it happen. It is hard not to be angry about the duplicity of both. B.C. Environment Minister Barry Penner said he’s grateful for the inquiry, claiming the loss of salmon stock is a mystery because the ocean is so big. There is not nearly as much mystery about what is destroying the salmon as he and others claim. In many ways their demise is a death by a thousand cuts. Many many things done or approved by governments, when added together, make it impossible for salmon to survive. Governments must stop siding with development every time a problem arises. They have a choice. They can start siding with the salmon, or let them be destroyed. If they are going to chose the latter, they should stop the charade. Forget the Salmon Inquiry if this is the choice they make within days of setting it up.

There is one option. The Salmon Inquiry Commissioner, Mr. Justice Cohen, could as his very first act, order the two governments to stop gravel removals until his report is completed. That would establish his Inquiry as a serious undertaking right from the start. And come to think of it why don’t all concerned BC residents blanket his inevitable Facebook page with this demand. Let’s find out how serious this Commission is.

The MacKenzie Gas Pipeline Project has been part of the lore of generations of Canadians, particularly in Northern Canada, since the 1970’s. It was then that the dream of building a huge natural gas pipeline from the delta of the MacKenzie River to southern Canada first took shape. At that time it was spurred on by energy shortage fears and a nationalistic desire to mount another great Canadian dream of the magnitude of the first transcontinental raiway. The Liberal Government of the day granted huge exploration subsidies to find and secure gas fields in the Beaufort Sea and surrounding areas, with great success. The government had been latecomers to the realization that the aboriginal owned lands of the MacKenzie Valley would have to be acquired before the line went through, but was soon convinced of this, largely thanks to the pathbreaking inquiry and report on the impact of the pipeline by Mr. Justice Thomas Berger. Berger traveled up and down the valley to community meetings, consulted with aboriginal leaders, listened to oil and gas company executives and studied the environmental, economic and social implications of the pipeline. In his report in 1977, he agreed that the pipeline could proceed under strict environmental controls and operational regulations, provided the consent of the aboriginal residents, who own much of the land, was obtained, just as it had been obtained before the railroad went through the prairies.

By the time he reported, energy markets had cooled and the industry lost immediate interest in the pipeline. However everyone knew it would be coming some day when the gas would inevitably be needed. As a result treaty negotiations continued between the federal government, the territorial government and the aboriginal groups to settle the land issue. At the same time the aboriginal groups began to see land ownership and governance as inseparable, and thus most demanded treaties that included recognized self government powers. Negotiations went on for a long time, but settlements were reached with the Inuvialiat on the north slope and the other aboriginal people down the MacKenzie to Yellowknife, some coming as late as the mid part of this decade. Today only the Deh Cho Dene in the south west corner of the NWT and a group of Metis in the Yellowknife area are without a Treaty. The rest now have unequivocal and uncontested ownership over thousands of hectares of northern land, self government powers, large capital funds and other things they sought in return for giving up ownership and control over vast amounts of the land.

Not so the Deh Cho. The Deh Cho Dene want a different kind of settlement. In the other settlements the First Nations agreed to drop their claims to large territories of land in return for clear ownership over a smaller territory, continuing wildlife harvesting rights, compensation, financial support and self government powers and other assets of value. The Deh Cho Dene have held out for co-ownership of all of the land with the Federal Government, co-management of resources, co-equal resources revenue sharing, and other provisions that would leave it with a high degree of continuing control over and interest in all of the lands and resources in their region. The Federal Government has outright refused, saying the Deh Cho must accept something similar to the rest. In response the Deh Cho have said that they will not give their go ahead to the pipeline. Not long ago that sounded like a real obstacle to the pipeline proceeding.

The industry led by Imperial Oil have promised aboriginal governments a substantial ownership interest in the pipeline provided the federal government will come up with the money. An Environmental Assessment, underway for the past five plus years, is due to report and give its approval in two or three weeks. Feverish survey and other preparatory work has been going at full tilt for some time and the communities along the river and in the delta region have been booming as things ramp up.

However, there now have been a couple of immense doses of cold water thrown on the project. Today much of the talk in the north is about a long and often bungled regulatory process, federal neglect and declining industry interest. The big industry players say that major federal financial support to offset some of the total costs estimated to be in the range of $15 – $20 billion dollars is needed. Opponents say that this is just standard industry rhetoric in search of government subsidies. But now it has come out that the federal cabinet see industry demands as serious obstacles, has reviewed the demands for money and other things and said no to proceeding on these terms.

Some think this means the project is just stalled. But it is more than that. The project just does not make sense in today’s terms. Gas prices have collapsed. New sources of shale gas in the south are hanging over an already well supplied market into the foreseeable future.

In fact, ten years of planning, $750 million of Imperial Oil Ltd. and parent Exxon Mobil Corp., Royal Dutch Shell PLC, ConocoPhillips Ltd. and the Aboriginal Pipeline Group (APG) money already spent, hundreds of millions spent by exploration firms, millions spent by Northern businesses and governments to provide services and infrastructure, and millions of hours of person time is now about to be washed away as sure as if it were flushed down the mighty MacKenzie into the Beaufort Sea.

The project is dead. The disappointment of northern and aboriginal groups is palpable. The waste, disruption of lives, communities and the environment, and the social disruption has been immense. For the big companies the termination of plans will be nothing more than a deductible blip on immense balance sheets bloated by recent high energy prices. Not so for many many others, particularly in the north.

This may all be a good thing in the end. But unless you live in the north, it is hard to understand the pain, bitterness, and disappointment. Those who oppose the pipeline might well have some sympathy for those in the north who awaited its arrival as a sure route to prosperity. Another dream has come and gone. It is a hard life north of 60*.