Wednesday, February 26, 2014

Scratching the Surface: 21st Century Realities Can’t be Ignored by Ring of Fire Developers - Part 2

For the Ring of Fire, the good news is that the Provincial government and First Nations are now on a better course to figure out what, if any, development in the region makes sense, and how that development will impact and benefit aboriginal communities. Presuming that negotiations with First Nations lead to agreement, the next questions for development in the Ring of Fire must be whether and how it will make sense for the people of Ontario and Canada. And that’s a question of long-term sustainability.

Triple Bottom Line Cost Benefit Analysis

There are a lot of opinions about how development of the ROF will impact Ontarians and Canadians – and from where I’m sitting, most of those opinions range from “positive” to “glowing”. The Chamber of Commerce’s "Beneath the Surface" positions itself somewhere between those two terms. Certainly, the economic benefits of resource development can’t be ignored, and with every report like the Chamber’s which comes out in support of development, the public is sure to be convinced that this is an opportunity to which our governments just can’t say no to. Certainly, after having looked closely at information that is available, that’s how I currently feel about the Ring of Fire – and until other information enters the public realm which might change my opinion, I can’t help but be a booster for the ROF.

However, an analysis of projected benefits must also include an analysis of projected costs – and that’s where “Beneath the Surface” falls short. The costs of developing this industrial enterprise are barely addressed – and where there is talk of costs (for example, the costs of building a transportation corridor), those discussion are more about how costs will be shared between governments and industry. Quite frankly, with the significant level of analysis which the report delves into regarding economic benefit, the appalling lack of analysis on costs is, in my opinion, a glaring omission.

A real triple bottom line analysis of costs and benefits should have been a priority of governments and industry in order to determine whether this massive new industrial enterprise is really in the public interest. Although people like myself may have a hunch that the public interest is being served by development, it really is just a hunch. A careful analysis of benefits and costs (both direct and indirect) is needed. Badly.

Putting the Benefit Cart Before the Cost Horse

Back during the 2011 provincial election campaign, the four candidates here in the Sudbury riding had an opportunity to speak about the Ring of Fire and the development of a proposed chromite processing facility on lands outside of Capreol. Candidates for the 3 old line parties were eager to embrace the projects, and used information provided by the company, Cliffs, regarding jobs and economic benefit in support of their position. It was left to the Green Party of Ontario’s candidate, Pat Rogerson, to ask the tough questions about cost – only to find out that while some good work had been done around the economic benefits of the project, costs had been hardly addressed at all. As a result, the media in part portrayed Pat and the Green Party as anti-development, all because she wasn’t as eager to embrace a mega-project entailing significant (read: billions of dollars) of government investments for an unknown total return on that investment. While the other political parties might have been eager to embrace the project in the absence of data, it’s clear that those positions are irresponsible ones to adopt – especially for those seeking to become the protector of the public purse.

Fast-forward three years later, and we still have politicians from the old-line parties talking up the significant benefits of developing the Ring of Fire with little or no additional information about costs provided. We know that there will be costs, and we even know what some of those costs might pertain to. We also know that there will be costs that we don’t yet know about. Yet, the triumphal championing of the project continues – often followed by laments, such as those made by the Chamber of Commerce, that the project just isn’t moving forward fast enough, continue.

Transportation Corridor – Technical Data Must Inform Choice

Let’s take a quick look at some of the costs that we know about. Building a transportation and utilities corridor is sure to be one of those costs in which the government is going to be on the hook for at least part of the tab (if not all of it). Cliffs and NorOnt Resources are, after all, in the business of mining, not road or rail building. The very first decisions related to transportation will involve looking at roads vs. rail, and which corridor makes the most sense.

To inform decisions related to the transportation and utilities corridor, one might think that it would make sense to have baseline data about natural features, including heritage and hazard features. Any corridor will surely have to traverse a number of river systems and floodplains, for example. Further, we know that this area of the James Bay Lowlands includes significant woodland caribou habitat. Technical studies which assess impacts on natural heritage and hazards should inform any decisions about the location and type of transport and utilities corridor.

But wait, there’s more. As part of any triple bottom line analysis of costs and benefits, and in keeping with the realities of the 21st Century, a carbon assessment must also form part of any analysis. Burning carbon comes with a cost – not just the direct cost of vehicle transport fuels, but the cost of contributing pollution to our atmosphere. We know that globally, we can only put so much carbon into our atmosphere before enough accumulates to guarantee that we will blow through the internationally agreed on threshold of 2 degrees C. Enter the carbon budget.

Where Does the Ring of Fire Fit in Canada’s Carbon Budget?

Our Conservative federal government has decided to take a back seat to ROF development in a way that it hasn’t with the Alberta tar sands. Annual Canadian greenhouse gas emissions are not on target to meet our Copenhagen commitments, and indeed are expected to rise. All of the rise in Canadian emissions has to do with the expansion of the tar sands enterprise. Provinces such as Ontario and British Columbia have done their part (in Ontario’s case, more than its part) in reducing emissions, but all of those reductions are offset by the tar sands. Although there have been modest steps in reducing the intensity of emissions, the fact of the matter is that overall amount of carbon Canada pollutes our atmosphere with is going up, thanks to the tar sands.

Where does that leave other emissions-intensive industries, particularly new start-ups like the Ring of Fire (and B.C.’s liquid natural gas enterprise, for that matter)? If Canada decides that it must get serious to meet our Copenhagen commitments (which may happen under a different federal government, but clearly isn’t a concern of this government), tough decisions are going to have to be made regarding emissions. Along with deciding how best to put a price on carbon, discussions will surely revolve around who gets to pollute and how much. While negotiations between the federal and provincial governments are sure to be acrimonious, if we are to have a viable plan to do our national part to hold warming at 2 degrees C, there will be no option but to look at carbon budgeting.

With this in mind, the costs of carbon for a development enterprise such as the Ring of Fire will not be trivial, and indeed, they may form one of the fundamental overall costs associated with the project. Using our earlier example of a transportation corridor, it’s unavoidable to think that factoring carbon costs into the decision matrix isn’t a sensible way to proceed. Yet, I strongly suspect that our business and government leaders aren’t thinking carbon in this way.

That Matter of Electricity

And then there’s electricity. Ontario has one of the highest prices per kilowatt hour for electrical energy, thanks to previous government’s support of expensive nuclear power. Ontario ratepayers are still paying for the poor investment decisions made to build expensive nuclear infrastructure, and then to privatize some of that infrastructure. Today, the provincial government continues to intervene in the marketplace by subsidizing ratepayers with taxpayer dollars.

(Continued from Part 1...)

ROF businesses are right to be concerned about the costs of electricity, particularly when it comes to the value-added part of their proposals. Cliffs Natural Resources estimates that the processing facility they propose to locate near Capreol will use the same amount of power of a city of 300,000 inhabitants. That’s the energy price-tag of keeping value-added jobs in this province, however, and someone is going to have to pick up that tab.

Calls for Intervention in the Marketplace

In “Beneath the Surface”, the Chamber of Commerce calls for the Province to explore a cost-benefit analysis of a special electricity incentive so that value-added processing facilities can locate in Ontario. Besides finding it somewhat strange that an organization which purports to embrace capitalist economic practices calling on governmental intervention in the marketplace, it’s astounding to me that any organization would leap to the conclusion that cheap electricity must be the driving force behind locating processing facilities in the Province. There are other options which make more sense.

Special electricity rates for ROF developers mean that the actual costs of electricity will be picked up by other electrical ratepayers, or by taxpayers if the reduced rate is in the form of a government subsidy. Since ratepayers and taxpayers tend to be largely the same people (ie. you and me), that ultimately means that you and I are going to be paying for the electricity used by Cliffs and potentially other companies. Yes, there are sure to be economic benefits in the form of jobs and other spin-off activities, but I’d very much like to know more about the “how much?”. Indeed, should anybody bother to compile the data, it’s within the realm of possibility that ratepayers and taxpayers might actually be on the losing end of this electrical proposition.

Innovation, Not Subsidization

At a time when the calls for energy conservation are becoming all the more urgent, subsidized electrical rates really can’t be justified from an economic point of view. They must be considered the cost of doing business, and as a cost, they will drive business and industry to innovate (whereas there is certainly less of a need to change one’s habits when you’re receiving a subsidy). If there are concerns that no economic case can be made for establishing processing facilities in Ontario as a result of the cost of electricity (which the Chamber’s Report suggests), so be it – because first, I very much doubt that’s actually the case, and second, because the Province can still chip in and help in other ways (such as with the transport corridor).

Processing Our Resources Here

And finally, if there is such a concern that multinational companies will choose to process raw resources in other jurisdictions, there are changes which the Province can make to legislation to require that our natural resources be processed here. The Green Party, and to its credit, the NDP, have long championed changing the law so that what’s taken out of the ground in Ontario is processed here. Why the NDP failed to act on this policy plank of theirs over the 5 years that it governed the province back in the early 1990s, I don’t know. But the NDP surely does talk about this a lot, and good for them. It’s the right approach to keep well-paying value-added jobs in Ontario.

“Business as Usual” Doesn’t Work

Sustainability and social license must be at the heart of the new Ring of Fire industrial enterprise. Although business and industry, and some in the political world, have decried the pace of development, the fact is that “getting it right” takes some time – and if anything, the time which we have lost has been largely the result of the federal government moving the project in the wrong direction at the outset. Rather than initiating meaningful nation-to-nation dialogue with First Nations, the feds choose to sideline them, ensuring that the way forward would not include a social license for development, unless everything were to first to come to a halt – and even then, the ill-will created between governments and First Nations would need to be overcome.

The environmental assessment process required by the federal government was also a problem, due to its lack of comprehensive focus. Unlike the matter of social licence and First Nations, the environmental assessment issue is one which is still not being addressed, as companies are still following the same individual processes which look at only their own pieces of the jigsaw puzzle. No one is assessing the entirety of the puzzle. It’s a pretty sure bet that questions of sustainability and triple bottom line cost/benefits won’t be answered through this approach. Why the provincial government isn’t taking a bigger-picture look at these issues, which include climate change impacts, probably has a lot to do with how the old line political parties continue to refuse to acknowledge 21st Century realities.

In their “business as usual” approach, our governments are supported by organizations like the Chamber of Commerce, which for some strange reason thought that it was ok in the year 2014 to produce an economic analysis of the Ring of Fire which fails to even mention “climate change”. Ignoring the economic realities of climate change is, frankly, absurd. And, if implemented, the Chamber’s plan will put ROF development on a path which goes nowhere quickly.

Chamber Report Scratches the Surface

While providing some good information and ideas (along with one or two very bad ideas – see hovercraft, below), it’s fair to say that the Chamber of Commerce’s “Beneath the Surface” is an epic waste of time and effort which may ultimately do more damage to developing the Ring of Fire. The Ring of Fire Action plan proposed by the Chamber starts in the wrong place, fails to consider the current economic and social environment, and advocates for a plan which is certainly doomed to fail – one which already has failed.

I will say it again: the starting point to any development proposal for the Ring of Fire must be real nation-to-nation negotiations. Until agreement can be reached between First Nations and the governments of Ontario and Canada, there is little to be gained by barging forward in the way the Chamber suggests. Yet, the Chamber urges the provincial government to move forward with infrastructure planning and subsidizing electricity as its priorities to getting the ROF back on track. First Nations agreement will only be afterwards, through some sort of needs-based assessment. Don’t misunderstand me, I believe that mutually beneficial agreements between First Nations communities and industry will prove to be good things – but the role in which First Nations are expected to take in the Chamber’s analysis does not fit the nation-to-nation reality, and can only be considered as a mechanism to further sideline First Nations.

The federal government tried that approach, was called out on it by First Nations, and ultimately it has led to failure and lost time. We can’t afford to go down that road again. But instead of urging governments and First Nations to come to an agreement as a first step, we have instead the Chamber of Commerce suggesting that short term infrastructure can be developed on mine sites deep in the James Bay Lowlands using hovercraft to ferry construction materials!

Sustainable Development vs. The Wild West Approach

And that brings us back to the notion of sustainable development – the other 21st Century economic reality which “Beneath the Surface” massively misses. Not only is there no discussion around carbon costs (or much discussion about costs of any kind), the natural environment is largely treated as an obstacle to be overcome by development – something which, along with the red-tape of environmental regulations and the Far North Act, stands in the way of moving forward now. This type of attitude might have been commonplace in the 20th Century (although certainly not in the latter part of that century, as “Beneath the Surface” seems to acknowledge in its call for the removal of environmental regulations which made sense “20 years ago” but apparently don’t today), but it has no place in developing a truly sustainable economy – which is what we must do if we are going to hold warming at 2 degrees C.

I sincerely hope that the Provincial government does not heed the advice offered by the Chamber of Commerce on a way forward for the development of the Ring of Fire. The current government, which has finally got serious about negotiating with First Nations and obtaining a social license for at least part of the development proposal, probably won’t. But with an election on the horizon, and a possible change in government, it’s not at all clear that the Chamber’s suggestions might not find resonance with at least one other political party. Certainly Tim Hudak’s Progressive Conservatives have called for a similar plan of action for the ROF – and have even called the ROF “Ontario’s oil sands” because somehow they believe that’s a good thing.

If the plan to develop the ROF proceeds the same way that the tar sands enterprise has, woe be to Ontario, and woe be to Canada – for there has been very little in the way of planning in Alberta at all. That might have been a little more accepted not long ago, but in the new realities of the 21st Century, we simply can’t afford a “wild west” development scenario for the ROF. We can’t let it happen because such a development scenario will ultimately cost us more and doom the ROF because it lacks a social license with First Nations. It should not be pursued because in pursuing runaway development, choices will be made which ignore carbon economics and which will ultimately add unsustainable long-term costs to the enterprise – costs which will likely be borne by the public purse for generations.

(opinions expressed in this blog are my own and should not be interpreted as being consistent with the views and/or policies of the Green Party of Canada)

1 comment:

rumleyfips said...

Perhaps the lack of costing is part of a campain to pass infrastructure expence to an unsuspecting public.