Why natural resources are the bedrock of British Columbia's economy

Developing the energy, mining and forestry sectors in an environmentally responsible manner is the key to a prosperous future for all British Columbians

Natural resources & the Lower Mainland

The natural resources sector is bedrock to the economies of both BC and Vancouver. That was the case throughout the development of the province and her major city, it’s the case today and it is projected to be the case long into the future.

To put it simply: the natural resource sector of BC is of great and enduring value to the Lower Mainland, and is a key contributor to our much-envied quality of life.

At Resource Works we celebrate this natural resource connection – and we build on it. All our efforts are based on sound economic research and engaging, timely and effective communication of that research. We celebrate our natural endowment of oil and gas, timber and minerals, and the significant benefits they provide the province and the city.

Our work also acknowledges our strong environmental ethic and our commitment to continual improvement. And it recognizes that, while some jurisdictions focus on manufacturing, we have a central role to play in sustainably providing the commodities for those manufacturing processes. That’s our great strength.

You may be aware of the host of myths floating around BC in relation to the natural resource sector and the provincial economy. We’re here to share scientifically verifiable, fact-based information about the important role natural resources can be expected to play in BC’s future, as well as the future of the Lower Mainland – and we’re here to bust some of those lingering myths.

For example, there’s a myth that suggests the resource sector only exists out in the remote, rural regions of BC, and that the resource economy doesn’t really affect people in Metro Vancouver.

The fact is, of all the jobs created by the resource sector, over half – that’s right, fully 55 percent – are in BC’s Lower Mainland. Many of those jobs are services: legal expertise, accounting, engineering, communications advice. And these positions are vital to our region.

There’s also a myth that says the resource sector is going through its “sunset phase,” that it’s in the process of being replaced by the high-tech sector.

In fact, today’s natural resources sector offers strong career and economic opportunities to workers and businesses throughout BC. And the resource sector continues to be not just a driver, but THE major driver of BC’s economy.

There are many other reasons to support – and to celebrate – BC’s natural resource economy and Vancouver’s role within it. For example:

The value of trade

• Canada is a trading nation with much of its economy based on international trade. British Columbia is a key driver of this trade and almost 80 percent of BC’s commodity exports are natural-resource products. Source: www.bcstats.gov.bc.ca/StatisticsBySubject/ExportsImports/Data.aspx

• BC is Canada's second-largest natural gas producer. The province’s oil and gas industry continues to see tremendous growth in the northeast. Source: http://www.gov.bc.ca/bcfacts/

• BC has the largest number of exploration companies and mining experts in the world. In total, more than 800 mining and mineral firms and 400 service suppliers to the mining sector are headquartered in Vancouver. Source: http://www.britishcolumbia.ca/invest/industry-sectors/mining.aspx

• In 2011 alone, BC produced over $8 billion worth of mine products, including coal, copper, gold, zinc, molybdenum, silver, lead, aggregates, industrial minerals and other mining products. Source: http://www.britishcolumbia.ca/invest/industry-sectors/mining.aspx

Tax revenues & natural resources

• The resource sector is the engine that powers much of British Columbia’s growth. As Resource Works’ senior research fellow Philip Cross notes, one extra dollar’s output from BC’s resource sector is expected to produce an extra $1.74 in the province’s total GDP. According to Cross, that means a 10 percent rise in BC natural resource output would boost BC’s GDP by $3.7 billion.

• According to BC’s provincial budget, revenues from natural resources brought in $2.5 billion to the BC government in 2013 – enough to pay 22,727 family doctors. And given the strength of our resource economy, these revenues are predicted to grow substantially. Source: bcbudget.gov.bc.ca and resourceworks.com

• BC now has the second-highest level of incoming natural resource projects in the country, after Newfoundland, all of which will contribute to increasing tax revenue to help pay for BC’s world-class health, education and social services as well as new infrastructure development. Source: resourceworks.com

• BC has the shortest sea route between North America and Asia – that’s a key advantage for diversifying Canadian natural resource export markets beyond the US. Source: www.britishcolumbia.ca/invest

Jobs and employment

• Some 111,000 people are directly employed in the resource sector in British Columbia (800,000 across Canada with about the same number of indirect jobs linked to the resource sector in fields like construction, manufacturing, transportation, financial, technology and business services). The sector represents 10 percent of the province’s nominal GDP. Assuming the same proportion of people are employed supporting resource industries as in Canada as a whole, means that one in 10 BC jobs are also connected to the natural resource sector. Source: http://www.nrcan.gc.ca/publications/key-facts/16013, resourceworks.com and Canadian Intergovernmental Conference Secretariat

• According to the BC government, if five liquefied natural gas plants are built in the province, some 39,000 construction jobs would be created. It’s estimated that up to 10,000 additional construction jobs would be created if both the Kinder Morgan and Northern Gateway pipeline projects proceed. Add in BC Hydro’s proposed Site C dam project, which the company estimates will create 33,000 construction jobs, and the total rises to some 80,000 construction jobs for British Columbians to be created over the next few years. Source: http://www.thenownewspaper.com/opinion/baldrey-reports-question-b-c-s-reliance-on-resources-1.919164#sthash.mf6Mbnkn.dpuf

Natural resources & innovation

The resource sector is a catalyst for the development of high technology and innovation. Here are a few examples of the resource sector at the cutting-edge:

• Canadian Dr. Roger Butler invented steam-assisted gravity drainage (SAGD) as a means of extracting oil from the oil sands by injecting steam underground. This method has revolutionized oil extraction. For the first time, an economical means of recovering oil from the Canadian oil sands was developed. This method also benefits from a small environmental footprint on the land. Roughly 80 percent of proven reserves in the oil sands are now recoverable using in situ (stationary) methods like this. Source: Canadian Association of Petroleum Producers

• The resource sector is pioneering autonomous robotics – a high-tech field not often associated with natural resources. Suncor Energy is testing massive autonomous dump trucks in the oil sands and Rio Tinto is operating similar vehicles at its mine sites. Source: http://www.bloomberg.com/news/2013-10-31/suncor-seeks-cost-cutting-with-robot-trucks-in-oil-sands-mine.html

• Many of our electronic devices contain mineral ores as well as plastic components derived from petroleum and natural gas-based processing. Many of us drive modern, efficient cars that contain some 50 pounds of copper – 40 pounds for electrical and 10 pounds for non-electrical components. Source: ‘Lyn Anglin op ed

Natural resources & sustainability

• Renewable energy requires metals and minerals. The increased production of renewable energy is also driving increased demand for mined metals and minerals. New solar panels require arsenic, bauxite, boron, cadmium, coal, copper, gallium, indium, iron ore, molybdenum, lead, phosphate, selenium, silica, tellurium and titanium dioxide. Wind turbines use concrete, bauxite, cobalt, copper, iron ore, molybdenum and rare earth elements. The rare earth elements (REE), also known as rare earth metals, are particularly important in wind turbines as they reduce the weight and size needed for magnets in wind turbines. Source: www.miningfacts.org

• The BC forest sector pioneered independent, third-party certification, which has now been adopted worldwide. This certification allows an independent, third-party auditor to verify that a forest is being well-managed using a variety of rigorous economic, social and environmental criteria. Source: Greenspirit Strategies Ltd.

• BC has been ranked as the greenest province in the country and fourth-greenest jurisdiction in North America, according to a 2014 report by Toronto-based magazine Corporate Knights. The magazine noted that BC ranked first in Canada because it had the highest percentage of protected land, the least number of kilometers driven per capita, and the most electric vehicle-charging stations per capita -- among a range of other criteria. Source: http://www.corporateknights.com/report/2014-green-provinces-and-states-report-card/canadian-provinces

Markets: the case for extraction vs manufacturing

• Resource Works’ senior research fellow Philip Cross notes that manufacturing is vulnerable to our modern, globalized economy and these types of jobs can be easily moved overseas. Manufacturing is also susceptible to increased competition from low-cost imports. By comparison, Canada’s resource sector jobs cannot be moved overseas because extraction must take place in the location where the resource is located. Consequently, according to Cross, “the largest downstream benefit from increasing the development of natural resources lies in the services required, not in manufacturing… services jobs increase more than twice as much as manufacturing in response to growth in the resource sector.”

• Resource Works’ senior research fellow Philip Cross makes the key point that, contrary to widespread public perception, “manufacturing represents less value-added as a percent of output, not more.” That’s because – again, contrary to popular perception – for most products, the largest amount of value-add comes from extraction activities like construction or the transportation of oil and gas by pipeline. High value-add also occurs in the service sector, including services connected to the resource sector such as financial and business services. By comparison, Cross notes that “manufacturing lies in the middle of the production process, where value-added is lowest.” This explains why refining, like other types of manufacturing, is not a high value-added process. As Cross indicates, most of the value has already been added via the extraction process prior to refining. Refining is, consequently, a low-margin business that adds little value. As Cross writes, “this answers why we export more crude than refined oil: crude is where the most value lies.”

• Andrew Leach, an associate professor at the University of Alberta, notes that building additional refineries instead of focusing resources and technology on improving extraction processes would also likely have a negative impact on government revenues. He writes that “by forcing refining, how much are you reducing government share by shifting profits from royalty (plus) tax to tax alone.” Source: http://www.macleans.ca/news/canada/andrew-leach-and-elizabeth-may-debate-northern-gateway/

The changing US energy picture

• It is most important that BC seeks to export liquefied natural gas (LNG) to markets where strong economic opportunities exist. Because the US is expected to achieve energy self-sufficiency by 2020, and since US natural-gas output has grown by 30 percent while ours has shrunk by 18 percent, BC must look beyond our neighbor to other markets such as Asia, where LNG prices are fairly strong. LNG is an industry with the potential to supplement or replace the US revenues to BC many times over, allowing jobs and economic progress for BC residents. Source: CAPP and resourceworks.com

Important socio-economic indicators

As British Columbians continue to learn about the importance of their resource sector, it’s important to take a larger perspective. BC is one of Canada’s most populous provinces and a key driver of the country’s economy, particularly with regard to resource exports and trade. So how does our country stack up to others with substantial resource export economies?

Resource Works has identified five core socio-economic indicators that are a general reflection of how a country’s citizens are faring from a social development perspective.

These five core indicators include:

• Percentage of women in labour force participation

• Civil liberties

• Political rights

• Corruption perceptions

• Expected lifespan since birth

These five indicators have been taken from a number of reputable sources including the International Labour Organization, the World Bank, Transparency International, and Freedom House.

We have used these indicators to compare Canada’s social development against the six largest oil and gas exporters worldwide: Nigeria, Kuwait, Iran, the United Arab Emirates, Russia and Saudi Arabia. In every case, Canada scores the top mark.

Percentage of labour force participation (females 15+)  

According to the International Labour Organization, Canada has one of the highest female labour participation rates in the world, and ranks higher in this category than any of the six largest oil and gas exporters. In Canada, women make up some 19 percent of the labour force in mining and oil and gas and 12 per cent of senior executives. According to the BC government, since 2009, women’s participation as apprentices in the skilled trades has risen from 8.5 percent to 10.3 percent. This compares to Saudi Arabia, where few if any women participate in the resource sector. Sources: International Labour Organization, World Bank, Alberta Venture Magazine, Government of BC

Civil liberties  

In its 2014 Freedom in the World report, Washington, DC-based Freedom House ranks Canada among the most free and open countries on Earth. When compared to the top six oil and gas exporting countries, Canada is the only free country. Freedom House categorizes civil liberties as “the freedoms of expression and belief, associational and organizational rights, rule of law, and personal autonomy without interference from the state.” Freedom House ranks civil liberties on a scale of one to seven with one being the most free and seven being the least free.

Political rights  

In its 2014 Freedom in the World report, Washington, DC-based Freedom House ranks Canada as among the most democratic countries on Earth. When compared to the top six oil and gas exporting countries, Canada is the only one that provides full political rights for its people. Freedom House says political rights “enable people to participate freely in the political process, including the right to vote freely for distinct alternatives in legitimate elections, compete for public office, join political parties and organizations, and elect representatives who have a decisive impact on public policies and are accountable to the electorate.” Freedom House ranks political rights on a scale of one to seven with one being the most free and seven being the least free.

Corruption perceptions index  

When compared to the top six oil and gas exporting nations, Canada is – by far – the least corrupt country based on Transparency International’s 2013 assessment. Transparency International’s corruption index runs on a scale of 0 (highly corrupt) to 100 (highly clean). With a score of 81, Canada ranks among the least corrupt countries in the world. A lack of corruption means that federal and provincial laws and regulations on environmental and social issues by which BC’s resource sector must abide are strictly enforced and adhered to.

Life expectancy at birth, total (years) 

According to the World Bank, when compared to the six largest oil and gas exporters, Canadians have the highest life expectancy at 81 years – much higher than the world average of 70.8 years. BC’s resource sector operates within the larger framework of a stable, democratic, and wealthy society with world-class healthcare for its citizens – as reflected by this indicator.

Tap into our expertise

Please spend some time on this website, and once you’ve done so, please give us a call or drop us a line. We’d love to hear from you. Equally important, we want to find additional ways to provide our information to you, our audience, in an engaging, useful way. Our staff is continually updating its research in the natural resources sector and its relation to BC and to the Lower Mainland. We think it’s an important story – one not well understood by the general public. We want to change that. Won’t you join us?

Stewart Muir is executive director and founder of the Resource Works Society. He launched the group in 2014 and it now has nearly 10,000 supporters.