Natural resources are the foundation of our industrial economy, writes Margareta Dovgal. But under CleanBC, both could be wiped out with drastic consequences for the cost of living.
BC’s budget for 2022-2023 now shows a surplus of $704 million, though at one point the prediction was for a deficit of $5.5 billion. What changed?
The last two or three years have been challenging for government finances, both provincially and federally. Particularly in the early days of COVID, governments dove into debt as they responded to pandemic fears with massive benefits, wage subsidies and other programs.
Despite gathering storm clouds, especially around structural issues, we’re seeing short-term wins in the economy. BC’s operating debt has been eliminated. Immigration is up and our population is growing at a rapid rate. The provincial economy is growing at 3.6% and is enjoying strong employment levels.
A key part of that success, at least for BC’s fiscal picture, is higher than expected revenues from natural resource royalties, highlighting how responsible resource development continues to be a foundation for our economic prosperity.
Canada as a whole profoundly relies on natural resources as sources of wealth. We’ve taken a natural advantage and applied homegrown ingenuity and entrepreneurialism to create a highly innovative and productive industry that employs some of the most advanced environmental technologies on the planet.
That’s not just an abstract reality, visible only on budget sheets, but also something easily taken for granted, quietly holding up both the provincial and national bottom line and the quality of life attained by previous generations of Canadians.
There are scores of businesses built around natural resources, large and small, in many communities across Canada, that provide us with that essential economic base. They are also decisively a big part of the economic reconciliation story, from training and employing Indigenous peoples to driving self-determination for Indigenous communities that participate as owners or investors in companies across the supply chain.
British Columbia is uniquely gifted with natural gas, forests and minerals and metals in high demand around the world. In many parts of the province, these industries built the communities and regions in which they operate while fueling the growth of urban BC.
Now, we’re seeing a major industry emerge out of that legacy. LNG (liquefied natural gas), produced in northeast BC, liquefied at facilities near the coast and shipped to coal-dependant Asia, will be a core part of our future.
A clean climate somewhere benefits everyone, everywhere, and no good economic opportunity should be off the shelf for British Columbians. That idea is core to the way this globally leading LNG export industry is being developed, creating jobs across Canada.
One of the best parts of the emerging LNG economy is its rapid adoption of partnership practices with Indigenous communities. There are a number of LNG export projects that include Indigenous interests, partnerships and equity shares. That’s an exciting practice that has emerged in the last couple of years. Not too far from where I live, the Squamish Nation made history by becoming the first in Canada to grant an environmental certificate to Woodfibre LNG under a regulatory approach that will soon become the norm in this country. Woodfibre LNG will come online in 2027.
On the northwest coast, LNG Canada, Canada’s largest private-sector investment project ever, is nearing construction completion alongside its supply pipeline, Coastal GasLink. It will be operational in the next couple of years.
These two projects, among others, will provide ongoing contributions to the BC economy for decades. Count on the mining industry, too, as BC hopes to meet some of the world’s demand for critical metals and minerals.
Two of BC’s recent premiers, Christy Clark and John Horgan, worked hard to get us to this place. But with new policies like CleanBC, the Zero Carbon Step Plan, the New Energy Action Framework, the “paradigm shift” on forestry and now uncertainty in mineral exploration, BC risks undoing the progress of decades of economic development.
The latest plans under the BC government’s core climate and industrial policy framework, CleanBC, threaten unmitigated economic disaster. As the BC Business Council wrote: “While difficult to believe, the provincial government is forging ahead with a set of policies that its own modelling shows will make BC’s economy $28 billion smaller in 2030 and set prosperity back more than a decade.”
Status quo policies further undermine the economic feasibility of these changes, like BC’s legacy ban on nuclear energy.
We stand to lose essential economic opportunities for British Columbians while shrinking the economy and undermining our already weak affordability. Here’s why: investment is global. Every dollar that goes into creating jobs and economic productivity in BC could go somewhere else if we are not strategic – and competitive with the rest of the world.
Attracting capital, by pursuing policies that enhance investor return and avoiding policies that compromise it beyond the point of feasibility, is essential to maintaining the flow of benefits to British Columbians from our responsibly developed resources.
Moreover, we live in a material world. We need lumber, metal, fuels and all the resources that support life and uphold an advanced economy. Regardless of the time we might spend online, we do not live in the Metaverse. And the information economy can’t exist without an industrial economy.
Join me on a thought experiment.
Perhaps you’ve heard the true statement that the service industry is among Canada’s largest, generating billions of dollars, a massive contribution to the economy. Now imagine you’re at the mall. You buy some jeans. Then you grab some Starbucks.
You look around and observe hundreds of people around you buying and selling these items, and you notice the cashier who served you has a Starbucks cup behind her, and the barista who gave you your coffee is wearing the same jeans you purchased from the cashier. Witnessing the flow of money from one hand to the other and back, you ask yourself, where did the money originally come from? Is the economy really just a closed system, the world’s greatest recycling project?
Clearly, the answer is no. The wealth you see around you hasn’t always been there – it came from somewhere, it was created somehow. I’ll tell you how: among other things, by developing and exporting natural resources through inputs like skilled labour and materials (that all have to be sourced, too).
By extracting and processing natural gas and consuming it to power a manufacturing plant (like one producing forest products, which relies on logging) and producing valuable and useful commodities for export, BC keeps its economic engine going. Trained blue-collar workers create something new, and sell it to the rest of the world, and they earn money for it. And then, the loggers, miners and manufacturers take their hard-earned wages and create demand for the products that cashiers and baristas sell. They pump money into the economy, which creates prosperity for everyone.
The hard truth about policies like CleanBC is that they misunderstand this reality. The willful suffocation of the industrial economy is the wilful destruction of the economy, period.
Without our natural resources, what does BC export? How would it get international investment?
Our real estate market, which delivers high returns for investors and often gets brought up as a driver of foreign capital, is only as lucrative as it is because of policy failure at the municipal and provincial level. If decades of artificial scarcity are reversed – and that is certainly the trend we are observing today – and we simultaneously snuff out the truly productive industries that elevate everyone’s standard of living in BC, we would have very little to go on. Not to mention, without the wage boost afforded by thriving resource sectors, the ability of households to afford homes or even rent would be compromised.
Without the natural resource economy, BC would slowly decline until the only jobs available were service jobs, and then the money recycled between cashiers and baristas wouldn’t be enough for anyone to live on.
Pretty soon, you might hear demands for “a living wage”, complaints that there isn’t enough housing to go around and worries that a rising cost of living could re-introduce poverty into the lives of the working class. Sound familiar?
Declining wages across the board are a real and imminent risk, not a hypothetical. According to a recent analysis by BMO Capital Markets, if BC’s new carbon pricing model, the Output-Based Pricing System (OBPS), is implemented as proposed, it would have an oversized economic impact – to the tune of $11,000 in average GDP by household. That would have the effect of impoverishment across the economy.
Natural resource development drives dollars into provincial coffers, and new projects bring new investment. An absence of growth in this sector deprives our entire economy and the government services we expect in a developed industrialized country.
Services like our healthcare system depend on tax and royalty revenues. Continued private sector investment keeps the provincial government solvent. Even keeping the lights on, let alone fixing our dysfunctional healthcare system, demands that governments enable highly productive industries like forestry, mining and oil and gas. The dollars generated go not only into health care but also into education, roads, infrastructure and all the other things on which we rely.
Instead of presiding over a time of avoidable stagnation and decline, the BC government has an opportunity to build on the province’s strengths, ensuring that our historically significant natural resource industries can serve as viral producers for our future. These industries created our shared prosperity, and they can restore opportunities for a new generation.
As Premier David Eby works to tackle the affordability crisis in the province, he won’t find lasting solutions without a new policy agenda. If CleanBC unravels the industrial economy, housing prices will be the least of our worries.
Margareta Dovgal is Resource Works’ Managing Director.
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