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Are We Fully Understanding the Consequences of Oil Transit Accidents? | Nick Martyn
Are We Fully Understanding the Consequences of Oil Transit Accidents? | Nick Martyn.
Recent events in Canada’s rail transport network have prompted a much-needed national debate about the risks of energy transport and rail safety. No matter our personal stance regarding climate change, we all live in an oil dependant society and until we find another way to power the global economy and our civil society, oil and gas will have to move from where it is found to where it is used. In Canada that largely means it will move either via pipeline or rail. But when a pipeline leaks or oil tankers derail, the risks of oil transit are thrown into stark relief; especially for the residents of communities in the immediate vicinity and the ecosystems affected.
Broadly speaking, risk is thought of as the “possibility of loss.” It is generally viewed as the combination of the likelihood of loss and the consequences of that loss. Likelihood, otherwise known as the “probability of occurrence”, is the foundation of actuarial science; which underpins the insurance industry. Probability suggests that if historical trends continue and the future cooperates with the past, then the likelihood of something occurring can be calculated to a sufficient degree that insurance against the event could be issued with a reasonable chance that it would not have to be paid. In essence a bet is laid against the event. If the event occurs then the insurer has to pay out. If it does not then the insurer makes money.
The Insurance Bureau of Canada declared 2013 the worst year on record for insurance related payouts, meaning that insurers will pay out a lot of money because the future did not cooperate with the past and the unlikely happened. The object lesson here is that while likelihood is interesting, consequences are costly.
As we seek export markets for Canadian energy products, so the volume of those products in transit increases. Eric Sprott, the renowned Canadian resource investor notes in his January 27, 2014 newsletter that by the end of 2013 Canada’s rail industry was shipping 375,000 barrels of oil per day and that figure is expected to each 900,000 barrels per day by the end of 2014. As for a pipeline, Sprott believes the Energy East pipeline will get the go-ahead and will increase Canada’s export capacity by 800,000 barrels. Since Canada has not added significantly to its pipeline infrastructure in decades, there is little choice but to ship it via the rail network, which coincidentally has not been significantly increased in decades. When both the nature and the volume of rail traffic increases on a network that has not appreciably increased in size or capability the “likelihood” of failure events also increases, as do the consequences.
To date consequence has been considered somewhat subjective and therefore less quantifiable than likelihood, partly because each stakeholder sees consequence differently. For instance the Mayor of a community thinks of the consequence of a train derailment and spill in the community in a much different way than the CEO of the rail company or the owner of the shipment. The cold hard reality is that no matter how small the statistical likelihood that derailments will happen, the consequences when derailments happen are significant. As events increase in frequency and it seems severity, it is clearly time to rethink our evaluation of risk in rail transport.
While the probability that a train-load of inappropriately classified oil products would careen down a hill in rural Quebec and explode, killing 47 people and contaminating a fragile lake ecosystem was so infinitesimally small as to be almost incalculable, the consequences were devastating and will be felt for generations. The policies that drive rail system regulation (or any system for that matter) are driven by the likelihood of a failure not the consequences. In part this is because it is difficult to foresee every event and frame a regulation to prevent it, but also because the risk analysis techniques to quantify consequence in a useful way, to date, have not existed.
Risk analysis techniques have improved markedly in recent years, to the point that networked risk analysis tools can fathom the pathways of exposure to risk in models containing thousands of entities. Given the complexity and importance of the energy transport question in Canada and the severe and sometimes tragic consequences of failure, it seems time to revisit the question of energy transport risk with modern tools so that no matter which side of the energy debate we stand on, we have a safer, cleaner Canada to live in and to pass on to our children.
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Are We Fully Understanding the Consequences of Oil Transit Accidents? | Nick Martyn
Are We Fully Understanding the Consequences of Oil Transit Accidents? | Nick Martyn.
Recent events in Canada’s rail transport network have prompted a much-needed national debate about the risks of energy transport and rail safety. No matter our personal stance regarding climate change, we all live in an oil dependant society and until we find another way to power the global economy and our civil society, oil and gas will have to move from where it is found to where it is used. In Canada that largely means it will move either via pipeline or rail. But when a pipeline leaks or oil tankers derail, the risks of oil transit are thrown into stark relief; especially for the residents of communities in the immediate vicinity and the ecosystems affected.
Broadly speaking, risk is thought of as the “possibility of loss.” It is generally viewed as the combination of the likelihood of loss and the consequences of that loss. Likelihood, otherwise known as the “probability of occurrence”, is the foundation of actuarial science; which underpins the insurance industry. Probability suggests that if historical trends continue and the future cooperates with the past, then the likelihood of something occurring can be calculated to a sufficient degree that insurance against the event could be issued with a reasonable chance that it would not have to be paid. In essence a bet is laid against the event. If the event occurs then the insurer has to pay out. If it does not then the insurer makes money.
The Insurance Bureau of Canada declared 2013 the worst year on record for insurance related payouts, meaning that insurers will pay out a lot of money because the future did not cooperate with the past and the unlikely happened. The object lesson here is that while likelihood is interesting, consequences are costly.
As we seek export markets for Canadian energy products, so the volume of those products in transit increases. Eric Sprott, the renowned Canadian resource investor notes in his January 27, 2014 newsletter that by the end of 2013 Canada’s rail industry was shipping 375,000 barrels of oil per day and that figure is expected to each 900,000 barrels per day by the end of 2014. As for a pipeline, Sprott believes the Energy East pipeline will get the go-ahead and will increase Canada’s export capacity by 800,000 barrels. Since Canada has not added significantly to its pipeline infrastructure in decades, there is little choice but to ship it via the rail network, which coincidentally has not been significantly increased in decades. When both the nature and the volume of rail traffic increases on a network that has not appreciably increased in size or capability the “likelihood” of failure events also increases, as do the consequences.
To date consequence has been considered somewhat subjective and therefore less quantifiable than likelihood, partly because each stakeholder sees consequence differently. For instance the Mayor of a community thinks of the consequence of a train derailment and spill in the community in a much different way than the CEO of the rail company or the owner of the shipment. The cold hard reality is that no matter how small the statistical likelihood that derailments will happen, the consequences when derailments happen are significant. As events increase in frequency and it seems severity, it is clearly time to rethink our evaluation of risk in rail transport.
While the probability that a train-load of inappropriately classified oil products would careen down a hill in rural Quebec and explode, killing 47 people and contaminating a fragile lake ecosystem was so infinitesimally small as to be almost incalculable, the consequences were devastating and will be felt for generations. The policies that drive rail system regulation (or any system for that matter) are driven by the likelihood of a failure not the consequences. In part this is because it is difficult to foresee every event and frame a regulation to prevent it, but also because the risk analysis techniques to quantify consequence in a useful way, to date, have not existed.
Risk analysis techniques have improved markedly in recent years, to the point that networked risk analysis tools can fathom the pathways of exposure to risk in models containing thousands of entities. Given the complexity and importance of the energy transport question in Canada and the severe and sometimes tragic consequences of failure, it seems time to revisit the question of energy transport risk with modern tools so that no matter which side of the energy debate we stand on, we have a safer, cleaner Canada to live in and to pass on to our children.
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Canada Middle-Class Dreams A ‘Myth’ In Troubled Economy: Internal Gov’t Report
Canada Middle-Class Dreams A ‘Myth’ In Troubled Economy: Internal Gov’t Report.
OTTAWA – Canada’s middle-class is mortgaging its future to stay afloat, making the Canadian dream “a myth more than a reality.”
That’s the blunt assessment of an internal Conservative government report, an unvarnished account of the plight of middle-income families that’s in contrast to the rosier economic picture in this month’s budget.
The document was prepared last October by experts in Employment and Social Development Canada, the department that runs the employment insurance fund and other income-support programs. The Canadian Press obtained the report under the Access to Information Act.
“The wages of middle income workers have stagnated,” it says, referring to the period from 1993 to 2007.
“Middle-income families are increasingly vulnerable to financial shocks.”
The document, drawing on three years of “internal research,” was prepared for the department’s deputy minister, Ian Shugart, shortly before the resumption of Parliament last fall.
“In Canada, political parties are making the middle class a central piece of their agendas,” notes the presentation.
A department spokesman, Jordan Sinclair, said in an email that the research “was not linked to the parliamentary schedule or topics raised within the House of Commons.”
The authors say middle-income families have seen their earnings rise by an average of only 1.7 per cent a year over the 15 years ending 2007.
“The market does not reward middle-income families so well,” says the report. “As a result, they get an increasingly smaller share of the earning’s pie” compared with higher-income families.
Shugart was also told middle-class workers “get lesser government support for their work transitions,” referring to a sharp fall-off in employment-insurance benefits compared with other economic groups.
The analysis stops short of the 2008 global recession, though other analysts have noted the economic crisis wiped out many well-paid manufacturing jobs in central Canada that have supported middle-class prosperity.
The report also refers to debt, saying “many in the middle spend more than they earn, mortgaging their future to sustain their current consumption.”
“Over the medium term, middle-income Canadians are unlikely to move to higher income brackets, i.e., the ‘Canadian dream’ is a myth more than a reality.”
Current Conservative messaging emphasizes a million new jobs created since the recession; Canada’s relative economic stability compared with other industrialized countries; and various tax cuts provided to “average” families since 2006.
Sinclair repeated those talking points when asked for comment on the report.
“Today, the Canadian economy is remarkably strong, setting the conditions for Canadians and their families to succeed and enjoy a high quality of life,” he said. “Middle-income Canadians receive proportionately greater (tax) relief.”
This month’s budget acknowledged the need to create jobs and provide workplace training, but the budget documents never refer explicitly to the “middle class.” The term “middle income” occurs just three times in the main budget, and once in a news release.
Since becoming Liberal leader in April last year, Justin Trudeau has frequently cited the plight of the middle class, a theme repeated at the party’s weekend convention in Montreal.
Research from the Library of Parliament shows that since Jan. 1, 2013, Trudeau has used the phrase “middle class” 52 times in the House of Commons, compared with twice for Prime Minister Stephen Harper and nine times for NDP Leader Tom Mulcair. None of them used “middle income.”
Toronto Liberal MP Chrystia Freeland commended the public servants who produced the report, saying that for the Liberals “it was like getting a good grade on your homework.”
“This is a very strong, non-partisan, data-driven report, focused on Canada, which confirms our assertion, which is at the centre of our policy, that the middle class in Canada is being squeezed and that we have to do something about it,” she said in an interview from Montreal.
“The public discourse has been lagging — we’ve been in denial.”
Freeland, who won a November byelection and now is the party’s trade critic, is author of the 2012 book Plutocrats, which argues that wealth distribution has favoured the ultra-rich and left everybody else behind.
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