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The greenhouse gas emissions from oil flowing through TransCanada Pipelines’ proposed Energy East project would be equivalent to putting seven million new cars a year on Canadian roads, according to a report from an environmental think-tank released today.
The Pembina Institute’s study looked at the potential upstream carbon pollution — that is, from the well to the refinery gate — from oil flowing through the pipeline and found that it could add anywhere from 30 to 32 million tonnes of CO2 a year to the atmosphere.
“For a single piece of infrastructure, that’s huge. It’s more than the emissions of five provinces,” explained Clare Demerse, Pembina’s federal policy director and co-author of the report.
“The single most effective climate policy today [in Canada] is Ontario’s decision to phase out coal [for generating electricity]. The emissions associated with building Energy East could effectively wipe out the gains of our single most effective climate policy by far,” she told CBC News.
Tune in to The National on CBC-TV tonight to hear how pipeline companies and environmentalists are changing their tactics in Canada’s energy infrastructure debate.
Energy East is planned to take both conventional and oilsands oil from Alberta to the deep-water port in Saint John. The project would convert an existing natural gas pipeline that runs to the Ontario-Quebec border to carry oil, then build a new pipeline the rest of the way. When running at full capacity, Energy East would eventually carry 1.1-million barrels of crude a day.
TransCanada has yet to file an application with the National Energy Board, but it is expected to do so in the middle of this year.
Demerse admits that this is a preliminary report and that it is hard to comment accurately on Energy East because so little detail is known about the project. Still, she said, Pembina wanted to start the conversation about it as soon as possible.
TransCanada said it wants to take a closer look at the numbers before it comments on the report. The pipeline company has already held information sessions about the project in communities along the route.
Ontario could avoid refurbishing aging nuclear stations and save over $1 billion annually on electricity bills if the province imported water power from Quebec, says the Ontario Clean Air Alliance, a coalition of 90 organizations that promote renewable energy.
“This one is really a no-brainer,” Jack Gibbons, chair of the alliance, told DeSmog Canada. The alliance was largely responsible for Ontario agreeing to phase out all coal-fire power plants by December 31, 2014.
Quebec is the fourth largest producer of hydroelectricity in the world (behind China, Brazil and the U.S.) and has a large hydro surplus the province usually sells to the U.S. Existing power lines between Ontario and Quebec can transport nearly as much power as Ontario’s Darlington nuclear station produces. This amounts to more than 10 per cent of Ontario’s peak demand on a hot summer’s day.
“Importing hydro from Quebec is technically feasible. The only barrier is lack of political will,” Mark Winfield, associate professor of environmental studies at York University, says.
Successive Ontario governments have insisted on the province producing all of its own electricity despite the fact it sits between two provinces with massive hydroelectric generating capacities — Quebec and Manitoba. Transmission lines from Ontario to both of these provinces have existed for decades. Ontario-based water and nuclear power provide the province with most of its electricity.
Ontario’s electricity supply mix in 2013. Source: Long Term Energy Plan 2013
“Ontario imports natural gas from outside the province, and uranium for its nuclear plants from Saskatchewan, and used to buy its coal from the American Midwest,” Winfield told DeSmog Canada.
“Why would importing electricity from Quebec be any different?” he says.
Ontario’s long-term energy plan, released last December, projects home power bills will rise 42 per cent by 2018. The plan calls for energy conservation and refurbishing old nuclear reactors to prevent rates from increasing even more.
Importing water power is mentioned in the province’s energy plan as a possibility if the price is right:
“Ontario will consider opportunities for clean imports [i.e. renewable energy such as water power] from other jurisdictions when such imports would have system benefits and are cost effective for Ontario ratepayers.”
Transmission power lines from Ontario to other provinces and states. Source: Long Term Energy Plan 2013
The Ontario Clean Air Alliance estimates the savings for Ontario will be at least $1.2 billion annually between 2020 and 2050 if the province cancels the refurbishment of Darlington’s nuclear reactors and signs a long-term power contract with Quebec instead. The cost of the refurbishment will be 8.6 cents per kilowatt-hour (kWh) according to Darlington’s operator,Ontario Power Generation. Quebec exports power at 4.1 cents/kWh on average.
The savings could be even more.
“Nuclear projects in Ontario usually run 2.5 times over budget. We are concerned that the actual cost of the Darlington re-build will be between 19-37 cents/kWh,” Gibbons told DeSmog Canada.
Ontario Power Generation, a provincially owned power company, has asked the Ontario Energy Board to approve a 30 per cent rate increase on what the company is paid for nuclear power. A big chunk of the rate increase is expected to go to extending the lives of Ontario Power Generation’s nuclear reactors at Darlington by an additional 30 years.
“As we see it, energy conservation and importing hydro from Quebec is the only way Ontario can reduce electricity bills for consumers,” Gibbons says.
Quebec stands to benefit from a power contract with Ontario as well since the U.S. export market is collapsing. The U.S. shale gas boom has dropped the price of natural gas so low that American states are burning more gas for their power than before, creating less economic incentive to buy electricity from Quebec.
Ontario could reap further economic benefits beyond being a consumer of Quebec’s cheap hydro. Winfield points out that Quebec’s electrical demand is the highest in winter when Ontario’s demand is low and wind power is at its strongest. Ontario could sell its power back to Quebec as part of the deal.
Cheaper electricity rates could provide some relief for Ontario declining manufacturing industry by reducing the cost of doing business and making manufacturers in Ontario more competitive.
“Although there would be some job loss in Ontario’s power generating sector, there would be a net-gain for the province’s economy,” Gibbons says.
Image Credit: DeborahCoyne.ca, Government of Ontario
Back in the spring of 2012, while walking in the deep woods of northern Ontario, Sonny Gagnon stumbled across a collection of surveying equipment among the towering spruce trees. Gagnon is chief of the Aroland aboriginal tribe, a band of 450 people living in a village of ramshackle houses surrounded by swampy muskeg. He tracks everything that goes on in his community. And the surveying tools weren’t supposed to be there.
“I was ticked off,” he says, after learning that the equipment belonged to a subcontractor of Cleveland-based mining company Cliffs Natural Resources Inc. (CLF)
It turned out Cliffs had plans to mine for chromite to the north of the Aroland reserve and to build a road through the territory to transport truckloads of the mineral to a railhead, Bloomberg Markets magazine will report in its March issue.
“They weren’t consulting us on what they were doing on the land,” Gagnon says. “I told them to leave and that we didn’t want them back.”
Gagnon and his native band then set up a roadblock to monitor traffic. Cliffs suspended plans for the mine in November, citing in a statement the “risks” associated with its ability to transport the ore for processing.
Cliffs officials didn’t respond to repeated requests for comment.
Aboriginal Canadians from Quebec to British Columbia are asserting their rights. Energized by a 2004 Supreme Court decision that requires governments to “consult and accommodate” aboriginal groups before miners and oil and gas drillers encroach on their lands, the natives have blocked half a dozen major projects since the court ruling.
The natives’ activism complicates Prime Minister Stephen Harper’s grand plan to boost the Canadian economy with C$650 billion worth of natural resource projects over the next decade in a quest to make the nation an “energy superpower.” Among the government’s priorities are mining projects in the so-called Ring of Fire region of northern Ontario, stepped-up oil extraction from Alberta’s tar sands and natural gas exploration in British Columbia.
Native Canadians are demanding a say in how these projects proceed, and the 2004 court decision forces the government to give them one.
“These are huge issues, which have enormous implications for the economy of the country,” says Bob Rae, a former Ontario premier who, until April 2013, led Canada’s federal Liberal Party. “They’re right at the center of Canada’s economic life.”
The natives have a powerful political ally in Rae, who has agreed to negotiate with mining companies and the provincial and federal governments on behalf of the nine chiefs of the Matawa First Nations, including Gagnon. The council holds sway over northern Ontario lands where major mineral discoveries were made as recently as 2008. Mining companies, including Cliffs and Toronto-based Noront Resources Ltd. (NOT), estimate the region contains C$50 billion worth of copper, zinc and chromite.
The aboriginals’ latest show of power came in New Brunswick in October and November, when demonstrators gathered in opposition to Houston-based Southwestern Energy Co. (SWN)’s plans to drill for natural gas on native lands. The protesters clashed violently with police, at one point throwing Molotov cocktails that incinerated six police vehicles.
The company says the disruption in its operations cost it $60,000 a day. It got a court injunction that stopped the protests and proceeded with exploratory drilling in December.
‘Begin by Listening’
Confrontations such as the one in New Brunswick are proof that the Canadian federal government has mishandled its mandate to consult with the First Nations over such projects, says Paul Martin, an aboriginal rights advocate who led Canada as prime minister from December 2003 to February 2006.
“If you want to have a relationship, begin by listening,” Martin says. “And the federal government seems incapable of doing so.”
Prime Minister Harper has pledged to “reset the relationship” between government and Canada’s indigenous people. “Certainly, in the past, lack of trust on both sides has held us back,” he said in 2012.
Canada is facing more challenges to resource-extraction projects from aboriginals than any other nation in the world, according to an October report by Fredericksburg, Virginia–based First Peoples Worldwide, which provides grants and services to native tribes. The activists are divided into two groups. The so-called traditionalists want to shut out development and preserve native lands for hunting and fishing. “Progressives” want to share in the enormous wealth being produced by the country’s resource companies.
Idle No More
Often both points of view are represented in the same native band, creating conflict. Both can be found in a national movement called Idle No More, which has staged protests around the world — including in Stockholm and London — demanding jobs, education and economic development for Canada’s indigenous communities.
Idle No More made headlines in January 2013, when it staged protests that blocked train traffic between Montreal and Toronto.
Canada is home to 1.4 million natives, who make up 4.3 percent of the population, compared with the U.S.’s 2 percent, according to the most-current census data. More than half of Canada’s First Nations peoples, as they are known, live and work in cities; the rest are scattered across six time zones on more than 600 reserves.
Unemployment is as high as 90 percent in native communities such as Aroland, and the median per capita income was C$14,000 in 2005, the latest year for which figures are available. The per capita income of all Canadians today is C$40,650, according to Statistics Canada.
Canadian resource companies say they’re eager to accommodate the First Nations — so long as they don’t make unreasonable demands. In August, Calgary-based Athabasca Oil (ATH) Corp. won approval from Alberta’s energy regulator to start up an oil sands project in northeastern Alberta over the protests of the Fort McKay First Nation, whose traditional hunting grounds are adjacent to the proposed site.
The Fort McKay group wants a 20-kilometer (12-mile) buffer around the bitumen drilling operation. Athabasca rejected the idea, but on Dec. 17, Sveinung Svarte, its chief executive officer, said, “It is our view that a mutually acceptable solution is achievable.”
Athabasca’s shares sank 38 percent in 2013 amid uncertainty about the project, which could produce 250,000 barrels of oil a day at full capacity.
On the Pacific coast, Calgary-based pipeline builder Enbridge Inc. (ENB) has reached an angry impasse with the natives. The company wants to lay a 1,178-kilometer line called Northern Gateway to connect Alberta’s oil sands with the Pacific port of Kitimat, where the oil would be loaded onto tankers and shipped to petroleum-thirsty Asian markets. The pipeline would traverse British Columbia’s mountains and salmon streams.
The pipeline is opposed by native groups along much of its proposed route because they say oil spills and leaks would destroy their hunting and fishing grounds. The Yinka Dene Alliance, a group of six tribes whose lands span the pipeline’s proposed route to the sea, have banned any Northern Gateway contractors from setting foot on their lands.
The Coastal First Nations, an alliance of nine aboriginal groups on the British Columbia seashore, is equally determined to block Enbridge’s pipeline, and joined dozens of First Nations that voiced their opposition to the pipeline during 2012 regulatory hearings by Canada’s National Energy Board.
The board gave the project a green light in a December ruling, placing 209 conditions on the pipeline, many of them designed to protect the environment — and, by implication, native lands. Enbridge says it will spend an extra C$500 million to boost the thickness of its pipes, will install dual leak detection systems and will post permanent staff at remote pumping stations to minimize the risk of a spill.
“I’ve been in a number of locations in B.C. trying to talk to people about the project, but, more importantly, listening to what they are saying,” Enbridge CEO Al Monaco says. “I don’t say a heck of a lot. I basically listen to what the concerns are.”
The natives aren’t persuaded. Art Sterritt, executive director of Coastal First Nations, stands aboard a 20-meter (70-foot) boat plying the waters near Prince Rupert and points across the Hecate Strait at a string of buoys marking the spots where the seabed was seeded with juvenile scallops in 2012.
The fragile shellfish beds are part of an effort to rebuild a traditional aboriginal economy based on aquaculture.
“The real foundation of who we are is shellfish,” Sterritt says, as a pod of whales surfaces within view of the boat. He adds that he doesn’t want to take a chance that an oil spill will destroy the pristine bay.
“We are still hopeful that they will see the merit of stopping this project,” says Arnold Clifton, chief councilor of the Gitga’at First Nation. “The recommendation is by no means the final say. All options are on the table.”
Prime Minister Harper, who also faces opposition to the pipeline from non-native British Columbians, has until June to decide the project’s fate.
Their recent victories in holding up projects have emboldened the aboriginals.
‘We Own It All’
“We have the authority to enter into any agreement that we want to,” says Gary Allen, chief of the Nigigoonsiminikaaning First Nation, which is negotiating logging rights on its land in northern Ontario with Montreal-based Resolute Forest Products (RFP) Inc. and other companies. “Whether with the mining sector, whether it’s in forestry, whether it’s water — we own it all,” he says.
In reality, what the natives own or control is a matter of dispute — and has been since Canada was founded. Although the 2004 Supreme Court decision forced the government to negotiate with First Nations when a company encroaches on land they occupy, the court did not give aboriginals veto power over government-backed resource projects.
Canada has signed 11 major treaties with natives since 1867, when the country gained independence from Great Britain. The treaties guarantee that the natives can practice their traditional way of life without giving them ownership of any land, says Thomas Isaac, a partner and head of aboriginal law at Toronto-based law firm Osler, Hoskin & Harcourt LLP. The Supreme Court decision clarified Ottawa’s responsibilities, Isaac says.
“Government is the centerpiece of the wheel,” he says. “The courts are going back and relying on ancient principles around fairness and equity. This is about government treating its subjects fairly.”
In the Ring of Fire in northern Ontario, the federal government is serving as an intermediary to make sure the new mines include training and jobs for the aboriginals and do no permanent harm to the environment.
“We want to do this right. It has to be inclusive,” says Greg Rickford, the federal minister responsible for the development. “First Nations communities can and will bring important understanding to the environmental assessment processes.”
Former Prime Minister Martin says “Canada’s indigenous peoples are not anti-development. What they want is for it to be done in a sustainable way. That means doing it in full consultation with the people who live near these projects.”
Native claims are mostly addressed in the courts and other government forums. Since 2011, aboriginals have filed 165 complaints against the federal government with the Canadian Human Rights Commission, claiming they receive insufficient funding for education and child welfare. In disputes over resource projects, the mining and drilling companies are caught in the middle.
“The expectations placed on companies in this area over the past 10 years have evolved incredibly quickly,” says Robert Walker, vice president at Vancouver-based NEI Investments, which oversees C$5.5 billion in assets. “First Nations’ power is growing.”
Aroland’s Sonny Gagnon intends to take full advantage of that fact. Conditions in Aroland are typical of rural native communities. Houses stand unfinished or in a state of decay. Clutches of mothers stroll up and down the dirt roads pushing baby carriages. The only business is a corner store selling gasoline and canned food. The biggest of the few employers is the tribal government, which provides paychecks to about 30 people. Most of the rest live on government welfare of about C$400 a month.
‘A Day at a Time’
“Every day is a challenge,” says Robinson Meshake, in charge of social work on the reserve. “We take each day one at a time.”
Gagnon says alleviating his community’s deep poverty is his only goal. Even as he blocks construction of Cliffs’ proposed road through his settlement, he says he has no objection to the mining project.
“I’m pro-development,” he says.
Cliffs would use the road to transport ore from a mine 340 kilometers to the north to a railhead in Aroland. As many as 100 ore-laden trucks a day would pass through the community.
“I want those jobs for my people,” Gagnon says. “I want them to be making $400 a day.”
With the stakes in the tens of billions of dollars for Harper’s government and the resource companies he supports, Gagnon and other native Canadians have never been in a better position to right some of the historic wrongs they believe their people have suffered.
To contact the reporter on this story: Jeremy van Loon in Calgary at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Serrill at email@example.com
Canada has a problem. Our greenhouse gas pollution is soaring. With climate impacts hitting harder and closer to home (ice storms, polar vortexes, floods…), our country is recklessly racking up a huge carbon bill that will saddle future generations with a debt impossible to pay off.
In a new report prepared for the United Nations, for the first time Environment Canada did the number crunching all the way to 2030. We’ve known for awhile that our 2020 target has become a mission impossible. But this report also paints a sorry picture of 2030, where Canada still doesn’t have its act together and climate pollution, specifically from the tar sands, continues to skyrocket (check out this detailed analysis by the Pembina Institute).
The report reaffirms that the growth in pollution from the tar sands – if the tar sands are allowed to continue expanding as projected – will wipe out any progress made to reduce emissions in any other sector, including Ontario’s coal phase-out, B.C.’s carbon tax, or other provinces’ energy efficiency and carbon reduction measures.
The result is while some pull up their bootstraps and clean up their acts, soaring pollution from the tar sands will cancel out everyone else’s hard work. And this means if Canada is to meet a national goal to cut emissions, some regions and sectors will need to do more than their fair share because one sector – oil – is getting off scott-free.
We hear a lot of talk these days about pipelines as “nation building projects” and being in the “national interest.” But if tar sands expansion is allowed, made possible by big new pipelines, this is a recipe for dividing our country, not uniting it.
Here’s why: At some point, Canada will need to get serious about reducing emissions, and how the carbon pie is divided between regions will become important. We can expect regions to speak up loudly if they’re asked to do more than their fare share to reduce carbon emissions because the oil industry is being irresponsible.
All provinces have a stake in major pipeline proposals like Enbridge’s Northern Gateway and TransCanada’s Energy East. There’s the tangible danger that these pipelines could spill tar sands oil into forests, farmland and drinking water sources. And then there’s the less tangible – but critical – impact they would have on the amount of carbon the country is pumping into the atmosphere and the impacts of climate change.
Will Ontario, British Columbia or Quebec be keen to do more than their fair share to cut carbon to make up for the impact of these pipelines? Doubtful. And they should not be asked to. All sectors and regions will need to reduce emissions. For the oil sector, that means keeping production at current levels and cleaning up existing operations – not expanding. It also means seeing the government put in place robust regulations on the oil sector that will see emissions go down, rather than up. Even the weak regulationsunder discussion now have just been punted ‘a couple of years’ further down the road by the Prime Minister.
The idea that Canada may fail to rein in soaring emissions by 2030 may not seem like the brightest news to kick off the New Year, but there is an important caveat to this story. It can only come true if industry and government get their way when it comes to rapid and reckless tar sands expansion.
The good news is that new pipelines and oil projects aren’t getting a free ride these days. With ever-growing public concern about moving oil (by tanker, rail, or pipeline), a world feeling the early impacts (and paying the price) of a changing climate, and new conversations in the financial sector about the risks of investing in high-carbon fuels, the tar sands are facing a serious uphill battle.
The world is waking up to climate change and the environmental devastation of projects like the tar sands, and while our current government chooses to leave their head in the sand, Canadians are also standing up to demand the safe, smart, clean energy future we deserve.
Mercury levels have risen to 16 times the regional “background” levels in an area around oilsands developments in northeastern Alberta, according to Environment Canada researchers.
Environment Canada researcher Jane Kirk, who presented the as-yet unpublished report at a Society of Environmental Toxicology and Chemistry (SETAC) conference in Nashville last November, told Postmedia News the affected area encompasses 19,000 square kilometres around oilsands operations.
Margaret Munro of Postmedia News reports that Kirk told the conference the area is “currently impacted by airborne Hg (mercury) emissions originating from oilsands developments.”
The mercury levels fall off gradually with increasing distance from the oilsands “like a bull’s eye,” said co-researcher Derek Muir, head of Environment Canada’s ecosystem contaminants dynamics section. The highest mercury loadings, which reached up to 1,000 nanograms per square metre, were found in the “middle of the bull’s eye,” covering around 10 percent of the impacted area.
In October, Environment Minister Leona Aglukkaq signed a global treaty pledging to decrease mercury emissions.
The federal researchers stressed that the findings were still lower than mercury levels found in southern Ontario and southern Quebec, where toxins from incinerators and coal-burning power plants are affecting the environment.
But the scientists said that mercury is “the number one concern” when looking at toxins released by oilsands production, with “indications that the toxin is building up in some of the region’s wildlife.” The contamination is further worrying to environmental groups and First Nations concerned about the oilsands’ impact on fishing, hunting and wildlife.
Environment Canada wildlife scientist Craig Herbert told the toxicology conference that the eggs of several species of waterbirds downstream of the oilsands have been showing increasing levels of mercury, with levels found in the majority of Caspian Tern eggs in 2012 exceeding “the lower toxicity threshold.”
Kirk’s team measured contaminants in cores of the snowpack collected from over 100 sites near the oilsands every March, to calculate how much pollution enters the ecosystem at spring melt after gathering in snow over winter.
The team’s 2011 results confirmed that “aerial loadings” of 13 priority pollutant elements including mercury were 13 to 15 times higher at sites within 50 km of the upgraders that convert bitumen into synthetic crude oil, and “highest within 10 km of the upgraders,” according to the presentation abstract.
The results “support earlier findings that the bitumen upgraders and local Oil Sands development are sources of airborne emissions to the Alberta Oil Sands Region.”
The researchers also found up to 19 nanograms of methyl mercury per square metre near oilsands sites, which is 16 times the region’s background level. Postmedia News reports that this is the first finding of this more toxic form of mercury in snow. The finding is significant because, as the abstract explains, “methyl mercury is a neurotoxin that bioaccumulates through foodwebs.”
“Here we have a direct source of methyl mercury being emitted in this region and deposited to the landscapes and water bodies,” Kirk told Postmedia News. “So come snowmelt that methyl mercury is now going to enter lakes and rivers where potentially it could be taken up directly by organisms and then bioaccumulated and biomagnified though food webs.”
Muir said that microbes in the snow could be converting mercury into methyl mercury, or that it could be coming from “dust and land disturbances,” though there is currently no data to support this.
“To our knowledge, emissions data from blowing dusts due to various landscape disturbances (open pit mines, exposed coke piles, new roads, etc.) and volatilization from tailing ponds are not publicly available,” the researchers said.
The research shows that zinc, nickel and vanadium levels in lake sediments peaked in the 1990s following oilsands development, but have fallen off since, which Kirk attributes to “improvements in the air pollution catcher technology at the upgraders.”
But levels of mercury and other “crustal elements” in lake sediments have been “going up more or less continually” with the expansion of the oilsands, said Muir, with open pit mines and coke piles possibly contributing to the pollution.
The fact remains that more research is required on why mercury levels are going up and the impact it’s having on ecosystems.
“Is it affecting fish levels and is it going to result in increasing fish consumption advisories? We don’t know,” said Kirk.
But Environment Canada’s latest results only confirm the need to further study and address the serious impacts of oilsands development.
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More than a dozen patients are in intensive care, some on ventilators, because of the H1N1 flu virus, according to the chief medical officer for a B.C. Lower Mainland health authority.
Dr. Paul Van Buynder, with Fraser Health, said Friday that 15 patients, many of them otherwise healthy, young people, were recently admitted to hospitals in the region.
“It is a lot for us at this particular time, especially because there is not a lot of circulating disease in the community at this point, and so we’re worried that this has happened to so many people so quickly,” he said.
He says the ages of the patients turning up with H1N1 flu span the spectrum, and include those in their 30s. He also said at least one of the patients is pregnant, and also that one person may have died from this flu strain.
“I have one person who hasn’t been confirmed, but I’m pretty sure did pass away from this,” Van Buynder told CBC News.
Van Buynder said medical officials are seeing small pockets of H1N1 breaking out across the region, in a pattern mirroring the flu’s spread in Alberta, Ontario and Texas.
Alberta’s Health Minister Fred Horne says there have been 965 lab-confirmed cases, another 251 people have been hospitalized due to influenza and five people have died so far this flu season.
The H1N1 flu outbreak of 2009, which the World Health Organization declared a global pandemic, prompted mass immunizations across Canada.
Van Buynder said anyone visiting a hospital or health facility in B.C. will either need to wear a mask, or be vaccinated against the flu — and he said that previous vaccinations against H1N1 may not help anymore due to mutations in the virus.
“Certainly we don’t think everybody should be reassured by previously being vaccinated, and we’d like them to make sure that they go out and get it again,” he said.
Fraser Health serves more than 1.6 million people from Burnaby to Hope, to Boston Bar.
What’s happened to Canada’s manufacturing sector? Kellogg’s recent decision to close its plant in London ripped another 500 factory jobs away from Ontario. That follows Heinz’s move to shutter its plant in Leamington, which is near Windsor. The 100-year-old plant, and its 740 employees, was the largest employer in the area. The announcement from Heinz comes on the heels of plant closures by Caterpillar, CCL Industries, and Novartis. Added up, and Ontario, home to what’s left of Canada’s industrial heartland, has shed 33,000 manufacturing jobs in the last year.
While the recent plant closures have grabbed headlines, it’s only a fraction of the jobs lost over the last decade. Once the top employer in Ontario, the manufacturing sector is now a shadow of its former self.
Since 2002, Ontario’s manufacturing sector has shrunk by nearly 30 percent—or more than 300,000 jobs. The story is similar when you look at real manufacturing output, which is down almost 20 percent over the same time.
Look back to the 1990s, or indeed most of the post-war period, and manufacturing could be counted on as an engine of economic growth for the province. Today, the opposite is true. The shrinking sector is a drag on growth and part of the reason Ontario’s economy has been a laggard versus other provinces over the last decade.
It’s unfamiliar territory for Ontario, historically the principle cheque writer of equalization payments to the poorer provinces in the Confederation. Not so anymore. The income-per-capita in what was once Canada’s most affluent province is now well below the national average. Ontario’s economic standing among other province’s, similarly, is also on the decline. The province’s share of Canadian GDP is down by roughly 5 percentage points in the past ten years.
It’s not a coincidence that manufacturing employment in Ontario peaked in 2002, just as a free falling Canadian dollar was plunging to nearly 60 cents against the U.S. greenback. Backed by that exchange rate, everyone from auto assemblers to food processors enjoyed a commanding cost advantage over competing plants south of the border.
Since then, the Canadian dollar has soared along with the rising price of oil. While the loonie has long moved to the rhythms of commodity prices, in the last decade it’s danced in lock step with oil prices, which have marched from $20 a barrel to the triple-digit range. These days the loonie is trading more than 50 percent higher than it was during the last peak in manufacturing employment in Ontario.
In the context of exchange-adjusted labour costs rising by more than 50 percent, there’s really no mystery behind why so many manufacturing plants are closing in Ontario. Offsetting such a dramatic swing in exchange-adjusted wage costs would take a boom in productivity that, frankly, just isn’t in the cards.
What’s worse, productivity in the manufacturing sector is actually languishing. In theory, a higher Canadian dollar should make it easier for plants to import machinery and equipment that will enhance productivity. The theory, however, assumes that plants will continue to run. In practice, a soaring loonie is spurring international manufacturers to look for greener pastures elsewhere. Instead of spending money in Canada to improve factory productivity, decisions are being made in the opposite direction, which is resulting in disinvestment.
The numbers speak for themselves. In the last decade, the manufacturing sector’s share of business investment is down by nearly half, falling from 14 percent to as little as 8 percent. Without capital spending on new plants and equipment, productivity growth is going nowhere. That, in turn, only exacerbates the competitive disadvantage that a high Canadian dollar puts on wage costs.
Where to from here? With the loonie trading in the 95-cent range against the greenback, who’s choosing to invest in boosting the productivity of an uncompetitive manufacturing sector?
Consensus is forming that 2014 will be the economic turning point for the United States and that is, traditionally, good news for Canada. But is it?
Most rosy is the forecast by UBS that U.S. GDP will grow by about 3 per cent in 2014 and in 2015 then beyond. The IMF has also just raised its U.S. forecast.
“There has been good action taken by Congress to eliminate the fear about the budget and to reduce the sequestration. We see the Fed having taken some very well-communicated action concerning the tapering of the program, and those are good signs — in addition to which we see some good numbers: Growth is picking up and unemployment is going down,” head of the IMF Christine Lagarde said this week. “So all of that gives us a much stronger outlook for 2014, which brings us to raising our forecast.”
Interestingly, if the United States grows by 3 percent that will virtually match China’s growth, in absolute dollars. (Lest we forget the math. A 3 percent rate in the U.S. is based on a nominal GDP of US$17-trillion and China’s equally rosy forecast of 7.5 percent is based on a nominal GDP of less than US$8-trillion.)
The turning point has come due to the energy boom in the U.S., the housing recovery, the health of its manufacturing sector and productivity rates, banking stability, job growth, low consumer debts and an improved fiscal situation due to the spending cuts imposed by sequestration.
Canada, unfortunately, has some headwinds that, until addressed, will likely decouple Canada’s growth from its neighbour’s in the short and medium term.
Here they are, not necessarily in order of importance:
— Canada lives beyond its means as an economy, with trade and export deficits, despite the benefits of high commodity prices in the past few years.
— Canada’s productivity lags U.S. rates considerably, representing a negative metric that makes export growth difficult. The reasons are varied and include the fact that the Canadian economy is balkanized into political spheres of influence, variant tax and labour laws, non-tariff barriers internally and disparate worker credentials because it lacks a national trade agency to insure the fair flow of workers, goods and services or an over-arching Inter-provincial Commerce Commission. There is no free trade within Canada.
— Canada’s dollar is headed to as low as 88 cents U.S. this year, according to some projections, which is a symptom of problems but also, ironically, somewhat helpful in exports if sustained but not helpful concerning the following issue.
— Canada’s federal and Western provinces are pitch-perfect when it comes to debt levels, spending and investment. Their Triple A or high AA credit ratings reflect that.
But Eastern Canada, on the other hand, is a problem, a clearly defined have-not part of the country with high unemployment rates, high underemployment rates and spendthrift provinces led by Ontario which has the biggest debt of any sub-national government globally. In 2003-4, debts were C$140-billion and in 2013-14 are expected to reach $260-billion and heading higher.
So this means that as the Canadian dollar falls, repayments to foreigners increase as does the need for the Bank of Canada to begin increasing interest rates. The only solution is to bite the bullet, something that vote-hungry politicians have failed to address in the past.
In light of that realization, Goldman Sachs and others are shorting the Canadian dollar.
— Consumer debt is Canada is worrisomely high. The housing bubble in Ontario, condo craziness, has forced prices for all real estate upwards, and increased borrowing, with the result that Canadians now have switched places with the Americans as holders of the highest consumer debt. (Americans were forced to shed their borrowing after the 2008 meltdown but Canadians continued the tradition.)
(This debt overhang will slow consumer spending in Canada, but the newly lower debt levels south of the border are expected to enhance U.S. growth in the next few years.)
— Canada’s cornerstone exports are facing declines. Natural gas is being replaced by U.S. shale gas production. Crude oil, Canada’s most valuable export, is expected to drop in price $20 a barrel due to increasing supplies: the U.S. shale oil boom, Canada’s increasing production, a relaxation of the embargo against Iran if it fulfills its pledges on the nuclear portfolio and Mexico’s invitation to foreign oil companies to help increase production for its moribund national oil giant.
The one bright spot would be approval, finally, of the Keystone Pipeline, with its 800,000 barrels a day of exports. Another would be the Northern Gateway proposal to the B.C. coast.
But both are political footballs for different reasons and may not happen for years, if ever.
The Iranian diplomatic deal, if successful, could enhance world peace but would unleash much oil onto the market. The embargo has limited exports from 2.5 million barrels per day to one million.
The other important export driver in Canada is Ontario’s auto industry but this year the province was overtaken, in terms of production, by the state of Michigan for the first time in a decade. And Ward’s Automotive forecasts a steady decline in Ontario production.
On a positive note, most of Canada’s problems are soluble if electorates, and their public servants, agree to old-fashioned belt-tightening.
Most importantly, Canada has to stop signing free trade agreements with countries that don’t offer reciprocity in terms of export or investment opportunities, such as China and/or the European Union, and forge a Canadian Free Trade Agreement among its provinces and territories. And the US-Canada bi-national issues should be fixed and talks about a development partnership in the North should become policy.
But those are long-term solutions that have eluded Ottawa for generations.
In the meantime, just curbing the excessive growth and overheads of the entire Canadian public sector, and creating a healthy, fair market at home for the Canadian private sector, are bottom-line essentials that any nation-state must enact in order to protect and grow.
What 7 days without power is like 3:58
Tens of thousands still in the dark in Ontario 3:36
The little generator that could2:11
- NB Power warns of outages into new year as storm threatens
- Latest storm updates
- Montreal vows to clear city streets by New Year’s Eve
- NB Power pushes restoration date back to New Year’s Eve
- CBC Weather Centre
- Ice storm’s beauty, ruin captured in stunning photos
- Insurance and the ice storm: Are you covered?
- Ice storm aftermath: Staying safe during power outages
About 30,000 customers in Ontario and New Brunswick remain in the dark one week after a major ice storm blanketed Central and Atlantic Canada, and warming temperatures have caused new power outages in Toronto.
Toronto Hydro CEO Anthony Haines said early Saturday that melting ice falling from trees and other structures has led to fresh damage. At about 1 a.m. ET the number of customers without power had dropped below 20,000 for the first time, but by 8 a.m. it was back up to around 23,000. The number is hovering at 18,000 as of mid-afternoon Saturday.
- Ice storm aftermath: Staying safe during power outages
- Insurance and the ice storm: Are you covered?
- Get the latest forecast information at CBC Weather Centre
“Over the morning hours we’ve been moving backwards, but I’m sure our crews will attend to those and we’ll start moving in the right direction again over the next couple of hours,” he told CBC News Network.
Calling it a “story of ups and downs,” Haines pointed out that the current tally — 18,000 — is about the same number that crews have been bringing power to each day.
The falling ice caused at least one injury when a Hamilton worker was struck in the head, Toronto Mayor Rob Ford said. Officials couldn’t provide an update on the worker’s condition.
“This is Day 7 and there’s light at the end of the tunnel,” said Ford in an interview with CBC News midday Saturday. “What that day is, I can not tell you…We’re trying our best.”
In response to the backlash the mayor and other officials have received from people still without power, Ford said “it tears my heart out.”
“We have crews from Ottawa, we have crews from Windsor,” he said. “I share their frustration…it’s all hands on deck [and] we are moving as fast as we can.”
Haines said computer simulations have shown three days, but that there are variables at work like the new outages and the arrival of more crews. The provincial utility, Hydro One, said the outages outside Toronto are largely over, which has allowed it to send crews in to help the city.
“I’m hopeful certainly by the early part of next week the vast majority of customers will be back,” Haines said.
Working around the clock
Haines, who noted that the average Toronto Hydro customer is equivalent to 2½ people, said he sympathizes with people.
“What we can do is work around the clock and we can bring extra resources in from far and wide … we will not stop until the power is on for everybody,” he said.
Haines and Toronto Community Housing CEO Gene Jones (who is still dealing with outages in about 80 housing units) said they will perform a postmortem after the outages are over to see what they might do better next time.
Haines stressed the enormous scope of the damage:
- Forty per cent of the city’s power lines, which would cross Canada twice, have been affected by the storm.
- Thirty-thousand pieces of equipment have been installed back into the grid and about 47,000 metres of cable have gone back up into the air.
- The City of Toronto says about 20 per cent of the city’s tree canopy has been damaged and it could take seven weeks to clean up all the fallen limbs, Haines said.
Amid the rising anger and frustration of those still in the dark, utility companies are pleading for patience, saying crews are working around the clock and nothing else can be done to speed up the process.
That’s little consolation for people who have been in the dark for a week, including Carmen Andronesu, who is one of more than 1,000 residents who live in a condo complex in Toronto’s north end.
“No matter how much you try calling here and there, it’s like you cannot find help from anywhere,” she said.
Wynne promises help for food spoilage
In a morning news conference, Ontario Premier Kathleen Wynne said the concern she’s heard most around the province is spoiled food. She said she’s looking at providing help and would offer details over the next couple of days when a plan had been confirmed.
“We’ve reached out to food suppliers to try to come up with a way of compensating people and getting some extra food — or food vouchers, something to folks, so that’s what we’re working out over the next couple of days,” she said.
Ford said Toronto won’t be looking into any sort of compensation until the power has been restored.
“I can’t give any numbers or any assurances that we can reimburse anyone,” Ford said.
11,000 without power in N.B.
About 11,000 customers in New Brunswick are also struggling through a long power outage, mostly in St. Stephen and the Saint John area.
Some people won’t have their power restored until the new year, according to a tweet from NB Power on Saturday. Gaetan Thomas, the utility’s CEO, said extra crews are being brought in from Quebec tonight, which means more than 200 crews will be working in the province to restore electricity.
Thomas said another large storm, forecast for tomorrow, will also hinder their efforts as it brings freezing rain and snow.
In the rural southern New Brunswick community of Titusville, people without power have been heading to the generator-powered general store to buy kerosene, propane, candles and water.
Owner Mark Carline said the storm and outage has caused him to reflect.
“I think we were all reminded and humbled by the fact that at any given time we could be set back to this state, where we’re scrambling [to get] the basic necessities.”
In Quebec, the outages are almost over: Hydro-Québec tweeted late Friday night that they were “almost there” with only about 400 customers left who needed power restored.