On Wil Horter’s Gish Gallop about Alberta heavy oil and the Trans Mountain

On December 26th, 2018 the National Observer published an article Discount Frenzy: The dirt on discount oil by Wil Horter, the former Executive Director of the Dogwood Initiative. In December 28th, I prepared a reply called Fact-checking the National Observer “Discount Frenzy oil piece. This week Wil replied with his pièce de résistance Myths die hard: Santa Claus and Canada’s oil discount. This final reply, and his original piece, provide an example of a tried and true debating trick commonly known as the “Gish Gallop” which is technically know as proof by verbosity. The Gish Gallop is used when a debater is trying convince his audience that up is down and left is right. My aim here is to show you what he has done and remind my readers the truth about Alberta oil and the Trans Mountain Pipeline expansion (TMX) project.

The Gish Gallop is a presentation technique developed in the creationism debate and has been described as:

the debating technique of drowning an opponent in such a torrent of small arguments that the opponent cannot possibly answer or address each one in real time. More often than not, these myriad arguments are full of half-truths, lies, and straw-man arguments — the only condition is that there be many of them, not that they be particularly compelling on their own. They may be escape hatches or “gotcha” arguments that are specifically designed to be brief, but take a long time to unravel.

The trick with the Gish Gallop is putting out so many “alternative facts” that no opponent can address them all. The form of argument depends on that truism of debate that “the amount of energy necessary to refute bullshit is an order of magnitude bigger than to produce it“. Moreover, the way the Gish Gish Gallop is used (directly in the final piece) is that if you miss one argument then they can claim that you have failed to refute their piece. As the article n the Gish Gallop explains:

This is especially true in that the Galloper need only win a single one out of all his component arguments in order to be able to cast doubt on the entire refutation attempt. For this reason, the refuter must achieve a 100% success ratio (with all the yawn-inducing elaboration that goes with such precision). Thus, Gish Galloping is frequently employed (with particularly devastating results) in timed debates. The same is true for any time- or character-limited debate medium, including Twitter and newspaper editorials.

Gish Gallops are almost always performed with numerous other logical fallacies baked in. The myriad component arguments constituting the Gallop may typically intersperse a few perfectly uncontroversial claims — the basic validity of which are intended to lend undue credence to the Gallop at large — with a devious hodgepodge of half-truths, outright lies, red herrings and straw men — which, if not rebutted as the fallacies they are, pile up into egregious problems for the refuter.

Reading what Mr. Horter has written you see how he played this game. His first article had so many half-truths and strawmen that is was simply impossible, in the space and time I had, to refute all his ridiculous arguments. That is how he “wins”. He simply tires me out by saying so many things that are wrong that I, a private citizen not being paid to do any of this, simply ran out of patience to refute it all.

Look at the start of his second article a classic Gish Gallop follow-up. He positively glows about the fact that I did not refute one of his “big lies”. The problem was my piece was already far too long for a blog post and I had to cut out a lot to make it readable. Not being an expert on that part of the problem I simply left it for the next guy. I am not an expert in economics so I am the wrong person to refute that “big lie” and my unwillingness to wander into that swamp pit of illogic doesn’t make it right.

I’m guessing you are asking: well what do you do when someone plays the Gish Gallop gambit? The secret to responding to a Gish Gallop comes straight out of that old movie War Games. You have to choose not to play. By wasting my time responding to his faulty analogies, bad logic and insults I would get stuck in the swamp and miss my opportunity to give good information to debunk his bad information.

Instead of responding to his half-truths, bad analogies and red herrings, let’s go to the heart of his argument. In this case he really is only trying to make two points: 1) that bitumen is not a desirable product and 2) there is not bottleneck. Both of these are easy to debunk.

The market wants Alberta heavy oil

Anyone who understands the world market knows oil is a fungible commodity. If Canada does not produce it, that supply will be replaced by Saudi Arabia, Nigeria or some other OPEC member-state.

If heavy oil was not desirable then in a global and fungible market it would fetch a significantly lower price and people would not design refineries specifically to process the material.

Except as I showed in my previous piece, the heavy oil discount has essentially disappeared on the global market. Heavy oils, for the last couple months, have been selling for a higher price than light oils. The only differentiator being transportation costs.

Mr. Horter can argue until he is blue in the face that heavy oil is an inferior product, but the market, which is the only thing that matters, consistently says otherwise. He can make all the bad analogies about syrup he wants but his bad analogies don’t trump the simple truth. On the market today (Jan 14, 2019) heavy Maya for delivery to the Gulf Coast is going for $54.56 and WTI for that market is $51.26. Remember WTI has no virtually no additional transportation costs for delivery to the Gulf Coast and yet buyers are willing to pay a 6% premium for the heavy oil. Put simply heavy oils, like Alberta heavies are desirable products.

As for refinery capacity, Mr. Horter make the easily debunked claims about heavy oil refineries indicating there aren’t many. Any observer knows that with the collapse of Venezuela as a reliable producer the world has more refineries tuned for heavy oil than there are heavy oil producers to supply them. That is why this supposedly inferior product is selling at a premium. So Mr. Horter can make all the claims he likes about “quality” but the market has spoken and the market says that it wants Alberta heavy oil and if we can get that oil to market it will sell at a premium.

Just look at the West Coast. The Trans Mountain has been oversubscribed for years now because so many suppliers want the oil and there is not enough capacity to get it there…this brings up point 2: the bottleneck.

There is a bottleneck in our oil transportation system that the TMX can help alleviate.

Mr. Horter uses a graph from an anti-oil NGO from 2016 to argue that in 2016 there was no bottleneck for the movement of Canadian crude oil. Now who do you trust an anti-oil NGO or the NEB, the province of Alberta and the world market which all say otherwise. We already know about the over-subscription of the Trans Mountain. Mr. Horter claims otherwise but, no surprise here, is completely incapable of providing any data to support his argument. So what do we know about the state of oil transportation in Alberta?

We know that the Province of Alberta had to curtail oil production because they have a huge backlog of product and no way to get it to market. They have so many months of supply in the holding tanks that there is nowhere-more to put it. Why else would the province be buying rail cars to ship oil-by-rail to get its product to market?

As for oil-by-rail the figures are sobering. Oil-by-rail is spiking and with the Province of Alberta getting into the game the numbers are only going to go higher. Just look at the NEB numbers:

It is simply inconceivable that the province would be buying rail cars and curtailing production if there was not a bottleneck the TMX could help alleviate.

Conclusion

Re-reading Mr. Horter’s Gish Gallop it is amazing how much time he spends trying to get us to look the other way so we miss the actual story he is trying to sell.

His first argument that heavy oil is less prized than light oil is debunked by the actual market data. He can make all the cases about it being “inferior” because the NEB used a term in a very specific context. But the proof of the pudding is in the eating and heavies are deeply sought after and every single drop that makes it to the West Coast is grabbed at premium prices. Nothing he writes can take away from the fact that the market has spoken and the market loves heavy oil.

As for his second argument? That the TMX won’t help reduce the transportation bottlenecks? The Province of Alberta, the NEB and the rail numbers don’t lie. There is a bottleneck and addressing that bottleneck is the only way to get Alberta a fair price for its highly-prized product.

Remember when someone uses a Gish Gallop, they do so to try and make you forget what the discussion is all about and get stuck worrying about trivia. Don’t let Mr. Horter do that to you. His case is built on two fundamental legs, that no one wants Alberta heavy oil and that there is not a bottleneck. All the data says otherwise. It is pretty hard to argue no one wants a product when every drop of the stuff is bought for a premium price when it becomes available and it is hard to argue that there are not transportation limitation issues when Alberta is curtailing production and buying up rail cars to ship the material to market. Mr. Horter is selling you a pig in a poke. Don’t let him do that. Don’t let him distract you from the truth.

Posted in Pipelines, Trans Mountain, Uncategorized | 2 Comments

Why a Pragmatic Environmentalist supports BC LNG – doing the climate math

As a pragmatic environmentalist , I am often asked how I could support the BC LNG export industry? I prepared a Twitter thread on the topic but have since been asked to show my work. This blog post builds on a couple previous posts on the topic and will explain how someone who is serious about fighting climate change can simultaneously support exporting BC LNG to Asia.

Let’s start this with some basic assumptions. I believe anthropogenic climate change is real and represents a fundamental threat. I agreed with Canada signing the Paris Agreement and believe that Canada should work to reduce our carbon emissions. That being said I believe the Paris Agreement is deeply flawed. It treats each country like a silo and ignores how trade affects carbon emissions. This is a problem because the Paris Agreement allows developing countries to set less stringent targets for reducing their carbon emissions. As a result many highly-developed countries have off-shored their carbon emissions. As presented in this graphic from Davis and Caldeira, the US (and Canada) have free-loaded on China’s carbon emissions for years by importing manufactured goods (and their embedded carbon) which are not counted against our totals. It is like saying you are on a diet, but only counting the calories you eat at home and then eating most of your meals at restaurants.

As Canadians we can do something to help off-set our freeloading by exporting lower-carbon energy to Asia. Unfortunately, this will increase our domestic carbon emissions but in doing so it should lower global emissions (as I will show below). A lot of Canadian politicians have staked their reputations on meeting our Paris Agreement commitments. They worry that emissions associated with exporting fossil fuels will drive our domestic emissions over our Paris Agreement commitments. I see that argument as myopic. Greenhouse gases (GHGs) don’t respect borders and if we can reduce total global emissions by increasing domestic emissions (even at the expense of our Paris Agreement commitments) then we have made the right choice. So let’s get into the numbers.

Using life-cycle analyses, Canadian LNG, when burned in Chinese electricity plants, is better for the globe than the Chinese burning coal

The most recent research on this topic is the peer-reviewed article: Country-Level Life Cycle Assessment of Greenhouse Gas Emissions from Liquefied Natural Gas Trade for Electricity Generation by Kasumu et al. This article demonstrates conclusively that when replacing coal in Chinese energy facilities, BC LNG produces lower total, life-cycle emissions. Others can make alternative claims until they are blue in the face, but until they provide numbers to compare to Kasumu et al. then they are simply blowing smoke. Good science trumps rhetoric.

But what about the Canadian Center for Policy Alternatives (CCPA) that says otherwise?

It was a load of hogwash. I prepared a detailed blog post on the topic: On the Canadian Centre for Policy Alternatives’ bad science about BC LNG emissions where I explain in detail all the tricks the CCPA authors used to generate their number. Using every trick in the book, and comparing BC LNG against the best-in-class Chinese coal, BC LNG was still 20% lower in CO2/MWh, except when they used the “Bridge to Nowhere” gambit.

What about the famous “Bridge to Nowhere” article we keep hearing about?

The Bridge to Nowhere is the legendary report by Robert Howarth with Santoro and Ingraffea in 2011 titled: Methane and the greenhouse-gas footprint of natural gas from shale formations where they estimated fugitive emissions from natural gas production. This study was universally panned. Howarth’s colleagues at Cornell published a scathing rebuttal of the Howarth paper then a follow-up. The Cornell group was not alone. Other commentators pointed out that paper incorrectly attributed to venting, gas that was actually burnt to run production equipment. While others had additional concerns. Here is a link to a well-written summary of the issues with the paper and the various information sources debunking most of its findings.

Howarth subsequently prepared another paper: A bridge to nowhere: methane emissions and the greenhouse gas footprint of natural gas. It acts as a sequel to his earlier work and like every horror sequel the original beast, once thought slain, is revived to attack again. The new Howarth study asserted that unconventional wells had a leakage rate of 3.3%. This is more than double the value used by the National Energy Technology Laboratory (NETL) in their analyses and is unsupported by the literature. I have written a lot about bad methodologies for estimating methane leakage and the emission numbers and here is my summary of the Howarth work in the context of the BC natural gas industry:

Howarth assumes that all unconventional well are vented and flared during installation and development. This would be a human health disaster in North-Eastern BC where venting those concentrations of sour gas would kill off drill crews. Rather, modern wells are generally “green-completed”, (they are connected to a pipeline in the pre-initial phase) and routine flaring and venting goes against BC Oil and Gas Commission Guidelines. While statistics for Canadian venting are not easily available, in the US only 3% of studied wells vented methane into the atmosphere. Just a reminder Howarth assumes 100% are vented. A study by the US Department of Energy showed very low methane leakage (roughly 0.4% of production) while other studies found unconventional wells with numbers up to 1.65% with the general numbers being closer to 1.4%. Coincidentally, the number used by NETL in their studies.

The missing consideration: coal-to-gas

The big argument that the activists keep making is that China is building newer high-performance coal facilities so BC natural gas only provides a marginal improvement in emissions (20% – 40%). To start let’s make it clear, China burns a LOT of coal (see graphic below) so reducing the emissions of their best facilities by 20% is no marginal gain.

But the bigger problem is the coal-to-gas problem. While it is clear that BC LNG will be replacing marginal coal in some parts of the country, in most of the country it will be replacing Chinese natural gas. You might ask how replacing Chinese natural gas with BC LNG will produce any emissions savings? The answer is because China doesn’t have a significant domestic natural gas industry so has instead turned to synthetic natural gas (SNG). SNG is created by using a complex chemical process to turn coal into natural gas which can then be burned for electricity or used as an input in plastic manufacturing.

As you can imagine, the major problem with SNG is that the process of turning coal to natural gas is very energy intensive and produces a huge amounts of carbon. A comprehensive study of the industry was recently produced titled Air quality, health, and climate implications of China’s synthetic natural gas development by Qin et al. They note that Chinese facilities emit 4.25 kg of carbon dioxide per cubic meter of SNG produced. This adds up to a big problem because:

Through 2013, a total capacity of 37.1 bcm [billion cubic meters] per year of SNG production had been approved by the central government, with another 40 projects (∼200 bcm per year) proposed by the industry. Total planned SNG capacity is ∼1.25 times China’s 2014 total natural gas consumption. Also, the Chinese government set targets for annual SNG production of 15 bcm to 18 bcm by 2015 and 32 bcm by 2017, with a potential production of ∼57 bcm by 2020. Notably, government plans for SNG production are continuously changing, likely due to a mix of concerns about the coal industry, local economy, air pollution in eastern China, energy security, local water stress, and global climate change.

If China produced 32 billion cubic meters a year of SNG in 2017, at a emission rate of 4.25 kg CO2/cubic meter, that comes out to 136 billion kg of carbon dioxide equivalents just to generate that SNG (or 136 million tonnes [MT}). In 2016 Canada, as a country, emitted 704 MT of carbon dioxide equivalents. So just to produce the SNG they subsequently burned (or used in plastic manufacturing) China emitted the equivalent of 20% of all Canadian emissions.

Why not let Australia or the US supply that LNG to China?

I have heard some people suggest that even if LNG improves Chinese emissions, it doesn’t have to be Canadians supplying them with the LNG. Let the US and Australia do the heavy lifting. Well my response is that Canada is uniquely suited to provide low-carbon LNG to the world. As I describe in my blog post: On the global climate change math supporting BC LNG using the Pacific Northwest gas (PNG) project as an example:

doing the simple math the PNW LNG project has a 18% lower greenhouse gas intensity versus our average competitor. Moreover, according to life cycle analysis of LNG, the raw material acquisition energy cost for LNG is equivalent to 3% – 4% of the energy generated by the LNG. If the British Columbia government can electrify the process then the PNW LNG project can operate at an intensity equivalent to 80% of our competitors. What that means is that if consumers in Asia use British Columbia LNG the global emissions for the LNG will be 20% lower than existing LNG sources. If this LNG replaces coal as an energy source the global benefit of using BC LNG is even greater. So from a global perspective this is also a slam dunk, we sell our LNG to Asian clients and in doing so prevent the emissions of millions of tonnes of carbon dioxide that would otherwise have come from using coal or dirtier LNG sold by our competitors.

Conclusion

To conclude, I want to make a number of things clear. The figures I have presented above are not mine. They come from some of the most respected energy scientists on the planet after having gone through rigorous peer-review. This is not data from activists but from objective researchers who have been studying this topic for years (or even decades) and what they have to say is clear. When compared to coal, the life-cycle analyses are clear: BC LNG will lower global emissions for electricity production. BC LNG is not “dirtier than coal” as some activists falsely claim, rather it is much cleaner than coal.

But more importantly, in the current market, BC LNG would not be replacing coal when exported to China. Instead BC LNG would mostly be replacing Chinese SNG and the climate math is even more categorical on that topic. BC LNG is much, much cleaner than Chinese SNG. Replacing Chinese SNG with BC LNG will help the planet and even if exporting BC LNG causes Canada to miss our Paris Agreement targets then the sacrifice is worth it. We have to keep reminding ourselves GHGs are global and it is more important to address global emissions than local ones. If a minor increase in Canada emissions can result in a major decrease globally then that is well worth our missing our Paris Agreement commitments.

Addendum

A reader has directed me to newer research that suggests that Qin et al. may have overstated China’s current capacity to produce SNG. According to this new source, in 2018 China had six SNG plants with a capacity of 6 bcm with a new goal of 17 bcm in 2020. This means that China currently emits 25.5 MT (or one third of the entire oil sands in 2017) just to create the SNG they will later burn. To put this into perspective the LNGCanada project in total is estimated to emit 10 MT/yr while Woodfibre would generate about 1 MT/yr .

Given the opaque nature of China’s energy business, I am not in a position to guess which of the two sources better represents current Chinese production, but both cases make a strong argument for exporting lower-GHG Canadian LNG to China.

Posted in Canadian Politics, Climate Change, Climate Change Politics, Uncategorized | 4 Comments

Follow-up on: Academics getting it wrong on Environmental Assessments – a case study

My previous post Academics getting it wrong about the role of private sector consultants in BC’s Environmental Assessment processes was started in November and sat in my “drafts” folder for over a month. The reason I finished it during my break was that I had been directed to a Narwhal article featuring a critique of Environmental Assessments (EAs) by a group of academics titled The Insignificance of Thresholds in Environmental Impact Assessment: An Illustrative Case Study in Canada by Murray et al. It was the article cited by the authors of the open letter from my previous post. In this post I want to further expand on what academics typically get wrong in their critiques of private sector EAs by looking at this paper in detail.

To begin, I want to point out something that I find somewhat odd about this article. Looking at the affiliation of the primary authors I can’t help but notice that the two primary authors present dual affiliations. Both report being associated with the “Institute for Resources, Environment and Sustainability at the University of British Columbia” but they also both report an affiliation with “WWF-Canada“. At the end of the article the authors declare that “they have no conflict of interest” but it sure has a funny smell when an article of this sort is authored by individuals with ties to an organization that has historically opposed most large resource developments in BC.

My first serious concern about this article goes, ironically, back to the major complaint (debunked in my last post) the authors of the open letter had about private sector EAs: lack of transparency. This article is completely opaque, there is zero transparency. As I mentioned in my previous post, when I do an assessment, I am required to present all the supporting material in a location where interested observers can examine it in detail. In this report the authors create spreadsheets detailing information like 1) the number of impacts evaluated, 2) the significance of the impacts and 3) the rationale for significance determination as well as the approaches used to evaluate this significance. Unfortunately, none of this information is available for review as supporting information. How is a reader to independently evaluate the authors’ work when there is literally no information presented to allow an evaluation to be carried out?

Another odd thing about this paper is that it uses the term “thresholds” liberally throughout the document without fully defining the term. Having read and re-read the paper, it is clear to me they do so to simplify their analysis, but in doing so they conflate an incredibly diverse number of indicators. There is a substantial difference between a regional guideline and a regulatory standard but both are treated identically in this analysis.

To understand why this is important, it is necessary to recognize that BC has a lot of regulations, guidelines and criteria. Some regulations come with strict standards, defined within those regulations, while others are much more flexible. Moreover, even in cases where apparently strict regulatory standards exist, these standards can be adjusted based on site-specific conditions.

To provide an example look at Schedule 3.1 through 3.4 of the Contaminated Sites Regulation (CSR). They provide the standards for soils, groundwater and vapours at contaminated sites but are used as criteria for any site that may eventually be drawn into the CSR process. Looking at the standards you see numbers that appear fixed in regulation, except in Section 18 of the CSR it is acknowledged that these fixed standards can be revised to address site-specific conditions.

The issue with creating standards under a provincial regulatory regime is that the standard necessarily has to be very generic. In order to provide a single number the regulator has to make a lot of different assumptions. Generic standards are created to provide simple guidelines for easy cases. They will usually involve the most conservative assumptions (most protective) with added room for conservatism. What does this mean? Well for water quality guidelines they usually take the most sensitive receptor in the entire province and then add a safety factor (often by dividing that number by 10).

Sometimes (in cases like Schedule 3.1) the regulator provides more specific standards (like the standard for protection of toxicity to soil invertebrates and plants) while in Schedule 3.2 they simply provide a single standard for all soils. Moreover, look at that standard for toxicity of soil invertebrates and plants. It is based on a toxicity reference value (TRV) that is the most conservative (most protective) for all provincial soil invertebrates and plants. If that standard is based on the TRV for a specific plant and that plant does not exist in the vicinity of a site, then an alternative standard for the most conservative regionally-appropriate plants/invertebrate would sensibly be considered to be appropriate.

In a proper assessment the first step is to identify what receptors are in the region. That allows you to establish site-specific standards that are tailored to the area under consideration.

The other thing to understand is that the science always evolves. The original soil standards for the CSR were created when the CSR was initially adopted (in 1996) and they were only just updated in 2018. During that update some of those standards were increased and some were lowered, all to reflect the latest science. That is to say, sometimes standards will increase when new and better information replaces older, less reliable information and in other cases standards will decrease.

In the technical guidance to the CSR, the Ministry of Environment & Climate Change Strategy (BC ENV) provides the information necessary for an expert to derive new risk-based standards to reflect the latest state-of-the-art in toxicology. This includes getting information from other jurisdictions, like the US, which spends a lot of research money on toxicology and generates lots of newer, more reliable numbers.

So you may ask why I went into this level of detail? Well the answer is because this flexibility is literally what the academics feel is wrong about current EAs. Their major critiques involve the fact that the EAs were flexible and that thresholds used were site-specific. Essentially the entire document argues that thresholds “should be consistent and transparent across EISs” (Environmental Impacts Statements). Now this type of thing sounds logical until you translate it in a way one can understand. The best analogy is them arguing that the entire province should have the same speed limit and there should be no flexibility for special cases (like say highways or school zones).

Now let’s look at the “six common rationales” the authors argue are not appropriate to explain cases where a generic threshold was exceeded:

(1) baseline conditions already exceeding thresholds; (2) uncertainty in the assessment models; (3) availability of different guidelines that allow for higher threshold values; (4) the scale of impact (temporal and spatial); (5) literature review contradicted threshold values; and (6) other reasoned argumentation.

Thinking to my earlier explanation about the necessity for site-specific standards, let’s consider that list in order.

  1. If a site has naturally high concentrations of a metal in the water then it would be assumed that the biota in the region may not be sensitive to that metal. Relying on a generic provincial standard in that case would not acknowledge local conditions and would not be scientifically justified.
  2. Assessment models are typically also generic in nature and include a lot of conservatism to address their generic nature. Once you have site-specific information you can correct the work to address the generic considerations. This means the models will better reflect conditions at the site.
  3. When the authors say “different” what they mean is site- or regionally-specific thresholds. Good science mean tuning your models for the local conditions. We don’t use the same speed limit for all roads, why would we have the same guidelines for all conditions?
  4. Scale matters. If you don’t believe that then I really can’t help you. Pretending that an impact that has regional effects is the same as an effect that might effect a couple acres and can be mitigated simply makes no sense.
  5. When the new science shows that the old rules are no longer relevant you trust the new science….that is how science works.
  6. Professional judgement supported by the science is why you hire experts to do these types of analyses.

The funny part is that the authors complain that thresholds from other jurisdictions were “weaker”. Except as I mentioned previously, if the latest science from another jurisdiction provides better, more relevant information then a good consultant will note that and incorporate that information in their EA.

As I have made clear, the primary complaint in this article is that the EAs were flexible, because they reflected site-specific conditions. Making a standard, model or “threshold” site-specific should be something we all look for in our environmental assessments. Only a bunch of academics would argue that “flexible”, site-specific thresholds are bad things when used in an EA. The reality is that a good EA has to incorporate site-specific conditions. Flexible thresholds thus reflect a feature of a good EA not sign of a deficient one.

Posted in Canadian Politics, Uncategorized | 1 Comment

Academics getting it wrong about the role of private sector consultants in BC’s Environmental Assessment processes

On November 19th a group of “scientists based in British Columbia” produced an open letter to Premier John Horgan, and several of his cabinet colleagues, about improving British Columbia’s Environmental Assessment (EA) process. The letter, was from the Earth to Ocean Group from Simon Fraser University and co-signed by a number of academics and graduate students and it betrays common, but serious, misconceptions about how science is done in the private sector.

I am a private sector environmental consultant. I am the professional hired by commercial and industrial clients to develop the sampling programs; collect and analyze the data generated; and prepare the reports being criticized by these academic scientists and frankly I am insulted by their faulty claims about our work. As a private sector consultant I am writing this blog post in response to the errors in this letter.

I am not, however, surprised by the content of this letter. The problem lies in the fact that while every private sector scientist has spent time in public institutions, virtually none of the academics or activists, who insult us, have spent significant time in the private sector. As such they really have no clue what is involved in private sector environmental consulting. They create a strawman version of private sector consultants and in creating that strawman demonstrate how little they know or understand about the topic.

As a private sector scientist, I have lots of first-hand experience encountering this type of bias. As a Professional Biologist, I am required to complete ethics courses and sign on to a Code of Ethics. My most recent ethics course was taught by an academic and the target audience was regulators (although one other consultant was in the course with me). Virtually every scenario presented involved the unethical private sector consultant skewing data and the brave regulator identifying the ethical lapses and calling them out on them. This is how we are viewed. We are the cartoon villain with no redeeming characteristics.

Now here is the truth. Unlike these academics (protected by tenure) and NGO scientists (hired precisely because they are willing to push a one-dimensional viewpoint) professional scientists are held responsible for what we say and how we do our work. I have previously written a blog post: A primer on Professional Governance in the Natural Resources Sector where I explain how professional scientists are governed. As I wrote in that piece outsiders like these academics:

imagine that environmental consultants act as advocates for their clients. Nothing could be further from the truth. A consultant who advocates solely for their client will soon cease to be able to operate as a consultant once their professionals lose their revocable professional designations and the government refuses to accept their submissions.  

Put simply, professional scientists in BC are held to much higher standards than our academic or NGO peers. We operate under strict rules of behaviour and practice guidelines and are overseen by regulators and our professional bodies to ensure that our work meets the highest standards. When our work does not meet those standards we are subject to disciplinary panels who have the ability to destroy our careers. We have a huge incentive to behave well and virtually no incentive to behave badly.

So let’s look at what else these academics got wrong in their letter:

1) Lack of scientific independence.

A lot of academics I have spoken seem to think that consultants are like lawyers. Lawyers are hired to advocate for their clients. This is not the case for environmental consultants. We are explicitly constrained from advocating for our clients. We are required to be both objective and independent. It is that very independence that explains our industry’s very existence. Most large industrial firms have the resources to hire in-house staff to do this type of work but no regulator would trust work done solely by in-house experts. That is precisely why our industry exists. To provide arms-length expertise that can be trusted by the regulators.

No consultant would have a career if they were known as being willing to be influenced by their clients. You simply can’t pay me enough to skew my results for one client because doing so would put my entire career at risk. That is why the only people who make these claims are activists and academics who have never done this type of work.

Sometimes junior staff make the mistake of acting as advocates for their clients. But every organization has policies to ensure that our people work in an above-the-board manner. Virtually every story you read about misbehaving consultants involves early-career individuals and junior field technicians rather than actual decision-makers. That is because it takes years to get your professional designation and during that time you have to learn how to be an effective and objective consultant.

This is why being insulted by activists is so ironic. The activist scientists are literally paid to promote the views of their employers. They go into the discussion with a fixed viewpoint and then look for the information to support that viewpoint. That is why it has been so easy for me to debunk their work at this blog. In this case it is clear, they are projecting their lack of objectivity on others.

2. Lack of peer-review of evidence.

This is another common trope from academics who simply don’t understand how private sector science works. These academics imagine that the academic model for peer review is the only model that exists. They are wrong. I have written a long post: On blogging and the irrelevance of academic peer review in multi-disciplinary fields which explains how peer review works in the private sector. Put simply, no report would leave our office until it has had a full review by appropriate experts who are arms-length from the project.

Moreover, as I will describe in the next section, unlike the academics and activists; our work is fully transparent. We include all the information used to generate our analyses in the reports themselves.

So no my report was not reviewed by some outsider who may not be familiar with the details of our work or the regulatory requirements in our region. Our work is reviewed by actual experts in our field and then submitted to regulators with all the information necessary for that regulator to confirm that everything I have produced is scientifically defensible. The letter authors complain that the regulators don’t have the expertise to review the work, but they ignore the fact that the regulators regularly hire outside specialists to review the work on their behalf.

Another important consideration is that I submit my reports under the penalty that if my report does not meet muster I can have my professional designation revoked and I can lose my job. I’m betting more academics would write their articles differently if instead of a rejection letter, every time a paper was judged unsuitable for publication, they were pulled up in front of a disciplinary committee investigation from their professional college. As I wrote in my Professional Governance post:

The college is tasked with ensuring that professionals act within professional standards; they don’t act outside their specific area of expertise; they don’t have undisclosed conflicts-of-interest and they act and operate independently of their client and/or government. You may be paid to do a task by your clients and/or you may work for the government but as a professional you have a responsibility to the public good and to behave ethically and the College has to be there to ensure that every professional measures up to that heady standard.

3. Lack of transparency.

This is another one that makes me laugh. Anyone who has read one of my reports knows that they are designed so that any outsider with time can completely replicate our analyses. The last report I submitted to the government was over 12,000 pages long. It was that long because every analytical result, every borehole log, every monitoring event is documented along with all its supporting information. Unlike academics who hold back critical portions of their work, in the private sector we have to provide the results of every analysis and every monitoring activity in our reports.

I would challenge any academic to provide the level of detail in one of their reports that we provide in ours. The NGOs are even worse. Look at their reports. They provide summaries with no information provided to establish the reliability of their results.

What is particularly funny, in a letter of this type, is that one of the few references in the document doesn’t even get the information right. Reference 4 is to a document: The Insignificance of Thresholds in Environmental Impact Assessment: An Illustrative Case Study in Canada by Murray et al. According to the letter that reference makes a claim that:

Under the proposed EA process, there is no requirement that all data generated by the proponent, or the evaluation of evidence by the Technical Advisory Committee, be made available to the public.This has been identified as a major flaw of the current EA process in BC.

I have carefully read reference 4 several times and nowhere in that article do I see the statement the authors of this letter claims it makes. That is not surprising because that claim is false. I am going to say this to be absolutely clear here: the claim made in this letter is simply wrong and is in no way supported by the reference they supply to support their faulty allegation.

Transparency is a fundamental basis of our industry. Often reviewers complain because we provide so much information in our reports that they find it hard to review it all. Anyone who has seen an Environmental Assessment wouldn’t make such a ridiculous claim. I simply cannot believe that so many academics signed this letter without confirming that the references cited actually supported the claims made.

To conclude let me be absolutely clear: the entire premise of the letter is wrong and the authors of the letter demonstrate that they have no clue about how private sector science is conducted. Not terribly surprising that a group of academics who have never held a decision-making, level position in a private sector environmental firm don’t know how the industry works.

The reason organizations and businesses hire private sector scientists is our objectivity. The reason the government trusts our work is because of our objectivity and the reputation our industry has built as being objective and transparent. Certainly like every industry there are bad actors, but unlike our peers in the activist or academic communities, in our industry misbehaviour is punished. We can’t lie about something and then claim it was a “non-verifiable statements of subjective opinion“. To do so will lose us our careers. Unlike academics and activists,we are bound by ethical and legal rules that preclude us from behaving in the manner that these activist academics imply we do. We operate under strict rules of behaviour and practice guidelines and are overseen by regulators and our professional bodies whose sole role is to protect the public by ensuring that we behave in a manner consistent with our rules of ethics and that our work meets the highest standards.

Posted in Canadian Politics, Environmentalism and Ecomodernism, General Politics, Risk Communication, Uncategorized | 2 Comments

A primer on environmental liability under BC’s Environmental Management Act.

Warning Wonky post ahead:

Every now and then I feel the urge to write a post that clarifies a topic I encounter in my professional life. This is one such post. I hope it will serve to explain, in simple language, how our environmental regime in BC protects the public with respect to contaminated sites. In doing so it will also show how even a well-designed system can sometimes result in unfortunate outcomes. In this case, it may help explain why so many old commercial facilities lie vacant as brownfields in and around our communities.

As I have previously noted, I carefully avoid blogging about my work but this post derives from a discussion I had with a friend over the Christmas holidays. My friend was recently informed that his aunt had passed away and, as her sole living relative, the executor of her estate was looking to pass on parts of her estate to him. In particular, she had owned a piece of land nearby that had historically been home to a gas station which shut down decades ago. The property had subsequently been used as a general store which is now closed. It is now a vacant property on a relatively busy street.

My friend asked me what could go wrong if he took over this property and tried to sell it. In reply, I jotted down some notes that I have now turned into this blog post. Be aware, nothing I am writing is intended to represent a legal opinion and shouldn’t be read as such. I’m not a lawyer, but what I do understand is how BC’s environmental legislation was formulated and how it has been interpreted to date by the BC Ministry of Environment & Climate Change Strategy (BC ENV).

The environmental regime in British Columbia is intended as a “polluter pays” system. The stated intention of our legislators was to ensure the costs of managing and remediating contamination is covered by the generators of that contamination rather than the public purse. As such, the program of managing contamination in British Columbia has been designed to connect as many potential responsible parties (i.e. potential pockets to pay for remediation) to a contaminated site as possible to ensure that the ultimate costs of cleaning up any residual contamination is kept off the public books.

The Environmental Management Act (EMA) provides the legislative framework for addressing contamination in British Columbia. The Contaminated Sites Regulation (CSR) provides the specific regulatory regime for managing contaminated sites under the EMA. The CSR includes a number of “Schedules” which represent items subject to the same regulatory restrictions or controls. Schedule 2 of the CSR presents a list of industrial and commercial activities that would draw an industrial or commercial property into consideration under the CSR. The property under discussion had historically be used for a Schedule 2 activity under the CSR (F5: petroleum product, other than compressed gas, dispensing facilities, including service stations and card locks) and as such it would be drawn into the Contaminated Sites regime of the EMA.

The EMA provides an expansive definition of parties who can ultimately be held responsible for cleaning up a contaminated site. Section 45 of the EMA presents a list of “Persons responsible for remediation of contaminated sites”. Section 45(1) (a) indicates that “a current owner or operator of the site” as a person “responsible for remediation of a contaminated site”. That is a party can become liable for remediation of a contaminated site merely by operating a business on that site (or even accepting the property as a gift), irrespective as to whether that party was involved in the generation of the impacts causing the contamination. This is why careful due diligence is recommended prior to any real estate transaction to ensure that unexpected accrual of liability will not occur through that transaction.

As discussed above, the intention of the regulatory regime in BC is to ensure that the “polluter pays” and as such the EMA includes Section 47 which defines “General principles of liability for remediation” of a contaminated Site. Section 47(1) states:

A person who is responsible for remediation of a contaminated site is absolutely, retroactively and jointly and separately liable to any person or government body for reasonably incurred costs of remediation of the contaminated site, whether incurred on or off the contaminated site.”

Note the language in that section. A party that has become a responsible party for contamination at a site, irrespective of relative blame, can be held fully responsible for the entire cost of any subsequent necessary remedial activities at the site (absolutely liable). The party can be held responsible for impacts that occurred prior to the party being associated with the site (retroactively liable). Finally, the party can either share the costs or be required to cover the entire costs themselves (jointly and separately liable). Certainly Section 47 (1) of the EMA does not prevent an injured party from using legal means to seek out other responsible parties to share in the costs, but the initial payment of those costs can be placed, by the government, on one party trusting that the civil litigation system will sort out relative liability at a later date. In doing this the government places the costs to establish relative blame on the individual parties themselves through the civil court system.

What would this mean for my friend? Well let’s assume the absolute best case scenario, that the historic operation had not caused any contamination. He would still be liable for some serious costs if he wanted to develop the piece of land. When he submitted a development permit to the City they would direct him to complete a Site Profile.The Site Profile system is one of the best features of the contaminated sites regime in BC because it forces municipalities to find out, up front, whether a property is potentially contaminated and gets that information on a permanent, publicly accessible, registry.

Due to the historic nature of the operations at the property, the submission of the Site profile would then draw the landowner into the Contaminated Sites process. As part of this process, the property owner would need to address any environmental requirements before a final development on the property could be issued an occupancy permit.

There are a lot of steps I won’t go into right now but suffice it to say that for an old gas station he would be required to carry out a Preliminary Site Investigation, then a Detailed Site Investigation and ultimately obtain a regulatory instrument (typically a “Certificate of Compliance” for a contaminated site or a “Determination” if the property was not contaminated). Since in this example, his property was clean getting a Determination would require an investigation of soil, groundwater and vapour at his property and then a submission to the BC ENV. Depending on the complexity of the site, we are talking about a minimum of tens of thousands of dollars of work.

If, alternatively, his property had contamination then the work would be much harder. The responsible party (my friend in this scenario) would be required to characterize and delineate the historical impacts at the site and remediation of those impacts would be required to meet either the numerical or risk-based standards specified under the CSR. Ultimately, this would need to be submitted to BC ENV as part of a regulatory submission for a Certificate of Compliance. That investigation/submission process easily puts you over $150,000 for a moderately complex site.

So here is my friend’s dilemma. By taking over ownership of the property he runs the risk of becoming retroactively, absolutely and jointly and separately liable for the costs to investigate, and potentially remediate, any historic impacts. Arguably he could always try and see if any of the historic owners/operators might still be around to help share the expense but absent that he would be on his own to cover the costs. Essentially, he is taking a gamble when he has exactly zero information upon which to base this decision.

Were this a multi-million dollar lot in Vancouver, the answer would be simple, accept the site and take a chance that you may spend a few hundred thousand trying to clean it up and getting it through the system. Then sell the property and re-coup his costs.

Similarly, if it was a small lot in the interior worth only a few thousand dollars the choice would be equally simple. Refuse the offer and let the property revert to the Crown. This would be fine for him but would turn the property into a brownfield. This is the sort of thing that has happened all over our province with old dry cleaners and independent service stations that closed leaving no one to cover the costs.

The system, as designed, is pretty robust, but it has some pretty important holes. The biggest of which may get plugged soon is that some municipalities have opted out of the system. This means that their citizens are not fully protected and in those communities it is possible to build on, and occupy a contaminated piece of land, with all the human health risks that entails. I hope that that the ability to opt out of the system will soon be ended giving all communities equal protection under the law.

Another future challenge is the suggestion that responsible parties be allowed to sell the liability associated with their properties. Unless done extremely carefully this has some very real possibilities to allow bad apples to off-load liabilities onto numbered companies, etc.. that could fold leaving the public holding the bag.

Ultimately, the challenge with any polluter pay system is that it only works if the polluters have the resources to pay. Under the CSR process, the government can essentially hold a property ‘hostage’ until a full investigation has been carried out; necessary remediation conducted; and the results confirmed by BC ENV. The problem with this model is that sometimes the cost of the work exceeds the cost of the property and the result is the government is left holding the bag.

What this means is that the current model works very well with large organizations (big oil companies and companies with a large corporate holdings in BC) since they are not in the position to walk away from the province leaving the government with a brownfield. The process works far worse in cases like the one described where no one is left to over to cover the tab and the land is not worth the cost to get it ready for further use.

The current system is really a balancing act. Every new regulation intended to reduce risk to the community runs the risk of creating a more costly system and thus the creation of more brownfields. In the recent past, most of the changes to the regulations have made closure more expensive, but the government does have some programs to help small land-owners deal with the costs of closing out a contaminated site. Still, as systems go, BC’s is the best in Western Canada (and to my mind the best in Canada). It provides real protections for communities; a clear process for stakeholders; and for the most part keeps the costs of polluting when it belongs, on the polluters themselves. Best of all,  it provides a mechanism by which communities can ensure that contaminated sites aren’t simply re-developed without ensuring they are safe for the next generation.

Posted in Canadian Politics, Uncategorized | 1 Comment

Fact-checking the National Observer “Discount Frenzy” oil piece

On December 26th, 2018 the National Observer published an article Discount Frenzy: The dirt on discount oil by Wil Horter, the former Executive Director of the Dogwood Initiative. Given its subject matter, I read the piece and responded to Mr Horter online. Given the number of times this post reappeared on my social media feed; I thought a quick-take blog post would be a good way to respond. 

The report starts with a common error that Alberta heavy oils represent an inferior quality product. I have encountered this error so many times that I have already written a full post debunking this error. Activists seem to have this mistaken idea that for crude oil, light means good and heavy means bad. The truth is that they are different products with different markets and heavy crude oils are a highly desired product. As for the argument that heavier crude oil is more expensive to refine, In my blog post I point out that heavy crude, refined in a heavy crude refinery, gives higher margins and less waste than light crude refined in a light crude refinery. The heavy crude costs more to refine but recoups more per barrel, which results in higher returns…which is why it is so desirable.

The author then claims that the $10-$25 dollar discount between Alberta’s Western Canada Select (WCS) and Western Texas Intermediate (WTI a light crude) is due to a difference in quality. Anyone familiar with world oil prices knows that the difference between heavy and light crudes on the world market is almost always in the low dollar range one way or another. The trick is that the author uses the WCS (which is landlocked) for a comparison rather than a heavy crude that is not land-locked. Anyone familiar with oil pricing knows that Mexican crude Maya is the most comparable crude to WCS. They are both low API blends with about 5% sulfur. Looking at the Oilprices.com price chart we see that today (December 28th) the price of WTI was $45.33 while Maya for delivery to the US Gulf Coast was fetching $48.26 and for delivery to the US West Coast it was getting $48.01. If heavy crude is inferior why is it selling for more than light today? The difference in price is due to Alberta WCS being land-locked, plain and simple.

The next section of the article I want to debunk is the suggestion that the “Trans Mountain pipeline is no solution“. This represents a common argument made by the opponents of the Trans Mountain Pipeline expansion (TMX): that if there was really a market for oil in Alberta then surely we would be selling there already. This trope can be easily debunked just by looking at where all the fuel has been going. Dr. Andrew Leach from the University of Alberta looked at the NEB data for all the oil that ran through the pipeline for the last decade. Virtually every barrel that ran through the pipeline was grabbed for use in BC and the Puget Sound, there was very little left over to sell elsewhere.

As for the oil that did make it to Westridge Terminal, it was all gobbled up by the Californians. I pointed this fact out online and Mr. Horter claimed that recent history contradicted my claims. Funny thing, he apparently hasn’t been talking to Greenpeace which wrote an entire report bemoaning all the Alberta crude going to California. Not that the Chinese don’t want to get into the act they just have to deal with higher transportation costs. But wait, the article claims:

“there is no price premium in Asia. In fact, former CIBC Chief Economist Jeff Rubin concludes “heavy oil … typically trade at more than US$8 a barrel less, not more, in Asian markets compared to the prices Gulf Coast refineries pay.”

No surprises here, that factoid is also suspect. The challenge was trying to figure out where that factoid came from. In the article it links to a paper by Jeff Rubin an economist who some have argued should not be listened to on this topic. The original citation links the claim to another paper by Mr. Rubin. When you go to that paper you find that it isn’t really something Mr. Rubin generated, this self-citation hides the fact that he actually got the number from a report at the “Price of oil” website. Go to that report and you discover that the number is not a general one (as suggested in the National Observer piece), rather it is a one-time result from a Reuters story. A convoluted route via which a one-day output by Reuters becomes a “typical” case in a National Observer article. So what is the truth? Well according to Oil Price.com Maya sells at a discount to the Far East. Why does it sell at a discount in that market? Well that is because oil prices have to account for transportation costs.

Maya is derived from the Cantarell and Ku Maloob Zaap oil fields in the Gulf of Mexico. The nautical distance between the Port of Vera Cruz in Mexico to Shanghai China is almost 10,020 nautical miles. The two ports are almost as far apart as you can put two ports. This incredible distance results in much higher transportation costs which explains the lower price for that market.

Going back to the West Coast, the nautical distance from the Port of Vancouver to Shanghai is 5110 nautical miles. By halving the distance the price to transport the oil goes down and the price Albertan producers can get for it goes up. Remember earlier when I talked about all that crude going to California. The trip from Vancouver to San Francisco is only 812 nautical miles and the cost to ship a barrel of oil from Vancouver to San Francisco is only $4/barrel. Given that short trip (and low transportation costs) the Californians can outbid the Chinese for Alberta oil because their shipping costs are so much lower. Given the limited volume of Alberta oil available, the Californians are going to win the battle for the limited supply. Given the transportation cost differential, the fact that any oil is getting to China is a sign of how robust that market is for Alberta oil.

Finally, in the article Mr. Horter claims: “In fact, Trans Mountain frequently operates at less than full capacity and, despite a blip last month“. According to Trans Mountain the Trans Mountain pipeline is almost always oversubscribed. When asked for back-up for his claim Mr. Horter provided a link to a story about the Enbridge pipeline which presents an irrelevant link to a web search of the NEB web site. Nothing in the back-up appears to says what the referencing article suggests it does.

Author’s Note 1:

For another take here is Markham Hislop who further debunks Mr. Horter’s piece.

Author’s Note 2:

In re-reading the post, I can see the effect of being tired in some of the language I used. I have revised the text to reduce the friction of the article and stick to the facts.

Posted in Canadian Politics, Pipelines, Trans Mountain, Uncategorized | 2 Comments

About that questionable IMF survey claiming $5.3 trillion in “subsidies” for fossil fuels

During the break I thought it would be nice to catch up on some blogging. The first topic I want to cover is that questionable International Monetary Fund (IMF) “subsidy” survey we constantly see quoted by anti-pipeline and climate change activists. The IMF Survey (authored by Coady, Parry, Sears and Shang) was mostly ignored in Canada when it came out in 2015, but has been used as cudgel by anti-pipeline activists since the Trudeau government bought the Trans Mountain Pipeline this year. The IMF survey web page claims that worldwide energy “subsidies” were $5.3 trillion in 2015 with Canadian “subsidies” being $46.04 Billion. As I will demonstrate in this blog post, these numbers are at best questionable and at worst designed to misinform presumably for political purposes.

A quick note: a lot of people have described this document as a formal IMF Report which represents the viewpoint of the IMF. This is not the case. The document is actually a working paper and the IMF is explicit about that fact. Here is the disclaimer they put right at the top:

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate.[bold is their emphasis not mine] The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

So the first thing to recognize is that this is not an IMF report, it is a survey produced by employees of the IMF for discussion purposes. Since the survey is about subsidies it seems obvious to first define a “subsidy“. The Google dictionary definition of a “subsidy” is:

a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.

As you can see, traditionally subsidies are viewed as financial help from government either in the form of money or a reduced tax rate to encourage an activity. The IMF survey doesn’t use that definition of a subsidy. Here is how the IMF survey defines “subsidies” in this survey:

A key factor in estimating the magnitude of current subsidies is which definition of “subsidies” is used. Pre-tax consumer subsidies arise when the price paid by consumers (that is, firms and households) is below the cost of supplying energy. Post-tax consumer subsidies arise when the price paid by consumers is below the supply cost of energy plus an appropriate “Pigouvian” (or “corrective”) tax that reflects the environmental damage associated with energy consumption and an additional consumption tax that should be applied to all consumption goods for raising revenues. Some studies also include producer subsidies, which reflect the net subsidy given to energy producers (for example, through access to subsidized inputs, preferential tax treatment, or direct budget transfers) although these are typically much smaller than consumer subsidies (OECD 2013).

So they include traditional governmental subsidies but add what economists have traditionally referred to as “externalities” and as a bonus the “additional consumption tax” which is basically what the authors believe the tax rate should be versus the actual tax rate applied by government (a bonus fudge factor).

Externalities in Economics are social and environmental costs to the community associated with an activity. Economists spend a lot of time trying to establish the cost of externalities because those costs are not always evident (what is the cost to the community of spilling soap into a river as one example?).

Reasonably speaking we could probably end this blog post here. The report we keep reading about is not really the viewpoint of the IMF and it doesn’t address what an economist would recognize as a “subsidy”. Simply speaking we should simply ignore it when activists cite its results. But what would be the fun with that? Instead, let’s look at the choices made in this “survey”. Let’s do this by considering the Canada numbers. From the spreadsheet associated with the report we get these values (in billions of 2015 dollars). The total “subsidy” in 2015 was reported as $46.04 billion. The breakout was:

  • Pre-Tax subsidies – $1.4 billion – 3% of IMF total
  • Global Warming – $17.20 billion – 37.4% of IMF total
  • Local air pollution – $6.05 billion – 13.1% of IMF total
  • Congestion – $14.89 billion – 32.4% of IMF total
  • Accidents – $2.08 billion – 4.5% of IMF total
  • Road Damage – $0.88 billion – 1.9% of IMF total
  • Foregone Consumption Tax Revenue – $3.53 billion – 7.7% of IMF total

According to the spreadsheet the actual 2015 “subsidy” for the entire fossil fuel industry in Canada was about $1.4 billion made up mostly of preferential tax treatments.

The remainder of the total (97% of the IMF survey “subsidy”) consists 89.3% of externalities and 7.7% of that fudge factor for taxes. I don’t have the patience to deal with the tax side so let’s look at those externalities.

The real flaw in the IMF “subsidy” evaluation is the externalities it considers as being the responsibility of fossil fuels and then how it accounts for those numbers. Unfortunately, the IMF study doesn’t actually give details in this report of how they generate their numbers. The spreadsheet provides the conclusions not how they were generated. It appears that most of the numbers are derived from other reports; the most important being Getting Energy Prices Right from Principle to Practice. Not surprisingly this report was co-authored by one of the IMF survey’s co-authors Parry (with Heine, Lis and Li).

This secondary report provides some of the meat underlying the “subsidies” and some of them are pretty odd. Let’s look at that “Congestion” and “Accidents” values ($14.89 billion and $2.08 Billion for Canada in 2015, respectively). Here is what that report says about congestion and accidents:

Traffic congestion costs imposed by one driver on other vehicle occupants are approximated by using a city-level database to estimate relationships between travel delays and various transportation indicators and extrapolating the results using country-level measures of those same indicators. Travel delays are monetized using evidence about the relationship between wages and how people value travel time. Accident costs are estimated based on country-level fatality data and assumptions about which types of risks drivers themselves might take into account versus those they do not, and extrapolations of various other costs, such as those for medical expenses, property damage, and nonfatal injury.

The easiest way to dismiss this number is to do a simple thought experiment. Imagine if magically every internal combustion engine were converted to electric engines would the congestion or accident rates change? The answer is, of course, no. This tells us that the externalities are not associated with the engine that moves the vehicles but the vehicles themselves. The subsidy has to do with our transportation infrastructure and urban design policies not fossil fuels. The same argument can be made for road damage. All these costs will occur irrespective of the type of engine in our vehicles.

Now if you didn’t think this study was flawed already then take another quick look at the spreadsheet. Do you notice anything funny about the numbers? Look at the congestion, accidents and road damage values for most European countries? Apparently British drivers don’t have accidents because their “subsidy” for road accidents is zero. The same goes for Germany, Italy and Finland. But be careful not to cross the border into France because apparently they have car accidents in France. Oddly enough the supporting reports provide values for these countries, but for reasons unknown those costs didn’t get transferred to this survey.

While I have not been able to completely go through all the underlying supporting information for this study I have also noted what I would argue is another significant flaw. To the best of my ability (and if I am wrong I would encourage my readers to direct me to the research) the authors ignore the fact that the Canadian and provincial governments actually have excise taxes, surtaxes (and carbon taxes) on our fossil fuel consumption. In 2018, total taxes on gasoline were estimated at approximately $24 billion. That number does not appear to be applied against Canada’s “subsidies” (or our Foregone Consumption Tax Revenue”) in the IMF survey math. If this is the case that represents a pretty significant oversight in my mind.

To summarize, there is a reason why economists have different words for different concepts. Because the correct language allows for a better understanding of the concepts under consideration. Economists differentiate between “subsidies” and “externalities” and have defined both for the purposes of policy discussions. To put this into language my readers can understand let’s think of this in biological terms.

In biology, dogs and cats are both mammals but they are not the same species. If I looked at a Labrador Retriever and claimed it was a Persian cat virtually every person reading this blog post would know I was making things up. If I insisted that every reader should consider a Labrador Retriever to be a Persian cat readers might ask why I was making such an obvious misstatement. They would look for some other reason why I am trying to play with language and would suspect that there was some underlying reason I was making such a clear misrepresentation.

The challenge with topics like fossil fuels and climate change is that few Canadians have studied economics. Because of this fact few will recognize the significant difference between a subsidy and an externality. The IMF survey authors calling an externality a subsidy is just as valid as the IMF survey authors calling a Labrador Retriever a Persian cat. It is not the correct use of the language and no matter how many times they choose to do so a dog is not a cat. The simple fact is that by using the correct language of economics these activist scientists would not be able to make a persuasive or effective case for the political goals they seek to achieve and so have decided to re-define the language to better sell their agenda. So no, Canada does not provide a $46 billion “subsidy” and globally we don’t provide a $5.3 trillion “subsidy” for fossil fuels. There is a reason the IMF calls this a “Working Paper” and does not stand behind its results. Perhaps the activists should consider that when citing these numbers.

Posted in Canadian Politics, Climate Change, Climate Change Politics, Fossil Fuel Free Future, Uncategorized | Tagged , , , | 2 Comments