Manifesto in favour of developing our oil for everyone’s benefit

List of signatories:

André Bisson

Bernard Landry,
Former Premier of Québec and professor at UQAM

Éric Forest,
Mayor of Rimouski

Françoise Bertrand,
President and CEO of Fédération des chambres de commerce du Québec

Johanne Desrochers,
President and CEO of Association des ingénieurs-conseils du Québec

Joseph Facal,
Professor at HEC and former President of the Treasury Board of Québec

Michel G. Hudon,

Legal Counsel

Monique Jérôme-Forget,
Special Advisor at Osler and former Minister of Finance for Québec

Serban Teodoresco,

President of Preventa

Simon Prévost,
President of Manufacturiers et exportateurs du Québec

Yves-Thomas Dorval,
President of Conseil du patronat du Québec


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Leaving Québec in a stronger financial position

The Quiet Revolution was a defining period for Québec. The solid foundations laid since then underpin our current economic and social success. Just look at hydroelectric development and Hydro-Québec’s role as a model crown corporation, for example.

This success has enabled us, as a society, to enjoy greater access to education and training, provide better social protection for the disadvantaged and introduce generous social programs such as parental insurance, to name but a few of the benefits. We welcome this redistribution of wealth and firmly believe that crucial steps must be taken to ensure that it continues.

A number of factors compel us to reconsider the direction we are headed. First of all, on March 31, 2012, Québec’s net debt reached the unprecedented level of $167 billion, which is equal to nearly 50% of GDP. To put this in context, Ontario’s debt corresponds to 36.7% of GDP while the provincial average across Canada is 27.7%. In other words, Québec is carrying a much heavier debt load than the rest of the country.

Secondly, Yves Daniel Bussière of INRS believes that “demographic ageing will be more rapid in Québec than in most industrialized countries that experienced a baby boom following the Second World War…and more pronounced than in other Canadian provinces.” As a result, there will be proportionately fewer workers for each retired person in Québec. Some estimates suggest that the current level of 5 workers for each retired person will drop to just 2 workers for each retired person within the next 20 years.

In the context of these observations about the current state of public finances, it is vital that the Québec population be better informed about the extent of the impending storm that awaits if no action is taken. These issues have been in the news for several years now, to the point that we no longer pay them much heed. Anyone hoping to leave Québec in a stronger financial position for future generations, however, must make no mistake about the urgent need for action.

Oil means wealth for all

There is no magic pill. We all need to roll up our sleeves just as we did during the Quiet Revolution. One way of doing this is to capitalize on our natural resources. Specifically, we need to develop Québec’s oil potential. Billions of barrels of oil lie waiting in Anticosti Island, Old Harry and the Gaspé Peninsula. Québec has the opportunity to develop vast reserves of oil—an opportunity not enjoyed by every state.

Developing alternatives to oil

We need to be concerned by the increasingly documented effects of climate change. Contrary to what some people believe, however, exploiting our oil resources is not inconsistent with fighting climate change, which must be a priority for every country in the world. All countries responsible are looking to reduce their dependence on oil. The day is coming when we will have to develop greener energy alternatives that are more environmentally friendly.

We strongly welcome, for example, the Québec government’s efforts to develop an electric transportation network. Yet however laudable this initiative may be, it cannot succeed in replacing hydrocarbons in the short or medium term.

Facing the facts: our dependence on oil is far from over!

Experts agree that we will continue using oil for many decades to come. As a society, we need to be realistic and practical about the situation: we continue to consume oil in Québec at a growing rate. Moreover, transportation is not the only culprit. Many products we use every day are manufactured from oil, including recyclable water bottles and smartphones, to name just two examples. A few key statistics confirm that our use of oil is on the rise:


Year in, year out, we consume between $11 billion and $14 billion worth of oil.

Improving the economic situation by reducing dependence on foreign oil

All of the oil consumed in Québec comes from overseas, specifically from Africa and the Middle East. The significant financial resources we spend abroad could potentially one day provide major economic benefits by staying at home. Québec is currently dependent on foreign oil. By investing in exploration and production of our own oil, we could meet part of our own demand in the coming years and decades.

One result of the dependence on foreign oil is a significant deficit in Québec’s trade balance. While a number of factors contribute to the deficit, Desjardins has noted that the growth in the trade deficit over the last ten years is primarily attributable to the energy sector, i.e. oil imports. To put this in context, oil represented $11 billion or 38% of Québec’s $29 billion trade deficit in 2011. Along the same lines, HSBC has identified reducing oil imports as one of five strategies Québec needs to adopt to eliminate its trade deficit. Given that a negative trade balance weighs heavily on an economy, the point must be conceded that developing Québec oil would have a positive impact on the province’s finances.

Important benefits for Québec

Improving our trade balance would be one major economic benefit of oil development, but there are several others, including wages, which represent the single greatest cost in producing a barrel of oil. Wages, in turn, generate substantial fiscal revenues for the various levels of government in the form of income tax and consumption taxes paid by workers.

It is too soon to project specific spinoffs such as the number of jobs that would be created by developing Québec oil. We do know, however, that other regions of the world have generated considerable wealth through similar projects.

In Ohio, for example, where the Utica Shale is similar to the geological formation of Anticosti Island, authorities estimate that development of the site will generate more than 200,000 direct and indirect jobs. The industry expects to spend nearly $12 billion in wages over a five-year period.

Respecting the environment while developing Québec oil

The purpose of developing Québec oil is to maximize economic benefits. However, there is nothing to gain and even much to lose if development does irreparable damage to the environment. Make no mistake: the position we are taking today is in favour of developing Québec’s oil responsibly.

Is it possible to develop oil in a way that presents zero risk to the environment? Unfortunately, the answer is no. Our collective responsibility is to ensure that high environmental protection standards are put in place.

Closing the door to developing Québec oil would be irresponsible. Allowing development to proceed without establishing high environmental protection standards would be equally irresponsible.

Norway’s model

Norway should serve as an example in this regard, for it has succeeded in developing its oil reserves while protecting the environment and, especially, continuing to pursue the maritime industries of fishing and aquaculture.

Norway currently produces 3 million barrels of oil a day from 51 offshore wells. This production serves, in part, to build a fund for future generations intended to diversify the country’s economy, in preparation for the day when the oil reserves eventually run out. The fund currently stands at $645 billion, and this is just one example that we could emulate to ensure that future generations here also benefit from the development of oil reserves.

At the same time that Norway has been experiencing an oil boom, its maritime industries have continued to flourish, with fishing and aquaculture generating $9.2 billion in 2011. This is nearly 60 times more than the same industries generate in Québec. Norway has proven that oil development is consistent with other economic activities and with environmental protection. There is a lesson to be learned here.

Need for a balanced debate

Some groups are constantly voicing their concerns and raising public opposition to any form of economic development associated with oil. While some of these concerns have scientific basis, and so must be addressed, we all need to recognize that certain groups do not hesitate to employ a strategy of misinformation that runs counter to the genuine interests of the population.

It is healthy for a society to engage in discussion about any issue so fundamental as the decision to start developing oil resources. Avoiding the debate serves the interests of no one and would be tantamount to proceeding headlong. Debate is essential! But it must be held in the appropriate way; most importantly, everyone will benefit if it is based in fact.

We are launching an appeal to all stakeholders to verify the information they present and to avoid stirring up unjustified fears solely for the purpose of advancing their cause.

Recommendations

Whereas Québec needs to address the issues of a heavy debt load and an ageing population;

Whereas Québec has large oil reserves on its territory;

Whereas oil consumption in Québec is not slowing down and will remain at a high level for several decades to come;

Whereas Québec has a large trade deficit primarily because of oil imports;

Whereas Québec would derive major economic benefits from oil development;

Whereas any development project should be conditional upon establishing high environmental protection standards;


We, the undersigned, hope that:


The Québec government authorizes exploration of oil resources in order to confirm the potential for development;

The debate over oil development is held in a respectful manner with cases on both sides supported by evidence-based information;

The Québec government authorizes potential oil development by setting out as soon as possible a regulatory framework establishing, among other things, high environmental protection standards.


Sources:

  1. Cirano. 2013. La dette provinciale en proportion du PIB plus importante pour le Québec que celle de l’ensemble des provinces et de l’Ontario.
  2. Ibid.
  3. Bussière, Yves, Jean-Pierre Thouez et Jean Carrière. « Le vieillissement de la population :
    une nouvelle spécificité québécoise
    ».
  4. Desjardins. 2013.The trade deficit weighs down Québec’s economy.
  5. HSBC. 2013. Cinq stratégies pour régler le déficit commercial du Québec. En ligne.  
  6. Kleinhenz & associates. 2011. Economic impact study: Ohio’s natural gas and crude oil industry


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