This article originally appeared in the Globe and Mail.
By Heather Exner-Pirot, February 7, 2023
The federal government’s “just transition” legislation, aimed at helping oil and gas workers find employment in the green economy, has no basis in economic reality.
It is hard to imagine a sector in less need of transition support. Canadian production has never been higher, and the industry is booming. The dividends of this boom are being enjoyed across the country: Analysis from Peters & Co., an investment firm specializing in Canadian energy, estimates the contribution by the oil and gas sector in royalties and taxes to federal and provincial governments in 2022 was $50-billion.
The workers are doing well, too. Oil and gas extraction is the most productive industry in the country, according to Statistics Canada, generating an average of $709 for each hour of labour put in. That’s more than 11 times the national average of $62. It’s far ahead even of the highly productive mining sector, which produces $207 for every hour of labour, and eclipses the labour productivity of construction ($52), manufacturing ($62) and government ($52).
Then there are the sector’s wages, which are also the highest in Canada. While the average Canadian worker makes $1,131 in weekly earnings, oil and gas workers bring in upward of $2,650. Despite those high wages, there is no surplus of oil and gas workers. The sector’s unemployment rate was just 1.7 per cent in December, 2022, signifying an acute labour shortage.
The proposed legislation, the details of which are yet unknown, will fulfill a commitment made under the supply and confidence agreement that the NDP and Liberals entered into last March. But it was on the Liberals’ agenda long before that, and identified in their 2021 re-election platform.
The concept of “just transition” gained political currency around the last oil bust in 2014-15, when 100,000 workers lost their jobs in Canada’s oil patch. It is about acknowledging and reducing the harm to workers caused by moving from high-carbon to green economies in the energy transition, by offering help such as financial assistance, retraining and employment.
This was attempted in Canada with the phase-out of coal power, but an official auditor’s report in April, 2022, decried the federal government’s efforts for coal workers and communities as a failure, saying there was no plan, no governance mechanisms, no completed national consultations, and no system to track results.
Legislation to support unemployed oil and gas workers would have been helpful eight years ago, when newly recoverable shale oil and gas turned our only export market, the United States, from a net energy importer into a net exporter and the world’s largest producer. In Canada, the lack of pipelines to tidewater either east or west left producers and workers squeezed.
But it’s clear now that the downturn in 2014-15 was part of a cycle, not a transition. The International Energy Agency expects global oil consumption will reach a new record, of 104 million barrels a day, by the end of the year. The anticipated peak for oil demand is perpetually a decade away.
Natural Resources Minister Jonathan Wilkinson knows all this. He has, appropriately, adjusted his prognosis of the future of Canadian energy in light of last year’s events – the war in Ukraine, an energy crisis and runaway inflation – asserting in the House of Commons last fall that the “global shift to a low-carbon future can be accomplished without phasing out Canada’s oil and gas sector.”
He has also expressed that Canada’s biggest challenge won’t be job losses in the oil patch, but filling all the new jobs now needed in the mining, manufacturing and utilities industries to meet our climate, energy and security goals. He is right about that. And if the federal government wants to support training and employment in those sectors, it is hard to argue against it.
But wrapping it in the nomenclature of “just transition” amounts to creating legislation based on a buzzword, and on assumptions that no longer hold. It is raising the ire of the Alberta government, industry, and oil and gas workers themselves, who rarely have reason to trust Ottawa to act in their best interests.
There are countless issues the federal government should have on its agenda for 2023 to help Canadians and the economy. Instead they are prioritizing legislation to help workers leave the country’s highest-paying jobs in its most productive industry while it is facing a labour shortage. It is neither just, nor wise.
Heather Exner-Pirot is a senior fellow at the Macdonald-Laurier Institute.