Question

The Province of British Columbia is a strong supporter of the investment in an LNG facility at Kitimat, while remaining strongly opposed to any extension of Trans-Mountain pipeline (TMX). There are a number of dimensions that the two projects could be compared; economic value, business case, permits and approvals, indigenous consent, environmental footprint, job creation and public subsidies. You should only focus on subsidies.

TMX received the ultimate financial aid when the government of Canada purchased the existing pipeline for $4.5-billion this summer, and agreed to take over the expansion project. On top of that purchase price, Canadian taxpayers could be on the hook for construction costs of $7.4-billion or more.

LNG Canada’s partners this spring received $5.34-billion in relief from provincial taxes and fees for LNG Canada. As well, the federal government will provide a one-time investment of $275-million to support infrastructure improvements and increase marine protection.

Question: using an impact analysis approach, which project is likely to have the greater net economic impact –you can assume the Type I and Type II multipliers are the same for oil as for LNG.

Answer 1

Comparing the overall cost of carrying LNG versus pipeline oil, the cost is much lower to LNG and environmental negative impact is mitugated due to low carbon emission and has easy portability and transport.

Secondly in terms of economic value and efficiency pipeline places higher risk and volatility of oil prices which gets buyer with heavy burden of high oil prices and making them worse off.

Secondly the installation of TMX Pipeline will cost taxpayers with higher tax outgo while installing LNG from LNG Canada will have net zero effect on tax outgo anf thus the economic positive impact gets magnified. Taking the overall costs for buying and maintaining the LNG alternative with subsidies forms greater savings to consumers and hence must be selected.