It’s a small town, and I know your dirty secret: You’ve been fracking again.
Ben Ryan told me. He’s a Whitehorse economic analyst who wrote a fascinating paper about the Yukon’s energy supply, and he knows what’s in your gas tank. But don’t worry. I won’t rat you out to Yukoners Concerned About Oil and Gas Exploration.
I can hear you protesting. “No, I don’t frack,” you say. You may even have a “Frack Free Yukon” bumper sticker on your car.
But let me ask you a couple of questions. Do you drive a car with an internal combustion engine? Do you heat your home with fossil fuels? Do you ever fly to Vancouver?
If you answered yes to any of those questions, you’re probably busted. According to Ryan’s paper, around one third of the over 200 million litres of petroleum products Yukoners burn every year comes from refineries in the Pacific Northwest. They get much of their feedstock from the heavily fracked Bakken shale formation.
This fracked oil gets everywhere in the various supply chains for gasoline, home heating and aviation fuel.
Your only chance of being frack free is if your particular petroleum products come from distributors that buy only from Alberta, B.C. or Alaska refineries.
In that case, you may be free of the “fracked” label. You can sleep easily at night, knowing you are personally supporting the Alberta oil sands and drilling beside the caribou on Alaska’s North Slope rather than fracking.
In 2013, the last year for which specific figures are available, Ryan estimates we burned through 223 million litres of go juice. If you do the math, that’s like filling up the Canada Games Centre pool with diesel once per day, and tossing in a match.
What’s interesting about this from an economics point of view is the “value chain.” That’s economics jargon for all the steps to create a product from start to finish, and how much of the final price ends up in the pockets of the people doing each step along the way.
In the oil business, Ryan estimates that 11 per cent of the value is in transportation and wholesaling. These are the activities that we do in the Yukon. That leaves 89 percent of the value happening in the places the oil comes from.
Basically, for every dollar you spent at the gas station or on home heating fuel, about 11 cents goes to Yukon businesses and workers. The other 89 cents of your dollar creates jobs and profits for our friends in Alaska, Alberta, B.C. and the Bakken shale country.
I’m sure they would thank you if they were here.
What Ryan’s value-chain analysis means is that if we produced oil and gas in the Yukon, it would have the potential to create a lot of jobs. Ryan figures the current set up generates around $35 million in economic activity per year, even when limited to that 11-cent slice of the value chain.
Just as a thought exercise, if we produced all our own oil and gas, there would be almost ten times as much economic activity. That means jobs and business opportunities.
It would also mean royalties for the Yukon government, which is facing some tough financial sledding these days. Ryan estimates the annual royalties could be over $10 million per year. That doesn’t count the income tax generated by highly paid Yukon oil workers or their companies.
Currently, the royalties on the oil you use go to the governments of Alaska, Alberta, Montana and other oil producing places. Once again, thanks for spreading your wallet across north-western North America.
One side effect of your continental-sized generosity, however, is that it burns a lot of oil to ship oil thousands of kilometres from Montana or Fort McMurray to you. Ryan estimates our shipping costs range from 11 to 18 cents per litre. That means that when you burn 10 litres, and maybe feel good about your car’s mileage, you actually burned around 11 litres if you include the fuel it took to get your 10 litres a few thousand kilometres from the well to your local gas station.
Ryan stressed to me that his analysis does not mean automatically that we should push into oil and gas, or support one specific project. But it does make it clear that, assuming that the environmental hurdles around Eagle Plains could be cleared and Yukon oil people could drill and refine at a reasonable cost, we could replace some of the 200 million litres we burn now with Yukon product. This would create a lot of jobs and tax revenues.
We could still work on reducing our total oil burn and migrating to renewable energy. That’s not the issue, here.
The issue is, for the next few decades, when it looks like we’ll still be burning lots of oil whether you like it or not, will we burn our own oil or pay people Outside to burn theirs? Even if we succeeded in cutting our fuel burn by half over the next two decades, which is probably very optimistic, that would still leave over 100 million litres of demand that could be supplied by Yukon wells.
This is definitely something we should think about. It would be silly to sit here in the Yukon complaining about lacklustre economic development, while we were shipping over $200 million per year to neighbouring states and provinces to create jobs for them.
Note: You can find Ryan’s presentation online at www.fuelingyukon.ca
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He won last year’s Ma Murray award for best columnist.