The Fraser Institute

The Fraser Institute

October 22, 2012 09:32 ET

The Fraser Institute: BC Stands to Gain Billions of Dollars If Moratorium on Offshore Oil and Gas Exploration Is Lifted

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 22, 2012) - British Columbia and Canada could see billions of dollars in economic benefits if the federal government lifted the moratorium on offshore oil exploration off the province's coast, concludes a new study released today by the Fraser Institute, Canada's leading public policy think-tank.

Using conservative estimates of the size of oil deposits from a single offshore development in the Queen Charlotte Basin, a baseline oil price of $90 per barrel, and including environmental costs while excluding indirect benefits, the study estimates the net benefits could exceed $9.6 billion.

"These are not solely profits to private companies, but are also large contributions to government revenues that can be used to fund health care, education, environmental projects, and other government services," said Joel Wood, Fraser Institute senior research economist and author of Lifting the Moratorium: The Costs and Benefits of Offshore Oil Drilling in British Columbia.

The report combines information from academic studies, government-commissioned reports, and government data bases to estimate the expected net benefits to Canadians from removing the federally imposed moratorium on offshore oil operations on BC's coast. It not only considers the economic benefits and costs, but also calculates estimates for the potential environmental damages and monetary costs from oil spills, such as lost profits to fisheries and tourism, and the cost of cleaning up and containing a spill.

"We should not rule out offshore exploration simply because of a 'what if' scenario," Wood said.

"The vast array of existing data clearly indicates that the environmental risks of offshore oil exploration in BC can be safely managed and that British Columbians would benefit enormously from this new industry."

The federal government imposed the moratorium on offshore oil and gas exploration in 1972. Although multiple scientific panels have since then concluded that with appropriate safeguards and assessments the ban on offshore activity could be lifted, it remains in place. As a result, accurate estimates of the size of BC's offshore oil and gas resources have been difficult to quantify. A 2004 study from the Royal Society of Canada concluded that without lifting the moratorium to allow preliminary exploration work, it is virtually impossible to fully determine if BC should proceed with developing its offshore resources.

Since the establishment of the moratorium on BC offshore oil exploration and development, other jurisdictions such as Norway, the United Kingdom, and Newfoundland and Labrador have developed offshore oil resources and enjoyed tremendous economic benefits through increased energy-related investment, massive positive economic impact on the economy, and significant government revenue all without causing significant environmental damage.

For example, Newfoundland and Labrador averaged $1.2 billion in annual industrial benefits from the offshore oil sector between 1990 and 2009. The offshore oil sector in Newfoundland and Labrador has also generated $43 billion in gross domestic product (GDP) between 1997 and 2007-around 25 per cent of the province's total GDP over that period.

Wood's study compares the regulatory regimes and history of oil spills in Newfoundland and Labrador, Norway, the United Kingdom, and the U.S. Gulf of Mexico. He concludes that the Newfoundland experience, combined with Canada's strong safety record and more stringent regulations and liability rules, make a strong case for lifting the moratorium on offshore oil exploration and development in BC.

"Regardless of where offshore drilling takes place, there are always some environmental risks. But the experience of Newfoundland and Labrador shows those risks can be contained. Consequently, there's no reason why BC could not also safely develop its offshore oil resources," Wood said.

Wood notes that any discussion of offshore oil exploration must also include consideration of the BP Deepwater Horizon oil spill in the U.S. Gulf of Mexico, which was deemed by a U.S. presidential commission to have resulted from human error. And while offshore drilling in BC would take place at a much shallower depth than in the US Gulf of Mexico, Wood suggests that any offshore exploration activity in BC must occur within a well-funded, world-class regulatory system to ensure environmental risks are managed and mitigated to the greatest extent feasible. This would include ensuring companies operating in BC waters have the financial ability to cover all costs stemming from a potential oil spill.

"With the right regulatory regime in place, the environmental risks posed by offshore oil exploration and development could be managed, allowing British Columbia to benefit from a new industry that would contribute to increased prosperity and create a large stream of revenue for the provincial government," Wood said.

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 85 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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