The Impacts of Canadian Oil Sands Development on the United States’ Economy
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Canadian Energy Research Institute The Impacts of Canadian Oil Sands Development on the United States’ Economy FINAL REPORT October 2009 Relevant • Independent • Objective THE IMPACTS OF CANADIAN OIL SANDS DEVELOPMENT ON THE UNITED STATES’ ECONOMY The Impacts of Canadian Oil Sands Development on the United States’ Economy Copyright © Canadian Energy Research Institute, 2009 This study was undertaken for the American Petroleum Institute. Sections of this study may be reproduced in magazine and newspapers with acknowledgement to the Canadian Energy Research Institute Authors: Asghar Shahmoradi Afshin Honarvar Peter Howard Paul Kralovic Special Thanks to: Marwan Masri David McColl Thorn Walden Rami Shabaneh Martin Slagorsky Acknowledgements: The authors of this report would like to extend our thanks and gratitude to everyone involved in the production and editing of the material, including, but not limited to, Capri Gardener, Megan Murphy, and Marwan Masri. CANADIAN ENERGY RESEARCH INSTITUTE #150, 3512 – 33 STREET NW CALGARY, ALBERTA CANADA T2L A6 TELEPHONE: (403) 282-1231 October 2009 Printed on Recycled Paper Canada The Canadian Energy Research Institute (CERI) is a cooperative research organization established by government and industry parties in 1975. Our mission is to produce relevant, independent, objective economic research and education on energy and environmental issues to benefit business, government, and the public. CERI’s public sector sponsors include departments and agencies of the federal and several provincial governments, plus one university; private sector sponsors consist of more than one hundred corporate and trade association members from the energy production, transportation, marketing, distribution, and consuming sectors in Canada and abroad, and from the financial community. CERI’s research program is guided by a board of directors named by the sponsoring organizations. Project advisory committees consisting of experts from government and industry are established to assist CERI staff and to review preliminary drafts of CERI reports. Responsibility for the content of studies rests with the author(s) and CERI’s officers. Canadian Energy Research Institute i TABLE OF CONTENTS TABLE OF CONTENTS ............................................................................................................ i LIST OF FIGURES ................................................................................................................. iii LIST OF TABLES .................................................................................................................. v EXECUTIVE SUMMARY ......................................................................................................... vii CHAPTER 1 INTRODUCTION ................................................................................................. 1 1.1 Background ............................................................................................................ 1 1.2 Objective of the Study ............................................................................................. 1 1.3 Structure of the Report ............................................................................................ 3 CHAPTER 2 OIL SANDS INDUSTRY IN CANADA ...................................................................... 5 2.1 Background ............................................................................................................ 5 2.4 Oil Sands Production and Investment Projections ....................................................... 9 CHAPTER 3 IMPACTS ON THE UNITED STATES’ ECONOMY ................................................... 13 3.1 Overall Modeling Framework .................................................................................. 13 3.2 Data and Assumptions ........................................................................................... 14 3.3 Results ................................................................................................................. 16 APPENDIX A CRUDE BITUMEN RESERVES ............................................................................ 25 A.1 Crude Bitumen Reserves ........................................................................................ 25 A.2 Mineable Crude Bitumen Reserves (under active development) ................................. 27 APPENDIX B METHODOLOGY .............................................................................................. 29 B.1 Overall Modeling Framework: A Generic Approach ................................................... 29 B.2 CERI US-Canada Multi-Regional I/O Model (UCMRIO) ............................................... 32 B.2.1 CERI Multi-Regional I/O Model of Canada ..................................................... 32 B.2.2 US I/O Model ............................................................................................. 33 B.2.3 US-Canada Trade Table and Model Structure ................................................ 36 B.2.4 Disaggregation of National Results to the US ................................................ 38 B.3 Data Sources ........................................................................................................ 38 B.4 Assumptions and Limitations .................................................................................. 40 October 2009 ii The Impacts of Canada’s Oil Sands Development on the United States’ Economy October 2009 Canadian Energy Research Institute iii LIST OF FIGURES Figure 2.1 The Top Five World Proven Reserves ..................................................................... 6 Figure 2.2 Oil Sands Areas in Alberta ..................................................................................... 7 Figure 2.3 Bitumen Production Capacity, Million Barrels per Day ............................................ 10 Figure 2.4 Oil Sands Capital Investment .............................................................................. 12 Figure 3.1 Investment Required to Meet Production Scenario………………………………………..………15 Figure B.1 Overall US-Canada Multi-Regional I/O Modeling Approach ..................................... 30 Figure B.2 Schematic of the Input-Output System ................................................................. 40 October 2009 iv The Impacts of Canada’s Oil Sands Development on the United States’ Economy October 2009 Canadian Energy Research Institute v LIST OF TABLES Table 2.1 Crude Oil Densities ............................................................................................... 9 Table 3.1 Capital Costs ...................................................................................................... 15 Table 3.2 Impact on US Output, GDP, and Employment ..…………………………………………………….16 Table 3.3 Change in US Output by Industry………………..……………..……….………………………………18 Table 3.4 Change in US GDP by Industry…………………………………………………………………………….19 Table 3.5 Change in US Employment by Industry…………………………………………………………………20 Table 3.6 Change in Industry Output by State……………………………………………………………………..21 Table 3.7 Change in State GDP..………………………………………………………………………………………..22 Table 3.8 Change in State Employment……………………………………………………………………………….23 Table A.1 Initial In-Place Volumes of Crude Bitumen ............................................................ 25 Table A.2 In-Place Volumes and Established Reserves of Crude Bitumen ................................ 27 Table A.3 Mineable Crude Bitumen Reserves ....................................................................... 28 Table B.1 Sectors/Commodities in CERI US- Canada Multi-Regional I/O Model ......................... 34 October 2009 vi The Impacts of Canada’s Oil Sands Development on the United States’ Economy October 2009 Canadian Energy Research Institute vii EXECUTIVE SUMMARY Background: CERI, a non-profit Canadian energy and environmental research institute, examines the impacts of developing Canadian oil sands on the United States’ economy. The study covers the period from 2009 to 2025 and is based on the 2009 CERI “Economic Slowdown Projection”. This production forecast envisions raw bitumen production slowly climbing from current levels of approximately 1.2 million barrels per day to around 4 million barrels per day in 2025. CERI estimates the annual capital investment and operating costs needed to achieve this output at $379 billion. This study estimates the impact to the US economy of these investments and related oil sands production occurring in Alberta, Canada. Results: Canada and the US are major trading partners, and the results clearly show significant economic benefits to the US from increased economic activity in Canada. As investment and production in oil sands ramps up in Canada, the pace of economic activity quickens and demand for US goods and services increase rapidly, resulting in an estimated 343 thousand new US jobs between 2011 and 2015. Demand for US goods and services continues to climb throughout the period, adding an estimated $34 billion to US GDP in 2015, $40.4 billion in 2020, and $42.2 billion in 2025. National Impacts 2010 2015 2020 2025 ($US Billion) U.S. Output 23.0 69.2 78.5 80.9 U.S. Gross Domestic Product 11.5 34.0 40.4 42.2 National Impacts 2009- 2011- 2016- 2021- (Thousand Person Year) 2010 2015 2020 2025 U.S. Employment 172 343 88 22 “Thousand Person Year” equates to the number of jobs created, times 1,000, for a given year and for as long as the project operates. With regards to the table above, the number of jobs listed indicates the