Assessing the public interest in environmental assessment: lessons from cost-benefit analysis of an energy megaproject

ABSTRACT

The potential contribution of cost-benefit analysis to environmental assessment is assessed through a case study of a proposed Canadian oil project and a comparison of results with those of the method of economic impact analysis. While the latter concludes that the project would generate substantial economic benefits, the cost-benefit analysis concludes that the project would be a net loss to society and that new oil mining is uneconomic. The case study demonstrates that economic impact analysis can help inform decision-makers of projects’ economic impacts, but the cost-benefit analysis should be used to help inform decision-makers with respect to the contribution of projects to the public interest. It is time to move beyond relying solely on economic impact analysis to measure project benefits in environmental assessment decision-making.

KEYWORDS:

• Cost-benefit analysis
• oil
• project evaluation
• environmental assessment
• economic impact analysis
• public interest

Acknowledgments

We would like to acknowledge funding of the original study by the Athabasca-Chipewyan First Nation and the Oil Sands Environmental Coalition. Thanks also to Robin Gregory and anonymous peer reviewers for their comments on drafts.

Notes

1. As both of the terms ‘oil sands’ and ‘tar sands’ are heavily politicized we use the technical and more neutral term ‘bitumen’.

2. Canada has adopted a new federal EA law – the Impact Assessment Act – but the Frontier project was initiated while the previous law was in force.

3. The CBA presented here updates evidence submitted to the Frontier EA (Joseph 2018) with respect to oil prices, natural gas consumption, reclamation costs, air pollution, and GHG damages.

4. All monetary values in 2017 Canadian.

5. At the time of writing, there is a recession in Alberta induced by the downturn in oil markets. Consequently, at this moment there would be an employment benefit until the economy recovered. However, these weaker markets will also reduce the revenue from the mine so the NPV of the mine would be lower than our base case even with higher employment benefits.

6. Dollar figures in 2017 Canadian.