A Multiple Account Benefit-Cost Analysis of Coal Mining in Alberta

Abstract

We examine the positive and negative effects of coal mining in Alberta from a social perspective — that of the province of Alberta rather than the project proponent — using benefit-cost analysis. We provide estimates of the economic, social and environmental impacts (benefits and costs associated with the development, construction, operation and reclamation) of an illustrative coal mine in the Eastern Foothills of Alberta’s Rocky Mountains. Our analysis is meant to inform the public on the potential trade-offs associated with additional coal development, and support and inform Alberta’s current coal policy review. Our analytical framework relies on the method of multiple account benefit-cost analysis. We find small economic benefits in the form of incremental tax revenues ($440 million, undiscounted dollars) and employment earnings by mineworkers ($35 million, undiscounted dollars). Given any individual mine’s small size relative to Alberta’s overall economy, there is unlikely to be any material increase in economic activity relative to the absence of mine development. In contrast, costs to Alberta are likely to be significant. These costs come from displacing other economic activity (primarily ranching and tourism); significant and adverse environmental impacts on water, wildlife, vegetation and air; a non-zero probability the province will be responsible for reclamation liabilities; negative social impacts on nearby communities; and interference with Indigenous Peoples’ interests and rights. Overall, we conclude that coal mine development is not likely to be a net benefit to Alberta, and the costs are likely to outweigh the benefits.

Keywords: coal mining, Alberta, public interest

JEL Classification: Q32, Q35, Q38, Q51, Q58, D61