Economic impact of the Nova Scotia ocean sector - …lunenburgregion.ca/images/uploads/English_-NS_Ocean_Sector_FINAL... · Gardner Pinfold ACKNOWLEDGMENTS Gardner Pinfold wishes

Economic impact of the

Nova Scotia ocean sector

2002-2006

March 2009

Economic Impact of the

Nova Scotia Ocean Sector 2002-2006

Prepared for

Fisheries and Oceans Canada Office of Economic Development

Atlantic Canada Opportunities Agency Department of Fisheries and Aquaculture

Department of Energy

Study Team

Michael Gardner, Gregor MacAskill and Chris DeBow, Gardner Pinfold Consulting Economists Ltd., Halifax, Nova Scotia

[email protected]

March 2009

Gardner Pinfold

ACKNOWLEDGMENTS

Gardner Pinfold wishes to thank the many individuals who contributed to the completion of this

study.

We appreciate very much the time and effort of those in federal and provincial government

departments and research institutes who delved into their records to provide us with the data we needed.

Special thanks to Mike Milloy in the Nova Scotia Department of Finance who ran the Nova

Scotia Input-Output Model used to generate the impact results, and to Shirley Hazen from Finance who offered technical advice on the I-O Model. Special thanks also to John Odenthal of

the Nova Scotia Department of Energy who offered advice on offshore matters.

We extend our gratitude to the members of the Steering Committee who provided excellent

guidance and thoughtful comments throughout the study. Our special thanks to Carla Dale and

Justin Huston who co-chaired the Committee and moved the project along expeditiously.

! Carla Dale (Federal Co-Chair), Policy and Economics Branch, Fisheries and Oceans Canada.

! Justin Huston (Provincial Co-Chair), Marine and Coastal Advisory Services, NS Department

of Fisheries and Aquaculture. ! Mike Davies, Economic Strategies and Initiatives, NS Department of Economic

Development.

! Gail Edwards, Policy and Research Unit, Atlantic Canada Opportunities Agency. ! Lisa Anderson, Nova Scotia Fisheries Sector Council.

! John Odenthal, Strategic Policy and Planning, NS Department of Energy.

! Mike Malloy, Economic and Statistics Division, NS Department of Finance. ! LCdr Lonnie McNeil, Department of National Defence.

! Jennifer Burley, Policy and Strategic Analysis Division, Environment Canada.

! Gary Hartlin, Labour Market Information, Service Canada.

! Stephen Coyle, Research Services - Tourism Division, NS Department of Tourism, Culture and Heritage.

! Doreen Liew, Policy & Economics Branch, Fisheries and Oceans Canada.

! Bill Steele, Economic and Statistics Division, NS Department of Finance. ! Bill MacDonald, Policy and Research, Atlantic Canada Opportunities Agency.

Any errors and omissions are, of course, the responsibility of the consultants.

Gardner Pinfold

TABLE OF CONTENTS

Page

ACKNOWLEDGEMENTS I Overview ...................................................................................................................1

1. Why this update .............................................................................................1 2. The ocean economy ......................................................................................1 3. Methodology ..................................................................................................2

II The Ocean Activities...............................................................................................5 1. Commercial Fisheries ....................................................................................5 2. Aquaculture ...................................................................................................6

3. Fish Processing .............................................................................................7

4. Offshore Oil & Gas.........................................................................................8 5. Water Transportation .....................................................................................9

6. Ocean Tourism ............................................................................................ 10

7. Marine Construction..................................................................................... 11 8. Shipbuilding & Boat building ........................................................................ 12

9. Government Services .................................................................................. 13

III Economic Impact 2006.......................................................................................... 15 1. Overall impacts ............................................................................................ 15

2. Impacts by activity ....................................................................................... 17

3. How impacts compare: 2006 vs. 2001 ......................................................... 18

IV Looking Ahead ....................................................................................................... 21 1. Commercial fisheries ................................................................................... 21 2. Aquaculture ................................................................................................. 21

3. Fish processing............................................................................................ 21

4. Offshore oil & gas ........................................................................................ 22

5. Water transportation .................................................................................... 22 6. Ocean tourism ............................................................................................. 22

7. Shipbuilding and boat building ..................................................................... 23

8. Marine construction ..................................................................................... 23 9. Government services ................................................................................... 23

BIBLIOGRAPHY........................................................................................................... 25

APPENDIX A: Marine activity definitions APPENDIX B: Data and sources APPENDIX C: Impacts by activity, 2002-2006 APPENDIX D: Nova Scotia ocean sector impacts

Gardner Pinfold 1

I OVERVIEW

1. Why this update This study provides an estimate of the economic impact of ocean activities in Nova Scotia. It

covers the period 2002-2006, updating an earlier impact study covering the years 1997-2001.*

Like previous studies of this kind, this one finds its rationale in the on-going change in ocean

activities and management, and the need to ensure decision-makers understand clearly the nature and economic significance of these activities. Specifically, the study represents the third in a

series of benchmarks aimed at gaining greater insight into the full range of ocean activities and

their changing contribution to the Nova Scotia economy.

The same general approach has been used to develop the impact estimates in this study as in the

previous one. Accordingly, direct comparisons between the results are possible for most sectors.

Where differences occur, they tend to centre on data and data sources. These differences and how they affect the comparability of results are explained.

2. The ocean economy

The analysis covers private and public sector activities. Deciding what activities to include is

determined by the relationship of the activity to the ocean. The activities are tied to the ocean in a primary sense; i.e., the ocean provides the direct basis for the activity, whether extractive (fishing,

offshore oil & gas or aquaculture) or non-extractive (tourism, ship-building and transportation).

Government departments and agencies with responsibilities for regulating or managing ocean activities are also included, as are universities and marine research. Descriptions of each activity,

including key statistics, are contained in the industry Fact Sheets in Section 2.

The table below sets out the specific activities included in this study, with the corresponding

activities from the previous study. Some of the names have changed to conform to the titles

contained in the 2002 North American Industrial Classification System (NAICS). Definitions of

each activity are set out in Appendix A.

* Gardner Pinfold, Economic Value of the Nova Scotia Ocean Sector, 2005.

2009 Report 2005 Report

Sector NAICS # Activity (2002-2006) Activity (1997-2001)

Seafood 114 Fishing Commercial fisheries

1125 Aquaculture Aquaculture

3117 Fish processing Fish processing

Oil & gas 211 Exploration/production Offshore oil and gas

23799 Field development

Transportation 4831 Water transportation Ports and shipping

4883 Support activities

Tourism Recreational fishing Recreational fishing

4831 Cruise ship travel Cuise ship travel

4872 Coastal recreation

Construction 23799 Ports & harbours Marine construction

Manufacturing 3366 Ship & boat building Ship building & repair and Boatbuilding

33451 Navigation equipment Marine Manufacturing and Services

Public sector Federal government Federal government

Provincial government Provincial government

Universities/research Research

2 Economic Impact of the Ocean Sector in Nova Scotia: 2002 – 2006

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3. Methodology Impacts are quantified using conventional economic indicators consistent with the national

income accounting framework. Economic impact is measured with three indicators:

! GDP: an industry’s contribution to Gross Domestic Product represents its broadest measure of economic impact. The domestic product of an industry captures the value it

adds to purchased inputs through the application of labour and capital. GDP represents

the sum of the value added by each industry. Value added should not be confused with sales value, since the latter would include the value of purchased inputs.

! Employment: industry employment is important politically because of the significance

generally attached to jobs, but from an economic impact perspective, the significance lies

in the economic impact generated through the spending of employment income. The greater the employment and higher the average income, the more significant the industry

in terms of economic impact.

! Household income: this captures the payments to households in the form of wages and salaries earned in the marine industries. Returns to labour in the form of wages and

salaries form a key component of GDP. Industries paying relatively high average wages

and salaries generate a correspondingly higher economic impact than industries paying lower average incomes.

Economic impacts are generated through direct, indirect and induced demand in the economy

expressed in terms of industry and consumer purchases of goods and services. The sum of indirect and induced impacts is often referred to as the “spin-off” impact.

! Direct impact: refers to impact arising from the expenditures made by firms in the subject industries on the goods and services needed to produce industry outputs. For

example, the fishing industry buys nets and traps from manufacturers; water

transportation buys fuel from refineries; the oil & gas industry buys food services from local catering companies.

! Spin-off impact: the sum of indirect and induced impacts. Indirect impact refers to the

impacts generated as direct demand triggers a range of inter-industry purchases. For

example, net makers buy monofilament line from manufacturers; refineries buy services from maintenance contractors; catering companies buy basic food products. These

industries in turn buy more basic goods and services, and so on. Induced impact refers to

the demand created in the broader economy through consumer spending of incomes earned by those employed in direct and indirect activities. It may take a year or more for

these rounds of consumer spending to work their way through an economy.

The sum of impacts flowing from each level of demand gives the overall economic impact of Nova Scotia’s marine sectors. Generally, the greater the domestic supply capability at each level,

the greater will be the economic impact. Conversely, the higher the import content, the weaker

the domestic industry response (multipliers) and the lower the impact.

Economic Impact of the Ocean Sector in Nova Scotia: 2002 – 2006 3

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Quantifying economic impacts begins with comprehensive data on the gross value of output for

each of the marine industries and activities selected for analysis. As expenditures work their way through the economy, they generate the GDP, employment and household income the study aims

to quantify.

Economists rely on economic models to quantify impacts at a national, regional or provincial level. Models provide a simplified view of the economy, expressing the complex web of demand

and supply transactions in the productive process as a set of coefficients or quantitative

relationships. These coefficients are based on the measurement of the actual flows of goods and services in the real economy.

For this study, economic impacts are estimated using the Nova Scotia Input-Output Model (NSIO 2003 version). Staff at the Department of Finance ran the NSIO for each activity by raising

expenditures for the specified industry by the amount of marine activity for that industry. For

example, for fishing, the impact of the industry would be determined by a “shock” equal to the

value of output of the industry. Similarly, for a government department, the model would be “shocked” by the level of marine spending.

For most industries, the NSIO is structured to reflect the pattern of inter-industry transactions, so all that is required to run the model is the gross value of output for the industry in question. For

some activities (e.g., government departments), expenditures would first have to be allocated to

specific commodities in order to trigger the right transactions in the model. This requires fine expenditure detail for those activities, which would have to be provided by the department or

estimated by the consultant.

The data used to drive the model are obtained either from Statistics Canada (through published reports or through special tabulations), or in the case of government departments, obtained

directly from officials or estimated using departmental reports. The data and impacts cover the

years 2002 to 2006. Impacts are reported in current dollars. The data are set out in the Fact Sheets in Section 2. A discussion of data and sources is contained in Appendix B.


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Gardner Pinfold 5

II THE OCEAN ACTIVITIES

Overview The Nova Scotia fishing industry is composed of some 5,400 mainly independent fishing vessels

employing about 9,500 (skippers and crew) in primarily seasonal fisheries. Shellfish account for about

80% of landed value. The quantity and value of landings increased during the 1990s, peaking in 2002-

2003. They began to decline after 2003, with significant drops in several species including all groundfish

(except haddock), herring, scallop and crab. Crab and scallop stocks have since begun to strengthen. For

reasons set out in Appendix B, employment is difficult to estimate. Here, it is based on number of EI claimants. Though it would appear from the table below that employment is increasing, it is actually the

number of claimants, due presumably to lower incomes resulting from the decline in landed value.

Performance Landings Core Employment

Tonnes ($000) Vessels

licence-holder (persons)

2002 367,683 808,778 5,452 3,546 7,958

2003 370,505 847,152 5,485 3,552 8,810

2004 332,484 743,529 5,570 3,536 9,239

2005 268,211 731,681 5,523 3,534 9,503

2006 284,271 656,694 5,474 3,524 9,507

2007 251,758 599,197 5,411 3,516 n.a. See Appendix B for sources.

Key Factors Primary

markets

" U.S. and local processors

Resource " Industry relies primarily on

shellfish, with limited signs of

groundfish recovery since the

collapse of stocks in the early 1990s. " Resource status varies, with some

key species (eg, lobster) fished at

high exploitation rates.

Key issues " Strong Canadian dollar coupled with

weak market conditions have

contributed to the declines in

revenues since 2003.

" Current North American recession

undermines the viability of key

segments of the industry.

" Pressure on stocks continues to be

an issue. " Out-migration from coastal areas

makes it a challenge to recruit crews.

Economic Impact (2006)

Direct Spin-off Total

GDP ($000s) 332,054 203,729 535784

Employment (P-Y) 3,462 3,659 7,121

Household Income ($000s) 232,427 124,679 357,106

1. Commercial Fisheries


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2. Aquaculture

Overview The coastal waters of Nova Scotia support approximately 350 aquaculture sites (not all in production).

Salmon, mussel and oyster are the main species. The industry is comprised mainly of independent

producers, employing some 700 people both on a full/part time basis. Aquaculture production generates

over $50 million in revenues, with about $2.4 million in direct exports. Most of the production goes to the processing industry and then to export.

Performance Production Exports Employment

Tonnes $000s $000s FTE

Issued aquacultures

sites

2002 4,508 24,300 3,544 529 389

2003 7,893 39,600 2,496 700 398

2004 5,225 24,600 1,687 532 404

2005 9,134 44,000 2,871 518 371

2006 7,661 42,200 1,349 439 353

2007 10,181 53,000 2,493 472 351

See Appendix B for sources

Key Factors Primary

markets

Resource

Key issues

" U.S., Hong Kong, and Japan

" Main species are salmon, blue

mussels and American oyster.

" Developing species include

Arctic Char, halibut, scallop,

striped bass, quahog and

European oyster.

" Vulnerable to natural processes.

(water quality, temperature, predation)

" Technological and knowledge

gaps

" Unsupportive public

environment

" Challenging regulatory regime.



GDP ($000s) 19,666 13,788 33,455

Employment (P-Y) 288 228 517



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3. Fish Processing

Overview The Nova Scotia fish processing industry consists of 285 licenced plants of which about 180 are active.

Most plants compete for raw material from independent fishing vessels. Plants range in size from under

five to several hundred employees. The sector utilizes some 30 species, supplying a wide range of fresh, frozen and value-added products to various markets around the world. Production is estimated at about

$900 million, with just over $500 million in exports (2006). The U.S. is the primary market, with important

secondary markets in the E.U., Japan and China.

Performance Production Exports Number of Plants Employment

$000s $000s Licences (persons)

2002 1,023,000 689,394 293 6,447

2003 1,197,000 634,136 292 7,180

2004 1,130,000 595,555 285 6,955

2005 955,000 557,251 279 6,460

2006 903,000 513,812 285 5,700 See Appendix B for sources

Key Factors Primary

markets

" U.S., E.U., Japan and China

Resource " Industry relies primarily on shellfish.

" Failure of groundfish recovery has

contributed to decline in number of

active plants

" Resource health varies with some

species subject to high exploitation

rates.

Key issues " Strong competition by plants for available supply.

" Strong Canadian dollar has

contributed to a decline in revenues in

recent years.

" The number of licenced and active

plants has steadily declined due to

difficulty securing raw material and

increasing consolidation of the

industry.

" Out-migration from coastal

communities makes it difficult to

recruit workers.


Direct Spin-off* Total

GDP ($000s) 175,236 402,230 577,466

Employment (P-Y) 3,710 6,255 9,965


*Includes impact on fishing industry


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4. Offshore Oil & Gas

Overview The Sable Offshore Energy Project (SOEP), with estimated recoverable reserves of 3 Tcf, came on stream

in December 1999, with field development continuing. The project currently ties in five fields, with

development of a sixth field under consideration. Natural gas production at a design rate of 510 MMscf/d

flows via a subsea pipeline to a gas plant at Goldboro, then liquids are shipped to a fractionation plant at

Point Tupper, and sales gas shipped to markets in the U.S. northeast, Nova Scotia and New Brunswick.

With rising energy prices, the value of production exceeded $1.5 billion in 2005. The decline in revenues

in 2006 is due to a drop in production and weaker natural gas prices. In addition to the employment and

income it creates, oil & gas projects make a major contribution to provincial government revenues, with royalties and related revenues of $331 million in fiscal 2006/07, up from $10 million in 2001.

Performance (SOEP) Expenditures ($millions)

Total Nova Scotia Gross Revenue

($ million)

Production Volume

(M3)

Employment

(Annual average

head counts)

2002 440 177 827 5,474,993 900

2003 543 209 1,152 4,665,769 974

2004 509 181 1,096 4,327,897 1,082

2005 413 136 1,518 4,225,762 733

2006 463 193 1,014 3,794,706 697 See Appendix B for sources

Key Factors Markets " U.S., NS and NB

Operations " SOEP, a $3 billion project, is Nova

Scotia’s second offshore project.

" SOEP has a life expectancy of 15-20

years, with the possibility that other

discoveries could extend project life.

" SOEP annual production expenditures

in Nova Scotia averaged $187 million

since 2001. " Deep Panuke, a proposed $700

million offshore gas project, is in

design; production is expected to

begin in 2010 or 2011.

Key issues " Total economic impact of SOEP

includes expenditures from production

and development (construction).

" Production dropped in 2006 due to

geological factors. Adding

compression facilities in 2007 has

restored production to pre-2006 levels.


Development Production

Direct Spin-off Total Direct Spin-off Total

GDP ($000s) 15,105 43,675 58,780 809,041 143,394 952,435

Employment (P-Y) 234 839 1,073 426 2,352 2,778

Household Income ($000s) 11,364 28,585 39,949 29,778 95,285 125,063


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Overview Water transportation in Nova Scotia generates direct revenues estimated at $500-600 million annually. This

includes all activities of shipping companies, cruise ships and ferry operators (Water Transportation

NAICS 4831), as well as revenues generated by cargo loading and unloading, port fees and the pilotage

authority (Support Services NAICS 4881). Nova Scotia’s major ports are Halifax (containers, crude oil,

vehicles and dry bulk) and Port Hawkesbury (crude oil, gypsum, aggregate). Cruise ships call at Halifax

and Sydney. Ferries operate between Nova Scotia and the other Atlantic Provinces and Maine.

Performance Freight Water transportation value of output

$ millions

Vessel

Movement

#

Tonnes of

Cargo

(000)

TEU

(000)

Transportation

Support

Services Total

2002 2,962 34,631 524 2002 191 286 477

2003 2,963 43,021 542 2003 200 300 500

2004 2,904 45,156 526 2004 197 295 492

2005 4,249 51,743 550 2005 229 344 572

2006 530 2006 243 365 608

TEU=twenty-foot equivalent units (containers). See Appendix B for transportation value sources.

Key Factors Primary

markets

" International (freight) and regional

(ferry)

Main

Cargo/

Service

" Freight: containers, vehicles, dry

bulk, oil, gypsum and coal

" Ferry: regular and seasonal

passenger/vehicle/commercial

service Marine Atlantic, Bay

Ferries, Northumberland Ferries

" Substantial spin-off impact in support services: trucking,

warehousing, agency, etc.

Key issues " Generally upward trend in freight

activity is driven primarily by

petroleum in Halifax and Port

Hawkesbury.

" Declining trend in container traffic

" Negative passenger trends due

mainly to declining traffic reported

by Marine Atlantic, 2002-2007.



GDP ($000s) 155,763 315,885 471,645

Employment (P-Y) 2,150 5,900 8,050


5. Water Transportation


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6. Ocean Tourism

Overview Ocean tourism is broken down into three expenditure-driven areas: cruise ship activity, marine recreational fishing, and coastal tourism in the form of water-based recreational activities.

! Cruise ship: this sector generates $20-30 million in passenger/crew expenditures annually. Halifax

and Sydney are the two most active cruise ship ports in the province attracting over 200,000

passengers from key markets in Canada, U.S. and Europe in 2007.

! Recreational fishing: this includes salt-water and estuarial fishing using charter vessels, as well as

own vessels and facilities. Overall, the activity generates approximately $20 million in

expenditures.

! Coastal tourism and recreation: this includes ocean touring (whale watching, sightseeing, coastal

hiking, diving, kayaking), as well as sailing, cruising and visiting beaches and other marine

locations. It generates an estimated $270-300 million in annual expenditures.

Performance Cruise Ships Marine Recreational Fishing Coastal Tourism

Number

of Ships

Number of

Passengers

(000)

Expenditures

($millions)

Participation

days (000)

Expenditures

($millions)

Number

of Trips

(000)

Expenditures

($millions)

2002 127 212 23 233 21 2,678 319

2003 150 215 24 222 20 2,312 301

2004 182 272 28 210 20 2,273 296

2005 155 248 24 199 19 2,288 283

2006 122 217 19 187 19 2,306 272 See Appendix B for sources.

Key Factors Primary

markets

" Domestic and International

Key issues " Cruise travel and recreational

fishing have been stable, while

coastal tourism has experienced

a declining trend. This is due to

rising fuel prices, a strong Canadian dollar, shifts in travel

patterns, security concerns and

economic uncertainty.

" Coastal tourism/recreation

estimates are conservative

because they exclude local

residents.



GDP ($000s) 132,794 113,731 246,525

Employment (P-Y) 4,450 2,034 6,484



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Overview Marine construction includes building and maintaining fixed installations to facilitate marine transportation

and related activities. Such installations include wharves, jetties, piers and loading facilities to serve

commercial shipping, ferry service, fishing and aquaculture, military requirements and recreational boating. Marine construction is conducted by various private and public sector entities including private companies,

port authorities, DFO, DND and small craft harbour authorities. The value of construction work ranged

from $77 to 107 million between 2002 and 2006.

Construction activity to install production facilities and sub-sea systems for the offshore oil and gas

industry is included under Offshore Oil & Gas.

Performance Expenditures ($ millions)

Ports & Harbours National Defence Total

2002 27 50 77

2003 37 59 96

2004 49 52 101

2005 43 53 96

2006 57 50 107 See Appendix B for sources

Key Factors Primary

markets

" Nova Scotia

Clientele " Supports the transportation, and

fishing industries, as well as the Canadian Navy.

Key

issues

" Expenditures for ports and harbours

have risen steadily, with National

Defence stable.

" Future projects that would greatly

increase the level of activity in this

industry include the proposed

container terminals in Melford and

Sydney.



GDP ($000s) 52,700 34,060 86,760

Employment (P-Y) 825 630 1,455


7. Marine Construction


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Overview The ship and boat building industry in Nova Scotia is comprised of two yards in Halifax and about 65 boat-

builders scattered around the province. Industry output can vary widely depending on success in securing

major ship/offshore fabrication contracts. This can be seen for the output value in 2002 when the drilling rig Eric Raude was undergoing a major refit. Though connected to the offshore sector, the value of this

work is assigned to shipbuilding by Statistics Canada because it took place in a shipbuilding establishment.

Boatbuilding is dependent mainly on conditions in the fishing industry, though some yards have also had

success over the years producing recreational vessels. The industry generated about $200 million in output

in 2006, and employed as many as 1,500 people.

Performance Boat building Output Shipbuilding Output

Number of Enterprises

($ millions) ($ millions)

2002 89 57 360

2003 63 122

2004 67 57 178

2005 37 108

2006 65 65 135 See Appendix B for sources.

Key Factors Primary

markets

" Domestic and U.S.

Operation

& Clientele

" Halifax shipyard: mainly ship repair

and refit, with capacity to build small

complex vessels and topside modules

for offshore. Major clients include the

Navy, Coast Guard, offshore &

shipping.

" Boatbuilding: serves mainly the

fishing industry, but has diversified

into pleasure craft market. Key issues " Shipbuilding: difficult to compete with

subsidized foreign yards.

" Boatbuilding: highly dependent on the

conditions in the fishing sector.

" Strong Canadian dollar coupled with

weak U.S./Cdn economies present

major challenges.

Economic Impact (2006) Direct Spin-off Total

GDP ($000s) 95,635 49,310 144,945

Employment (P-Y) 820 860 1,680


8. Shipbuilding & Boat building


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9. Government Services

Overview Federal and provincial government departments and agencies contribute to the value of the oceans sector in

Nova Scotia through management, conservation, protection, research and support of ocean activities. The

economic impact occurs through the expenditures to implement these activities and carry out these

functions. Overall, the public sector spends over $1.1 billion on ocean-related activities, employing 13,180 military and civilian personnel, scientists, managers, academics and officials.

Performance (2006) Expenditures (000s)

Salaries Total Expenditures FTE

Federal Departments

National Defence 614,000 869,000 10,700

Fisheries and Oceans 113,700 185,164 1,704

Natural Resources Canada 7,200 19,620 120

Transport Canada 5,100 6,100 77

Canadian Food Inspection Agency 2,260 2,545 34

Environment Canada 1,060 1,360 15

Ocean research/universities 22,900 32,700 220

Provincial Departments

Fisheries and Aquaculture 3,807 6,107 64

CNSOPB 3,262 4,875 32

Energy 2,904 7,255 49

Tourism and Culture 2,460 7,202 54

Natural Resources 700 785 30

Transportation & Infrastructure Renewal 4,456 7,414 81

Total 783,790 1,145,125 13,180

Key Factors Primary

Activities

" Federal Public Sector-responsible for overseeing activities related to:

resource management; sovereignty and defence; economic, trade and

industrial development; transportation and safety; and health and

environment

" Provincial Public Sector-responsible for overseeing activities related to:

transportation; economic development; and environmental monitoring.

Observations " Departments of National Defence and Fisheries and Oceans comprise the bulk of ocean-related expenditures in the public sector.

" Public sector funding may be negatively impacted by a weak Canadian

economy.

Economic Impact (2006) Direct Spin-off Total

GDP ($millions) 788 618 1,406

Employment (FTE) 13,180 11,490 24,620

Household Income ($millions) 788 385 1,173


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Gardner Pinfold 15

III ECONOMIC IMPACT 2006

1. Overall impacts

The direct GDP impact of the ocean sector in the Nova Scotia economy is estimated at $2.6

billion in 2006 (current dollars). The direct impact accounts for 8.1% of provincial GDP. When spin-off impacts in the broader economy are considered, the GDP impact rises to just under $5.0

billion, 15.5% of the Nova Scotia total (Table 1).

Table 1: Economic impact of ocean activities in Nova Scotia 2006

Ocean activity also makes a major contribution to household income, a major component of GDP.

Ocean activities generated just under $1.6 billion in income in 2006, about 5.7% of the provincial

total. This rises to 10.2% of the total when spin-off impacts are included.

Employment impacts are comparable in relative scale to GDP. Ocean activities created just under

30,000 direct jobs (full-time equivalent) in 2006, accounting for 6.8% of the provincial total. The

spin-off impact increases this to just over 60,000 jobs, or 13.9% of total provincial employment.

! GDP: With the largest armed forces base in Canada located in Halifax, National Defence ranks slightly ahead of offshore oil & gas and the fishing industry in its ocean impacts,

accounting for 24% of the overall GDP impact (Figure 1). Offshore oil & gas and the

fishing industry (fishing and fish processing) follow closely, at 23% and 22%,

respectively. Water transportation (shipping, ferries, ports and harbours) also makes a major contribution, accounting for 11% of the overall GDP impact.

! Employment: National defence also creates the largest employment impact, accounting for 30% of the overall total (direct and spin-off), followed closely by the fishing industry

at 23%. Water transportation and tourism follow at 13% and 11%, respectively (Figure

2).

! Income: It follows from its employment impact that National Defence also creates the

largest income impact, accounting for 32% of the overall total. The fishing industry and

water transportation follow at 23% and 14% respectively.

Direct Impact Total Impact

IndicatorOcean impact NS total

Ocean % of NS total

Ocean impact NS total

Ocean % of NS total

GDP ($ millions) 2,576 31,737 8.1% 4,930 31,737 15.5%

Income ($ millions) 1,565 27,527 5.7% 2,794 27,527 10.2%

Employment (FTE) 29,499 432,590 6.8% 60,267 432,590 13.9%

Sources: Appendix C for impact results by sector; Statistics Canada, CANSIM 384-0002; Census of Canada, 2006


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Figure 1

GDP

Impact

Figure 2

Employment

Impact

Figure 3

Income

Impact


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2. Impacts by activity

Impacts for each marine activity, 2002-2006, are set out in Appendix C. In brief:

! National Defence: the results show the substantial economic impact of Maritime Forces

Atlantic based in Halifax, 12 Wing Shearwater and 14 Wing Greenwood. National

Defence leads all other sectors in its contribution to GDP, employment and income. The balance between direct and spin-off impacts indicates the importance of local spending

and supply.

! Fishing industry: the results shown the combined impact of the commercial fisheries,

aquaculture and fish processing sectors after double counting has been eliminated.* It ranks second in terms of its contribution to GDP, employment and income. Its impacts in

absolute terms have declined since 2001, in part because of a reduced resource base, and

in part because of a weaker U.S. dollar. Nonetheless, the industry generates a substantial direct impact, while also creating considerable economic activity in supporting industries.

This is key to the economic health of many coastal communities.

! Oil & gas: this industry generates high revenues at the direct level, most of which accrue as returns to and of capital, hence the strong showing of oil & gas in terms of contribution

to direct GDP. In addition, the development work for the Sable offshore gas project

makes a substantial impact through marine construction activities in the province. The

offshore industry also makes important contributions to employment and income, especially through its indirect activities, though these are relatively low compared with

the GDP impact because of the capital intensiveness of the industry. The industry’s

relative position is lower than it was in 2001 in part because of a difference in the way the GDP impact was computed then (more on this below), but also because of adverse shifts

in production, prices and the exchange rate in 2006. Production returned to pre-2006

levels in 2007 with the installation of compression facilities.

! Water transportation: this sector captures both shipping and support activities (port services and cargo handling). The relatively large indirect impacts (GDP, employment

and income) reflect the strong backward linkages in the broader economy, including the

dependence on trucking, warehousing and various agency services. This industry’s impact (in absolute and relative terms) is higher in 2006 than reported in 2001, in part

because of a difference in industry definition and in part because of access to better data.

! Tourism: this sector, composed of recreational fishing (marine), cruise ship travel and coastal tourism, ranks fourth overall as an employer and generator of income, but ranks

sixth in terms of its contribution to and GDP. These rankings reflect the labour

intensiveness of the industry, but also its relatively low wages and margins. The much

stronger showing in 2006 than 2001 is attributable to the quantification of coastal tourism, for which data were not available in the earlier study.

! Fisheries and Oceans: occupies the middle ground in terms of its impacts. The balance

between direct and spin-off impacts indicates the importance of local supply capability. The broad mandate of the department, including fisheries management, Coast Guard and

ocean science account for its substantial presence and impact in the provincial economy.

* Double counting occurs if the impacts of fishing, aquaculture and fish processing are simply added to give

an overall impact of the fishing industry. This is because the total would count the direct impacts of fishing

and aquaculture in their own right, and also as indirect impacts of fish processing (because fishing and

aquaculture supply inputs to the fish processing industry. Giving zero value to purchases from the fishing

and aquaculture industries when running the I-O model for fish processing, eliminates double counting.


Gardner Pinfold

! Shipbuilding/repair and boat building: two traditional Nova Scotia activities demonstrate

consistent strength in their respective markets. A steady stream of refit and repair work keeps the Halifax shipyard occupied, while the fortunes of the boat building industry are tied

closely to the health of the fishing industry and increasingly to the recreational market.

! Construction: marine construction includes major ports and small-craft harbours, as well

as DND facilities. These provide a fairly stable base for the industry, though overall investment in ports has declined over the past several years. Construction is an industry that

is well integrated into the economy as evidenced by the relatively large spin-off impacts.

! Other federal departments and provincial departments: three other federal departments and one agency, and five provincial departments and the offshore board, combine to

generate about $40 million in direct GDP and create about 500 jobs. Their roles are crucial

to managing, regulating and supporting all the extractive and non-extractive activities the ocean sustains.

! Universities/research and aquaculture: these activities make a significant contribution

to the ocean economy. The impact of universities and research institutes can be measured

by their contribution to GDP and employment, but their real impact occurs through the development and transfer of knowledge about the ocean and its various functions.

3. How impacts compare: 2006 vs. 2001

The ocean economy expanded in absolute terms between 2001 and 2006 at a slightly faster rate

than the Nova Scotia economy as a whole. As a consequence, the relative impact of the ocean

economy is higher in 2006 than it was in 2001. Figure 4 shows that the ocean sector contribution to provincial GDP increased from 14.5 to 15.5%, while the share of provincial employment

remained stable at from 13.9%, and the share of provincial income increased from 9.3 to 10.2%.*

Figure 4

* To ensure the indicator values in Figure 4 are directly comparable, an adjustment to the 2001 impacts is

needed. This is because of a difference in approach used to estimate the value of output for the Oil & Gas

industry. In the 2005 report, output value was estimated on the basis of the gross value of sales without adjusting for the cost of transportation (the pipeline toll). In this current study, this adjustment is made in

order to more accurately reflect the netback to the project. Applying this approach to the 2001 analysis

reduces the value of output by about $230 million. When this adjusted value is run through the NSIO, it

reduces the overall 2001 GDP impact by just over $300 million. The net effect is to reduce the impact of

marine activities in 2001 to 14.5% of provincial GDP, rather than the 15.7% set out in the earlier report.


Gardner Pinfold

Though the aggregate data in Figure 4 indicate a marginal increase in relative impacts, important

changes occurred in the performance of specific activities and also in the way impacts are measured. To facilitate comparison, the 2001 impacts by industry are depicted in Appendix D.

! Oil & gas: The 2001 impact (Appendix D) appears to be substantially higher than that

indicated for 2006 (Figure 4). This is mainly due to a difference in method used to

compute the impacts (see footnote on previous page). Also, 2006 was an unusual year in the Sable offshore project as it saw a temporary drop in gas production due to decreased

pressure. As planned, this was addressed by the development in 2007 of a compression

deck, returning Sable production to pre-2006 levels. In addition to a more refined approach to determining the value of output, our 2006 methodology has been revised to

separate Oil & Gas field development and production activities. Oil & Gas development

expenditures are now captured as construction impacts. This method is considered more

precise, though it contributes to a reduction in the apparent GDP impact. Using this method for the 2001 analysis would have resulted in a direct GDP impact of just under

$900 million for Oil & gas category instead of the $1,250 million reported in the previous

study (see Appendix D). Future studies should continue to separate production and development impacts, but note that combining the two is appropriate when determining

the overall offshore Oil & Gas impact.*

! Fishing industry: While the overall GDP impact remains unchanged at about $1,000 million, the relative size of direct and spin-off impacts changed substantially between

2001 and 2006. The direct impact is considerably higher in 2006 presumably because the

changing species mix (greater proportion of shellfish with limited processing required)

leaves the harvesting sector with a greater share of the value of final output. Also, the declining value of the U.S. dollar after 2002 would have reduced processing sector

margins and contribution to GDP.

! Water transportation: The definition of this sector captures two distinct industries for statistical purposes: shipping and port-specific support activities. Data for each should

have been used in the previous study (and should be used in future studies), but data

limitations made this difficult. The earlier study relied on estimates of transportation

activity that resulted in underestimation of industry size and impact. The current study relies on Statistics Canada data unavailable in 2001. There are still data issues for this

sector and these are fully explained in Appendix B.

! Tourism: the impacts reported in this study are substantially higher than for 2001 because a wider array of data is now available to measure industry activity. Specifically,

data on coastal tourism used to estimate 2006 impacts were not available for 2001. The

earlier study excluded any estimate of this source of impact, though it was acknowledged as a major component of ocean activity. The availability of data (from the Statistics

Canada Travel Survey of Residents of Canada 2007) provides the basis for estimating the

coastal tourism impacts.

*In addition to the its impacts on GDP and household income the offshore Oil& Gas sector has a unique

and sizeable fiscal impact in Nova Scotia. It is based on the royalty agreements the Province holds with the

Oil & Gas developers. In 2001, at start of Sable project the royalties were negligible. In fiscal 2006/07 the

royalties and related revenues to Nova Scotia from offshore oil & gas were $331 million.

Economic Impact of the Ocean Sector in Nova Scotia: 2002 – 2006

Gardner Pinfold

20

Gardner Pinfold 21

IV LOOKING AHEAD

1. Commercial fisheries

The commercial fisheries sector has faced several difficult years with declining landings of key

species and reduced revenues due to adverse exchange rate movements. The challenges were exacerbated by rising input costs after 2006, fuel in particular. Though fuel costs dropped in mid-

2008, any gains were more than offset by a sharp drop in shore prices due to weak markets.

Weak markets are expected to continue through much of 2009, putting downward pressure on incomes and making it increasingly difficult to attract vessel crews.

Market conditions should improve in 2010 and beyond as the U.S. and other markets recover

from the current recession. Whether the resource recovers to levels experienced in the early 2000s is more difficult to say. What seems more certain is that cost and earnings pressures are

likely to force further consolidations through concentration of quota and combining licences.

This will result in less capital in the industry and a decrease in the numbers employed. But in the long run and with careful management, the industry will continue to be one of Nova Scotia’s

leading sources of ocean impact.

2. Aquaculture Expanding production depends on access to suitable sites, industry competitiveness and continued

investment in research and development. Recent announcements on funding programs by the

provincial government should help to address some of the latter issues. But the immediate issues constraining industry expansion are a lengthy and cumbersome regulatory regime and a lack of

public support for aquaculture arising from environmental and aesthetic concerns. Also,

considerably more research and development are required to identify the best strains for Nova

Scotia conditions. Unless and until these issues are resolved, it will be very difficult for the industry to expand beyond current levels of production.

3. Fish processing The industry approaches the second decade of the 21st Century facing some major challenges.

Nova Scotia processors have seen their numbers and competitive position eroded over the past

10-15 years due to declining resources, competition from low-cost producers, rising raw material

costs, increasing concentration of buying power in major markets, adverse exchange rate movements and the regulatory environment as it affects the terms and conditions of access to raw

material. Added to these structural and operating issues is the current market turmoil that can only

weaken the balance sheets of an already fragile industry.

The trend towards industry consolidation is likely to continue, unless some of these factors

improve. But it is clear that the industry and policy-makers have little or no control over most of them. Most importantly, there is limited prospect for growth without access to greater quantities

of raw material. This means careful management of resources for long-term sustainability.

Without it, there will be fewer plants and fewer employees, and in the long run, lower economic

impact.

22 Economic Impact of the Ocean Sector in Nova Scotia: 2002 - 2006

Gardner Pinfold

4. Offshore oil & gas

Sable gas production had a temporary drop in the study year 2006 but has since returned to pre-2006 levels of production with the installation of compression facilities. Though the project has

several more years of sizable production, the Sable field will begin a slow natural decline in

production. Growth of the industry depends on development of the Deep Panuke field, which is in

the advanced planning stage, and depends critically on further exploration leading to the discovery of new recoverable reserves. With growing demand for natural gas in the U.S. and the

Maritimes, further interest in the Nova Scotia offshore is expected. Complementing this interest

is the prospect of the development of a liquefied natural gas terminal in Nova Scotia. This would also contribute to the impact of ocean activity in the province.

5. Water transportation

Bulk cargo traffic has been fairly stable for the past several years, while there has been a recent decline in container traffic despite substantial increases in overall container movements globally.

Halifax, a discretionary container port, may be feeling the effects of the expansion efforts in key

U.S. ports, New York and Norfolk.

The growth path for the industry is difficult to predict. Bulk cargo traffic is expected to continue

at historic levels, though there will be fluctuations in response to general economic conditions.

Ferry services are also expected to operate at historic levels, though some uncertainty surrounds the Digby-Saint John service.

It is with container traffic that the greatest level of uncertainty lies. This is due to several factors including the changes occurring in shipping technology and economics, the shifts in origin and

destination markets, and the investments being made in shipping routes and facilities and in new

and expanded terminals. The shipping and terminal industry could expand substantially in Nova Scotia over the next decade (with two new terminals proposed) or could contract significantly (if

new terminals are not developed and traffic continues to drift away from Halifax) depending on

how these various changes play themselves out.

6. Ocean tourism

Tourism generally has declined in Nova Scotia, as in the other Atlantic Provinces. This is due to

rising costs, a stronger Canadian dollar and changing tastes in tourism travel. These shifts have benefited cruise ship travel, which has expanded in Nova Scotia. Recreational fishing, another

form of ocean tourism, has remained fairly stable, while the survey evidence suggests that coastal

tourism is following the general downward trend.

Cruise ship travel is expected to continue to strengthen, though not until after 2010 when North

American economies emerge from recession (see Appendix D for trends). Similarly, coastal

tourism is expected to strengthen after 2010 in response to lower costs and improved economic conditions. With a consistent data set available from the national travel survey, it should be

possible to track changes in coastal tourism with some confidence.


Gardner Pinfold

7. Shipbuilding and boat building

For shipbuilding and repair, steady demand for refit work is expected from commercial cargo vessels, DND and Coast Guard. The economic impact of the industry would be greatly increased

if the Halifax shipyard were the successful bidder on one or more of several Coast Guard and

naval vessels planned to be replaced over the next several years.

Demand for the boatbuilding industry rises and falls with the fortunes of the fishing industry, the

lobster fishery in particular (because so many vessel owners hold lobster licences). Demand has

been steady for the past several years, but could face a downturn in 2009-2010 as the fisheries go through a difficult period due to the market crisis.

8. Marine construction

Demand arising from DND and Small Craft Harbours is expected to be steady, with the possibility of a sharp increase in activity from the start of construction of one or both of the

proposed container terminals by 2010. Development of the Deep Panuke natural gas field, also

planned for the next 2-3 years, would also contribute an expansion of this sector. Proposals have also been put forward to the federal government for further development of container terminal

facilities in Halifax as part of the Atlantic Gateway.

9. Government services There is no indication the roles and responsibilities of any of the departments and agencies will

change. Expenditures and staffing levels have remained fairly stable for the past several years

and are expected to remain so for the immediate future. The likelihood of deficit spending over at least the next year or two could cause some cuts in departmental resources in order to restore

balances. Such cuts occurred in the mid-1990s, causing significant loss of resources in marine

departments.


Gardner Pinfold

Gardner Pinfold 25

BIBLIOGRAPHY

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Appendix A: Marine Activity Definitions

Gardner Pinfold A - 1

These are the formal definitions of the marine industries under NAICS

! Commercial fishing: NAICS #11411 – harvesting fish from natural habitat using specialized vessels

and gear. Vessels include trawlers, seiners, trollers, long-liners and various open-decked boats used

for lobster, crab and dive fisheries. Gear includes, trawl, long-line, purse seine, hook and line, and various traps and pots.

! Aquaculture: NAICS #11251 – establishments engaged in farm raising and production of aquatic

animals in controlled environments and using various forms of intervention (e.g., net pens, cages,

various suspension systems) to enhance production including stocking, feeding and protecting from

predators and disease.

! Seafood product preparation and packaging: NAICS #31171 – establishments engaged in dressing,

filleting, canning, smoking, salting and freezing fish, and shucking and packing shellfish. Factory ships

are included in this industry.

! Oil & gas development and production: NAICS #211111 – this industry consists of establishments

primarily engaged in the exploration, development and production of petroleum or natural gas from

wells in which hydrocarbons flow using normal pumping techniques. Offshore facilities would include fixed or floating production systems, with hydrocarbons transported to shore facilities via ship or

pipeline.

! Oil & gas exploration: NAICS #213111/2 – this industry consists of establishments engaged

primarily in performing activities on a contract basis for oil & gas operations. Included are exploration

drilling and the various services needed to test a well and prepare it for production (running casing,

cementing, perforating well casings, and acidizing and chemically treating wells).

! Water transportation: NAICS #48311 – this industry consists of establishments primarily engaged in

deep sea, coastal, Great Lakes and St. Lawrence Seaway shipping services for freight and passengers

(including ferries and cruise ships). Only the impacts arising from deep sea and coastal shipping

(including ferries and cruise ships) are included in this study.

! Support Activities for Water Transportation: NAICS #4883 – this industry consists of four sub-

components: port and harbour operations, marine cargo handling, navigational services (piloting, tugboat, docking, salvage) and other services to water transportation (cargo surveyors/checkers, vessel

supply services, floating drydock for maintenance).

! Recreational fishing: this includes salt-water and estuarial fishing using charter vessels and guides, as

well as own vessels and facilities.

! Cruise ship travel: NAICS #4331 – this sector has emerged over the past decade as a major seasonal

source of tourism activity. On the east coast, cruise lines offer return trips between northeast U.S. and

ports on the St. Lawrence, with various ports of call in the Atlantic Provinces. On the west coast,

Vancouver is a home-port, with several ports of call en route to Alaska.

! Coastal tourism and recreation: this includes ocean touring (whale watching, sightseeing, coastal

hiking, diving, kayaking), as well as sailing, cruising and visiting beaches and other marine locations.

! Marine construction: NAICS #2379 – establishments primarily engaged in constructing heavy and civil engineering works involving specialized trade activities such as pile driving and dredging,

including development of marine facilities.

! Ship building and repairing: NAICS #336611 – this industry consists of establishments primarily

engaged in operating a shipyard with fixed facilities including drydock and fabrication equipment

capable of building and repairing ships (vessels not intended for personal use).

! Boat building: NAICS #336612 – establishments primarily engaged in the manufacture of boats

(vessels intended for personal use, including fishing boats).

! Navigation and guidance systems: NAICS #334511 – establishments primarily engaged in the

manufacture of such equipment as aeronautical systems and equipment, nautical systems and

instruments, radar systems, fish finders (sonar).

Appendix B: Data and sources

Gardner Pinfold B - 1

The analysis draws on data from several sources:

! Commercial fisheries: Two sources of data are available for value of output data. DFO publishes

value of landings data for the commercial fisheries by province with about a one-year lag. These data

are available on the DFO website: (http://www.dfo-mpo.gc.ca/index-eng.htm). Statistics Canada uses

these data for its commercial fisheries data at the provincial level, though with a 3-4 year lag

(CANSIM 381-0016 http://estat.statcan.gc.ca/cgi-win/CNSMCGI.EXE). Statistics Canada relies on these data, its own surveys and also administrative (taxation) data to calibrate its input-output model

and to develop annual GDP estimates.

Employment estimates for the fisheries represent one area of weakness. It is possible to estimate the level

of participation from employment insurance data (number of claims), but at best this gives a lower bound

on the numbers because not all participants claim. DFO fisher registration data would provide an upper

bound, but not all those who register to fish actually do so. There are no official data on full-time

equivalents, and no reliable way to estimate this. In part this reflects the status of crewmembers – they are

classified as independent contractors, not employees – and in part the seasonal nature of the fisheries.

Work is not confined to the time spent fishing, but also extends to preparation time before and

maintenance time at the end of the season. The employment estimates contained in the impact analysis

are derived from the results of the input-output model runs. The model calculates the level of employment

needed to reach a given output level based on income levels derived from administrative and survey data.

! Aquaculture: There is good reporting of aquaculture statistics (including production and value by

species, number of sites and numbers employed) by the Nova Scotia Department of Fisheries and

Aquaculture (http://www.gov.ns.ca/fish/aquaculture/stats/index.shtml), with value added accounts for

the industry in each province published by DFO (http://www.dfo-

mpo.gc.ca/communic/statistics/aqua/index_e.htm) and Statistics Canada (CANSIM 381-0016

http://estat.statcan.gc.ca/cgi-win/cnsmcgi.pgm. There is about a one-year lag in reporting by the

province and DFO. Statistics Canada relies on production data, its own surveys and also

administrative (taxation) data to calibrate its input-output model and to develop annual GDP estimates.

! Fish processing: Annual output value and other key manufacturing statistics from Statistics Canada is

available for 2004-2006 online through CANSIM 301-0006, and for earlier years from CANSIM 301-

0003 and 301-0005 http://cansim2.statcan.ca/cgi-win/cnsmcgi.exe?Lang=E&RootDir=CII/&ResultTemplate=CII/CII___&Array_Pick=1&ArrayId=301

0006

Export statistics are available online from the Industry Canada Strategis website http://strategis.gc.ca/sc_mrkti/tdst/tdo/tdo.php?lang=30&headFootDir=/sc_mrkti/tdst/headfoot&productType=HS6

&cacheTime=962115865#tag One issue with the output data is inclusion of imported raw material in the

production and export statistics. This is a concern if the rationale for including seafood processing is its

linkage with domestic fisheries. Otherwise it is not an issue (this study does not consider this an issue).

The contribution to output of imported raw material can be substantial, e.g., one major seafood producer

in Nova Scotia relies almost exclusively on imported raw material for its production.

! Oil & gas: Output data for the offshore oil & gas industry in Nova Scotia is suppressed by Statistics

Canada due to confidentiality restrictions. Value of output can be estimated using production data

(quantity) applied to average market prices. Monthly production data can be obtained from the

CNSOPB (http://www.cnsopb.ns.ca/production.php). Value can be derived by using monthly average

natural gas import prices (U.S. northeast) obtained from the U.S. Energy Information Agency (http://tonto.eia.doe.gov/dnav/ng/ng_move_poe1_a_EPG0_PRP_DpMcf_a.htm) and adjusted for the

Canada-U.S. exchange rate and netting out the pipeline toll (to obtain the producer’s net-back

revenue). The calculation is shown in the table below.

Other data on the offshore industry tends to be reasonably well reported by the CNSOPB, though

expenditure data on project development vs. operations are not distinguished in the benefits reports.

Unless the analyst has access to this detail (which is the case for this analysis), development phase

impacts could only be reported with wide confidence limits.

B - 2 Economic Impact of the Ocean Sector in Nova Scotia: 2002 – 2006

Gardner Pinfold

! Marine transportation: GDP data for marine transportation (NAICS #48311) are available at the

national level, but are suppressed by Statistics Canada for Nova Scotia in some years due to

confidentiality restrictions. The output data used for this report were obtained by special request to

Statistics Canada. These data cover the “for-hire” segment of the industry, not the marine

transportation activity of companies that ship using their own vessels (referred to as “own-account”

shipping). This is not believed to represent a significant component of the industry in Nova Scotia.

Marine transportation is divided into two distinct industries under NAICS: #4831 covers shipping and

#4883 covers support services (port activities). Neither GDP nor value of output data are available for

support services because Statistics Canada incorporates this activity in the broader grouping, Support Services for Transportation (NAICS 488). If a complete picture of the water transportation sector is to be

developed, then it is necessary to estimate the contribution of support activities using indirect methods.

The estimate contained in this report is based on historical data at the national level (1997-2000) that

distinguished NAICS 48311 and 4883 and allows the relative contribution to GDP of the activities to be

determined (the ratio of 4883/48311 is 1.5:1.0). This ratio is confirmed by current U.S. data for these

industries.

! Tourism and recreation: Comprehensive data on the tourism sector are not systematically compiled in

Canada. This study relies on three secondary sources. Two are focused on specific marine related

tourism activities, cruise ship travel and recreational fishing, with expenditure data available on a

provincial basis. Data on cruise ship travel is available from BREA, 2008, The Economic Contribution

of the International Cruise Ship Travel in Canada, 2007. Data on recreational fishing is available from DFO, Survey of Recreational Fishing in Canada, 2000 and 2005. The third source – the Travel Survey

of Residents of Canada conducted quarterly by Statistics Canada – addresses tourism generally, but

allows the analyst to extract participation data (days and expenditures) on specific activities including

several with an oceans focus (coastal hiking, diving, kayaking, sailing, visiting beaches). Access to the

electronic files of the recreational fishing and TSRC survey databases from DFO and Statistics Canada

greatly facilitates the analysis.

Taken together, the three sources provide a good approximation of the economic impact of ocean

tourism. Results should be regarded as conservative because the criteria for what constitutes a “trip” in

the TSRC survey lead to an under-estimation of local residents’ participation in ocean activities, and

also because non-residents are not included in the survey.

With the data, the next step is to run the expenditures through the input-output model. But tourism is

not one of industries for which input and output vectors have been developed in the NSIO. This means expenditures have to be sorted by commodity (the surveys provide a breakdown of expenditures by

category) before running the model.

Production Volume Price Export value Toll Pipeline toll Netback to SOEP

cubic metres mcf US$/mcf CDN$/US$ CDN $ $/mcf $ $

1 2 3 4 5 6 7 8

2001 5,375,353 189,828,778 4.47 1.60 1,357,655,422 1.2 227,794,534 1,129,860,888

2002 5,474,993 193,347,514 3.49 1.57 1,059,409,033 1.2 232,017,017 827,392,016

2003 4,665,769 164,770,062 5.85 1.40 1,349,466,811 1.2 197,724,075 1,151,742,736

2004 4,327,897 152,838,235 6.44 1.30 1,279,561,705 1.2 183,405,882 1,096,155,823

2005 4,225,762 149,231,375 9.40 1.21 1,697,357,655 1.2 179,077,650 1,518,280,005

2006 3,794,706 134,008,769 7.73 1.13 1,174,696,744 1.2 160,810,522 1,013,886,2221. CNSOPB annual production volume. http://www.cnsopb.ns.ca/production.php

2. Converted to mcf (thousand cubic feet) @ 1 mcf = 0.02831685 m3

3. US Energy Information Agency, based on price of natural gas via pipeline to Calais.

http://tonto.eia.doe.gov/dnav/ng/ng_move_poe1_a_EPG0_PRP_DpMcf_a.htm

4. Average annual exchange rate (Bank of Canada). http://www.bankofcanada.ca/en/rates/exchange_avg_pdf.html

5. Value of production in CDN $

6. Toll on Maritimes & Northeast Pipeline

7. Toll cost/year

8. Netback to SOEP used as driver for I-O model

Economic Impact of the Ocean Sector in Nova Scotia: 2002 – 2006 B - 3

Gardner Pinfold

! Marine construction: This is not an exclusively marine activity, and consequently output and GDP

data are not available from published sources. For purposes of running the input-output model, marine

construction would fall under a broad construction category: “Other heavy and civil engineering

construction (NAICS #2379). Expenditure data were compiled from several sources including port

authorities (not just for their own data, but for construction expenditures generally in each port), DFO

for small craft harbours, and DND for naval base capital expenditures. The data for oil & gas development expenditures were estimated using annual Benefits Plan information submitted to the

CNSOPB by the Sable offshore project. These sources would exclude capital spending at private

marine facilities and hence would underestimate overall construction impacts.

! Shipbuilding and boat building: Output value is published by Statistics Canada, though data are

suppressed in some years due to confidentiality restrictions. Output value and a range of other key

statistics including employment are available online through CANSIM 301-0006 (for 2004-2006) and

for earlier years from CANSIM 301-0003 and 301-0005 (subject to confidentiality).

(http://cansim2.statcan.gc.ca/cgi-win/CNSMCGI.EXE?Lang=E&ArrayId=301-

0006&Array_Pick=1&Detail=1&ResultTemplate=CII/CII___&RootDir=CII/) For the years under

consideration in this study, the data are confidential. Output data were obtained from Statistics Canada

by special request. Employment is based on data provided by the Nova Scotia Boat Builders

Association and estimates for the Halifax Shipyards.

Beyond ships and boats, navigation and research equipment is also manufactured for ocean uses. But

the manufacturers do not fall into a unique NAICS marine manufacturing industry. They fall under a

broader industry grouping that includes mainly companies producing for aeronautical applications.

Consequently, output value, the key statistic that would allow industry impacts to be determined, is

unavailable.

! Government services: The expenditure data needed to run the NSIO was obtained by request from

each of the departments, with spending broken down into salary costs and O&M. The latter was

further broken down into greater detail in order to run the model. DND is an exception to this

approach. The DND accounting system is not set up to provide financial information by service

(maritime, land, air). Fortunately, expenditures can be estimated using a DND publication, DND

Estimated Expenditures by Electoral District and Province (annual). With some adjustments for land forces, expenditure estimates for Halifax, Shearwater and Greenwood can be isolated.

! Universities/research: expenditure data must be obtained directly from each institution. Isolating

marine activity expenditures can be a laborious exercise because financial systems are not set up to

respond to this kind of data request.

Appendix C: Impacts by activity 2002 - 2006

Gardner Pinfold C - 1

GDP Impact $000s Direct Spinoff Total Direct Spinoff Total Direct Spinoff Total Direct Spinoff Total

2002 660,226 117,018 777,244 124,919 253,333 378,252 166,107 142,261 308,368 197,424 101,790 299,214

2003 919,045 162,891 1,081,936 130,805 265,270 396,075 158,806 136,008 294,813 87,586 45,159 132,745

2004 874,689 155,029 1,029,718 128,843 261,291 390,134 155,155 132,881 288,036 111,258 57,364 168,622

2005 1,211,527 214,730 1,426,257 149,772 303,734 453,506 146,484 125,455 271,940 68,649 35,395 104,043

2006 809,041 143,394 952,435 155,763 315,884 471,646 132,794 113,731 246,525 95,635 49,308 144,943

Employment Impact Person years

2002 348 1,920 2,267 1,724 4,732 6,456 5,566 2,545 8,110 1,697 1,772 3,469

2003 484 2,672 3,156 1,805 4,955 6,760 5,321 2,433 7,754 753 786 1,539

2004 460 2,543 3,003 1,778 4,881 6,659 5,199 2,377 7,576 956 999 1,955

2005 638 3,522 4,160 2,067 5,673 7,740 4,908 2,244 7,152 590 616 1,206

2006 426 2,352 2,778 2,149 5,900 8,050 4,450 2,034 6,484 822 859 1,681

Income impact $000s

2002 24,301 77,758 102,059 138,036 176,069 314,104 113,132 206,491 319,623 118,332 61,236 179,569

2003 33,827 108,241 142,067 144,540 184,365 328,905 108,159 197,414 305,573 52,497 27,167 79,665

2004 32,194 103,017 135,211 142,372 181,600 323,971 105,673 192,876 298,549 66,686 34,510 101,196

2005 44,592 142,688 187,280 165,498 211,098 376,596 99,768 182,098 281,865 41,147 21,293 62,440

2006 29,778 95,285 125,063 172,118 219,542 391,660 90,444 165,079 255,523 57,322 29,664 86,985

OIL AND GAS PRODUCTION WATER TRANSPORTATION TOURISM

SHIPBUILDING AND REPAIRING

AND BOAT BUILDING


2002 408,877 250,863 659,740 11,325 7,940 19,264 198,605 455,869 654,474 198,605 273,264 471,869

2003 428,082 262,646 690,729 18,455 12,939 31,394 232,386 533,407 765,793 232,386 319,743 552,128

2004 375,520 230,397 605,917 11,464 8,038 19,502 219,378 503,551 722,929 219,378 301,846 521,224

2005 369,960 226,986 596,946 20,505 14,377 34,882 185,404 425,567 610,971 185,404 255,100 440,503

2006 332,054 203,729 535,784 19,666 13,788 33,455 175,236 402,230 577,466 175,236 241,110 416,347


2002 4,263 4,505 8,769 166 131 297 4,205 7,089 11,294 4,205 3,151 7,355

2003 4,464 4,717 9,181 270 214 485 4,920 8,295 13,215 4,920 3,687 8,606

2004 3,916 4,138 8,053 168 133 301 4,644 7,831 12,475 4,644 3,480 8,125

2005 3,858 4,076 7,934 301 238 539 3,925 6,618 10,543 3,925 2,941 6,866

2006 3,462 3,659 7,121 288 228 517 3,710 6,255 9,965 3,710 2,780 6,490

Income impact $000s

2002 286,200 153,524 439,724 5,441 4,922 10,364 152,560 292,026 444,586 152,560 170,534 323,094

2003 299,643 160,735 460,378 8,868 8,021 16,889 178,509 341,696 520,204 178,509 199,540 378,049

2004 262,851 140,999 403,850 5,509 4,983 10,492 168,517 322,570 491,087 168,517 188,371 356,888

2005 258,960 138,912 397,871 9,853 8,913 18,766 142,419 272,614 415,033 142,419 159,199 301,618

2006 232,427 124,679 357,106 9,450 8,548 17,998 134,609 257,664 392,274 134,609 150,468 285,077

*Green shading indicates that processing sector impacts have been adjusted to eliminate double counting of fisheries and aquaculture activity (See footnote on page 17). This allows the

addition of commercial fishing, aquaculture and seafood processing impacts to determine overall fishing industry impacts.

COMMERCIAL FISHERIES AQUACULTURE SEAFOOD PROCESSING

SEAFOOD PROCESSING EXCLUDING

FISHERIES AND AQUACULTURE*

C - 2 Economic Impact of the Ocean Sector in Nova Scotia: 2002 – 2006

Gardner Pinfold


2002 12,888 37,264 50,152 37,748 24,396 62,144 108,800 135,154 243,954 532,343 379,508 911,851

2003 17,323 50,086 67,409 44,675 28,873 73,548 108,400 134,658 243,058 551,582 393,223 944,805

2004 13,442 38,867 52,309 45,710 29,542 75,252 113,900 141,490 255,390 534,695 381,185 915,880

2005 7,206 20,836 28,042 43,789 28,300 72,089 114,300 141,987 256,287 547,123 390,044 937,167

2006 15,105 43,675 58,780 52,698 34,058 86,756 113,700 141,241 254,941 613,696 437,505 1,051,200


2002 200 716 916 592 452 1,044 1,915 3,798 5,713 10,316 7,166 17,482

2003 269 962 1,231 701 534 1,235 1,827 3,623 5,450 10,395 7,221 17,616

2004 209 747 955 717 547 1,264 1,768 3,506 5,274 10,297 7,153 17,450

2005 112 400 512 687 524 1,211 1,739 3,449 5,188 10,693 7,428 18,121

2006 234 839 1,073 827 630 1,457 1,704 3,380 5,084 10,709 7,440 18,149

Income impact $000s

2002 9,696 24,389 34,085 28,680 15,389 44,069 108,800 86,680 195,480 532,343 234,571 766,913

2003 13,033 32,781 45,814 33,943 18,213 52,156 108,400 86,361 194,761 551,582 243,048 794,630

2004 10,113 25,438 35,551 34,730 18,634 53,364 113,900 90,743 204,643 534,695 235,607 770,302

2005 5,422 13,637 19,059 33,270 17,851 51,121 114,300 91,062 205,362 547,123 241,083 788,206

2006 11,364 28,585 39,950 40,039 21,483 61,523 113,700 90,584 204,284 613,696 270,418 884,114

FISHERIES AND OCEANS NATIONAL DEFENCE OIL AND GAS DEVELOPMENT CONSTRUCTION: PORTS

UNIVERSITY/RESEARCH

GDP Impact $000s Direct Spinoff Total Direct Spinoff Total Direct Spinoff Total

2002 16,507 10,836 27,343 13,312 8,739 22,051 n.a. n.a. n.a.

2003 17,728 11,637 29,364 12,731 8,357 21,088 n.a. n.a. n.a.

2004 19,032 12,493 31,524 13,312 8,739 22,051 n.a. n.a. n.a.

2005 19,109 12,544 31,653 14,476 9,502 23,978 n.a. n.a. n.a.

2006 19,426 12,751 32,177 18,095 11,878 29,972 22,900 15,032 37,932


2002 219 207 426 176 167 343 n.a. n.a. n.a.

2003 235 222 457 169 160 328 n.a. n.a. n.a.

2004 252 239 491 176 167 343 n.a. n.a. n.a.

2005 253 240 493 192 182 373 n.a. n.a. n.a.

2006 257 244 501 240 227 467 220 197 417

Income impact $000s

2002 16,507 6,675 23,182 13,312 5,383 18,695 n.a. n.a. n.a.

2003 17,728 7,168 24,895 12,731 5,148 17,878 n.a. n.a. n.a.

2004 19,032 7,695 26,727 13,312 5,383 18,695 n.a. n.a. n.a.

2005 19,109 7,727 26,836 14,476 5,853 20,329 n.a. n.a. n.a.

2006 19,426 7,855 27,280 18,095 7,316 25,411 22,900 9,259 32,159

OTHER FEDERAL DEPARTMENTS PROVINCIAL DEPARTMENTS

Appendix D: 2001 Nova Scotia ocean sector impacts

Gardner Pinfold D - 1

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