Economic Impact of Marine Related Activities in Canada

Economic Impacts – Private Sector

1. Seafood sector

The sector

The Canadian seafood sector generates sales revenues in the $4 billion range, placing Canada generally amongst the world's top five exporting nations.

The sector is composed of three interrelated industries: fishing, aquaculture and fish processing:

• Commercial fisheries: 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.

The commercial fishing industry is composed of some 21,000 mainly independent fishing vessels (Table 3.1) employing about 40,000 (skippers and crew) in primarily seasonal fisheries. The number of vessels and licence-holders has dropped by about one-third on the Atlantic coast since the early 1990s, and by about half on the Pacific coast. The drop is due in part to the collapse of important stocks on both coasts (groundfish on the Atlantic and salmon on the Pacific), and also in part to changes in management systems (i.e., transferable quotas) that promote more efficient use of capital. Data outlining trends in the fisheries are set out in the discussion of regional impacts in Chapter V.

Table 3.1: Seafood sector structure, Canada, 2006

Commercial fisheries		Aquaculture		Processings
Vessels	Jobs	Sites	Jobs	Plants	Jobs
21,000	40,000	2,906	5,450	752	38,100

Source: provincial departments of fisheries and aquaculture

Vessels sell their catches to processing plants or other intermediaries, with a small percentage going directly to consumers. There is vertical integration in certain fisheries (common ownership of fishing vessels and processing plants), though this represents a relatively small proportion of overall industry production. The fisheries are managed through a combination of limited-entry lincensing, total allowable catches and individual quotas, fish size restrictions, seasons and gear and vessel restrictions.

The aquaculture industry is a mix of vertically integrated and independent operations (including contract growers), with 2,906 licenced sites (not all of which are active). Salmon accounts for 75-80% of production value, with mussels and oysters making up most of the balance. Many aquaculture operations process their own production, though aquaculture production also finds its way to plants serving the commercial fisheries.

The seafood processing industry consists of 752 establishments, employing some 38,100 workers in mainly seasonal jobs (Table 3.1). Most plants compete for raw material from independent fishing vessels, with vertical integration generally limited to high capital cost offshore fisheries, including those allowing factory vessels (e.g., northern shrimp, sea scallop and surf clam). The number of plants has declined since the early 1990s as the industry has consolidated in response to reduced supply and fewer vessels from which to secure raw material.

Production

Canada's commercial fisheries typically produce about one million tonnes (landed weight) of raw material annually, with a value in the $1.8-2.2 billion range (Table 3.2). The decline in the value of output since 2003 is attributable in part to reduced landings, but is due primarily to reduced revenues from exports to our major trading partner, the U.S. (due to the declining value of the U.S. dollar).

Aquaculture shows a steady increase in tonnage and value to 2006; the slight drop in value seen in 2007 resulted largely from pressure on exchange rates. Output value represents a mix of farm gate value and final product value since the official statistics include aquaculture processing as part of the aquaculture industry.

Through the early to mid-2000s, the final product value of the seafood industry overall (processing plus aquaculture; commercial fisheries output is included in processing) was stable at just under $5.0 billion, with about 80% destined for export markets. The abrupt decline in the value of processed output from marine fisheries in 2005 was offset by an increase in aquaculture production (Table 3.2). The decline is explained in part by the exchange rate shift, but also by an abrupt drop in 2005 in prices for snow crab, a major species in the Atlantic fisheries.

Table 3.2: Seafood production, Canada, 2003-2007

	Commercial fisheries Landings		Aquaculture Output		Processing Output	Seafood industry	Export Value
	tonnes	$000s	tonnes	$000s	$000s	$000s	$000s
2003	1,068,682	2,185,383	146,900	573,981	4,301,326	4,875,307	4,368,285
2004	1,130,260	2,213,428	138,400	526,828	4,301,326	4,840,438	4,306,948
2005	1,048,159	1,937,984	151,390	700,158	4,301,326	4,680,063	4,168,157
2006	1,030,041	1,820,281	167,800	895,031	3,962,305	4,857,336	3,951,772
2007	972,628	1,887,543	166,170	787,494	n.a.	n.a.	3,726,594

Source: DFO, http://www.dfo-mpo.gc.ca/stats-eng.htm; Statistics Canada, special tabulation Statistics Canada, Cat. No. 301-0006

Data issues and adjustments

• In order to provide an estimate of the overall impact of the seafood sector, care must be taken to eliminate double counting of backward linkages to fisheries and aquaculture when estimating indirect and induced impacts of the processing industry. This is accomplished by forcing purchases from the fishing industry to zero when estimating the processing industry impacts.

Economic impact

The seafood sector generated $3.9 billion in GDP (Table 3.3) on total revenue of just under $4.9 billion in 2006 (Table 3.2). The sector created the equivalent of 37,255 full-time direct jobs (actual direct employment is about double due to seasonal variation) and another 25,200 in spinoff activities. This employment resulted in about $2.3 billion in household income.

Table 3.3: Economic impact of the seafood sector in Canada, 2006

GDP and Income in $000s Employment in full-time equivalent	Fishing	Aquaculture	Processing1	Seafood sector
Direct impact
GDP	929,861	289,010	932,433	2,151,304
Employment	10,098	4,173	22,983	37,255
Income	623,943	121,845	650,887	1,396,675
Indirect impact
GDP	220,891	204,659	566,486	992,037
Employment	3,416	2,936	7,863	14,215
Income	119,958	102,429	214,123	436,510
Induced impact
GDP	302,414	141,140	297,283	740,837
Employment	3,447	2,012	5,625	11,084
Income	213,573	70,409	178,830	462,811
Total impact
GDP	1,453,167	634,810	1,796,202	3,884,178
Employment	16,961	9,121	36,472	62,554
Income	957,474	294,683	1,043,840	2,295,997

¹Processing industry indirect and induced impacts adjusted to eliminate double-counting of fishing activty.
Source: Statistics Canada Interprovincial Input-Output Model, 2005 version.

2. Offshore oil & gas sector

The sector

The offshore oil & gas sector generated sales revenues in the $9.0 billion range (2006), with most of the production exported to the U.S.

The sector is composed of two interrelated industries: crude petroleum and natural gas extraction and support activities for oil & gas operations:

• Extraction: 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.
• Support activities: 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).

Offshore oil & gas extraction activity is to date conducted only on the East Coast of Canada. Three crude oil projects have been developed and are in production on the Grand Banks off Newfoundland and Labrador (Hibernia, Terra Nova and White Rose), with another project in the planning stage (Hebron). One natural gas project has been developed and is in production on the Scotia Shelf off Nova Scotia (Sable), with another project in the planning stage (Deep Panuke). Given the substantial capital requirements to develop these projects (several billion dollars each), all projects are developed by consortia of major petroleum companies.

Table 3.4: Offshore oil & gas sector, operating costs and employment, 2006

	Extraction	Support activities
Projects #	Operating costs $ millions	Employment FTE	# Wells drilled	Cost $ millions	Employment FTE
4	1,300	3,000	6	185	200

Source: CNLOPB/CNSOPB

Support services (exploration) activities consisted of six wells in 2006, all on the Grand Banks. Four of these were drilled to delineate the White Rose field, while two were exploration wells. A drilling program typically is conducted a jack-up or semi-submersible rig, supported by supply and safety vessels, helicopters and a range of well finishing and testing services. Exploration activities on the Grand Banks have been fairly steady over the past decade, while disappointing results on the Scotia Shelf have led to a drop-off in exploration in that area. Offshore exploration is an expensive activity, with wells typically costing in the $30-40 million range.

Production

The three oil projects combined to produce 125 million barrels of crude oil in 2008, with a total value of $12.9 billion (Table 3.5). The substantial increase in value since 2004 was due to rising oil prices, which more than offset the declining value of the U.S. dollar.

Similar increases in natural gas prices served to push the Sable gas production value to $1.5 billion in 2005. The decline in 2006 was due to reduced output, weaker prices and the reduced value of the U.S. dollar. Production recovered in 2007 with the addition of a compression platform, and with rising prices, revenues increased to an estimated $1.46 billion in 2008.

Table 3.5: Offshore petroleum production, Canada, 2002-2008

	Crude oil		Natural gas
	million bbls	$ millions	bcf	$ millions
2002	104	4,082	193	827
2003	123	4,994	165	1,152
2004	115	5,681	153	1,096
2005	111	7,387	149	1,518
2006	110	8,108	134	1,014
2007	134	10,435	155	1,079
2008	125	12,917	164	1,462

Source: See Appendix A for derivation and sources

Data issues and adjustments

• Statistics Canada does not publish output and GDP data for the offshore sector due to confidentiality (too few producers). Applying crude oil and natural gas commodity prices to production data (available from the respective offshore petroleum boards) allows the value of output needed to estimate impacts to be derived. These results are shown in Table 3.5, with derivation of the estimates set out in Appendix A.
• The total nominal GDP impact is assigned to the respective provinces (Newfoundland and Labrador and Nova Scotia) because this is where production occurs. Estimating direct employment and income impacts is problematic because not all the expenditure triggering these impacts occurs in the provinces, and also because direct impacts are not reported due to confidentiality. These impacts are derived from the share of total expenditures occurring in the provinces (obtained from the respective offshore petroleum boards) and adjusted for published values for these indicators.

Economic impacts

The offshore oil & gas sector generated $9.3 billion in GDP overall (Table 3.6) on total revenue of $9.1 billion in 2006 (Table 3.5). The sector created 3,800 direct jobs and another 4,600 in spin-off activities. This employment resulted in over $465 million in labour income. It is worth noting that most of the direct GDP is accounted for by profits and debt payments (returns to and of capital), most of which leaves the provinces of origin (resource royalties remain). This does not mean that GDP should be adjusted. While GDP accurately captures the income produced in an area, it does not necessarily reflect income flowing to the economy of that area. In this respect oil & gas is simply an extreme example of many other industries where income accrues as payments to the owners of capital residing outside the area where that income is generated.

In addition to the employment and income created through field development and production, the producing provinces benefit greatly from royalties. In 2007 for example, Newfoundland and Labrador earned $1.5 billion in royalty payments, while Nova Scotia earned $380 million.

Table 3.6: Economic impact of the offshore oil & gas sector in Canada, 2006

GDP and Income in $000s Employment in full-time equivalent	Oil & gas extraction	Support services	Oil & gas sector
Direct impact
GDP	7,753,603	85,560	7,839,163
Employment	3,334	488	3,822
Income	227,039	35,340	262,379
Indirect impact
GDP	952,713	35,340	988,053
Employment	2,800	271	3,071
Income	115,558	13,020	128,578
Induced impact
GDP	435,316	26,598	461,914
Employment	1,365	160	1,524
Income	63,252	11,160	74,412
Total impact
GDP	9,141,632	147,498	9,289,130
Employment	7,498	919	8,417
Income	405,850	59,520	465,370

Source: CNLOPB/CNSOPB; Statistics Canada Interprovincial Input-Output Model, 2005 version.

3. Marine transportation sector

The sector

The marine transportation sector generates revenues estimated at $6.5 billion (2006), based on carriage of domestic and international cargoes on deep sea and coastal routes (excluding Great Lakes-St. Lawrence Seaway upstream from Montreal).

The sector is composed of two closely related industries: water transportation and support activities for water transportation:

• 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).

Marine transportation consists of the vessel side of the sector, capturing the activities of shipping and ferry companies only. The industry may be divided into two segments: "for-hire" and "own account". Only financial results for the "for-hire" segment are included in the official statistics. The industry excludes the marine transportation component of companies that integrate shipping into their operations ("own-account"). In 2006 after some years of analysis, Statistics Canada completed a satellite account in order to gain some insight into the magnitude of own-account activity. The report concluded that if own-account activity were included in the official statistics, it would more than double the size of the industry in terms of contribution to GDP. Vessel data in Table 3.7 includes both the for-hire and own-account segments of the industry.

Table 3.7: Marine transportation industry structure, Canada, 2007

Major ports		Canadian flag vessels
Port Authorities	Transport Canada	# Cargo	GRT	# Ferries	GRT
19	77	110	1,780	72	428

Source: Transport Canada, Transportation in Canada, 2007

Support activities for water transportation consists of the port/harbour side of the sector, capturing the activities occurring when ships enter port to load or unload cargo or transport passengers. This is not an indirect activity in relation to water transportation, but a distinct industry.

Canada has 96 major ports, 19 managed by Canada Port Authorities and 77 by Transport Canada. Of those managed by Canada Port Authorities, 15 are on either the Pacific (6) or Atlantic coast (9); and of those managed by Transport Canada, 55 are marine ports (40 Atlantic and 15 Pacific). For purposes of this study, activities at the CPA ports of Québec City and Montréal are included in the analysis. Upstream ports on the Great Lakes-St. Lawrence Seaway system are excluded.

Production

The marine component of the water transportation sector generated an estimated $6.3 billion in revenues in Canada in 2006. The water transportation segment (NAICS 48311) accounted for $2.8 billion, while support activities (NAICS 4883) contributed an estimated $3.5 billion (Table 3.8).

Table 3.8: Marine transportation sector production, Canada, 2001-2005

	Vessel movements #	Cargo (000 t)	Cargo (% container)	Water transportation revenues ($m)	Support activities revenues ($m)	Total revenues ($m)	Pilotage assignments #
2001	-	394,700	8.2	2,021	2,535	4,556	50,992
2002	40,048	408,141	9	2,191	2,748	4,939	51,118
2003	40,926	443,779	9.2	2,369	2,971	5,340	51,004
2004	40,705	453,280	9.9	2,429	3,019	5,448	51,917
2005	42,919	470,109	9.6	2,626	3,290	5,916	53,549
2006 1	n.a.	n.a.	n.a.	2,783	3,487	6,270	n.a.

Source: Statistics Canada, Shipping in Canada 2005; Transport Canada, Transportation in Canada 2007
¹2006 revenue data estimated from 2006 GDP using a 2005 GDP/Revenue ratio of .367.

Industry activity is characterized by rising vessel movements and increased cargo tonnage. Also of note in Table 3.8 is the increasing share of total tonnage accounted for by container traffic. This trend affects mainly three ports, Vancouver, Montreal and Halifax. Though increasing, the relatively small share of total tonnage accounted for by containers reflects the importance of Canada's marine ports in the shipment of bulk cargoes, including such commodities as petroleum, various metallic and nonmetallic minerals and wheat. Pilotage assignments increased with vessel movements.

Data issues and adjustments

• Statistics Canada does not report GDP or other data separately for any of the activities supporting water, rail, truck or air transportation. Without such separate reporting, if a complete picture of the water transportation sector is to be developed, it is necessary to estimate the contribution of support activities using indirect methods. The estimate contained in Table 3.8 is based on historical data (1997-2000) that distinguished NAICS 48311 and 4883 and allowed the relative contribution to GDP of the industries to be determined (the ratio of 4883/48311 is 1.5:1.0). Working backwards from this ratio, it is possible to derive the output value for NAICS 4883 shown in Table 3.8. The GDP ratio is confirmed by current U.S. data for these industries (the U.S. Bureau of Census reports GDP for NAICS 4883 and support activities for other transportation modes). Applying this ratio to NAICS 48311 allows the derivation of NAICS 4883, providing a basis for estimating overall industry impacts (see Appendix B).
• Another deficiency lies in the exclusion of "own-account" shipping activity. While strictly speaking this activity is not by definition part of the water transportation industry, the failure to include it nonetheless results in a substantial underestimate of the contribution of the marine environment to economic well-being. A strong case can be made to address this deficiency by relying on satellite account estimates, which would effectively increase water transportation (NAICS 48311) impacts by 130%. Whether a case can be made for making the same adjustment to support activities (NAICS 4883) is more difficult to say. Presumably all or most of the support activities would be triggered by "own-account" vessels and captured in the NAICS 4883 data regardless of their industry designation, provided they were trading at CPA or TC ports for which Statistics Canada data are compiled. The extent of private port activity is not known and is not captured in the support activities data.
• Neither output (revenue) nor cargo data are available for 2006. Revenue for 2006 set out in Table 3.8 is derived by applying the 2005 GDP to revenue ratio (.367) to an estimate of current dollar GDP for 2006. The estimate is derived by applying 6% growth to 2005 GDP based on 2005/2006 real GDP growth for water transportation. GDP data by industry for 2006 in chained (2002) dollars are available from Statistics Canada.

Economic impact

The deep sea and coastal segments of the water transportation sector generated $5.5 billion in GDP overall (Table 3.9) on total revenue of just under $6.3 billion (Table 3.8). The sector created about 41,560 direct jobs and another 36,400 jobs in spin-off activities. This employment generated about $3.7 billion in labour income.

These impacts reflect only the "for-hire" component of the industry, and consequently represent a conservative estimate of the economic significance of the water transportation sector.

Table 3.9: Economic impact of the marine transportation sector in Canada

GDP and Income in $000s Employment in full-time equivalent	Marine transportation	Support activities	Marine transportation sector
Direct impact
GDP	1,211,790	1,826,641	3,038,431
Employment	14,506	27,086	41,592
Income	845,742	1,209,378	2,055,120
Indirect impact
GDP	497,318	633,509	1,130,827
Employment	6,633	11,718	18,351
Income	288,256	399,305	687,561
Induced impact
GDP	553,693	796,101	1,349,794
Employment	6,380	11,713	18,093
Income	382,854	540,755	923,608
Total impact
GDP	2,262,801	3,256,251	5,519,052
Employment	27,518	50,517	78,035
Income	1,516,852	2,149,437	3,666,289

Source: Statistics Canada Interprovincial Input-Output Model, 2005 version.

4. Tourism and recreation

The sector

Tourism is not classified under NAICS because it cuts across several established industries including transportation, accommodation and food service. Nonetheless, tourism is widely recognized as a major source of economic impact and for this reason is included as one focus of analysis within the range of marine activities.

Due largely to the scope and focus of data sources, tourism is broken down into three expenditure-driven areas for this analysis: marine recreational fishing, cruise ship travel, and coastal tourism in the form of water-based recreational activities. In each case the activities tend to be seasonal, lasting 2-6 months in most coastal regions of Canada. An overview of each activity with expenditure estimates is set out in Appendix C.

• Recreational fishing: this includes salt-water and estuarial fishing using charter vessels and guides, as well as own vessels and facilities.
• Cruise ship travel: 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. This segment includes resident and international tourists, as well as local residents.

The data in Table 3.10 provide an overview of the key industry indicators, including average spending per trip or person that forms the basis of the impact estimates (Note: estimates are based on actual expenditures; non-market values are not included). With recreational fishing and coastal recreation, spending is on travel, accommodation, food, charters and equipment. With cruise ship travel, impacts are driven by expenditures by passengers and crew at ports of call. Excluded in the average spending figure in Table 3.10 is spending by the cruise ship on port fees, fuel and provisions. These are captured in Water Transportation.

Table 3:10: Tourism and recreation activity, Canada, 2006

Recreational fishing		Cruise ship			Coastal tourism1
Days 000s	Avg spend/day $	Ship calls #	Passengers 000s	Average spend/passenger $	Days 000s	Avg spend/day $
3,210	242	1,000	1,749	270	36,278	47

Source: Appendix C
¹Recreational boating is not included in these figures, only in the total spending, since days of participation were not available.

Production

Marine tourism activity generated expenditures of about $4.3 billion in Canada in 2006. Spending by tourists engaged in coastal activities account for just over 73% of total spending, followed by recreational fishing at 17% and cruise ship travel at 10%. Appendix C provides a detailed explanation for the derivation of expenditures.

Table 3.11: Tourism expenditures in Canada, 2002-2006 ( $millions)

	Recreational fishing	Cruise ship	Coastal tourism	Total
2002	693	334	n.a.	n.a.
2003	714	337	n.a.	n.a.
2004	736	411	n.a.	n.a.
2005	757	442	n.a.	n.a.
2006	778	472	3,093	4,344

Source: Appendix C

Data issues and adjustments

• Comprehensive data on the tourism sector are not systematically compiled in Canada. Estimates of tourism spending or impact tend to be either activity-specific or very broad, and generally gathered through surveys. An on-going deficiency in conducting ocean impact studies has been the lack of focus on ocean activities in conducting these surveys. As a consequence, ocean impact estimates have been partial at best, or at worst, comprehensive, but relying on difficult to verify assumptions.
• The estimates in this study are drawn from several sources. Two are focused on specific marine related tourism activities, cruise ship travel and recreational fishing. The others, including the Travel Survey of Residents of Canada (TSRC) conducted quarterly by Statistics Canada, and the Statistics Canada Travel Activities and Motivational Survey address tourism generally, but allows the analyst to extract participation data (days and expenditures in the case of the Travel Survey) on specific activities including several with an oceans focus. Another source, Economic Impact of the Canadian Recreational Boating Industry (2006), provides expenditure data by province, but only for 2006. Consequently, data are incomplete for 2002 – 2005.
• Taken together, these sources provide a good approximation of the economic impact of ocean tourism and recreation. Ordinarily, the weakest aspect of the analysis would lie in valuing coastal recreation. But in the absence of a specific survey directed at ocean recreation, the combination of the TSRC and Travel Activities Survey, coupled with the recreational boating analysis, provide the basis for a fairly comprehensive estimate of ocean recreation impacts (though non-market values are not included). More work is needed to estimate expenditures associated with local residents' beach activities.

Economic impact

The ocean tourism sector generated $4.2 billion in GDP overall (Table 3.12) on total expenditures of $4.3 billion (Table 3.11). The sector created over 45,400 direct jobs and another 46,400 jobs in spin-off activities. This employment generated almost $3.2 billion in labour income.

Table 3.12: Impact of ocean tourism in Canada, 2006

GDP and Income in $000s Employment in full-time equivalent	Recreational Fishing	Cruise Ship Travel	Coastal Tourism	Total Marine Tourism
Direct impact
GDP	338,992	205,463	1,345,598	1,890,053
Employment	8,151	4,941	32,357	45,449
Income	259,915	157,534	1,031,708	1,449,157
Indirect impact
GDP	233,318	141,413	926,133	1,300,864
Employment	4,492	2,723	17,831	25,045
Income	165,429	100,266	656,656	922,351
Induced impact
GDP	182,558	110,648	724,646	1,017,852
Employment	3,838	2,327	15,237	21,402
Income	142,452	86,340	565,449	794,240
Total impact
GDP	754,868	457,524	2,996,377	4,208,770
Employment	16,482	9,990	65,424	91,896
Income	567,796	344,140	2,253,812	3,165,748

Source: Statistics Canada Interprovincial Input-Output Model, 2005 version.

5. Marine construction

The sector

Marine construction consists of construction activity taking place in the marine environment. Two types of marine construction are included in this study: ports and harbours and offshore oil & gas development (installation of facilities). Under NAICS, marine construction falls under a broad construction category:

• Other heavy and civil engineering 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.

Quantifying the impact of marine construction draws on four distinct data sources:

• Port Authorities and port operators/users (including BC Ferries) for construction of works including docks and cargo handling facilities
• Fisheries and Oceans Canada for construction and maintenance of small craft harbours
• Department of National Defence for construction and maintenance of naval bases and facilities
• Oil & gas industry for offshore field development.

Production

The value of marine construction activity in Canada ranged from about $420 to $590 million annually between 2002 and 2006, with an average annual capital expenditure of $535 million (the figures in Table 3.13 are adjusted for inflation and expressed in 2005 dollars). Development of offshore oil & gas fields off Newfoundland and Labrador and Nova Scotia accounts for about half the total. Economic impacts are estimated using the 5-year average capital expenditures. Expenditure details are set out in Appendix D.

Table 3.13: Marine Construction in Canada, 2002-2006

Expenditures in $000 (2005)	Ports	Small craft harbours	National Defence	Oil & gas	BC Ferries	Total
2002	95,435	n.a.	82,519	316,815	39,378	n.a.
2003	69,637	28,776	79,031	369,957	39,574	586,975
2004	83,291	27,931	73,060	329,124	73,630	587,036
2005	90,736	25,094	97,119	204,750	101,000	518,699
2006	139,563	27,504	88,534	118,272	45,806	419,679
5-year avg.	95,732	27,326	84,052	267,784	59,878	534,772

Source: Appendix D

Data issues and adjustments

• Ports data excludes construction at private ports and marinas for which data are not compiled. The figures in Table 3.13 consequently understate actual capital expenditures.
• Published reports for oil & gas development expenditures specify local (provincial) expenditures, but do not make a distinction between fabrication and installation of facilities. The figures in Table 3.13 consequently overstate what would be regarded as pure construction activity (installation). Nonetheless, even if not pure construction impacts, the figures do accurately capture the level of activity in the provinces that contributes to economic impact arising from offshore development.

Economic impact

The marine construction sector generated $440 million in GDP overall (Table 3.14) on total expenditures of $535 million (Table 3.13). The sector created about 2,410 direct jobs in 2006, and another 3,200 jobs in spin-off activities. This employment generated over $270 million in labour income.

Table 3.14: Economic impact of marine construction in Canada, 2006

GDP and Income in $000s Employment in full-time equivalent	Ports & harbours	Offshore oil & gas	Total marine construction
Direct impact
GDP	106,796	125,607	232,402
Employment	1,569	841	2,410
Income	69,417	65,926	135,343
Indirect impact
GDP	66,655	47,193	113,847
Employment	1,572	423	1,996
Income	57,287	16,067	73,355
Induced impact
GDP	53,708	41,282	94,990
Employment	909	285	1,194
Income	40,686	21,417	62,103
Total impact
GDP	227,158	214,082	441,240
Employment	4,051	1,549	5,600
Income	167,390	103,409	270,800

Source: Statistics Canada Interprovincial Input-Output Model, 2005 version.

6. Shipbuilding and repairing and boat building

The sector

The sector consists of two industries: shipbuilding and repairing and boat building. In 2006, they generated total revenues in the $1.1 billion range.

• 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).

Canada's ship and boat building industry consists of some 810 establishments producing vessels for industrial and personal use in deep sea, coastal and inland waters. Since many types of watercraft can be used in either marine or freshwater applications, there is no straightforward way to isolate the marine component of the industry. The approach adopted in this study is to assign a marine designation according to the location of establishments, specifically to firms located on Canada's coasts. Using this approach reduces the total by about 225, to 585 establishments (135 shipyards, NAICS 336611; 450 boatyards, NAICS 336612). Total employment exceeds 6,700.

Table 3.15: Shipbuilding and boat building industry structure, Canada, 2006

Ship building & repairing1		Boatbuilding1
establishments	employment	establishments	employment
135	2,800	450	3,900

Source: Industry Canada, http://www.ic.gc.ca/cis-sic/cis-sic.nsf/IDE/cis33661este.html; Statistics Canada,Cat. No. 301-0006, Principal statistics for manufacturing industries
¹Includes data from coastal provinces only

Production

The marine component of the ship and boat building industry generated output valued at an estimated $1.1 billion in Canada in 2006. The shipbuilding segment (NAICS 336611) accounted for $520 million, while the boat building segments (NAICS 336612) contributed an estimated $540 million (Table 3.16).

Table 3.16: Ship and boatbuilding (marine) industry production, Canada, 2002-2006

	Ship building & repairing1		Boatbuilding1		Total1
	establishments #	revenues $ millions	establishments #	revenues $ millions	establishments #	revenues $ millions
2002	68	608	289	550	357	1,158
2003	80	468	258	584	338	1,052
2004	191	517	665	552	856	1,069
2005	119	450	456	461	575	911
2006	135	521	450	543	585	1,065

Source: Statistics Canada, special tabulation; Industry Canada, http://www.ic.gc.ca/cis-sic/cis-sic.nsf/IDE/cis33661este.html
¹Includes data from coastal provinces only

Data issues and adjustments

• Data confidentiality represents the most challenging issue for the shipbuilding and boatbuilding industries. The industries, particularly shipbuilding and repair, are small in the Atlantic provinces, with only a few establishments carrying on business. Statistics Canada may provide a special tabulation on value of output, though the data would be aggregated to meet confidentiality restrictions. Data by province combining the shipbuilding and boatbuilding industries is set out in Appendix E.

Economic impact

The ship and boatbuilding industry generated $803.5 million in GDP overall (Table 3.17) on total revenue of $1.1 billion (Table 3.16). The sector created over 8,940 direct jobs and another 7,100 jobs in spin-off activities. This employment generated over $674 million in household income.

Table 3.17: Economic impact of the ship and boat building industry, Canada, 2006

GDP and Income in $000s Employment in full-time equivalent	Shipbuilding	Boatbuilding	Industry total
Direct impact
GDP	317,730	144,660	462,390
Employment	6,766	2,179	8,944
Income	312,080	74,640	386,720
Indirect impact
GDP	95,820	54,250	150,070
Employment	2,468	768	3,236
Income	89,000	26,500	115,500
Induced impact
GDP	127,920	63,166	191,086
Employment	3,013	872	3,885
Income	138,599	33,301	171,900
Total impact
GDP	541,470	262,076	803,546
Employment	12,247	3,819	16,066
Income	539,679	134,441	674,120

Source: Statistics Canada Interprovincial Input-Output Model, 2005 version.

7. Secondary activities

The terms of reference for this study identifies several activities linked directly or indirectly to the ocean for which one or more of the following may apply: a) there is limited information about the nature and extent of the connection between the ocean and the activity in question; b) the activity may depend on marine and terrestrial inputs that are not easily distinguishable; c) the activity may be too amorphous or poorly developed to be captured as a distinct NAICS classification, so it is included in a broader industry grouping; and, d) even if none of these constraints exists, relevant output or GDP data needed to determine impacts may be confidential.

This section examines the issues for three activities: subsistence fishing, refining and offshore pipeline. A complete impact analysis is conducted for the other three secondary activities identified in the terms of reference for which a qualitative examination was to have been performed.

• Subsistence fishing: occurs in the Arctic amongst the Inuit peoples and in southern areas amongst First Nations on the Atlantic and Pacific coasts. In all areas, the extent of participation and harvest levels is poorly documented, if at all.

  Subsistence hunting and fishing provided almost all of the food and materials used by the Inuvialuit in the early 1900s. Ringed seal, bearded seal, bowhead and beluga whales, and many species of fish and waterfowl have all contributed to subsistence of early inhabitants. The blubber and meat were an important component of the diet for Inuvialuit and their dogs, though year-round available fish was probably the most important part of the diet. Inuvialuit traditional whale hunting has continued for domestic purposes, and seals are still hunted from the sea ice or from boats. The current wage economy and change in lifestyles has led to a significant decline in the subsistence harvest, in particular the decline in use of sled-dogs has reduced the need for protein sources to feed them. Some estimates indicate that current harvest levels are about one-third of what they were in the 1960s.

  Harvest studies for the Inuvialuit Settlement Region and for Nunavut only provide data up to 1999 and 2001 respectively. Recent reports, including the 2008 Economic Overview and Assessment Report for the Beaufort Sea LOMA, refer to these sources and work done by GSGislason and Associates in 2003 to estimate the associated economic value. In short, there exists a considerable gap in understanding the current scope and significance of subsistence fishing.

  Considering the latest harvest data, the 1999 and 2001 harvest estimates continue to be relevant. An approximate average of 1,200 Mt of edible weight from mammals, and just over 300 Mt of fish are captured each year. If the same average annual level of harvests could be assumed through to 2006, only the value of the harvest needs to be considered. A "Nunavik Comparative Price Index" study reported the changes in meat prices from 2000 to 2006. If the subsistence protein sources continue to be valued according to the replacement cost of protein sources in stores, these have increased approximately 20% since the GSGislason study. This would suggest a 2006 value of marine subsistence harvest activities of approximately $39 million.

  Among First Nations, the Food, Social and Ceremonial (FSC) fisheries qualify as subsistence fisheries, and in some cases may include sale of catch to defray fishing related costs. These fisheries are prosecuted subject to a range of management measures imposed by Canada and designed to limit effort and conserve fish stocks. These measures are set out in regulations according to agreements with each of the First Nations, and may include: limits per individual fisher per day, total allowable catch (TAC) for the First Nation, amounts considered to be for FSC purposes, limits according to certain fishing areas or other designations, and by-catch limits. These fisheries are also subject to many of the same restrictions customary of commercial fisheries including gear restrictions, legal size limits, fishing seasons, monitoring and reporting requirements.

  Data on First Nations subsistence fishing is not available. Not only does the complexity of fishing arrangements make it difficult for DFO to provide estimates of quantities allocated, the monitoring and reporting of actual catches is limited or non-existent. This makes it impossible to quantify activities in economic terms. The allocation information is found in the text of numerous agreements, and in some cases these are further tied to TAC decisions that appear in other documents or result from annual negotiations with First Nations. Even if the necessary cross-referencing and follow-up research could be undertaken, some allocations are vague, referring only to amounts for individual fishers or FSC amounts. It would be necessary to investigate participation levels and interpretations of these definitions before estimates of the catch could be established. Even where catch data are collected, there is a lack of consistency and reliability of tracking methods across Canada. Consequently, Fisheries and Oceans does not report subsistence (FSC) catch data.

• Refining: refining could be described as a marine-dependent industry, depending on the source of crude oil. If crude is sourced from fields in offshore areas, then refining is to the oil as seafood processing is to fish – a backward linkage to an ocean resource. As such, it is conceptually correct to include offshore-supplied refineries in the class of marine related industries.
  
  While the conceptual hurdle is easily overcome, the methodological and data challenges are more serious. The difficulties and some possible solutions can be illustrated using the refineries in Atlantic Canada and crude oil produced offshore Newfoundland and Labrador ("Grand Banks crude") as an example.
  
  The Atlantic region has four refineries, one in each of Newfoundland and Labrador, Nova Scotia, New Brunswick and eastern Québec (there are also six refineries in Montreal). The four regional refineries have a combined capacity of 720,000 barrels of crude oil per day. The region has three producing oil fields, Hibernia, Terra Nova and White Rose, all offshore Newfoundland and Labrador. These fields have been producing at an average of about 300,000 barrels per day. So, under the best of circumstances, the offshore could supply about 40% of regional refining capacity.
  
  Before examining the challenges in quantifying impacts, it is worth noting that while the regional refineries are marine-related, they are not necessarily marine-dependent. All the refineries pre-date the development of the Grand Banks fields. Even today, with a crude source on the doorstep, the refineries depend mainly on imported sources of crude oil. In part, this has to do with how well Newfoundland crude approximates the specifications of the oil the refineries are designed to process (and whether blending is necessary or possible). And in part it has to do with competitive forces in global crude markets.
  
  The minimum requirements for estimating an industry's impact with confidence are data on the gross value of output and contribution to GDP. Gross revenue is available from CANSIM 301-0006 (industry output was valued at $63.2 billion in 2006), but even with 22 refineries in Canada, GDP data are not available even at the national level (due to confidentiality). If national data were available, it might have been possible to estimate the regional share of national GDP based on relative production (capacities are known and capacity utilization can be determined). The weakness in this lies in the different product slates (and hence, value) each refinery is capable of producing. Also, depending on capacity utilization and competitive conditions in regional petroleum product markets, refining margins (and hence, profits) can differ substantially from the national average.

  Assuming these potential barriers could be overcome, there remains the problem of determining the share of crude throughput at the regional refineries that is accounted for by domestic offshore supply. Statistics Canada and the National Energy Board report on domestic supply and disposition by region. The data indicate that utilization of Grand Banks crude by Atlantic region refineries has steadily increased, reaching about 22% of total refinery requirements in 2007 (assuming 90% refinery capacity utilization, this means Grand Banks crude supplies about 3% of total refining requirements in Canada). Shipping data indicate that the balance of the Grand Banks production is exported to the U.S. northeast and Gulf coast, with some also used by one or more refineries in Montréal.
  
  In short, the data needed to estimate the ocean impact arising from refining activity are not available from publicly available statistical sources. Publicly traded oil companies publish financial statements, but refining results tends to be consolidated with other business units, making it impossible to link values with refining. Moreover, not all refining companies are publicly traded (including Irving Oil, Canada's largest refinery). In light of the unavailability of key data and given the assumptions required, any estimate of economic impact would be open to question.

• Offshore pipeline: Canada has one pipeline transporting hydrocarbon produced offshore. It carries natural gas and liquids from the Sable project offshore Nova Scotia to a shorebased fractionation plant in the province. This offshore pipeline (and fractionation plant) form an integral part of the Sable production system, with the gas sold to customers at the point of entry into the land-based pipeline once it has been processed to meet sales gas specifications.
  
  The method for determining how the economic impact of an offshore pipeline would be estimated is no different from that for an onshore pipeline. Statistics Canada reports GDP for this industry (NAICS 4861 for crude oil and NAICS 4862 for natural gas) at the national level, though confidentiality concerns would limit data availability for some provinces (e.g., Nova Scotia).
  
  Beyond the confidentiality issue, the other limitation is that the data make no distinction between offshore and onshore pipelines. So even if pipeline data were published, in jurisdictions with both onshore and offshore systems (such as Nova Scotia), it could be a challenge to separate the onshore and offshore contributions to GDP with confidence.
  
  As an alternative, because the offshore pipeline in Nova Scotia is an integral part of the Sable project, one possible way of estimating its economic impact is to base the contribution to GDP (and other impact indicators) on its share of the total capital costs of the offshore project. This approach would provide a good approximation of its contribution to GDP impact because the project is so capital intensive, with most of the impact in the form of returns to and of capital (rather than labour income). Employment and labour income impacts are small, given the nature of the facility and its operation.
  
  Following this approach, the offshore pipeline accounted for about 25% of the total Sable capital cost. The Sable project accounted for about 15% of total offshore oil & gas revenues in 2006 (Table 3.5). Assuming the contribution to GDP is in proportion to the revenues from offshore oil vs. natural gas projects (there is no way of knowing this, given the data available), then the offshore pipeline would account for 3.75% of the offshore oil & gas GDP impact in Table 3.6 ($291 million in direct GDP).
  
  
• Navigation and guidance systems: This industry had been included as a primary industry, but impacts could not be estimated due to a lack of basic data. Though the industry manufactures products primarily for aeronautical applications, Industry Canada descriptive information on firms in the industry suggests that at least some of the output of about one-third of these firms would appear to have marine applications.
  
  It is not possible to provide an estimate of the economic impact of the marine component of this industry because basic financial and economic data are not available. The industry consists of 176 establishments with 7,180 employees. This industry as a whole had total revenues in the $1.5 billion range in 2006, with manufacturing value added of almost $800 million. Statistics Canada reports principal statistics for the industry as a whole (CANSIM 301-0006), but provides no information that would make it possible to distinguish the marine from the aeronautical segments.
  
  While it is possible that the marine segment of the industry may be isolated from the broad grouping at some point in the future, this may not happen for some years since it would appear to account for a relatively small proportion of industry output. And since it is the nature of the product or service, not the use to which it is put, that determines the industry designation, it seems unlikely that NAICS would be modified for this reason.
  
  In light of these constraints, two options would appear to be available to develop an estimate of the value of output derived from marine manufacturing: ask Statistics Canada to develop a satellite account, or, conduct an industry survey. The Industry Canada database of 176 establishments would be the starting point for the latter. But since the survey would be asking for sensitive financial information (essentially the same information Statistics Canada requests), experience suggests the likelihood of success is remote.