Nfld. & Labrador

Here's what could happen if the Come By Chance refinery shuts its doors

The ripple effect from a closure would mean losses far greater than 500 jobs.

Ripple effect from closure would reach all corners of the province, analyst says

One oil industry analyst outlines the fallout from a potential North Atlantic refinery closure. (Bruce Tilley/CBC)

Fred Bergman hardly takes a breath as he rattles off the list of economic injuries.

Most notably, there's the income losses for 500 people who work at the oil refinery in Come By Chance, N.L., many of them making salaries in excess of $100,000.

"But then, of course, there's all the spinoff jobs — the distribution facilities for wholesale bulk fuel dealers, the jobs in the distribution network at the retail gas stations," Bergman said, outlining the cascading effects if the refinery shuts its doors for good.

"You're probably talking at least 1,400 jobs lost in total, potentially more."

North Atlantic Refinery Ltd. said this week it's considering all options, including cutting costs, before ending operations. Irving Oil, which had been considering buying the refinery, recently walked away from a deal, leaving the company floundering.

If its owners can't find a solution, the closure would be the latest hit to Newfoundland and Labrador's embattled oil industry, which has seen multiple delays in expansion and exploration projects in the last year.

Fallout would spread to other sectors, too, said Bergman, a senior policy analyst for the Atlantic Provinces Economic Council.

"You're getting crude oil coming in.… You're getting import jobs, you're getting jobs in the transportation sector. Then you're getting refined product going out," he explained.

Nearby retail stores can expect a dip in sales, as out-of-work residents tighten spending. As a result, the provincial coffers can expect to take a hit, too.

"You're going to get a loss of personal income tax, corporate tax, sales tax," he said.

The North Atlantic refinery in Come By Chance began operations in the mid-1970s, and has changed hands five times. (Bruce Tilley/CBC)

Those sources of income for the government — adding up to about $50 million or $60 million — "would be gone, effectively."

The refinery makes up about one per cent of the provincial gross domestic product, according to Bergman. Its loss would further slow an already-sluggish offshore industry hit by delays and uncertainty following global oil market volatility this year.

The ripple effect would be smaller in comparison with offshore setbacks, he said, "but certainly, it would add to the woes of the oil and gas industry in Newfoundland and Labrador."

Another blow for the province

Looking at the situation optimistically, he said, oil refineries everywhere — not just at home — appear to have a limited life span.

Demand for fuel products could see a broader slowdown globally with more economies pushing for net-zero emissions, said Bergman, pointing to two refinery closures in Nova Scotia, the latest in 2013. "It does happen," he said.

But if the Come By Chance refinery does close, it offers a new set of future problems: what to do next.

"Obviously there's environmental cleanup," Bergman said, and associated costs.

The lack of refined fuels also means buyers must import: there's no longer a local option.

"That's a deduction from GDP. It doesn't really add to GDP anymore," he said

"You have to get the fuel from somewhere. People still need to drive their cars, planes still need to fly, boats still need to sail."

Read more from CBC Newfoundland and Labrador

With files from The St. John's Morning Show


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