Where is the Truth in an Economic Analysis?

Coal Mining 101: Oversell, Underdeliver

by Lorne Fitch, P. Biol.

I’m not an economist and I suspect those making decisions on development proposals with broader implications aren’t either. One can question whether the proponents of development avail themselves of objective economic advice, but maybe they have other ulterior motives. However, it doesn’t take much of an understanding of economic theory to develop a highly tuned BS detector on some of the promotional hype for coal mines.

There are reasonable assumptions to be made on royalties, taxes, employment, spinoff benefits, and the like that are necessary metrics to assess the benefits to the public. But there are also costs—social, health, and environmental— that are just as real and often more lingering. Unfortunately current economic analyses do an imperfect and poor job of helping us understand the balance between development benefits and costs.

Northback, the Australian company with designs on a coal mine on Grassy Mountain, has just released some economic assessments of their mine proposal to Crowsnest Pass council. A synopsis of this presentation included a rosy projection for direct, full time jobs, indirect employment, startup spending and over 10 billion dollars in gross domestic product, including federal, provincial, and municipal revenues.

Before you go rushing off to buy company stock it would be good to recognize these are projections, not employment commitments, or realized economic activity.

The study was prepared by Ernst & Young LLP for Northback and the company says its modelling relied on unaudited financial information supplied by Northback, public data, and its own economic model. The report apparently did not factor in environmental effects and costs. Like dating sites where people portray themselves as taller, thinner, more attractive, and richer than they are, one should entertain some skepticism about coal company economics.

This is a typical one-sided story, tarted up with enthusiastic assumptions, self- affirming figures, and back-of-the-envelope calculations. It is a technique used to put a thumb on the scales of decision-making, to over-emphasize economic benefits and influence how a regulator would weigh a project in the public interest. Like in math class, if you can’t show how you got to an answer, you can’t get full marks.

If history is a guide, the answers provided by mining proponents create more questions and less certainty about the economic benefits of their developments in the public interest. Just because it appears good for a corporate entity does not necessarily hold relevance to Albertans .

Several scholarly articles provide clarity and a dose of reality to the promotional hype of the economic projections of mining companies.

In a 2024 FACETS article, the authors audited 27 BC mines (Does regulation delay mines? A timeline and economic benefit audit of British Columbia mines). For many mines there was a lack of data and transparency to compare forecasted versus actual economic benefits (production, employment, and taxes).

Mines for which data was available were underperforming across production (only 23 per cent of predictions), employment (only 18 per cent of predictions), and tax revenue (zero per cent of predictions).

Similarly, in the journal Environmental Impact Assessment (Volume 100, 2023) an article, Years Late and millions short: A predictive audit of economic impacts for coal mines in British Columbia, Canada, related economic impacts were significantly overestimated. Only 59 per cent of forecasted employment and 34 percent of forecasted tax revenue materialized.

A paper written by Cornelis Kolijn, an independent mining engineer, (Crowsnest Coal Area Reserves’ Inflated Value and Unlikely Economic Benefits- July, 2025) provides insights on coal quality and market values for the proposed Grassy Mountain mine. Crowsnest Pass coal mines (including Grassy Mountain) ceased operations due to inadequate coal quality and low market value of coal produced. Coal quality requirements for steel making have since increased and his assessment was it is unlikely any proposed mines will be economically feasible due to their low quality coal compared to BC’s Elk Valley, with the added issues of thin coal seams and challenging geological conditions.

Kolijn warns that if approved, Alberta could be faced with failing mines, mine closures, and inadequate funds for reclamation and selenium management.

From the Report of the Joint Panel: Benga Mining Limited Grassy Mountain Coal Project (2021 ABAER 010, CEAA Reference no. 80101), the panel found that Benga’s socioeconomic impact assessment did not include the reliability of its project benefit estimates, and had insufficient details about the methodology used. The company overstated the economic impacts including royalties generated and understated the potential for economic risks.

The School of Public Policy at University of Calgary published A Multiple Account Benefit-Cost Analysis of Coal Mining in Alberta (Publication 14:32, 2021). This method was developed to retain many of the strengths of traditional benefit-cost analysis while recognizing that not all costs and consequences can be monetized and that assessing the public interest cannot be reduced to a single monetary value. This provides a transparent distribution of costs and benefits, allowing the public and policy makers to better determine if the trade-offs are in the public interest.

When this was applied to the Benga Grassy Mountain coal mine proposed to start in 2019 the authors concluded there was no scenario where the mine developer earns a positive return on investment in present value terms and there are more costs than benefits to the development scenario. Furthermore, the analysis suggested the mine would not break even, exclusive of payments to government, until 2039, at or near the anticipated mine’s life span.

Added to this is the acknowledgement of reclamation liability. The authors note that coal mining results in substantial changes to topography, soils, vegetation, and water courses, and can leave behind pit lakes, waste rock dumps, and sources of water quality contamination that have proven challenging to remediate. The review suggested post-operation reclamation may not be fully covered for the costs of addressing liabilities at the mine site. Or, in other words, there is a risk of additional cost to Albertans from a new mine.

The study suggested the qualitative evidence was sufficient to conclude that adverse effects are likely to be large and negative. Overall, the authors concluded the minor economic benefits were insufficient to justify large and potentially irreversible harms.

The analysis by the School of Public Policy comes close to a full or true cost accounting approach. This approach allocates all costs, including direct, fixed, and variable overhead, to the production of goods or services. This measures and values the hidden and rarely assessed impacts of economic activities on the environment (natural capital), society (human capital), health, and produced capital. This moves beyond narrow economic thinking with the aim of improving decision-making in commercial organizations and in public policy.

In the spirit of engaging in due diligence and governance accountability, all levels of government should undertake full cost accounting for project reviews instead of simply drinking the purple economic Kool-Aid of a proponent. Part of full cost accounting might well include the following for the proposed Grassy Mountain mine:

• What if Albertans, fed up with seeing pollution, biodiversity loss, health impacts, and failure of reclamation, especially if they are expected to backstop the costs, demand punitive financial penalties that have a real economic bite?

• What if the life span of the mine is shorter than anticipated, like the Gregg River and Cheviot mines have exhibited? What then are the economic implications?

• How would the displacement of other economic activity by coal mining be dealt with in an economic analysis?

• What happens when an industrial pall falls over the Crowsnest Pass, as it did when the tipple in Coleman was processing coal from Tent Mountain? Will blind community support for a coal mine remain with fugitive coal dust?

• What if pollution abatement lasts for a 100 years, or more? How is that cost factored into economic projections?

• What if downstream water users suffer economic impacts from mine-related pollution and water shortages and they sue for compensation?

The other historical perspective is that environmental costs are consistently understated by proponents yet the reality of mining includes significant pollution, human health impacts, and biodiversity losses. A 2016 report by the BC Auditor General (An Audit of Compliance and Enforcement of the Mining Sector) concluded that”…the lifespan of mines and mining companies is finite, creating a risk that taxpayers may bear the costs. So, while the benefit from mining occurs for a limited time, the costs, including government’s obligation to monitor these sites, may continue for a very long time.”

One might only look at the unresolved reclamation deficit created by the oil and gas industry in Alberta for reference. Mitigation has been proven to be ineffectual at compensating, even moderating the impacts, even when monitoring is rigorous (which it often isn’t).

Independent, objective, and evidence-based reviews raise questions about the accuracy, reliability, scope, and uncertainty of economic predictions from the coal mining sector. Yet, decision makers often reason that the (often inflated) economic benefits outweigh the potential adverse effects to environmental and societally valued components. The result leads to project approvals in the “public interest.”

Northback’s economic promises may well be a castle built on sand, not coal. Let’s not be fooled by self-serving and empty promises! The Alberta government needs to step away from tacit support for coal mining in the Eastern Slopes. In particular, this government needs to accept evidence that coal mining isn’t in the interests of Albertans, or, at least, undertake the necessary homework to weigh the benefits versus the costs of coal mining using transparent, full cost accounting.

Lorne Fitch is a Professional Biologist, a retired Fish and Wildlife Biologist and a former Adjunct Professor with the University of Calgary. He is the author of Streams of Consequence, Travels Up the Creek, and Conservation Confidential.