Mining, Oil & Gas Extraction

Mining played a pivotal role in the early development of BC’s economy and has continued to do so since then—from the 1840’s, when coal was the main mineral product, through the gold rush years, and to the present.

The discovery of gold in the Interior was an important turning point in BC’s economic and political history. Miners hoping to strike it rich came to the province from San Francisco and points even further away.

Before the gold rush, Victoria was a Hudson’s Bay Company trading post. The first ship full of miners and adventurers headed for the gold fields arrived in Victoria in 1858 and changed the town forever. It became a stopping point and outfitting centre for miners headed for the gold fields, and many new businesses sprang up to supply their needs. The gold-seekers traveled on from Victoria to the mainland to begin the long trek up to the area around Barkerville, where they hoped to stake a claim. Barkerville is now a ghost town, popular with tourists who have an interest in history, but in the 1860s it was the largest city west of Chicago and north of San Francisco.

What's included in the mining, oil & gas extraction industry?

Mining establishments are primarily involved in extracting naturally-occurring solid minerals, such as coal and ores. Oil & gas extraction involves removing liquids (crude petroleum) and gases (natural gas) from underground. The industry also includes establishments that explore for minerals or develop mineral properties and mining operations. BC’s mining, oil & gas extraction industry is diverse. A variety of metals and minerals, as well as coal, oil and natural gas resources are found throughout the province.

Most of the jobs are in primary mining...

...but most of the industry’s value added comes from oil and gas extraction

Most (14,300) of the people working in this industry are employed in primary mining activities (extracting metals, non-metallic minerals and coal from the ground). Mineral exploration and development (9,300) is the second biggest employer in this industry, while oil & gas extraction employs just 2,200 people.

Natural gas accounted for nearly half of the total value of mineral production in 2007²⁴

In terms of GDP, however, the oil & gas extraction industry generates about two-thirds of the industry’s total value added. Mining (metals and non-metals) generates about a quarter of the industry’s GDP, with the remainder coming from industries providing mining-related services, such as drilling and exploring for minerals.

The discrepancy between GDP and employment shares is a reflection of the way outputs are produced. Oil & gas extraction requires a huge investment in capital equipment, and labour is a less important input used in production. Natural gas is mechanically pumped out of the ground, processed, and then distributed to customers via a pipeline system. This does not require a lot of hands-on work. Most of the people employed in this industry are there to set up, monitor, and maintain the equipment that does this and to keep things operating smoothly. They don’t physically extract the natural resource from the ground.

There’s a lot of capital equipment used in primary mining as well, but mining activities tend to be more labour intensive. They typically require workers to find and manually extract ores from the ground, or to operate the equipment used to do this. Similarly, quarries and sand pits require equipment operators to remove and load the sand or stone onto trucks for transport to customers.

Copper, molybdenum and gold are the major metals mined in BC

Although only a handful of metals—copper, molybdenum, gold, silver and zinc—are mined in significant quantities in BC, mining companies operating in the province are major world producers of these products. Production of these and other metals was valued at $2.6 billion in 2008.

Copper accounts for nearly two-thirds of the total value of metal production in BC

In terms of value, copper is by far the most important metal mined in BC, accounting for nearly two-thirds ($1.7 billion) of the province’s total metal production in 2008. More than a third of the copper produced in Canada comes from BC mines. This makes the province an important player in the global copper mining industry, since Canada is one of the world’s top five copper-producing countries. Most of the world’s refined copper is used in electrical wire and cable and to make tubes, pipes and other shapes.

Molybdenum, a metal that is used in alloys and to make high-temperature steels, is now the second-most important metal mined (based on value) in BC.

The province is a leading world producer of this metal. BC is home to Canada’s only primary molybdenum mines, although molybdenum is also extracted as a secondary product at other types of mines. Gold (10%), silver (2%) and zinc (2%) account for most of the rest of the value of metal production in BC. Nearly 80% of the world’s gold supply is used for jewelry, coins and other ornamentation. It’s also used in electronics, dentistry and the aerospace industry. Silver is used for many of the same purposes, as well as for photographic applications and as a catalyst for producing some of the substances needed to make plastics and polyester materials. Zinc, which is often found together with copper or lead, is used as a coating to make galvanized iron and steel, which is resistant to rust and corrosion.

The average car battery contains about 10 kilograms of lead, another metal mined in BC. Lead is also used as a protective sheathing for underground and underwater cables.

Non-metallic mineral products are primarily construction related

Non-metallic minerals produced in BC were valued at $997 million in 2008. The most important of these are cement ($327 million), sand and gravel ($254 million) and stone ($90 million), which are extracted from quarries and sandpits in the province. BC produced nearly a fifth of the total value of Canadian cement and sand and gravel production in 2008.

These products are used intensively by the construction industry. Sulphur and barite are other non-metallic minerals found in significant quantities in BC, but they account for only a small percentage of the total value.

Coal is exported for use in steelmaking, while natural gas fuels homes and businesses in the province

British Columbia is the country’s biggest coal-exporting province. The value of coal production was $3.0 billion in 2008, accounting for 71% of total Canadian production.

Coal mines are found in Kootenay, Northeast and on Vancouver Island. Elk Valley in southeastern BC is the world’s second-biggest supplier of metallurgical coal, used in steel-making. Much of the coal mined in the province is sold to customers in Japan and South Korea.

The province’s natural gas reserves are located in Northeastern BC. Gas extracted from these reserves is sold to customers in the province and other parts of Canada, but much of the energy is destined for export to the US, primarily to Northwestern and Midwestern states, as well as California.

In 2007²⁵, the value of natural gas production in BC was $6.1 billion. The value of petroleum and crude oil production was $929 million.

Exploration and development

Many establishments in the mining, oil & gas extraction industry are primarily engaged in extracting mineral resources. Others provide support services on a contract or fee basis. These companies do mineral exploration, including traditional prospecting methods such as taking core samples and making geological observations. They’re also involved in drilling, surveying and cleaning out wells. They generated about 8% of the sector’s total GDP in 2008.

What's happened since 1990?

GDP growth in mining, oil & gas extraction has been volatile, but over the long run the industry’s share of total GDP has remained close to 3%. Similarly, employment in mining, oil & gas extraction was just over 1% of the provincial total in 2008, the same share as in 1990 despite some ups and downs during this period.

The industry accounts for about 3% of total GDP, but its share of employment is much lower

Total GDP in mining, oil & gas extraction expanded by 80% between 1990 and 2008, while the number of people working in the industry rose 37%. Most of the industry’s growth has come from the oil &gas extraction sector and related exploration & development activities. In oil & gas extraction, GDP has tripled, while employment has risen 57%. In exploration, development and other mining-related services, GDP has increased by nearly two-thirds, and employment has risen even more (82%). In mining, there’s been a slight decline in GDP relative to 1990, but the number of people working in the industry has increased by 15%.

Labour productivity in mining, oil & gas extraction is higher than in other industries

The mining, oil & gas extraction industry’s share of total GDP is a lot higher than its share of employment, indicating that labour productivity is well above the provincial average. This is partly a reflection of higher wages paid to workers, but may also be due to the type of technology that’s used by the industry.

The growing productivity gap between mining, oil & gas extraction and other industries may reflect a greater emphasis on oil & gas extraction, where the resource is taken out of the ground using pumps and other types of equipment, with less reliance on manual labour. In addition, robotics, global positioning systems and other types of high tech equipment are now being used to locate and extract mineral resources in the province.

Ups and downs: the price effect

The mining industry is very sensitive to changes in world markets because products such as coal and copper are usually exported, and prices for most mineral products are set internationally. This means that exchange rate fluctuations and economic conditions in countries like Japan and China affect the value of metals, fuels, and other minerals produced in BC. This can both help and hurt the industry.

British Columbia’s mining industry faced some challenges during the 1990s, when prices for many products were depressed. Coal prices were flat or down during the 1990s and the early years of this decade. This was almost certainly a big factor in the decision to close down the Bullmoose and Quintette mines in Northeast BC. More recently, there has been an upturn in world demand for metallurgical coal, largely driven by China’s need for steel, and a number of new coal mining operations been started up in recent years.

World demand for metals and other mineral products has driven prices up

China is emerging as a major market for many mineral products, and prices skyrocketed in the early part of the decade partly because world supply was not able to keep up with the demand for these commodities. As the Chinese economy continues to develop its industrial base, the demand for raw materials to supply its emerging industrial machine is likely to remain elevated. However, the current economic slowdown has had a dampening effect on world demand for these products, and this is reflected in both the price and the volume of production.

Molybdenum prices, in a slump during the 1990s, are still high by historical standards, although they have dropped slightly after peaking in 2004. (That’s one of the reasons why molybdenum, previously one of the smaller metals in terms of value, was ranked second in 2008).

The price of natural gas remains nearly two-and-a-half times what it was in 1997. Copper prices have also more than doubled, after slumping between 1997 and 2003.

The price of gold has also been climbing. Unlike other metals, gold (and to a lesser extent, silver) are valued not only for their industrial uses, but also as a form of storing wealth. With the recent chaos in financial markets, the attractiveness of gold to investors has been rising, and this has helped drive the value of this precious metal up.

High, and rising, prices have helped restore the fortunes of some of the mining companies in the province, but the value added to the economy by metal and non-metallic mineral mining has declined 6% since 1990. That’s because mines are not necessarily extracting a lot more ore. In fact, the volume of production of every major BC metal product has fallen since 1990.

The value of natural gas production is more than 10 times what it was in 1990

This effect can be illustrated by looking at what’s happened in the natural gas production industry. Since 1990, the volume of gas produced in the province has grown quite significantly, to nearly three times the level in 1990. However, this increase pales in comparison to the rise in the value of natural gas production, which is more than 10 times what it was in 1990. This indicates that the enormous increase in the value of natural gas production in BC since the mid-1990s is largely (but not entirely) due to rising prices.

The increase in the volume of the oil & gas extraction industry’s output has contributed to growth in its GDP, but this has far exceeded employment growth over the same period. That’s largely because the actual amount of work required to extract the gas hasn’t risen by a similar amount. In other words, although higher prices mean higher profits for the industry (and more dividends for the individuals and investors who are shareholders) the industry’s output isn’t rising at the same rate.

What are the most common occupations?

Four out of 10 workers in this industry are trades, transportation and equipment operators. These include mechanics, heavy equipment operators, truck drivers as well as other types of occupations such as welders. One in three works in occupations unique to primary industries. This includes oil and gas well drillers, or miners who work underground.

Most of the workers in this industry are miners, drillers, or mining equipment operators

Twelve percent work in natural and applied science occupations, many of whom are geologists, geochemists or geophysicists, or work as technicians, engineers and computer scientists.

One in 10 workers is in a business, finance or administrative occupation and 3% are in occupations unique to processing, manufacturing & utilities.

How many people work in mining, oil & gas extraction, and how much do they earn?

Mining, oil & gas extraction employed 25,800 people in 2008. Employment in the industry has nearly doubled in the last few years. Drilling, exploration and other support activities employed 9,300 people. Another 4,600 worked at metal mines, 9,700 were employed at other mines and 2,200 worked in the oil & gas industry.

Wages in mining, oil & gas extraction are well above the all-industry average

Workers in the industry may be exposed to risks not encountered in other industries and this, combined with the conditions under which they must work, helps keep wages in the industry relatively high. The average hourly wage rate in mining, oil & gas extraction was $27.96 in 2008, six-and-a-half dollars higher than the typical wage in BC ($21.46). Workers in oil & gas extraction ($28.90) and mining ($28.88) had the highest earnings, while those employed in support activities ($25.75) received a lower hourly wage.

We do not have data on average hours worked in mining, oil & gas extraction, but the average work week in forestry, fishing, mining, oil & gas was 45 hours.

What are the characteristics of the work force?

Virtually all (96%) of the people working in this industry have full-time jobs. Eight out of 10 workers are male.

Thirty-six percent of the workers in forestry, fishing, mining, oil & gas extraction have union coverage, about five percentage points higher than the average for the economy as a whole (31%). Seasonal variations in employment are not significant.

Between 1990 and 2008, the unemployment rate in mining, oil & gas extraction has averaged 7.6%. This is slightly less than the provincial rate (7.8%) and below the average for the goods industries (8.4%).

About 11% of the people who work in this industry are self-employed. Most of them work in exploration, development and similar activities. Self-employment is not common in mining or oil & gas extraction. Mining, except for panning for gold, is typically an activity that requires a huge investment in capital equipment.

Data on employment by establishment size isn’t available for mining, oil & gas extraction separately from fishing and forestry. However, most mining operations tend to be relatively large.

Establishments in mining and other primary resource extraction tend to be a little larger than in other industries

Where are the jobs located?

Vancouver Island/Coast, Thompson-Okanagan and Northeast are home to about half of the workforce in resource extracting industries

Mineral deposits are found in various locations around the province: copper is mined near Campbell River on Vancouver Island and in the Interior near Houston, Logan Lake, Mackenzie and Williams Lake. Most of these mines also produce silver, gold or molybdenum. Molybdenum is mined in the Interior. BC’s large deposits of coal are mainly found in the Crowsnest Pass area and the Northeastern regions of BC, while natural gas comes from the Peace River area. The employment associated with extracting these minerals is largely localized in these areas, although many mining companies have offices in Vancouver or other urban areas.

What's the outlook to 2017?

The mining, oil & gas extraction industry is forecast to generate just over 3% of the province’s GDP by 2017, up from its present level of just under 3%. Employment is expected to grow at about the same rate as in other industries, and retain its share of the total at about one percent.

GDP is expected to grow faster than in other industries