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New Brunswick Ignores Neighbour's Energy Success

12/24/2014 08:42 EST | Updated 02/23/2015 05:59 EST
cta88 via Getty Images

New Brunswick Premier Brian Gallant seems poised to follow through on a campaign promise to institute a moratorium on hydraulic fracturing. News reports suggest he'll implement that moratorium before Christmas. Quite a lump of coal for the people of his province in need of additional jobs and higher incomes.

In a recent Fraser Institute review of the various commissions and panels that have investigated the risks of hydraulic fracturing, the conclusions were remarkably similar: while risks exist and there are still unknowns and the governmental panels investigating risk have not called for moratoriums.

For example, as a panel from New Brunswick's neighbour, Nova Scotia, observed, while everyone is aware there are unknowns, "there is currently no evidence of catastrophic threats to public health in the short-to-medium term that would necessitate the banning of hydraulic fracturing outright. On the safety of fracking, the preponderance of evidence suggests that risks, while real, are readily manageable."

That conclusion would explain why over 175,000 wells have been fracked in Canada without conclusive evidence of significant harm to the environment. Or why on water pollution, a key concern about hydraulic fracturing, a recent review in the journal Science concludes that, "Since the advent of hydraulic fracturing, more than 1 million hydraulic fracturing treatments have been conducted, with perhaps only one documented case of direct groundwater pollution resulting from injection of hydraulic fracturing chemicals used for shale gas extraction."

Residents of New Brunswick should keep something else in mind: The proposed fracking is for natural gas. For those who want to demonize coal, natural gas is an improvement over both conventional pollutant emissions and greenhouse gas emissions. Generating power with natural gas (rather than coal) results in significantly lower emissions of nitrous oxides, sulfur dioxide and mercury compounds. And electricity from natural gas produces less than half the greenhouse gas emissions generated from coal.

Politicians are free to ignore the science, safety and history of hydraulic fracturing. But if the New Brunswick government sticks with its election promise, it will outlaw (temporarily, at least) one of the more innovative ways to extract oil and gas in the 21st century.

Real opportunities are foregone when provinces close the door on energy exploration. For example, last year, New Brunswick estimated its own known shale gas reserves at 15 trillion cubic feet, good for a 350-year in-province supply based on current residential, industrial and commercial use in New Brunswick.

Then there is the unrealized revenue potential.

In New Brunswick this year (2014/15), resource revenues will account for just $94 million, all of it from mining and forestry. That is just 1.2 per cent of New Brunswick's $7.7 billion in total revenues.

Compare that to Newfoundland and Labrador, which will garner an estimated $2.5 billion in resource revenues (including mining taxes and royalties) this year, comprising 38 per cent of the province's total $6.5 billion in revenue. Newfoundland and Labrador's resource revenues are mainly offshore, not onshore, but the relevance is that "The Rock" allowed a resource sector to flourish and is now reaping the benefits.

Such benefits now include the lowest marginal tax rates in Atlantic Canada. And for the last five years, it's been a "have" province in the federal equalization system.

New Brunswick, however, has chosen a different route, foregoing the potential windfall--and jobs. To be sure, until an industry is allowed to develop, no one can say whether five or 5,000 jobs would result. But a moratorium on fracking does provide a precise number of potential new shale gas jobs in New Brunswick: zero.

Another comparison: South of the border, Pennsylvania is home to a shale gas boom in the Marcellus region, and that has helped create jobs.

According to the Pennsylvania department of Labor and Industry, direct jobs attributable to the shale gas sector in the state (at the end of 2013) were estimated at more than 28,000 (up from 16,000 in 2009). The average wage for those directly employed in the industry was $90,000 (US).

Newfoundland and Labrador is reaping benefits from conventional oil production. Pennsylvania has benefitted from tapping into the Marcellus gas discovery. The science and risk-reward ratio are both on the side of hydraulic fracturing. The potential for a more dynamic economy is staring New Brunswick politicians in the face.

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