New Brunswick

Province must stop 'flying blind' on shale gas

Rod Hill argues it is still unclear how much of an economic boon the shale gas industry could be for New Brunswick.

A series of special op-eds on the shale gas industry

Rod Hill is a professor of economics at the University of New Brunswick, Saint John campus.

He is a member of the editorial board of the Encyclopedia for Quality of Life Research and the co-author with Tony Myatt of The Economics Anti-Textbook: A Critical Thinker’s Guide to Microeconomics.

He teaches courses in public sector economics and Canadian economic policy issues at UNB.

Would New Brunswick be better off with shale gas mining?

To reach a judgment, we must weigh the possible gains of some against the possible losses of others, where considerable uncertainty surrounds both.

What makes shale gas mining unattractive in the view of many is the nature of the costs.

Large, perhaps catastrophic, costs are borne randomly by an unknown number of people. If the experience of some in Penobsquis is any guide, both the companies and the government will leave those with losses to fend for themselves. They will then have to devote years of their lives in a struggle for justice.

In the November issue of Scientific American, the editors wrote about "the rush to frack" in New York, adding: "Fracking is already widespread in Wyoming, Colorado, Texas and Pennsylvania. All these states are flying blind. A long list of technical questions remains unanswered about the ways the practice could contaminate drinking water, the extent to which it already has, and what the industry could do to reduce the risks." Until these questions are properly answered, it recommends "putting the brakes on the drillers".

Two kinds of risks

Opponents of shale gas mining have stressed two kinds of costs. The first are costs we know will occur, such as congested roads, noise, ugly industrial sites in rural areas, and air pollution from many sources. 

The second are the risks of significant pollution costs that would likely occur randomly.

It is well known that hydro-fracking natural gas wells involves large quantities of toxic mining waste and (using current technology) enormous quantities of toxic fluids.

What is the probability that soil and water pollution from these sources will occur from well blowouts and spills, for example? How and where will the large quantities of wastewater be safely disposed of?

What is the frequency with which methane will migrate into some drinking water sources?  There is overwhelming evidence from the experience of other places that these are real problems.

Natural Resources Minister Bruce Northrup asserts that shale gas extraction will only occur "if it can be done in a safe and environmentally responsible manner."

Economic opportunities

Yet the government has failed to pause, as some jurisdictions have done, to study the matter carefully before proceeding. Instead, the New Brunswick government talks up the benefits, saying that shale gas "may be the most significant economic opportunity which New Brunswick has seen in a generation".

It offers the vague promise of "job creation in the thousands or tens of thousands," but gives no evidence.

In any case, the issue is not job "creation" but what jobs people will have and how much they will be earning. Driving truckloads of toxic waste may pay more than alternative employment, but at what cost?

The government’s apparent enthusiasm for shale gas may come from its hopes for royalty revenues and other tax revenue from additional economic activity.

But it is doubtful that the current royalty regime, designed to attract outside investment by offering favourable tax treatment, is up to the task.

Even if they create a new royalty regime that would yield revenues, the federal government may be able to capture much of it by reducing equalization payments, while leaving the province stuck with significant extra costs of generating that revenue.

Those costs include increased costs of repairing roads damaged by heavy trucks, the costs of regulation, inspection and monitoring companies’ activities, and decreased property taxes as property values fall in response to the various forms of pollution (noise, air, water) and other costs imposed on residents of the affected areas. Future costs to the province also include the "legacy costs" in dealing with the mess the industry will inevitably leave behind.

Economic benefits are unclear

On balance, it’s not at all clear that the provincial treasury would gain anything. At the same time, with its methane leaks from wells, pipelines and storage sites, shale gas production would have implications for the province’s Climate Change Action Plan.

When considering the benefits and the costs of shale gas extraction, the "precautionary principle" is relevant.

It suggests that if an activity, such as fracking, poses a risk of significant and long-term environmental damage, the burden of proof rests with those who want to undertake the activity to show that it does not pose a threat.

All too often in the past, polluters have been allowed to pursue short term profit while leaving behind a legacy of long-term damage whose costs they did not bear.

Neither the government nor the industry are in a position to offer evidence that shale gas extraction can be done "in a safe and environmentally responsible manner" that will not risk imposing unjust costs on some, including future generations.

An open-ended moratorium on shale gas drilling in New Brunswick is in order. It’s time to stop flying blind.