What the frack!

In his new book Groundswell: The Case for Fracking, Sun News Network’s Ezra Levant explores the promise of natural gas that fracking has made possible and the controversy that is preventing the exploitation of this resource around the world and here in Canada. In this excerpt, Levant looks at the situation in New Brunswick where the potential benefits of fracking are meeting with protest…

With fracking, New Brunswick could be an economic force.

For more than a century, New Brunswick has been what they call in Canada a “have not” province. Less politely put, it’s a province dependent on constitutionally mandated “equalization” payments from more financially secure provinces just to keep up with the national Canadian standard of living.

Even less politely put, New Brunswick is poor. It’s the third-poorest province in Canada. Its per-capita GDP is 18% lower than the Canadian average. But compared with an energy-producing province, like Alberta or Saskatchewan, its GDP per person is more than 40% lower.

New Brunswick governments have tried almost everything to goose economic growth in their province. In the 70s, taxpayers shovelled subsidies into the Bricklin Motors company, with visions of starting a Canadian-made car company. The Bricklin SV-1, designed by the same guy who helped create TV’s Batmobile and backed by Malcolm Bricklin, who founded Subaru’s American operation, was sleek, with gull-wing doors, but it was a huge money-loser.

Bricklin spent $16,000 to make each SV-1 and then sold them to dealers for $5,000. Fewer than 3,000 cars were made before Bricklin went out of business, taking millions in taxpayer loans with it.

In the 90s, the provincial government had a grand plan to use subsidies to lure call-centre operations – for banks, tech companies, travel agencies, etc. – to New Brunswick. The province would be the call-centre centre of North America. That must have sounded like a plausible plan – until India decided to turn itself into the call-centre centre of the world.

New Brunswickers might need the work – the province’s 10.5% unemployment rate in the first quarter of 2013 was double that of oil-rich Alberta’s- but with a legislated minimum wage of $10 an hour, they weren’t going to stand much of a chance competing with New Delhi.

The next big idea to hit New Brunswick was natural gas. Not just drilling for gas: with 10 million cubic feet of gas produced each day, N.B. wasn’t much of a producer. Nearby Nova Scotia was producing 10 times that, never mind a more energy-rich province like British Columbia, which produces 3.5 billion cubic feet a day. New Brunswick was going to import gas, from abroad. Liquefied natural gas (LNG).

Canaport, a facility designed to accept liquefied natural gas from Qatar and other gas-producing nations and re-gasify it, started construction in the mid-2000s. It accepted its first shipment in 2009. When Canaport was about to open, it must have been a very hopeful time for the province.

Co-owned by Spanish-based Repsol and locally based refining firm Irving Oil, Canaport was the first LNG facility to be built on the North American east coast in 30 years. By the time it was operational, a lot of that hope must have been dissipating. The timing couldn’t have been worse.

In July 2008, the U.S. wellhead price for natural gas had hit a record high – $10.79 per thousand cubic feet. By June 2009, just 11 months later, when that tanker with three billion cubic feet of LNG pulled in from Trinidad and Tobago, prices had collapsed by more than two-thirds, to $3.38 per thousand cubic feet. And they would never again climb anywhere near to where they had been.

Canaport today is running well below capacity – using just 30% of its capacity. By early 2013, with gas still trading at around US$4, Repsol had decided to bail on the natural gas business and on Canaport. Its debt rating was in danger of being downgraded to junk status. But it was Canaport – and a 25-year commitment to ship gas into Canada – that blocked the deal. Nobody wanted to be saddled with an LNG-import facility on the east coast, when northeastern states like New York were suddenly awash with a glut of shale gas. Canaport wasn’t alone: all LNG import operations in New England were running idle, or at least close to it.

New Brunswick, it seems, is stuck with yet one more failure in its attempt to become an economic force.

But New Brunswick may finally have something that the world would dearly value – not uneconomical sports cars, overpriced call centres, or foreign liquefied natural gas imports. It has shale – the thickest shale gas reservoir in North America is located in New Brunswick.

Nobody knows yet how much gas is trapped in that thick reservoir; the exploration is just beginning. But Frank McKenna, the province’s former premier and a former Canadian ambassador to the United States, has estimated that developing New Brunswick’s shale-gas industry could generate more than $7 billion in royalties and tax revenues for the government. For a province with an annual budget just over $7 billion, that’s an incredible amount of money. Imagine if California had suddenly stumbled on a new industry worth $100 billion – the total of its annual state budget.

That’s why the New Brunswick government is taking shale gas very seriously. All that potential for shale gas combined with an Atlantic seaport – with the potential for exporting LNG to Asia or Europe, replacing the now-uneconomic import plan – could feasibly turn New Brunswick into a vibrant energy-export hub someday.

In May 2013, the provincial government released a “blueprint” for energy exploration in the province. The premier, David Alward, called it a “key part of our government’s plan to rebuild New Brunswick’s economy and create jobs here at home.”

The blueprint considers how to balance the interests of water management, air quality, royalty regimes, workforce development, economic development and attracting investment, supply planning, and opportunities to get economically challenged First Nations bands involved in the energy industry. It has already granted an exploration licence to SWN Resources Canada to search 2.5 million acres of the province for gas, and SWN has committed to investing a minimum of $47 million into the project.

Alward is taking an exceedingly careful and gradual approach to rolling out shale-gas development. He should. He needs to. New Brunswick borders Quebec, where anti-fracking hysteria has reached absurd proportions, with the Quebec government imposing a draconian moratorium on shale-gas exploration, as we’ve seen. New Brunswick is also close to New England, where the American anti-fracking movement has managed a firm foothold.

Environmentalist groups have already started working to mobilize Indian bands in New Brunswick, exploiting them to hijack aboriginal interests just as they have done in western Canada and Quebec.

And they’re stirring up trouble, using fear. In June 2013, members of the Elsipogtog Indian Nation band confronted a seismic testing crew from SWN Resources, accompanied by protesters claiming to be “independent UN observers” (there are no UN observers in Canada). After a heated encounter, the demonstrators towed the company’s trucks onto the nearby native reserves – essentially stealing millions of dollars’ worth of equipment. Later that same month, police arrested protesters trying to block SWN trucks from doing testing in the same area.

The protests turned even more violent and destructive when protesters turned to arson, setting ablaze two of SWN’s seismic rigs. Police had to arrest more than 30 people for breaking the law in the onslaught against the company and its employees.

This is what New Brunswick is up against: the opportunity to develop its economy, finally, in a sustainable and market-oriented way, facing resistance from a handful of professional anti-fracking agitators using local native groups as their pawns. It won’t be an easy battle – the anti-fracking lobby has a lot of resources and support behind them, from well beyond New Brunswick.

But New Brunswick has known for too long what it means to be dependent on others just to get by. To the province’s credit, it seems, so far, determined to overcome the attacks by anti-fracking groups and finally build energy security, and a thriving economy, for itself.

wellandtribune.ca