Seven months ago, a major report on Nova Scotia's economic prospects predicted a grim future for the Maritime province as a de facto seniors' colony, with few young people and even fewer entrepreneurs. Nothing short of an attitude change among Nova Scotians could turn the tide.
The report, by a government-appointed panel led by Acadia University president Ray Ivany, did a good job explaining the demographic and fiscal time bombs facing the province. Its vague, apple-pie recommendations were a bit of a cop-out, given the urgency of the situation. Nevertheless, it provided freshly elected Liberal Premier Stephen McNeil with a wake-up call.
"Yes, there is a crisis," the panel warned, "and it does threaten the basic economic and demographic viability of our province, most dramatically in our rural regions."
Last week, Mr. McNeil's government signalled just how seriously it takes that warning by announcing that it would table legislation to instate a permanent ban on hydraulic fracturing in the province. With that, Nova Scotia turned its nose up at a potential $1-billion-a-year industry that could help reverse the depressing scenario of decline outlined in the Ivany report.
Hydraulic fracturing, or fracking, is transforming regional economies across North America for the better. Rust-belt states such as Pennsylvania and Ohio, which experienced among the highest unemployment on the continent during the recession, have seen their jobless rates cut in half (to 5.7 per cent) as the fracking boom revitalizes small towns once left for dead.
The process of unlocking natural gas deposits by pumping a combination of water, sand and chemicals into shale rock formations has been around for five decades. But the recent dramatic rise in high-volume fracking has led to legitimate concerns about groundwater contamination, climate-warming methane gas leaks, even earthquakes.
These are, by all accounts, manageable risks. Just ask U.S. President Barack Obama, who, as the proponents of the Keystone XL pipeline can attest, is hardly a shill for the oil-and-gas lobby. For Mr. Obama, the shale gas revolution has been a godsend – it's not just slashing energy costs and revitalizing manufacturing, it's reducing overall greenhouse gas emissions by displacing coal. Unlike Mr. McNeil, Mr. Obama is not about to look this gift horse in the mouth.
"We'll keep working with the industry to make drilling safer and cleaner, to make sure we're not seeing methane emissions," Mr. Obama said last year in a major address on climate change. "… The bottom line is natural gas is creating jobs."
Unfortunately, Mr. McNeil faces different economic and political incentives than the U.S. President. Under the current equalization formula, any onshore resource royalties Nova Scotia received from fracking would translate into less cash from Ottawa.
The Nova Scotia government already depends on federal transfers for 35 per cent of its revenues. This year, it will get $1.6-billion in equalization and another $200-million under a 2005 deal, signed by former prime minister Paul Martin, that protects the province against a decline in equalization stemming from offshore gas royalties. Without a similar deal for onshore royalties, Nova Scotia would be effectively penalized by Ottawa for developing its mainland gas industry.
So, why buy the cow when you can get the milk for free? Why entail the political fallout from fracking – NIMBY protests and First Nations unrest – when you can just cash a federal cheque?
Maybe because it's the right thing to do. Fracking alone wouldn't solve all of Nova Scotia's problems, but it would be a start. More important, it would signal the attitude change that the Ivany report identified as critical to tackling the province's economic challenges.
Unfortunately, political courage often goes unrewarded. Pro-fracking New Brunswick Premier David Alward appears headed for defeat in the Sept. 22 provincial election. Liberal Leader Brian Gallant has exploited voter fear and ignorance about fracking to promise a ban – even though New Brunswick is even more dependent on federal transfers than Nova Scotia.
Strangely, the man who wants to hold the federal purse strings is fine with that.
"I'm very much in agreement with Mr. Gallant [on] fracking and shale gas," federal Liberal Leader Justin Trudeau said last month. "… We need to make sure that we're strong both on the science and the long-term vision for New Brunswick and Canada before we move ahead with that."
Mr. Trudeau should call Mr. Obama for a primer.