New Brunswick's recent election campaign featured starkly different visions of how to lift the province's moribund economy. The governing Progressive Conservatives saw unlocking shale-gas resources as a job and wealth-creating opportunity while the Liberals, playing on fears instilled by anti-fracking protesters, promised increased infrastructure spending.
In a choice between building wealth or building debt, frack-fearing voters chose debt. Just days after newly elected Liberal Premier Brian Gallant vowed to institute a moratorium on natural gas well hydraulic fracturing, neighbouring Nova Scotia introduced legislation prohibiting fracking. This, despite a report by a government appointed commission that acknowledged unlocking shale gas resources could bring billions of dollars into the province's economy and a recommended establishment of baseline monitoring with effective and enforceable regulations.
The two Atlantic provinces have joined Quebec in shunning a technology that has one of the most impressive industrial safety records ever compiled. In the United States, where some 1.2 million wells have been hydraulically fractured over the past 60 years, the Bureau of Land Management and the Environmental Protection Agency have found no supportable evidence of fracture-induced water contamination. Here in Canada, more than 200,000 wells have been fractured in Alberta, British Columbia and Saskatchewan with a similarly sterling record.
News that the three eastern provinces are shunning technology that helps generate the very funds they receive through Canada's Equalization Program is stirring an undercurrent of resentment in the west. Letters on editorial pages echo an "okay in our back yard, but not in yours" sentiment while a "no fracking, no cheque" quip went viral on the Internet.
Adding fuel to these sentiments is opposition to TransCanada Corp.'s critically needed Energy East Pipeline that would move oil sands production through Quebec and New Brunswick to international export markets. Led by environmental NGOs, the same groundless apocalyptic rhetoric used to foment opposition against hydraulic fracturing is being adopted against Energy East.
Matthew Abbott of the Conservation Council of New Brunswick alleges, "The Energy East pipeline would put thousands of fishery jobs a risk." Greenpeace campaigner Patrick Bonin pronounces "Quebeckers should not have to assume the risks … which only serves the interests of oil companies." Here again, the message that Westerners hear is "Keep your dirty oil, just send us the cheques."
Of course, Canada's equalization system doesn't actually involve "have provinces" sending cheques to "have-not" provinces. But in practice that's what happens, through the federal treasury. The system ties equalization grants to per-capita "fiscal capacity."
Unlocking shale gas and oil sands resources results in a higher fiscal capacity for B.C., Alberta and Saskatchewan. That higher per-capita fiscal capacity means higher tax payments to the federal treasury, which are redistributed to lower fiscal capacity provinces including Quebec, Nova Scotia and New Brunswick. Without natural gas and oil sands revenues, those funds simply wouldn't be available for redistribution. What would that mean to the three anti-fracking, anti-oil sands provinces?
Quebec's fiscal plan for 2014-15 projects a deficit of $2.4-billion. This is after a $9.3-billion equalization grant. Without that grant, the provincial deficit would mushroom to a whopping $11.7-billion. New Brunswick projects a deficit of $400-million (before Premier Gallant's new infrastructure spending program) while its equalization grant is expected to be $1.7-billion. Without that grant, its deficit would jump to $2.1-billion. That means one-quarter of all spending would have to be borrowed. Nova Scotia projects a deficit of $300-million and an equalization grant of $1.6-billion, so without the grant the deficit would jump to $1.9-billion. One fifth of all spending would need to be borrowed.
Without those gas- and oil-funded equalization payments, the fiscal position of these three provinces would clearly be disastrous, leaving no choice but to make dramatic cuts to health care, education and social programs. Perhaps then, gas well fracturing and the oil sands might not seem so awful any more.