Economic risks matter, too

In my column this morning, I suggest that economic risk matters, too.   The folks fighting natural resources development (forestry, mining, shale gas, etc.) will say those industries are not worth the environmental risk but have no interest in talking about the economic risk.  They will cite daily the 16  homes that had water problems in Penobsquis as a result of the potash mine but never mention the net 38,000 out-migration among our youth population over the past 40 years.

Alternatively, they will accuse me of sacrificing our environment on the alter of economic development.  That’s silly.  New Brunswick has made monumental strides in its environmental protection in the past 40 years.  In the 1960s and 1970s, NB factories were dumping toxic effluent into our rivers and air – now virtually nothing.  We were cutting trees right up to the edge of water ways and had no real efforts at forest renewal.  Now there is very little industrial pollution at all and our forest management practices (at least some firms) is world renown.

I refuse to agree that economy and environment is some kind of Solomonesque trade off – one or the other.  I also really dislike the idea of outsourcing our carbon emissions in the name of being green.  Sable Island natural gas is drying up.  It is distinctly possible that we will be importing our natural gas from the U.S. within a decade – and most like it will be gas extracted with hydraulic fracturing.    We outsource our carbon emissions and the economic benefits of the natural gas industry to the U.S.


Net Interprovincial Migration – New Brunswick – Ages 15-24





















































































10 thoughts on “Economic risks matter, too

  1. I agree with you to a point. Although great progress has been made, the economy has typically come first. I’d argue that “we” (society as a whole) have subsidized our steady economic growth over the past decades by not paying the true remediation costs to our activites as we’ve been drawing down on our natural captital. That said, I’m realistic and I want us to have a vibrant economy to pay for our schools and hospitals etc. So rather than getting excited about things like natural gas that will have low prices for decades given a glut of production in the US, I’d like to see some real innovation… Some green techology and energy (and I know that even those will have some risks though). I keep waiting to see economic leadership!

  2. Inevitably I am getting emails disparaging my interest in the environment. I get that. But I once again feel compelled to push back against the charge that I am some kind of corporate lackey – in the back pocket of industry. As I have said many times before I don’t really care that much about corporations or about capitalists. They will mostly be alright one way or the other. It’s not the millionaires that I am concerned with. I am interested in the pipefitters, the welders, the labourers, the engineers, the architects, the cashier at Walmart, nurses, doctors, physios.

    Those are the folks I am fighting for and have for more than 20 years. When companies deploy their capital here and pay good jobs and generate taxes to pay for public services, I don’t really care that much if a fund manager in Toronto or a baron in the Bahamas makes a good return on the investment. I figure those folks can take care of themselves.

    But if no one is investing in New Brunswick, our people won’t have jobs and our public services will eventually erode. If companies don’t deploy capital here then you get the tens of thousands of young New Brunswickers heading for the exits. That’s who I care about and that is who matters.

  3. I hear the green energy innovation/clean tech argument and want to shake my head sometimes. The only way you get investment in green energy and clean tech options is by having an already vibrant economy where investment is happening in many areas, one of which might spur a clean tech cluster. It’s no wonder that a robust German economy has also led to some of the most innovative clean tech solutions out there. It didn’t come from a vacuum.

    Clean tech not going to rise from the ruins like an economic phoenix; the private sector is where the majority of innovation comes from, and without a private sector or young and emerging professionals in rural areas like New Brunswick and Nova Scotia, there will be no innovation in anything. Rural economies need renewal, and they need investment, and it can’t just come from government.

    Shale gas extraction is happening elsewhere, and innovation in this area to make the extraction easier and safer is also happening elsewhere too. Those locations will reap the benefits, both directly from shale gas production, and the induced innovation that will come from it. If you want a clean/green tech industry, you need to encourage the private sector’s growth to get it, because that’s where the investment is going to come from.

  4. I think the case regarding economic risk would be better made if we knew (a) how much money is to be made, and (b) who is getting it.

    Otherwise, there isn’t a good correlation to be made between exploration and extraction of natural gas, and population figures in the province. Even if it results in a lot of income, if all that income simply ends up in, say, the Irvings’ bank accounts, then it will have no impact on out-migration.

    This isn’t just idle speculation. In yesterday’s post, you cited export figures. Between 1992 and 2010 exports went from $3.1B to $12.8B. That’s a huge increase. One would have expected a spate of new jobs – and yet the population declined. The only reasonable conclusion is that this wealth was not distributed, and hence, there was no particular gain to the economy as a whole.

    Given the likelihood that they won’t see any benefit from natural gas exploration, it is not surprising that many New Brunswickers are opposed to subjecting themselves to the risks involved.

    The poverty of wealth distribution in this province is its most President economic problem, and until it is addressed, there will be little support for economic development initiatives in general.

  5. I don’t disagree with that, Downes. The proceeds from any industrial development must accrue to the worker, to communities and to the investor (in our system we need private capital). The worker wants a good return on their labour. Communities want proceeds from economic development invested in public infrastructure, services and the social safety net and investors want a reasonable return on invested capital (or they will move it to where they can get a reasonable return.

  6. “That’s a huge increase. One would have expected a spate of new jobs – and yet the population declined.”

    Not necessarily. Was there an increase in productivity, an increase in units exported, or an increase in capacity? The last would create jobs. The first two might simply retain jobs, rather than increase them. The increased value in exports might in some industries represent windfall profits. Some of those could be taxed back by govt, but that would be a separate issue.

    I’d also note that often I see comments where someone will say we should not have this or that natural resource extraction industry because of environmental impacts. When asked what industries we should have, they will say ‘something green’ or ‘data centres’. There has to be a business case for any industry. If we only have certain choices, we have to chose among them.

  7. First, I don’t question David’s commitment to a sustainable environment and robust economy. They are both good things.

    Second, I’m advocating a more complete cost-benefit analyses which factor-in the remediation costs of ´when´ accidents happen. It’s clear that there is no such thing as a zero-risk.. that’s why we have insurance, and why we restore habitats (when possible). Strong regulations are required to ensure that the parties benefiting are accountable(although the track record of accountability is mixed). This is where I have a problem with shale gas, “if” things do go wrong and the water table is contaminated there is really no effective mitigation with current technology.

    As Steve points out, it’s critical to really understand the benefits. If we are assuming risks, the benefits to the province of any activity should outweigh the costs with a good margin. Ultimately governments end-up on the hook to fix things and add to the tax-burden. “Green” doesn’t need to be completly impact-free, some impacts are part of the cost-of-doing buissness (some might be write-offs) in order to receive the benefits and society needs to accept that. We don’t tend to include these things in the accounting (e.g. export numbers) in order to understand whether we are really getting a good deal or not.

  8. ““if” things do go wrong and the water table is contaminated there is really no effective mitigation with current technology.”

    It seems to me you could measure that risk fairly easily, given the amount of shale drilling done elsewhere. And don’t forget that the well drillers are also taking a risk – they need to extract enough gas to make the venture profitable. Their ability to turn a profit must be pretty low right now, given the price of natural gas in the US. Given those proces, I would be surprised to see a lot of shale gas extraction here in the next few years.

    Perhaps what we need for shale gas is a better defined compensation system. Some people are bound to be adversely affected if a large number of wells are drilled. Why not use part of the royalties earned hived off into a compensation fund, and have that compensation awarded on the basis of probabilities (i.e. not on the basis of a strict finding of fault)? You’d have to draw some boundaries re what is compensated for, but might be a start.

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