Rural Nova Scotia is the Economic Engine

Halifax has 40% of the population of Nova Scotia and, together with its younger demographics, well over half of the jobs. It might be tempting to conclude that Halifax is the economic engine that drives the Nova Scotian economy. It would also be wrong.

For a jurisdiction to be prosperous, whether provincial or national, it must produce goods and services wanted in other jurisdictions. The value of those goods and services must exceed the value of what the jurisdiction imports.

In other words, like a household, a province must earn from others more than it spends outside. This is what happens in the “have” provinces of Canada.

The largest employers in Halifax are education, health, military, and government. That is to say: government, government, government, and government.

There is not much of a market in other jurisdictions for our skills at government. Yes, we earn a bit from foreign students. Our military establishment, including shipbuilding, is on behalf of all provinces and legitimately supported by them.

But most of the burden of that Halifax government activity falls on the shoulders of all Nova Scotian taxpayers.

Historically, there were major contributions to the treasury from forestry, coal mining, fisheries, and farming. More recently the forest products industry has taken far more taxpayer money than it has provided. Coal mining is almost entirely gone.

Today, although much of the historic ground fishery is moribund, wild fishery exports still exceeded $900 million in 2012.

New opportunities have arisen and old ones have expanded. Blueberries are worth $30 – $35 million a year at the farm gate. A nice cottage industry has developed around wine, with tourism spinoffs.

Unfortunately, the really big opportunities often encounter opposition.

The current government deserves credit for it support of aquaculture although its recent rejection of a project for the Eastern Shore sent a negative message. Its appointment of a review panel on regulations, to report in 2014, smells more of an effort at political expediency than policy enhancement.

Aquaculture earns $57 million per year for Nova Scotian producers and employs 750 people. It has the potential to grow much more. The Economist recently reported that worldwide aquaculture production has surpassed beef in annual tonnage. Cows produce more manure than salmon.

Mink is the most valuable agricultural product. Mink farming provides 1,000 badly needed jobs, primarily in Digby County, and was worth $140 million in the most recent year. Of course the industry needs to be well regulated, particularly for the impact of waste management on watercourses. But beyond that it has asked for no handouts, just permission.

By far the single best opportunity is in Oil and Gas. Apart from the considerable economic activity, there are substantial royalties. In the last decade the province has received over $3.2 billion in various payments related to offshore oil and gas. Without that our $14 billion net debt would be much higher.

The remaining Sable offshore production, and a few years’ worth of gas from Deep Panuke, will make a contribution but not nearly at the previous level. Offshore exploration commitments by Shell and BP are encouraging but, if successful, will take a decade or more to reach production.

Meanwhile, onshore exploration has been shut down by the moratorium on fracking. The government, which promised the outcome of a review in early 2012, has now asked for yet more study to be completed in 2014, after the election. This is the triumph of political cowardice over potential opportunity.

From the Globe and Mail last Saturday:

“The shale oil and gas boom in the United States has done more than rewrite the energy supply picture south of the border. It may also have put an extra $1,200 (U.S.) a year into the average American’s pocket.

According to a study by energy industry consulting firm IHS CERA, in 2012 the hydraulic fracturing boom supported 2.1 million jobs, added $283-billion to U.S. gross domestic product, put $75-billion into state and government coffers, and increased the income of the average U.S. household by $1,200.

It is an industry-supported study, so we’ll all make sure we view its results through somewhat-jaded eyes. Even so, they are impressive results. The findings indicate that the fracking boom is lifting the U.S. economy in concrete ways, which is no small claim at a time when output is sluggish and the price of energy is uncomfortably high.”

Or from the government’s own fact sheet, released in 2011 and still to be found on the Department of Energy website:

“Nova Scotia does have resource potential to support a strong onshore industry that can provide good jobs and spinoff benefits to rural communities. As an important source of revenue for the province, it can help pay for public programs, such as health care and infrastructure improvements.

Most issues attributed to hydraulic fracturing have been traced back to poor drilling practices rather than the fracture operation itself. Since the commercial application of hydraulic fracturing in the late 1940s, more than a million wellbores have been drilled and stimulated using hydraulic fracturing.

Nova Scotia’s geology is such that most freshwater aquifers are within 150 to 250 metres of the surface. Shale gas in Nova Scotia is generally drilled to a depth of between one to two kilometres below the surface.

In Nova Scotia, regulations require any well being drilled to be cased in steel to ensure nothing put down the well or brought up the well can escape anywhere it is not intended. The steel casing is then encased in cement for additional protection of the aquifer.

Oil and gas is available in the natural environment and can often be found at various depths depending on the geology. Cases have been reported of water wells containing methane in their drinking water. These water wells typically have several reasons for the methane that had nothing to do with oil and gas operations. These water wells, when drilled, did not have adequate protection (ie: casing) in the well to isolate the well from the surrounding formations. These wells also drilled through coal seams which naturally have associated methane/gas.”

These facts are unlikely to be changed by the latest review. Surely an equal amount of effort should be underway to provide the most up-to-date regulations but there is no indication that this is occurring.

The opposition parties have not been much braver. The Tories have contented themselves with expressing impatience for the review to be done.

Unfortunately the Liberals have gone further. Critic Andrew Younger had this to say, “Until we can definitively determine that fracking will not harm our resources, our environment, or the general public in any way, the extraction procedure should be prohibited.”

He seems to asking for proof that fracking is completely free of risk. It isn’t. It is always possible that operator error will cause a problem. Of course the operator should be penalized and those affected compensated. But it is not possible to eliminate all risk.

Using the same risk-free requirement Mr. Younger would need to also forbid all offshore exploration. No new mines would be allowed in Nova Scotia. The Northern Pulp mill in Pictou County would have to shut down. In fact almost every resource-based industry would fail Mr. Younger’s test.

We cannot have a province that is viable, let alone prosperous, unless the parts outside of Halifax are doing well. As shown by Canada’s “have” provinces it is well managed and well regulated resource industries, not corporate handouts, that will be central to a successful strategy.

It would be nice to hear the contending political leaders recognize and say as much.

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