Choking Out Economic Growth with Bad Public Policy

Commentary, Energy, Gerard A. Lucyshyn

With an estimated 1.6+ trillion cubic feet of natural gas literally under foot, Nova Scotian policy makers are choking out the economic growth potential for their province and communities with bad public policy. Their hasty decisions regarding the not-so-new technology of hydraulic fracturing (which has been around since the 1950’s) were justified by claiming to have been based on  incomplete, unavailable, or unobtainable information. As such, it appears the ‘fear of the unknown’ sent policy makers retreating to a ‘better-safe-than-sorry’ public policy on fracking. This continued type of politically fuelled phobic-thinking smothers the economic potential of Nova Scotia. It contributes to its economic woes and costs Nova Scotians millions each year in opportunity costs.

In 2014 the Wheeler Commission published the Report on Nova Scotia Independent Panel on Hydraulic Fracking. The commission’s mandate was to assemble a panel of experts, conduct public consultations, and perform a literature review on the health and socio-economic impacts of hydraulic fracturing. The purpose of the commission was to provide information so that the provincial policy makers could make an informed decision on the future of hydraulic fracturing in Nova Scotia. The 387 page report concluded “We [the commission] conclude that the Province is not able to make fully informed decisions either for or against, the development of unconventional gas and oil resources by hydraulic fracturing at the present time.”

Despite the inconclusive conclusion, the commission proposed four potential scenarios if Nova Scotia engaged in fracking (hydraulic fracturing). Using “reasonable assumptions drawn from analogous geologies”, the commission’s lower-medium-scenario proposed drilling 100 wells per year over a course of 40 years. This scenario, the commission estimated, would yield $1 billion in annual spending, of which, approximately one-third ($333 million) per year would directly be spent in Nova Scotia’s economy.  In addition, this scenario predicted the creation of 750 to 1500 full-time jobs spanning across Cumberland, Colchester, Harris, and Pictou counties.

The commission admitted that due to its “funding constraints” they were unable to model the costs of externalities in as much detail as the potential benefits and that further modelling was recommended as an immediate research priority. This further modelling seems to never have occurred.

The range of potential externalities the commission examined included exposure to toxic materials, contamination of drinking water sources, atmospheric exposure, and mental health. Fracking has been around for at least 60 years, the commission indicated in its report that they did not have sufficient funding to further examine these externalities and that such impacts are not known. The commission did report that they were unable to find any long term and cumulative public health impacts and found “no evidence of catastrophic threats to public health in the short-to-medium term that would necessitate the banning of hydraulic fracturing outright.”  It appears a simple listing of a “range of potential unquantified economic costs that could accrue” was sufficient for policy makers to continue the ban. These potential unquantified economic costs remain a mystery and will continue to haunt policy makers until such economic costs are quantified.

In the meantime there is at least one quantifiable economic cost policy makers need to consider, that is, the opportunity cost of the ban on fracking. Alarmist decision-making and inconclusive findings of the commission have cost Nova Scotians an estimated $333 million per year in lost spending, based on the commission’s own lower-medium scenario. Since the commission’s report six years ago, the ban on fracking has choked out of the Nova Scotia economy nearly $2 billion in spending along with 750-1500 full-time jobs across the Northumberland shore counties.