110 College Street
Woodstock, N.B. E7M 1K6
April 30, 2013
Hon. David Alward
Premier of New Brunswick
P. O. Box 6000
Fredericton, N.B. E3B 5H1
premier@gnb.ca
cc: Blaine Higgs, Minister of Finance Craig Leonard, Minister of Energy
Dear Premier David Alward:
We generally agree that creating jobs in New Brunswick is critical for the economic welfare of the province, for balancing the budget and reducing the provincial debt. Having our workers leave the province to find jobs is not good for the workers and their families, or for the province.
Where we disagree is with your solution to this problem, which is to establish shale gas development through outside investment by industry, and additionally, to pipe bitumen tar sands oil all the way from Alberta to Saint John both for refining and for shipping abroad. Our objections are the following:
1. The expected benefits of royalties and the mostly temporary jobs from shale gas will very likely be matched and probably exceeded by the risks and costs that accompany this industry. These risks and costs include unhealthy air quality and contaminated water that will drive up health care costs and drive down residential and agricultural land values. The net result in the long run will almost certainly be a loss of economic value, health and wellbeing for our province. This industrial development policy is based on the assumption that it is necessary and legitimate to require certain areas of the province to become sacrifice zones. This policy is short sighted, undemocratic, and unacceptable to the common good.
2. Fossil fuels are now a sunset industry. Oil industry profitability is measured by the ratio of energy return on energy invested. The industry started out with a ratio of 100 to 1. In recent years this profitability ratio has fallen precipitously. It is now on average 18 to 1 worldwide and dropping. Alberta oil sands is down to 5 to 1. Energy science economists calculate that when this ratio drops to 3 to 1, investment from capital markets will stop and the oil industry will come to a halt. In addition, carbon pricing and carbon caps are coming which will restrict and depress the fossil fuel industry. And finally, the World Bank, the International Energy Agency, and the Stern Report are warning that up to two thirds of the fossil fuel deposits remaining must be left in the ground in order to avoid runaway global warming. HSBC, Citi, Standard and Poors, and the Bank of England are taking this warning seriously in their investment outlook. Given this outlook, pumping Alberta bitumen to St. John is likely to be a short-term proposition with a high level risk factor. Pumping unrefined bitumen crude oil is particularly risky as it is highly corrosive and requires higher pressure to move than refined oil; additionally, when it spills into lakes and rivers it sinks, making it very difficult to clean up. Even one major spill in New Brunswick could have very costly long-term effects on the province. Job creation will be short-term, risk will be long-term, the world market will still determine the price of petroleum products in NB, and the export of oil from St. John will be of little financial benefit to the citizen of NB.
3. Climate change is the enemy of the future, and economic development in NB should not be contributing to this global emergency. Escaping methane from shale gas operations and leaking pipelines is bound to increase global warming, as are the trucks used in the operations. Based on the experience of existing shale gas operations, leaking methane is very likely to offset the lower greenhouse gas emissions from burning natural gas as compared to burning oil or coal. It is well known that oil extraction from the Alberta tar sands is a higher-level contributor to greenhouse gas emissions than conventional oil sources. If NB helps facilitate the expansion of the oil sands industry it will be going backward on its commitment to reduce greenhouse gas emissions.
In the Energy Blueprint released in October, 2011 your party committed to a 10 percent decrease in greenhouse gas emissions below 1990 levels by 2020. How do you intend to keep that promise going into the election in 2014? After you became premier in 2010 you started out on the right foot by consulting with the people who wanted to be heard, and the Energy Blueprint was clearly a response to that. However, once the decision was made by your government to pursue shale gas development consultation with those who were opposed ended, and that has left all those with valid concerns frustrated and determined to stop this project. What positive vibes were present in 2010 are gone as you near the end of your term, and this is unfortunate.
The Sustainable Energy Group, as you know, is committed to sustainable renewable energy coupled to a lowered demand through energy efficiency. As a small province that is presently shrinking in population we have no other choices left but to start to think and act small, smart and steady, and to avoid any large risks that can undo the gains that are being made. By making the environment central to all business plans we will be able to turn the provincial fortunes around and make the province attractive in many ways. There are no quick or easy fixes and we should stop looking at outside investors and the rest of Canada to bail us out of debt; the sooner we start to take care of ourselves in a responsible and environmentally benign manner, the sooner the province’s fortunes will improve. The following ways will help to bring this about.
The Environment and Economics
When we seriously consider the quality of land, air and water as being critical for both survival and economic success we may learn how to use them without harming them. The environment will work for us so long as we protect it and don’t abuse it. This is especially true for water, which may soon become more precious than any natural resources found in New Brunswick because of a growing global need for clean water. We’re taking clean water for granted because we still have an abundant supply, but this will inevitably change if the shale gas industry is licensed to set up business in N.B. This is because the aquifers will be drilled through them hundreds to thousands of times, and then into the shale rock beneath, which will then be fracked horizontally using chemicals that must never find their way into the drinking water supply. No guarantees can be made that shale gas wells won’t contaminate the aquifers, or that chemicals used to fracture the shale and residual methane will not migrate into the water supply. To date no regulations have made unconventional fracking “safe”, and it seems very unlikely that any regulations and enforcement regime will ever be able to guarantee an acceptable level of safety.
SEG advocates the development of a slow growth economy that is not affected by the booms and busts characteristic of short-term ventures such as oil and natural gas. A sustainable economy is built on long-term predictable resources and practices that are much less subject to upheaval if they are managed carefully for the long haul. The forest industry is an example where this has not been done due to unsustainable harvesting practices that have reduced the regenerated growth to a level where the industry is hurting. The forests, habitat and people are vulnerable to erosion from extreme weather events due to climate change (global warming). Changing the Crown Lands Act to support sustainable harvesting practices and urging private woodlot owners to do the same, adopting natural mixed forests using select thinning practices to increase growth rather than single species stands would not only make the forests healthier, but also increase the annual yield of lumber over time, and would create more jobs. And rather than exporting raw lumber it should stay in the province for value added products and jobs. The state of Vermont is a good role model for how to manage the forest industry sustainably.
Thinking small while promoting and improving all the things that bring prosperity without compromising the natural and ecological environment of the province is the way to get on the right economic track. Prince Edward Island is using this approach and the province has not run up a debt anything like New Brunswick has. NB’s debt is $10 billion more than PEI. When you look at the history of big projects they generally have not delivered what they promised because the population and tax base is too small. The Point Lepreau nuclear power station is one example of a poor investment, because long after it goes out of service the costs and concerns will continue to haunt NB taxpayers. We should forget about looking for “nation building game changers” like the proposed west-east oil pipe line to Saint John and shale gas development because they are already on shaky, high-risk investment ground and are very unlikely to deliver the benefits forecast. Taking a big risk is never a good idea, especially when making debt payments, and if the risk involves the environment and has negative effects on people’s health it’s an idea that shouldn’t even be considered. The potential costs are incalculable and could be catastrophic.
Energy Efficiency
Energy efficiency means using less energy to provide the same level of service, and it needs to be made the cornerstone to reducing energy consumption while the province is transitioning to clean energy. New Brunswick has been under-investing in energy efficiency, and the recent budget cut to Efficiency New Brunswick was the wrong thing to do. It has been proven that energy efficiency creates jobs while saving in energy costs.
Leslie Malone, Program Director with Environment Northeast (ENE) reports that businesses and consumers in New Brunswick could save $6 billion in energy costs over the next 30 years by investing in cost-effective energy efficiency. Ms. Malone was a speaker at The Andrews Initiative on April 17, 2013 at the WU Conference Centre where she declared, “Energy and the environment are inextricably linked,” meaning that when the environment is not considered along with energy production the performance will fall short of expectations. She further added, “Saving money through energy efficiency results in people spending more on other things.” According to the International Energy Agency and World Energy Outlook 2012, “Energy efficiency can improve energy security, spur economic growth and mitigate pollution, but current and planned efforts fall well short of tapping its full potential.” In short, energy efficiency creates improved economic activity, reduces energy demand, and is better for the environment.
Energy Security
There are excellent environmentally acceptable solutions in the renewable energy portfolio and their costs are continually declining, and yet they’re still being seen as energy replacements for the future rather than now by the fossil fuel industry, and by governments who feel dependent on fossil fuel investors.
Small to medium scale generating technologies that now are emerging are far more cost effective than in the past. They are less expensive to design and build, and can be installed in a fraction of the time required for large central generators. These include micro co-generation, micro-turbines, fuel cells, micro-hydro, wind turbines of many sizes, biomass and solar photovoltaics. Most of these small generators use renewable ambient energy, which produce very low carbon dioxide emissions during construction and operation. These technologies work well in the kind of decentralized power system toward which NB Power could be moving. They are being utilized by many jurisdictions worldwide and are clearly the best option for a sustainable energy future.
“Solar photovoltaics have joined the ranks of lower-cost alternatives to new nuclear plants,” according to John O. Blackburn, a professor of economics at Duke University and Sam Cunningham, a graduate student, in their paper, “Solar and Nuclear Costs — The Historic Crossover.” According to their research, this crossover occurred at 16 cents per kWh. Solar energy is steadily gaining the economic and environmental advantage over nuclear and fossil fuel power, to say nothing about risk or decommissioning costs with nuclear.
Walt Patterson, author of Keeping The Lights On: Towards Sustainable Electricity, said it’s time to stop thinking of electricity as a commodity generated mostly by non-renewable fossil fuels, and to start providing it as a function of infrastructure generated by renewable energy using a wide variety of suitable technologies. Shifting to “Infrastructure Electricity” he says, will solve a number of problems, which include maintaining or lowering power rates and improved performance reliability. The present system of providing mostly one-way centralized power to customers needs to be changed over to a two-way decentralized configuration, says Patterson.
Customers will then be able to both purchase and sell power from and to the smart grid. This will make electricity more affordable, more reliable, and generators will be closer to the load. He advocates a meter-less system where participants pay a flat rate based on their annual consumption and output of electricity. Patterson says that renewable ambient energy, besides being the cleanest energy, is economically more stable because there is no fuel cost. Non- renewable fuel, on the other hand, is affected by economic activity, by finite supply, and contributes to global warming and pollution.
The present net metering program at NB Power does not provide sufficient incentive for businesses and homeowners who want to invest in producing electricity for the grid as the built up credits are cancelled every spring. As a crown corporation NB Power should be operating more in the interest of the taxpayers of New Brunswick.
Paying down the debt
Here are three suggestions for the government to begin to pay down the debt at NB Power and to make electricity sustainable. 1) Allow other utilities to use our transmission lines to reach their customers and thus help pay down the NB Power debt; 2) concentrate on making New Brunswick energy self-sufficient with low-risk, small scale, and clean power generators in a decentralized two-way flow system; 3) allow the current export power contracts to gradually expire. This will allow NB to eventually unhook from large central generators and the debt cycle they create.
By switching from large non-renewable energy generators and one-way centralized power to Infrastructure Electricity and a “smart grid” system, NB would achieve four important goals: 1) We would be dramatically lowering our carbon dioxide emissions that contribute to global warming and climate change; 2) we would achieve a high level of community and provincial energy self-sufficiency, 3) we would break the debt cycle associated with large scale centralized generation, and 4) province-wide long-term employment would be created to build and service the distributed generation and smart grid system. Our part of the world would become a distinctly better place and future generations will benefit from this kind of energy policy foresight.
Your government and NB Power are to be commended for implementing the smart grid system and for hiring Siemens to do this. SEG did recommend the smart grid to the Energy Policy Commission in 2011. We hope the smart grid will continue to reach full effectiveness to make the grid stable and efficient. The next steps will be to integrate smaller and more affordable renewable energy power generators, purchase power from private and community co-ops within the province, and purchasing clean power from outside the province, but only when it’s needed. Exporting power should be limited to superfluous power on demand when it’s not required.
Energy Blueprint
Any day now your government is expected to release the Energy Blueprint. Indications are that it will set a timetable for initiating oil and natural gas development that a growing number of New Brunswickers object to. Regulations, no matter how strict, will not prevent accidents or prevent environmental degradation. The environment will mete out its consequences and we will have to accept them, but we hope that wisdom or good fortune will prevail and it won’t come to that.
Energy Minister Craig Leonard and the proponents of shale gas development continue to insist publicly that fracturing has been in use for decades, suggesting that it’s safe. However, the claim is not true with regard to unconventional horizontal fracturing, which is at most one and a half decades old. Evidence is now surfacing showing that there are at least 1,123 cases of damage to property, health problems and deaths to animals and even to people as a result of unconventional horizontal fracturing in the United States. These are only the cases where people have come forward, and does not include many more who have had to sign non-disclosure agreements with operators. Please take a close look at the link below.
Recently you told the Economic Club of Canada in Toronto that the west-east oil pipeline is “as important to our nation’s economic future as the railway was to our past.” That comparison is a stretch of the imagination because the railway was new at the time and it was built to carry both people and goods across the country. The pipeline, on the other hand, will only be moving crude oil for a few years at best, because oil is running out and is fast becoming environmentally unacceptable. As soon as various alternative clean energy sources are developed to replace oil, such as hydrogen or solar electric, oil will become history. Bitumen oil is heavy and highly corrosive, and requires high pressure to pump. Breaks in oil pipelines coming from the Alberta tar sands have caused devastating results in Mayflower, Arkansas this year and in Marshall, Michigan in 2010, as well as spills in Canada. Such accidents rightly threaten US approval of the Keystone XL Pipeline, and hopefully will do the same in Canada.
All future projects must be environmentally benign. The risk of bringing bitumen oil to St. John is far too great, and is not worth building and running for relatively small gain that might accrue to NB. Our environment will not continue to support us if we continue to abuse it. If the Irving empire intends to continue to prosper it must learn this important lesson as well.
Constantine Passaris, a professor of economics at UNB, wrote in his commentary in the Daily Gleaner on April 5, 2013 that a former prime minister once told him that finance ministers come in two sizes. “The first is the diligent accountant who is obsessed with balancing the books and trimming the fat from the administration of government. The second is the visionary who sees unrealized potential on the contemporary economic landscape and sees the role of government in spearheading strategic investments in order to bake a bigger economic pie.” Mr. Passaris goes on to say, “The role of the provincial government in economic stewardship is essential. We need a plan to grow our provincial economy. The economic recovery will not happen simply because we wish it so. It will happen because we roll up our sleeves and make it happen.” Restoring funding for Efficiency New Brunswick would be a good first step.
The Sustainable Energy Group believes that besides Mr. Passaris advice the best economic plan is a stable slow growth economy that’s built around energy efficiency and renewable energy, avoids environmental risks and protects our water, air and land. This will take a perspective on time, which governments often don’t seem to have, but if we start now with strategic changes the fruits of our labour will surely start to grow, and, with a second term in office, we may all be able to smile at the early results. The time to start is right now!
Yours truly for government leadership on renewable energy economics,
Sam Arnold, Coordinator
Sustainable Energy Group & Transition Town Woodstock
110 College Street
Woodstock, N.B. E7M 1K6
506-328-9420
This link provides 1,123 cases of claims of shale gas related harm done in Pennsylvania and other states. http://pennsylvaniaallianceforcleanwaterandair.wordpress.com/the-list/