The elephant and the gnat

There is a story in the TJ today that quotes APEC as reporting New Brunswick will likely lead Atlantic Canada in economic growth next year if all the major projects go ahead as planned. That is true. GDP growth is heavily tilted towards major capital projects so in a year where the Potash Corp. expansion, Lepreau refurb and the LNG terminal gets completed, it is bound to drive up the GDP numbers.

But the interesting sub-point in the story is the article makes a point about how the mining sector is on the upswing (another story called interest ‘unprecedented). Spending is expected to reach a whopping $25 million this year (tongue firmly planted in cheek). And the impact on government coffers is not exactly stellar. Here are the forecasted royalty revenues (07/08 budget):

Royalties on Coal $26,000
Royalties on Peat Moss $1,000,000
Royalties on Potash $7,600,000
Royalties on Sand and Gravel $300,000
Royalties on Salt $400,000
Royalties on Natural Gas $3,500,000

On a provincial budget of $6 billion, $13 million is a pittance.

So after we are blitzed with the massive growth hitting the province, the journalist slips in:

Atlantic exports of lumber and other wood products fell 31 per cent in the first seven months of 2007, and further declines in U.S. demand, continued low prices and the strong Canadian dollar will likely lead to further reductions in lumber exports near year, APEC says. In New Brunswick, the economic downturn in the forestry industry has led to the loss of more than 5,000 jobs in less than two years.

Now, what is the story here? What is the economic impact? A couple of mega projects with limited job creation, the wonderful mining sector and its $25 million in activity or the huge challenges in the forestry sector?

We have a pathological need in this province to portray things as always on the upswing. In government press releases and in the media. It’s as if somehow if we only emphasize the positive – it will happen. A kind of The Secret for economic development.

But it’s not true.

I’ll leave with an anecdote I mentioned before but one that is emblematic of this situation. Former BNB Minister Peter Mesheau was asked upon his departure what was he most proud of during his tenure as minister. Without hesitation he answered the saving of the Nackawic pulp mill.

That response stunned me. His greatest accomplishment was a project that actually led to less jobs at lower overall compensation. In essence, a project that moved the province slightly backwards was his greatest achievement.

That’s a metaphor for NB governments these days.

So is the story above one of boom boom boom? Or it one of a few megaprojects not being able to make up for a serious decline in the forestry sector?

We report. You decide.

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0 Responses to The elephant and the gnat

  1. Anonymous says:


    The Mining Sector in New Brunswick is undergoing an unprecedented boom.

    Metallic Mineral Tax Royalty Revenues hit $112 million in 2006 and are likely to meet or exceed that number in ’07.

    That’s the good news. The bad news is the majority of the $1.6 billion in mineral production in NB comes from Xstrata – $1.2 billion.

    Xstrata will likely close in May 2010.

    But at 10,000 tonnes per day and with Blue Note now outputting 3,000 tonnes per day, all we need is a few more finds and high metallic mineral prices to continue for the boom to last.


  2. David Campbell says:

    Actually, I forgot about that mine and I don’t have a problem with mineral exploration. I think it is great and I hope they find commercial deposits. But I don’t think we can rest on this sector as a panacea for growth.

    This is the crux of the matter. Our guys want easy economic development. Mines, oil & gas, and Irving. As Ralph Klein once said, “we just need to get out of the way”. But that won’t be the solution in New Brunswick. It is highly unlikely that there is enough mineral resources or Irving Refineries in our future to just compensate for loses elsewhere.

  3. David Campbell says:

    I hate to split hairs, but according to the 2007/2008 estimates published by the government, Metallic Mineral Tax Royalty Revenues hit $19 million in 2006-2007 and are projected to hit $70 million in 2007-2008. I’m looking at it right now. If you add in everything else from under the ground, gas, potash, etc. – it might get you up to close to $100 million (and that’s an estimate). But there may be some hidden revenue that I can’t see when I read the estimates. Or maybe they have revised their estimates for this year but based on last year’s data, I don’t see it.

  4. David Campbell says:

    I read the press release, and I hate to dispute the Minister and this will be my last point on it. He says “New Brunswick is a major Canadian producer of copper, lead, zinc, silver, potash, salt, limestone, silica, and peat, and more recently natural gas.”

    In 2006, New Brunswick exported 0.08% of the oil & gas exported from Canada and 2.2% of all other mining exports. So, to characterize us as a ‘major’ producer of anything except a couple of products, sends my crap-o-meter into the red zone.

  5. mikel says:

    One explanation is that the 112 million ‘added to government coffers’ doesn’t say ‘per year’. It could be a ten year average-remember, this is a government publication.