From a recent TJ article:
Over time, economic progress doesn’t follow a linear path. The introduction of disruptive new technologies, new natural resources development, efforts to foster free trade and many other factors can lead to a spike in economic growth. The same thing can be said about provincial or even local economies.
The Saskatchewan economy circa 1990 looked a lot like New Brunswick today. Economic output was stagnant, there was little new private business investment and young people were exiting the province at an accelerated clip. Starting in the mid-1990s Saskatchewan became a hotbed for investment into non-renewable natural resources development (mostly oil, gas and potash).
In 1992, oil and gas extraction in Saskatchewan generated $971 million worth of international exports. Twenty years later the dollar value of exports from this sector has ballooned to more than $12.5 billion. Potash and related exports also leaped from just over $ 1 billion in 1992 to $5.8 billion in 2012.
Overall, the total value of Saskatchewan’s international exports grew from $6,600 per capita in 1992 to more than $30,000 per capita in 2012.
This growth, mostly unforeseen in 1990, has resulted in an astounding change in the fortunes and the attitudes in the province. Saskatchewan went from a have-not province that was shedding population to one of the strongest economies in Canada.
The same case for can be made in other provinces. British Columbia took a substantial economic leap forward in advance of the transfer of Hong Kong to China. There was a major influx of investment, entrepreneurs and talent into Canada’s westernmost province.
The offshore oil boom along with other mining in Newfoundland and Labrador led to an unprecedented change in that province’s economic fortunes starting in the late 1990s.
Even in New Brunswick, we had an example of this effect although at a much smaller scale. The rise of the consolidated back office/customer contact centre industry in the late 1980s/early 1990s – driven by regulatory and technological changes in the telecommunications industry – disproportionately benefitted this province.
In 1991, there were 5,100 people employed in the administrative and support services industry across New Brunswick. By 2003, that number had skyrocketed to 25,000.
This industry accounted for an amazing 44 percent of all net new employment growth between 1991 to 2003.
As we look to find ways to revitalize the current economic situation in New Brunswick, shale gas could represent one of these ‘brand spanking new’ industries offering new supply chain opportunities, significant royalties and taxes for government and, most of all, brand spanking new employment opportunities for our residents.
If another restaurant or grocery story opens up, it’s not ‘new’ growth as the new store hasn’t fundamentally changed the market size for these industries.
If the government gives a company millions of tax dollars to expand its employment, it may be the government is just displacing private sector investment into that firm. In other words, it may not be fostering ‘new’ growth – just supporting growth that would have occurred anyway without the taxpayer support.
On the other hand, if we can find ways to safely extract the potentially hundreds of billions of dollars’ worth of natural gas under our feet over the next 70 years, it would truly be brand new economic activity.
Other jurisdictions understand this. British Columbia has made shale gas a central component of its economic development effort. Alberta and Saskatchewan are witnessing a significant increase in the use of hydraulic fracturing to augment already significant industries in those provinces.
Across the United States, shale gas and shale oil, is expected to drive growth in the country’s overall GDP both from the economic value of exploration and production and the positive impact of lower energy costs on manufacturing and other segments of the economy.
We need brand spanking new economic development. Shale gas could be this kind of opportunity. We need to find others.