1

June 1, 2015

Dr. Ray Gosine

Chair, Hydraulic Fracturing Review Panel

c/o Office of Associate Vice-President (Research)

Bruneau Centre for Research and Innovation, IIC-3067

Memorial University of Newfoundland

St. John’s, NL A1C 5S7

Dear Dr. Gosine:

I am writing as an individual citizen to provide my thoughts on the issue of whether or not to allow

hydraulic fracturing or “fracking” in Western Newfoundland. As an economist and concerned citizen

I feel compelled to write, research and speak about the topic for two fundamental reasons:

1. First of all, I have a deep concern for the future of the West Coast. The Newfoundland and

Labrador economy outside the Avalon Peninsula, and in particular on the West Coast, is in a

state of continual economic and population decay without significant ongoing new

industrial opportunities being developed. Without new industry, our population will

continue to decline and communities will continue the path into oblivion. In the last 20

years, we have seen population declines of more than 30 percent in some of our rural west

coast communities. The residents that remain in some of these communities are heavily

dependent on government transfers as a means of income, as opportunities for

employment are limited to non-existent. Without new industrial development, these

communities will not (materially) exist in a generation.

2. I also saw a gap in the local discussion about fracking and decided to try to provide some

balance to the discussion on fracking costs and benefits. The public discussion of the

fracking on the west coast has been dominated by a local anti-fracking group named the

“Port au Port/Bay St. George Fracking Awareness Group”. They highlight the risks to fracking

from an environmental, social and even economic perspective. From what I have heard

communicated in written letters, interviews on radio, at public meetings etc., they do not

disclose or discuss the potential economic benefits that have been realized from

communities and regions that host the industry. Given the lack of public “awareness” on

this very important and core element of the debate, I have conducted research on this topic

that I would like to share with the panel to provide some balance during this Review

Process.1 I request a one-on-one meeting with the Review Panel in Corner Brook to discuss

my research.

1 Slides from a presentation on the economics of the region and fracking that I conducted in November 2014 are in Appendix 2.

2

Technological innovation in oil and natural gas extraction through hydraulic fracturing has provided

a significant shock to the U.S., Canadian and global economies and the geopolitical landscape. It has

enabled the extraction of crude and natural gas from reserves that were previously uneconomic

while shifting global energy balances and putting the United Sates on the path towards energy self-

sufficiency. Many have referred to the technology and its impacts as a “game changer”, the “Shale

revolution”, the “modern day gold rush”, etc. Even local anti-fracking leader Graham Oliver

recognizes this technological innovation stating that “fracking is a brilliant technology. It is an

absolutely brilliant technology”2. This supply shock to energy balances has driven the price of

natural gas to very low levels driving down electricity costs in the U.S. as power producers migrate

to natural gas based generation instead of coal. Oil markets have also been impacted driving crude

prices to multi-year lows – the fallout of which, we are currently experiencing – providing a boost to

the global economy while having a negative impact on areas that extract crude oil.

Economic Literature

While not prominent in local fracking discussions, there is a tremendous amount of research

available on the positive economic effects associated with fracking – both those effects that have

been realized and the anticipation of future economic benefits. The magnitude of these effects can

be appropriately referred to as extraordinary. I summarize and highlight some of the recent and

relevant literature for your socioeconomic review and provide other examples in the Appendix.

In recent research conducted for the Brookings Institute, researchers found that:

Overall, we found that the shale gas revolution has led to an increase in welfare for natural

gas consumers and producers of $48 billion per year3.

The Congress of the United Sates Congressional Budget Office also recently noted the significance

on the economy and the tax base:

CBO expects the effect of shale development on revenues to be slightly higher in percentage

terms than the effect on GDP. As the previous section also mentions, CBO estimates that real

GDP will be 0.7 percent higher in 2020 and 0.9 percent higher in 2040 than it would have

been without shale development. On the basis of that increase in GDP, CBO estimates that

revenues will be higher by 0.8 percent (or about $35 billion) in 2020 and by 1.0 percent in

2040 than they would have been without shale development.4

In Canada, the Government of British Columbia is hoping to use fracking to continue their

development of their natural gas reserves:

2 VOCM, October 16, 2015.

3 Welfare and Distributional Implications of Shale Gas BPEA Conference Draft, March 19–20, 2015, Catherine Hausman, Ford School of Public

Policy, University of Michigan; Ryan Kellogg, Department of Economics, University of Michigan and National Bureau of Economic Research

http://www.brookings.edu/~/media/projects/bpea/spring-2015/2015a_hausman.pdf 4 The Economic and Budgetary Effects of Producing Oil and Natural Gas From Shale

http://www.cbo.gov/sites/default/files/cbofiles/attachments/49815-Effects_of_Shale_Production.pdf

3

Research shows that if five LNG plants were built in the province, British Columbians would

receive the following benefits over a 30-year period: a total investment of $175 billion; $1

trillion to the province’s gross domestic product; and over $100 billion in provincial tax

revenues. This revenue could be used to help eliminate the provincial debt over time, reduce

cost burdens for families and local communities, and support government services such as

health care and education. It would also create: 58,700 direct and indirect construction jobs,

23,800 permanent direct and indirect jobs for operations. There will be thousands more of

induced jobs as a result of households having more income. To date, over $7 billion in

investments have been made by industry to acquire natural gas assets needed to support the

LNG industry. It is estimated that another $2 billion have been spent preparing for the

construction of LNG infrastructure.5

Regional studies also show the impact fracking has had or can have on Canadian localities. In the

Bakken region of Saskatchewan economic impacts have been estimated to be over 38,000 jobs

(person years), over $20 Billion in GDP and more than $5 Billion in taxes from 2007 through 2012.6

Nova Scotia research from their panel review process indicates that even in a lower medium case

scenario, “of (4000 wells developed over 40 years i.e. 100 wells drilled per annum) we calculate

annual investments of around $1 billion and steady state employment of between 750 and 1,500

full-time equivalent (FTE) direct employees”7.

In my own experience, I have seen communities in North Dakota with comparable population to the

Port au Port Peninsula area double in size over a 5 year period leading the area and the state to

have unemployment levels more than 60 percent lower than the National average.

There are many other economic publications by well respected organizations that discuss the

positive economic impact of fracking that the Review Panel should consider. The potential

economic benefits of fracking are why the Provinces of Manitoba, Saskatchewan, Alberta provide

incentives to frack within their jurisdictions and why British Columbia is so anxious further develop

the industry. The Provinces of British Columbia, Alberta and Saskatchewan in particular are the

wealthiest in Canada as they have been highly successful in developing their natural resources.

Saskatchewan has recently been the most successful economy in the Country with its

unemployment rate of 4.3 percent in April 2015, about one third of that in Newfoundland8.

5 http://engage.gov.bc.ca/lnginbc/files/2014/10/TC10-Benefits.pdf

6 Investing in Growth, Bakken Formation Economic Impact Report, November 5, 2013 http://www.southeastcollege.org/assets/files/bakken-

formation-investing-in-growth.pdf 7 Report of the Nova Scotia Independent Review Panel on Hydraulic Fracturing, 2014.

8 Statistics Canada, CANSIM, table 282-0087.

4

Local Economy

Our west coast economy is in desperate need of such an economic stimulus. The West Coast

unemployment rate is currently at more than 20 percent, almost 3 times the national average and

more than 2 times that of the Avalon Peninsula, and at its highest in five years9. Population declines

are being experienced all across the region despite the positive economic influence migratory work

has had, up to now, in some communities10

. About 10 percent of provincial employment consisted

of workers transiting to western Canada and other jurisdictions for work in the oil, natural gas

extraction and other industries.

The Port au Port area, where industry proponents want to employ fracking, is a compelling example

of how difficult the economic situation is in parts of Western Newfoundland. The area has seen

population decline by between 30 and 40 percent over the last 20 years and almost half of

individuals’ income are derived from government transfer payments11

. This is more than 4 times the

national average. These numbers highlight both the aging population in the region and the lack of

employment opportunities in the region. Median individual incomes are only 5512

percent of the

national average as well and unemployment rates exceed on average 3013

percent or about 4 times

the national average. While I am not aware of a similar measure in Canada, the U.S. government

considers regions to be economically distressed14

if the unemployment rate average over a 24

month period is 1% or more above the national average or the per capita or personal income is 80%

or less than the national average. It is important to recognize in this socioeconomic review that we

paint an accurate profile of the communities in which fracking has been proposed. The Port au Port

area is statistically economically distressed and will continue to be economically distressed without

some form of industrial stimulus. Many other rural communities up and down our west coast face

similar economic circumstances. The harsh reality is that if we are not going to develop our natural

resources when the opportunities arise, our rural regions on the West Coast will experience further

economic and population decay and remain until these communities no longer exist.

Can allowing hydraulic fracturing in these areas stop these trends and improve the local economic

conditions? In my opinion, if hydraulic fracking is commercially viable on the west coast, the

economic impact will be positive and potentially very positive for the regional and provincial

economy. If commercially viable and if production is significant, the industry could do for Western

Newfoundland what offshore oil and gas did for the St. John’s and Northern Avalon area. Market

forces will ultimately determine whether an industry develops here and the degree to which these

effects materialize.

9 Statistics Canada, CANSIM, table 282-0122

10 http://www.wsj.com/articles/fallout-of-energy-price-crash-spreads-to-towns-far-from-the-oil-fields-1430785965

11 Statistics Canada Census and National Household Survey data, 2011.

12 Ibid.

13 Ibid

14 https://www.dot.ny.gov/recovery/goals/distressed

5

Social and Environmental

Given this economic potential, is it a no-brainer to develop the industry? The answer is no, not

necessarily. We must appropriately consider and balance the trade-offs between economic, social

and environmental factors associated with fracking to appropriately address that question. There

are recognized risks to such an industrial development; especially in the absence of firm regulations

and compliance monitoring. The risks commonly cited in relation to fracking are highlighted in

Figure 1.

Figure 1: Fracking Benefits, Costs and Externalities

The key question for us as citizens and for the Review Panel is whether strict regulations,

monitoring and enforcement practices can appropriately mitigate and manage the risks of fracking.

The provinces in Western Canada have deemed the fracking risks to be manageable while the

provinces in Eastern Canada have generally put a hold, some permanent and some temporary, on

any development. British Columbia government reference material refers to “Safe Hydraulic

Fracturing” and notes that: The Technology is Proven, B.C. has been producing natural gas for more

than 50 years, Hydraulic fracturing has been occurring safely in British Columbia for decades, British

Columbia was the first province in Canada to regulate the disclosure of ingredients used for

hydraulic fracturing, the online registry: www.FracFocus.ca, hydraulic fracturing is rigorously

monitored by the BC Oil and Gas Commission, pressure-tested steel casings are cemented in place to

prevent hydraulic fracturing fluids from migrating into freshwater aquifers, for every well, the

Commission’s trained professionals review all engineering, environmental and safety measures,

before and after hydraulic fracturing occurs15

.

15

http://www.gov.bc.ca/mngd/doc/2_LngCard_HydraulicFracturing.pdf

6

In contrast, a recent review process in Nova Scotia determined that the risks associated with

fracking could be appropriately managed with the right regulations and monitoring but that the

Province should take some time to figure out the regulations and community level involvement in

decision making. They found that the three largest risks were vehicle accidents, industrial nuisance

and economic impacts (e.g., incomes, employment vs. threats to existing sectors) – factors common

to any sort of industrial development. After the report, however, the Province of Nova Scotia put a

moratorium on fracking.

In late 2014, the European Academies Science Advisory Council issued the following statement

(verbatim): The EU's National Science Academies conclude that there are no scientific or technical

grounds to ban shale gas exploration or extraction using hydraulic fracturing (commonly known as

'fracking')16

. This is similar to previous determinations by the Royal Society and the Royal Academy

of Engineering in the UK17

in 2012. In contrast and at about the same time, state/provincial

jurisdictions in Quebec and New York recently concluded that the risks to the environment and

society were too significant to consider fracking, much to the chagrin of some residents in

economically distressed areas18

.

I have read these various reviews to educate myself on these various technical matters and I do

believe in general that with the appropriate regulations, monitoring and enforcement, that

hydraulic fracturing can be conducted in a safe and responsible manner. I recognize however, that I

am not a domain expert on areas of the engineering and environmental risks associated with the

process. Therefore, I will leave it to the Review Panel to make the ultimate determination of

whether fracking can be conducted responsibly and safely based on the scientific evidence

identified and reviewed through this process.

If the review panel determines that risks associated with fracking can be appropriately mitigated -

like the governments in Western Canada - I would fully support allowing this industry to develop in

Western Newfoundland.

Dennis Bruce

16

http://www.easac.eu/home/press-releases/detail-view/article/no-scientifi.html 17

https://royalsociety.org/policy/projects/shale-gas-extraction/report/ 18

http://www.pbs.org/newshour/rundown/upstate-new-york-towns-look-secession-right-frack-pennsylvania/

7

Appendix 1: Reports that the Review Panel Should Consider Related to Socioeconomic Impacts

Investing in Growth, Bakken Formation Economic Impact Report, November 5, 2013 (SK)

http://www.southeastcollege.org/assets/files/bakken-formation-investing-in-growth.pdf

Welfare and Distributional Implications of Shale Gas BPEA Conference Draft, March 19–20, 2015

(Brookings), Catherine Hausman, Ford School of Public Policy, University of Michigan

Ryan Kellogg, Department of Economics, University of Michigan and National Bureau of

Economic Research

http://www.brookings.edu/~/media/projects/bpea/spring-2015/2015a_hausman.pdf

The Impact of Shale Oil and Gas Drilling on Local Housing Markets

Michael D. Farren, Ohio State University

http://ageconsearch.umn.edu/bitstream/170644/2/AAEA2014ConfPaper(28May2014)(Farren)(Draft).pdf

Employment Impact Review, Ministry of Energy, Mines and Natural Gas, February 2013 (for The Ministry

of Energy, Mines and Natural Gas, BC)

http://www.empr.gov.bc.ca/OG/Documents/Grant_Thornton_LNG_Employment_Impacts.pdf

Fallout of Energy-Price Crash Spreads to Towns Far From the Oil Fields (article)

http://www.wsj.com/articles/fallout-of-energy-price-crash-spreads-to-towns-far-from-the-oil-fields-

1430785965

European Academies Science Advisory Council (press release)

http://www.easac.eu/home/press-releases/detail-view/article/no-scientifi.html

CBO – Congressional Budget Office of the United States Congress

The Economic and Budgetary Effects of Producing Oil and Natural Gas From Shale

http://www.cbo.gov/sites/default/files/cbofiles/attachments/49815-Effects_of_Shale_Production.pdf

The Local Economic Impacts of Horizontal Drilling in Texas, Jiapei Guo, Northeastern University, May 01,

2015

http://iris.lib.neu.edu/cgi/viewcontent.cgi?article=1005&context=econ_theses

Economic Impact Permian Basin's Oil & Gas Industry,

http://www.depts.ttu.edu/communications/media/downloads/PermianBasin.pdf

Canadian Energy Research Institute

Economic Impacts of Drilling, Completing and Operating Conventional Oil Wells in Western Canada

(2010-2035)

http://www.ceri.ca/images/stories/CERI__IO_Conventional-Oil-Report_June_2011.pdf

8

Hydraulic Fracturing for Natural Gas Extraction: Research and Regulatory Impacts,

http://depsc.delaware.gov/Agenda%2003-17-15/Whitepaper%20JRS.pdf

The Economics of Shale Gas Development

http://www.rff.org/RFF/Documents/RFF-DP-14-42.pdf

The Adverse Impact of Banning Hydraulic Fracturing in the City of Denton on Business Activity and

Tax Receipts in the City and State,

http://d3n8a8pro7vhmx.cloudfront.net/themes/540dbeeaebad643b5a000001/attachments/original/14

10398621/Perryman_Denton_Fracking_Ban_Impact_6_20_2014_(1).pdf?1410398621

Hydraulic Fracturing Ban, The Economic Impact of a Statewide Fracking Ban in Colorado,

http://www.oilandgasbmps.org/docs/CO90-Economic-Impact-Of-Fracking-Moratorium.pdf

The Local Economic Impacts of Hydraulic Fracturing and Determinants of Dutch Disease,

http://pages.uoregon.edu/ralphm/fracking_oct14.pdf

Hydraulic Fracturing: Critical for Energy Production, Jobs, and Economic Growth Hydraulic Fracturing:

Critical for Energy Production, Jobs, and Economic Growth

http://www.heritage.org/research/reports/2012/08/hydraulic-fracturing-critical-for-energy-production-

jobs-and-economic-growth

Frackonomics: Some Economics of Hydraulic Fracturing,

http://www.heritage.org/research/reports/2012/08/hydraulic-fracturing-critical-for-energy-production-

jobs-and-economic-growth

Economic Affairs Committee - Third Report

The Economic Impact on UK Energy Policy of Shale Gas and Oil,

http://www.publications.parliament.uk/pa/ld201314/ldselect/ldeconaf/172/17202.htm

General BC Government website on LNG development through fracking:

http://engage.gov.bc.ca/lnginbc/

The Bakken Oil Boom, Federal Reserve Bank of Minneapolis (website with useful resources)

https://www.minneapolisfed.org/publications/special-studies/bakken/oil-production

Saskatchewan Oil and Gas Facts

http://www.ir.gov.sk.ca/Oil

http://www.economy.gov.sk.ca/oilandgas

9

Appendix 2: Excerpts from Dennis Bruce Presentation, November 2014

PRESENTATION EXCERPTS

FROM NOVEMBER 2014

DENNIS BRUCE

1

� It (fracking) has huge implications for energy, for economy and for geopolitics. These are historical developments. The United States is becoming an energy exporter, completely new role, and the new US energy strategy, foreign policy will be based on this new reality….In one or two years, the US will be the number one oil producer in the world, overtaking Saudi Arabia. In 2012, it became the number one natural gas producer, passing Russia. The IEA projects that the US and Canada will be energy self-sufficient by 2020, and the US alone by 2035.

Fatih Birol, Chief Economist at the International Energy Agency (IEA), October 2014

� US energy-related emissions of carbon dioxide, the main greenhouse gas, have fallen 450m tonnes over the past five years – the largest drop among all countries surveyed. “This is a success story based on a combination of policy and technology –policy driving greater efficiency and technology making shale gas production viable,”.

Fatih Birol, Chief Economist at the International Energy Agency (IEA), 2012

BEFORE WE START…

2

� Discussion is based on my direct experience and research as an economist

� I have assessed impact of NL offshore oil before production in late 80’s

� I have conducted recent studies on several jurisdictions that “frack”:

o North Dakota & Montana (Bakken), Texas (Eagle Ford), Alaska and Utah

o BC, Alberta & Saskatchewan

� The state of west coast economy is of great personal interest

� I believe the continued and expected future decay of our population base and economy (outside St. John’s) is the #1 issue facing the Province

o But is never openly discussed

INTRODUCTION

3

� I do believe:

o rural NL and rural Atlantic Canada need private sector investment

o government intervention cannot solve the current rapid economic decay

o a rational, balanced, evidence-based approach is needed to assess fracking

o the NL government & Review Panel may be “intimidated” (like in NS)

o difficult for media to cover and politicians to deal with – many “loud voices”

o if commercially viable, fracking will provide economic benefits and potentially significant economic benefits

• Can we really afford to not at least consider it as an option?

INTRODUCTION (CONT’D)

4

Employment

Investment / Income

Taxes / Royalties

Property Values

Greenhouse Gases

Accidents

Criteria Air Contaminants

Traffic

Water Use

Water Contamination

Industrial nuisance

Seismicity

THE FRACKING DEBATE CONDENSEDDO THE POTENTIAL ECONOMIC BENEFITS WARRANT THE ENVIRONMENTAL AND SOCIAL RISKS?

Way of life

Health impacts

Tourism, Fishery Impacts

5

Economic Social

Environmental

� Two major independent review panel reports released in 2014 in Canada

1. Report of the Nova Scotia Independent Review Panel on Hydraulic Fracturing

• Prepared for the Nova Scotia Department of Energy

2. Environmental Impacts of Shale Gas Extraction in Canada: The Expert Panel on Harnessing Science and Technology to Understand the Environmental Impacts of Shale Gas Extraction (Council of Canadian Academies)

• Prepared for the Government of Canada in response to a request from the Minister of Environment

� The findings of these two reports are the relevant evidence for us (until our Review Panel finished)

� They provide a reasoned, balanced analysis of the evidence

� I summarize the core study findings verbatim in the following slides as important context

RELEVANT EVIDENCE

6http://energy.novascotia.ca/sites/default/files/Report%20of%20the%20Nova%20Scotia%20Independent%20Panel%20on%20Hydraulic%20Fracturing.pdf

http://www.scienceadvice.ca/uploads/eng/assessments%20and%20publications%20and%20news%20releases/Shale%20gas/ShaleGas_fullreportEN.pdf

THE FRACKING DEBATEASSESSMENT OF THE NS INDEPENDENT REVIEW ON HYDRAULIC FRACTURING (VERBATIM: PAGES 318-321)

Hazard Frequency Severity Risk Mitigation Risk Characterization

A Direct migration of pollutants from deep zone to shallow aquifer.

Rare – no evidence of occurrence to date.

Significantnegative impact.

Local EIA required monitoring required.

Further general research to properly characterize the risk. Site specific geological research required to estimate and manage risks adequately.

B Well integrity failure leading to shallowgroundwater well contamination by chemicals

Rare to unlikely based on current Canadian data.

Significantnegative impact.

Existing regulations exist but need review. Monitoring required. Emergency planning required.

Further research required on possible bioaccumulation and ecosystem effects. Risk relatively low to population health if detected and removed. Risk relatively low to ecology if detected and remediated.

C Surface activityrisks to shallow groundwater well contamination

Certain. Significant. Existing regulations exist but need review. Local EIA, monitoring, emergency planning required.

Wastewater treatment, water protection andremediation research required. Risk relatively low to population health if malfunctions detected and removed. Risk relatively low to ecology if detected and remediated and assuming effective liability regime in place.

THE FRACKING DEBATEASSESSMENT OF THE NS INDEPENDENT REVIEW ON HYDRAULIC FRACTURING (VERBATIM: PAGES 318-321)

Hazard Frequency Severity Risk Mitigation Risk Characterization

D Wastewatertreatment

Certain Minor to moderate impacts on receiving waters assuming properly operated and regulated system.

Effective design and operation with effective monitoring,reporting, regulation and enforcement.

Wastewater treatment, water protection and remediation research required. Risk relatively low to population health if malfunctions detected and corrected. Risk relatively low to ecology if malfunctions detected and remediated and assuming effective liability regime in place.

E Waterresource impacts

Certain Minor to significant impacts – highly dependent on water system used.

Effective design and operation with effective monitoring,reporting, regulation and enforcement.

Local hydrologic and hydrogeological studies required to assess demand. Risk relatively low to population health if regulations enforced. Risk relatively low to ecology if regulations enforced.

F Industrial air pollution

Certain Minor to moderate short-term negative impact according to proximity

Existing reg’s existbut need review. Local EIA, SIA and HIA, planning and monitoring required.

Risk very low to population health if managed effectively. Risk relatively low to ecology if managed effectively and assuming liability in place.

THE FRACKING DEBATEASSESSMENT OF THE NS INDEPENDENT REVIEW ON HYDRAULIC FRACTURING (VERBATIM: PAGES 318-321)

Hazard Freq. Severity Risk Mitigation Risk Characterization

G Vehicular traffic effects e.g., accidents, emissions, disruption, noise ecology, quality of life

Certain Minor to very significant medium-term negative impact according to proximity and nature of effects and incidents

Existing regulations exist but need review. Local EIA, SIA, HIA, monitoring, planning, adaptive management required.

Risk low to population health if managed effectively. Risk relatively low to ecology if managed effectively.

H Industrial nuisance e.g. light and noise

Certain Minor to very significantshort-term negative impact according to proximity

Existing regulations exist but need review. Local EIA, SIA, HIA, monitoring, planning required.

Risk low to population healthif managed effectively. Risk relatively low to ecology if managed effectively.

J Communityeconomic impacts e.g., incomes, employment vs threats to existing sectors

Certain Minor to very significant short-term and long-term positive and negative impacts according to social scale and location

Community level economic analysis req’d re. interaction with existing economic sectors. Community participatory planning and adaptation, monitoring.

There will be economic winners and losers who will require evidence based adaptive management, remediation and mitigation.

THE FRACKING DEBATEASSESSMENT OF THE NS INDEPENDENT REVIEW ON HYDRAULIC FRACTURING (VERBATIM: PAGES 318-321)

Hazard Freq. Severity Risk Mitigation Risk Characterization

K Community economicimpacts e.g., unequal distribution of benefits and costs possibly leading to social divisiveness

Certain Moderate tosignificant long-term impacts according to individual and location

Community level analysis req’d re. social cohesion. Community participatory planning and adaptation, monitoring.

There will be social winners and losers who will require evidence based adaptive management, remediation and mitigation.

L Climate change CO2

emissions (through industrial activity)

Certain Moderate Requires modeling, monitoring and mitigating measures

Equivalent to many industrial activities therefore requires investigation to ensure consistency with EGSPA (2007) as updated by the Green Economy Act and provincial climate change goals.

M Climate change CO2

emissions (through exploitation of resource) versus fossil fuels used in electricity generation and home heating

Certain Significantpositive

Requires modeling and monitoring

Capable of significantly affecting provincial climate impacts therefore requires investigation to ensure consistency with EGSPA (2007) as updated by the Green Economy Act and provincial climate change goals.

THE FRACKING DEBATEASSESSMENT OF THE NS INDEPENDENT REVIEW ON HYDRAULIC FRACTURING (VERBATIM: PAGES 318-321)

Hazard Freq. Severity Risk Mitigation Risk Characterization

N Climate change CO2

emissions (through exploitation of resource) versus extension of renewables commitments beyond current targets

Certain Significant negative

Requires modelling and monitoring

Capable of significantly affecting provincial climate impacts therefore requires investigation to ensure consistency with EGSPA (2007) as updated by the Green Economy Act and provincial climate change goals.

P Climate change CH4emissions (through fugitive emissions from wells or distribution)

Certain Moderate negative impact

Requires modeling, monitoringand effective regulation and enforcement of well integrity and distribution leaks

Requires investigation to ensure consistency with EGSPA (2007) as updated by the Green Economy Act and provincial climate change goals.

Q Seismicity associated with…

Certain Inconsequential

Requires geological modeling and…

Inconsequential risk to population health. Moderate risk of….

R Seismicity associated with deep water waste injection (if permitted)

Likely Minor to Moderate

Requires geological modeling, monitoring and effective regulation (existing reg’s do not exist). Local EIA required.

Minor physical risk to population health but more research required. Moderate risk of anxiety mitigated by public communication, No risk to physical infrastructure.

THE FRACKING DEBATEASSESSMENT OF THE NS INDEPENDENT REVIEW ON HYDRAULIC FRACTURING (VERBATIM: PAGE 324)

Inconsequential Minor Moderate Significant Very Significant

Certain Q D E F G H JD E F G H J K N L P

E G H JK N C

G H J

Likely R R

Unlikely B

Rare A B

Very low risk Low risk Medium risk High risk

THE FRACKING DEBATEASSESSMENT OF THE NS INDEPENDENT REVIEW ON HYDRAULIC FRACTURING

Significant Very Significant

High RiskItems Identified in NS Panel Report

• E: Water resource impacts (water use) • G: Vehicular accidents• H: Industrial nuisance• J: Community economic impacts e.g., incomes, employment vs threats to existing sectors

• K: Community economic impacts e.g., unequal distribution of benefits and costs possibly leading to social divisiveness

• N: Climate change CO2 emissions (through exploitation of resource) versus extension of renewables commitments beyond current targets

• C: Surface activity risks to shallow groundwater well contamination

• G: Vehicular accidents

• H: Industrial nuisance

• J: Communityeconomic impacts e.g., incomes, employment vs threats to existing sectors

THE FRACKING DEBATECOUNCIL OF CANADIAN ACADEMIES (VERBATIM: PAGE 220)

Large scale development of shale gas and, in particular, hydraulic fracturing presents a similar dilemma: promise of significant economic benefits and the possibility of major adverse impacts on people and ecosystems. The highly controversial nature of the topic is manifest in growing concerns expressed by citizens in many parts of the world fueled, in part, by scientific uncertainty as authoritative data about potential impacts are currently neither sufficient, nor conclusive. This seems to be the case both with regard to specific impacts such as the protection of groundwater, as well as to systemic aspects related to broader, long-term questions of energy policy, and community and ecosystem health.

More, well-targeted science is required to ensure that, ultimately, long-term public interests are well understood and safeguarded. Science alone, however, will not address all the relevant concerns because the actual (as opposed to potential) impacts of shale gas development will likely depend to a great extent on the manner in which resource development is managed and regulated. Because shale gas development is still at an early stage in Canada, there is opportunity to put in place the management measures required supported by appropriate research to reduce or avoid some of the negative environmental effects of this development. Whether or not shale gas development will turn out in the long term to have been a positive or negative influence on global well-being will depend on how society understands this technology and manages it.

� On November 13, 2014, the European Academies Science Advisory Council issued the following statement (verbatim):

In a statement published today, the EU's National Science Academies conclude

that there are no scientific or technical grounds to ban shale gas exploration or extraction using hydraulic fracturing (commonly known as 'fracking'). However, they warn that fracking will not provide a miraculous solution for energy

security or reducing greenhouse gas emissions.

� This is similar to what the Royal Society and the Royal Academy of Engineering in the UK concluded in 2012: the health, safety and environmental risks can be managed effectively in the UK.

o fracture propagation is an unlikely cause of contamination; well integrity is the highest priority; robust monitoring is vital; an Environmental Risk Assessment (ERA) should be mandatory; seismic risks are low; water requirements can be managed sustainably; regulation must be fit for purpose; and, policymaking would benefit from further research

ALSO NOTEWORTHY

15

http://www.easac.eu/home/press-releases/detail-view/article/no-scientifi.html

https://royalsociety.org/policy/projects/shale-gas-extraction/report/

� Offshore oil and gas development is considered a major success for NLo Despite some major accidents

� About 30 percent of Provincial GDP is derived from this industry

� About 1/3 of all provincial government revenues are derived from Royalties

� About ½ of all provincial government revenues are related to the industry

OIL AND GAS IN NEWFOUNDLAND AND LABRADOR

NL Population

Provided to D. Bruce by Wade Locke

� Oil and gas has stopped our overall population decay

� Without oil and gas, NL would be a have-not province & the poorest provinces

� Oil and gas $ has funded a lot of west coast public infrastructure & lowered income tax rates

16D. Bruce derived from Gov. of NL Economic and Fiscal Data

� Offshore benefits have led to major economic gains on the east coast o Pop’n in SJ +13% since 91

� Off the Avalon, economies struggle and population decays

o Pop’n -22% since 91

� More than 22K workers commuting for work outside NL (10%)

� The area in NL near where fracking is proposed, is in steep population declines

NL REGIONAL POPULATION GROWTH DISPARITY

17D. Bruce derived from Statistics Canada Census Data

� Even with the benefits of offshore oil, rural NL residents over-reliant on government transfers

� What will it look like in a generation?

� The area in NL near where fracking proposed is over-reliant on government transfers - 7 times the rate of Alberta, 4 times the National average

� This is not sustainable!

NL REGIONAL ECONOMIC DISPARITY

18D. Bruce derived from Statistics Canada Census Data

POPULATION MOVEMENTS TO THE WEST

19D. Bruce derived from Statistics Canada Census Data

� All provinces have been losing population to Alberta and BC sine 1996

� And since 2006, losing population to Saskatchewan as well

� In general, all of our recent net population losses have been to Alberta (>21,000)

NL POPULATION MOVEMENTS

20D. Bruce derived from http://www.stats.gov.nl.ca/statistics/population/PDF/O-D_Migration_Census_Year.pdf

Year To/From Alberta

2001 -1,703

2002 -697

2003 -1,133

2004 -2,966

2005 -4,187

2006 -4.139

2007 -1,312

2008 -40

2009 441

2010 -790

2011 -606

2012 -384

CANADIAN POPULATION GROWTH DISPARITYFRASIER INSTITUTE REPORT: GO WEST, YOUNG ADULTS: THE 10-YEAR

WESTERN BOOM IN INVESTMENT, JOBS,

AND INCOMES (NOVEMBER 18, 2014)

Conclusions (verbatim):

� Overall, what is clear is that provinces with substantial private sector investment flows end up with employment opportunities and better prospects to enjoy a middle-class lifestyle. In general, if one seeks opportunity—money, jobs, and employment security—the opportunities are showing up in Western Canada, especially in Alberta and Saskatchewan

� Newfoundland and Labrador has turned the corner on a

number of the opportunity indicators: private sector

investment, per-capita income, and weekly wage rates.

21http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/research/publications/go-west-young-adults-the-10-year-western-boom-in-investment-jobs-and-incomes.pdf

CANADIAN POPULATION GROWTH DISPARITY

Where is our future population coming from?

22

CANADIAN POPULATION GROWTH DISPARITY

� NL population forecast to decline over next 25 years (Statistics Canada)

� NB & NS stagnant as well

� Atlantic Canada population is not expected to grow

� Population is moving West –Alberta expected to be the high growth area – low case 40% population growth

� Like in NL, people are moving to economies fueled by “oil and gas”

23

NL Population

OIL AND GAS IN CANADA IS DRIVING CANADA’S ECONOMY, DRIVING PEOPLE WESTWARDS. WILL IT CONTINUE?

ProvinceGDP $ per Capita

(2012)% of GDP from

Mining, Oil & Gas (2013) Fracking?Alberta $80,516 25% Yes, incentives

Saskatchewan $72,156 25% Yes, incentives

Newfoundland & Lab. $65,958 32% Moratorium

Ontario $49,940 1% No

British Columbia $47,590 4% Yes, incentives

Manitoba $45,970 6% Yes, incentives

Quebec $44,428 1% Moratorium

New Brunswick $41,723 2% Moratorium to come

Nova Scotia $40,473 2% Moratorium

PEI $37,967 0% Moratorium“Have” Provinces 24D. Bruce derived from Statistics Canada Data

MACROECONOMIC COMMENTARYIN LAST 5 YEARS, TIGHT OIL TRANSFORMED US

ENERGY OUTLOOK

2

NORTH AMERICAN TIGHT OIL PRODUCTION

In Canada, total tight oil production averaged 0.34 MMbbl/d in 2013, close to 10% of the 3.52 MMbbl/d of total Canadian crude oil production. This production was concentrated

entirely in the country's western provinces of Alberta, Manitoba, and Saskatchewan. 26

GLOBAL PRODUCTION TRENDS: WHY PRICES ARE DROPPING,

SUPPLY GROWING FASTER THAN DEMAND DUE TO FRACKING

2014

Country mmbd

1 Russia 10,083

2 Saudi Arabia 9,771

3 United States 8,382

4 China 4,159

5 Canada 3,481

6 Iran 3,239

7 Iraq 3,278

8 United Arab Emirates 2,820

9 Kuwait 2,650

10 Mexico 2,500

Row 26,563

World 76,925

� References to shale oil/gas development by major consultancies as:

o The Shale Revolution, The Shale Gale, A Game Changer, Modern Day Gold Rush

� Impact on global economy

o PWC (2013): increase global GDP by up to 3.7% by 2035 or $2.7 trillion

o IHS (2013) - $0.5T by 2025 in US GDP, 3.5 m jobs

o Mckinsey: US net oil exporter by 2020, >$1T in capital infrastructure

o Purdue (2013): increase US GDP 3.5% for entire 2008-2035 period or $0.5T

MACROECONOMIC COMMENTARY

28

� Geopolitical impacts:

o IEA says US the largest oil producer soon due to shale oil, already largest gas producer

o U.S. now looking to export oil, removing the embargo

o Prices for oil and natural gas trending down

� Indirect effects:

o Americans $1,200/yr better off (IHS)

o MIT: replacing coal plants with gas plants

• most effective way of reducing CO2

o US emission declined after signing on to

Kyoto (in 1997) due to:

• Weak economy

• Reduction in coal fired power generation

MACROECONOMIC COMMENTARY

29

� Report of the Nova Scotia Independent Review Panel on Hydraulic Fracturing

o In our “lower medium case” (4000 wells developed over 40 years i.e. 100 wells drilled

per annum) we calculate annual investments of around $1 billion and steady state

employment of between 750 and 1,500 full-time equivalent (FTE) direct employees.

o Pennsylvania averaged 1,650 new wells drilled per annum in the three year period 2010-

2012 and averaged direct employment in the unconventional gas and related industries of

more than 23,000 over the same period (14 jobs per new well drilled).

o royalty payments perhaps as much as $150 million per annum

� Environmental Impacts of Shale Gas Extraction in Canada: The Expert Panel on Harnessing Science and Technology to Understand the Environmental Impacts of Shale Gas Extraction (Council of Canadian Academies)

o Large scale development of shale gas and, in particular, hydraulic fracturing presents a

similar dilemma: promise of significant economic benefits and the possibility of major

adverse impacts on people and ecosystems 30

1. “Alberta fracks and they have a deficit” – we have to avoid that risk

2. Fracking will harm $1 billion tourism industry

3. Fracking will harm inshore fishery

4. Fracking will negatively impact property values

5. Fracking will have a “Boom Town” effect

LOCAL FRACKING ECONOMIC COMMENTARY

31

Statements I have read or heard through local media reports

NL Population

1. “ALBERTA FRACKS AND THEY HAVE A DEFICIT”:

Deficit($B) Rev/GDP

Net Debt ($B) Debt/GDP

Income Taxes (on $100K)

Prov. HST

Equal.$B

UnemployRate

ALTA $0.8 13.5% -$9.7 -2.9% $8,221 0% $0.0 4.5%

SASK $0.6 17.6% $4.6 5.6% $10,443 8% $0.0 3.5%

B.C. $0.4 19.4% $38.8 17.2% $7,146 7% $0.0 6.1%NL -$0.3 18.8% $9.0 24.9% $10,447 8% $0.0 12.0%

MAN -$0.5 23.6% $17.3 28.8% $12,694 8% $1.8 5.0%

N.B. -$0.5 24.5% $11.6 36.7% $12,246 8% $1.5 9.3%

P.E.I. -$0.1 27.9% $2.1 37.1% $12,841 9% $0.3 9.2%

N.S. -$0.7 23.4% $14.8 37.8% $13,142 10% $1.5 8.6%

ONT -$10.5 16.7% $267.2 38.6% $8,704 8% $3.2 6.5%

QUE -$3.1 19.1% $182.0 49.9% $16,760 10% $7.8 7.7%

“Have” ProvincesSource: RBC, October 2014 – reflects 2013-14 fiscal year data 32

2. FRACKING WILL HURT $1B TOURISM SECTOR

Significance of south west coast tourism needs to be put in perspective (1% of 1% or ~$2M). No evidence to support notion that fracking will hurt tourism sector #’s. In fact, if successful influx, of workers will likely improve “room” revenue and tourism statistics will likely improve dramatically on

some areas.

Oil and Gas28%

Tourism1%

Fishery, Agri, Logging, Hunting

2%

Other Industries69%

NL Provincial GDP CompositionTourism $0.3B

33

Western (other)13%

Gross Morne4%

South West Coast1%

Other regions82%

NL TourismHotel Room Revenue $0.2B

D. Bruce derived from Gov. of NL Economic and Tourism Data

3. FRACKING WILL HURT FISHERY

Oil and Gas28%

Tourism1%

Fishery, Agri, Logging, Hunting

2%

Other69%

NL Provincial GDP Composition

34

Commercial fish harvest from west coast ~$40M in 2011 (areas 4Rb, 4Rc, 4Rd)Commercial fish harvest for NL Total ~$0.6B in 2011

http://www.cnlopb.ca/pdfs/wnlsea/wnlseaen.pdf

4. FRACKING WILL NEGATIVELY IMPACT PROPERTY VALUES

� Economic literature specifically related to fracking and property values is mixed.

� In urban areas, proximity to industrial activity does lower property values. Proximity to green space increases property values.

� Some US studies have shown property value decreases of 2% to 13% for houses within close proximity to wells.

� Others have shown massive property value increases due to housing scarcity.

� In rural areas with low population, due to supply constraints, an influx of workers can make house prices increase and possibly a quite significant increase – like Long Harbour.

� If fracking commercially viable in Western NL, it is almost certain housing prices will increase in those areas. 35

4. FRACKING WILL NEGATIVELY IMPACT PROPERTY VALUES

36

Fracking counties

Non-fracking counties

Fracking counties

Non-fracking counties

Fracking counties

Non-fracking counties

Non-fracking counties

Fracking counties

800%

200%

5. BOOMTOWN EFFECT

37

� Sudden economic growth, population growth and high salaries.

� Often, boomtowns are the site of both economic prosperity and social disruption as the local culture and infrastructure struggles to accommodate the waves of new residents

� Businesses develop to cater to workers often eager to spend their money.

� Problems can include: doctor shortages, inadequate medical and/or educational facilities, public infrastructure (road needs), affordable housing shortages, sewage disposal problems, a lack of recreational activities for new residents, etc.

� Concerns also with what happens after the boom.

� Examples: Estevan, Fort McMurray etc.

� Solutions: Mining camps, government mitigation from redistribution of proceeds of wealth generated from economic activity.

WE NEED A BALANCED, HONEST & RESPECTFUL DISCUSSION ON FRACKING

38

I think Dr. David Wheeler and his panel did the very best they could. I also think the public engagement has to be looked at. We’re hearing from people that they felt they weren’t able to participate or they didn’t feel comfortable participating because the anti-hydraulic fracturing voices were so loud. If we get into public meetings about a real controversial or emotional topic like this one in the future, we need to consider what those meetings look like so everyone feels like they have a fair opportunity to talk.

Nova Scotia’s Energy Minister Andrew Younger, November 2014

Public policy is often influenced by groups who are highly motivated, highly organized and have the biggest megaphone even when the silent majority have a different view. This is something that governments deal with all the time and good leaders can sort out the chaff from the wheat. Good governments do not allow mob rule. They seize control of the agenda, they communicate, they make decisions and they lead. And leadership is usually rewarded! The bottom line is that we cannot allow public policy to be decided by the biggest blowhard. We need facts, good communication, and leadership.

Former New Brunswick Premier, Frank McKenna, November 2014

� Fracking has changed the energy landscape globally – to the great benefit of the US economy

� Areas of major tight oil developments reported significant economic benefits in North America

� Fracking has played an indirect but significant role in reducing US emissions

� Whether fracking can have a major economic impact in Atlantic Canada is unknowable

o If commercially viable, there will be positive local economic benefits

o The degree of the benefit is directly correlated with the magnitude of reserves and production

• The same can be said of the environmental/social risks

� An objective, honest, balanced and pragmatic review of the evidence is needed

� Let’s the Review Panel do its work and encourage government to act on its recommendations

Given the regional economic context, can we afford to outright disregard this opportunity?

CONCLUSIONS

39