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What Nova Scotia's fracking decision means for the Yukon

With the Yukon's fracking review committee due to report this fall, it is interesting to watch Nova Scotia's example.

With the Yukon’s fracking review committee due to report this fall, it is interesting to watch Nova Scotia’s example. The province’s fracking review panel came out with its recommendations last week, proposing what is effectively a ban. The local minister of energy said he would introduce legislation prohibiting onshore fracking in the coming session of the legislature.

Nova Scotia is an interesting example since, like the Yukon, it has a struggling private sector economy and is heavily reliant on transfers from Ottawa. The promise of energy-industry jobs must have been tempting.

The Nova Scotia fracking review, led by Cape Breton University president Dr. David Wheeler, took place in a rather dire long-term economic situation for the province: slow growth, aging population and high unemployment.

Nova Scotia’s average GDP per person was $7,700 below the national average in 2003, a gap which is expected to be $12,300 next year according to TD Economics. Real economic growth in 2011-13 averaged 0.4 per cent, reminiscent of the sclerotic Eurozone, compared to the Canadian average of 2.1 per cent. These seem like small differences, but over the decades sustained under-performance like this can compound into huge differences in incomes, tax revenues and opportunities for young people.

Unemployment has hovered around 9 per cent for years, double the rate in Saskatchewan and Alberta. Nova Scotia has one of the oldest populations in Canada. Median age is 44, the third highest in Canada, and the province has the nation’s highest percentage of people over 65 according to Statistics Canada. The cheery statisticians say Nova Scotia’s demographics are due to “both lower fertility and to interprovincial migratory losses for many years.” That’s wonk-speak for people moving to Fort McMurray.

Oh yeah, and the provincial government just reported a whopping $680 million deficit for the last fiscal year. The province’s debt is $15 billion and rising.

Nova Scotians are well aware of the challenges. In parallel with the fracking review, they also had another university president, Dr. Ray Ivany of Acadia, do a report on the economy. “Because of a combination of economic and demographic factors, we are teetering on the brink of long-term decline,” Dr. Ivany told the media after releasing his glossy report. He forecast that Nova Scotia would have 100,000 fewer working age adults in 2036 than it does today.

However, Dr. Ivany’s report did not issue a ringing call for fracking, and doesn’t mention the F-word until page 182 in the appendix. The report included some polling data that showed that there is a widespread belief in Nova Scotia that fracking cannot ever be done in an environmentally safe manner.

Dr. Ivany’s report also largely ignored the topic of tax rates. Nova Scotia’s top personal tax rate is the highest in Canada outside Quebec. It is 21 per cent, compared to the Yukon’s top rate of 12.76 per cent. Its corporate income tax rate is tied with P.E.I.‘s for Canada’s highest, and it has the highest retail sales tax.

I guess the politest thing can be said is that economists will take great interest if Nova Scotia manages to revive its economy by banning fracking and having one of the harshest tax regimes in the country.

Canada seems to be dividing into pro-frack and anti-frack zones. CAPP, an industry group, says that 175,000 wells have been fracked over the last 60 or so years in B.C. and Alberta. There must be thousands more in Saskatchewan. (Of course, we can’t know with absolute certainty what the long-term effects of this will be).

B.C.‘s premier is keen to use the natural gas industry to transform B.C.‘s economy.

Meanwhile, Quebec has a moratorium and fracking is a highly controversial topic in the current New Brunswick election campaign.

The Yukon’s fracking review is being done by an all-party committee of politicians, not internationally renowned university presidents with resumes packed with gigs at the World Bank, United Nations and international business schools. We’ll see what they say in a few months.

If our politicians decide to ban fracking, or put so many conditions on the practice that it amounts to the same thing, that is their prerogative. Unlike Alaskans, Yukoners aren’t allowed to vote on important topics like this. However, if our politicians do close the door on the industry, I hope they’ll do better than their Nova Scotia counterparts and come up with some convincing alternative source of high-paid jobs and tax revenues for our public services.

Hopefully the answer will be better than “sit around and commission economic studies until global mineral prices go back up.”

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Channel 9’s Yukonomist show or Twitter @hallidaykeith