New Brunswick Commission on Hydraulic Fracturing releases final, three-volume report

February 26, 2016

An independent and integrated regulatory process, a renewed, nation-to-nation relationship with Indigenous people and the need for an environment and energy strategy are among the findings released by the Commission on Hydraulic Fracturing.

Commissioners Marc Léger, John McLaughlin and Cheryl M.G. Robertson have completed their 11-month study of hydraulic fracturing and today submitted their three-volume final report to Premier Brian Gallant.

• Volume I: The Findings, places the Commissioners findings within New Brunswick’s larger economic, social and environmental context.
• Volume II: Potential Economic, Health and Environmental Impacts of Shale Gas Developments, provides a detailed review of major potential health and environmental impacts related to shale gas development.
• Volume III: Compendium of Mitigation Options for Potential Human and Environmental Impacts of Shale Gas Development, is the companion piece to Volume II and is designed as a working document for New Brunswick policy makers and regulators.

“We firmly believe that the Government of New Brunswick has before it an opportunity to reset its relationship with New Brunswickers. To do that it will have to change the way it interacts with the people of the province,” write the Commissioners. “We assert that the crux of the dilemma over shale gas isn’t just about the science – it’s about the varying levels of trust New Brunswick residents have in all levels of government (federal, provincial and municipal) and the province’s resource sector. While the Commission limited its research and its inquiries to shale gas, it quickly became clear that the root causes of the shale gas impasse are directly related to the process for identifying, evaluating and approving any resource development project.”

In regards to shale gas development specifically, the industry has the potential to impact New Brunswick residents in three important ways:

• economic, through private sector job creation and public sector revenue, most notably taxes and resource royalties;
• environmental, which includes water, air and land resources; and,
• human health and safety, which is influenced by the physical environment, the social environment, the economic environment and the lifestyle environment.

Taken together, these are the core elements required for sustainable community development, and this model should sit at the heart of a more community-focused consultation and regulatory process.

This community-focused process is necessary because New Brunswick is in a period of major economic, social and technological change. These changes bring with them a mixture of excitement and volatility, particularly for governments, which must respond and manage these changes in an environment where neither governments, industry or members of the public fully understand the long-term repercussions.

“To date this has been the story of hydraulic fracturing in New Brunswick,” write the Commissioners. “In fact our study revealed that the most contentious issues within this debate are rooted in a number of complex social and economic issues, all of which reach beyond the risks and benefits of shale gas but all of which relate to social license.”

Contextual Issues

New Brunswick’s economy needs to transition to a new economic and environmental reality: New Brunswick needs to generate more wealth. To do this, the private sector must accelerate its transition to a value-added resources and knowledge-based economy. Value-added industries rely primarily on technology, productivity and skilled labour to create products and services, often from natural resources, that are sold at premium prices. Energy can play a key role in getting us there, but only if we change how we think about it. New Brunswickers need to regard energy investments as part of the larger advanced technology story rather than simply as a commodity as we have done in the past. This will stimulate greater investment in energy technologies, particularly those that can help us transition to a more affordable, cleaner energy future.

The role of natural gas in the New Brunswick economy: New Brunswick’s economy is now heavily linked to natural gas and will be for many years to come. By the end of 2017 most, if not all, natural gas used in New Brunswick will be produced via hydraulic fracturing from somewhere in North America. For this reason New Brunswick residents, Indigenous people, governments and industry can no longer avoid a conversation about hydraulic fracturing and the future of shale gas. Together we must decide if we want to use locally-sourced shale gas to serve our domestic energy needs or continue to purchase hydraulically fractured natural gas from other jurisdictions. If the Government of New Brunswick chooses to proceed, it will need to develop a new model for managing impacts.

Current market conditions for natural gas: The glut of natural gas supply, caused by the U.S. shale gas boom, has caused commodity prices to plummet, taking oil and gas producers’ share prices with it. Barclays Plc expects U.S. and Canadian oil and natural gas drillers to cut more than $35 billion US from exploration and production budgets in 2016, the deepest reduction of any region for the second consecutive year. This means investment in new exploration and production is unlikely in the immediate future, if the Government decides to proceed.

Climate change commitments and energy: To meet existing regional and national climate change goals New Brunswick residents, businesses and governments will need to change the way we produce and consume energy. The Commission heard from individuals, companies and governments that are either ready to begin this transition to a low carbon society or want to accelerate what is already underway. Determining the role of natural gas in New Brunswick’s current and future energy mix is an important part of this conversation.

Relationship with Indigenous people: Indigenous people in New Brunswick are watching the actions of the federal government very closely, and by extension the Government of New Brunswick. Both the Mi’gmaq and the Maliseet (Wolastoqiyik) are wary of government actions, particularly around the issues of hydraulic fracturing and local land use. The Government needs to rebuild its relationship with Indigenous people. Only then will Indigenous people in New Brunswick be willing to fully participate in a conversation about hydraulic fracturing.

Water management: Water is of greatest concern to New Brunswick residents in regards to hydraulic fracturing. Comprehensive mapping and monitoring of New Brunswick’s groundwater aquifers is a required first step in assuring residents have the necessary baseline data to properly determine how to balance human activities with maintaining the health and viability of our watersheds.

New Brunswick’s potential oil and gas resource: Right now, neither the Government of New Brunswick nor shale gas producers know definitively if shale gas and/or oil exist within these licenses or if it can be extracted commercially. Therefore neither the Government, producers nor the Commission can accurately predict either production levels or a timeline for hydraulic fracturing in New Brunswick.

The Commission’s Findings in Relation to the Five Conditions Regarding Hydraulic Fracturing in New Brunswick

Addressing the issues of hydraulic fracturing will require deep systems change and Government cannot and should not do this alone. We got to this point in the conversation because of a breakdown in the relationship among communities, Indigenous people, industry and governments; mending that relationship is how we will move forward. What follows are the Commission’s findings for how that might be achieved, if the Government chooses to proceed.

Government condition: A social license in place.

The Commission’s findings in relation to social license:

1.     A different approach is needed to address complex public issues such as hydraulic fracturing: New Brunswickers must rebuild trust in our public institutions, in our corporate sector and in each other. There remains great uncertainty as to the size and commercial viability of New Brunswick’s shale gas resources. This fact, coupled with current prices, means little is likely to happen in the immediate future. Knowing that, the Government has time to design, resource and implement a regulatory system, including a robust research and monitoring process, and industry has time to engage in a substantive way with local communities.

2.     A broader community conversation about community risks and benefits is required: Conversations regarding hydraulic fracturing and shale gas must be community-focused because it is the communities located closest to proposed and existing developments that accept the most direct risk if Government decides to proceed. At its core is a recognition that the Government’s relationship with residents is built on trust and mutual respect. Within this relationship, the first obligation is New Brunswick’s Indigenous people because they are rights holders, and the Government has a duty to consult with them ahead of any development.

3.     An independent environment and energy research network is required: To conduct open and transparent evidence-based consultations, the regulator will need to be supported by an independent research network. Fortunately, we already have the foundation for this network in the work already being done by New Brunswick’s community of academic researchers.

4.     An environment and energy strategy needs to be developed that helps transition to a new, value-added knowledge-based economy: The independent regulator’s mandate must be born of strong public policy, specifically a new environment and energy strategy that:

• is driven by a clear vision that New Brunswick businesses must develop wealth in this province through the adoption of new technologies and processes and an increase in our production of value-added goods and services;
• reflects New Brunswick’s role in meeting Canada’s commitment to limit our country’s overall carbon emissions and transition to a carbon neutral society;
• accelerates New Brunswick’s adoption of low and/or no-carbon energy technologies via private sector investment and community-sponsored projects;
• outlines what will be required to mitigate the impacts of climate change-related effects, such as extreme weather, on New Brunswick’s watersheds, coasts and land base; and,
• clarifies the role natural gas and other fossil fuels will play in New Brunswick’s energy mix over the next 10-20 years as New Brunswick transitions to a carbon-neutral society.

Government condition: Clear and credible information about the impacts of hydraulic fracturing on our health, environment and water, allowing us to develop a country-leading regulatory regime with sufficient enforcement capabilities.

Government condition: A plan in place that mitigates the impacts on public infrastructure and that addresses issues such as wastewater disposal.

The Commission’s findings in relation to these two conditions:

5.     An independent regulator should be created with a mandate to strengthen New Brunswick’s monitoring and evaluation of shale gas development in terms of understanding cumulative effects, including impact on human health and the environment: The bottom line is New Brunswickers need to understand if the risks and benefits associated with hydraulic fracturing can be managed within acceptable levels. To determine that, residents, local governments, Indigenous people and businesses need a trusted, independent voice to convene that conversation. The Government’s current regulatory process for shale gas development has created silos of information and authority. This has frustrated industry applicants, Indigenous people and members of the public who want to participate in the process. A single regulator could eliminate the duplication and inefficiencies within the current regulatory system by leading ongoing, community-focused consultations rather than project-specific assessments. This should be an evolutionary process designed to improve efficiencies and ensure the concept of sustainable community development is reflected in regulatory decisions.

6.     Adequate resources must be assigned to properly plan for potential public infrastructure impacts: Under a new regulatory process, the departments of Transportation and Public Safety should continue to be integrated into the impacts assessment process, as municipal governments need to understand how ongoing maintenance of roads and other infrastructure will be financed both during the project and after the industry has left.

7.     Short-term and long-term solutions to hydraulically fractured wastewater should be determined before commercial production begins: Technology to deal with wastewater exists; the next step is to determine what options to employ in New Brunswick if the Government decides to proceed with hydraulic fracturing. Communities need to understand, should the Government decide to proceed with hydraulic fracturing, how companies will treat wastewater, whether there is an opportunity for industry to reuse water from the hydraulic fracturing process, and how and where companies will eventually dispose of wastewater.

Government condition: A process in place to respect our obligations under the duty to consult with First Nations.

The Commission’s finding in relation to its obligations to Indigenous people:

8.     The Government of New Brunswick needs to work with Indigenous leadership in New Brunswick to adopt a nation-to-nation consultation process for hydraulic fracturing: The Government of New Brunswick must redefine its relationship with Indigenous people. Only then will Indigenous people in New Brunswick be willing to fully participate in a conversation about the future of shale gas development. Mi’gmaq and Maliseet (Wolastoqiyik) people told the Commission they don’t want to talk about hydraulic fracturing until more work is done to improve the relationship between these two Indigenous nations and the Government of New Brunswick.

Government condition: A mechanism in place to ensure that benefits are maximized for New Brunswickers, including the development of a proper royalty structure.

The Commission’s finding in relation to benefits and a royalty structure:

9.     The Government should determine a royalty structure that encourages responsible development and promotes specific government priorities: The overriding goal of the Government’s royalty regime should be to encourage sustainable community development. We believe the current system can achieve that, and we encourage ongoing consultation with industry and community stakeholders to achieve it. If the Government chooses to proceed with hydraulic fracturing, the royalty system will scale up alongside development, affording the Government modest revenue in the early years and increasing revenues once commercial development is established. A note of caution: the volatility of natural gas prices should not impact how or when Government determines royalty rates. Shale gas producers must calculate royalty rates into business forecasts and decide whether to proceed or not. If, in this current market, royalty rates are deemed to be too high, that is not sufficient reason for the Government to lower its rates. Rather, it is an indication that the market is not prepared to proceed.

NT5