Cracks are starting to appear in New Brunswick’s ambitious plan to escape Canada’s have-not club as the province grapples with setbacks to a number of key energy projects — the most devastating blow coming with Irving Oil’s recent decision to cancel a major refinery slated for Saint John.
The $8-billion facility, an expansion on Irving’s existing refinery in the region, would have formed the heart of an energy hub serving Canada and the northeastern United States. While some of the projects associated with that hub have come to fruition, others, such as the refinery itself, have languished.
The $1.4-billion refurbishment of New Brunswick’s Point Lepreau nuclear generating station, home to the first Candu 6 reactor in the world, was undertaken with the mantra “on time and on budget” as its driving force. But unforeseen delays and cost overruns have since plagued to the project — already half a year behind schedule — with ratepayers on the hook for replacement power costs.
“Every day it’s late … it’s a million dollars, roughly, on the books of New Brunswick,” Energy Minister Jack Keir said.
Meanwhile, plans for a second, private-sector-funded reactor at Lepreau have not moved past the discussion phase, another indication that the initial momentum powering the government’s self-sufficiency agenda may have started to falter.
The target set by the Shawn Graham Liberals three years ago was self-sufficiency by 2026. Success in that venture would make New Brunswick the second Atlantic province after Newfoundland to get off equalization, a federal formula that provides extra funds to provinces that generate smaller revenues.
In New Brunswick, a province of about 750,000 people that has struggled for years with economic depression and an exodus of workers to the West, signs of an emerging energy boom suggested a way out of those problems. A new liquefied natural gas terminal in Saint John started receiving its first shipments this summer. Work is continuing on a potash mine in Sussex and wind farms are being developed to deliver 400 megawatts of power.
But a combined government-private sector study last year looking at ways to maximize the potential of the energy boom indicated that two key investments — the second refinery and the second nuclear unit at Lepreau — were critical elements that could genuinely breathe new life into the region.
Without them, predicted the Benefits Blueprint study, the population of Saint John would plummet by 7,000 people in two decades and net job losses would total nearly 3,000.
While the nuclear unit may still move forward, the loss of the second refinery will clearly have a significant impact. It would have contributed about half of the estimated $19-billion in capital investments initially slated for the region when the Blueprint was drawn up.
In announcing the refinery’s cancellation, Irving cited “dampening forecasts for petroleum product demand.”
Critics such as University of New Brunswick economics professor David Murrell, who called New Br unswick ‘ s self-sufficiency agenda “too ambitious” from the get-go, said the announcement essentially dealt the strategy its death blow.
“Now we definitely won’t reach it,” Mr. Murrell said. “That would have been the largest oil refinery in North America, and we’re a tiny, poor province, so having that built here would have been an amazing and very important capital investment, which would have spurred economic growth.”
Opposition Conservative leader David Alward, who has repeatedly called for more transparency on the Lepreau refurbishment project as costs balloon, criticized the Premier for continuing to pay “lip service” to the self-sufficiency plan while its central plank — the expanded energy hub–has failed to materialize in the way rosy projections suggested it would.
Mr. Alward is pushing the concept of creating a panel of business and community leaders to re-evaluate the self-sufficiency agenda and “remap” a road for the future, with a focus on key planks such as education and literacy, areas New Brunswick has struggled with for years.
Mr. Graham says while the province “knew there were going to be bumps in the road,” he is still confident 2026 is a reasonable deadline to realize self-sufficiency. He pointed to other prongs of the strategy that have already been rolled out, including a dramatic overhaul of the taxation system that will push the province’s corporate income tax rate to the lowest in the country while shedding two brackets from the personal income tax structure. Mr. Keir, who is still
holding out hope for the second nuclear unit, is also optimistic that new opportunities in electricity generation and the renewable energy sector could help fill the void left by the cancellation of Irving’s second refinery.
There is talk, he said, of building a gas-fired electricity generator close to the LNG terminal to produce electricity at a cheaper rate, for domestic and international sales. On the renewable energy side, Saint John’s harbour boasts the highest tides in the world, and a recent consultant’s report suggested the province could ultimately harness as much as 4,500 megawatts of wind energy, Mr. Keir said.
“The fact the refinery isn’t going forward is disappointing, but it’s not the end of the energy hub,” he said. “We still have all the advantages that we’ve always had… That growth is still going to occur.”
Charles Cirtwill, executive vice-president with the Atlantic Institute for Market Studies, said the other Maritime provinces, Nova Scotia and Prince Edward Island, are unlikely to attempt to get off equalization any time soon because of their dependence on external funding sources.
Nova Scotia Premier Darrell Dexter said while he is watching New Brunswick’s progress in the matter, his own province is grappling with different economic concerns including a sharply rising deficit.
“At this point, what we’re really focusing on is how to bring our government’s books back into balance to put us on a firm financial path for the years to come. … If we do those things, obviously that will affect the question of self-sufficiency,” Mr. Dexter said.
Nailing down a fixed date such to achieve self-sufficiency is key from a motivational perspective, Mr. Cirtwill said, lauding New Brunswick’s ambitious timeline.
“I think you have to have a target and if they’re not going after 2026, everyone loses their sense of urgency and nothing gets done,” he said. “They’ve picked their avenues, they’ve retooled the car, now it’s time to put your foot on the gas pedal and see how far you can get.”