I think all New Brunswickers who are interested in future prosperity should read McKenna's speech delivered yesterday in Saint John. Here is the transcript.
" Thank
you Mr. Premier.Thank you for the kind remarks and thank you for beinghere
today.
There’s no place else in the country where a sitting Premier would
introduce a former Premier, of a different politica lparty, and then sit
through a half hour speech.
It speaks to the character of the Premier.It also speaks to the
magnitude of the challenges that we face.
Incidentally, I would never speak on New Brunswick issues without
first advising the Government of the day. The Premier is aware of the
opportunity that I am about to discuss and support of my intervention.
I was provoked to speak after listening to the rather apocalyptic
news of the last several months.•
The chronically high unemployment levels
•Anaemic growth
•The Finance Minister’s dire warning that this year’s deficit will
hit $350,000 million -- almost double whatwas forecast
• Warnings that sharp tax increases are in store
• Economist Constantine Passaris warning of a demographic time
bomb
I believe the realization that we are facing unprecedented
challenges to our survivability as a province is somewhat responsible for all
three mainstream political parties supporting a west to east pipeline
terminating in Saint John. This is an extraordinary accomplishment and I
applaud the political leadership in New Brunswick. That unanimity may very well
be the silver bullet needed to win this battle.
I want to build on that spirit of compromise and goodwill by
connecting some dots and laying out a possible path from doom and gloom to hope
and prosperity.
The theme for this talk is taken from an anecdote about a preacher
and a flood:
As the water came up to the first floor windows, some friends came
by in a row boat. “Get in” they said, “It’ sgoing to be a bad flood”. “Oh no”,
the preacher answered.“I’m a righteous man, I don’t need your help. The Lord is
going to save me.”
An hour or so later the water was up to the second floor windows
and this time a motor boat came by. “Get in”they said “It’s getting worse.” “Oh
no”, he said. “I’ve kept the commandments; I’ve gone to Sunday school all my
life. I don’t need your help; the Lord is going to save me.”
Finally
the preacher finds himself standing on the chimney. The water is up to here. A
helicopter comes over, drops a rope. The guy says “Grab the rope.”“Oh no” he
said. “I’m a righteous man. I don’t need your help; the Lord is going to save me.”
Well
sure enough, a few minutes later, he finds himself standing in front of Saint
Peter and he’s absolutely furious:
“What happened?”
Saint
Peter said, “What do you mean what happened? Stupid, we sent two boats and a
helicopter, didn’t we? Why didn’t you grab the rope ?!!!!”
For many
years Saint John boosters have enthusiastically extolled the virtues of Saint
John as an energy hub.
For a variety
of reasons our fondest dreams have not borne fruit.
Quite
understandably many Saint Johners are disillusioned and discouraged.
I am
here today to tell you that the dream is still alive.
It is far from a certainty but it is more than
a faint hope. For a variety of reasons Saint John and New Brunswick is at the epicentre
of several developments that could bring profound changes to this community and
the province.
Throughout
the last year I have spoken ad nauseam on the virtues of bringing western oil
all the way to Saint John, New Brunswick, both for further processing or for transhipment
to other North American or world markets.
A variety
of public utterances from both producers and shippers have provided credibility
to the vision.
The
Premier’s work with his colleagues has resulted in widespread political support
for this opportunity. The recent presence of Energy Minister Joe Oliver in
Saint John, New Brunswick was encouraging and validating. And as mentioned the
expression of unanimous political support in this province is in complete
contrast to experience elsewhere.
Should
this initiative be successful it will result in over 5,700 direct construction
jobs between Quebec and NewBrunswick in building the pipeline alone. Even more
jobs would be created in receiving facilities and shipping movements to foreign
markets.
I believe that all the stars are aligned for
us to win this very significant battle.
Once
this pipeline is built an even larger opportunity presents itself. Everybody
agrees that Canada should be upgrading more of its petroleum. Adding value
represents massive value for the country.
It is
also well known that Alberta is a very expensive place to build upgrading
facilities. You may have noticed in the news recently that Imperial Exxon’s
Kearl Project is expected to be at least $2 billion over budget. The major
reason for the dramatic overrun is from the delay in transporting modular
equipment through Idaho and Montana. Strong local resistance required Imperial
to take more than 200 of the modules apart to be moved on an alternate route.
Saint
John has access to tidal water transportation for evenl arger modules, existing
infrastructure and a highly skilled labour force. By one estimate, the cost of
an up grader in Saint John New Brunswick would be 40% less than in Alberta.
These
projects require billions of dollars in investment and create as many as 5,000
jobs per year. It may be the real pot of gold at the end of the pipeline.
When the
time comes, grab the rope!
Now, I
am here today about another project with even greater potential for jobs and
investment and even more realistic in terms of implementation. I am going to be
talking about natural gas and connecting the dots as to how oil and gas could
translate into an exciting new future for Saint John and for the province as a
whole.
Now, I
know how controversial some of these issues are and I deeply respect the strong
diversity of views. I want to make a few things clear before the critics even
start.
Firstly,
I have absolutely no vested interest in the results of any of these energy
projects that I am talking about.
Secondly,
I am not impervious to the environmental and social equity arguments. I happen
to believe that climate change is real and that we should be doing something
about it. Canada should be known and should set the new standard for
responsible development – which integrates environmental and social benefits as
part of the case for development of our diverse resource mix. If we don’t do this
– who will? And as unpopular as it is, I actually believe that we should have a
carbon tax in this country to provide market based mechanisms that would give
impetus to advancements intechnology.
I am
Deputy Chair of a bank which is considered amongst the greenest in North
America. I am the Chairman of the Board of Brookfield Asset Management which
has the largest portfolio of renewable energy resources in all of North
America.
But I am
also a pragmatist. I know that fossil fuels will form the base of the global
energy supply for decades to come. I know that even with the rapid acceleration
of renewable energy sources that this market will not be going away in the
future.
The only
question is whether we subsidize the Americans to buy it with cheap prices or
sell it elsewhere in the world and use the money for the benefit of Canadians.
The CEO of
Synovis during this past week suggested that the price differential that we are
currently experiencing is costing every Canadian $1,200 per year.
So let
me talk about shale gas which, I believe, will inevitably lead to a revolution
environmentally, geopolitically and as an energy source. Indeed its low price and
highly desirable carbon properties will result in a displacement of other
energy sources.
This
abundant new energy form in the United States is already creating an energy
revolution.
Last year access to low price natural gas
saved $107 billion or almost $1,000per household. Over 1.7 million jobs have
already been created from the shale gas boom.8A confluence of conditions put
Saint John, New Brunswick in an extraordinarily advantaged position to take
advantage of this unprecedented energy revolution that is sweeping the world.
Firstly,
we have an existing LNG facility that I will talk more about later.
Secondly,
we have access to existing pipeline capacity from offshore gas deposits and we
are also connected to major consumer markets.
Thirdly,
we have access to an ice free deep water port that can accommodate the largest
vessels in the world.
Fourthly,
we have access to world class deposits of potash.
Fifthly,
we have access to a shale gas resource that some estimate is larger than that
of Alberta located within several hundred kilometres of Saint John and
connected by a pipeline to Saint John.
So let’s
try to connect the dots.
You have
to appreciate that we are dealing with a lot of back of the envelope estimates
here but I can assure you that more than a few smart people are putting their
minds t oa New Brunswick scenario because it is so compelling.
The
first step revolves around the LNG Terminal in Saint John. It is no secret that
it is for sale as part of a basket of Repsol assets.
It is
also common knowledge that the business case for importing liquid natural gas
at present is very sketchy while, in theory, the business case for exporting
natural gas is very robust.
Natural gas currently attracts
approximately$3.50 per thousand cubic feet in North America with prices in
Europe as high as $12 and prices in Asia as high as $17.North America is
increasingly being flooded with shale gas driving down or holding down prices
while the rest of the world has not yet started exploiting this resource.
That is
why there are at least 20 LNG export proposals on the table across North
America. Undoubtedly, there will be a significant narrowing of the gap but
there is still a strong business case to be made for exporting natural gas.
First mover advantage will be very important.
Saint John is uniquely positioned in this
regard.
Canaport
is the only LNG import facility in Canada. It can be reversed to become Canada’s
first export LNG facility.
It
already has storage tanks with 10 billion cubic feet of capacity and an
offshore jetty which allows LNG vessels to dock.
To
reverse Canaport requires the construction of liquefaction trains. This is not
like a conventional train. A train is an LNG plant’s liquefaction and
purification facility. These “trains” have a compression area and methane,
ethane and propane condenser areas. Here are some crude estimates of the
potential:
The
first liquefaction train would be capable of producing approximately 600
million cubic feet of gas annually and could be operational within four years.
A second liquefaction train could become operational several yearsl ater. Each
train would require direct investment of about $2.5billion creating 900
constructions jobs for four years and 80permanent jobs. It is not inconceivable
that at least two more trains could be added in the fullness of time
contributing $5 billion more ininvestment.
Think of
the jobs.
Grab the
rope!
Simultaneously,
natural gas would need to be sourced for this export facility. In the short
term this would undoubtedly come from offshore Nova Scotia, more specifically,
Sable Island and Deep Panuke. In such a case a substantial investment in
infrastructure would be required to move the gas to Saint John. The most
important phase is the exploitation of New Brunswick’s indigenous shale gas
reserves. It is estimated that New Brunswick has 82 tcf of shale gas which is located
less than two hundred kilometres from the coastline. Even if less that 10% of
this shale gas was exploitable it would result in 150,000 person years of work
during the life of the shale gas basin.
Producing
and exporting this currently stranded shale gas can generate over $7 billion in
royalty and tax revenues to the province of New Brunswick over the life of the
project.
In
short, reversal of the LNG facility in Canaport and the export of New
Brunswick’s indigenous shale gas resources could result in the following impact
in our province.
• $17
billion of direct investment in New Brunswick
• $4 billion
of provincial tax revenue.
• $3
billion of provincial royalties.
•
150,000 person years of new jobs.
These
are direct jobs and direct revenues.
Grab the
rope!
There
could be much more. If we are smart we would develop an entire knowledge
industry around the exploitation of these resources with additional spin off
jobs in knowledge related industries .A recent report reveals that the
University of Alberta has over 1,000 university researchers currently engaged
with corporate partners to innovate and develop new technologies. What a
wonderful opportunity for New Brunswick’s knowledge sector.
Grab the
rope!
By the
way, New Brunswick must demand equal treatment by the Government of Canada for
these revenues in the same way that the offshore resources in Newfoundland and Labrador
and Nova Scotia are assessed.
These
Provinces have saved billions of dollars in equalization reductions. It would
be unconscionable if the Atlantic accord was really a Nova Scotia and
Newfoundland accord. This is abridge we must die on.
Finally,
the cherry on the cake is the creation of new value added industries in New
Brunswick. We are closer to India than western Canada. I recently returned from
India and can vouch for the fact that there is a strong demand for natural gas.
There is
also a strong demand for products made with natural gas as a major input. In
New Brunswick’s case we have potash. We have natural gas. There is no reason
why we cannot create an entire petrochemical sector of the economy and export
value added goods rather than raw material.
This is
not idle speculation. Access to cheap natural gas is already attracting
offshore companies back to the United States and I know for a fact that
offshore companies are looking at Canada and, in fact, New Brunswick as a possible
site for major investments based on the potential or plentiful and low price
natural gas.
It will
be incumbent on the province to ensure that enough of our resource is allocated
to exploit these opportunities for a new entrance and our existing New
Brunswick enterprises.
Again,
grab the rope!
In
closing, I would stress all of this is speculative. None of this may happen.
The world energy footprint is transforming itself at a breathtaking pace.
Methane hydrates
may even replace shale gas as the “new bestthing”.
However,
very smart people and very smart money are currently investing billions of
dollars across North America in an explosive race to be first to market to
export natural gas.
There is
no jurisdiction in this hemisphere better positioned at the present time to
exploit this enormous potential tha nright here in New Brunswick.
I recognize there are some who believe that
shale gas production should go ahead at all costs and others who believe it
should not proceed under any circumstances.
I
believe that the vast majority of New Brunswickers are in a third camp.
This
third group looks at other jurisdictions for guidance, understand there are
some risks and understands the mitigants to these risks. This group believes
that a regulatory and royalty regime can be put in place that would make us
globally attractive to investors but highly secure as citizens.
That is
the camp that I am in. I believe that the Premier and his government will
honour their commitment to provide a regulatory and royalty regime adopting
best practices from other jurisdictions with a long history of shale gas
exploitation.
Opposition
parties have a right and, in fact a responsibility ,to scrutinize and ask
questions on these important issues. However, it is my fervent hope that at the
end of the day we will be able to find a common path forward that will allow us
to create an environmentally respectful and economically sustainable energy
sector. And a province that can provide badly needed social programs for its
citizens and a home for its sons and daughters. As Saint Peter said “Grab the
Rope!”Thank you.