N.B. is still hooked on building highways

Frank McKenna began the trend of large capital expenditures with the Trans Canada Highway. He took us into the four-lane world, just like the big provinces and states. And it seemed like a good idea at the time. There were a number of deaths caused by collisions, and didn’t we deserve highways as good as Quebec and Ontario?

That’s what politics is all about – finding a leverage point with the masses and using it to lengthen your run in power. The projects were extremely expensive and one section was contracted to the private sector, with tolling as part of the annual payment. In 2000, Bernard Lord removed the tolls and arranged compensation for the road contractor. He continued down the path of road construction.

Our present premier, Shawn Graham, has proposed spending $1 billion to bring route 11 between Shediac and Miramichi to four lanes as well. But before betting the farm on highway construction, perhaps we should examine the implications of this adventure. The existing book value of our highways is now $4.2 billion and requires an annual interest payment of $394 million. The gas tax provides $199 million and motor vehicle registrations bring in approximately $100 million of annual revenue. That means that we are short of revenue to pay for highways by $95 million, if highway users are to pay for roads. As we use 1.5 billion litres of gas and diesel each year, the gas tax should be 6.3 cents a litre higher. It’s a strange twist of fate that Premier Graham removed 3.8 cents of gas tax after he was elected and now we are short of revenue.

Now supposing that the premier succeeds in persuading the feds to cost-share his billion-dollar baby of four lanes between Shediac and Miramichi, then the province will go into debt only $500 million more. That means $47 million extra in interest, which should translate to 3 cents more gas tax. So, it looks like we can expect a total of 9.3 cents per litre increase in gas tax – or perhaps we can just layoff 1,800 teachers and nurses, or increase the HST.

No matter how you slice it or dice it, there is no free ride.  Federal cost-sharing programs are always popular with politicians. The funding is mostly allotted among provinces on a per capita basis. There’s an economic term “opportunity cost” meaning that choosing one alternative negates another choices. If we use the $500 million federal dollars and $500 million of our own money for an expense like highways, then we get a short-term high with employment building the road in exchange for many years of interest to be paid. Cost – $47 million every year.

A simple alternative would be using the money to pay down debt. Benefit – $47 million reduction in government’s interest expense every year. Another distinct opportunity would be investing the money in energy efficiency in homes, or perhaps installing wind turbines to get us off oil. For example, a 1 MW turbine costs roughly $2 million dollars and produces roughly 2,200,000 kWh per year. At 8 cents / kWh, that’s $175,000 per year per turbine, or $87 million per year gross revenue. Benefit – with maintenance and interest costs subtracted, it’s a $35 million return every year, and increasing as power rates rise.

The worst is yet to come as world oil production peaks in the next few years, increasing fuel costs and hence lowering gas tax revenues here in New Brunswick. If we have $4.7 billion in highway debt, we will have a gigantic problem. The economist James Hamilton suggests that oil prices are to blame for the current recession: “The evidence to me is persuasive that, had there been no oil shock, we would have described the U.S. economy in fourth-quarter 2007 to third-quarter 2008 as growing slowly, but not in a recession.” If this is true, then peak oil will cause further recessions in the near future. Without significant restructuring of the province’s finances, we risk slipping into a deficit-financing spiral. How do we cut the health and education budgets?

Unfortunately for the residents of New Brunswick, Shawn Graham has become a weapon of mass financial destruction, busily building roads to lead us into poverty. If you’ve ever been to Cuba, you may have noticed the empty roads with few private cars. There’s little chance of an accident when you pass a horse driven carriage or bicycles ambling along major highways. A similar fate awaits us when peak oil affects the world’s economies, except we’ll have four lanes.

In fact, if Premier Graham were serious about self-sufficiency, we would spend the very least possible on roads and the most we could on getting off oil and improving energy efficiency.

Is the road upgrade plan another hint from Francis McGuire for Miramichi residents to commute to Moncton jobs?   Wow, that’s real energy efficiency.


More food security needed for Metro area

Published Tuesday, May 12, 2009 in the Moncton Times &Transcript – written in association with Michel Desjardins (co-founder of Post Carbon Greater Moncton)

If you were affected by the changes in energy prices in the last year, you are not alone.

Post Carbon Greater Moncton (PCGM) is a group of approximately 65 citizens of the Metro Moncton area that have come together because they share the view that the world is about to enter an era of oil scarcity.

This will result in dramatically more expensive energy supplies and a significant shift in the way we live. This view is supported by a growing number of geologists and scientists from around the world.

The time to start planning for a future marked by the high energy costs is now. Being less dependant on fossil fuels means being more self-sufficient and less vulnerable to volatility in the world oil market.

To reduce our dependency on fossil fuels we should start by focusing our attention on at least four areas of activity:

1. Food self-sufficiency and security;

2. Energy efficiency;

3. Active and public transportation;

4. Education and awareness.

Let’s take food as an example. The agri-food industry is extremely reliant on cheap fossil fuel energy. Vast amounts of oil and gas are used to manufacture fertilizers and pesticides and to produce food (i.e., planting, irrigation, feeding and harvesting). Fossil fuels also play a critical role in the processing, distribution and packaging of food.

Furthermore, oil and gas are essential in the construction and the repair of equipment and infrastructure needed to facilitate this industry, including farm machinery, processing facilities, storage, ships, trucks and roads.

The year 2008 has shown just how quickly a surge in oil prices can drive world food costs through the roof. Had it not been for the Canadian dollar gaining in value against the American currency, and therefore counterbalancing the increased cost of American food imports, Canadians would have paid considerably more for their food during this period.

Even though oil prices have pulled back recently, PCGM believes history will repeat itself. Most energy analysts today are of the opinion that oil prices are poised for a swift recovery in the next few years, if not months. Communities unprepared for a new round of price hikes run the at-best risk of having to pay a higher proportion of their income on food. At worst, they could suffer food shortages.

PCGM proposes to conduct an experiment to determine how urban agriculture can contribute to self-sufficiency and food security.  A volunteer local family “backyard farm” will grow fruits, vegetables and also raise three chickens.

The goals of the project are to explore optimal conditions for small-scale farming in an urban setting and lay the groundwork for an effective municipal regulatory framework.  PCGM also expects to use the project to raise awareness about food self-sufficiency and security in the Greater Moncton area.

Many of you already benefit from a vegetable garden in your yards, but the raising of chickens for eggs may seem exotic or strange at first glance. Our grandparents raised chickens at home and today it is common practice in approximately 100 North American cities. For example, in San Francisco: “It is permitted for any person, firm or corporation to keep or feed up to four of the following in any combination: dogs of age six months or older unless part of a dog kennel, hares, rabbits, guinea pigs, rats, mice, gerbils, chickens, turkeys, geese, ducks, doves, pigeons, game birds of any species, or cats provided that coops or enclosures are approved by the Director of Public Health.”

Other chicken-friendly cities include Victoria, Vancouver, Seattle and New York.

There are numerous advantages to raising chickens in an urban setting. Here are a few key ones:

* Chickens are productive. They provide eggs for personal consumption and fertilizer for gardens;

* Chicken-raising gives control over the quality of eggs, i.e. antibiotics, etc.

* Chicken-raising is an easy and accessible way for average people to contribute to local food security and self-sufficiency;

* Chickens are trouble-free, quiet and people-friendly. It is a fun and educational hobby.

It is for serious reasons that Post Carbon Greater Moncton has formally requested that the City of Moncton allow this pilot study and consider at a later date any necessary changes to bylaws.

Within a few years, energy will decline. Economic dislocation will greatly stress the fabric of our society causing financial problems for most citizens.

Some economists believe that this recession was caused by rising oil prices in 2007 and 2008. Therefore, the next recession may be sooner than many imagine.

Shall we examine our future under a clear and focused light, and acknowledge that oil will decline and that we need to adjust?

Or shall we wait until a larger crisis strikes, and our leaders flop about like fish out of water?

The choice is ours to make.