In Fort McMurray, it’s been a bad year for the cocaine and snowmobile dealers but boom times for the repo companies; thousands of oil sands workers are returning to places as far removed as Newfoundland, China and the Philippines; and Alberta’s provincial government is forecasting a $6.9-billion shortfall this fiscal year, its first deficit in 15 years.
With the party over, how big is the hangover?
Unemployment at home and in other provinces, pay cuts for remaining oil sands workers, and lean times for certain Fort McMurray businesses are all pieces of that puzzle.
The oil sands boom brought with it a culture of big spending and decadence. It also brought tens of thousands of workers to the Fort McMurray region in northern Alberta. A century ago, writers like Jack London and the poet Robert Service immortalized the adventure-seeking gold stampeders of the Klondike. Likewise, there have been Wild West stories emanating from Fort McMurray these past years: roughnecks sharing a basement with seven others, their bed-spaces separated by sheets for walls, working 12-hour days for 21 days straight, earning $150,000 or more in manual labour.
With oil prices soaring since 2003, development in the oil sands had taken off at breakneck speed. With tens of billions of dollars being spent, and up to 45 per cent of Canada’s oil now produced there, the oil sands were called the engine of Canada’s growth.
Then, the engine stalled.
In 2008, the price for a barrel of crude went down by two-thirds: from a peak of $148 U.S. per barrel, to a low of $38, all within a few months. As quickly, billions of dollars were dropped from oil sands investment projections, major expansion projects were delayed, and thousands were laid off. Spending projections over the next 11 years have been cut by more than $100 billion.
Between July 2008 and July 2009, Alberta shed almost 64,000 full-time jobs and the province’s unemployment rate hit 7.2 per cent in July, the highest in 13 years. Many of those who kept their oil sands jobs were forced to take pay cuts, often 15-20 per cent.
During the boom, the population of Wood Buffalo/Fort McMurray had mushroomed to 103,334, up 141 per cent over nine years. The population of the work camps built on or near the oil sands grew an eye-popping 637 per cent to 26,284 during that period.
Temporary foreign workers were recruited from countries like China, Russia, Venezuela and the Philippines. The Alberta Federation of Labour estimates that the number of temporary foreign workers in the province increased from 13,000 in 2004 to 57,000 in 2008, with many of those destined for the oil sands work camps.
They were joined at the camps by many more from out of province: Canadian shift-workers on rotations (for example, working 14 days then taking 14 days off) flew in to work and flew home for their days off, often at their employer’s expense.
– – –
Fort McMurray has been called Little Newfoundland. No wonder: In 2006, Newfoundlanders made up 17 per cent of the population of Fort McMurray’s population. In 2007, oil companies set up their own charter flights to ferry workers directly from St. John’s to their own private airstrips in northern Alberta. This year, oil sands flights to Newfoundland and Nova Scotia have been cancelled.
The 20,000 Newfoundlanders who had found work in the oil sands represented a major chunk of the labour force of their home province, which has a population of about 509,000. With many of those workers returning, even with Newfoundland’s own oil boom ramping up, unemployment there jumped by a Canada-high 3.6 per cent between July 2008 and July 2009, to 17.1 per cent.
To make matters worse, Newfoundland newspapers have reported on hard drug habits making the trip back home with oil sands workers.
Diane Keough is a hotel bartender in Fort McMurray, newly arrived from Newfoundland. Her husband has been working here for two years. When asked whether she knows many Newfoundlanders who have been laid off, Keough does some quick mental tabulations: “At least 28,” she says.
– – –
A survey of the work camps showed a population drop from 26,284 to 22,000 from 2008 to 2009.
The camps shrank for three reasons: First, residents mainly worked on expansion projects, which have stalled while existing operations have, for the most part, kept pace. Second, foreign workers are given permits based on local worker shortages. With the recession, those permits have dried up. Finally, flying workers in and out from all corners of Canada is an expense the oil sands operators could cut while maintaining a locally based work force.
As the return migrations began, the cuts have not always been clean.
Workers who had been sending money to families in their home countries found themselves now needing return airfare.
Ramazan Nassery, who works at Fort McMurray’s YMCA Immigration Settlement Services, dealt with many of the foreign workers on their way out. “There were lots of problems. They sent their cheques home, so they didn’t have any savings.
“When they were laid off they’d be forced out of the work camps, so they had nothing, no dishes or blankets even. There were some cases where people woke up with a job, and by the end of the day didn’t even have a place to stay that night and we’d have to find places for them to stay in the community.”
Nassery says that almost half of his clients were from the Philippines.
– – –
During the the oil sands boom, stories came out about the rowdy antics of the roughnecks, young men making more money than they’d ever seen before and learning ways to spend it.
One study found that in the past three years, the number of energy industry employees seeking counselling for drinking problems was up 481 per cent.
Constable Sean Sexsmith, of the Fort McMurray RCMP detachment, confirms that cocaine is the drug of choice. All the companies have mandatory drug testing as a condition of employment, but there are always ways to cheat the drug tests – “clean” urine is available for purchase in Fort McMurray.
Industry insiders (who asked not to be named in this article) tell of parallel oil-drunk behaviour within the business itself: the wastefulness of the oil companies, inefficiencies, outrageously priced contractors, all taken in stride while the money flowed.
Because the cuts targeted the work camps, the city of Fort McMurray itself actually managed the downturn quite well. Beautiful new subdivisions ring the city, and the building continues apace. The effects are obvious here nonetheless. Everyone feels the tightening of the money taps, the euphoria is gone. On Franklin St., the once rowdy strip is near empty; bars are quiet, and the prostitutes have gone on sabbatical.
Earl’s is a trendy watering hole and eatery chain in Western Canada. At any other location, patrons are dressed to the nines, metrosexuals and high-heeled women. At Fort McMurray, the metrosexuals mix with the muscle shirts and mullets. The crowd is three quarters male. The bartender says things slowed down just around Christmas, and it has been the slowest year in ages.
The Globe and Mail recently reported on the drop in sales in Fort McMurray liquor stores, particularly among the high-end liquors. Patron Tequila and Grey Goose vodka now gather dust on the shelves. Liquor Stores Income Fund, the largest private retailer of liquor, reported some store sales down 4.8 per cent in the first half of 2009.
There’s a “vice” associated with the boom that wasn’t as well reported.
“Chris,” a manager with a technology and equipment suppliers to the oil companies who asked not to have his name published, noted: “Every guy who works here has new trucks, sleds, quads, boats. The toys are non-stop. I’ve never seen anything like it. It’s not normal when you drive to a guy’s house and he’s got a trailer and he’s got a quad, a snow machine and a boat and they’re all brand new.”
During the bust, the toy dealers have felt the pinch, too. At Four Seasons Power Sports, sales staff tell of years of 10-per-cent-plus growth – and then 2009 came, and things slowed immensely.
Now, the party has morphed into a new twist on the key party. “The banks were getting keys turned in for houses, boats, trucks, everything,” Chris says. “Everything was bought on credit.”
Sharon Pritchett, a co-ordinator at Fort McMurray’s Salvation Army, hears of laid-off workers handing the keys to their new homes back to the bank.
“I remember there were five stories in one Friday afternoon we heard about.”
Keough, the bartender from Newfoundland, says an in-law had just bought a $500,000 house in Fort McMurray before losing his job, while city councilor Sonny Flett tells of a man who had gone all-out, buying a new house, new truck, two snowmobiles and two ATVs. All lost with his job.
The business culture is changing, too. Oil companies are tightening their belts and reining in costs. Shifts are being shortened to cut overtime pay, fewer workers are flown in for their rotations, fewer consultants given free rein. According to insiders, the feel is very different now, and if the companies ramp up projects again, they will do so in a far more cautious way. Many camps are now going “dry,” banning alcohol altogether and increasing the dog-aided drug searches.
– – –
The Fort McMurray area is known for its Northern Lights, which illuminate the night sky. On my visit, the skies were cloudy, and my first glimpse of lights in the sky were the flames at the Suncor plant, Canada’s first oil sands facility.
There, and at the many surrounding plants, the immense industrial tangle of metal silos and chutes are crowned by these flames, burning atop their stacks 24 hours a day, seven days a week: a beacon for workers and an ignition spark for this engine of Canada’s economy, as well as a sulfurous symbol of the environmental degradation of the region.
The environment is the giant elephant in the room. It was ducks that reminded the world of the problem in April 2008 – 500 died after landing in a Syncrude tailings pond, an image that resonated worldwide.
The extraction of oil from the sands requires massive quantities of water, diverted from the Athabasca River, and natural gas to provide energy for the process. This on such a large scale that the burning of that natural gas represents a major component of Canada’s greenhouse gas emissions. The mining itself digs up vast swaths of boreal forest and ancient peat; although oil sands companies are required to “restore” the land, and impressive efforts are under way, this local environment will never return to its pre-mining state. The tailings ponds are kilometres-long lakes of sludge, actually visible from outer space. On top of all this, there are now questions whether contaminated water is leading to higher rates of cancer among the native community of nearby Fort Chipewyan.
With discussions in Washington on boycotting such “dirty” energy sources, and Canada’s own greenhouse-emissions plan still a work in progress, this elephant might, to twist a metaphor, stomp the golden goose.
But already, the industry is gearing up for the next revival. With the combination of the recession and the industry’s own efforts to rein in costs and slash contractor salaries, expenses for materials and staffing have been lowered dramatically. The twinning of Alberta’s Highway 63, plans for new continental oil pipelines, and the reworking, again, of Alberta’s royalty fees have all improved the investment climate.
At the same time, the price of oil has inched back up towards $70 U.S. per barrel. A rash of deals has signalled new investment coming to the sands: There was the merger of industry giants Suncor and Petro-Canada; a newly formalized relationship between Alberta and OPEC; and a multi-billion dollar investment from PetroChina.
Over the summer, plans have been announced to proceed again with several stalled expansion projects – Connacher’s Algar sands, CNRL’s Kirby project, and Imperial Oil’s Kearl sands. But with proposals for a Clean Energy and Security Act in the United States that could severely handicap the industry, there are new concerns for the future.
Still, those concerns are overshadowed by confidence that the economic might of the region will continue to earn it a free pass from political interference.
Insiders say business will be handled more soberly this time around. But a drunk always believes that until the bottle is within reach.
Montreal Gazette, Sat Sept 26 2009
Byline: David Sachs