The Globe and Mail gave big play today to a story on Fort McMurray and how oilsands expansion has been put on hold
I offer some background (I lived there in 1987-1988).
Project after future project has been shelved or slowed down until, according to the companies, plunging oil prices stabilize and financing starts to loosen up.
Fort McMurray will not become a ghost town. You can still see the signs everywhere of an overheated economy. Highway 63 is a parking lot during rush hour as the workers stream out of the city toward the big oil sands projects. The slots at the Boomtown (casino) are busy even on a Monday night, and you can hardly find a hotel room with less than a week's notice.
But the mood is decidedly less bullish in the work camps and motels around Fort Mac, where the shadow population, the temporary workers flown in from everywhere, are insecure about the future.
In McMurray Newfoundlanders club, a popular watering hole, the waitress is ominously talking of layoffs. Mr. Brewer's tradesman job looks safe – welders are the aristocracy of the oil sands – but he doesn't expect a lot of his friends from the Maritimes to be joining him any time soon.
For at least another two years, and probably more, Fort Mac will no longer be the dream factory for ambitious young men and women from elsewhere in North America. It won't be the escape valve for frustrated workers in areas short of jobs and long on shuttered factories – places like northern Nova Scotia and central Ontario.
Just as the global economic boom was driven by China, the Canadian economic expansion of the past decade was fired by northern Alberta. Now China is talking about 8 per cent growth, not the 11 per cent-plus of past years, and Fort McMurray is talking about more “normal” growth built on operations, not massive capital spending.
The oil sands will no longer be the strong shoulders that carry the economy. With the price of oil below $40 (U.S.) a barrel, as current construction projects finish up there will be no immediate plunge into Phase 2 expansions, and new bitumen upgraders – and that will cool activity in and around Edmonton, including in the hectic oil sands manufacturing centre of Nisku south of the city.
One case in point: Whereas 10,000 workers once laboured in building Canadian Natural Resources Ltd.'s Horizon project northwest of Fort McMurray, there were recently only 1,500 people onsite as CNRL prepares to launch its $10-billion mine and upgrader. Those 8,500 excess workers won't easily be soaked up in a slumping global economy.
And with the cancellation or delay of future capital projects, what once amounted to 24,000 mobile workers' jobs in the oil sands are now in jeopardy.
The article didn't mention a key word of context: Alsands (there's even precious little about it on the Web).
In the early 1980s, Alsands was to be the first big megaproject expansion in the oilsands (Suncor was the pioneer in 1967, followed by Syncrude in 1978).
But on May 3, 1982, the consortium announced the project was dead.
My dad was then 56 years old. A pipefitter by trade, he had seen Alsands as the project that would take him through to retirement.
In the wake of the project's collapse, he never got more than a few weeks work here and there in construction. He was finally able to retire at age 60 and start collecting a pension.
He socked a fair bit away during the boom years of the late 1970s, and my mom had a steady job through this period. Some of his buddies didn't save their big cheques. They got in financial trouble when things collapsed, and an unfortunate few ended up committing suicide.
Many people in the oil patch volunteered 30 per cent pay cuts in this period to help keep their companies going. If you remember Ralph Klein taking over in Alberta in the early 1990s, he imposed pay cuts of five per cent on some public-sector workers. You can imagine there wasn't much support from the oilpatch types for the resultant squawking.
The article talks about Nisku. I graduated from the University in the spring of 1982. Two of my forestry classmates got staff jobs upon graduation. There were 42 of us in the class (remember, there was a vicious recession going on, one designed to fight inflation with high interest rates. That cuts into the demand for mortgages and lumber).
After a summer fighting forest fires out of Grande Cache and then working on the carnival with my brother in B.C., I came back to Alberta and started scratching about for work.
One of the places in which I scratched was Nisku.
During those go-go years of the late 1970s, Nisku was the busiest industrial park on Earth.
When I took a drive through there in the fall of 1982, I saw things that will haunt me forever.
The phrase "ghost town" applied to large parts of Nisku. Gates were padlocked. Signs saying -- "for sale," "for rent," "for lease" or, most poignantly, "bankrupt" -- abounded.
Rusting drilling rigs and other oil patch equipment just lay on the ground.* Nisku had been largely abandoned.
* I did a cursory search on "Nisku, Alberta" in Google Images. I didn't find what I was looking for. Edward Burtynsky, I believe I've found your next project.
I can't remember whether I saw actual tumbleweeds or just imagine I did. Either way, they wouldn't have looked out of place.
I went into one drilling company office. Rows of "rig pigs," as some called them, sat passively along the walls.
I spent a lot of my youth working on the fringes of the oil patch. A roomful of rig workers would normally have a collective testosterone level that would fall somewhere between a hockey dressing room and a cellblock in a maximum-security federal prison. But what I felt, saw and smelled this day was fear.
Their eyes particularly haunted me, with the shame almost trumping the fear.* Welcome to life in a deep, nasty recession when the main pillar of your economy has collapsed -- and when you have no other options and you only are what you do.
* Industrial forestry also went through a spasm of downsizing and contraction at this time. When interest rates are at 18 per cent, not many people take out mortgages to buy houses, so not many companies build them. You'd hear stories of loggers and millworkers in places such as Vancouver Island who'd held jobs for 30 years and found themselves out of work. They'd be too ashamed to even leave the house. It was shattering for them.
Skip ahead to May 1987.
I arrived in Fort McMurray at 7:56 p.m. on May 10 to start a job the next day as a crime reporter for Fort McMurray Today, a small daily newspaper.
While I saw Fort McMurray disappear in my rearview mirror at 3:44 p.m., May 29, 1988 (funny how I can remember the exact times and dates), I actually liked the year I spent up there. But a much better-paying and more professionally-challenging job awaited in Regina.
A plus for the McMurray experience was easy access to the outdoors. Fishing is one of my big hobbies, and Fort Mac was a good place to live at that time if you liked fishing. Five minutes after work, I could be casting for walleye or pike in the Athabasca River.
(In the photo above, the lime-green square shows where I lived. The orange dots mark some particularly good spots to cast a line.)
Close to Fort McKay, north of the oilsands plants, lay the McKay River. It had a population of graceful, silvery grayling, with their sail-like dorsal fins. Unfortunately, it was on the east bank. But fortunately, there was a bridge that would get you there. We called it "the bridge to nowhere."
That $6-million bridge (1982 dollars) had been constructed for Alsands.
The eerie thing about the bridge was how the road quickly petered outward (judging from maps, Highway 63 now continues to push northward, presumably to other oilsands leases). The river is just upstream of the bridge (or just below it in the satellite photo at right).
The Alsands site had been fully surveyed. Construction pegs were in the ground. It was that close. But the site sat empty at that time except for the occasional moose.
As a fisherman, this was a good thing. The McKay River would have suffered significant damage from oilsands development in the immediate area.* Grayling are a wilderness fish; they are very susceptible to human pressures.
* The provincial government issued its first oilsands reclamation certificate in March. It was for land Syncrude had mined in 1982. The Alberta government sees that as a victory.
The river itself was small but beautiful. As a marker of its place, the banks were seemingly paved with asphalt in places, but it was just the exposed bitumen that had put a twinkle in the eyes of so many oilmen.*
* I once interviewed a prominent Fort McMurray slumlord named Norm Simmons, who was not without a certain wit and charm. When I said something about Alsands being a twinkle in some peoples' eyes, he replied: "Boy, it was more than a twinkle. I had my cock in my hand for that one!" :)
Despite the devastating effects of the oil slump on the Alberta economy throughout much of the 1980s (a popular bumper sticker in the 1987-88 period was "Please God: Just one more oil boom. I promise not to piss it away this time"), people in Fort McMurray maintained faith in the resource that lay beneath the muskeg. They maintained their city would be Alberta's third-largest some day (I don't think they've made it yet). And those with jobs at the plants generally kept working. The city itself didn't look shattered in this period; the impact was likely felt further away where the engineering and prefabrication work might have been done (the Globe article talked about how the effect of the current slowdown might be felt more in the Maritimes and central Ontario).
The boom times of Fort McMurray, last seen in the runup to the building of Syncrude in the mid-1970s, didn't really return until early this decade. The six-year bull market in oil started in about 2002. The rising price, declines in conventional crude oil reserves in Alberta and U.S. unease over dependence on the Middle East combined to make the oilsands an attractive place to invest.
When I flew out west in 2006 for a summer holiday, I picked up a rental car in Leduc near the Edmonton International Airport (Nisku is about half-way between Edmonton and Leduc). Within eyeballing distance of the rental car place, I saw three shops with signs out looking for welders. The good times were back!
Nisku had also returned to its former glory.
And now, it would appear things are set to fade again -- for a time, at least (and relatively; Alberta still has a below-average unemployment rate).
The easing of credit markets and a general revival of the global economy should lead to the price of oil rebounding enough to tempt oilsands investors in the coming years. However, the price has to come up significantly.
Remember, when you see oil in the newspaper listed at US$100 per barrel, that's for top-quality conventional crude. Oilsands oil has to be manufactured into synthetic crude, and it is several steps below something like West Texas Intermediate in quality. As a result, a barrel of oilsands crude would only fetch about 50 to 60 per cent of that US$100 figure.
As I understand it, the oilsands require conventional oil to be in the US$50 to $60 range to justify building a new extraction facility.
The question of whether it should happen, given the environmental damage done in oilsands production and how dirty the final product is in terms of greenhouse gas emissions, is a debate for another day.
But that's one of the tragedies we face. Developing the oilsands in an unsustainable way comes at a great environmental cost -- one that our planet's climate system might not be able to bear. But when a major strut of the economy just collapses or even sags, there is an undeniable human cost.
I know. I've seen it. I've lived it.