Spring 2007 Issue
Special Report - Canada
Fort McMurray - Center of the Universe
Posted: October 1, 2008
Brutal Cold and Shortages of Nearly Everything - Except Money, Oil & Controversy Veteran Northwest journalist Morris Malakoff is a dual citizen of Ireland and the United States and a hopeless enthusiast for the sports of curling and ice hockey. This means he probably knows more about Canada than 99 percent of the rest us. Last summer Seattle Industry dispatched Malakoff to Fort McMurray to research the oil sands and also to bring back a cultural report that might help our readers better understand all things “Canadien.” His reports follow.
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Fort McMurray is now North America’s most famous boomtown, and one of the biggest booms seems to be in the sale and distribution of “help wanted” signs. The signs hang in the windows of nearly every storefront throughout the town and the curbsides are crowded with portable readerboards with large movable letters in garish colors of green, yellow, and red. At midday, some stores and offices are closed owing to staffing shortages. The businesses that are open seem to be transplanted from Communist-era Moscow, with long lines of customers waiting for basic consumer goods that are often in short supply or missing altogether.
A taste of the problem is supplied by the simple act of trying to get a cup of coffee at the new Tim Hortons outlet in Fort McMurray. Tim Hortons is a coffee and donut chain that is a national institution in Canada. The new outlet resorted to offering iPods as a bonus to lure new employees, but the store still struggles to serve its customers. Pickup trucks and SUVs were lined up 20 at a time for service at the drive-through window. The line for in store service snaked around the outside of the building and just to get a cup of coffee required a 40-minute wait.
One patron in the early morning queue was outfitted in the work boots and mud-stained pants that comprise the uniform of the working class in northern Alberta. “Well,” he said. “If you think this is bad, it’s better than the wait at Starbucks.”
He was proven right by a trip across town to the Starbucks outlet in a Safeway grocery store. A single employee behind the counter kept apologizing to customers about the wait, saying continually, “I had two people scheduled to work today, but they quit for other jobs.”
That is the mantra in a town where Burger King and McDonalds advertise a starting wage of $14 an hour plus benefits but still suffer worker shortages.
Twenty years ago, Fort McMurray was a town of just 6,000 souls located at the junction of several roads that linked mining camps and villages scattered sparsely throughout the low, scrub-like, arctic boreal forest that extends for tens of thousands of square miles across northern Alberta. Today, the town is occupied by 60,000 people and it stands at the center of a universe based on sea-like stretches of oily sand that tug at Canadian national politics and all the geopolitical considerations connected with the issue of global energy supplies.
As with any boom, there are very large asterisks that should be applied to just about every aspect of the oil sands. But there are also a few central facts that are beyond dispute. There are billions and billions of barrels of oil contained in the sands. There is enormous economic and political pressure to get as much oil out as quickly as possible, and a primary impediment to development is a shortage of human beings with the skills necessary to extract, process, and refine the black, sandy, smelly substance that north of Fort McMurray covers an area the size of Florida.
Fort McMurray may be one of the few places in the world where money is almost literally no object. Billions of dollars are available for investment and it’s estimated that somewhere around $120 billion was invested in just the past three years. But dollars alone can’t do the work, and while the shortage of service workers in Fort McMurray may be a pain in a consumer’s backside, the shortage of skilled workers in the oil fields threatens the whole enterprise.
The Canadian national government predicts 35,000 more skilled industrial workers will be needed just to complete the projects already planned, and right now companies are failing to find them.
Combined with falling oil prices, which have receded to about $50 a barrel, there are whispers that the bust side is already coming to an industry notorious in Alberta for previous booms and busts.
Not everyone agrees, and some big factors argue to the contrary.
The U.S. is, and will be, the primary market for Alberta’s oil, and the value of the resource can’t be calculated by near-term ups and downs in oil prices. The oil sands now produce about 500,000 barrels per day and production is projected to grow to 3 million barrels per day by 2015. To put it in perspective, that rate would equal about 1.1 billion barrels per year, to equal the amount imported to the U.S. in 2006 from Saudi Arabia, Venezuela, and Iraq combined.
The oil sands will never make the U.S. energy independent but the resource has the potential – at least on paper – to make the U.S. far less dependent on countries it doesn’t want to depend on. None other than Vice President Dick Cheney has said that the oil sands are a “pillar of sustained North American energy and economic stability.”
Then again, the terms “North America” and “United States” are not synonymous.
A Chinese firm bought a share in a small oil-sands developer last year and the national Chinese oil company, Petro China, is searching for a way to build a new $2.5 billion oil pipeline between Edmonton and the Pacific Coast. It is not up to Washington, D.C., to determine what happens with the oil sands. It’s up to the Canadians, and a growing in-house debate is well underway about how to proceed from the perspective of Canada’s own self interest.
“I don’t see the geopolitical problems going away anytime soon,” Bart Melek, a senior economist with BMO Capital Markets, told Canadian Business magazine. “The only question is whether energy companies are going to make a lot of profit or an insane amount of profit.”
Watching with shock and awe as all of this occurs is virtually every environmental group on the planet. To better understand the environmentalist perspective, look at it like this:
If you fear the impacts of global warming and believe it is caused by burning fossil fuels …
If you want to encourage greater use of alternative fuels, and feel that dwindling worldwide oil supplies and global warming are the best one-two punch in favor of converting to them…
If you like forests and other landscapes to remain as much as possible in their pristine states...
If you have a special place in your heart for animals that remain free in natural habitats…
If you believe and/or feel any of these things, there is absolutely nothing to like about the oil sands and their potential to extend the Oil Age and the reign of Hydrocarbon Man (and Woman).
The scale of the surface mining just to scrape up the sands is now so gargantuan it can be seen by cameras on satellites in outer space.
In a recent interview, Elizabeth May, the Leader of the Green Party of Canada and former Executive Director of the national Sierra Club of Canada, summed up her feelings this way:
“From a forests perspective, the Athabasca tar sands represents a complete removal – deforestation in a real sense – of thousands and thousands of hectares for every single mine, so it’s got an immediate impact on forests... [It also has] an immediate impact on caribou habitat, an immediate impact on migratory bird habitat, and a very significant impact on the availability of water throughout the region as it’s a very large consumer of water... [It is also] producing air pollution that’s resulting in acid rain and acidification in northern Saskatchewan. It’s producing toxic emissions which at this point some doctors believe are associated with the cancer spike of rare cancers in Fort Chipewyan. On top of all that, it’s a major greenhouse gas producer.”
May’s views are virtually unanimous among members of the Green Party, based in Ottawa. Then again, Ottawa is 3,500 miles to the east of Fort McMurray.
The official symbol of the province of Alberta is a cowboy on a horse, and that begins to tell you something about the distance between Alberta and Ottawa to the east or, for that matter, Vancouver to the west. Alberta is regarded as the Canadian province that is culturally most like the United States.
Calgary – home of the annual Calgary Stampede – hosts an official picnic every Fourth of July to honor the 20,000 or so U.S. citizens who work in the city. Most of the expatriots are from Texas, Oklahoma, and Louisiana, and they work in the corporate suites of the oil industry.
In the last elections, the Conservative Party in Alberta pulled an astonishing 65 percent of the vote. That was nearly triple the Conservative vote for the nation as a whole and it nearly doubled the 37 percent Conservative vote in neighboring British Columbia.
The Conservative landslide in Alberta in 2006 helped propel Canada’s conservatives to national leadership for the first time in many years, and the post of Prime Minister went to Stephen Harper, a member of the House of Commons. Harper is from Calgary. For a region that has long felt neglected by the powers- that-be back east, the election and the oil sands combined to justify a very loud and proverbial “Yeehaw!”
The oil sands have turned Alberta into an economic powerhouse with a provincial budget surplus of around $10 billion, and Alberta’s riches are felt throughout the neighborhood.
According to Landcor, a land-assessment service based in British Columbia, Albertans purchased 2,219 properties in B.C. during the first six months of 2006, with a value of more than $650 million. Albertans accounted for more real estate purchases in B.C. during that period than buyers from California, Washington, and Ontario combined.
On Vancouver Island, resort communities adjacent to the popular Gulf Islands have drawn so many vacationers and buyers from Alberta that the Canadian discount airline WestJet has begun service from Edmonton and Calgary to the small town of Comox, 60 miles north of Victoria, using newly purchased Boeing 737s.
Vancouver was already suffering from a serious labor shortage in meeting the construction needs related to the 2010 Winter Olympics that will take place in British Columbia. The Alberta boom has made the shortage worse.
To top it off, Alberta is not only “rich.” It’s also “young.” Nearly 60 percent of Albertans are under the age of 40 and over 60 percent have a university degree. Internet usage is the highest in Canada. Calgary has more corporate headquarters per capita than Toronto, and the provincial tax rate is, on average, 45 percent below the rest of the country.
It won’t last forever and it may not last for long, but Alberta has emerged as a center of national gravity in Canada – and Alberta turns around Fort McMurray.
In both the province and the town, the concerns about the oil sands are almost solely practical ones. The philosophical questions and many of the environmental ones went out the window about when the barrel price of oil rose above $20 and the experts could see it would soon be profitable to wring oil from the sands on a massive scale.
In the summer, Fort McMurray looks a lot like Yakima or Wenatchee, but it is confronting challenges and opportunities on a scale most cities would find unimaginable. Over the past ten years, the town’s population grew from 34,000 to 60,000 and the population is expected to double over the next five years. The resulting housing, utility, road, and school shortages are palpable as you walk through town, and the civic drawing boards are full of new construction projects for all types of residential, commercial, and public purposes.
One project will construct a pair of towers with residential condominiums. At 36 and 31 stories, these towers will dwarf the current downtown where no existing building even approaches 10 stories. In fact, the towers will stand second only to a 52-story building in Oslo, Norway, as the tallest buildings in the world at such a northern latitude. When completed, the residential units will go for at least $1 million each.
A facility is also planned that will be one of the world’s largest indoor recreational centers. It will be built on an island in the Athabasca River on the edge of town. It will span 400,000 square feet and will include three full-sized ice rinks, 12 lanes for curling, a 300-meter track, gyms, meeting rooms, restaurants, and a public library.
The reason for the massive indoor center is the same one affecting the shortage of labor. Fort McMurray suffers winters that are brutally cold. All of the province lies south of Anchorage, but Albertans claim their province is colder than Alaska and it often is.
It’s tough to draw workers, but the Canadians are trying and thousands of job openings are now approved for applicants from other countries. Most jobs in the oil fields come with subsistence allowances of up to $135 a day. Put it together with signing bonuses and hourly rates and many skilled workers around Fort McMurray are earning more than $120,000 per year.
To make the winters more tolerable, most workers are on split shifts, with extended stays back home for R&R. Many workers commute between the oil sands and Canada’s Maritime Provinces, which are nearly 4,500 miles to the east. So many workers follow this route it has led to a joke that Fort McMurray is now the second largest city in Newfoundland.
Recruiting efforts aimed at workers have so far concentrated on Canada, Eastern Europe, Asia, and Venezuela. If the severe labor shortage continues, it’s only a matter of time before recruiters begin looking on our side of the border, and by air, Fort McMurray is only a half-day away from Sea-Tac.
But if you want to get in on the boom, be forewarned.
Make sure you secure housing before you head north. About 450 people are homeless in Fort McMurray at any given time because they failed to line up housing prior to their arrival.
And, if you’re a coffee drinker, pack a large thermos, because for most of the year it’s brutally cold and the lines at Tom Hortons probably won’t get shorter anytime soon.
