Oil Sands Truth: Shut Down the Tar Sands

Alberta's tar sands show signs of life

Alberta's oil sands show signs of life
Katherine O'Neill, and Dawn Walton
Globe and Mail, Monday, Jun. 22, 2009

Unlimited overtime pay was just one of the many perks John Halbauer enjoyed as a welder during Alberta's super-sized energy boom.

That's disappeared, along with 11 of the 25-year-old's 13 co-workers who got laid-off in January. “I was worried. I didn't know if I was going to have to move back home or what,” the Kimberley, B.C., native said.

His employer, Harley's Welding Inc., is located in Nisku, an industrial park south of Edmonton that caters to the province's notoriously unpredictable oil and gas industry. Most companies were hit hard when the global economic crisis and plummeting energy prices side-swiped Alberta late last year.

But in recent weeks, Mr. Halbauer and many others in the province have noticed that the economy is slowly improving, especially in the northern half of Alberta.

“We are almost really busy. Work is rolling in,” Mr. Halbauer said.

Indeed, a run-up in oil prices and recent news that two oil sands projects, including Imperial Oil Ltd.'s $8-billion Kearl mine outside Fort McMurray, are going ahead has buoyed many.

But the optimism is guarded, and no one is predicting another unprecedented boom for Alberta, once the country's hottest economy.

Earlier this year, Statistics Canada estimated that oil-sands spending will drop to $13.2-billion in 2009, down more than 30 per cent from last year. Billions worth of capital projects have either been scrapped or put on hold.

And until the natural gas sector also begins to turn around, the debt-free province, which is predicting a $4.7-billion deficit this year – the largest in its history – will still be in tough times.

Natural gas royalties account for more than half of the province's total non-renewable resource revenues.

Those royalties are expected to drop from $6-billion last year to $3.7-billion this fiscal year, mainly due to low natural gas prices.

“Clearly, the provincial government is going to be hammered on the revenue side because there will be no gas windfalls,” said Mike Percy, an economist and dean of the University of Alberta business school in Edmonton.

He said the province will be forced to make difficult budget decisions in coming months, and the situation will likely have national implications. “I think the perception of a disproportionately rich Alberta, in comparison to its provincial counterparts, will be a thing of the past.”

But still, he's optimistic that the province's economy is headed towards “balanced growth,” instead of the recent boom that led to high construction and labour costs and housing prices.

“When we look at the decline here, it's not as through we were declining from a normal growth path.”

Grande Prairie Mayor Dwight Logan said the slowdown has given many businesses in his small northern Alberta city of about 50,000 a much-needed breather. While the city's real estate market has softened and there have been layoffs, no companies have closed down and new ones are still opening.

“I'm hesitant to say this, but I feel like we've almost dodged a bullet,” Mr. Logan said.

He said this slowdown is dramatically different from the early 1980s, when energy prices crashed and high interest rates devastated the province and oil and gas communities like his.

“You could have literally fired a cannon off down Main Street and not hit anybody in 1982, it was that bad here,” he said. “[The city] took back whole subdivisions that developers couldn't finish. There has been nothing like that this time around.”

But in Calgary, the province's office capital, the situation is much different.

Condominium developments have come to a near standstill. Cranes hang over unfinished buildings all over the city.

The city went to court last week to force the filling-in of the hole dug for the Astoria on Tenth project – which boasted a $10-million, two-storey penthouse and won its developer, Arcus Developments Inc., an industry-marketing excellence award. The unfinished hole posed a danger, city officials successfully argued.

EI claims in Calgary are almost four-times higher than the national average, full-time employment continues to fall and part-time jobs are on the rise.

Adam Legge, chief economist with Calgary Economic Development, said renewed capital development in the oil sands will give the economy in northern half of the province some support, but overall, Alberta is still in deep trouble.

“I don't see a lot of glimmers of recovery,” he said, “…We're getting optimistic about bad news not being as bad as we thought. Not about good news, let alone a trend of good news.”

Any talk of recovery at this point, he added, is built on a “foundation of quicksand.”

http://www.theglobeandmail.com/news/national/albertas-oil-sands-show-sig...

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