Fort McMurray gives new meaning to 'boom town'

JEFFREY SIMPSON
Globe and Mail
Tuesday, September 19, 2006

FORT McMURRAY, ALTA. All Canadian roads, and not just the overburdened one from Edmonton, these days lead to Fort McMurray, Alberta.

The massive oil sands that lie throughout northern Alberta, with Fort McMurray as the urban epicentre, are pouring money into Alberta's coffers, widening the spread between its fiscal wealth and that of all other provinces.

The oil sands are pouring money into the federal treasury, helping it to show surpluses, which in turn are eyed by provinces and interest groups. They are pouring contracts into other provinces, spreading at least some of the wealth elsewhere in Canada.

They are pouring profits into shareholders' pockets of energy companies.

They are pouring oil into the market, especially the United States, at the very moment when Alberta's sources of conventional oil and natural gas are declining.
Canada produces about 2.5-million barrels of crude oil daily, and ships about 1.6-million to the U.S. To keep that level of exports, let alone to expand it, the oil sands are critical.

They are also pouring carbon dioxide into the atmosphere, making it among the reasons why Canada will not meet its Kyoto greenhouse gas emission reduction targets.

Unless new ways of handling this climate-warmer are found and applied in the exploitation of the oil sands Canadians will continue to be among the worst per capita carbon-emitters in the world.

A few oil sands projects are using new technologies to capture carbon; most are not. The oil sands, as nowhere else in Canada, pose the issue squarely: Will Canada take greenhouse gas emissions and global warming seriously and attempt to be a world leader in fighting climate change; or will Canada continue to be a laggard with one of the worst records on earth? The Alberta government estimates that only 2 per cent of established oil sands reserves have thus far been exploited. What gets done with the rest will spell the difference between massive climate degradation by Canada or serious progress.

The oil sands are pouring people into Fort McMurray, straining every social service and physical infrastructure. Roads, schools, health-care, housing, recreational facilities you name it, and Fort McMurray is grappling with providing them.

The oil sands boom caught the Alberta government of outgoing Premier Ralph Klein snoozing. Nobody could see the boom coming, Mr. Klein insists by way of explaining why his government has been playing catch-up. Another explanation is that Mr. Klein slept through a host of issues in the last half of his years in office, content to ride along on a magic carpet of petrodollars.

Now the Premier is leaving, having lost the confidence of his party. The debate about who succeeds him is partly over the right vision for Alberta which, in turn, means how to handle the wealth generated by energy revenues, notably from these oil sands.

Predicting how much money the oil sands will generate is a mug's game. One estimate, accepted by the local chamber of commerce, suggests $125-billion of oil sands investment will flow into the municipality of Wood Buffalo that extends northward from Fort McMurray in the next decade. Edmonton is anticipating about $30-billion of oil sands investment money. And there will be billions more in the Cold Lake and Peace River Oil Sands area.

The Fort McMurray area is therefore the most robust economic engine in the western world. The vacancy rate for housing is zero. About a thousand people are waiting for some kind of social housing. People are doubling up in units. This spring, again according to the local chamber, the average cost of a house in Fort McMurray surpassed that of Toronto.

Labour is in short supply. Workers are being flown in daily from Edmonton. People are migrating from Newfoundland, other Atlantic Canadian provinces, Northern Ontario, Saskatchewan; in short, from wide swaths of Canada. Air Canada put on a daily flight to Toronto, while it cuts non-stop flights in other parts of hinterland Canada.

There are 69 oil sands projects in various states of operation or development in northern Alberta. They now produce about 1.1-million barrels of oil per day, or a little under half of the country's daily production. That share will rise.

With money like that in play, and with staggering environmental and fiscal consequences at stake, all roads by one route or another run through Fort McMurray.

jsimpson@globeandmail.com

Posted by Arthur Caldicott on 20 Sep 2006