It has been 10 months since the wildfire began that would cause further devastation in an economy that was already feeling the strain of a recession. While the fire is out and the evacuation is over, things are far from back to normal in Fort McMurray—and with the way things are going, it looks like it might take a while for normal to become visibly foreseeable once again.
While everyone felt the effects—and the trauma—of the fire, it was the oil industry that took one of the hardest hits, since oil and gas is the foundation of Fort McMurray’s economy.
The blaze, which spread across 590,000 hectares, overtaking 2,400 homes and buildings, consuming forested areas, and forcing the largest wildfire evacuation in Albertan history, halted oil sands operations in Fort McMurray. Many oil and gas operations heavily scaled back if they weren’t forced to shut down completely. Shell Canada shut down output at its Albian Sands operation, and Suncor Energy and Syncrude Canada were both forced to scale back operations. The fire disrupted more than 1 million barrels of daily output—one quarter of Canada’s oil production—costing the Alberta economy an estimated $70 million per day. Two months after the fire began, on July 5, it was declared to be under control, but it is still considered to be the costliest disaster to occur in Canadian history, and the bulk of that financial burden continues to fall on Fort McMurray.
Of course, the fire is only one part of the equation for Fort McMurray. The wildfire may have halted operations, but the 2014 drop in oil prices, the recession, the new government and its carbon tax, and a prior decline in research and development investment that has been affecting the industry since as far back as 2001 have all added up to create a city that is hesitating to even begin the recovery process until the economic stars align once more.
Leon Beaudoin, owner and operator of L&D Adventures, is one of many business owners who are biding their time, waiting to get back into an oil and gas industry that still has a lot of closed doors.
A local consultant for the oil and gas industry who supervises service and drilling rigs for completion and workovers in the oil field in and around Fort McMurray, Beaudoin had been operating his business out of Bonnyville, Alberta since 2004 when the fire brought things to a halt.
“We were evacuated and shut down,” describes Beaudoin. “The fire ripped through the plant I was working at and halted production there.”
But the fire wasn’t the only thing causing problems for Beaudoin. “The company I was working for had a lot of bad luck—pipeline breaks and weather factors among them. Operations were still down from the recession. The fires were the last straw, but the economy isn’t helping to get things back in motion even now.”
Despite a number of federal approvals for new oil and gas projects, Beaudoin, along with many of his colleagues in the oil and gas industry in Fort McMurray, is hesitant to get too excited.
“Approvals are good,” Beaudoin explains, but a lot still depends on how the government manages those approvals. If they continue to increase taxes and royalties to the point where businesses can’t make their profits, then it really limits the number of investments businesses are willing to make in the area.
Many are waiting to see how government protocols and decisions will affect Fort McMurray’s future recovery. The climate tax was imposed in part to repair the oil and gas industry’s reputation as a climate villain, but Prime Minister Justin Trudeau has also made it clear that the world’s 11th-largest economy needs to shift its focus to become a services and knowledge-based sector rather than purely a resource industry if it is going to survive, and while that type of diversification is paying off for a number of companies who are using this recession as an opportunity to divert attention to research and development, a lot of businesses in Fort McMurray have lost too many resources to be able to afford recovery, let alone that level of innovation.
For Beaudoin, focusing on diversification meant giving up on the oil and gas industry entirely—and a lot of his colleagues, he notes, have followed suit.
“I started another business called L&D Marine Rental Repair,” says Beaudoin. “We rent marine equipment and provide small marine engine repairs. It doesn’t provide oil field wages, but it is keeping us afloat.”
“A lot of my friends have turned away from the oil and gas industry, too,” Beaudoin adds. “Some are going back into construction work, but some are also taking up tourism.”
Beaudoin and his son, Darwin, were fortunate to have started L&D Marine Rental Repair in 2012, before the economy took its hit, and well before the fire swept through. When the fire brought L&D Adventures to a halt, he had another business venture to fall back on, but he’s noticed an impact in the recreation and tourism industry, too.
“It is definitely a different world out there—it isn’t like it was 10 years ago,” Beaudoin recalls. “Even the rental business has slowed significantly from previous years, but it’s still a lot more stable than the oil and gas industry right now. The oil and gas industry is the hub of everything, so there is a huge ripple effect that transverses all the way down to even the smallest grocery stores. It doesn’t matter what industry you are in—from tourism to grocery—you are feeling the impacts right now in Fort McMurray. People who aren’t making money aren’t spending money either.”
For now, Beaudoin describes, it is a waiting game for businesses in Fort McMurray. “We are mostly waiting on oil prices. There isn’t much we can do. We just need to wait it out and hope we get pipeline approval so we can get oil to market on the other side of the country and can start using our own instead of importing.”
Greg Cartney, owner of Emerald Oilfield ATV Services, a Sherwood Park company that services ATVs and other equipment for use in the oil fields, agrees that right now, it’s a waiting game for the oil and gas companies in and around Fort McMurray.
“Things are a lot quieter,” Cartney describes. “The recession started that ball rolling, but after things slowed down, the fire hit and everything shut down. There has been little movement since. I’ve heard from other people that things are starting to move again, but we are far from back to normal. A lot of people are just sitting and waiting to see what happens before they start getting their money back out.”
Emerald Oilfield ATV Services has been in business since 2011. “We’re just hanging on,” Cartney notes. “We’ve been around a while, so we still get regular rental fleets. Things are a lot quieter, but we didn’t lose the business. I see a lot of resourcefulness as a result of the fire and the recession. People are taking anything they can get these days. We just have to hang on. It’s all we can do at this point. We’re waiting on the economy—something has to happen there. A lot of people are relying on the industry to put food back on the table, but there are a lot of variables, and a lot of people are just waiting to see what happens with Trump. No one is moving until we see whether what he says makes things better or worse. For right now, it comes down to time—it really is just a waiting game.”
What does Trump mean for Oil and Gas in Alberta?
Donald Trump’s election to US Presidency has left a number of Canadians holding their breath to see what happens with projects and negotiations that are in the works between Canada and the US. The oil and gas industry is no different. While Trump’s favouring of pipeline projects may resurrect a glimmering hope for the construction of the Keystone XL pipeline, he’s also made a number of comments alluding to his intention to claim a larger share of the profits for the US, and his blatant dissent of the Trans-Pacific Partnership has left an export industry in economic limbo.