Newspaper article International New York Times

Oil Sands Boom Is Collapsing in Alberta ; as Industry Declines, Fiscal Squeeze Has Caused Thousands to Lose Jobs

Newspaper article International New York Times

Oil Sands Boom Is Collapsing in Alberta ; as Industry Declines, Fiscal Squeeze Has Caused Thousands to Lose Jobs

Article excerpt

After extraordinary growth that attracted energy companies and billions in investments, the industry is in financial straits.

At a camp for oil workers here, a collection of 16 three-story buildings that once housed 2,000 workers sits empty. A parking lot at a neighboring camp is now dotted with abandoned cars. With oil prices falling precipitously, capital-intensive projects rooted in the heavy crude mined from Alberta's oil sands are losing money, contributing to the loss of about 35,000 energy industry jobs across the province.

Yet Alberta Highway 63, the major artery connecting Northern Alberta's oil sands with the rest of the country, still buzzes with traffic. Tractor-trailers hauling loads that resemble rolling petrochemical plants parade past fleets of buses used to shuttle workers. Most vehicles carry "buggy whips" -- bright orange pennants attached to tall spring-loaded wands -- to help prevent them from being run over by the 1.6-million-pound dump trucks used in the oil sands mines.

Despite a severe economic downturn in a region whose growth once seemed limitless, many energy companies have too much invested in the oil sands to slow down or turn off the taps. In addition to the continued operation of existing plants, construction persists on projects that began before the price fell, largely because billions of dollars have already been spent on them. Oil sands projects are based on 40-year investment time frames, so their owners are being forced to wait out slumps.

"It really is tough right now," said Greg Stringham, the vice president for markets and oil sands at the Canadian Association of Petroleum Producers, a trade group that generally speaks for the industry in Alberta. "We see kind of a lot of volatility over the next four or five years."

After an extraordinary boom that attracted many of the world's largest energy companies and about $200 billion worth of investments to oil sands development over the last 15 years, the industry is in a state of financial stasis, and navigating the decline has proved challenging. Pipeline plans that would create new export markets, including Keystone XL, have been hampered by environmental concerns and political opposition. The hazy outlook is creating turmoil in a province and a country that has become dependent on the energy business.

Canada is now dealing with the economic fallout, having slipped into a mild recession this year. And Alberta, which relies most heavily on oil royalties, now expects to post a deficit of 6 billion Canadian dollars, or about $4.6 billion. The political landscape has also shifted.

Last spring, a left-of-center government ended four decades of Conservative rule in Alberta. Nationwide polls suggest that the Conservative Party -- which championed Keystone XL and repeatedly resisted calls for stricter greenhouse gas emission controls in the oil sands -- is struggling to get re-elected this month.

"The pendulum has swung," said Stephen Ross, the president of Devonian Properties, an Alberta development company that has built several residential and commercial properties in Fort McMurray.

Since the end of World War II, oil has made Alberta wealthy. The increase in oil sands development since the early 2000s had only intensified the province's good fortune and turned obscure Fort McMurray into a boomtown and an outsize contributor to the entire Canadian economy.

When Mr. Ross first bought development land here in 2000, he paid about $20,850 an acre. He stopped buying land long before it hit $772,000 an acre.

"The town has had huge growing pains," Mr. Ross said. "It's like something you've never seen."

Operating oil sands plants quickly decreased budgets and cut services, like equipment cleaning, which were deemed optional. And as portions of construction projects are finished, construction workers are sent packing. …

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