Alberta Oilsands: Boom Town

Fort McMurray reaps big money--and big problems--from the oilsands.

If you drive four hours north of Edmonton along Highway 63, you eventually reach Fort McMurray, a remote mining town of about 61,000 chilly souls. Situated amid thousands of square kilometers of muskeg, it is basically the last bit of significant civilization directly north of Edmonton until you're travelling south again in Russia. Fort McMurray is so isolated that the first car didn't show up here until 1957, and residents watched television for the first time in 1970. In the winter, the temperature can dip to -51°C, while the weak sun seems to set far too quickly. For most, all of that suggests this frontier city isn't worth the trip.

So why was Dick Cheney, the vice-president of the United States, planning to come here in early September? To shake hands, of course, and poke around the oilsands. His visit (postponed because of Hurricane Katrina) was to include a tour of one of the major operations that is busy digging up oil-soaked sand trapped between the Alberta boreal forest floor and bedrock–a task that has of late become monumentally important, both economically and politically.

Something has changed in the way people think about oil. The price, of course, recently spiked to US$70 a barrel, more than triple what it was just a few years ago. One reason is a growing sense that we are getting to the end of the easy stuff. Many big fields, like the North Sea and Mexico's Cantarell, are in decline; at the same time, new reserves aren't being found fast enough. On top of that are several political developments that seem to herald the dawning of a new era of resource conflict. Venezuelan President Hugo Chávez–the leader of a country that is the fourth-largest provider of oil to the United States, and who survived a 2002 coup against him after he fired senior management at PDVSA, the state-owned oil giant–is now raising an army reserve of two million loyal men and women. On the other side of the globe, Saudi Arabia–which is attracting doubts about the quality and amount of its reserves–has a massive population of young people who are generally underskilled, a demographic time bomb that could threaten the rule of the House of Saud and see that country fall under the sway of Islamic fundamentalists. And then, of course, there is Iraq. The home to the last real big-and-easy oil (with estimated proven reserves of 115 billion barrels) may be moving into the hands of religious types, setting the stage for closer political ties between the Iraqi Shias in the south, where much of the oil is, and Shia-dominated Iran.

All this worries the United States, which uses roughly a quarter of the oil produced in the world each day. Since April 1998, it has relied on foreigners for more than half of the petroleum it consumes, while the U.S. Department of Energy estimates that by 2025, oil imports will account for almost 70% of the country's total oil consumption. No wonder Dick Cheney was planning to visit Fort McMurray. The end of easy oil is generating a one-time and permanent upward shift in the long-term price, as unconventional sources like the oilsands–which are more expensive to mine and develop–come to be relied upon more heavily.

As the gateway to a potential reserve of between 1.7 trillion and 2.5 trillion barrels, Fort McMurray is rapidly registering that new reality. House prices have tripled since 1995. There is a rumour that couches are being rented out at up to $700 a month. The town's waste-water treatment plant has a special operating licence from the province to run above capacity because of an influx of workers needed to build the oilsand extraction facilities. A new subdivision north of town is going up so fast that the mayor, giving a tour to a reporter, is momentarily surprised. “I haven't been out here in two weeks,” says Melissa Blake, who ended up in Fort McMurray after her father, a former heavy-duty mechanic, moved west in the early '80s. “It's different.”

Welcome to the last western boom town, riding high on the arc of oil depletion. Like Dawson City during the Yukon gold rush of the late 1890s or Saskatchewan's Uranium City in the Cold War '50s, Fort McMurray, and two of its main oilsand mining and extraction operations run by Syncrude Canada Ltd. and Suncor Energy Inc. (TSX: SU), is attracting people from across the country. Which is important. For years, the big issue was how to dig up the sand and then separate it from the oil and water, a process that requires massive extraction plants, but do it at a price that was competitive. That's largely been taken care of. The challenge now is finding people willing to man the massive expansion that is coming. So far, that doesn't seem to be a problem. Plentiful jobs and high wages–on top of the $30 to $40 an hour skilled tradespeople can command, some firms offer between $100 and $150 for a daily living allowance–have swelled the city's population 8.7% since June 2004. The migration has attracted people from across Canada, and the result is a remarkably vibrant social scene for a city of this size–even though men decidedly outnumber women.

That times are good is obvious on a recent Saturday night. Crowds of twentysomething guys, many of them welders, pipefitters or millwrights who work on the sands and have lots of cash, line up to get into the several bars clustered around the north end of the city's main street. At Diggers, the dance floor is packed, and patrons knock back pitchers of mixed drinks to help them get down to a distinctly Albertan mix of hip hop and country. Next door, at the Oil Can, well-dressed males in cowboy hats and boots twirl their equally spiffy partners around the dance floor to the sounds of a country band. There's a strip club in the same complex, as well as a cheque-cashing operation, while across the street the 7-Eleven, locally acknowledged as the best place to score any sort of illegal substance you might desire, is a hive of activity. Outside, revellers wander along the main street as a never-ending stream of massive, tricked-out pickup trucks drive by. If there is a sign of the wealth being created here, it is the ubiquity of the fully loaded Dodge RAM 2500 Mega Cab four-by-four (MSRP: $50,345)–though there are any number of other examples, too.

The next day I meet up with Jayme, the owner of the town's top escort agency, Paige's Playmates. She's finally found the time (10 p.m. on Sunday–“paperwork night”) to talk about what it's like to run an escort service in a boom town overrun by itinerant workers. “You can do all right,” she says, understatedly, and goes on to mention that her 2004 Mustang convertible was an impulse buy. She picked it up while at a dealership to purchase a truck to carry her son's quad ATV. “It was nice to be able to buy two cars at once,” she says. When isn't it?

But that's what happens when you live next to lots of oil. One of the first things you notice wandering around the downtown is the number of Help Wanted signs. City Hall is looking for a records clerk and a finance clerk, as well as about a dozen other bodies. Tim Hortons has two signs up, one inside and one by the drive-thru, urging customers to apply. (You can get benefits slinging Timbits up here.) Most odd, however, is a newly constructed CIBC branch that is finished but not yet open: they can't find people to work as tellers, according to a sign on the door.

These are good days, indeed, and they seem likely to last this time–which would be a welcome change for a town that has long been subject to the cycle of boom and bust. White men first found out about the oilsands in 1719, when a Cree named Wa Pa Su came out of the woods and handed a chunk of the tar that oozes from the banks of the Athabasca River to Henry Kelsey, a Hudson's Bay Co. explorer. But it wasn't until 1912, as the world entered the oil age, that Fort McMurray experienced its first boom. Since then, economic activity on the sands has ebbed and flowed. That fact is not lost on the mayor's assistant, Wanda Hynes. She remembers the crash in oil prices in 1980 that knocked the wind out of the town, and declines to call what's going on now a boom. “We don't like to use the B-word,” she says. “It can also mean 'bust.' “

Only a few years ago things didn't look as good for Fort McMurray. The price of oil was trading around $20 per barrel and talk about the Kyoto Accord–which would significantly affect the economics of oilsands production–caused companies to suspend projects as recently as 2003. But the mayor these days is upbeat. “I think we're OK,” says Blake. “Even at $20 a barrel we're profitable, and I don't think we're going back under that. I think this one is going to last.”

That is what a lot of people are thinking. Michael Klare, author of Blood and Oil, a recent book about the burgeoning conflicts over the fossil fuel, says the sands have been promoted by the U.S. government as a solution to its energy problems. “Every time I speak about oil concerns, someone in the audience stands up and says, 'What about the Canadian oilsands?' They have acquired this mythic status for many Americans.” Klare recently invited former Canadian cabinet minister Lloyd Axworthy to speak at Hampshire College in Amherst, Mass. (where Klare teaches); Axworthy told the audience he expected to see U.S. companies become more involved in “intra-Canadian politics” as the sands become a subject of American foreign policy.

The mayor, for her part, is well aware of her town's status in the new world of “post-easy” oil (basically, oil that can be produced for a buck a barrel, as in the Mideast). “Sometimes I feel we're recognized globally more than we are locally,” says Blake. She is working long hours preparing for a growth spurt she expects will expand Fort McMurray's population to 100,000 over the next five years. “As mayor of the fastest-growing city in Canada, I couldn't be luckier,” Blake says. “But it's going to be a challenge.”

The centre of Fort McMurray is 10 blocks long and maybe five wide. It rises out of the valley where the Athabasca and Clearwater rivers meet, so there's a wall of aspen, spruce and pine framing every cityscape. The town's isolation has some disappointing practical manifestations–the Globe and Mail doesn't show up until at least 10:00 a.m. on weekdays and often not until 5:00 p.m. on Saturdays. But many consider its remoteness ultimately a blessing. Mixed with physical beauty is a sense that the world's problems lie far away to the south.

Of course, that's just an illusion. As one of the world's largest construction sites, Fort McMurray has become a stop on the global work tour for mobile tradespeople, and that has made it more difficult to find a place to live here than, well, just about anyplace. For such a far-flung town, it's insanely crowded. The hotels are always jammed and the apartment vacancy rate sits at 0%.

Luckily, I had a contact among three construction workers in the suburb of Thickwood. Their shared apartment is decorated in what can only be described as the school of impermanence: there is exactly one Coors Light poster and an ashtray by way of appointment. But its occupants have generously afforded me the use of their walk-in closet, which is usually rented out along with the couch. (They are not the ones charging the rumoured $700, but rather split the rent five ways, the thinking being that if you put in time on the couch, you may someday inherit a bedroom for the same price. You've got to pay your dues in the Fort.)

But making do with what life throws at you is the motto of many here. Typical of the human migration to this town is Barry Critch, formerly of St. John's. A local joke is that the second-biggest city in Newfoundland is Fort McMurray. According to Critch, about 70% of the guys working in the strip mines from which the oilsand is extracted (a process that takes place after 30 feet of “overburden” is removed) are from the Rock. Critch, 38, found himself here after the café he owned back home failed when a nearby call centre cut back jobs. Critch got training as a heavy-equipment operator, packed his stuff into his truck and drove for four and a half days across the country. “It was a beautiful drive,” he says, though he admits to missing his family, which is the case with many in town. A lot of workers leave their loved ones at home, and loneliness can compound the already difficult living conditions.

There is, of course, the extreme weather. The temperature ranges from a high of 37°C in the summer to -51°C in the depths of the winter, when bitter cold can bring all outside work to a stop or force workers onto a “10 minutes on, 10 minutes off” schedule. The hours are also long. In the mornings, my hosts get up around 5:30 to catch one of the many red-and-white coaches that roam the streets picking up and delivering workers to the job site for 7:30. Every morning along Highway 63, large convoys of the buses form and head north about 80 kilometres (along with half the pickups in town) to the various open-pit mines and extraction plants. At the giant Suncor plant, two roads enter the main site from the highway but only one exits, so going home you often sit in what's known locally as the Fort McMurray 500, a massive traffic jam at shift changes. It can also be a dangerous road; crosses hung with hard hats and union local numbers identify where someone died in a traffic accident.

Les Lovell, one of my hosts, usually gets home around 7 p.m. after an official 10-hour shift (with no overtime after eight hours, he adds, as is the usual agreement) doing electrical work on a new pumphouse at Syncrude's Aurora site. “It's creepy,” he says. “Enough time to eat, do laundry and go to bed.” Lovell prefers living in town and commuting, however, to staying in a work camp, which he did for two months after arriving in Fort McMurray near the end of April.

All of the big operations maintain work camps, which are among the largest cafeteria and housing operations in North America, second only to Las Vegas. Yet life in the work camps is no trip to Sin City. “It's like being in the army or jail,” says a welder who does not want to be named. “You get this little room in an Atco trailer big enough for a bed, a closet, and that's about it. Oh, they allow you visiting hours.” The food is generally described as a succession of different fried brown lumps. “Although I think I remember a swan made out of mashed potatoes one Christmas,” says the welder. The only thing to do for leisure at the camps is to get a TV or computer for your room or sit around smoking, drinking coffee and playing pool. “It's fine for some guys,” says Lovell. “I know some of them didn't mind it. But you'd hear the older guys on the phone late at night arguing with the wife about how to raise the kids.”

No wonder you get the odd riot. Back in the '80s, disgruntled and restless workers set a couple bunkhouses on fire; the most recent disturbance occurred in 2000, when word spread one morning that non-union workers had been found on site. Union members pulled over buses on their way in and checked workers for union cards. Fights ensued if none were produced, while lunches from the cafeteria were thrown into a huge pile in the road and set on fire. At some point, a bootlegger with a cube van full of beer showed up and a Dumpster was filled with empties over the course of the day, during which a couple of rioters seriously considered whether to release a bear sitting in a nearby trap. The bear remained caged, but a TV reporter from Edmonton showed up. By that time, however, everyone was pretty loaded, according to the welder, and “the message kind of got lost.” Eventually, someone remembered it was written into the contract that 5% of labour onsite was allowed to be non-union. “And that was it–we went back to work,” says the welder. “It was basically a big party.”

It was, of course, a way to work off some steam, but the camps aren't the only rowdy area. Biker gangs are reported to be moving into Fort McMurray because of the money. And crack cocaine and crystal meth are becoming quite common downtown; many young revellers have a certain glassy-eyed look about them. “It's getting pretty crazy here,” says Jayme, the escort agency owner. “They have to do something about the camps. When you put guys together like that, they take on a new attitude.” Indeed, on a recent Saturday night there were reports of a 15-person brawl outside Cowboys, another local watering hole that had three bullets fired into it the weekend before.

Perhaps more distressing is the wealth disparity among Fort McMurray's residents. “The delta between the incomes of oil industry workers and service industry workers is rising, and that's making it difficult for those people to live here,” says Mayor Blake. She's proud of the low-income housing she has been able to get built, but says the city needs more. “The service industry people are finding it tough to live here, but you need them if you want the town to function.”

The development of two separate classes is a dynamic unfolding not only here but at the interprovincial level, as well. This summer, Dalton McGuinty, premier of Ontario, mused about the need for an “East-West energy policy,” a notion that smacked of the loathed National Energy Program to local ears and was soundly slapped down by Alberta Premier Ralph Klein, who argues the bounty from the sands could evaporate at any time. Canada, it appears, is returning to the oil politics of the '80s.

The dynamic is repeated on a global scale, too. Klare is worried about the growing divide between the “oil elite” in many Third World nations, where disputes are picking up between those who have access to oil revenue and those who don't (uprisings in Ecuador and Bolivia this summer are examples). As well, with demand rising in China and India, there is a distinct possibility of supply falling dangerously behind–and of clashes between superpowers over access to oil. From that perspective, Canada may be able to soothe tension in the world by expanding its oilsands production.

The big problem for the sands, however, will be keeping needed talent. Just a month after visiting Fort McMurray, I heard from Lovell, one of my hosts, that he has returned to Windsor, Ont., after only four months. “I couldn't take it anymore,” he explained. “I needed a life.” If Fort McMurray is going to retain tradespeople, it's going to have to do something more than pay good wages.

Perhaps it should look to Paige's Playmates for some suggestions on keeping workers happy. Many Canadians may be tempted to turn their noses up at the type of business she runs, but Jayme considers the services she offers vital in a town where the only two psychiatrists are booked solid. “If we didn't provide the option we do, it would be much worse up here,” she says matter-of-factly. She also prides herself on running an “enlightened” business compared to most in the adult entertainment business. “By offering them a better place to work, I attract all the best girls. I've cornered the market here,” says Jayme, like the true entrepreneurial Albertan she is. You might even say she's doing her bit to wean the United States off Mideast oil. One wonders what Dick Cheney would think about that.