The Suncor tar sands processing plant near the Athabasca River is shown at their mining operations near Fort McMurray, Alberta, in this September 17, 2014 file photo. Despite the drop in oil prices, the impact on local businesses isn’t expected to be severe as long as production continues.Todd Korol/Reuters
This article is part of a year-long Globe project about Fort McMurray, Alta., which has come to be the emblem of Canada's energy sector, and all the issues that surround it.
Melissa Blake has seen this before. Six years ago, the price of oil plunged as the world economy slowed. And yet Fort McMurray, Alta., chugged along – between 2008 and 2010, its population grew as the oil price crashed and rebounded.
"One of the things I think people have a perception of [about] this community is that everything is doom and gloom with the low oil price. It's certainly a challenge … but it doesn't mean we're turning into a ghost town," Ms. Blake, who is mayor of the Alberta municipality of Wood Buffalo that includes Fort McMurray, told The Globe and Mail in her office Wednesday. Instead, oil production here is forecast to continue even as the pace of new construction slows, and it's the production jobs that most heavily support the full-time residents.
"I really worry people are getting a false impression about what making a choice to live in the region represents when times like this are so uncertain," Ms. Blake said.
She spoke Wednesday shortly after the Bank of Canada trimmed its key interest rate amid fears of the impact of an oil-price drop, and after the Canadian Association of Petroleum Producers said one-third of projected oil-industry capital spending, roughly $23-billion, was being slashed from budgets this year, including $8-billion in the oil sands.
That slowdown in capital spending, though, is expected to mostly affect contract, temporary and fly-in construction workers who live elsewhere – whereas Fort McMurray's workers and full-time residents work more heavily in actual production, which companies are pledging to continue.
Those full-time residents "are still producing the oil … that's not going to change," said Nick Sanders, president of the local chamber of commerce. "We don't see anything to indicate the current production is going to get reduced in any way, shape or form. That's a good thing. That will keep our town extremely viable."
Businesses in Fort McMurray have said, in interviews and through the chamber, that sales have slowed as the oil price has dropped, but the impact isn't expected to be severe as long as oil production continues. Some people here even welcomed the 2009 oil price plunge as a breather for a community that had been dealing with extreme growth rates.
"The best thing that ever happened to this town was 2009 … we had a chance to catch up," says Allan Vinni, a municipal councillor and lawyer. Any impression that the price drop will drive an exodus from town is wrong, he said, given the billions already invested here. "If oil's going to stay at $50 a barrel for the rest of time, we can still make money off that."
Layoffs have been announced this month at nearby major producers, including Suncor and Shell. "I'd say people are watchful, maybe a bit cautious. We are all conscientious about the cost-cutting measures and what kind of impacts it can have here locally," Ms. Blake said.
Some indicators released last week, however, have suggested activity in Fort McMurray hasn't fallen off: The Alberta Electric System Operator said late last week that December power consumption in Fort McMurray was up 5.6 per cent from the previous December, despite the drop in oil prices, while both commercial and charter traffic at Fort McMurray's airport increased 7.8 per cent that month, compared with the previous December.
It's too early to say what the impact of the Bank of Canada's announcement will be, Mr. Sanders said, adding it could lower borrowing costs for major projects here. At a chamber of commerce meeting this month, Mr. Sanders said business leaders said local shoppers are spending more cautiously. Businesses will now look for ways to remain competitive; they don't want to slash costs and be caught off-guard if the oil price surges and reignites the frenzied pace of growth, he said.
"We are still doing what we've always done. Are we keeping an eye more on what's going on globally? Yes, we are. Are we concerned? Yes. It'd be silly for us to say we're not. But we're not concerned to the point where we're going to see any significant [local] economic impact," he said.