Ready for another round?

Oilsands Review — The perception of Fort McMurray, Alberta, over the past few years has been that of a boom town on the frontier of the Wild West. Companies laid claim to massive parcels of land, shipped massive pieces of equipment up Highway 63, built massive operations, and began recovering massive deposits of bitumen.

Workers came in droves from across Canada after hearing the tales of thousands before them who had struck it rich. They came in hope that they too would be able to carve out a piece of the giant oilsands pie. Dozens more arrived every day, many without jobs or accommodations.

Serving as a backdrop to all of this madness was Fort McMurray. It was this remote northern city that was expected to absorb all of the new people and all of the stresses they placed on its infrastructure. Tales began to emerge of massive traffic snarls whenever new equipment worked its way through town, and at any shift change for the massive construction projects to the north and south of the city.

The cost of rent for a two-bedroom apartment was in excess of $2,500 per month; the average price of homes skyrocketed to almost $700,000; people were living in tent cities. There wasn’t enough room at the local hospital and there were no facilities for new families that were moving to the region.

The break-neck speed of development in Fort McMurray seemed to be spiralling out of control when the international credit crisis struck. The economic collapse eliminated a lot of the funding that the new projects were counting on. The price of oil plummeted, making bitumen cost prohibitive to bring out of the ground. Companies shelved new projects and even stopped ones already under construction.

Community leaders in Fort McMurray breathed a collective sigh of relief, noting that the slowdown in development would give province and the city a chance to play catch-up with their infrastructure projects.

At the dawn of 2010, oil prices have stabilized at around $70 per barrel. The credit markets are starting to open up for borrowers, so that capital projects are more likely to find funding. Oilsands producers are announcing that previously stalled projects will go ahead.

The resurgence of investment and activity begs one enormous question: Is Fort McMurray ready for another boom?

“We are more ready now than ever before,” says Guy Boutilier, member of the legislative assembly (MLA) for Fort McMurray–Wood Buffalo. “And I say that going back to the 1960s, when the first development started up here. Over the last two years we, as a community, have taken a much-needed breather from incredible pace and pressure that the oilsands has placed on us. It has allowed us to catch up a little bit and be better prepared for the next round of developments.” This optimism is being echoed by industry insiders including Don Thompson, president of the Oil Sands Developers Group.

“During the last boom, the region got in an infrastructure deficit. Because of this, the province recognized the problem and put forth a tremendous amount of effort to help,” says Thompson. “I would say that given the incredible infrastructure construction and the nature of the oilsands projects coming up, I believe that Fort McMurray is very well positioned for the future.”

Thompson also believes that the nature of new projects that are beginning construction will help to ease some of the strain on Fort McMurray.

“When you look at the projects that are starting up, you have [Imperial Kearl], where most of the workers will be housed on site and many of the in situ developments are very far to the south, so these projects will have much less impact, per barrel, on Fort McMurray than the previous projects had,” Thompson says.

One of the largest infrastructure projects currently ongoing is the twinning of Highway 63, a project that has been given $600 million in provincial funding. The twinning is already complete on the first 25 kilometres north of Fort McMurray to where the large mining operations exist, and work has begun on the highway south of the city.

The province is also spending $150 million to complete a new five-lane bridge across the Athabasca River. The bridge will help ease traffic congestion with all five lanes headed northbound (to oilsands mining projects), allowing the two existing bridges to handle southbound traffic. It is scheduled to be completed by the summer of 2011. An additional $300 million is being spent to create two new overpasses in the city that will be completed in the fall of 2011. The overpasses will allow traffic to flow more freely along Confederation Way and Thickwood Boulevard.

“We’ve been making great progress as far as our ability to handle the influx that comes with increases in oilsands operations,” says Melissa Blake, mayor of the Regional Municipality of Wood Buffalo, “but we still have areas of concern. The area I am most concerned with is our population growth.”

Fort McMurray experienced an 8.5 per cent population growth in the period from 1999 to 2006. For reference, a population increase of three per cent is considered to be ‘boom’ growth. The 2008 census showed that the city of Fort McMurray had a population of 72,363 people, with the greater area of Wood Buffalo having a population of 103,334 people. One of the problems previously confronting Fort McMurray is directly related to its rapid population growth—an overtaxed water treatment plant. However, the province of Alberta provided $103 million to build a new tertiary water treatment plant, which is now in operation.

“We are about to start to on Phase 2 of the water treatment plant, and when all of the expansion is complete, the plant will be capable of handling in excess of 100,000 residents,” says mayor Blake. “Looking at the studies on the plant, it is very capable of handling a population of about 85,000 people right now, and looking back at the population figures from 2008 our population was right around 72,000, so we are in very good shape as far as our water system is concerned.”

But the most significant problem facing Fort McMurray in light of its unprecedented population growth is a lack of housing. In light of this, the Alberta government has released two parcels of land to be developed into subdivisions, each large enough to house approximately 20,000 new residents. These developments—Saline Creek Plateau and North Parsons Creek—are in the initial stages of development. The province also released parcels of land in south Fort McMurray to be used for light industrial and commercial development. There is also new multi-family housing capacity.

“There has been a lot of construction of condos and multi-family dwellings, so that has eased some of the pressures on the housing market,” says Jim Foote, president of Keyano College in Fort McMurray. “The new developments to the north and the south are in the initial stages, with the deep services having funding in place, and I think the timing of these subdivisions is important in easing the pressures in the housing markets. From a rental market perspective, it seems like in the last year there has been a backing off on the cost of rents. I think that is probably because the capacity has been increasing.”

Until the new housing units are nearing completion, it is expected that housing prices will stay stable, which is good news for people who currently own homes in the municipality.

“Housing prices are a unique watch point for us,” says mayor Blake. “When you go through neighbourhoods and you see ‘for sale’ signs go up, you see the ‘sold’ sign go up within a week. Our prices have reached a stabilization point, where they are not escalating as much.”

Going forward, there is a realization that other projects will be required to ensure that Fort McMurray is well positioned to support the operations of a global energy leading industry. A western bypass road is a priority to allow for dangerous goods to go around the city rather than through the middle of it. This bypass road would also allow greater access to residential areas on the western edge of the city and could also serve as the starting point to an east—west connector for the province, which is a significant road joining up Wood Buffalo with the Peace Country and beyond into British Columbia and on to Prince Rupert on the coast.

Additionally, there will be a requirement with all of the new housing for an expansion of fire and emergency response capabilities. An additional recreation facility will also need to be constructed in the north end of the city as a complement to the new $171-million Suncor Community Leisure Centre at MacDonald Island. This complex is the largest of its kind in western Canada.

“Oil is a strategic resource in this world and it is only growing in value,” says Foote. “The demand for petroleum will grow. We need to plan knowing that the economy up here will grow with the demand for petroleum. The development of the oilsands will create thousands of jobs, not just for Fort McMurray, but for Edmonton and Calgary as well, for at least the next 50 years. We are just beginning to understand the potential for this incredible resource. There are challenges to this development for sure—shifting politics, environmental issues—but these are challenges that we have to meet and solve. To keep the economic development of this resource growing in the future, we need to keep growing the public infrastructure.”