Important Lessons about Cost Planning in Contracting
RenatoGandia003
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April 2009
Still “Fort McMoney”
By Renato Gandia
Popular watering holes stand decrepit and decaying along Franklin Avenue. They used to be
swarmed with workers comforting themselves with alcohol after a day of back-breaking toil at the
plants north of Fort McMurray, the Oilsands City. The letter B in the sign of the famous
Boomtown Casino dangles, ready to drop any time a massive whoosh of wind wallops the once
busy gambling den. A Tim Hortons drive through has closed after several years of car lineups
spilling onto Highway 63.
Neon signs at downtown hotels have been replaced with hand-written notes that perpetually read
“Vacancy.” A rusty, half-ton truck crawls its way to Morimoto Drive by the Snye, a favourite
hangout for fishing enthusiasts. Flashy four-wheel drive vehicles used to populate the busy streets
of Fort McMurray, but now even a simple new car is rarely seen.
If these images are playing in your mind as you imagine what Fort McMurray has become since
the global recession hit everywhere, that means you're not a believer of the slogan "We have the
Energy," coined and popularized by its former mayor, now Wood Buffalo MLA Guy Boutilier.
Though the economic downturn has resulted in some layoffs at the worksites, residents of the
Regional Municipality of Wood Buffalo, which includes Fort McMurray, say recession is hardly
visible in town, if at all.
Signs of an overheated economy still abound all around. Highway 63 still turns into a parking lot
during shift change at the oilsands plants. The slots at Boomtown Casino continue to gobble
gamblers’ money and it’s still tedious to book a hotel room on short notice.
Layoff is a fearful plague that people prefer not to discuss in depth, because they’re not sure
who’s going to distribute ugly pink slips next. Suncor Energy recently announced a massive cut in
its spending, resulting in hundreds of contractors getting the boot. Those with operational jobs at
any of the sites feel more secure, but the contractors flown in from the Maritimes, the Atlantic,
and foreign countries are not sure for how long they will continue to benefit from the waning
oilsands boom. If the dangerously low crude oil price drops to $30 per barrel, they could be next.
Early in the year Suncor halved its previously lowered 2009 capital spending budget to $3 billion
and halted construction of its $20.6-billion oilsands expansion called Voyageur, including its
planned upgrader, and new stages to its steam assisted gravity drainage production project known
as Firebag.
The municipality is keeping tabs of similar announcements, especially from the big players, but
the community’s infrastructure challenges remain.
“The reality is Fort McMurray still has more people than we have services to accommodate them,”
says Mayor Melissa Blake. “We’re not feeling quite the downturn that other places are
experiencing.”
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Blake says the commuter-type workers are most at risk of losing jobs. Those who actually live in
the region and have oilsands operation-related work are likely to continue reaping the rewards of
the industry.
In a recent job fair at Keyano College (located in Fort McMurray), more than 2,000 people
showed up looking for employment. About 50 local businesses set up information booths to recruit
workers and answer questions job seekers had about current market conditions. Organizers said
many of the posted jobs were for the Miskanaw Golf Course, set to reopen this spring following a
massive overhaul of the MacDonald Island Park.
Jack Bonville, president of the Fort McMurray Chamber of Commerce and president of Cow
Harbour Construction, views the area to be unique in a lot of ways, and that’s why it seems to be
bucking the trend seen in many places during this difficult economic time.
“It’s a little different than the rest of the country because there’s a considerable amount of
investment here,” said Bonville.
“The companies that are in place—Syncrude, Suncor, and Albian Sands—they’ve got billions
invested.”
From the perspective of the chamber of commerce, there have been no earth-shattering changes in
the past months, said the former banker-turned-businessman.
“Production is continuing and we’re here to service the oilsands.”
Though there have been layoffs of contractors, he says large companies such as Syncrude
continue to hunt for potential employees in eastern Canada.
“A lot of baby boomers are set to retire and they’re going to need a lot of tradespeople [to replace
them],” said Bonville.
When asked if he’s seen any local business closed due to economic hardships, Bonville is quick to
say that there were some that shut their doors but mainly due to unaffordable commercial space, a
pre-recession reality in Fort McMurray. His organization, which has more than 700 members,
continues to grow every month and many of the businesses are always in search for people to
work.
Annelies Geisler, former owner of Import Connection, a store on Franklin Avenue that supplies
ethnic food from 10 different countries around the world, has seen Wood Buffalo recently grow to
almost 80,000—more than 64,000 of whom live in Fort McMurray. As a long-time resident, she
has a good pulse on whether the city is feeling the pinch of such drastic economic change.
“All you have to do is listen to people fearful they may lose their jobs,” she said.
But that fear has not translated with the way they spend their money. In the past months, she
hardly noticed any change in people’s shopping habits. She recently sold the small grocery store
to a new owner because she decided to retire after seven fruitful years in the business.
“We have not noticed any change on receiving and selling goods. It’s pretty on par with how it
has been,” she said. Right after Christmas,Geisler normally sees a short slump period but sales go
back up pretty fast, and this year is no exception.
That seems to be the case as well in the car retail industry, as the city’s several dealerships
continue to fight for sales of big 4X4 trucks loaded with options. The day that Fort McMurray
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continue to fight for sales of big 4X4 trucks loaded with options. The day that Fort McMurray
streets will be seen sans those gas-guzzlers appears far from the oilsands horizon.
Those who have never set foot in the region may quickly think the slumping economy is going to
be doubly disastrous for the northern Alberta community, but local officials say the changes are
negligible, and far from disastrous proportions. They say the slowdown is actually set to yield
some positive results for the region, which has for years been aching to catch up with its
infrastructure deficit.
A couple of years ago, the municipality intervened in provincial regulatory hearings asking
officials to delay the approval of some oilsands megaprojects because the blistering pace of
development had maxed out capacity to provide basic necessities such as housing, health care, and
roads. But the projects were approved one after the other, leaving the pleas of many stakeholders
reverberating throughout the country. A slowdown was nowhere in sight.
But now, Blake says without a doubt the slowdown has come.
“It may not be the kind that we have envisioned, but this nonetheless will give us a breathing
space, a time to get caught up with what we need to do.” She points out that Fort McMurray still
needs more roads, bridges, and overpasses to handle the throngs of oilfield construction workers
who remain.
“Should the economy turn around in a few years, and we had not picked up all the opportunities to
catch up, it would be unfortunate.”
A new, $220-million water and waste water treatment plant is among the most crucial
infrastructure that must be completed soon, as Fort McMurray’s population continues to swell.
The big blue plant, located on the east side of Highway 63 just past Confederation Way, has been
designed to service a population of about 133,000—a number not only reflective of Fort
McMurray’s growing population, but also of camp workers at oilsands plants.
The $170-million renovation of MacDonald Island will be finished by fall and in December
residents will get a chance to enjoy a new aquatic park attached to the facility. The new library
will also be relocated to the site by the end of the year.
The development of the so-called Parsons Creek land parcel is in the works, with the province
appointing an advisory board this January. This project will create about 7,000 new housing units,
expected to accommodate 20,000 residents when finished by 2012. The twinning of some portions
of the deadly Highway 63 is also ongoing, and local officials hope money will continue to flow to
pay for it. The $100-million expansion to the municipal airport is also underway, as it continues to
see massive traffic. The expansion plan includes a new terminal more gates and stores. The
airport’s current size will be tripled.
Meanwhile, the $17.6-million renovation of an arena in the community of Fort Chipewyan will
also likely to be completed this spring. The roof of the facility collapsed several years ago.
There is a lot going on, but Blake says the municipality still needs support to keep all these
projects moving forward, and it’s imperative they all proceed.
“The municipality has financial constraints due to the planned infrastructure.”
What worries her is if some of the oilsands projects are mothballed for a long time, as that would
mean lost revenue for the municipality.
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“We’re going to be in an even greater financial peril than what we’re experiencing now,” she said.
“So, we’re looking for actual support that will come to the municipality in the form of grants as
opposed to loans that we have to pay.”
In February, the Alberta government unveiled a new, long-term plan for development of the
oilsands with a 47-page report that calls for reducing the environmental footprint of the massive
mining operations and increasing the quality of life in the Fort McMurray region. The report
outlines immediate and long-term actions to address social, economic, and environmental
challenges and strategies to take advantage of opportunities in the region.
One of the most pressing social issues that has long afflicted the fast-growing community is the
lack of affordable housing. In 2005, a newcomer looking for a spot to rent could find ads such as
“$650 monthly for a couch.” Now, there are furnished rooms that can be rented for as low as $750
monthly. It’s still high if you compare it with what one can get in bigger cities like Calgary for the
same amount. People trying to sell their three-bedroom houses are seen slashing asking prices
from $800,000 to $680,000 and bargain hunters can now get a one-bedroom condo for $300,000,
which was difficult to come by years ago. According to the Canadian Mortgage and Housing
Corporation, housing starts in the region has been going down since early 2008, but that was
because there were elevated levels of active listings and units already in construction, said analyst
Richard Cho.
“Builders in the Wood Buffalo area are building in a very challenging environment,” he noted.
“As well, they are facing stronger competition from the resale market, and with the oil price
dropping and uncertainty in the market, buyers want to wait and be more cautious, affecting
demand for homes.”
This results in builders pulling back from housing starts, which doesn’t necessarily mean the
market is slowing down but rather heading to more balanced levels, Cho explained.
Although grim news about the recession is regularly reported by the media, people continue to
head up north in search for better-paying jobs. Even those who have limited skills still find work,
but often they have to make ends meet with visits to the local food bank. In the past months, Erin
Lambert, executive director of the Fort McMurray Food Bank, has seen an increase of 10 to 20
per cent in clients, ranging from students, to seniors, to large families. She says that’s partly due to
the economic downturn.
“I think there’s a lot of families that are just making it,” she noted.
One thing that Lambert wants to highlight is that whenever the food bank needs supply, the
community always comes to its rescue.
“Generosity here is overwhelming,” she said.
That generosity however, could be put to a test if more layoffs happen in the future, a reality that
can turn to an increase in the homeless population.
That’s what Daven Seebarran, executive director of Fort McMurray Health Promotion Centre,
formerly known as Wood Buffalo HIV/AIDS Society, doesn’t want to see happen.
“Our fear is that if the homeless population increases, the risk factors for sexually transmitted
infections and hepatitis may also increase,” he said.
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Blake says the commuter-type workers are most at risk of losing jobs. Those who actually live in
the region and have oilsands operation-related work are likely to continue reaping the rewards of
the industry.
In a recent job fair at Keyano College (located in Fort McMurray), more than 2,000 people
showed up looking for employment. About 50 local businesses set up information booths to recruit
workers and answer questions job seekers had about current market conditions. Organizers said
many of the posted jobs were for the Miskanaw Golf Course, set to reopen this spring following a
massive overhaul of the MacDonald Island Park.
Jack Bonville, president of the Fort McMurray Chamber of Commerce and president of Cow
Harbour Construction, views the area to be unique in a lot of ways, and that’s why it seems to be
bucking the trend seen in many places during this difficult economic time.
“It’s a little different than the rest of the country because there’s a considerable amount of
investment here,” said Bonville.
“The companies that are in place—Syncrude, Suncor, and Albian Sands—they’ve got billions
invested.”
From the perspective of the chamber of commerce, there have been no earth-shattering changes in
the past months, said the former banker-turned-businessman.
“Production is continuing and we’re here to service the oilsands.”
Though there have been layoffs of contractors, he says large companies such as Syncrude
continue to hunt for potential employees in eastern Canada.
“A lot of baby boomers are set to retire and they’re going to need a lot of tradespeople [to replace
them],” said Bonville.
When asked if he’s seen any local business closed due to economic hardships, Bonville is quick to
say that there were some that shut their doors but mainly due to unaffordable commercial space, a
pre-recession reality in Fort McMurray. His organization, which has more than 700 members,
continues to grow every month and many of the businesses are always in search for people to
work.
Annelies Geisler, former owner of Import Connection, a store on Franklin Avenue that supplies
ethnic food from 10 different countries around the world, has seen Wood Buffalo recently grow to
almost 80,000—more than 64,000 of whom live in Fort McMurray. As a long-time resident, she
has a good pulse on whether the city is feeling the pinch of such drastic economic change.
“All you have to do is listen to people fearful they may lose their jobs,” she said.
But that fear has not translated with the way they spend their money. In the past months, she
hardly noticed any change in people’s shopping habits. She recently sold the small grocery store
to a new owner because she decided to retire after seven fruitful years in the business.
“We have not noticed any change on receiving and selling goods. It’s pretty on par with how it
has been,” she said. Right after Christmas,Geisler normally sees a short slump period but sales go
back up pretty fast, and this year is no exception.
That seems to be the case as well in the car retail industry, as the city’s several dealerships
continue to fight for sales of big 4X4 trucks loaded with options. The day that Fort McMurray](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)