BUSINESS WATCH

Keeping the frontier alive

Peter C. Newman January 11 1993
BUSINESS WATCH

Keeping the frontier alive

Peter C. Newman January 11 1993

Keeping the frontier alive

BUSINESS WATCH

PETER C. NEWMAN

Give a warm thought this frigid January to Canada’s northern frontier, specifically to Fort McMurray—the place that was supposed to safeguard the country’s energy future. That isolated Alberta settlement perched on the edge of the Canadian Shield now makes news so seldom that it seems to have never existed.

Yet two decades ago, Fort McMurray’s population was expanding at 30 per cent a year; its underground tar sands held the promise of making this country self-sufficient in oil. Unlike most pioneer communities built up in a hurry to exploit a natural resource, it did not slide into permanent limbo. As I discovered on a recent visit, Fort McMurray is exactly what it hoped it would become: no boomtown, but a permanent northern settlement with a steady employment base and a quality of life that ideally suits its 34,700 inhabitants. A pleasant place, 435 km northeast of Edmonton, it’s a self-contained community with a highly developed sense of pride and a healthy future outlook. “The boom is over,” I was told by Cathy Goulet, executive director of the local venture initiatives council, “but what we’re seeing now is slow, steady growth. In terms of health care, social services, education, outdoor sports and cultural facilities, we’ve got a lot to offer.”

Fort McMurray hasn’t escaped the recession. Its two tar sands plants, which have on their payroll just about everybody who isn’t working for governments, schools or the municipality, are each laying off workers and undergoing massive restructuring. Suncor Inc., which posted a $237-million loss (and took a $238-million writedown) on revenues of $1.1 billion for the first nine months of 1992, is letting 400 of its 2,400 people go; Syncrude Canada Ltd. has just cancelled a planned $4billion expansion, and the much-ballyhooed $5-billion OSLO tar sands extraction project, sponsored by six of Canada’s largest oil companies, has been shelved indefinitely.

The good news is that both Suncor and Syncrude recently recommitted themselves to

Fort McMurray has a cemetery, but its 33-year-old mayor doesn’t know where it is—because the average age in town is 26

staying in Fort McMurray for at least another 50 years. Between them they now supply 16 per cent of Canada’s oil and expect to pass Pembina, in southwestern Alberta, as Canada’s most productive oil field by 1996. Both plants, but especially Suncor, are getting cost structures down to the point where they will soon be able to compete with more conventional petroleum sources. With our crude oil reserves declining and low oil prices preventing much new exploration, the Alberta oil sands are expected to come into their own.

Tar sands oil has to be mined in great open pits, separated from the sand and clay and put through a highly complicated—and expensive—processing procedure. Total reserves have never been accurately measured, but analysts claim that at least 300 billion barrels of extractable synthetic crude lie beneath Fort McMurray and its surrounding counties. Together with other known deposits at Peace River, Cold Lake, Wabasca and the Athabasca region, the Alberta tar sands are thought to hold a trillion barrels of oil—more than the lucrative basins of the Middle East. So far, only a billion barrels have been extracted.

The Geological Survey of Canada first investigated the tar sands in the 1870s, although the

explorer Peter Pond had noticed strange gummy bubbles in the ground of a substance that the Indians used to repair their birchbark canoes, as early as 1778. But it wasn’t until the 1920s that some of the necessary extraction technology became available, and another 40 years before the Sun Oil Company opened its first oil sands plant at Fort McMurray. Television didn’t come to town until 1970, and as late as 1971 the town’s population was only 6,743.

Suncor, owned 68 per cent by the Philadelphia-based Sun Company Inc. and 14 per cent by the Ontario Energy Corporation, produces

60.000 barrels of oil per day and has just launched a $370-million modernization program. Under the leadership of executive vicepresident Edythe (Dee) Parkinson, a spunky 44-year-old engineer who has spent 20 years in the Oil Patch, the company has become determined to shave its processing costs. At the current cost level of $19 a barrel, the plant was heading straight for extinction. By ditching its expensive bucket-wheel excavators and substituting the most up-to-date truck and megashovel system, and by revamping its utilities operations, the company hopes to save $7 per barrel in extraction costs by 1996. “For the first time in the history of this plant,” Parkinson told me, “we’ll become competitive with the price of crude oil.” She added: “That means we can afford the future and open new mines. That’s why we recently went out and bought a couple of new leases and told the community the uncertainty had ended—that we would be here for at least another 50 years.”

Syncrude, which is owned by eight Canadian-based oil companies and produces a daily

180.000 barrels, is in a similar modernization mode. It is downsizing its current 4,340-person payroll mainly through attrition.

Fort McMurray s most serious problems are its total dependence on being a two-company town; it also has the highest municipal tax rate in the province, and despite some attractive new local shopping facilities, merchants are having trouble keeping retail dollars from travelling down Highway 63 to Edmonton. The town’s main advantages are that its two employers are staying put, that they pay higher than average wages, and the remarkable youth of its population. “I arrived in Fort McMurray 17 years ago,” I was told by Wendell MacEachem, chairman of the local economic development board, “and now I’m being called part of the Old Guard—it’s the nicest compliment I’ve ever had.” MacEachem is 39. Guy Boutillier, a 33year-old instructor in business administration at the local Keyano College and recently elected mayor, told me that he was sure Fort McMurray had a cemetery, but he didn’t know where it was, because it is so seldom used. Average age in town is 26; a quarter of Fort McMurray’s residents are from Newfoundland.

What strikes the visitor most dramatically about Fort McMurray is that its citizens are so proud of their community. Life may be far from perfect and the smell of oil being processed often hangs over the community like a shroud. But at least here, at the outer margin of our geography, the Canadian dream is still alive.

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