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Collapsing oil prices hit B.C. residents working in Alberta

But that could help skilled labour shortage at home, provide boost for LNG, mine projects
Toby Ellingsen of Surrey, left, and Brendan Washbern of Cowichan Bay discuss developments in Fort McMurray, Alta.

Just six months into a pipefitting job in the oilsands at Fort McMurray, 23-year-old Brendan Washbern of Cowichan Bay on Vancouver Island is out of work.

“I just got laid off,” he said Wednesday after arriving at Vancouver International Airport from Alberta. “I got the word two weeks ago — one more shift, and now that’s it. I don’t think it will be too long-term.”

Washbern said he now hopes to land a plumbing job for lower pay. “That’s the way it goes. At least you’re home every night.”

British Columbia is likely to experience a net benefit from the more-than-50-per-cent collapse in oil prices, according to economists, as consumers save an estimated $1 billion this year in lower fuel costs and a lower Canadian dollar benefits exports such as lumber, pulp and minerals.

But the oil-based Alberta economy is expected to suffer from lower prices, with the Conference Board of Canada forecasting the province will slip into recession. As as a result, the thousands of British Columbians who work in Alberta find their jobs at risk.

The benchmark West Texas Intermediate price has dropped from over US$100 per barrel last summer to $45.89 on Tuesday, the lowest point since April 2009.

Already, Calgary-based energy giant Suncor has announced it’s cutting 1,000 of 14,000 jobs and slashing capital spending by $1 billion.

On Wednesday, Washbern was travelling from Fort McMurray with Toby Ellingsen, a 38-year-old Surrey resident and fellow non-union employee of Strike Energy, a Calgary-based company that services the oil-and-gas industry in Western Canada.

Ellingsen, the father of four girls aged 15 to 20, is a heavy-equipment operator who’s been working in Fort McMurray — the centre of oilsands development — for three years. He remains employed, for now at least.

“Work is getting pretty scarce up there, but they’re trying to keep me working, no matter what,” Ellingsen said.

If he gets laid off, he plans to return to road construction work in B.C. “I can always come back here,” he said, noting he earns 20 to 30 per cent more in Fort McMurray. “It’s hard to be away from the family.”

The two men work in a dry camp — 10-hour days for two weeks, then one week off — so they don’t have to fight for expensive accommodation, and get their flights home paid. Each has their own satellite TV and toilet in the room. Company rules prevent them from disclosing their wages. “I was making pretty good (money),” Washbern allowed. “I don’t know, enough to party?”

It is difficult to pinpoint exactly how many B.C. residents are working in Alberta, but a Statistics Canada study using tax data found that about 29,000 British Columbians were working in Alberta in 2009 (the latest figures available).

That’s equal to just more than one per cent of the B.C. labour force.

B.C. Business Council chief economist Ken Peacock said the slowdown in Alberta from collapsing oil prices does have negative implications for other provinces.

But Peacock noted that not all of the British Columbians commuting to Alberta for work will be laid off or have their hours cut, so it is only a portion of the 1 to 1.5 per cent of the B.C. labour force that would be affected.

“But if people who are making good incomes who are commuting to Alberta get laid off, it will impact their households,” said Peacock.

He noted there are B.C. companies that do business in Alberta that will also be affected by the slumping oil-based economy.

According to the Canadian Association of Petroleum Producers, there are 614 B.C. companies that have direct business with the Alberta oilsands.

In starting direct flights from Kelowna to Fort McMurray last year, WestJet noted they had about 5,000 people from the Okanagan Valley commuting to Fort McMurray regularly.

Both WestJet and Air Canada say they monitor performance on their routes on a regular basis but have no immediate plans to cut service between B.C. and Fort McMurray.

There are also positives to a slowing Alberta economy for British Columbia.

In the fall of last year, for the first time in three years, more people from Alberta moved to B.C. than the reverse, according to B.C. Statistics data. That trend is expected to continue as the Alberta economy gets hit by falling oil prices, noted Peacock.

And that means a greater labour pool for British Columbia, which has been dealing for years with a shortage of skilled labour.

“The general sense is that when there is not a huge demand in that giant sucking sound from Alberta taking all our workers, its just going to be easier to advance major projects,” said Peacock. “If you are willing to work in Alberta, you should be able to commute up to northern B.C. as well.”

The B.C. Liberal government just announced BC Hydro’s $7.9-billion Site C hydroelectric project will go ahead. Construction is expected to start this summer, with a peak workforce at 1,700.

Seabridge Gold’s up-to-$5.3-billion KSM gold and copper mine in northwestern B.C. was also recently approved, although the company will need a funding partner. Mine construction would employ up to 1,800 people.

Although no companies have given final investment approval, multibillion-dollar liquefied natural gas plants and their pipelines also remain on the books in northern B.C.

Peacock said having less pressure on the labour pool from the Alberta oilsands could be viewed as a positive for the LNG projects.

Art Jarvis, executive director of Energy Services B.C., agrees.

His organization fights on behalf of more than 200 companies to ensure that B.C. oilpatch work stays in B.C. and doesn’t flow to Alberta.

“Construction costs are going to be huge and where is the labour going to come from?” he asked of the proposed LNG projects. “If Fort McMurray is backing off and laying off people, certainly that’s an opportunity for them to come to B.C.

“It’s a great opportunity for some of these producers to say, ‘okay, look, we’re going to go ahead with some plans ...’ It’s a positive effect, in my mind.”

However, if oil prices remain low for a number of years, that could dampen interest in the LNG projects.

Lower oil prices means less revenue for global energy heavyweights.

Malaysian state-controlled Petronas has already scaled back its capital spending and delayed a decision on its proposed $11-billion Pacific NorthWest LNG project in northwest B.C.

Werner Antweiler, an economist at the University of B.C.’s Sauder School of Business, said that because the price of long-term LNG contracts in Asia are tied to the price of oil, oil prices that remain low for one or two years could diminish the profitability of the LNG projects.

But it’s hard to know what oil prices will do in the next year, Antweiller added.

If something curtails supply — for example, Libya’s increased oil production falls off again — the price could rise, he said.