Alberta Trades Jobs Work Careers Edmonton Calgary

Alberta’s energy crown threatened -Globe and Mail Story

DAVID EBNER

From Friday’s Globe and Mail

March 27, 2008 at 9:02 PM EDT

CALGARY — British Columbia and Saskatchewan are on the verge of a huge oil and natural gas exploration boom as companies pour hundreds of millions of dollars into land rights, shifting their focus away from the established energy capital of Alberta.

B.C. raked in $152-million from its latest sale of exploration rights, the province announced yesterday. Buoyed by high natural gas prices and big exploration prospects, energy companies are rushing to stake a claim in the province’s northeast.

Last month, Saskatchewan took in $197-million in a single sale of exploration rights, by far its biggest-ever sale – and almost as much as it previously generated in an entire year. Stoked by $100-a-barrel oil, companies are in a frenzy over the Bakken play in the southeast part of the province, where interest has percolated in recent years and has now exploded.

“It’s the big M – momentum. There’s no question B.C. and Saskatchewan have momentum,” said Gregg Scott, president of Calgary-based land broker Scott Land & Lease Ltd.

New exploration rights are closely correlated with drilling activity, which remains active in Alberta but is poised to notably broaden beyond the province.

Alberta, during its 2004-06 boom years, saw billions of dollars flood into the provincial treasury, peaking in 2006 with a stunning $3.4-billion paid to scoop up fast-disappearing exploration territory, especially in the oil sands.

But now, the best new prospects are not in Alberta but in neighbouring provinces.

And that’s expected to continue.

“We’ll be seeing more and more competition at land sales in B.C.,” Mr. Scott said.

FirstEnergy Capital Corp. in a recent report said “frantic” land sale activity in B.C. is likely to extend into April, saying it is a “massive land grab equivalent to that of the oil sands binge observed in Alberta during late 2005 and early 2006.”

Bids for the next B.C. sale are due April 23.

In Saskatchewan, April 7 is the deadline for the next rounds of bids.

The province likely will smash its annual exploration rights record of $250-million, set last year, just four months into 2008.

For British Columbia, driving the boom are drilling results from EnCana Corp. and EOG Resources Inc., both of which may be sitting on some of the biggest natural gas discoveries in Canadian history in the Horn River region of northeastern B.C.

The hot Montney play, which is also in northeastern B.C., where companies such as ARC Energy Trust are active, attracted big bids yesterday as well.

Yesterday’s $152-million take was the fourth-biggest single sale in B.C.’s history, extending a run that includes $401-million collected in December and $265-million in September. The province’s largest sale was in September, 2003, with EnCana leading a charge that month that saw B.C. collect $418-million.

This year, for the first time ever, B.C. is on pace to surpass Alberta in the competition for dollars for exploration rights. Alberta has seen only $202-million spent in 2008.

Beyond high commodity prices and strong prospects, advances in technology underpin the industry’s new look at B.C. and Saskatchewan.

Horizontal drilling techniques, and better fracturing of subsurface reservoirs, is helping unlock previously difficult-to-recover oil and gas.

A further factor is royalties. In Alberta, the rates charged on natural gas will rise in 2009, and will hit the most attractive gas plays in the province the hardest.

In B.C., while royalties on gas are roughly the same as Alberta’s increased rates, a special deal was instituted last year to encourage investment in emerging gas plays, such as the kind at Horn River, where much of the recent money has been spent.

Land sales are conducted twice a month in Alberta, once a month in British Columbia, and every two months in Saskatchewan.

In other areas, such as Newfoundland and the Northwest Territories, the land sales generally happen once a year.

Tap oil sands to increase energy security

Mackubin Thomas Owens • Special to the Register • March 28, 2008

World demand for oil continues to grow-and is likely to keep on climbing. Americans currently consume about 20 million barrels of oil daily, of which about 60 percent is imported. The Energy Information Administration expects imports to reach 70 percent by 2025.

This situation threatens U.S. energy security. Energy security is not to be confused with “energy independence.” While energy independence is a pipe dream, energy security is achievable. The key to enhanced energy security is an increase in the supply of energy. Unfortunately, energy security is often sacrificed because of environmental concerns.

A case in point is the exploitation of “oil sands,” geologic formations containing deposits of bitumen (heavy crude oil) - a viscous, solid or semisolid form of crude oil that does not easily flow at normal ambient temperatures and pressures, making it relatively difficult and expensive to process into gasoline, diesel fuel and other products. Canada possesses substantial oil sands. Indeed, Canada’s oil-sands reserves are approximately equal to the world’s total reserves of conventional crude oil.

According to oil industry analysts, 174 billion barrels of crude oil are trapped in the oil sands of Alberta. Since Canada is our No. 1 source of imported oil, the Alberta oil sands constitute a vast, secure and reliable supply of crude oil, which also creates thousands of well-paying jobs.

Currently, about 1 million barrels per day are piped from Alberta to U.S. refineries in the Midwest and Gulf Coast, and several refineries and pipelines are investing heavily to increase their refinery and pipeline capacity so they can use more of the Canadian oil sands, with planned expansion to 3 million barrels per day by 2015. Such investments will increase America’s energy security and reliability, reducing the risk of supply disruptions.

But the exploitation of oil from oil sands oil typically requires enhanced extraction and refining methods, which has led environmental groups and some makers of public policy to raise concerns about the environmental consequences both of the Canadian oil-sands mining process and expansion of petroleum refineries capable of refining crude oil from oil sands, particularly in the Midwest. Arguing that expanding the use of oil from oil sands will increase greenhouse gases, environmental groups have issued challenges to the environmental permits required for oil-sands extraction and refinery expansion.

Such environmental challenges to the expanded use of oil sands threaten U.S. energy security, while doing little if anything to reduce global greenhouse emissions. It is possible to extract, refine and transport crude oil from oil sands in an environmentally responsible manner. Oil companies have developed mitigation measures that conform to permit constraints based on current rules and regulations.

The public must understand that the additional mitigation measures demanded by environmental groups may make the exploitation of oil sands less economically viable, undermining U.S. energy security. Since refining oil sands is capital intensive, refiners need to have certainty regarding the availability of the resource. Such regulatory roadblocks make it less likely that oil companies will make the necessary investments to exploit this vast resource.

In addition, challenges by environmentalists are likely to be used as precedents for hampering development of tar sands in California and the substantial deposits of oil shale in the American West.

Of course, environmental concerns are valid, but they need to be placed in proper context. All economic decisions involve trade-offs. Unfortunately, environmentalists often act as though the value of a pristine environment is infinite, permitting no trade-offs at all. When such a view takes hold in policy debates, the consequences can be severe.

Environmental concerns have become a centerpiece of the U.S. political economy, but they must be balanced against the requirement for affordable energy and energy security.

MACKUBIN THOMAS OWENS is a professor of national security affairs at the Naval War College in Newport, R.I., and editor of Orbis, the journal of the Foreign Policy Research Institute.

Calgary has second highest business costs in Canada: study

Gina Teel, Calgary Herald

Published: Thursday, March 27, 2008

CALGARY - Calgary is now ranked the second most costly city in Canada in terms of business costs, says KPMG’s 2008 Competitive Alternatives study.

Calgary edged out Toronto to take over second place, behind Vancouver, which retains its No. 1 spot. Toronto, meanwhile, ranked fourth, behind Calgary and Chilliwack, B.C.

The study, last done in 2006, measured 27 significant cost components that are likely to vary by location, including labour, taxes, real estate, and utilities, which are applied to 17 business operations over a 10-year planning horizon.

Mark MacDonald, global director, competitive alternatives, KPMG, said the 2008 results for Calgary come as no surprise, given the significant economic success the city has experienced. With that success comes increases on the cost side, in inflationary pressures in the labour, property and facilities, he said.

“On the input side, which is what this study deals with, you have seen the result of economic success, and that is rising costs” he said.

Canada-wide, the study found the depreciated U.S. dollar is challenging Canada’s competitive edge.

gteel@theherald.canwest.com

KPMG’s 2008 Competitive Alternatives Study - PDF Download

Boomtown hustles to keep up with breakneck growth

Jac MacDonald, Freelance

FORT McMURRAY - With $20 billion slated for oilsands investment this year alone, job-wise, housing-wise and business-wise, there can be no doubt Fort McMurray is on fire.

“It’s exciting. There’s lots of action. People have a pretty good attitude,” says Milly Quark, president of the Fort McMurray Real Estate Board.

However the immensity of development may be lost on many Albertans and Canadians.

The $20 billion represents more money than will be invested in manufacturing in the rest of Canada this year and a sum that is almost double the annual rate of the previous few years.

It’s a staggering amount as companies work hard to extract energy from the world’s second-largest oil deposit from lands north and south of this city of 65,000.

Despite the pressures, the city is working hard to become a wonderful place to raise a family, with the $140-million MacDonald Island Redevelopment Project underway, and a new sports complex recently opened by Keyano College.

New suburbs and modern new homes are going up quickly, and land is being readied for new houses of worship, including a Catholic church and a mosque.

The stereotypical partygoer at a downtown tavern is less representative of Fort McMurray than busy families with a growing quality of life, or a single older mobile worker who can be found reading a book over coffee at Tim Hortons, says local businessman Dave Kirschner.

Statistics back up Kirschner’s observation. Most of the 25,000 mobile workers living in camps at oilsands construction projects or in the city, are men aged 35 or older. More of them are married than the Alberta average, a 2007 study shows.

But this is a place with housing and infrastructure pressures. Even for a real estate agent, the price of a single family house is getting to be too much. It reached a record high of $654,622 in February, Quark says.

Canada Mortgage and Housing Corporation forecasts prices will rise eight to 10 per cent this year.

People are buying homes and renting out bedrooms for $1,000 a month to help out with the payments, she says.

“We have got land in the works but the infrastructure can’t keep up. We can’t get the services in and out to the builders quick enough,” she says.

More land is needed yesterday for servicing and development to keep up with a population that is conservatively expected to grow to 100,000 within three years, says Jacob Irving of the Athabasca Regional Issues Working Group, the local voice of the oilsands industry.

Fort McMurray will soon overtake Red Deer as the third-largest city in the province, so it needs to be building 5,000 housing units a year to move toward conservative growth estimates. It is only building 2,000 a year at present, Irving notes.

Mayor Melissa Blake puts land for housing and commercial space at the top of her wish list. She’s pushing the province to release two large areas of land — Saline Creek and North Parsons — for development this year.

“We want to have two pieces going at the same time so we don’t find ourselves so far behind in the future,” Blake says.

Jeff Penney concurs. Wood Buffalo’s 33-year-old manager of economic development, a Newfoundland expatriate, knows what he is talking about.

On the job since last July, Penney and his wife are among those shopping for a home in a market with fewer than 200 listings.

Already thousands are believed to be living in illegal basement rooms and suites. Two-bedroom condos rent for $3,000 a month and the average house rents for $4,000.

People with salaries in the six figures aren’t coming out that much ahead when you factor in the costs of real estate.

But people can still gain, because this is the land of opportunity, residents say.

Plans and construction abound for building and development to increase quality of life in and around Fort McMurray. They include a new bridge over the Athabasca River, and $100 million for an enlarged airport to help cope with an average 195 flights a day — 70,802 flights a year — at Fort McMurray airport last year.

One of those is a daily return Air Canada flight to Toronto, added in 2007.

“We are hoping to proceed this year with a huge expansion, including another runway, a brand-new terminal building three times the size of the current one, and a car park,” says Sally Beaven, spokesperson of Fort McMurray Regional Airport.

A new sports complex on MacDonald Island called the MacDonald Island Redevelopment Project is underway.

It will be the largest recreational facility in Alberta when it is completed next year, with pool, water park, fitness centre, library, four curling rinks, two arenas and two indoor soccer pitches.

It will join the new $36-million Keyano College Sport and Wellness Centre, with two new indoor soccer pitches and a basketball court, completed in September of 2007.

There’s also a second water treatment plant underway. Highrise apartment buildings are started. Others are on hold for lack of sewage capacity and labour.

Other projects underway include the twinning of Highway 63 south of Fort McMurray. Overpasses are needed to speed traffic in and out of the bustling Thickwood and Timberlea neighbourhoods.

And it’s all prompted by oilsands plants going 24-7 north and south of town.

Some plants are so big they have huge camps of workers on site and their own runways to accommodate large jet aircraft.

After much discussion, work camps (the municipality prefers to call them project accommodations) were also permitted inside city limits for workers at major construction projects such as the MacDonald Island redevelopment.

The regional municipality includes other smaller communities where more housing is also needed; places such as Anzac, a half-hour south of town, where many work at the Conoco Phillips and Opti-Nexen projects.

Not only housing is needed. Retail and commercial space is pinched as well, Penney says.

Quark gets six to 10 calls a week from merchants looking for retail and commercial space.

“I just tell them it’s very hard to find. I can’t promise them anything. It comes up and it’s gone before it goes.

Health issues are also among the area’s challenges, in no small part because the estimated 25,000 mobile workers living in camps around Fort McMurray put extra demand on health facilities with 32 per cent of emergency room visits in 2007.

The province should quickly address infrastructure needs in the municipality and the development of the province’s oilsands resource, including studying the feasibility of a new town to be built north of Fort McMurray to serve workers of more far-flung oilsands operations, says the Radke report.

As well, the province needs to inject $45 million for 600 units of affordable housing in Fort McMurray, says the report, which was issued in December.

“It may be unreasonable in any event to expect the municipality to fund the full cost of basic municipal infrastructure to support the massive oilsands projects which benefit the entire province,” it said.

“Things came fast and government doesn’t work fast,” Kirschner says.

Like any community, there are also social needs. Homeless shelters are run by the Salvation Army and by the municipality at Marshall House. There is also a day shelter and a food bank.

The five First Nations and seven Métis settlements in the region are also eager to get a piece of the economic action. In 2006, aboriginal companies secured $412 million in oilsands-related business.

The Northeast Aboriginal Business Association mentors new aboriginal businesses and secures new business for members, says general manager Cheryl Alexander.

For example, the association showcased its 85 aboriginal members and 106 associate members at an exhibition at the Sawridge Inn and Conference Centre last week, Alexander says.

The challenge for aboriginal business sometimes is to work out subcontracting arrangements to get started because they don’t have the initial capacity and equipment to take on a contract on their own, she says.

But the economy is working for the 5,000 aboriginal people in the region. “One chief told me: ‘Everybody who wants to work is working,’ ” she says.

BY THE NUMBERS

OILSANDS IMPACT IN THE REGIONAL MUNICIPALITY OF WOOD BUFFALO

- 2008 operating costs to rise to about $12.5 billion, construction capital costs to rise to $20 billion, most of which will be spent in Wood Buffalo.

- 2012 operating costs to rise to

$18 billion, construction capital costs to decline to $18 billion, most of which will be spent in Wood Buffalo.

- Construction capital costs forecast to take a slight decline in 2012 due to higher provincial royalty regime.

- New operations jobs estimated to rise from about 8,500 new jobs in 2008 to 13,700 new jobs in 2012, all in the Wood Buffalo region alone.

- Urban population in Fort McMurray area conservatively forecast to rise from 65,169 in 2006 to over 100,000 in 2010. Figures do not include the 25,000 workers now estimated to be in work camps, hotels/motels/illegal suites.

- Value of contracts to aboriginal companies in 2006 was $412 million.

- Contributions to aboriginal communities in 2006 was $3.7 million.

- Half of mobile/transient workers are over 35 years old, and the majority of those are over 45 years old.

- Over half of mobile workers live in Alberta and 56 per cent are from the greater Edmonton area.

- Mobile workers’ spending in Fort McMurray is estimated at $150 million in 2007.

- Mobile workers put extra demand on health facilities with 32 per cent of emergency room visits in 2007.

- Males make up 92 per cent of mobile workers.

- About 54 per cent of mobile workers are married, and the largest single age group are those aged 44 or over at almost 30 per cent.

- Mobile workers from elsewhere in Canada make up 44 per cent of mobile workers, and 22 per cent of them come from Newfoundland.

- Estimated spending in Fort McMurray by mobile workers rose from $84.1 million in 2006 to $150.6 million in 2007.

Source: Jacob Irving, executive director, Athabasca Regional Issues Working Group; 2007 Surveys and Reports

Story From The Edmonton Journal 

Highlights of the ‘State of the West’ - Employment Report

The historically high labour market participation rate in Alberta is unique within
Canada.

The unemployment rate in the West is the lowest in a generation. Today, labour
shortages are a major concern. This stands in stark contrast to years past—the early to mid-
1990s for example—when high unemployment was a top concern of politicians and other policymakers.

Services producing industries are responsible for 3 out of every 4 jobs in the West
and Canada as a whole. Compared to BC and Manitoba, a larger proportion of people make a
living in the goods producing sectors in Alberta and Saskatchewan.
Just as services producing sectors provide the majority of jobs, these sectors have
been responsible for most of the new jobs created. In the West, services producing industries
accounted for 80.6% of new jobs. Outside the West, the services sector was responsible for
all job growth.

The changes taking place in western Canada’s agricultural and rural communities
are noticeable in changes to the workforce. For example, employment in the agriculture
sector has dropped considerably in the past 30 years. This trend is particularly evident in
Saskatchewan.

Western Canada’s workforce is better educated than ever before. At the same
time as the proportion of the workforce with post-secondary education has increased, the
proportion with less than high school has declined.

Alberta’s traditionally high labour force participation
rate—the highest in Canada—sets it apart from the other
western provinces and the rest of the country. The 1970s
were characterized by the entry of more women into the job
market, leading to a marked increase in the percentage of
working-age women in the labour force.

Shifting demographics will have an impact on future
labour force participation rates. As the population ages and
more workers retire and exit the labour force, participation
rates will likely fall.

Provincial unemployment rates in the West are the
lowest in a generation. For the majority of the past decade,
BC stood out with an unemployment rate consistently
higher than the rest of the West. However, since 2002, BC’s
unemployment rate has plummeted. Saskatchewan’s rate
of unemployment has traditionally been lower than the
Canadian average. This lower rate is due in part to outmigration
of people to other provinces. Alberta, which has
arguably reached full employment, had the strongest job
growth record in the region since 1995 (see Figure 9.3).
Between 1995 and 2007, Alberta’s average annual percent
change in employment was 3.1%, compared to 2.0% in BC,
0.8% in Saskatchewan, 1.2% in Manitoba, and 1.9% in the rest
of the country. Alberta was responsible for one-quarter of all
the new jobs in Canada in 2006 and 2007.

Three in four Canadians are employed in the broad
services producing sector. The same holds true for the
West, although a slightly larger proportion of workers in
Alberta and Saskatchewan are in goods producing sectors
compared to BC and Manitoba. Industry employment as
a percentage of total employment differs significantly from
province to province. This is especially true for industries in
the goods producing sector. Manufacturing is relatively more
important to Manitoba than to the other western provinces.
Saskatchewan has the largest share of employment in
agriculture while Alberta has the largest share in mining and
oil and gas extraction.

There have been some big changes in the employment
picture over time. In general, growth in total employment
from 1990 to 2007 was driven by gains in the services
producing sectors. In the West, 80.6% of job gains were in
service industries. For the rest of Canada, all job gains were
due to service industries—employment in goods producing
sectors contracted between 1990 and 2007. Outside the
West, particularly Ontario and Quebec, the decline in the
relative importance of the goods producing sector is largely
due to manufacturing. East of Manitoba, there were 100,000
less manufacturing jobs in 2007 than 1990; construction was
the only goods producing industry in which employment
increased. In the West however, manufacturing sector
employment expanded between 1990 and 2007.

From 1990 to 2007, total employment increased 39.9%
in the West compared to 24.4% in the rest of Canada.
However, the overall numbers for the West mask large
variations between provinces. The percentage increase in
total employment in was much higher in Alberta (53.5%) and
BC (45.3%) than in Saskatchewan (10.5%) and Manitoba
(16.1%).

Employment in agriculture declined from 1990 to 2007
with only BC posting a gain in this area. Alberta stands
out with strong employment gains in its goods producing
sector. These gains were driven by huge increases in
employment in construction and mining and oil and gas
extraction. Both Alberta and BC witnessed tremendous
gains in several services producing sectors. Construction
was also an important source of employment growth for
BC. On the other hand, BC’s important forestry sector has
suffered losses. In Saskatchewan, losses in agriculture were
counterbalanced by increases in mining and oil and gas
extraction, construction, and several industries in the services
producing sectors. Manitoba’s health care and social services
industries were responsible for over 25% of total employment
gains in that province.

Technological advancement and the increasing
importance of knowledge-based industries have contributed
to the need for a more educated workforce. The period from
1990 to 2007 saw a divergence of the proportion of total
employment that is highly educated from the proportion that
is less educated. In the West, the percentage of employed
people that have completed post-secondary education
increased from 39.8% to 53.5%. Post-secondary in this
context includes certificates or diplomas as well as university
degrees. In contrast, the proportion of workers with less than
high school fell from 23.9% to 13.4%.

This trend is likely to continue. Industries and
occupations that require highly skilled and highly educated
workers continue to gain prominence within the Canadian
economy. Demographic changes will also play a part, as older
workers are replaced by younger workers who are, on average,
better educated.

Alberta’s labour market has stood out, not just
in the West, but all Canada, for a number of reasons.
Employment growth in Alberta in recent years has been
unrivaled—it alone was responsible for one-quarter of
all new jobs in Canada in 2006 and 2007. Moreover,
Alberta’s traditionally high labour force participation
rate—the highest in Canada—sets it apart from the other
western provinces and the rest of the country.

State of the West Report 2008 from Canada West Foundation Direct Link Page

Major demographic and economic trends are changing the face of western Canada, says a newly released benchmark study by the Canada West Foundation.

Since its last edition of State of the West five years ago, Canada West Foundation says there have been considerable changes in western Canada, demographically and economically. Several of the trends discussed in the previous edition have continued, while other significant new trends have emerged.

Key findings include:

• Communities across western Canada are in the midst of a profound demographic transformation as their populations continue to grow older. The proportion of the western population under the age of 15 has dropped steadily, from roughly 30% in 1971 to less than 20% in 2007, while the proportion over the age of 65 has increased. The number of seniors in the West will more than double by 2031.

• The West’s share of total immigrants to Canada has increased in recent years and is virtually the same as the region’s share of the national population (30%). Immigration will be instrumental for population growth in the West as the natural rate of population increase (births minus deaths) declines.

• Interprovincial migration has been a source of population growth for western Canada as a whole. From 1972 and 2007, the region attracted 629,000 more people than it lost, while the rest of Canada combined suffered a net loss.

• Almost 60% of all Aboriginal peoples in Canada live in the West, roughly twice the West’s share of Canada’s population. The Aboriginal population is younger and has grown faster than the non-Aboriginal population. In 2006, 32% of Aboriginal peoples were under age 15, compared to 17% of the non-Aboriginal population. Western Canada’s Aboriginal population grew 16% between 2001 and 2006, almost three times faster than the non-Aboriginal population.

• Large urban areas dominate the populations of the western provinces. Approximately two-thirds of the population lives in the region’s nine largest urban areas. Urban areas have been responsible for the overwhelming majority of population growth in the West.

• In terms of overall performance, economic strength within Canada has shifted westward, with the West leading the nation in economic growth in recent years. The unemployment rate is significantly lower in the West than elsewhere in Canada. From 1990 to 2007, total employment increased 39.9% in the West compared to 24.4% in the rest of Canada.

• Although there is diversity in terms of the West’s industrial structure, and over 80% of job gains have been in service industries, the West remains a resource-based economy. The region’s exports are dominated by raw and semi-processed natural resource products.

• The US, by a large margin, is the most important market for western Canada’s exports. While countries such as China and India have become much bigger players on the world economic stage, the proportion of western Canada’s exports destined for the US increased between 1992 and 2006.

Canada West Foundation’s Senior Economist, Brett Gartner, author of the work says that State of the West 2008 provides detailed information about individual western provinces, the region as a whole, how the region has changed and how it compares to the other parts of the country.

“Pan-western research such as State of the West provides insight into specific challenges, opportunities and trends that are shaping Western Canada,” said Andrew Scheer, Member of Parliament for Regina-Qu’Appelle, on behalf of the Honourable Rona Ambrose, President of the Queen’s Privy Council for Canada, Minister of Intergovernmental Affairs and Minister of Western Economic Diversification. “Canada is a vast and diverse nation, and understanding the unique challenges and opportunities of each region is the first step in building a stronger West in a stronger Canada.”

State of the West 2008 is part of the Canada West Foundation’s The NEXT West Project. Core funding for this project has been provided by Western Economic Diversification Canada and the Kahanoff Foundation. Additional funding has been provided by an anonymous foundation, the Canada West Foundation Founders’ Endowment Fund, Canadian Western Bank, CN, Petro-Canada, Phillips, Hager & North Investment Management Ltd., Teck Cominco Limited, and SaskEnergy. The Canada West Foundation expresses its sincere thanks for this generous support.

Ontario Risks Losing ‘Fat Cat’ Status

OTTAWA — Ontario’s budget mirrors a grim economic outlook for 2008, but though the province is by far the biggest economy in Canada, its pain will largely remain contained within its borders, economists say.

Yesterday’s budget shows an economy at a standstill, driven to a halt by a stagnant export sector, a contraction in home building, deteriorating corporate profits and a lethargic labour market. Government spending will barely grow this year, and there will be no surplus to speak of.

While many economists believe the Ontario economy is hovering on the brink of recession, the provincial government projected real growth of 1.1 per cent this year, followed by a recovery to 2.1 per cent in 2009 and 2.7 per cent in 2010.

“The biggest risk [that the government’s numbers are too optimistic] is in 2009,” said Derek Burleton, director of economic studies at Toronto-Dominion Bank.

The province uses an average of private sector forecasts as a basis for its own forecast, but the private sector is quickly revising its expectations downward as trade with the United States falters.

Traditionally, a province with Ontario’s economic heft could drag down much of the country with it, by spreading its troubles in two key ways: through economic channels, and by cutting into the equalization payments.

This time around, the economic problems hampering Ontario’s growth are so tied to trade with the United States that the spillover beyond the trade sector will be limited, economists say, unless the U.S. downturn deepens significantly.

And changes to the equalization formula over the past few years mean that Ontario’s economic weight is no longer the key determinant for how much other provinces receive.

“Ontario is no longer king of the castle,” said equalization expert Tom Courchene, director of the Institute for Intergovernmental Relations at Queen’s University in Kingston. “It used to be that people would watch the Ontario budgets more than their own budgets, in terms of equalization. And now they’re probably watching Alberta’s oil revenues, instead of Ontario’s income level.”

The old equalization formula excluded the richest and poorest provinces from its calculations, and then dished out federal funds to bring the poorest up to same level of fiscal capacity as the average determined by five median provinces. In reality, Ontario, by its sheer size, usually determined the average. But now, Ottawa uses a 10-province formula to determine the average, diluting the sway of Ontario. The new formula also increases the importance of resource revenues to provincial economies.

As well, with the lags needed to calculate the complex equalization payments, Ontario’s weakness won’t affect the size of the pool of money until about three years from now, when the slowdown will likely be over, Mr. Courchene added.

At that time, it’s quite possible that the formula will put Ontario on the receiving end of equalization, and turn Newfoundland and Labrador into a contributor, he said.

“This Ontario hit won’t show up until three years from now … Ontario will likely be a have-not when the lag catches up,” he said. “Everyone still believes that Ontario is the fat cat of Confederation. That’s not the case any more.”

While the equalization formula has subdued fiscal contagion, economic contagion is also contained because of the nature of Ontario’s slowdown, economists said. The province’s problems are concentrated mainly in the trade sector, while the consumer side of the economy continues to fare well, said Pedro Atunes, director of forecasting for the Conference Board of Canada.

Triggered by a rising currency and compounded by a U.S. slump, output in Ontario’s wood, construction and manufacturing sectors is declining, as are jobs in those sectors, he said. The auto sector is heading into tougher times, too, as U.S. consumers hunker down.

But Canadian consumers are in good shape, and should be able to bolster Ontario’s services sector as long as the U.S. downturn doesn’t deepen significantly, he added.

Data released yesterday about consumers on both sides of the border are a case in point, he said. Consumer confidence in the U.S. plunged to its lowest level since 1973. In Canada, retail sales grew strongly in January, even in Ontario and Eastern Canada.

HEATHER SCOFFIELD

From Wednesday’s Globe and Mail

March 25, 2008 at 9:13 PM EDT

With files from reporter Kevin Carmichael in Ottawa

CALGARY, Alberta (Reuters) - TransCanada Corp (TRP.TO: Quote) is mulling development of a C$5 billion ($4.9 billion) hydroelectric project on the Slave River in the remote reaches of northern Alberta, Alex Pourbaix, president of the power and pipeline company’s energy division, said on Thursday.

The company said it is in the early stages of planning for a run-of-the river hydro project on the Slave, an undeveloped river that carries more that two-thirds of Alberta’s water flow north to Great Slave Lake in the Northwest Territories.

The project, which would not include a large reservoir behind a dam, would likely generate 1,200 to 1,300 megawatts of electricity, and could be operating in a decade.

“We are in what I would call an early-stage feasibility exercise,” Pourbaix said. “We’ve done a fair bit of work on the technical aspects and are now starting to engage with stakeholders.”

TransCanada’s partner on the project is a unit of Atco Ltd. (ACOx.TO: Quote), which owns generating plants in Canada, Britain and Australia.

Power from the project would be sold in Alberta as well as in export markets, Pourbaix said. However it would require significant additions to the province’s electricity transmission network, which already lacks capacity to send power from the province’s northern reaches to the more developed southern areas.

The project “will require significant transmission upgrades and, likely, better interconnections of the Alberta power market with markets to the south of us,” Pourbaix said.

TransCanada is the country’s biggest pipeline company. It also owns electricity operations in Canada and the United States. As well, the company is a partner in Bruce Power LP, which operates the Bruce nuclear facility in Ontario, which supplies a fifth of the province’s power.

($1=$1.02 Canadian)

(Reporting by Scott Haggett; Editing by Peter Galloway)

Energy giant eyes $5B hydro project

TransCanada, ATCO assess Slave River

Geoffrey Scotton, Calgary Herald

Published: Thursday, March 20, 2008

Energy and pipeline giant TransCanada Corp., along with ATCO Power Ltd., is eyeing the development of Alberta’s last remaining major hydroelectric prospect, on the Slave River — a potentially $5-billion project supplying emissions-free power.

“We are presently assessing the feasibility of the Slave River project with our partner ATCO,” TransCanada’s president for energy, Alex Pourbaix, told the Herald, suggesting the site could accommodate a 1,200 to 1,300-megawatt hydro development.

“A very key part of that feasibility analysis (is) we are doing some work to understand the project itself, understand the stakeholders up in the region and people that would be impacted by it. We’re in an early feasibility stage,” said Pourbaix.

The project is the latest of a raft of massive generating proposals that have emerged to serve a near-doubling of Alberta’s power production required by 2027 to satisfy North America’s fastest-growing industrial and residential demand.

The Slave River concept — which would easily be Alberta’s largest hydro facility — comes on the heels of Bruce Power LP announcing it is pursuing an up to 4,400 megawatt, $10-billion or more, nuclear facility near Peace River.

“Obviously we’re looking at a major project,” ATCO power president Rick Brouwer told the Herald, adding the facility, if completed, would require transmission upgrades. Sister company ATCO Electric is

Alberta’s second-largest transmission operator and controls the territory around the Slave River site.

“We’re not averse to developing large projects,” said Brouwer, adding that emissions-free generation is particularly attractive in the wake of changing and increasingly onerous standards around carbon-dioxide production, particularly in power generation.

“With this type of generation, we can help Alberta and Canada meet some of their environmental goals in terms of greenhouse gas production and reductions,” said Brouwer. “This could make a very significant impact.”

Interest in the Slave River’s hydroelectric potential stretches back to at least the 1970s. In the early 1980s, Alberta Environment conducted a study on the hydroelectric potential of the area near Fort Smith., where the river — and 107 billion cubic metres of water a year — crosses into the Northwest Territories.

“Due to the high volume of water, the rapids along this stretch of river possess enormous hydroelectric potential,” Alberta Environment said in a commentary.

“The monetary and environmental costs were deemed too high for the power demand and the project was put on hold indefinitely,” the department added.

Now, TransCanada and ATCO, both Calgary-based, are examining the economics and social and environmental aspects of the project and have already decided a traditional hydro project with a large dam and reservoir is not appropriate.

As an alternative, a so-called run-of-river approach, where river water is directed through turbines without being stored, is being studied.

“The Slave River hydro development is looking at a number of different run-of-river concepts,” says a brochure the two firms will use in community consultations. “Most require a structure on the river somewhere between Fort Smith and Fort Fitzgerald . . . without long-term water storage capability.”

Brouwer emphasized that TransCanada and ATCO view extensive consultation with local residents and aboriginal communities as an essential first step in the evaluation process for the project, which would take at least 12 years to complete.

“Trust is absolutely critical — and we have to earn it,” said Brouwer. Atco Power, part of the broader ATCO Ltd. network controlled by Calgary’s Southern family, operates about 4,800 MW of generation in Alberta and around the world, including the 1,000 MW Barking Power Station in London, England.

“We have people in the community over the next few months to talk about the process they, the community, feel is appropriate,” said Brouwer. “That’s the first point on our agenda.”

Analysts note that a Slave River project will have to compete with roughly 20,000 MW in potential projects that are vying to satisfy the 5,000 MW of additional capacity required by 2017 and the 11,500 MW of additional output needed by 2027.

In a market where the risk of projects is borne completely by the developers, the very long lead times and massive capital costs of a major hydro-electric proposal can put it at a disadvantage.

“A project of that size, scale and magnitude, $5 billion, is significant with a long lead time. That’s putting a lot of money at risk for a very long time in an uncertain marketplace,” said Duane Reid-Carlson, president of the Calgary-based energy consultancy EDC Associates Ltd. “That’s the problem with a project of this size and magnitude. It’s very vulnerable.”

gscotton@theherald.canwest.com

TransCanada, Atco May Build Hydropower Dam, Calgary Herald Says

By Ian McKinnon

March 20 (Bloomberg) — TransCanada Corp., owner of Canada’s largest pipeline system, and partner Atco Power Ltd. are considering building a hydroelectric dam in northern Alberta that may cost C$5 billion ($4.9 billion), the Calgary Herald reported, citing the head of TransCanada’s power business.

The Slave River dam could generate as much as 1,300 megawatts, the newspaper cited TranCanada’s Alex Pourbaix as saying. Atco executive Rick Brouwer said the project would take at least 12 years to complete, according to the article.

TransCanada and Atco may build a so-called run-of-river project where water flows through turbines without being stored in a reservoir, the newspaper said. The report cited Duane Reid- Carlson, president of Calgary energy consulting firm EDC Associates Ltd., for the C$5 billion estimate of potential project costs.

To contact the reporter on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net.

Canadian HR Reporter,

March 24, 2008

Immigrants don’t get much for $130,000

Nova Scotia scraps mentorship PNP and offers refunds

By Shannon Klie

An immigration program aimed at attracting business managers and entrepreneurs to Nova Scotia by promising them business mentorships was doomed from the start, according to an immigration lawyer.

Most immigrants want to settle in Alberta or British Columbia, because of the hot job market, or Ontario and Quebec, said Sergio Karas, a Toronto-based lawyer and chair of the Ontario Bar Association’s citizenship and immigration section.

“People in Nova Scotia and New Brunswick are making valiant efforts to reverse that trend but, let’s face it, the jobs are not there,” he said. “Immigrants are going to go wherever the jobs are and business immigrants are going to go wherever the money is.”

The Nova Scotia provincial nominee program’s (PNP’s) economic stream fast-tracked potential immigrants, who paid $130,000, to permanent resident status and promised them a minimum six-month mentorship with a local business, for which they would be paid a minimum of $20,000.

“It was designed to provide newcomers to the province with an opportunity to gain some exposure to the Canadian workplace,” said Mary Anna Jollymore, director of communications for the Nova Scotia office of immigration. The hope was they would then open their own business in the province, she added.

But with a softer economy, immigrants who came to Nova Scotia under the economic stream had a hard time finding mentorships with local businesses. Those who did find placements were often working well below their experience level.

“It wasn’t meeting the needs of many of the nominees who were coming through the program,” said Jollymore.

Of the $130,000 program fee, $100,000 went to the mentoring business and $30,000 went to administration fees, including a $20,000 immigration consultant fee.

PNPs in other provinces also have business or entrepreneurial streams, most of which require a minimum investment in a current or new business of up to $400,000 (usually with the requirement the immigrant own at least one-third of the company). Some provinces, such as Manitoba and Prince Edward Island, require the immigrant to make a good faith deposit with the provincial government, usually about $100,000, which the immigrant gets back when the business investment is made.

However, Nova Scotia’s economic stream differs because the immigrant doesn’t end up owning part of the company in which he has invested $100,000.

The economic stream program stopped accepting applicants on July 1, 2006. The unused mentorship fees are in a $75-million trust fund and last fall the government offered $100,000 refunds to participants who lived in Nova Scotia for 12 months but never found a mentorship. About 600 of the 800 participants qualified for the refund option.

However, about 75 immigrants who did find mentorships are petitioning the government for a refund of the difference between the $100,000 and what the mentorship paid. Some of these immigrants told the legislature’s public accounts committee last month they felt betrayed by the province because their experiences didn’t live up to the promise of the program.

A former department store manager from Tehran told the committee his boss at a fish company told him to stay home because there wasn’t any work for him. An Iranian psychiatrist spent his time at a construction company studying for Canadian medical tests.

Many immigrants who came to Canada under the program didn’t bother to stay in Nova Scotia and immigrants who found mentorships want the government to use the fees these immigrants forfeited for their refund.

There were, however, some success stories from the program. John Huang, a food exporter from China, had a year-long mentorship with the Atlantic Institute for Market Studies (AIMS) in Halifax, during which time he worked on research projects to improve trade between Atlantic Canada and Asia.

“As a think-tank, we exist to draw new and innovative thinking to public policy ideas. By going outside of the country, you get a guaranteed different perspective on things,” said Charles Cirtwill, the acting president of AIMS, who added that Huang brought a valuable perspective on immigration and trade policy.

While working at AIMS, Huang also set up his own China-Canada import-export business in Halifax, and he became a member of the city’s chamber of commerce.

Where the program fell short, in Cirtwill’s opinion, was in matching immigrants with businesses. Despite having paid a $30,000 administrative fee, it was Huang, not Cornwallis Financial, the organization that administered the program, who found AIMS and convinced the institute to take him on, said Cirtwill.

“It was that matching piece that they were never able to fulfil the promise of,” he said.

Nova Scotia is redesigning the economic stream into an entrepreneurial stream that will more closely resemble that of other provinces, said Jollymore.

“We’re still aiming to attract the same kind of individuals who have an interest in setting up their own business down the road or have skills that would meet the needs of the local labour market,” she said.

While the majority of immigrants to Canada aren’t choosing to settle in Nova Scotia, there has been an increase in the number of immigrants coming to the province since 2001, said Jollymore.

The province had 1,474 total landings in 2003 and that increased to 2,585 in 2006. The province wants to reach 3,600 annual landings by 2010 and increase its retention rate from 40 per cent in 2001 to 70 per cent by 2010, she said.

“While it’s all well and good to bring people into the province, at the end of the day you want them staying here,” she said. “The targets are ambitious, but we’re on track.”