Alberta Trades Jobs Work Careers Edmonton Calgary

Mar 2008 [Alberta Construction Magazine]

Good times for the oil industry drive commercial and retail construction
Godfrey Budd

The boom in oilsands development in northeastern Alberta, which has seen $8 to $12 billion worth of industrial construction annually in recent years, has coincided with a residential and commercial construction boom. It´s especially apparent in cities like Edmonton, Calgary, and Red Deer.

As for Fort McMurray, where rental rates for a modest two-bedroom apartment have hit as high as $3,000 per month, many regard it as the eye of an economic storm-and a case unto itself.

But what of the small northern communities of Peace River and Cold Lake, both long associated with heavy oil production? Neither region has any Athabasca-style open-pit oilsands mining and Lloydminster´s brand of cold, heavy oil production began only very recently near Peace River, but each has a long-standing production facility, injecting steam underground to produce thousands of barrels of heavy oil daily.

Shell´s Peace River Heavy Oil Complex has been in operation since the 1980s and now produces over 12,000 bbl/d.

Imperial Oil´s Cold Lake facility began production in the late 1960s and now produces about 165,000 bbl/d. Both facilities are expected to increase daily production in future. Also, as long as the benchmark West Texas Intermediate crude oil price stays above US$50 or $60 per barrel, analysts expect further new heavy oil development in both regions. (Through 2007, the WTI price averaged US$72.30 per barrel, according to the U.S. Department of Energy. The price began 2007 at about US$55 per barrel, but zoomed north of US$90 after the greenback tanked.)

Drawing power
Officials from both Peace River and Cold Lake, however, are quick to point to their respective communities´ drawing power as regional centres to account for some of the new construction, while acknowledging the role of the local heavy oil industry.

“In the last six to eight years, Peace River has changed dramatically,” says Amy Murphy, the town´s development officer.

“It used to be a government town, but it´s now a trade and service centre for the region. Also, if you are going to be living somewhere in the North, it´s a nice place to live. Peace River has lifestyle attractions and people want to come and live here. A critical mass has been reached that has turned Peace River into a regional centre.”

The energy sector has also played a part in helping the town achieve a critical mass.

“Other producers [besides Shell] in the region have also made finds and are developing bitumen and tar sands projects,” says Murphy, who believes the town´s open-door approach to inquiries of all kinds helps foster a positive development climate.

Recent commercial additions to the town´s retail mix include the Brick, Canadian Tire, and Mark´s Work Wearhouse.

Some of the new commercial and retail developments suggest something of a transformation for the town of 7,000. A Wal-Mart is scheduled to open in April. Mirroring similar projects in other centres, an adjacent 84,146 sq. ft parcel of retail space is also slated for development with construction expected to be underway this summer.

Murphy says that there is a fairly typical pattern of development adjacent to a Wal-Mart store. Outlets of the American-owned retail giant tend to function as the anchor store in shopping malls-as Eaton´s, Woodward´s, and the Bay once did-with a cluster of adjacent, specialized retailers nearby.

“To date, it appears that Pennington´s and Shoppers Drug Mart have committed to being tenants in the commercial retail development, as has Reitmans, which is already in town, but is apparently changing locations,” Murphy says.

The arrival of a Wal-Mart in small-town North America is often something of a milestone for a local community. In the case of Peace River, it comes after about seven years of robust construction and development activity. Although most of the construction was done in 2007, the Wal-Mart permit to build was granted in 2006, one of the two biggest years in terms of the total dollar value of building permits for the town in the last few years.

Last year saw nearly $20 million worth of building permits for Peace River. Of this, residential construction accounted for $12.56 million, commercial/retail, $4.03 million, institutional with $2.93 million, and $357,000 for commercial demolition. 2007 did, however, mark a slight drop from the previous two years.

The value of permits peaked in 2005 with a $24.33 million total. In 2006, permit values totalled $23.38 million. There´s no breakdown into construction categories-commercial versus institutional, for example-for years before 2007. But the 2005-07 period marked a sharp upswing from before.

Development activity before that had been steady, but hardly dramatic. In the four previous years, 2001 to 2004, the annual total value of building permits in Peace River never strayed above $9 million or below $8 million.

Looking towards the future
In concert with two local municipalities, the town is assembling about 15 quarter-sections for future development, with area structure plans already in place for a couple of the quarter-sections. Construction of two car dealerships and a Home Hardware should start this spring in the southeast corner of Section 35, Murphy says.

On the eastern side of the province at Cold Lake, new commercial development has been brisk in the last couple of years.

Doug Parrish, director of planning and development for the City of Cold Lake, points to several big projects for the community of just fewer than 12,000 and says, “There´s been talk of a new hardware big-box expansion.”

Projects on the books include a $5 million-hotel, a Shoppers Drug Mart, and Blockbuster Video with a combined permit value of $4.5 million. Another $3.75 million will likely be spent this year on a new Staples and two adjacent retail stores. Also, two car dealerships and a Canadian Tire store are upgrading and expanding their outlets.

Bonnyville, about 25 minutes down the road from Cold Lake, is also seeing a burst of commercial construction activity.

Between 80 and 90 per cent of this is “driven by oil,” says Ryan Poole, the assistant chief administrative officer for the town.

He says Cold Lake´s commercial and retail development is more “residential” focused, whereas that in Bonnyville emphasizes “business-to-business.” Cold Lake, he points out, got a Wal-Mart while Acklands, a supplier of pumps and other equipment for the oil and gas sector, and NAPA, an auto and truck part supplier, recently set up regional outlets in Bonnyville.

The area´s industrial activity is apparently spurring demand for more temporary accommodation. Two new hotels, each with 84 suites, are being built in Bonnyville. One is a Days Inn, the other, a Best Western.

It´s around 8:30 on a frigid moonlit January morning on the north side of Fort McMurray. Two construction workers are unloading precast concrete beams from the back of a semi- trailer at a sprawling apartment-condominium complex.

It must be minus 20°C-maybe minus 25-so cold I can barely feel my fingers despite thick gloves. But Fort McMurray, a place where a mobile home can fetch $400,000, is in desperate need of housing, so the construction continues even on the coldest of mornings.

The two workers, Roy Hargrave and Darrel Carey, joke about the temperature with the photographer, Joey Podlubny, who is shooting pictures of the towering white Liebherr hydraulic crane from Northern Crane Services.

The workers, their mustaches white with frost, echo what others have said. There´s no problem finding work here. In fact, these workers, based in Calgary, have jobs lined up for several years.

The region´s labour shortage is well known throughout Canada. Charles Iggulden, president of the Fort McMurray Construction Association for the past three years, admits that finding skilled labour is a big issue for his membership.

“They´re [association members] very concerned about quality products,” he says. Long-term relationships are crucial, he adds. “That´s always a challenge, to make sure you give proper customer service.”

With $90 to $100 billion in oilsands work is planned for the next few years, it´s a challenge that won´t go away anytime soon.

A report on worker needs and shortages that was prepared in December for Alberta Employment, Immigration and Industry found that of the about a quarter of the 50,000 jobs in the Regional Municipality of Wood Buffalo, which includes Fort McMurray, were construction related. Eighty per cent of residential construction companies surveyed expressed difficulty in filling certain positions.

According to the report, some of the most difficult positions to fill mentioned were labourer, salesperson, carpet installer, carpenter, and administrative staff. On the non-residential side, it was a bit better. Only 60 per cent of non-residential construction companies report having difficulties finding staff.

The hardest jobs to fill? Carpenters, drivers, mechanics, welders, electrical engineers, management staff, administrative staff, accountants, janitors, labourers, and heavy equipment operators. Here are some of the answers given when companies in both categories were asked why it´s so difficult to fill some construction jobs:

- “There is a huge shortage of tradespeople right now.”

- “It is difficult to find someone who is skilled. Many people write on their resumé that they have experience and know what they´re doing. Just because you can hammer in some nails doesn´t make you a carpenter.”

- “Up here, the problem is that people aren´t qualified.

- “I get many resumés each day, but I only get three or four resumés a month from labourers. Most people don´t want these jobs and don´t apply for them.”
-
But it´s not only finding skilled labour that´s an issue in the oilsands. The Wood Buffalo region´s infrastructure is strained. The explosive growth has created traffic nightmares. And finding affordable housing is…well, good luck.

According to Royal Le Page True North Realty, the average selling price for a multi-family unit in December was $404,994. While that´s below the $638,242 a single-family home fetched that month, it illustrates what buyers have to pay in the market.

Employment, Immigration and Industry analysis found that the majority of construction companies provide some sort of living allowance or housing for workers.

“We want everybody to feel good, and you can´t feel good if you don´t have a place to live,” said one of the survey´s participants. “The company owns two trailers where people who work for them can stay. It´s a trailer…but it´s a roof over your head.”

Iggulden says the Fort McMurray area´s growth caught many by surprise. What´s needed now, in addition to more affordable housing, is for Highway 63 to be twinned to relieve traffic congestion “and a lot more retail and industrial type services.”

Entering “Oilsands Alley”
With all the attention on oilsands operations near Fort McMurray, it´s easy to forget that production is occurring in other areas as well. Increasingly, companies are using steam assisted gravity drainage technology to bring the oil from the ground. That´s helped the region running south along Highway 881 from Fort McMurray to earn the nickname “Oilsands Alley.”

It is the following day and I am in Lac La Biche, a lakeside hamlet 3 ½ hours south of Fort McMurray on the southern edge of the Athabasca oilsands deposit. Jane Palmer, a genial woman with a bright smile, is telling me about a new condominium project that´s being built, a hotel construction project that will begin this spring south of the hamlet, and the increased traffic she´s noticed along Highway 55 recently.

“We´re at the crossroads of two major oilsands deposits [Athabasca and Cold Lake],” she points out. “What do they say?” She pauses a moment, then leans slightly forward across the desk.

“Location, location, location.”

Palmer is general manager of Community Futures, a not-for-profit organization that provides loans to small businesses and works with Lac La Biche County (it had been Lakeland County until last year) to provide economic development services. She proudly points to the county´s double-digit growth in the 2006 Census (the population is now over 9,100) and discusses what´s bringing people to the community.

“I think they come maybe as tourists initially and they´re looking for some lake lots,” she explains. “And then we´re finding some are into the retirement. Maybe they have family still in Fort McMurray. They want to be somewhat close but not in Fort McMurray.”

Not hemmed in
“This is one of your first stops coming south of Fort McMurray. We´re not hemmed in by provincially owned land like Conklin and Fort McMurray. That gives us an interesting dynamic in that we can grow, whether that´s commercial or residential. We´re not waiting on the province to release land. We already have it here.”

According to Mark Wiebe, development officer for Lac La Biche County, water and sewer service has been installed from the hamlet west to Plamondon and east to Lakeview Estates subdivision near the golf course.

“We have seen significant growth in these serviced areas and anticipate that the growth pressures will continue to be heavy in these areas in particular,” he says. There are also a few development proposals in various stages of the approval process on the north and east side of Lac La Biche, he notes.

Like Wiebe, Palmer credits the paving of Highway 881 as opening the area to more development. Whatever future growth occurs, problems such as increased crime and accidents are almost certain to arise. But Palmer is realistic about that as well.

“We have issues here,” she admits. “It´s not Shangri-La.”

Palmer wants Lac La Biche to be ready to meet tomorrow´s growth-something she believes is only a matter of time.

“StatoilHydro is the first [oilsands] company that has land in the northern component of Lac La Biche County,” she says. “They have the first oil company office in our community as well.”

From an economic development standpoint, attracting an oilsands services company to the community would be a big plus, she says.

“It feels like we´re at the brink here.”

By ANTONELLA ARTUSO AND BILL KAUFMANN, SUN MEDIA

TORONTO — Ontario is on track to become a “have-not” province within two to three years, says federal Finance Minister Jim Flaherty, prompting his Alberta counterpart to vow she’ll be closely eyeing any redrawing of the country’s equalization formula.

And Flaherty’s suggestion that any needed reform of transfer payments to the provinces to help Ontario would be “disruptive,” will also be watched keenly by Alberta, said the province’s new Finance Minister Iris Evans.

Alberta is expected to receive $3.2 billion in transfer payments from Ottawa for such things as advanced education and health care, or about 8.5% of total provincial spending.

Flaherty said the prospect of Canada’s two largest provinces, Quebec and Ontario, becoming “have-not” provinces would be “unprecedented,” and could heighten pressures on other jurisdictions.

“You can imagine the concerns that will raise in the provinces that are above the bar,” he said.

Evans noted Alberta taxpayers pay into the equalization pot under a set formula and those in the province already ante up generously.

“Good fortune has translated into paying a greater share of equalization - we are already giving more than what we’re receiving, and I don’t think we’ll quarrel with that … we’ll monitor with interest the implications,” said Evans.

She added she hopes Alberta will get more back in the future.

Flaherty said he’s greatly concerned about the consequences of a weakening Ontario economy and said Premier Dalton McGuinty would secure a dubious place in history.

“It will be Premier (Dalton) McGuinty’s legacy that he, in two terms, took Ontario from being the strongest economic province in the federation to a ‘have-not’ province.”

A blunt-talking Flaherty told a Sun Media editorial board yesterday that the federal government would have to “rethink” the federal equalization program should that happen.

“If Ontario becomes entitled to those kinds of things, then that will distort the system dramatically and will bring strains into Confederation,” Flaherty said.

The architects of the equalization formula never envisioned a scenario in which Ontario and Quebec, home to 21 million of the country’s 34 million residents, would both be recipients, he said.

Flaherty is continuing to call on the McGuinty government to lower business taxes in its provincial budget next week to create a friendlier climate for investment.

In the Ontario legislature yesterday, provincial Conservatives urged the McGuinty government to respond to the deepening manufacturing job losses with reductions in business taxes and regulations. “Alberta has a track record of monitoring that very closely,” said Evans.

“We’ve got agreements in place, we’re living by the agreements and we’d expect others to do so.”

Equalization is an important national formula through which tax dollars from wealthier provinces, mainly Ontario and Alberta, flow to less well-off provinces to ensure all Canadians have comparable levels of public service.

Claudia Cattaneo, Financial Post  Published: Wednesday, March 19, 2008

In taking on the government of Venezuelan President Hugo Chavez, Exxon Mobil Corp. is going to bat for a principle it says is fundamental to foreign investment around the world — sanctity of contract.

“When you enter a country and you make enormous investments over several years, and then it’s several years for those investments to pay out, you have to have an understanding between yourselves and the host government that these are the rules,” Rex Tillerson, Exxon Mobil’s chief executive, argued in a recent analyst presentation.

“They write the rules in laws, constitutions, regulations, and then we put them into contracts, and we sign contracts and we trust one another to honour those contracts. If you don’t have that situation, on what basis do you then invest?”

The same principle could soon be tested in Alberta, a province that has attracted a flood of foreign investment to develop the oilsands, partly on the promise that its political and legal systems are safe.

Now, however, the government of Ed Stelmach wants to renegotiate a Crown agreement expiring in 2016 with the Syncrude oilsands project — in which ExxonMobil is a major partner through its ownership of Imperial Oil Ltd. and also the project manager — so it can collect higher royalties as part of its new royalty framework.

While the two sides are still trying to work out a deal, the spectre of a confrontation was raised last week, when Tim Hearn, the retiring CEO of Imperial, said the consortium would not agree to new terms unless shareholders are compensated for the loss in value.

This raises the question: If push comes to shove, who sits on firmer ground — the state (Alberta), or a private corporation (Syncrude)?

One of the few certainties is that this situation is a lot more complex than Mr. Stelmach made it sound a few months ago, when he said in announcing the new royalty terms that deals with Syncrude and Suncor Energy Inc., the other oilsands pioneer with a Crown agreement, would be renegotiated “so there would be a level playing field for all industry stakeholders.”

The other certainty is that time is on Syncrude’s side. The province is at risk of losing its new deal with Suncor, under which the company can back out if Syncrude and the province haven’t come to terms by the end of the year.

If this turned into a court fight, experts say that Alberta has a weak legal case. The government can indeed change terms for oilsands projects governed by generic terms by changing the law, but a contract between two parties is a different situation. As one lawyer put it: “The general principle is that agreements can’t be unilaterally amended.”

But there is a big practical side to this: governments can strong-arm corporations into doing what they want — whether in Russia or in Alberta, which is probably why these types of confrontations don’t happen that often.

Greg Stringham, vice-president at the Canadian Association of Petroleum Producers, said tactics available to the government include withholding approvals, which would be a problem for some of the Syncrude members that are developing other oilsands projects for which they need government co-operation.

Bob Schulz, a professor of strategic management at the University of Calgary’s Haskayne School of Business, said Alberta could also persuade some Syncrude partners to break ranks with Exxon Mobil, threaten to charge huge royalties when the Crown deal expires, delay environmental approvals, or play the social corporate responsibility card.

“Social corporate responsibility is higher up on an ethics ladder than a contract,” Mr. Schulz argues. “Exxon is making enough money. Their profits are astronomical because oil prices are high. If they want to do what is right, they should sign a new deal.”

Considering the stakes, it’s in everyone’s interest that this doesn’t turn into another Exxon showdown. There are some broader lessons: That governments shouldn’t go around the world making promises they can’t keep, that corporations shouldn’t invest expecting that terms won’t ever change, that Mr. Stelmach took a risk when he promised the electorate more oil money.

Geoffrey Scotton,
Calgary Herald

Published: Monday, March 17, 2008

CALGARY
- Alberta’s manufacturing sector started 2008 on a financially positive
note, with the value of shipments from the province’s factories,
refineries and assembly facilities rising 0.9 per cent from January
2007 to more than $5.5 billion.

The positive performance in
January followed an annual gain in 2007, when the sector posted record
output for the fifth consecutive year despite year-end weakness, with
sales for the year rising about one per cent to more than $67 billion.

January’s
rebound in Alberta from a 1.2 per cent drop in December - the fourth
decline in five months - was led by gains among energy products,
Statistics Canada said. The gains were attributable to improved prices.

“Manufacturing sales in the western provinces were led by Alberta
(up 0.9 per cent) in January, as a two-per-cent price increase assisted
petroleum and coal product manufacturers in the stalwart oil patch,”
StatsCan said in an analysis.

Manufacturing shipments also picked
up nationally in January, rising 1.3 per cent to $49.3 billion from
December, when the country posted a three-year low, marked by a
3.7-per-cent decline from the previous month. Despite the
month-to-month improvement, January’s overall sales were the lowest
since March 2005.

gscotton@theherald.canwest.com

Evans says U.S. credit crisis unlikely to derail provincial investment plans

Tony Seskus and Tony Seskus, Calgary Herald, Archie McLean,
The Edmonton Journal, With files from Renata D’Aliesio,
Calgary Herald; The Edmonton Journal; Canwest News Service

Alberta’s new finance minister doesn’t expect a downturn in the U.S. economy to torpedo the province’s spending plans.

Iris Evans, who is planning how the province will invest in key areas such
as health and education, said Monday the billions of investment dollars
destined for the oilsands provide a buffer for the economy other
jurisdictions don’t have.

The escalating credit crisis in the
U.S. rattled North American stocks Monday, stirring fears of a pending
recession. But even as oil prices slid by more than $4 US per barrel,
Evans said Alberta is “relatively well off” because of the energy
industry.

“I don’t see it having an effect on spending plans,” Evans said,
adding there could be an impact if the problems drag on. “But at this
stage, they’re not ringing any alarm bells.”

The provincial government is expected to release its budget by early May.

Economists agree Alberta is well-positioned to weather an economic storm, but some
local industries are already hurting from the U.S. slowdown. And
Canadian investors who’ve poured their savings into equity markets are
being impacted by the market jitters.

Mike Percy, dean of the University of Alberta School of Business, warned that Albertans could
feel the pinch of the North American credit crunch.

“It’s clear that the sub-prime fiasco and the general crunch in credit markets is
going to affect everyone, regardless of where they live,” Percy said.

“You will find a tightening up of credit conditions and, whether you live in
Alberta or Ontario. In these types of credit crunches, no one or no
region is immune. Either credit will be unavailable if you have a
spotty record, or it will be available to you at a higher cost than it
had been.”

The Toronto Stock Exchange’s main index fell sharply
on Monday, reflecting weaker commodity prices and further worries over
how a stumbling U.S. economy will affect the rest of the world.

Canada’s main stock index dropped to its lowest point in five weeks, led by
Royal Bank of Canada and other financial companies. The drop came after
U.S. investment bank Bear Stearns Cos. was sold for $2 per share –
less than one-tenth of its market value as recently as Friday — to
avoid collapse.

In Ottawa, the federal finance department stressed that the domestic banking system is solid and
well-capitalized, but acknowledged Canada is not bullet-proof to market
uncertainty.

“As an open trading economy, Canada is not immune to
the growing uncertainty in the United States and on global markets,”
said Finance spokesman David Gamble.

In Edmonton, Evans said Alberta’s economy is on solid ground with the long-term investment of
the oilsands unaffected by the ebb and flow of markets.

“Alberta will be relatively well off because we’re safer,” she said. “I think
the long-term investments in the oilsands really protect us, so there’s
a sustainability to our economy that isn’t there elsewhere.”

Brett Gartner, senior economist at the Canada West Foundation, said the slowdown in the U.S. is “real and it’s deep.”

“But I am still holding strong to my belief and my view that Alberta
– and the West in general — are fairly well positioned to fare better
than the rest of Canada and will not be dragged down completely by the
U.S.,” Gartner said. Gartner said some of the good news for Alberta is
the strength of the economies in China and India, which keeps energy
markets strong.

However, Percy cautioned the provincial
government has significant economic challenges. The province will want
to meet public demand for infrastructure without “overheating an
already heated economy,” he said.

Some sectors are still being hit hard.

Alberta’s $11-billion forestry industry, the province’s
third-largest economic sector, is alarmed by its financial state and
the fallout for 47,000 workers.

Brady Whittaker, the executive of the Alberta Forest Products Association, points to high energy and
utility costs, a buoyant Canadian dollar, the softwood lumber agreement
with the U.S., the American housing crash and the province’s mountain
pine beetle infestation as challenges for the industry.

In the past year, 1,000 forestry jobs have been cut, while 1,500 to 2,000
indirect positions, such as logging and transport contracts, have
evaporated.

Like the forestry industry, Alberta’s cattle
producers are suffering, too — and looking for export markets outside
of the sluggish U.S.

Erik Butters, chairman of the Alberta Beef
Producers, said the industry is facing a double-whammy: a Canadian
dollar that rose rapidly and soaring feed prices due to the biofuels
boom.

“We probably could sort of withstand one or the other,”
Butters said. “But to have them both at once has proven extremely
difficult.”

But Butters is expecting a turnaround through higher food prices.

“It would be nice to just get back to a profitable margin because we are far from it right now,” he said.

© The Edmonton Journal 2008

Oil & Gas Outlook

By Mike Byfield

Ominous clouds loom on the energy sector’s horizon: recession in the United States, anti-trade rhetoric from American presidential contenders, tightening environmental legislation across North America and the like. Even so, some petroleum managers and analysts remain optimistic about the future. “The drilling downturn in Alberta, low storage inventories and a tight international market for LNG [liquid natural gas] will generate a significant rally in natural gas prices beginning as early as this summer,” predicts Len Kerkovius, a senior research analyst with McLean & Partners Wealth Management Ltd. Bob Keiller, CEO of Production Services Network (PSN), is even more confident about the longer-term outlook. “Western Canada represents a fantastic international source for growth in the oil and gas sector,” says the Scottish oilman (shown below), whose global company is now establishing an engineering hub in Calgary.

“The fundamental factor is the price of oil,” comments Jerry Taylor, a senior fellow with the Cato Institute. The Washington-based scholar notes that crude values surged in a major way on six occasions over the past century, often prompting speculation that world supplies were at the point of permanently diminishing. “Of course, that concern proved groundless. But there is a difference this time. In the past, oil price increases were always triggered by supply shortages or disruptions. The dramatic jumps that we’ve experienced in recent years have been driven by demand - we’ve just experienced the longest period of prosperity in history - and that’s new,” Taylor says.

The American boom appears to be over at last. “We believe the U.S. has already entered a recessionary period,” says Anil Tahiliani, research director at McLean & Partners. For many economists, a recession is defined as two or more consecutive quarters of negative growth in GDP (Gross Domestic Product). Although the Americans have not yet recorded even one monthly decline, economic growth below the 49th parallel has all but disappeared. That slowdown raises basic questions: Do high oil prices trigger recession in consuming countries? Will oil demand slacken in a recessionary U.S. and possibly elsewhere? And if oil demand does weaken, will crude prices drop in response?

“Our research into the last few recessions indicates that crude demand in the U.S. and globally did not decline much,” Tahiliani says. In fact, oil consumption is strikingly unresponsive to higher prices. Even though American gasoline rocketed from $1 per gallon to about $3 within the past few years, drivers there are pumping as much fuel as ever into their tanks. So Tahiliani doubts that crude over $100 per barrel is the prime culprit in the current slowdown.

After OPEC engineered a four-fold jump in crude prices during the 1970s, North America went into a recession that persisted into the early ’80s. Cato’s Taylor is not convinced that a repeat of that debacle will occur now. “First, it’s not certain that higher oil prices were in fact responsible for that recession,” he cautions. “Also, federally imposed wage and price controls were in place at the time, which impeded the economy’s capacity to adjust promptly to higher energy prices. That’s not the situation now. And interest rates rose to crippling heights in the late 1970s. Today interest rates are coming down, not going up.”

“The million-dollar question is the global impact of a slowdown in the U.S.,” Tahiliani suggests. The United States has powered much of the world’s recent prosperity through heavy, debt-financed imports. Its net trade imbalance reached $838 billion in 2006. But the country’s capacity to continue buying with borrowed funds has been hobbled by record public and private debt - the national credit card may be maxed out. Fortunately, however, China and India may be less dependent on exporting to the U.S. than previously. “An increasing percentage of Asia’s economic activity occurs within the region,” Tahiliani says. “Asian oil demand may bear up despite a recession in the U.S.”

Americans are scheduled to elect a new president on November 4. In hard times, U.S. voters typically shift leftward, expecting their federal government to cushion the blow for the most vulnerable as well as jump-start the economy again. The leading Democratic candidates, Hillary Clinton and Barack Obama, are liberal senators who advocate a larger spending role for government in health care, education and elsewhere. And both presidential contenders have played heavily on fears that the North American Free Trade Agreement (NAFTA) with Mexico and Canada has caused job losses in the U.S.

George Eynon, vice-president of the Canadian Energy Research Institute (CERI), acknowledges some concern over this issue. “The Americans have a dynamic political process and you can never completely rule out the possibility of major policy changes,” he says. But NAFTA also has formidable strengths. The Cato Institute, among many others, insists that free trade has generated a net employment gain for the country, with the creation of well-paid jobs more than making up for the loss of less skilled work. Furthermore, Eynon notes that Canada provides 15% of American oil and natural gas supply along with a big chunk of its electricity. “The trade treaty is an important component of American energy security and that’s not going to change for the foreseeable future,” he says.

CERI, which tracks international energy trends, does not see the political hostility of Venezuelan President Hugo Chavez (shown here) toward neighbouring Colombia as a large economic concern, nor does he believe that Chavez is likely to make good on his threats to choke exports to the U.S. “Venezuela is not a really big piece of the global oil market to start with,” Eynon observes. The Latin American nation, whose economy is already fragile, cannot afford to shut in much crude production. If Chavez diverts his oil to customers in Asia or Europe, the overall international supply-demand balance will not be affected and the U.S. will buy elsewhere. Nor do other customers have the refining capacity to process the heavy, sulphur-laden crude exported by Venezuela.

Environmental policies in the U.S. and Canada do concern Eynon. “Regulatory interventions designed to minimize climate change are not necessarily bad for petroleum producers but the industry must maintain an ongoing dialogue with those jurisdictions,” he says. The U.S. Energy Security Act already places restrictions on federal use of fuels derived from high-carbon sources like oilsands bitumen. A California-led alliance of states and provinces (British Columbia and Manitoba) has adopted regulations designed to restrict future consumption of high-carbon fuels. Beginning July 1, B.C. will start phasing in a direct consumer tax on carbon fuels. And the federal government just announced stringent carbon sequestration standards for Canadian bitumen projects coming on stream in 2012 or later.

Natural gas prices, which sagged badly last fall, are a crucial factor for conventional producers in the gas-prone Western Sedimentary Basin. Although prices have recovered recently, Kerkovius notes that further softening may occur later this spring. By mid-summer, though, the McLean analyst expects to see longer-term price gains. Gas storage inventories coming out of the winter season are lower than they’ve been for the past three years. Despite aggressive drilling in the U.S., production is not rising. Canadian gas output has declined due to lower drilling activity. Nor does Kerkovius think North American demand will draw in a flood of cheap LNG. “Liquefaction facilities are not coming on stream overseas as quickly as the market requires,” he forecasts. And the gas price recovery would become a spike if next winter is unusually cold or a hurricane ravages the U.S. Gulf Coast.

Alistair Green, business development director for Production Services Network, says Alberta’s recent squabbling over royalty rates will soon pass. PSN is an engineering and service contractor based in Scotland with a world-wide payroll of 8,000. The company just acquired Calgary’s Tartan Engineering, which will act as its expansion platform for Western Canada. “We have both NOCs [state-owned national oil companies] and IOCs [non-government international oil companies] as clients. At this point, IOCs have access to just 16%-18% of the world’s oil,” Green (shown here) says. “For those producers, the oilsands in particular have a powerful appeal. Thanks to its energy resources and political stability, this region has a tremendous future.”

Source: DOB Magazine

OTTAWA — Canada’s workforce is aging dramatically as the baby boom generation slides into retirement, census data released yesterday shows, and labour analysts are sounding alarm bells about the economic fallout if shortages in information technology, skilled labour and health care are allowed to materialize.

Statistics Canada says 15.3 per cent of Canadian workers are 55 or older and nearing retirement and for the first time, there are just as many Canadian workers over 40 as under.

The combined force of retiring boomers and declining fertility rates have conspired to erode the ratio of retirees to replacement workers.

In 2006, there were 1.9 Canadians aged 20-34 entering the workforce for every person aged 55-64 leaving it. There were 2.7 replacement workers for every retiree five years ago and, 25 years ago, there were 3.7.

Statistics Canada analyst Geoff Bowlby says it could take the labour market 20 years to correct itself.

“We know the Canadian workforce is getting older. We know that it is inevitable that baby boomers approaching retirement will eventually retire or leave the labour market,” Bowlby said.

“That will have an impact on the labour market well into the future, probably for the next two decades.”

Industry watchers say governments and corporations across the country are unprepared for the labour shortages that will result.

“Right now, many organizations are in denial about the whole issue,” said Linda Duxbury, a labour specialist at Carleton University’s Sprott School of Business.

“Any government sector, any public sector, doesn’t matter if it’s municipal, provincial or federal, are going to have real big issues. The other big group that’s going to have huge issues is health care and education.”

Between 2001 and 2006, the country’s overall annual employment growth dominated that of the G7 nations — rising at 1.7 per cent each year.

Alberta’s thriving oil and gas industries and B.C.’s booming construction industry accounted for one-third of the surging employment rate hike.

Researchers have been warning for years about potential labour shortages across Canada, yet labour market analysts say employers and governments have not responded, and they are now predicting a widespread shortage of workers impacting a broad range of occupations.

The year opened with a Conference Board of Canada report warning that 90,000 jobs in the tech industry need to be filled in the next three years to avoid a $10-billion blow to the economy.

A shortage of the right kind of workers can damage a healthy economy because the labour market and economy are so tightly bound. When the ratio of workers arriving to the workplace dips below the number leaving it, it creates a drag on the economy and stagnates growth.

The looming worker shortage is compounded by a glut of middle-aged workers whose knowledge base is quickly becoming obsolete.

“We’re in bit of a transition time,” said Linda Franklin, president of Colleges Ontario, a group representing the province’s 24 colleges of applied arts and technology.

“We have workers who are desperately in need of retraining so that they’re able to do other jobs that are crying out for people. . . . As time goes forward, as the baby boomers retire and as we have fewer young people coming into the workforce, we are going to face a very serious crisis.”

For those entering or established in the workforce, the seller’s market could produce a set of employees who will demand better wages, benefits and working conditions or they will threaten to walk.

Some say the thriving Alberta economy is a microcosm of what’s to come for the nation.

Dan Kelly, Western Canadian vice-president of the Canadian Federation of Independent Business, says several firms there are tolerating corporate theft rather than fire staff they cannot easily replace.

“They’re so desperate to hang onto any staff they can,” he said. “They can’t afford to get rid of them.”

Companies that spent the last three years clamouring for the best workers — or any workers — to fill jobs in the economic boom, find some who worked the oilsands of Fort McMurray have marched over to Vancouver for top-dollar construction jobs ahead of the 2010 Olympics.

Finance Minister Jim Flaherty has warned that labour shortages are one of the “most daunting economic challenges” Canada will face in coming years.

In January, he said Ottawa needs to find ways to help Canada hold onto its skilled workers and draw talented immigrants to the country to help avert an economic nightmare.

But just a few days later there were media reports about immigrants from France, highly prized and ardently recruited, packing up in droves and going home because they are working at menial jobs and struggling to make ends meet, suggesting employers and governments are only paying lip service to immigrants.

BY THE NUMBERS

Some key numbers culled from the 2006 census on work, education and commuting, released yesterday by Statistics Canada.

- 1.4: Percentage annual decline in manufacturing jobs since 2001. The sector lost 136,700 jobs during the five-year period, with the auto industry in central Canada being hit especially hard.

- 1.7: Canada’s average annual employment growth, in percentage, between 2001 and 2006 — the highest among G7 countries.

- 1.8: Annual percentage increase of retail trade jobs since 2001. More than 1.8 million Canadians work in retail jobs.

- 2.6: Average annual employment growth rate of Northwest Territories and Nunavut. The opening of new diamond mines explains why the territories outstripped the national average.

- 3.0: Unemployment rate among those who took education studies as a post-secondary degree — the lowest rate for any field of study. The next lowest was Bible studies (3.2 per cent).

- 3.4 : Percentage of the country’s total workforce that moved to a different province or territory between 2001 and 2006.

- 15: Percentage of Canadians with less than a high school education.

- 15.8 : Employment rate gap between aboriginal Canadians (65.8 per cent) and non-aboriginals (81.6 per cent). The gap closed from 19.1 in 2001.

- 18.4 : Percentage of Canadians who spent unpaid time caring for seniors.

- 21.2: Percentage of foreign-born workers in the Canadian workforce.

- 24: Percentage increase since 2001 of adults aged 25 to 64 who have a university degree.

- 33: Percentage of workers in Vancouver who speak neither English or French on the job.

- 36.3: Proportion of ministers of religion aged 55 and over.

- 51.9: Median age of a farmer in Canada.