How the oilsands changed Alberta and Canada forever
Hard work and imagination turned an ugly duckling into a golden goose
FORT MCMURRAY, ALTA. — David O’Laney unlocks the gate to the historic site he is charged with protecting and swings it wide, allowing entrance to what is arguably the birthplace of modern Alberta and all that has meant to the rest of Canada.
Appropriately, the road in is paved with bitumen.
“This is where the first experimental oilsands processing took place,” says O’Laney, who monitors and maintains the site for Alberta Culture.
“This” — a stretch of Athabasca River bank north of Fort McMurray — is Bitumount.
It’s where almost a century ago, men and money laboured mightily to turn the black, gooey, sandy gunk into something — anything — that people would pay for.
Eventually, an industry was founded. The result changed Alberta — and Canada — forever.
“It really did change the economy and the political landscape of the country,” says University of Toronto political scientist Chris Cochrane. “It’s still changing them.”
Half homestead, half abandoned industrial yard, Bitumount doesn’t look like a birthplace.
It was started in the mid-1920s when Robert Fitzsimmons, a career oilman, decided the tarry goo along the riverbank was his ticket to riches.
For more than a decade, he did everything he could to make the oilsands pay. He advertised 38 ways to use bitumen, including road paving, home roofing and even as a therapeutic bath.
His cabin and those of his workers, the gaps in the walls chinked with bitumen, still stand.
Some of today’s mines have their own airstrips, but in those days the only way in and out was Fitzsimmon’s boat. The Golden Slipper still moulders on the riverbank.
Fitzsimmons was bought out in 1942 by Lloyd Champion, a serial entrepreneur who thought bitumen just the thing to pave the Alaska Highway, then under construction. Champion later partnered with the provincial government, which ultimately ran the site until it closed in 1955.
Touring Bitumount today, it’s impossible not to be struck by the parallels between past and present.
Despite their rusty patina, many of the structures from Fitzsimmons’ time would look familiar to today’s oilsands workers — the dormitories, the power plant, the refinery, the pipelines.
There’s an old rail car on site once used as a travelling road show to sell the oilsands — a harbinger of the two-storey dump truck Alberta brought to Washington D.C. in 2006 for the same purpose.
Fitzsimmons’ old operation even presaged the modern method of using hot water to separate the oil from the sand it’s mixed with. Except his workers stirred a huge open-air cauldron and raked off the oily slurry by hand. “Imagine the smell,” says O’Laney. Those old crews produced about 60 barrels a day. Now, 2.3 million barrels are piped out each day.
That’s the result of decades of innovative engineering — and a pipeline of money.
“The perfect metaphor is someone spiking the punch bowl,” says Todd Hirsch, chief economist for Alberta Treasury Branches, a
provincially-owned bank.
In 2014 alone, the oilsands attracted $34 billion in investment.
Alberta, a jurisdiction of just over four million people, knocked back years off that. It was quite a party. Corporate shindigs featured caviar and filet at the Calgary Stampede, where $100 hotdogs loaded with cognac and lobster sold out. Mobile homes in Fort McMurray sold for $400,000.
A 17-year-old could make $80 an hour driving a truck. Retail sales staff in Alberta could expect to earn $5,000 a year more than elsewhere in the country.
Every year from 2000 to 2015, Alberta gained about 23,000 people at the expense of the other provinces. The Alberta economy grew by a fifth between 2010 and 2014. That’s not necessarily good, Hirsch says. “When you have one dominant industry that pulls so much capital, it turns into a bit of a black hole that has its own gravitational force and it pulls in everything around it including labour, capital, everything from office space to building materials to all kinds of talent. It makes it very difficult for other industries and non-energy sectors to compete.”
The industry has created enormous wealth, but it has left Alberta vulnerable.
“Everyone would like to have a more diverse economy, but when oil’s at $100 a barrel it pinches off any attempts,” says Hirsch.
Nationally, the oilsands boom exaggerated the regional tensions that have plagued Canada since 1867, says Cochrane.
“It’s very difficult to craft comprehensive economic strategies for this country given the variable conditions and industries that dominate in different regions.
“I don’t want to say the oilsands have damaged Canadian politics or national unity. (But) I think the reaction to the oilsands has left a lasting impact on people’s sense of national cohesiveness.”
Alberta’s financial strength during the 2000s was enough to destabilize the relationship between Alberta, Ottawa and the other provinces, says Hirsch.
“If the Fathers of Confederation had to go back and make a redo, they probably wouldn’t have handed over natural resources to provinces,” he says. “This is really what has caused the enormous imbalances between the provinces.”
Think of the now-notorious 2001 firewall letter, written by a young lobbyist named Stephen Harper to then-Alberta Premier Ralph Klein urging him to opt out of national programs such as the Canada Health Act.
“Nothing of that is even imaginable without the kind of fiscal independence that Alberta was able to secure from the resource industries,” Cochrane says.
But the industry has also fostered national ties. There’s all those Newfoundlanders moving west, or the 1,500 Ontario manufacturers filling oilsands orders.
“There’s no question Alberta’s energy industry has really become Canada’s energy industry,” says Hirsch.
The industry is so big that when the 2016 wildfires near Fort McMurray temporarily shut production in May, Canada’s GDP shrunk that month by 0.6 per cent.
The oilsands have also become an international issue.
At one point in 2010, arguments from environmental groups convinced six Fortune 500 companies to promise to avoid oilsands-derived fuel in their transportation fleet. Ad campaigns targeting the industry ran throughout the U.S. and in Europe.
Under attack, Albertans became more than a bit defensive about the industry that butters their bread.
“We are a bit on our back foot,” says Hirsch. “We’ve painted ourselves into a corner where we find ourselves with a dependence on a commodity that the rest of the world is viewing unfavourably.”
Things, of course, have changed since 2014. Oil prices have collapsed from over $100 a barrel to about $50.
Analysts wonder if the age of megaprojects such as the $16.5-billion Fort Hills project — jointly owned by Suncor, Total and Teck Resources, next door to Bitumount — is nearing the end.
ExxonMobile and Chevron recently wrote down $183 billion of oilsands reserves in response to concerns from American securities regulators that they were no longer economically feasible to produce.
And other multinationals are backing away from the resource. Royal Dutch Shell recently sold most of its oilsands holdings to Canadian Natural Resources. Statoil has sold its oilsands assets to Athabasca Oil Corp. of Calgary.
Alberta actually lost people to other provinces last year.
Hirsch suggests the current oil price is Goldilocks — high enough to stabilize the industry and keep it profitable, low enough to leave economic space for diversification.
The problem for the Alberta government is that high-tech manufacturing or the renewable energy or advanced agri-food or tourism or engineering sectors may create tax revenue, but they don’t pay royalties.
“Royalties are really nice and easy to spend because you didn’t have to work very hard for them,” Hirsch says.
Nationally, the oilsands have been an abundant and growing source of good-paying middle-class jobs, the kind to which Prime Minister Justin Trudeau constantly refers. More than 400,000 direct, indirect and induced jobs depend on the oilsands and supporting sectors.
Even if the oilsands remain stable, it’s hard to see where new jobs for all those skilled trades will come from, says Cochrane.
“To what extent are people fundamentally malleable in terms of the kinds of things they’re willing or able to do?” he asks.
“There’s a kind of person who stands to gain stable employment from oilsands work. One line of thinking is that these folks will have to go away and retrain and adapt to another kind of economy.
“I think that people’s horizons for what they want to do, the kind of thing they’re good at, isn’t as infinite as some of these arguments imply.”
Canadians who have grown accustomed to fat oilsands paycheques may be facing a reckoning, Hirsch says.
“Wages are coming down, wage expectations are coming down, and that is difficult when households have set up budgets and expectations of how much money and how many vacations to Maui.”
And the challenge of climate change — perhaps the biggest one the industry faces — has never gone away.
Still, Bitumount holds one more lesson, this one more optimistic.
The oilsands are just one more example of Canadians creating value with persistence, hard work and imagination — turning an ugly duckling into a golden goose.
“The oilsands didn’t work at the beginning,” says Hirsch.
“Agriculture, at the beginning, did not work here.
“We took a marginal resource and turned it into something.”