Late last month, five trade unions representing 2,500 Alberta construction workers won strike mandates from their members, an unprecedented event: Alberta's construction unions have been regulated since 1982 by a labour code so complex -- or so business-friendly, in the unions' view -- that securing a strike mandate is akin to solving a Rubik's cube by committee. Because it is the first threat of job action in a generation, observers shrink from predicting what disruptions could take place in the oil sands, the sector most vulnerable to a strike. For oil sands executives, already beset by a labour crunch, the vote is a foul dose of castor. Alberta's construction workers are among the highest paid in Canada. A journeyman electrician, for example, earns as much as $34 an hour. Yet the tradesmen look at US$75-a-barrel oil and record-breaking profits by the likes of EnCana, which last year earned profits of $6.4 billion, and argue they deserve more.

They make a good case. "This is not just about a boom-time-make-good-while-the-getting's-good," says Barry Salmon, a spokesman for the unions. "It is that much overused phrase of an 'overheated economy,' which has made housing, food, travel, gas -- almost everything -- that much more expensive." Inflation, which averaged 3.9 per cent in Alberta in 2006, jumped to 5.2 per cent in the first half of this year(the national average for the last 12 months was 2.2 per cent). Most workers, too, must leave their families for oil sands projects concentrated around far-off Fort McMurray, where many live in camps. Such circumstances make for resolute members: the refrigerator mechanics, one of the unions in question, were the least sure, voting 85 per cent in support of a strike mandate; 99 per cent of the boilermakers, meanwhile, voted yes.

Such numbers reflect a rosy perception of oil sands robustness -- a perception shared by the broader Canadian public, for whom the oil sands remain as exotic as the sands of Saudi Arabia and just as synonymous with wealth. Yet such notions are predicated on what's become, after just a few years, an antiquated view of the sector's health. Last summer, former Alberta premier Peter Lougheed called for an oil sands slowdown to tame the province's rampaging economy. Now observers in Alberta worry they are entering a testing ground that could impose a far pricier and longer-lasting moratorium than anything even he might have envisioned.

A casual glance yields little evidence of malaise. Everyone, it seems, is moving to Alberta. Last year, the province showed a net migration of 62,000 -- amazing when set against Ontario's net loss of 34,000. Indeed, Alberta's growth -- its GDP swelled 6.8 per cent in 2006 -- has been so spectacular that it helped drive the Bank of Canada to raise interest rates last month, despite a comparatively moribund Ontario.

It seems like Alberta has been roaring for ages, but it was only in late 2002, when the influential Oil & Gas Journal began including the oil sands in its inventory of world reserves, that the international community began taking notice. Recognition of the province's 175 billion barrels of oil catapulted Canada into second place, after Saudi Arabia, in a ranking of world oil holdings. That new focus coincided with a rise in oil prices, triggering $125-billion worth of announced investments.

Now the oil sands outlook has darkened. Alberta is wracked by a labour shortage, its jobless rate hitting a historic low of 3.4 per cent last year. The Conference Board of Canada predicts that, by 2025, Alberta will be short as many as 330,000 workers; other forecasts are more dire, envisioning a demand for 400,000 more labourers by 2015.(So frustrated are some by a lack of bodies that, in an interview with Maclean's, one observer charged Dave Bronconnier, the mayor of Calgary, with throwing too much manpower at the city's current infrastructure works.)Above those local considerations, prices for raw materials jumped worldwide. Driven largely by insatiable China, steel prices, for example, rose by 70 per cent in the past five years.

The result has been oil sands overruns -- and even the occasional surrender to circumstance. Capital costs have tripled in a decade, and doubled in the last three years. Last summer, Shell Canada Ltd., now wholly owned by Royal Dutch Shell PLC, said costs for expanding the Athabasca Oil Sands Project would rise as much as 75 per cent from earlier estimates, to $12.8 billion. Next, Nexen Inc. said costs at the Long Lake project would drive estimates up 20 per cent, to $4.6 billion. Canadian Natural Resources Ltd. said in March it wouldn't move on plans to build a bitumen processing plant, or upgrader. Synenco Energy Inc., meanwhile, shelved its upgrader in May. "I don't think it's an anomaly," says Mark Friesen, a Calgary-based analyst at FirstEnergy Capital Corp. who subtitled a recent report on Synenco "A Warning Shot Across the Bow for Oil Sands Economics." "I think it's an indication of how difficult the environment is. If we're not careful, more projects may end up being delayed or cancelled."

Print Article    Send to a Friend    Write a letter to the editor

Digg this Stumble It!   Post to del.icio.us Seed Newsvine   Share on Facebook Technorati links