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JULY 2009, Volume
24 Issue 7
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Regional Roundup: Fort McMurray, AB
Fort Mac's break
may be over
Oiltown planners got busy when slowdown finally
freed up space and time for infrastructure work
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Fort McMurray manager of planning and development
Dennis Peck: playing catch-up with a high-density
proposal in Canada's fastest growing municipality |
There was a time when job losses in the tens of thousands and the shelving of multibillion-dollar oilsands projects would have rocked Fort McMurray to the core. But when the 2008 recession hit the northern Alberta boomtown, Fort McMurray's leaders and oil executives breathed a collective sigh of relief. Instead of rushing headlong into projects requiring thousands of new employees, big oil companies are selectively hiring professionals that were laid off by smaller companies and perfecting their latest technology. Instead of dealing with another huge increase in traffic and housing woes, the municipal council is dusting off it's planning books and taking time to deal with the problems faced by a community that is growing faster - 8.5 per cent annually - than any other town in Canada.
For Dennis Peck, general manager of planning and development for Wood Buffalo Regional Municipality, of which Fort McMurray is part, the hiatus in the oilsands expansion is a vindication. The Provincial Energy and Utility Board had ignored the municipality's appeal to disallow the expansion when the oil companies first sought it. Now, the municipal council is using this "downtime" to invest in "the infrastructure, housing and businesses to try to catch up to the services required by the population," says Fort McMurray mayor Melissa Blake.
It seems to be working.
Lighter traffic crossing the Athabasca River (a half-hour commute is now reduced to eight minutes) has helped speed the construction of an additional bridge linking the north and south areas of the town.
In the past year, according to Len Clarke, broker/ owner of Sutton Group Fort McMurray, the number of houses for sale increased by two and a half times to more than 900 listings. Housing prices fell by about 15 per cent when the recession hit, but a single family home still costs about $600,000. Sales, Clarke says, have increased in the past two months, fuelling the rumour that economic recovery is on the way, as newly hired oil workers are seeking accommodation in the town.
According to Canada Mortgage and Housing Corporation, housing starts in Fort McMurray are down by 56 per cent in 2009 compared to last year. A total of 133 detached homes and only 82 multiple-family homes have been built. The planned community of Eagle Ridge, developed by Alberta-based Centron Group is indicative of that statistic. Many of the contractors slowed their projects to reflect the decreased demand for new housing as the recession took hold. Still, a drive through the subdivision shows that land is being broken and many homes and condos are occupied. Dozens of units, many valued at over half a million dollars for semi-detached homes, have already been sold.
Further residential development is in the plans. Late last year, the province released thousands of acres of Crown land for residential development in the Saline Creek area, near the airport, and in North Parsons, about six kilometres north of the city.
The projects have yet to begin, but when complete will result in 6,800 new homes in Saline Creek alone with a population of 20,000. This projection comes closer to the industry estimates that 3,000 to 5,000 units be built every year to meet demand.
The real demand in Fort McMurray is for commercial and industrial real estate. The 65-acre TaigaNova Eco-Industrial Park on Highway 63, seven kilometres north of Fort McMurray, represents the last scrap of industrial land in the municipality, according to Clarke.
Commercial tight
Clarke says the price of lots - up to $1.5 million per acre - plus the cost of building to LEED standards makes the investment "too brutal for local companies." Still, 10 of the 26 available lots managed by Eco-Industrial Solutions Ltd. for the Wood Buffalo Housing and Development Corporation, have been sold, and others are pending. When that land is gone, it may take four or five years for more to be developed says Clarke, who blames the province's supply and demand policy for the lack of industrial development in Fort McMurray. "With all this land, there is no land," says Clarke. "That's ridiculous."
Still, Ken Shebib, an associate broker with Colliers International in Fort McMurray, said his office had closed on $27 million worth of commercial real estate deals in the past six months. "This region was largely unaffected, or at least less affected than most, during the recent recession," he said.
In the Lower Townsite, the downtown core of Fort McMurray, the cost of renting commercial land is comparable to Vancouver and Toronto at $45 to $65 a square foot, and every foot is rented. There's only 31.8 square feet per person of commercial space available, compared with 45 square feet per person for a city of comparable size.
With the local big-box stores like Canadian Tire and Marks Work Wearhouse outselling all others in their chains across Canada, it's little wonder that the rent often escalates with every renewal. Some small enterprises have almost priced themselves out of business in their efforts to afford a commercial presence in the downtown core.
Higher density
Peck admits that more Crown land for commercial purpose will have to be released to solve that problem, but hopes the ambitious Lower Townsite Redevelopment Plan will clarify land use in the downtown core and create a renewed central business district which will support 8,000 to 10,000 jobs. The plan also calls for mixed-use commercial and some residential buildings of 14 storeys, hoping to boost the urban population to 24,000 people who want to work, live and play downtown.
For play, the area surrounding the Lower Townsite couldn't be better. The city owns all of the waterfront land enclosed in the arms of the Athabasca, Clearwater and Hangingstone Rivers providing them with pristine areas for recreational development, some of it within walking distance of the downtown core.
As with most urban renewal plans, Peck and the municipal council are in for the long haul. They plan to finance the redevelopment through the regular municipal budget process to prepare for a municipal population predicted to be 250,000 by 2030.
Oil projects back
Of course all of this depends on the future investment by oil companies in the oilsands industry.
Innovations such as in-situ production, is now being used by Suncor at Firebag, a production site about two and a half hours' drive north of Fort McMurray. This technology reduces the cost of recovering the oil and makes the industry more eco-friendly.
In-situ production is accomplished by drilling two parallel horizontal wells, one for steam injection and the other for oil recovery. Recovered bitumen is piped to an upgrading facility. The process disturbs only 15 per cent of the land around the site and creates no tailings pond. Suncor has invested $1.8 billion in this technology since 1993 as part of their growth plan to recover 550,000 barrels of oil per day by 2013.
With crude prices rising above $60 a barrel and the agreement of Suncor and Petro Canada's shareholders to allow Suncor to takeover Canada's national oil company, there have been a few more signs that the industry in Fort McMurray will soon be back to normal. Although the deal still has some hoops to go through, Suncor is projecting savings of $300 million in annual costs and about $1 billion in project spending every year.
Meanwhile, Imperial Oil Ltd. says it's charging ahead with its long-awaited Kearl oilsands project northeast of Fort McMurray.
The Calgary-based company said the mining project will cost an estimated $8 billion to build - unchanged from its original 2004 estimate. "The Kearl project is a high-quality, long-life oilsands mining operation,'' said Imperial spokesman Gordon Wong. The company had been set to make a decision on Kearl last year but took extra time to renegotiate contracts in an effort to rein in costs.
"At the end of last year when the business downturn began in earnest, we made the conscious decision to take the time necessary to look at the project again and look for ways to push costs out of the project,'' Wong said.
Imperial expects Kearl's first phase will begin production in late 2012, just two years later than the original startup plan.
The respite from stress that the municipal and industry leaders in Fort McMurray are enjoying may soon be over.
– Noreen Heighton
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