Oilsands woes reach far-flung eastern shores

Slowdown in flights, truck sales, real estate sales
By Greg McNeil
|hrreporter.com|Last Updated: 03/19/2015

SYDNEY, N.S. (Reuters) — Cory Troke joined the exodus west two years ago, leaving scenic but job-scarce Cape Breton, Nova Scotia, after being laid off as a machinist.

Troke, 37, headed to the Alberta oil sands, apprenticing as a pipefitter and finding 19 months of steady work, flying in for two weeks, returning home for one.

By October Troke was out of work again, and he was not alone. A downturn driven by tumbling crude prices is causing turmoil in an island economy that has grown dependent on workers commuting more than 3,000 kilometers west.

"I personally know 40 to 50 guys that have been laid off since October," says Troke.

Cape Breton is another example how the 60 per cent slide in oil prices since last June has rippled far and wide, affecting property markets in Alberta and North Dakota, helicopter sales in Houston, the Canadian dollar and national interest rates.

Once an industrial powerhouse fueled by now-closed coal mines and steel mills, the island has turned into an exporter of labour. Many young workers head to Fort McMurray in northern Alberta, lured by big paychecks awaiting at oilsands projects clustered around the city.

"If we didn't have the oilsands, the McMurray factor as we sometimes call it, we would be in economic chaos," said Cecil Clarke, mayor of the Cape Breton Regional Municipality.

Clarke, who has a brother working in Fort McMurray, says there is no precise data on the number of Cape Breton residents working in Western Canada, but pegs it at around 10,000. Other think it is closer to 5,000.

Still, in a region where the population has shrunk to around about 136,000, the distant oilsands have become an important contributor to the local economy.

One industry town

"We used to be a one industry town," said Doug Lionais, a business professor at Cape Breton University, speaking of the region's steel-making past. "We're beginning to be a single industry town again. Only this time, the industry is in Alberta."

While forestry and fishing also provide jobs, unemployment in the region is chronic, with 14.6 per cent of the labour force looking for work in December compared with Canada's national unemployment rate of less than seven per cent.

In contrast, Alberta has been a magnet for workers. Its population has grown nearly nine per cent in three years to October 2014 compared with a 3.5 per cent national rate.

"There's nothing on my union board. Nothing with flights and camp. Nothing I'm really qualified for," said John Gnatiuk, a Sydney River, Nova Scotia, truck driver who has spent the past five years as a fly-in, fly-out worker in western oilfields.

He said he was not expecting any new opportunities to come up there for at least six months.

Layoffs among oilsands producers have included Suncor Energy, the largest oilsands operator, which said last month it would cut 1,000 jobs; Canadian unit ofSaipem SpA which laid off about 1,000, and Royal Dutch Shell Plc , which cut 300 jobs.

Nearly every operator in the region has cut spending, limiting work for the northern Alberta contractors that once needed to reach east for workers.

That spells trouble for Cape Breton, where oilsands workers often buy the big-ticket items like snowmobiles, boats and new houses, though the area has yet to feel the brunt of the oil downturn.

"If I were to ask the agents in this office, some of them would say up to 75 per cent of their business is based on oil," said Valarie Sampson, a real estate agent in the Cape Breton city of Sydney.

Sampson says that though sales are slowing, she does not expect to see the full effect of the oil downturn until the spring, when sales are usually the busiest.

The largest airport in Cape Breton saw passenger numbers fall by 1.9 per cent in January and then 4.8 per cent in February, a drop airport officials are attributing in part to oil worker-related traffic.

Helen MacInnis, the airport's chief executive, said much of that decline followed a decision by the charter service Canadian North to halve the number of flights between Sydney and Fort McMurray.

Ron MacDonald, general manager of Cape Breton-based dealership MacDonald Auto Group, said sales of the big, expensive pickup trucks favored by oil sandsworkers have recently slowed down.

"They're not sure about their jobs right now," he said.

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