By Keith Norbury

The worldwide slump in oil prices of the last two years was already devastating the economy of the oil sands region of northern Alberta. That, in turn, was hammering the business of companies that transport project cargo into the region. As if that wasn’t enough of a blow, a massive wildfire this May ravaged Fort McMurray, at the epicenter of the oil sands. Not only did the fire force the evacuation of about 88,000 residents from the city for several weeks, it caused cargo movements in the region to grind to a halt. A few months after the fire, operations in the oil sands have resumed, although still not at the level they were before oil prices tanked. And Fort McMurray is beginning the slow process of rebuilding, which should also result in the movements of material and equipment into the region.

Fire had dramatic impact

“The overall impact during the time of the fire for us was dramatic,” said Glen Fleming, Vice-President of operations with Entrec Corporation, an Acheson, Alta.-based heavy haul and crane rental company. During the fire itself, some Entrec crews that were on their way out of the area turned around and hauled in support equipment, such as fuel tanks and card locks, Mr. Fleming said. Once the fire was over, Entrec had a large backlog of modules and vessels to transport to its customers in the region. A particular challenge, however, was a lack of accommodations for the company’s staff. They couldn’t move back into their homes, and all the hotels in the city were closed.

“So we had to come up with some fairly creative ways to house them for the first couple of weeks,” Mr. Fleming said. That included “some temporary housing accommodations and mobile shower units” that Entrec brought in. The company also took on a contract to move hundreds of refrigerators to a landfill site. Those fridges contained food that had spoiled after over a month without electricity.

Damage estimated at $3.58 billion

The fire destroyed about 2,400 homes and buildings, but left the city’s downtown intact. Insurance Bureau of Canada estimated in July that costs from the fire would reach $3.58 billion, making it the most costly disaster in Canada’s history. In late August, Alberta’s NDP government revealed that the wildfire would have an estimated $500 million impact on the province’s next budget. That was based on a calculation of “$647 million in disaster relief assistance minus $452 million in federal transfers plus $300 million in lost revenue,” said a news release on the government’s website. That loss and other changes would add another $527 million to Alberta’s deficit, bringing it to $10.9 billion.

Also in August, Statistics Canada confirmed what was already suspected: the Fort McMurray wildfire “and ongoing maintenance at oil sands facilities contributed to a decrease in crude oil and equivalent production.” Most of that was from a drop in synthetic crude oil production of 50.1 per cent in May to 1.7 million cubic litres, the lowest decline since 2005.

Entrec’s business activity in the region increased about 20 per cent post-fire compared with pre-fire activity, Mr. Fleming said. He attributed part of that to “maybe a heightened awareness in our capabilities due to some of the assistance that we gave during the fire” as well as “picking up some market share.” However, another factor is that oil sands plants had fallen behind schedule during the fire and had ramped up their activities to catch up. Even so, the oil sands market is much flatter than it was a couple of years ago. “There’s a lot more capacity just from a supplier point of view, and there are fewer projects on the go than there were previously,” Mr. Fleming said.

First rebuilding permit issued

As for the rebuilding of Fort McMurray, the Regional Municipality of Wood Buffalo, which encompasses the city, issued its first rebuilding permit since the fire on Aug. 11. A week earlier, the municipality announced that the Canadian Red Cross had already raised $299 million for the recovery effort. The federal government had earlier pledged it would match whatever the Red Cross raised.

However, a media inquiry to the municipality regarding the plans for repairing infrastructure wasn’t answered. Nor did Bob Couture, the Director of Emergency Management for the municipality, return telephone messages.

Mr. Fleming said in late July that the Fort McMurray rebuilding effort was still in its preliminary stages. When it ramps up, though, he expects his company to play a role. “Undoubtedly there’ll be some modular homes that’ll be built, say, here in Edmonton and then trucked up there,” Mr. Fleming said. “We have the capacity to do that.” But, as someone who lived in Fort McMurray for 20 years, he cautioned that since the economic downturn, the city’s housing market for rental condos and hotels has had a lot of excess capacity, which can already accommodate those displaced by the fire. “I don’t think that every structure that was burned or destroyed is going to be rebuilt unless things really change where there’s a need for more people in Fort McMurray,” Mr. Fleming said.

Insurance Bureau of Canada noted on its website that a rebuilding period of 14 to 18 months isn’t uncommon after a large disaster. During the peak of Fort McMurray’s boom, about 600 homes were built each year, the bureau said. At that rate it would take a few years to replace all 2,400 structures — 1,600 of them homes — that were lost in the fire.

Ed Scherbinksi, President of Calgary-based heavy hauler Mullen Trucking, doubts that his company will even be called upon to bring in heavy equipment for the rebuilding effort. “There’s so much overcapacity there already with the slowdown,” Mr. Scherbinski said. Other Mullen Group trucks and vans, however, might transport building materials to assist with the reconstruction, he added.

At the annual conference of the Crane Rental Association of Canada — held in Calgary this June — representatives of heavy haul and crane companies that have significant operations in the region recounted their experiences during the wildfire. Those companies — NCSG Crane and Heavy Haul Service Ltd., Mammoet Canada Western Ltd., and Sterling Crane — together had about 350 employees working in the region at the time. Yet only about five of those employees lost their homes in the fire, and the companies themselves didn’t lose any equipment. However, they did describe scenes of employees dispensing gasoline and water to those fleeing the fire, and of the evacuation itself. For example Gijs (Gus) Verdeijen, Vice-President Operations for the crane division of Mammoet Canada Western Ltd., recounted the flight from the fire of Curtis Burnett, the company’s Regional Director in Fort McMurray. Burnett described the scene from the Supertest hill, a steep stretch along highway 63 north of the city, as like “driving into hell,” Verdeijen said.

An oversupply of heavy haul equipment

Mr. Scherbinksi noted that the wildfire didn’t damage any of the mining or industrial operations in the region. However, he has noticed that the movement of project cargoes there has slowed down “dramatically” with the oil price plunge. “We suffer from overcapacity,” Mr. Scherbinski said. “We live in a supply and demand world. Right now the supply drastically outweighs the demand. Here in Alberta anyways.”

One bright spot for Mullen has been some project work at the controversial Site C dam project in B.C.’s Peace River region. However, he added, “We’re not going to buy a lot of capacity and a lot of equipment just because there’s one project on the go.”

Entrec’s Mr. Fleming said the rebuilding effort will likely involve traditional trades, such as carpenters and electricians. “There’s definitely going to be an increase in freight up there,” he said. For traditional heavy haul business in the region, the roads are open now and “it’s business as usual.” Mr. Fleming said it’s difficult to gauge the outlook for project cargo in the oil sands. That’s because while a few major projects are still underway, and other smaller ones are in the works, he doesn’t see any new major projects on the horizon.

For that reason, the company is shifting its focus to long-term maintenance work in the oil sands rather than trying to capture new construction support work. Entrec is also working to diversify its business. That was an aim of its recent acquisition of HighMark Crane Ltd., which specializes in power transmission, mining, and commercial construction across Canada, primarily in Manitoba and Newfoundland. “Power transmission is an example of something that’s expanding across North America, and has a bright future. So it makes sense for us to be in it,” Mr. Fleming said.

Ports notice change of direction

Meanwhile, movement of cargo from Port of Thunder Bay to the Alberta oil sands, “hasn’t been big for a while,” said Tim Heney, CEO of the Thunder Bay Port Authority. One of the few examples of recent Alberta-related project cargo was a massive Terex crawler crane that left the Alberta oil sands for Europe. That crane, which arrived at the port in 84 truckloads, “almost filled a whole ship,” Mr. Heney said.

Port of Halifax has also handled equipment destined for the Alberta oil patch, although that has slowed of late. “I don’t want to be alarmist or anything like that but for a number of years we’ve moved a fair amount of equipment westward, and you know we still continue to move a lot of that type of equipment, but it seems to be for Ontario and eastern Canada,” said Patrick Bohan, Director of Supply Chain Solutions for Halifax Port Authority. The port’s container terminal might handle materials for the Fort McMurray rebuilding effort, Mr. Bohan said, but added, “It’s still early days.”