Alberta’s Oil Economy

Alberta’s Oil Economy

The gas and oil extraction industry is a major sector in Alberta, accounting for 16 percent of the province’s GDP. It creates employment opportunities and generates resource revenues such as royalties, thus contributing to infrastructure projects and the provision of social services.

The Oil Economy in Figures

Oil sands are found in Peace River, Cold Lake, and Athabasca, spanning a territory of 142,000 sq.km. Some 20,000 businesses operate in the gas and oil sector, indirectly or directly, accounting for $4.8 billion in royalties and other resource revenues of the provincial government. The province mainly exports crude petroleum, along with gas liquids and gas and petrochemicals. Oil is mainly exported to the U.S. Midwest Region, and small volumes are also shipped to the West Coast, Rocky Mountain, East Coast, and Gulf Coast. Non-oil exports include processed beverages and food, livestock and crops, machinery and metals, and forestry products.

Other Sectors

As of 2016, the business and commercial services sector is the second largest, making for 11.8 percent of GDP, followed by real estate (11.7 percent), construction (10.1 percent), and retail and wholesale (9.5 percent). Other major sectors include public administration, consumer services and tourism, and utilities and transportation.

Key Players in the Oil Sector

Alberta is the home to major companies such as Canadian Natural Resources, Imperial Oil, Suncor, and Husky Energy. Imperial Oil has three operations in the province – Nabiye, Aspen, and Kearl Lake Oil Sands Projects. It is involved in the sale, production, and exploration of bitumen, synthetic oil, and crude oil. Husky Energy specializes in the production, development, and exploration of natural gas liquids, natural gas, bitumen, and crude oil, its operations being the Tucker Oil Sands Project and Sunrise Energy Project. Suncor Energy exports, produces, and explores crude oil, two of its major projects being the North Steepbank Site and Millennium Site. Canadian Natural Resources markets, produces, and explores natural gas liquids and natural gas and crude oil. Its major operation is the Horizon Oil Sands. Other major companies operating in Alberta include Cenovus Energy, Talisman Energy, and Encana Corporation.

Economic Decline Due to the Coronavirus Pandemic

Alberta is expected to suffer a significant economic decline in 2020 due to the collapse in oil prices. Estimates point to production cuts by over 10 percent, accounting for contraction of 5.6 percent. Refineries already slashed their production outputs, with storage capacity being nearly full. Major companies postponed plans for maintenance, upgrades, and expansion amidst the coronavirus pandemic, with thousands of workers losing their jobs. According to experts, the solution lies in economic diversification and investment in sectors such as sustainable agriculture, clean transport, renewable energy, health sciences, and hydrogen. Innovation in the sector of gas and oil well reclamation also has the potential to contribute to economic prosperity. Investing in infrastructure projects and reduction of fugitive methane emissions can help overcome the current crisis.

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Fort McMurray Wildfires

Wildfires that started in May 2016 caused the biggest evacuation of this kind in the history of Alberta. Firefighter crews were aided by the Royal Canadian Mounted Police, Canadian Forces, and other agencies in an attempt to save hundreds of buildings, homes, and forested land.

How It Started

While the Fort McMurray wildfire is said to be human caused, low humidity, hot weather, and gusty winds made it grow in just two hours after being spotted. It grew to cover 120 hectares next morning, spreading across a territory of 1,250 hectares by the next evening. In the early morning of May, 4 the fire spread to Fort McMurray and the Athabasca River, forcing officials to issue a mandatory evacuation notice. The same day, it span a territory of 10,000 hectares, covering a total of 85,000 hectares by May, 5.

Evacuations

Fort McMurray was evacuated on May, 4, with additional evacuation orders extended for the communities of Gregoire Lake Estates, Anzac, and the Fort McMurray First Nation. A total of 88,000 people were successfully evacuated from the area, with no fatalities or injuries. On May, 4, the wildfire spread to the gas and oil sites of several companies, including Statoil ASA, ConocoPhillips, Nexen, Suncor Energy, and Syncrude, forcing them to close facilities. A provincial state of emergency was announced, with communities such as Waterways, Abasand, and Beacon Hill being seriously affected. As the fire began to cover remote forested regions, some 8,000 workers were evacuated from 19 camps and oil developments. The firefighter crews were able to contain the inferno by mid-June thanks to rainy weather and temperature drops. The wildfire was put under control by the beginning of July, with no outbreaks left unextinguished by August, 2.

Impact

Many buildings were affected, and 16 commercial properties and 2,300 residential units were destroyed. Insurable losses amounted to $3.6 billion. Businesses also suffered considerable losses, with close to 32 percent decline in receipts of crude oil compared to the previous year. The provincial government also faced a $300 million loss in royalties and corporate and personal income taxes. In addition, Alberta experienced a decline in employment growth by 0.3 percent.

Financial Support

The provincial government extended assistance to households that suffered loss - $500 per dependent and $1,250 per adult. In 2018, the local municipality announced plans to provide $2 million in financial aid to help residents of Fort McMurray who were unable to return or rebuild their homes. The government of Alberta and the Canadian Red Cross also extended $2 million each. The money was intended to help residents who were unable to return, including costs such as special assessment fees and interim housing. The Canadian Red Cross was tasked with funds distribution based on unmet needs rather than loss. Rental properties and secondary homes did not qualify for relief assistance. A registry of rental properties was also established for evacuees, created by Yardi Canada, the Alberta Residential Landlord Association, City of Edmonton, and Capital Region Housing Corporation of Edmonton. Over a six month period, free services were available to landlords under the initiative, some of whom offered free or reduced rent and reduced security deposits to evacuees. At the same time, criticism of the federal government mounted over turning down offers for assistance by the international community. Offers were extended by countries such as the U.S., Australia, Taiwan, Israel, Russia, the Palestinian Authority, and Mexico. The government responded that firefighter crews from across Canada were dispatched to put the fire under control.

 

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