March 19, 2015 / 10:09 AM / 4 years ago

Canadian oil sands woes reach far-flung eastern shores

SYDNEY, Nova Scotia (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 (1,860 miles) 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 percent 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 labor. Many young workers head to Fort McMurray in northern Alberta, lured by big paychecks awaiting at oil sands projects clustered around the city.

“If we didn’t have the oil sands, 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 oil sands have become an important contributor to the local economy.


“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 percent of the labor force looking for work in December compared with Canada’s national unemployment rate of less than 7 percent.

In contrast, Alberta has been a magnet for workers. Its population has grown nearly 9 percent in three years to October 2014 compared with a 3.5 percent 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 oil sands producers have included Suncor Energy Inc, the largest oil sands operator, which said last month it would cut 1,000 jobs; Canadian unit of Saipem SpA which laid off about 1,000, and Royal Dutch Shell Plc, which cut 300 jobs. [ID:nL1N0US2BW] [ID:nL1N0WD2L2]

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 oil sands 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 percent 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 percent in January and then 4.8 percent 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 pick-up trucks favored by oil sands workers have recently slowed down.

“They’re not sure about their jobs right now,” he said.

($1 = 1.2780 Canadian dollars)

Additional reporting by Scott Haggett in Calgary and Leah Schnurr in Ottawa; Editing by Jeffrey Hodgson and Tomasz Janowski

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