A year and a half ago, unemployment figures for the Peace region in northeastern B.C. were so low they couldn’t be reported.
Today, it has the highest unemployment rate in the province, which otherwise has seen unemployment rates drop elsewhere.
New housing starts in Fort St. John and Dawson Creek plummeted in 2016’s first half, and Fort Nelson is being hit with heavy job losses and businesses closures.
Northeastern B.C.’s unemployment rate climbed to 8.8% in July 2016 from 6.4% in July 2015, according to Statistics Canada; in March 2016 it hit 9.7%.
In Fort St. John, new housing starts dropped to 68 this year from 250 in 2015’s first half. In Dawson Creek, new housing starts fell to just three in 2016’s first half from 36 in 2015’s first half.
Northeastern B.C.’s current economic contraction is the direct result of a dramatic slowdown in the natural gas sector, due to the uncertainty surrounding the province’s development of a liquefied natural gas (LNG) industry.
In June 2014, an average of 27 oil and gas rigs were at work in B.C., according to the Canadian Association of Oilwell Drilling Contractors (CAODC). In June 2016, there were just seven.
Each rig employs roughly 20 workers directly and another 115 indirectly, according to the CAODC. That’s not counting all the retail and service jobs generated in towns like Dawson Creek, Fort St. John and Fort Nelson when there are workers in the area buying gas, staying in hotels and eating in local restaurants.
Based on those estimates, the number of workers in the field would have dropped from roughly 3,600 in June 2014 to under 1,000 in June 2016.
“The beginning of this year has been the worst on record, for sure, for utilization,” said CAODC spokesman John Bayko. “We haven’t seen records like that since we started taking records in 1977.”
“Devastating” is how Fort Nelson Mayor Bill Streeper describes the impact that a stalling liquefied natural gas industry has had on his town.
Unlike the Peace region, the Fort Nelson area has no “wet” gas (oil and natural gas liquids), so the only reason anyone was drilling there was in anticipation of an LNG industry developing.
When Fort Nelson’s forest industry evaporated virtually overnight nearly a decade ago, throwing several hundred people out of work, the natural gas industry provided a bridge for the remote B.C. community of 5,800.
Energy companies began drilling in the area, drawn by the promise of supplying a liquefied natural gas industry. Then, a year and a half ago, the drilling started slowing down. It has now stopped altogether in the Fort Nelson area, Streeper said.
“All major service suppliers and oilfield service companies have closed the doors and left town,” he said. “Right now industrial property in Fort Nelson has approximately 60% vacancy rates. We have seen massive layoffs from these firms that had local employees that they no longer need.
“We’ve lost over 1,000 people. We have apartment blocks closed down. We have one hotel here that has cut their rooms in half and just shut the floors down, drained the water and cut the heat off. We have buildings that are boarded up all over the community.
“We have seen families here where the wife and the kids are in Fort Nelson but the husband is somewhere in Western Canada working at a job. I personally have two of my sons who have left Fort Nelson.”
Even communities like Dawson Creek, which is still seeing investment in oil and gas processing plants and pipelines, thanks to the Montney’s “wet gas” (oil and natural gas liquids), is feeling the pinch from the sudden halt to exploration and development that LNG had been driving.
“I think all of us in the northeast have been impacted by the obvious downturn in the exploration and development of the natural gas industry,” said Dawson Creek Mayor Dale Bumstead. “And the delay that’s been experienced by the final investment decisions on the LNG industry have really impacted all of us in the northeast.”
Fort St. John is also buoyed by the natural gas liquids industry, which continues to build new pipelines and processing plants. An even bigger cushion, however, is the $9 billion Site C dam construction project.
“If it wasn’t for Site C dam, there’d be a lot more people losing their houses,” said Art Jarvis, executive director for Energy Services BC, which represents the service companies that supply the oil and gas industry with goods and services. Otherwise, businesses that serve the gas industry are hurting, Jarvis said.
Jennifer Moore, regional economic development officer for the North Peace Economic Development Commission, said housing prices and sales have been going down. The number of properties sold in 2016’s first half is half of what was sold in 2015’s first half, she said.
At the opposite end of the east-west LNG corridor that has yet to develop, Kitimat and Terrace are also starting to see the effects of a stalling LNG industry, although not to the extent that northeastern B.C. has.
Smaller airlines that serve northern B.C. have noticed a drop in traffic.
“We’ve noticed a bit of a decrease in our one-off charters going to the oilpatch,” said Jocelyn Lebell, director of corporate services for Hawkair Aviation, based in Terrace.
She added general airline volumes for the northwest region (Terrace-Kitimat) are down about 10% year-over-year.
Don McCrea, CEO for Central Mountain Air, which serves Western Canada, said his company has had to make some schedule changes in response to a drop in traffic for northern B.C. and Alberta. Traffic is down in flights to both northwest and northeast B.C.
Kitimat Mayor Phil Germuth said the problems in his town aren’t so much a contraction of economic activity as a stalling of activity that had been expected.
A number of new developments that had received zoning approval are now stalled on the drawing board.
Horizon North, for example, had planned a new hotel and 1,000-person work camp in Kitimat. And in May, LNG Canada announced a 4,500-person work camp would be built by Bird Construction Inc. (TSX:BDT) and Civeo Corp. (NYSE:CVEO).
“All of those are on hold right now,” Germuth said, “and everybody’s waiting for a final investment decision, which obviously is probably going to be at least a couple of years away right now.”
