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FORT MCMURRAY, Alberta (Reuters) – Canada’s northern oil hub Fort McMurray is learning the hard way that there is no such thing as simply going back to normal after a long boom that got cut short by the collapse in crude prices.
With prices down 70 percent over 18 months, producers have deferred costly new oil sands projects and laid off tens of thousands of mainly fly-in fly-out workers, who overwhelmed the city during the 15-year oil boom, but also bankrolled much of its prosperity.
That huge shadow population, which by some estimates peaked at around 70,000 nearly matching the city’s permanent population of around 80,000, stretched its public services, inflated rents and property prices.
The stress was so great that city officials welcomed the onset of the market downturn with a sense of relief – an opportunity to return to a more balanced development.
Now, downtown parking and spots at popular restaurants and cafes are easy to find and traffic flows smoothly. But local businesses estimate that half of the transient workers have left, heading home to other parts of Alberta and other provinces, and say the exodus has hit them hard.
“Anybody who tells you it’s not tough, they are lying,” said Jeff Peddle, a restaurant owner and property manager. He said he and his wife work 15-hour days, seven days a week, to keep their businesses going after cutting staff.
Several new restaurants opened in the city in 2015 in an unlucky twist of timing, including Peddle’s Jamaican restaurant, and Cosa Nostra, an upscale Italian with a dress code and live piano music.
“I started this project two years ago when this town was booming and everything was rock and roll,” said Cosa Nostra owner and chef Mark Hobson. “Now everybody is crossing their fingers. We are struggling with the fact there are not a lot of people in town.”
Statistics paint a similar picture of a swift and painful descent from the heights of the boom when the regional economy kept growing by nearly 8 percent a year.
Last year, local authorities estimate it shrunk by over 1 percent, while unemployment in the Wood Buffalo-Cold Lake region nearly doubled over the past year to 8.6 percent in December.
The city started trimming its budgets shelving C$84 million of capital projects in 2015, including an energy supply pipe to downtown Fort McMurray and a waste water treatment plant. It also trimmed its initial 2016 budget by C$30 million to C$831 million.
Demand for the local food bank, which mainly caters to the local population, soared 76 percent last year, according to executive director Arianna Johnson.
Fort McMurray and other former hotspots, such as Williston in the heart of North Dakota’s vast Bakken shale formation, risk experiencing a “shrinking city” syndrome that “Rust Belt” mining towns grappled with decades ago, said Sandeep Agrawal, urban studies and regional planning professor at the University of Alberta.
“It is very difficult for these municipalities to change course because they have never thought in that way, or they get caught in the euphoria of growth,” Agrawal said.
Local officials frown at “boomtown” or “ghost town” labels, saying there is more to the local economy than oil.
“It was a boomtown western frontier, which is not true, and now it’s doom and gloom and Fort McMurray is empty, which is also not true,” councillor Tyran Ault said.
There is no denying though, that oil has been a key factor in the modern history of the city that was founded in 1870 as a fur trading post and a gateway to the Arctic.
A C$250 million investment in the 1960s by the company that is now Suncor Energy hatched the oil sands industry that went into overdrive in the 2000s with improved technology and climbing global oil prices. Workers would fly in from as far away as Cape Breton on Canada’s Atlantic Coast and the permanent population soared by more than 70 percent between 2000 and 2012.
Now the city, which in 2011 projected its population to reach 230,000 by 2030, is adjusting its budgets to new forecasts of 1-2 percent population growth and grappling with post-boom withdrawal symptoms.
‘For sale’ signs pop up on almost every block, 30 percent of rental properties are empty compared with around 10 percent a year earlier and some commercial buildings sit vacant downtown.
The airport, lavishly refurbished in 2014 for C$258 million ($182.81 million) saw December 2015 passenger numbers drop by a quarter year-on-year and flights to destinations such as Denver, Colorado and Mexico suspended.
Nearly half of the city’s 2,550 hotel rooms stood empty last year compared with a third in 2014, as did camps in the muskeg and boreal forest surrounding the city that housed tens of thousands of the fly-in-fly-out workers.
“Our parents said save for a rainy day,” said Ian Robb, president of the union representing camp cleaners and cooks. “Well, it’s pouring now.”
Yet many in the city accept it will have its ups and downs and cling to the hope the boom times will return.
“Fort McMurray is always a transient town, it’s nature of the beast with the work we do here,” said Herb Exell, assistant business manager with the IBEW Union, representing electrical workers. “When things are going well this community can double overnight.”
($1 = 1.4113 Canadian dollars)
Reporting by Nia Williams; Editing by Tomasz Janowski
Our Standards: The Thomson Reuters Trust Principles.
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