BC's north seeing growing signs of slowdown

Fort St. John restaurateur Gus McLeod knows only too well how northeastern B.C.'s tight labour market can affect business.

He was recently forced to shut down a Taco Bell, one of his five fast-food restaurants in Fort St. John and Dawson Creek.

"We had to close it down because we couldn't get anybody to work there," McLeod said in an interview. "It had been open for six years. But you just can't compete with the [oilfield] wages, where they get $18 to $19 an hour. I just lost two employees to Staples, because they start at $10 an hour."

But McLeod said that offering higher wages -- his average is between $10 and $11 an hour -- isn't the solution, because wages already eat up too much of his budget and other companies would just up the ante by offering more. "We need 15 to 20 people to run the [Taco Bell]. But it was down to six people. We have a total number of employees of about 100. We'd like to be at 130 or 140."

A tripling of natural gas prices over the past five years, and a decline in the productivity of gas fields of Alberta have sparked unprecedented interest in B.C.'s gas resources -- and Fort St. John is at the centre of the action.

B.C. accounts for 16 per cent of Canada's annual natural gas production, and was described in a Conference Board of Canada report last year as the nation's "bright spot" for development of new resources.

But despite a labour crunch that is hurting people such as McLeod, there are growing signs that a slowdown has begun in the natural gas industry that could bring the booming northern economy at least partially back to earth.

"Some of the national drilling associations have predicted that drilling will be down 20 to 30 per cent in 2007, Fort St. John Chamber of Commerce president Bruce Lantz, also owner-editor of the Northeast News, a weekly community paper, said in an interview. "Natural gas pricing is relatively flat. It could alleviate the labour situation in that sector, but it may take a while."

However, Lantz said that companies are still having a difficult time hiring and keeping staff, because they can jump ship and find other work immediately.

He said many local businesses are threatened with closure due to a shortage of people willing to work at so-called soft-skilled jobs.

Because of that, Lantz and other business leaders in the northeast have pressed the provincial and federal governments to consider overhauling immigration laws and providing "tax holidays" that would support construction of affordable housing.

"They [local businesses] can't offer more money, because the profit margins just aren't there," he said. "I own a newspaper and I'm constantly looking for new staff."

Lantz said living costs are still very high in the area -- "you're looking at more than $900 for a one-bedroom apartment" -- and that getting skilled staff to move up north is a continuing issue.

Lantz believes that a new $12-million training centre slated to open in Fort St. John this spring will have a "significant" impact on the situation. "It will offer programs for all aspects in the oil industry."

According to a recent forecast by the Petroleum Services Association of Canada (PSAC), drilling activity in B.C. is expected to drop in 2007 to 1,060 wells, a 28-per-cent decrease in 2006 drilling levels.

PSAC, which represents over 260 companies in the petroleum industry's service, supply and manufacturing sectors, said the slowdown will be the first since 2002 and that it is prompted by lower oil and natural gas prices.

"Both commodities saw a price decline in 2006, with natural gas taking the hardest hit," said PSAC president Roger Soucy in a statement. "We need a cold or even normal winter in 2007 to use up our large gas storage inventories. If we have another warm winter across North America, gas prices will weaken further in the spring, which could have an even more adverse effect on field activity."

Jackie Kjos, manager of the Northern Society of Oilfield Contractors & Service Firms (NSOCSF), said in an interview that there's already been a large drop in natural gas drilling activity in northeastern B.C. "Drilling dropped off considerably in October, November and December. In some respects, it means a return to stability."

Kjos said there are still tons of job opportunities, but that it's the hospitality and retail sectors that are having trouble finding employees.

"For the most part, [contractors] are getting the employees they need. There's still a shortage of trades workers, but [the slowdown] has returned the region to some normalcy. Last year, the pace was ridiculous. It wasn't sustainable and costs were going through the roof.

"For short-term entry-level positions, the opportunities are not nearly what they were last year. [People] shouldn't come here unless they have accommodation and a job to come to.

"But everything can change very quickly, especially if prices [for natural gas] go up."

Sandra Minifie is the vice-president of operations for Action Industrial First Aid which provides first aid vehicles and attendants on contract to gas drilling operations around northeast British Columbia.

The company, which has seen its gross revenues climb from $900,000 four years ago to about $6 million today, has a fleet that's at least tripled in size over that period.

"If you've got good recruiting strategies, you can find and keep good people, Minifie said in an interview. "We have 40 to 45 medics on staff and we have people who have been here for eight years. They're very loyal."

Minifie said Action Industrial is constantly recruiting around the province and employees make anywhere from $60,000 to $120,000 a year, depending on their skills and number of hours worked.

However, company owner Brad Caldwell, who is also president of NSOCSF, said in an interview that the industry may be due for a slowdown and that Action Industrial "is now at capacity."

Caldwell said there is still plenty of demand for skilled trades workers, but that unskilled workers might have a harder time. "The oil and gas industry is not quite as busy as this time last year. Everyone hears about the fantastic wages, but there are other issues. Often they can't find accommodation and they expect to make what a welder makes when they don't have those skills."

Caldwell said the drilling companies are letting their contractors know that lower prices could mean a slowdown in the spring. "There's also concern that oil and gas companies are getting charged too much, so they're cutting back drilling programs."

(prepared by Brian Morton/Vancouver Sun)