Canada oil town wants to stop giving free ride to 'fly-in/fly-out' workers

Fly-in-fly-out workers first emerged in the 1970s. At the time, a focus on cost cutting led energy companies to build work camps rather than full-fledged communities in far-flung parts of Canada rich with oil deposits, said Keith Storey, a professor of geography at the Memorial University of Newfoundland. In the late 1990s, when companies were eager to ramp up their operations to take advantage of rising commodity prices, they began to offer retention bonuses to workers who were willing to relocate full-time to Fort McMurray. In recent years, the bonuses amounted to around $20,000 annually, so long as the employee stayed with the company and lived in town. With the dive in oil prices last year, however, companies have shifted again to cutting costs, laying off 20,000 workers in Alberta’s natural-resource sector since September 2014.

But employment uncertainty is only the latest obstacle to attracting new residents to Fort McMurray. The biggest one may be the cost of living. Average rent for a one-bedroom is 1,700 Canadian dollars ($1,400) per month, and food prices are the highest in the province. There’s also the perception that Fort McMurray, which had a population of just 2,500 before oil-sands production began in 1967, is a bleak place to live. The downtown core consists of a shopping mall, a casino and a few strip malls, from which prefab suburban developments and box stores sprawl outwards. Oil company logos are emblazoned across buildings all around town, advertising their willingness to fund recreation centers, suburban developments and education programs, but producing the overall effect of a sanitized, corporate town. It’s undeniable that Alberta has invested far more in generating revenue in the region than in building affordable housing or developing a more livable city.

The influx of so many fly-in-fly-out workers has created resentment among residents. In the last decade, Fort McMurray has earned a reputation as a hotbed of gambling, meth and crack cocaine. While that characterization is exaggerated — the rate of crime in Wood Buffalo is below the average in Alberta and only slightly higher than the national average — it is the full-time residents who are left to defend Fort McMurray. 

“[The camps are] kind of an eyesore for us,” said Mary Thomas, the loquacious executive director of the Multicultural Association of Wood Buffalo. An emigrant from India, Thomas and her husband bought a home when they moved here six years ago, thanks to a generous retention package offered to him in his job as an oil-sands engineer. (About 15 percent of Fort McMurray’s residents are from overseas). She defends the town as a thriving, welcoming community. “We think [it] is ridiculous, and it should stop,” she said of the fly-in-fly-out program. Otherwise, “they will continue to use our community for the money they need, and then they’ll take [the money back] out.”

With the fall in oil prices, Fort McMurray now has an opportunity to step back and consider how to manage its response to the flow of itinerant workers. In May, Wood Buffalo’s campaign to convince residents to participate in the latest census was in full force. This would be the first official attempt to count the so-called shadow population, and the hope was that the survey would provide data showing the provincial government just how many people Fort McMurray provides services for. Currently, the town misses out on an estimated $200 to $250 a head a year, totaling $8 million to $15 million, in provincial health funding, according to a municipal official overseeing the census. Much larger sums are likely lost when the province apportions its budget for regional projects such as infrastructure development.

A few months earlier, candidates in a special municipal council election had debated how to deal with the influx of these workers. One proposal was to levy a commercial tax on fly-in-fly-out workers, a version of which McGrath first suggested during his 2012 campaign. He compares it to a hotel tax, amounting to about $5 a day for each worker staying in a room. The money would be charged not to the individual workers but the oil companies, which typically pay for their employees to stay in the contractor-run work camps.

Storey said this approach might not be the most sensible one, however, as the municipality lacks a way to monitor the number of workers in the camps. A better solution, he said, would be a “fair-share agreement” akin to one recently implemented in British Columbia’s Peace River district. There, the province distributes royalties stemming from oil production back to the areas where they are generated. In fact, the New Democratic Party, or NDP, which won control of the Alberta legislature in May’s provincial elections, has pledged to review the amount of royalties the energy industry must pay to the province. These are considered to be extremely low (about 20 to 40 percent of profits, compared with 85 percent in Saudi Arabia or 80 percent in Norway).

Higher royalties would increase the amount of provincial revenue available for special grants provided to municipalities, which might include funding for sorely needed infrastructure projects. Jim Roy, a former adviser on royalty policy for Alberta Energy, the government ministry that manages the province’s natural resources, said that any evaluation of royalty rates “will generally include consideration of the social pressures caused by a rapid pace of development,” including the pressures caused by itinerant workers. “Economic benefits of rapid development must be considered together with the social cost of rapid development,” he said.

What all agree on, meanwhile, is that Fort McMurray needs more affordable housing, retail outlets and infrastructure if it wants to attract more full-time residents. These are precisely the reasons why Musgraves keeps his apartment in Edmonton; there are many more entertainment, culture and shopping options there. Nevertheless, since his new employer, Suncor, recently offered him a retention bonus, Musgraves has begun to consider the move. The amount — $20,000 for every six months he lives in town — is a hefty sum. Still, he said, “I’m only 50 percent considering it. I work 12-hour days, and [in the camp] my bed is made, my meals are made, and I don’t have to do laundry. But it’s a big bonus and hard to turn down.”