‘Fort McMurray is still alive,’ says fire chief; oilsands mull restart, IMF asses economic impact

Satellite images that show the extent of the Fort McMurray forest fire as of May 4, 2016. PHOTO: CNW Group/Effigis Géo-Solutions inc.

Zoom out on this stretch of Beacon Hill Drive in southwest Fort McMurray and it’s a scene sapped of colour—all charred black, ashy white and sickly beige.

Zoom in and everyday objects become discernible in a tangled sea of rubble. By the curb is the husk of a pickup truck, its tires melted puddles on the pavement.

Beacon Hill was one of the first Fort McMurray neighbourhoods to catch fire a week ago, regional fire chief Darby Allen told reporters on a bus tour Monday of the northeastern Alberta city.

If not for the quick action and smart decisions of firefighters, much more of Fort McMurray would have suffered the same fate, he said.

Up to 90 per cent of the city was saved in the end—2,400 structures damaged and 25,000 still standing.

Firefighters worked for 12 hours to keep flames on a thickly treed hillside from spreading, Allen said. Had they not been successful, “we would have lost the downtown.”

Uphill, in the community of Abasand, it’s a scene of stark contrast.

On one side of a street, a row of homes is perfectly intact. On the other, a condo complex has been flattened.

To Fort McMurray residents seeing the devastating images on television or social media for the first time, Allen had a message—hundreds of emergency workers “gave their all” to save as much of the city as they could.

“Fort McMurray is still alive.”

One million barrels a day of raw and upgraded bitumen is offline

But the fire isn’t out yet, and it has forced the shutdown of another oilsands project.

The Canadian subsidiary of Norwegian giant Statoil ASA confirmed that it has closed its Leismer demonstration project.

Spokeswoman Kyra Grue said the facility had been producing about 20,000 barrels of bitumen a day before the fire began a week ago, but more recently had been operating at a reduced rate as non-essential staff were sent home.

The decision to shut it completely was made because of the precautionary closure of an Enbridge pipeline that supplies light oil to dilute the bitumen and allow it to flow in a pipeline to market.

Analysts estimate about one million barrels a day of raw and upgraded bitumen is offline because of the wildfires. That’s about one-quarter of Canada’s overall crude oil production.

CEO Mark Ward of Syncrude Canada and Steve Laut, president of Canadian Natural Resources Ltd., will be among those meeting Notley in Edmonton today to discuss how to get the oilsands industry back on track following the evacuation of 80,000 people from the city.

Warren Mabee, director of the Institute for Energy and Environmental Policy at Queen’s University, said he thinks the companies will be anxious to see people allowed back into Fort McMurray as soon as possible because a stable workforce is critical to their operations.

“The oilsands can continue to operate—as we said, they haven’t really lost a lot of their critical infrastructure—but what they have lost, right now, is the support mechanism that the whole city represented and that is significant.

“Without that, their costs go through the roof. It’s essential to those companies that the city gets up and running even if all the neighbourhoods aren’t inhabited, even if all of it isn’t back where it was.”

Mabee said an extended period of downtime due to infrastructure or staffing issues could lead to the industry requesting financial help through bailouts or tax incentives.

Rob Bedin, a 30-year engineer and director at Calgary-based consultancy RS Energy Group, said he doesn’t think the industry will ask for money but agreed that staffing is one of the biggest questions it is facing before the production of an estimated one million barrels per day of raw and upgraded bitumen can resume.

“The fact that it was an organized shutdown, that’s positive in regards to the speed at which it will come back,” Bedin said.

One concern for the sector is water quality. Oilsands mines that draw water from the Athabasca River or have open storage ponds could be exposed to ash contamination. Bedin said producers who have been able to keep their water heating systems warm will have an easier time getting their plants running again.

Jackie Forrest, vice-president of energy research at ARC Financial in Calgary, pointed out the oil sector was back in business within two weeks after wildfires that had closed thermal operations south of Fort McMurray were extinguished last spring.

“Although this is much more serious, once the fires were out, the operators were in there fairly quickly and getting their production back on line,” she said. “Assuming there’s no damage to the actual facilities, that will happen quite quickly.”

Imperial Oil Ltd. said it had shut down its Kearl operations due to the uncertainty of the situation. The plant and other assets were unaffected by fire, and there was no formal timeline for operations to resume.

Rebuilding will boost consumption, investment, says IMF
Cheng Hoon Lim, head of the IMF’s annual review of Canada’s economic performance, said it’s too soon to calculate the impact of the Alberta wildfires that have devastated a huge area including parts of Fort McMurray.

“We need to see the extent of the damage that’s been done to the oilsands industry,” Lim said in a conference call from Washington, D.C.

Still, rebuilding efforts in Alberta will likely provide “a positive boost to consumption and to investments,” she added.

Canada’s economy has coped well with a shocking decline in oil prices but the country’s central bank and federal government should remain prepared to do more if the need arises, an International Monetary Fund analysis has concluded.

Lim also said the Bank of Canada has room to lower its policy rate, currently at 0.5 per cent, to stimulate the economy.

“But for the Bank of Canada to resort to unconventional monetary policies, it will require another big shock to the Canadian economy—and we see that risk, at this stage, as being very remote,” Lim said.