As oil sands output rises, Cold Lake struggles to keep up

In situ oil sands hub faces Fort McMurray-sized challenges

| follow Geoffrey Morgan on Twitter

January 03, 2013

Subscribe Email This Post Print This Post Bookmark and Share

article_coldlake
Photograph Airscapes

Cold Lake mayor Craig Copeland calls his city of 14,400 people “Little Fort McMurray.” Standing in the snow at Imperial Oil’s 45,000-barrel-per-day Mahkeses plant, he says, “The Cold Lake oil sands are becoming a hot play. It started slowly but now it’s really taking off.” That’s an understatement. The Mahkeses plant is one of four in-situ operations located on Imperial’s 780-square-kilometer lease north of the city, just 25 minutes from city hall. This coming April, Imperial has scheduled $60 million in maintenance to replace the steam tubes at Mahkeses, which will require 300 contractors and book every remaining hotel room in Cold Lake.

The maintenance at Mahkeses is just one small project. In addition to Imperial, major producers including Canadian Natural Resources, Pengrowth, Cenovus, Husky and Shell all operate in the area. Smaller producers, including Baytex Energy and Osum Oil Sands, also have in-situ projects planned. In total, production from the Cold Lake oil sands region is expected to increase from 300,000 to 400,000 barrels per day (bpd) in five years.

“When it was very busy here, we had people living in trailers in the bush.”

At the same time, Copeland expects the city to grow to almost 20,000 people. And that makes him nervous. “We have no permits pulled to do any 48-suite or 64-unit apartments and no permits for new hotels. So if you bring in 800 to 1,500 construction workers next year for all the projects here, where are they going to stay?” He doesn’t know. Welcome to Alberta’s next boom town.

 

Since the 1950s, Cold Lake’s identity has been closely tied to the Royal Canadian Air Force and the 4 Wing base on the city’s south side. Pairs of CF-18 fighter jets still fly overhead on their way in and out of town, but Cold Lake is changing quickly. In 2009, the federal government still the No. 1 employer in town. Soon, Copeland says, energy sector workers will outnumber Canadian Forces personnel by a 2:1 ratio. And that ratio is expected to widen. Copeland says that for every 100 additional barrels of oil produced per day in the area, the city will gain one new resident.

It’s a crude calculation, the mayor admits, but one that nonetheless highlights the city’s torrid growth. Imperial, for example, currently produces 160,000 bpd in the Cold Lake area and employs 400 full-time staff and another 1,200 contractors. Next year, the company will add a fifth cyclical-steam in-situ plant to its lease. The new plant, a $2-billion project called Nabiye, will produce 40,000 bpd and require a construction crew of 1,000 people through 2013 and 2014.

For its part, Baytex Energy produces 1,200 bpd in the area and employs 11 full-time people. Baytex’s chief operating officer, Marty Proctor, says he expects the company’s local workforce to double in the next five years. Baytex announced in October 2012 that it had purchased a lease for $120 million with an approved 5,000-bpd SAGD project, called Gemini, close to the city. In the first half of 2013, Proctor says, the company will hire between 60 and 80 contractors to build the first phase of the Gemini project and then another 200 workers to build a second phase in 2015.

“That acquisition that we made is 46 sections of land,” Proctor says, “and the SAGD project is really only on two sections.” As a result, he says, Baytex also plans to drill conventional wells on the remaining sections of the lease, which would further boost its production in the region.

The production profile around Cold Lake includes both enormous in-situ projects, like Imperial’s, and conventional wells, many of which line the sides of Highway 55, which runs straight west from the city’s lakeshore neighbourhood. On the highway, Copeland steers his truck past Flint URS yards and CNRL wells. The route bisects the area’s thermal and conventional drilling areas, he says, pointing out the window. Leases on the south side of the highway consist mostly of conventional oil wells, while the north side include mostly thermal in-situ projects.

Those in-situ projects, in particular, are of greatest concern to Copeland. The Canadian Association of Petroleum Producers (CAPP) released its crude oil forecast in June 2012. It says in-situ bitumen production will surpass mining production by 2015. By 2020, CAPP expects thermal operations to produce 1.87 million bpd, compared to 1.52 million bpd from mining operations. By 2030, CAPP expects in-situ production to reach 3.16 million bpd, compared to 2.17 million bpd from mining. The trend would result in additional activity on leases immediately north of Cold Lake.

In October, the Oil Sands Developers Group released a list of existing and proposed oil sands projects throughout Alberta. Seven companies, including Imperial and Baytex, have announced plans to either build new or expand existing in-situ projects in Cold Lake. If every one of those projects is built, the region would produce an additional 150,000 bpd, the OSDG says, with many of them expected to begin production by 2017.

Osum Oil Sands is one of those companies. Its 35,000-bpd Taiga project is expected to begin producing in 2016. “During construction, when workforce demand is greatest,” company chief operating officer Rick Walsh says, “we anticipate being able to source a significant portion of these workers from the large, skilled labour force living locally.”

 

In Little Fort McMurray, there’s no shortage of work. The Cold Lake First Nation has built multiple businesses as a result of the increase in local energy production. The aboriginal group’s largest company, Primco Dene, provides camp services, catering, EMT paramedics and ambulance services to the oilfield. The band also owns Tri-Rez Oil and Gas Productions and is a joint partner in Seven Lakes Oilfield Services, Dene-Cor Construction and several drilling rigs in the area.

In 2011, a B.C.-based home builder, Harwood Homes, relocated operations from Salmon Arm to Cold Lake because, the company says, “There is long-term opportunity in this growing town.” Other local home builders, including Colbrooke Homes, Classic Homes and Legend’s Construction, are benefiting from the housing boom as well. Each is building dozens of new homes in half-finished subdivisions throughout the city. Still, the city averages just 100 new housing starts per year, all of which will be absorbed by the growing demand from energy sector workers. To keep up with the pace of energy development, Copeland says, the city needs between 200 and 300 housing starts over the next several years.

But energy sector workers aren’t the only people buying up houses in Cold Lake. Clark’s General Store and Eatery overlooks Cold Lake’s marina, where there’s currently a 150-boat waiting list. The store would be open for business seven days a week, if only owner Pam Curry could find enough staff. She employs two south Asian chefs right now and is waiting on government approvals to hire four more staff. The chefs live in a half-duplex owned by the restaurant because there’s no place else to go. Says Curry, “We need to have a place for them to live, or else they can’t afford to move up here.”

A similar problem is playing out at CFB Cold Lake for the Canadian Forces. Personnel on base pay local market rates to live in the 50-year-old homes at 4 Wing, and market rental rates in Cold Lake start at $1,200 a month for a one-bedroom apartment. City council is concerned that high wages and high demand for real estate from the energy sector will inflate housing prices in the area to the point where Canadian Forces staff won’t be able to afford to live in the city.

Last year, Cold Lake council voted against rewriting the city’s bylaws to allow for energy services companies to build work camps within the city limits. A camp would alleviate some of the strain on the local housing market, but Copeland was the proposal’s lone supporter. “In 2007, when it was very busy here,” he says, “we had people living in trailers in the bush. Next summer, I’m anticipating there will be fifth-wheels everywhere.”

 

As Copeland drives his truck down a back-country road away from Imperial’s lease and the Mahkeses plant, where clusters of 20 to 30 pumpjacks draw a mixture of oil and steam from the earth, he describes what Cold Lake and Fort McMurray have in common. “Our wages are very comparable to Fort McMurray wages,” he says. “The workers are given Fort McMurray per diems and Fort McMurray-style [14-days-on; seven-days-off] shifts. We’re in a boom time here and, personally, I have big concerns about next year.”

He brings his truck to a stop along Highway 55 behind a long line of work trucks on their way to and from operations at Husky, Cenovus, Shell, CNRL and Pengrowth plants. The traffic jam lasts half an hour, not unusual, according to the mayor. “With the growth of the oil sands in this area,” he says, “we’re going to be a little Fort McMurray and we’re going to need some major money to come in and develop this area.” That’s another understatement.

Follow @AlbertaOilMag

Issue Contents

Comments

  • Stacey Tomiuk

    I understand the growing need for employees as well. I am a small business owner in Cold Lake and find it extremely difficult to find skilled workers with good work ethics. The money to be made in the oil patch is better as an unskilled laborer than a skilled worker with a trade, pulling people from their trade of choice. It is really hard to run a business properly with hardly enough staff.

    • Skeeter

      Stacey, that’s because people coming here are greedy.
      Kids right out of school don’t even want to work their way up anywhere or even ‘lower themselves’ to working in the food/retail jobs because they want the money and toys. Very sad actually…. considering so many that I’ve come in contact with cannot even write or do simple math….. actually it’s scary not sad…..

  • Dianne Toth

    I used to live in cold lake in the 90’s it was a beautiful place to live with wildlife, lovely camping area’s and nice people willing to help you. I can not imagine the changes having an oil company there has done to the once lovely community. My husband is with the canadian force, and he went back to Cold Lake for Maple Flag two years ago…he said he was shocked at the changes there, and not for the better. I am only hoping that it is not ruining the once lovely area, and making it into a boomtown of uncaring rich folk with not sense of community. I was born there in the 60’s both of my children were born there in the 90’s. I would hope that in years to come my children, if they wanted to see their birthplace, they would still be proud of where they were born, and not ashamed of what the oil project has done to Cold Lake…I know that nothing good comes from big business. They usually come in, ruin things and move on. My only wish for Cold Lake is that this isn’t the case. A concerned former resident of a beautiful place!!!

    • Bob

      I ‘m not sure what your husband was reporting to you but over the last few years Cold Lake has experienced highway improvements by the twinning of hwy 28 thru the city, improved services, enhanced facilities like the Energy Centre, with much more infrastructure improvements to come…. all with the new oil assessments from the development in the area. True there are challenges but to attached negative comments to recent changes is a stretch for this local resident.

      • Skeeter

        omg, Bob, are you serious?!?!
        You are excited about the fact that they twinned a road that obviously couldn’t handle the traffic?
        The Energy Centre is a joke – after all the drama about the money involved with getting it built to begin with and the end result?!?! A school in the same building as a rec centre? ohhhh, yeah – GREAT IDEA! I’ve used the ‘facilities’ numerous times and I can see why the young people in our town… oh pardon me…. ‘city’ are the way they are! When are they actually in class???
        There are many negative comments to be expressed about this great ‘progress’ (again, HA!) but for those of us who have given to this area a good 1/2 of our lives, I think we have every right to express our disgust. Dianne’s husband was correct in his ‘report’.

    • Skeeter

      Dianne, I absolutely agree with you 110%!
      I have lived in this area for about 1/2 of my life and I am so discouraged by all the changes/development due to the oil companies and the influx of ignorant people! I’ve read the comments from people who are actually promoting this b.s. and all I can say is this:

      I don’t care WHO you are or how long you’ve lived here — in my opinion, if you can’t see that Cold Lake is going downhill, then you are being blinded by the money and the lifestyle is rotting your brain!
      Thank you for having the sense to see the difference between progress and ruin! :)

  • Shannon Brassard

    There are more communities than just Cold Lake facing this growing problem in North Eastern Alberta. But why spin it as a problem. Instead of crying about how hard it is, let’s say “Wow look at all the opportunities we have” There are opportunities for builders and developers, and new businesses. There are lots of places to build and develop in the area including the M.D. of Bonnyville, Ardmore, Fort Kent, Glendon and The Town of Bonnyville to name just a few, not only Cold Lake. Instead of profiling the problems of each community, why can’t we work together for a regional solution?

    • Skeeter

      Shannon, maybe people who are upset about all the changes and ‘progress’ are justified in their feelings.
      We came here years ago BECAUSE of the beauty and simple lifestyle of the area. If we all wanted to live in booming areas, we’d reside in or in the outskirts of cities.

      I know that I don’t bitch about things that are going on around me simply to hear myself speak — it’s very upsetting to see this area slowly being destroyed. People who have lived here a long time and care about their town know exactly how we feel.

  • Dave Burton

    I work in the construction trade, and for the most part we have high quality builders and tradesmen in Cold Lake. As a smaller town, there has always been pride in what we do as we probably will know some who purchase these homes. I would hope we don’t get a bunch of fly by night tradesmen building purely for a quick buck without the same level of quality.

    • Skeeter

      Sadly, Dave, there are fly-by-night tradespeople coming to our area and they figure they can charge whatever they want simply because we are so far from any place significant.

  • Skeeter

    I wish our ‘Mayor’ would stop referring to Cold Lake as ‘Little Fort McMurray’.

    What was once a beautiful area is now a huge disappointment. Big Oil is ruining our ‘city’ (ha! it should have remained 3 small towns, but some dim-wit decided it needed changing). Cold Lake cannot keep up with the amount of people coming here. The infrastructure is a joke; housing is out of control – there are no affordable rentals because greedy landlords are basing their rents upon rig-pig income (they aren’t smart enough to figure out that not everyone wants to work in the patch and, therefore, DON’T have the money for such outrageous rents! Also, road improvements are a ‘make-work’ project – that’s obvious! The pot-holes are filled but not filled properly. Why? Because it will employ people to fill them, yet again, in months to come. The wonderful forests are being chopped down in order to build housing for the influx. No wonder there is so much road-kill — the poor animals have no where to go because selfish humans are taking over. I’m sickened by the amounts of garbage in our ditches! A beer can every 20 ft is disgusting beyond words, not to mention the tossed personal garbage! What a disgrace! Pigs with zero conscience for their home. Don’t even get me started about the lack of consideration from drivers – young ones with their stupid trucks that are too big for them! Every time one passes me on Hwy 28 heading either direction to Cold Lake or Bonnyville (they are obviously exceeding the speed limit) I wish they would end up in the ditch! I would wave at them as I drove by! IDIOTS!

    Anyone thinking that these ‘changes’ are for the good of Cold Lake are here for the money. Sad to think of what was once such a great place to live is now a dump with morons taking over. Money is Cold Lake’s downfall and ‘Little Fort McMurray’ is a joke….. only the laughs won’t be coming from those who truly love this area.