Mobile oil workers and the Cape Breton economy

Cape Breton’s economy has been in crisis mode for over half century. For at least the same time, Cape Breton labour, lacking work at home, has found employment in other parts of Canada and the world. Destinations for jobs have shifted from ‘the Boston states’ in the late 19^th and early 20^th centuries to ‘going down the road’ to upper Canada in the mid to late 20^th century. For the past 20 yrs, however, Cape Breton labour has found its way West, to the resource riches of Alberta.

 

Working the Alberta oil patch has become and important part of the Cape Breton economy. However, we know this through anecdotes and personal observation; through public interest stories in the news media, seeing the flow of mobile workers at the local airport, and, for most Cape Bretoners, because we know at least a handful of people who are travelling back and forth. For increasing numbers of young people, the oil sands has become the default career plan. However, while we know that income form the Alberta oil sands is significant, we have not known the extent to which we are economically dependent on mobile labour to the oil sands. We do not know how many workers are going back and forth nor do we know how much income they bring onto the island.

 

Statistics Canada has developed a new database that enables us to answer these questions. The Canadian Employer-Employee Dynamics Database (CEEDD) links T1 tax filer information with T4 employer payment data. This allows us to compare place of work and place of residence, capturing interprovincial employees. Interprovincial employees are defined as workers who reside in one province but who commute to work in another province. In this case we are interested in workers who live in Cape Breton but who work in Alberta. Though the data is dated (most current year is 2011), CEEDD provides a first opportunity to put some numbers on Cape Breton’s relationship with Alberta.

 

How many Cape Breton workers travel for work to Alberta? The available data spans the years 2006 to 2011. In 2006, there were 2,711 Cape Breton resident workers in Alberta. By 2008, that number rose to 3,789. The financial crisis of 2008, however, slowed growth in the oil sands and the number of interprovincial workers declined by over a thousand workers then rebounded slightly to 2,947 in 2011. Those 2,947 mobile workers represented 5.5% of the employed workforce in Cape Breton in 2011. Based on investments and growth in the oil sands since that time, it is likely that the number of Cape Breton workers in Alberta increased to at least match the 2008 peak by 2014. Since 2014, those numbers have likely declined and perhaps quite precipitously.

 

How much money flows into Cape Breton from mobile workers in Alberta? The mean earnings for a mobile worker in Alberta in 2011 was $44,545; for those that worked solely in Alberta (who didn’t have earnings in any other province), the mean was $60,448. This can be compared to the mean income a wage earner would expect in CBRM: $32,840. For the individual worker, expected income is much higher working in Alberta. It is not hard to see why Alberta has become a destination for mobile workers.

 

For the region as a whole, remittances from mobile workers make a significant contribution to the local economy. Earnings from all mobile workers from Cape Breton brought in over 200 million dollars in 2011, workers in Alberta account for two thirds of that flow at $131 million. Mobile work, particularly to Alberta, is playing a very important part in keeping the chronically poor local economy afloat. For comparison, the last time mining employed the same number of people in Cape Breton was in 1990 (with 2983 DEVCO employees) at which time the wages in salaries were (in 2011 dollars) $153 million. One would have to go back to the early 1980s to see employment levels in the mines similar to that of mobile workers in Alberta in 2008. Mining the Alberta oil sands is as important to the Cape Breton economy now as mining coal was in the 1980s.

 

Cape Breton’s economy would be in greater trouble if were not for the remittances of mobile workers. However, the boom-bust nature of resource extraction makes for a rough ride. There are three main risks to basing your economy on bitumen. Unfortunately, in the current climate, each of those risk factors are coming into play. The first factor is the price of oil. In the last 18 months oil has tumbled from over $100 per barrel to its current price of $29. Oil sands producers get paid even less then this as the quality of their product, Western Canada Select, is lower than standard crude oil (West Texas Intermediate). Western Canadian Select currently has a price of around $17 per barrel, a $12 gap with conventional oil.

 

The forces of supply and demand suggest that the price will stay low for quite some time. For the oil sands, this spells trouble as the extreme engineering required to squeeze oil from the bitumen soaked sands makes it one of the highest cost for recovery oil stocks in the world. Oil sands are simply uneconomical at these prices. As a consequence, new projects are being shelved and costs are being cut all through the Alberta oil sands. Mobile workers, often working in construction related jobs, are the first to feel the impacts of these cutbacks.

 

The second risk factor is market access. Prior to the price shock, the biggest concern for oil sands producers was getting land-locked Alberta oil to market. Oil sands operators wanting to reach global markets (as opposed to traditional reliance on the U.S., which thanks to fracking, is awash in its own oil now) need to get their oil to tidewater. There already exists a number of pipelines transporting bitumen to the US, but future growth of the oil sands (back when growth was on the agenda) would be constrained by supply routes. Hence the great effort over the last decade in seeking new pipelines. However, pipelines have become symbols of climate change and have proven to be effective projects for mobilizing climate change activists (see 350.org). Projects that were originally claimed to be ‘no brainers’ (Prime Minister Stephen Harper on Keystone XL in 2011), became political footballs. Keystone XL was cancelled by President Obama in 2015. Looking West, the Enbridge Northern Gateway and the Kinder Morgan Trans Mountain pipelines have met with indigenous and grassroots opposition. The industry has since shifted its focus Eastward on the much longer TransCanada Energy East pipeline that would bring Alberta oil to New Brunswick tidewater. The opposition to Energy East is mounting as well with indigenous groups, municipalities and activists opposing the project. While the political hurdles to Energy East seem to be less substantial, its success is by no means guaranteed.

 

The third risk is climate change policies. The science is abundantly clear. The IPCC estimates that 80% or more of our fossil fuel reserves must be left in the ground in order to avoid cataclysmic climate change. While oil will be part of our lives for a long time to come, most of our proven reserves will need to remain unburned. The aspirations of the Paris climate talks will necessitate strong policy action to achieve. A price on carbon will likely be a key part of that policy response. Alberta has already instituted a price on carbon, though in the short term oil sands producers receive a partial subsidy to offset the cost. This subsidy will decline over time, and the Federal government will eventually have to regulate more aggressive carbon prices if greenhouse gas emission targets are to be realized.

 

Over the last twenty years, Cape Breton has become increasingly dependent on income from mobile oil workers. Many of the former mining towns have again become single industry towns; the industry is simply on the other side of the country. As the oil sands go through this latest slump, Cape Breton, and Atlantic Canada generally, is feeling the pinch. What was once a safety valve on critical levels of local unemployment is being shut off. The long burning crisis within the local economy is likely come to a boil again. While oil prices will eventually rebound (but perhaps not to the historic $100/bbl range), the long term pressures on the oil sands mean that the era of going out west to work may be over. Cape Breton, once again, must face the question of what a sustainable and resilient economy will look like.