Is Calgary ready?

When economic oil runs out, Calgary will become as besieged by mass migrations and social problems as Vancouver was when the trees, fish and minerals ran out. Does Calgary know what is coming?

by Kevin Potvin <kpotvin@republic-news.org>

Calgary and Vancouver couldn’t seem to be flying more divergent trajectories if they tried. One is a land-locked huddle of buildings awash in cash standing tall at the edge of a vast and cold prairie, the other is a major seaport with a moderate climate going nowhere while clinging to the edge of the even more vast Pacific Ocean. These two cities are separated by more than just the imposing ranges of mountains between them. They are also separated by equally high walls thrown up by different histories, different cultural experiences, and most of all, by nearly completely opposite economic and social conditions. It is more effect than cause that Alberta this year will retire its public debt, while British Columbia takes its debt to yet another record depth.

Yet, for all that, the biggest differences might all be accounted for merely by their different positions along the very same time line. It wasn’t so long ago that Vancouver was the exciting, capital-lubricated home of over-night millionaire barons making fast and big money robbing the surrounding province of all the natural resources till they were completely gone. Trees, fish and minerals were to British Columbia fifty years ago what oil and gas is to Alberta today. And, just as the trees, the fish, and the minerals in British Columbia have by now all been cut, caught, or crushed, so too will all the oil and gas wells in Alberta soon enough be pumped dry—or at least rendered uneconomic.

Marks from the hey days of the recent past linger. Throughout the downtown eastside of Vancouver you can still find old signs over doorways saying “lumberman’s club” and many older buildings have dusty underground dens where prostitutes went down and heroin was shot up by sojourning fishers and miners. The more dramatic scars are over the faces of those old timers still alive who survived the hey days of cutting trees for a few months and partying in Vancouver a few more months on the piles of money handed out. Up and down the coast, there are defunct canneries, fishing villages now ghostly empty, dying towns as the last of the lumber mills close, and big holes in the ground, now flooded, where mining used to be big.

The remaining communities are still shrinking, schools and hospitals are closed by the government over the frail cries of remaining residents, young people leave as soon as they can, and those left behind are trapped by shrunken house prices.

Meanwhile, the cities of the lower mainland fill up, bringing strains to public services, overcrowding schools and hospitals, jamming the roads with vehicles, and converting Vancouver into a globalized metropolis with all the new and exotic problems that brings.

It’s hard to say what is keeping the city’s and the province’s economy ticking—it is far from a collapse. On the other hand, social problems from all over BC have ended up on Vancouver’s streets and successive provincial and municipal governments have struggled to ease the pressures, but to little avail.

Long time ruling party of Vancouver, the NPA, were thoroughly paddy-whacked out of city council last election exactly because of their failure to address the social problems on the streets. But the left-wing COPE party is proving not much more inspired than to do what the NPA could only think of doing: hire more police. This solution doesn’t solve problems, of course, but only chases them around and then brings on its own set of problems on top of the old, namely outrageous abuses of power by police left feeling ineffective, over-crowded courts turning loose in the same day perpetrators of violent crimes, and a frustrated citizenry increasingly alienated from the city they built, and choosing to leave it behind.

Vancouver and suburb Surrey lead the nation in poverty-related crimes. Distribution of damaging illicit drugs expands apace. Gang warfare has erupted on the streets in broad daylight. A man, it seems, was able to murder and mutilate over 50 young women all picked up from the same few blocks in downtown Vancouver streets over the course of a few years without anyone ever noticing. United Nations officials and experts from cities around the world come to Vancouver to study our social and criminal problems, so intense, multifaceted, and intractable do they appear.

These problems besieged Vancouver because no one noticed the fish, forests and mines disappearing, or if they did, no one figured what would happen to the people in the communities built to supply fishers, forestry workers, or miners, or if they did, no one understood that that widespread distress would migrate to Vancouver. The city was unprepared. It continues to pay the price for that negligence today and will continue doing so for decades.

Alberta’s oil patch is booming with oil hovering now near US$50 a barrel. The picture of Calgary today couldn’t look more different from the picture of Vancouver today. But it does closely resemble a picture of Vancouver from 30 years ago, when the good times also looked like they would never end.

There may be a lot of oil and gas left in and under the oil shales of north Alberta, but what few experts have bothered to calculate—because no one wants to pay someone to find bad news—is how much oil and gas is left that can be brought to market using less energy than the energy contained in that oil or gas.

It may be so that the higher the price of energy goes, the more marginal reserves become economic to exploit, essentially making more oil available to the market the higher the price. This is the argument posed by defenders of the status quo who think it is all chicken little-like to worry about the end of oil.

But it isn’t just that marginal reserves are more expensive to exploit. It is also the case that oil that is deep requires more energy to pump up to surface, oil that is further afield requires more energy to truck or pipe to consuming markets, and heavier oil requires more heat to crack it into more usable carbon forms. As the price of energy rises, the cost of the energy used to bring that oil to market also rises. At some point, if you have to spend $1,000 worth of energy to bring to market $1,000 worth of energy, it doesn’t matter anymore if that $1,000 buys a tanker truck of oil or just a barrel of oil. No one will go get it.

This is the debate that should be happening as a result of new oil accounting methods that have now pole vaulted Alberta reserves to second largest in the world, behind only Saudi Arabia, but it’s a debate that isn’t happening. Investors, and in particular the Alberta government as the largest stakeholder in the province, should be asking whether that oil is ever going to be economical to market. Most of the suddenly larger reserve estimate is comprised of very heavy oils very tightly locked up in remote north Alberta shale. To dig up two tons of shale, separate it from the oil, crack the useless heavy oil into lighter oil, truck that to refineries, convert it to gasoline and other fuels, and then transport that to markets to the south, all the while being careful not to poison the air and water with sulphur and other toxins, may well use up more than the 40 gallons of gasoline those two tons produced, not to mention the cost of labour, office, royalties, and so on.

When economical oil runs out, which will be far sooner than when oil itself runs out, cities like Calgary will experience what Vancouver began experiencing 30 years ago. There may well be enough entrepreneurial spirit and expertise carried over from the hey days to prevent a total collapse of the Alberta and Calgary economy, but there will be massive dislocations of workers and families from defunct oil towns, whole industries full of contractors in the exploration and pipeline building services laid off, and mass migrations to the streets of Calgary.

In future issues of The Republic, we will look at the state of social infrastructure in Calgary, assess the city’s ability to absorb the impact of the looming economic transition, and inquire into whether there is sufficient political will and experience to prepare the city to avoid the long drawn out social crisis that began to afflict Vancouver when its surrounding economy shifted three decades ago, a crisis that continues to lay waste to all efforts, inspired and otherwise, to contain it. The chief question we will be asking is this: Is Calgary prepared? What should be done now, while there is money and time available?

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