Suncor's Political Role in Fort McMurray

Suncor’s enthusiasm for the massive growth in the oil sands had been tempered lately by the government’s inability to address the social and ecological issues that, as a result of the oil sands, had emerged in Fort McMurray and the surrounding area. Like other Canadian oil and gas companies, Suncor is accustomed to looking over its shoulder for claims that could dramatically curtail its reputation as a legitimate and responsible company, regardless of the company’s direct role in these issues. In many cases, all oil and gas companies, no matter how proactive, were painted with the same brush as sources of environmental destruction, social inequity and exploitation. So when Suncor heard of a growing number of issues in and around Fort McMurray related to crime, drug use, prostitution, income inequality, indigenous rights violation, poor public service provision and biodiversity loss, they often wondered where to set the boundaries of the firm’s responsibility.

Oil in Alberta, Canada

Commercial production of oil from the Athabasca oil sands began in 1967, with a production level of 30,000 barrels per day.[1] Although the 1973 oil crisis had sparked investor interest in the oil sands, the low price of oil throughout the 1980s had tempered investor interest in the expensive oil sands production process. However, since 2003, oil prices had increased to levels (typically $70 to $80 per barrel) that made oil sands production much more viable. According to the Alberta Energy and Utilities Board, 2006 production of crude bitumen amounted to 1.13 million barrels per day. In this same year, oil sands were the source of 62 per cent of Alberta’s total oil production and 47 per cent of all oil produced in Canada. The Alberta government believed that production levels could reach 3 million barrels per day by 2020.[2]

In 2005, the U.S. government predicted that Alberta would soon surpass the Middle East as the primary supplier of United States oil.[3] Indeed it has. As of May 2010, Alberta represented the leading source of energy for the thirsty U.S. market.[4] Alberta’s economy was in a league of its own, with gross domestic product (GDP) growth of 7.0 per cent in 2006, 4.2 per cent in 2007 and 3.7 per cent in 2008. In 2007 alone, Alberta added 95,200 full-time jobs, while the other nine provinces together added just 83,200 full-time jobs.[5] Clearly, Alberta’s oil deposits represented the primary reason for this phenomenal growth. As of early 2011, Canada’s economy and its currency were “now more closely tethered to oil than any other industry.”[6] For oil companies, no end appeared in sight. Oil represented 11 per cent of Canada’s GDP and was expected to rise to 15 per cent of GDP later in the decade. By 2020, the oil sands industry was expected both to create 540,000 jobs a year (44 per cent of those outside Alberta) and to generate $170 billion worth of goods and services from other provinces over the next quarter-century.[7] Although the economic recession slowed growth, by bringing the price of a barrel to approximately $50 (close to one-third of the value at its 2008 peak), the projected increase in prices from growing demand and dwindling supply was likely to spur greater investment in the region in 2010 and onwards.

Fort McMurray, Alberta

At the centre of this industrial activity was Fort McMurray, located 435 kilometers (270 miles) northeast of Edmonton, approximately 60 kilometers (37 miles) west of the Saskatchewan border in the boreal forest where the Athabasca and Clearwater rivers meet. In 1790, the explorer Alexander Mackenzie made the first recorded discovery of the oil sands.[8] By the 1920s, interest had been expressed in developing a refining plant to separate the oil from the sands. Abasands Oil was the first company to successfully separate oil from the sands but at very low levels of production (1,100 barrels per day by World War II). Growth began to take off in 1967, when Great Canadian Oil Sands (now Suncor) opened its plant. Additional oil plants emerged as a result of the 1970s oil crisis, and the population of Edmonton jumped to 31,000 by 1981.[9] Population growth plateaued largely because of the slow growth in oil production in the 1980s. As oil prices started to increase once again in 2003, the boom in Fort McMurray was unprecedented. Population growth ballooned from 38,667 in 2001 to 72,363 in 2010 representing an annual growth rate of 9.9 per cent between 1999 and 2007.[10]

Gaps in Public Welfare and Public Service Provision

Growth in Fort McMurray was so explosive that the municipality was begging for provincial legislation to suspend further oil exploration.[11] In 2006, Alberta’s Energy and Utilities Board received 60,125 applicants for oil exploration and approved three megaprojects totaling $27 billion in Fort McMurray alone.[12] The manager of the municipality explained: “Oil sands development has become a speeding car with a gas pedal and no brakes.”[13] Fort McMurray Mayor Melissa Blake said her city simply could not house the thousands of new workers needed for such projects or promise them a community that was safe and functional.[14] She explained, “Everything that you would have adequately supplied for a 34,000 population now needs to serve 80,000 to 100,000 people, which means that you have a lot of work to do in a short term.”[15] The head of the medical staff for the local health region said it had only half the number of doctors it needed and approximately one-third of what it would need by 2011. On the educational front, infrastructure for new schools to accommodate increased demand would take years to come to fruition. Aboriginal groups were worried that one mega-project after another would eventually drain the Athabasca River to the point of fisheries collapse. The municipal government explained:

"With growth pressures expected to continue, public-sector service providers in the region . . . have stated that the region will not be able to provide the needed services to support the anticipated pace of growth without substantial additional support from the government of Alberta".[16]

Most newcomers to Fort McMurray were men, approximately 32 years of age, who were looking to make a lot of money in a short period before heading home. Called transient workers, these men were expected to increase in number as speculations of peak oil and the subsequent increase in prices made exploiting the oil sands even more attractive.[17] Many of these workers had very little interest in becoming permanent residents of Fort McMurray:

"Me personally, I don’t like this place. Back in Windsor, Ontario, they’re going through a rotten recession right now. Out here there’s lots of work and lots of money . . . rents are very high . . . it’s tough living out here, it’s dog eat dog."[18]

"I could never call this home. Would I be here if I didn’t have to? We’re not all born rich".[19]

The lack of housing to accommodate the influx of these workers had inflated real estate prices, and the presence of these workers in the city overburdened the infrastructure and public services for those citizens who had established lives in Fort McMurray. These permanent residents were not able to fulfill their basic needs as the cost of living had skyrocketed with little accompanying salary increases for public service providers (i.e., police, emergency services, etc.).[20]

When projecting the benefits and costs of natural resource development, economists typically failed to consider the time lag between the increased demand of public resources and the development of additional infrastructure and public services required to meet this demand. More specifically, several months, even years, could elapse between the time when additional people occupied a region and further drained municipal resources and the building of infrastructure and public services to meet and serve that additional occupation. The result was often substantial animosity between communities and government, with oil companies caught in the crossfire.

On the ecological side, growing evidence suggested that, according to the public, companies could not simply defer to government regulation when determining the scale of their response to environmental degradation. More and more companies were realizing that their responsibilities might also entail supplementing government regulation with their own initiatives.[21] The impact on the environment was even taking its toll on these workers:

"I love the money but I hate what it’s doing to the environment . . . . I’d much rather be catching lobsters in a trap off the coast of Cape Breton. Every tradesman that comes up to Fort McMurray to work at these plants . . . have no choice because it’s a good support system for our families financially and otherwise. And we don’t agree with it but we have to do it and that’s what a lot of us feel. I truly believe that I speak for a lot of people. The bottom line for me is that these companies should stop destroying the environment and to find other means to power this planet".[22]

"Oil does make the wheel of the world go round right now. Until we do come up with an alternative fuel, this is what we gotta come up with". (Oil Sands Worker)[23]

Although the provincial government recognized that such growth would present a massive burden on public infrastructure, public service and the environment, it pointed to other agencies as being responsible for picking up the slack. Ultimately, the demoralized municipality recognized that despite these concerns, little evidence suggested that the provincial government would assist and/or suspend oil sands development.[24] The mayor believed that moving forward didn’t mean stopping the oil sands development, but rather growing the municipality more intelligently and sustainably for future generations. As one worker explained:

"I moved to Alberta in 1980. We raised two kids here. They went through school. I’m at the age where I have grandchildren and we’re staying the course. I love the city. I personally believe that Fort McMurray is going to be the oil sands capital of the world. I’m hoping to be here to celebrate Fort McMurray with my great grandkids".[25]

Suncor

Suncor, with a vision to be “Canada’s premier integrated energy company,” had a market capitalization of US$47.7 billion in 2009 and a production capacity of more than 200,000 barrels of oil per day. Suncor was regularly praised for its commitment to society and the environment. Maclean’s magazine touted Suncor as one of the top 50 socially responsible corporations in Canada,[26] and Corporate Knights praised Suncor for several joint ventures it had with Aboriginal groups and for having an Aboriginal representative on its board of directors.[27] More recently, Suncor became the first oil and gas company to effectively manage tailings reclamation.[28] Suncor’s Technology Reductions Operations (TRO) process uses a polymer to rapidly separate the water from the clay, thereby transforming the liquid tailings into a dry, hard surface,[29] which reduces the draining time from several decades to just a few years. Furthermore, according to Suncor’s website, the company was eager to strengthen the communities in which it operated and to advance education and health care.

But the aforementioned public service issues extended beyond the typical activities of corporate social responsibility (CSR) in which corporate efforts were focused on giving something back through discretionary social investments. Here, the focus was on filling in for government in the absence of effective infrastructure or processes associated[30] with Fort McMurray’s inability to handle oil sands growth socially, economically and ecologically. So, although Suncor had always been involved in supporting various charities, it had yet to explore its role in addressing more systemic issues related to public service provision at the municipal level. This extended role would mean helping with infrastructure, filling gaps in educational and health services, playing a decision-making role in housing and addressing ecological issues that resulted from the industry more generally.

Suncor’s Meeting

Although Suncor had been highly praised as a leader in social responsibility, this reputation was not enough for an oil and gas company operating in a small community that had major gaps in its public welfare. As a result, Suncor called a meeting to discuss the deteriorating state of Fort McMurray and the surrounding area, inviting a range of stakeholders to discuss some of the social and ecological issues plaguing the city and how Suncor could begin to help fill gaps in public welfare. Although Suncor called this meeting, the stakeholders’ concerns lay primarily with the oil and gas industry rather than with any one company.

Endnotes

[1] ArticlesBase, “Introduction to Canadian Oil Sands,” http://www.articlesbase.com/science-articles/introduction-to-canadian-oil-sands-3437790.html, accessed April 11, 2011.

[2] Government of Alberta, “Oil Sands,” 2008, http://www.energy.gov.ab.ca/OurBusiness/oilsands.asp, accessed January 30, 2008.

[3] “U.S. Eyeing Alberta Oilsands,” Canada.com, February 4, 2006, http://www.canada.com/calgaryherald/news/story.html?id=2c603716-ff3d-4721-8555-c7e74f210a39&k=10285, accessed October 15, 2010.

[4] Suite101.com, “US Crude Oil Imports by Top Supplying Countries in 2010,” http://www.suite101.com/content/us-crude-oil-imports-by-top-supplying-countries-in-2010-a354987, Accessed April 11, 2011.

[5] Barrie McKenna, “Why Oil (Not Cars) Drives the Economy,” Globe and Mail, February 7, 2011, http://www.theglobeandmail.com/report-on-business/why-oil-not-cars-is-driving-canadas-economy/article1896460/, accessed March 3, 2011

[6] ibid.

[7] ibid.

[8] Soul of Alberta, “Alberta’s Petroleum History,” http://www.soulofalberta.com/soaweb_history_01.html, accessed April 7, 2011.

[9] Ibid.

[10] Wikipedia, Fort McMurray, http://en.wikipedia.org/wiki/Fort_McMurray#Demographics, accessed April 7, 2011

[11] CTV News, “Oil Sands Growth Beyond Regulator’s Reach: Analysts,” http://www.ctv.ca/CTVNews/World/20061228/oilsands_alberta_061228/, accessed October 12, 2010.

[12] Ibid.

[13] Ibid.

[14] Ibid.

[15] David Suzuki, “David Suzuki Explores Fort McMurray (Episode 6; Part A), The Bottom Line, CBC Radio, 2011.

[16] CTV News, “Oil Sands Growth Beyond Regulator’s Reach: Analysts,” December 28, 2006, http://www.ctv.ca/CTVNews/World/20061228/oilsands_alberta_061228/, accessed October 12, 2010.

[17] David Suzuki, “David Suzuki Explores Fort McMurray (Episode 6; Part A),” The Bottom Line, CBC Radio, 2011.

[18] Tim Ford, a representative of Boiler Makers, quoted in David Suzuki, “David Suzuki Explores Fort McMurray (Part A),” The Bottom Line, CBC Radio, 2011.

[19] An oil sands worker, quoted in David Suzuki, “David Suzuki Explores Fort McMurray (Episode 6; Part A), The Bottom Line, CBC Radio, 2011.

[20] CTV News, “Oil Sands Growth Beyond Regulator’s Reach: Analysts,” December 28, 2006, http://www.ctv.ca/CTVNews/World/20061228/oilsands_alberta_061228/, accessed October 12, 2010.

[21] Michael Valente and Andrew Crane, “Public Responsibility and Private Enterprise in Developing Countries,” California Management Review, vol. 52, no. 3, 2010, pp. 52–78; Jodi Short and Michael Toffel, “Making Self-regulation More Than Merely Symbolic: The Critical Role of the Legal Environment,” Administrative Science Quarterly, issue 55, 2010, pp. 361–396; Philip Selznick, Law, Society, and Industrial Justice, Transaction Books, New Brunswick, NJ, 1969; Christopher D. Stone, Where the Law Ends: The Social Control of Corporate Behavior, Harper & Row, New York, 1975.

[22] Tom Head, boiler maker, quoted in David Suzuki, “David Suzuki Explores Fort McMurray (Audio Podcast: Episode 6; Part A),” The Bottom Line, CBC Radio, 2011.

[23] Oil sands worker, quoted in David Suzuki, “David Suzuki Explores Fort McMurray (Audio Podcast: Episode 6; Part A),” The Bottom Line, CBC Radio, 2011.

[24] CTV News, “Oil Sands Growth Beyond Regulator’s Reach: Analysts,” December 28, 2006, http://www.ctv.ca/CTVNews/World/20061228/oilsands_alberta_061228/, accessed October 12, 2010.

[25] Oil sands worker, quoted in in David Suzuki, “David Suzuki Explores Fort McMurray (Audio Podcast: Episode 6; Part A),” The Bottom Line, CBC Radio, 2011.

[26]Macleans magazine, “Top 50 Socially Responsible Corporations,” June 14, 2010, http://www2.macleans.ca/2010/06/14/social-responsible-corp-2010/43/, accessed October 24, 2010.

[27] Corporate Knights, “Corporate Knights Magazine Announces Best Aboriginal Relations in Extractive Industries,” April 21, 2009, http://www.corporateknights.ca/in-the-press/72-press-releases/372-corporate-knights-magazine-announces-best-aboriginal-relations-in-extractive-industries.html?page=2, accessed October 25, 2010.

[28] Tailings are leftover material produced during the extraction process that separates bitumen from the oil sand.

[29] Nathan Vanderklippe, “Suncor Speeds Reclamation of Tailings Ponds,” Globe and Mail, September 26, 2010, http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/suncor-speeds-reclamation-of-tailings-ponds/article1726821/, accessed October 15, 2010.

[30] Michael Valente and Andrew Crane, “Public Responsibility and Private Enterprise in Developing Countries, California Management Review, vol. 52, no. 3, 2010, pp. 52–78.