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Harnessing the boom
An expanding resource sector golden chance for local growth. Small towns learning to cope with economy
Rod Nickel, The StarPhoenix
Published: Friday, May 09, 2008
COLONSAY -- Tyler and Terrilynn Young wanted it all.
Two years ago, they packed up their three kids and left nearby Allan for the slightly larger Colonsay, where they could make affordable plans to build a house and stay close to family.
They like the lifestyle so much that they chose to live in this town 63 kilometres east of Saskatoon while Tyler works as a journeyman mechanic in the Drayton Valley, Alta., oilpatch, a seven-hour drive away.
"I think we will stay here quite a while," Tyler Young, 32, said contentedly, sitting at the kitchen table in a modest home the couple is renting as their new 1,300-square-foot bungalow is built. "I like the quiet."
Colonsay had everything but a job. Now it's getting plenty of those, too.
This sleepy town of 462 is poised for growth after three census periods of stagnation, thanks to Mosaic Co.'s plan to add 162 jobs at its expanding potash mine eight kilometres away. Colonsay is one of a dozen or more small Saskatchewan communities with a rare chance to boom as the resource sector explodes.
Job growth in potash mines, oilfields and perhaps diamond and coal mines are turning talk of survival into a swaggering sense of prosperity in places such as Colonsay, Estevan and La Loche.
High housing prices in Saskatoon and Alberta have already sent a trickle of young families to Colonsay. Not since its potash mine opened in 1968 has the town had a similar shot at growth.
But there's more to attracting residents than creating jobs.
Many workers at the Colonsay mine live in Saskatoon, Watrous, Humboldt and Langham, says Mosaic spokesperson Brad DeLorey. Staffing Mosaic's expanding Esterhazy mine is likewise a regional effort.
"Let's be realistic -- you're not going to get 'em all," said Colonsay Mayor Jim Gray. "I would just be happy to get a portion of them, see the town grow and keep the school."
TOWN PITCHES ATTRACTIVE AMENITIES
Gray, a retired farmer, knows how to make a sales pitch too, lauding Colonsay's water quality, rink, golf course, pool and churches -- "we have three" -- as amenities to attract residents. Fuel prices might encourage more miners to live closer to work.
Even the promise of hundreds of new jobs is no guarantee a town will grow, says Rose Olfert, a professor in the University of Saskatchewan department of agricultural economics.
"Where people work doesn't necessarily determine where they live. And when people choose where they live, they're looking for a package of amenities, maybe a place where the spouse can work, where there are other facilities available. That is indeed a complex issue."
For that reason, larger communities such as Weyburn in the Bakken oil play region may be in a better position to boom, she said, than smaller towns. Housing new workers is the biggest challenge. Colonsay has no more than a handful of homes for sale. So it's hatching an ambitious plan to sell up to 78 serviced lots -- at cost -- to attract new mine families.
The town wants to sell 14 serviced lots this summer at $25,000 apiece to a combination of professional builders and people building for themselves.
Once those sell, it will service 20 more. After that, if demand warrants, it's planning to service and sell another 44 lots at the other end of town. That's when Colonsay may have to pay the price of success.
The town's sewer capacity will max out after the next 78 homes are built, Gray says. That leaves Colonsay town council to contemplate infrastructure such as another $250,000 sewage lagoon -- roughly the equivalent cost of Colonsay's entire annual budget.
"It's going to get expensive," Gray says. "You're looking at small-town Saskatchewan. You can only go so far in the hole."
That leaves Colonsay in a dilemma of whether to spend money on housing and hope for the best or play it safe but risk being penny-wise, pound-foolish.
"They can develop the houses and they may or may not get the people," Olfert says. "If they don't build the housing they can be pretty sure nothing will happen."
To Colonsay's small business community, the potential payoff is worth the town's efforts to harness the potash boom.
Jim Walker owes to the mine half the sales at his one-man cabinet-making business. His cabinets hang in the offices of the mine buildings. Wooden wedges and blocks he fashioned are used in production.
"It's going to be a good thing for this area, for sure," said Walker, who has been in the carpentry business for 31 years. "It always has been. What would we do without it?"
Ben and Muling Liang got by for seven years running Colonsay's Chinese food restaurant before striking oil. They signed a contract with the mine to deliver "overtime lunches." Mosaic buys a meal for any worker putting in at least two hours of OT.
Eight years after signing the contract, Ben's Place delivers up to 500 meals per month to workers at the mine.
"(The mine is) too important," says Ben Liang, sitting at one of his kitchen-countertop-style tables. "Otherwise we won't make any money in this small town. The more people work there, more chance for us to make money."
BETWEEN THE OILSANDS
One of Saskatchewan's poorest communities finds itself happily caught between the Saskatchewan and Alberta oilsands. Jobs at either location could provide a quick, lasting fix for La Loche's 85 per cent unemployment rate.
But La Loche needs basic infrastructure such as sewer and water mains, lift stations, streets and houses if it's going to ride the economic wave of the Alberta oilsands to the west and Saskatchewan oilsands a two-hour drive north. There are few hotel rooms or office space.
The northern village of 2,348 doesn't even have a bank, but village officials met recently with a credit union, says Mayor Georgina Jolibois.
Oilsands Quest Inc. hopes to start construction on a $5-billion oilsands project by 2012. If it produces 100,000 barrels of bitumen daily as projected, it would be producing one-third of the petroleum the province currently pumps out of the southern part of the province.
"It's an extremely important development for La Loche," Jolibois says. "(There are) oh, so many opportunities -- employment, more housing to be built, infrastructure to accommodate the existing population and other people who may choose to live in La Loche."
The northern village's housing corporation, Methy Construction, has a plan to build 70 single-family homes on new serviced lots. The village met with June Draude, the minister of First Nations and Metis Relations, last week about help paying for it. Jolibois left without a commitment, but is encouraged senior governments are in.
"We are optimistic we are going to get the financial support we need to move this project forward."
BOOMING BY THE BARREL
Southeastern Saskatchewan is also measuring economic development by the barrel.
In 2007, there were 1,055 wells drilled in the region, according to the Ministry of Energy and Resources. This year, the conservative estimate is 1,100, including about half in the Estevan area. Each drill fleet employs 40-50 people, says Michel Cyrenne, community development manager for the Estevan & District Board of Tourism, Trade and Commerce.
That may be just the beginning.
The Bakken oil play, straddling the border and taking in Saskatchewan, Montana and North Dakota, has 3.65 billion barrels of recoverable oil on the American side alone, according to the United States Geological Survey.
There's no estimate for the Bakken's riches north of the border. But Saskatchewan's Bakken play has produced about four million barrels since production began in 2002 and fueled record-breaking land sales.
For Estevan, that means direct jobs working on the rigs and spinoff benefits for nearly everyone else.
"(The retail sector) are getting a lot of the benefits of this increased activity," Cyrenne said. "It's a booming economy and relatively affordable housing here in Estevan so people have a lot of disposable income."
Jobs may be plentiful, but people to fill them are not, Cyrenne says. There are currently 530 jobs posted in Estevan, including oilpatch trades and transport jobs and many retail openings.
The other major challenge is a lack of hotel rooms and homes for incoming oilpatch workers, Cyrenne says.
"I was in Calgary about a month ago and people in Calgary are hearing about Estevan a lot and are considering relocating to this area. It's on the radar across Western Canada."
DIAMONDS AND COAL
Potash, uranium, oil and gas may be driving the Saskatchewan economy now. But other small communities are eyeing diamonds and coal as lifelines.
After being kicked around by the forestry industry for the last few years, Hudson Bay is hoping a newly discovered coal deposit 50 kilometres east of the town eventually becomes a mine employing hundreds.
"It's exciting news, but I'm a cautious optimist," said Mayor Elvina Rumak. "It's all in the test-hole stages."
The surprise announcement Monday by Goldsource Mines that it had found a potentially large deposit of high-ranked coal may create just enough hope to keep laid-off workers around, Rumak says.
Weyerhaeuser announced last month it's closing its oriented strandboard plant in the town, putting 170 people out of work. That follows a February announcement by Weyerhaeuser that its Hudson Bay softwood plywood mill and Carrot River softwood stud mill, which had been temporarily shut down since January 2007, would close permanently.
"I don't really think the people want to leave the area at all," Rumak said. "Everybody likes Hudson Bay."
The 2,500 residents of the James Smith First Nation, located across the Saskatchewan River from a kimberlite exploration site, have as much to gain as anyone if Shore Gold and partner Newmont Mining Corp. of Canada build a diamond mine. More than half of the reserve's residents are unemployed.
"It's going to fulfil everything for the First Nations people. We're going to go far with this," said band councillor John Mcleod.
The problem is it takes a 90-minute drive to get to the site over the nearest bridge. The exploration site is no more than four minutes away as the crow flies.
Mcleod says he's confident the federal government will step up to build a new bridge if the diamond mine becomes reality.
"Everything is going to be positive."
Colonsay stands to get busier in the next few years, but small-town guy Tyler Young says that's OK with him.
"It gives people an optimistic outlook," he said.
After all, prosperity may bring the kind of job Young is looking for, at a fair wage. Right now, he's earning $10 an hour more in Alberta than he would in Saskatchewan.
Cabinet-maker Jim Walker has seen the town grow and shrink before. But he, too, is enjoying the ride.
"I just wish I was 20 years younger so I could take advantage of it," he said, breaking into a wide grin that almost dislodged the pencil over his ear. Instead, Walker, 61, plans to retire around the time the mine completes its expansion.
"It's a good way to finish up. For sure."
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GROWTH IN MOTION
Colonsay: Mosaic is expanding three mines, creating 162 permanent jobs at Colonsay between 2011-12.
Belle Plaine: 270 jobs at the Mosaic mine, most created between 2013-15.
Esterhazy: 307 Mosaic jobs, most between 2015-17.
Construction work on the three mine expansions is estimated at 4,552 person years. That roughly translates into hundreds more jobs over a seven-year period.
La Loche: Oilsands Quest hopes to start building a $5-billion oilsands project north of the village by 2012. There are already hundreds of people working in a camp at Axe Lake.
Estevan, Weyburn and other communities: At least 1,100 wells are being drilled this year in the Bakken play.
James Smith First Nation: Shore Gold and its partner is spending nearly $95 million this year on diamond exploration.
Hudson Bay: Two wood plants are closing, but Goldsource Mines Inc. has discovered a major coal deposit 50 kilometres east of the town.