Newfoundland's oil ripple effect: As prices fall, commuting workers stay home

It was a tell-tale sign when East Coast Catering of St. John's laid off 44 workers in September. The company supplies meals and housekeeping services to Newfoundland's offshore oil rigs, two of which departed this year at the end of their contracts.

"The majority of our business is not directly impacted by the recent drop in oil prices," East Coast Catering said, but the subtle signs of a downturn are there.

"I am not worried yet. And I am certainly not pushing the panic button, but I think we should have our hand hovering over it," said Paddy Daly a well known call-in radio host for VOCM in St. John's.

Newfoundland's offshore oil industry has been somewhat insulated from the shock of plunging oil prices over the last 16 months, but the long tail of job losses and cancelled contracts so clearly evident in Alberta is beginning to show, especially as the province's "turnaround workers" come home for good.

For years, thousands of Newfoundlanders commuted back and forth to Alberta's oil patch, working three or four weeks at a time and bringing home plump paycheques. Many of them aren't going back this fall.

Darryl Day used to fly from Gander to Alberta and back — 22 days out, 13 days back home. He was recruited at a job fair in Newfoundland six years ago to drive heavy machinery for a hydraulic fracturing company. Those were the "good times."

"Different companies would run three or four job fairs in Newfoundland a week and they would leave with however many employees," Day said. "Then if they ran short, they would come back again."

In March, he got notice of a temporary layoff. In June, that became permanent, and he came home to stay.

"You could pretty much see it coming, watching the markets, even though you hoped it was not going to happen," he said. "There's a lot of us."

Massive oil reserves

The number of jobs in Newfoundland is projected to fall this year. In September, RBC Economics forecast real GDP in 2015 to decline three per cent, reflecting "that tough conditions in the energy sector are unlikely to turn around as quickly or as greatly as previously thought."

The long term future appears brighter. Seismic data released by the province last week shows there are as many as 12 billion barrels of oil in an 11-parcel block of unexplored deep water in the Flemish Pass area.

"You could have several Hibernias in that one sector, " said Ed Martin, CEO of provincially owned Nalcor Energy.

But reaping those benefits is a long way off, and those Alberta oil jobs had been lighting a torch under consumer spending.

In places like Bonavista, a pretty outport 300 kilometres from St. John's, a new truck parked near the harbour displays Alberta plates. Construction had been brisk on big new homes, but housing starts across the province have now fallen by 17 per cent.

Bonavista's longtime mayor, Betty Fitzgerald, is worried about what's to come.

"When you've got good money coming in, you spend more, and you enjoy life more," she said.

"When you look around you see people with new quads, new side by sides, new trucks, new cars, new homes. Their kids are getting all they need. Then all the sudden if there are layoffs, all those things are no longer there and it's going to be very, very hard on the families."

Not to mention the local businesses who sell those grownup toys. It is a kind of hidden economy; everyone knows someone who went out to service the oilfields but the numbers aren't officially documented. So now that the layoffs are piling up, there is a kind of quiet uncertainty.

"My son was in Alberta and this year he got a job there in Marystown, in the shipyard, because he's not sure what's going to happen in Alberta," Fitzgerald said. "There's a lot more like that, right?"

Newfoundland is used to boom and bust, especially after the cod fishery shut down more than 20 years ago. This is one more cycle.

"Ever since I can remember, people went away to other parts of Canada to work, and I think that's something that's going to happen in the years to come as well," Fitzgerald said. "But all of us will be affected in some way by the decrease in oil."

Big pay cut

Darryl and Bev Day are better off than many. He got a new trucking job nearby, earning about one-third of his pay in Alberta. They had put some of their "oil money" away, unlike some younger workers, who went cheque to cheque.

"I think a lot of people didn't prepare too well," Bev Day said. "That comes with maturity.

"It hit people pretty hard. It was there and then it was gone. People thought it would build back up like it did a few years ago" — after the downturn in 2009 — "but it's going to take a long time for it to rebound this time".