Business bracing
for slow down

By Don Patterson
Staff Reporter

While there were warnings of a possible slowdown in the oil and gas industry – and those businesses directly connected to it as the province reviewed its royalty rates, low gas prices already meant slower times for some Foothills companies connected to the industry.
Dave Lunn, safety manager with Mesken Contracting, said it’s business as usual for the company after Premier Ed Stelmach announced the Province’s new royalty framework on Oct. 25. He said the company anticipated and prepared for less oil and gas activity as far back as 18 months ago.
“Eighteen months ago we had a meeting and it was put to us,” he said “Part of it was the Trust announcement and that was in combination with full gas reserves and a slow market back east.”
Lunn said the company does a lot of construction work and diversifies its activities to offset a downturn in one area or another.
Dean Macleod, manager of Eveready Industrial Services Corporation at the High River office, said business was already slow because of low gas prices.
“I definitely don’t think the royalty news and the changes on that front helped. It’s a combination of things and to simplify it is difficult,” he said. “The biggest impact, and it has been for a year now, is gas prices.”
Macleod said most of his employees drive trucks involved in oilfield activities and he has been able to keep his trucks moving when he needs them most. He said many of his drivers are from the Maritimes and return home to fish in slower summer months, at which time drivers from the area are able to fill in.
The royalty review process also had an impact on another Foothills transportation business as the Aldersyde-based Mullen Group announced prior to Stelmach’s announcement that the company would lay off up to 100 employees at several of its business units – many of whom are drivers – because of uncertainty generated in the wake of the royalty review.
Independent oil and gas contractor Chris Simpson, of Okotoks, said any potential impact of the review could be felt in a number of areas around Alberta. He said there are a lot of people like him who work at different sites across the province, staying in hotels and eating in restaurants.
“Labourers that are making $15 to $16 per hour, living in hotels when they’re off working, they’re buying all their lunches and that stuff, the grocery stores get hit and convenience stores. It’s a trickle down effect,” he said.
Simpson said it could also impact a range of other areas.
“How many of these oil companies support minor hockey, high school football?” he asked. “Those things are going to dry up. That’s the first thing that’s going to go.”
Maria Clarke, general manager of Lakeview Inn and Suites, said the number of oil and gas workers staying in the hotel had decreased before the royalty review and expects things will be slower during leaner months.
“It started before it, it was just another kick,” she said.
Clarke said there are other things that bring people to the hotel that could offset any potential impact.
She said the hotel has seen an upswing in business related to construction projects.
“We get a lot with construction. Because the oil and gas industry isn’t working, those men have now gone into construction,” said Clarke.
Rick Bart, General Manager of the Heritage Inn in High River, said there was already less activity involving oil and gas companies for the past year. However, it wasn’t an entirely negative story for the hotel.
“Last year at this time we had a tremendous amount of seismic crews that came through here,” he said. “The fourth quarter of 2006 was extremely busy even though there was no oil activity, but it was for future oil.”
Bart expected there could be additional impact from the new royalties, but said it could be offset by increases in other area of the business, such as meeting room bookings.
“As far as sleeping rooms and oil business, there has definitely been a decline from that particular area, but there’ve been other increases in other areas,” he said.

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