The western Canadian construction climate has been in a period of transition over 2019 and into 2020, in part due to the challenges experienced by Canada’s oil and gas industry. Despite this and the impacts felt by the global COVID-19 pandemic, in many cases, construction across western Canada has continued as provinces have deemed the construction industry an essential sector for its contribution to economic health.
The western Canadian construction landscape is largely shaped by the influence of environmental regulation, political policy, and the economic health of the region. Many of the largest construction projects in western Canada in 2019, particularly across Alberta and British Columbia, have been impacted by environmental, political, and economic factors, which has resulted in over an estimated $75 billion in construction projects being cancelled or put on hold.
A predominant reason for this contraction in the western Canadian construction sector has been the reduction in upstream oil and gas, which has been severely constrained due to collapsing commodity prices, regulatory uncertainty, and provincial production curtailments. As a major driver of Alberta’s economic strength, many other construction projects across western Canada have suffered the domino economic impact of a struggling oil and gas industry.
A prominent example of this effect, among many others, is the $20.6 billion Frontier Oil Sands Mine Project cancelled by Teck Resources Ltd. in February 2020. The project was due to be one of the largest oil sands mine in Alberta’s history, with unprecedented support from the fourteen Indigenous communities that bordered the project area. However, cratering oil prices and environmental regulatory turmoil led the project to become politically and economically untenable. Teck Resources Ltd. withdrew a regulatory permit sought from the federal government. Several other oil sands projects have been recently affected since last year by similar regulatory, political and economic factors.
The breakdown of upstream oil and gas construction projects has been somewhat offset by a burgeoning downstream oil and gas sector supporting refining, petrochemical, and pipeline construction projects. These construction initiatives represent nearly an estimated $60 billion in the current and future western Canadian construction industry, with many projects already underway or breaking ground in 2021. Notable projects include: Heartland Petrochemical Complex (Alberta), Coastal Gaslink Pipeline Project (British Columbia), Moose Jaw Natural Gas Plant (Saskatchewan), and LNG Canada (British Columbia).
The oil and gas industry is a key driver of construction in western Canada, but in recent years, renewable energy has also created space for growth. The largest contributor to the expansion of renewable sector construction is the $10.7 billion Site C Hydroelectric Project in British Columbia. The $200 million Canyon Creek hydroelectric power storage project in Alberta is also due to start construction by year end 2020. We note, however, that wind farm construction is growing across the region, particularly in Alberta.
As of June 2019, the Canadian Wind Energy Association estimated there were approximately 60 key wind farm construction projects in western Canada, with 38 of them in Alberta, and the remainder divided fairly evenly across British Columbia, Saskatchewan, and Manitoba. The top six projects in Alberta represent nearly $1.5B in construction currently underway or beginning in 2021, with the next largest being the $254 million Golden South Wind Project in Saskatchewan.
While construction projects driven by the energy industry and infrastructure work have implemented COVID-19 health and safety protocols as construction continues, only two have been put on hold. Woodfibre LNG, a $1.6 billion project in British Columbia by Singapore-based Pacific Oil and Gas Ltd., has been forced to shut down construction until mid-2021 due to spread of COVID-19 in their Asian fabrication yard. The Vancouver International Airport Expansion was also halted indefinitely until the end of the COVID-19 crisis.
In contrast, the agriculture industry, which also supports current and future growth of the western Canadian construction sector, is highly susceptible to the impacts of COVID-19. For example, the Manitoba-based Portage Le Prairie $460 million potato plant expansion has been put on hold due to a steep drop in demand across Canada and the US, as restaurants and other facilities close to prevent spread of the virus. Although Saskatchewan boasts a significant collection of potash construction projects across the province totalling approximately $8 billion, with the leading use of potash in agricultural fertilizers, these projects could also suffer a setback.
Despite the economic impacts of the oil and gas industry and COVID-19, western Canadian provinces continue to invest in infrastructure construction projects totalling over $20 billion in the construction industry currently and into the near future.
Although the western Canadian construction industry has faced obstacles this year, the construction sector continues to offer many opportunities for current and future growth across the energy, renewables, agriculture, and infrastructure sectors.
Leading Firm and Practitioners in Construction Sector
Mathews Dinsdale lawyers from coast-to-coast are recognized in the 2019 Canadian Legal Lexpert® Directory as leaders in Construction Labour Relations. In this issue we shine a spotlight on 5 lawyers from our Construction Practice Group who assist construction companies with their labour relations and employment law needs and work closely with clients in meeting owner’s requirements on construction projects. They advise clients on labour management strategies, collective bargaining and project labour agreements, as well as supporting companies in addressing pre-job requirements, contract administration and with Occupational Health & Safety compliance.
This newsletter is not intended as legal advice. Any employer or organization seeking assistance should feel free to contact a Mathews Dinsdale lawyer for assistance.