Investors Attack Energy Boomtown's Housing Shortage by Sea

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By Julie Gordon

Hundreds of construction workers in booming northern British Columbia are taking up residence in unique digs on board a cruise ferry revamped into a floating luxury hotel. The aging ship will help relieve a housing shortage in one busy Canadian port town already bursting ahead of a promised energy boom that could last more than a decade.

The Silja Festival -- a Baltic ferry made over as the Delta Spirit Lodge -- will spend at least a year docked outside Kitimat, B.C., where it will provide housing for about 600 workers in town for Rio Tinto Alcan's $3.3 billion smelter-upgrade project, which is expected to wrap up in 2015. After%VIRTUAL-pullquote- "If the house is priced right, it sells within a few days."% that, the ship's owners hope more contracts will float their way as major energy companies like Chevron Corp, Petronas and Royal Dutch Shell push ahead with proposed liquefied natural gas export projects along Canada's Pacific coast.

"This kind of investment would never occur without the kind of mega-opportunities that are growing in the Pacific Northwest," said Andrew Purdy, vice president of Bridgemans Services Ltd, the privately held company behind the hotel. "We saw the opportunity and we put it all together, but it was effectively driven by industry."

Despite the "No Vacancy" signs popping up all over town, the endeavor is risky. Bridgemans declined to say how much it is making from its first job, but it has already spent more than $4 million Canadian dollars ($3.6 million U.S.) to import and upgrade the ship, with further improvements planned. It has no contract after work wraps up at the Rio smelter.

But if just four major LNG projects go ahead, roughly 15,000 extra beds will be needed in coastal northern British Columbia at peak construction, according to a report from National Bank Financial. For employers, offering free top-end accommodations complete with a basketball court, a theater, a fine-dining room that serves three hearty meals a day and a captain's lounge for relaxing may be a draw in a very competitive labor market.

"We always go back to what our client wants. They want to build a platform that attracts and retains the best workers," said Purdy.

Scrambling for Skilled Labor: The North American energy industry is booming. Yet as companies make new investments, there are doubts the sector will be able to find and keep the%VIRTUAL-pullquote-"They want to build a platform that attracts and retains the best workers."% employees needed to complete all the potential projects. Speaking at an event earlier this year, British Columbia's energy and mines minister, Bill Bennett, said the province will need to import workers from other provinces and abroad. "If every single high school kid in B.C. graduated, became an apprentice ... it wouldn't even come close to satisfying the demand we see coming," he said.

Luring skilled labor away from other thriving areas, like the Alberta oil sands and the Bakken region driving North Dakota's fracking boom, will take more than good pay. Workers are looking for perks. The floating hotel, with its all-inclusive facilities and gourmet meals, may be just the ticket for companies that want to take temporary living to the next level.

The ship, which used to sleep more than 2,000 people on overnight trips across the Baltic Sea, has been retrofitted with 700 single-occupancy rooms, each fitted out with a memory foam bed and flat-screen TV. In addition to providing room and board for the temporary construction workers, the ship has meeting facilities and even a private dining area that can be rented out for special events. The hotel also provides jobs for local residents who don't have a professional trade, the owners note, helping to ease the pain of a sharp increase in local housing costs.

Tripling Rents, Soaring Home Prices: A quick scan of real estate listings for Kitimat shows just how tight the market has become. Only two houses are listed for under $200,000 Canadian%VIRTUAL-pullquote-Floating lodges are nothing new along the West Coast, where they have traditionally been used for road, lumber and fishery projects, but there's never been anything close to the same size as the 11-deck Silja Festival ship.% dollars, and both are fixer-uppers. "If the house is priced right, it sells within a few days," said Ilona Kenny, a Realtor with RE/MAX Kitimat Realty who has lived in the area for nearly four decades. "They're being snapped up by people who live here, by investors who are renting out properties and families that are moving into town."

The town's typical family home -- an older three-bedroom, one-bathroom bungalow -- is selling for about $250,000, said Kenny, compared with $100,000 to $150,000 last year. In one new subdivision, not yet under construction, townhomes start at $288,500.

Rents too have skyrocketed, which is putting pressure on long-time residents who can no longer afford their homes, said Kitimat mayor Joanne Monaghan. "All the apartment buildings that were built in the 1970s have been purchased and are being refurbished, and that's causing problems," she said. "People were paying $400 a month rent, and now, in some cases, it's up to $1,200 a month."

The worry is the town will soon find itself in a housing-affordability crisis, much like Williston, N.D., where a fracking boom delivered high-paying jobs for thousands of workers but also led to a sharp rise in homelessness. While the housing crunch keeps Monaghan awake at night, she is happy the local economy is thriving. There are new hotels, restaurants and retail shops in the works, and the town of 11,000 just got its first Tim Hortons, a popular coffee shop chain that is the hallmark of a bustling Canadian town.

Parade of the U-hauls: Still, the long-time politician knows that with every resource boom there is usually a bust. Indeed, the town was hit hard during the economic crisis when the local forestry industry collapsed.

"A few months after I became mayor, the Eurocan (paper mill) just pulled out. We had more U-haul trailers going out than I could shake a stick at," said Monaghan. "Now they're coming back in and I'm just thanking God."

Floating lodges are nothing new along the West Coast, where they have traditionally been used for road, lumber and fishery projects, but there's never been anything close to the same size as the 11-deck Silja Festival ship. As workers finish up last-minute vacuuming and polishing on board the floating hotel, the four investors are eager to secure their next contract. They have had meetings with various companies that plan to build LNG export projects.

To mitigate risk, the group did not buy the roughly $30 million cruise ferry outright but rather reached a type of rent-to-own deal. If things go well, the investors can buy it. If not, they can walk away.

"I think everybody is sitting here waiting to see if this is a success," said Brian Grange, president of Bridgemans. "Am I terrified? No, I'm not. I think this is probably one of the most innovative ideas that has been seen on the B.C. coast in quite some time."

FASTEST-GROWING BOOMTOWNS IN THE U.S.:
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Investors Attack Energy Boomtown's Housing Shortage by Sea

Population: 26,677
1-year growth: 9.3%

The small city of Williston, N.D., was once a sleepy farm town -- until oil companies discovered ways to tap the vast Bakken Formation believed to hold as many as 24 billion barrels of oil.

"It's a game-changer, a bonanza," said Tom Rolfstad, executive director for the city economic development department. Workers have flocked to the town. "We've doubled in size in three years, and we will double again in the next three years," said Rolfstad, who grew up in the area.

But the town needs to take care of one major problem first: A severe housing shortage. Rolfstad said that developers fly into town nearly every day with plans for commercial and residential building.

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Photo: AP

Population: 26,771
1-year growth: 6.5%

Located on the southern edge of the Bakken Formation, Dickinson is going through similar growth as Williston. In fact, out of all metro areas -- large and small -- last year, Williston is the only place in the country where the population grew faster.

Here, too, the influx of job seekers has left the city short on housing. Rents have nearly doubled in three years, with two-bedroom apartments going for $1,600 or more a month.

The number of building permits for single-family homes more than quadrupled in 2012. "Usually, winter halts construction," said city administrator Shawn Kessel. "But we've had two pretty mild winters in a row and construction never did stop."

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Photo: Google Maps

Population: 16,117
1-year growth: 4.6%

Oil companies have been drilling successfully for crude in the Andrews area for more than 80 years. However, rising oil prices have caused a recent spike in production.

And with advances in drilling techniques, oilmen have also been able to tap reserves in West Texas's Permian Basin that they couldn't economically exploit in the past. Now the oilfields produce 20% more oil than three years ago.

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Photo: Wikimedia Commons

Population: 151,662
1-year growth: 4.6%

The hometown of the 43rd president of the United States, George W. Bush, has been a major oil-producing area since the early 1920s. It's a white-collar town where many of the managers and executives who supervise oil production live. That's where "W's" dad, George H.W. Bush, moved to get into the oil business.

The current energy boom is driving Midland's population growth, according to Thomas Mesenbourg, acting director of the Census Bureau. "The Permian Basin, located primarily in West Texas and North Dakota, accounted for almost half of the total U.S. growth in firms that mine or extract oil and gas, during [the] one-year period," he said.

In December, the unemployment rate in Midland was a miniscule 3.1 percent, down from 3.6 percent earlier.

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Population: 34,524
1-year growth: 4.1%

Utah is the nation's 11th largest oil-producing state, most of which comes from the northeast corner near VernalHigh energy prices have boosted the town's economy in recent years, according to Mayor Gary Showalter. Besides the well-paying oilfield jobs, several branch offices of companies like Halliburton and Schlumberger have opened in the area, he said, with more coming.

But the city isn't solely reliant on oil drilling to keep its economy afloat. It also has one of the largest deposits of natural gas in the country. And the area's natural beauty, Old West roots and excellent fishing draws tourists, as does the area's plentiful deposits of dinosaur fossils.

There's also mining for an asphalt-like mineral called Gilsonite that is used in dozens of products. It's in high demand as an ingredient in oil drilling mud, which keeps drill bits clean and cool.

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Population: 23,081
1-year growth: 3.5%

Visitors to the "Natural Gas Capital of the World" know exactly where the town's wealth lies: They are greeted by a 180-foot tall, non-operating oil rig as soon as they enter downtown. Located about halfway between Oklahoma City and Amarillo, Texas, Elk City lies smack in the middle of the Anadarko Basin, a major natural gas reserve.

The city also serves as a retail and health care center for people -- many of whom are energy industry workers -- living within an 80-mile radius, according to Jim Mason, director of economic and community development.

Like most boomtowns, Elk City is dealing with a housing shortage, according to Mason. A never-completed housing development that cratered in the "Oil Patch" bust of the 1980s has been relaunched, with 85 new homes slated to be completed within 18 months. Another 104 apartments and 40 new houses are also being built.

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Photo: Flickr/farmalldanzil

Population: 53,217
1-year growth: 3.5%

Elko has long been riding the roller coaster of gold prices, which have been on a steep climb over the past 10 years. Yet, while the area mines produce about as much gold as South Africa, the quality isn't exactly top-notch.

"The gold mining here is microscopic," according to Curtis Calder, Elko's city manager. "You can't even see it." But when gold prices are soaring at $1,600 an ounce, even "microscopic gold" is worth pursuing. Mining companies have stepped up exploration and extraction and are hiring.

Those who don't find work mining gold can try their hand at molybdenum -- a metal used to make very hard steel alloys. A new $1 billion molybdenum mine is currently under construction.

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Photo: Wikimedia Commons

Population: 141,325
1-year growth: 3.4%

Located just 20 miles from Midland, Texas, Odessa is a smaller, working-class city made famous by "Friday Night Lights," a book -- and later a film and television series -- that described the almost religious fervor of West Texas high school football.

Odessa's latest oil boom began once "[t]he oil companies figured out a way to make drilling old wells cost effective," said Mike George, president of Odessa's Chamber of Commerce. "That has turned an old oilfield -- the Permian Basin -- into the biggest play in the nation."

Developers built about 500 new homes last year to handle the newcomers. And nearly 2,500 new businesses opened in Odessa over the past three years, according to George.

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Photo: Wikimedia Commons

Population: 78,621
1-year growth: 3%

It's not just oil and gas fueling Casper's economic growth, coal and uranium are playing a part, too. Improvements in oil drilling techniques are enabling oil companies to squeeze more crude out of deposits. In the lands north of town, 2,500 new wells are expected to be drilled over the next couple of years, according to City Manager John Patterson. And, after a 20-year hiatus, uranium mining is being pursued again in the mountains, said Patterson.

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Photo: Wikimedia Commons

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