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Construction crunch

With a construction slowdown on the horizon, what will 2013 bring for drillers?

January 9, 2013  By Julie Fitz-Gerald

A moderate slowdown in residential construction is on the horizon according to Canada Mortgage and Housing Corporation (CMHC), causing many industry-related workers to wonder just how much of an impact it will have on their businesses. The answer depends largely on which province you operate in.

A moderate slowdown in residential construction is on the horizon according to Canada Mortgage and Housing Corporation (CMHC), causing many industry-related workers to wonder just how much of an impact it will have on their businesses. The answer depends largely on which province you operate in.

The federal agency’s most recent forecasts for 2013 are a tad drearier than the numbers they issued back in June. CMHC now says new housing starts in 2012 are forecast to be 207,200 and will decline by about seven per cent in 2013 to 193,100. The coming year will see a reduction in single-detached housing starts in Eastern Canada, with the exception of Ontario and Nova Scotia, which are expected to see no growth at all.


The largest decline will be in Prince Edward Island with a reduction of 10.7 per cent.

Western Canada, with the exception of Saskatchewan, is expected to actually see increases in single-detached starts thanks to stronger economic projections tied to the natural resources sector. British Columbia should see the largest increase at 11.2 per cent, while Saskatchewan will be the only western province to see a reduction of 4.1 per cent in single-detached starts.

No matter where you are located, the instability and fragility of the global economy already has many business-owners reeling in spending and searching for cost-saving methods. Rob MacKinnon, co-owner of MacKinnon Well Drilling Ltd., in Pembroke, Ont., estimates that over the last five years, approximately 70 per cent of his business has come from newly built homes. With the forecasted residential construction slowdown, MacKinnon and his brother, Jamie, have been extremely careful about company spending. When their rig was approaching its final days, they chose to refurbish it rather than buy a brand new rig, something that they’ve noticed their competitors doing as well. “I think there are a lot of other drillers doing the same thing. I have a competitor that was going to go out and buy a new rig and then he changed his mind. Last year he did a full refurb on his and he’s glad he did it that way. We’ve done the same thing. Our rig is a little bit older and the truck was getting old so we put a brand new truck under it two years ago. I’ve got spare compressors, spare diesel and spare hydraulics and we’ll just keep running it that way,” MacKinnon says. Canadians are carrying more household debt than ever before, causing other countries to warn that Canada may be heading into a similar debt crisis to that happening in the United States.

In the drilling industry particularly, many new housing projects are now constructed next to municipal water hook-ups and the forecasted slowdowns for 2013 already seem to be coming true with a scarcity of plans for future subdivisions. MacKinnon has noticed both of these circumstances in his area, making him uncertain of what the future will bring. “There are still a lot of new wells being drilled, but things are changing. Once these existing subdivisions that have been approved are filled up it’s hard to say what will happen. It’s very difficult to sever a lot now as well . . . .We will feel that impact. It’s something we haven’t felt so much up until now, but it is going to change.”

While the residential construction forecast for 2013 isn’t rosy, Mother Nature may have softened the blow for water well drillers in Central and Eastern Canada. Ontario, Quebec and the Atlantic provinces experienced record-setting high temperatures this past summer, combined with some of the lowest rainfall on record, effectively stunting crops and drying up wells across these usually lush lands. As a result, water well drillers have been running from one site to the next, prioritizing jobs based on which customers still have water in their wells and which wells are bone dry. “This year has just been crazy with dug wells going dry. We’ve been run right off our feet. It’s not a nice way to make a living, because with a new house people have budgeted for it, but if you get a young couple with a mortgage, a couple of kids and a car payment and all of a sudden their well goes dry, it’s an awful hit. It was terrible up here. Swamps were drying up, the river was the lowest it’s been in probably 100 years, creeks and dug wells were dry. The rivers and lakes are back up now because we’ve had some rain, but there’s still dug wells going dry because it’s taking a while for the water to get down there.”

Depending on the amount of snow that falls in Central and Eastern Canada this winter, MacKinnon says, the effects of the drought may still be felt into the first half of 2013. “I think we’re still going to have the after-effects of this drought if there’s not a ton of snow and it doesn’t melt gradually into the ground. Last year it dried up here very, very quickly and a lot of it evaporated or ran away. So I think we might be sheltered again for next year because of the leftovers from this year’s drought, but certainly if construction slows down, it will affect us.”

With the uncertainty of what 2013 will bring by way of snowfall and water run-off, coupled with the less-than-stellar construction forecast and unsteady global economy, water well drillers may be wise to save where they can and have some strategies in place to deal with a possible slow year of drilling. Perhaps looking back to how past generations scrimped and saved is the best option. As MacKinnon points out, “Live within your means and don’t go borrowing a whole bunch of money. We’re kind of old school around here. We do that in our business and in our personal life.” It’s an “old school” idea like this that may just save your business in tough economic times.

Julie Fitz-Gerald is a freelance writer based in Uxbridge, Ont.

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