Record levels of oil and gas activity along the provincial boundary separating Alberta and British Columbia is proving a boon to local economies, but the prosperity sometimes comes with a social price, local officials concede.

While it hasn't quite matched the same development associated with Fort McMurray's oilsands, the northern border region has experienced steady and significant economic growth due in large part to natural gas projects.

"We're growing like Billy-be-damned," says Steve Thorlakson, the mayor of Fort St. John, the city that will host B.C.'s annual oil and gas conference in October. "And with oil and gas prices going the way they are, I don't think things will be slowing down anytime soon."

On the east side of the border in Grande Prairie, the chamber of commerce echoes those sentiments.

"We're firing on all cylinders. The oil and gas industry is certainly a mainstay for us, but people underestimate forestry, which is a big part of the economy," says Lionel Frey, manager of the Grande Prairie and District Chamber of Commerce.

Bill Given, manager of Grande Prairie-based Hi-Tech Business Solutions, which sells computer software and hardware products in addition to networking and communications services, says he's seen annual sales increase from $4 million to more than $7 million a year since 2001. He attributes this "huge growth" to the energy industry.

"Our largest market for notebook computers is for (energy) consultants in Grande Prairie and the region, which is known for being a hotbed of small business," says Given, who also serves on city council as an alderman. "It's one of the best places to set up for anyone with some kind of skill to contract out."

It's a similar story in Fort Nelson, perched on the northeast corner of B.C. Dave Giddings, the branch manager of Hertz Equipment Rental's Fort Nelson location, says it has been a fairly busy summer. "But once winter starts, things just go stupid here because, in addition to the oil and gas, we've got the forestry, and because we've got hardwood, the softwood dispute doesn't affect us."

Rig-utilization levels are also up. According to data from the Canadian Association of Oilwell Drilling Contractors (CAODC), since early July around 56 of 77 available rigs have been working - an average rig-utilization rate roughly 40 per cent higher than the same period last year.

The increased summer activity is in part a response to the provincial government's summer drilling incentive program, which offers royalty breaks to explorers and producers (E&Ps) who take advantage of off-peak seasons to carry out their exploration and development programs. Investment in local infrastructure has been another driver, says Fort St. John's mayor.

"We created a rural-roads taskforce with the objective to try and expand the year-round road access to 100-per-cent load levels," says Thorlakson. "As a result, we have seen several hundreds of millions of dollars pumped into our local roads network," making it easier for E&Ps to operate in almost every season.

EnCana Corp. is among the most active companies operating in the region. According to corporate data, the company expects to drill almost 300 wells in northwest Alberta and northeast B.C. in 2005. Capital expenditures will total about $670 million this year.

Canadian Natural Resources Ltd., meanwhile, says it produces nearly one billion cubic feet per day of natural gas from its northeast B.C. and northwest Alberta operations. Information from its website shows the company has identified in the neighbourhood of 2,000 potential targets in these two regions that could be drilled in the coming years.

Burlington Resources, Talisman Energy, Devon Resources, Shell Canada and a host of other E&Ps also operate in the region.

About a half-hour drive west of Grande Prairie, Beaverlodge is preparing to accommodate increased demand for business space. Mayor Leroy Durand says the town of 2,100 is in the final stages of adding several hundred acres of commercial industrial land.

"Some of that land would also be for (forestry-related) operations, but the major impact for the present time would be the energy industry," Durand says.

"We're growing at a good rate. We assume that will continue as the oil companies continue to search and develop prospects that, without the rising (natural gas prices), probably wouldn't be as feasible."

Energy industry activity, coupled with a robust forestry sector, is causing small and medium enterprises (SMEs) to sprout up in increasing numbers. A BMO Financial Group report from 2003 predicted that after Lloydminster, Fort St.

John and Grande Prairie will see the greatest growth of SMEs in Canada until 2008 for communities with populations under 100,000.

However, finding workers to staff these businesses is proving to be a challenge.

In Fort Nelson, Hertz's Giddings says attracting and retaining workers is the toughest part for any business around town.

Hertz opened the Fort Nelson branch a year ago with just two employees, which has since quadrupled to eight.

"We've a tough time getting the people we needed," Giddings says. "We've tried very hard to add some better benefits and make a nice atmosphere for the people working here. If they're not happy, they'll go elsewhere, because there are lots of companies looking for employees."

Grande Prairie's Frey says he's aware of Fort McMurray businesses unable to match growth and having to scale back operations because of labour shortages, and worries that this could become the trend in the Swan City.

"Even though I haven't heard of specific examples of that, I've heard talk that in Grande Prairie employers are becoming very frustrated with not really achieving growth potential because they're unable to find the staff to support that," he says. "It's not at a level where they're closing their businesses, but there's definitely a frustration."

There are other challenges: In Grande Prairie real estate prices have increased at an average of seven per cent per year. Frey says: "You're probably looking at $210,000-$220,000 for an average three-bedroom new home."

In Fort St. John, Thorlakson estimates that in the last few years home prices have jumped 15 per cent on average each year. "That makes us comparable, not yet with Calgary, but maybe with (the Calgary bedroom communities of) Okotoks or Airdrie."

Increased drug use is another problem being experienced in several communities along the B.C.-Alberta border, as well as higher crime rates. In Grande Prairie, a steady upward trend of break-and-enters and robberies - especially against city businesses - have prompted city council to hike taxes, in part to bolster law enforcement.

"(City council) took the route of increasing taxes by eight per cent, half of which will be used to bring on 16 more RCMP officers" over the next three years, says Given, donning his alderman hat. "While initially people were concerned about the (tax) increase, most support it knowing that half the money will be going to fight crime."

(John Ludwick can be reached at ludwick@businessedge.ca)