Canada’s elusive quest for energy wealth.

It’s hard to find news reports about Canada these days that don’t include the words constitutional crisis. But political dysfunction in Ottawa isn’t the only problem facing the country. On the other side of the vast Canadian prairies, the falling price of oil has put a question mark over the Alberta oil sands, a vast deposit of thick, sticky goo called bitumen that holds more potential energy than anywhere outside Saudi Arabia—and, until recently, held the promise of huge wealth for Alberta and the country.

The trouble is that turning bitumen into crude is expensive; it needs to be injected with steam to bring it to the surface, then diluted further to ship it through pipelines. So it wasn’t until the price of oil began its long rise early this decade—from just $20 a barrel in 2002 to $50 in 2004, then nearing $150 this year—that northern Alberta, already the source of 80 percent of Canada’s natural gas, became the Next Big Thing for oil producers around the world. The Alberta government claims the oil sands hold some 315 billion barrels of oil—enough to meet world oil consumption for an entire decade at 2005 levels of demand. Shell opened an oil sands mine in 2003, the first in 25 years, and EnCana, ExxonMobil, StatoilHydro, and others announced plans for projects of their own.

Times were so good that the province, unable to spend its burgeoning royalties, announced in late 2005 a one-time “prosperity bonus” of 400 Canadian dollars, payable tax-free to every man, woman, and child who lived in the province. The checks—nicknamed Ralph bucks, after then-Premier Ralph Klein—cost the province CA$1.4 billion, just one-fifth of the CA$6.8 billion surplus the province amassed from oil revenues that year alone. In Fort McMurray, the small city in northern Alberta that became ground zero for the oil boom, the frenzy brought the city near-legendary status—anybody could find work and make a killing.

But it was not to last, and the plunge, when it came, was swift. Oil prices peaked last July, falling to $100 by September and below $50 in December. On Oct. 23 Suncor said it would cut back on construction at its CA$20 billion Voyageur oil sands project. On the same day, Petro-Canada and UTS Energy Corp. said they were thinking about postponing the construction of a new CA$10 billion processing facility. On Nov. 27 Shell said it was withdrawing an application for a new facility of its own, and on Dec. 4 StatoilHydro, the Norwegian oil company, announced that it would withdraw its application to build a CA$16 billion refinery. The torrent of planned new investment has slowed to a trickle.

Is the turmoil of recent months just a hiccup for the oil sands or something more serious? The answer depends on more than just the price of oil.

Frank Atkins, an economics professor at the University of Calgary, said the price that matters for the oil sands isn’t just the price per barrel—it’s the price per barrel in Canadian dollars, since that’s where the companies incur their costs. As the price of oil fell, so did the value of the Canadian dollar. So while a barrel of oil now costs around $50, it’s about CA$63.