The Great Oil Age

The Great Oil Age

By Peter McKenzie-Brown, Gordon Jaremko and David Finch

Note to Readers: The text in this entry is a draft. The book went through another major edit after this text was written!

Chapter 1: Introduction
Chapter 2: The Source
Chapter 3: The Early Years
Chapter 4: Oil Between the Wars
Chapter 5: The Leduc Era
Chapter 6: The Pipeline Era
Chapter 7: Processing Gas
Chapter 8: Oil Sands and the Heavy Oil Belt
Chapter 9: Frontiers of Muskeg, Ice and Water
Chapter 10: From Crude to Refined
Chapter 11: Miracle Workers
Chapter 12: A Matter of Policy
Chapter 13: The Industry and the Environment
Chapter 14: The Impact of the Petroleum Industry on Canada

Chapter 1: Introduction

The world watched spellbound in the winter of 1991 as the might of its industrial countries put a quick end to the territorial ambitions of Iraq. But the aftermath of the Gulf War illustrated the power of Canadian technology in time of peace.

Toward the end of the conflict, Iraq had turned to sabotage by dynamiting Kuwait's oilfields, setting 736 wells on fire and turning the desert into a sooty inferno. After the war, Kuwait called in an international array of fire-fighters.

Four large American firms had been on the job for two months when a Canadian well control company arrived on the scene. But Calgary-based Safety Boss extinguished 180 of the oilwell fires - the largest total by far. Of 14 other teams that struggled to control the wells, the second best, an American outfit, snuffed 126 fires.

This episode illustrates Canada's impact on the world's oil industry. Her influence has been greater in some ways than that of the entire Middle East.

In its own right, Canada's oil and gas industry is a giant with room to grow. But she has left her real mark in knowledge and technology for nearly 150 years. Canadians helped define the profound difference that oil and its sister commodity, natural gas, made to human society.

"In the oil barrel . . . is peace and war," claimed Stephen Leacock in a 1930 essay in praise of petroleum. Leacock was not the first to recognize that war and oil mix. For example, a popular study of the Canadian petroleum industry had hit the bookstores during the First World War. Said author Victor Ross, "in the greatest of wars . . . we read of armies striking at or tenaciously defending territories, for the main reason that petroleum abounds therein."

But Leacock went further. Defining man as "the animal that uses oil," the Canadian humorist proclaimed "the Great Oil Age, which now is." Leacock's prophetic though somewhat gloomy essay foretold the day the world would rely on petroleum like no other resource.

In the nineteenth century, oil's primary use had been for lamp fuel, candles and grease for home and factory. But the electric light bulb soon replaced the smoky lamp. And by 1930, Leacock's Canada and the other industrial countries were using oil as a transportation fuel. "Like the Arabian genie imprisoned in a bottle," in Leacock's words, when released that commodity shook the world.

Two decades earlier, illuminating oils had been far more important petroleum products than gasoline. That changed during the battles of the First World War. By 1930 oil fuelled cars and trucks, tractors, airplanes and some industrial equipment. Yet, by today's standards, all the motors in all those vehicles and tools had created only a tiny market for fuels and lubricants.

In the country, horse-drawn wagons were still common, and steam-powered railways were by far the most important long-distance transportation system. The shift from coal to fuel oil was well along, but the diesel locomotive would not become the railroad's workhorse for more than a decade. As on the rails, so on Canada's lakes, rivers and seas. Her steamers and ocean liners would not be completely oil-fuelled until much later.

Leacock shared his generation's adulation of "the trans-Atlantic flight of Lindbergh, the new Icarus." And although he celebrated "the humming of the transcontinental mail planes," the creation of Trans-Canada Airlines (later called Air Canada) was seven years in the future. The first transcontinental flight was nine years away.

In 1930 there were four times as many automobiles as ten years earlier. Despite this large increase, there were only a million cars on Canada's small network of mostly unpaved roads. And, unable to afford gasoline, many farmers in the worsening Depression would soon hitch their autos to teams of horses. The resulting Bennett Buggy became a vivid and enduring symbol of the Dirty Thirties.

Clean-burning gas and oil furnaces were largely conveniences of the future. Chimneys and stacks belched black smoke from burning coal, which remained overwhelmingly Canada's most important source of energy until well after the Second World War. In 1930, her essential fuel problem was finding ways to get coal from mines in the Maritimes and the west to central Canadian furnaces and boilers. One study of the day's energy problems devoted only six pages (of 140) to crude oil and natural gas. The reason, of course, is that in those days the entire nation used only 30 million barrels of oil per year. That volume is much less than tiny Ireland consumes today.

Debates raged about the reliability of American oil supplies. As early as 1918, thoughtful analysts had forecast the depletion of that country's oil fields within 20 years. A decade later, vast discoveries had put huge surpluses of oil onto the world market. In 1930, Canada imported all but 3 per cent of her oil from the United States, and no national or local policies encouraged petroleum development. In the middle of the '30s, Alberta tried to induce central Canadian businessmen to invest in the risky oil business. But it found no takers.

When Leacock wrote his essay, Canada's oil and gas industry was a regional business. Largely centred in Alberta, it existed on the fringes of the national economy. After an Ottawa-financed subsidy of oil production ended in 1925, the industry had no protective tariffs or other development incentives. Only after three years of Depression, in 1933, did the federal government impose a stiff tariff on refined products to encourage domestic refining. That was of no benefit to oil or natural gas producers, though. The refineries built behind the tariff wall would also rely mostly on foreign oil.

In 1930, 72 years had elapsed since Upper Canada gave birth to the world's petroleum industry. With the opening of the oil barrel, Leacock declared, "the contents flew out all over the world, like the contents of Pandora's box." But in that year the opening of the barrel was incomplete. Nylon was still the miracle fibre of the future. Even the word petrochemical would not emerge until chemists began developing synthetic rubber for another world war. Canada's farmers began using petroleum-based fertilizers during that war. But the widespread use of plastics and the medical applications of petroleum were far in the future.

This is the environment in which Leacock celebrated the birth of the great oil age. Published just between the early and later events recounted in this volume, his essay suggests a milestone in petroleum industry history.

In 1930, Leacock wrote about "the spluttering of the farm motor on the country road, the grinding of the irresistible tractor, and long processions on the highway with motorfuls of baskets, tents, mattresses and children overflowing at the windows." The process by which oil and gas would transform society had clearly begun. Soon, these commodities would become more powerful forces in Canada's social life than Leacock or anyone else could have imagined. Oil would shape her cities and towns and the lives of her people.

After the Second World War came the discovery of large new oil and gas fields in Alberta, Saskatchewan and northeastern British Columbia. Smaller fields in Manitoba made that province a modest producer. With those finds, Canada's petroleum industry became a mighty economic force. By 1990 that industry produced 550 times as much oil as in 1930, 165 times as much natural gas. And Canada's producing provinces, especially Alberta, soon found their economies driven by powerful petroleum engines.

Poor and a political backwater during the Depression, Alberta watched its national presence grow as its wealth multiplied and its population tripled. Petroleum royalties flowed into the provincial treasury, the economy diversified and Albertans came to enjoy the nation's highest standard of living. Twenty years after Alberta's transformation began, Canada's geographical hinterlands - the north and the offshore - began to show tantalizing glimmers of petroleum riches.

What is there to say of the industry that engendered the great oil age? The story of Canada's petroleum industry is a story of courage and peril, success and failure, wisdom and folly, high risks and high stakes, innovation, boneheadedness and frustration. Influential since the 1850s, her industry is a leading world repository of advanced technology and expertise.

Located in southern Ontario, the world's first oilfield helped create an industry. And in time that industry became the world's biggest and richest. But since its tenuous beginnings, it has undergone many boom and bust cycles on a trend line which once seemed to point resolutely upward.

Ontario's oilfields quickly became a fringe source of supply. But as the industry dwindled in central Canada, it awakened in the west. There, the industry's early years witnessed the discovery and unwitting waste of gas and oil in Turner Valley. And it saw countless hopeful though primitive efforts to coax oil from the ever-frustrating oil sands.

But the industry's real story parallels national growth from a small nation reliant on imported oil to an industrial nation with few peers. That story is about the metamorphosis of society as oil and gas became its dominant sources of energy. It is about the enormous industrial effort which built plants and pipelines and refineries to feed a growing hunger for hydrocarbons and their products. It is about the birth and exuberant adolescence of the modern industry in the west. It is about industrial wizardry yielding one of the world's finest oils from the tarry gunk in Alberta's oil sands. It is about the march of drilling rigs to the Arctic and the plunge into the submerged shelves of the continent - west, east, and north.

Canada is a large producer, but her expertise outdistances the magnitude of even her production. Her technological impact far exceeds that of Russia, the world's largest oil producer and second largest natural gas producer. Canada also has more sophisticated expertise than the countries of OPEC combined. Second in strength to the enormous expertise of the United States and perhaps third to the technical power of Britain, Canada has brilliantly served world petroleum exploration and development.

Partly, that is because Canada has developed the world's most diverse petroleum industry. In doing so, she has been host to many industry firsts. She has also been home to people who have become industrial legends.

For example, in the 1840s Nova Scotian Abraham Gesner developed a refining process which transmuted coal, natural tar and, eventually, oil into kerosene. Of equal importance, he helped found the world's first refinery - an operation which extracted kerosene from coal. In the move from whale oil lamps to petroleum lighting, this was a critical development. And until the First World War, most refined oil simply burned in lamps. Gesner's work thus lit homes and factories throughout the world.

Slightly after Gesner's early efforts, another Canadian dug the world's first commercial oil well. In 1858, James Miller Williams brought a well into production in Ontario - a well which signalled the birth of the petroleum era. Yet most historians credit the world's first well to Edwin Drake, an American who drilled his famous wildcat in Pennsylvania the following year.

Only three years after the Williams discovery, Thomas Sterry Hunt of the Geological Survey of Canada came up with a radical theory to explain how oil and gas fields form. Not until years later, when an American geologist came up with the same theory, did the idea (described in Chapter 2) gain wide acceptance.

For more than one hundred years, Canadians have drilled around the world. One of Canada's early drillers, William McGarvey, founded a business empire on large oilfields in Galicia (since divided between Poland and Ukraine.) His interests included the largest refinery in Europe when, during the bitter struggles of the First World War, the guns of Austria and Russia laid waste his lifetime's work.

Canadians think of oil and gas as a western industry, yet the search for these resources has affected every province and the territories. Ontario is the petroleum industry's cradle, and there was a producing oilwell within the metropolitan limits of Toronto at least as recently as 1978.

The Northwest Territories hosted the Norman Wells oil discovery in 1920 - Canada's largest until 1947 and still an important source of oil. And the Canol pipeline - one of the remarkable industrial projects of the Second World War - took Norman Wells oil to a gleaming new refinery in the Yukon. Located in Whitehorse, that refinery briefly piped fuel for the Pacific fleet to Skagway, Alaska.

Quebec and New Brunswick have also played roles. Oddly enough, one of Canada's most spectacular natural gas blowouts occurred on the grounds of a monastery in Quebec. In New Brunswick the colony, entrepreneurs drilled an oil and gas well in 1859; by 1909 the province produced both oil and gas. Still a producing region, New Brunswick also hosts Canada's largest refinery.

The other Atlantic provinces have been sites for offshore drilling. During the Second World War, the industry drilled its first offshore well in Prince Edward Island's Hillsborough Bay. The continental shelf off Nova Scotia was the site of important natural gas discoveries, and that province can boast oil production from Cohasset, Canada's first producing offshore oil field. Another offshore field, Hibernia, is in Newfoundland's Grand Banks. With field development costing $5.2 billion, that project may produce the world's costliest oil.

Canadians have pioneered in the pipelining business for a century and a half. In 1858, a 25-kilometre pipeline (then the world's longest) began carrying natural gas to Trois Rivieres, Quebec. The world's first oil pipeline connected an oilfield in Petrolia Ontario to nearby Sarnia in 1867. Today, Canada is still home to the world's longest crude oil pipeline, and hosts the world's second longest natural gas pipeline. Nowhere does the industry use better or safer pipeline technology.

And nowhere have petroleum projects and policies been more politically explosive than in Canada. A political drama erupted in 1956, when a House of Commons debate on TransCanada PipeLines brought down the Liberal government of Louis St. Laurent. In 1980, energy issues which included an unpopular gasoline tax helped topple the weak Conservative government of Joe Clark. And the most contentious energy policy to date, the National Energy Program, created outrage when the Liberal Trudeau government introduced it later that same year.

The producing provinces perceived the NEP as encroaching on their political and financial turf. Memories of that trauma lingered. During the unsuccessful attempts at constitutional reform in 1992, Alberta insisted upon the creation of an equal, effective and elected Senate. It was hardly coincidence that the proposed new Senate could veto legislation that changed tax policy on natural resources.

Petroleum represents Canada's biggest resource industry by a large margin. In sales, it is the fifth biggest non-financial industry - after food, consumer goods, motor vehicles and construction. Canada is the world's ninth largest producer of oil, the third largest producer of natural gas. Primarily because of sulphur stripped from gas, she is the foremost supplier of sulphur to international markets.

Canada is unique among the world's advanced industrial countries in being a net exporter of oil, gas and all other energy commodities. And trade in energy makes up a big part of her economy. During the five years ending in 1991 - and despite the 1986 oil price collapse, - petroleum generated a trade surplus of $26 billion. During the same period, Canada's total merchandise trade surplus was $15 billion. Put differently, oil and gas provided her trade surplus and then some.

What does the industry's future hold?

The potential is unfathomable. Most of Canada's present oil and gas production comes from the Western Canada Basin, which stretches along the American border from Manitoba almost to British Columbia. From that base it reaches north by northwest, narrowing, to the Beaufort Sea. Originally, recoverable oil in that basin was about 19 billion barrels.

Canada's three important frontier basins - the Beaufort Sea, the Arctic Islands and the East Coast offshore - have almost that amount again, and virtually none is on production. The potential for light and medium oil recovery in the frontiers is almost 17 billion barrels.

Exploration in harsh frontier environments has made Canada the world leader in countless Arctic and offshore technologies and exploration techniques. In 1920, Norman Wells became the world's most northerly oilfield, but Russian oilfields later assumed that distinction. The mantle of being the world's most northerly producer came back to Canada in the mid-1980s, however, when the small Bent Horn oil field in the Arctic Islands began producing.

That field is more than a symbol of Canada's sovereignty in the sparsely-populated north. Since the 1950s, she has used petroleum policy to assert her territorial claim to those rugged, barren lands.

Although Canada's frontier and conventional oil resources are immense, they stand in the shadow of her non-conventional resources. Chief among these are the oil sands, the world's largest known oil deposits. The oil in those sands probably totals 2.5 trillion barrels. Of that almost incomprehensible volume, 33 billion barrels are recoverable by strip mining.

Unique in the world, the strip mining of oil has enabled Canada to become the undisputed world leader in synthetic oil production and technology. The Syncrude oil sands plant in northern Alberta takes hydrocarbon ore from the planet's biggest mine and processes it through one of the world's most complex industrial plants. That single plant produces 11 per cent of Canada's oil.

While the oil sands plants are a technological marvel, history has witnessed projects which were anything but. A startling example is a plan which came within a whisker's breadth of actual completion - a proposal to detonate a 9-kiloton nuclear device under an oil sand reservoir. In theory, the atomic blast would melt the thick, tarry oil so pumps could suck it to the surface. The plan died because of public unease about nuclear contamination.

However, in 1992 a provincial agency gave the idea new life. It proposed using controlled heat from a nuclear plant to produce oilsand reservoirs too deep for strip mining. And dramatic advances in underground mining techniques, pioneered in Alberta, have put 600 billion barrels of deeper oil within technological reach. That amount is roughly equal to one and a half times the reserves of the entire Middle East.

As if that resource bounty were not enough, the heavy oil belt along the Alberta/Saskatchewan border contains 37 billion barrels of oil. Although heavy oil is expensive to produce, it is readily accessible. With conventional fields depleting, this resource has become a critical part of Canada's oil supply.

And then there is natural gas. Canada is the world's third largest natural gas producer, after the United States and Russia. She is the world leader in technologies which strip sulphur from sour gas. So sophisticated is that technology that she can drill sulphur wells - wells which produce almost pure hydrogen sulphide. Properly treated, this potentially deadly gas yields huge blocks of yellow sulphur.

There is enough natural gas in western Canada to supply her domestic and export markets well into the next century. And the likelihood of more discoveries means this premium, environmentally attractive fuel can be plentiful through the lifetimes of almost every living Canadian.

As Canada goes about the business of developing her oil and gas potential, she will probably construct more of the world's largest industrial projects. Arctic pipelines will cost as much as $10 billion. New oil sands plants will be so technically complex and physically huge that many will look upon $5 billion or $6 billion price tags as a bargain.

How much of her potential Canada can develop is a matter of conjecture, however. While the resources are vast, there are financial, technical and environmental limitations on development. Beginning in the latter 1980s, the petroleum industry underwent a structural shift so profound it brought many of the industry's core beliefs into question.

No longer was money available to keep the petroleum industry growing. A mature industry in a rapidly maturing Western Canada Basin found itself besieged with rising operating costs, lower oil and gas prices, increasing environmental responsibilities and competition from more attractive prospects elsewhere. These ingredients led to a drastic drop in drilling and development proposals. Nearly certain projects suddenly went on the shelf.

A cash-strapped industry experienced rapid and painful change. Companies took every conceivable step to cut costs. On the positive side of the ledger, these included technical and administrative innovations. On the negative side, bankruptcies and mergers became the order of the day.

In terms of human dislocation, there was no precedent in the industry's history. Almost every large corporation underwent brutal rounds of layoffs. A once rich, overmanaged and somewhat arrogant industry cultivated ever-leaner corporate cultures and ever-flatter management structures. Morale crept into the cellar. For an industry accustomed to growth, the times were unimaginably bleak.

As this volume went to press, Canada's petroleum industry had weathered its profoundest crisis, and was beginning to mend. As the industry applied its talents and energies to struggles that often put corporate survival in play, the large oil companies came back -- smaller and less influential, but still strong. And in the properties and people the big oil companies shed during the years of crisis, smaller companies found opportunities for growth. These years showed once again that Canada's petroleum industry is an enterprise steeped in drama and romance, fortune and folly. As these pages venture to show, that has been the case since the beginning of the great oil age.

Chapter 2: The Source

The petroleum industry is a youngster. Born little more than a hundred years ago, it sprang from the earliest oil wells in Canada and the United States. They tapped a resource endowment that took hundreds of millions of years for natural forces to form. For thousands of years before oil became an industry, people used petroleum for religious, domestic and commercial functions. This chapter examines petroleum from its geological origins to early records of its use by man.

What is Petroleum?

A range of substances help define the word petroleum. All are mixtures of mostly hydrocarbon, or molecular compounds of hydrogen and carbon. They form a spectrum of materials from light gases through liquids to heavy, gummy near-solids. The differences derive from varying proportions of hydrogen and carbon making up the petroleum molecule. At the light end, natural gas contains a high ratio of hydrogen to carbon atoms. At the heavy end, tarry bitumen contains a much lower hydrogen to carbon ratio.

Hydrogen and carbon can combine in an enormous number of ways. A variety of combinations are usually mixed together in a single reservoir. These petroleum mixtures also usually contain sulphur and traces of other elements and compounds. As a result, there are almost endless numbers of petroleum types, without clear-cut distinctions between them. But going from lighter to heavier hydrocarbons, petroleum generally falls into five categories: natural gas, natural gas liquids, light and medium crude oil, heavy oil and bitumen.

Origin of Petroleum

To understand the origin of petroleum, scientists have studied the geological history of the earth, considered astrophysical theories of the universe, and have examined the chemical reactions capable of generating the hydrocarbon chain. The many theories fall into two categories: inorganic and organic origins.

In the nineteenth century, the inorganic school of thought argued that unknown processes operating at great depth in the earth produced petroleum, and that its occurrence was associated with volcanic activity. Eugene Coste, known as the father of the Canadian natural gas industry, stoutly held this view. This theory was not quite satisfactory in its original form, because it left the actual process unidentified. Then, in 1866, French chemist Pierre Berthelot showed how hydrocarbons could be chemically derived by reacting carbonic acid with alkali metals. In 1877, the Russian chemist Dmitri Mendeleef - better known for his work with the periodic classification of the elements - suggested that percolating waters could react with iron carbide to produce hydrocarbons. Another idea held that the early planet earth had an atmosphere of methane, and that the other hydrocarbons were derived from this original endowment.

Organic theories of petroleum origin are certainly older. An eighteenth-century French chemistry text attests to "the destruction of organic vegetable and animal products, buried in the earth and decomposed by the action of mineral acids" as the probable source of liquid and solid petroleum. This approaches current theories. Others believed that petroleum derived from underground deposits of coal. This idea too has carried forward to the present. Those believing that plant and animal matter are the source material of petroleum have long argued over which of ancient history's plants and animals are responsible and whether plants or animals are the predominant source.

The debate between organic and inorganic theories of petroleum's origin has not ended. Inorganic theories are making a comeback.

According to conventional geology, oil and gas originated from plant and animal matter, buried in fine-grained sediments under oxygen-deficient conditions. Pressure from successive layers of sediment produced heat, and the combination of heat and pressure, combined with bacterial action and perhaps radiation, converted the organic matter into petroleum.

The petroleum then migrated along the paths of least resistance from the fine-grained rocks in which it originated. As it migrated, much of the petroleum passed through pores and cracks and unconsolidated material to the surface of the earth, and was thus lost to commerce. However, other hydrocarbons migrated into porous rock that was somehow closed off, forming the reservoirs that are the industry's bread and butter today.

Others advocate a new variation of inorganic theory they call abiogenic. The best-known modern advocate of inorganic origin is Thomas Gold, an astrophysicist at Cornell University. When explorations of space revealed that meteorites and other planets contained hydrocarbons in the total absence of life forms, it seemed to Gold to be strong evidence that petroleum could have originated abiogenically on earth as well.

Gold suggested that hydrocarbons may be abundant deep within planet Earth, and that the oil and gas already found originated at least in part in these deep zones. To test Gold's theories, a group drilled a deep well in the Siljan Ring - an impact crater in Sweden - and apparently found some 80 or more barrels of oil in a granite reservoir. But results proved inconclusive and the group began drilling a second well in 1991.

An iconoclastic Calgary geologist has developed even more radical theories than Gold's about the formation of oil and gas in the earth. Through a family-owned company, in 1991 Warren Hunt acquired the oil and gas rights to 960 000 hectares of Precambrian bedrock to test his theories. What is remarkable about this exploration play is that, according to conventional geology, he has acquired exploration rights in a geological region which could not possibly contain oil or gas.

In Hunt's two books - Environment of Violence and Expanding Geospheres, - he proposes theories which, if proved, will fundamentally alter the geosciences. One test of his thinking is the exploration play in northern Alberta, which assumes that the Alberta oil sands had a deep-earth origin.

In Hunt's view, Earth's core contains vast amounts of hydrogen which can sometimes migrate toward the surface. Deep within Earth's mantle, it may react with silicon carbide to form gaseous hydrocarbons and silane gas. When disturbed, these brews move up to the underside of the earth's brittle granite crust. There, the silane can react with water to form silica sand. The slurry of sand, water and hydrocarbons is lighter than the granite above, creating instability.

Hunt believes the granite ruptured through what he refers to as the Carswell Gastrobleme, a 37-kilometre wide crater in northwestern Saskatchewan. Silica erupted violently, then oozed eastward from this conduit. Over time, 50 000 cubic kilometres of sand wound up sitting in a granite bowl across northwestern Saskatchewan - a phenomenon Hunt claims has never been explained geologically.

He speculates that the shifting granite eventually resealed the Carswell rupture, trapping hydrocarbon-rich silica sand layers under Alberta's oil sands. His exploration play is based on the notion that only some of that oil rose to the surface to be degraded into today's oil sands. Hunt suggests that a great deal of conventional oil - perhaps hundreds of billions of barrels - could still be present in reservoirs west of the Carswell rupture - under the oil sands. If they exist, those reservoirs would have been formed by fractures in the granite which filled first with sand, then with abiogenic oil and gas.

Although it is a long-shot venture, Hunt has proposed a drilling program into granite which, if successful, will have a profound impact on conventional thinking about the origin of oil and gas. While the arguments continue in scientific circles, the fact remains that the large majority of geologists believe in some form of the organic theory of petroleum's origins.

The Origin of Petroleum in Canada

Assuming the biological theory of petroleum, the origin of petroleum on this planet coincided with the creation of life. The span of time during which petroleum has been forming is difficult to comprehend. When the process began, even the most basic features of the earth's surface were drastically different from the ones we know today.

Until approximately 200 million years ago, the present continents of the earth were fused into a single gigantic continent called Pangaea. The part of Pangaea that became North America was subject to repeated ocean inundations and orogenies (periods of mountain building) over the millions of years before a period of uplift broke Pangaea apart and the modern continents began drifting away from mid-ocean ridges. Chains of enormous mountains were worn flat, again and again, by the forces of erosion. The resulting sediments were carried by wind and water to depressional areas - lakes, ocean margins, deltas - where they were laid down layer upon layer.

When life forms began to flourish in the oceans and then on land, their organic remains were deposited along with other sediments in a continuous rain on the lake and ocean floors. The pressure of the upper layers upon the lower ones compacted the lower layers into various kinds of stone: the mud into shales, the sands into sandstone, the shells of animals into the carbonates, limestone and dolomite. According to the most commonly-held theory, the fine-grained shales are the source rocks in which petroleum was born; the coarser-grained sandstones and carbonates, which are more porous, became the reservoir rocks into which the petroleum would migrate and remain. A variation of this theory holds that limestone can be both a source and a reservoir rock.

Canada is well-endowed with sedimentary basins. Most of Canada's oil and gas production has come from the Western Canada Sedimentary Basin, a portion of North America's Great Interior Basin, which has its southern terminus in the Gulf of Mexico. The Western Canada Basin begins at the Beaufort Sea in the north, and stretches south through the Yukon and Northwest Territories. In southern Canada, it embraces the northeastern portion of British Columbia, almost all of Alberta, the southern half of Saskatchewan, and the southwestern corner of Manitoba. To the west, the basin is limited by the Cordillera, the series of mountain ranges which begins with the Rockies and continues west to the Pacific Ocean. The eastern boundary is the Precambrian Shield, the huge expanse of exposed granite that covers two-thirds of Canada. Precambrian rocks formed before life was plentiful on this planet, and so this enormous area is unlikely to contain petroleum.

The enormous periods of time shown by the earth's rocks can be seen on the geological time scale chart on page ???. The majority of the oil reserves in the Western Canada Basin are found in reservoirs of Devonian Age, rocks that date back as much as 390 million years.

The limestone remains of coral reefs formed in the ancient inland seas have proved a particularly fruitful hunting ground for oil in Alberta. By contrast, about half of the gas reserves of the Western Canada Basin are found in Cretaceous reservoirs (rocks 140 million to 67 million years old). Gas found in older Palaeozoic reservoirs frequently contains hydrogen sulphide, and is known in the industry as sour gas.

Although the Western Canada Basin is the most heavily explored and the most prolific of Canada's major sedimentary basins, the first explored was the basin in southern Ontario. This basin yielded several small oil and gas finds. It is one of several, all of Palaeozoic age, found in eastern Canada. The largest and least explored of these is the Hudson Bay Basin.

In several areas of Canada's far north, great depths of sediment accumulated and enclosed a bounty of organic matter and potential oil or gas reservoirs. The basin areas can be divided into those associated with the Beaufort Sea and the Mackenzie River delta, and those associated with the Arctic Islands. The Beaufort-Mackenzie Delta area is a continental shelf where great thicknesses of deltaic sandstones and shale overlie Palaeozoic rocks. Exploration of this region has only really begun, and proceeds slowly because of difficult climatic, logistical and economic conditions. Nonetheless, the petroleum industry made important discoveries of both oil and gas there in recent decades.

Even less well explored are the basins of the Arctic Islands. Exploration in the thick sediments in these areas has produced large gas discoveries and significant oil pools. Development is hampered by the shifting Arctic ice pack under which many petroleum prospects lie.

The west coast of Canada and the inter-mountain areas of British Columbia include several basins which contain hydrocarbons. But these basins have not yet yielded significant discoveries or production.

The east coast offshore is proving more prolific. Sedimentary basins along the continental margin stretch for 5500 kilometres, most of them the result of sedimentary deposition after the break-up of the continents. Exploration in some of these basins found several important discoveries. These include the Hibernia oil field on the Grand Banks of Newfoundland, and the gas fields surrounding Sable Island on the Scotian Shelf. Optimists expect production from the east coast offshore in the late 1990s.

While this review of Canada's sedimentary basins indicates that important discoveries have been made in the geological frontiers - that is, the northern and offshore sedimentary basins, - it is important to note that most of these discoveries are only indications of the geological potential of those areas. A basin's geological significance and its commercial significance are related, but not the same.

A geologically important find - for example, one of the discoveries in the Beaufort Sea - may include a major accumulation of oil. But the costs associated with developing the field and delivering the oil to market may not justify the price it will fetch at the refinery gate. In that case, the field would be a geological success but a commercial failure. By contrast, a virtually identical field located in Alberta could be a commercial bonanza, since it could probably be easily and economically developed. The Beaufort Sea reservoir used in the illustration could only be developed if oil prices reached a high enough level to justify development costs.

The following table summarizes the resource potential of Canada's major sedimentary basins - but without reference to their economic potential, since the commercial value of most frontier discoveries is still in doubt. Only time will disclose how much of Canada's oil and gas resource potential will ever be actually produced.

Petroleum Use

Once it is squeezed from its source rocks, petroleum migrates from high pressure to lower pressure spaces within rocks. In general, this means it migrates upwards. The oil or gas usually meets an impermeable layer of rock. If not, it continues its forced march upward to the surface of the earth. Thus tar, oil and gas seeped onto the earth's surface for millions of years.

With the evolution of people into a thinking, material-using species, one of the cornucopia of materials available for exploitation was the petroleum at surface seeps. Although we do not know how people used petroleum prior to recorded history, palaeolithic peoples, like North American Indians, apparently used it for medicinal purposes. Excavations of some of the earliest sites of civilization show signs of petroleum use. In the Euphrates River valley, the ancient civilization of Ur used bitumen as a brick mortar. The people of this society also used bitumen as a kind of glue for holding flint cutting edges in bone sickles. In the Bible, Noah's instructions for the building of an ark included the command to "pitch it within and without with pitch"(Genesis 6:14). The ancient civilization of the Indus Valley used bitumen to waterproof its baths as long as 5000 years ago.

Gas seeping out of the earth, ignited by lightning, could burn for as long as the gas flowed. Such "eternal fires" were objects of veneration for many early religions. Other ancient records claim that barbarians carried naphtha with them and would inspire fear and awe by igniting it in sight of the homes of local leaders.

The Chinese civilization was probably the first to harness and use natural gas. The Shu Han Dynasty used natural gas 200 years B.C. to light its temples and to evaporate brine from salt wells. By the tenth century A.D. the Chinese of Peking succeeded in transporting natural gas by bamboo pipeline and used it for street lighting.

The ancient languages used in Greece and Rome gave us basis for the word "petroleum": "petra" is Greek for rock; "oleum" is Latin for oil. One of the roles played by petroleum in ancient Greece was to supply the Oracle of Delphi with some of its mystical authority from a burning gas seep.

Toward the end of the Middle Ages, petroleum began to serve a variety of purposes in Europe. Europeans used it for medicine, paving, lighting and caulking ships. Some primitive refining methods were applied to raw petroleum. A pamphlet published by Johan Volck in Strassbourg in 1625 explained petroleum refining methods of the day. Uses included lamp fuel, dressings for wounds, wood preservative, and lubricant.

Although refined oil provided illumination for many Europeans and North Americans in the nineteenth century, it was not the only petroleum-based fuel. Gas derived from coal lit lamps in London streets in 1807, and coal gas street-lighting made its Canadian debut in Montreal in 1836.

The Chinese precedent of using natural gas for this purpose was not followed again until 1821 when the residents of Fredonia, New York, brought natural gas into town from a shallow nearby well by a hollow log pipeline, and lit their streets with it. Fredonia called itself "the best-lit city in the world." Because of severe leakage problems, other towns refrained from trying to become as well-lit.

A common eighteenth and nineteenth century source of lubricant and illuminating fuel came from the whaling industry. Whale oil supplied much of the household demand for lamp oil. As whalers pursued their prey to the far corners of the earth, they supplied ever-larger markets for lamp fuel and lubricants. But whales could not have continued to meet the growing demand, especially as hunting depleted their numbers. Society needed a more secure and less costly source of fuel and lubricant.

Since the amount of petroleum found in seeps and gum beds was insufficient to fill the gap, clever inventors set about distilling usable oils from oil shales and coal. This approach gained ground swiftly when the Williams well in Ontario and the Drake well in Pennsylvania made underground supplies of oil plentiful for the first time. The industries devoted to lubrication and illumination swiftly shifted to this cheap and plentiful commodity. Thus was the petroleum industry born.

Chapter 3: The Early Years

A thirsty army of new machines powered the Industrial Revolution and by 1850, their demand for fuel and lubricants exceeded conventional supplies. Household and commercial use of illuminating fuels also increased. As whale populations declined, the price of whale oil rose quickly. Efforts to distil illuminating fuels from oil shales and bitumen deposits, though making progress, failed to meet the increasing demand. And smelly supplies of coal gas, although available in some cities, were not a long-term solution for urban lighting and fuel.

It was only a matter of time before shovels began searching for oil. This in itself was not a radical step. Evidence suggests that the Chinese dug for oil 2 000 years ago. Throughout history the quest for water and for salt had occasionally run into nuisance deposits of oil, which foiled and fouled these efforts. By the mid nineteenth century, however, the industrial climate was ripe for oil to become an important commercial enterprise.

Those who eventually dug the epoch-making oil wells of the late 1850s benefitted from technological innovations pioneered by the Ruffner brothers, David and Joseph. When they sank a well in a West Virginia salt lick in 1806 they fought to keep mud and gravel from caving into their hole. Their solution was a hollow sycamore tree. As they dug, the sycamore slid down, protecting the sides of the hole.

When the Ruffners arrived at bedrock and still did not have the quantity of brine they wanted, they went deeper, using a steel bit hung from a long iron rod which they repeatedly dropped to smash the stone. To get the springing action needed for repeated strikes, they devised a spring pole (probably the green trunk of a young tree). The driller used his weight to drive the drill bit down, then let the spring in the tree bring it back up. Though the Ruffners can not take total credit for this development, since the Chinese had been doing it for thousands of years, they did make a few improvements that qualify as invention. The Ruffners thus penetrated bedrock and got their brine. To raise the brine to the surface undiluted, they made one more innovation. Constructing a pipe from long strips of wood, they pushed it to the bottom of the hole. Brine drawn through this tube did not touch the water that stood in the hole above the brine. By the time the Ruffners completed their well in 1808, they had invented casing, cable tool drilling and tubing.

The First Oil Wells

With oil scarce and fetching a high price, and with the Ruffner technology providing a method for penetrating both soil and bedrock, it was only a matter of time before entrepreneurs began drilling for oil. The first recovery of petroleum for commercial use in Canada was by Charles Nelson Tripp in Enniskillen Township on the north shore of Lake Erie. Tripp's dabbling in the mysterious "gum beds" of that locale near Black Creek in 1851 led to the incorporation of Canada's first oil company. Parliament chartered the International Mining and Manufacturing Company in 1854, with Tripp as president. The charter empowered the company to explore for asphalt beds and oil and salt springs, and to manufacture oils, naphtha paints, burning fluids, varnishes and related products.

Although Tripp's asphalt received an honorable mention at the Paris Universal Exhibition in 1855, financial success eluded his company. Several factors contributed to the downfall of the operation, including the lack of roads which made the movement of machinery and the distribution of the products difficult. After every heavy rain, the area became a swamp.

A carriage builder named James Miller Williams became interested and visited the site in 1856. Tripp unloaded his hopes and properties on Williams, reserving a spot for himself on the payroll as landman. Williams incorporated J.M. Williams and Company in 1857 to exploit the Tripp properties. Stagnant, algae-ridden water lay almost everywhere and, looking for better drinking water, Williams dug a well a few yards down an incline from his asphalt plant. At a depth of 20 metres, the well struck free oil instead of water. In 1858 it became the first oil well in North America, remembered as Williams No. 1 at Oil Springs, Ontario.

The famous Edwin Drake discovery well went into production on August 28, 1859 near Titusville, Pennsylvania. It vies for the claim as North America's first oil well. Admittedly the Drake well was no water well gone wrong, but a true oil well from start to finish. Backed by the Seneca Oil Company, the well drilled among the oil springs beside Oil Creek, and poked down into bedrock a total of 21 metres before filling with oil. The supporters of Colonel Drake's claim to the first oil well in North America point out that his well found oil beneath the bedrock, while the Williams well in Ontario found oil above. Both wells stand as milestones in the history of the North American oil industry. Each well touched off a flurry of events, the oily product of which eased the plight of industrialists and householders desperate for lubricants and fuel.

Williams eventually abandoned his Oil Springs refinery and transferred his operations to Hamilton. In 1860, the local newspaper carried his ad: "Coal oil for sale, 16 cents per gallon for quantities from 4 000 to 100 000 gallons." Williams reincorporated his firm as The Canadian Oil Company and operated facilities for petroleum production, refining and marketing - a mix that qualifies his company as the first integrated oil company in the world.

Exploration in Lambton County quickened with the discovery of free flowing oil in 1860. Until then, hand pumps coaxed oil from the ground. But the first gusher blew in on February 19, 1862, when Hugh Nixon Shaw struck oil at 48 metres. For a week the oil gushed unchecked, coating the distant waters of Lake St. Clair with black film. Dr. A. Winchell, in his Sketches of Creation, refers to the event in these words:

Though Western Pennsylvania has produced many flowing wells of wonderful capacity, there is no quarter of the world where production has attained such prodigious dimensions as in 1862 upon Oil Creek in the Township of Enniskillen, Ontario. The first flowing well was struck there January 11, 1862, and before October not less than 35 wells had commenced to drain a storehouse which provident nature had occupied untold thousands of years in filling for the uses of man. The price had fallen to ten cents a barrel, three years later that oil would have brought ten dollars a barrel in gold. From detailed determinations I have ascertained that during the spring and summer of 1862, no less than five million barrels of oil floated off upon the waters of Black Creek.

Within a few years the wells were producing mostly salt water and the boom moved eight kilometres north, to Petrolia. Crews drilled ten thousand wells there, a rail line replaced the oxen trails and a pipeline carried oil to the refineries and docks at Sarnia.

Although the industry in Central Canada began with a promising start, Ontario's status as an important oil producer declined rapidly. Canada became a net importer of oil during the 1880s, and dependence on neighboring Ohio for crude oil increased following the arrival of Canada's first automobile in 1898.

Technological Advances in the Art of Drilling

While Williams brought in Canada's first well with a shovel and backbreaking labor, the famous American discovery used only slightly less primitive cable-tool technology. Drake's rig also used steam power. Early Canadian rigs relied on foot power and the recoil of the spring pole. Steam-powered rigs arrived from the United States shortly after 1860. In the early American rigs, the string of heavy tools and the chisel-edged bit hung from a manila cable - hence the phrase cable tool drilling. In Canada, in the 1860s or '70s, a rig emerged that suspended the drilling tools from a series of linked hardwood rods. The pole-tool rig also originated in the United States, but because Canadian drillers preferred it to the cable tool rig, it became known as the Canadian rig.

Both rigs used a walking beam which rocked over a fulcrum called the sampson post, pulling and dropping the tools and bit in the bottom of the hole. A bailer replaced the drilling tools and cleaned cuttings from the bottom of the hole. Canadian entrepreneur W.H. MacGarvey helped develop the Canadian rig. He also made Canadian drilling technology and the Canadian driller famous around the world.

MacGarvey used Canadian rigs to develop an oil field in Austrian Galicia. Soon, the Canadian rig became the preferred drilling device in central Europe. Although few records remain, it is certain that drillers from Petrolia worked in Java, Peru, Turkey, Egypt, Russia, Venezuela, Persia, Baluchistan, Rumania, Austria and Germany. MacGarvey amassed a large fortune from his efforts but saw his Galician properties destroyed when the First World War swept across Europe.

Another drilling method, making a hole by rotating a sharp bit, is at least as old as the idea of pulverizing the earth with repeated blows. Egyptians drilled holes using the rotary method in stone quarries as early as 3000 B.C. Leonardo de Vinci left sketches of a rotary auger drawn circa 1500. The French used dry rotary drilling to procure well water during the seventeenth and eighteenth centuries and, in 1844, Robert Beart of England received a patent for a fluid circulating system for rotary drilling.

Drillers used a crude version of the rotary rig in the l9th century petroleum industry, often powered by a mule walking in a circle. But the best known pioneering effort in rotary drilling took place in 1901 with the drilling of the Spindletop well near Beaumont, Texas. Besides being the first big success in the oil patch with rotary equipment, Spindletop was also a legendary American gusher. It proved the existence of petroleum in salt domes and it was the first rotary well to use drilling mud as a circulation medium.

Rotary drilling equipment invaded the Turner Valley oilfield in southwestern Alberta during the 1920s, and entirely displaced cable-tool drilling by the late 1930s. The first rotary equipment in Turner Valley used steam derived from coal. Rigs eventually used natural gas as it became available. As the transition from cable tool to rotary rigs progressed, some rigs used both rotary and cable tool machinery. These "combination rigs" used either method of drilling, thus taking advantage of the appropriate technology.

Birth of the Gas Industry

Canadians knew about natural gas long before they put it to any practical use. Around 1820, youngsters of Lake Ainslie, Nova Scotia, amused themselves by driving stakes into the ground, removing them, then firing the escaping natural gas. In 1859, Dr. H.C. Tweedle found both oil and gas in what became the Dover field near Moncton, New Brunswick, but water seepage prevented production from these wells. Tainted with foul-smelling and toxic hydrogen sulphide, sour gas greeted drillers in 1866 near Port Colborne, Ontario, during the oil drilling boom. It was a harbinger of the gas fields found later in the southwestern part of the province.

Eugene Coste, the Paris-educated geologist from Ontario mentioned earlier as a stout advocate of the inorganic theory of the origin of petroleum, brought in the first producing gas well in Essex County, Ontario, in 1889. His work in that area eventually led to the formation of the Ontario utility, Union Gas.

Canada first exported natural gas in 1891 to Buffalo, N.Y. from the Bertie-Humberstone field in Welland, Ontario. A 20-centimetre pipeline under the Detroit River eventually transported gas from the Essex field to Detroit. By 1897, a pipeline to Toledo, Ohio taxed the Essex gas field to its limits. As a result, the Ontario government revoked the pipeline licence and passed a law prohibiting the export of natural gas and electricity.

The central Canada gas industry reached another important milestone in 1911 when a merger of three companies using Ontario's Tilbury gas field formed Union Gas Company of Canada Limited.

In 1909, New Brunswick's first successful gas well came in at Stoney Creek near Moncton. This field still supplies customers in Moncton and has produced nearly 800 million cubic metres of gas and 130 000 cubic metres of oil. Propane now supplements the limited supply of natural gas from the field to meet the city's needs.

In western Canada, petroleum discoveries date back to 1883. Natural gas greeted water well drillers at the Canadian Pacific Railway Siding No. 8 near Langevin, west of the current city of Medicine Hat, Alberta. An accidental find, the gas discovery shocked the drillers who sought a reliable supply of water for the CPR's steam-driven locomotives. The gas flow caught fire and destroyed the derrick.

This find prompted Dr. George Dawson of the Geological Survey of Canada to make a notable prediction. Having observed that the strata penetrated in this well were continuous over great areas of western Canada, he prophesied that the territory would some day produce large volumes of natural gas.

A well drilled near Medicine Hat in 1890, this time in search of coal, also encountered a large flow of natural gas. The find prompted town officials to approach the CPR with a view to drilling deeper wells for gas. The resulting enterprise led to the discovery of the Medicine Hat gas field in 1904. The community took advantage of the natural resource and became the first urban area with a gas utility in western Canada.

In 1894, the Dominion Government brought a rig from Toronto to northern Alberta to drill for oil along the Athabasca River. The second well drilled by this rig at Pelican Rapids struck gas in 1897 and then blew wild. Out of control, it burned for 21 years, consuming natural gas at estimated 240 000 cubic metres per day until 1918.

Natural gas service began in Calgary at the beginning of this century when A.W. Dingman of Toronto formed the Calgary Natural Gas Company. He drilled a successful well in east Calgary, laid pipe to the Calgary Brewing and Malting Company site and provided gas to the brewery on April 10, 1910. Gas mains soon provided domestic fuel and street lighting.

In another development, Eugene Coste moved west and drilled the locally famous Old Glory gas well near Bow Island, Alberta, in 1909. In 1912, his Canadian Western natural Gas Company built a 280-kilometre pipeline connecting his Bow Island field to Lethbridge and Calgary. It augmented the Dingman enterprise in Calgary, which was unable to supply the growing demands of the city. By 1913, several other towns in southern Alberta also boasted natural gas service from the Canadian Western system and Coste's pioneering enterprise provided fuel to nearly 7 000 customers.

Oil in Western Canada

John George (Kootenai) Brown was probably the first man to attempt to develop western Canada's petroleum potential. An Irish frontiersman with an Eton and Oxford education, he was also an early homesteader in this region. In 1874, Brown filed the following affidavit with Donald Thompson, the resident solicitor at Pincher Creek:

[I was] engaged as a guide and packer by the eminent geologist Dr. George M. Dawson, and he asked me if I had seen oil seepages in that area, and if I did see them, would I be able to recognize them. He then went into a learned discussion on the subject of petroleum. Subsequently some Stoney Indians came to my camp and I mixed up some molasses and coal oil and gave it to them to drink, and told them if they found anything that tasted or smelled like that to let me know. Sometime afterward they came back and told me about the seepages at Cameron Brook.

In 1901, John Lineham of Okotoks, Alberta, organized the Rocky Mountain Drilling Company and in 1902 drilled the first exploration well in Alberta on the site of these seepages. Now part of Waterton Lakes National Park, the Historic Sites and Monuments marker commemorates the discovery well and Oil City, the boom town which sprang up briefly in the area. The discovery well briefly produced up to 350 barrels of oil per day, but neither this well nor seven later exploration attempts resulted in steady production. Perhaps the greatest contribution of the Oil City play came about when the Western Oil and Coal Company drilled there and collected 256 rock samples at different depths which they examined for traces of oil. This method of systematic sampling set a precedent that drillers now routinely follow.

The End of an Era

As World War I approached, the oil industry in central Canadian waned while the petroleum potential in the west struggled to become commercially viable. As southern Ontario oil and gas fields declined, the word "inexhaustible" disappeared from news reports about them. Sages recommended that entrepreneurs turn their energies to manufacturing gas from coal, because a growing nation could not rely on petroleum. In Alberta, the natural gas industry blossomed quickly and, for a few years, had the reserves to support local markets. But the oil industry in the west showed no signs of bursting into production. Despite endless tantalizing seeps and shows, the wildcat wells disappointed speculators and observers. Most wells ended up dry and abandoned. George M. Dawson's 1888 map of the petroliferous areas of western Canada seemed to promise petroleum wealth. But where was it? Where should one look?


Chapter 4: Oil Between the Wars

For many years Indians, ranchers and then settlers frequented the quiet foothills of the Rocky Mountains southwest of Calgary. Then a rancher struck oil and for more than thirty years western Canada's petroleum industry focused squarely on a curious valley. Named after two brothers who began ranching there in 1886, Turner Valley sat atop an enormous geological structure which contained naphtha-soaked, or wet, natural gas along two horizons and oil in a deeper reservoir. Gas and oil from Turner Valley fuelled urban and industrial development in Alberta and, during World War II, fuelled the planes of a Commonwealth air training program. For some time it seemed that Turner Valley might be the only major petroleum field in Canada. That prediction seems ridiculous in retrospect, but it was the premise upon which oil companies and governments relied until the discovery of oil at Leduc in 1947.

The Turner Valley era is in fact three periods characterized by the three exploration discoveries that instantly and substantially changed the industry's perception of the field. These periods were the Dingman era, the Royalite #4 era and the Oil Column era.

The Dingman Era

In early 1914, oil fever swept Calgary. Investors lined up outside makeshift brokerage houses to get in on exploration activity triggered by a wet gas discovery at Turner Valley. So great was the excitement that in one 24-hour period promoters formed more than 500 "oil companies." Although incorporated in 1913, the Calgary Stock Exchange was unable to control the unscrupulous practices that relieved many Albertans of their savings.

Calgary Petroleum Products drilled Dingman #1, the well behind this speculative flurry, near the crest of the great structure that underlies Turner Valley. Using an American style cable tool drilling rig, the tools hung from the longest manila drilling line ever used. Spudded in January 1913, the well came in with a roar on May 14, 1914. It found the reservoir at 664 metres and soon produced 4 million cubic feet of gas per day from the Cretaceous sandstone horizon. The gas dripped with smelly naphtha, a light oil condensate, pure enough to burn in automobiles without further refining. Fame and success greeted Bill Herron, William Elder and driller Archibald Dingman as well as the other partners in the syndicate that created the Calgary Petroleum Products Company.

While the Dingman well and its successors established the first commercial field in western Canada, the high expectations raised by the discovery did not last. The few wells from the ensuing boom that struck gas in the Cretaceous sandstone produced only small volumes of naphtha. By 1917, the Calgary City Directory listed only 21 "oil mining companies," compared to 226 in 1914.

The Royalite #4 Era

Financial hardship followed the Calgary Petroleum Products Company. Finally, the small processing plant attached to its Dingman #1 and #2 wells burned down in 1920. Royalite Oil Company, a new Imperial Oil subsidiary, arose from the ashes of the fire, taking over the CPP interests. In late 1921, Canadian Western Natural Gas began buying processed Turner Valley gas from Royalite. The new supply arrived just in time to help meet the growing demand of consumers who were using more gas than the rapidly depleting Bow island gas field could produce.

Taking up where its predecessor had left off, Royalite began a drilling program which included the legendary Royalite #4 well. Spudded in 1923, this well became the first to drill test the Palaeozoic rocks, at a much deeper level than the formation that produced the naphtha in the Dingman wells. It did not start out that way; in fact it blew in the first time at the relatively shallow depth of 875 metres. This was above the productive sandstone layer of the earlier wells and, when #4 started to decline sharply, Royalite drilled deeper into the sandstone horizon. The well pierced the sandstone and struck limestone without any further discovery. The drillers pushed on and, at a depth of 1 140 metres, the drilling tools stuck in the hole. During attempts to fish the tools out, the well blew in at 21 million cubic feet of gas per day.

The gas contained high volumes of naphtha and a high percentage of hydrogen sulphide. Since hydrogen sulphide is a highly poisonous gas, Royalite built a sweetening plant to take the dangerous substance out before it sold it to Canadian Western.

Trouble began at Royalite #4 when the crew attempted to clamp a valve on the well to shut it in. The shut-in pressure rose at alarming speed. When the gauge hit 1 150 pounds per square inch, the drillers ran for their lives. In 20 minutes, 939 metres of 21-centimetre pipe and 1 052 metres of 16-centimetre pipe, a total weight of 85 tonnes, rose out of the ground to the top of the derrick and the well blew out again. On October 19, 1924, the gas caught fire. Residents of Lethbridge, more than 150 kilometres away, saw the light from the burning well. The fire blazed for 21 days. When the combined flow of steam from seven steam boilers failed to snuff out the flame, a charge of dynamite extinguished the blaze. It took Oklahoma wild-well experts two more months to bring Royalite #4 under control.

The reaction to this discovery was quite different from the sudden boom that had followed the first Dingman well. The next few wells drilled into the Palaeozoic limestone did not produce similar results, and many explorers took it to mean that the productive area was small. It was five years before a real boom began. Home Oil's discoveries in a sandstone reservoir, when deepened, produced from the limestone horizon and established the field. Activity slowed during the Depression, but about 100 naphtha wells met with success in the decade following Royalite #4.

The Oil Column Era

The wells of both the Dingman and the Royalite #4 eras at Turner Valley produced only naphtha, not crude oil. Similar to gasoline, naphtha served as fuel for local automobiles and tractors. But the process of stripping naphtha from the gas also produced huge volumes of natural gas for which there was no market. Since Royalite had the only natural gas pipeline to Calgary consumers, the remaining Turner Valley producers flared the byproduct gas after producing the valuable liquid product. Also, with the Royalite #4 blowout fresh in their minds, fear of a similar accident prompted most producers in Turner Valley to just flare excess gas. Day and night, the huge flares burned enough fuel to heat thousands of homes.

Royalite burned off much of the surplus gas in a small ravine known to locals as "Hell's Half-Acre." Grass beneath the flares stayed green year-round and local hunters stalked game by the artificial light. Depression hobos slept in the circle of warmth. Reporters from around the world described the flares in florid terms. One Manchester scribe wrote that,

seeing it, you can imagine what Dante's inferno is like . . . a rushing torrent of flame, shooting forty feet high . . . a ruddy glow to be seen for fifty miles . . . . Men have seen the hosts of hell rising, the titanic monster glowering from the depths of Hades.

This was waste by anyone's definition, but the producers cared little for a product for which they had no market. When the Alberta government attempted to control the waste in 1932, producers appealed to the Supreme Court of Canada. It declared the conservation orders ultra vires, or beyond the power of the province.

But waste of crude oil was a different matter. And on June 16, 1936, the day Bob Brown's Turner Valley Royalties #1 well began flowing 850 barrels of crude oil per day, the industry realized it had been doing just that - wasting crude oil right along with the gas since 1914.

The Brown discovery meant that the great Turner Valley field was both a gas and an oil reservoir, with the gas cap surmounting and putting pressure on the oil. By producing and burning off billions of cubic feet of natural gas from that gas cap, the naphtha producers had decreased the natural gas pressure, or drive, on the oil reservoir. As a result, the Turner Valley field realized only a portion of its original oil potential. In 1938, the Alberta government finally created the Oil and Gas Resources Conservation Board. With a mandate to enact regulations to control gas production and make best use of the remaining gas cap, it did so. But the worst of the damage had already been done.

Although the gas waste reduced the amount of recoverable oil from the field, Turner Valley was still western Canada's first major discovery. Until the late 1940s, Calgary oilmen also boasted it was the largest producing oil field in the British Empire. Turner Valley production peaked during World War II when the federal oil controller doubled production quotas from the Turner Valley wells. During 1942, the field produced 10 million barrels of oil - more than 27 000 barrels of oil per day. Total wartime production for the field accounted for 95 per cent of total Canadian output.

Turner Valley Firsts

Producers faced many technological problems in Turner Valley, and a few of those problems were new. Some drilling holes wandered as much as 22 degrees off course. High-pressure gas caused freezing as the product expanded quickly. Gas hydrates blocked pipelines. Hydrogen sulphide threatened the lives of workers. High-pressure sour gas, casing failures, sulphide stress corrosion cracking, corrosion inside oil storage tanks, and the cold climate caused a host of other problems.

In dealing with such problems, Turner Valley operators acquired new expertise and made technological improvements that helped earn the field its place in history.

Following are a few Turner Valley firsts - not firsts for the world, but milestones in the development of the industry in Canada.

Rotary drilling, introduced to Turner Valley in 1925, eventually replaced cable tool drilling everywhere in western Canada. Because the steam driven rigs of that period delivered smooth power at relatively low operating costs, they became common in the valley until the early 1950s even though they were rapidly becoming an anachronism elsewhere. At the beginning of the modern era, this dated technology proved to be absolutely essential to bring the legendary Atlantic #3 blowout of 1948 under control.

Another first for Turner Valley was the first true gas processing plant in Canada, constructed in 1914. The second Canadian hydrogen sulphide removal or sweetening facility arose there in 1925. The McLeod #2 well in 1927 introduced nitro-shooting to Canada. This process involved detonating an explosive charge within a well bore to increase the well's productivity. The first use of acidizing, a process that uses acids to etch small channels in the producing formation, thereby allowing oil and gas to flow more easily, helped extend the life of the Model #3 well in 1936. Gas storage began in 1944 and water injection in 1948.

A dispute between the federal government and the petroleum industry developed in response to the success in 1936 of the "royalties" system of financing wells. Under this system, pioneered on the Turner Valley Royalties #1 well, investors received a royalty-like percentage of total oil and gas production from a successful well. If a well was prolific, the return on investment could be high. This system was so successful that investors drilled 69 royalties-type wells in Turner Valley in the two years following the Royalties discovery. Since only two of those wells were dry, the primary constraint on new investment was the rapid saturation of local oil markets which accompanied the new production.

But in 1938, the federal government decreed that income from oil production was taxable as profits in the hands of the producing company. In the investor's hands it was taxed again as income, rather than as the return of capital. Although a producing company appealed this decision successfully, the incident shook confidence in the royalties system of finance. Indeed, in 1942 the government amended the Income Tax Act to tax oil income from royalty trusts at wartime rates. Although the federal government repealed this tax provision in 1950, the royalties system of financing never returned.

Also during the Second World War, Turner Valley saw the formation of Canada's first Crown oil company. Anxious to increase production, the Canadian federal government created Wartime Oils Ltd. to finance drilling in the Turner Valley field. Under the scheme, a leaseholder only had to repay drilling costs out of production from successful wells. During a debate in Parliament, the minister in charge of wartime production, C.D. Howe, explained that the purpose of the company was not "to wildcat for oil." Howe said:

It will drill out a particular area under a particular plan. To set up a government company which would provide money for anyone who wished to drill in wildcat areas would call for unlimited funds and the likelihood of obtaining returns would be exceedingly small.

Norman Wells

Turner Valley made most of Canada's petroleum industry news during the 1914-1946 period, but not all of it. Another exciting saga played out thousands of kilometres north at Norman Wells in the Northwest Territories.

The Norman Wells story goes back two centuries. In 1789, when Alexander Mackenzie was exploring the Mackenzie River in hopes of reaching the Pacific Ocean, he made a note in his journal about oil seeps issuing from the banks of the river. A century later, R.G. McConnell, exploring on behalf of the Geological Survey of Canada, made the same observation. In 1911 Jim Cornwall, a northern businessman, saw oil on the Mackenzie and hired a local Indian named Karkesee to look for seepages. Karkesee found several, and analysis of this oil found it similar to the crude oil from Pennsylvania. Cornwall formed a syndicate with two Calgary businessmen and the group engaged T.O. Bosworth, a prominent petroleum geologist, to study the area. During this 1914 study, Bosworth staked three claims on behalf of his backers and reported enthusiastically on the prospects of the area. The outbreak of World War I put a halt to plans for development. By the end of the war, Imperial Oil owned the Bosworth claims.

In 1919, Imperial began exploratory drilling on the Mackenzie. Two wells in the Great Slave Lake vicinity found salt water. Farther down the Mackenzie, in the Fort Norman area, the third well showed oil.

Led by Ted Link, who later became Imperial's chief geologist, the crew that drilled the successful well consisted of several drillers, an ox named Old Nig, and a cable tool rig. This crew made the trip from Edmonton in six weeks, arriving at the drill site on Bosworth Creek with just enough time to set up camp and erect a rig before winter set in. Legend has it that Ted Link chose the site by waving his arm and saying, "Drill anywhere around here."

The crew that wintered with the well ate Old Nig before the relief crew arrived the next July. During August, 1920, at a depth of about 1 240 metres, the world's most northerly oil well came in. The well produced 600 to 900 barrels per day at first, but settled down to an average of about 100 barrels daily.

The geology of this discovery is unusual. Sandstone reservoirs were the best understood at the time and most believed that the oil at Norman Wells came from the sandstone horizon. In fact, the drill passed through the sandstone with no result and found oil in hard fractured shales below. The shale itself seemed too compact to contain oil in such quantity, so at first Imperial believed the oil resided in fractures in the shale. If true, it represented something new in petroleum geology. Subsequent drilling disproved this notion. The shale enveloped a coral reef of middle Devonian age, the same kind of fossil structure in which Leduc's oil appeared later. The oil resided in the reef. The discovery well at Norman Wells found a quantity of oil escaping through cracks to the surface.

In the months following its discovery, Imperial drilled three more holes, two successful and one dry. The company also installed enough refining equipment to produce fuel oil for use by the local missions and boats. The refinery and oil field both closed in 1921, after the operation proved too costly to maintain.

Norman Wells marked another important milestone in 1921 when Imperial flew two all-metal, 185-horsepower Junkers airplanes to the site. These aircraft were among the first of the legendary bush planes which helped develop the north, the forerunners of today's northern commercial air transport. A new refinery opened at Norman Wells in 1936 to supply the Eldorado Gold Mines at Great Bear Lake, but the site did not become significant until after the United States entered World War II.

When Japan captured two of the Aleutian Islands, Americans grew concerned about the safety of their oil-tanker routes to Alaska. They began looking for an inland supply of oil, safe from attack. The United States and Canada negotiated to build a refinery at Whitehorse, Yukon, with crude oil to be supplied by pipeline from Norman Wells. This spectacular project took twenty months, 25 000 men, 11 million tonnes of equipment, 1 600 kilometres of road, 1 600 kilometres of telegraph line and 2 575 kilometres of pipeline. Dubbed Canol, the name was a contraction of either the longer title "Canadian oil" or, more likely "Canadian American Norman Oil Line." Estimates of the project's cost range up to $300 million. The pipeline network consisted of the 950-kilometre crude oil line from Norman Wells to Whitehorse and three lines to carry products to Skagway and Fairbanks, Alaska, and Watson Lake, Yukon.

Because of wartime urgency, the line ran on top of the ground, alongside the road, often without supports. Vulnerable to frost heaving, snowstorms and flooding, the Canol pipeline benefitted from few of the normal precautions commonly employed today by pipeline construction companies. The pipe was not designed for extreme cold and, without proper handling and installation, failed frequently.

Meanwhile, Imperial drilled more wells. The test for the Norman Wells oilfield came when the pipeline began operating on February 16, 1944. The field surpassed expectations. During the remaining year of the Pacific war, the pipeline pumped about 160 000 cubic metres of oil to the Whitehorse refinery. But at the end of the war the line had no commercial value. Imperial bought the Whitehorse refinery for $1 million, dismantled it and moved it to Edmonton. There, the company reassembled the facility to handle production from the post-war Alberta discoveries.

Other Successes and Disappointments

The goal of most petroleum exploration in this era was oil. As the automobile grew in popularity worldwide, Canada emerged as one of its most enthusiastic converts. Considering the country's size, this was no surprise. The climate also dictated heavy use of fuel oils for heating. This demand, filled in large part from outside the country, put pressure on oil explorers to succeed. And they did find oil. Generally, they found it in lower Cretaceous reservoirs - small quantities of heavy oil that were either uneconomical to produce or quickly exhausted.

In the course of this search, the explorers also found gas. They shut in most of these gas discoveries, but occasionally a field developed a field close to a town or city that provided a local market. A small amount of exploration sought sources of natural gas in order to support regional natural gas distribution systems in Alberta.

In a few cases, town councils coveted cheap sources of local fuel. Some fell prey to promoters and drillers eager for contracts and not too worried about the presence or absence of promising geological structures. But there were important natural gas developments in this era. The discovery of the Viking-Kinsella field justified a pipeline to Edmonton in 1923. A gas find at Lloydminster, in 1934, provided fuel for that border community. The 1944 discovery of wet sour gas at Jumping Pound eventually supplied part of Calgary's needs and tied Exshaw and Banff into the natural gas distribution system. The Jumping Pound field tapped the prolific Mississippian limestone. In developing it, Shell drilled what was then the deepest well in Canada. Its Jumping Pound #4 well reached a depth of more than 4 000 metres.

Pre-World War II oil finds outside Turner Valley included the discovery of heavy oil at Wainwright in 1925 and at Lloydminster in 1939. These led to the construction of local refineries.

The leader in both exploration activity and frustration in this era was Imperial Oil. Looking for another Turner Valley, the company drilled a series of wells, finding a little gas here, a little heavy oil there and a lot of nothing everywhere else. The big one eluded Imperial before, during and immediately after World War II. By 1946, it seemed possible that the portion of the vast Western Canadian Sedimentary Basin straddling the four western provinces contained no major oil fields other than the unusual discovery at Turner Valley.
Chapter 5: The Leduc Era

It takes skill to drill wells in Alberta and not hit oil or gas. Skill, or bad luck. Fortune was not with Imperial Oil as it searched the prairies after World War II. After 133 dry holes in Saskatchewan and Alberta, Imperial almost gave up its drilling program and moved elsewhere for the next major oil field in Canada. But in 1946, the company embarked on one last wildcat drilling program across Alberta. It began with Leduc #1 on Mike Turta's farm, 15 kilometres west of Leduc and 50 kilometres south of Edmonton. Located on a weak seismic anomaly and 80 kilometres from the closest attempt to find oil, it was a "rank wildcat."

Leduc #1 and #2

Drilling at Leduc #l started November 20, 1946, and continued through a winter described as "bloody cold" by members of the crew. It looked like a gas well at first but, at about 1 530 metres, drilling sped up and bit samples began to show hints of oil. At 1544 metres, oil flowed to the surface. Imperial finally had an oil discovery and the company decided to bring the well in with fanfare. It invited the mayor of Edmonton and other dignitaries to a celebration at 10 o'clock on the morning of February 13, 1947. The night before the big event, swabbing equipment broke down and the crew labored through the night to repair it.

The appointed hour came and no oil flowed. Many of the invited guests went home. Finally, at 4 p.m., the mud blew out of the hole and the chilled onlookers, by then numbering about 100, watched a spectacular column of smoke and fire as the first gas and oil flared in the evening sky. Alberta's Minister of Mines, Nathan Tanner, opened a valve and the Canadian oil industry burst into the modern era.

Imperial lost no time developing its find. Almost immediately the company began drilling Leduc #2, about three kilometres southwest of #1, hoping to delineate the producing formation. Nothing showed at the expected depth, however, and company officials disagreed over what to do next. One group wanted to abandon the well and drill a direct offset to #1. Another group voted to continue drilling #2 as a deep stratigraphic test. Drilling continued while the arguments raged. Then, on May 10, Leduc #2 struck the vastly bigger Devonian reef formation at 1657 metres, 100 metres deeper than the discovery at #1. This formation became one of the most prolific in Canada.

Exploring the Devonian Reefs

The Leduc discovery put Alberta on the world petroleum map. News of the field spread quickly, due in large part to a spectacular blowout in the early days of the development of this field. In March 1948, drillers on the Atlantic Leduc #3 well lost mud circulation in the top of the reef, and the well blew out. In one journalist's words,

The well had barely punched into the main producing reservoir a mile below the surface when a mighty surge of pressure shot the drilling mud up through the pipe and 150 feet into the air. As the ground shook and a high-pitched roar issued from the well, the mud was followed by a great, dirty plume of oil and gas that splattered the snow-covered ground. Drillers pumped several tons of drilling mud down the hole, and after thirty-eight hours the wild flow was sealed off, but not for long. Some 2 800 feet below the surface, the drill pipe had broken off, and through this break the pressure of the reservoir forced oil and gas into shallower formations. As the pressure built up, the oil and gas were forced to the surface through crevices and cracks. Geysers of mud, oil, and gas spouted out of the ground in hundreds of craters over a ten-acre area around the well.

Atlantic #3 eventually caught fire, and the crew worked frantically for 59 hours to snuff out the blaze.

It took six months, two relief wells and the injection of 700 000 barrels of river water to bring the well under control. Cleanup efforts recovered almost 1.4 million barrels of oils in a series of ditches and gathering pools. The size of the blowout and the cleanup operation added to the legend. By the time Atlantic #3 was back under control, the whole world knew from newsreels and photo features of the blowout that the words "oil" and "Alberta" were inseparable.

Exploration boomed. By 1950, Alberta was one of the world's exploration hot spots, and seismic activity grew until 1953. After the Leduc strike, it became clear that Devonian reefs could be prolific oil reservoirs, and exploration concentrated on the search for similar structures. A series of major discoveries followed, and the industry began to appreciate the diversity of geological structures in the province that could contain oil. Early reef discoveries included Redwater in 1948, Golden Spike in 1949, Wizard Lake, Fenn Big Valley and Bonnie Glen in 1951 and Westerose in 1952. In 1953, drillers found Pembina, the largest field in western Canada, in a sandstone formation. By 1956, more than 1 500 development wells dotted the Pembina field, with hardly a dry hole among them. The Swan Hills field, discovered in 1957, exploited a carbonate rock formation.

Geologists only looked for oil. The price of gas remained low, with limited markets. But major gas discoveries appeared at Pincher Creek in 1948, Cessford in 1950, Bindloss, Hussar, Minnehik, Duck Lake, Nevis and Olds in 1952.

Exploration Outside Alberta

The widening scope of exploration in Alberta soon led to investigation of basin lands outside the province. To the east, exploration spilled over into the southern half of Saskatchewan and into southwestern Manitoba where, in 1951, an important light oil discovery greeted drilling efforts near Virden. The Virden discovery sparked rapid development in nearby areas of both Manitoba and Saskatchewan. Numerous heavy oil discoveries followed in the Lloydminster area of Saskatchewan, with light oil finds in other parts of the province. Exploratory drilling in Saskatchewan peaked for the decade in 1954.

In 1919, British Columbia withdrew its lands from exploration by private interests. Although lifted briefly in 1933, this ban lasted for 25 years in the Fort St. John area, longer in other parts of the province.

In 1921-22, the provincial government conducted a six-well program in the Peace River area of northeastern B.C. and found small accumulations of natural gas and oil, all non-commercial. And in 1924, an Imperial Oil subsidiary made an important gas discovery just across the Alberta border near Pouce Coupe. Although there were no follow-ups to these discoveries at the time, drilling in the 1940s led to confirmed substantial gas reserves for the area and eventually led to the development of the Westcoast Transmission natural gas pipeline. Subsequent exploration in B.C. yielded unusually high success rates for wildcat wells. But until the Boundary Lake oil discovery in 1955, only gas was found in significant volumes.

In the older exploration areas of central and eastern Canada, activity met limited success in southern Ontario along the St. Lawrence lowlands and in New Brunswick. Although discoveries proved modest, many small finds had economic value. It took until 1959 for oil production in Ontario to exceed the record set in 1895. From that point on, Ontario set new records every year until 1967, when oil production peaked at around 1.4 million barrels. Ontario natural gas production, however, had already peaked in 1917.

In the St. Lawrence lowlands of Quebec, small natural gas reservoirs supplied fuel for local consumption. In 1960, on land owned by a religious order - Les peres de la Fraternite Sacerdotale - a crew drilled a shallow well at Pointe du Lac near Trois-Rivieres. The order hoped for a local source of inexpensive fuel, primarily to heat its monastery. The well encountered high-pressure natural gas at only 80 metres and blew wild. The flow rate could not be measured but was estimated at between 17 and 35 million cubic feet per day - remarkable volumes even by Alberta standards. The gas flowed unfettered during attempts to control the flow, but it blew wild for nearly two months. Finally, a relief well near the discovery well plugged it with with concrete. The incident was an anomaly. The Pointe du Lac gas field's remaining reserves were only about 3 billion cubic feet, but the field remained a small producer until its reserves depleted in the mid-1970s.

Moving the Product to Market

The discoveries of oil and gas in the Leduc era were so large that local markets could not begin to absorb the supply. Producers needed pipelines to take western Canadian petroleum to the heavily-populated central region of Canada and or the United States. Oil pipelines materialized quickly while those for natural gas took time. Concerns arose regionally and nationally about future gas supplies, and development stalled for years. The feverish exploration spawned by Leduc coincided with a period of export hearings and heated political debate over who had the right to sell, transport and buy western Canadian gas.


Chapter 6: The Pipeline Era

In 1853, a small gas transmission line in Quebec established Canada as a leader in pipeline construction. A 25-kilometre length of cast-iron pipe moved natural gas to Trois-Rivieres, to light the streets. It was probably the longest pipeline in the world at the time. Canada also boasted the world's first oil pipeline when, in 1862, a line connected the Petrolia oilfield to Sarnia, Ontario. In 1895, natural gas began flowing to the United States from Ontario's Essex field through a 20-centimetre pipeline laid under the Detroit River.

In western Canada, Eugene Coste built the first important pipeline in 1912. The 274-kilometre natural gas line connected the Bow Island gas field to consumers in Calgary. Canada's debut in northern pipeline building came during World War II when the short-lived Canol line delivered oil from Norman Wells to Whitehorse (964 kilometres), with additional supply lines to Fairbanks and Skagway, Alaska, and to Watson Lake, Yukon. Wartime priorities assured the expensive pipeline's completion in 1944 and its abandonment in 1946.

By 1947, only three Canadian oil pipelines moved product to market. One transported oil from Turner Valley to Calgary. A second moved imported crude from coastal Maine to Montreal while the third brought American mid-continent oil into Ontario. But the Leduc strike and subsequent discoveries in Alberta created an opportunity for pipeline building on a grander scale. As reserves increased, producers clamored for markets. With its population density and an extensive refining system that relied on the United States and the Caribbean for crude oil, Ontario was an excellect prospect. The west coast offered another logical choice - closer still, although separated from the oilfields by the daunting Rocky Mountains. The industry pursued these opportunities vigorously.

The Crude Oil Arteries

Construction of the Interprovincial Pipeline Ltd. system from Alberta to Central Canada began in 1949 with surveys and procurement. Field construction of the Edmonton/Regina/Superior (Wisconsin) leg began early in 1950 and concluded just 150 days later. The line began moving oil from Edmonton to the Great Lakes, a distance of 1 800 kilometres, before the end of the year. In 1953, the company extended the system to Sarnia, Ontario, and in 1957 to Toronto. Until the completion of the Trans Canada gas pipeline, Interprovincial (IPL) was the longest pipeline in the world.

The IPL line fundamentally changed the pricing of Alberta oil to make it sensitive to international rather than regional factors. The wellhead price reflected the price of oil at Sarnia, less pipeline tolls for shipping it there. IPL is by far the longest crude oil pipeline in the western hemisphere. Looping, or constructing additional lines beside the original, expanded the Interprovincial system and allowed its extension into the American midwest and to upstate New York. In 1976, it reached its present length of 3 680 kilometres through an extension to Montreal. Although it helped assure security of supply in the 1970s, the extension became a threat to Canadian oil producers after deregulation in 1985. With Montreal refineries using cheaper imported oil, there was concern within the industry that a proposal to use the line to bring foreign oil into Sarnia might undermine traditional markets for Western Canadian petroleum.

The oil supply situation on the North American continent grew critical during the Korean War and helped promote construction of the Trans-Mountain pipeline from Edmonton to Vancouver and, later, to the Seattle area. Oil first moved through the 1 200-kilometre, $93 million system in 1953. The rugged terrain made the Trans-Mountain line an extraordinary engineering accomplishment. It crossed the Rockies, the mountains of central British Columbia, and 98 streams and rivers. Where it crosses under the Fraser River into Vancouver at Port Mann, 700 metres of pipe lie buried nearly five metres below the river bed. At its highest point, the pipeline is 1 200 metres above sea level.

To support these major pipelines, the industry gradually developed a complex network of feeder lines in the three most westerly provinces. A historic addition to this system was the 866-kilometre Norman Wells pipeline. This pipeline accompanied the expansion and waterflooding of the oilfield, and began bringing 2 500 barrels of oil per day to Zama, in northwestern Alberta, in early 1985. From Zama, Norman Wells oil travels through other crude oil arteries to Alberta and other Canadian refineries.

The Politics of Natural Gas Transportation

Those who applied for permits to export Alberta natural gas made the painful discovery that it was politically more complex to export gas than oil. Canadians tend to view oil as a commodity. However, through much of Canadian history, they have viewed natural gas as a patrimony, an essential resource to husband with great care for tomorrow. Although the reasons behind this attitude are complex, they are rooted in an incident at the turn of the century, when Ontario revoked export licenses for natural gas to the United States.

By the late 1940s Alberta, through its Conservation Board, eliminated most of the wasteful production practices associated with the Turner Valley oil and gas field. As new natural gas discoveries greeted drillers in the Leduc-fuelled search for oil, the industry agitated for licenses to export natural gas. In response, the provincial government appointed the Dinning Natural Gas Commission to inquire into Alberta's likely reserves and future demand.

In its March 1949 report, the Dinning Commission supported the principle that Albertans should have first call on provincial natural gas supplies, and that Canadians should have priority over foreign users if an exportable surplus developed. Alberta accepted the recommendations of the Dinning Commission, and later declared it would only authorize exports of gas in excess of a 30-year supply. Shortly thereafter, Alberta's Legislature passed the Gas Resources Conservation Act, which gave Alberta greater control over natural gas at the wellhead, and empowered the Oil and Gas Conservation Board to issue export permits.

The federal government's policy objectives at the time reflected concern for national integration and equity among Canadians. In 1949, Ottawa created a framework for regulating interprovincial and international pipelines with its Pipe Lines Act. Alberta once again agreed to authorize exports. The federal government, like Alberta, treated natural gas as a Canadian resource to protect for the foreseeable future before permitting international sales.

Although Americans were interested in Canadian exports, they only wanted very cheap natural gas. After all, their natural gas industry was a major player in the American economy, and American policy-makers were not eager to allow foreign competition unless there was clear economic benefit.

Consequently, major gas transportation projects were politically and economically uncertain.

Gas Pipeline Construction Begins

Among the first group of applicants hoping to remove natural gas from Alberta was Westcoast Transmission Limited, backed by British Columbia-born entrepreneur Frank McMahon. The Westcoast plan, eventually achieved in a slightly modified form, took gas from northwestern Alberta and northeastern B.C. and piped it to Vancouver and to the American Pacific northwest, supplying B.C.'s interior along the way. Except for a small export of gas to Montana which began in 1951, Westcoast was the first applicant to receive permission to remove gas from Alberta. Although turned down in 1951, Westcoast received permission in 1952 to take 50 billion cubic feet of gas out of the Peace River area of Alberta annually for five years. The company subsequently made gas discoveries across the border in B.C. which further supported the scheme. However, the United States Federal Power Commission (today known as the Federal Energy Regulatory Commission) rejected the Westcoast proposal in 1954 after three years of hearings and 28 000 pages of testimony.

Within eighteen months, however, Westcoast returned with a revised proposal, found a new participant in the venture, and received FPC approval. Construction began on Canada's first major gas export pipeline.

The Canadian section of the line cost $198 million to build and at the time was the largest private financial undertaking in the country's history. Built in the summer seasons of 1956 and 1957, the line moved gas from the Fort St. John and Peace River areas 1 250 kilometres to Vancouver and the American border.

TransCanada PipeLines Limited also applied early for permission to remove natural gas from Alberta. Two applicants originally expressed interest in moving gas east: Canadian Delhi Oil Company (now called TCPL) proposed moving gas to the major cities of eastern Canada by an all-Canadian route, while Western Pipelines wanted to stop at Winnipeg with a branch line south to sell into the midwestern United States. In 1954 C.D. Howe forced the two companies into a shotgun marriage, with the all-Canadian route preferred over its more economical but American-routed competitor.

This imposed solution reflected problems encountered with the construction of the Interprovincial oil pipeline. Despite the speed of its construction, the earlier line caused angry debate in Parliament, with the Opposition arguing that Canadian centres deserved consideration before American customers and that "the main pipeline carrying Canadian oil should be laid in Canadian soil". By constructing its natural gas mainline along an entirely Canadian route, TCPL accommodated nationalist sentiments, solving a political problem for the federal government.

The regulatory process for TCPL proved long and arduous. After rejecting proposals twice, Alberta finally granted its permission to export gas from the province in 1953. At first, the province waited for explorers to prove gas reserves sufficient for its thirty-year needs, intending to only allow exports in excess of those needs. After clearing this hurdle, the federal government virtually compelled TCPL into a merger with Western pipelines. When this reorganized TCPL went before the Federal Power Commission for permission to sell gas into the United States, the Americans greeted it coolly. The FPC proved sceptical of the project's financing and unimpressed with Alberta's reserves.

Engineering problems made the 1 090-kilometre section crossing the Canadian Shield the most difficult leg of the TransCanada pipeline. Believing construction costs could make the line uneconomic, private sector sponsors refused to finance this portion of the line. Since the federal government wanted the line laid for nationalistic reasons, the reigning Liberals put a bill before Parliament to create a crown corporation to build and own the Canadian Shield portion of the line, leasing it back to TCPL. The government restricted debate on the bill in order to get construction underway by June, knowing that delays beyond that month would postpone the entire project a year. The use of closure created a furore which spilled out of Parliament and into the press. Known as the Great Pipeline Debate, this parliamentary episode contributed to the government's defeat at the polls in 1957.

But the bill passed and construction of the TransCanada pipeline began. The completion of this project was a spectacular technological achievement. In the first three years of construction (1956-58), workers installed 3 500 kilometres of pipe, stretching from the Alberta-Saskatchewan border to Toronto and Montreal. Gas service to Regina and Winnipeg commenced in 1957 and the line reached the Lakehead before the end of that year. In late 1957, during a high pressure line test on the section of the line from Winnipeg to Port Arthur (today called Thunder Bay), about five and a half kilometres of pipeline blew up near Dryden, Ontario. After quick repairs, the line delivered Alberta gas to Port Arthur before the end of the year, making the entire trip on its own wellhead pressure.

Building the Canadian Shield leg required continual blasting. For one 320-metre stretch, the construction crew drilled 2.4 metre holes into the rock, three abreast, at 56-centimetre intervals. Dynamite broke up other stretches, 305 metres at a time.

On October 10, 1958, a final weld completed the line and on October 27, the first Alberta gas entered Toronto. For more than two decades, the Trans-Canada pipeline was the longest in the world. Only in the early 1980s was its length finally exceeded by a Soviet pipeline from Siberia to western Europe.

TCPL and Westcoast Transmission receive their Alberta gas at the province's borders. The Alberta Gas Trunk Line (AGTL is now called Nova Corporation of Alberta) system gathered gas from wells in the province and to delivered it to exit points.

There were many reasons for the creation of AGTL. One was that the provincial government considered it sensible to have a single gathering system in Alberta to feed export pipelines, rather than a number of separate networks for TransCanada, Westcoast and the other proposed export pipelines.

Another was that pipelines crossing provincial boundaries and those leaving the country fall under federal jurisdiction. By creating a separate entity to carry gas within Alberta, the provincial government stopped Ottawa's authority at the border.

Incorporated in 1954, AGTL issued public shares in 1957. The 2.5 million shares, reserved to Alberta buyers, met a high demand. Despite a limit of 100 shares per customer, Albertans oversubscribed by 500 per cent. Shares quickly doubled in value.

Legislation originally limited AGTL's mandate to gathering gas within the province. In 1974, with a broadened role, AGTL quickly became a highly diversified company. Today the company operates more than 18 000 kilometres of pipeline, is the majority owner of a Calgary-based integrated oil company, is one of the world's largest producers of petrochemicals, and has business interests in manufacturing and high technology. To reflect its newfound diversity, AGTL changed its name to Nova in 1980.

Gas Export Pipelines

The five pipelines described so far - Interprovincial, TransMountain, Westcoast, TransCanada and the Nova system - provided Canada with a basic transportation infrastructure for its petroleum industry. The first major pipeline developments after their completion were the efforts during the late '50s of TCPL and of a new company, Alberta and Southern Gas Company (A&S). Both companies wished to gain permission to market gas into the United States but they wanted to serve different regional markets. TCPL wanted to serve the American midwest through the Emerson, Manitoba, border gate while A&S sought to market gas from Alberta's foothills trend reservoirs, conveying it to an American pipeline. The stateside pipeline would be owned by A&S's parent company, Pacific Gas and Electric of San Francisco.

Alberta granted both companies permission to proceed with these export schemes in 1959, and the newly-created National Energy Board approved their proposed exports in early 1960. To serve the A&S system, AGTL built a trunk line down the foothills trend from a series of processing plants, spurred into existence by the export approval. From the Alberta border, the gas passed through a pipeline in British Columbia to a Kingsgate, Idaho export point, and on to California. At the beginning of 1962, Alberta gas began moving to California through the world's largest-diameter pipeline.

Thirty years later, however, the natural gas industry was in a very different position. As concern over oil related pollution rose in the 1980s, natural gas became increasingly attractive to producers and consumers alike. When deregulation in the middle part of the decade flooded the markets with gas, analysts predicted a short period of excess supply followed by shortages. But when the United States began offering attractive subsidies to producers of coal bed gas, the supply glut increased. Consumer agencies traded cost consciousness for their previous concern over security of supply and by the early 1990s new pipeline projects proliferated to help move natural gas to distant North American markets.

In the late 1980s, plans for a 534 kilometre pipeline to move gas from the British Columbia mainland to Vancouver Island appeared. Although subsidized by various levels of government, politicians lauded it as a way to reduce the island's dependence on coal, oil and hydroelectric power. Delays in the projected 18 month construction schedule and cost overruns were partly due to environmental concerns but a federal review approved the project. By late 1991, supplies gas began flowing to consumers on the island.

In 1990, the Iroquois Gas Transmission System received permission from the American Federal Energy Regulatory Commission and the NEB to build a $583 million pipeline. Using western Canadian gas from the TransCanada pipeline system, it began supplying markets in the American northeast in 1992 after crossing the St. Lawrence River into New York state at Iroquois, Ontario.

During 1993, various Canadian and American companies collaborated on the Pacific Gas expansion project. With additional pipeline volume and compression facilities, they added 75 per cent more capacity to the Alberta-to-California pipeline system already carrying 1.2 billion cubic feet of gas per day. To the Pacific northwest it also took an additional 150 million cubic feet and 750 million cubic feet more per day to California. The project also extended the pipeline from northern California south to the Los Angeles area.

A competitor to the only pipeline from Alberta to California lost out in its attempts to secure permission to export gas in 1992. Unwilling to give up on its plans, Altamont merely deferred its construction schedule and once again sought permission from the regulators. Its optimism was reflected in its plans to complete the project by November 1, 1994.

As long as gas surpluses exist in Canada and customers further south find the prices attractive, proposals for new gas pipelines will appear regularly in the business news.

Pipelines from the Frontiers

The prolific Prudhoe Bay oil strike in Alaska in 1968 affected the Canadian oil industry in many ways, a number of which are discussed elsewhere in this book. As far as the pipeline business is concerned, it indirectly led to two competing Canadian projects to carry Prudhoe Bay gas through Canada to the United States.

The first of these projects originated as a plan to transport Alaskan oil by pipeline through Canada. A consortium of companies suggested this proposal as an alternative to the proposed Alyeska pipeline which eventually transported oil along an all-American route, first by pipeline to Alaska's Pacific coast at Valdez and then by tanker to markets in the lower 48 states.

The companies behind the Canadian proposal formed the Mackenzie Valley Pipeline Research Group in 1969 to study the feasibility of an oil pipeline through eastern Alaska to northern Alberta. Both AGTL (Nova) and TCPL were important members of this group. In the summer of 1970, the gr