The Norman Wells Story
In Canada’s early years, important hydrocarbon discoveries occurred almost independently of settlement. In the frontiers, of course, that pattern continues. The relationship between Norman Wells and Alberta’s post-war discovery at Leduc is one example of a pattern that turns on its head the American model of petroleum development. Remote exploration has always played a critical role in the industry’s development.
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Calgary |
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Edmonton |
· Wells |
· Leduc |
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It would be easy to think of Canada’s petroleum industry as one that began in the south, grew wealthy, then began exploring and developing more remote lands. That is indeed a realistic caricature of the US industry, but in Canada the story was different. The most important oil discovery prior to Leduc took place just south of the Arctic Circle. In a drama worthy of the great white north, that discovery led directly to the creation of Canada’s modern petroleum industry. |
Before I address the major topic of my presentation today, I would like to suggest an idea about the development of Canada’s petroleum industry compared to that in the United States. Simply put, the patterns of petroleum industry development in the two countries paralleled their respective patterns of settlement.
As you know, the US takes up the best temperate lands along the eastern seaboard, and there are no major barriers to settlement between New York and San Francisco. The Cordillera is a problem, but settlement in the far west was still not seriously hindered – especially after the construction of the transcontinental railways. That pattern exactly reflects the development of the US petroleum industry. In the US there are many sedimentary basins – smallish, but regularly spaced across the country. Once Colonel Drake drilled his historic well, the American petroleum industry developed with patterns of settlement.
Canada has quite a different geography. Settlement was difficult in this country because of the predominance of the Canadian Shield, which provided barriers in many ways. Trapped between the Shield and the Cordillera, the Western Canada sedimentary basin is far bigger than the many on-shore basins in the US. Because of the Shield, it is well separated from the small basins in eastern and central Canada. The Shield and our northern latitudes created what I call the coureurs du bois model of how the Canadian industry developed.
In case you don’t know
the expression, coureurs du bois were fur traders who earned their
livelihoods with the aid of canoe transport along our mostly northward-flowing
rivers. They played a big role in the creation of Canada. For example, from
remote northern locations they brought information about resource potential to
our political and commercial centres.
Alberta’s first recorded natural gas find came in 1883 from a well at CPR siding No. 8 at Langevin, near Medicine Hat. This well was one of a series drilled at scattered points along the railway to get water for the Canadian Pacific Railway’s steam-driven locomotives. The unexpected gas flow caught fire and destroyed the drilling rig. The discovery took place as we built our first transcontinental railway – itself an effort to settle our empty prairies before the Americans did the job for us.
Pelican
Rapids
The Athabasca oil sands were already well known – in
fact, the first recorded mention of Canada’s bitumen deposits goes back to a
Hudson’s Bay Company record of June 12, 1719. Hoping to find light oil beneath
the sands, in the late 19th century Ottawa undertook a drilling program to help
define the region’s resources. Using a rig taken north by river, in 1893
contractor A.W. Fraser began drilling for liquid oil at Athabasca, where the
oil sands had been known for centuries. In 1897 he moved the rig to Pelican
Rapids, also in northern Alberta. There it struck natural gas at 250 metres.
But the well blew wild, flowing huge volumes of gas for 21 years. It was not
until 1918 that a crew succeeded in killing the well.
These few examples
illustrate my point. Quite unlike the situation in the US, Canada’s early
hydrocarbon exploration took place along transportation corridors rather than
in settled areas. The country had been well explored during the fur trade era,
but settlements were still few and far apart. That pattern is in evidence in
the case of Norman Wells, to which I now turn my attention.
Ask any of Canada’s
exploration professionals when Western Canada’s oil industry began, and you
will get one of two answers. The first is the Dingman #1 discovery, which began
disgorging wet gas at Turner Valley in 1914. The second is Imperial’s 1947 oil
discovery at Leduc. The more thoughtful industrial historian would probably say
Dingman was the critical event for the industry’s early years, while the modern
era began at Leduc.
I want to suggest that
another event was equally pivotal. The year was 1914. The occasion was an
expedition down the Mackenzie River by a British geologist, Dr. T.O. Bosworth.
There are direct links between that trip and the modern industry’s birth.
Out
of Calgary
Two Calgary businessmen, F.C. Lowes and J.K. Cornwall,
commissioned Bosworth’s journey. They wanted to investigate the petroleum
potential of northern Alberta and beyond, and to stake the most promising
claims. Bosworth did not disappoint. His confidence that the north was highly
prospective is apparent on almost every page of his 69-page report.
Bosworth’s own words
suggest how ambitious the expedition was. “The undertaking was planned in March
1914,” he says. “In April I consulted with the officers of the Government
Geological Survey and other Departments in Ottawa and gathered from them all
available information; maps and literature bearing on the subject.
“At the beginning of
May, I journeyed from London to Canada accompanied by three assistant
geologists and surveyors, and on May 19th, the expedition set out from Edmonton
to travel northwards in the Guidance of the Northern Trading Company. We
returned to Edmonton September 24th.”
During that period, the
Bosworth expedition covered huge distances. And according to his report, there
were excellent exploration prospects in three general regions: “The Mackenzie
River between Old Fort Good Hope and Fort Norman; the Tar Springs District on
the Great Slave Lake; and in the Tar Sand District on the Athabasca River.”
His report offered
concise, well-written geological descriptions of rocks, formations and
structures. It also included chemical reports on both rocks and oil from the
many seepages in the area. Some of his greatest praise came from investigations
north of Norman Wells, areas which to this day have not yielded a major oil
discovery. “Near Old Fort Good Hope (lat. 67 30’) in the banks of a tributary
stream, the shales are well exposed ... from the fossils it is evident that the
shales are of Upper Paleozoic Age and probably belong to the Upper Devonian,”
he said. “This remarkable series of Bituminous Shales and Limestones, of such
thickness and of such richness contains the material from which a vast amount
of petroleum might be generated and might pass into an overlying porous rock.
It is admirable as an oil generating formation.”
In a discussion of the
evidence of good reservoir rock, Bosworth points to a nearby occurrence of
“gray clay shales and shaley sandstone,” and to another of “greenish shaley
sandstone containing occasional fossils – corals, chenetes and rhynconella.”
Both of the reservoir
rocks Bosworth speculates upon lie above the Devonian shales. He was looking
specifically for “overlying porous rock” to form the reservoir. It does not
seem to have occurred to him that reefs within the shales could have served as
reservoirs, even though he specifically noted the presence of Devonian corals.
Before I turn to the
outcome of this expedition, which was quite important, I would like to share
with you the business advice he gave his clients in the conclusion to his
general report. “To avoid all competition,” he said, “I strongly advise that
you form a controlling company or syndicate containing the most influential
men. I recommend particularly that you arrange matters in such a way that it
would be to the obvious advantage of every oil man to join you, and that you
freely provide the opportunity so that the Company may include every man who
wishes to venture anything in the exploitation of the oilfields of the North.
By this means alone can you hope to avoid competition and the unfortunate
results which must follow….”
Ted
Link
In his report Bosworth noted that he had
“investigated” the discovery at Turner Valley. Fifteen months in the drilling,
the wet gas discovery came in on May 14, 1914 – just before Bosworth left
Edmonton on his expedition. Within 20 years, that discovery would be recognized
as “the largest oilfield in the British Empire.” Bosworth, however, was not
impressed. In his view, the real potential was in the North.
Believing Turner Valley
was doomed to disappoint explorers, he wrote that that “there are a number of
oil companies in Western Canada who have capital in hand which must be spent on
drilling wells. At this moment they are faced with failure (at Turner Valley),
and might gladly turn to any region where there is a genuine reason to expect
oil. Any such companies might become associated with your controlling company
to the obvious advantage of all parties, on terms which can be mutually
arranged...”
After further
commentary, he advises his clients in these words: “You would also provide for
the transportation; the necessary railroads; the pipe lines, the refineries,
and, what is more important than all the rest, and which would give you
complete command of the whole situation, all of the oil produced in the region
would pass through your hands to be marketed by you.
“If you could succeed
in promoting a great scheme on some such lines as these, no smaller rival group
could hope to compete against you, and you might eventually be in the position
to control the great oil fields of the North.”
One of the great
ironies of these comments, of course, is that they came barely three years
after the Standard Oil Trust was dismantled for just such anti-competitive
practices. In addition, Bosworth completely misread the importance of Turner
Valley and the petroleum potential of Alberta, so smitten was he by the North.
The practical value of his advice may be seen in the fact that seven decades
elapsed before oil from the Norman Wells oilfield actually began flowing to
southern markets.
Now, let us push on
with our story. Bosworth does not remark on the coming of World War I. However,
when he and his men left the world was at peace; when he returned, Europe and
the British Empire had become embroiled in that terrible war. He was probably
totally unaware of those developments while in the north.
The exigencies of war
postponed exploration of Bosworth’s claims. So did the Dingman discovery. The
petroleum industry by this time was focused on Turner Valley field development,
where standard practice was to strip naphtha from the gas stream and flare the
gas itself. By 1918 an Imperial Oil subsidiary, The Northwest Company, had
acquired the properties Bosworth had staked for his clients. Imperial had hired
Bosworth himself as chief geologist. The company decided to drill on one of
those claims.
Imperial Oil Limited’s
legendary exploration geologist, Ted Link, led the drilling expedition. By
train, scow and riverboat, he and his crew followed Bosworth’s route north to
Fort Norman, just south of the Arctic Circle. They had taken with them the
wherewithal to assemble a cable-tool drilling rig, and they soon set to work.
One valuable member of the party was an ox, which supplied heavy labour during
the summer. As the autumn cold began killing off the forage, he delivered
steaks and stew.
Before moving on, it is
worth noting that the most important early geological work at Norman Wells,
including the location of the discovery well, needs to be attributed to Ted
Link – not to T.O. Bosworth. In an important 1947 presentation to the AAPG,
J.S. Stewart of the Geological Survey of Canada is adamant on this point.
Canol
Imperial’s first well brought in the great Norman
Wells discovery, in 1920. However, there was no practical way to get the oil to
market. Because demand in the Northwest Territories was marginal, Imperial had
little reason to develop the field. However, later in the decade the company
constructed a tiny refinery at Norman Wells to supply gasoline and other
products to missions, mines, riverboats and other local customers. The company
did not need many wells to meet local needs, and did little investigation of
the geology of the reservoir.
That changed after
Pearl Harbor. When the Americans came into the Second World War, they were
extremely concerned about having secure local fuel supplies in the North,
especially after Japan took control of a couple of Alaska’s Aleutian islands.
They therefore worked with Canada to develop Norman Wells into a source of
local oil supply for a refining and distribution complex. This was the
beginning of the Canol Project. The name supposedly comes from the contraction
of “Canadian” and “oil”, but I suspect the second syllable is actually “oil”
with a Texas accent.
Construction crews
built a 950-kilometre oil pipeline over the Mackenzie Mountains to a newly
constructed refinery in Whitehorse, in the Yukon Territory. The pipeline was
built over some of the most difficult terrain in the country, and much of the
work had to be done in bitter cold. Crews also laid product pipelines to
Skagway, Alaska. In total, they constructed 2,560 kilometres of pipeline.
By any standard those
lines were terrible. The line ran on top of the ground, alongside the road,
often without supports. Vulnerable to frost heaving, snowstorms and flooding,
the Canol pipelines were not designed for extreme cold. They were neither
installed nor handled properly, and they failed frequently. The crude oil
pipeline leaked onto the permafrost. So did the product pipelines, which
delivered diesel and gasoline to a fuelling station in Skagway, Alaska.
To meet the needs of the refinery,
Imperial drilled more wells, and began to better understand the Norman Wells
reservoir. Of note, the company discovered that it was a Devonian reef – of
earlier vintage than the Leduc and Redwater fields soon to be discovered in
Alberta, but still a Devonian reef. That turned out to be the geological key.
By the time the
refinery was ready to begin operations, the company had drilled 60 productive
wells out of 67 project wells in total. The test for the field came on February
16, 1944 when the pipeline began operating. As a producer of good-quality oil
(39° to 41° API), the field surpassed expectations. By October 1944 Norman
Wells was producing 4,600 barrels per day by natural pressure.
The extraordinary Canol
project did not contribute meaningfully to the war effort. The threat to west
coast shipping had disappeared and it was clear that the war would soon be won.
First oil flowed through the pipeline in 1944, and the refinery operated for
less than a year before being mothballed. Perhaps Canol was the greatest white
elephant in petroleum history.
No one really knows how
much the project cost, though there is no doubt the American taxpayer picked up
the tab. For the following calculations I will use one of the common cost
estimates: $134 million. Total oil production was about 1.5 million barrels. In
as-spent dollars, therefore, it cost $89.33 per barrel. The Whitehorse refinery
only produced 866,670 barrels of refined product. Dividing that by total
project cost, you get $0.97 per litre.
Now, let’s adjust those
numbers by official consumer price inflation in the United States. In today’s
money, the oil would cost $982 a barrel. The refined products would cost $10.69
a litre. And that’s before taxes!
Later studies of the
project’s environmental impact in Whitehorse were revealing. The Canol legacy
included the creation of an environmental horror known locally as the Maxwell
Tar Pit. Appalling disposal and clean-up practices during the Canol debacle had
created an oily mess that was declared an environmentally contaminated site in
1998. Forty years earlier, a man had stumbled into the pit and got stuck. He
later died in hospital.
Leduc
Although Canol had little impact on affairs of state,
it had a huge impact on oil development in Western Canada. As the result of
wartime field development at Norman Wells, Imperial learned that the field’s
reservoir rock was Devonian reef. Armed with this knowledge, the company’s
geologists – led by Ted Link, who by this time was in charge of
Imperial’s exploration efforts – their approach to Western Canada.
This was an important
example of thinking outside the box. Other oilmen at the time were on the hunt
for big plays that looked, walked and talked like Turner Valley. They would be
roughly 340 million years old. They would be thrusted anticlines of Paleozoic
age in a Mississippian formation. Much fruitless drilling in the foothills
sought the next Turner Valley.
Perhaps we should not
give all the credit to Imperial Oil for the geological idea that there might be
Devonian reefs in Alberta. In an email, my friend Clint Tippett asked whether
GSC mapping of the Rockies west of Edmonton – work undertaken by Helen Belyea,
Digby Maclaren and others – influenced Imperial’s thinking. Before the Leduc
discovery, Charles Stelck at the University of Alberta also gave thought to the
question of Devonian reefs in Alberta.
However Imperial
arrived at its revolutionary idea, the importance of its decision to drill for
a reef cannot be understated. That geological idea brought forth a series of
great discoveries. The first came with the aid of primitive seismic technology,
and it was a big one – the famous Leduc #1 discovery well. When it came in to
much fanfare on February 21, 1947, Leduc laid the groundwork for one of the
world’s great post-war oil booms.
There is another
important connection between post-war oil development in Alberta and the Canol
project. The refinery built in Whitehorse played an important role in Alberta’s
industrial development. Imperial bought the mothballed refinery for one dollar,
dismantled it and moved it to Strathcona, near Edmonton. There, the company
reassembled it to handle production from Leduc and other post-war discoveries.
That refinery laid the foundation for one of Canada’s biggest refining
complexes.
As I leave this
discussion, a final piece of trivia. Although Imperial is the hero of this
drama, I understand that the company’s geologists mapped the Leduc reefs at a
90° angle to their actual orientation. After mapping them correctly, Texaco
came to have the dominant position in the Leduc chain of reefs.
Summary
The Norman Wells story illustrates a pattern that
turns on its head the American model of petroleum industry development. Briefly
put, remote exploration has played a critical role in the industry’s
development since the earliest years of oil and gas exploration in this
country. Bosworth was wrong in important areas. However, his work greatly
influenced that of his successor, Ted Link, who ultimately proved that Devonian
reefs were an important key to Canada’s petroleum wealth. That change in
thinking paved the way for a series of discoveries which represented the birth
of the modern petroleum industry in Canada.
It would be easy to
think of Canada’s petroleum industry as one that began in southern Ontario and
Alberta, grew wealthy, then began exploring and developing its frontiers. But
this model doesn’t fit the facts. Key discoveries and developments took place
in remote regions. In the sector’s early years, important discoveries occurred
almost independently of settlement, and a great deal of oil and gas development
continues to take place in sparsely populated areas. In our frontiers, of
course, that pattern is fully intact.
If not for the Bosworth report, Canada’s petroleum industry would have had quite a different history. Imperial Oil’s efforts were heroic – indeed, the stuff of legend. Enormously frustrated with its unbroken string of 133 dry holes, Imperial planned the program that yield