Tuesday, July 17, 2012

One Man, Immeasurable Impact

How J. Howard Pew's intense and unwavering belief in the oil sands created an industry.
This article appears in the August issue of Oilsands Review 
By Peter McKenzie-Brown
If he is remembered at all, Americans interested in business history think of J. Howard Pew as an industrialist who created what was once one of the world’s largest energy companies. For Canadians, though, he was the legendary force behind the harnessing of the oilsands. Though his efforts in the oilsands sector were a cash drain for his company – at the time, one of the 20 largest in the United States – for this country he created an industry.

The thumbnail sketch of his life is this: Born in 1882, J. Howard Pew graduated from high school at age 14, from university at 18 and became president of Sun Oil at age 30. With his brother Joseph he transformed Sun (founded by his father; now called Sunoco) by introducing new refining, marketing, and distribution techniques. He was astute. During the First World War he responded to the war-time demand for crude by building a navy of tankers. That fleet became one of Sun’s most profitable businesses.

A publication celebrating Sun Oil’s centenary in 1986 described the man, who had died in 1971. “Tall and broad-shouldered, with bushy eyebrows, he was often seen clutching an enormous cigar in his fingers as he moved about Sun’s corridors. He was intense, sure of himself and deliberate in his speech even in old age.”

The Venerable Pew: An extreme conservative in his religious and political views, Pew was passionate about his work. “Working for Sun Company these years has been not merely a job,” he said in 1956. “It has been participation in an exciting adventure – a way of life providing satisfaction in the accomplishment of our goals. So our people have become a great team, welded together by great ideals and purposes accepted by each of us.”

In the 1940s the venerable Pew took a serious interest in the oilsands, in part because of an investigation of potential crude oil sources Sun undertook during the Second World War. In the early 1950s, George Dunlap had a remarkable interview with Pew before moving to Calgary to set up Sun’s Canadian exploration and production operations.

“I have one area that I am interested in and would like to share with you my interest,” Pew told him. He went to a cabinet to pull out a thick file marked “Athabasca Tar Sands,” then shared his vision of the future importance of the oilsands. He told Dunlap to ensure that “Sun Oil always has a ‘significant position’ in the Athabasca Tar Sands area!”

The venture was called Great Canadian Oil Sands Limited (now the Suncor plant), and in 1962 the Oil and Gas Conservation Board (today the ERCB) granted approval for the company to proceed with a 31,500 barrel-per-day, $122 million plant, but imposed severe environmental restrictions on the plant. The partners had serious concerns about economies of scale for such a small project. Costs began to rise and financial difficulties ensued. By 1964 it was clear that a company with deep pockets – not Canadian Oil Sands Ltd. – was needed to lead GCOS. Sun took on that responsibility. The capacity of the proposed plant increased to 45,000 barrels per day and the cost escalated from $122 to $190 million.

The larger plant received approval in 1964, partly because Pew wrote a letter to the Petroleum Resources Conservation Board (now the ERCB) saying “I believe in the future of this project and I will put up my own money without reservations if the permit is approved.” Read aloud at a meeting of the Conservation Board, that letter carried the day. By the time GCOS reached completion in 1967, costs had risen to $235 million.

Building the Plant: The contractor for the project was Bechtel of Canada, and the engineer representing Sun during construction was Robert (Bob) McClements, Jr., who later became chairman and CEO of Sun Oil. McClements described Pew as “one of the strongest influences on my life.”

Pew would visit the construction site and “we would have engineering (and other) discussions. He would ask ‘How much does it cost to feed a man an average twelve hours on a shift?’ He was very, very detailed. I still remember: it was six to eight pounds of food per person per day and a little less than $2.00 per person to feed a construction worker… Anyway, there was a side of J. Howard that I don’t think has really been widely recognized. I think many people would describe him first perhaps as an industrialist. He was certainly known as the leader of a large corporation. Sun was always in the top 20 of the Forbes list of companies. It was a huge company. But there was also a spiritual side to him. He was a very religious individual. His conversations often included two words: faith and freedom, and they were welded together….”

The Sun Company McClements joined in the 1960s was much different from those in today’s oilpatch. “There was no retirement plan, there was no healthcare plan, there was no sick plan. When you were sick, you took your own time off….You would pay for that time. When you retired – and nobody quit and nobody was ever fired at the Sun Company – you retired at 50% of your pay. There were no documents explaining this in those days.”

McClements described the only meeting he attended between Pew and Premier Ernest Manning. “I’m telling you I’ve never been in a business meeting in my life like that. It was like you and me sitting here talking. There were no hard specifics. (There) was a feeling of absolute trust between the two of them. And I remember when I went back to the plant, somebody asked me about it. Without thinking, I said ‘Those two men just reeked with honesty.’ The relationship they had was unbelievable, exactly the same wavelength.”

McClements served as master of ceremonies at the official GCOS opening. A Sun Company publication commemorating the event quoted him as saying “synthetic crude is a natural for petrochemicals. I see no reason why the stretch along the Athabasca (river) cannot become an industrial valley in time.”

McClements vividly remembered the official opening. “It was the end of September in 1967 at the dedication of the plant. Pouring rain, not a very good day at all.” Premier Ernest Manning and Pew (then 85 years old) both addressed the audience of about 200.

According to Manning, “no other event in Canada’s centennial year is more important or significant.… It is fitting that we are gathered here today to dedicate this plant not merely to the production of oil but to the continual progress and enrichment of mankind.” For his part, Pew told the assembly that “No nation can long be secure in this atomic age unless it be amply supplied with petroleum. It is the considered opinion of our group that if the North American continent is to produce the oil to meet its requirements in the years ahead, oil from the Athabasca area must of necessity play an important role.”

McClements, who was the first plant manager for GCOS, recalled a tour he gave Pew once production had begun. “We had visited the mine and were in the refining section of the plant (when he) asked to see a sample of what we were running and I asked an engineer to pull a sample of the product we were making at the moment. Mr. Pew took the bottle and held it up to the light. It was water white. He unscrewed the cap, held one nostril and sniffed the oil again. Finally, he stuck his finger in the bottle and tasted the oil. When he did, you could just see his face beam.”

A broad view of the GCOS story comes from Paul Chastko, a renowned oilsands historian. “When Great Canadian Oil Sands began production in 1968, it represented a remarkable achievement,” he wrote: “a Canadian company, backed by the investment capital of a U.S. multinational corporation, used a separation process researched and developed by scientists funded by the governments of Canada and Alberta to produce a synthetic oil capable of competing against conventional Saudi crude in world oil markets.” All true, but the energy behind this effort was the vision of J. Howard Pew. The impact on the oilsands of this one man has been immeasurable.

No comments: