Articles

What the pipeline will do for Canada

Alan Phillips September 14 1957
Articles

What the pipeline will do for Canada

Alan Phillips September 14 1957

What the pipeline will do for Canada

Articles

Alan Phillips

Here's what to look for:

DEFINITELY A chemicals boom from a thousand by-products A battle for your home-heat and appliance money

POSSIBLY A mass migration of light industry

A change in living costs and standards

Across three quarters of Canada a new industrial giant is stirring, threatening to break longset patterns of business. Natural gas, having played its part in last June’s political upheaval, is now expected to trigger a business upheaval.

The Trans-Canada Pipeline, not so long ago a pipe dream, is fast becoming a fact. By late next year this underground tunnel of high-pressure steel will stretch from Alberta’s gas fields in sight of the soaring Rockies to the seaport of Montreal, 2,294 miles. Twelve “spreads” of highbooted pipeliners are working on it now. They’ve just reached Winnipeg. They'll be in Port Arthur by November. By fall ’58 the last link between the Rockies and Montreal will be forged.

As the pipeline swings east the men who find, transport, and sell the gas are prophesying changes in kitchen and factory, in living costs and living standards, and it becomes apparent that these things will come about mainly through

• a stepped-up search for oil

• the creation of new chemical products

• huge injections of new money into the bloodstream of commerce

• new secondary industry, followed by population shifts

• a fight for markets, both domestic and industrial, between gas, oil and coal

These heady forecasts are solidly based on

what gas can do. First, it’s fuel, the purest known, refined in the bowels of the earth by nature from organic ooze. It’s invisible, silent, clean, convenient—“the wonder fuel” it’s called in the U. S. Second, it’s raw material, the source of a thousand chemicals.

We can glimpse what this means by looking south of the border. Natural gas is the Cinderella of U. S. industry. It was thought in 1940 that its future lay in the past. But the introduction of 36-inch pipe brought down the cost of gas as the prices of oil and coal were going up. Utilities selling high-cost gas made from coal switched to natural gas so fast that gas is now the sixth-largest industry in the U. S. It has captured the new suburban heating market. It’s making a bid for the rich new field of home air conditioning. It has twenty-five thousand industrial uses, its boosters say. All told, it supplies twenty-six percent of all U. S. energy, compared with five percent in Canada.

These things won’t happen here overnight. And, warn gas men, they can’t be taken for granted. The gas utilities have a big selling job to do. They’ve got to wrest markets from oil, coal and electricity, the entrenched competition. If they don’t work hard enough at it the pipeline could go broke.

But gas has an edge because it’s found while geologists are looking for something else. In the decade since Leduc ushered in the oil era in Canada, companies probing the prairies for oil have stumbled on

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Gas spending: $2 million a day to find it; 200 millions to process it; 600 millions to move it

more than twenty-four trillion cubic feet of natural gas. Even at bargain-basement gas-field prices that’s close to two and a half billion dollars’ worth of energy. In the absence of a market for gas, the cost of finding it has been written off against oil. So the companies can sell gas cheap and still be in money.

Over the past ten years oil companies have spent three billion dollars for exploration in Canada. In the next ten years, predicts Carl Nickle, millionaire publisher of Calgary’s Daily Oil Bulletin, they’ll spend three times as much. Here is the pipeline’s first effect: an extra two million dollars a day for prairie people to spend.

The oil boom shows us what this signifies. In the five years following Leduc, manufacturing in Alberta grew five times as fast as in the rest of Canada.

This brings us to the second impact of gas: as a raw material. Gas as it comes from the ground is “wet.” It’s a mixture of hydrocarbon: natural gasoline, methane, ethane, propane, butane and others. Often it’s “sour,” which means it contains sulphur. Almost pure methane goes into the pipeline. The other hydrocarbons and the sulphur must be removed first.

Here lies one of the brightest prospects confronting the west today. At the big gas field of Pincher Creek, British American Oil has just finished building Alberta’s third sulphur plant. Now under way are two plants to remove ethane, propane and butane. From butane comes butadiene, the raw material for synthetic rubber, and the Polymer Corporation has just bought a butadiene plant site at Red Deer, Alta. All told, to get the gas from the ground and take out the hydrocarbons, petrochemical companies will spend an initial 250 to 300 million dollars.

Hydrocarbons are the building blocks of the chemical industry. They can be separated and re-combined into thousands of products, from DDT to cosmetics, from drugs to explosives. Natural gas is the raw material for three out of four chemical plants now being built in the U. S. And chemicals are the most dynamic industry in the U. S. economy.

This dynamism can be seen in the Edmonton plant of Canadian Chemical Company Limited, a seventy-five-milliondollar giant built in 1953 to make textile yarns and fibres. The fibres are made from acetate flake. The flake is made from pulpwood and gas. But the process yields by-products: the ingredients for quick-drying paints, varnishes, plastics, insecticides, antifreeze, and formaldehyde for plywood glue. So. to lower its price tag on fibre, the company turns out these products as well. By-products are pulling chemical companies along at a pellmell pace.

The world’s appetite for chemicals is insatiable. A twenty-three-million-dollar plant has just been completed at Medicine Hat to turn the invisible hydrocarbons in gas into .fertilizer. Du Pont is planning a huge expansion near Brockville, Ont.—using pipeline gas as a raw material, it will produce enough methane to heat fifty thousand homes. At Millhaven, Ont., C-I-L plans to make ammonia from methane. From ammonia

comes cyanide. From cyanide comes Plexiglas. There’s no end to the chemical chain reaction gas can bring. Already, says A. P. Craig, vice-president of TransCanada, firms that intend to use the pipeline’s gas as a raw material are planning to spend two hundred million expanding.

Most ambitious of all these plans is a second seventy-five-million-dollar pipeline to pump hydrocarbons east from Alberta to the lakehead, where a petrochemical industry could use the deep-sea route opened up by the St. Lawrence Seaway. The planner is Canadian Hydrocarbons, a Winnipeg firm selling propane gas in metal cylinders to sixty thousand rural prairie customers.

Just to move the gas will set in motion a third chain of events. The gas producers are spending fifty-two million dollars on small-bore pipe to connect their wells with Trans-Canada’s main artery. Trans-Canada is spending 378 millions. The gas utilities are spending some 200

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millions to enlarge their plants, install new mains and build spur lines.

Raising this money means work for almost every stock and bond broker in Canada. Spending it means jobs for about eight thousand construction workers and added business for hundreds of merchants along the pipeline route. It means one million tons of freight for railway, steamship and truck lines. It means a new Canadian industry—new plants in Welland, Sault Ste. Marie, Regina and Edmonton—to make the steel pipe needed to move the gas.

But these are preliminaries to the pipeline's chief effect: a battle of fuels in the three hundred towns and cities it will serve. Gas is challenging oil for the home-heating market. It’s muscling in on electricity’s long-held field of home appliances. It’s raiding coal’s industrial domain.

The tide of battle will turn largely on how much the gas can be sold for. It won’t cost Trans-Canada much in Alberta: ten cents an MCF (one thousand cubic feet, roughly six gallons of fuel oil). But every hundred miles Trans-Canada moves that MCF adds a cent and a half to two cents to its cost. So the farther a customer is from the gas fields the more he will pay for gas.

Secondly, gas, like everything else, is cheaper to sell in bulk. As Oakah Jones, vice-president of Consumers’ Gas of Toronto, says, "The more customers we serve the more natural gas we sell, and the more we sell the lower we can make the rate.”

Thirdly, a gas company must have enough gas on tap to supply a homeowner’s peak periods. He’ll need perhaps fifteen times as much on a cold winter’s day as in summer. To balance this, the company sells “off-peak gas” cheap to industry in summer, with the right to stop delivery on notice if need be. Many plants can switch in a couple of minutes from coal to oil or gas, and back again, whichever is cheapest.

The coal companies claim it costs about fifty cents to bring a thousand cubic feet of gas into Toronto, while the same amount of energy in the form of U. S. coal can be brought in for thirtyfive cents.

But gas men can marshal some forceful selling points. They point out that gas is clean—there's no ash or residue. And no other fuel gives such precise automatic control of heat.

Late in 1954 Consumers’ Gas in Toronto, a 116-year-old firm that was making gas from coal, began a sales campaign with Texas gas (which will be cut off when Alberta gas arrives). The company wooed and won plants making bricks, ceramics, soap, steel, asphalt, TV tubes and auto parts. By this year Consumers’ had boosted its sales to industry by 133 percent over 1954, its order with Trans-Canada by 250 percent.

The outlook 'for northern Ontario is even more exciting. This region is a

long freight haul from the coal fields and oil refineries and the high cost of fuel blocks the growth of industry. Indeed, skeptics said two years ago that in this “barren stretch” the pipeline’s only customers would be trappers, hunters and Indians.

Now, between Kenora and Orillia, the newly formed Northern Ontario Natural Gas Company will serve six pulp mills and thirty-four communities. The mines at Noranda and Timmins will be large users. At Sudbury, International Nickel plans to use gas in a new and still-secret ore-leaching process. All told, instead of the four percent it first figured on, TransCanada may sell as much as ten percent of its gas in this area.

Northern Ontario expects rates one fifth to one quarter lower than Toronto's, and Cyril Young, a Northern Ontario Natural Gas Company director and vice-president of the Prospectors and Developers Association, sees “important industries” moving northward. He points as an example to the seven-million-dollar chemical plant Du Pont is building at North Bay. He sees ore being processed on the spot, products being manufactured from wood pulp, fertilizer plants springing up in the clay belt, bringing a boom in agriculture.

At Winnipeg, the advent of gas will open a potato-chip plant this fall, and has helped start other industries. But Saskatchewan soft coal is -cheap in Winnipeg, and gas is too high-priced for industry’s liking. “If they make the rates competitive,” says George Fanset, head of Manitoba’s industrial - development board, “they'll attract industry.”

In Saskatchewan, despite the cheapness of coal, gas is used to generate power in three government-owned plants. It’s the choice of meat packers, two sodium-sulphate plants, and one making wallboard from wheat straw. It helped start a new cement plant near Regina, and a company soon to be making tile. Western Clay. It figured in the planning of a large pulp mill now under construction near Prince Albert. And it’s sparking the use of Saskatchewan’s enormous potash deposits, which some day may support a soap or glass industry.

There is no disguising the fact that between oil and gas coal has been hardhit. In the past three years seven underground mines have closed in Alberta and the government has spent fifty thousand dollars placing miners in other jobs.

In Quebec and southern Ontario the rapid build-up of industry may more than make up for the markets coal will lose in northern Ontario. The St. Lawrence Seaway is Ontario’s last source of water power close enough to industry to be cheap. “We’ll need more and more steam plants to generate cheap electrical energy,” says C. L. O’Brian, of the Dominion Coal Board. “That’s coal’s big future.”

In the struggle between gas and oil the suburbs are the main front. Oil has long held the rich home-heating market without competition. Now. in some of Toronto’s new subdivisions signs read “Gas Mains Installed.”

The key to this situation is the subdivision builder. He’s concerned with costs, and a gas furnace costs less to install than an oil furnace. Nor does he have to buy a storage tank. And, in a basementless house, the saving in space means money saved.

But builders also want features that will attract buyers. Which is best for home heating, oil or gas? According to Dr. Douglas Montgomery, a federal fuel scientist, “they give equal comfort. So it all boils down to a matter of dollars and cents—which is cheaper?”

This question is hotly disputed by both combatants—and by coal as well. Coal is cheapest of all in Quebec and southern Ontario, and it still heats one out of four Canadian homes. But its inconvenience puts it out of the running. Even residents of Drumheller, Alberta, who make their living from coal, have voted for a community gas system.

A study by Union Gas of Chatham, now building a 141-mile pipeline to service seventeen of southwestern Ontario’s largest cities, shows that gas-heating an average-sized house in its area costs $147, while oil costs $173. But a study in Toronto by an oil-heating association favors oil over gas by $170 to $213.

Such studies mean little unless one has all the facts: temperatures, house exposures, insulation factors, furnace designs. It seems simpler to compare the price of a thousand gallons of fuel oil —the amount that heats a standard sixroom house most winters most places— with the price of 163 thousand cubic feet of gas, which contains about the same amount of heat.

In Alberta this gas would cost about $50, roughly one third the cost of oil. That same gas would cost from $90 to $100 in Saskatchewan, $160 in Winnipeg, $170 to $185 in northern Ontario, and by the time it gets to Toronto, a whopping $228. Gas officials say that gas burns five to seven percent more efficiently than oil. Even so, that’s $212, compared with $186 for oil.

The gas companies, however, have an ace in the hole. Suppose that homeowner who is paying $212 for spaceheating puts in a gas water heater and

a cooking range. Now he’s using more gas so he gets a cheaper rate. On the lower rate his space-heating bill drops to SI69. Also, most gas companies make no charge for servicing furnaces, an item that costs an oil-furnace owner fifteen to thirty dollars a year.

Gas has a long-range price advantage as well. Since 1940, fuel-oil and coal prices in the U. S. have risen an average of 115 percent. Gas has gone up less than fifteen percent. Gas, because it’s a by-product, costs little at the source. Gas could jump fifty percent in Alberta and Consumers’ Gas in Toronto would only pay about ten percent more.

Since natural gas came to Toronto, Consumers’ Gas has gained 30,000 new house-heating customers. Twin Cities Gas at the lakehead will start off this fall with 2.500 homes, and expects to double this figure by next year. Winnipeg & Central Gas has sold 3,000 new' homeow'ners, and expects to add about 5,000 more a year. Saskatchewan Power will soon be serving 6,000 homes in Regina, now has 21,000 customers in five cities and tw'enty-six towns.

Will such inroads harm the oil industry? “The worst it can do,” says A. J. Rowe-Sleeman. director of the Toronto Oil Heating Association, “would be to slow down our rate of increasing sales.”

The warfare on the appliance frontgas versus electrictiy—has just started at the lakehead but is well advanced on the plains. The Saskatchewan Power Coiporation has set up sales offices in trailers and is touring Regina suburbs offering low down payments and free installations.

Gas has had great success against electricity in the U. S.—more than 100 million gas appliances are in use there. But gas costs less in the eastern United States than in eastern Canada, while electricity costs more.

Gas men nevertheless insist that gas is the cheapest way to cook when you take the life of the stove into account. “Repairs are practically nil,” says Jack Spence, manager of Ottawa Gas. “There are no moving parts to wear out except the valves. We know of gas ranges in use after forty years.”

There’s little difference in price or cleanliness between the new gas and electric stoves. Gas is a trifle faster. Oil is safer. For although natural gas isn’t poisonous, a heavy concentration in a room could cause humans or plants to smother, or, if fired, might explode. But common sense makes accidents rare with modern gas appliances. They’re all equipped with pilot lights that ignite the gas automatically if a child should happen to turn it cn. Also, gas companies add to the odorless natural gas a high-smelling impurity so that a leak can be detected. If a leak does occur, natural gas, being lighter than air, dissipates quickly once a window is opened. When the gas is burning the only products given off are water vapor and carbon dioxide, the odorless gas we exhale. Since the sulphur is taken out at the gas field, it doesn’t tarnish silver.

Both gas and electric stoves are automatically controlled, so gas men are stressing flexibility. “Instead of four to seven heats,” says Spence, “you can get any heat you desire from one control, like the volume knob on a radio. There’s no waste of heat, fewer boil-overs, less grease-carrying vapor in the air, and gas shuts off instantly, which means a cooler house.” Since gas came to B. C. sales of electric stoves have fallen off twenty percent, while sales of gas stoves have risen sixty percent.

All gas appliances — refrigerators, clothes driers, incinerators, water heat-

ers—are money-saving in either their cost or upkeep or both. Gas water heaters. moreover, are selling well on the basis of speed. Consumers’ Gas in Toronto boosted their installations last year from 4,000 to 30.000.

In the U. S., General Electric sells a gas-powered heat pump, and sales have doubled every year for the past seven years. Half a dozen companies, including Coleman Lamp in Canada, are testing gas-powered air conditioners.

But gas. paradoxically, may step up the use of electricity. “Gas brings new

industry,” says Frank McMahon, a prominent Calgary oil and gas man, "and then electricity is needed for motors, lifts and lights in the plants, and in the homes of new workers coming to the area.” A few electric-appliance makers seem slated to lose business, but in the long run no one seems likely to lose from this competition. “We need every scrap of energy we can get.” says Premier Frost of Ontario.

Our trade deficit with the U. S. last year was a worrisome 1.6 billion dollars. By cutting our imports of coal, oil. sulphur and propane, A. P. Craig of Trans-

Canada thinks the pipeline will shave that figure by one hundred million dollars. In time, we’ll cut it still more by exporting gas, for we’re finding it now ten times as fast as Trans-Canada can sell it. By 1980. the Gordon Commission estimates, we may be exporting a billion dollars of oil and gas a year.

New capital, new' factories, new products. new people—this is the promise of the pipeline. Canada is growing fast. In gas we are tapping a hoard of new and versatile energy to power our continued expansion.