GENERAL ARTICLES

Quest for Crude

Twenty-five wells are currently drilling in the Turner Valley oil field — Will they locate a major crude oil pool?

WILFRID SANDERS July 15 1937
GENERAL ARTICLES

Quest for Crude

Twenty-five wells are currently drilling in the Turner Valley oil field — Will they locate a major crude oil pool?

WILFRID SANDERS July 15 1937

Candid camera photos by W. J. Oliver.

Quest for Crude

GENERAL ARTICLES

Twenty-five wells are currently drilling in the Turner Valley oil field — Will they locate a major crude oil pool?

WILFRID SANDERS

THERE WAS once a newspaperman who was sent to Calgary to report on conditions. He started his first article: “Calgary is optimistic ...”

His city editor read no further, but wired back: ‘Now go to Niagara Falls and tell us that it is still running.” At the risk of incurring similar sarcasm, I beg to report that Calgary is optimistic.

Calgary, both geographically and economically, lives eternally on the border of big things.

This time it’s oil.

“But,” the Easterner will remark, “the oil boom is over, for the time being at least. Look at the market.”

Calgary—and the West generally—has been so busylooking for oil, however, that it has had little time to look at the stock market. That is why the boom is not over as far as the West is concerned. That is why not one well has stopped drilling because of the decline in market values of stock. That is why there is a definite shortage of skilled drillers.

In Turner Valley alone, more than twenty-five wells are being drilled for oil, with many more planned. It is true that the slump in the market has left a few companies unfinanced. These orphans, however, were in the main hastily organized concerns, more anxious to sell stock than they were to find oil. Most of the big substantial operators were able to find sufficient capital during the early part of this year to. finance their wells.

Where and what is this Turner Valley? Canadians should

know, because in this little morsel of Canada, an area only about 7}£ square miles, an intensely dramatic chapter of Canadian history has been, and is being, written. Here, for more than twenty-five years a small group of Canadians has struggled against sickening obstacles, failures and ignorance in an attempt to realize a dream—the discovery of crude oil. For all these years, the key to success has been hidden deep under the benign and smiling contours of the foothills country. From time to time, tantalizing glimpses of what might be have been afforded the band of oil seekers, reviving their faith, bolstering their optimism.

In the jargon of a recent Broadway success, every good drama should run along the following lines: “Boy meets goil; boy wants goil; boy gets goil.”

Drop the “g” and you have the story of Turner Valley in skeleton form, and it is good drama.

The setting is a peaceful valley some forty miles southwest of Calgary. Gradually the low swelling hills which mark the valley rise westward until they become the sharp peaks of the Rocky Mountains, thirty miles away. From north to south along this valley, for some four miles, rise more than a hundred derricks, looking for all the world like some Lilliputian imitation of the distant mountain range.

Today, from numerous pipes large and small, are the burning flares of waste gas—popular havens of warmth for cattle and hoboes in the chill winter months.

In this valley, “boy met goil” as long ago as 1911, when a rancher noticed a seepage of gas from a crack in the bank of a creek. Reading the sign aright, a former Calgary mayor, J. W. Mitchell, sought to develop the property in the name of the City of Calgary, but was balked by legal technicalities. Nevertheless, the seed had been sown, and since that time the search for oil has continued with admirable faithfulness but with varying degrees of intensity.

Previous Oil Booms

r"PHREE TIMES has Calgary experienced a major oil boom. The first and wildest was in 1914. In May of that year, the late A. W. Dingman struck a small flow of light crude oil at 3,839 feet. Before the sun set over the mountains that day. Calgary was in the throes of its first oil boom. Ordinary business virtually stopped, as stores on all streets and hucksters on every corner started trading hastily-printed certificates for good coin of the realm. So great was the rush to make this exchange that these vendors, on some days, had no time to count their takings, and

would sweep the money into wastepaper baskets, to be counted after the day's business was at an end. Calgaryfound herself swamped with speculators as her usually level-headed citizens rushed to buy stock in any and evencompany. Streets were plastered with advertisements of stock.

It took a Great War to put an end to this, Canada’s first real oil boom. When Great Britain declared war on Germanyin August, the mad rush ended. Lacking knowledge of the geological structure of the valley, tangible results of this first activity were meagre, and by 1920 the onlymonument to this activity was nine wells scattered over an area three miles long and one mile wide, each producing a high proportion of gas and a minimum amount of light crude oil.

Ten years after the first rush, and after the well-financed and experienced Imperial Oil Co. had entered the field, this company’s subsidiary. Royalite Oil Co., set off a spark which ignited the second major boom, by bringing in the famed Royalite No. 4 well with a good flow of gas and high quality naphtha.

Again the rush was on. Again the people of Canada and beyond plunged their savings into misguided promotions. Again came the slow anticlimax of failure and the realization that the much-sought crude pool, believed to underlie the structure, had not yet been found.

Still the faithful kept up the search. The activity had not been a complete failure, because of the naphtha pro-

duction and the piping of the gas to Calgary and Edmonton for commercial and domestic use.

Still the search for crude continued.

Then with startling suddenness at 5.15 p.m. on June 16, 1936, with a roar and a rush, the Turner Valley Royalties well, which had been sunk to 6,396 feet, burst forth with a comparatively spectacular flow of 700 barrels of good quality crude oil daily.

This started the third Alberta oil boom—a much saner, more mature kind of boom, but a boom nevertheless. Profiting from the experience of the past, the result of this oil strike was a more studied approach. So sane was this approach that even the slump in the market which set in early this year failed to stop the activity.

The Present Boom

'“PHIS THIRD oil boom has not been without its color.

Buying of oil stocks was eager and widespread all over Canada, in United States and England. Some students in Western universities were able to finance themselves through college as a result of fortunate purchases of oil stocks. Easterners became oil conscious for the first time in twelve years, with the result that a dozen Western oil stocks were listed on exchanges in Toronto and Montreal. In these cities, brokers, caught practically unaware, were willing to offer almost any sort of salary to anyone who knew anything about the oil industry. Provincial Governments across Canada hastily studied the situation and passed new regulations to cope with the sudden flood of promotions.

As was inevitable, success since last June has been mixed with defeat. The disappointing results obtained by about half of the wells drilled dampened public ardor, and the market prices of oil stocks fell.

But in the West the boom is still on. If you live in the East and find this difficult to believe, a visit to Canada’s newest townlets, known as Little Chicago and Little New York, would convince you otherwise.

To the uninitiated, the scene does not give the impression of a boom. Everyone goes about his business quietly, and the only noise one hears is the gentle chugging of the steam engines used to drive the drills to the limestone 6,000 to 8,000 feet below the surface. The heat to generate the steam is of course obtained from the natural gas. Through the valley winds a gravel road, on which passes an occasional car. In front of the shacks, children play happily in

their prairie yards, or in the deep dust beside the road. \\ andering peacefully wherever they wish, are the cattle, completely unperturbed by the change which has come over their pasture lands.

But this is, nevertheless, a Turner Valley boom, as the score of new derricks can testify.

1 he four or five towns which lie scattered over the valley are in reality mere huddles of board shacks and cottages, housing in all probably a couple of hundred drillers, their wives and offspring. But they, together with the score of new derricks, comprise the outward and visible sign of an intensive search for oil.

1 hough this boom is less spectacular than former ones, optimism rides high in the areas. There is, for instance, the man with whom the writer was discussing the problem of marketing the oil.

“There is no reason.” said this man, “why pipe lines cannot be constructed to the Pacific seaboard and to the head of the Great Lakes. We even have plans to pipe our oil to the industrial centres of Eastern United States.” “How about the competition of Mid-Continent oil?” the writer asked.

“These areas could conceivably take all the oil we could pipe there.”

“Did you ever consider the possibility of erecting a pipe line straight up to serve the trans-Canada airplanes?” asked the writer rather rudely.

The oil man was by no means baffled by this attempt at sarcasm.

“You know,” he replied, with a dreamy, faraway look, “that’s an idea that hadn’t occurred to us.”

Such a man is not, of course, typical of the 1937 type of oil operator, and is only quoted to show to what lengths the subtle optimism which seems to seep from the very prairies with the gas, can carry one.

In the main, your Western oil man is a hard-headed businessman who knows the hazards of oil drilling and the problems which would face any large-scale production. He does, however, believe that after years of trial and error, Western oil development has reached the stage where its significance to Canadians can be evaluated.

Let’s see if we can make such an evaluation, and find the real significance of this drama to Canada.

Effect on Employment

TT IS OBVIOUS that if Western oil developments have any significance at all, they will affect directly three main groups of Canadians—the men and women actually employed in the oil business, the consuming public, and the investing public.

The actual work of drilling a well employs between nine and eighteen men. If the old-fashioned “standard rig” is used only nine men need be employed, but the trip-hammer method used in this process is much slower than the modern “rotary rig” which usually employs eighteen men and bores through the rock with a rotary action. Once a well gets into production, it requires a crew of three or four men to handle the oil flow. The drilling crew is then free to find employment in drilling another well. It takes between four and six months under normal conditions to reach the producing strata.

Thus drilling for oil does not absorb much labor when compared with its sister industry, mining, where much larger crews are employed for longer periods. That is why there has been no influx of labor into Alberta as a result of the oil boom. This fact has its advantages, of course, if an oil boom should suddenly collapse.

Oil drilling is a skilled trade. It takes usually about three years to become an expert oil driller, or tool dresser. Once mastered, however, the art is well paid, and a job is fairly well assured. An oil driller in Turner Valley is paid about $10 per day, while his helper usually gets around $6.

The life of an oil driller is a nomadic one. About half the men employed in Western Canadian oil fields, the writer was told, are from the United States, and obtained their early training in the oil fields of Texas, Oklahoma, and other oil-producing states. In this sense they know no country, the boundaries of their affiliations being limited only to the boundaries of the producing oil zone.

Of such is the citizenry of Little Chicago, Little New York, Turner Valley, Black Diamond, and Okotoks—all settlements, new and old, in Turner Valley.

In the processing, refining and distributing of bil and gas products, there is, of course, a field of steady employment for many thousand Canadians, but the fact must be admitted that the actual search for crude oil is an unimportant factor in relation to the employment problem.

The Potential Market

WII AT ABOUT the consumer? Has T urner Valley any real significance to the Canadian public, which today imports some 30,000,000 barrels of crude oil every year, for which it pays some $50,000,000 to $60,000,000 annually?

Today, Alberta is producing about 5.000 barrels of crude oil and crude naphtha daily. The market which under present conditions can take this production has a daily

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consumption of approximately 10,000 barrels daily. Already, then, Turner Valley’s present market, which includes the Western provinces with the exception of British Columbia, has its needs half filled. In other words, there is not much scope for a large-scale oil industry in the West unless the market is broadened.

That this market can be broadened under proper circumstances is unquestionable. In the first place, greater production would tend to Vow er prices, and would logically be expected to result in greater demand.

In the second place, the Alberta oil fields are no more remote from the consuming centres of the East than the Texas field is from the United States manufacturing centres.

The idea of a pipe line to the Pacific Coast and to the Head of the Lakes is no mere “pipe dream’’ if—and it is an important “if”—Alberta can show that she has sufficiently large oil reserves to allow amortization of the tremendous cost involved.

At the present time it must be admitted that neither Turner Valley nor the other Alberta fields have proved these reserves. But there is excellent geological opinion for the belief that they have a chance of doing so. J. Grant Spratt and Vernon Taylor, experts of the Petroleum and Natural Gas division of the Alberta Government, have attempted an estimate of Turner Valley’s capacity. After expressing due scientific caution, these authorities, by relating the rock pressure to the volume of gas in known gas areas, estimated a potential oil reserve in the valley of about 50,000 barrels per acre. Since there are, in the gas area, some 10,000 acres, this would give a reserve of 500,000,000 barrels. However, as the product is removed, the pressure declines and the flow of oil drops off. Geologists, some of whom consider the Spratt-Taylor estimate conservative, believe that about twenty-five per cent, or 125,000,000 barrels, is recoverable.

While admittedly largely a matter of geological guesswork, this estimate is as close an approximation to the probable oil content of this field as can be made at the present time.

If this estimate can be placed on a firm, businesslike footing, the estimated fifty or 100 million dollars necessary to build a

pipe line might become a profitable venture, but certainly not before.

The significance of the Turner Valley oil field to the Canadian consumer generally is at the present time, then, potential only.

We can omit under the heading of consumer significance, the potential importance of this field to the British Empire generally. A large source of oil would of course be a boon to the navy-minded British peoples, but its realization is too “long-term” to be included in a 1937 estimate.

Curbing the Wildcatters

NOR DOES the significance of Turner Valley to the investor properly come within the scope of an article such as this. As in other forms of market endeavor, oilshare fans can be divided into investor, speculator and gambler, with the usual definitions of these three types applicable. The investor is the man who buys oil stock fully aware of the geological and economic hazards involved, but who feels, with justification, that the oil industry is a legitimate one and worth intelligent support. The speculator is one who backs a certain stock to rise or fall in market price, and who counts on this movement for his profit. Under the term gambler, I would include the broker who told a group during last summer’s market activity: “I made quite a bit of money yesterday. I bought stock in Margal and sold it at a nice profit, before I learned it was an oil company and not a gold mine.”

Of such are market booms made. If this man had lost money instead of making it in this particular stock, he would have used the incident to illustrate his complaint that the oil market is “just a gamble,” as it most certainly is if approached in this spirit.

At the present time, between $35.000,000 and $45,000,000 is invested in Turner Valley, according to the estimate of a Government official. Of this amount, nearly half would be represented by the huge investment of Imperial Oil Co. through its subsidiary, Royalite Oil Co. Of the remainder, it is estimated that seventy-five per cent represents Western capital. Present plans call for an investment of $6,000,000 more.

Investment in Canadian oil stocks is in a comparatively young stage, and subject to all the faults of youth. It has, however, in previous booms, passed through the hooligan stage, and learned its lessons well. Following the market activity of last winter and spring, steps are being taken by the Securities Officials of the Alberta Government to regulate the sale of oil stocks, and to keep it in line with other forms of market activities. One of the most important of these new regulations requires that a company have at least $130,000, the average cost of drilling a well, in the treasury before drilling starts.

This, of course, is aimed at eliminating the wildcat company which is less interested in the production of oil than it is in the collection of money from the public.

In this connection, and whatever one’s views are concerning Alberta’s present government, it is generally conceded that the Aberhart Government has been sympathetic to the oil industry; largely because the men who have had supervision of the oil industry have either been practical oil men, or men who appreciate the potential importance of this industry. Fears expressed during the early days of the Social Credit Government, to the effect that the industry was to be “nationalized,” have proved groundless. No matter what form of government is elected in Alberta, it is unlikely that, with the experience this province has had during twenty-six years of oil activity, it will do anything to retard development.

What of the immediate future? Things, when they move, move rapidly in an oil field, and it is quite probable that before this article appears in print such wells as Monarch Royalties and Richland No. 3 may have proved or disproved their oilproducing abilities. If they are successful, the Westerner’s view that the oil boom is by no means over will probably prove correct. If they are not successful, Alberta and Turner Valley have still many acres of rolling prairie to the north, west and south which remain untested, and which are considered, geologically, likely fields for development.

To date, then, Turner Valley has realized its ambition to the extent of proving a crude oil-bëaring zone of some three or four miles in extent. It has yet to prove its worthiness in the form of large, reserves.

In the meantime, please note, Alberta remains optimistic.