Articles

It’s a Great Day for Alberta

Albertans are tapping a rich new frontier right under their feet. Some experts say the province will be Canada’s Texas

BLAIR FRASER November 15 1948
Articles

It’s a Great Day for Alberta

Albertans are tapping a rich new frontier right under their feet. Some experts say the province will be Canada’s Texas

BLAIR FRASER November 15 1948

It’s a Great Day for Alberta

Articles

BLAIR FRASER

Maclean’s Ottawa Editor

Albertans are tapping a rich new frontier right under their feet. Some experts say the province will be Canada’s Texas

THE twenty-five or thirty housen of Redwater, Alta., straggle off a main street just one block long. You can get a train out of Redwater once a day to Edmonton, 37 miles to the southwest, but you can’t buy a ticket the station is just a three-sided shanty beside the two small grain elevators. No station master.

For amusement, there’s the poolroom and the beer parlor. A few months ago, Imjierial Oil brought in a safety film to show to the crew of its one drilling rig. When the men came into town at eight o’clock, they found the community hall already packed to the floors word had spread that there was to be a movie show, something that hadn’t happened in Redwater since it was settled about 1908.

“Nothing ever happens here,” a young schoolteacher said. “There’s just nothing to do, winter or summer.”

But something did happen in Redwater last summer. Imperial’s prospectors struck oil—a field that looks like the biggest in Canada.

It’s too soon to be sure about Redwater; only one well has been drilled so far. But that one well showed an oil-producing zone four times as thick as at Leduc, which was the major oil discovery of 1947. Sober oilmen think the field may be as big as several Leducs. If so, its rolling brown prairie covers at least a billion dollars worth of highq ua 1 i ty pe trole u m.

And so today there’s a new excitement in Redwater. Nobody’s exactly

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sure what to hope for—the concrete plans are extremely modest. Maybe they’ll have a bank, or even two banks; maybe they’ll have a movie theatre; a citizens' committee is hoping to build a curling rink. All they know is that things are beginning to happen—the town has a future.

Redwater’s story is the story of Alberta.

Two years ago Alberta, despite her agricultural wealth, seemed to he a “have - not” province, chronically broke. Its non-farm resources were more impressive on paper than in fact —huge reserves of coal, with no readily accessible market for it; Canada’s largest oil field in Turner Valley, but producing less than half of even prairie requirements and declining each year.

Then in February, 1947, oil was found at Leduc, near Edmonton on the central Alberta plain. It was a major discovery; even before the Redwater strike came along to prove it, oilmen knew they’d found one of the great producing regions of North America. Alberta’s future changed overnight.

Already it’s likely that Alberta will he supplying the oil needs of Western Canada by the end of 1949. In 1950, export to the American Middle West should begin; eventually, Alberta may well make Canada self-sufficient in petroleum, producing not only the 19 million barrels that the Prairies require but the whole 98 million barrels that all Canada uses each year.

In Calgary, weeks before the Redwater well had even been started, 1 talked to an American engineer, a quiet man in his middle 50’s who had seen all the major oil fields of this continent and who is not given to overstatement.

“Alberta stands today,” he said, “right where Texas stood 25 years ago —on the brink of the greatest industrial development the country’s ever seen.”

The Third Oil Boom

Albertans themselves have hardly realized it yet. Even those who struck it rich are still living at the old tempo.

1 called on a farmer at Leduc who had leased his mineral rights for $200,000 cash and 12 royalty on production. His income for this year may run as high as $300,000. When I knocked at the back door, he was just coming out toward the barn with a bucket in his hand.

“Come in,” he said. We went into a plain farmhouse, clean and comfortable but with no more of luxury than any other Alberta farmhouse. His wife was washing the dinner dishes and the week’s ironing was piled on the kitchen table—they had no help, indoors or out.

“Don’t think 1 ever worked as hard as I did this summer,” the rich man said. “I couldn’t get any help at all, had to run the farm alone.”

I asked if he intended to keep on farming, now that he was rich. “Why not?” he said. “I’m too young to retire —I’m not 40 yet. A man can’t play all the time. Got to work at something and this is the work I like best.”

Sitting on top of billions of cubic feet of natural gas, he was still carrying wood for the kitchen stove—he’d bought a gas stove for his wife but hadn’t got around to connecting it yet. He drove the car he’d had for five or six years, sat on the same chairs and wore the same clothes.

In Edmonton a department-store manager said, “It’s like pouring money

into the ground, to pay these fortuna to our Ukrainian farmers. They worn spend it. They won’t even put it m the bank, for fear the income-tail people might catch up with them They just put it under the mattress, same as grandpa used to do.”

But it isn’t only the newly riel farmer. Even in the cities you don’t see much evidence of the “boom’ mentality. Retail sales are down a littfe from last year and consumer resistan« to high prices is stiff. There’s no great market for luxury goods. Stockbrokers are busy but not swamped. Maybe it's because Alberta, twice bitten, is three times shy.

Alberta has seen oil booms before. In May, 1914, when Turner Valley’s discovery well blew in, Calgary went crazy. Ordinary business stopped altogether. Every vacant store became a brokerage house, everybody with a dollar in his pocket became an “investor” in oil. Some of the “brokers” were so busy they used big wire wastebaskets for cash registers.

Three months later the boom ended —thousands lost their shirts. The o2 was there all right, but the discoveren hadn’t money enough or skill enough to develop it. Anyway, investors were scared by the war in Europe and by the greath depth of the Turner Valley wells. A well 3,000 feet deep seemed beyond all reason (today they bring up oil from two miles below ground).

In 1924, when the great Royalite No. 4 blew in with 700 barrels of naphtha and 21 million cubic feet of gas a day, the Turner Valley boom started again. It wasn’t so wild this time, lasted longer, left some really valuable work behind, but it crashed with everything else in 1929. More shirts were lost.

This time the boom is at once bigger and quieter than any of its predecessors.

Money is being spent in huge amounts. A dozen major oil companies and a brood of little ones are drilling and exploring all over Alberta. This year they are spending $50 millions, compared to only $12 millions in 1946; in 1949 they may spend $75 millions or even $100 millions, much of it American capital.

.But these great sums are being pumped into Alberta’s economy systematically, with little or no dislocation. Edmonton today is humming With prosperity—hundreds more jobs than there are people to take them, the usual Canadian shortage of houses, though 1,500 are being built this year. Reservations in the Macdonald Hotel are booked solidly for a month in advance; it’s been that way ever since the war and it’ll stay that way until another hotel is built. Plans for a new $7 ^-million hotel have been announced but so far work hasn’t even begun.

Except for the housing shortage, which is perhaps a little tighter than elsewhere in Canada, Alberta on the surface looks the same as any other province. It’s busy, but we all are; it’s well-to-do, but not flush. To get the real significance of Alberta’s third and greatest oil boom you have to look to the future.

Alb.erta now provides only seven per cent of Canadian oil requirements —last year we bought $206 millions worth of petroleum and its products, all in American dollars, from either the U. S. or South America. Even such a cautious prophet as H. H. Hewetson, president of Imperial Oil, believes that within a few years Alberta will

produce all the oil Canada needs. It may not all be1 used in Canada— perhaps it will still pay to ship oil from Venezuela or Texas to the eastern provinces while Alberta’s oil serves the American Middle West. But in terms of American dollars, it makes no difference; our net gain is the same. Oil alone may solve our American dollar problem.

That’s for Canada. What about Alberta?

For individuals on the land it’ll be no Klondike. Only on the farms settled before 1905 do the farmers own their mineral rights. In most of Alberta’s oilrich acres the minerals are either owned by the CPR or Hudson’s Bay Company (which reserved mineral rights when they sold land to settlers); or, even more frequently, they remain Crown property.

A Treasury Bonanza

That’s why Alberta has, and will have, few mushroom millionaires. I’ve spoken of one Leduc farmer who got $200.000 for his lease; he was one of t he lucky ones. Right across the road, his brother has a farm which, three or four years ago, would have brought just as much money at auction. But the brother didn’t own mineral rights; all he gets from the Leduc boom is a modest rental for the few acres of his land actually occupied by drilling rigs.

The greatest beneficiary from Alberta oil production will be the Alberta Government itself. And Alberta drives an increasingly hard bargain.

No discoverer can get a monopoly on the oil wealth he finds, for one thing. He’s entitled to lease nine square miles around his discovery well; the land farther out is broken up into checkerboard lots of which the discoverer may lease half, but no two adjoining. The rest of the lots are put up for auction and leased to the highest bidder among competing firms. Around Leduc, the last six quarter sections put up for auction brought $366,000 in direct revenue to the Government, an average of $61.000 each.

At Redwater no leases at all have been taken yet, but the oil companies reserved a million acres for exploration within a fortnight of Imperial’s discovery.

When the lease is taken, the Government still collects a royalty on every barrel of oil produced. At the moment the royalty is 12or one eighth. Oil companies are glumly certain that by 1951, at the latest, the royalty will go up to 169r, one sixth.

Hon. N. E. Tanner, Alberta’s young and able Minister of Lands and Mines, tells them quite frankly, “We’re closing in on you and the more oil you find the tighter we’ll close in. A man doesn’t mind paying a high fishing license fee when he knows the fish are there.”

This new wealth makes a sensational difference to Alberta’s budget. Four years ago the revenue from fees, royalties, rentals, etc., for petroleum and natural gas totaled $650,000. This year it was set down in the estimates at $U j millions—a figure that was exceeded in the first five months of the fiscal year. Actual revenue to the province, by next March 31, will probably come to about $4 millions.

And this itself is only a beginning, a ! fraction of what may be expected. The 1949 revenue may be double this year’s and so on up—Alberta’s oil resources are barely tapped today.

What this may mean to Alberta is considerable.

’Lake roads, for one example. Alberta now vies with Saskatchewan for the distinction of having the worst roads between Mexico and the Yukon. Only 650 of its 80,000 miles of road are

paved. The others are at liest a thin and dusty gravel, at worst a gumbo clay in which, when it rains, a car may sink hub-deep or slide into the great yawning ditch.

The reason is simple poverty— Alberta had only three people per square mile, compared to Ontario’s 10. But this year, oil alone will earn half of what Alberta is spending in capital outlays on highways. Within a decade oil could buy Alberta as fine a set of roads as any in Canada.

They Don’t Stoke in St. Paul

Besides, t here will he other sources of wealth. Oil is bringing people out to Alberta, people with money to invest, and they are seeing with amazement the really fabulous quality of the place.

Take the town of St. Paul, population 1,018, lying about 125 miles out along the rough gravel-and-gumbo highway that runs northeast from Edmonton. St. Paul has no inside plumbing and it lacks a number of other amenities, but it has one great advantage—nobody in St. Paul need split wood or shovel coal.

In a field just outside town you see two pieces of pipe sticking out of the ground. These are St. Paul’s fuel supply. A few years ago the citizens formed a little syndicate, which included practically everybody in town; they raised $20,000, drilled a couple of shallow wells and found enough natural gas to fuel St. Paul for two or three generations.

A few more miles down the North Saskatchewan River is Lindbergh, a little hamlet even smaller and poorer than Redwater. Lindbergh happens to have been built on top of the finest salt bed in Canada.

Last year, some engineers from Eastern Canada joined Alberta industrialists in building a million-dollar salt plant at Lindbergh. Haifa mile away, they drilled a shallow hole and found plenty of natural gas—fuel for the plant, fuel for the new town that’s already staked out and beginning to be built, and raw material for the chemical industry which will be Lindbergh’s next development.

Alberta, like Texas, has everything a chemical industry needs. It has plenty of undeveloped hydroelectric power. According to a Royal Commission report, it has six billion tons of minable coal and nobody knows how much natural gas. That’s raw material for a whole web of chemical products— plastics, nylon, antifreeze, fertilizer and half a dozen chemicals that are raw materials for other industries.

So far, only one chemical plant is using this opportunity; that’s a warcreated project just outside Calgary owned by Consolidated Smelters.

Early in the war the Allies were very short of ammonium nitrate for explosives. At the urgent request of the British and American Governments. Canada built a plant at Calgary to make this precious material out of Alberta’s natural gas. Just as they got into production, the explosive RDX was developed — ammonium nitrate wasn’t needed any more. But there was a desperate shortage of chemical fertilizer.

Ammonium nitrate had never been any good as a fertilizer; the stuff caked in the bags and couldn’t be spread on the fields. Canadian chemists discovered a way to treat it that prevented it from caking. The obsolete explosives plant became a brand-new export business that is now producing 250 tons of fertilizer a day, employing 365 people and using more electric power and water than the whole city of Calgary.

For chemical fertilizer there’s a world market—they could sell twice as

much, if they could make it. For other chemical industries in Alberta, markets have been the big problem. But industrial development is a snowballing process; one industry creates a market for another.

Next spring, work will commence on a pulp-and-paper mill being built in Calgary by a group headed by R. 0. Sweezey of Montreal. Initial investment will be $15 millions for a plant producing 230 tons of newsprint a day, plus a 65-ton surplus of pulp. Later, other units of the same size will be added. Calgary will make enough newsprint to supply not only the western Canadian market but American publishers as far east as Chicago and as far south as Texas. Incidentally, the Calgary pulp mill will provide a market for the caustic soda which would be a major product at the Lindbergh chemical plant. So the industrial snowball rolls.

Already, Edmonton’s population has increased 40% since the 1941 census, up from 93,000 to 120,000. Premier Ernest Manning, who is not usually overoptimistic, thinks that within five years the present population of Edmonton will have doubled and that of all Alberta greatly increased.

Meanwhile, however, Alberta is facing a fundamental decision: How,

where and by whom are these great resources to be developed?

About oil there isn’t much dispute. It will certainly be exported, first to other western provinces and then to the United States. Imperial Oil is ready to start building a pipe line, certainly to Regina and possibly to Winnipeg, which may cost as much as $50 millions. East of Winnipeg, however, the pipe line will not go—it has been decided that to run Alberta crude oil all the way to the Lakehead would

be uneconomic. Instead, pipe lines will run south from Regina and/or Winnipeg to serve the American Middle West; American and South American oil will still be brought into Eastern Canada.

That’s the oil picture. For natural gas the outlook is much more uncertain.

Up to now, the province has permitted no export of natural gas. Albertans wanted to be sure, they said, that there would be enough for themselves. Also, they wanted if possible to take advantage of the clean, cheap fuel.

But industries have not come in sufficient numbers. There are great new gas fields, like the 900 billion cubic feet that Shell Oil Company found at Jumping Pound, in the foothills, northwest of Calgary, which are lying idle for lack of a market. New supplies are being discovered every year— Alberta can no longer pretend that there might not be enough for the home folks.

Freight-Rate Problem

Last summer, Dr. George Hume and A. Ignatieff of the federal Department of Mines and Resources completed a survey they’d made at the Alberta Government’s request. They reported “proven and probable” gas reserves to be 3 Yi trillion cubic feet, enough for 90 years at the present rate of use. No one knows the extent, of the “potential” reserves in the enormous areas never fully explored but where gas is known to exist.

This winter the Alberta Government is appointing a committee of its own to determine the “present and probable needs” of Alberta and to report on the basic economics of the question: What should be done with natural gas, any-

way? Should it be used as fuel only? j Should it be converted, say, into synthetic gasoline? Should it be sold abroad or used at home?

The committee will probably report before the end of the next Legislature session. It’s generally expected to recommend export, with certain conditions and restrictions—perhaps allowing export of gas for fuel but not for use as an industrial raw material.

If export of natural gas is permitted, two companies are ready to start work on pipe lines. One would tap the fields in the southern part of the province, pipe the gas through the State of Washington to Vancouver, serving Seattle and Portland, Ore., en route. The other would run a pipe line from the Edmonton district through Saskatoon and Regina to Winnipeg.

This would be of enormous benefit to the West. Natural gas is the cheapest fuel in the world. Coal, to compete with it in Alberta would have to sell to industrial users at $2 a ton, retail to home owners for $4.

It might deprive Alberta of a few industries—plants might locate in Winnipeg that otherwise would have gone to Edmonton or Calgary. But these losses are purely hypothetical; the gains will he concrete. Alberta will collect millions, in returns to private industry and in royalties to the Government, from the sale of natural gas t hat would otherwise be useless for at least a generation to come.

So far we’ve been talking only of Alberta’s advantages. What about the drawbacks? Why, if Alberta is such a paradise of industrial opportunity, haven’t some of these things been developed long ago?

You can wrap up the answer in one word: “Markets.”

Alberta suffers more from freight rates than any ot her part of Canada. She’s cut oil’ from the West Coast by the notorious “mountain differential”

the extra charge made by the railways for crossing t he mountains. Eastward, she faces the most expensive' haul in Canada. For shipments going all the way across the continent from the West Coast, freight charges are kept down by the competition of water carriage through the Panama Canal. On shipments originating in Alberta, the railways have a monopoly. Result: It

costs less to send a car of freight from Montreal to Vancouver than from Montreal to Edmonton or Calgary, j

Alberta as a Market

Albertans, therefore, have to pay more for what they buy and take less for what they sell than anybody else in Canada. Industry in Alberta must have a heavy advantage in other costs before it can get, over the transport obstacle, so far as trade within Canada is concerned.

Southward, the exports of Alberta face another obstacle—the American tariff wall.

Americans are hungry for Alberta’s raw material. They want her oil. her natural gas, a certain amount of her j coal. But they don’t want the finished j product that could be made from these ¡ things.

Lately, though, there have been signs j that this tariff wall might be breached, at least at some points. The Geneva Treaties cut many an American tariff j in half and quiet informal discussions ¡ have been going on ever since in the hope of still further reductions. if ! these reductions are obtained, even in a few limited fields, Alberta would have a market—the rich Pacific northwest of the United States.

Meanwhile, more and more businessmen are working out: sums on the back of old envelopes and wondering if

Alberta’s natural advantages don’t outweigh the freight-rate difficulty anyway. Freight rates are a crippling levy on bulk commodities, like coal or lumber. But the more valuable the cargo, the less important freight charges become and the produce of an Alberta chemical industry could be very valuable indeed.

Besides, the local market in Alberta is growing every year and will continue to grow.

Oil companies, drilling the plains around Edmonton, are still using imported drilling tools, producing equipment, and casing. Already there’s market enough to justify making a good many of these things right on the spot.

Alberta’s oil resources are practically untapped. The real significance of the Leduc discovery was not the size of that one field, considerable though it is. It was the revelation that oil could be recovered from the Alberta plains. Once Leduc had been found, there was every reason to expect an unknown number of Leducs scattered along the great plain between Edmonton and Norman Wells. Already the Redwater strike (50 miles northeast of Leduc) has shown this is no idle daydream.

Search for those undiscovered oil fields will be spurred by more than the mere hope of profit. There is a security angle to the Alberta oil development

it could be vital to North American defense.

At the moment this continent is no longer self-sufficient in oil. Not only Canada but the United States as well is a net importer of petroleum. Those supplies are brought in by sea; in many cases they are brought from countries which are politically explosive, countries that might become enemy territory or he cut off in the event of another war.

A fid in those terms. Alberta’s resources become even larger. If the day should come when we can no longer get enough crude oil for our needs, if we should have to resort as Germany did to synthetic gasoline, Alberta has everything.

German gasoline was made from coal and Alberta has six billion tons of that. Natural gas is an easier source for gasoline and Al Vierta has plenty. But most important of all, Alberta has the tar sands of Fort McMurray.

These great deposits of bituminous sand, lying along the Athabaska River in the northern part of the province, extend over 50.000 square miles. The United States Bureau of Mines has estimated t hat oil in the Alberta sands exceeds the entire proved reserves of the rest of the world.

With oil and gas at present prices, it’s too costly to develop this huge reserve. But if war should create an oil shortage, and price cease to matter,

&lt hen the Athabaska sand would become a precious reservoir.

“If it was worth while to spend millions on Canol,” one Alberta Minister remarked, “it’ll certainly lie worth while to spend a little on McMurray.’’

These are the things that conspire in Alberta’s favor. The province is still agricultural and will remain so

farm production this year will have a total value of about half a billion dollars; industrial production won’t he more than half that. Nor will farming lag because industry increases; the larger home market will mean more irrigated acres, more varied production, less dependence on t he uncertain export market.

But industry is the new thing, the main thing. In 10 years, perhaps in five years. Alberta may well be one of the major industrial provinces of Canada. ★