BACKSTAGE

THE ARCTIC’S OIL RICHES: Have stock sharks caught The Vision?

BLAIR FRASER May 23 1959
BACKSTAGE

THE ARCTIC’S OIL RICHES: Have stock sharks caught The Vision?

BLAIR FRASER May 23 1959

THE ARCTIC’S OIL RICHES: Have stock sharks caught The Vision?

BACKSTAGE

AT OTTAWA

BLAIR FRASER

SOME WESTERN MPs are worried by recent debates on northern development, the “Diefenbaker Vision” of the 1958 campaign. They fear one effect of the current revival, unintended by either party, may be to promote the sale of worthless stock in fly-by-night oil companies.

Each party in its own way exaggerates the known worth of oil and minerals in the far north. Both talk as if resources were proven which are merely sought and hoped for. Both talk as if oil companies had sunk vast sums in development, when in fact no company has spent more than a modest cash deposit for exploration rights. In most cases this deposit has not yet gone above five cents an acre, enough to hold exploration rights for the first eighteen months. If the company does explore, as some arc doing, it gets back as much of its money as it actually spends on exploration. If it does nothing at all. it Still retains exploration rights for a year and a half, with no other penalty than that it doesn’t get its nickels back.

For five thousand dollars a shyster promoter could get the rights on a hundred thousand acres for eighteen months, and extend them another eighteen months for only a few thousand dollars more. How many thousands worth of stock he could sell, on the strength of this “property,” would depend on his powers of salesmanship— but he would certainly find it easier if the government and the opposition go on outdoing each other in the values they put on Canada’s northern treasures.

This is no mere bogey. More than a hundred applicants, companies and individuals, have put in for exploration permits in the far north. Two-thirds of these applicants are unlisted in the latest Canadian Oil and Gas Directory, a Calgary publication that seldom omits any reputable oil man or oil company. No doubt some are bona-fide newcomers, but it’s a fair assumption from past experience that a good many are stock shysters.

These have cause to rejoice at the political combat that began two months ago with a broadcast by the prime minister. He said:

"It was because I knew Canadians felt so strongly about the necessity of preserving Canada’s destiny that I have advocated, and the government has launched, its national development policy to push back our northern frontiers. The result of our action has been that in the past several weeks over seventyfive million acres in northern Canada have been taken up for oil and mineral

development. And I want to underline that this is a major means to preserve our sovereignty.”

In parliament a Liberal MP asked how many acres had gone to U. S., Canadian and other oil companies. By coincidence it happened that on the very day of the prime minister's speech, exploration permits were auctioned off for a large block of three million acres near the proven oil and gas fields of northern B. C. The answer, which came down a few weeks later, referred only to this one sale.

It showed that in this one case, American-owned companies had got ninety-three percent of the acreage and Canadian only four percent (the rest went to British firms).

L B. Pearson used these figures in the budget debate, to pour scorn on the government’s method of “preserving our sovereignty." He apparently thought, mistakenly, that the figures applied to the whole north. Alvin Hamilton, minister of northern affairs, protested indignantly; so did the prime minister. The original answer had stated quite plainly that it referred to one sale only. To give a similar breakdown for the entire north would mean analyzing the structure of every company holding a permit, and Hamilton said this would take a great deal of work.

But the broad outline of the situation is obvious at a glance. About twenty of the companies holding oil permits in the Canadian north are recognizably foreign-owned. They are mostly big companies, and their permits cover vast areas. Another twenty-odd are recognizably Canadian, mostly small, with acreage to match.

The prime minister’s point about sovereignty is, of course, unaffected by these facts. The proof of sovereignty is not whose citizens hold the permits, but which government issues them. So long as the oil companies, foreign or not, apply to the Canadian authorities for permission to explore, Canadian sovereignty is both asserted and accepted.

But the really important point, overlooked in the sovereignty argument, is that the rest of these applicants are not recognizable at all. Their holdings are not large, but large enough to give pretext and legality to considerable sales of phony stock.

Actually, even the giants of the oil business are moving slowly in the far north. The market at the moment is awash with oil. Wells in Alberta are cut back to mere dribbles, far below capacity; imports into the U. S. are restricted to save a glutted market for American producers, and keep out cheap oil from the Middle East.

Moreover, even if oil were scarce, the Arctic is full of unsolved problems. Only the most southerly of the potential oil and gas fields in the Mackenzie district are anywhere near either a market or a major pipeline. As for the seventy-five million acres mentioned by the prime minister, these are up in the northern islands, completely surrounded by ice for the greater part of every year.

What makes them even theoretical sources of commercial oil is the recent development of the nuclear submarine. Oil men are giving a lot of thought to underwater tankers, powered by nuclear fuel, which could go straight from the Queen Elizabeth Islands to Britain on

a course hardly longer than the course from Montreal. However, no such undersea craft has yet been built.

Another exciting possibility is the nuclear - powered ice - breaker, w'hich could have vastly greater punch and range than conventional ones. It might keep open, for all or most of the year, northern ports that now are ice-blocked. However, this hasn’t been built yet either.

And even if it were, no oil has yet been found in the far north, except for the small field around Norman Wells. Hardly any drilling has yet been done. Even exploration is in the earliest stages, most of it carried out by the Canadian government. In a major project of 1955, two years before the present government took office, the Canadian Geological Survey carried out a reconnaissance by helicopter of a hundred thousand square miles in the northern islands. The geologists found lots of encouraging signs—great depth of sedimentary rock of the right age, numerous “domes” of the kind that often are found above oil pools. Altogether they have blocked out, over the last four summers, more than two hundred thousand square miles of potential oil country. But of actual oil, not a gallon. Any money spent on development is a gamble at very long odds. The gamble will probably be taken, in time, but it’s no game for amateurs.

In varying degree this is true of practically everything done and planned in the Arctic. It’s all a vast wager on the future, one that may pay off but not for a long while yet. Meanwhile, Arctic experts are becoming mildly embarrassed at the rhetoric of nonexperts.

Frobisher Bay is an example, the tiny settlement on Baffin Island that some people already call a “city.” Frobisher Bay has an airfield at which the big planes stop on their way from the west coast to Europe. It’s not very busy yet —not as busy as Gander, or even Goose Bay— but as the trans-Arctic route develops it will become busier. There is also a small military establishment, at the airport and at a nearby radar station of the Pinetree Line. Because of these things, and certain natural advantages, Frobisher has been made the administrative centre for the eastern Arctic. Its population varies with the season, but at its peak is approaching fifteen hundred.

That’s as many people as are expected in Frobisher in the foreseeable future —and that’s men, women and children, including Eskimos. However, because it’s so difficult and expensive to lay in water and sewer and other services in the far north, Arctic experts said it would be prudent to allow for a very high growth factor, just in case. They recommended that the water mains, etc., be big enough for a town of fortyfive hundred.

Somehow that figure got out as the expected population of Frobisher “city.” Some enthusiast rounded it out to an even five thousand. The tentative plans for building, which are still in the contemplation stage, became a “seventyfive-million-dollar project.”

In fact nobody knows what any sort of building project would cost, though a group of consulting engineers are now trying to make sober estimates. When they’ve finished their study, the government may be ready to decide what kind to build—if any. Up to now it’s not even a final decision to expand Frobisher at all. it