Encyclopedia of the Great Plains

PETROLEUM, CANADA

The still-expanding petroleum industry in Alberta has redefined the balance of economic and political power within the Prairie Provinces and the nation. The Western Canada Sedimentary Basin is the chief geologic feature relating to the occurrence of oil and gas. Stretching from Canada's Northwest Territories to South Dakota, it is a large basin within a vast multibasin freeway that extends from the Arctic islands through the Mackenzie Delta and Central Plains in varying widths to the Gulf of Mexico.

The first reported hint of the petroleum wealth hidden beneath the basin's sedimentary strata came from Alexander Mackenzie. He noticed "bituminous fountains" while traveling along the Athabasca River in 1788 and explained that the liquid bitumen, when mixed with spruce gum, produced an excellent caulking compound for canoes. Over the following century many travelers viewed the tar oozing from the rock and sand formation along the riverbank. While some became captivated by this potential El Dorado in the northern wilderness, until the 1960s the region remained too remote to attract much more than scientific curiosity, especially when there seemed to be promising possibilities in more accessible areas.

The first indication of southern Alberta's petroleum potential came in 1883 and was the unexpected by-product of the Canadian Pacific Railway's search for water along its right-of- way through the dry belt west of Medicine Hat. The company's drilling crew hit a natural gas pocket, and, to their misfortune, the gas ignited and consumed the drilling rig in a great ball of fire. Subsequent discoveries confirmed the location of significant gas fields in the Medicine Hat area, and in 1904 a municipal natural gas company was organized to serve residential and commercial customers. By 1912 both Lethbridge and Calgary were connected by pipeline to southern Alberta's prolific new gas fields. From this humble beginning the industry grew on the strength of continued gas field discoveries and an expanding pipeline network that by the late 1950s spanned the continent.

The recognition that oil could be expected to exist in combination with natural gas prompted a parallel but prolonged search that failed to yield a significant result until the "Dingman discovery" in 1914. Located a short distance southwest of Calgary, the discovery identified what soon became known as the Turner Valley oil field and launched a speculative frenzy that distinguished western Canada's first oil boom. Speculative excess and disappointing results in the field brought the boom to a quick end. Starved for capital, legitimate local petroleum companies made little progress over the following decade.

Further development of the field awaited the arrival of outside capital, which eventually came with Imperial Oil, a subsidiary of Standard Oil of New Jersey. Imperial's interest was stimulated as much by the activities of archrival Shell as by the Dingman discovery. In 1920, to protect its interests in western and northern Canada, Imperial launched an energetic exploration and drilling program along the Mackenzie River in the Northwest Territories, in east-central Alberta, and, under the direction of a new subsidiary company, Royalite Oil Ltd., in the Turner Valley area. Success came first in the North with an important strike at Fort Norman in August 1920, but the location was far too remote, and interest was not rekindled until World War II. Drilling activity in east-central Alberta was unrewarded, but in the Turner Valley, on October 24, 1924, Royalite No. 4 struck oil and ignited Alberta's second oil boom. By year's end thirty-four companies were drilling, and, supported by modest finds, development continued through the 1930s. Although production was very small by Texas or Oklahoma standards, it was sufficient to meet regional demand and to turn Calgary into a minor refining center. Perhaps more important, field development and growing production by 1938 compelled the creation of Alberta's Petroleum and Natural Gas Conservation Board to address various matters of oil field management, especially the contentious issues of market sharing and "waste" gas flaring.

The appointment of the first board chairman, W. F. Knode, formerly of the Texas Railroad Commission, underlines the extent of American influence during the first decades of petroleum production and regulation in western Canada. An important factor shaping the social and regulatory environment, one that distinguishes the Canadian experience, is that, unlike their U.S. cousins, the great majority of Canadian homesteaders held only surface title to their farm and ranch lands. Mineral rights for the most part were retained by the crown, which meant not only a different pattern in the distribution of oil wealth but also that Knode and subsequent Alberta regulators did not have to contend with thousands of ranchers and farmers who held mineral rights and who were inclined to vociferously resist conservation or other measures that would restrict development and production. The regulatory tradition that Knode and his colleagues put in place was perhaps Turner Valley's most important legacy in shaping the pattern of development and production in the big oil fields discovered after World War II.

The turning-point discovery that Albertans had been waiting for since 1914 occurred on February 13, 1947. Located about fifteen miles southwest of Edmonton, Imperial Oil's Leduc No. 1 discovered a prolific new oil field, and the dramatic blowout and fire at Atlantic No. 3 a few months later signaled to the world that the Alberta discovery was in the big league. Turner Valley companies were joined by a host of newcomers from Oklahoma, Texas, and California. The string of big finds that quickly followed launched the province on an oil boom that, with but a few brief interruptions, has continued to the present.

While Alberta's oil and natural gas emerged as a significant contributor to Canada's postwar economic prosperity, the impact at the provincial level was of much greater significance. The provincial economy was transformed. By 1960 the value of exported oil and gas products surpassed the returns earned from agriculture. Alberta's burgeoning oilfired economy produced the fastest population growth rate of any Canadian province and accelerated the urbanization trend that had begun well before Leduc. The growing petroleum industry shifted the economic center of gravity from the eastern to the western edge of the Prairie region, and Calgary captured Winnipeg's historic role as the region's dominant metropolis.

If oil transformed Alberta's economy, it did not alter the province's political agenda. The politics of wheat and the politics of oil were not dissimilar. Sustained by petroleum revenues and rock-solid electoral support, Alberta's premiers emerged as formidable spokespersons for western and, especially, Alberta's interests. This hypersensitivity is manifest in the battery of provincial legislation put forward with the intent of forestalling federal interference in the management of the province's oil and gas resources. The bitter confrontation between Alberta and Ottawa over the latter's imposition of the National Energy Policy (1980) ultimately led to a constitutional amendment (section 92A) affirming exclusive provincial control over the exploration, development, and management of nonrenewable natural resources. Alberta's interests, shaped by both the needs of the new economy and historical memory, coalesced to reinforce in post-Leduc Alberta the broad sense of alienation that had developed throughout the preceding decades of agrarian protest.

See also POLITICS AND GOVERNMENT: Alberta.

David H. Breen University of British Columbia

Breen, David H. Alberta's Petroleum Industry and the Conservation Board. Edmonton: University of Alberta Press, 1993.

Doern, G. Bruce, and Glen Toner. The Politics of Energy. Toronto: Methuen, 1985.

Smith, Philip. The Treasure-Seekers: The Men Who Built Home Oil. Toronto: Macmillan of Canada, 1978.