Chastko, Paul. Developing Alberta’s Oil Sands: From Karl Clark to Kyoto. Calgary: University of Calgary Press, 2004.
Reviewed for H-Energy by John N. McDougall, Professor of Political Science, University of Western Ontario.
Paul Chastko’s history of the development of the Alberta oil sands, from their earliest, highly tentative beginnings to the point where they now account for roughly half of Canada’s oil production, contains several themes, including most notably their persistent marginality (until recently) and the concerns within Alberta’s oil patch over their impact on production from conventional sources. This worry is a little hard to credit in the face of today’s market for oil, where aggregate demand – enhanced by a growing American determination to wean itself off traditional supplies from the Middle East – makes the future prospects for almost unlimited levels of synthetic production seem very bright, indeed. Still, the economic fundamentals of oil sands production, especially their very high capital intensity and long lead-times, must be recognized as potentially complicating factors, to the point where only a very bold analyst would completely rule out the possibility that yet another bust will follow the current spectacular boom in oil sands activity.
Other themes that Chastko weaves throughout Developing Alberta’s Oil Sands from Karl Clark to Kyoto involve Canada’s federal-provincial relations, Canada-US relations, business-government relations (both nationally and provincially), technological innovation, and the degree to which synthetic oil production should receive special consideration by governments. The author exhibits considerable narrative skills in keeping these motifs from colliding with one another, and nearly all of them are reviewed with admirable clarity. The one significant exception to this is Chastko’s failure to provide an adequate overview of structure of the North American energy market. For example, Alberta’s dependence upon access to the US market for oil and natural gas, especially in the early stages of the industry’s development there, could have been rendered much more clearly by including a few paragraphs on the development of major oil and gas pipelines, both inter-provincially and internationally.
During the late 1950s and through the 1960s, there were essentially four outlets for Alberta’s oil and gas production: one gas pipeline serving markets as far west as the mid-western states and Ontario; one oil pipeline to the American mid-west; and one oil and one gas pipeline to Vancouver and the American northwest. The destinations and carrying capacity of these transportation systems played an important role in some of the stories that Chatsko does tell, including industry and government concerns over the extent to which increasing oil sands production might threaten the marketing of conventional oil, as well as some of the politics surrounding Canada’s ostensible quest for energy self-sufficiency in the aftermath of the oil shocks of the early 1970s. The infrastructure necessary to create a completely national, as opposed to continental market structure for Canada’s oil and gas industries has never been constructed, or even seriously contemplated, largely because of the enormous investments that would have been required to do so but also because of the relatively low cost – most of the time – of oil imports into Quebec and the Atlantic provinces.
Another element missing in Chastko’s account of oil sands development is his failure to question, at least in principle, their very desirability. His account ends in 2003, so he cannot be faulted for failing to acknowledge the growing number of people – including Peter Lougheed, a former premier of the province – who are beginning to express serious reservations about the negative impact of oil sands development on other dimensions of life in Alberta. (Some of these concerns are featured in the current campaign to elect a new provincial premier.) Chastko does spend much of his closing chapters on conflicts between oil sands production and Canada’s Kyoto commitments, but the enormous “footprint” of current production on other provincial priorities is also a significant concern for a growing number of Albertans. The rapacious appetite of oil sands production facilities for vast quantities of water as well as other fuels (notably natural gas) places them in direct competition with other users and uses of these increasingly scarce commodities. For example, native people who live near along the Athabasca river – which is already under stress because of shrinking glaciers on the eastern slopes of the Rocky Mountains – are fearful that oil sands production will reduce both the quantity and the quality of its flow. Further, young adults in the province are beginning to wonder if there will be enough natural gas left there to heat the homes of their children when they grow up. And many Canadians will be hard to convince of the wisdom of subsidizing the construction of a Mackenzie Valley natural gas pipeline for the almost exclusive purpose of extracting oil from the sands. Using a relatively clean fuel to help manufacture a dirtier one for export to the American market is not convincingly in the province’s best interest.
Given the format for this review, which is clearly aimed to begin a discourse on Chatsko’s book, it seems appropriate to raise a number of questions concerning passages in the book that seem to me to be at best questionable and at worst misleading. The first of these is Chastko’s charge that the federal government, through its involvement with Abasands – a largely experimental operation created in the early 1930s but ramped up in the early 1940s to help solve oil shortages in Canada as a consequence of World War Two – was attempting to undermine the successful development of synthetic oil. In a major section of Chapter 2 labelled “Sabotage”, Chastko reviews the suspicion raised in the provincial legislature by an Alberta cabinet minister that, “the gross mismanagement of the facility led to public fears that Ottawa deliberately and systematically sabatoged the development of the oil sands.” (48)
I personally do not have a clue as to whether or not such a charge might have been justified, but I must say that the author’s case for taking it seriously is itself far from air-tight. For one thing, with one exception, the entire account of the dispute between the Alberta and Canadian governments over the issue is based on the record of debates in the respective legislatures. It seems to me that, if this possibility is serious enough to occupy roughly nine pages of Chastko’s text, then it is serious enough to be investigated more deeply than the mere repetition of the political rhetoric the accusation engendered. Moreover, a lack of archival investigation is not a rarity in Chastko’s account. To cite one other, more recent example, he observes without citing any source that in 2001 the Canadian government was “leery of expanded [oil?] trade with the United States.” (221).
A more serious investigative lapse is evident in Chastko’s treatment of the Trudeau government’s so-called Third Option, which he inserts into a discussion of the massive changes in Canada’s energy policy in response to the OPEC-induced oil price shocks of 1973. The problem with this is that – as he acknowledges – the Third Option study was released in 1972. Now, it is true that the Third Option was a component of a rising tide of Canadian nationalism that had focused on American control of Canada’s major industries since the late 1960s, and it is no doubt also true that this tide of nationalism served as one of the permissive conditions for the statist approach that Trudeau pursued toward oil and natural gas through the decade following 1973. (147-60) However, a more immediate stimulus for the specific move toward a reconsideration of Canada’s relations with the United States was the Nixon economic package of 1971, which disillusioned many Canadians concerning their supposed “special relationship” with the US and seemingly breached a pattern that had developed in the decades following World War Two, where Canada sought and frequently received exemptions from some of the United States’ protectionist economic policies.
Chastko gets this more or less right in a half-page footnote to his account (Ch. 6, fn.55), but his account of it in the main text muddles the issue (along with the time-lines) and, more significantly, completely overlooks the domestic political pressures bearing down on Trudeau at the time. His government was in a minority position in the House of Commons, and it owed its political survival to the New Democratic Party, which had recently fended off a leadership bid from one of the most radical left-wing figures in Canada’s post-war political history. Most of Trudeau’s dirigisme of the 1972-74 period stems from this threat and carried some momentum through the rest of the decade.
Moreover, for a book largely devoted to the Alberta oil and gas industry, Chastko is at times a little cavalier with respect to distinguishing its two main components. One of the most egregious of these conflations concerns the TransCanada Pipeline, which in the main text appears – if the text is presumed to make any sense – to be destined to carry Alberta’s oil to points east:
During the acrimonious TransCanada Pipeline debate, the St. Laurent government revealed that the federal government would have to make an eighty-million-dollar loan to pay the construction costs of building the pipeline from Alberta to Manitoba. While the move would, in effect, subsidize Alberta’s oil industry, it also suggested that eastern consumers would have to pay higher prices for fuel. This view was reinforced by Manitoba refiners, representing over one-third of the country’s refining capacity, who believed that Canadian crude could not arrive in Montreal “by normal commercial means at prices competitive with foreign crudes.” (95)
Again, the author gets part of this story right in an earlier footnote (fn.47), when he presents some details of the famous pipeline debate that essentially destroyed the Liberal hold on power and eventually brought John Diefenbaker to power. But the TransCanada Pipeline was intended to carry natural gas and had nothing directly to do with the central Canadian market for oil, at least part of which was already being served by an extension of the Interprovincial oil pipeline designed initially and primarily to deliver Alberta’s oil into the American mid-west. (I haven’t taken the time to look this up, but Chastko’s main text on this point – of which the quotation above is only a part – may in fact be describing a proposal to extend this oil transmission system from Southwestern Ontario to Montreal.)
Another place in the book where oil issues become confused with natural gas issues is the section dealing with a proposal for a continental energy policy in the late 1960s. Once more, it is important to be exactly clear about what the author wrote, so I quote him at some length:
Negotiations on a common oil policy continued to lurch along mostly because Ottawa desperately wanted to expand the Canadian industry’s access to the American market without compromising the domestic provisions of Canada’s oil policy [reserving the market from Montreal east for overseas oil]. To sweeten the deal, and draw attention away from the two-price system, Ottawa held out the riches of the oil sands to the Nixon administration. If the United States accepted the Canadian proposal, the proposed Alaska pipeline could hold production from the oil sands. Such a pipeline would “go a long way toward making production of oil from the Athabasca Tar Sands economical” and promise the United States “an almost limitless supply of oil.” (139-40)
While I have not consulted any sources on this point, I have difficulty remembering any concrete proposal to bring Alaska oil to the “lower 48 states” via Canada, and we all know that eventually this happened instead by transporting North Slope oil to the southern shore of that state and carrying it thence by tanker to the west coast of the US. There was, without question, a proposal to deliver Alaska natural gas via Canada, and in fact there still is. If, however, there was any such “cross-Canada” project for oil to the US, through which Canada might “piggy-back” exports of synthetic oil, I believe Chastko owed it to his readers to document the fact. As it is, he appears to have based this section of his discussion exclusively on Canadian secondary sources.
Less troubling, but still worrisome, inaccuracies create some murkiness around more detailed subjects. For example, the author claims that “the basic provisions of the NEP remained in place until March 1985, when the newly elected federal government of Brian Mulroney dismantled the program.” (193) Here, the weasel qualifier, “basic”, might get Chastko off the hook, but I think not. Even as early as 1982, Pierre Trudeau was backing away from some key components of the NEP, and during the last two years of his administration he was searching for substitutes for the industrial strategy that he had originally intended to underwrite with it, such as negotiation of a possible “sectoral free trade” agreement with the United States. Interestingly, it was during this phase that Trudeau struck the Macdonald Commission to undertake a sweeping overview of “Canada’s economic prospects,” which eventually (and famously) endorsed Canada’s pursuit of a comprehensive free trade agreement.
Finally, one tiny note of omission might be of interest to readers of the book, although here I do not fault Chastko for missing it. Before I took up the book for the first time in preparation for this review, I wondered to myself whether I might find within it any details concerning one of the most bizarre episodes concerning the oil sands I could remember. This had to do with a suggestion from one Herman Kahn, of the Rand Corporation, that nuclear weapons should be used to free the oil from the sand. So my attention was drawn more closely than usual to page 97, where Chastko describes Richfield Oil Corporation’s suggestion to do the same thing. Alas, Mr. Khan made no appearance, not even in a footnote, so my memories of this episode will have to remain unfreshened.
Since I grew up in Calgary during the 1950s and 60s – and was able first-hand to track the growth of the Alberta petroleum industry by counting the number of office towers rising in the heart of the city – I perhaps can be forgiven for closing this review on a personal note. The broad strokes of Chastko’s account of the role of the oil sands in promoting that progress were familiar to me, simply by virtue of reading “the Herald” every day and picking up on a spate of historical legends and current gossip about the oil patch. Moreover, all of Alberta’s youngsters were taught to take pride in the vast potential of the “tar sands”, and I probably did. However, from the hindsight of someone who has spent almost his entire adult life outside the province, I am more inclined to view recent developments in Alberta with some wariness, if not actual concern. (Besides, I still have a host of family members there – none of whom had any direct connection to the industry.) So the reading I do now on oil sands development is more along the lines of “The downside of the boom” (Canadian Business, May 22-June 4, 2006), a feature story which catalogues “the hyper-inflationary pressures of Alberta’s energy boom...undermining many sectors of the economy.” Even as a Canadian citizen, it is impossible to read Chastko’s story as one with a particularly happy ending. For one thing, those inflationary pressures are being felt all across the country, where even as far away as Newfoundland wages are rising as a result of attempts by local firms to hold workers from flying out to Alberta; for another, the imbalances between Alberta’s finances and those of other provinces are creating extra strains in the fabric of Canadian federalism.
Nevertheless, for anyone who feels a need to place these current matters in full historical perspective, Chastko has done them a service by showing the interconnections between the oil sands and Canadian federalism, business-government relations, Canada-US relations, and other dimensions of oil and gas production, sale and transportation. Perhaps greatest strength of Developing Alberta’s Oil Sandsis in serving as a prism through which to examine the history of entire Alberta’s oil and gas industry, as well as the story of national, provincial and American policies toward the sector. It is far from a flawless treatment of these issues, as I have tried to show in this review, but it is the most comprehensive account of its subject I have yet encountered and some of its details were indeed instructive. Read it, then, for perspective, but take care when citing it on matters of fact.
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