Chastko, Paul. Developing Alberta’s Oil Sands: From Karl Clark to Kyoto. Calgary: University of Calgary Press, 2004.
Reviewed for H-Energy by Tammy Nemeth, Editor, H-Energy.
Paul Chastko’s book, Developing Alberta’s Oil Sands, based upon his dissertation of the same name, is a welcome contribution to the history of Canada’s oil industry and the oil sands in particular. Chastko effectively pulls together the existing literature (much of which is outdated) on the understudied oil sands, and updates it to the time of publication, including some discussion of current events. Some new archival collections are utilised such as the collections of Karl Clark, Sidney Blair, the Canadian Petroleum Association (CPA), and the Independent Petroleum Association of Canada (IPAC). Divided into two parts – pre- and post-World War 2 – with the first part comprising three chapters, and the second six chapters, the book describes the relatively slow progression of developing Alberta’s oil sands. Technological challenges had to be overcome, and large discoveries of conventional oil in Alberta after the Second World War reduced the urgency and need to press ahead with rapid development. Chastko weaves his narrative around a few themes: the role of government in developing the resource when companies were not interested; the role of key personalities in the earlier period that both advanced and hindered development; the competing interests of provincial and federal governments particularly during the energy crises of the 1970s and 1980s; the challenges of marketing Canada’s oil particularly in the U.S. market; and, more recently, environmental concerns.
Chastko describes how in the late 19th and early 20th centuries a number of different ventures attempted to produce useable crude oil from the sands, which failed miserably. One researcher, Sidney Ells, from the Dominion Mines Branch took an avid interest in the sands and set about accumulating data. Dr. Karl Clark was one of the scientists chosen within the Mines Branch to review and report on Ells’ work, and came to the conclusion that Ells’ vast research was unorganized and required re-writing. Dr. Clark continued to work for a few years from Ells’ data and managed to separate oil from the tar sands in 1920. At this point, the province of Alberta established the Scientific and Industrial Research Council at the University of Alberta (the precursor to the present day Alberta Research Council) and hired Dr. Clark, rather than Sidney Ells, as a Research Professor to continue research into the oil sands. Ells remained with the federal government and competed with Clark who now worked for the province of Alberta.
For American readers, Canada is a federal state like the United States that divides powers between the provinces and federal government. Until 1930, the federal government retained control over the natural resources of the provinces of Alberta and Saskatchewan, and continues to exercise control over Crown or federal lands particularly in the Yukon, Northwest Territories, Nunavut, and offshore areas. Interestingly, Chastko points out that when the federal government ceded control over natural resources to Alberta in 1930 it kept back an area of the oil sands. This only helped to increase suspicions and tensions between the two levels of government concerning the development of the oil sands.
Progress on developing a commercially viable and reliable separation process stalled during the depression years of the 1930s, but heated up during the Second World War, as Canada’s conventional oil production from Turner Valley, Alberta, declined considerably. Chastko outlines how various pilot plants were established between 1920 and the 1950s, but the one that stands out in this period was the Abasand plant operated by Max Ball. However, the personality conflicts between Clark, Ells, and Ball contributed to the plant’s unspectacular performance. Part of the problem was the geography and lack of infrastructure in the area. The oil sands deposits are located several hundred miles from population centres in fairly wild areas, which, until the 1960s did not have highways connecting them to the rest of the province. The harsh climate wrought havoc on men and equipment. It was also difficult for the various pilot plants to recruit highly skilled workers, and there were few services in the area to help retain workers. Some of these challenges, particularly those relating to infrastructure, continue today. Another factor, dealt with in the book, was the strained cooperation between the provincial and federal governments, particularly during World War Two. While the federal government remained overseer of the oil sands pilot projects, the Abasand plant was terribly mismanaged. Ball and Ells retained stiff relations with the Research Council of Alberta, but when the federal government assumed direct control of the plant in 1943 (under the direction of the powerful Cabinet Minister C.D. Howe) and fired Ball, it chose not to utilize the knowledge base developed through the Alberta Research Council and Clark’s relentless efforts. Curiously, Chastko does not explain why the federal government ended contact with the Research Council, or why it “neglected the best experts in the field.” (42-43) Perhaps this could have been explained if Chastko had examined the archival records of the Canadian Department of Mines and C.D. Howe’s papers. Given that the ongoing struggle between the provincial and federal governments is a significant theme in the book, it is disappointing that few if any federal archival records were examined.
Where Clark and Ells played a crucial role in the technological developments in the earlier period, American J. Howard Pew of Sun Oil played a crucial role in the commercial development of the 1960s. Chastko suggests it was the entrepreneurial spirit and drive of Pew who was something of a business maverick and risk-taker, and had pioneered heavy oil refining and “big-inch” pipelines. He believed developing the oil sands would be crucial to North America in the future and wanted Sun Oil to be in on the ground floor. Pew developed a friendship with Alberta Premier Ernest Manning, and in partnership with Great Canadian Oil Sands was eventually granted a lease and approval to set up a commercial plant. Chastko concludes that commercial development in the 1960s took place only because of American interest, capital, and access to markets, as well as the foresight of Premier Manning.
Manning is an important factor in the equation. He was a rare breed of politician who believed that his position was one of stewardship for the people of the province. He wished to encourage industries and resource extraction that could help alleviate the continuous boom-bust cycle of agriculture, but to do so in a controlled and planned way. To that end, Manning cautiously supported oil sands development when it appeared the conventional oil would run out at Turner Valley, and still allowed limited development in the 1960s even after significant new conventional finds meant development of the oil sands were not necessary. He understood the precarious balance of Canada’s difficulty in marketing its oil, and did not want to overwhelm that balance by permitting uncontrolled development of the oil sands.
There is a bit of a contradiction in Chastko’s discussion of Alberta’s oil marketing problems of the late 1950s early 1960s. On p.106-107 Chastko states that “the problem of finding markets for Canadian crude…waned by the end of the 1950s. . . . The marketing problems that hampered previous attempts to begin commercial development of the oil sands seemed outdated.” But then on the very next pages, Chastko quotes Premier Manning as saying a second plant “would aggravate a marketing situation which is already serious.” (108) And that because of “producers in the United States demanding further restrictions on Canadian exports, Alberta’s conventional producers faced a grim future.” (109) So which was it: no problem or a grim future?
Although Chastko mentions Canada’s exemption to the U.S. Mandatory Oil Import Program, which provided a market for Canadian crude, he fails to mention the most significant development in Canadian oil policy in this period: the National Oil Policy (NOP). Alberta is some distance from the consuming areas of Canada, and though there were oil pipelines to take Alberta’s oil as far as the province of Ontario, Quebec and the Maritimes were supplied by imported oil. A great deal of lobbying took place in the early 1960s for Canada to build an oil pipeline from Alberta to Montreal (a major refining area in Quebec), but the NOP made it Canadian policy to utilize Canadian oil as far as Ontario, export the surplus to the U.S., and import oil into Quebec and the Maritimes. Even with the MOIP exemption, the U.S. sought to control and limit the amount of Canadian oil entering the American market, and was not keen to have another source of Canadian oil from the oil sands competing in its market. It is not really conveyed in Chastko’s writing, but the situation of marketing Canadian oil in this period was in a precarious balance that was managed by the cooperation between the Alberta Energy Resources Conservation Board, the National Energy Board (NEB), and the Canadian and American governments.
This balance was upset to some degree by the discovery of a large field at Prudhoe Bay, Alaska, and led to discussions of a Canada-U.S. continental oil policy. These negotiations continued over four years but the OPEC crisis of 1973 altered everything and the discussions terminated with no agreement. Where the Americans sought to limit and control imports of Canadian oil in the 1960s, they were eager to secure as much oil as Canada could spare in the 1970s. This increase in demand and the sudden increase in world prices put Alberta in an enviable position, and created a great deal of tension between the provincial and federal governments. The Alberta government under the new Premier Peter Lougheed sought to tighten its control over development within the province and increase revenues in the hopes of diversifying Alberta’s economy. Concurrently, the federal government sought to expand its control over Canadian oil development while maintaining low prices for Canadian consumers. The goals of the two governments collided and, as Chastko points out, the industry was often caught in the middle.
Oil sands development from the 1970s onward accelerated because American production began to decline, the increase in world prices now made it more worthwhile, and instability in the Middle East made Canada a welcome alternative. As Chastko makes clear, one of the unique and beneficial properties of the oil sands is that no exploration is required, only technological and geographical challenges had to be overcome. Both the provincial and federal governments were eager to develop Alberta’s oil sands, but the battle over pricing, taxes, and jurisdiction in the 1970s that culminated in the National Energy Program (NEP) in 1980, delayed development.
The NEP was a comprehensive package intended to restructure the Canadian oil and gas industry that would put control over development, taxation, and pricing firmly in the hands of the federal government. Although the federal government could not control development on provincial lands, it sought to encourage development away from provincial lands by pricing “old” oil very low, and “new” oil very high; providing tax incentives for exploration on federal lands; placing taxes on gross industry revenues; and enabling the state oil company Petro-Canada to buy out private firms.
It is heartening to see recognition that the NEP was not gutted by the time the Conservatives took power in 1984. Although Chastko is not specific about what basic provisions of the NEP remained intact, here are some examples. The NEP covered three main areas: regulations, taxation, and pricing. In the first area, the Canada Oil and Gas Lands Administration (COGLA) was created in order to manage exploration and development on federally controlled Crown or Canada Lands. This included the offshore and Arctic areas, which was important because of the large oil finds in the Hibernia deposit off the coast of Newfoundland, the natural gas in the Venture deposit off the coast of Nova Scotia, and the oil and gas deposits in the Beaufort Sea and Mackenzie Valley areas of the Arctic and Northwest Territories. COGLA remained fully intact when the Conservatives came into power in 1984, as did the controversial retroactive twenty-five percent “back-in” on all developments on Canada Lands for the state oil company Petro-Canada. However, in a move to reduce American complaints, some compensation was granted for companies that lost their share to Petro-Canada. Nevertheless, the “back-in” remained. COGLA required companies exploring on Canada Lands to use Canadian labour and equipment where possible, and any companies that decided to develop a find on the federal lands had to have a minimum Canadian ownership level of fifty percent. These measures remained intact until the Conservatives restructured the administration in 1985. With respect to taxation, the much hated Petroleum and Gas Revenue Tax (PGRT) continued to exist until it was phased-out by the Conservatives, although the Liberals had reduced it from 16% in 1980 to 8% by 1983/84 (in the NEP update). The Incremental Oil Revenue Tax, the Canadian Ownership Charge, the Petroleum Compensation Charge, the Natural Gas and Gas Liquids Tax, all continued to exist until 1985. As for pricing, the NEP unilaterally set oil prices in a complicated formula relative to an oil sands reference price. This was altered somewhat in the 1981 Alberta-Ottawa agreement, and was modified further in subsequent years as world prices shifted. Nevertheless, the federal government retained control of Canadian oil and gas pricing until the NEP was effectively dismantled in 1985.
As a historian, I found the main weakness in Chastko’s book to be the lack of primary source material. Yes, the use of CPA and IPAC materials for some of the middle chapters is original and lends a new dimension to our understanding of oil sands development from a business perspective. However, what about C.D. Howe’s or the Department of Mines’ records at the national archives; or Premier Manning and Lougheed’s records at the Provincial Archives of Alberta; or the records of the Alberta Energy Resources Conservation Branch and National Energy Board? Since C.D. Howe and the Department of Mines seemed to play such a crucial role in the early period, and during World War Two in particular, those records may have added some nuance to the federal government’s quixotic approach to oil sands development. A much greater understanding of why Premier Manning from the 1940s to the 1960s supported oil sands development, albeit in a limited form after the large Leduc and subsequent conventional finds, could perhaps have been revealed by examining his records. Why did Manning feel the need to do something about the oil sands; why did he believe that the “government would have to blaze a trail for the private sector to follow,” why was he concerned that “the oil sands might continue to sit undeveloped for the foreseeable future”? (63) Also, it is possible to examine the provincial government records of Alberta through an access to information request, which would have perhaps provided some new information on the provincial government’s strategy for development during the controversial years of the 1970s and early 1980s. The conflict between Alberta and Ottawa is important and could have been better conveyed with an examination of the records. Indeed, Premier Lougheed’s papers are open to the public without requiring an access to information request, and an examination of them certainly would have added some depth to the discussion. For example, one document I found in the Alberta records soon after the 1973 energy crisis reflects on how the federal government was upset that Alberta did not ask it to participate in oil sands development when Ontario, Quebec, and other provinces were asked. How did this affect the federal-provincial relationship when the federal government bought into Syncrude when Atlantic Richfield pulled out?
The last two chapters dealing with more recent developments will provide a good base for future historians to build upon. At this point, few if any records are available for examination, thus Chastko is left to rely upon newspaper articles and the odd interview. Environmental concerns seem to be a more recent development, yet I was left wondering, what, if any, provisions were required (and when) by the provincial government to conduct environmental impact assessments of oil sands development? What about the role, concerns, and effects of First Nations people? All sorts of activism began to take place in the 1970s and continues to this day, how has this affected development of the oil sands? What about the more recent pace of development? What is the current process for project approval; are there limits, and if so, how are they determined?
The story Chastko tells is a humble reminder that development is not a simple matter. In the case of the oil sands, obstacles such as geography and lack of infrastructure, had to be overcome, as well as conflicts between personalities and different levels of government. The oil sands are a huge resource, and as long as people are reliant upon fossil fuels, they will continue to play a large role in the Alberta, Canadian, and American economies. Chastko’s book is a useful base history for understanding how the oil sands came to be developed.