Steward : 75 Years of Alberta Energy Regulation / the Sans Serif Is Itc Legacy Sans, Designed by Gordon Jaremko
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75 years of alb e rta e ne rgy re gulation by gordon jaremko energy resources conservation board copyright © 2013 energy resources conservation board Library and Archives Canada Cataloguing in Publication ¶ This book was set in itc Berkeley Old Style, designed by Frederic W. Goudy in 1938 and Jaremko, Gordon reproduced in digital form by Tony Stan in 1983. Steward : 75 years of Alberta energy regulation / The sans serif is itc Legacy Sans, designed by Gordon Jaremko. Ronald Arnholm in 1992. The display face is Albertan, which was originally cut in metal at isbn 978-0-9918734-0-1 (pbk.) the 16 point size by Canadian designer Jim Rimmer. isbn 978-0-9918734-2-5 (bound) It was printed and bound in Edmonton, Alberta, isbn 978-0-9918734-1-8 (pdf) by McCallum Printing Group Inc. 1. Alberta. Energy Resources Conservation Board. Book design by Natalie Olsen, Kisscut Design. 2. Alberta. Energy Resources Conservation Board — History. 3. Energy development — Government policy — Alberta. 4. Energy development — Law and legislation — Alberta. 5. Energy industries — Law and legislation — Alberta. i. Alberta. Energy Resources Conservation Board. ii. Title. iii. Title: 75 years of Alberta energy regulation. iv. Title: Seventy-five years of Alberta energy regulation. hd9574 c23 a4 j37 2013 354.4’528097123 c2013-980015-8 con t e nt s one Mandate 1 two Conservation 23 three Safety 57 four Environment 77 five Peacemaker 97 six Mentor 125 epilogue Born Again, Bigger 147 appendices Chairs 154 Chronology 157 Statistics 173 INSPIRING BEGINNING Rocky Mountain vistas provided a dramatic setting for Alberta’s first oil well in 1902, at Cameron Creek, 220 kilometres south of Calgary. Strong early flows aroused dreams of a cavern brimming with a subterranean lake of black gold. Fortune hunters rushed to erect a boomtown called Oil City. But production swiftly petered out. New drilling came up dry. Waterton Lakes National Park absorbed the deserted well and abandoned town. Today a monument and plaques mark the scenic spot as a National Historic Site. ERCB Library 87.031 no029, Goodall Collection mandate eter Lougheed never forgot his first contact as “It was just so startling to me,” Lougheed recalled PAlberta premier with the provincial Energy Resour - in an interview four decades later. Far from feeling ces Conservation Board (ERCB). After his party’s break- intruded upon, he was honoured by Govier’s visit, he through victory in the 1971 election, he was enjoying added. “He was so highly regarded.” the garden of his southwest Calgary house — but not Govier dropped by because he needed to know picking daisies. Rather, he was selecting Alberta’s first whether he should keep an imminent date in Poland Conservative cabinet for the government swearing-in for a conference of regulatory chiefs from around the ceremony when ERCB chairman George Govier strode world. Would the new Conservative regime want an into the backyard. appointee of the old Social Credit government to rep- resent Alberta on the world stage? 1 PETER LOUGHEED “We would not have changed that,” Lougheed said. Familiarity bred respect for the ERCB as the Con- sustained the ercb “I had no idea that we belonged to an international servatives began to revisit and revamp provincial as the only legacy of the old Social network of regulators, like a cartel. I was surprised. policies on everything from liquor laws, civil rights, Credit regime left It was a shock.” But he could think of no agency or and mental health care to oil and gas royalties. “It unchanged after his Conservatives official more fitting to represent the province abroad. [ the ERCB ] was one of the very few entities we inher- won power in 1971. The ERCB and its chairman, he said, exuded “credi- ited from the Social Credit era that we didn’t really Glenbow Archives na-2864-19590-15 bility that really gets your attention.” change,” Lougheed said. “We worked closely and 2 ste wa r d 75 Years of Alberta Energy Regulation the alberta formula effectively together. We [ the government ] were the owner of the natural resources on the public’s behalf, The garden encounter offers a quick lesson in Alberta’s and they [ the ERCB ] were the agent of the owner.” approach to stewarding its natural resources. It is a dis- Agent did not mean errand boy. From policing tinctive, internationally recognized approach located oilfield drilling and setting standards for production in the moderate centre of the spectrum between state measurement equipment on up to the quasi-judicial and private enterprise. role of making landmark decisions on contested issues, To Lougheed, the Alberta formula — business use the ERCB had always operated at arm’s length from of public resources under independent expert super- politicians — and this mandate continued during the vision — was, above all, practical. The ERCB keeps Lougheed years. order even as its mandate, rules, and personnel adapt “We didn’t interfere on the technical side,” Lougheed to unpredictable energy markets, technology, and said. In big cases that determined the fate of oil sands, politics. natural gas, power, and petrochemical projects, his The formula paid off — big time and consistently, cabinet accepted ultimate responsibility for ratifying or for generations. In the six decades since the 1947 Leduc rejecting board rulings. But the Conservatives upheld gusher ushered in the modern Canadian energy indus- the Alberta regulatory tradition of dealing with deci- try, the payoff has been astronomical. By 2010, Alberta sion reports as intact packages, an approach that denies oil and natural gas sales added up to $1.2 trillion, even the most senior politicians the power to court according to records kept by the Canadian Associa- favour with voters or companies by changing rulings, tion of Petroleum Producers. The provincial treasury’s reasoning behind the rulings, or approval conditions. share was over $200 billion, including $176 billion The only special consideration the ERCB grants in royalties and $28 billion from mineral rights lease the provincial cabinet is a courtesy: an early glimpse auctions. at its decisions, so there is time to think about politi- Convert those old dollars into twenty-first century cal implications and prepare for public questions. purchasing power on the Bank of Canada’s inflation “They provided us with the reports — not the drafts,” calculator, and the numbers are even more impres- Lougheed said. “We’d get the first look as an oppor- sive. Alberta’s 1947 – 2010 oil and gas sales have a true tunity to peruse the document. They would make it value of $1.7 trillion in today’s dollars, including a public.” public share of over $360 billion made up of $314 bil- lion in royalties and $52 billion in sale of rights. The one: mandate 3 inflation-adjusted total is nearly double the $859 bil- Alberta had policy advantages that countered the lion combined income of the entire twelve-nation technical difficulties the company faced. Organization of Petroleum Exporting Countries in “Demand alone will not encourage oil production,” 2008, its best year ever when oil peaked at $147.27 a Fournier wrote. “A company must be assured that the barrel on July 11. politics of the country is sound even before considering Alberta owes the birth of this fortune to a formula the geological attractiveness of its basin areas. The calculated to encourage industry in the public inter- petroleum laws must be so designed that the company est, says geologist Frank Fournier in Oil Exploration is given ample time to explore and is rewarded for in Canada from 1937 to 1947, the memoir he wrote for the money expended. And taxation must be geared Imperial Oil and archived at the Leduc #1 Energy to leave sufficient profits to encourage development.” Discovery Centre. In the memoir, Fournier describes Imperial alone conducted about half of western the persistence required for Imperial Oil to make the Canadian oil and gas activity in the 1930s and ’40s, founding discovery of the modern Canadian oil age, and although its international ownership pedigree was even with new seismic survey technology. In a famous well known, the region did not see the energy industry eight-year, 133-well drilling campaign, Imperial Oil as an unwanted interloper. Visions of growth in that uncovered the rich geological formations that signalled pioneer era foresaw harvesting both private and gov- the find, probing beneath farmland that bore no sur- ernment wealth from public ownership of resources. face signs of the treasure buried 1.6 kilometres below. In Alberta’s case, the government held 81 per cent of Written just three months after provincial, com- the natural endowment, or 537 000 square kilometres munity, and business leaders celebrated the Leduc of mineral rights, an area three-quarters the size of find with a first-oil ceremony on February 13, 1947, Texas. If measured by modern energy content rather the memoir explains that Alberta attracted the fortune than geographic extent, the public share of the resource hunt by taking the right route a decade earlier, when endowment comes even closer to 100 per cent because North America chose the road of investor-owned the provincially owned buried treasure includes the versus state-owned energy. As the Canadian arm of oil sands. the world’s biggest investor-owned energy empire Long experience encouraged belief in home-grown (then Standard, now ExxonMobil), Imperial could energy enterprise. A railway construction crew made spend $18.4 million ($209 million in today’s dollars) the first Alberta gas find near Medicine Hat in 1883. on the epic trial-and-error drilling campaign because Lumber baron and politician John Lineham and 4 ste wa r d 75 Years of Alberta Energy Regulation HEAVY LIFTING Pipelines have a pedigree in Alberta that dates back to 1912, when construction relied on ancient methods because trucks, roads, and earth- moving machines were still rare novelties.