Canada's Western Energy Boom

Neighbors cast envious glances at those sheiks of Calgary

Surveying the skyline of Calgary, where 29 huge construction cranes are climbing atop new office towers, Canadian Novelist Mordecai Richler observed: "That's going to be a helluva city when they get it uncrated." In Edmonton, 180 miles to the north, Ford has sold hundreds more Thunderbirds than usual this year. Boasts Dealer Ryan Taylor: "They can't give those gas guzzlers away south of the border, but they are going like crazy up here." Around the town of Medicine Hat, where 1,700 oil and gas wells have been drilled in the past year, Canadian, British and West German tank troops on war games have to aim very, very carefully to avoid blowing up one of those pools of energy.

Welcome to booming Alberta, the Texas-size province that contains roughly 85% of Canada's proven oil and gas reserves, half of its coal, some major untapped hydropower sites, and vast, oil-bearing tar sands.

Under the Canadian constitution, these mineral rights belong to the provincial government. So Alberta, rather than the national government in Ottawa, has gleefully collected the rewards of gushing oil and gas prices. The province takes an average 43% cut for oil and 33% for gas from the energy companies' local production revenues, and its royalties surged from $1.3 billion in 1974 to $4 billion this year. Coveting more of this wealth for themselves, many Canadians outside the province call Alberta "OPEC North" and refer to its leaders as "blue-eyed sheiks." After traveling throughout the nouveau riche province, TIME Correspondent Ed Ogle reports:

The changes that have resulted from the energy windfall are tremendous. Culture has swept the province like a whirlwind. A critic for the Edmonton Journal figured that in twelve months he covered 136 first nights of theater, opera and symphony. Calgary, once just a prairie cow town that was famous for its Calgary Redeye (beer and tomato juice), has become a cosmopolitan community of 550,000. Nearly 60% of the people are not of English-speaking origin, and despite the presence of some 60,000 Americans in the area, the largest ethnic group is German. This is Canada's fastest growing large city. In the past five years, 20 foreign banks have opened offices in Calgary, and last June the Bank of Montreal became the first major Canadian bank to move its chairman, Fred H. McNeil, to Alberta. Says he in his Calgary office: "The time of the West has come."

Calgary is already the headquarters for 483 of the 587 oil and gas companies that have main offices in the country. It is not hard to spend $250,000 for a four-bedroom house, but heating bills in Alberta average only $27 a month, and gasoline sells for 53-c- a gal. Thanks to energy royalties, Alberta is Canada's only province with no sales or gasoline taxes. Its property and income taxes are the lowest of any province; for a family of four earning $17,000, the overall tax burden is $912 a year, vs. $2,130 in Quebec.

Sensibly, provision is being made for when the energy reserves run out. Fully 30% of all royalties are deposited in a "Heritage" trust fund, which now totals $5 billion and is expected to reach as much as $34 billion by the end of the 1980s. The fund makes major loans to other provinces (at competitive rates), but its main purpose is to bankroll Alberta's economic future. The provincial government has acquired its own Pacific Western Airlines; set up a local company to invest in all forms of energy, including oil from the thick, gummy tar sands; and offers fat incentives to new firms willing to open up in smaller communities.

It is quite possible that Alberta's energy bonanza will not give out for many decades. Expert estimates of conventional oil reserves range from 5 billion to 8 billion bbl. (The U.S. has proven reserves of 28.5 billion bbl., and Mexico has 16 billion bbl.) Most significant, Alberta has huge additional "unconventional" sources of energy that are not yet economical to tap but will become increasingly feasible --and necessary--as oil prices rise. The basic sources are heavy bitumen oil and the tar sands, which together could provide as much as 320 billion bbl., or enough to supply the entire world demand for some 15 years at current rates of use.

Two producers, Suncor and the Syncrude consortium, are turning out a total of some 150,000 bbl. a day from tar sands. A group headed by Shell has won approval for another project that will cost close to $5 billion and help lift output from the sands to an expected 500,000 bbl. daily by 1985. Meanwhile, Exxon's Imperial Oil plans to spend more than $5 billion to produce oil from heavy crude. These projects may be stretched out if some recent finds of conventional petroleum elsewhere prove more financially attractive. Some oilmen believe that two offshore strikes, in the Arctic's Beaufort Sea and along the Newfoundland coast, could prove to be of Middle East proportions.

Natural gas also seems boundless in Alberta, and it provides a double benefit because sulfur is a byproduct of refining. The National Energy Board puts the province's gas reserves at 60 trillion cu. ft., equal to almost one-third the entire U.S. reserves. Energy developers argue that the real total is many tunes that size, and they are pressing to sell more to the U.S. Canada exports about 1 trillion cu. ft. a year, notably to the Northern Plains states; producers would like this increased threefold.

There is little chance, however, that Canada will soon raise its net oil sales to the U.S., now a rather modest 100,000 bbl. a day, (vs. 425,000 bbl. from Mexico). Dedicated to energy independence and fearful that conventional oil will decline in spite of the recent finds, Canada is not even fully exploiting Alberta's capacity of 1.8 million bbl. a day. Says Mitchell Sharp, the commissioner of Canada's Northern Pipeline Agency: "The U.S. should drop any ideas it might have about a North American energy common market."

It is also unlikely that Alberta will submit to the wishes of less blessed Canadian provinces and share its energy royalties with them. Alberta's officials, notably Conservative Premier Peter Lougheed, argue convincingly that other regions are already "subsidized," because Ottawa holds down the domestic price of oil to $13.75, half as much as some OPEC nations charge.

But splitting up the energy wealth remains a bitter and divisive issue in a nation already torn by threats of separatism. When Calgary made an offer of $217.5 million and thus became Canada's choice to be host of the 1988 Winter Olympics, one Vancouver official growled: "What are they going to do --landscape the Rockies?" That, for a province as rich and resourceful as Alberta, remains a possibility.

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