The oilsands at 50: Will they still be producing in 100 years?

On Sept. 30, 1967, the Great Canadian Oil Sands facility opened north of Fort McMurray, Alta.,with much fanfare, bunting andspeeches by politicians.

It was the first large-scale commercial operation of the oilsands, and the result of a gamble taken by Philadelphia's Sun Oil and its chief executive, J. Howard Pew, and by 100,000 Alberta households who invested $1,500 each to buy a bond to fund construction of the facility.

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Alberta's premier at the time, Ernest Manning, stood on a podium and declared, "This is a historic day for the province of Alberta, and it is fitting that we are here today to dedicate this plant not merely to the production of oil, but to the continual progress and enrichment of mankind."

While this is typical political hyperbole, Manning nailed at least the first part of his statement it's hard to think anything else that has so affected the economic direction of Alberta in the past half century. But it's doubtful that any of the dignitaries or oil workers that day could have predicted the rocky road ahead.

See Alberta's oil sands as they appeared in 1967, when they first opened for large-scale commercial operation

7 years ago

Duration 1:21

On September 30th, 1967, the Great Canadian Oil Sands facility opened north of Fort McMurray with much fanfare, bunting, and speeches by politicians.

Not just the economics, which have always been touch and go, but the shifting place that the oilsandshold in the Canadian consciousness,from being considered crucial in the era of the OPEC oil embargoto the currentdiscomfort many Canadians feel about the resource in the era of climate change.

Sun Oil takes a flyer

Decades of research went into how best to separate bitumenfrom sand, research that continues today.

The Great Canadian Oil Sands operation itself wasthe story of Alberta wanting to demonstrate the economic viability of the oilsands and Pew's Philadelphia's Sun Oilbeing willing totakea flyer in 1960s, according to Paul Chasko, an oilsands historian at the University of Calgary.

"Not because this was going to produce anything tangible for the company in the short term," said Chasko. "But because Pew had a sense this was importantand had to be done, andbecause this was going to pay dividends in the long run."

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Pew's gamble appeared unwisein the first few years of development. CBC News archives contain stories of Sun Oil taking hits on its oilsands projects through much of the 1970s. The project lost money for many years, and according to the biography of former executive Rick George, the Canadian oilsands were considered "Pew's folly" even into the 1990s.

The Trudeau factor

Great CanadianOil Sands was not the only player in Fort McMurray in the 1960s. The Syncrude consortium, which began as a research project, was also applying for permits in the late '60s and nearly fell off a cliff as its costs doubled during the construction phaseto more than $2 billion. One of the backing companies, Atlantic Richfield, pulled out because it wanted to develop its oil discovery in Alaska's Prudhoe Bay.

This all probablysounds familiarto anyone who has watched the oilsands over the past decade, as escalating costsand foreign oil companies with priorities outside of Alberta are a constant theme.

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But in 1973, Prime Minister Pierre Trudeau stepped in to save Syncrude. With Atlantic Richfield out, the project's other partners were sent scrambling, and the federal government took a 15 per cent stake in Syncrude. Ontario's government took 10 per cent, and Alberta a further 10per cent, saving the project from falling apart.

This mayseem surprising now, but in the early '70s, oil seemed scarce and Ontario bought its energy from offshore sources, where prices werespiking because of moves by OPEC. For his part, Trudeau wanted lots of fossil fuel development in Canada. The conflict between Alberta and Ottawa at that time was over pricing and ownership of the resource.

"Thetremendous concernat the time was that oil was the scarce resource," said John English, historian and former Ontario MP.

"We needed it, there was no concerns at that time about climate change;if there was any fear, it was nuclear winter. The result was that this was a bet on the future by a province that needed cheaper energy."

What now?

The question now is around the future of the resource.Despite prognostications of doom, there are many factors that keep the oilsands in the game. Hundreds of billions of dollars have alreadybeen spent to bring onlinewhat's expected to be nearly three million barrels a day of production in 2018.

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As well, oilsands production, once started, remains relatively stable for decades. It would take an even sharper drop in oil prices than we have seen in recent years for producers to shut in their production.

"I do think that many of these assets have been builtfor 20- or a 40-year life, and I think they will produce to the end of their useful lives, said Jackie Forrest, director of research at the Arc Energy Research Institute."The oilsandsrepresents about three per cent ofglobal supply. It's a major component of the oil market today andwill continueto be so for a long time."

200 years of oilsands?

Steve Williams, the chief executive of Suncor,has said that his company will stay in the oilsands for 100or 200 years, solving carbon technological problems as it goes.

"We will earn the right to be here for the next 100 or 200 years. We have an absolutely world-class resource that's been given to us Canadians," said Williams at an anniversary event in Fort McMurray.

That's the supply side of the equation. There are significant questions about the demand side and when we will hit peak oil demand. And that's tricky to forecast.

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"It feels like in Alberta, we're in a bit of a bubble, in terms of international news," said Simon Dyer, regional director of the Pembina Institute.

"You have countries likeFrance and the U.K. announcing that they'll be banning the combustion engine by 2040. You've got China and California musing about doing the same thing.

"The idea that the oilsands are going to continue for another 100, 200 years, I wouldn't invest in that."