Ned Gilbert at the Calgary Petroleum club.Todd Korol/The Globe and Mail
Sixty-one years ago, a lowly Calgary employee of U.S. multinational Sun Oil Co. wrote a subversive letter to the company brass in Philadelphia.
The message spit in the eye of his local managers in Alberta.
"I have long felt that our company should take a permit to explore for oil from the Tar Sands of Alberta," 30-year-old Ned Gilbert wrote in September, 1951, in defiance of his immediate superiors, who opposed the idea of going any further than their first tentative steps in the area.
Mr. Gilbert appealed over their heads to Sun's senior team, seeking the go-ahead to lease a tract of remote, undeveloped forest north of Fort McMurray that was believed to contain 800 million barrels of oil.
That letter set off a chain reaction that resonates to this day. Now 91 and living in a retirement home in Calgary, Mr. Gilbert helped tip the balance in persuading Sun, the precursor to giant Suncor Energy, to stay in the bitumen game. The company ended up becoming the first commercial developer of the economic juggernaut now known as the oil sands.
Mr. Gilbert, a rail of a man who still stands his full 6 foot 4 inches, cheerfully accepts the title of game-changer in the oil sands. Yet back in 1951, he admits, "I had no concept of how big they were going to be."
The oil sands are now a vast, controversial resource trove, supplying more than half of Canada's oil, and constituting the third-biggest stock of oil reserves in the world after Saudi Arabia and Venezuela. The resource dominates the public agenda, igniting fierce debates over its effect on Canada's economic balance, the viability of proposed pipelines and, above all, the environment.
The story of how a low-ranking land man prodded the forerunner of one of Canada's energy giants to explore the potential of the oil sands sheds light on the painstaking, decades-long efforts that culminated in the development of what has become a defining piece of the nation's economy. Without the efforts of men like Mr. Gilbert, who looked past the high costs and challenging economics of the oil sands and saw a risk worth taking, the industry would not have gotten the start needed to hit its stride decades later just as oil prices soar amid relentless global demand. And for oil executives today, that belief in long-term success is as important as ever, as soaring costs for new developments and battles over oil transportation infrastructure test their resolve.
Suncor has emerged as the elite player among Canadian-controlled oil companies, valued at almost $50-billion. (Sun Oil divested its stake in the company in the early 1990s.) Suncor's pre-eminence stems directly from Great Canadian Oil Sands, the first commercial oil sands project, which was launched by Sun Oil in 1967.
Born in Madison, Wis., the son of the head of the botany department at the University of Wisconsin, Mr. Gilbert joined Sun Oil in the 1940s and, just after the Second World War, was posted to its tiny Calgary office in the ornate Palliser Hotel. There was a staff of just two – one manager and himself. Mr. Gilbert spent his days typing geological reports to be sent back to Philadelphia.
But then, as a land man, he got a front-row seat to Canada's emergence as an energy power after the Second World War. He was at Leduc, just south of Edmonton, in 1947, in the weeks that followed the magnificent blow-out that set off the Alberta energy boom. He also became aware of bullish geological reports on the oil sands and advances in bitumen upgrading technology.
Sun's Calgary manager, George Dunlap, opposed oil sands development. His view was the same as that of most people in the oil patch: With all the easy oil flowing from Leduc and other sources, there was no way to justify carving out pipeline capacity for a difficult, costly oil sands scheme – certainly not with oil priced under $4 (U.S.) a barrel.
Mr. Gilbert argued that the vast sands were too attractive to ignore – and his impudent opinion carried the day.
Oil patch historian David Finch, who championed Mr. Gilbert's 2011 induction into the Canadian Petroleum Hall of Fame, says this contrarian voice helped overcome rampant skepticism. As a land man whose job was acquiring energy leases, Mr. Gilbert could see the benefits of the oil sands' extremely low land costs.
And he believed in bitumen's long-term prospects even after witnessing spectacular outbursts of conventional oil from Leduc, and from Redwater, northeast of Edmonton, in 1948.
"You had to have your head turned by the events of Redwater and Leduc, with all that oil gushing out of the ground," Mr. Finch says. "And you compare that with this long costly series of events in the oil sands." Yet Mr. Gilbert still saw their potential.
While the oil sands had some strong detractors inside Sun Oil as of 1951, the resource also had supporters, including, crucially, J. Howard Pew, the key member of the controlling Pew family, and a guiding hand inside the company for decades.
Mr. Pew pushed for the oil sands from the top, often battling his own colleagues. Arguing that the United States needed every possible drop of energy security, he once vowed to his board that if they didn't support the oil sands, he would make the investment personally.
Thanks to Mr. Pew's enthusiasm, and Mr. Gilbert's pivotal letter, the young land man filed land lease applications that laid the foundation for Suncor's footprint around Fort McMurray. One of those filings was known in the company as "Gilbert's Folly"; today the land in question is the site of Suncor's big Firebag project.
During the development of the Alberta projects, Mr. Pew would take over large parts of the Jasper Park Lodge hotel. Mr. Gilbert vividly recalls one personal contact with Sun Oil's leader. In the early 1960s, Mr. Gilbert had to take a report from Calgary to Mr. Pew's Jasper residence, driving through pounding rain to meet the great man. He arrived two minutes late, to find an angry Mr. Pew pacing at the hotel entrance with a clock in his hand.
"You're late," he snapped, followed by "Do you know anything about the oil sands?" Mr. Gilbert said he did, and the two proceeded to do a back-of-the-envelope assessment of total reserves. They came up with a figure of trillion barrels – which Mr. Gilbert says is pretty close to today's estimates (although estimates are much lower when it comes to what can be extracted with current technology).
Today Mr. Gilbert is bemused by the twists of history. Mr. Pew died in 1971, never personally seeing a dollar of return from the oil sands. The politically conservative Pew family formed Pew Charitable Trusts, whose environmental arm is accused of funding activists who seek to undermine J. Howard Pew's legacy in Fort McMurray.
Mr. Gilbert also recalls walking one day into the office of Alberta's long-time energy deputy minister, Hubert Somerville, and asking about some leases in the "tar sands." Mr. Somerville said the government had decided to change the name to "oil sands," because, recalls Mr. Gilbert, "it sounds better." Thus began a public relations battle that still rages today.
After his decisive work in the oil sands, Mr. Gilbert went on to champion other causes, such as a big oil shale deposit in Saskatchewan. He claims the deposit holds the potential of countless barrels that could be extracted at the surface, rather than with the controversial latter-day approach of "fracking." But Sun was already deep into the oil sands and decided to stay out of oil shale. "I went kicking and screaming to the company but this time I did not succeed," Mr. Gilbert says. The leases ran out and they are now owned by another company.
Mr. Gilbert never rose to senior jobs at Sun Oil. After a merger, he was laid off in 1972 and never worked for Sun again. He bounced around the oil patch as an independent operator, including a short stretch working for Petro-Canada, whose reputation as an intrusive Crown corporation inspired his friends to give him a hard time. (Petro-Canada was acquired by Suncor in 2009.)
"I worked for myself, generally with a geologist, putting deals together," the old oilman recalls. "I wish I had done more. I played around with things that I still think were very interesting but never paid me anything."
But he met interesting people, such as a budding auto parts magnate named Frank Stronach, who travelled to Calgary determined to invest in oil sands projects. Mr. Stronach said he would put up most of the money if Mr. Gilbert found some other backers in the city. The oilman hunted around but couldn't raise a cent.
Proudly opinionated, with professorial tufts of white hair, Mr. Gilbert regards the oil sands much as a parent regards an unruly but gifted child.
On the resource's environmental impact, he says: "I'm sure a lot of people hate me because I got the damn thing going." Yet he hardly fits the caricature of the landscape-ravaging oilman. Early in the process, he anticipated the scrutiny the oil sands' gooey bitumen would attract. He wanted Sun to perform a baseline assessment of the water quality on the Athabasca River upstream from the oil sands, but was ignored at the time. That very issue is now at the heart of the debate over the oil sands' ecological impact.
Yet Mr. Gilbert is also a proud Albertan, who defends the projects' economic value against eastern politicians and environmental activists who would rein them in. "If I had the money, I would take a full page ad in a Toronto or Quebec paper, and list all the things we give them, and what we would not give them if they shut down the oil sands. They don't know what they're getting."
He adds that "I think the companies have the message now, and I think they are doing their best to clean it up." Still, they would not have done as much, or as quickly, he concedes, if they hadn't been pushed by critics.
Having been present at the creation of this bonanza, you might think Mr. Gilbert would be extravagantly wealthy. He's not, although he lives comfortably with his wife at the Garrison Green Seniors Community. "I don't think you get paid for being ahead of the times," he says.
Maybe it didn't matter, because he mostly loves being a gadfly of ideas. He still plays that role in the men's club of the retirement home. His current obsession is with the immense potential of gas hydrates, ice-like crystals that trap methane on the ocean floor. "No one has figured out how to get the gas to the surface without blowing themselves up," he says, excited by the challenge.
He admits his fellow retirees' eyes often glaze over when he talks, "but sometimes they listen to Ned."
And they should. People have made a lot of money listening to Ned.