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The
government is building a $500,000 fireproof pilot plant at Bitumount that
should be in operation next July,” wrote William Elmer Edkin, the
project’s operating engineer, in 1946. “Unless I miss my bet,
we’ll prove to the world that oil can be extracted from the tar sand at
less than $1 per barrel, a figure that we believe would warrant a large-scale
commercial development.” Edkin did lose his bet, but his comments
reflect the rampant optimism that ultimately led to commercial success.
Edkin’s plant was one of a series of projects that began with the
efforts of a redoubtable oilsands pioneer, Robert Fitzsimmons. Confidently
naming his business the International Bitumen Company in 1927, by 1930
Fitzsimmons had constructed a small oil separation plant at Bitumount
(Fitzsimmons gave the place its name) on a federal lease. The long-term
significance of his operation and its successors can’t be overstated.
Located 89 kilometres north of Fort McMurray, the plant used a process
similar to the hot-water separation process developed by Dr. Karl Clark of
the Alberta Research Council, but without the refinements. In essence,
Fitzsimmons' approach was to heat bitumen ore in hot water, then skim off the
oily gunk that rose to the surface. These efforts were only half as efficient
in terms of oil recovery as Clark had achieved with his process, but in the
early years they generated a profit. After his company made its first
deliveries, the Edmonton Journal gushed that “those shipments of
absolutely pure bitumen are the first and second and only shipments in the
history of McMurray tar sands to be made for commercial purposes and it
certainly (augurs) well for the future development of the much talked of tar
sands of northern Alberta.”
Fitzsimmons had a passion for the oilsands and he was as stubborn as a mule,
but two storms were brewing against him. One was the Great Depression. The
other was a flood of light crude oil from Texas and Oklahoma, which was
driving down prices. In the Dirty Thirties oil prices were as low as $0.67
per barrel ($9 in inflation-adjusted terms), and markets were lousy.
Fitzsimmons’ strategy was to focus on roofing and road surfacing as the
most likely markets for his bitumen.
Fitzsimmons expanded his facilities, adding a small upgrader (it was called a
refinery) in 1937-38. By then he had spent its shareholders’
investment. Sales were slow, and cash flow problems began frustrating his
dreams. In the vernacular of the period, his company was a day long and a
dollar short.
Fitzsimmons sought support in capital markets in eastern Canada and Chicago
without success. In a final attempt to succeed, he established Tar Sands
Products Limited in 1941 to sell International Bitumen Company products. The
strategy didn’t help much, and he couldn’t secure the $50,000 he
needed to keep the plant running, eventually applying to the provincial
government for either a straight loan or an advance on bitumen for road
paving.
The Champion
After the province declined, in 1943 he sold the failing enterprise to a
hard-nosed financier from Montreal, Lloyd Champion, reserving for himself a
job as operations advisor. Frustrated, Fitzsimmons left that position in 1944
but was soon called back to get the plant, which had been sitting idle for
five years, back in operation. Once he got the plant going again, Champion
fired him. Oilsands pioneer Robert Fitzsimmons died alone in Edmonton in
September 1971.
Champion had acquired Bitumount through a holding company, Oil Sands Limited.
With Fitzimmons out of the picture, in 1944 he transferred the Oil Sands
assets to a holding company owned by himself and his wife, Ruby. He then
arranged for the province of Alberta to finance to the tune of $500,000 a new
and larger plant (costs eventually rose to $750,000), using Clark’s
hot-water process. The idea was to investigate extraction methods with
large-scale equipment. Construction dragged on until well after the war.
Premier Ernest Manning, who also had Cabinet responsibility for petroleum
resources, was the project’s champion. He arranged the funding and had
the entire legislature visit the plant in 1949, its second year of operation.
Despite his efforts, the plant soon closed. The flurry of oilsands activity,
which had climaxed during and just after World War Two, was over. The reason
was Alberta’s Leduc oil strike and the other petroleum finds that
quickly followed. Bitumen couldn’t compete with inexpensively produced
conventional light oil. Though interest waned in those years, however, it did
not die.
Manning had also commissioned an independent evaluation by Sidney Blair. The
oilsands expert, who began his oilsands career as Karl Clark’s research
assistant, based his report to a very large degree on the Bitumount project.
Published in 1950, Blair’s study concluded that oilsands development
could be economic for projects producing 20,000 barrels or more of oil per
day. He envisioned such a plant costing $43 million and generating a 5 to 6
per cent annual return on investment. He believed that such an operation
could profit in a market where conventional oil was fetching only $2.70 per
barrel, because synthetic oil is an attractive feedstock that can yield more
valuable refined products than a barrel of conventional oil. Blair concluded
that the oil sands were “a commercially viable source of crude oil that
could compete on the world market.”
The plant was down, but Lloyd Champion was not out. In 1953 he began forming
the Great Canadian Oil Sands consortium, based on his oilsands assets and his
business acumen and drive. That effort lurched from crisis to crisis until
Premier Manning brought his friend, J. Howard Pew, into the conversation. The
chairman of Philadelphia-based Sun Oil Company, Pew soon became the primary
financial backer of the project. As a result, the Great Canadian Oil Sands
plant went into operation in 1967.
Champion sold his interest in the plant around the time it was being
commissioned and, like Karl Clark and Robert Fitzsimmons, died in 1971.
However, his Oil Sands Ltd. was not liquidated until five years later.
As for the Bitumount site, it remained a place for oilsands experimentation
and testing until abandoned at the end of the 1950s. However, on December 4th
1974 the province declared it a provincial historic site, and today it serves
as an important interpretive centre and testament to Alberta’s oilsands
pioneers.
Its skeletal remains can be found in eight clusters. These range in interest
from Fitzsimmons’ small cabin to primitive industrial equipment to
garbage dumps and latrines. Bitumount may not look like much, but this is
where the modern oilsands industry began.
Peter McKenzie-Brown
Language
Instinct
Although
the writer is a director and officer of Stratabound, the thoughts and views herein
are mine only and not those of Stratabound. I am not registered in any
jurisdiction as a broker or investment adviser, so nothing herein should be
construed as advice on whether to buy, sell or hold shares of Stratabound or
any other company mentioned herein.
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