History of the economic development of Canada's Energy Sector
Canada is one of the most resource rich countries in the world. Due to this abundance of resources Canada has become a world leader in the energy industry's such as, coal, natural gas, hydro, and oil. These industries have been imperative to the success of the Canadian economy and have and continue to be the backbone of the nation's economy.
INTRO TO COAL
Coal mining began in Canada can be dated back to 1639, when Canada's first mine was opened in Grand Lake, New Brunswick In 1720. However Commercial coal mining in New Brunswick would only begin in 1825. The majority of the coal was used to support the local population and was rarely exported. In western Canada mining began in the mid 19th century with the first mines opening on Vancouver Island. The Building of the transcontinental railway contributed to the early development of coal mines in western Canada. Coal mines were built near railways in interior British Columbia and Alberta, so they could easily be transported to the numerous ports in BC. By 1867, coal production had reached an annual total of 3 million tonnes, with over 2 million tonnes of coal coming from Nova Scotia and the remainder from western Canada. Western Canada became the leader in coal production in 1911. Factors Contributing to the success of the west were the transcontinental and other railways being built in the region allowing for western Canada to extract its abundance of coal more efficiently than ever.
By the mid 19th century Coal supplied half of Canada's energy needs. However, in 1947, oil and natural gas began to be produced commercially. The introduction of this new energy source had a major impact on the coal industry. Beginning in 1950, almost all coal used for domestic heating, industrial energy and transportation energy began to be replaced by petroleum and natural gas. This sudden drop in demand for coal resulted in the laying off of thousands of workers, the complete shutdown of coal mines along with towns which had been built around these mines to turn into ghost towns.
However, the fate of the coal mining industry was not sealed. In the 1960s coal mining saw a major expansion across western Canada. This sudden expansion of coal came from Canadian producers accepting long term deals with Japan to supply millions of tons of coal annually. This led to the re-opening of closed mines and the development of new mines in western Canada. The sudden expansion was also fueled by Alberta and Saskatchewan beginning to use coal for the production of electricity. These two major factors were able to rescue the coal mining industry from the economic downturn it had suffered just 10 years prior. Throughout the 1970s, the coal industry continued to expand as major increases in the price of oil allowed coal to become a viable option as an alternate energy source. In the mid-1970s producers of steel such as Japan looked to further diversify their sources of supply for coal who needed it to operate their factories. This led to more expansion of the Canadian coal industry in the 1970s and early 1980s. New mines continued to open with new railway systems and ports being built to support the industry.
Following an expansion of the coal industry in the 1970s, coal production has remained stable since 1990. As of 2010, coal supplied about seven per cent of Canada's total energy and produces 12.6 per cent of the country's total electricity. Canada now produces more coal than it uses and because of an ever-growing worldwide demand for coal. Almost half of Canada's coal is exported, with a majority of it going to Asian countries where demand for coal is high.
The coal industry fuelled economic expansion, particularity in western Canada due to the proximity of Asia and its abundance of the resource. It aided the construction of infrastructure in western Canada as it was necessary to export the resource. Coal was essential in the development of western Canada and continues to benefit the economy as the exports of coal remain stable.
NATURAL GAS AND OIL INTRO
The first oil well was dug in 1858 in North America at Oil Springs, Ontario. Following that there would be a massive expansion of the industry and by 1870 Canada had 100 refineries in operation with the majority of the exports going to Europe. However, these Ontario Oil fields were very shallow and small so by 1900 Ontario oil production began to decline. Although the eastern Canadian oil production had begun to decline, Oil Production in the West had just begun.
In 1914, Turner Valley was the first significant field found in Alberta. The project however would become a missed opportunity because due to the lack of regulations at the time 90 per cent of the gas was burned off to extract the small amounts of petroleum. The gas burned is worth billions today. A similar situation occurred in 1930 when crude oil was found. Again, a large amount of this was burnt off and as a result Turner valley was only able to extract 12 per cent of its oil.
The Alberta government became upset by continued waste of the oil and resources, so in 1931 it passed the Oil and Gas Wells Act, followed in 1932 by the Turner Valley Conservation Act. These Acts aimed to reduce the wasteful burning of natural gas and loss of valuable resources. Unfortunately, these acts would be declared unconstitutional and the wasteful burning continued until 1938 when the provincial government created the Alberta Petroleum and Natural Gas Conservation Board to initiate conservation across the province and did it with success. The Boards regulation of Albertan oil and gas became the model on how other provinces would regulate this industry.
By the end of 1945 Canada was importing 90 per cent of its oil from the U.S. However, in 1947 when a large oil field was found just outside of Leduc, Alberta. Geologists soon began to make major discoveries of oil across Alberta. The Alberta oil rush began, and as even bigger discoveries were made. This produced a large surplus of oil which had no immediate market. In 1949, Imperial Oil applied to build the Interprovincial oil pipeline which was completed in 1950 to the port of Superior, Wisconsin. The reason the pipeline was built into the U.S. is because the Canadian Government was focused on equalizing the trade balance between the U.S. In the same year the Transmountain pipeline which was built from Edmonton to Vancouver. These pipelines allowed oil to reach much larger markets and the surplus in oil fell.
After the big discoveries of the 1940s and 1950s the U.S. saw the potential of Albertan oil to be imported in large quantities. This resulted in the U.S. giving preference to the U.S. gave preference to oil imports from Alberta. The U.S. did this through a policy which would treat Alberta like it was a State. This meant that it was more profitable to export the oil than to sell it domestically. This lead to the producers asking for access to eastern Canada so that they could keep the oil in Canada and calculated that they could do it for the same price as importing it. However, the Quebec government decided they would rather continue to import which resulted in the National Oil Policy of 1961. This policy created a line along the Ottawa river which gave Canadian producers exclusive rights to the areas to sell oil to the west of the line, while east of the line could continue to import it. The aim of the Policy was to promote Albertan oil domestically. This policy divided Canada's oil market into two which created price differences between the east and the west. In general Canadians who lived on the west side of the line were subject to higher prices than the east because the Albertan oil was more expensive to produce. The higher oil prices in the west would raise the cost on the majority of products due to the fact many of them used oil production and transport.
By 1973 Canada's economy was suffering from inflation and rising oil prices. To counteract this Pierre Trudeau asked the western provinces to put a freeze on all oil prices as they were rapidly rising each day. This meant that the western provinces were now seeing drastically lower prices than the east. To balance the price across Canada the government imposed a 40-cent tariff on every barrel of oil exported. These funds were then reallocated to the east to account for the higher oil prices. Alberta premier announced shortly after than they would revise the old Royalty policy to one that reflected international oil prices.