Historical Development - British Columbia

Before the province of British Columbia existed, the area was originally part of the Northwest Territories. In 1875, Alfred Selwyn, the Director General of the Dominion Geological Survey, led the first geological expedition into British Columbia’s Peace River country. He mapped surface outcrops, faults, and topography of the foothills. The expedition geologist George Dawson described the potential of oil and gas in the area, but his research did not gain the notice of any existing oil companies. At the time, British Columbia was an importer of oil, usually from the Standard Oil refinery in Ohio. In the 1890s, Imperial Oil set up a terminal in Vancouver to ship in oil. Union Oil then set up a large tank at Coal Harbour as the sea-going and coastal vessels converted from coal to oil. There was little interest in any petroleum extraction. This would change with the advent of the automobile facilitating the need for a local supply of oil. British Columbia’s southeast was explored extensively, resulting in forty wells being drilled after the 1880s but no major reserves being uncovered.

The first documented British Columbia well, Akamina #1, was drilled in 1909 to 383 metres (1256 feet), with oil shows at 182 metres (598 feet) and 381 metres (1251 feet). Further geological studies of the interior led to the belief that there existed massive beds of deposits that may retain oils. The Kootenay area was gaining worldwide notice as the place to drill. Several attempts were made to drill for the expected massive oil field, with wells flowing up to twenty barrels of oil per day. Wells were drilled by a cable tool, which literally dropped a heavy chisel bit on the end of a cable, thereby chipping a hole down through the layers of bedrock to the porous reservoir below. The method was dangerous and slow but information on zones was visible in the rock chips that were scooped up to the surface. In the ocean, oil and tar seeps on northern Graham Island were a constant source of interest through the early 1900s. Between 1911 and 1915, drilling was conducted near northwest Graham Island. An early oil-shale pilot plant reported that the black tarry shale could yield about twenty gallons per ton.

In the 1880s the Canadian Pacific Railroad was drilling for coal and had some gas show near Haney. In 1904, a natural gas well near the mouth of the Fraser River at Steveston was used to light the streets for several years. Drilling occurred over a wide area and up the valley as far as Chilliwack. A refinery had been built at Port Moody and another across the inlet in 1914. An Imperial Oil find at Peace River in 1922 was considered British Columbia’s first commercial gas discovery, with rates reported up to 12 million cubic feet (339,600 cubic metres) per day. However, only a handful of deep wells have been drilled in recent history, none of which are commercial. Instead of extinguishing the exploration interest with its abundant fresh water, each new well provided data on geochemical makeup and depositional history that continues to fuel interest in British Columbia’s Petroleum industry. A current major site for natural gas is the Tofino Basin off of Vancouver Island.

Many believe the slow development of the oil and gas industry in British Columbia can be attributed to the provincial governments’ current monopoly. In the 1920s, the provincial government felt the potential resources of northeast British Columbia should only be developed by the government and froze all activity for the next twenty five years. The last well drilled by the government in northeast British Columbia was Pine River #1 between 1940 and 1942. Minor exploration continued in other British Columbia basins for the next two decades but not much happened until 1947.

British Columbia’s oil industry truly began after the Second World War. Drilling began in the Queen Charlotte Island region in 1949. Massive coal based natural gas reserves were uncovered in the area, which led to the industry concentrating on offshore drilling efforts. In 1959, British Columbia declared a Crown reserve over oil and gas resources in the area east of a line running north-south three miles seaward of Queen Charlotte Islands and Vancouver Island. Under the Petroleum and Natural Gas Act, exploration permits for oil and gas in a Crown reserve could only be granted through public auction. From 1962 to 1966 British Columbia Crown reserve over offshore oil and gas resources was cancelled to encourage companies to apply for exploration permits. Many in the oil industry believed the provincial hold on rights was over.

However, in 1966 British Columbia reinstated the Crown reserve over offshore oil and gas resources to the area beginning at the low-water mark seaward to the outer limits of Canada's Territorial Sea. In 1967, British Columbia declared a Crown reserve over offshore mineral and placer minerals in the same area as the offshore oil and gas Crown reserve. The ownership of these reserves became hotly debated between provincial and federal governments. In 1967, the Supreme Court of Canada declared that the Territorial Sea off British Columbia, outside of bays, harbours, and inland waters, belonged to Canada. As a result, Canadian government’s policy of oil exploration was applied to holdings in British Columbia.

Under the heavy political background, Imperial Oil and Shell Canada were able to gain a foothold in the industry. In 1967, Shell Canada began a drilling program off Barkley Sound, Vancouver Island. Over the next two years, fourteen wells were drilled in the offshore in the region from Barkley Sound north through Queen Charlotte Sound and Hecate Strait. The power struggle that began between British Columbia and the federal government over oil and gas control continued under the auspice of environmental issues. With the growth of industry came concerns for the environmental impact from the oil and gas industry. The government of Canada declared that no drilling or exploration would occur in the Strait of Georgia. British Columbia suspended work obligations on provincial permits in the same region until the question of ownership of the seabed in Strait had been addressed.

In 1976, British Columbia Court of Appeal decided the Strait of Georgia was owned by British Columbia. Without limiting its earlier Crown reserve, British Columbia designated that all oil and gas in the area landward of a line drawn off the west coast of Queen Charlotte Islands south to the west coast of Vancouver Island was reserved to British Columbia. After many years of legal battles, the Supreme Court of Canada decided in 1984 that the Strait of Georgia was owned by British Columbia.

The issue laden oil and gas industry of British Columbia continues to this day. From 1984 to 1986, an independent Federal-Provincial Environmental Review Panel was established to ascertain any environmental and socio-economic effects of offshore oil and gas exploration. The panel recommended exploration could proceed if ninety two specific recommendations were met. The governments of British Columbia and Canada conducted negotiations on management and jurisdiction over offshore oil and gas exploration and development. The Pacific Accord was developed to address many of the issues around which government controlled natural resource on the Pacific coast.

In 1989, British Columbia decided that there would be no drilling offshore for at least five years. Canada announced it would not consider any development in the offshore until requested to by British Columbia. With these decisions, British Columbia’s sovereignty over their oil and gas rights was supported by the federal government. The environmental impact of off shore drilling remained a hotly debated topic. In 2001, British Columbia appointed an independent scientific panel to examine whether offshore oil and gas could be extracted in a scientifically sound and environmentally responsible manner. An Offshore Oil and Gas Task Force visited nine northern coastal communities to listen to views of communities, local residents and First Nations Peoples. When the report was finished, the goal was to decide where and how these off shore reserves could be tapped with minimal impact on the fragile ecological system off the coast.

The oil and gas industry is regulated by the BC Oil and Gas Commission. Their mandate was to regulate the industry for the benefit of the people and balance the environmental, economic, and social developments surrounding the exploration and acquisitions of oil and gas, on land and sea. In 1998, the British Columbia provincial government and the Canadian Association of Petroleum Producers (CAPP) were working together and developed a plan to increase production and stimulate investment in the oil and gas industry in the province. One of the components of the plan, called Oil and Gas Development Strategy, was the creation of the Oil and Gas Commission (OGC), a crown corporation. In August of 2005, Terasen (previously known as B.C. Gas) was acquired by the Houston based company, Kinder Morgan, whose bid for the struggling Terasen may result in a substantial growth in the gas industry in British Columbia. With continued effort and cooperation, the oil and gas industry in British Columbia can expand within a framework of sustainability economically and environmentally.