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Petroleum and Natural Gas
The first important revenues from the hydrocarbon
group (i.e., petroleum and natural gas) appear to
have come from what was known as the Coste
Agreement, entered into in 1911, with one Eugene
Coste, founder of the gas company that was later to
serve Calgary with natural turned over to the gas.
It was under this agreement that the Company gas
company its interests in exploratory welts it had
drilled (originally in a search for water) in the
vicinity of Medicine Hat, Brooks and Bow Island, and
the original pipeline was built from the latter
point in 1911- 12 to supply the City of Calgary.
Shortly thereafter, in 1914, the discovery of oil
in Turner Valley by the team of A.W. Dingman and WS.
Herron sparked interest in oil rights owned by the
Company Although the 1914 oil boom quickly subsided
as a result of the outbreak of WWI, the more
permanent segment of the oil industry (notably
Imperial Oil), continued to work persistently in the
area, mainly through a subsidiary known as Calgary
Petroleum Products Ltd.
As a result of Imperial Oil's persistence, the
famous ''wonder well'' (Royalite No. 4) was
eventually discovered - incidentally on Company-
owned rights (W½ 7-20-2 W5) in 1924. This well
yielded to the Company royalties of more than
$400,000 during its active 5½-year life. The bulge
in mineral revenues shown on the attached statement
for the period 1924- 29 is directly traceable to
this well.
It was during this period that the Ohlson Case
had its origin. In the early days Turner Valley was
regarded as a ''wet gas'' or ''condensate'' field -
that is to say the effluent consisted of a heavy wet
gas from which quantities of a highly volatile
liquid (then referred to as ''naphtha'' but actually
a light-gravity petroleum) could be extracted by
simple separation at the wellhead. In this instance
the Company's mineral title was limited to Coal and
Petroleum. The practice was for the operators to
Place separators at each well, the liquids being
produced into a stock- tank, and the gas piped away
to a convenient spot and ''flared''. In the Ohlson
case, the owner of the minerals other than coal and
petroleum, one Carl Ohlson, contended through his
solicitor (M.M. Porter) that the Company and its
lessee, Imperial Oil, should be compensated for it.
After were wasting his gas and that he considerable
negotiation, an arrangement was arrived at whereby
Ohlson was to be paid a royalty of 2½% of the value
of the substances produced and marketed, this to be
shared equally by the Company and Imperial) i.e.,
Imperial paying a royalty of 13¾% to the Company,
from which the Company paid 2½% to Ohlson, thus
netting 11¼%. In other parcels in the vicinity under
lease to Home Oil Co., Home solved the problem by
simply purchasing the surface owner's entire rights
for cash, and made no claim against the Company This
action, along with the settlement in the Ohlson
case, served to delay for many years the litigation
which ultimately was entered into (see reference to the
Borys case)
in an effort to settle the question
of ownership of mineral rights.
In the following years, interest in the search
for oil in Alberta waxed and waned, due in part to
the efforts of brokers and promoters, but it was not
until 1939 that the interest of the major oil
companies became evident. Imperial Oil, of course,
being a Canadian-based company had been conducting
continuous exploration in Saskatchewan and Alberta,
and in 1942, entered into the first of our so-called
Sliding Scale Reservation Agreements (PR 128) under
which they undertook to diligently explore for oil
and/or gas in the general areas covered by the
reservation. This and other similar reservation
agreements subsequently granted to other major oil
companies, were on the basis of a fee of 10¢ per
acre per annum on the first 200,000 acres, 5¢ per
acre per annum on the next 200,000 acres, and 2½¢
per acre per annum on the excess over 400,000 acres.
The reservations carried the right on the part of
the oil company to take under lease lands upon which
they wished to actually drill, terms of the lease
being more or less standard for all companies and
providing for $1.00 per acre per year rental, and a
royalty of 12½% on production.
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