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"Decades of Discovery"

by Ken Fisher

Every time you drive down a paved road, smear bug repellent on your body, hurtle down the ski hill or take Echinacea to fend off a cold, you can thank, at least in part, the Alberta Research Council (ARC). As it celebrates its 80th anniversary this year, the organization can stand on its record of innovation even as it broadens its reach and purpose.

The ARCs humble beginnings, not surprisingly, are rooted in the province’s resources. Founded in 1921 by a provincial government order-in-council, making it the first provincially funded research council in Canada, the ARC’s mandate was to map natural resources and research ways to exploit them. The ARC charted Alberta’s first geological map, identifying coal deposits, mineral formations, and potential oilfields. Dr. Karl Clark, an ARC chemist, pioneered the hot water extraction, a process which laid the foundation for the operations of energy giants Syncrude and Suncor.

"I think the leaders of the time saw there were enormous opportunities; they could see the oilsands oozing out of the banks of the Athabasca River and they knew we had this tremendous resource base," says John McDougall, managing director and CEO. 'They realized it would be important for people to know what was there and also have some idea of how they could exploit it. It was a remarkable decision."

As the organization evolved, its purpose has evolved as well. Today the council has expanded its areas of expertise to include biotechnology, health services, manufacturing, forestry, and agriculture. Its focus is narrowed to contract- or fee-based applied research and development for private enterprise. It also co-ventures with partners to develop new technologies, earning a return on investment from the Alberta commercialization of new products and processes.

"The ARC is a unique organization - we're a business where our driving ambition is to develop and commercialize technology for the benefit of Alberta," McDougall says. "We are constantly looking for new ideas and new innovations that we can apply to solve real problems that industry and government face.

But the council faced major hurdles early on. Research slowed during the Depression era and government funding dried up for the next decade. The University of Alberta took over the ARCs funding, work and staff in 1933. It wasn't until the onset of the Second World War, and the subsequent increase in the demand for energy, that interest in oilsands research was rejuvenated. The immediate post-war era was a time of expansion for the ARC and, coinciding with the discovery of oil in Leduc in 1947, those years saw the province's economic base shift from agriculture to industrial and engineering services. By 1956 the ARC had grown to nearly 100 staff and its own laboratories opened on the U of A campus. That year also marked the beginning of the hail project - geared to studying the effects of summer hail - which would last for 30 years. One important discovery during the hail study was the ingredient used in artificial snowmaking.

In the 1960s, the ARC established a product research and development group while the 70s saw the beginning of contract research. Great Canadian Oil Sands, now Suncor, opened its plant near Fort McMurray in 1967, using technology developed by the ARC to unlock the oilsands potential - resulting in a $5-billion industry in Alberta.

"With the development of oil after the war, what happened was people began to see industrial opportunities," McDougall says. "So the research council moved into a number of areas related to that."

Although never a big drain on the public coffers, an indication of the ARC's importance is the fact that the council reported directly to the premier right up to 1971 and in its early years the premier served as its official chairman. But by the time the ARC moved into its new home at Edmonton Research Park in 1986, the government was reeling from plummeting energy prices - and the provincial coffers were bare. This adversity forced the ARC on the path to independence, where it would rely less on government funding and take a more business-like approach by earning its revenues from contracts with the private sector.

By 1990 the ARC had signed more than 20 formal agreements and was participating in a number of joint ventures with industry and other R&D organizations, while ARC scientists were taking on work from countries such as Cuba and Japan. With the government in full privatization mode, the ARC kept in step with the times by privatizing parts of its operation and integrating some activities with the Alberta Environmental Centre in Vegreville. The move brought the corporation a wide array of agricultural capabilities and strengthened its own environmental research. It was also a time of confusion and uncertainty for a staff that endured three presidents in four years and four different board chairs during the '90s. Former board member Gerald Tertzakian says there was a lot of soul searching going on over the organization's role.

"There was a lot of discomfort for a lot of people; it was a time when there was a lot of consolidation and a lot of layoffs," he says. "You can't run a business like that. You need continuity. You need stability. But the good part of it was the really hard-core work never suffered." Tertzakian says part of the reason for the turnover was that the ARC's ability to hire the best talent was hampered by the provincial government's policies on restricting wages and the organization couldn't compete with the private sector. "That was a big problem; we couldn't pay the CEO above a certain government level - it was about half of what most CEOs were getting," he says. "We really couldn't do anything seriously autonomous unless the government OK'd it."

Eventually the ARC restructured into four new divisions, which also brought about a new philosophy. Today McDougall insists the council is reducing its dependence on the provincial government as a source for funds and has undergone a 180-degree change in thought process.

"What we had to do was determine what was the most effective use of public money and what role we played in the province," McDougall says. "The real question becomes how much should we be a business as opposed to a government laboratory? If you think of yourself as a government laboratory, you tend to think in terms of 'how do I spend the money that is provided to me?' If you think of it like a business, you try to think of how you can go out and acquire the resources to solve problems for people. It's a different mindset."

Tertzakian says while the ARC is more entrepreneurial today than it once was, it's still under the governments thumb. The council is still partially funded by the Alberta Science Research Authority (ASRA), which is under the Ministry of Innovation and Science. Still, he sees the ARC as a benefit to the province and believes its absence would be felt.

At the same time as the restructuring, the board noticed the organization was lacking a system to market the technology being developed. The ARC combined talents with government and industry to open a technology commercialization office in 1998 with the goal of reducing the time it takes for technology to get to market. The decade closed with an $11-million research centre opening in Calgary and a $3-million renovation to the facilities at Devon, near Edmonton.

The organization has raised its profile outside of Canada in the last 20 years as it has started developing technology and researching problems for clients in Europe, Asia and the U.S. This is in addition to performing about 5% of the $1.5 billion in research and development conducted in Alberta. "The ARC has attracted a lot of international attention because of the specialized research capabilities in a number of areas," says Martin Kratz, the technology law team leader for Bennett Jones’ Calgary office. "They have really hit their stride; their revenues really show how effective they have been in working together with the business sector, both in Alberta and elsewhere." But should the Alberta government be giving money to an organization that develops technology to be used outside of Canada? Kratz says there is a benefit to Alberta in having the scientists and engineers working and living here. "That level of expertise is available to Alberta businesses and those individuals pay taxes and contribute to our community. They earn their keep by having that expertise available that Americans, Europeans, Asians will pay for."

Carmen Forster, director of corporate relations for the ARC, says by having international partners, the organization is able to sell technology that isn't used in Alberta anymore. "The government has invested a tremendous amount of money in oilsands technology and it can bring more revenues to the province by taking these technologies and giving them a second life."

The ARC'S focus on technology commercialization resulted in revenues increasing 1,400% over five years, according to the organization's annual report. Kratz, chairman of the Alberta Science and Technology Leadership Awards Foundation, adds the ARC is doing exactly what it should be - focusing on being world-class in specific areas, rather than trying to be good at everything.

"They are eminently relevant to the economy and business community," he says. "They have made investments in strategic technologies that ultimately they transfer out to the marketplace or can be spun out into new companies."

Recent projects being commercialized in Alberta and beyond include environmentally safe plastic, developed with Edmonton's Poly Pacific International, and a new source of remote power generation - a solid-oxide fuel cell - developed in partnership with Calgary's Global Thermoelectric Inc. Heat-reducing products, developed by the ZiMARC team, a unit of the ARC, are found aboard the International Space Station. Though it is one of Alberta's biggest research and development spenders on its own, Syncrude Canada turns to the ARC for its greenhouse infrastructure and agricultural expertise. Wayne McKee, director of research for Syncrude, says it's not possible for his company to do some types of environmental testing, specifically soil and vegetation development, without the help of the ARC. "We like to keep our business in Alberta if we can, and they are ideally situated to meet that need," McKee says. "They're aggressive and have a lot of characteristics that are attractive to us." McDougall says one reason the average Albertan doesn't know much about the ARC is because of the long lead time between when research is done and when the product reaches the marketplace. But, he adds, the organization is results-oriented and focuses on the long-term good of research to the public rather than immediate successes. For the record, the ARC has approved 56 new investment projects, signed nine new licensing agreements and licensed three new technologies.

Critics complain that the provincial government defers calls for corporate tax credits for R&D investment by pointing to its contribution to the ARC. However, in the final analysis, the best proof of whether the ARC is relevant and worth the $35 million Alberta taxpayers contribute each year, is the assessment by its customers in terms of sales and job creation. Since 1993, the ARC has measured its contribution to the Alberta economy by surveying its customers and asking them to assess the jobs and profits attributed directly to the technology developed by the ARC. In 1995-96, the ARCs impact was estimated at $90 million and 700 jobs. Officials expect the numbers for 2000-01 to be $180 million and 810 jobs.

McDougall says the ARC's future looks bright because the organization will build on its traditional strengths in energy research and development while steadily increasing its global profile. "In business you're really only going one of two directions - forwards or backwards," he says. "Staying still just doesn't happen."

Hot Projects

SMART (System of Modular Assessment and Rehabilitation Tools): ARC and Tenet Medical Engineering in Calgary developed innovative computer-based physical assessment equipment that will help cut employee injury cost and minimize long-term costs of workers' compensation. The system measures strength and range of motion in selected limbs to provide a reliable assessment of a person's physical abilities.

Diabetes project: Diabetes patients, who compose 6% of the Canadian population, may be able to better manage their own care and increase their quality of life, thanks to ARC and Calgary Regional Health Authority. The project will empower patients and set up an information system using the Internet to promote education for diabetics.

Telephone pole preservation: A water-soluble glass rod, developed by ARC and Genics Inc., promises to boost the life expectancy of in-ground wooden utility or telephone poles from 35 to 40 years to 80 to 100 years. At an average cost of $1,000 per pole, COBRAROD could result in substantial savings for utility companies.

Straw nutrition: Jaydar Manufacturing Ltd. and ARC devised a revolutionary system to convert cheap straw into high quality livestock feed. The system injects liquid nutritional supplements through probes, distributing it evenly throughout the bale, saving farmers an average of $39.60 per cow over a standard winter.

Canola disease and pest control: An ARC program to manage blackleg disease in canola has saved farmers more than $40 million a year for the past decade, in addition to disease monitoring and seed testing, council scientists have conducted research on cultural and chemical controls, and helped to register a fungicide.

Pulp mill sludge: Farmland treated with pulp and paper sludge has produced crop yield increases from two to five times greater than control land for at least six growing seasons. ARC is continuing to investigate whether the sludge can economically replace commercial fertilizers to achieve a target yield.

Oilfield toxicology: ARC is a leader in the toxicology of oil and gas field pollution as it pertains to livestock and is the primary provider of research and development on oil and gas issues for the provincial agriculture department. The expertise is now being extended to other industry and government partners.

Water shut-off clay gels: Six barrels of water are produced for every barrel of oil recovered, making the handling and disposing of water one of the petroleum industry's billion-dollar challenges. Using "swelling clays" the ARC has developed a new process now being tested by operators that involves injecting clay slurry into reservoirs which spontaneously turns into a clay gel that plugs water conduits.

Trap-testing simulation: Advance in computer modelling technologies at ARC, developed with the Fur Institute of Canada and the National Research Council, will virtually eliminate the use of animals for trap testing and allow for the continued development of more humane traps.

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