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UBC Theses and Dissertations

Class and state in the Canadian petroleum industry Wake, Drew Ann 1984

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CLASS AND STATE IN THE CANADIAN PETROLEUM INDUSTRY By Drew Ann Wake B.A. , The U n i v e r s i t y o f B r i t i s h Co lumb ia , 1984 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF THE FACULTY OF GRADUATE STUDIES (Department o f An thropo logy ) We a c c e p t t h i s t h e s i s as con forming to the r e q u i r e d s t anda rd THE UNIVERSITY OF BRITISH COLUMBIA March 1984 Drew Ann Wake MASTER OF ARTS i n In presenting t h i s t h e s i s in p a r t i a l f u l f i l m e n t of the requirements f or an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e for reference and study. I f u r t h e r agree that permission for extensive copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the Head of my Department or by h i s rep r e s e n t a t i v e s . It i s understood that copying or p u b l i c a t i o n of t h i s t h e s i s f o r f i n a n c i a l gain s h a l l not be allowed without my w r i t t e n permission. Department of The U n i v e r s i t y of B r i t i s h Columbia 207S Wesbrook Place Vancouver, Canada V6T 1W5 ABSTRACT T h i s t h e s i s o u t l i n e s t h e changes t h a t t o o k p l a c e i n t h e Canadian p e t r o l e u m i n d u s t r y between t h e y e a r s 194 7 and 1965. B e g i n n i n g w i t h t h e f i r s t d i s c o v e r y o f o i l a t Leduc, i t f o l l o w s t h e development o f o i l and n a t u r a l gas as t h e y a r e i n t e g r a t e d as s t a p l e s i n t o t h e N o r t h A m erican market. The t h e s i s d e l i n e a t e s a l t e r a t i o n s . i n t h e c l a s s s t r u c t u r e o f t h e i n d u s t r y d u r i n g t h i s p e r i o d and examines t h e r o l e t h a t t h e f e d e r a l and p r o v i n c i a l government's p l a y e d i n t h i s p r o c e s s . The t h e s i s c o n c l u d e s t h a t t h e c l a s s s t r u c t u r e o f the Canadian p e t r o l e u m i n d u s t r y became more complex and fragmented i n t h e post'-Leduc e r a . The f o r e i g n - b a s e d , i n t e g r a t e d companies, because t h e y had s u p e r i o r a c c e s s t o c a p i t a l , e x p e r t i s e and t e c h n o l o g y , became t h e s t r o n g e s t segment o f t h e i n d u s t r y . / a b s o r b i n g many o f t h e Can a d i a n companies. The n o n - i n t e g r a t e d , f o r e i g n companies d i d n o t meet w i t h g r e a t s u c c e s s . O t h e r companies f l o u r i s h e d because of. t h e i r o w n e r s h i p o f m i n e r a l r i g h t s o r t h e i r r e l a t i o n s h i p w i t h f o r e i g n i n v e s t m e n t companies. The f e d e r a l s t a t e p l a y e d a fu n d a m e n t a l r o l e i n t h e development o f t h e p e t r o l e u m i n d u s t r y t h r o u g h t a x ( i i ) p o l i c i e s that gave incentives to foreign, p a r t i c u l a r l y American, investors and through an export p o l i c y that favoured the import/export patterns of the foreign, integrated companies. The p r o v i n c i a l government assi s t e d the growth of the same segment of the industry by creating mineral r i g h t s p o l i c i e s that favoured w e l l -c a p i t a l i z e d firms. ( i i i ) TABLE OF CONTENTS I : INTRODUCTION 1 I I : DEBATES IN CANADIAN POLITICAL ECONOMY 7 A: The F o r m a t i o n o f the B o u r g e o i s i e B: The Role o f t h e S t a t e C: Toward a P o l i t i c a l Economy o f the Canadian O i l I n d u s t r y I I I : CLASS AND THE CANADIAN PETROLEUM INDUSTRY: 1947 ... 55 A: The I n t e g r a t e d P e t r o l e u m Companies B: The N o n - I n t e g r a t e d P e t r o l e u m Companies IV: THE ROLE OF THE STATE 68 A: F e d e r a l T a x a t i o n P o l i c y 1. D i r e c t Investment 2. Investment by F i n a n c i a l I n s t i t u t i o n s 3. T r u s t Money and Tax S y n d i c a t e s B: R e s e r v a t i o n s and Leases C: F e d e r a l E x p o r t P o l i c y V: CLASS AND THE PETROLEUM INDUSTRY: 19 65 143 V I : CLASS AND STATE IN THE CANADIAN PETROLEUM INDUSTRY: SOME THEORETICAL OBSERVATIONS 175 A: The B o u r g e o i s i e and the P e t r o l e u m I n d u s t r y B: The S t a t e and the P e t r o l e u m I n d u s t r y C: P e t r o l e u m i n a S t a p l e s Economy ( i v ) LIST OF TABLES TABLE 1: C a p i t a l i z a t i o n o f Canadian N o n - I n t e g r a t e d O i l Companies 63 TABLE 2: Land H o l d i n g s o f S e l e c t e d N o n - I n t e g r a t e d A l b e r t a - b a s e d O i l Companies. 100 TABLE 3: D r i l l i n g C o n s o r t i a E s t a b l i s h e d by A l b e r t a -based N o n - i n t e g r a t e d P e t r o l e u m Companies.. 102 TABLE 4: World O i l Reserves as a t End 1957 115 TABLE 5: Crude O i l R e c e i v e d a t Canadian R e f i n e r i e s . . . 130 TABLE 6: O r i g i n s o f U.S. Imports o f Crude O i l 131 TABLE 7: O p e r a t i o n s o f I n t e g r a t e d P e t r o l e u m Companies 146 TABLE 9: N o n - I n t e g r a t e d O i l Companies: 1965 TABLE 10: Independent O i l R e f i n i n g Companies: 1965.....169 TABLE 11: A Comparison o f P r i c e I n c r e a s e s o f s e l e c t e d Items :1961-71 171 (v) I: INTRODUCTION In his c l a s s i c work The Fur Trade i n Canada, Harold Innis sought to understand the growth of the fur trade and the repercussions i t had for the subsequent development of Canadian society. By following the fur trade from i t s b i r t h to i t s withering, Innis was able to show that diverse facets of New World l i f e were i n d e l i b l y marked by the passage of the fur economy. The scattered populations of beaver forced the branched organization of the great trading companies. The Hudson's Bay Company and the Northwest Company defined demography, race relations and the accumulation of p r o f i t not only i n t h e i r own time, but for the century that followed. This, then, was one of the fundamental contributions which Innis made to Canadian thought: the demonstration that the present i s bound to the past, not by a thin thread, . but by deep st r u c t u r a l t i e s . This thesis i s an examination of a newer raw resource -petroleum - and the e f f e c t which i t s exploitation has had on Canadian class structure. Following Innis, I w i l l attempt to show that the development of a new resource brought an organi-zation of c a p i t a l i n the form of the international petroleum Industry Into f u l l flower i n western Canada; that t h i s new force caused profound changes i n the Canadian class structure, in the accumulation of c a p i t a l and the organization of 1. Canadian s o c i e t y . I b e l i e v e i t i s p o s s i b l e t o show t h a t d u r i n g the e a r l y p e r i o d , 1947 t o 1965, t h e s t a g e was s e t f o r many of t h e phenomena t h a t a r e b e s e t t i n g t h e p e t r o l e u m i n d u s t r y i n t h e 1980s: t h e r i s e o f a s m a l l group o f power-f u l Canadian-based o i l companies, t h e e x p a n s i o n o f m u l t i -n a t i o n a l o i l companies i n t o energy c o n g lomerates and t h e c r e a t i o n o f a s t r o n g , A l b e r t a - c o n t r o l l e d s e r v i c e s e c t o r . F i n a l l y , I w i l l a ttempt t o show t h a t t h e r e has been a con-t i n u i t y i n t h e e x e r c i s e o f economic power i n Canada from the e a r l i e s t days; t h a t t h e companies t h a t n u r t u r e d the f u r t r a d e and b u i l t t h e r a i l l i n k s t o the P a c i f i c con-t i n u e t o reap p r o f i t s from t h e new energy s t a p l e s o f t o d a y . I n a d d i t i o n t o h i s s t r o n g sense of the c o n t i n u i t y o f our h i s t o r y , H a r o l d I n n i s has l e f t Canadian s c h o l a r s a second l e g a c y : h i s e l a b o r a t i o n o f t h e s t a p l e s t r a p . Throughout h i s c a r e e r , I n n i s p l o t t e d t h e development o f a s e r i e s o f s t a p l e s i n d u s t r i e s - t i m b e r , f u r s , m i n e r a l s -c o n c l u d i n g t h a t t h e r o l e o f s t a p l e - e x p o r t i n g n a t i o n would not e a s i l y be c a s t o f f . U n l i k e h i s c o u n t e r p a r t , W.A. M a c i n t o s h , who saw t h e s t a p l e e x p o r t s as t h e f i r s t s t age i n t h e development o f a s t r o n g , i n d u s t r i a l economy, I n n i s f e l t t h a t s t a p l e s would never g i v e r i s e t o a s t r o n g manu-f a c t u r i n g s e c t o r . I n n i s ' work l e d him t o b e l i e v e t h a t Canadian i n d u s t r y would grow o n l y i n t h o s e a r e a s t h a t d i d not 2. t h r e a t e n the i n d u s t r i a l machine o f t h e "Mother C o u n t r y " . Energy has been d i r e c t e d toward th e e x p l o i t a t i o n o f s t a p l e p r o d u c t s and t h e tendency has been c u m u l a t i v e . The raw m a t e r i a l s u p p l i e d t o t h e Mother C o u n t r y s t i m u l a t e d m anufactures o f t h e f i n i s h e d p r o d u c t and a l s o o f t h e p r o d u c t s which were i n demand i n t h e c o l o n y ( I n n i s , 1967: 385). I n I n n i s 1 v i e w , f a r from c o n t r i b u t i n g t o t h e development o f a f u l l - f l e d g e d i n d u s t r i a l economy, s t a p l e s e x p o r t gave r i s e t o a growing c u m u l a t i v e dependency on the i m p e r i a l c e n t r e . T h i s p o s t u l a t e became known as t h e ' s t a p l e s t r a p ' . The o i l i n d u s t r y i n A l b e r t a p r o v i d e s a p a r t i c u l a r l y i n t e r e s t i n g case s t u d y f o r t h e s t a p l e s debate;.. F o r t h e f i r s t t h i r t y - t h r e e y e a r s o f i t s e x i s t e n c e , from 1914 t o 1947 the A l b e r t a o i l i n d u s t r y c a t e r e d t o a s t r i c t l y l o c a l market. P e t r o l e u m f o r g a s o l i n e had t o be i m p o r t e d from o u t s i d e t h e p r o v i n c e , and w h i l e n a t u r a l gas s e r v e d th e c i t i e s , many A l b e r t a homes s t i l l depended on c o a l t o meet home h e a t i n g needs. By t h e end o f World War I I , t h e r e s e r v e s i n A l b e r t a o n l y s i g n i f i c a n t o i l f i e l d were d e c l i n i n g . S e v e r a l l a r g e o i l companies had g i v e n up hope o f making a major d i s c o v e r y and were abandoning the p r o v i n c e and s m a l l e r companies had become dormant. C o n s e q u e n t l y , f o r more th a n t h i r t y y e a r s p e t r o l e u m was a raw r e s o u r c e , not a s t a p l e e x p o r t . W i t h th e d i s c o v e r y o f l a r g e q u a n t i t i e s o f o i l a t Leduc i 194 7, t h e e x p l o i t a t i o n p a t t e r n changed r a d i c a l l y . By l a t e 1948 A l b e r t a ' s o i l p r o d u c t i o n had s u r p a s s e d p r o v i n c i a l demand and w i t h i n t h r e e y e a r s o f t h e Leduc d i s c o v e r y e x p o r t s o f o i l t o t h e U n i t e d S t a t e s and e a s t e r n Canada had commenced. O i l and gas were no l o n g e r s i m p l y raw r e s o u r c e s , they were s t a p l e e x p o r t s , p a r t o f the g l u e which bonded the American and Canadian economies i n t h e post-war p e r i o d . Few s t a p l e s demonstrate such a r a p i d i n c o r p o r a t i o n i n t o the t r a d i n g p a t t e r n s o f two n a t i o n s , and hence s u c h a r a p i d a l t e r a t i o n I n the r e l a t i o n s h i p between the c e n t r e and the ma r g i n o f t h e economy. An e x a m i n a t i o n o f t h e Canadian o i l i n d u s t r y , t h e n , g i v e s us the o p p o r t u n i t y t o compare the c l a s s s t r u c t u r e i n t h e i n d u s t r y ' s e a r l y p e r i o d , when i t s e r v e d a l o c a l market, w i t h t h e c l a s s f r a c t i o n s w h i c h d e v e l o p e d as t h e I n d u s t r y moved i n t o a s t a p l e - r e l a t e d boom. S i n c e o n l y t h r e e y e a r s passed between the Leduc d i s c o v e r y t o t h e b e g i n n i n g o f e x p o r t s , the d e v e l o p -ment o f the new s t a p l e can be examined a g a i n s t a r e l a t i v e l y c o h e s i v e s o c i a l and p o l i t i c a l backdrop. I n t h e p e t r o l e u m I n d u s t r y , t h e o p p o s i t i o n o f c e n t r e and m a r g i n , o f m e t r o p o l i s and h i n t e r l a n d , has been p a r t i c u l a r l y c l e a r . D u r i n g the p e r i o d under q u e s t i o n , t h e Canadian o i l i n d u s t r y d e v e l o p e d under t h e a u s p i c e s o f two n a t i o n s : the U n i t e d S t a t e s and Canada. Most o f the c a p i t a l , t e c h n o l o g y and e x p e r t i s e needed i n the e a r l y years: came from the U n i t e d S t a t e s , and American r e f i n e r i e s were t h e o n l y market f o r 4. Canadian p e t r o l e u m o u t s i d e o f Canada, e s t a b l i s h i n g the U n i t e d S t a t e s as t h e p o w e r f u l m e t r o p o l i s . J u s t as I n n i s was a b l e t o t r a c e the t i e s w hich l i n k e d B r i t a i n and F r a n c e t o the f u r t r a d e i n the Canadian N o r t h w e s t , so we w i l l be a b l e t o examine the b i l a t e r a l p o l i t i c a l and economic bonds which, formed between Canada and t h e U n i t e d S t a t e s with: the i n t r o -d u c t i o n o f o i l and n a t u r a l gas as s t a p l e s . By examining t h i s i n t e r a c t i o n we w i l l be a b l e t o a s c e r t a i n i f , as I n n i s s u g g e s t e d , t h e s e bonds d e v e l o p e d I n t o a " s t a p l e s t r a p " . I f s o, we w i l l e x p e c t t o f i n d t h a t t h e tendency toward the e x p l o i t a t i o n o f raw r e s o u r c e s became c u m u l a t i v e , and t h a t few secondary m a n u f a c t u r e s d e v e l o p e d . We w i l l e x p e c t t o f i n d t h a t i n c r e a s i n g amounts o f o i l and n a t u r a l gas were s h i p p e d t o t h e U n i t e d S t a t e s market and t h a t Canadian t r a d e became i n c r e a s i n g l y dependent on t h e s e raw r e s o u r c e s t o keep a b a l a n c e a g a i n s t U.S. manufactures:. F i n a l l y , I n n i s was one o f t h e f i r s t t o d e f i n e , i n a r u d i m e n t a r y way, t h e s u c c e s s i v e c r i s e s which a r e e x p e r i e n c e d i n a c o l o n i z e d n a t i o n because o f i t s dependency on s t a p l e s e x p o r t s . I n h i s words "...each s t a p l e i n i t s t u r n l e f t i t s stamp, and t h e s h i f t t o a new s t a p l e i n v a r i a b l y produced p e r i o d s o f c r i s e s i n which, a d j u s t m e n t s i n the o l d s t r u c t u r e were p a i n f u l l y made and a new p a t t e r n c r e a t e d I n r e l a t i o n t o a new s t a p l e " (quoted In Drache 1976: 71. A f t e r h i s e x h a u s t i v e 5. s t u d i e s o f a s e r i e s o f s t a p l e s , i t d i d not escape I n n i s 1 a t t e n t i o n t h a t , i n Canada, c a p i t a l had a tendency t o e x h a u s t one r e s o u r c e and then move on t o a n o t h e r . The time p e r i o d chosen f o r t h i s s t u d y , 1947-65, a l l o w s f o r a d e t a i l e d e x a m i n a t i o n o f t h e f i r s t growth c y c l e o f t h e Canadian o i l i n d u s t r y a f t e r t h e Leduc d i s c o v e r y . I n 1946, t h e r e were 16 3 companies .in t h e A l b e r t a o i l i n d u s t r y -, but most were i n a c t i v e . By 1950, t h e number o f o i l companies had more t h a n d o u b l e d and t h e e x p l o r a t i o n and development o f p r o p e r t i e s was b e i n g c a r r i e d on a t an unprecedented r a t e . A f t e r 1961, f o r r e a s o n s we s h a l l examine, a r e c e s s i o n h i t t h e i n d u s t r y and a s e r i o u s r e o r g a n i z a t i o n began. S m a l l e r and weaker companies went ba n k r u p t o r were merged w i t h o t h e r e n t e r p r i s e s . Only the s t r o n g e s t companies s u r v i v e d . As a consequence, we w i l l have the o p p o r t u n i t y t o examine one f u l l c y c l e - from boom t o b u s t t o r e c o v e r y - i n the development o f an e xport-dependent r e s o u r c e , and t o i d e n t i f y t h o s e f a c t o r s w hich were most i m p o r t a n t I n s u s t a i n i n g some s e c t o r s o f the i n d u s t r y w h i l e o t h e r s f a i l e d . 6. I I : DEBATES IN CANADIAN POLITICAL ECONOMY: CLASS STRUCTURE AND THE STATE A l t h o u g h t h e work o f H a r o l d I n n i s has l a i d t h e ground-work f o r t h i s t h e s i s , o t h e r s c h o l a r s . h a v e made c r i t i c a l c o n t r i b u t i o n s t o the work. I n the t h i r t y - f i v e y e a r s s i n c e t h e p u b l i c a t i o n o f The Fur Trade i n Canada, s c h o l a r s have pursued I n n i s ' q u e s t i o n s I n two f r e s h d i r e c t i o n s . I n t h e e a r l y s e v e n t i e s , one group o f s c h o l a r s began t o l o o k a t how t h e s t r u c t u r e o f the Canadian b o u r g e o i s i e had been moulded by a s t a p l e s - b a s e d economy. They s t r u g g l e d t o d e v e l o p a c l a s s d i m e n s i o n t o t h e s t a p l e s paradigms which would a l l o w us t o t r a c e i n more d e t a i l t h e l i n k s between the m e t r o p o l i s and t h e h i n t e r l a n d . A second group o f s c h o l a r s has i n v e s t i g a t e d the r o l e o f t h e Canadian s t a t e i n t h e development o f a s t a p l e economy, t r a c i n g the a s s i s t a n c e w h i c h th e s t a t e gave t o c e r t a i n f r a c t i o n s o f the b o u r g e o i s i e w h i l e o t h e r f r a c t i o n s were l e f t t o f e n d f o r t h e m s e l v e s . B o t h o f t h e s e q u e s t i o n s have a fundamental i m p o r t a n c e f o r our s t u d y o f t h e Canadian p e t r o l e u m i n d u s t r y , and so they s h a l l be d e a l t w i t h a t some l e n g t h . A: The F o r m a t i o n o f t h e B o u r g e o i s i e Three decades a f t e r the p u b l i c a t i o n o f The F u r Trade i n Canada, h i s t o r i a n Tom N a y l o r r e t u r n e d t o I n n i s ' o b s e r v a t i o n s 7. w i t h t h e i n t e n t i o n o f d e v e l o p i n g a t h e o r e t i c a l b a s i s f o r u n d e r s t a n d i n g Canadian s o c i e t y . I n h i s e s s a y "The R i s e and F a l l o f t h e T h i r d Commercial Empire o f t h e S t . Lawrence" N a y l o r s e t out t o e l a b o r a t e a t h e o r e t i c a l framework t h r o u g h w h i c h t h e f u n c t i o n i n g o f the s t a p l e s economy c o u l d be under-s t o o d . Whereas I n n i s made d e s c r i p t i v e r e f e r e n c e s t o t h e s t a p l e s t r a p , N a y l o r s l i c e d deeper, d e f i n i n g t h e dynamics which caused the Canadian economy t o grow i n on i t s e l f . What a r e the r e s u l t s o f s t a p l e s p r o d u c t i o n on c a p i t a l a c c u -m u l a t i o n i n Canada, he asked. H i s c o n c l u s i o n : t h e s t a p l e s t r a p has caused " . . . t h e o v e r e x p a n s i o n o f r e s o u r c e I n d u s t r i e s r e l a t i v e t o m a n u f a c t u r i n g , and the d r a i n a g e o f s u r p l u s income as s e r v i c e payments f o r f o r e i g n i n v e s t m e n t i n s t e a d o f i t s b e i n g used f o r g e n e r a t i n g new c a p i t a l f o r m a t i o n i n Canada" ( N a y l o r 1975, I : x i x ) . Here, f o r t h e f i r s t t i m e , t h e p a r a s i t i c r e l a t i o n s h i p between c e n t r e and m a r g i n i s : l a i d b a r e . By s e e k i n g out t h e r e l a t i v e advantages and d i s a d v a n t a g e s w h i c h s t a p l e s p r o d u c t i o n a c c o r d e d t o e a c h s e c t o r o f the b o u r g e o i s i e , N a y l o r added a c l a s s d i m e n s i o n t o the s t a p l e s debate. He c r a c k e d the supposed u n a n i m i t y o f I n t e r e s t o f the b o u r g e o i s c l a s s i n t h e c o l o n i z e d c o u n t r y , p i t t i n g m a n u f a c t u r e r s a g a i n s t m e r c a n t i l i s t s ; he took the s t a p l e s debate beyond th e s i m p l e j u x t a p o s i t i o n o f c e n t r e and m a r g i n i n t o a c o n s i d e r a t i o n o f the complex o f c o o p e r a t i o n and antagonism which e x i s t e d between 8. c l a s s f r a c t i o n s i n b o t h m e t r o p o l i s and h i n t e r l a n d . N a y l o r went on t o ask why i t was t h a t t h e unequal r e l a t i o n s h i p between the i m p e r i a l c a p i t a l and t h e r e s o u r c e -e x t r a c t i n g s a t e l l i t e s tended t o be s e l f - p e r p e t u a t i n g . He c o n c l u d e d t h a t " . . . ( f ) r o m t h e s t r u c t u r e o f t h e m e t r o p o l e , i t s dominant c l a s s , i t s s tage o f development and t h e s t r u c t u r e o f c a p i t a l , and i t s e x t e r n a l economic r e q u i r e m e n t s , we can deduce the c h a r a c t e r o f t h e i m p e r i a l l i n k a g e . From the form o f the i m p e r i a l l i n k a g e f o l l o w s t h e p o l i t i c a l economy o f t h e h i n t e r l a n d and t h e degree and p a t t e r n o f development.... The dominant c l a s s i s d i r e c t l y dependent on t h e m e t r o p o l e ; o t h e r c l a s s e s i n c o n t r a s t , a r e d e f i n e d by t h e i r p r o d u c t i v e r e l a t i o n s h i p s w i t h t h e dominant c l a s s . . " '(.in T e e p l e 1972: 2 ) . Here f o r t h e f i r s t t i me I s a methodology f o r b r e a k i n g down the r a t h e r amorphous " l i n k a g e " w h i c h th e e a r l y s t a p l e s t h e o r i s t s used t o d e s c r i b e t h e r e l a t i o n s h i p between the m e t r o p o l i s and t h e h i n t e r l a n d . The dominant c l a s s o f t h e i m p e r i a l c e n t r e i s a n a l y s e d a c c o r d i n g t o a s e t o f s a l i e n t needs w h i c h i n t u r n f o r m u l a t e the s t r u c t u r e o f t h e dependent c l a s s e s o f t h e h i n t e r l a n d . T h i s methodology, employed by dependency t h e o r i s t s s i n c e i t s f i r s t e x p o s i t i o n by Gunder Frank i n t h e m i d - S i x t i e s ' , has proven p a r t i c u l a r l y u s e f u l I n e x p l a i n i n g unequal r e l a t i o n s h i p s w h i c h p e r s i s t o v e r l o n g p e r i o d s o f t i m e . < 9. In his two volume study, The H i s t o r y of Canadian Business Naylor r e d e f i n e s the c l a s s breakdown which he i n i t i a t e d i n the e a r l i e r essay, analysing, the c a p i t a l i s t c l a s s which emerged from Canada's dependent r e l a t i o n s h i p w i t h m e t r o p o l i t a n centres. He d i v i d e s the c a p i t a l i s t c l a s s i n t o two p a r t s : a strong, m e r c a n t i l e e l i t e made up of men "associated w i t h the s t a p l e trades, w i t h the i n t e r n a t i o n a l flow of commodities and of the c a p i t a l that complemented the commodity movements" (Naylor, 1975, I : 3-4), and a v a s t l y weaker manufacturing e l i t e . I t i s Naylor's t h e s i s t h a t the i n t e r e s t s of the m e r c a n t i l i s t s and the i n d u s t r i a l i s t s were a n t i t h e t i c a l . The e a r l y m e r c a n t i l i s t s operated w i t h a low r a t i o of f i x e d to c i r c u l a t i n g c a p i t a l , moving t h e i r resources from one safe investment opportunity to another w i t h r e l a t i v e frequency. I n d u s t r i a l entrepreneurs, on the other hand, make long-term, h i g h - r i s k investments i n the sphere of production. Thus, i n Naylor's view, "maximization of the me r c a n t i l e surplus w i l l minimize the I n d u s t r i a l surplus" Cin Teeple, 1972: 3). The h i s t o r y of Canadian business has been dominated by a merc a n t i l e c l a s s which, i n conjunction w i t h the B r i t i s h , f i n a n c i a l c l a s s and l a t e r w i t h /American I n d u s t r i a l entrepreneurs, has worked against the development of a n a t i o n a l i n d u s t r i a l base. C r i t i c a l to N a y l o r 1 s essay Is h i s i d e n t i f i c a t i o n of the f a c t o r s which helped to forge a bridge between merchant 10. c a p i t a l and d i r e c t i n v e s t m e n t , and a l l o w e d American b u s i n e s s t o e n t e r Canada w i t h such f a c i l i t y a f t e r World War I . In Canada, the p r o c e s s o f p e n e t r a t i o n by d i r e c t i n v e s t m e n t has been a i d e d by the l e g a c y o f mer-chant c a p i t a l , an o v e r d e v e l o p e d t r a n s p o r t a t i o n and f i n a n c i a l i n f r a s t r u c t u r e which d r a i n s funds away from i n d u s t r y . . . Canadian c a p i t a l c o n t i n u e s t o f l o w i n t o u t i l i t i e s , a g r i c u l t u r e , h o u s i n g , m e r c h a n d i s i n g and government bonds, thus r o b b i n g i n d u s t r y o f funds ( i n T e e p l e 1972: 31) . T h i s c l a s s a n a l y s i s made a c r i t i c a l c o n t r i b u t i o n t o Canadian s o c i a l s c i e n c e . F o r t h e f i r s t t i me t h e s t a p l e s economy was conn e c t e d t o a v i s i b l e , s e l f - r e e n f o r c i n g c l a s s s t r u c t u r e . Canada d i d not move from one s t a p l e t o t h e n e x t on a whim; the s t a p l e s t r a p s were i n d u c e d by a h e r e d i t a r y e l i t e w h i c h found i t e a s i e r and more p r o f i t a b l e t o engage i n b a n k i n g , t r a d e and t r a n s p o r t a t i o n than t o s t i m u l a t e t h e development o f a s t r o n g i n d u s t r i a l base. The work o f W a l l a c e Clement i s t h e most d e t a i l e d attempt t o date t o mesh our u n d e r s t a n d i n g o f a s t a p l e economy and t h e s t r u c t u r e o f c l a s s r e l a t i o n s . I n h i s f i r s t book, The Canadian  C o r p o r a t e E l i t e , Clement examines t h e r u l i n g c l a s s : i n Canada through: two s e t s o f l e n s e s . H i s f i r s t p e r s p e c t i v e I s t h a t o f the c o r p o r a t e e l i t e , " t h a t s e t o f p o s i t i o n s known as s e n i o r management and d i r e c t o r s w i t h i n dominant c o r p o r a t i o n s " CClement 1975: 51. He a n a l y s e s n o t o n l y the s t r u c t u r e o f the e l i t e - t h e p o s i t i o n s t hemselves - but t h e manner i n whi c h 11. "the members o f t h e group i n t e r a c t and a r e r e l a t e d t o one an o t h e r s u f f i c i e n t l y t o say th e y e x h i b i t s o l i d a r i t y , c o h e s i v e -n e s s , c o o r d i n a t i o n and c o n s c i o u s n e s s o f a k i n d " [Clement 1975: 5 ) . I n Clement's view t h e n , s t u d y i n g the c o r p o r a t e e l i t e i s a s y n c h r o n i c method o f a s c e r t a i n i n g the i m p o r t a n t p o s i t i o n s w h i c h govern economic l i f e a t any g i v e n p o i n t i n t i m e , whereas t h e concept o f c l a s s i s d i a c h r o n i c and d i a l e c t i c a l - Clement uses i t t o a n a l y s e t h e f u n c t i o n i n g o f the bour g e o i s i e over t i m e . Clement agrees w i t h N a y l o r ' s a s s e r t i o n s about t h e d i f f -e rence between f i n a n c e and i n d u s t r i a l c a p i t a l , a dding t h a t " . . . p o r t f o l i o c a p i t a l i s i n t e r e s t - b e a r i n g c a p i t a l w hich i s lo a n e d and can be r e p a i d by u s i n g e a r n i n g s from i n v e s t m e n t ; i t i s ' s e l f - l i q u i d a t i n g ' . D i r e c t i n v e s t m e n t i s c a p i t a l w hich c o n t r o l s t h e means o f p r o d u c t i o n whether i n d u s t r i a l o r r e s o u r c e -based. ..While p o r t f o l i o i n v e s t m e n t can be r e p a i d , d i r e c t i n v e s t m e n t remains e s t a b l i s h e d " (Clement 1975: 351. In h i s second book, C o n t i n e n t a l C o r p o r a t e C a p i t a l i s m , Clement t a k e s N a y l o r ' s argument one s t e p f u r t h e r , b r e a k i n g t h e p r e s e n t - d a y b o u r g e o i s i e i n t o t h r e e f a c t i o n s : t h e dominant, i n d i g e n o u s b o u r g e o i s i e , " v e r y a c t i v e i n f i n a n c e , t r a n s p o r t a t i o n and u t i l i t i e s , t o a l e s s e r e x t e n t I n t r a d e and much l e s s I n m a n u f a c t u r i n g and r e s o u r c e s " ; t h e m i d d l e - r a n g e i n d i g e n o u s f r a c t i o n , n a t i o n a l i n i t s scope; and the dominant comprador b o u r g e o i s i e w h i c h i s " a c t i v e i n m a n u f a c t u r i n g and r e s o u r c e s , i s b o t h n a t i o n a l and i n t e r n a t i o n a l and i s l o c a t e d i n b r a n c h p l a n t s o f f o r e i g n - c o n t r o l l e d m u l t i n a t i o n a l s " (Clement, 1977: 25) . I n c o n t r a s t , t h e b o u r g e o i s i e o f t h e U n i t e d S t a t e s d i s p l a y s no such d i v i s i o n between the f i n a n c i a l and r e s o u r c e s e c t o r s . I t s h i s t o r i c a l development has a l l o w e d f o r t h e u n i o n o f t h e s e two f u n c t i o n s i n t o a s i n g l e , i n t e r n a t i o n a l l y - p o w e r f u l c l a s s . I n Clement's v i e w , th e r e s u l t i s a c l o s e , m u t u a l l y - c o n v e n i e n t r e l a t i o n s h i p between the e l i t e s o f t h e two n a t i o n s . Canada g i v e s up i t s n a t u r a l r e s o u r c e s and p r o v i d e s a market f o r American m a n u f a c t u r e d goods. I n exchange, the Canadian f i n a n c i a l and t r a n s p o r t s e c t o r s a r e s t r e n g t h e n e d . Clement's c l e a r and c o n c i s e c a t e g o r i e s , backed by a w e a l t h o f d a t a , a r e c r i t i c a l t o our u n d e r s t a n d i n g o f the Canadian b o u r g e o i s i e today. The p o s t - I n n i s i a n group o f s t a p l e s t h e o r i s t s , t h e n , have g i v e n us some i m p o r t a n t c o n c e p t s f o r d e v e l o p i n g our under-- -s t a n d i n g o f t h e r o l e which s t a p l e s p r o d u c t i o n p l a y s i n Canadian c l a s s s t r u c t u r e and t h e y have f i t t h e Canadian b o u r g e o i s i e i n t o a h i s t o r i c a l p e r s p e c t i v e o f t h e economic growth o f Canada. They have t r i e d t o d i v i d e t h e b o u r g e o i s i e I n t o component f r a c t i o n s w h i c h would account f o r t h e i n c r e a s i n g -l y dependent n a t u r e o f t h e Canadian economy and t h e y have 13. noted t h e t i e s t h a t have bound t h e Canadian economy t o the U n i t e d S t a t e s i n t h e post-war p e r i o d . I n s h o r t , the dependency s c h o o l has f i n e - t u n e d t h e s t a p l e s paradigm so t h a t i t s e r v e s as a t h e o r e t i c a l as w e l l as a d e s c r i p t i v e t o o l . N e v e r t h e l e s s , the dependency t h e o r i s t s have had t h e i r c r i t i c s . Four y e a r s ago, two Western s c h o l a r s s e t the m s e l v e s the t a s k o f e x p l o r i n g how the n a t u r a l r e s o u r c e i n d u s t r i e s o f A l b e r t a and Saskatchewan have moved out o f the c o n t r o l o f American i n d u s t r y . L a r r y P r a t t and John R i c h a r d s , i n t h e i r book P r a i r i e C a p i t a l i s m , e x p l i c i t l y r e j e c t t h e v i e w t h a t " p r o v i n c e s h e a v i l y dependent on the e x p l o i t a t i o n and s a l e o f s t a p l e s a r e t h e r e b y p l a c e d i n a permanent p o s i t i o n o f depen-dency v i s a v i s e x t e r n a l c a p i t a l " ( P r a t t and R i c h a r d s , 1979: 8) . W h i l e t h e y agree t h a t a t t h e o u t s e t the n e g o t i a t i o n s between f o r e i g n s t a p l e s - p r o d u c i n g companies and the p r o v i n c i a l governments may have f a v o u r e d t h e companies, t h e y cannot a c c e p t t h a t the advantage s t a y s w i t h t h e f o r e i g n i n v e s t o r I n p e r p e t u i t y . T h i s i s a r a d i c a l d e p a r t u r e from t h e paradigm o f t h e s t a p l e s t h e o r i s t s . P r a t t and R i c h a r d s a c c e p t t h a t t h e a c t o r s w h i c h make up Canada's p o l i t i c a l and economic s t r u c t u r e do not l i e i n a f i x e d r e l a t i o n s h i p w i t h one a n o t h e r . P r a t t and R i c h a r d s go on t o p i n p o i n t t h e c r u c i a l f a c t o r w h i c h they 14. f e e l i s r e s p o n s i b l e f o r p e r m i t t i n g the r i s e o f a s t r o n g Canadian r e s o u r c e s e c t o r : a r e g i o n a l b o u r g e o i s i e . I n a c h a p t e r on t h e A l b e r t a a r r i v i s t e b o u r g e o i s i e , P r a t t w r i t e s t h a t i t i s made up o f " l e a d i n g i n d i g e n o u s e n t r e p r e n e u r s , managers and upper income p r o f e s s i o n a l s , l i n k i n g p r i v a t e and p u b l i c s e c t o r s i n a q u a s i - c o r p o r a t i s t a l l i a n c e o f i n t e r e s t s " ( P r a t t and R i c h a r d s 1979: 167). I n p l a c e o f Clement's c a r e f u l d e f i n i t i o n o f c l a s s f r a c t i o n s P r a t t and R i c h a r d s have g i v e n us a broad amalgam o f i n t e r e s t s -one group a l i g n e d w i t h f o r e i g n . c a p i t a l , a n o t h e r w i t h a n a t i o n a l base, a s t a t e e l i t e and a dependent c o l l e c t i o n o f p e t t y -b o u r g e o i s p r o f e s s i o n a l s . T h i s b r o a d l y based group o f A l b e r t a n i s u n i t e d by an e m o t i o n a l l o y a l t y t o t h e p r o v i n c e as: a s e m i - s o v e r e i g n p o l i t i c a l e n t i t y . I n s h o r t , R i c h a r d s and P r a t t have g i v e n us a number o f i d i o s y n c r a t i c f a c t o r s : t o e x p l a i n t h e changes which, t a k e p l a c e I n c l a s s s t r u c t u r e . They p o s i t t h a t a l e a r n i n g c u r v e makes modern p r o v i n c i a l governments more s o p h i s t i c a t e d when d e a l i n g w i t h m u l t i n a t i o n a l c o r p o r a t i o n s . They mention t h e psycho-l o g i c a l e f f e c t s o f Western a l i e n a t i o n and the trauma o f t h e Lougheed f a m i l y f o r t u n e s d u r i n g t h e d e p r e s s i o n . I n c o n t r a s t t o t h e p r e c i s e c a t e g o r i z a t i o n o f t h e new s t a p l e s t h e o r i s t s , P r a t t and R i c h a r d s have g i v e n us a v a r i e t y o f means by - . which, s h i f t s i n s o c i a l s t r u c t u r e may be measured. I n a d d i t i o n t o t h e s e two s c h o o l s o f thought - t h e M a r x i s t dependency t h e o r i s t s and t h e s u p p o r t e r s o f a r e g i o n a l bour-g e o i s i e , t h e r e i s a t h i r d l i n e o f thought on t h e s u b j e c t o f the Canadian b o u r g e o i s i e w h i c h has d e v e l o p e d o ut o f t h e work o f J o r g e N i o s i . I n The Economy o f Canada: A Study o f Owner- s h i p and - 1 C o n t r o l , N i o s i makes a d i s t i n c t i o n between the. j u r i d i c a l owners o f Canadian c o r p o r a t i o n s - t h o s e who own sh a r e s - and t h e economic owners who have d e c i s i o n - m a k i n g power t h r o u g h ownership o f l a r g e b l o c k s o f s t o c k , d i r e c t o r -s h i p s o r t h r o u g h p o s i t i o n s i n s e n i o r management. I n t h i s f a s h i o n , N i o s i s e p a r a t e s the l e g a l and f i n a n c i a l a d v i s o r s (.who have v e r y s p e c i f i c tasks), from t h e c o n t r o l l i n g element w i t h i n the Canadian b o u r g e o i s i e . I n t h i s way he a l l o w s f o r a c l e a r e r d i s t i n c t i o n between tho s e who govern and t h o s e who a d v i s e . "Together," he c o n c l u d e s , "wealthy c o n t r o l l i n g s t o c k h o l d e r s and s e n i o r c o r p o r a t e o f f i c e r s form t h e c o r e o f the Canadian b o u r g e o i s i e . " I n h i s second book, Canadian C a p i t a l i s m , N i o s i r e v i e w s t h e c l e a v a g e s w h i c h e x i s t I n t h e Canadian b o u r g e o i s i e : t e n d e n c i e s toward c e n t r a l i z a t i o n and c o n c e n t r a t i o n ; e t h n i c and r e g i o n a l d i v i s i o n s ; and t h e I n f l u e n c e o f f o r e i g n i n v e s t m e n t . He c o n c l u d e s t h a t t h e c a p i t a l i s t c l a s s i n Canada cannot be l o o k e d upon as a homogeneous group, "...bound by economic and s o c i a l b o r d e r s w h i c h cannot be c r o s s e d . On the c o n t r a r y , the 16. b o u r g e o i s i e i s a r e s t r i c t e d group, but a dynamic and c h a n g i n g one, c o n s t a n t l y i n c o r p o r a t i n g new elements and e x c l u d i n g o t h e r s as economic, and p o l i t i c a l and s o c i a l c i r c u m s t a n c e s change" ( N i o s i 1980: 2 3 ) . Here N i o s i has g i v e n us a group o f f a c t o r s w h i c h , o p e r a t i n g a t d i f f e r e n t speeds and a t d i f f e r e n t t i m e s , produce complex schisms i n t h e facade o f t h e Canadian b o u r g e o i s i e . N e v e r t h e l e s s , i n N i o s i ' s v i e w , t h e s e f a c t o r s do not a l l have e q u a l w e i g h t . He c i t e s the d i v i s i o n between the Canadian-based and f o r e i g n s e c t o r s as the most c r i t i c a l s p l i t i n the Canadian r u l i n g c l a s s ( N i o s i , 1980: 3 5 ) . A c c o r d i n g l y , N i o s i has d e v o t e d much o f h i s work t o examining the r e l a t i o n s h i p between th e comprador and Canadian-based b o u r g e o i s i e s . Throughout h i s work he q u e s t i o n s the a s s e r t i o n t h a t f o r e i g n c a p i t a l i s t h e dominant f o r c e i n Canada. " I m a i n t a i n , on t h e c o n t r a r y , t h a t I t i s t h e Canadian b o u r g e o i s i e t h a t p l a y s a dominant r o l e i n Canada, i n t h e p r i v a t e s e c t o r where i t c o n t r o l s a t l e a s t 70% o f a l l c o r p o r a t e a s s e t s , as w e l l as i n t h e p u b l i c s e c t o r where many government-owned c o r p o r a t i o n s a r e r u n by t h i s Canadian c a p i t a l i s t c l a s s and i t s key a d v i s o r s " ( N i o s i 1980: 21. N e v e r t h e l e s s , he does see a s t r u g g l e e x i s t i n g between th e two g r o u p s , I n w h i c h each, a t t e m p t s t o g a i n hegemony o v e r t h e Canadian economy. There i s a p a r t n e r s h i p h e r e , a k i n t o t h a t d e s c r i b e d by Clement, but N i o s i does not f i n d i t f r e e o f t e n s i o n s o r c o n f l i c t s . A second c l e a v a g e i n t h e Canadian b o u r g e o i s i e which i s fundamental t o N i o s i ' s work i s t h e r e g i o n a l s p l i t w hich has d e v e l o p e d between th e n a t i o n a l b o u r g e o i s i e and the b o u r g e o i s i e s o f o t h e r p r o v i n c i a l c e n t r e s . N i o s i b e l i e v e s t h a t t h e r i s e o f the comprador b o u r g e o i s i e i n t h e post-1914 p e r i o d was o n l y a phase d u r i n g which, the r e g i o n a l b o u r g e o i s i e s g a t h e r e d s t r e n g t h . I n h i s v i e w , the decade from 1970 t o 1980 was c h a r a c t e r i z e d by t h e s t r u g g l e o f t h e s e r e g i o n a l b o u r g e o i s i e s t a g a i n s t the growing c o n c e n t r a t i o n o f economic power I n O n t a r i o . We have seen t h a t t h e r e a r e t h r e e main e x p l a n a t i o n s f o r t h e f o r m a t i o n o f the Canadian r u l i n g c l a s s . One s c h o o l , t h e dependency t h e o r i s t s , have emphasized th e h i s t o r i c a l d e v e l o p -ment o f a p o w e r f u l m e r c a n t i l i s t s e c t o r and a weakened m a n u f a c t u r i n g group i n Canada. They have t a k e n p a i n s t o p u t t h e f r a c t i o n s o f t h e Canadian b o u r g e o i s i e i n a n a t i o n a l and i n t e r n a t i o n a l p e r s p e c t i v e , d e s c r i b i n g t h e m u t u a l l y -b e n e f i c i a l l i n k s between th e I m p e r i a l c e n t r e and the r e s o u r c e -p r o d u c i n g h i n t e r l a n d . I f t h i s p r o f o u n d d i v i s i o n between th e f i n a n c i a l and i n d u s t r i a l f r a c t i o n s o f t h e b o u r g e o i s i e e x i s t s , we would ex p e c t t o see i t r e f l e c t e d i n s e v e r a l a s p e c t s o f t h e p e t r o l e u m i n d u s t r y . We would e x p e c t , f o r example, t h a t f o r e i g n d i r e c t i n v e s t m e n t would p l a y t h e s t r o n g e s t r o l e I n 18. d e v e l o p i n g t h e Canadian o i l and gas i n d u s t r y and t h a t such t r a d i t i o n a l l y Canadian s t r e n g t h s as u t i l i t i e s and t r a n s -m i s s i o n f a c i l i t i e s would be under th e c o n t r o l o f the dominant Canadian . f r a c t i o n . R e f i n i n g and s a l e s would be most p r o b a b l y i n t h e hands o f f o r e i g n - b a s e d companies. I n r e a c t i o n a g a i n s t the dependency s c h o o l , P r a t t and R i c h a r d s have s e t o u t t o u n d e r s t a n d how t r a d i t i o n a l power r e l a t i o n s h i p s change, e m p h a s i z i n g the r e g i o n a l bonds which c r e a t e a b o u r g e o i s c l a s s c a p a b l e o f u s i n g i t s power t o advantage. I n t h e l i g h t o f t h e i r work, i t w i l l be p a r t i -c u l a r l y i n t e r e s t i n g t o examine the r e l a t i o n s h i p between the m u l t i n a t i o n a l o i l companies and t h e A l b e r t a - b a s e d Independent o i l companies. I n what sense do t h e y r e p r e s e n t a s i n g l e c l a s s and where a r e t h e i r g r e a t e s t a r e a s o f c o n f l i c t ? F i n a l l y , i f we examine N i o s i 1 s hypotheses i n t h e d a t a we have c o l l e c t e d on the p e t r o l e u m i n d u s t r y , we would e x p e c t t h a t t h e m u l t i n a t i o n a l companies would be I n c o n t r o l o f the i n d u s t r y , but a s t r o n g Canadian f r a c t i o n would d e v e l o p , as n a t i o n a l i s t t e n d e n c i e s b e g i n t o a s s e r t t h e m s e l v e s . I f N i o s i ' s n o t i o n o f r e g i o n a l s p l i t s i n t h e b o u r g e o i s i e i s c o r r e c t , we w i l l e x p e c t t o f i n d t h a t the o i l I n d u s t r y had g i v e n r i s e t o an A l b e r t a b o u r g e o i s i e w h i c h would s t r a i n a g a i n s t an i n f l u e n t i a l , e a s t e r n - b a s e d f r a c t i o n . I n e f f e c t we have t h r e e t h e o r i e s on the f o r m a t i o n o f the b o u r g e o i s i e , a l l o f which may be t e s t e d a g a i n s t t h i s d a t a . The t h e o r i e s o f N i o s i and the dependency s c h o o l do not d i f f e r g r e a t l y i n t h e i r c o ncept o f t h e make up o f t h e b o u r g e o i s i e ; t h e i r c h i e f p o i n t s o f d i f f e r e n c e r e v o l v e around the r e l a t i v e s t r e n g t h s w h i c h t h e y g r a n t t o t h e Canadian and f o r e i g n s e c t o r s o f t h e r u l i n g c l a s s . The work o f P r a t t and R i c h a r d s , and N i o s i , d e v e l o p the concept o f a r e g i o n a l b o u r g e o i s i e , an i d e a w h i c h t h e dependency s c h o o l w i t h i t s emphasis on n a t i o n a l c o r p o r a t e l i n k s , has tended t o i g n o r e . I t i s on t h e s e two p o i n t s t h a t our e x a m i n a t i o n w i l l f o c u s . B: The R o l e o f t h e S t a t e . I n t h e main, t h e , r o l e o f t h e s t a t e i n Canada has been examined from a l i b e r a l p e r s p e c t i v e , by s c h o l a r s who share the v i e w t h a t Canadian s o c i e t y i s made up o f a v a r i e t y o f s p e c i a l i n t e r e s t g r o u p s , and t h a t the s t a t e s e r v e s as a n e u t r a l a r b i t e r among t h e competing I n t e r e s t s . A t any t i m e , any one o f t h e s e groups may be s u c c e s s f u l I n p r e s s i n g i t s . c l a i m s , depending on a v a r i e t y o f f a c t o r s : the s k i l l o f i t s l e a d e r s h i p , the s t r e n g t h and g u i l e o f i t s l o b b y i n g e f f o r t s and so on. These f a c t o r s v a r y w i t h t h e i n d i v i d u a l s c h o l a r . F o r example, J.L. G r a n a t s t e i n ' s A Man o f I n f l u e n c e , I s a m e t i c u l o u s 20. e x a m i n a t i o n o f t h e p o l i c i e s o f the Department o f E x t e r n a l A f f a i r s , p a r t i c u l a r l y d u r i n g t h e p e r i o d when Canadian t a r i f f p o l i c y t u r n e d away from B r i t a i n i n the m i d d l e y e a r s o f t h e c e n t u r y and began t o l e a n toward th e U n i t e d S t a t e s . G r a n a t s t e i n a c c o u n t s f o r t h i s c h anging emphasis by r e f e r r i n g t o a g r e a t number o f c o n s i d e r a t i o n s , v a r y i n g from the s t r e n g t h o f t h e American economy f o l l o w i n g t h e wars t o t h e h o r r o r w h i c h the Canadian mandarins had of the s u p e r i o r a i r s o f the B r i t i s h . B i g and s m a l l , t h e s e f a c t o r s a r e thrown i n t o t h e book, as i f i t were a t o s s e d s a l a d . The r e s u l t i s a r e v e a l i n g b i o g r a p h y and a t o u r de f o r c e o f t h e m a t e r i a l a v a i l a b l e on the s u b j e c t , but we a r e not brought any c l o s e r t o u n d e r s t a n d i n g the d i f f e r e n c e w h i c h the a u t h o r would see between the many i n f l u e n c e s o f t h e p e r i o d . L i b e r a l s c h o l a r s h i p , even o u t s t a n d i n g l i b e r a l s c h o l a r s h i p , i s hemmed i n by i t s even-handed t r e a t m e n t . I t f a i l s t o i s o l a t e t h e fundamental i s s u e s t o which the Canadian s t a t e must respon d . Those Canadian s c h o l a r s who t u r n e d t h e i r a t t e n t i o n t o the h i s t o r i c a l s t a p l e s e x p o r t s r e l a t i o n s h i p with, the U n i t e d S t a t e s have a d i f f e r e n t i n t e r p r e t a t i o n o f the r o l e o f t h e s t a t e . I n h i s e s s a y " D e f e n s i v e e x p a n s i o n i s m : The S t a t e and Economic Growth i n Canada" H.G.J. A i t k e n s u g g ested t h a t the purpose o f t h e N a t i o n a l P o l i c y was t o c r e a t e and s u s t a i n t h e v i a b i l i t y o f Canada as a n a t i o n s t a t e . 21. "The o v e r a l l o b j e c t i v e o f t h e p o l i c y , " he w r o t e , "was t o make p o s s i b l e t h e maintenance o f Canadian p o l i t i c a l s o v e r e i g n t y o v e r t h e t e r r i t o r y n o r t h o f t h e American boundary; t h a t i s t o say, t o p r e v e n t a b s o r p t i o n by the U n i t e d S t a t e s and t o b u i l d a n a t i o n a l s t a t e t h a t c o u l d g u i d e i t s own economic d e s t i n y . . . " ( i n Watkins and E a s t e r b r o o k 1976:209). Thus p o l i t i c a l p o l i c i e s might promote th e r i s e o f one f r a c t i o n o f the b o u r g e o i s i e o v e r o t h e r s - i n t h i s case t h e r i s e o f t h e c e n t r a l Canadian m a n u f a c t u r i n g f a c t i o n a g a i n s t t h e r e g i o n a l c l a s s e s o f e a s t e r n and w e s t e r n Canada - but t h e y a l s o may become the bulwark a g a i n s t the d i s i n t e g r a t i o n o f the n a t i o n . W i t h the growing i n t e g r a t i o n o f the Canadian and American economies i n t h e f i f t i e s , A i t k e n saw a weakening o f the s t a t e ' s power t o defend i t s s o v e r e i g n t y . " I f c o n t i n e n t a l economic i n t e g r a t i o n i s i n any sense a t h r e a t , i t i s a t h r e a t t o Canada as a n a t i o n " (pp. c i t . : 1 7 6 ) . F o l l o w i n g A i t k e n , K a r i L e v i t t has noted t h a t i t I s t h e s t r u c t u r e o f t h e modern m u l t i n a t i o n a l c o r p o r a t i o n which a c t i v e l y b r e a k s down the s t r e n g t h o f the n a t i o n s t a t e . The a b i l i t y o f d i r e c t o r s t o move l a r g e amounts o f c a p i t a l i n and out o f a v a r i e t y o f c o u n t r i e s , as w e l l as management's c o n t r o l o v e r t e c h n o l o g i c a l I n n o v a t i o n and e x p e r t i s e , a l l o w s the modern c o r p o r a t i o n t o p l a n t h e development o f major s e c t o r s o f a n a t i o n a l economy. The c o r p o r a t i o n i s ; moved o n l y by i t s own needs. The needs o f the n a t i o n s t a t e a r e s e c o n d a r y , o r not t a k e n i n t o account a t a l l . L e v i t t p o i n t s o u t t h a t t o d a y , s i n c e some c o r p o r a t i o n s a r e l a r g e r t h a n many contemporary c o u n t r i e s , "the t h r e a t t o t h e n a t i o n s t a t e i s r e a l " ( L e v i t t , 1972:37). Thus, L e v i t t sees m u l t i n a t i o n a l c o r p o r a t e c a p i t a l i s m i n an a n t a g o n i s t i c r e l a t i o n s h i p w i t h t h e s t a t e : m a x i m i z i n g th e s e c t o r s o f t h e economy under d i r e c t i n v e s t m e n t e a t s away a t t h e power o f t h e s t a t e i t s e l f . I n t h e i r book, P r a i r i e C a p i t a l i s m s c h o l a r s L a r r y P r a t t and John R i c h a r d s r e a c h a v e r y d i f f e r e n t c o n c l u s i o n . They det e r m i n e t h a t t h e i n v o l v e m e n t o f t h e s t a t e i n t h e energy i n d u s t r y i s p r o d u c i n g a s t r o n g e r , l e s s dependent p r o v i n c i a l economy. P r a t t agrees w i t h o t h e r s c h o l a r s t h a t f o r t h e f i r s t two decades a f t e r Leduc, th e economy o f A l b e r t a was u n d e r d e v e l o p e d , but he e x p l a i n s t h i s underdevelopment by r e f e r r i n g t o a number o f f a c t o r s which a r e r e l a t e d t o A l b e r t a and the o i l and gas i n d u s t r y : the n a t u r e o f p e t r o l e u m p r o d u c t i o n , t h e d i s t a n c e from markets and a s m a l l and w i d e l y - f l u n g p o p u l a t i o n . As a r e s u l t , he c o n c l u d e s t h a t the economic underdevelopment o f the p r o v i n c e was i t s "normal f a t e " ( P a n i t c h 1977:158), not a s i t u a t i o n w h i c h d e v e l o p e d out o f the dependent, s t a p l e -r e l a t e d n a t u r e o f r e s o u r c e e x p l o i t a t i o n . P r a i r i e C a p i t a l i s m d e f i n e s two r o l e s f o r t h e p r o v i n c i a l s t a t e . On t h e one hand, i t i s P r a t t ' s v i e w t h a t i n A l b e r t a , government r e g u l a t i o n . h a s - been used as a t o o l f o r f u r t h e r i n g t h e i n t e r e s t s o f a r e g i o n a l , p e troleum-based b o u r g e o i s i e . He g i v e s t h e example o f the P e t r o l e u m and N a t u r a l Gas C o n s e r v a t i o n Board, th e r e g u l a t o r y agency r e s p o n s i b l e f o r i n s t i t u t i n g p r o r a t i o n i n g i n t h e A l b e r t a o i l f i e l d s and he c o n c l u d e s t h a t " . . . r e g u l a t o r y a g e n c i e s charged w i t h the a d m i n i -s t r a t i o n o f market p r o r a t i o n i n g schemes have been s u c c e s s f u l l y used by major o i l companies as I n s t r u m e n t s t o r e a l i z e t h e i r t a r g e t r a t e s o f r e t u r n and t o p e r p e t u a t e t h e i r dominant market s h a r e s . From the p o l i t i c a l p o i n t o f v i e w , s u c h a g e n c i e s a l s o p e r m i t e f f e c t i v e i n d u s t r i a l c a r t e l i z a t i o n w i t h o u t the danger o f a n t i - t r u s t a c t i o n s " ( P r a t t and Richards,-1979: 6 0 ) . I n t h i s c o n t e x t t h e s t a t e s e r v e s as an agent f o r the s t r e n g t h e n i n g o f t h e r e g i o n a l c a p i t a l base, and p a r t i c u l a r l y t h e c a p i t a l base o f t h e m u l t i n a t i o n a l o i l companies. At t h e same t i m e , P r a t t and R i c h a r d s s t r e s s ; t h e i m portance o f t h e p r o v i n c i a l s t a t e as an agent f o r c a r r y i n g out a r e g i o n a l economic s t r a t e g y . I n t h e i n t r o d u c t i o n t o P r a i r i e C a p i t a l i s m t h e y s t a t e t h e i r b e l i e f t h a t the p r o v i n c e s are "competent, r e l a t i v e l y autonomous agents: o f economic development" ( P r a t t and R i c h a r d s 1979: 4 ) . T h e i r work su g g e s t s t h a t t h e p r o v i n c i a l s t a t e has been n u t u r i n g and expanding t h i s power over th e l a s t t h i r t y y e a r s . "Our c e n t r a l and u n i f y i n g theme...is th e g r a d u a l , i f uneven, emergence o f the p r o v i n c i a l s t a t e as an e n t r e p r e n e u r i a l a c t o r i n s t a p l e - l e d economic development" ( P r a t t and R i c h a r d s 1979:3). The s t a t e i s t h u s c a p a b l e o f i d e n t i f y i n g i t s own economic g o a l s o u t s i d e o f t h o s e w h i c h a r e brought t o bear by t h e p e t r o l e u m b o u r g e o i s i e . P r a t t b e l i e v e s t h a t a government o f any p o l i t i c a l s t r i p e w i l l use I n t e r v e n t i o n i n s u p p o r t o f I t s own autonomy and he c i t e s the example of the c a u t i o u s S o c i a l C r e d i t government of P r e m i e r Manning, which, r e s o l v e d t h e debate over e x p o r t s o f n a t u r a l gas from A l b e r t a by c r e a t i n g a common c a r r i e r , A l b e r t a Gas Trunk L i n e , t o t r a n s p o r t n a t u r a l gas w i t h i n the p r o v i n c e . T h i s meant t h a t the government c r e a t e d a p r i v a t e u t i l i t y t o f u l f i l l a p u b l i c g o a l . I t i s the a u t h o r ' s b e l i e f t h a t s u c h modest a t t e m p t s t o meet p e r c e i v e d p r o v i n c i a l needs through, s t a t e i n t e r v e n t i o n i n t h e f i f t i e s grew n a t u r a l l y I n t o t h e b r o a d l y p r a c t i c e d i n t e r v e n t i o n s o f t h e A l b e r t a government to d a y . " I n c r e a t i n g A l b e r t a Gas Trunk L i n e , Manning h i m s e l f h e l p e d s e t the p r o c e s s o f r e g i o n a l a c c u m u l a t i o n i n m o t i o n . . . " ( P r a t t and R i c h a r d s . 197 9: 68) . J u s t as R i c h a r d s and P r a t t proposed th e e x i s t e n c e o f a r e g i o n a l b o u r g e o i s i e competing a g a i n s t a n a t i o n a l b o u r g e o i s i e , - so t h e y have proposed t h a t t h e r e g i o n a l s t a t e - i n t h i s case the governments of Alberta and Saskatchewan - struggles: against the encroachment of the federal state. "Nation-builders" ('like CD. Howe) are pi t t e d against "province-builders:" ; seemingly there i s l i t t l e area of common concern where the two sets of in t e r e s t s co-operate. The paradigm of Pratt and Richards;, then, comes; to very d i f f e r e n t conclusions from those elaborated by Aitken and L e v i t t . The l a t t e r see the multinational corporation undermining the power of the nation state. Pratt and Richards envision the combination of multinational and l o c a l firms l i n k i n g with the regional state against national corporate and p o l i t i c a l power. Juxtaposed against these views i s the Marxist school. .Marxist theory seeks to explain the r o l e of the state from within a m a t e r i a l i s t framework, focusing on the relat i o n s h i p between the economic base of society and the p o l i t i c a l superstructure. Unlike t h e i r l i b e r a l colleagues;, the Marxists assume the primacy of the means of production i n determining the way classes i n t e r - r e l a t e , and they further assume that i n advanced c a p i t a l i s t nations, the exploitative nature of these relationships wil1 produce fundamental antagonisms which w i l l have to be dealt with through the state structure. The Marxist view i s h i s t o r i c a l , seeking to show how these in t e r n a l c o n f l i c t s force societies: to change over time. The M a r x i s t debate on t h e n a t u r e o f the. Canadian s t a t e began i n e a r n e s t w i t h the p u b l i c a t i o n o f t h e c o l l e c t i o n o f es say s, The Canadian S t a t e : P o l i t i c a l Economy and P o l i t i c a l Power, e d i t e d by Leo P a n i t c h . The c o l l e c t i o n s e t i t s e l f t h e t a s k o f l a y i n g the groundwork f o r a M a r x i s t t h e o r y o f the Canadian s t a t e , and P a n i t c h h i m s e l f l a i d o u t t h e requirements: f o r such a t h e o r y i n the f i r s t e s s a y . I t must c l e a r l y d e l i m i t t h e complex o f I n s t i t u t i o n s : t h a t go t o make up t h e s t a t e . I t must demonstrate c o n c r e t e l y , r a t h e r t h a n j u s t d e f i n e a b s t r a c t l y , the l i n k a g e s between t h e s t a t e and t h e system o f c l a s s : I n e q u a l i t y I n t h e s o c i e t y , p a r t i c u l a r l y I t s t i e s : t o the dominant s o c i a l c l a s s . And i t must s p e c i f y as f a r as p o s s i b l e t h e f u n c t i o n s : o f t h e s t a t e under the c a p i t a l i s t mode o f p r o d u c t i o n ( P a n i t c h . 19.77 : 5)1. P a n i t c h b e g i n s by c o n s i d e r i n g t h e problem o f the r e l a t i o n s h i p o f t h e s t a t e t o t h e dominant c l a s s - the bourge-o i s i e - and grapples: w i t h t h e a g e - o l d M a r x i s t dilemma o f t h e degree t o which, t h e s t a t e a c t s i n r e s p o n s e t o the needs: o f the b o u r g e o i s i e . To s o l v e t h e problem he d i s t i n g u i s h e s : between the s t a t e a c t i n g on b e h a l f o f t h e b o u r g e o i s i e and a c t i n g a t i t s b e h e s t . "For t h e s t a t e t o a c t o n l y a t t h e behest o f p a r t i c u l a r segments o f t h e b o u r g e o i s i e would be d y s f u n c t i o n a l t o i t s managing t h e common a f f a i r s o f t h a t c l a s s . F o r i t t o accomplish, t h i s : t a s k , i t needs a degree o f independence from t h a t class:., a ' r e l a t i v e autonomy 1. ( P a n i t c h , 1977; 4).. On t h e one hand, M a r x i s t s : must a v o i d assuming t h a t the s t a t e i s s i m p l y t h e r o b o t arm o f the b o u r g e o i s i e ; a t the 27. same t i m e , t h e y must not t r a v e l so f a r a l o n g t h e l i b e r a l p a t h t h a t they l o s e t h e i n t e r n a l c o h e s i o n o f the M a r x i s t paradigm. And so the e x p l i c a t i o n o f t h e c oncept of ' r e l a t i v e autonomy' becomes the c e n t r a l i s s u e o f The Canadian S t a t e . Three s e p a r a t e e s s a y s from the c o l l e c t i o n show t h a t even w i t h i n the M a r x i s t paradigm, r a d i c a l l y d i f f e r e n t approaches may be used. I n an e s s a y on the l a b o u r f o r c e and s t a t e w o r kers i n Canada, Hugh Armstrong a t t a c k s t h e problem from th e p e r s p e c t i v e s u g g ested by James O'Connor i n h i s book. The F i s c a l  C r i s i s o f the S t a t e . O'Connor i s I n t e r e s t e d i n t h e f u n c t i o n s which the s t a t e p l a y s i n advanced c a p i t a l i s t s o c i e t i e s . "Our f i r s t p r emise i s t h a t t h e c a p i t a l i s t i c s t a t e must t r y t o f u l f i l l two b a s i c and o f t e n m u t u a l l y - c o n t r a d i c t o r y f u n c t i o n s - a c c u m u l a t i o n and l e g i t i m a t i o n . . . T h i s means t h a t the s t a t e must t r y t o m a i n t a i n o r c r e a t e the c o n d i t i o n s i n which p r o f i t a b l e c a p i t a l a c c u m u l a t i o n i s p o s s i b l e . However, the s t a t e a l s o must t r y t o m a i n t a i n o r c r e a t e t h e c o n d i t i o n s f o r s o c i a l harmony" (0 1 Connor 1973 :6) . Armstrong makes use o f t h i s t h e o r e t i c a l framework t o examine the s t a t e ' s r o l e i n employment c r e a t i o n s i n c e t h e Second World War, by r e v i e w i n g a v a r i e t y o f f e d e r a l I n i t i a t i v e s . Armstrong c o n c l u d e s t h a t " . . . ( a ) s employees o f l a s t r e s o r t , the s t a t e i s a t t e m p t i n g t o f u l f i l l I n p a r t i t s l e g i t i m a t i o n f u n c t i o n . . . I n c a r r y i n g out i t s second, a c c u m u l a t i o n f u n c t i o n , t h e s t a t e mounts and expands a m u l t i t u d e o f programmes which d i r e c t l y and i n d i r e c t l y s u b s i d i z e the p r i v a t e s e c t o r " 28. i n P a n i t c h 1977:303). Armstrong c o n c l u d e s t h a t t h e O'Connor t h e s i s can be used " f r u i t f u l l y " i n Canada. T h i s essay p o i n t s out t h e weakness of t h i s approach. There i s a tendency f o r t h e a c c u m u l a t i o n and l e g i t i m a t i o n f u n c t i o n s t o become c a t c h - a l l c a t e g o r i e s , so t h a t a l m o s t any d a t a r e l a t i n g t o the modern s t a t e can be thrown i n t o one b i n o r t h e o t h e r . T h i s i s not a problem unique t o O'Connor's work, but Armstrong has been p a r t i c u l a r l y t i m i d about s t r e t c h i n g the bounds of t h e framework. Many f a c t o r s r e l a t i n g t o employment i n t h e p u b l i c s e c t o r i n Canada a r e not d e a l t w i t h , r o b b i n g h i s essay o f much of i t s p o t e n t i a l r i c h n e s s . He has not l o o k e d a t Canadian employment as a whole, f o r example, so t h a t he i s not a b l e t o say a n y t h i n g about the p u b l i c s e c t o r i n a dependent, r e s o u r c e - e x t r a c t i v e economy. And because he has not d e f i n e d t h e Canadian r u l i n g c l a s s i n whose i n t e r e s t , presumably, the s t a t e i s a c t i n g , t h e r e a r e no p o w e r f u l r e v e l a t i o n s about the r e l a -t i o n s h i p between c l a s s s t r u c t u r e and t h e a c c u m u l a t i o n f u n c t i o n . Thus, w h i l e t h e d e f i n i t i o n o f t h e a c c u m u l a t i o n and l e g i t i m a t i o n f u n c t i o n s i s a u s e f u l h e u r i s t i c d e v i c e , u n l e s s i t i s put i n a p a r t i c u l a r and e x p l i c i t c o n t e x t , i t does not s u f f i c e t o e x p l a i n t h e r o l e t h e s t a t e p l a y s i n our s o c i e t y . I n c o m p a r i s o n , a second essay i n t h e c o l l e c t i o n , by W a l l a c e Clement, s e t s o u t t o c l e a r l y d e f i n e the s t r u c t u r e of t h e b o u r g e o i s i e . Clement then goes on t o r e l a t e t h e r u l i n g c l a s s t o t h e s t a t e , b oth i n terms o f p e r s o n a l t i e s and s t a t e a c t i v i t i e s . I t i s h i s t h e s i s t h a t " . . . ( i ) n terms o f f r a c t i o n s o f t h e c a p i t a l i s t c l a s s , l a r g e f o r e i g n and Canadian c a p i t a l i s t s have been e f f e c t i v e i n u s i n g t h e s t a t e a p p a r a t u s t o a g g r a n d i z e t h e i r own power i n t h e i r spheres o f c o n c e n t r a t i o n w h i l e s m a l l e r n a t i o n a l c a p i t a l i s t s have o f t e n been l e f t t o 'fend f o r t h e m s e l v e s ' " ( i n P a n i t c h 1977:226). Thus, i n c o n t r a s t t o the g e n e r a l i z e d argument broached by Hugh A r m s t r o n g , Clement has c r e a t e d a s p e c i f i c s e t o f i n t e r e s t s which stem from t h e needs o f t h e r u l i n g c l a s s , and has attempted t o see how the s t a t e w i l l r espond t o t h e s e . "The s t a t e does not a c t a t the command of t h e c a p i t a l i s t c l a s s but f o r I t s i n t e r e s t s , o r more c o r r e c t l y , i n i t s g e n e r a l i n t e r e s t . S i n c e the c a p i t a l i s t c l a s s I n Canada i s a f r a c t i o n i z e d one i n terms: o f s i z e and c o n t r o l , i t i s a l s o i m p o r t a n t t o u n d e r s t a n d the p a r t i c u l a r as w e l l as the g e n e r a l i n t e r e s t s b e i n g s e r v e d " ( i n P a n i t c h 1977:228). T h i s i s an argument w h i c h g i v e s Clement c o n s i d e r a b l e scope f o r h i s a n a l y s i s , and he t a k e s advantage o f t h a t , d e s c r i b i n g t h e t i e s w h i c h e x i s t between the c o r p o r a t e e l i t e and the Commons and t h e Senate, as w e l l as the h i g h l e v e l o f s u p p o r t o f f e r e d by l a r g e c o r p o r a t i o n s t o Canadian p o l i t i c a l 30. p a r t i e s . But t r a c i n g t h e p e r s o n a l and f i n a n c i a l l i n k s . b e t w e e n the s t a t e and t h e b o u r g e o i s i e i s : n o t s u f f i c i e n t t o e x p l i c a t e t h e f u n c t i o n i n g r e l a t i o n s h i p between th e two, t h e d i a l e c t i c a l component o f t h e i r r e l a t i o n s h i p . This; i s what Clement has t r i e d t o do i n t h e f i n a l s e c t i o n o f h i s e s s a y , and i t i s ; perhaps t h e l e a s t e f f e c t i v e p o r t i o n o f h i s argument. I n h i s development o f t h e r o l e o f t h e s t a t e r e g u l a t o r y agencies: he touches b r i e f l y on the Canadian T r a n s p o r t Commission, th e F o r e i g n Investment Review Agency: and the R o y a l Commission on C o r p o r a t e C o n c e n t r a t i o n . I n o r d e r t o f u l l y u n d e r s t a n d the post-war phenomenon o f i n c r e a s e d s t a t e r e g u l a t i o n i t i s : c r i t i c a l t o . c a s t t h e i n v e s t i g a t i o n o f t h e s e agencies: i n a h i s t o r i c a l l i g h t , t o compare the p r e s e n t s i t u a t i o n with, t h e way i n which t h e i n d u s t r y o p e r a t e d b e f o r e r e g u l a t i o n was i n t r o d u c e d . The f u n d a m e n t a l q u e s t i o n s here d e a l with, the p e r c e i v e d need f o r r e g u l a t i o n on t h e p a r t o f the s t a t e and the r e s p o n s e o f t h e b o u r g e o i s i e and i t s : f r a c t i o n s t o a c h a l l e n g e t o t h e i r h i s t o r i c a l r i g h t t o dominate the b u s i n e s s sphere. I n t h i s e s s a y , Clement i s not a b l e t o g i v e any a n a l y t i c a l p r e c i s i o n t o our u n d e r s t a n d i n g o f t h e problem o f r e l a t i v e autonomy. The f a c t s a r e t h e r e , but t h e 'why' and t h e 'how' a r e n o t . Rianne Mahon, i n an essay "Canadian P u b l i c P o l i c y : t he unequal s t r u c t u r e o f r e p r e s e n t a t i o n " , r e t u r n s ; t o the concept o f r e l a t i v e autonomy which, she t r e a t s : a c c o r d i n g t o the framework o f N i c o s P o u l a n z a s . He wrote t h a t : " . . .the. s t a t e i s a r e l a t i o n , an e x p r e s s i o n o f t h e a n t a g o n i s t i c and c o n t r a d i c t o r y r e l a t i o n s among c l a s s e s ' and f r a c t i o n s . . .The s t r u c t u r e o f t h e s t a t e i s n o t h i n g hut the m e d i a t e d e x p r e s s i o n o f b a s i c s o c i o - e c o n o m i c I n e q u a l i t i e s as t h e s e a r e m a n i f e s t e d p o l i t i c a l l y i n t h e v a r i o u s forms and l e v e l s which, t h e s t r u g g l e assumes" (quoted i n P a n i t c h , 1377:"169J1. F o r .Mahon, the s t a t e r e p r o d u c e s the c l a s s : r e l a t i o n s w i t h i n s o c i e t y as: a whole, i t s d i v i s i o n s and p r e s s u r e s . A s a consequence, a l t h o u g h the s t a t e i s u l t i m a t e l y w e i g h t e d i n f a v o u r o f t h e hegemonic f r a c t i o n o f t h e b o u r g e o i s i e , t h e needs and demands: o f o t h e r c l a s s e s and o t h e r f r a c t i o n s : o f t h e b o u r g e o i s i e w i l l a l s o be r e f l e c t e d w i t h i n t h e a p p a r a t u s o f t h e s t a t e , I n measures: which, r e f l e c t t h e i r u l t i m a t e power. Thus, t h e d i f f e r e n t groups w i l l be a b l e to. e x t r a c t concessions: from t h e s t a t e i n d i f f e r e n t d e g r e e s , and I n t h e l a s t a n a l y s i s : , t he p r o f i l e o f t h e s t a t e w i l l m i r r o r t he p r o f i l e o f t h e s o c i e t y i t s e l f . I n o r d e r t o examine t h i s : p r o p o s i t i o n , Mahon o u t l i n e s , t h e h i s t o r y o f f o u r departments" o f t h e f e d e r a l government: F i n a n c e ; I n d u s t r y , Trade and Commerce; Labour; and the Department o f I n d i a n and N o r t h e r n A f f a i r s . I n r e v i e w i n g the mandate and the a c t i v i t i e s : o f each, Mahon d i s c o v e r s t h a t t h e y a r e by no means e q u a l . The Department o f F i n a n c e has a hegemonic r o l e , i n her v i e w , c o o r d i n a t i n g and c o n t r o l l i n g o t h e r arms o f government t h r o u g h i t s d o m i n a t i o n o f f i s c a l p o l i c y , and s e r v i n g as the c e n t r a l d i v i s i o n f o r p o l i c y a r e a s which most c o n c e r n the c o r p o r a t e community. A c c o r d i n g t o her a n a l y s i s , t h e Department o f I n d u s t r y , Trade and Commerce s h o u l d demonstrate c o n s i d e r a b l e power, y e t Mahon shows how the I n d u s t r y s i d e o f t h e Department, r e s p o n s i b l e f o r m a n u f a c t u r i n g , has been s u b s e r v i e n t t o t h e Trade and Commerce s i d e , w i t h i t s emphasis on the e x p o r t and s a l e o f raw r e s o u r c e s . F i n a l l y , i n her e x a m i n a t i o n o f t h e two departments w h i c h r e p r e s e n t dependent c l a s s e s - Labour and I n d i a n A f f a i r s -Mahon c o n c l u d e s t h a t p o l i c y i s s u e s :not o n l y r e p r e s e n t , b u t a l s o t o c o n t a i n t h e a s p i r a t i o n s o f workers and n a t i v e p e o p l e . "For f r a c t i o n s o f t h e s u b o r d i n a t e c l a s s e s , " she c o n c l u d e s , "the c o e r c i v e a s p e c t o f r e p r e s e n t a t i o n p r edominates" ( i n P a n i t c h 1977:189). F o r Mahon, the unequal s t r u c t u r e o f r e p r e s e n t a t i o n a l l o w s the s t a t e t o o r g a n i z e the hegemony o f the dominant f r a c t i o n o f t h e b o u r g e o i s i e , w h i l e a t t h e same time g i v i n g v e n t t o the a s p i r a t i o n s o f o t h e r c l a s s e s : . But she adds t h a t " t o argue t h a t an unequal s t r u c t u r e o f r e p r e s e n t a t i o n e x i s t s i n s i d e t h e s t a t e i s n o t , however, t o argue t h a t the s t a t e i s an i n s t r u m e n t i n t h e hands o f the dominant c l a s s . A l l s o c i a l f o r c e s a c h i e v e a form o f r e p r e s e n t a t i o n - a l t h o u g h t h e r e l a t i o n s among t h e r e p r e s e n t a t i v e s e x p r e s s t h e i n e q u a l i t i e s e s t a b l i s h e d i n c i v i l s o c i e t y . ( T ) h e n o t i o n o f the unequal r e p r e s e n t a t i o n draws a t t e n t i o n t o t h e ' c o n t r a d i c t o r y u n i t y ' o f the s t a t e " ( i n P a n i t c h , 1977:193). There a r e some v e r y c l e a r problems i n Mahon's work. A t ti m e s she comes d a n g e r o u s l y c l o s e t o b e i n g t a u t o l o g i c a l . A comparison o f government departments i s most u s e f u l i f t h e y are measured by the same y a r d s t i c k , and not by a s e r i e s o f u n r e l a t e d p o l i c i e s . F o r example, I f t h e s e same f o u r departments had been measured i n s e v e r a l p o l i c y d e c i s i o n s i n w hich they had t a k e n d i f f e r e n t p o s i t i o n s - t h e f a b r i c a t i o n o f Canadian p i p e f o r t h e A l a s k a p i p e l i n e , A r c t i c o f f s h o r e d r i l l i n g , and A l b e r t a - A l a s k a gas swaps - t h e outcome o f her a n a l y s i s might have t o l d us a good d e a l about t h e r e l a t i v e power o f the departments, and how i n t r a - d e p a r t m e n t a l c o n f l i c t s a re s t r u g g l e d o u t . I t i s p o s s i b l e t h a t she would have d i s c o v e r e d t h a t the hegemonic f r a c t i o n w i t h i n government was not l o d g e d i n one department, but r e s i d e s i n s e v e r a l departments, so t h a t i n t e r d e p a r t m e n t a l a l l i a n c e s : become t h e means o f a c h i e v i n g a p p r o v a l o f p o l i c y i n i t i a t i v e s . N e v e r t h e l e s s , Mahon's argument makes some i m p o r t a n t c o n t r i b u t i o n s t o our u n d e r s t a n d i n g o f t h e way i n whi c h the s t a t e f u n c t i o n s . I n l o o k i n g f o r t h e ' r e l a t i v e autonomy' o f the s t a t e , i t i s v e r y h e l p f u l t o see t h e s t a t e a p p a r a t u s as r e f l e c t i n g a v a r i e t y o f i n t e r e s t s and not s i m p l y r e s p o n d i n g t o t h e needs o f t h e r u l i n g c l a s s . The concept o f t h e hegemonic f r a c t i o n , i s s i m i l a r l y , a co n c e p t which f o c u s e s a t t e n t i o n on the a r e a o f the s t a t e which i s a c t i v e l y p r o m o t i n g the i n t e r e s t s o f t h e dominant s e c t o r o f t h e b o u r g e o i s i e . Thus, t h e t h r e e s c h o l a r s who made t h e s e c o n t r i b u t i o n s t o the P a n i t c h c o l l e c t i o n have used v e r y d i f f e r e n t approaches t o t h e problem o f r e l a t i v e , autonomy. As The Canadian S t a t e was t h e f i r s t c o n c e r t e d a t t e m p t t o g r a p p l e w i t h the i n t e r -r e l a t i o n o f t h e s t a t e and the b o u r g e o i s i e , t h e s c h o l a r s r e l i e d on t h e o r i e s which, had been d e v e l o p e d e a r l i e r by s c h o l a r s i n t h e U n i t e d S t a t e s , B r i t a i n and F r a n c e . As a r e s u l t , t h e p e c u l i a r a s p e c t s o f t h e Canadian s t a t e have been overshadowed by the g e n e r a l paradigm. N e v e r t h e l e s s , a l l o f t h e s c h o l a r s r a i s e d i s s u e s and s t i m u l a t e d a debate which, has been c a r r i e d on by M a r x i s t s c h o l a r s s i n c e t h a t t i m e . Among the r e c e n t s t u d i e s o f the Canadian s t a t e , t h e work of J o r g e N i o s i i s o u t s t a n d i n g . By combining a s t r o n g t h e o r e t i c a l background and e m p i r i c a l spadework, N i o s i i s a b l e t o b r i n g some f r e s h i n s i g h t s t o t h e problem. From the b e g i n n i n g , N i o s i assumes t h a t t h e s t a t e i s not s i m p l y an e x t e n s i o n o f the b o u r g e o i s i e . I t has a measure o f power t o i n f l u e n c e t h e r i s e and f a l l o f d i f f e r e n t c l a s s i n t e r e s t s . 35. "(T)he s t a t e a l s o has t h e power t o s e t the g u i d e l i n e s o f a s o c i a l group's p a t h t o c a p i t a l i s t development; t h r o u g h t h i s p r o c e s s , some s o c i a l c l a s s e s a r e c r e a t e d w h i l e the growth o f o t h e r s i s s t u n t e d " ( N i o s i . 1980:21). T h i s i s a much g r e a t e r measure o f power than any o f t h e o t h e r s c h o l a r s has g r a n t e d t h e s t a t e . N i o s i n o t o n l y g i v e s t h e s t a t e the a b i l i t y t o i n f l u e n c e the development o f c l a s s e s , but t o enable new c l a s s e s t o come i n t o b e i n g . N i o s i i s t h e f i r s t s c h o l a r who has g i v e n us a c l e a r d i s t i n c t i o n between t h e s t a t e and the s t a t e - r u n c o r p o r a t i o n s . He f i n d s t h a t t h e b o u r g e o i s i e o f t h e s t a t e , "the f u l l time managers o f p u b l i c l y - o w n e d c o r p o r a t i o n s who p a r t i c i p a t e a c t i v e l y i n the c o n t r o l o f t h e i r c o r p o r a t i o n s " i s a c l a s s fragment e q u a l t o the b o u r g e o i s i e o f p r i v a t e e n t e r p r i s e , which he c a l l s t h e o l i g o p o l y . I n a p e n e t r a t i n g c h a p t e r i n Canadian C a p i t a l i s m , N i o s i shows t h a t t h i s s t a t e b o u r g e o i s i e i s under t h e c o n t r o l o f the i n d i g e n o u s s e c t o r o f the Canadian b o u r g e o i s i e . But a t t h e same time he d e t e r m i n e s t h a t "government c o r p o r a t i o n s . . . do not s e r v e the i n t e r e s t s o f monopoly c a p i t a l a l o n e : on the c o n t r a r y , i n Canada t h e y have o f t e n h e l p e d the r e g i o n a l p e t t y and m i d d l e b o u r g e o i s i e s g e t o f f t h e ground and s u p p o r t e d them a g a i n s t l a r g e s c a l e Canadian c a p i t a l " ( N i o s i 1980:80). N i o s i has d e s c r i b e d a dynamic system; w h i l e t h e power 36. r e l a t i o n s h i p s a r e w e i g h t e d I n the i n t e r e s t o f l a r g e s c a l e c a p i t a l , t h e y can be a l t e r e d t h r o u g h the i n t e r v e n t i o n o f a v a r i e t y o f e t h n i c , r e g i o n a l - and p o l i t i c a l f a c t o r s . Thus, i n h i s v i e w , d e s p i t e the power o f t h e m u l t i n a t i o n a l s , t h e i n t e r v e n t i o n o f t h e s t a t e may promote t h e i n t e r e s t s o f o t h e r C l a s s f r a c t i o n s . As N i o s i p o i n t s o u t , t h i s p r o c e s s has o p e r a t e d a t t h e p r o v i n c i a l l e v e l as w e l l as the f e d e r a l , and has been put i n t o m o t i o n by C o n s e r v a t i v e , L i b e r a l and NDP governments. N i o s i ' s a n a l y t i c a l d i v i s i o n o f the b o u r g e o i s i e has much t o recommend i t , p r i n c i p a l l y because he has I n t e g r a t e d the r o l e o f t h e s t a t e i n a c l e a r and p r e c i s e form. U n l i k e P r a t t and R i c h a r d s he has d i s t i n g u i s h e d between the s t a t e a p p a r a t u s and the s t a t e - r u n c o r p o r a t i o n s , and he has e v o l v e d a system which a l l o w s f o r t h e s t a t e t o have a c o n s i d e r a b l e range o f power and a c t i v i t y , w i t h o u t l o s i n g s i g h t o f t h e l i m i t s s e t by the power o f t h e b o u r g e o i s i e i n a c a p i t a l i s t s t a t e . T h i s c o n c e p t u a l c l a r i t y i s c r i t i c a l b e f o r e any i n c i s i v e s t u d y of t h e r o l e o f the s t a t e can b e g i n . A l l o f t h e a u t h o r s mentioned above have attempted t o d e a l w i t h t h e " d i s t a n c e " between t h e s t a t e and the b o u r g e o i s i e . S c h o l a r s l i k e L e v i t t have suggested t h a t the i n t e r e s t s o f the s t a t e and t h e m u l t i n a t i o n a l c o r p o r a t i o n a r e a n t i t h e t i c a l , t h a t w i t h the growing power o f the comprador b o u r g e o i s i e i n Canada, the n a t i o n s t a t e i s i n j e o p a r d y . P r a t t and R i c h a r d s : have suggested th e o p p o s i t e . They b e l i e v e t h a t the s t a t e has been the p r i n c i p a l agent through, which, a r e g i o n a l b o u r g e o i s i e has been a b l e t o grow and t o f i g h t o f f the encroachment o f t h e n a t i o n a l b o u r g e o i s i e . The M a r x i s t s haye f o r m u l a t e d a v a r i e t y o f ways o f u n d e r s t a n d i n g t h e r e l a t i v e autonomy o f t h e s t a t e . The most s u c c e s s f u l M a r x i s t t r e a t m e n t stems from th e work o f J o r g e N i o s i who has argued t h a t the s t a t e has wide d i s c r e t i o n a r y powers: based on c l e a v a g e s w i t h i n t h e b o u r g e o i s i e . T h i s debate has r a i s e d s e v e r a l i s s u e s w h i c h a r e germane t o a s t u d y of the Canadian p e t r o l e u m i n d u s t r y . I n the f i r s t p l a c e i t w i l l be i m p o r t a n t t o examine whether the i n c r e a s i n g power o f t h e m u l t i n a t i o n a l o i l I n d u s t r y i n t h e wake o f t h e Leduc d i s c o v e r y has undermined the Canadian s t a t e , as L e v i t t s u g g e s t s . S e c o n d l y , i t i s : v i t a l t o examine the: r e l a t i o n s h i p between the p r o v i n c i a l s t a t e and t h e o i l i n d u s t r y . Have the two formed a u n i t e d f r o n t a g a i n s t an e a s t e r n - b a s e d " n a t i o n a l " b o u r g e o i s i e ? How does the p r o v i n c i a l government d e a l w i t h c o n f l i c t s among a n t a g o n i s t i c s e c t o r s ; o f the o i l i n d u s t r y ? F i n a l l y , how much power does; the s t a t e possess: i n p r o m o t i n g new c l a s s f r a c t i o n s and i n a l t e r i n g t h e f o r t u n e s o f o t h e r s ? I f , as: N i o s i i n d i c a t e s , the s t a t e does: p o s s e s s t h i s power, we w i l l e x p e c t t o see s t a t e p o l i c i e s t h a t 38. p l a y the Canadian and m u l t i n a t i o n a l s e c t o r s o f f a g a i n s t one a n o t h e r . C: Toward a P o l i t i c a l Economy o f the Canadian O i l I n d u s t r y The problem we have s e t has two p a r t s . I n t h e f i r s t p l a c e we must u n d e r s t a n d how the development o f two new s t a p l e s -o i l and gas - has a f f e c t e d Canadian c l a s s s t r u c t u r e . T h i s i s a q u e s t i o n o f u n d e r s t a n d i n g t h e r e l a t i o n s h i p between d i f f e r e n t f r a c t i o n s o f t h e b o u r g e o i s i e . S e c o n d l y , we seek t o u n d e r s t a n d the r o l e which th e s t a t e has p l a y e d i n t h e development o f t h e f r a c t i o n s o f t h e b o u r g e o i s i e i n v o l v e d i n t h e o i l i n d u s t r y . T h i s i n v o l v e s the a r t i c u l a t i o n o f the s t a t e a p p a r a t u s and t h e b o u r g e o i s i e . Rosemary Crompton and Jon Gubbay ar e two s c h o l a r s who have attem p t e d t o use the c o n c e p t s f i r s t e l u c i d a t e d by Marx t o shed l i g h t on t h e c l a s s s t r u c t u r e and the r o l e o f the s t a t e i n advanced c a p i t a l i s t s o c i e t i e s . I n t h e i r book, Economy and  S o c i a l S t r u c t u r e , t h e y have I d e n t i f i e d c a p i t a l , not as a s e t o f p e o p l e - managers o r s h a r e h o l d e r s - "but as a complex s t r u c t u r e o f r o l e s d e f i n e d i n f u n c t i o n a l terms." Thus d i f f e r e n t c a p i t a l s can be i d e n t i f i e d i n terms: o f the way i n which t h e y c a r r y out t h e f u n c t i o n s o f m a r k e t i n g , p r o d u c t i o n and t h e s u p e r v i s i o n o f l a b o u r . N e v e r t h e l e s s , t h e modern f i r m has one o v e r r i d i n g g o a l - c a p i t a l a c c u m u l a t i o n . "We use t h e term ' a c c u m u l a t i o n o f c a p i t a l ' t o r e f e r t o the p r o c e s s e s o f i n v e s t i n g I n new p l a n t and equipment, h i r i n g and t r a i n i n g l a b o u r , a c q u i r i n g o t h e r companies o r s h a r e s i n them, w i t h t h e aim o f r e d u c i n g c o s t s , expanding b u s i n e s s and a t t a i n i n g more s e c u r i t y i n t h e v a r i o u s markets i n w h i c h t h e y a r e i n v o l v e d " (Crompton and Gubbay 1977:74). I n t h e i r work, Crompton and Gubbay have i d e n t i f i e d f i v e d i f f e r e n t forms o f c a p i t a l a t work i n Western c a p i t a l i s t n a t i o n s . The f i r s t i s i n d u s t r i a l c a p i t a l , t h a t w h i c h i s put t o work i n the e x t r a c t i v e i n d u s t r i e s , i n a g r i c u l t u r e , i n m a n u f a c t u r i n g and i n t r a n s p o r t a t i o n . I n t h i s sphere o f t h e economy, the l a b o u r p r o c e s s r e s u l t s i n the p r o d u c t i o n o f new goods o r t h e moving o f goods t o market so t h a t t h e y may be p urchased. S e r v i c e c a p i t a l d i f f e r s from i n d u s t r i a l c a p i t a l i n t h a t i t h i r e s l a b o u r and c a r r i e s out work, but no raw m a t e r i a l i s t r a n s f o r m e d t o c r e a t e a new p r o d u c t . I n s t e a d , l a b o u r i s p a i d t o c a r r y out work f o r a c l i e n t . N e c e s s a r i l y , s e r v i c e c a p i t a l encompasses.a wide v a r i e t y o f o c c u p a t i o n s i n c a p i t a l i s t s o c i e t i e s from h a i r d r e s s e r s t o auto mechanics. Three o t h e r forms o f c a p i t a l - commercial, f i n a n c e and p r o p e r t y c a p i t a l s - do not c r e a t e s u r p l u s v a l u e , b u t s i p h o n o a p o r t i o n o f the s u r p l u s c r e a t e d by i n d u s t r i a l and s e r v i c e c a p i t a l . Thus commercial c a p i t a l buys a p r o d u c t and then 40. s e l l s i t a t a h i g h e r p r i c e w i t h o u t a l t e r i n g i t s : n a t u r e . F i n a n c e c a p i t a l l e n d s money t o t h e i n d u s t r i a l and s e r v i c e c a p i t a l i s t s i n exchange f o r I n t e r e s t and p r o p e r t y c a p i t a l l e n d s t h e use o f p r o p e r t y b u i l d i n g o r equipment i n exchange f o r r e n t . A l l f i v e o f t h e s e forms o f c a p i t a l may work i n c o n j u n c t i o n . A l t h o u g h i t may appear t h a t commercial c a p i t a l b e n e f i t s a t t h e expense o f i n d u s t r i a l c a p i t a l , as: t h e authors: p o i n t o u t , "the i n d u s t r i a l c a p i t a l i s : a b l e t o g e t payment as soon as the p r o d u c t s a r e made, w i t h o u t h a v i n g t o w a i t u n t i l a f i n a l consumer... buy s; them; e a r l y payment a l l o w s e a r l y i n v e s t m e n t i n the n e x t c y c l e o f p r o d u c t i o n . C e r t a i n l y t h i s d i f f e r e n t i a t i o n between I n d u s t r y and commerce g r e a t l y enhances each c a p i t a l ' s c a p a c i t y t o assemble c a p i t a l " CCrompton and Gubbay 1977:86-7). S i m i l a r l y , t h e c r e d i t advanced by t h e f i n a n c e c a p i t a l i s t a l l o w s the i n d u s t r i a l c a p i t a l t o purchase the means o f p r o d u c t i o n and pay f o r i t over a l o n g p e r i o d o f t i m e . Loans p e r m i t t h e i n d u s t r i a l c a p i t a l t o t a k e advantage o f b e n e f i c i a l s h o r t - t e r m c o n d i t i o n s : i n the market p l a c e . I n t h i s way, f i n a n c e m o b i l i z e s c a p i t a l and f a c i l i t a t e s c a p i t a l a c c u m u l a t i o n . Crompton and Gubbay c o n c l u d e t h a t " c a p i t a l s a r e bound t o g e t h e r i n s t r u c t u r e d r e l a t i o n s o f mutual dependency" CCrompton and Gubbay 1977:90) w i t h t h e o v e r r i d i n g g o a l o f f o m e n t i n g c a p i t a l a c c u m u l a t i o n . A t t h e same time t h e authors; note the i n c r e a s i n g tendency 41. f o r i n d u s t r i a l c a p i t a l s t o expand t h e i r i n f l u e n c e i n t o o t h e r c a p i t a l s . Under monopoly c a p i t a l i s m , t h e i n d u s t r i a l c o nglomerate t a k e s r e s p o n s i b i l i t y f o r t h e p r o d u c t i o n o f a commodity and i t s m a r k e t i n g , l i n k i n g i n d u s t r i a l and commercial c a p i t a l s under a s i n g l e r o o f . An I n d u s t r i a l c a p i t a l may a l s o h o l d p r o p e r t y w h i c h i s not used s o l e l y i n the p r o d u c t i o n p r o c e s s , t h a t i s , p r o p e r t y and b u i l d i n g s w h i c h produce r e n t , and i n t h a t case the i n d u s t r i a l c a p i t a l w i l l have t o " l o o k a t such a s s e t s as p r o p e r t y , not j u s t means of p r o d u c t i o n " (Crompton and Gubbay 1977:92). F i n a l l y , i n d u s t r i a l f i r m s may e s t a b l i s h c l o s e l i n k s w i t h f i n a n c e c a p i t a l s a l l o w i n g "the c r e a t i o n o f a c o r p o r a t e empire a c q u i r e d t h r o u g h growth, merger, t a k e o v e r and j o i n t v e n t u r e " ( I b i d ) . Thus i n d u s t r i a l c a p i t a l may become bonded t o any one o f t h e o t h e r c a p i t a l s c r e a t i n g a network of i n t e r r e l a t i o n s w hich s t r e a m l i n e the p r o c e s s o f c a p i t a l a c c u m u l a t i o n . The a u t h o r s c o n c l u d e t h a t , "CT)he i n c r e a s i n g c e n t r a l i z a t i o n o f c a p i t a l I s i n d e e d a c r u c i a l and a p p a r e n t l y i n e v i t a b l e tendency i n c a p i t a l i s m " ( i b i d ) . I n a d d i t i o n t o t h e c o o p e r a t i o n among c a p i t a l s , and t h e tendency t o c r e a t e c o n g l o m e r a t e s , the a u t h o r s b e l i e v e t h a t d i f f e r e n t forms o f c a p i t a l may f i n d t h emselves i n c o m p e t i t i o n . High, i n t e r e s t r a t e s , f o r example, may h e l p the f i n a n c i a l s e c t o r accumulate c a p i t a l , b u t i n h i b i t i n d u s t r i a l c a p i t a l s from b o r r o w i n g money. S i m i l a r l y , h i g h t r a d i n g p r o f i t s may cause c o n f l i c t ' b e t w e e n i n d u s t r i a l and commercial c a p i t a l s . I n t h e s e i n s t a n c e s c a p i t a l s may form a l l i a n c e s o r t h e y may engage i n s h a r p l y c o m p e t i t i v e p r a c t i c e s which t h r e a t e n t h e v e r y b a s i s o f c a p i t a l a c c u m u l a t i o n . I n summation, Crompton and Gubbay have p o s i t e d f i v e d i v i s i o n s i n t h e b o u r g e o i s i e - f i n a n c e , I n d u s t r i a l , s e r v i c e , commercial and p r o p e r t y c a p i t a l s . I n t h e i n t e r e s t o f a c h i e v i n g t h e i r p r i m a r y g o a l , a l l f i v e o f t h e s e may o p e r a t e i n c l o s e c o n j u n c t i o n . A l t e r n a t i v e l y , t hey may l i n k t o g e t h e r t o form c o n g l o m e r a t e s , o r t h e y may work s i n g l y o r i n groups t o a c h i e v e t h e i r ends a t t h e expense o f o t h e r c a p i t a l s . T h i s then i s a dynamic system I n which f i v e e x c l u s i v e f u n c t i o n s o f t h e b o u r g e o i s i e s t r i v e t o i n c r e a s e t h e i r s t r e n g t h , f o r m i n g and b r e a k i n g a l l i a n c e s . The a p p r o a c h w h i c h Crompton and Gubbay have t a k e n has some advantages as a s t a r t i n g p o i n t f o r our a n a l y s i s . They have begun w i t h a s t r u c t u r a l a n a l y s i s o f t h e breakdown o f c a p i t a l i n t o f i v e p a r t s , but t h e y have r e f u s e d t o s t a t e a p r i o r i t h a t one form o f c a p i t a l t a k e s precedence o v e r a n o t h e r a t any g i v e n t i m e . As a consequence, t h e i r system escapes th e r i g i d d e t e r m i n i s m o f some o t h e r s c h o l a r s . (Frank and L i b h y P a r k , f o r example) who have r u n I n t o d i f f i c u l t i e s by g i v i n g prime importance t o one form o f c a p i t a l and r e d u c i n g a l l o t h e r s t o s u b o r d i n a t e s t a t u s . A l t h o u g h Crompton and Gubbay show t h a t i n d u s t r i a l and s e r v i c e c a p i t a l s a r e t h e o n l y ones w h i c h produce s u r p l u s v a l u e , t hey do not t h e r e f o r e assume t h a t t h e s e two c a p i t a l s w i l l d e t e r m i n e t h e r o l e s w h i c h t h e o t h e r t h r e e c a p i t a l s p l a y i n the economy. Indeed i t i s one o f the s t r e n g t h s o f t h e i r argument t h a t d i f f e r e n t c a p i t a l s w i l l t a k e precedence depending on t h e i r s t r e n g t h s and im p o r t a n c e a t any g i v e n p o i n t i n h i s t o r y . I f we a p p l y Crompton and Gubbay's paradigm t o the Canadian p e t r o l e u m i n d u s t r y we f i n d t h a t f o u r o f t h e f i v e c a p i t a l s a r e r e p r e s e n t e d w i t h i n the i n d u s t r y . Many o f t h e a c t i v i t i e s o f t h e o i l b u s i n e s s , o f c o u r s e , f a l l i n t o t h e i n d u s t r i a l s p h e re: w e l l d r i l l i n g , o i l and gas p r o d u c t i o n , p i p e l i n i n g , p r o c e s s i n g and r e f i n i n g . As a consequence, t h e s t r u c t u r e and e v o l u t i o n o f i n d u s t r i a l c a p i t a l i n the p e t r o l e u m i n d u s t r y w i l l be t h e prime f o c u s o f t h i s t h e s i s . However, as the o i l i n d u s t r y has grown, s e r v i c e c a p i t a l s have come t o p l a y an i n c r e a s i n g l y i m p o r t a n t r o l e , p e r f o r m i n g g e o l o g i c a l and g e o p h y s i c a l work, w e l l c l e a n i n g , sump p r e p a r a t i o n and so on. Commercial c a p i t a l s , t o o , have been fundamental t o t h e growth of t h e i n d u s t r y as b u s i n e s s e s grow up t o p r o v i d e g a s o l i n e , p e t r o l e u m p r o d u c t s and n a t u r a l gas t o the g e n e r a l p u b l i c . P r o p e r t y c a p i t a l has had s e v e r a l d i f f e r e n t r o l e s t o p l a y i n t he p e t r o l e u m i n d u s t r y . On the one hand t h e r e a r e those c a p i t a l s w h i c h have r e n t e d b u i l d i n g s and equipment t o the 44. p e t r o l e u m i n d u s t r y . These a r e an i m p o r t a n t c l a s s f r a c t i o n i n t h e c i t i e s o f C a l g a r y and Edmonton, where r e a l e s t a t e c o n n e c t i o n s w i t h t h e o i l b u s i n e s s have been c r i t i c a l t o t h e economic l i f e . More i m p o r t a n t f o r our d i s c u s s i o n however, ar e t h e p r o p e r t y c a p i t a l s t h a t have emerged from an o i l company's need t o d r i l l on l a n d t h a t does not b e l o n g t o the company i t s e l f . An o i l company cannot d r i l l a w e l l u n t i l an agreement has been reached w i t h t h e owner o f t h e s u b s u r f a c e r i g h t s . I n Canada, t h e s t a t e owns a l a r g e p r o p o r t i o n o f t h e sub-s u r f a c e r i g h t s and hence, t h e l e g i s l a t i o n g o v e r n i n g the l e a s i n g o f r i g h t s from t h e s t a t e has been v e r y i m p o r t a n t t o the development o f t h e o i l i n d u s t r y . The r e m a i n i n g t i t l e i s fragmented among hundreds o f owners: c o r p o r a t i o n s , f a r m e r s and I n d i a n bands. Thus, t h e r e l a t i o n s h i p between i n d u s t r i a l and p r o p e r t y c a p i t a l s i n t h e Canadian p e t r o l e u m i n d u s t r y i s complex, and c r i t i c a l t o our a n a l y s i s . S i m i l a r l y , t h e r e l a t i o n s h i p between f i n a n c e and i n d u s t r i a l c a p i t a l s i s complex. A c c e s s t o l a r g e l o a n s and f a v o u r a b l e r a t e s o f i n t e r e s t i s fundamental t o t h e o i l b u s i n e s s , where the c o s t o f equipment i s h i g h and t h e r e t u r n s on i n v e s t m e n t may not come f o r months o r y e a r s . However, under Canadian law, the ownership of f i n a n c i a l i n s t i t u t i o n s - p a r t i c u l a r l y banks - by i n d u s t r i a l c a p i t a l s i s s e v e r e l y c o n s t r a i n e d , so t h a t l i n k s between f i n a n c i a l and i n d u s t r i a l c a p i t a l s have tended to take other forms, shared d i r e c t o r s h i p s f o r example. As Crompton and Gubbay have suggested, we w i l l look f o r these kinds of r e l a t i o n s h i p s among these f i v e c a p i t a l s . We w i l l expect them to cooperate to enhance t h e i r accumulation of c a p i t a l ; we w i l l look f o r c o n f l i c t i n those areas i n which one c a p i t a l stands to g a i n a t the expense of o t h e r s , and f i n a l l y we w i l l look f o r mergers, where a v a r i e t y of c a p i t a l s become u n i t e d i n a s i n g l e e n t i t y . The o i l i n d u s t r y lends i t s e l f p a r t i c u l a r l y w e l l to t h i s l a s t k i n d of o r g a n i z a t i o n , the conglomerate. D e s p i t e i t s s i z e and importance, the petroleum i n d u s t r y i s r a t h e r simply organized, p a r t i c u l a r l y i n Canada where petr o c h e m i c a l and o i l sands t e c h n o l o g i e s are s t i l l i n t h e i r i n f a n c y . The two main products, o i l and n a t u r a l gas, are a range of a c t i v i t y - u n i t i n g i n d u s t r i a l , s e r v i c e , commercial and p r o p e r t y c a p i t a l s - are known as " i n t e g r a t e d " o i l companies. Those companies which operate as i n d u s t r i a l c a p i t a l s o n l y , are known as "non-integrated" o i l companies. T h i s d i s t i n c t i o n between the i n t e g r a t e d and n o n - i n t e g r a t e d companies forms the f i r s t l e v e l of a n a l y s i s i n our study of the Canadian o i l i n d u s t r y . 4 6 . Crompton and Gubbay p o i n t out t h a t a l t h o u g h t h e d i f f e r e n c e s between the f i v e c a p i t a l s a r e f u n d a m e n t a l , t h e r e a r e o t h e r i m p o r t a n t c l e a v a g e s t o be c o n s i d e r e d as w e l l , between s m a l l and l a r g e f i r m s , between n a t i o n a l and r e g i o n a l f i r m s , between e x p o r t i n g companies and t h o s e d e a l i n g w i t h a l o c a l market. A l t h o u g h t h e s e f a c t o r s a r e s u b o r d i n a t e t h e y may t a k e on g r e a t i m p o r t a n c e under c e r t a i n s i t u a t i o n s . F o l l o w i n g I n n i s and N i o s i , i t would seem t h a t t h e most c r i t i c a l o f t h e s e s u b o r d i n a t e i s s u e s i s t h a t o f n a t i o n a l i t y ; Canadian-based and f o r e i g n - b a s e d o i l companies can be e x p e c t e d t o form d i f f e r e n t camps and t o compete w i t h one a n o t h e r i n a v a r i e t y o f c i r c u m s t a n c e s . Thus, w i t h i n the group o f i n t e g r a t e d companies we w i l l f i n d b o t h Canadian and f o r e i g n s e c t o r s and i n the n o n - i n t e g r a t e d companies a s i m i l a r d i v i s i o n w i l l be found. By comparing the s t r u c t u r e o f t h e s e two groups i n 1947 and i n 1965, i t w i l l be p o s s i b l e t o draw c o n c l u s i o n s about the development o f a new s t a p l e i n d u s t r y i n a b i - n a t i o n a l c o n t e x t . T h i s , t h e n , w i l l be t h e second l e v e l o f a n a l y s i s w h i c h w i l l be used i n t h i s s t u d y . A t h i r d c l e a v a g e , s u g gested by t h e work o f Crompton and Gubbay, i s t h a t between companies which have a r e g i o n a l m arket-i n g o r g a n i z a t i o n and t h o s e w h i c h are n a t i o n a l i n scope. I n t h i s case we would e x p e c t e x p o r t p o l i c y , p r i c i n g and a c c e s s t o markets t o be a r e a s where c o n f l i c t s would a r i s e between t h e s e two groups. The d i f f e r e n c e between r e g i o n a l and n a t i o n a l f i r m s , t h e n , i s the t h i r d l e v e l o f a n a l y s i s used i n t h i s t h e s i s . What then i s t h e r o l e o f t h e s t a t e i n a system w h i c h i s dominated by t h e s e f i v e forms o f c a p i t a l ? I n the v i e w o f Crompton and Gubbay, the s t a t e ' s p r i m a r y aim i s t o a s s i s t i n the a c c u m u l a t i o n of c a p i t a l , but I t s r o l e does not end t h e r e . They p o i n t out t h a t t h e s e v e r i t y o f t h e c o n f l i c t s w h ich o c c u r between the c a p i t a l s , a t t i m e s put the s u r y i v a l o f t h e system i n q u e s t i o n . " I n monopoly c a p i t a l i s t s o c i e t i u n l e s s the s t a t e e f f i c i e n t l y c a r r i e s out c e r t a i n p u b l i c f u n c t i o n s . . . t h e a c c u m u l a t i o n p r o c e s s c o u l d not c o n t i n u e -the economy would c o l l a p s e " (Crompton and Gubbay 1977:1031. I n the event o f a c o n f l i c t t h e s t a t e becomes a b r o k e r , u s i n g i t s own powers t o m e d i a t e between the p a r t i e s i n c o n f l i c t . "The d i f f e r e n t t y p e s of c a p i t a l - i n d u s t r y , s e r v i c e s commerce, f i n a n c e and p r o p e r t y - may e f f e c t i v e l y form f a c t i o n s , each one p u r s u i n g i t s d i s t i n c t i v e i n t e r e s t s i n c o n f l i c t w i t h the o t h e r s and i n p a r t i c u l a r p r e s s i n g i t s c l a i m s upon the s t a t e . The s t a t e i s c l e a r l y v e r y i m p o r t a n t i n s e c u r i n g r e l a t i v e advantages between t h e s e f a c t i o n s t h r o u g h i t s f i s c a l and monetary p o l i c i e s . " CCrompton and Gubbay 19.77 :177)_ I n t h i s way t h e a u t h o r s g i v e the s t a t e a r o l e w hich c o n s i s t s o f two f u n c t i o n s . On t h e one hand the s t a t e i s q u i t e c l o s e l y bound t o t h e c a p i t a l s because o f i t s need 48. t o a s s i s t i n t h e a c c u m u l a t i o n o f c a p i t a l . On the o t h e r hand the s t a t e does p o s s e s s powers which a l l o w i t t o s e c u r e advantages f o r one f a c t i o n a g a i n s t a n o t h e r . The s t a t e i s b o t h an a l l y and a p o t e n t i a l f o e o f each c a p i t a l , and i t i s i n t h i s a r e a t h a t t h e s t a t e ' s " r e l a t i v e autonomy" i s found. As was mentioned e a r l i e r , Crompton and Gubbay see a whole s e r i e s o f c r o s s - c u t t i n g i n t e r e s t s between c a p i t a l s . S i m i l a r l y , t h e y do not see t h e s t a t e as a m o n o l i t h . There ar e broad d i f f e r e n c e s between the g o a l s and r e s p o n s i b i l i t i e s o f government departments, l e a d i n g t o f r a c t i o n s w hich may be i n c o n f l i c t w i t h one a n o t h e r . Then t o o , as t h e a u t h o r s p o i n t o u t , " s t a t e employees a r e not p a s s i v e cogs i n a machine, but have t h e i r own v a r i o u s i n t e r e s t s , i n c l u d i n g c l a s s i n t e r e s t s " (Crompton and Gubbay 1977:103). Thus the s t a t e has i n t e r n a l l i m i t a t i o n s on what i t can a c h i e v e . The concept o f t h e d i v e r s e I n t e r e s t s o f c a p i t a l s and the d i v e r s e i n t e r e s t s o f t h e s t a t e i s a u s e f u l one f o r t h i s t h e s i s . I n the p a s t , c r i t i c i s m has been d i r e c t e d a t the supposed M a r x i s t n o t i o n t h a t t h e s t a t e a c t s i n the i n t e r e s t o f the r u l i n g e l i t e . By d e v e l o p i n g a m u l t i f a c e t e d a n a l y s i s Crompton and Gubbay have a v o i d e d t h i s problem. I n t h e i r paradigm, a g r e a t v a r i e t y o f i n t e r e s t s - from w i t h i n and w i t h o u t - impinge on the s t a t e . The s t a t e r e s o l v e s t h e s e c o n f l i c t s based on t h e g e n e r a l i z e d g o a l o f l o n g - t e r m a c c u m u l a t i o n o f c a p i t a l and not s i m p l y on the immediate needs o f one c l a s s f r a c t i o n . T h i s f o r m u l a t i o n a l l i e s t h e s t a t e w i t h t h e l o n g - t e r m growth o f the c a p i t a l i s t mode o f p r o d u c t i o n . T h i s a n a l y s i s i s p a r t i c u l a r l y u s e f u l because i t a l l o w s f a r g r e a t e r room f o r i n t e r p r e t a t i o n o f d a t a t h a n does a more f u n c t i o n a l i s t argument which has the s t a t e o p e r a t i n g on b e h a l f o f the b o u r g e o i s i e . W i t h i n the c o n t e x t o f t h e s t a p l e s d e b a t e , one c r i t i c a l q u e s t i o n d e a l s w i t h c o m p e t i t i o n between f o r e i g n - b a s e d and Canadian-based companies f o r t h e b l e s s i n g o f t h e s t a t e . Crompton and Gubbay's f o r m u l a t i o n o f t h e problem would have t h e d i s t i n c t i o n between c a p i t a l s as the main d i v i s i o n o f t h e b o u r g e o i s i e . But t h e c o m p e t i t i o n between Canadian and f o r e i g n - b a s e d c a p i t a l s would be seen as a second s i g n i f i c a n t d i v i s i o n ; w i t h i n t h e i r argument i t i s q u i t e p o s s i b l e , under c e r t a i n h i s t o r i c a l c o n d i t i o n s , t h a t t h e Canadian-based companies would be a b l e t o make t h e i r i n f l u e n c e f e l t on the s t a t e . Crompton and Gubbay do not deny the p o s s i b i l i t y , . r a t h e r t h e y c h a l l e n g e o t h e r s c h o l a r s t o d e f i n e t h e c i r c u m s t a n c e s under w h i c h weaker c l a s s f r a c t i o n s a c h i e v e t h e i r g o a l s by u s i n g the i n f l u e n c e o f t h e s t a t e . I n e x a m i n i n g our m a t e r i a l on t h e Canadian s t a t e and the o i l i n d u s t r y we f i n d s e v e r a l a r e a s I n which the s t a t e becomes c r i t i c a l i n the o r g a n i z a t i o n o f c a p i t a l s . . S i n c e t h e 50. o v e r r i d i n g r o l e o f the s t a t e i s t o a s s i s t i n t h e a c c u m u l a t i o n o f c a p i t a l , we would e x p e c t t h a t t a x a t i o n would be the a r e a i n w hich the s t a t e ' s g r e a t e s t r o l e would be p l a y e d . The t a x s t r u c t u r e a s c e r t a i n s t h e speed and e f f i c i e n c y w i t h which c a p i t a l can be accumulated and a f f e c t s which k i n d o f c a p i t a l i s i n v e s t e d . The l e v e l o f c o r p o r a t e t a x e s , p e r s o n a l t a x s h e l t e r s , w i t h h o l d i n g t a x e s , i n c e n t i v e s and exemptions a r e a l l l e v e r s w h i c h t h e s t a t e uses t o det e r m i n e how much c a p i t a l i s i n v e s t e d and i n which a r e a o f the economy the i n v e s t m e n t i s made. Tax p o l i c y has been t h e p r i n c i p a l t o o l w hich the s t a t e has used i n i n f l u e n c i n g economic a c t i v i t y ; i t s power i s demonstrated by the massive ebbs and f l o w s which have f o l l o w e d major changes i n t a x p o l i c y o v er the l a s t t h i r t y y e a r s . T a x a t i o n and t h e p e t r o l e u m i n d u s t r y w i l l thus be a major f o c u s o f t h i s s t u d y . A second a r e a i n wh i c h t h e s t a t e has t r a d i t i o n a l l y e x e r c i z e d i n f l u e n c e i s t h a t o f e x t e r n a l r e l a t i o n s . I n Western c o u n t r i e s t h e r e has been a danger t h a t c o m p e t i t i o n between c a p i t a l s would harm the e f f i c i e n c y o f c a p i t a l a c c u m u l a t i o n , as the s t a t e has t a k e n c o n t r o l o f t h e development o f t a r i f f s and e x p o r t p o l i c y . I f e x p o r t r e l a t i o n s h i p s can be s t i m u l a t e d abroad, and i f tar . i f f b a r r i e r s can be ke p t low, p r o d u c t i o n o f i n d u s t r i a l and s e r v i c e c a p i t a l w i l l f o l l o w . However, because t a r i f f and e x p o r t p o l i c i e s a r e n e g o t i a t e d m u l t i l a t e r a l l y , t h e y o f t e n b e n e f i t c a p i t a l s w h i c h a r e i n t e r n a t i o n a l i n scope, and can i n f l u e n c e more than one government i n t h e i r i n t e r e s t . F o l l o w i n g the work o f t h e s t a p l e s t h e o r i s t s , t h e n , we w i l l e x p e c t t o see t h e s t a t e i n t e r v e n i n g v e r y s t r o n g l y i n debates between c a p i t a l s o v er the f u t u r e o f t a r i f f and e x p o r t p o l i c y . Crompton and Gubbay d i d . n o t l i m i t t h e i r d i s c u s s i o n o f the r e l a t i o n s h i p between t h e s t a t e and c a p i t a l s t o t h e spheres where p r i v a t e c a p i t a l o p e r a t e s , but d e l v e i n t o the spheres i n which the s t a t e i s d e v e l o p i n g i t s own c a p i t a l i n t e r e s t s . They' note t h a t i n t h e n i n e t e e n t h c e n t u r y the p o l i t i c a l and economic systems were s e p a r a t e , although, they i n t e r a c t e d i n t e n s e l y . However, today t h e s t a t e has a d i r e c t r o l e i n p r o d u c t i o n r e l a t i o n s and i n t h e r e s t r u c t u r i n g o f c a p i t a l . " . . . C S ) t a t e i n t e r v e n t i o n does more than s i m p l y r e g u l a t e the r e l a t i o n s between e x i s t i n g c a p i t a l s ; t h e s t a t e promotes new c o m b i n a t i o n s o f c a p i t a l ; t a k e s c o n t r o l o f p a r t i c u l a r c a p i t a l s and r e -o r g a n i z e s r e l a t i o n s between c a p i t a l s , and between c a p i t a l s and l a b o u r " CCrompton and Gubbay .1977: 107], T h i s i s a much b r o a d e r d e f i n i t i o n o f t h e r o l e o f t h e s t a t e t h a n we have en c o u n t e r e d b e f o r e . I t a l l o w s the s t a t e not o n l y the r o l e s o f promotor and a r b i t e r , but a l s o t h e r i g h t t o i n t e r v e n e i n t h e economy t o t a k e ownership o f some o f t h e means o f p r o d u c t i o n . I t has o f t e n been charged t h a t t h e s t a t e takes: c o n t r o l o f some c a p i t a l s when t h e y cannot be r u n p r o f i t a b l y by t h e p r i v a t e s e c t o r ; t h a t i s , t h a t t h e s t a t e has a s e r v i c e f u n c t i o n t o s u p p o r t u n p r o d u c t i v e e n t e r p r i s e . But here Crompton and Gubbay are expanding t h i s d e f i n i t i o n i n s i s t i n g t h a t t h e s t a t e w i l l t a k e o v e r h e a l t h y p r i v a t e f i r m s i n o r d e r t o promote i t s fundamental g o a l s . " S i n c e t h e s t a t e ' s c o r e f u n c t i o n i s the p r o m o t i o n o f o v e r a l l c a p i t a l a c c u m u l a t i o n , any s t a t e (quasi) c a p i t a l , because I t i s a s t a t e c a p i t a l , i s bound t o be p r e s s e d i n t o t h i s t o t a l f u n c t i o n " ("Crompton and Gubbay, 1977: 111). Thus p r i v a t e and s t a t e c a p i t a l s s e r v e p a r a l l e l , n o t d i v e r g e n t , f u n c t i o n s i n monopoly c a p i t a l i s t s o c i e t i e s . I n the Canadian o i l I n d u s t r y , t h e s t a t e c o n t r o l o f a c a p i t a l has been p a r t i c u l a r l y i m p o r t a n t I n t h e a r e a o f m i n e r a l r i g h t s l e a s i n g . Most o f the m i n e r a l r i g h t s i n A l b e r t a a re owned by the p r o v i n c i a l government. As a r e s u l t the s t a t e c o n t r o l s an i m p o r t a n t p r o p e r t y c a p i t a l , the p r o v i n c e c o n s e q u e n t l y performs a d u a l r o l e , as: the owner o f p r o p e r t y c a p i t a l and as the r e g u l a t o r o f the r e l a t i o n s h i p between p r o p e r t y c a p i t a l s , and i n d u s t r i a l c a p i t a l . By examining the way i n which, t h e p r o v i n c i a l s t a t e h a n d l e d t h e s e two r e s p o n s i b i l i t i e s we w i l l be a b l e t o t e s t Crompton and Gubbay's a s s e r t i o n t h a t s t a t e and p r i v a t e c a p i t a l s have a c t e d i n tandem, i n the i n t e r e s t o f the a c c u m u l a t i o n o f c a p i t a l . There a r e t h e n t h r e e p r i n c i p a l a r e a s i n w h i c h we w i l l examine the s t a t e ' s r e l a t i o n s h i p w i t h the p e t r o l e u m i n d u s t r y . I n two o f t h e s e a r e a s - t a x a t i o n and e x p o r t p o l i c y - we w i l l want t o know i f t h e s t a t e has i n d e e d a c t e d i n the i n t e r e s t o f c a p i t a l a c c u m u l a t i o n , and f u r t h e r m o r e , how d e c i s i o n s have been made whi c h p e r m i t t e d t h e s u c c e s s o f the i n t e g r a t e d and n o n - i n t e g r a t e d f r a c t i o n s o f t h e i n d u s t r y as w e l l as t h e Canadian and non-Canadian f r a c t i o n s . The t h i r d a r e a o f s t a t e i n t e r v e n t i o n - t h e m i n e r a l r i g h t s p o l i c y o f t h e A l b e r t a government - w i l l g i v e us g u i d e l i n e s f o r u n d e r s t a n d i n g t h e r o l e the s t a t e p l a y e d as a c a p i t a l and as an a r b i t e r between Canadian and m u l t i n a t i o n a l segments o f t h e i n d u s t r y . B e f o r e t u r n i n g t o the r o l e o f t h e s t a t e , however, i t i s i m p o r t a n t t o d i s s e c t t h e s t r u c t u r e o f the. p e t r o l e u m i n d u s t r y a t the time o f t h e Leduc d i s c o v e r y . 54. I l l : C l a s s and t h e P e t r o l e u m I n d u s t r y : 1947 I t was l a t e i n t h e a f t e r n o o n o f F e b r u a r y 13, 1943, when Vern "Dry H o l e " T a y l o r h e l d a f l a m i n g r a g t o t h e Leduc #1 w e l l , s e n d i n g a b l a c k r i n g of smoke i n t o t h e sky and u s h e r i n g i n an i n d u s t r y t h a t would change t h e f a c e o f a n a t i o n . The Leduc o i l f i n d was t h e l a r g e s t o i l d i s c o v e r y i n A l b e r t a ' s t h i r t y - f i v e y e a r s as a p e t r o l e u m p r o d u c i n g p r o v i n c e , and t h e f i r s t o i l d i s c o v e r y i n t h e deep s t r u c t u r e s o f the A l b e r t a p l a i n s . Y et t h e importance o f t h e Leduc w e l l was not so much t h a t i t c r e a t e d an o i l i n d u s t r y i n A l b e r t a , b u t t h a t i t r a d i c a l l y changed t h e s t r u c t u r e o f t h e i n d u s t r y t h a t was a l r e a d y t h e r e . A: The I n t e g r a t e d O i l Companies B e f o r e t h e d i s c o v e r y o f o i l a t Leduc t h e r e were s i x l a r g e , i n t e g r a t e d o i l companies o p e r a t i n g i n Canada. Four o f t h e s e were f o r e i g n - b a s e d : I m p e r i a l O i l , S h e l l Canada, Texaco and S t a n d a r d O i l o f B.C. Two o t h e r l a r g e , i n t e g r a t e d companies were C a n a d i a n - c o n t r o l l e d : B r i t i s h American O i l s and Canadian O i l Companies L i m i t e d . I n 1946, I m p e r i a l O i l was t h e most p o w e r f u l o i l company i n Canada. I t was founded i n the 1880s by 55. O n t a r i o merchants who used the o i l found near P e t r o l i a , O n t a r i o t o make k e r o s e n e . Near the t u r n o f the- c e n t u r y t h e s e merchants f a c e d i n c r e a s i n g c o m p e t i t i o n from S t a n d a r d O i l , the g i a n t American company owned by John D. R o c k e f e l l e r . By 189 8, t h e Canadian company found i t s e l f u nable t o compete w i t h S t a n d a r d , so the O n t a r i o owners s o l d out t o the American f i r m ; e v e r s i n c e , I m p e r i a l O i l has been 69% owned by t h e l a r g e s t o i l company i n the w o r l d . A f t e r t h e d i s c o v e r y o f o i l i n the Turne r V a l l e y o f A l b e r t a i n 1914, I m p e r i a l began an a g g r e s s i v e l a n d a c q u i s i t i o n programme i n t h e Canadian West. Because o f i t s s t r o n g c a p i t a l p o s i t i o n , I m p e r i a l was a b l e t o s t o c k p i l e m i n e r a l r i g h t s , p a y i n g out t h e annual r e n t a l f e e s y e a r by y e a r u n t i l t he g e o l o g i c a l s t r u c t u r e o f the Western.sedimentary b a s i n was f u l l y u n d e r s t o o d . By 1946, . I m p e r i a l c o n t r o l l e d 2 3 m i l l i o n a c r e s o f m i n e r a l r i g h t s and had d i s c o v e r e d the Norman W e l l s f i e l d i n t h e Northwest T e r r i t o r i e s . I m p e r i a l ' s , c a p i t a l p o s i t i o n a l s o h e l p e d the company t o become preeminent i n t h e T u r n e r V a l l e y . - I n 1920, when t h e s t r i p p i n g o p e r a t i o n owned by a l o c a l f i r m , C a l g a r y P e t r o l e u m P r o d u c t s , burned down, I m p e r i a l bought out t h e company and r e b u i l t the p l a n t , f o r c i n g o t h e r companies i n t o a dependent r e l a t i o n s h i p . By the time t h e Leduc d i s c o v e r y was made, I m p e r i a l was the most i m p o r t a n t company i n Canada i n a l l phases o f the i n d u s t r y . I n a d d i t i o n t o i t s 2 3 m i l l i o n a c r e s o f m i n e r a l r i g h t s , the company had i n t e r e s t s i n 19 8 o i l and. gas w e l l s i n the Turner V a l l e y and 6 3 i n Norman W e l l s , w i t h an a n n u a l p r o d u c t i o n o f o v e r two m i l l i o n b a r r e l s o f o i l . . I t had t h e l a r g e s t s t a k e i n the M o n t r e a l t o P o r t l a n d p i p e l i n e which b r o u g h t f o r e i g n o i l i n t o Canada;, i t owned seven r e f i n e r i e s which a c c o u n t e d f o r 48% o f the c o u n t r y ' s c a p a c i t y . F i n a l l y , i t owned t h r e e s u b s i d i a r i e s which were a c t i v e i n Western Canada. I n p r o d u c t i o n , t r a n s m i s s i o n and r e f i n i n g and . s a l e s , I m p e r i a l O i l was number one. S h e l l O i l e n t e r e d Canada s h o r t l y a f t e r t h e t u r n o f the c e n t u r y as a wholly-owned s u b s i d i a r y o f R o y a l Dutch o f t h e N e t h e r l a n d s and S h e l l O i l o f the U n i t e d S t a t e s . S h e l l ' s i n t e r e s t s remained p r i n c i p a l l y i n t h e r e f i n i n g and m a r k e t i n g a r e a ; the company owned r e f i n e r i e s i n M o n t r e a l and Vancouver w i t h the second l a r g e s t c a p a c i t y o f any company i n Canada -38,000 b a r r e l s per day. S h e l l a l s o e s t a b l i s h e d a seven-year e x p l o r a t i o n programme i n A l b e r t a which ended w i t h o u t making any d i s c o v e r i e s i n 194-6. The company a l s o h e l d a 20% share i n the M o n t r e a l t o P o r t l a n d p i p e l i n e . • The Texas Company ( l a t e r Texaco) took a d i f f e r e n t r o u t e t o e s t a b l i s h i n g i t s Canadian base. I n 19 36, i t began t o purchase s t o c k i n one o f Canada's l a r g e s t i n t e g r a t e d o i l companies, M c C o l l F r o n t e n a c . Two y e a r s l a t e r , w i t h 35% o f the company's s t o c k under i t s c o n t r o l , Texaco's American 57. d i r e c t o r s walked i n t o t h e a n n u a l m e e t i n g and v o t e d t h e i r own s h a r e s , p l u s o t h e r s o b t a i n e d i n a b i t t e r proxy; f i g h t , t o o u s t t h e Canadian d i r e c t o r s and management. S u b s e q u e n t l y , through, mergers and s t o c k swaps', Texaco was, able, t o c o n s o l i d a t e i t s c o n t r o l o v er 6 0% o f t h e stock, o f i t s new s u b s i d i a r y - , Texaco Canada. Soon a f t e r w a r d , the', company took c o n t r o l ' o f two. r e g i o n a l r e f i n i n g companies: t o become o f one o f t h e l a r g e s t r e f i n i n g and m a r k e t i n g companies I n Canada. The o n l y o t h e r i n t e g r a t e d , f o r e i g n - o w n e d company i n Canada i n the pre-Leduc e r a was S t a n d a r d O i l o f C a l i f o r n i a , . which, e s t a b l i s h e d a wholly-owned s u b s i d i a r y S t a n d a r d O i l . o f B.C. t o r u n i t s Vancouver r e f i n e r y , and a n o t h e r s u b s i d i a r y C a l i f o r n i a S t a n d a r d , t o conduct i t s e x p l o r a t i o n a c t i v i t i e s i n t h e Canadian West. A l l f o u r o f t h e m u l t i n a t i o n a l s .were i n an advantageous p o s i t i o n I n t h e event o f a major d i s c o v e r y . A l l o f t h e p a r e n t companies had l a r g e p o o l s o f c a p i t a l which, c o u l d be put a t t h e d i s p o s a l o f t h e i r s u b s i d i a r i e s . I m p e r i a l ' s p a r e n t , S t a n d a r d O i l o f New J e r s e y , was the, l a r g e s t c o r p o r a t i o n i n the w o r l d with, a s s e t s o f over $1 b i l l i o n i n 194-6. The S h e l l group was t h e second l a r g e s t o i l company i n the w o r l d , with, a g l o b e - g i r d l i n g empire 'second o n l y t o t h a t o f S t a n d a r d O i l o f New J e r s e y . Two o f t h e 58. f o u r m u l t i n a t i o n a l s had t h e e x t r a advantage of b e i n g t h e s o l e owners o f t h e i r s u b s i d i a r i e s . S h e l l and S t a n -d a r d o f C a l i f o r n i a c o u l d p l o t t h e i r s u b s i d i a r i e s ' f u t u r e s w i t h o u t any c o n c e r n f o r o u t s i d e s h a r e h o l d e r s . In a d d i t i o n t o t h e i r s t r o n g c a p i t a l p o s i t i o n , the f o r e i g n - b a s e d companies had t h e t w i n advantages of t e c h -n o l o g y and e x p e r t i s e . Because t h e y belonged t o i n t e r -n a t i o n a l n e t w o r k s , t h e s e companies c o u l d c a l l on g e o l o -g i s t s , g e o p h y s i c i s t s and s t a t e - o f - t h e - a r t s e i s m i c equipment t o a s s i s t i n t h e s e a r c h f o r o i l i n A l b e r t a . The f o r e i g n - b a s e d o i l companies, t h e n , had t h r e e l i n k e d advantages t h a t t h e y c o u l d bank on i n t h e event o f a major o i l d i s c o v e r y i n Canada. Each had a s t r o n g c a p i t a l base, a p o o l o f e x p e r t i s e and a c c e s s t o t h e most modern t e c h n o l o g y . The l a r g e s t o f t h e i n t e g r a t e d Canadian o i l companies was B r i t i s h American O i l (B.A.). B.A. had been founded by a H a m i l t o n e n t r e p r e n e u r , A.L. E l l s w o r t h , t o r e f i n e i m p o r t e d crude i n t o k erosene f o r t h e E a s t e r n Canadian market. L i k e I m p e r i a l O i l , B r i t i s h American had seen t h e development of a p r o d u c i n g o i l f i e l d i n t h e T u r n e r V a l l e y of A l b e r t a as a p o t e n t i a l t h r e a t , so d u r i n g t h e t w e n t i e s B.A. had. i n t e g r a t e d 'backwards 1, by j o i n i n g the" s e a r c h f o r o i l i n A l b e r t a . An a b s o r b t i o n p l a n t p r o c e s s i n g 9 0 m i l l i o n c u b i c f e e t o f gas a day was c o n s t r u c t e d t o h a n d l e t h e p r o d u c t i o n o f many o f the s m a l l independent p r o d u c e r s . A t the same t i m e , because B.A. had an a s s u r e d c a p i t a l f l o w from i t s e a s t e r n r e f i n i n g o p e r a t i o n s , d u r i n g the D e g r e s s i o n the company was a b l e t o l e n d money t o t h e independents t o d r i l l w e l l s i n t h e Tur n e r V a l l e y . The r e t u r n on t h e i r c a p i t a l was u s u a l l y make as a p e r c e n t a g e o f t h e o i l d i s c o v e r e d and as a r e s u l t the B r i t i s h American b a l a n c e sheet showed t h e p r o d u c t i o n from t h e i r own w e l l s as w e l l as t h a t from w e l l s b e l o n g i n g t o many o f t h e i n d e p e n d e n t s . But B.A.'s s t r e n g t h l a y i n i t s e a s t e r n Canadian r e f i n i n g o p e r a t i o n s ; w i t h f i v e r e f i n e r i e s and a c a p a c i t y o f 35,300 b a r r e l s p e r day, t h e company was t h e t h i r d l a r g e s t r e f i n e r i n Canada. By 1946, B.A. was p r o v i n g t o be a s t r o n g c o m p e t i t o r t o the f o r e i g n - b a s e d companies. The second l a r g e Canadian-based i n t e g r a t e d o i l company was Canadian O i l Companies L i m i t e d ; by t h e end o f World War I I , Canadian O i l Companies had a f o r t y - y e a r h i s t o r y o f r e f i n i n g and d i s t r i b u t i n g o i l p r o d u c t s . The company's P e t r o l i a r e f i n e r y p r o c e s s e d 100,000 b a r r e l s a month and i t s n i n e hundred s e r v i c e s t a t i o n s d i s t r i b u t e d White Rose brand p r o d u c t s a c r o s s Canada. Canadian O i l Companies was c o n t r o l l e d by the 60. M o n t r e a l i n v e s t m e n t house,. N e s b i t t Thompson, w i t h P e t e r A. Thompson as the Chairman o f the Board. I t was N e s b i t t Thompson which had c o n t r o l l e d M c C o l l F r o n t e n a c b e f o r e i t s t a k e o v e r by t h e Texas Company i n the l a t e 19 3 0 s. Thus, i n 19 4 7, t h e r e were two l a r g e , i n t e g r a t e d Canadian o i l companies r u n by men who r e p r e s e n t e d t h e f i n a n c i a l and r e s o u r c e i n t e r e s t s o f the Canadian b o u r g e o i s i e . They had s t r o n g c a p i t a l bases - B.A. had a net. p r o f i t of $1.8 m i l l i o n i n 194-6 and Canadian O i l Companies p r o f i t was over a m i l l i o n d o l l a r s i n the same p e r i o d ( F i n a n c i a l P o s t 1947:51). A l t h o u g h t h i s was o n l y a f r a c t i o n o f the c a p i t a l base o f t h e f o r e i g n - b a s e d companies, i t was c e r t a i n l y l a r g e by the s t a n d a r d s o f Canadian i n d u s t r y . These l a r g e Canadian-based i n t e g r a t e d companies f a c e d two major h u r d l e s i n the event o f a major o i l d i s c o v e r y on t h e Canadian p l a i n s . I n t h e f i r s t p l a c e , t h e i r r o o t s were on the r e f i n i n g s i d e o f t h e i n d u s t r y , so they were a n x i o u s t o i n t e g r a t e 'backwards', t o d e v e l o p t h e i r own s o u r c e s o f crude o i l f o r t h e i r r e f i n e r i e s . S e c o n d l y , because t h e y were c o n t r o l l e d by i n s t i t u t i o n s and i n d i v i d u a l s t h a t were h e a v i l y i n v o l v e d i n t h e f i n a n c i a l s p h e r e , they d i d not have immediate ac c e s s t o a. p o o l o f i n d u s t r i a l t e c h n o l o g y and e x p e r t i s e . These l i m i t a t i o n s had not s e v e r e l y i n h i b i t e d t h e Canadian companies up t o 1947, but t h e y were weaknesses which would become c r i t i c a l a f t e r a major d i s c o v e r y . Thus, the i n t e g r a t e d o i l companies o p e r a t i n g i n Canada i n 1947 were d i v i d e d i n t o two main groups. The f o r e i g n - b a s e d com-p a n i e s c o n t r o l l e d 65% o f r e f i n i n g i n 1946. Two l a r g e , i n t e -g r a t e d Canadian companies shared th e r e s t . The d i f f e r e n c e between the f o r e i g n and Canadian segments was more p o t e n t i a l than immediate. The i n t e r n a t i o n a l l i n k s o f the f o r e i g n -based companies gave them a p o t e n t i a l power t h a t c o u l d be a c t i v a t e d q u i c k l y and e f f i c i e n t l y i n the e v ent of a major o i l d i s c o v e r y . The i n t e g r a t e d Canadian f i r m s , even th o s e w i t h the b a c k i n g o f l a r g e f i n a n c i a l i n s t i t u t i o n s , had the t h r e e d i s a d v a n t a g e s t h a t came from not b e i n g i n t e g r a t e d i n t o an i n t e r n a t i o n a l m a r k e t i n g network: they l a c k e d c a p i t a l , t e c h n o l o and e x p e r t i s e . These t h r e e f a c t o r s were d e c i s i v e i n t h e decade f o l l o w i n g the Leduc d i s c o v e r y . B. The N o n - I n t e g r a t e d Companies 1. The N o n - I n t e g r a t e d , P r o d u c i n g F i r m s J u x t a p o s e d a g a i n s t the i n t e g r a t e d p e t r o l e u m companies were a l a r g e number o f n o n - i n t e g r a t e d f i r m s . A t the end o f 1946, v i r t u a l l y a l l o f t h e s e companies were Canadian owned. A-f-ew o p e r a t e d out of the o i l f i e l d s o f P e t r o l i a , O n t a r i o , b u t f o r t h e most p a r t t h e y were based i n the Turner V a l l e y o f A l b e r t a ( T a b l e I ) . N o n - i n t e g r a t e d , l o c a l companies had been r e s p o n s i b l e f o r two o f the T u r n e r V a l l e y ' s three.booms. A l o c a l r e s i d e n t , A r c h i b a l d Dingman, d r i l l e d the w e l l t h a t d i s c o v e r e d gas a t Sheep Creek i n 1914; t h r e e C a l g a r y businessmen were b e h i n d the d i s c o v e r y o f o i l i n 19 36. A h o s t o f s m a l l companies had grown up around each o f the t h r e e Turner V a l l e y booms., Tab l e I C a p i t a l i z a t i o n o f Canadian N o n - I n t e g r a t e d O i l . Companies: 1946 C a p i t a l i z e d i n A l b e r t a 140 C a p i t a l i z e d i n B r i t i s h Columbia 11 C a p i t a l i z e d i n O n t a r i o 11 C a p i t a l i z e d i n M anitoba 1 C a p i t a l i z a t i o n u n c e r t a i n 7 T o t a l Canadian-based, n o n - i n t e g r a t e d companies o p e r a t i n g i n A l b e r t a , 1946 16 3 ( F i n a n c i a l P o s t ' S u r v e y o f ' O i l s : 1947) Most p e o p l e l o o k i n g a t the odd c o l l e c t i o n o f owners and managers o f t h e n o n - i n t e g r a t e d companies would not have re g a r d e d them as a b o u r g e o i s i e . Most o f them l i v e d from o t h e r v o c a t i o n s - t h e r e was a p a t e n t m e d i c i n e salesman, two o r t h r e e r a n c h e r s , a s t o c k b r o k e r , some l a w y e r s , t h e manager o f C a l g a r y 1 c i t y t r a n s i t system and a few f u l l - t i m e o i l promotors. They r i s k e d what money t h e y had t o spare on k e e p i n g a few o i l w e l l s open. N e v e r t h e l e s s , t h e y d i d c o n t r o l the means o f p r o d u c t i o n t h e y h i r e d l a b o u r and c o n t r o l l e d c a p i t a l , so i n the c l a s s i c a l s e nse, t h e y were members o f t h e b o u r g e o i s i e . D u r i n g the t h i r t i e s , t h e s e independent o i l companies had f a l l e n on h a r d t i m e s . A f t e r the d i s c o v e r i e s o f 1914 and 1925, t h e e n t e r p r i s e s w h i c h t h e y e s t a b l i s h e d had t a k e n t h e form o f j o i n t s t o c k companies. But a decade l a t e r , when i t was f i r s t s u g g e s ted t h a t o i l as w e l l as gas might be found I n the Tu r n e r V a l l e y , the j o i n t s t o c k companies were u n a b l e t o r a i s e any c a p i t a l t o b e g i n d r i l l i n g . I n s t e a d , a d o p t i n g a system w h i c h had been used I n Oklahoma and Texas, the e n t r e -p r e n e u r s went t o a s m a l l group o f C a l g a r y o i l e n t h u s i a s t s and s o l d them s h a r e s - as low as 1/4 0 o f one p e r c e n t - i n the p r o d u c t i o n from a s i n g l e w e l l . T h e . f i r s t w e l l t o t r y the new system s t r u c k o i l i n 1936, and w i t h i n months l o c a l m erchants, d o c t o r s , d e n t i s t s and r a n c h e r s were r e c e i v i n g cheques: f o r t h e i r p o r t i o n o f t h e o i l . A new form o f f i n a n c i n g had become the backbone o f t h e A l b e r t a o i l I n d u s t r y . T h i s method o f r a i s i n g d r i l l i n g monies had some marked e f f e c t s on t h e s t r u c t u r e o f t h e n o n - i n t e g r a t e d o i l companies. S i n c e i n v e s t o r s were encouraged t o buy r o y a l t i e s i n a s i n g l e w e l l r a t h e r t h a n s h a r e s i n a j o i n t s t o c k company, hundreds o f d i f f e r e n t companies sprung up, most o f them w i t h o n l y a q u a r t e r o r a h a l f s e c t i o n on w h i c h t o d r i l l . I f no o i l were d i s c o v e r e d and t h e c a p i t a l had been used up, the company f o l d e d q u i c k l y . I f o i l were d i s c o v e r e d , the company's f u t u r e was no more e n c o u r a g i n g , s i n c e a l l o f t h e e a r n i n g s went back, t o t h e i n v e s t o r s . The p r o f i t s from T u r n e r V a l l e y o i l were not used t o b u i l d a s t r o n g c o r p o r a t e base, one w h i c h would have s e t the independent companies on a n y t h i n g l i k e a c o m p a r a t i v e f o o t i n g w i t h t h e f o r e i g n o i l companies e n t e r i n g t h e p r o v i n c e . I n s t e a d , the money produced from A l b e r t a ' s f i r s t o i l and gas w e l l s went t o s w e l l t h e p e r s o n a l f o r t u n e s o f the businessmen r a n c h e r s and p r o f e s s i o n a l s who had i n v e s t e d i n o i l . By t h e time o f t h e Leduc d i s c o v e r y , the T u r n e r V a l l e y f i e l d was i n d e c l i n e , and i t took the f o r t u n e s , o f t h e non-i n t e g r a t e d o i l companies with. i t . D u r i n g t h e war, p r o d u c t i o n from t h e T u r n e r V a l l e y had been i n c r e a s e d t o meet wartime demand, so t h a t p r o d u c t i o n peaked i n 1942 a t 10 X 10^ b a r r e l s . 6 By 1947, p r o d u c t i o n was down t o 6.4 X 10' b a r r e l s a y e a r , l e s s than 10% o f Canadian demand ( O i l and Gas C o n s e r v a t i o n Board 194 7 ) , and A l b e r t a seemed t o have no f u t u r e as an o i l -p r o d u c i n g p r o v i n c e . I f we examine the main s p h e r e s o f the p e t r o l e u m I n d u s t r y i n the y e a r b e f o r e the Leduc d i s c o v e r y we can see t h a t the i n t e g r a t e d companies h e l d t h e edge over t h e i r n o n - i n t e g r a t e d c o m p e t i t o r s . In t h e sphere of p r o d u c t i o n , I m p e r i a l O i l dominated th e meagre p r o d u c t i o n from the T u r n e r V a l l e y f i e l d w i t h almost two hundred w e l l s under i t s c o n t r o l ( F i n a n c i a l P o s t Survey o f O i l s 1946:98). I n c o n t r a s t , the n o n - i n t e g r a t e d companies had v e r y few w e l l s . Only Home O i l , w i t h s i x t e e n w e l l s , seemed t o have a f i r m f o o t h o l d i n the p r o d u c t i o n s i d e of the i n d u s t r y . On the eve o f the Leduc d i s c o v e r y t h e n , the n o n - i n t e g r a t e d companies were i n a weak p o s i t i o n . They were fragmented i n t o more than one hundred companies c o n t r o l l i n g o n l y a s m a l l p a r t o f the p r o d u c t i o n i n the Canadian West. T h e i r c a p i t a l base d i s s i p a t e d , dependent on t h e i n t e g r a t e d companies t o purchase t h e i r o i l , w i t h o u t modern equipment o r e x p e r t s t a f f , they were not i n a p o s i t i o n t o move d e c i s i v e l y i n t h e event of a major d i s c o v e r y . 2. N o n - I n t e g r a t e d R e f i n i n g Companies I n a d d i t i o n t o t h e two groups of p r o d u c i n g companies, t h e r e were e l e v e n o i l r e f i n i n g companies s c a t t e r e d t h r o u g h o u t Canada. They were s m a l l , w i t h r e f i n e r i e s t h a t produced under 5,000 b a r r e l s a day. They s e r v e d a r e g i o n a l market o n l y . For the most p a r t they i m p o r t e d crude o i l from w e l l s i n the n o r t h e r n U n i t e d S t a t e s . T h e i r boards c o n s i s t e d o f l o c a l e n t r e p r e n e u r s , and a l t h o u g h t h e y were c a p i t a l - p o o r , t hey s u r v i v e d because t h e y had l o n g - t e r m c o n t r a c t s t o s u p p l y a r e a s o f t h e c o u n t r y t h a t c o u l d not be s e r v e d e a s i l y by t h e l a r g e r m u l t i n a t i o n a l o r Canadian i n t e g r a t e d companies. (The one e x c e p t i o n t o t h i s r u l e was the Consumer's Co-op R e f i n e r y i n R e g i n a , w h i c h p r o c e s s e d 7,500 b a r r e l s p e r day and had a b r o a d l y - b a s e d l o c a l ownership w i t h i n the Saskatchewan co-op movement.) These companies were a l s o i n a weak p o s i t i o n . T h e i r c a p i t a l b a c k i n g was poor, they d i d not c o n t r o l l a r g e o i l r e s e r v e s , and t h e i r a c c e s s t o markets was l i m i t e d . I n s h o r t , t hey had l i t t l e chance o f making g r e a t s t r i d e s , even i f a major d i s c o v e r y were made on t h e Canadian p l a i n s . 3. The T r a n s m i s s i o n Companies The r e m a i n i n g segment o f t h e p e t r o l e u m i n d u s t r y , the t r a n s m i s s i o n companies, f u l f i l l e d a v e r y l o c a l i z e d market. W i t h i n A l b e r t a , t h e r e were t h r e e s m a l l p i p e l i n e s t a k i n g n a t u r a l gas from M e d i c i n e Hat, V i k i n g and Turner V a l l e y t o the major c i t i e s . P e t r o l e u m t r a n s p o r t a t i o n depended on the i n t e r n a t i o n a l t a n k e r systems owned by the i n t e g r a t e d companies i n the E a s t , w h i l e t r a n s p o r t a t i o n t o p r a i r i e r e f i n e r i e s was by r a i l r o a d . I n 1946, t h e r e was no n a t i o n a l t r a n s m i s s i o n system f o r t h e energy s u p p l i e s t h a t were r a p i d l y becoming i n d i s p e n s i b l e . IV: THE ROLE OF THE STATE The p e t r o l e u m i n d u s t r y i s : a f f e c t e d by two l e v e l s o f government, t h e p r o v i n c i a l and t h e f e d e r a l . The p r o v i n c i a l government, w i t h i t s c o n t r o l o v e r n a t u r a l r e s o u r c e s , d e v i s e s the r u l e s f o r l e a s i n g p r o v i n c i a l l y - o w n e d s u b s u r f a c e r i g h t s , r e g u l a t e s p r o d u c t i o n , o v e r s e e s t r a n s m i s s i o n f a c i l i t i e s w i t h i n the p r o v i n c e and sets: p r o v i n c i a l t a x and r o y a l t y r a t e s . The f e d e r a l government c o n t r o l s i n t e r p r o v i n c i a l and i n t e r n a t i o n a l t r a n s p o r t o f p e t r o l e u m and n a t u r a l gas, as w e l l as, t h e f e d e r a l t a x and r o y a l t y r e g i m e s . I n the f o l l o w i n g s e c t i o n o f t h i s paper I w i l l examine t h r e e p o l i c i e s w h i c h had i m p o r t a n t e f f e c t s on t h e development of t h e p e t r o l e u m i n d u s t r y . Two o f t h e s e p o l i c i e s l a y i n t h e f e d e r a l j u r i s d i c t i o n : e x p o r t p o l i c y and t a x a t i o n . The t h i r d p o l i c y , the e v o l u t i o n o f l e g i s l a t i o n g o v e r n i n g t h e l e a s i n g o f m i n e r a l . r i g h t s on Crown l a n d , i s a p u r e l y p r o v i n c i a l c o n c e r n . I n each c a s e , t h e s e p o l i t i c a l i n i t i a t i v e s w i l l be examined i n terms o f t h e e f f e c t t h e y had on t h e growth o f the p e t r o l e u m i n d u s t r y and on t h e development o f c l a s s r e l a t i o n s w i t h i n t h e community o f o i l companies. A: F e d e r a l T a x a t i o n P o l i c y A t the end o f World War IT Canada was f a c i n g a b a l a n c e of t r a d e c r i s i s . Canada's e a r l y e n t r y i n t o the war had l e d t o massive i m p o r t s o f s t e e l , m u n i t i o n s , and a u t o m o b i l e s and a i r p l a n e p a r t s . The b a l a n c e o f t r a d e d e f i c i t blossomed from 68. $149 m i l l i o n d o l l a r s i n 1938 to $603 m i l l i o n i n 1946. U n f o r t u n a t e l y , the 's tresses- o f the pos t -war p e r i o d made the d e f i c i t worse . W i t h the d e r e g u l a t i o n o f consumer p r i c e s i n the U n i t e d S t a t e s , the c o s t o f consumer goods r o s e r a p i d l y . Moreover , i n the f l u s h o f pos t -war p r o s p e r i t y , Canadians began to purchase l a r g e q u a n t i t i e s o f American-made consumer goods , and the southward d r a i n o f Canadian c u r r e n c y became even more s e r i o u s . T r a d i t i o n a l l y , the Canad ian government had f o l l o w e d two paths In r e s p o n d i n g to c r i s e s i n i t s c u r r e n c y imbalances w i t h the U n i t e d S t a t e s . One r e a c t i o n was to t u r n more r e s o l u t e l y toward B r i t a i n and the empire c o u n t r i e s , i n c r e a s i n g e x p o r t s i n t o those p r o t e c t e d markets to g a i n more s t e r l i n g c u r r e n c y . But i n the pos t -war m a r k e t , t h i s was i m p o s s i b l e . Canada was not o n l y s u b s i d i z i n g i t s food e x p o r t s to B r i t a i n , but was b a c k i n g up the B r i t i s h r e c o n s t r u c t i o n e f f o r t w i t h s i z a b l e loans ( G r a n a t s t e i n 1982: 259) . The second t e c h n i q u e f o r s h o r i n g up the Canadian d e f i c i t was the s a l e o f g o l d to the U n i t e d S t a t e s . T h i s had proved p a r t i c u l a r l y u s e f u l i n the open ing y e a r s o f the war; i n 1941 a l o n e , over $200 m i l l i o n worth, o f g o l d had been sh ipped from n o r t h e r n O n t a r i o to the U n i t e d S t a t e s (Hansard March. 4, 1947: 990) . But a t the end o f the war, w i t h the c o s t o f l a b o u r and m a t e r i a l s no l o n g e r p r o t e c t e d , h a l f o f the n o r t h e r n mines were i n danger o f c l o s i n g and t h e U n i t e d S t a t e s , i n p o s s e s s i o n o f two t h i r d s o f the w o r l d s u p p l y o f g o l d , v i g o r o u s l y opposed any attempt t o r a i s e t h e f i x e d p r i c e o f g o l d o r t o s u b s i d i z e g o l d p r o d u c e r s (.ibid..) . W i t h o u t the t r a d i t i o n a l methods o f h a n d l i n g an exchange c r i s i s / t h e f e d e r a l government implemented a s e r i e s o f s t o p -gap measures. I n 1946, t h e Canadian d o l l a r was r e v a l u e d by 10%. When t h a t f o r c e d a m assive o u t f l o w o f c a p i t a l . , the d o l l a r was d e v a l u e d by 5%. F i n a l l y , i n 1949, Ottawa a l l o w e d t h e Canadian d o l l a r t o f l o a t . I t was t h e Department o f F i n a n c e , under L i b e r a l M i n i s t e r Douglas A b b o t t , w h i c h took on t h e p r i n c i p a l r e s p o n s i b i l i t y f o r r i g h t i n g t h e b a l a n c e o f payments s i t u a t i o n . The v e h i c l e chosen by t h e Department t o do t h i s was f e d e r a l t a x p o l i c y . From the end o f t h e war f o r w a r d , Ottawa used t a x measures t o encourage f o r e i g n i n v e s t m e n t i n Canada i n t h e hope t h a t a v a s t i n f l u x o f s t r o n g c u r r e n c i e s would not o n l y s t r e n g t h e n t h e Canadian economy but would d e v e l o p new raw r e s o u r c e and m a n u f a c t u r i n g i n d u s t r i e s . Dependence on f o r e i g n c a p i t a l i n t h e s h o r t term was t o l e a d t o a h e a l t h y m a n u f a c t u r i n g economy i n t h e f u t u r e . I n d e v e l o p i n g i t s p o l i c i e s , t h e Department o f F i n a n c e p l a y e d up t h e advantages w h i c h Canada p o s s e s s e d f o r i n v e s t o r s . The c o u n t r y , w i t h i t s s m a l l p o p u l a t i o n and l a r g e r i c h l a n d base had immense g r o w t h p o t e n t i a l ; i t had a good i n t e r n a l 70. market; i t was p o l i t i c a l l y s t a b l e . Most i m p o r t a n t , t h e c o u n t r y had h i s t o r i c a l l y been governed by monetary p o l i c i e s c o n d u c i v e t o t h e growth o f c a p i t a l and t h e r e was complete freedom o f movement f o r money and s e c u r i t i e s and no r e s t r i c t i o n on i n t e r n a t i o n a l t r a n s f e r s . These two elements - a s e c u r e monetary system and freedom o f c a p i t a l movement - became t h e fundamental t e n e t s o f postwar f i n a n c e p o l i c y CGlassco 1956: 81. S p e c i f i c t a x p o l i c i e s w i t h r e s p e c t t o f o r e i g n i n v e s t m e n t were f i r s t i n i t i a t e d i n 1933 w i t h t h e i n t r o d u c t i o n o f t h e w i t h h o l d i n g t a x l e v i e d on income ( d i v i d e n d s , r e n t a l s or, i n t e r e s t ) . , p a i d by r e s i d e n t s t o n o n - r e s i d e n t s . The r a t e o f t h e w i t h h o l d i n g t a x was f i r s t p l a c e d a t 5% (and n i l f o r s u b s i d i a r i e s ) , and was l a t e r r a i s e d t o 15% i n 1941. L e g i s l a t i o n g o v e r n i n g t h e t a x a t i o n o f t h e p e t r o l e u m i n d u s t r y was i n p l a c e i n the f o r t i e s , b ut the i n d u s t r y was i n such a p r e l i m i n a r y s t a t e o f development t h a t many o f i t s r e g u l a t i o n s had never been t e s t e d . And so t h e s i t u a t i o n s t o o d i n 1946, when the government i n i t i a t e d i t s programme o f a t t r a c t i n g f o r e i g n i n v e s t m e n t t o Canada. F o r e i g n i n v e s t m e n t between 1947 and 1965 took, t h r e e forms - d i r e c t i n v e s t m e n t by f i r m s , i n d i r e c t i n v e s t m e n t by f i n a n c i a l i n s t i t u t i o n s and i n v e s t m e n t by i n d i v i d u a l s . The e f f e c t o f each o f t h e s e on t h e development o f t h e p e t r o l e u m i n d u s t r y w i l l be examined i n the pages t h a t f o l l o w , a) D i r e c t Investment There were two s t i m u l i w h i c h c o n t r i b u t e d t o the l a r g e f l o w o f American i n v e s t m e n t c a p i t a l t h a t came i n t o Canada i n the post-war p e r i o d . Both the Canadian and t h e American governments d e v e l o p e d p o l i c i e s w hich encouraged American c o r p o r a t i o n s t o e s t a b l i s h s u b s i d i a r i e s abroad. These measures worked hand i n g l o v e t o e s t a b l i s h t h e b e s t p o s s i b l e c l i m a t e f o r d i r e c t i n v e s t m e n t i n Canada. One f a c t o r which encouraged American companies t o e s t a b l i s h s u b s i d i a r i e s abroad was the h i g h t a x p o l i c i e s w h i c h were i n t r o -duced a t t h e b e g i n n i n g o f t h e Korean war. I n o r d e r t o r e -arm the s e r v i c e s , the U.S. Wartime E x c e s s P r o f i t s Tax was imposed i n 1950, p l a c i n g a 57% t a x on " e x c e s s " p r o f i t s . By 1953 t h i s s p e c i a l t a x r e a c h e d a c e i l i n g o f 82%. A t t h a t r a t e , l a r g e American c o r p o r a t i o n s , t h e b i g o i l companies among them, found t h a t I t was t o t h e i r advantage t o e s t a b l i s h f o r e i g n s u b s i d i a r i e s . The p r o f i t s which, might o t h e r w i s e have been t a x e d would be i n j e c t e d i n t o t h e new v e n t u r e s , which were exempt from t h e t a x . S i m i l a r l y , a t a x on t h e E x c e s s i v e A c c u m u l a t i o n o f Income made i t d i s a d v a n t a g e o u s f o r American c o r p o r a t i o n s t o h o l d onto t h e i r p r o f i t s . The i n t e n t o f t h i s l e g i s l a t i o n was t o f o r c e companies t o r e t u r n a s i z a b l e p r o p o r t i o n o f t h e i r p r o f i t s t o t h e i r s h a r e h o l d e r s , but i t a l s o , had t h e e f f e c t o f i n d u c i n g companies t o e s t a b l i s h b r a n c h p l a n t s abroad. A n o t h e r c r i t i c a l p i e c e o f l e g i s l a t i o n e s t a b l i s h e d t h e Western Hemisphere Trade C o r p o r a t i o n . T h i s l e g i s l a t i o n a l l o w e d American" t r a d i n g companies w h i c h d i d 95% o f t h e i r b u s i n e s s o u t s i d e o f the U n i t e d S t a t e s a 27% r e d u c t i o n i n t h e i r American t a x e s - from 52% t o 38%. Thus an American o i l company would n o r m a l l y pay i t s U.S. t a x a t t h e r a t e o f 52%; but i f t h a t company o p e r a t e d l a r g e l y i n Canada i t s t a x e s would have been reduced t o 38%, and t h e income o f t h e Western Hemisphere Trade C o r p o r a t i o n c o u l d be c o n s o l i d a t e d w i t h i t s p a r e n t . As J . G r a n t G l a s s c o p o i n t e d out i n h i s study f o r t h e R o y a l Commission on Canada's Economic P r o s p e c t s " . . . t h i s p e r m i t s o f f s e t t i n g l o s s e s o r development c o s t s i n e a r l y s t a g e s o f a b u s i n e s s a g a i n s t t h e income o f t h e U.S. p a r e n t , p r o v i d e d t h e r e i s a l o s s i n t h e aggregate on the o p e r a t i o n o f a l l Western Hemisphere Trade C o r p o r a t i o n s as c o n s o l i d a t e d " ( G l a s s c o 1956: 25 > • I n the o i l i n d u s t r y , t h e c r e a t i o n o f t h e Western Hemispher T r a d i n g C o r p o r a t i o n encouraged s e v e r a l p a t t e r n s o f b e h a v i o r . In the f i r s t p l a c e , i t encouraged U.S. o i l companies t o e s t a b l i s o p e r a t i o n s i n Canada w i t h o u t t a k i n g on Canadian s h a r e h o l d e r s . S e c o n d l y , i t encouraged v e r y h i g h e x p e n d i t u r e s d u r i n g t h e f i r s t y e a r s o f o p e r a t i o n . T h i s i s normal p r a c t i c e i n t h e o i l i n d u s t r where h i g h e x p l o r a t i o n and d r i l l i n g c o s t s come a t t h e b e g i n n i n g o f an o p e r a t i o n , but t h e f a c t t h a t t h e s e e x p e n d i t u r e s c o u l d be w r i t t e n o f f a g a i n s t t h e p r o f i t s o f t h e p a r e n t company was an s y n d i c a t e " money e n t e r e d Canada from t h e U n i t e d S t a t e s , but,' as i n the case o f t r u s t f u n d s , t h e r e was no c o r r e s p o n d i n g p o o l o f i n v e s t m e n t c a p i t a l a v a i l a b l e from Canada. Why d i d the f e d e r a l government t a k e t h e a t t i t u d e i t d i d toward the ownership s t r u c t u r e o f t h e p e t r o l e u m i n d u s t r y ? J o u r n a l i s t James H. Gray t a c k l e d t h e Deputy M i n i s t e r o f Finance, on the i s s u e o f t a x exemptions f o r i n d i v i d u a l c i t i z e n s , a r g u i n g t h a t Canadians would i n v e s t much l a r g e r amounts o f money i n the o i l i n d u s t r y i f they- were p e r m i t t e d t h e same t a x w r i t e o f f s as were a v a i l a b l e i n the U n i t e d S t a t e s . A c c o r d i n g t o Gray, Dr. Kenneth Eaton argued t h a t a l l o w i n g a t a x w r i t e o f f on such an i n v e s t m e n t l o s s would amount t o a s u b s i d y f o r gambling i n t h e o i l o r m i n i n g i n d u s t r i e s , a p o l i c y w h i c h would be p o l i t i c a l s u i c i d e f o r t h e government. When Gray responded t h a t t h e r e s u l t o f t h e government's p o l i c y would be an even g r e a t e r c o n t r o l o f the Canadian o i l i n d u s t r y by t h e U n i t e d S t a t e s , Dr. Eaton p r u p o r t e d l y r e p l i e d , " I don't g i v e a damn who owns t h i s c o u n t r y , as you put i t , as l o n g as we have t h e power t o t a x , because whoever has t h e power t o t a x c a l l s t h e tune" (.Gray 19 78: 232 !• Gray's anecdote would i n d i c a t e t h a t the f e d e r a l g o v e r n -ment was more concerned w i t h raw g r o w t h and wi t h , a t t r a c t i n g f o r e i g n i n v e s t m e n t than w i t h the s t r u c t u r e o f the i n d u s t r y . American i n v e s t m e n t c o u n s e l l o r s l o o k e d f o r two k i n d s o f 74. o p p o r t u n i t i e s i n the o i l f i e l d s o f A l b e r t a . F o r t h e i r t r u s t funds t h e y l o o k e d f o r v e r y s e c u r e i n v e s t m e n t s , i n an e s t a b l i s h e d company f o r example. F o r t h e i r " t a x money" t h e y c o u l d a f f o r d t o seek out o p e r a t i o n s w h i c h were a l i t t l e more r i s k y - - a d r i l l i n g programme i n a p r o d u c i n g f i e l d o r even a w i l d c a t d r i l l i n g programme, i f t h e g e o l o g i c a l and g e o p h y s i c a l i n d i c a t i o n s were good. S i n c e t h e l a r g e o i l companies r a i s e d t h e i r d r i l l i n g money i n t e r n a l l y , the i n v e s t m e n t c o u n s e l l o r s sought out the s m a l l e r , n o n - i n t e g r a t e d o i l companies o r independent d r i l l e r s . The d e a l s they s i g n e d o f f e r e d a c e r t a i n amount o f money f o r a d r i l l i n g programme I n exchange f o r a c e r t a i n p e r c e n t a g e o f t h e p r o f i t from t h e o i l d i s c o v e r e d . I n A l b e r t a , t h e U.S. i n v e s t m e n t c o u n s e l l o r s s i g n e d d e a l s w hich p r o v i d e d l o c a l o i l companies w i t h money t o b e g i n d r i l l i n g on l a n d t h e y had a l r e a d y a c q u i r e d . An agreement between Empire and Husky O i l , f o r example, a l l o w e d Husky t o d r i l l f o r "heavy o i l " near t h e A l b e r t a - S a s k a t c h e w a n b o r d e r . The d e a l was advantageous t o Husky because the company had complete c o n t r o l over the conduct of the d r i l l i n g programme,, and the s a l e o f t h e p r o d u c t . The American i n v e s t o r s m e r e l y shared i n the r e t u r n s . I n e f f e c t the t a x s y n d i c a t e money a l l o w e d Husky to t e s t the o u t e r m a rgins of t h e L l o y d m i n s t e r f i e l d w i t h o u t endangering c o n t r o l o v e r t h e company. Perhaps th e b e s t known case o f a " t a x s y n d i c a t e " i n v e s t -75. merit, and one which, g i v e s some i n s i g h t i n t o t h e a t t r a c t i v e n e s s o f t h i s form o f f i n a n c i n g , was .made t o two A l b e r t a companies, Western L e a s e h o l d s and Western M i n e r a l s . These two companies had been s e t up by E r i c H a r v i e , a C a l g a r y l a w y e r who had bought 456,000 a c r e s o f m i n e r a l r i g h t s i n the Leduc and . Redwater areas y e a r s b e f o r e o i l was d i s c o v e r e d t h e r e . When the v a l u e o f h i s l a n d became c l e a r , H a r v i e d e c i d e d t o t u r n h i s two s m a l l companies i n t o f u l l - f l e d g e d d r i l l i n g o p e r a t i o n s , but i n o r d e r t o do so he needed a c a p i t a l source much g r e a t e r t h a n t h a t which was a v a i l a b l e i n A l b e r t a . F o r t u n a t e l y f o r h i s t o r y , H a r v i e l e f t a r e c o r d t o show how he d e c i d e d who h i s p a r t n e r s would be. H a r v i e had f i v e groups i n t e r e s t e d i n b u y i n g i n t o h i s f i r m . One was t h e Canadian i n v e s t m e n t house N e s b i t t Thompson, which c o n t r o l l e d Canadian O i l Companies. N e s b i t t Thompson was e x t r e m e l y i n t e r e s t e d i n making a d e a l w i t h H a r v i e ; Canadian O i l Companies was t h e second l a r g e s t I n t e g r a t e d o i l company i n Canada and i t d i d not have l a r g e " o i l r e s e r v e s o f i t s own. N e s b i t t Thompson was the l a r g e s t Canadian i n v e s t m e n t house and th u s had the c a p i t a l t o e n t e r t h e p a r t n e r s h i p . The N e s b i t t Thompson group had s e v e r a l m e e t i n g s w i t h H a r v i e i n which t h e y o f f e r e d t o purchase 20-40% o f Western L e a s e h o l d ' s shares f o r between one and two m i l l i o n d o l l a r s . But H a r v i e seems never t o have been tempted by the o f f e r s i n c e i t would s e v e r e l y l i m i t e d h i s c o n t r o l o v e r t h e development o f h i s l a n d s and t h e m a r k e t i n g o f h i s o i l . N e v e r t h e l e s s , i t i s i n t e r e s t i n t o s p e c u l a t e about the changes w h i c h might have t a k e n p l a c e i n th e Canadian o i l i n d u s t r y i f some o f t h e b e s t o i l l a n d s i n the west had been d e v e l o p e d i n c o n j u n c t i o n w i t h t h e second l a r g e s t i n t e g r a t e d o i l company under Canadian ownership. Two n o n - i n t e g r a t e d American-based o i l companies, B a r n s d a l l and Amerada O i l , a l s o sought t o make a d e a l w i t h E r i H a r v i e . I n a memo H a r v i e c o n f e s s e d t h a t he "would l i k e t o d e a l w i t h companies Cs/icl s u c h as B a r n s d a l l and Amerada a t l e a s t as f a r as o p e r a t i n g i s c o n c e r n e d " ( S l a t t e r 1974:86). The U.S. companies c o u l d o f f e r e x p e r t i s e as w e l l as c a p i t a l . However, H a r v i e p o i n t e d o u t t h a t two o r t h r e e new t a x p r o p o s a l might work a g a i n s t Western L e a s e h o l d s and "our t a x p o s i t i o n would n ot be any too good." H a r v i e spent many months n e g o t i a t i n g w i t h t h e two American companies b e f o r e c o n c l u d i n g t h a t the p o t e n t i a l t a x l o s s o f l i n k i n g w i t h a n o n - i n t e g r a t e d U.S. company was too s e r i o u s t o be overcome. A f o u r t h p o s s i b i l i t y was brought t o H a r v i e t h r o u g h two r e p r e s e n t a t i v e s o f t h e Canadian m i n i n g e s t a b l i s h m e n t , the Toronto b r o k e r s Sandy R i c h a r d s o n and George Webster. As mentioned p r e v i o u s l y , Canadian t a x laws a l l o w e d companies i n v o l v e d i n t h e Canadian m i n i n g i n d u s t r y t o e s t a b l i s h s u b s i -d i a r i e s and s u b t r a c t t h e i r c o s t s from the t a x e s o f t h e p a r e n t company. H a r v i e saw t h i s d e a l h a v i n g advantages " s i n c e t h e Gold ( s i c ) companies would l i k e l y be i n t e r e s t e d i n g e t t i n g i n t o t h e development end. A l s o I t h i n k the a s s o c i a t i o n o f some of the d i r e c t o r s o f t h e s e g o l d companies would add s t r e n g t h t o our company" ( s i a t t e r 1974:90) . F i n a l l y , H a r v i e was approached by "a group o f i n d i v i d u a l s i n New York" - i n f a c t , Empire T r u s t and some o f i t s c l i e n t s . They were i n t e r e s t e d i n p u r c h a s i n g an i n t e r e s t i n Western L e a s e h o l d s but t h e y d i d not want any d i r e c t r o l e i n r u n n i n g t h e company. They a l s o made i t c l e a r t h a t t h e y d i d not want Western L e a s e h o l d s t o become a p u b l i c company. By s t a y i n g p r i v a t e t h e v a l u e o f t h e i r s h a r e s would r i s e d r a m a t i c a l l y once p r o d u c t i o n began, g i v i n g them t h e maximum r e t u r n on t h e i r i n v e s t m e n t under b o t h U.S. and Canadian law. I n a l e t t e r , H a r v i e wrote t h a t t h e Empire T r u s t group were i d e a l p a r t n e r s . They would be q u i e s c e n t d i r e c t o r s , i n t e r e s t e d i n e a r n i n g a l a r g e c a p i t a l g a i n . They were not o i l m e n and would not be s e e k i n g t o c o n t r o l o r buy out h i s f i r m . "They have t h e advantage o f g i v i n g the p r e s e n t s h a r e h o l d e r s a s u b s t a n t i a l sum o f money a t t h e p r e s e n t time and s t i l l l e a v e them i n t h e p i c t u r e i n a major way, w i t h freedom o f a c t i o n as t o t h e n a t u r e o f development d e a l s " ( i b i d . ) . F o r Empire T r u s t , t h e a t t r a c t i o n was t h a t a 20% i n t e r e s t i n 456,000 a c r e s o f e x c e l l e n t p e t r o l e u m l a n d s c o u l d be 78. p u r c h a s e d f o r $1 m i l l i o n , compared t o the $3 m i l l i o n w h i c h was b e i n g p a i d f o r 160 a c r e s a t t h e p r o v i n c i a l a u c t i o n s o f t h e t ime S a i d Les R i c e who n e g o t i a t e d t h e d e a l f o r Empire T r u s t : " I c o u l d not imagine m i n e r a l r i g h t s and l e a s e h o l d i n t e r e s t s s e l l i n g f o r l e s s t h a n we were p a y i n g f o r them a t t h a t t i m e . I t seemed t o be an e x c e l l e n t b e t . " ( i n t e r v i e w w i t h C.L. R i c e ) . Among the f o u r o p t i o n s t h e n - U.S. independent company, the Canadian i n t e g r a t e d o i l company, the Canadian g o l d i n d u s t r y and the U.S. t r u s t f i n a n c i e r s , H a r v i e gave the nod t o American t r u s t c a p i t a l . T h i s e v e n t u a l l y gave a 3 0% share i n the w e a l t h i e s t o i l l a n d s i n Western Canada t o a group composed o f Loeb Rhoades, a New York i n v e s t m e n t house, and s e v e r a l o f i t s major p a r t n e r s ; and s e v e r a l o f t h e c l i e n t s o f Empire T r u s t the Hamm f a m i l y (Hamra's B r e w i n g , S t . P a u l , Minnesota)., th e P h i p p s f a m i l y and i t s s e c u r i t i e s c o r p o r a t i o n , s e v e r a l p a r t n e r s i n Degolyer and McNaughton, and George B a u e r d o r f , a w e a l t h y New York i n v e s t o r . One t r u s t f u n d managed by Empire T r u s t , the P r i n c e t o n U n i v e r s i t y Endowment Fund, a l s o took p a r t . A t h i s d e a t h E r i c H a r v i e was r e p u t e d t o be t h e w e a l t h i e s t man i n Canada w i t h a f o r t u n e which, was r e p u t e d t o exceed $120 m i l l i o n . I t i s q u i t e p o s s i b l e t h a t the s m a l l group o f American i n v e s t o r s who j o i n e d H a r v i e a t the b e g i n n i n g o f h i s c a r e e r as an o i l m a n made a g r e a t e r margin o f p r o f i t on t h e i r $1 m i l l i o n i n v e s t m e n t t h a n any o t h e r i n v e s t o r s i n Canadian o i l . With th e Western L e a s e h o l d s d e a l , i n v e s t m e n t by U.S. t r u s t and t a x s y n d i c a t e s became more p o p u l a r . S i n c e t h e s e d e a l s were n e g o t i a t e d p r i v a t e l y , t h e r e i s no aggregate f i g u r e f o r t h e amount o f money f u n n e l l e d i n t o n o n - i n t e g r a t e d Canadian companies by t h e p r i v a t e , American t a x s y n d i c a t e s . However, t h r e e f i n a n c i e r s i n t e r v i e w e d f o r t h i s s tudy i n d i c a t e d t h a t t h e y had p l a c e d d r i l l i n g money w i t h many of t h e Canadian n o n - i n t e g r a t e d companies t h a t s u r v i v e d t h e 1950s: Husky O i l , Western L e a s e h o l d s , A n g l oAmerican O i l s . , and Scurry-Rainbow. I n an essay w r i t t e n i n 1968, C h a r l e s S. Lee o f Western D e c a l t a gave c r e d i t t o t h e " t a x money s y n d i c a t e s " as "a v e r y a c t i v e s o u r c e o f e x p l o r a t o r y funds f o r an i n d e -pendent o i l company o p e r a t i n g i n Canada" ( H i l b o r n e 1968: 59) . Thus, i n t h i s one a s p e c t , t h e American t a x regime had a s i g n i f i c a n t e f f e c t on t h e s u r v i v a l and development of Canadian e n t r e p r e n e u r s h i p . 80. B: R e s e r v a t i o n s and L eases L e a s a b l e p e t r o l e u m and n a t u r a l gas r i g h t s i n A l b e r t a a r e owned by s i x g roups: the p r o v i n c i a l government, I n d i a n bands, the CPR, t h e Hudson's Bay Company, i n d i v i d u a l f r e e -h o l d e r s , and " o t h e r s " . The p r o v i n c i a l government i s t h e most i m p o r t a n t o f t h e s e g r o u p s , w i t h c o n t r o l o v e r 93% o f t h e sub-s u r f a c e r i g h t s (Hanson 1 9 5 8 : 1 8 5 ) . As a consequence, the l e a s i n g r e g u l a t i o n s s e t by the p r o v i n c e a r e a c r i t i c a l f a c t o r i n d e t e r m i n i n g th e s u c c e s s o r f a i l u r e o f a company's d r i l l i n g programme. I t was a t t h e b e g i n n i n g o f t h e S o c i a l C r e d i t government's second term i n o f f i c e t h a t o i l and gas r e g u l a t i o n s .became an i m p o r t a n t f o c u s o f t h e government's p o l i c y . I n 1 9 3 7 , t h e government o f P r e m i e r A h e r h a r t was i n d i s a r r a y . The p o l i c y on w h i c h i t had come t o power — f r e e i n g the. p r o v i n c e and i t s c i t i z e n s from dependence on e a s t e r n Canadian f i n a n c i a l i n s t i t u t i o n s - had ended i n f a i l u r e . Two k e y p i e c e s of f i n a n c i a l l e g i s l a t i o n had been s t r u c k down by t h e Supreme C o u r t o f Canada and t h e government's r e p u d i a t i o n o f t h e p r o v i n c i a l debt had d e s t r o y e d A l b e r t a ' s c r e d i t r a t i n g i n a l l o f t h e major money markets o f t h e w o r l d . Q u i t e n a t u r a l l y , many S o c i a l C r e d i t members were w o r r i e d about s a t i s f y i n g t h e i r r e s t i v e c o n s t i -t u e n c i e s , and a movement began among some o f t h e younger members, of the caucus t o r e o r i e n t p a r t y p o l i c y . They wanted t o draw more economic a c t i v i t y i n t o t h e p r o v i n c e , t o show t h a t t h e S o c i a l 8 1 . C r e d i t a d m i n i s t r a t i o n was r e s p o n s i b l e and b u s i n e s s - m i n d e d ( B a r r 1974 : 135-142). I n 1937, Nathan E l d o n Tanner, a s m a l l town shopkeeper, boy s c o u t and s t a l w a r t o f t h e Mormon Church, was- made M i n i s t e r o f Lands and M i n e s , and a l m o s t i m m e d i a t e l y began t o s o l i c i t f i n a n c i n g f o r o i l e x p l o r a t i o n programmes i n A l b e r t a . A c c o r d i n g t o H.H. S o m e r v i l l e , who was w i t h t h e Department a t t h e t i m e , a t r i p t o v i s i t f i n a n c i e r s i n M o n t r e a l and T o r o n t o was "a t o t a l l o s s " . Two y e a r s l a t e r , Tanner l e d a d e l e g a t i o n o f A l b e r t a businessmen t o seek f u n d i n g i n t h e London money market, but t h a t t r i p t o o was a f a i l u r e . When he r e t u r n e d , Tanner suggested t o t h e government t h a t i n t h e f u t u r e "we s h o u l d e n t e r t a i n i n v e s t m e n t from any s o u r c e i n t h e w o r l d " . Beggars c o u l d not be c h o o s e r s . The a c c e p t a n c e o f any f i n a n c i n g - not s i m p l y t h a t from n a t i o n a l o r empire s o u r c e s - became the i d e o l o g i c a l back-drop f o r S o c i a l C r e d i t r e s o u r c e p o l i c y . I n 1940, w i t h wartime p e t r o l e u m demand r i s i n g s h a r p l y , s e v e r a l l a r g e o i l companies i n d i c a t e d t h a t t h e y were i n t e r e s t e d i n b e g i n n i n g a major o i l e x p l o r a t i o n programme i n A l b e r t a . I m p e r i a l O i l and S h e l l O i l i n p a r t i c u l a r were a n x i o u s t o sweep the A l b e r t a p l a i n s w i t h g e o p h y s i c a l d e v i c e s t o t r y t o d e t e c t a p a t t e r n o f s u b s u r f a c e a n o m a l i e s . To do so t h e y would have t o have t h e c o o p e r a t i o n o f t h e p r o v i n c e i n s e c u r i n g e x p l o r a t i o n r i g h t s o v e r l a r g e p a r c e l s o f l a n d . I n 1941, A l b e r t a ' s f i r s t comprehensive O i l and N a t u r a l 82. Gas Regulations were passed. They were very generous, as be f i t t e d an administration trying to entice the o i l industry into the province. According to Hubert H. Samex.vil.le,' who was with the Department of Lands and Mines: Clater Mines and Minerals), for 44 years, 21 of them as Deputy Minister, the government's thinking was that "you could not expect to get extensive development i f you only had small areas available to companies". For t h i s reason, the reservations granted to companies for exploratory purposes were increased i n siz e to a maximum of 200,000 acres, and any company could hold a maximum of three reservations:. This meant that a single o i l company could conduct exploration a c t i v i t i e s on a t o t a l of 939 sections. To undexstand what such a vast acreage, meant to the o i l industry at that time, i t i s necessary to r e c a l l that i n Texas or Oklahoma, where v i r t u a l l y a l l of the mineral r i g h t s are pri v a t e l y owned, an o i l company had to send out crews to reach separate agreements with hundreds of ind i v i d u a l land holders. It was an expensive and time consuming process, with.no guarantees that a l l the necessary land would be made av a i l a b l e . In Alberta, the p r o v i n c i a l government could complete the paper-work for vast areas of land i n a mattex of hours, and the only expense was the nominal fee of $1.00 an acre. I t was the multinational o i l companies that were the 83. o b j e c t of the government's a t t e n t i o n . Canadian companies d i d not o f t e n have the r a r e , new g e o p h y s i c a l equipment and the e x p e r t i s e to conduct huge surveys of the subsurface areas of the p r o v i n c e . Nor d i d t h e y have the c a p i t a l to put down a d o l l a r an acre on 200,000-acre r e s e r v a t i o n s . Consequently, i t was I m p e r i a l O i l and S h e l l which d i d most of the p r o v i n c e ' s e x p l o r a t i o n . From 1918 to the beginning of World War II.', I m p e r i a l O i l spent $17.2 m i l l i o n on a d r i l l i n g programme across the p r a i r i e s ; a f t e r 1939 the company became even more a g r e s s i v e and spent $13.2 m i l l i o n i n seven y e a r s . There were 133 dry holes d r i l l e d i n t h a t p e r i o d . By the time Leduc was i n p r o d u c t i o n , I m p e r i a l O i l had chalked up one t h i r d of a l l the s e i s m i c work and j u s t under h a l f the g e o l o g i c a l work accomplished on the p r a i r i e s (Calgary H e r a l d , February 6, 1947). With the d i s c o v e r y of o i l a t Leduc, the A l b e r t a government was f o r c e d to revamp the r e g u l a t i o n s , to develop a system which would r e g u l a t e not o n l y e x p l o r a t i o n but development. C l e a r l y , the v a s t areas h e l d under r e s e r v a t i o n c o u l d not be developed r a p i d l y by s i n g l e companies. A method had to be i n s t i t u t e d by which a s p e c i f i c area of the r e s e r v a t i o n c o u l d be l e a s e d by the company f o r long-term development. For a decade A l b e r t a law had s t a t e d vaguely t h a t i f there were a d i s c o v e r y , h a l f of the land i n the r e s e r v a t i o n would have 84. t o be r e t u r n e d t o t h e p r o v i n c i a l government, bu t t h e mechanism by w h i c h t h i s was t o be done had not been s p e l l e d o u t . I t was o n l y w i t h the p r o m u l g a t i o n o f the new O i l and: Gas R e g u l a t i o n s s i x months a f t e r t h e d i s c o v e r y a t Leduc, t h a t t h e maximum a r e a o f a development l e a s e was s e c u r e d . " I f t h e y found o i l , t h e y were g r a n t e d one-hundred p e r -c e n t ownership o f n i n e s e c t i o n s - 5,760 a c r e s - s u r r o u n d i n g the w e l l w i t h o u t a d d i t i o n a l payment o f any k i n d . Then t h e y were e n t i t l e d t o p i c k up h a l f the r e m a i n i n g acreage i n m i l e -square u n t i s c h e c k e r b o a r d e d over the o r i g i n a l . . . r e s e r v a t i o n . " wrote James H. Gray. And he added: "The n i n e s e c t i o n b l a n k e t thrown over the o r i g i n a l w i l d c a t s i t e would have e n t i r e l y c o v e r e d the v a s t m a j o r i t y o f t h e o i l f i e l d s d i s c o v e r e d i n t h e U n i t e d S t a t e s , f o r t h e r e would be room on t h o s e 5,760, a c r e s f o r the company t o d r i l l a n o t h e r 144 w e l l s " (Gray 1978: 2131. The 50% r e g u l a t i o n meant t h a t t h e l a r g e companies wh i c h had t a k e n out r e s e r v a t i o n s c o u l d l e a s e the b e s t p a r c e l s i n each, g i v i n g them a d i s t i n c t advantage o v e r t h e Canadian companies which had been d r i l l i n g i n the T u r n e r V a l l e y w e l l t o t h e s o u t h . The f o r e i g n - b a s e d companies m a i n t a i n e d t h a t advantage because t h e y were a b l e t o a f f o r d t h e a n n u a l cash r e n t a l o f $1.00 per a c r e , w h i c h was p a y a b l e o n l y i n c a s h . And s i n c e l e a s e s were good f o r 21 y e a r s , and were renewable, the r e s e r v a t i o n s and l e a s e s w h i c h the f o r e i g n companies o b t a i n e d 85. b e f o r e and i m m e d i a t e l y a f t e r Leduc became a f o o t h o l d w h i c h would l a s t u n t i l t h e o i l r a n o u t . I n t h i s way, t h e b i a s i n f a v o u r o f l a r g e c o r p o r a t i o n s , w h i c h had been a p a r t o f S o c i a l C r e d i t p o l i c y s i n c e 1937, worked i n c r e a s i n g l y i n t h e i r i n t e r e s t as t h e y e a r s p a s s e d . The s t o r y o f I m p e r i a l O i l was t h e most d r a m a t i c case i n p o i n t . B e f o r e t h e d i s c o v e r y a t Leduc, th e company; had t i e d down one m i l l i o n a c r e s i n r e s e r v a t i o n s ( C a l g a r y H e r a l d , F e b r u a r y 6, 1947). (There was no l a w p r o h i b i t i n g s u b s i d i a r i e s from h o l d i n g r e s e r v a t i o n s , so t h e number o f s u b s i d i a r i e s . r e g i s t e r e d i n A l b e r t a blossommed e v e r y time t h e r e was a s t r i k e . ) . I m mediately a f t e r t h e Leduc f i n d , I m p e r i a l was g r a n t e d a n o t h e r 440,000 a c r e s , so t h a t t h e company had t i e d up a m i l l i o n and a h a l f a c r e s f o r p e r i o d s o f up t o two y e a r s , d u r i n g which i t c o u l d choose th e b e s t p a r c e l s f o r i t s l e a s e s . A y e a r and a h a l f l a t e r , as I m p e r i a l b u i l t i t s e x p l o r a t i o n a c t i v i t y toward t h e Redwater d i s c o v e r y w e l l , t h e m u l t i n a t i o n a l s moved i n once a g a i n . Two days b e f o r e the Redwater s t r i k e I m p e r i a l took out 775,000 a c r e s i n a r e s e r v a t i o n i n i t s own name, and t h e n seven more r e s e r v a t i o n s t o t a l l i n g 400,000 a c r e s i n t h e names o f v a r i o u s i n d i v i d u a l s . The day b e f o r e Redwater #1 blew i n , G u l f O i l and Socony-Vacuum took out 700,0.00 a c r e s and 105,000 a c r e s r e s p e c t i v e l y ( C a l g a r y H e r a l d , September 16, 1948). Those r e s e r v a t i o n s a l o n e c o s t t h e companies more than 86. $2,000,000 and e f f e c t i v e l y sewed up the p r o v i n c i a l m i n e r a l r i g h t s i n t h e Redwater a r e a . A f t e r a company had chosen i t s l e a s e s , t h e r e m a i n i n g a r e a s o f t h e r e s e r v a t i o n were r e t u r n e d t o t h e p r o v i n c e as Crown Reserve. B e g i n n i n g i n t h e l a t e summer o f 1948, t h e p r o v i n c e o r g a n i z e d a u c t i o n s a t which t h e s e p a r c e l s o f l a n d would be l e a s e d t o the h i g h e s t b i d d e r . The b i d d i n g was u s u a l l y v e r y i n t e n s e , s i n c e t h e s u r r o u n d i n g a r e a s were a l r e a d y b e i n g d e v e l o p e d by t h e major l e a s e h o l d e r , and many o f t h e p a r c e l s t o be a u c t i o n e d were a l m o s t c e r t a i n t o h o l d h y d r o c a r b o n s . I n e f f e c t , t h e a u c t i o n system took much o f the gamble out o f a u s u a l l y r i s k y v e n t u r e . Under t h e o i l and gas r e g u l a t i o n s , t h e b i d s had t o be accompanied by a c e r t i f i e d cheque, so t h a t o n l y companies w i t h a v e r y s t r o n g c a p i t a l p o s i t i o n c o u l d a f f o r d t o e n t e r b i d s on the b e s t p a r c e l s o f l a n d . A t t h e f i r s t p r o v i n c i a l a u c t i o n , t h e i n t e g r a t e d Canadian o i l company, B r i t i s h American O i l s , c a p t u r e d e i g h t o f t h e f i f t e e n p a r c e l s , and an A l b e r t a - b a s e d company, Home O i l , was a l s o a s t r o n g b i d d e r . A t t h a t t i m e t h e b i d s were i n t h e a r e a o f $300,000. A ye a r l a t e r t he b i d s had r i s e n t o w e l l o v e r a m i l l i o n d o l l a r s f o r 160 a c r e s , and the Canadian companies were e f f e c t i v e l y o u t o f t h e b i d d i n g war. I n a d d i t i o n , t h e company w h i c h had o r i g i n a l l y c o n t r o l l e d the r e s e r v a t i o n was not b a r r e d from b i d d i n g , so t h e "spaces" 87. between t h e o i l l a n d s which- t h e y had a l r e a d y l e a s e d c o u l d be added t o t h e i r domain by p u t t i n g i n a ca s h b i d t h a t was v e r y h i g h . (The Canadian companies p r o t e s t e d so b i t t e r l y a f t e r t h e d i s c o v e r y a t Redwater t h a t I m p e r i a l O i l v o l u n t a r i l y r e f r a i n e d from b i d d i n g f o r a p e r i o d o f t i m e , so t h a t o t h e r companies might g e t a l a n d p o s i t i o n i n t h e f i e l d ( I m p e r i a l O i l 1980: n.p.). The terms o f t h e p r o v i n c i a l a u c t i o n s d i d not o n l y promote the f o r t u n e s o f t h e l a r g e f o r e i g n - b a s e d o i l companies; t h e y a p p e a l e d t o any e n t i t y w i t h l a r g e amounts o f c a p i t a l t o i n v e s t , and t h a t brought a whole new economic f o r c e i n t o t h e Canadian o i l i n d u s t r y . One group w h i c h was p a r t i c u l a r l y i n t e r e s t e d I n new i n v e s t -ment o p p o r t u n i t i e s was t h e t r u s t and i n v e s t m e n t community i n the U n i t e d S t a t e s . As noted p r e v i o u s l y , t h e s e companies oversaw c a p i t a l i n t h e form o f f a m i l y and i n s t i t u t i o n a l t r u s t f u n d s , which needed s t e a d y and s e c u r e r e t u r n s . They a l s o found i n v e s t m e n t o p p o r t u n i t i e s f o r t a x money f r o m w e a l t h y i n d i v i d u a l s . T h i s was s u b j e c t t o fewer r e s t r i c t i o n s . The complementary t a x p r o v i s i o n s o f t h e Canadian and American t a x laws made i t more w o r t h w h i l e f o r t h e s e funds t o be i n v e s t e d i n Canada t h a n i n t h e U n i t e d S t a t e s i n t h e decade w h i c h f o l l o w e d t h e war. As a consequence, much o f t h e money had been used t o back t h e n o n - i n t e g r a t e d Canadian o i l companies. 88. However, by 1949, when the p r o v i n c i a l l a n d a u c t i o n system was i n f u l l s w i n g , i t became c l e a r t o some o f t h e s e t r u s t companies t h a t A l b e r t a ' s system o f a u c t i o n s made l a n d a c q u i s i t i o n i n Canada more s e c u r e t h a n i n t h e U.S. I n t h e U n i t e d S t a t e s , one o f t h e f a c t o r s w h i c h made t h e p e t r o l e u m i n d u s t r y r i s k y was t h e fragmented n a t u r e o f m i n e r a l r i g h t s o w nership. An o i l company t h a t wanted t o o r g a n i z e a " p l a y " was f o r c e d t o n e g o t i a t e w i t h hundreds o f d i f f e r e n t owners o f s u b s u r f a c e r i g h t s . I f o i l o r gas were s t r u c k , t h e company might f i n d t h a t o t h e r companies had a c c e s s t o t h e p o o l t h r o u g h s u r r o u n d i n g l a n d , so t h a t f r e q u e n t l y t h e company which, found a new f i e l d was not t h e same company t h a t e n j o y e d th e s p o i l s . But t h e A l b e r t a system o f l a n d a u c t i o n s l a r g e l y removed t h a t e v e n t u a l i t y from o c c u r r i n g i n t h e Canadian west. The p r o v i n c i a l government k e p t t h e w e l l r e c o r d s and the d r i l l i n g c o r e s o f e v e r y w e l l i n t h e p r o v i n c e s t o r e d a t t h e O i l and N a t u r a l Gas C o n s e r v a t i o n Board. A y e a r a f t e r a d i s c o v e r y , any g e o l o g i s t i n t h e p r o v i n c e c o u l d command t h e w e l l r e c o r d s and r e c r e a t e t h e underground s t r u c t u r e o f t h e w e l l . I n t h e U n i t e d S t a t e s , i n c o n t r a s t , such i n f o r m a t i o n was p r i v a t e . Moreover, t h e p i e c e s o f l a n d a u c t i o n e d by t h e government were o f t e n v e r y r i c h . These l a n d s had been r e t u r n e d t o t h e government by an o p e r a t i n g o i l company a f t e r a d i s c o v e r y had been 89. made. The l o c a t i o n s o f d i s c o v e r i e s o f t e n p o i n t e d o u t t h e c h o i c e s t p i e c e s o f l a n d t o be a u c t i o n e d o f f . Under t h e s e c o n d i t i o n s , American t r u s t companies d e c i d e d t h a t t h e r i s k o f o p e r a t i n g i n t h e A l b e r t a o i l p a t c h c o u l d be k e p t low. Les R i c e o f Empire T r u s t remembers t h a t he made an a n a l y s i s o f n o n - i n t e g r a t e d Canadian o i l companies and found t h a t t h e y c o u l d be purchased o u t r i g h t a t a c o s t o f two t o t h r e e d o l l a r s f o r each b a r r e l o f o i l t h e y produced. I f t h e i n v e s t -ment company d e c i d e d t o f orm i t s own o i l company and purchase o i l l a n d s t h r o u g h t h e a u c t i o n system, the r e s e r v e s would be even cheaper "on t h e o r d e r o f 50£ a b a r r e l " . A c c o r d i n g t o R i c e , t h e r e a l m o t i v a t i o n was t o assemble enough money i n a c o r p o r a t e e n t i t y t o be a b l e t o go t o A l b e r t a and purchase t h e b e s t l a n d s p o s s i b l e a t a u c t i o n . "Our. whole theme was t o t a k e the money we had r a i s e d and buy o i l r e s e r v e s a t a u c t i o n and t h e r e b y e s t a b l i s h a base i n v a l u e t h a t would be a t l e a s t e q u a l t o what we had i n v e s t e d and t h e r e f o r e our r i s k . would a t l e a s t be m i n i m i z e d " ( i n t e r v i e w w i t h C»L. Rice).-F o r i n s t i t u t i o n a l i n v e s t o r s - h o s p i t a l s . , u n i v e r s i t i e s and p e n s i o n funds - t h e v a l u e o f t h i s i n v e s t m e n t came, n o t t h r o u g h the d i v i d e n d s , but t h r o u g h t h e l o n g term enhancement i n t h e v a l u e o f t h e i r o r i g i n a l i n v e s t m e n t . Soon the l a r g e s t i n v e s t m e n t houses and t r u s t companies i n the U n i t e d S t a t e s -M e r r i l l L ynch, Loeb Rhoades, Empire T r u s t , and S t a t e S t r e e t 90. Investments - were a c t i v e l y investigating the p o s s i b i l i t i e s of entering the o i l industry. One of the companies which emerged from the investment community was Dome Petroleum. I t i s i n d i c a t i v e of how luc r a t i v e the tru s t and investment communities considered the prospects to be that the men behind Dome Petroleum broached the idea of creating an o i l company late one Friday night i n August 1949; they set out to tr y to ra i s e $10 m i l l i o n i n investment c a p i t a l and by Tuesday morning had $40 m i l l i o n pledged from associates and family alone. They chose to use only $2 m i l l i o n which came from the endowment funds of Princeton. Harvard and MIT, the Clarke estates (the t r u s t fund established by Isaac Singer's partner i n the sewing machine business) the U.S. Steel Pension Fund as well as personal purchases for the individuals and associated with the deal. (Two and a half m i l l i o n i n equity funding came from Dome Mines which, as a mining company operating i n Canada, received a tax write o f f for establishing a subsidiary i n the o i l industry.1 The company's f i r s t land purchase, i n the middle of the Redwater f i e l d , cost $1,250,000, a record for a quarter section at the time. Nevertheless, the Redwater wells produced enough o i l to guarantee Dome's cash flow for some time. There were, then, two kinds of companies which p a r t i c u l a r l y benefited from the p r o v i n c i a l mineral rights p o l i c i e s : the f o r e i g n - b a s e d o i l companies and t h o s e companies e s t a b l i s h e d by American i n v e s t m e n t and t r u s t i n t e r e s t s . B o t h o f t h e s e groups had the r e a d y c a s h t o purchase th e most p r o m i s i n g o i l l a n d s , r e g a r d l e s s o f c o s t . There was one group of companies which blossomed because o f t h e l a n d p o l i c i e s e s t a b l i s h e d by; t h e f e d e r a l government. B e f o r e 1930, c o n t r o l o v e r the n a t u r a l r e s o u r c e s o f A l b e r t a r e s t e d w i t h t h e government i n Ottawa. The f e d e r a l government s o l d l a n d s f o r w e s t e r n c o l o n i z a t i o n and gave away l a r g e t r a c t s as i n c e n t i v e s t o r a i l w a y and c o l o n i z a t i o n companies. Up u n t i l 1887, t h e r i g h t t o any m i n e r a l s , i n t h e s u b s u r f a c e was t r a n s f e r r e d a u t o m a t i c a l l y a l o n g w i t h s u r f a c e r i g h t s . Sub-s e q u e n t l y , however, t h e f e d e r a l government r e s e r v e d the m i n e r a l r i g h t s f o r t h e Crown. C o n s e q u e n t l y , over e l e v e n m i l l i o n a c r e s o f A l b e r t a m i n e r a l r i g h t s were h e l d p r i v a t e l y , by t h e Hudson's Bay Company, by t h e CPR, and by t h e C a l g a r y and Edmonton C o r p o r a t i o n . About 5 m i l l i o n a c r e s o f m i n e r a l r i g h t s were h e l d by I n d i a n bands and p i o n e e r farm f a m i l i e s . As a consequence, a f t e r o i l was d i s c o v e r e d a t Leduc, some of t h e companies w h i c h had s t i m u l a t e d e a r l i e r phases o f t h e Canadian economy had t h e u n p a r a l l e l e d o p p o r t u n i t y t o e n t e r t h e o i l b u s i n e s s . The Hudson's Bay Company c o u l d use i t s s u b s u r f a c e r i g h t s t o make the l e a p from f u r t r a d i n g and r e t a i l i n g t o o i l , w h i l e the CPR and the C a l g a r y and Edmonton C o r p o r a t i o n c o u l d t a k e t h e l a n d s w h i c h they r e c e i v e d as r a i l w a y i n c e n t i v e s t o b e g i n t h e i r search, f o r o i l i n e a r n e s t . I t was t h e Hudson's Bay Company and t h e CPR w h i c h p u t t h e i r m i n e r a l r i g h t s t o b e s t use. As e a r l y as 1926., t h e Hudson's: Bay's v a s t acreages had caught the a t t e n t i o n o f E a r n e s t M a r l a n d , the owner o f M a r l a n d O i l , an i n t e g r a t e d o i l company based i n t h e American mid-west. S h o r t l y a f t e r w a r d , t h e two companies formed Hudson's Bay O i l and Gas; the Hudson's Bay put up a l l o f i t s m i n e r a l r i g h t s i n exchange f o r an 18% i n t e r e s t i n t h e new v e n t u r e and the r i g h t t o ex t e n d t h a t i n t e r e s t t o 25% i n t h e event t h a t o i l was d i s c o v e r e d (Gray 1970: 286). W i t h i n two y e a r s , M a r l a n d O i l had merged with, t h e C o n t i n e n t a l O i l Company and t h e Hudson's Bay had become a p a r t n e r o f one o f t h e l a r g e s t n o n - i n t e g r a t e d o i l f i r m s i n t h e w o r l d . Twenty y e a r s l a t e r , a f t e r t h e d i s c o v e r y a t Leduc, Hudson's Bay O i l and Gas (HBOG) mounted a mas s i v e e x p l o r a t i o n programme a c r o s s ' t h e Canadian p r a i r i e s . Over t h e f i r s t y e a r s o f the programme t h e two p a r e n t companies poured m i l l i o n s o f d o l l a r s i n t o HBOG, and by the end o f 1956 the company had s u s t a i n e d a l o s s o f $5.8 m i l l i o n . But t h e i n v e s t m e n t p a i d o f f i n the l o n g r u n . By 1960, HBOG's annual p r o d u c t i o n was 22,689 b a r r e l s o f o i l and 44.3 m i l l i o n c u b i c f e e t o f gas p e r day and the company was r e g i s t e r i n g a p r o f i t o f almost $3 m i l l i o n ( F i n a n c i a l P o s t 1961: 1021. W i t h i n two decades o f t h e Leduc d i s c o v e r y , HBOG was t h e t h i r d l a r g e s t o i l and gas p r o d u c e r i n Canada, a f t e r I m p e r i a l O i l and S h e l l Canada. I n c o n t r a s t with- t h e Hudson 1 s Bay Company, Canadian P a c i f i c was s low t o become i n v o l v e d i n t h e o i l i n d u s t r y , d e s p i t e the f a c t t h a t t h e r a i l w a y was the l a r g e s t s i n g l e owner o f m i n e r a l r i g h t s i n Canada w i t h 9.5 m i l l i o n a c r e s under i t s c o n t r o l . F o r a l m o s t a decade a f t e r the Leduc d i s c o v e r y CPR. l a n d s were made a v a i l a b l e t o o i l companies on v e r y l e n i e n t terms. I n 1955, a change i n management prompted t h e d i v i s i o n o f Canadian P a c i f i c ' s t r a n s p o r t a t i o n network- from I t s o t h e r h o l d i n g s , and a s u b s i d i a r y , Canadian P a c i f i c O i l and Gas, was s e t up t o e x p l o r e f o r h y d r o c a r b o n s on Canadian P a c i f i c l a n d s . I n i t s f i r s t f u l l y e a r o f o p e r a t i o n t h e new company spent $3.4 m i l l i o n d o l l a r s , borrowed on t h e f i n a n c i a l s t r e n g t h , o f i t s p a r e n t company, and i n subsequent y e a r s t h e l e v e l o f b o r r o w i n g r o s e . As t h e company expanded, i t began t o a c q u i r e Crown l a n d s r a t h e r t h a n d r i l l i n g s o l e l y on Canadian P a c i f i c p r o p e r t y . By t h e l a t e 1960 s, Canadian P a c i f i c O i l and Gas was a f u l l - f l e d g e d o i l company, o p e r a t i n g t h r o u g h o u t Canada and abroad. Canadian P a c i f i c . I n v e s t m e n t s , C.P.'s n o n - t r a n s p o r t arm, was c o n t r i b u t i n g more t h a n h a l f o f the e a r n i n g s t h a t made CP t h e second l a r g e s t conglomerate i n Canada. Among th e companies on the i n v e s t m e n t s i d e o f t h e b u s i n e s s , Canadian P a c i f i c O i l and Gas made the l a r g e s t p r o f i t (Gray 1970: 293) . Thus two c o r p o r a t i o n s , one Canadian and one f o r e i g n , managed t o t a k e advantage of t h e i r e x t e n s i v e l a n d bases t o become c o m p e t i t i v e o i l companies. I n b o t h c a s e s t h e y were backed by c o r p o r a t i o n s w h i c h c o u l d f i n a n c e t h e f i r s t decade o f e x p l o r a t i o n and development work, b e f o r e p r o f i t s would a l l o w the new companies t o s t a n d on t h e i r own. I n c o n t r a s t , the C a l g a r y and Edmonton C o r p o r a t i o n was not a b l e t o make the same g a i n s . I n 1891, the C a l g a r y and Edmonton R a i l w a y was g r a n t e d 1,142,109 a c r e s o f l a n d and m i n e r a l r i g h t s . D u r i n g t h e 1930s, C and E, w h i c h was under the c o n t r o l o f t h e Winnipeg i n v e s t m e n t house O s i e r , Hammond and Nanton, l e a s e d out d r i l l i n g r i g h t s t o a number of o i l companies i n r e t u r n f o r a 12^% r o y a l t y and t h e r i g h t t o p a r t i c i p a t e i n t h e d r i l l i n g o f w e l l s . By mid-June o f 1948 the company had a r o y a l t y i n t e r e s t i n 90 o i l and g a s - p r o d u c i n g w e l l s , most o f them d r i l l e d i n t h e T u r n e r V a l l e y by s m a l l A l b e r t a - b a s e d companies. The company had a l s o p a r t i c i p a t e d i n d r i l l i n g 15 w e l l s w i t h R o y a l i t e O i l , an I m p e r i a l O i l s u b s i d i a r y . I n 1947, r o y a l t i e s from th e company's l a n d were $326,826. Thus, when o i l was s t r u c k a t Leduc, the C a l g a r y and Edmonton C o r p o r a t i o n was a c t i n g l a r g e l y as a r e n t i e r , with, o n l y a s m a l l p o r t i o n o f i t s e a r n i n g s d e r i v i n g from a c t i v e d r i l l i n g . I n t h e post-Leduc p e r i o d , C and E m o d i f i e d i t s t r a d i t i o n a l r e n t i e r s t a n c e somewhat by e n t e r i n g i n t o a p a r t n e r s h i p w i t h two A l b e r t a - b a s e d , n o n - i n t e g r a t e d companies: A n g l o Canadian O i l and Home O i l . Both o f t h e s e companies had o p e r a t i n g e x p e r i e n c e i n t h e Turn e r V a l l e y , w h i l e C and E owned l a r g e a r e a s o f m i n e r a l r i g h t s i n t h e Calgary-Edmonton c o r r i d o r . The c o n s o r t i u m ' s f i r s t i n v e s t m e n t was s u c c e s s f u l . Two thousand a c r e s i n t h e South Woodbend f i e l d produced t h i r t y - t w o s u c c e s s f u l w e l l s . U n f o r t u n a t e l y , n e i t h e r o f C and E's two p a r t n e r s had t h e c a p i t a l t o s u s t a i n development a t t h a t pace, development c o s t s on t h e d i s c o v e r e d w e l l s c u t i n t o t h e f i n a n c e c a p i t a l a v a i l a b l e f o r p u r c h a s i n g new l a n d s . The l a n d owned by the C a l g a r y and Edmonton C o r p o r a t i o n - 1.14 m i l l i o n a c r e s was about 12% o f t h e m i n e r a l r i g h t s owned by t h e CPR - was t o o meagre and s p r e a d o ut t o a l l o w t h e A l b e r t a - b a s e d companies t o amass enough l a n d f o r a " p l a y " i n t h e major f i e l d s . -D u r i n g t h i s v e r y i m p o r t a n t p e r i o d i n t h e A l b e r t a o i l i n d u s t r y t h e C a l g a r y and Edmonton C o r p o r a t i o n neyer moved a g g r e s s i v e l y i n t o t h e o p e r a t i o n s s i d e o f t h e o i l b u s i n e s s . U n l i k e Canadian P a c i f i c o r t h e Hudson's Bay Company, t h e b a c k e r s o f the C a l g a r y and Edmonton C o r p o r a t i o n d i d not f u n n e l l a r g e amounts o f c a p i t a l i n t o t h e o i l company. I n t h e t w e n t y - f i v e y e a r s between 1929 and 1954, t h e C a l g a r y and Edmonton C o r p o r a t i o n spent, o n l y $4,176,764 on e x p l o r a t i o n and development. T h i s was a h a l f m i l l i o n d o l l a r s l e s s t h a n was r e c o v e r e d b y t h e company d u r i n g t h e same p e r i o d ( F i n a n c i a l P o s t 1955: 971.. So w h i l e many A l b e r t a o i l companies were f i n a n c i n g a heavy debt t o become i n v o l v e d i n t h e o i l i n d u s t r y , t h e C a l g a r y and Edmonton C o r p o r a t i o n and O s i e r , Hammond and Nanton were f o l l o w i n g a s a f e r c o u r s e . As a consequence, t h e p a r t n e r s h i p o f t h e two A l b e r t a -based o i l companies and C and E w i t h e r e d and by t h e m i d - f i f t i e s the C a l g a r y and Edmonton C o r p o r a t i o n had gone back t o l e a s i n g out i t s l a n d s t o o t h e r o i l companies. By 1954, i t s r o y a l t y r e t u r n s had I n c r e a s e d t o a l m o s t a m i l l i o n d o l l a r s a y e a r , and i n 1959, i t s share o f o i l p r o d u c t i o n was 1,027,000 b a r r e l s . I n 1966, when Hudson's Bay O i l and Gas was q u i c k l y becoming the t h i r d l a r g e s t o i l p r o d u c e r i n Canada and Canadian P a c i f i c O i l and Gas had begun i t s m a s s i v e l a n d a c q u i s i t i o n programme, the C a l g a r y and Edmonton C o r p o r a t i o n was bought out by t h e Canadian S u p e r i o r O i l Company, a s u b s i d i a r y o f the S u p e r i o r O i l Company o f C a l i f o r n i a . There were t h r e e groups o f companies, t h e n , t h a t b e n e f i t e d from t h e l a n d a c q u i s i t i o n p o l i c i e s o f t h e A l b e r t a and t h e f e d e r a l governments: t h e f o r e i g n - b a s e d i n t e g r a t e d companies, companies sponsored b y t h e American f i n a n c i a l s e c t o r and companies t h a t had been t h e b e n e f i c i a r i e s o f e a r l y l a n d g r a n t s . I n c o n t r a s t , A l b e r t a l e g i s l a t i o n s e r i o u s l y hampered a f o u r t h group o f companies i n t h e i r s e a r c h f o r m i n e r a l r i g h t s . The n o n - i n t e g r a t e d Canadian o i l companies were n e g a t i v e l y a f f e c t e d by a l l t h r e e major p r o v i s i o n s i n the m i n e r a l r i g h t s system. R e s e r v a t i o n s , l e a s i n g and a u c t i o n s a l l depended on having, l a r g e c a p i t a l r e s o u r c e s which t h e A l b e r t a - b a s e d companies c o u l d n o t hope t o o b t a i n . In t h e wake o f t h e Leduc d i s c o v e r y i t was not i m m e d i a t e l y o b v i o u s t h a t t h e c a p i t a l i z a t i o n o f t h e Canadian companies . was i n a d e q u a t e t o s e c u r e them d r i l l i n g p r o p e r t i e s . The Leduc f i e l d , near Edmonton, was one a r e a where f a r m e r s had s e t t l e d b e f o r e the t u r n o f t h e c e n t u r y when m i n e r a l r i g h t s were s t i l l g r a n t e d t o homesteaders. As a consequence i n the months a f t e r the Leduc d i s c o v e r y t h e r e were s t i l l q u a r t e r and h a l f s e c t i o n s o f m i n e r a l r i g h t s which, t h e l o c a l n o n - I n t e g r a t e d companies c o u l d p u r c h a s e from f a r m e r s . One y e a r a f t e r Leduc s e v e r a l non-i n t e g r a t e d companies had made t h e i r mark i n t h e new f i e l d : t h e Globe-Leduc West group o f C a l g a r y s t o o d second i n t h e f i e l d ( a f t e r I m p e r i a l O i l ) w i t h f i v e p r o d u c i n g w e l l s and f i v e more i n t h e p r o c e s s o f b e i n g d r i l l e d . A t l a n t i c O i l s had t h r e e w e l l s , as d i d E a s t L e d u c - S o u t h Br a z e a u and Home O i l . O f t e n good l u c k and c o i n c i d e n c e s h e l p e d t h e s e companies s u r v i v e t h e d i f f i c u l t f i r s t f ew y e a r s . Home O i l was a b l e t o 98. o b t a i n a prime p i e c e o f l a n d i n t h e h e a r t o f t h e Leduc f i e l d because the farmer who owned t h e r i g h t s had heard t h a t t h e company l a w y e r was an honest man. A t l a n t i c O i l s had t h e good f o r t u n e t o have a blowout w h i c h caught f i r e a t i t s #3 w e l l . The p u b l i c i t y drew m i l l i o n s o f d o l l a r s i n i n v e s t m e n t c a p i t a l t o t h e company from a l l o ver N o r t h A m e r i c a . But f o r t h e most p a r t , a f t e r t h e f i r s t i n v e s t m e n t s were made, th e i n f l o w o f money was i n s u f f i c i e n t t o a l l o w the Canadian companies t o compete w i t h t h e m a j o r s . They were never a b l e t o o b t a i n t h e huge r e s e r v a t i o n s w h i c h g u a r a n t e e d them l a r g e l e a s e s i n prime a r e a s , and a f t e r 1949 the p r i c e o f l a n d a t a government a u c t i o n had gone t o o v e r a m i l l i o n d o l l a r s . A t t h a t p r i c e i t was i m p e r a t i v e t o f i n d o i l ; s e v e r a l companies went ba n k r u p t when a l l f o u r w e l l s on an e x p e n s i v e q u a r t e r s e c t i o n t u r n e d o ut t o be d r y h o l e s . Table 3': Land Holdings of Selected Non-Integrated Alberta-based O i l Companies: 1950 Turner Leduc Woodbend Redwater Valley field Golden Spike field field fields Anglo Canadian Oil Co. Ltd. Atlantic Oil Co. Ltd. British-Canunion Oil and Development Corp. Calvan Petroleums Central Leduc Oils Ltd. Davies Petroleum Ltd. East Leduc Oil Co. Foothills Oil and Gas Co. Globe Oil Co. Ltd. Heme Oil Co. National Petroleum Corp. Okalta Oils Ltd. 1,240 acres 1,043 acres 5,752 acres 560 a. 2,777 a. 2,124 a. 28,900 a. 660 a. 2,236 a. 60 a. 96 a. 640 a. 880 a. 480 a. 480 a. 1,120 a. 1,200 a. 1,440 a. 1,120 a. 1,760 a. 478 acres 1,120 a. 3,840 a. 1,920 a. 480 a. TOTALS 38,497 a. 6,083 a. 10,952 a. 7,838 a. (Source: Financial Post Survey of Oils, 1950). 100. By 1950, none o f the A l b e r t a - b a s e d companies owned l a r g e l a n d t r a c t s i n any- one o f t h e f o u r major o i l - p r o d u c i n g a r e a s o f t h e p r o v i n c e e x c e p t t h e Turn e r V a l l e y . As T a b l e .3 i n d i c a t e s , t h e t w e l v e l a r g e s t A l b e r t a - b a s e d , n o n - i n t e g r a t e d companies h e l d a t o t a l o f 38,497 a c r e s o f m i n e r a l r i g h t s i n t h e Turner V a l l e y , but o n l y 6,083 a c r e s i n the Leduc f i e l d . When i t i s c o n s i d e r e d t h a t i n t h e same y e a r I m p e r i a l O i l con-t r o l l e d more than a m i l l i o n a c r e s o f m i n e r a l r i g h t s i n t h e Leduc f i e l d , i t becomes c l e a r t h a t t h e l o c a l n o n - i n t e g r a t e d f i r m s were a t a c o n s i d e r a b l e d i s a d v a n t a g e i n p l o t t i n g a s u c c e s s f u l d r i l l i n g programme. The A l b e r t a companies t r i e d two new s t r a t e g i e s t o compete w i t h the m u l t i n a t i o n a l s . I n l a t e 19,49, groups o f companies began t o band t o g e t h e r i n c o n s o r t i a o f t h r e e o r more companies (Table 4 ). E v e n t u a l l y t h r e e c o n s o r t i a emerged: N o r t h w e l l O p e r a t o r s , t h e A l b e r t a E x p l o r a t i o n S y n d i c a t e and G.E.L. O i l s L i m i t e d . The t h r e e companies, w h i c h sponsored N o r t h w e l l had c o n s i -d e r a b l e s u c c e s s i n t h e i r f i r s t d r i l l i n g v e n t u r e i n t h e Wbodbend f i e l d ; 15 w e l l s were d r i l l e d s u c c e s s f u l l y . T h e i r n e x t v e n t u r e , however, ended w i t h t h r e e d r y h o l e s and t h e e x h a u s t i o n o f t h e c o n s o r t i u m ' s d r i l l i n g f u n d . T h e r e a f t e r N o r t h w e l l was f o r c e d t o become a j u n i o r p a r t n e r i n agreements w i t h I m p e r i a l O i l and C a l i f o r n i a S t a n d a r d . A second s t r a t e g y was t o form a c o n s o r t i u m t o b i d on 101. large areas of mineral r i g h t s i n remote areas. The Alberta Exploration syndicate followed t h i s strategy by purchasing mineral rights at South Beaverhill Lake (14,000 acres), B i r c h Lake (50,000 acres), and West Viking (34,000 acres) . Unfortunately, those areas could only be adequately tested by massive seismic and geological surveys which the l o c a l companies could not afford to mount. As a consequence, afte r d r i l l i n g only a few wells, the consortium was forced to farm out to Texaco, Imperial O i l , P h i l l i p s Petroleum and several smaller companies. Table 4: D r i l l i n g Consortia Established by Alberta-based, non-integrated O i l Companies 19.49-52. Consortium Alberta Exploration Syndicate Northwell Operators Limited G.E.L. O i l s Limited Participants Superior O i l s General Petroleums Gas and O i l Refineries Globe O i l s Anglo Canadian Oils: Home O i l Calgary & Edmonton Corporation East Leduc O i l s Leduc West O i l s British. Empire O i l Development Corp. Davies Petroleum South Brazeau O i l s (Financial Post Survey of O i l s , 1949-52) 102. By 1952, t h e c o n s o r t i a w h i c h had been mounted i n t h e m i d s t o f t h e Leduc boom had a l l gone b a n k r u p t - o r had d i s s o l v e d , and t h e n o n - i n t e g r a t e d companies had been f o r c e d i n t o e n t e r i n g dependent r e l a t i o n s h i p s w i t h t h e w e l l - c a p i t a l i z e d f o r e i g n -based o i l f i r m s . Companies which d i d not have a s t r o n g l a n d p o s i t i o n but d i d have equipment and e x p e r t i s e found i t u s e f u l t o "farm i n " t o l a n d s a l r e a d y l e a s e d by t h e major companies. O k a l t a O i l d e v e l o p e d 22 w e l l s i n t h e Leduc a r e a by f a r m i n g i n t o acreage c o n t r o l l e d by I m p e r i a l O i l ; the r e s u l t i n g p r o d u c t i o n was shared w i t h I m p e r i a l , as l a n d h o l d e r , r e c e i v i n g 50%. Other n o n - i n t e g r a t e d companies were not so l u c k y . M i d -C o n t i n e n t O i l and Gas L t d . , f o r example, farmed i n t o a 60,000 a c r e r e s e r v a t i o n h e l d by C a l i f o r n i a S t a n d a r d and d r i l l e d s i x w e l l s . The programme c o s t $168,773 but none o f t h e w e l l s was s u c c e s s f u l . The farm i n system had a double b e n e f i t f o r the f o r e i g n - b a s e d companies. Most o f them had f a r more l a n d t h a n t h e y c o u l d e x p l o r e e f f i c i e n t l y , so the farm o u t a g r e e -ments w i t h t h e s m a l l A l b e r t a companies were a p p r e c i a t e d . The p o t e n t i a l l y l e a s t p r o d u c t i v e a r e a s were farmed o u t t o t h e non-i n t e g r a t e d companies t o be e v a l u a t e d a t l i t t l e o r no c o s t t o t h e major o i l companies. Why d i d t h e government o f A l b e r t a choose a l e a s i n g p o l i c y which, was so o b v i o u s l y w e i g h t e d i n f a v o u r o f t h e f o r e i g n - b a s e d , companies? I t was c e r t a i n l y n ot because t h e r e 103. were no o t h e r models f o r t h e d i s p o s a l o f m i n e r a l r i g h t s . I n n e i g h b o u r i n g Saskatchewan the government's system d i v i d e d a r e s e r v a t i o n i n t o a l t e r n a t i n g b l a c k and w h i t e s q u a r e s , so t h a t i n t h e event o f a d i s c o v e r y , the b l a c k s q u a r e s would be r e t a i n e d by t h e company and t h e w h i t e squares would be r e t u r n e d t o t h e government. I n t h i s f a s h i o n , t h e government would r e t a i n some c o n t r o l o v e r t h e way i n w h i c h h a l f o f t h e f i e l d was d e v e l o p e d . I n Saskatchewan, t o o , c e r t a i n a r e a s were s e t a s i d e f o r t h e Saskatchewan F e d e r a t e d Coop, so t h a t t h e l o c a l r e f i n e r y c o u l d produce i t s own o i l . I n o t h e r a r e a s , Canadian companies were g i v e n p r i o r i t y , and c a p i t a l - p o o r e n t e r p r i s e s were a l l o w e d t o b i d a p r o p o r t i o n o f t h e o i l produced r a t h e r t h a n c a s h . But i n A l b e r t a , the g o v e r n i n g S o c i a l C r e d i t p a r t y had deep f r e e e n t e r p r i s e r o o t s , and found any s u g g e s t i o n o f f a v o u r i -t i s m a b h o r e n t , even i f i t was a p o l i c y , l i k e t h a t i n p l a c e I n Saskatchewan, which a l l o w e d l o c a l b u s i n e s s t o s u r v i v e . A t the same t i m e , many members o f t h e government - Mr. Tanner and P r e m i e r Manning among them - were d e e p l y r e l i g i o u s , and t h e " w o r l d l y " s u c c e s s o f a company l i k e I m p e r i a l O i l suggested h a r d work and p e r s e v e r ance. Many o f t h e l o c a l o i l m e n , whose p r i v a t e l i v e s were w e l l known i n t h e C a l g a r y a r e a , were not e x a c t l y wedded t o t h e s t r a i g h t and narrow. A l l o f t h e s e emotions were e v i d e n t i n E l d o n Tanner's r e s p o n s e t o an O p p o s i t i o n member who a t t a c k e d h i s government's l a n d p o l i c y . 104 . " I don't know how t h e s m a l l man t h i n k s he has t h e r i g h t t o move i n t o an a r e a when he h a s n ' t spent a c e n t t o d i s c o v e r t h e o i l , " he snapped. Most i m p o r t a n t l y , however, t h e A l b e r t a government f a v o u r e d l a r g e f o r e i g n - b a s e d f i r m s because the m u l t i - n a t i o n a l s were p r e p a r e d t o g uarantee t h a t t h e o i l t h e y found would get t o market. As t h e l a r g e s t o i l r e f i n e r s and m a r k e t e r s i n Canada, i t was i n t h e i r i n t e r e s t t o s t r e a m l i n e t h e i r o p e r a t i o n s by u s i n g A l b e r t a o i l t o produce th e g a s o l i n e used on t h e Canadian p r a i r i e s and on t h e West Coast. The n o n - i n t e g r a t e d companies c o u l d make no such p r o m i s e . S i n c e they owned no r e f i n e r i e s , t h e y had no immediate market f o r t h e i r o i l . From t h e A l b e r t a government's p o i n t o f v i e w , o n l y the f o r e i g n - b a s e d companies had t h e power t o g e t A l b e r t a o i l and gas t o market. A c c o r d i n g t o Hubert S o m e r v l l l e , t h e Department o f Mines and M i n e r a l s was moved by two c o n s i d e r a t i o n s i n d e v e l o p i n g A l b e r t a ' s o i l and gas l a n d s r egime. The government was i n t e r e s t e d i n m a x i m i z i n g the a r e a under e x p l o r a t i o n and i t wished t o maximize the r e venues r e t u r n e d t o p r o v i n c i a l c o f f e r s . And b o t h o f t h o s e concerns took precedence o v e r any d e s i r e t o a f f e c t t h e s t r u c t u r e o f t h e i n d u s t r y . " I t was t r u e , " says S o m e r v l l l e , " t h a t because, o f t h e amount o f money some companies had, t h e y were a b l e t o walk away with, more o f the b e n e f i t s t h a n th e ones w i t h l e s s c a p i t a l . But s t i l l and a l l , we were i n i t f o r t h e money..." S o c i a l 105. C r e d i t had a need f o r money, stemming from th e d e b t s of t h e D e p r e s s i o n and the war. Once the Manning government had d e c i d e d t o r e n e g o t i a t e t h e d e b t , i t was incumbent on h i s government not t o do a n y t h i n g t h a t would r a i s e t h e s p e c t r e o f f i s c a l i r r e s p o n s i b i l i t y a g a i n . The Department o f Mines and M i n e r a l s b e l i e v e d t h a t the f a s t e s t way t o g e t money from th e p e t r o l e u m s e c t o r was not t o depend on r o y a l t i e s , w hich would not a c c r u e u n t i l t h e i n d u s t r y was i n f u l l swing, bu t t o charge h e a v i l y f o r t h e r i g h t t o d r i l l . The a u c t i o n s , i n p a r t i c u -l a r , gave the p r o v i n c e v e r y l a r g e revenues f o r v e r y l i t t l e o u t p u t , and f o r t h i s r e a s o n t h e m u l t i n a t i o n a l s were g i v e n e v e r y o p p o r t u n i t y t o b i d . "Often t h e company wh i c h had ( l e a s e d t h e s u r r o u n d i n g ) l a n d was the b i g g e s t b i d d e r , " says H.H. S o m e r v i l l e . "There was a l i t t l e innuendo t h e n t h a t maybe they s h o u l d n ' t l e t t h e m a j o r i t y h o l d e r , by r e a s o n of h i s e x p l o r a t i o n , g a t h e r i n t h i s e x t r a a c r e a g e . But who e l s e was g o i n g t o put up t h e e x t r a money? I f you c o u l d g e t a m i l l i o n d o l l a r s more from th e p e r s o n who had d e v e l o p e d i t t h a n you c o u l d from any o t h e r company, th e n you were c r a z y not t o t a k e t h e m i l l i o n d o l l a r s " ( I n t e r v i e w w i t h H.H. S o m e r v i l l e ) . The second g o a l o f t h e government i n d e f i n i n g i t s o i l l a n d s p o l i c y was t o maximize e x p l o r a t i o n i n t h e p r o v i n c e . 106 . I t was f e l t t h a t by p u t t i n g l a r g e a c r e a g e s under t h e c o n t r o l o f s i n g l e companies, the i n d u s t r y would be f o r c e d t o do v a s t amounts o f s e i s m i c t e s t i n g . There was no f e a r on t h e government's p a r t t h a t t h e l a r g e companies would t a k e out so much, l a n d t h a t t h e y would f i n d i t i m p o s s i b l e t o e x p l o r e , s i n c e l e g a l d r i l l i n g o b l i g a t i o n s e nsured t h a t a c e r t a i n amount of e x p l o r a t i o n work would be done a n n u a l l y . B e s i d e s , t h e Canadian companies were seen as a s a f e t y v a l v e ; t h e y were so d e s p e r a t e f o r a l a n d p o s i t i o n t h a t t h e y were w i l l i n g t o e n t e r i n t o farm out a g r e e -ments w i t h t h e m u l t i n a t i o n a l s , f u l f i l l i n g t h e d r i l l i n g o b l i g a t i o n s o f t h e l a r g e r companies w h i l e g a i n i n g some minor p r o d u c t i o n f o r t h e m s e l v e s . I n t h i s way, t h e A l b e r t a goyernment a c h i e v e d i t s g o a l o f m a x i m i z i n g e x p l o r a t i o n . F i f t e e n y e a r s a f t e r E l d o n Tanner f i r s t c o n v i n c e d h i s p a r t y t o a c c e p t t h e p r i n c i p l e t h a t c a p i t a l s h o u l d be a c c e p t e d from any s o u r c e , t h e f a c e o f the p r o v i n c e had u t t e r l y changed. P r e v i o u s t o t h e Leduc d i s c o v e r y , most of t h e twenty m i l l i o n a c r e s under e x p l o r a t i o n i n w e s t e r n Canada was c o n c e n t r a t e d i n s o u t h e r n Saskatchewan and s o u t h - c e n t r a l A l b e r t a . By May, 1954, t h e l a n d under p e r m i t had i n c r e a s e d more than e i g h t f o l d , t o 170 m i l l i o n a c r e s . The p e r m i t s b l a n k e t e d A l b e r t a from the American b o r d e r t o t h e Peace R i v e r , w i t h , o n l y t h e n a t i o n a l p a r k s o u t s t a n d i n g . On a v e r a g e , a l m o s t two m i l l i o n a c r e s a month had been a c q u i r e d by t h e i n d u s t r y - an amount e q u a l t o a 107 . s t r i p o f l a n d more th a n f o u r m i l e s ; wide s t r e t c h i n g between Winnipeg and Edmonton C l m p e r i a l O i l 1954: n.p.).. By t h e 1960s, 77 m i l l i o n a c r e s i n A l b e r t a had been l e a s e d t o t h e o i l i n d u s t r y . Of t h i s , t w e l v e m i l l i o n a c r e s were under the c o n t r o l o f independent companies and more than f o u r t i m e s t h a t amount o f l a n d was c o n t r o l l e d by f o u r t e e n i n t e r n a t i o n a l o i l f i r m s . The A l b e r t a government had a c h i e v e d i t s g o a l o f opening th e p r o v i n c e ' s o i l and gas l a n d s f o r e x p l o r a t i o n , but i t had done so a t t h e c o s t o f b r i n g i n g the s m a l l group o f i n d i g e n o u s businessmen t o t h e i r knees. 108. LAND ACQUISITIONS I N D U S T R Y - W E S T E R N CANADA cm Q ACREAGE HELD PRIOR TO LEDUC ACREAGE HELD AT MAY 1954 T r' a c. / r — P a D u I ' j ' - . n i 'V— S A S K . \ w \ n - „ _ . . I S- : • \ X ( I m p e r i a l O i l 1955) 109 IV: F e d e r a l E x p o r t P o l i c y The t h i r d a r e a of government p o l i c y which had a pr o f o u n d e f f e c t on the development of o i l and gas as s t a p l e s was e x p o r t p o l i c y . The t r a d e d i r e c t i o n s e s t a b l i s h e d by the American and Canadian governments i n the f i f t i e s c o n t i n u e d t o a f f e c t the i m p o r t / e x p o r t p a t t e r n s of the two c o u n t r i e s f o r the two decades t h a t f o l l o w e d . In t he immediate post-war p e r i o d , the government of the U n i t e d S t a t e s d i d a thorough r e e x a m i n a t i o n of i t s r e l a t i o n s h i p w i t h i t s major t r a d i n g p a r t n e r s , Canada among them. The t r a d i n g r e l a t i o n s h i p between the U n i t e d S t a t e s and Canada had a l t e r e d d r a m a t i c a l l y d u r i n g the war, p a r t i c u l a r l y a f t e r the R o o s e v e l t a d m i n i s t r a t i o n committed U.S. i n d u s t r y t o produce war m a t e r i a l f o r t he A l l i e s . I n 1940, Canadian raw m a t e r i a l s began t o f l o w i n t o the U n i t e d S t a t e s a t an unprecedented r a t e . In exchange, a i r c r a f t , m u n i t i o n s , and armoured v e h i c l e s moved out of American p l a n t s t o Canada and t o the war. A f t e r the war, both Canada and the U n i t e d S t a t e s recommitted themselves t o the c o n t i n e n t a l approach. One of the f i r s t j o i n t a c t s i n t h i s d i r e c t i o n was a d i p l o m a t i c note s i g n e d by both c o u n t r i e s i n October, 1950. A f t e r r e f e r r i n g t o the c o n t i n e n t a l c o o p e r a t i o n between the two c o u n t r i e s d u r i n g World War I I , p a r t i c u l a r l y a f t e r the Hyde Park Agreement, the note a f f i r m e d t h a t the s i g n a t o r i e s would develop a " c o o r d i n a t e d p r o -110. gramme o f r e q u i r e m e n t s , p r o d u c t i o n and p r o c u r e m e n t . " T h i s was t o be done by i n s t i t u t i n g " c o o r d i n a t e d c o n t r o l s o v e r t h e d i s -t r i b u t i o n o f s c a r c e raw m a t e r i a l s and s u p p l i e s , " ( R o y a l Commission  on E n e r g y , Volume I I : 3-4). As t h e U n i t e d S t a t e s began t h e p r o -c e s s o f r a t i o n a l i z i n g i t s i n t e r n a t i o n a l t r a d i n g p o s i t i o n and g u a r a n t e e i n g t h e b r o a d e s t r a n g e o f m a r k e t s f o r i t s p r o d u c t s , i t was o n l y n a t u r a l t h a t s t r o n g , b i l a t e r a l a greements were made w i t h t h e o n l y m a j o r t r a d i n g p a r t n e r w h i c h had n o t been d e v a s t a t e d by t h e war. I n t h e y e a r s t h a t f o l l o w e d t h e war, t h e U n i t e d S t a t e s government began t o see i t s e l f f a c i n g an i n c r e a s i n g l y h o s t i l e w o r l d . As a c o n s e q u e n c e , a new c o m p e l l i n g r e a s o n f o r i n t e r n a t i o n a l t r a d e l i n k s emerged: n a t i o n a l s e c u r i t y . As e a r l y as t h e 1930s, A m e r i c a n p o l i c y m a k e r s had r e c o g n i z e d t h e a d v a n t a g e o f r e c e i v i n g some o f i t s o i l f r o m n a t i o n s s i t u a t e d c l o s e t o t h e U n i t e d S t a t e s . The d e v e l o p m e n t o f V e n e z u e l a n o i l s u p p l i e s had a l w a y s been f a v o u r e d o v e r t h e M i d d l e E a s t e r n o i l -f i e l d s on t h e a s s u m p t i o n t h a t A m e r i c a n n a v a l power c o u l d be d e p l o y e d t o keep t h e C a r i b b e a n open i n t i m e o f war. In t h e l a t e f o r t i e s , t h e r e were two o i l - p r o d u c i n g c o u n -t r i e s c o n t i n e n t a l l y l i n k e d t o t h e U n i t e d S t a t e s : M e x i c o and Canada. U.S. c o n f i d e n c e i n M e x i c o as an o i l p r o d u c e r had weakened a f t e r t h e M e x i c a n n a t i o n a l i z a t i o n o f f o r e i g n o i l companies i n 1938, and c o n s e q u e n t l y no p i p e l i n e e x i s t e d between M e x i c o and t h e U n i t e d S t a t e s . T h i s l e f t Canada as t h e o n l y c o u n t r y i n a p o s i t i o n t o s h i p o i l t o t h e U n i t e d S t a t e s o v e r l a n d . 111. D u r i n g the e a r l y 1950s, commissions of the U n i t e d S t a t e s government p o i n t e d t o the s t r a t e g i c advantages of h a v i n g an o i l import r e l a t i o n s h i p w i t h a n e i g h b o u r i n g c o u n t r y w i t h a s t a b l e p o l i t i c a l h i s t o r y . The U.S. A d v i s o r y Committee on Energy S u p p l i e s and Resources P o l i c y noted the "importance t o the economies of f r i e n d l y c o u n t r i e s of t h e i r o i l e x p o r t s t o the U n i t e d S t a t e s , as w e l l as the importance t o the U.S. of the a c c e s s i b i l i t y of f o r e i g n crude s u p p l i e s both i n peace and war." ( S c h a f f e r 1 9 6 8 : 1 0 9 ) . In June, 1956, the U n d e r - S e c r e t a r y of S t a t e f o r the U n i t e d S t a t e s s a i d i n an a d d r e s s : "The ( C a b i n e t ) Committee r e c o g n i z e d the d e s i r a b i l i t y of p l a c i n g i n a s e p a r a t e c a t e g o r y crude o i l i m p o r t s from Canada and V e n e z u e l a ... n a t i o n a l defense was one of t h e b a s i c f a c t o r s a f f e c t i n g t h i s d e c i s i o n : In the event of a n a t i o n a l emergency, o i l from Western Hemisphere c o u n t r i e s w i l l always be r e c o g -n i z e d as our s a f e s t s u p p l e m e n t a l source of p e t r o l e u m . " (Royal Commission on Energy 11: 3-20). At the same t i m e , the P a l e y Commission began t o l o o k a t the a b i l i t y of the U n i t e d S t a t e s t o o b t a i n c r i t i c a l raw r e s o u r c e s i n the event of an i n t e r n a t i o n a l c o n f l i c t . I n 1952, the P a l e y Commission p u b l i s h e d i t s r e p o r t Resources f o r Freedom recommending t h a t the o v e r a l l o b j e c t i v e of a n a t i o n a l m a t e r i a l s p o l i c y be " t o i n s u r e an adequate and dependable f l o w of m a t e r i a l s at the l o w e s t p r i c e c o n s i s t e n t w i t h n a t i o n a l s e c u r i t y ..." (Laxer 1970:26). For the P a l e y Commission, Canada had a 1 1 2 . p a r t i c u l a r l y i m p o r t a n t r o l e t o p l a y i n i n s u r i n g raw m a t e r i a l s u p p l i e s t o the U n i t e d S t a t e s . As a pro d u c e r of l e a d , z i n c , n i c k e l , copper and p e t r o l e u m , Canada was i n a p o s i t i o n t o s u p p l y most of the n e c e s s i t i e s f o r war p r o d u c t i o n . For t h e s e r e a s o n s , when the U n i t e d S t a t e s s e t up i t s import quota system i n 1955, i n s t i t u t i n g c o n t r o l s on the amount of o i l p e r m i t t e d t o e n t e r the U n i t e d S t a t e s from v a r i o u s c o u n t r i e s , Canada and V e n e z u e l a were exempted from c o n t r o l s . An American government r e p r e s e n t a t i v e e x p l a i n e d t o t h e O i l and Gas  J o u r n a l t h a t " i t has always been the p o l i c y of government ... t o c o n s i d e r t h o s e c o u n t r i e s (Venezuela and Canada) ... as w i t h i n the U.S. o r b i t when d e a l i n g w i t h defense q u e s t i o n s ( S h a f f e r 1968:109). There were, on the o t h e r hand, f a c t o r s t h a t m i l i t a t e d a g a i n s t the i m p o r t a t i o n of Canadian o i l i n t o the U n i t e d S t a t e s . In the f i f t i e s , w o r l d o i l p r o d u c t i o n was i n c r e a s i n g a t an unprecedented pace. Between 1946 and 1960 t h e r e were 62 g i a n t o i l d i s c o v e r i e s made w o r l d w i d e , each of them l a r g e r than Leduc. A s h i f t a l s o took p l a c e i n the l o c a t i o n of the d i s c o v e r i e s . At the b e g i n n i n g of World War I I , the U n i t e d S t a t e s had been the u n d i s p u t e d w o r l d l e a d e r w i t h 60% of w o r l d o i l p r o d u c t i o n t a k i n g p l a c e w i t h i n i t s b o r d e r s . The M i d d l e E a s t , V e n e z u e l a and the S o v i e t Union p r o v i d e d another 30% (See Graph #1, page 132). At the end o f the war, e x p l o r a t i o n began i n e a r n e s t i n the M i d d l e E a s t where an average of 20.7 b i l l i o n b a r r e l s a year were d i s c o v e r e d i n the f i f t i e s and e a r l y s i x t i e s . E s p e c i a l l y 1 1 3 . tOOr 80 WORLD PRODUCTION 1938.1954.1964 (INCLUDES NATURAL GAS LIQUIDS) U S A CARia u s ME USSR 1938 I • 1 1954 1964 U S A . C A R I B B E A N M I D D L E E A S T 1 " A F R I C A ' tt'.r. ''ITT?*?! U S S R £-- - ' .1 •' ( B r i t i s h P e t r o l e u m s : P e t r o l e u m Yearbook, 1965) £ 50 Kev. Amount discovered in all known giant field* Amount discovered in known giant fields X excluding super-giants Number of super giants discovered Y Number ot known giants discovered Z Number of known and potential giants discovered 1 j — — J*- •** 1/ ^""^ \ P'e- 1881 1891 1901 1906 1911 1916 1921 1926 1931 1936 1941 1946 1961 1956 1961 1966 1971 1881 1890 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 X 0 2 0 3 1 1 5 4 7 2 0 V 1 3 2 7 I 4 7 11 18 16 9 Z 1 5 2 8 1 5 7 14 29 34 26 -Crude oil discoveries in giant fields in the Middle East through 1975 (Deqolyer and "cNaughton, G r e a t O i l f i e l d s and World O i l R e s e r v e s , 1971) 114 . TABLE IU — W O R L D O I L R E S E R V E S AS A T E N D 1957 (in millions of barrels) Western Hemisphere 1957 Eastern Hemisphere 1957 MIDDLE EAST U.S.A. Crude oil 30,300 Natural gas liquids 5,688 Total 35,988 CARIBBEAN Venezuela 16,000 Colombia 650 Trinidad 300 Total 16,950 CANADA Crude Oil 2,874 Natural gas liquids 395 Total 3,269 MEXICO 2,750 ARGENTINA 750 PERU 275 OTHERS. 280 Iran 32,000 Iraq 25,000 Kuwait 60,000 Neutral Zone 5,000 Qatar 1,750 Saudi Arabia 45,000 Southern Arabia 500 Other Middle East 251 Total 169,501 AFRICA 814 WESTERN EUROPE 1,369 EAST INDIES 8,085 OTHER FAR EAST 493 U.S.S.R. and associated countries 24.500 EASTERN EUROPE 900 CHINA 800 TOTAL WESTERN HEMISPHERE .... 60,262 TOTAL EASTERN HEMISPHERE .... 206, 4 62 TOTAL WORLD 1957 — 266,724 Source: Compiled by BP Canada Limited from published sources. ( R o y a l Commission on Energy Volume 11:9) 115. r e s u l t was t h a t tremendous q u a n t i t i e s of new o i l - h a l f of Venezuelan s u p p l i e s and h a l f of the new M i d d l e E a s t e r n d i s c o -v e r i e s - came under the c o n t r o l of the U n i t e d S t a t e s . The American government's d e c i s i o n t o conserve n a t i o n a l o i l s u p p l i e s touched o f f a c o n f l i c t w i t h i n the American o i l i n d u s t r y . The i n c e n t i v e s which the American government had extended t o f o r e i g n p r o d u c e r s had a c c r u e d l a r g e l y t o t h e l a r g e m u l t i n a t i o n a l companies - t h e S t a n d a r d group, G u l f and Texaco. Those American o i l companies which o p e r a t e d s o l e l y i n t h e c o n t i n e n t a l U n i t e d S t a t e s , the "in d e p e n d e n t s " , began t o run i n t o s e r i o u s economic d i f f i c u l t i e s because of the c u t b a c k s which had been imposed on t h e i r p r o d u c t i o n . T h e i r l o b b y , the Independent P e t r o l e u m A s s o c i a t i o n , argued v o c i f e r o u s l y i n Washington i n f a v o u r of i n c r e a s e d p r o d u c t i o n i n the c o n t i n e n t a l U.S. At the same t i m e , the o r g a n i z a t i o n l o b b i e d a g a i n s t o i l i m p o r t s from Canada, which, i t argued, would make f u r t h e r i n r o a d s a g a i n s t m i d - c o n t i n e n t p r o d u c e r s . In t he m i d - f i f t i e s , t h e n , t h e r e were s t r o n g arguments put f o r w a r d i n the U n i t e d S t a t e s b o t h f o r and a g a i n s t i m p o r t s of Canadian o i l . On the one hand, the U.S. a d m i n i s t r a t i o n wished t o see the o i l f i e l d s of A l b e r t a developed, f o r reasons of s e c u r i t y o f s u p p l y . On the o t h e r hand, the w o r l d s u p p l y of p e t r o l e u m was i n c r e a s i n g so r a p i d l y t h a t Canadian crude was f o r c e d t o compete w i t h cheaper o f f s h o r e s u p p l i e s . F i n a l l y , the s t r o n g l o b b y o f the independent p e t r o l e u m companies i n the U n i t e d S t a t e s s t o o d i n the way o f Canadian o i l e x p o r t s t o the U n i t e d S t a t e s . From the American p o i n t of view, t h e n , t h e r e l a r g e f i n d s were made i n S a u d i A r a b i a , I r a n , I r a q and K u w a i t and by t h e m i d - s i x t i e s , M i d d l e E a s t e r n n a t i o n s h e l d more t h a n h a l f o f t h e r e c o v e r a b l e o i l i n t h e w o r l d and were p r o d u c i n g more t h a n a q u a r t e r o f t h e w o r l d ' s needs (See Graph #2, page 1 3 2 ) . The r e s u l t was t h a t by t h e t i m e A l b e r t a ' s -o i l f i e l d s r e a c h e d f u l l p r o d u c t i o n i n t h e l a t e f i f t i e s , t h e E a s t e r n H e m i s p h e r e o i l r e s e r v e s s t o o d a t 206,462 m i l l i o n b a r r e l s ( R o y a l Commission on E n e r g y 1959:9). I t was n o t a s e l l e r ' s m a r k e t . A m a j o r i t y o f t h a t o i l was under t h e c o n t r o l o f t h e c o u n t r y w h i c h w o u l d have been t h e n a t u r a l m a r k e t f o r C a n a d i a n p e t r o l e u m e x p o r t s : t h e U n i t e d S t a t e s . As Edward S h a f f e r has p o i n t e d o u t i n h i s book, The O i l Import program o f t h e U n i t e d  S t a t e s , i n t h e y e a r s w h i c h p r e c e d e d W o r l d War I I t h e U n i t e d S t a t e s r e e v a l u a t e d i t s p o l i c y on t h e r e l a t i o n s h i p between d o m e s t i c and f o r e i g n o i l s u p p l i e s , c o n c l u d i n g t h a t f o r e i g n p r o d u c t i o n u n d e r t h e c o n t r o l o f U.S. companies s h o u l d be m a x i -m i z e d so t h a t i t w o u l d be p o s s i b l e t o f a l l b a c k on d o m e s t i c s u p p l i e s i n t h e e v e n t o f an emergency ( S c h a f f e r 1968:15). C o n s e q u e n t l y , s t a t e and f e d e r a l a u t h o r i t i e s imposed a s e v e r e p r o r a t i o n i n g scheme on w e l l s i n t h e c o n t i n e n t a l U n i t e d S t a t e s ; d o m e s t i c p r o d u c t i o n s c a r c e l y expanded between 1948 and 1960. A t t h e same t i m e , t h e U.S. S t a t e Department a s s i s t e d A m e r i c a n - b a s e d o i l companies t o win c o n c e s s i o n s a b r o a d , and t h e f e d e r a l a d m i n i s t r a t i o n gave t a x r e l i e f and m i l l i o n s o f d o l l a r s i n d i r e c t a i d t o t h e p r i v a t e o i l f i r m s ( i b i d ) . The 117 . W i t h i n f o u r y e a r s o f t h e f i r s t b i g o i l d i s c o v e r y i t was c l e a r t h a t t h e Leduc f i e l d was n o t an i s o l a t e d one. In 1946 t h e r e were o n l y e i g h t o i l f i e l d s i n W e s t e r n Canada, p r o d u c t i o n was 18,368 b a r r e l s a day and r e s e r v e s were e s t i m a t e d a t 72 m i l l i o n b a r r e l s . By t h e end o f 1950, e l e v e n more major o i l -f i e l d s had been d i s c o v e r e d and p r o d u c t i o n had r i s e n t o o v e r 70,000 b a r r e l s a day. Ten y e a r s l a t e r , 240 o i l f i e l d s had been d i s c o v e r e d i n W e s t e r n Canada, most o f them i n A l b e r t a . P r o d u c -t i o n a v e r a g e d 371,811 b a r r e l s a day and r e s e r v e s had i n c r e a s e d t o more t h a n f o u r b i l l i o n b a r r e l s ( O i l and N a t u r a l Gas Con-s e r v a t i o n B o a r d , 1960). One decade a f t e r t h e Leduc d i s c o v e r y , A l b e r t a had become t h e p r i m a r y o i l and gas p r o d u c i n g a r e a o f Canada, and a s i g n i f i c a n t p r o d u c e r on a w o r l d s c a l e . In t h e l a t e 1940 s, no e x i s t i n g l e g i s l a t i o n c o v e r e d t h e c o n s t r u c t i o n and o p e r a t i o n o f n a t i o n a l p i p e l i n e s . I t was c l e a r t h a t t h e f e d e r a l government w o u l d have t o assume t h e p r i n c i p a l j u r i s d i c t i o n o v e r p i p e l i n e s c r o s s i n g more t h a n one p r o v i n c e , and so t h e M i n i s t r y o f T r a n s p o r t was g i v e n t h e r e s p o n s i b i l i t y o f d r a w i n g up t h e r e q u i s i t l e g i s l a t i o n i n c o n j u n c t i o n w i t h o t h e r d e p a r t m e n t s o f t h e f e d e r a l government. The P i p e l i n e s A c t o f Canada, w h i c h came b e f o r e P a r l i a m e n t i A p r i l , 1949, a r r a n g e d f o r p i p e l i n e c h a r t e r s t o be g r a n t e d i n much t h e same way as r a i l w a y c h a r t e r s had been g r a n t e d t h e c e n t u r y b e f o r e : by s p e c i a l a c t s o f P a r l i a m e n t . By i n c o r p o r a -t i n g p i p e l i n e c ompanies t h r o u g h a c t s o f P a r l i a m e n t , t h e g o v e r n -ment e f f e c t i v e l y made p i p e l i n e s an i n s t r u m e n t o f n a t i o n a l p o l i c 118. (Canadian Petro leum A s s o c i a t i o n , Annual. S t a t i s t i c s , 1960) BP was no o v e r w h e l m i n g argument i n f a v o u r o r a g a i n s t o i l i m p o r t s . A t t h e same t i m e as t h e A m e r i c a n government was b e g i n n i n g i t s e x a m i n a t i o n o f i t s i n t e r n a t i o n a l m a rket s i t u a t i o n , t h e C a n a d i a n government was r e g i s t e r i n g c o n c e r n o v e r i t s b a l a n c e o f t r a d e p o s i t i o n . As we have s e e n , i m m e d i a t e l y a f t e r t h e war, t h e D epartment o f F i n a n c e began a t t e m p t s t o s t a b i l i z e t h e C a n a d i a n d o l l a r . . , I n t h e same p e r i o d f o u r o t h e r government d e p a r t m e n t s - E x t e r n a l A f f a i r s ; M ines and T e c h n i c a l S u r v e y s ; T r a d e and Commerce; and A g r i c u l t u r e embarked on a programme o f s t i m u l a t i n g e x p o r t s t o t h e U n i t e d S t a t e s . P r e v i o u s t o t h e war, t h e s t r o n g e s t C a n a d i a n e x p o r t s had been wheat, meat and t i m b e r . The need f o r p o s t - w a r raw m a t e r i a l e x p o r t s t o t h e U n i t e d S t a t e s was s e e n by many o f f i c i a l s as an o p p o r t u n i t y t o b r o a d e n Canada's e x p o r t b a s e , and p o t e n t i a l l y t o d e v e l o p a more s o p h i s t i c a t e d i n d u s t r i a l economy. Hence, t h e Department o f T r a d e and Commerce p r o d u c e d a s e r i e s o f s t u d i e s on new m a r k e t s f o r C a n a d i a n p r o d u c t s , and t h e D epartment o f M ines and T e c h n i c a l S u r v e y s began t o c o n c e n t r a t e on d e v e l o p i n g m i n e r a l t r a d e w i t h Canada's s o u t h e r n n e i g h b o u r . W i t h t h e K o r e a n War l o o m i n g , i n d u s t r i a l raw m a t e r i a l s s u c h as n i c k e l , c o p p e r and i r o n o r e r e p l a c e d g o l d and a g r i c u l t u r a l p r o d u c t s as t h e new s t a p l e e x p o r t s w h i c h w o u l d keep t h e C a n a d i a n economy on even k e e l . W i t h t h e d i s c o v e r y o f o i l a t Leduc i n F e b r u a r y , 1947, C a n a d i a n o f f i c i a l s t u r n e d t h e i r a t t e n t i o n t o see i f p e t r o l e u m m i g h t become a n o t h e r v i t a l u n d e r p i n n i n g o f Canada's e x p o r t t r a d e . 120. J u s t as the r a i l w a y s had been the backbone of the N a t i o n a l P o l i c y i n the l a t e n i n e t e e n t h c e n t u r y , so p i p e l i n e s , by d e f i n i n g the d e s t i n a t i o n of cheap energy and t h e r e f o r e the l o c u s of i n d u s t r y , would b e c o m e ' a - " c r i t i c a l t o o l of n a t i o n a l development i n the second h a l f o f the t w e n t i e t h c e n t u r y . At the same t i m e , by p l a c i n g p i p e l i n e s under the d i s c r e -t i o n a r y power of P a r l i a m e n t , the P i p e l i n e s A c t made c o o p e r a t i o n between government and i n d u s t r y b e f o r e i n c o r p o r a t i o n a v i r t u a l n e c e s s i t y . Whereas i n o t h e r f a c e t s of i n d u s t r y i n c o r p o r a t i o n was a f o r m a l i t y , the i n c o r p o r a t i o n of a p i p e l i n e company was a l e g a l and a p o l i t i c a l p r o c e d u r e . Months of c o n s u l t a t i o n between the c i v i l s e r v i c e , p o l i t i c i a n s and the p i p e l i n e company were needed t o ensure t h a t the a p p l i c a t i o n met w i t h the govern-ment's long-range p l a n s f o r n a t i o n a l development. An a p p l i c a t i o n which f a i l e d t o meet w i t h the r u l i n g p a r t y ' s c r i t e r i a c o u l d be k ept from i n c o r p o r a t i o n and hence from h a v i n g a l e g a l e x i s t e n c e . With l e g i s l a t i o n g o v e r n i n g p i p e l i n e s i n p l a c e , the f o r e i g n -based o i l companies moved q u i c k l y t o dominate the t r a n s p o r t sphere of the i n d u s t r y . They were i n an i d e a l p o s i t i o n t o do so f o r 3 r e a s o n s . In the f i r s t p l a c e , the f o r e i g n - b a s e d com-p a n i e s dominated the s u p p l y of o i l from A l b e r t a . Of the 27,698,000 b a r r e l s of o i l produced i n A l b e r t a i n 1950, almost 9,000,000 b a r r e l s came from w e l l s owned by I m p e r i a l O i l a l one ( F i n a n c i a l P o s t 1951:135). In the second p l a c e , the f o r e i g n -based companies dominated most of the major r e f i n e r i e s of e a s t e r n Canada and thus they c o u l d d i r e c t t h e i r new o i l s u p p l i e s 121. d i r e c t l y t o the r e f i n e r i e s where they would g a i n the g r e a t e s t economic advantage. F i n a l l y , the same m u l t i n a t i o n a l o i l companies c o n t r o l l e d t a n k e r i m p o r t s of o f f s h o r e o i l , and hence they were a b l e t o make an o r d e r l y w i t h d r a w l of t h e i r o f f s h o r e o i l as A l b e r t a n o i l r eached f a r t h e r and f a r t h e r e a s t w a r d . In 1948, a f t e r the immense r e s e r v e s of the Redwater f i e l d had been a s c e r t a i n e d , I m p e r i a l O i l formed the I n t e r p r o v i n c i a l P i p e l i n e Company t o b u i l d a " b i g i n c h " p i p e l i n e t o R e g i n a . I t was on t h i s b a s i s t h a t ~ : . i t a p p l i e d f o r i t s f e d e r a l c h a r t e r and i t s a u t h o r i z a t i o n t o c o n s t r u c t . S u b s e q u e n t l y , I n t e r p r o v i n c i a l d e c i d e d t o e x t e n d i t s l i n e from Regina t o S u p e r i o r , W i s c o n s i n . From t h e r e the o i l would be put i n t o t a n k e r s f o r shipment t o the I m p e r i a l r e f i n e r y i n S a r n i a . The company gave two reasons f o r g o i n g i n t o the U n i t e d S t a t e s r a t h e r than t o the l a k e h e a d a t F t . W i l l i a m - P o r t A r t h u r : the American r o u t e was s h o r t e r and i t would p r o v i d e a "jumping o f f p o i n t " f o r g e t t i n g Canadian o i l i n t o the Chicago market. At t h a t time the mid-western a r e a was s e r v e d by independent o i l companies. I t was hoped t h a t Canadian crude f l o w i n g i n t o the a r e a c o u l d u n d e r c u t the crude from independent American companies by f o r t y t o s i x t y c e n t s a b a r r e l and win the mid-west markets away from the independents ( S c h a f f e r 1968:142). In e f f e c t , S t a n d a r d O i l of New J e r s e y , t h r o u g h i t s Canadian s u b s i d i a r y , I m p e r i a l O i l , was j o c k e y i n g t o i n c r e a s e i t s c o n t r o l over the U.S. midwestern market, w h i l e c o n t i n u i n g t o dominate the e a s t e r n seaboard markets w i t h i t s o f f s h o r e c r u d e . 122 . In f o r m i n g the I n t e r p r o v i n c i a l P i p e l i n e Company, I m p e r i a l took 30% o f the o u t s t a n d i n g s h a r e s . I m p e r i a l ' s f i n a n c i a l b a c k i n g was t o secu r e t h a t , when q u e s t i o n s were r a i s e d about the amount of o i l a v a i l a b l e f o r the l i n e , I m p e r i a l s i g n e d an agreement e n s u r i n g t h a t the company would make up any d e f i c i e n c i e s i n revenue i f throughput f e l l below . an economic l e v e l . The f e d e r a l government, under L i b e r a l Prime M i n i s t e r L o u i s S t . L a u r a n t backed the p i p e l i n e p l a n s t o the f u l l . The o p p o s i -t i o n C o n s e r v a t i v e s mounted a campaign a g a i n s t I n t e r p r o v i n c i a l P i p e l i n e ' s r o u t e through the U n i t e d S t a t e s , but Trade and Commerce M i n i s t e r C. D. Howe defended the d e c i s i o n on the grounds of lower c o s t . When Howard Green, C o n s e r v a t i v e member f o r Vancouver-Quadra suggested t h a t "the p l a n i s t o s e l l a g r e a t d e a l of o i l i n the U n i t e d S t a t e s " Howe r e p l i e d " I s t h e r e a n y t h i n g wrong w i t h t h a t ? " (Grey 1970:138). The I n t e r p r o v i n c i a l P i p e l i n e was o f f i c i a l l y opened i n October, 19 50, and C. D. Howe p r o u d l y announced t h a t the p i p e -l i n e would s t o p a d r a i n of $150 m i l l i o n a year which Canadians had been spending on im p o r t e d crude o i l (Gray 1970:140). The throughput of the I n t e r p r o v i n c i a l P i p e l i n e grew r a p i d l y . I n 1952-3, the l i n e was extended 643 m i l e s through the U n i t e d S t a t e s t o S a r n i a and i t s c a r r y i n g c a p a c i t y doubled. W i t h i n t h r e e y e a r s the throughput of the l i n e was almost doubled a g a i n - t o 265,000 b a r r e l s a day. F i v e independent American r e f i n e r i e s were s e r v e d by the I n t e r p r o v i n c i a l P i p e l i n e and e x p o r t s t o them i n c r e a s e d from 4,000 b a r r e l s a day i n 123 . 1954 t o 42,400 b a r r e l s i n 1956 (Royal Commission on Energy 1959: 3-22) . In 1950, a second c o n s o r t i u m made up of f o r e i g n - b a s e d o i l companies - I m p e r i a l O i l , Canadian G u l f O i l , S h e l l O i l of Canada and S t a n d a r d O i l of B.C. - began t o make p l a n s t o b u i l d the Trans Mountain P i p e l i n e from Edmonton t o Burnaby, B.C. and then south t o t h e Buget Sound a r e a . T h i s was t h e f i r s t p i p e -l i n e p l a n n e d e x p l i c i t l y f o r e x p o r t s . U.S. D i s t r i c t V, as the West Coast was known i n the U n i t e d S t a t e s , was the o n l y o i l j u r i s d i c t i o n not s e r v e d by crude from the m i d - c o n t i n e n t a l U.S. With the b e g i n n i n g of the Korean War, the c o n s o r t i u m argued t h a t a p i p e l i n e from A l b e r t a t o the West Coast was v i t a l f o r s t r a t e g i c r e a s o n s . Both the Canadian and American governments moved q u i c k l y t o g i v e the Transmountain P i p e l i n e the go ahead. C o n s t r u c t i o n was a s s i s t e d by the U.S. P e t r o l e u m A d m i n i s t r a t i o n and the Canadian Department of N a t i o n a l Defense which i n t e r v e n e d t o a l l o c a t e 154,000 tons of s t e e l so t h a t c o n s t r u c t i o n c o u l d b e g i n i m m e d i a t e l y . E x p o r t s t o the West Coast e s c a l a t e d even more r a p i d l y t han they had t o the mid-west. From l e s s than a m i l l i o n b a r r e l s i n 1954 t h e y l e p t t o n i n e t e e n m i l l i o n b a r r e l s two y e a r s l a t e r (Hanson 1958:176). The c o n s t r u c t i o n of the Transmountain P i p e l i n e had s e v e r a l advantages f o r the f o r e i g n - b a s e d companies which sponsored i t . I t a l l o w e d them a market f o r t h e i r w e s t e r n Canadian crude 124 . s e c u r e s u p p l y o f o i l from Canada. They o f f e r e d t h e Canadian government a d e c r e a s e i n i t s b a l a n c e o f t r a d e d e f i c i t . They o f f e r e d t h e A l b e r t a government guaranteed markets f o r Western Canadian o i l . By t h e m i d d l e o f . t h e f i f t i e s , 152,000 b a r r e l s of o i l were c r o s s i n g i n t o t h e U n i t e d S t a t e s e v e r y day. T h i s r e p r e s e n t e d 12% o f t o t a l U.S. e x p o r t s i n 1956, b u t f u l l y 72% o f A l b e r t a ' s a n n u a l p r o d u c t i o n ( S c h a f f e r 1968:129). In s h o r t , Canada's i m p o r t / e x p o r t map had been t o t a l l y revamped i n t h e space o f o n l y seven y e a r s . I n 1950, Canada was an o i l - i m p o r t i n g n a t i o n . The o i l f i e l d s of A l b e r t a produced 73,000 b a r r e l s o f o i l a day, enough t o s a t i s f y t h e p r a i r i e market. A n o t h e r 221,000 b a r r e l s a day were i m p o r t e d - 136,000 b a r r e l s from o f f s h o r e s o u r c e s and 85,000 b a r r e l s from w e l l s i n t h e U n i t e d S t a t e s . By 1957, Canadian o i l p r o d u c t i o n had s k y r o c k e t e d and demand had more th a n d o u b l e d . From 1946 t o 1957, t h e o u t p u t o f o i l grew from 75 m i l l i o n b a r r e l s t o 181.8 m i l l i o n b a r r e l s - an i n c r e a s e o f 142%. D u r i n g the same p e r i o d , Canadian demand jumped from 97 m i l l i o n b a r r e l s a y e a r t o 270.8 m i l l i o n b a r r e l s . Thus t h e gap between s u p p l y and demand had narrowed c o n s i d e r a b l y d u r i n g the decade and Canada was p r o d u c i n g enough t o be 66% s e l f - s u f f i c i e n t . D e s p i t e t h i s f a c t , t h e Canadian i m p o r t / e x p o r t p a t t e r n remained c u r i o u s l y skewed. W h i l e 151,000 b a r r e l s o f o i l were 125. w i t h o u t t h r e a t e n i n g t h e e a s t e r n C a n a d i a n m a r k e t s f o r t h e i r o f f s h o r e o i l . I t a l l o w e d them t o s u p p l y t h e west c o a s t o f t h e U n i t e d S t a t e s w i t h c o n t i n e n t a l o i l . F i n a l l y , t h e l o n g - t e r m s u p p l y c o n t r a c t s , s i g n e d w i t h t h e b l e s s i n g o f b o t h t h e C a n a d i a n and A m e r i c a n g o v e r n m e n t s , p r o v i d e d t h e f i r s t l a r g e - s c a l e e x p o r t s o f o i l t o t h e U n i t e d S t a t e s , t h e t h i n edge o f t h e wedge. In a l e t t e r t o A l b e r t a P r e m i e r Manning i n 1957, I m p e r i a l O i l C h a i r m a n W i l l i a m T w a i t s d e s c r i b e d t h e t h r e e arguments t h a t h i s company, and t h e government, m i g h t use i n f a v o u r o f l o n g - t e r m e x p o r t s o f C a n a d i a n o i l t o t h e U n i t e d S t a t e s : "(a) I m p o r t a t i o n o f C a n a d i a n c r u d e i n t o U.S. r e p r e s e n t s no e conomic t h r e a t t o t h e p r o d u c e r . (b) E x e m p t i o n o f C a n a d i a n o i l moved by ' p i p e l i n e ' i n t o t h e U.S. p r o v i d e s a s e c u r i t y r e a s o n f o r d i s c r i m i n a t i o n i n f a v o u r o f C a n a d i a n a g a i n s t o t h e r W e s t e r n H e m i s p h e r e s o u r c e s o f s u p p l y . (c) C a n a d i a n o i l i s a commodity w h i c h t h e U.S. needs i n t h e l o n g r u n and w h i c h d e c r e a s e s t h e t r a d e d e f i c i t w i t h o u t d o i n g harm t o U.S. m a n u f a c t u r i n g g r o u p s , " ( C l a r k 1979:268). W i t h i n a decade o f t h e Leduc d i s c o v e r y t h e n , t h e m u l t i -n a t i o n a l o i l c ompanies had c o n s t r u c t e d an i n t e r n a t i o n a l m a r k e t -i n g s y s t e m w h i c h m a x i m i z e d t h e i r own p r o f i t p i c t u r e . A t t h e same t i m e , t h e r a t i o n a l e b e h i n d t h e i r m a r k e t i n g n etwork met many o f t h e c o n c e r n s o f t h e governments w i t h w h i c h t h e y i n t e r a c t e d . They o f f e r e d t h e U.S. a d m i n i s t r a t i o n a g u a r a n t e e d , 126. e x p o r t e d d a i l y from Canada, another 277,000 b a r r e l s a day were i m p o r t e d from o f f s h o r e c o u n t r i e s and an a d d i t i o n a l 27,000 b a r r e l s came i n t o e a s t e r n Canada from the U n i t e d S t a t e s . I n e f f e c t , the f o r e i g n - b a s e d o i l companies had a s t r a n g l e h o l d on both the p r o d u c t i o n and i m p o r t a t i o n of o i l i n t o Canada, and had o r g a n i z e d the d i s t r i b u t i o n p a t t e r n t o p r o v i d e a market both f o r t h e i r A l b e r t a o i l and f o r cheaper o f f s h o r e s u p p l i e s . There was an i m p o r t a n t economic c o n s i d e r a t i o n i n the f o r e i g n companies ' i n s i s t e n c e on m a i n t a i n i n g t h e i r E a s t Coast i m p o r t s . Under A l b e r t a law, the o i l w e l l s of the p r o v i n c e were p r o r a t e d by the government, so t h a t each p r o d u c i n g w e l l would c o n t r i b u t e t o the monthly s u p p l y of o i l . Thus, the r e f i n i n g companies were f o r c e d t o purchase o i l produced by the n o n - i n t e g r a t e d o i l companies. I m p e r i a l O i l , f o r example, c o u l d not s u p p l y i t s Edmonton r e f i n e r y s o l e l y from i t s own w e l l s . The p r o r a t i o n i n g p l a n had been i n s t i t u t e d by the p r o v i n c i a l government a t the i n s i s t e n c e of the n o n - i n t e g r a t e d companies d u r i n g the heyday of the Turner V a l l e y , and i t c o n t i n u e d t o se r v e the s m a l l e r companies w e l l a f t e r Leduc. O f f s h o r e o i l , by c o n t r a s t , came from wholly-owned con-c e s s i o n s . Thus the company c o u l d e arn p r o f i t s on the p r o d u c t i o n , t r a n s p o r t a t i o n and r e f i n i n g t r a n s a c t i o n s . G i v e n the oppor-t u n i t y , an o i l company would p r e f e r t o use s u b s t a n t i a l amounts of o f f s h o r e crude i n i t s r e f i n e r i e s and t o a v o i d p r o v i d i n g p r o f i t s f o r i t s c o m p e t i t i o n by r e f i n i n g o i l b e l o n g i n g t o the n o n - i n t e g r a t e d Canadian companies. At the same t i m e , Canadian 127 . o i l was g a i n i n g a c c e s s , s l o w l y , t o the r e f i n e r i e s of Mi n n e s o t a , M i c h i g a n and W i s c o n s i n . The n o n - i n t e g r a t e d , A l b e r t a - b a s e d o i l companies watched the c o n s t r u c t i o n of the two p r i n c i p a l p i p e l i n e systems w i t h a m i x t u r e o f s a t i s f a c t i o n and c o n c e r n . I n the e a r l y y e a r s p a r t i c u l a r l y , none of the Canadian companies had the c a p i t a l o r the secure s u p p l y o f crude t o conte m p l a t e b u i l d i n g a p i p e l i n e t o R e g i n a , much l e s s t o O n t a r i o , so a p i p e l i n e c o n s t r u c t e d by the majors seemed t o be the o n l y way i n which A l b e r t a o i l would r e a c h the l a r g e r p o p u l a t i o n c e n t r e s . I t was the independents t h a t s u f f e r e d most i n the y e a r s 1948-53, when i n c r e a s i n g amounts of A l b e r t a o i l were "shut i n " ; by the time t h a t the Tr a n s -mountain P i p e l i n e was c o n s t r u c t e d , about 45% of A l b e r t a ' s crude o i l p r o d u c t i o n c o u l d not be s h i p p e d t o market ( C l a r k 1979:250). A f t e r the A l b e r t a government i n s t i t u t e d p r o -r a t i o n i n g r e g u l a t i o n s , f o r c i n g the i n t e g r a t e d companies t o buy and t r a n s p o r t crude from o t h e r companies, the s i t u a t i o n of the n o n - i n t e g r a t e d companies improved markedly. S i m i l a r l y , the f o r e i g n - b a s e d companies' a b i l i t y t o pene-t r a t e U.S. e x p o r t markets was v a l u a b l e t o the n o n - i n t e g r a t e d companies. In bo t h bases, the n o n - i n t e g r a t e d companies s t o o d t o g a i n a g r e a t d e a l from the i n i t i a t i v e s t a k e n by the f o r e i g n -based companies. On the o t h e r hand, the n o n - i n t e g r a t e d companies were de e p l y concerned t h a t t h e i r f o r e i g n - b a s e d r i v a l s would use t h e i r c o n t r o l over i m p o r t e d crude and the e a s t e r n r e f i n e r i e s 128. t o p l a c e a c e i l i n g on t h e amount o f o i l w h i c h w o u l d e n t e r t h e e a s t e r n C a n a d i a n m a r k e t . As T a b l e V i n d i c a t e s , t h e w e s t e r n C a n a d i a n o i l moving t o e a s t e r n m a r k e t s r e a c h e d a maximum o f 54% i n 1955, and t h e n r e m a i n e d a t t h a t l e v e l f o r f i v e y e a r s . A t t h e e n d o f 1957, t h e n o n - i n t e g r a t e d o i l companies were h i t w i t h a s e r i e s o f s e v e r e blows t h a t r e s u l t e d i n a c r i p p l i n g o f t h e i r p r o d u c t i o n and b r o u g h t a b o u t a s e r i o u s e x a m i n a t i o n o f C a n a d i a n i m p o r t / e x p o r t p a t t e r n s . The f i r s t b low was t h e end o f t h e Suez c r i s i s w h i c h p e r m i t t e d M i d d l e E a s t e r n o i l s u p p l i e s t o resume t h e i r n o r m a l t r a d i n g p a t t e r n t o t h e U n i t e d S t a t e s . T h i s meant t h a t t h e e x t r a q u a n t i t i e s o f C a n a d i a n o i l w h i c h had been f l o w i n g i n t o t h e U n i t e d S t a t e s were s u d d e n l y no t n eeded. At t h e same t i m e , t h e U.S. A d m i n i s t r a t i o n o f Dwight D. E i s e n h o w e r i n s t i t u t e d t h e ' s e c o n d v o l u n t a r y 1 q u o t a s y s t e m by w h i c h t h e U.S. o i l i m p o r t e r s were a s k e d t o r e d u c e t h e i r l e v e l o f i m p o r t s by 10%. N e i t h e r Canada n o r V e n e z u e l a was exempted f r o m t h i s p r o v i s i o n ; no e x p l a n a t i o n f o r t h e sudden p o l i c y r e v e r s a l was g i v e n a l t h o u g h t h e f a c t t h a t C a n a d i a n o i l i m p o r t s had grown by 226% i n two y e a r s b r o u g h t a b o u t i n t e n s e l o b b y i n g by t h e i n d e p e n d e n t A m e r i c a n c o m p a n i e s . As c a n be s e e n f r o m T a b l e V I , t h e end o f t h e Suez c r i s i s and t h e b e g i n n i n g o f t h e v o l u n t a r y q u o t a s y s t e m had a d e v a s t a -t i n g e f f e c t on C a n a d i a n e x p o r t s t o t h e U n i t e d S t a t e s ; t h e y d r o p p e d f r o m 15% o f U.S. i m p o r t s i n 1957 t o 8.4% a y e a r l a t e r . Whereas Canada had e x p o r t e d 173,000 b a r r e l s o f o i l a day i n 129 . Table V: Crude O i l Received at Canadian Refineries 1945-1963 1945 1950 1955 1960 1962 1963 Total Crude Received (b/d) 178,081 254,460 525,484 756,394 846,497 911,630 Canadian Crude as % of Total Receipts 8.8% 24.4 54.8 54.1 56.2 56.0 (Refineries of Canada, Queen's Printer, 1978) 130. Table V I : O r i g i n s of U.S. Imports of Crude O i l and U n f i n i s h e d O i l s 1950-59 •000 b b l / d a y 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 Ve n e z u e l a 295 291 329 334 362 419 496 576 566 571 Canada 1 3 8 7 45 118 147 84 93 M i d d l e E a s t 111 104 156 220 214 278 284 233 347 337 (from S h a f f e r 1968:129) 131. the t h i r d q u a r t e r of 1957, by the end of 1958, o n l y 66,000 b a r r e l s a day were c r o s s i n g the b o r d e r . A l b e r t a ' s o u t p u t of o i l , which had r i s e n e v e r y year s i n c e 1947, f e l l i n 1958 t o a l e v e l o f p r o d u c t i o n below t h a t of 1955. The number of w e l l s d r i l l e d d e c l i n e d from 3, 000 t o 2, 500 and e x p l o r a t i o n e x p e n d i t u r e s d e c r e a s e d . P r o d u c t i o n from A l b e r t a w e l l s was s e v e r e l y c u t back. In 1958, o n l y 39.2% of the a v a i l a b l e o i l was produced (Ro y a l Commission on Energy 1959:2-22). I t was the n o n - i n t e g r a t e d companies which s u f f e r e d most from the c u t b a c k s . A l t h o u g h the p r o v i n c e ' s p r o r a t i o n i n g system f o r c e d a d e c l i n e i n p r o d u c t i o n a c r o s s the i n d u s t r y , the Canadian-based companies; because they l a c k e d o t h e r s o u r c e s of ope r a -t i n g c a p i t a l , were h u r t b a d l y by the i n a b i l i t y t o s e l l t h e i r o i l . I n 1958, f o r example, Home O i l ' s p r o d u c t i o n f e l l by h a l f a m i l l i o n b a r r e l s - 18%. The company's sh a r e s f e l l from a h i g h of $23.75 i n 1957 t o $12.75 t h r e e y e a r s l a t e r , even though the company's r e s e r v e s expanded 600% i n the same p e r i o d (Smith 1978:188). Another n o n - i n t e g r a t e d company, Western D e c a l t a had a l s o s u f f e r e d from the c u t b a c k s . I n 1958, the c h i e f exe-c u t i v e o f f i c e r s of thes e two companies brought the i s s u e of markets f o r Western o i l t o n a t i o n a l prominence. In 1956, C h a r l e s Lee, of Western D e c a l t a commissioned a study on the economics of a p i p e l i n e e x t e n s i o n t o M o n t r e a l from the e n g i n e e r i n g f i r m Pryde F l a v i n . When the r e s u l t seemed t o be e n c o u r a g i n g , Lee j o i n e d w i t h Bob Brown J r . of Home O i l t o sponsor an i n depth s t u d y by the New York o i l c o n s u l t a n t 132 . W a l t e r J . L e v y . E v e n t u a l l y t e n o t h e r n o n - i n t e g r a t e d A l b e r t a -b a s e d o i l c ompanies j o i n e d Home and D e c a l t a i n p r o m o t i n g t h e M o n t r e a l p i p e l i n e i d e a . I t was t h e f i r s t t i m e t h a t t h e s m a l l , n o n - i n t e g r a t e d companies had j o i n e d t o g e t h e r t o a c h i e v e p o l i t i -c a l g o a l s , r a t h e r t h a n s t r i c t l y e c onomic o n e s . The t w e l v e c o mpanies were t h e n u c l e u © o f t h e o r g a n i z a t i o n w h i c h became t h e f i r s t , c l a s s - c o n s c i o u s o r g a n i z i n g t o o l o f t h e C a n a d i a n -b a s e d o i l i n d u s t r y , t h e I n d e p e n d e n t P e t r o l e u m A s s o c i a t i o n o f Canada. D u r i n g 1957, Brown a p p e a r e d b e f o r e t h e R o y a l Commission on E n e r g y . The Commission had been s t r u c k by t h e n e w l y - e l e c t e d C o n s e r v a t i v e government t o i n v e s t i g a t e t h e p r o c e e d i n g s w h i c h s u r r o u n d e d t h e d e c i s i o n t o b u i l d t h e T r a n s Canada P i p e l i n e , b u t Brown s u g g e s t e d t h a t t h e mandate o f t h e Commission be e x panded t o d e a l w i t h t h e m a r k e t i n g and e x p o r t o f c r u d e o i l . The q u e s t i o n was a d i c e y one, s i n c e i t i n e v i t a b l y b r o u g h t t o t h e f o r e t h e c o n f l i c t s between t h e f o r e i g n - b a s e d , i n t e g r a t e d o i l c ompanies and t h e A l b e r t a - b a s e d , n o n - i n t e g r a t e d f i r m s . N e v e r t h e l e s s , t h e D i e f e n b a k e r government a c c e d e d t o t h e s u g g e s t i o n , and t h e R o y a l Commission on E n e r g y and t h e d e b a t e on a M o n t r e a l p i p e l i n e became t h e f o r a f o r w o r k i n g t h r o u g h t h e a n t a g o n i s m s between t h e f o r e i g n and C a n a d i a n s e c t o r s o f t h e p e t r o l e u m i n d u s t r y . T h e r e were t h r e e s e c t o r s o f t h e C a n a d i a n p e t r o l e u m i n d u s t r y w h i c h a p p e a r e d b e f o r e t h e R o y a l C ommission on E n e r g y . The n o n - i n t e g r a t e d , C a n a d i a n - b a s e d o i l companies m a r s h a l l e d 133. a s e r i e s of arguments t o show t h a t t h e c o n s t r u c t i o n of a p i p e -l i n e from A l b e r t a t o M o n t r e a l would be i n the n a t i o n a l i n t e r e s t . In the f i r s t p l a c e , t hey argued t h a t the c o n s t r u c -t i o n of the p i p e l i n e would r e s t o r e the economic l i f e of the A l b e r t a o i l i n d u s t r y by p r o v i d i n g a s e c u r e , n a t i o n a l market f o r Western Canadian o i l . C o n s t r u c t i o n would p r o v i d e thousands of j o b s and the use of Canadian o i l would save $350 m i l l i o n a year i n f o r e i g n exchange. The new markets would p r o v i d e funds f o r more e x p l o r a t i o n and d r i l l i n g i n Western Canada. F i n a l l y , crude o i l d e l i v e r e d by p i p e l i n e t o M o n t r e a l from A l b e r t a would c o s t no more than f o r e i g n crude brought i n by t a n k e r . Concluded Bob Brown of Home O i l : "Our s u b m i s s i o n has f o c u s s e d on the u r g e n t problems of the Canadian o i l p r o d u c i n g i n d u s t r y and, the c r i t i c a l need t o expand i t s m a r k e t i n g range by moving Canadian o i l t o E a s t e r n Canadian r e f i n e r i e s t h a t now o p e r a t e on f o r e i g n crude o i l s u p p l i e s . Our s o l u t i o n i s based on the c o n v i c t i o n t h a t a p i p e l i n e t o M o n t r e a l can be b u i l t w i t h o u t customs d u t i e s on f o r e i g n o i l , s u b s i d i e s , government b u i l t p i p e l i n e s or any p e n a l t i e s t o the consumers." (Ro y a l Commission on Energy Volume 29:4032). B u t t r e s s i n g the arguments o f the n o n - i n t e g r a t e d o i l companies was the r e p o r t which had been commissioned from W a l t e r J . Levy. Levy's o r g a n i z a t i o n was c a r e f u l not t o endorse the c oncept of an A l b e r t a - M o n t r e a l p i p e l i n e , but i t d i d put the m a r k e t i n g o p t i o n s i n c l e a r p e r s p e c t i v e . I t p o i n t e d out t h a t new markets f o r Canadian o i l c o u l d be found i n o n l y t h r e e areas - C a l i f o r n i a , C h i c a g o - D e t r o i t , o r M o n t r e a l . Expan-s i o n i n t o e i t h e r a r e a of the U n i t e d S t a t e s would i n v o l v e 134 . r u n n i n g t h e r i s k o f renewed A m e r i c a n q u o t a s . O n l y t h e M o n t r e a l market w o u l d r e m a i n p e r m a n e n t l y u n d e r C a n a d i a n c o n t r o l . On t h e q u e s t i o n o f p r i c e , t h e L e v y R e p o r t was l e s s e n c o u r a g i n g . I t would c o s t a b o u t 25C a b a r r e l t o move t o b r i n g o i l by p i p e l i n e f r o m A l b e r t a t h a n t o b r i n g i t f r o m V e n e z u e l a by t a n k e r . However, i f C a n a d i a n p r o d u c e r s c u t t h e i r w e l l h e a d p r i c e by 1CK a b a r r e l and t h e C a n a d i a n g o v e r n -ment, l i k e t h e U.S. government, i m p o s e d a t a r i f f o f IOC a b a r r e l on i m p o r t e d o i l , t h e c o s t s w o u l d be r o u g h l y e q u a l . F i n a l l y , t h e L e v y R e p o r t d e a l t w i t h t h e p r o b l e m o f ' c o m m e r c i a l p r e f e r e n c e ' : t h e f a c t t h a t t h e i n t e g r a t e d , f o r e i g n - b a s e d companies c o n t r o l l e d t h e M o n t r e a l r e f i n e r i e s , and p r e f e r r e d t o buy t h e i r o i l f r o m t h e i r own p r o d u c i n g w e l l s o v e r s e a s . The r e p o r t o f f e r e d no s o l u t i o n t o t h i s p r o b l e m , e x c e p t t o s t a t e i n c o n c l u s i o n , t h a t t h e d e c i s i o n i n f a v o u r o f a M o n t r e a l p i p e l i n e l a y i n t h e p o l i t i c a l a r e n a : " I t w o u l d p r o b a b l y r e q u i r e an e x p l i c i t f o r m u l a t i o n o f p u b l i c p o l i c y i n s u p p o r t o f C a n a d i a n c r u d e o i l " ( S m i t h 1978:196). T w e n t y - f o u r o i l companies j o i n e d Home O i l i n making i t s s u b m i s s i o n t o t h e R o y a l Commission on E n e r g y . Most o f them (See A p p e n d i x A) were s m a l l , A l b e r t a - b a s e d , n o n - i n t e g r a t e d c o m p a n i e s , a l t h o u g h two s m a l l A m e r i c a n companies j o i n e d them: M e r r i l l P e t r o l e u m s and C a n a d i a n D e l h i . ( M e r r i l l , a l t h o u g h an arm o f M e r r i l l L y n c h i n v e s t m e n t house i n New Y o r k , had l i n k s w i t h A l b e r t a ' s f o r m e r M i n i s t e r o f M i n e s , E l d o n T a n n e r , C a n a d i a n D e l h i was a s u b s i d i a r y o f D e l h i O i l , t h e Texas company w h i c h was f u n d a m e n t a l i n b u i l d i n g t h e T r a n s Canada P i p e l i n e , and 135. d o u b t l e s s l y was i n t e r e s t e d i n any move t o b u i l d i n g an o i l p i p e l i n e t o e a s t e r n Canada.) The A s s o c i a t i o n o f O i l w e l l D r i l l -i n g C o n t r a c t o r s a l s o s i g n e d t h e s u b m i s s i o n . The body o f t h e i r s u b m i s s i o n d e a l t w i t h t h e M o n t r e a l p i p e l i n e i n terms o f t h e n a t i o n a l i n t e r e s t , c o n c l u d i n g t h a t t h e s m a l l e r , A l b e r t a - b a s e d c o m p a n i e s , as o p p o s e d t o t h e m u l t i n a t i o n a l s , " a r e v i t a l l y c o n -c o n c e r n e d w i t h t h e immediate and f u l l e s t p o s s i b l e d e v e l o p m e n t o f t h e p r o d u c i n g i n d u s t r y i n w e s t e r n Canada b e c a u s e t h a t i s where t h e i r e n t i r e i n t e r e s t l i e s and we b e l i e v e t h i s i n t e r e s t i s i d e n t i c a l w i t h t h e b e s t i n t e r e s t s o f Canada as a n a t i o n " ( R o y a l C o m m i s s i o n on E n e r g y Volume 29:4028). O n l y once d i d t h e n o n - i n t e g r a t e d companies m e n t i o n an a l t e r n a t i v e t o t h e d e v e l o p m e n t o f t h e M o n t r e a l m arket f o r C a n a d i a n c r u d e . I n t h e m i d d l e o f t h e i r s u b m i s s i o n , t h e y made r e f e r e n c e t o t h e p o s s i b i l i t y t h a t t h e U.S. west c o a s t m arket w o u l d c o n t i n u e t o s e r v e as t h e main m a r k e t a r e a t o s t i m u l a t e t h e d e v e l o p m e n t o f A l b e r t a o i l s u p p l i e s . I n t h i s c a s e , t h e s m a l l o i l companies s t a t e d , "agreement w o u l d have t o be o b t a i n e d f r o m r e f i n e r s i n t h a t a r e a t o t a k e A l b e r t a c r u d e on a l o n g - t e r m b a s i s . . . T h i s agreement w o u l d n o t be f o r t h c o m i n g v o l u n t a r i l y . I t w o u l d t h e r e f o r e r e q u i r e t h e most e x p l i c i t and l o n g - t e r m f o r m u l a t i o n o f p o l i c y by t h e U n i t e d S t a t e s government t o e s t a b l i s h p r e f e r e n c e f o r C a n a d i a n o i l w i t h i n i t s s y s t e m o f q u o t a s " ( R o y a l Commission on E n e r g y , Volume 29: 4019). I n e f f e c t , t h e n o n - i n t e g r a t e d C a n a d i a n companies t h r e w down a c h a l l e n g e t o t h e f e d e r a l g overnment: Ottawa w o u l d e i t h e r 136. have t o agree t o the c o n s t r u c t i o n of the M o n t r e a l p i p e l i n e o r c o n v i n c e t h e American government t o exempt Canadian o i l from i t s quota system. The f o r e i g n - b a s e d , i n t e g r a t e d o i l companies f o l l o w e d Brown's s u b m i s s i o n w i t h a r e b u t t a l which emphasized the s t a t u s quo. The Canadian P e t r o l e u m A s s o c i a t i o n s u b m i t t e d i t s own s t u d y , s u g g e s t i n g t h a t o i l r e a c h i n g M o n t r e a l from A l b e r t a would not be c o m p e t i t i v e w i t h crude from V e n e z u e l a . In a d d i t i o n a l e v i d e n c e , I m p e r i a l O i l suggested t h a t M o n t r e a l was not the o n l y market a r e a a v a i l a b l e f o r w e s t e r n c r u d e . S i n c e O n t a r i o accounted f o r 40% of Canadian demand, the f i r s t l o g i c a l s t e p i n expanding Canadian markets would be t o s a t u r a t e the s m a l l e r r e f i n e r i e s t h e r e . S econdly, I m p e r i a l O i l f e l t t h a t the U.S. market c o u l d be opened up t o Canadian o i l e x p o r t s . T h i s was f e l t t o be a p o l i t i c a l problem. " F u l l i n v e s t i g a t i o n of t h i s a s p e c t s h o u l d be exhausted b e f o r e assuming l o n g - t e r m f i n a n c i a l commitments, c o u p l e d w i t h t r a d e r e s t r i c t i o n s , which seem t o be p a r t of the M o n t r e a l p i p e l i n e p r o p o s a l " (Royal Commission on Energy, Volume 50: 6971) . In e f f e c t , the m u l t i n a t i o n a l s were p u t t i n g up a defense of t h e i r t r a d i t i o n a l d i v i s i o n of the Canadian market, w h i l e at the same time e n c o u r a g i n g the Canadian government t o oppose, not o n l y the import quotas of the U.S. government, but a l s o the independent American o i l companies t h a t were b e h i n d them. The l a r g e i n t e g r a t e d companies reasoned t h a t 137 . t h e c o m b i n a t i o n o f p r e s s u r e f r o m t h e C a n a d i a n government and fr o m t h e i r own p a r e n t c o r p o r a t i o n s m i g h t n e g a t e t h e power o f th e i n d e p e n d e n t s ' l o b b y and f o r c e t h e A m e r i c a n market open t o C a n a d i a n c r u d e . The i n t e g r a t e d companies hoped t h a t i f U.S. ma r k e t s t o o k C a n a d i a n c r u d e i n q u a n t i t y , t h e n a t i o n a l i s t a r g u -ments o f t h e n o n - i n t e g r a t e d C a n a d i a n companies w o u l d d i e away. F i n a l l y , a t h i r d g r o u p o f o i l i n d u s t r y r e p r e s e n t a t i v e s a p p e a r e d b e f o r e t h e Commission. L e d by J a c k G a l l a g h e r o f Dome P e t r o l e u m , t h e e i g h t c ompanies o f t h e B a y l e y S e l b u r n e g r o u p (see A p p e n d i x B) were s m a l l , n o n - i n t e g r a t e d , A l b e r t a -b a s e d and f o r e i g n - o w n e d . They d i d n o t j o i n t h e grou p o f companies w h i c h r a l l i e d b e h i n d Home O i l . I n s t e a d , t h e y r e m a i n e d members o f t h e C a n a d i a n P e t r o l e u m A s s o c i a t i o n and s u p p o r t e d t h e b r i e f d e l i v e r e d by t h a t o r g a n i z a t i o n i n s u p p o r t o f t h e l a r g e , i n t e g r a t e d c o m p a n i e s . T h i s g r o u p o f o i l companies s h a r e d many o f t h e p r o b l e m s o f t h e o t h e r n o n - i n t e g r a t e d f i r m s . T h e i r f o r t u n e s were b a s e d i n t h e o i l f i e l d s o f A l b e r t a ; t h e y d i d n o t p o s s e s s i n t e r n a t i o n a l n e t w o r k s t o b u f f e r them o r g i v e them f l e x i b i l i t y . The l a c k o f m a r k e t s f o r C a n a d i a n c r u d e had h i t them h a r d . Y e t a t t h e same t i m e , e a c h o f t h e s e e i g h t c ompanies had o u t s i d e s o u r c e s o f c a p i t a l - u s u a l l y i n t h e U n i t e d S t a t e s -wh i c h made them l e s s f i n a n c i a l l y v u l n e r a b l e t h a n t h e companies w h i c h had t o r e l y on t h e C a n a d i a n banks f o r t h e i r f i n a n c i n g . Dome P e t r o l e u m , f o r example, u s e d i t s c o n t a c t s i n t h e A m e r i c a n f i n a n c i a l community t o s e c u r e t h e l o a n s n e c e s s a r y f o r b u i l d i n g 138 . i t s gas p r o c e s s i n g p l a n t s i n i t s A l b e r t a and Sa s k a t c h e w a n f i e l d s . The company was r u n c o n s e r v a t i v e l y ; i t s A m e r i c a n owners were a n x i o u s t o make a s t e a d y r e t u r n on t h e i r c a p i t a l , n o t t o r u n an e m p i r e . The a m b i t i o u s p l a n s t o b u i l d a p i p e -l i n e t o M o n t r e a l , and t o head d i r e c t l y i n t o a c o n f l i c t w i t h t h e m a j o r o i l companies was n o t v e r y a p p e a l i n g t o Dome. As J a c k G a l l a g h e r s a i d i n a 1978 i n t e r v i e w : "We're g r a t e f u l t o t h e m u l t i n a t i o n a l s . We w o u l d n ' t be h e r e w i t h o u t them." T h i s median p o s i t i o n , between t h e i n t e g r a t e d c ompanies and t h e gr o u p r e p r e s e n t e d by Home O i l , l e d t h e B a y l e y S e l b u r n e g r o u p t o push v e r y s t r o n g l y f o r e x p o r t s t o t h e U n i t e d S t a t e s . They c a l l e d f o r "immediate a c t i o n " , f o r " d i p l o m a t i c r e p r e s e n t a t i v e s a t t h e v e r y h i g h e s t l e v e l s " t o expand m a r k e t s f o r C a n a d i a n o i l i n t h e m i d - c o n t i n e n t a l U.S. I n exchange t h e y e n d o r s e d t h e a c c e p t a n c e o f n o n - C a n a d i a n o i l i n t o e a s t e r n Canada ( R o y a l Commission on E n e r g y , Volume 42:5890). I n so d o i n g t h e y l e n t s u p p o r t t o t h e argument a d v a n c e d by t h e l a r g e i n t e g r a t e d o i l c o m p a n i e s . I n e f f e c t , t h e t a x a t i o n p o l i c i e s w h i c h had e n c o u r a g e d A m e r i c a n i n d i v i d u a l s , t r u s t s and f i n a n c i a l i n s t i t u -t i o n s t o become i n v o l v e d i n t h e C a n a d i a n p e t r o l e u m i n d u s t r y had b o r n e f r u i t i n t h e f o r m o f a new c l a s s f r a c t i o n i n t h e A l b e r t a o i l b u s i n e s s , one w h i c h s u p p o r t e d t h e major o i l c o m p a n i e s ' d e t e r m i n a t i o n t o c o n t r o l t h e m a r k e t i n g s t r u c t u r e . The R o y a l Commission, and t h e C o n s e r v a t i v e government t h a t b a c k e d i t , were f o r c e d t o walk a t h i n l i n e among t h e t h r e e segments o f t h e p e t r o l e u m i n d u s t r y . A c c o r d i n g t o m a t e r i a l 139. c o l l e c t e d l y M e l i s s a C l a r k (1979:276), t h e r e was d i s s e n s i o n among t h e members o f t h e c o m m i s s i o n and i t s s t a f f , and t h e r e were t h r e e addenda a t t a c h e d t o t h e recommendations o f t h e s e c o n d r e p o r t . I n f a c t t h e recommendations went a l o n g way t o w a r d s a t i s -f y i n g a l l p a r t i e s , ( w i t h t h e e x c e p t i o n o f Bob Brown who r e g a r d e d t h e recommendations as 'weak-kneed'). The f u n d a -m e n t a l b l u e p r i n t o f t h e i n t e g r a t e d companies r e c e i v e d t h e a p p r o b a t i o n o f t h e c o m m i s s i o n e r s . They w r o t e t h a t "no g o v e r n -ment a c t i o n s h o u l d be t a k e n a t t h i s t i m e t o e n s u r e t h e c o n s t r u c t i o n o f p i p e l i n e f a c i l i t i e s t o t r a n s p o r t C a n a d i a n c r u d e o i l t o t h e M o n t r e a l r e f i n e r y a r e a " ( R o y a l C ommission on  E n e r g y 1959:6-32). The c o m m i s s i o n e r s r e c o g n i z e d t h a t t h e l a r g e o i l c o m p a n i e s , as t h e owners o f Canada's p i p e l i n e f a c i l i t i e s and r e f i n e r i e s , were i n a c r u c i a l p o s i t i o n o f power and o n l y t h e s t r o n g e s t a c t i o n s o f t h e f e d e r a l government c o u l d b r e a k t h e i r monopoly. " ( T ) h e M o n t r e a l r e f i n e r s ..." t h e y w r o t e , " a r e i n a p o s i t i o n t o "block" any p l a n s f o r t h e use o f C a n a d i a n c r u d e i n t h e M o n t r e a l r e f i n i n g a r e a and no p i p e l i n e f a c i l i t i e s f o r s u c h p u r p o s e c o u l d i n f a c t be b u i l t w i t h o u t t h e i r a p p r o v a l and c o o p e r a t i o n . I n o t h e r words, i n o u r o p i n i o n , i f i t s h o u l d become a d v i s a b l e t o move C a n a d i a n c r u d e t o M o n t r e a l ... t h e n a l i c e n s i n g s y s t e m i n v o l v i n g r e s t r i c t i o n s on t h e i m p o r t a t i o n o f o v e r s e a o i l w o u l d be n e c e s s a r y " ( R o y a l Commission on E n e r g y 1959:6-29). C l e a r l y t h e Commission d i d n o t f e e l t h a t t h e D i e f e n b a k e r 14 0. government was p r e p a r e d t o t a k e t h e b o l d s t e p t o w a r d t h e r e g u -l a t i o n o f t h e o i l i n d u s t r y t h a t i m p o r t q u o t a s w o u l d have r e q u i r e d . I n s t e a d , t h e Commission recommended t h e c r e a t i o n o f an e n e r g y watchdog agency, t h e N a t i o n a l E n e r g y B o a r d . F o r t h e m a j o r o i l c o m p a n i e s , t h e huge Mo n t r e a l m arket was s a f e f o r i m p o r t e d o i l . A t t h e same t i m e , t h e Commission d i d make a s t r o n g recom-m e n d a t i o n on t h e one i s s u e i n w h i c h a l l o f t h e s u b m i s s i o n s had been i n a c c o r d . T h e r e had been a u n i v e r s a l demand, s t r o n g e s t f r o m t h e m a j o r s and t h e i r s u p p o r t e r s , weaker f r o m t h e A l b e r t a -b a s e d c o m p a n i e s , t h a t t h e f e d e r a l government use i t s i n f l u e n c e t o g a i n a c c e s s f o r C a n a d i a n o i l t o t h e U.S. m a r k e t . The R o y a l Commission a g r e e d , and i n f a c t , e ven b e f o r e t h e com-m i s s i o n ' s recommendations were p u b l i c , t h e f e d e r a l Department o f T r a d e and Commerce was u s i n g t h e e v i d e n c e o f t h e i n q u i r y p r o c e s s t o p r e s s i t s c l a i m s i n W a s h i n g t o n . I n J a n u a r y , 1959, C a n a d i a n o i l was exempted f r o m t h e new mandatory c o n t r o l s i n s t i t u t e d by t h e E i s e n h o w e r a d m i n i s t r a t i o n ; and a l m o s t a t once C a n a d i a n o i l e x p o r t s t o t h e U n i t e d S t a t e s began t o r i s e . A t l e a s t one a n a l y s t f e l t t h a t t h e s t r o n g r e p r e s e n t a t i o n s made b e f o r e t h e R o y a l Commission had much t o do w i t h t h e change i n a t t i t u d e o f t h e A m e r i c a n government ( S h a f f e r 1968: 116) . The d e b a t e w h i c h t o o k p l a c e on t h e f l o o r o f t h e R o y a l Commission on E n e r g y r e v e a l e d a g r e a t d e a l a b o u t t h e way i n w h i c h t h e C a n a d i a n government was p r e p a r e d t o c a r r y o u t p o l i c y . 141. As e a r l y as 1948, the f e d e r a l government had s e t i t s e l f the t a s k of f r e e i n g Canada from i t s b a l a n c e of payments d e f i c i t w i t h the U n i t e d S t a t e s . The development of the p i p e l i n e debate o f f e r e d two ways i n which the d e f i c i t c o u l d be a l t e r e d . . , A M o n t r e a l p i p e l i n e would have saved $350 m i l l i o n i n 1959, the exchange which was sent abroad t o pay f o r i m p o r t s of o f f s h o r e c r u d e . In t h a t y e a r t h e d e f i c i t r o s e t o $1 b i l l i o n . The o t h e r a l t e r n a t i v e was t o a l l o w the $350 m i l l i o n d r a i n t o con-t i n u e , and t o o f f s e t i t w i t h i n c r e a s e d i m p o r t s of crude o i l t o the U n i t e d S t a t e s . T h i s was the p a t h which the l a r g e o i l companies recommended, and the p a t h which the government chose t o f o l l o w . 142 . V. CLASS AND THE CANADIAN PETROLEUM INDUSTRY: 19 6 5 I n an e a r l i e r c h a p t e r we examined the s t r u c t u r e o f t h e Canadian p e t r o l e u m i n d u s t r y b e f o r e t h e Leduc d i s c o v e r y . U s i n g the Crompton and Gubbay argument as a g u i d e , we found t h a t i n 1947 the p e t r o l e u m i n d u s t r y had f o u r segments: the i n t e -g r a t e d companies, th e n o n - i n t e g r a t e d o i l and gas p r o d u c i n g companies, companies i n v o l v e d s o l e l y i n r e f i n i n g and companies i n v o l v e d i n t r a n s m i s s i o n . When each of t h e s e groups was s u b - d i v i d e d as t o n a t i o n a l i t y , i t was d i s c o v e r e d t h a t the f o u r f o r e i g n - b a s e d , i n t e g r a t e d f i r m s c o n t r o l l e d 65% o f r e f i n i n g , t a n k e r t r a n s m i s s i o n o f o i l , and much of t h e o i l and gas p r o d u c t i o n i n the Canada. The Canadian-owned i n t e g r a t e d companies, by c o m p a r i s o n , c o n t r o l l e d o v er 30% o f t h e r e f i n i n g , a v e r y few m i l e s o f p i p e l i n e and some of the t a n k e r t r a f f i c from the C a r i b b e a n , 20% o f the p r o d u c t i o n o f o i l and gas, and owned s t r o n g m a r k e t i n g n e t w o r k s . Thus i t was p o s s i b l e t o c o n c l u d e t h a t i n 1947, t h e f o r e i g n - b a s e d i n t e g r a t e d companies had c o n t r o l over the l a r g e s t segment o f t h e i n d u s t r y , w i t h t h e C anadian, i n t e g r a t e d companies p l a y i n g a s m a l l e r b u t s i g n i f i c a n t r o l e . The t h r e e n o n - i n t e g r a t e d a r e a s o f the o i l b u s i n e s s were much weaker by comparison. I t was found t h a t t h e n o n - i n t e g r a t e d o i l and gas p r o d u c i n g companies, most o f them c a p i t a l i z e d i n 143. A l b e r t a , produced 30% o f the o i l and gas i n Canada's o n l y major f i e l d , t h e Turner V a l l e y , but t h e i r c a p i t a l s t r u c t u r e and l a n d p o s i t i o n was weak. The n o n - i n t e g r a t e d , r e f i n i n g companies ac c o u n t e d f o r o n l y a s m a l l p r o p o r t i o n o f Canada's r e f i n i n g c a p a c i t y . Such t h e n , was t h e s t r u c t u r e o f the Canadian o i l i n d u s t r y p r i o r t o the d i s c o v e r y o f o i l a t Leduc. How had t h e s t r u c t u r e o f t h e o i l i n d u s t r y changed by 1965? A g a i n , f o l l o w i n g Crompton and Gubbay, i t i s p o s s i b l e t o break the Canadian o i l i n d u s t r y i n 19 6 5 i n t o two major s e c t i o n s : i n t e g r a t e d companies (those t h a t encompass more th a n one k i n d o f c a p i t a l ) and t h e n o n - i n t e g r a t e d companies (those t h a t i n v o l v e o n l y one c a p i t a l ) . A. The I n t e g r a t e d Companies The i n t e g r a t e d o i l companies were t h e p r i n c i p a l b e n e f i c i a r i e s o f the o i l d i s c o v e r i e s made i n A l b e r t a a f t e r 1947. There were i n t h a t y e a r i n t e g r a t e d oi-1 companies w i t h a s s e t s of-$383 . m i l l i o n . I n 1965 t h e r e were e i g h t i n t e g r a t e d o i l com- .. p a n i e s , b u t t h e i r a s s e t s had s w o l l e n t o $3.5 b i l l i o n ( F i n a n c i a l  P o s t Survey o f O i l s 1965). Thus, the a s s e t s o f t h e i n t e g r a t e d companies had i n c r e a s e d v a s t l y i n the 18 y e a r s f o l l o w i n g the Leduc d i s c o v e r y . A second s t r i k i n g change t h a t took p l a c e i n t h i s p e r i o d was the s h i f t i n t h e l o c u s o f ownership o f the i n t e g r a t e d companies. 144 . Whereas i n 1947, 35% o f Canada's r e f i n i n g c a p a c i t y was under the c o n t r o l o f Canadian-owned, i n t e g r a t e d companies, by 1965 not one o f th o s e companies remained i n Canadian hands. I n s t e a d , a l l e i g h t i n t e g r a t e d companies were based abroad: i n B e l g i u m , England and the U n i t e d S t a t e s . As can be seen from T a b l e V I I , the e i g h t f o r e i g n , i n t e -g r a t e d o i l companies c o n t r o l l e d 46% o f the o i l and 75% o f t h e gas produced i n Canada. They c o n t r o l l e d a l l b u t one major o i l p i p e l i n e and owned g a t h e r i n g systems i n e v e r y major o i l -f i e l d . T h e i r r e f i n e r i e s h a n d l e d 84% o f the o i l r e f i n e d i n Canada - 89% i f the j o i n t ownership o f t h e I r v i n g R e f i n e r y i s c o n s i d e r e d . F i n a l l y , the m a r k e t i n g network t h a t t h e i n t e g r a t e d companies s e t up had s e t the c o m p e t i t i v e s t a n d a r d f o r s a l e s a c r o s s Canada ( B e r t r a n d 1980). U n q u e s t i o n a b l y , the e i g h t f o r e i g n - o w n e d , i n t e g r a t e d o i l companies dominated the Canadian o i l i n d u s t r y . B.The N o n - I n t e g r a t e d O i l Companies 1. The O i l and Gas P r o d u c i n g Companies In 1947, the n o n - i n t e g r a t e d o i l and gas p r o d u c i n g com-p a n i e s t o o k two forms. Some were o r g a n i z e d as j o i n t s t o c k companies, w h i l e o t h e r s were o r g a n i z e d as s y n d i c a t e s , formed f-o-r- the purpose o-f--d-ri-l-l-i-ng -a few w e l l s . Most o f these-com-TABLE VIII: OPERATIONS OF INTEGRATED PETROLEUM COMPANIES IN.CANADA COMPANY PRODUCTION (oil/gas) Canadian Petrofina 4,393,000 bbl 20,320,000. Mcf Gulf O i l 29,930,000 bbl 114,110,000 Mcf ...through AngloCana-dian Oils 1,034,436 bbl TRANSMISSION REFINING 72 miles (oil) 30,000 bpd 16% Montreal-Portland 7% Interprovincial 153,000 bpd ...through Royalite O i l 20,643,014 bbl 3 small 70 mi..lines 16,000 bpd TABLE V I I I : OPERATIONS OF INTEGRATED PETROLEUM COMPANIES IN CANADA COMPANY PRODUCTION Husky O i l 3,941,000 b b l 10,291,000 Mcf Imperial O i l 41,760,611 b b l 585,000,000 Mcf P a c i f i c Petroleums 7,933,000 b b l 64,050,000 Mcf TRANSMISSION REFINING 72 mi. ( o i l ) 9,000 bpd 32% Interprov. 355,000 bpd 32% Montreal-P o r t l a n d 8% Transmountain 580 mi. ( o i l ) 5,500 bpd COMPANY S h e l l Canada Sta n d a r d O i l of B.C. Texaco PRODUCTION 18,527,500 b b l 111,885,000 Mcf 10,233,329 b b l 46,742,572 Mcf 3,402,152 b b l T o t a l f o r I n t e -g r a t e d Companies T o t a l f o r a l l o i l companies 122,792,754 b b l 972,969,586 Mcf 274,250,125 b b l 122,792,754 Mcf TRANSMISSION REFINING 16'%'Mohtreai-' " 177,000 bpd P o r t l a n d 8% TransMountain 16% M o n t r e a l -P o r t l a n d 3 3% T r a n s N o r t h e r n 50% F e d e r a t e d i—i 885,000 bpd 50,000 bpd ( j o i n t ) 1,055,400 b b l 18,000 bpd 50,000 bpd ( j o i n t ) 121,800 bpd parties were Canadian-owned and o p e r a t e d s o l e l y i n A l b e r t a . The n o n - i n t e g r a t e d o i l and gas p r o d u c e r s grew i n number a f t e r t h e Leduc d i s c o v e r y . I n 1946 t h e r e were 163 such companies i n the A l b e r t a o i l p a t c h , b u t many o f them were i n a c t i v e . By 1950, t h e number o f n o n - i n t e g r a t e d o i l companies had more th a n d o u b l e d ( F i n a n c i a l P o s t Survey o f O i l s , 1950). By 1965, the n o n - i n t e g r a t e d o i l companies c o u l d be d i v i d e d i n t o s i x d i s c e r n a b i e groups. a ) D r i l l i n g S y n d i c a t e s The d r i l l i n g s y n d i c a t e s t h a t had been s e t up d u r i n g t h e D e p r e s s i o n were t h e companies w i t h t h e h i g h e s t r a t e o f bank-r u p t c y i n the post-Leduc e r a . F e d e r a l p e r s o n a l income t a x l e g i s l a t i o n d i d n o t a l l o w i n d i v i d u a l s t o w r i t e o f f "dry h o l e s " a g a i n s t income and so many p o t e n t i a l i n v e s t o r s were l o s t . A t the same t i m e , p r o v i n c i a l l a n d l e g i s l a t i o n , by e m p h a s i z i n g h i g h c o s t l e a s e s and a u c t i o n s , made l a r g e p l o t s o f l e a s a b l e l a n d i n a c c e s s i b l e t o t h e s y n d i c a t e s . As a consequence, the d r i l l i n g s y n d i c a t e , the most i m p o r t a n t form o f p e t r o l e u m e x p l o r a t i o n f u n d i n g i n t h e pre-Leduc p e r i o d , had been mar-g i n a l i z e d by 1960. I n v e s t o r s i n T o r o n t o , M o n t r e a l and the West continued' t o e s t a b l i s h p r i v a t e . d r i l l i n g s y n d i c a t e s , but the p r o d u c t i o n from t h e s e random w e l l s had no g r e a t s i g n i f i -cance w-i-t-h-i-n t h e i n d u s t r y a s a. whole.' 149. (In t he U n i t e d S t a t e s , i n c o n t r a s t , l o s s e s on "dry h o l e s " are t a x d e d u c t i b l e , and d r i l l i n g s y n d i c a t e s c o n t i n u e t o be r e s p o n s i b l e f o r thousands o f w e l l s each year.) b) Canadian-owned J o i n t S t ock Companies The Canadian-owned, n o n - i n t e g r a t e d o i l companies found themselves i n s e r i o u s f i n a n c i a l d i f f i c u l t i e s i n the po s t - L e d u c e r a as the r e s u l t o f s e v e r a l f a c t o r s : the l a c k o f a s t r o n g c a p i t a l base, the l a c k o f t a x i n c e n t i v e s f o r Canadian com-p a n i e s , p r o v i n c i a l l a n d s l e g i s l a t i o n t h a t d i s c r i m i n a t e d a g a i n s t p o o r e r companies and a l a c k o f s e c u r e markets. As a r e s u l t , many of t h e s e companies were f o r c e d t o s e l l out t o l a r g e r , o f t e n f o r e i g n , o i l companies. A c c o r d i n g t o a l i s t p r e p a r e d by D a v i d Crane (Crane 1982: 73-8), the s a l e o f Canadian companies t o f o r e i g n o i l f i r m s took a d r a m a t i c r i s e a f t e r 1957. D u r i n g the y e a r s 1950-57, f o r t y - o n e Canadian companies were t a k e n over by f o r e i g n f i r m s . Seven o f t h e s e t a k e o v e r s were con n e c t e d w i t h r e f i n e r y a s s e t s r a t h e r t h a n p r o d u c i n g companies, l e a v i n g t h i r t y - f o u r t a k e o v e r s of p r o d u c i n g companies d u r i n g a seven y e a r p e r i o d . D u r i n g t h e y e a r s 1958-65, t h a t number of t a k e o v e r s r o s e d r a m a t i c a l l y t o 102. Of t h e s e , e i g h t e e n companies were i n v o l v e d i n o t h e r a s p e c t s o f the o i l i n d u s t r y . That l e f t some. 8.0 Canadian-based., p r o d u c i n g companies t h a t were 150. swallowed up d u r i n g the seven y e a r s between 1958 and 1965. There are s e v e r a l r e a s o n s f o r the f l u s h o f f o r e i g n t a k e o v e r s d u r i n g t h i s p e r i o d . The most i m p o r t a n t of t h e s e were the d e v a l u a t i o n o f t h e Canadian d o l l a r d u r i n g the l a t e 1950s and e a r l y 1960s and t h e r e s t r i c t e d o i l markets t h a t d e v e l o p e d d u r i n g the same p e r i o d . These two f a c t o r s had r e p e r c u s s i o n s i n t h e U n i t e d S t a t e s , p a r t i c u l a r l y i n t h e f i n a n c e community. Money managers had been a n x i o u s t o i n v e s t i n Canadian s t o c k s as l o n g as t h e Canadian d o l l a r w a s . f i r m and the o i l i n d u s t r y was i n a boom p e r i o d . But by t h e l a t e 1950s the boom had ended and American f i n a n c i e r s q u i c k l y d i v e s t e d t hemselves of s t o c k i n s m a l l Canadian o i l companies and d e c l i n e d t o seek out new l o a n s f o r t h e s m a l l f i r m s t h a t had been dependent on them. During" the same p e r i o d , Canadian-rowned o i l and gas f i r m s o f t e n found i t d i f f i c u l t t o find"development- c a p i t a l i n Canada. Once the U.S. c a p i t a l market weakened, f i r m s were f o r c e d t o t u r n t o the Canadian banks f o r a s s i s t a n c e and most o f t e n , t h e s e banks were u n w i l l i n g t o advance l a r g e amounts of c a p i t a l t o a n o t o r i o u s l y r i s k y b u s i n e s s dominated by a few, f o r e i g n f i r m s . A few o i l companies d i d r e c e i v e h e l p from the Canadian b a n k i n g e s t a b l i s h m e n t ; Home O i l borrowed from the Canadian I m p e r i a l Bank of Commerce u n t i l b o t h the bank and the o i l company were i n s e r i o u s f i n a n c i a l d i f f i c u l t y (Smith 151. 1979: Chapters 16-18). A few Canadian o i l companies had t o s e l l o ut because of s p e c t a c u l a r s u c c e s s , when i t became c l e a r t h a t they would n o t be a b l e t o d e v e l o p a newly-found o i l f i e l d a l o n e . B a n f f O i l , f o r example, s o l d out t o Aquitaine-, a F r e n c h company, , when i t d i s c o v e r e d the l a r g e Rainbow f i e l d i n n o r t h e r n A l b e r t a . F o r a s e r i e s o f r e a s o n s , t h e n , t h e Canadian-owned, p r o -d u c i n g companies found themselves i n d i f f i c u l t y a f t e r t h e b l u s h o f t h e A l b e r t a o i l boom wore o f f . Of t h e 150 f i r m s t h a t were a c t i v e and h e a l t h y i n 1952, o n l y e l e v e n remained s t r o n g o i l companies i n 1965 (Table V I I I ) . When the p r o d u c t i o n of t h e s e f i r m s i s compared t o t h a t .of t h e i n t e g r a t e d companies,•the weak-nesses of the Canadian f i r m s i s e v i d e n t . W i t h a p r o d u c t i v e c a p a c i t y o f under 12 m i l l i o n b a r r e l s o f o i l . a y e a r , they were c l e a r l y minor p r o d u c e r s . c) The F o r e i g n , N o n - I n t e g r a t e d P r o d u c i n g Companies The magnitude o f the A l b e r t a o i l boom drew a number of f o r e i g n , n o n - i n t e g r a t e d o i l companies t o A l b e r t a . Most of t h e s e companies were w e l l - c a p i t a l i z e d and had e x t e n s i v e o p e r a t i o n s w i t h i n t h e U n i t e d S t a t e s . Most o f them had sprung up i n t h e o i l f i e l d s o f Oklahoma and Texas and 1 5 2 . belonged t o e n t r e p r e n e u r s who had come i n t o c o n f l i c t w i t h the major i n t e g r a t e d companies i n t h e U n i t e d S t a t e s . I n t h e p o s t -war p e r i o d , t h e s e " i n d e p e n d e n t s " began t o move o u t s i d e o f t h e U n i t e d S t a t e s t o d e v e l o p s u p p l y n e t w o r k s . i n the M i d d l e E a s t , N o r t h A f r i c a and t h e South P a c i f i c . I n t h e f o r t i e s D e l h i O i l , Asamara, Murphy, S u p e r i o r and T i d e w a t e r O i l began e x t e n s i v e ex-p l o r a t i o n i n t h e se d i m e n t a r y b a s i n o f Western Canada. A de-cade l a t e r t h e y had been j o i n e d by Landa O i l , G r e a t P l a i n s De-^• velopment, U n i t e d Canso and the F r e n c h P e t r o l e u m Company, t h e o n l y non-American independent f i r m . These companies s h a r e d many advantages w i t h the l a r g e , i n t e g r a t e d American o i l companies. They were a b l e t o w r i t e t h e i r Canadian e x p l o r a t i o n expenses o f f a g a i n s t t h e i r U.S. t a x e s . They were w e a l t h y enough t o t a k e advantage of the p r o - c a p i t a l b i a s o f A l b e r t a l a n d r e g u l a t i o n s . And they owned p i p e l i n e networks i n t h e U n i t e d S t a t e s t h a t c o u l d be connected t o Canadian o i l and gas t r a n s m i s s i o n systems. N e v e r t h e l e s s , the f o r e i g n , n o n - i n t e g r a t e d o i l companies d i d not f l o u r i s h i n Canada. By 1965, Asamara was d i v e s t i n g i t -s e l f of i t s p r o d u c i n g p r o p e r t i e s and T i d e w a t e r had been s o l d t o t h e e x p l o r a t i o n arm o f B r i t i s h P e t r o l e u m s . Among them, t h e f o r e i g n , n o n - i n t e g r a t e d companies produced 9.7 m i l l i o n b a r r e l s o f o i l i n 1964 - l e s s than was produced by the e l e v e n , f i n a n -153 . TABLE IX: Non-Integrated Canadian-Based O i l Companies: 1965 Production (Oil) (Bbl/Yr) Production (Gas) (Mcf/year) Alminex Bralsamin Petroleums Cdn. Export O i l and Gas Cdn. Homestead O i l s Cdn. Industrial Gas/Oil Central-Del Rio Oi l s Home O i l Co. Permo O i l and Gas Ranger O i l Ltd. Scurry-Rainbow O i l Western Decalta Total 925,986 16,871 382,515 169,000 . 1,15606 3,107,815 3,278,991 14,524 170,318 1,632,000 1,122,000 11,978,727 n. a. n.a. 4,000,000 714,000 17,456,207 n.a. 589,520 3,647,593 2,908,928 2,226,000 1,062,000 (compiled from F i n a n c i a l Post Survey of Oils) 154 . c i a l l y s t r a p p e d C a n a d i a n c o m p a n i e s . Why was t h i s s o ? The most i m p o r t a n t f a c t o r d i s t i n g u i s h i n g t h e s u c c e s s o f t h e i n t e g r a t e d companies f r o m t h e n o n - i n t e g r a t e d f o r e i g n f i r m s was t h e c o n t r o l o v e r r e f i n e r i e s . The i n t e g r a t e d c o mpanies d o m i n a t e d t h e r e f i n i n g s e c t o r t o s u c h a d e g r e e t h a t i n d e p e n d e n t r e f i n i n g c o n t r a c t s were i m p o s s i b l e t o n e g o t i a t e . Thus t h e o i l p r o d u c e d by t h e i n d e p e n d e n t s i n A l b e r t a was s h i p p e d t o t h e r e f i n e r y a t a f i x e d r a t e , l e a v i n g t h e I n d e p e n d e n t w i t h a r a t e o f p r o f i t t h a t v a r i e d v e r y l i t t l e o v e r t h e l i f e t i m e o f t h e w e l l . The o n l y o t h e r o p t i o n a v a i l a b l e t o t h e i n d e p e n d e n t s was t o s h i p t h e i r o i l t o r e f i n e r i e s i n t h e U n i t e d S t a t e s . T h a t i n c r e a s e d t h e amount o f o i l e n t e r i n g t h e U.S. f r o m a b r o a d and e n d a n g e r e d t h e i r own d o m e s t i c p r o d u c t i o n . C o n s e q u e n t l y , e a r l y i n t h e 1960s t h e f o r e i g n , n o n - i n t e g r a t e d c ompanies began t o move o u t o f Canada. d) P r o p e r t y - o w n i n g O i l Companies D u r i n g t h e p o s t - L e d u c e r a t h e r e were s e v e r a l o i l com p a n i e s f o u n d e d on t h e m i n e r a l r i g h t s t h a t had come t o them t h r o u g h p r e v i o u s e c o n o m i c a c t i v i t i e s . I n t h e body o f t h i s t h e s i s t h e t h r e e l a r g e s t o f t h e s e c ompanies were e x a m i n e d : Hudson's Bay O i l and Gas, C a n a d i a n P a c i f i c O i l and Gas and t h e C a l g a r y and Edmonton C o r p o r a t i o n . I t was e v i d e n t t h a t the c o m b i n a t i o n o f a l a r g e l a n d g r a n t and a s t r o n g f o r e i g n p a r e n t company ( C o n t i n e n t a l O i l ) had p e r m i t t e d HBOG t o grow s i g n i f i c a n t l y i n the post-Leduc e r a , w h i l e a l a c k o f a v a i l -a b l e c a p i t a l had slowed the growth of t h e C a l g a r y and Edmon-t o n C o r p o r a t i o n . By 1965, Hudson's Bay O i l and Gas had de v e l o p e d 340,000 o f i t s 11 m i l l i o n a c r e s o f m i n e r a l r i g h t s and was p r o d u c i n g 14 m i l l i o n b a r r e l s of o i l and 42,800 b i l l i o n c u b i c f e e t of na-t u r a l gas a y e a r . The company had bought out two Canadian-owned p r o d u c i n g companies and had c r e a t e d s e v e r a l s u b s i d i a r i e s . The C a l g a r y and Edmonton C o r p o r a t i o n , d e s p i t e the f a c t t h a t i t owned the r i g h t s t o more than t h r e e m i l l i o n a c r e s i n the Ed-monton o i l b e l t and t h e Turn e r V a l l e y , was p r o d u c i n g 1.5 m i l l i o n b a r r e l s o f o i l and 5 m i l l i o n c u b i c f e e t o f gas a y e a r . In 1965, the C a l g a r y and Edmonton C o r p o r a t i o n was bought by Canadian S u p e r i o r O i l . C l e a r l y , the two m i n e r a l r i g h t s h o l d i n g c o r p o r a t i o n s cannot be compared t o o c l o s e l y w i t h one a n o t h e r . T h e i r l a n d g r a n t s d i f f e r e d i n s i z e and l o c a t i o n . N e v e r t h e l e s s , i t seems p r o b a b l e t h a t the f o r e i g n ownership o f Hudson's Bay O i l and Gas p l a y e d a s i g n i f i c a n t r o l e i n i t s r a p i d e x p a n s i o n , g i v i n g the Canadian o p e r a t o r a c c e s s t o c a p i t a l , e x p e r t i s e and t e c h n o l o g y . The C a l g a r y and Edmonton C o r p o r a t i o n on the o t h e r hand, w i t h i t s c a p i t a l l i m i t e d , l i m p e d a l o n g u n t i l i t s s a l e i n 1965. As was t h e case w i t h the growth o f f o r e i g n , i n t e g r a t e d f i r m s , c a p i -t a l was t h e most c r u c i a l f a c t o r i n s u c c e s s . e) Companies Spawned by F o r e i g n F i n a n c i a l I n t e r e s t s The p e c u l i a r c o m b i n a t i o n of t a x i n c e n t i v e s and min-e r a l r i g h t s l e g i s l a t i o n i n Canada gave r i s e t o a k i n d o f o i l company t h a t d i d not e x i s t i n the U n i t e d S t a t e s - the o i l company founded by f o r e i g n , f i n a n c i a l i n t e r e s t s . F e d e r a l l e g i s l a t i o n e n sured t h a t Canadian f i n a n c i e r s c o u l d not o b t a i n the same t a x w r i t e o f f s , so a l l o f the companies i n t h i s group were American o r B r i t i s h owned. I r o n i c a l l y , j u s t a t the time when two of Canada's l a r g e s t i n v e s t m e n t houses, N e s b i t t Thomp-son and O s i e r , Nanton and Hammond, were l o s i n g c o n t r o l o f t h e o i l companies t h e y had r u n f o r two decades, f o r e i g n i n v e s t -ment f i r m s were moving i n t o the o i l i n d u s t r y . H i s t o r i c a l l y , f o r e i g n f i n a n c i e r s d i d not found o i l companies because of t h e h i g h r i s k n a t u r e of o i l e x p l o r a t i o n . But i n A l b e r t a , where the p r o v i n c e ' s b e s t o i l l a n d s were put up t o a u c t i o n , t h e r i s k s d i m i n i s h e d enough t o tempt the f o r e i g n , i n v e s t m e n t community. There were s e v e r a l o i l companies s t a r t e d by f o r e i g n f i n a n c i a l i n t e r e s t s - , b u t one- I n p a r - t i c u l a r a c h i e v e d c o n s i d e r a b l e s u c c e s s . 157. M e r r i l l P e t r o l e u m s was e s t a b l i s h e d by the New York i n v e s t -ment house M e r r i l l Lynch i n 1952. The company a t t r a c t e d as i t s P r e s i d e n t A l b e r t a ' s former M i n i s t e r o f N a t u r a l R e s o u r c e s , N.E. Tanner, and by .1956 was p r o d u c i n g 715,198 b a r r e l s - of-• o i l a day- (Financial P o s t S u r v e y - o f O i l s , ' 1 9 5 6 ) . An o i l company e s t a b l i s h e d by an i n v e s t m e n t f i r m i s i n an e n v i a b l e p o s i t i o n . In t h e case o f M e r r i l l , the s p o n s o r i n g company was one o f the w e a l t h i e s t on W a l l S t r e e t and had e x c e l l e n t c o n n e c t i o n s i n t h e f i n a n c i a l community. However, u n l i k e the m u l t i n a t i o n a l o i l companies t h a t spawned s u b s i d i -a r i e s i n Canada, M e r r i l l Lynch was not i n a p o s i t i o n t o mani-p u l a t e i t s own a s s e t s t o p r o v i d e t h e needed e x p a n s i o n c a p i t a l . C o n s e q u e n t l y , M e r r i l l P e t r o l e u m s never expanded beyond moderate s u c c e s s . In the l a t e 1950s, when the Canadian r e s o u r c e boom began t o s l o w , M e r r i l l Lynch put M e r r i l l P e t r o l e u m s up f o r s a l e . The p a r e n t company had been i n t e r e s t e d i n m a x i m i z i n g the r e t u r n on i t s c a p i t a l , not i n d e v e l o p i n g an o i l empire, so i n 1957 M e r r i l l was s o l d t o P a c i f i c P e t r o l e u m s . T h i s seemed t o be t h e case w i t h many of the o i l companies t h a t were brou g h t i n t o b e i n g by f i n a n c i e r s . The money men, l i k e f a i r weather f a r m e r s , s o l d out when t h e g o i n g got tough. 158 . f ) P r o d u c i n g Companies E s t a b l i s h e d by M i n i n g Concerns The Canadian government gave s p e c i a l t a x c o n s i d e r a t i o n s t o m i n i n g companies t h a t w i s h e d t o expand i n t o t he p e t r o l e u m i n -d u s t r y . I n t h e immediate post-war p e r i o d , companies m i n i n g i n d u s t r i a l m e t a l s were u n l i k e l y t o t a k e advantage of t h e s e p r o v i s i o n s s i n c e the markets f o r z i n c , l e a d and copper were expanding r a p i d l y . G o l d companies, on the o t h e r hand, were c o n f r o n t i n g r i s i n g c o s t s and a f i x e d p r i c e f o r g o l d , so a t l e a s t t h r e e of t h e g o l d mines o f the Canadian S h i e l d i n v e s t e d i n o i l companies. The o n l y one o f t h e t h r e e t o succeed was Dome Mines, w h i c h c r e a t e d a s u b s i d i a r y , Dome P e t r o l e u m . Dome was a h y b r i d , the p r o d u c t o f a merger between a group o f American f i n a n c i e r s and t h e o l d e s t and r i c h e s t o f the O n t a r i o g o l d mines. As a consequence, Dome was s u b j e c t t o two competing s e t s o f i n f l u e n c e s , t he c o n s e r v a t i v e f i n a n c i e r s and the m i n i n g e n t r e -p r e n e u r s . I n t h e e a r l y 1960s, when the r a s h o f c o r p o r a t e t a k e o v e r s began t o decimate the ranks o f the Canadian-owned, n o n - i n t e g r a t e d o i l companies, Dome P e t r o l e u m was i n a p a r t i c u l a r l y weak p o s i t i o n o v e r e x t e n d e d and c a p i t a l - p o o r . Three American o i l companies made b i d s to' purchase Dome P e t r o l e u m and i n 19 6 3 i t was d e c i d e d t o t a k e t h e o f f e r o f an American i n d e p e n d e n t , S i n c l a i r O i l , 159 . b e f o r e the board o f d i r e c t o r s . The s t o r y o f the board me e t i n g i s i n t e r e s t i n g , not o n l y from t h e p o i n t o f view of the d e v e l o p i n g f r a c t i o n s i n the .. p e t r o l e u m i n d u s t r y , but a l s o because o f the r o l e t h a t the s t a t e p l a y e d i n i t s r e s o l u t i o n . When the bo a r d f i r s t met on t h e o f f e r , two s i d e s emeraed. L i k e t h e p r i n c i p a l s o f M e r r i l l P e t r o l e u m s , t h e f i n a n c i e r s who founded Dome P e t r o l e u m had e n t e r e d the o i l b u s i n e s s t o g e t a good r e t u r n on t h e i r c a p i t a l . W i t h Dome P e t r o l e u m i n a weak p o s i t i o n , t hey were ready t o s e l l . Dome P e t r o l e u m ' s P r e s i d e n t J a c k G a l l a g h e r and Dome Mines P r e s i d e n t James Redpath, b o t h C a n a d i a n s , f e l t t h a t the company s h o u l d n o t be s o l d . As p r o f e s s i o n a l managers they b e l i e v e d t h a t the company would emerge from i t s d i f f i c u l t i e s . On the second day o f a c r i m o n i o u s d i s c u s s i o n , t he lawyer f o r b o t h Dome Mines and Dome P e t r o l e u m , G e n e r a l Bruce Matthews (who was p u b l i c a l l y s u p p o r t i n g the p o s i t i o n o f the American owners) approached G a l l a g h e r and Redpafh s e c r e t l y t o suggest an a l t e r n a t e s t r a t e g y . The n e x t day, G a l l a g h e r and Redpath a c q u i e s c e d t o the s a l e , w i t h one p r o v i s o : t h a t the d e a l would o n l y go t h r o u g h i f the p r o f i t s t h a t would a c c r u e t o t h e s h a r e h o l d e r s were d e c l a r e d n o n - t a x a b l e . The p r o v i s o s u i t e d t he American i n v e s t o r s , who s t o o d t o l o s e hundreds o f thousands o f d o l l a r s i f t h e i r p r o f i t s were t a x e d . 160. General Matthews was a senior partner i n the Toronto law firm of Faskin, Calvin, and a member of the boards of several of the largest mining firms i n Canada. After the meeting, the Dome board requested that General Matthews contact the Depart-ment of National Revenue to ensure that the sale could be declared non-taxable. Since the Income Tax Act gave special treatment to investment and trust funds established especi-a l l y for investment i n Canada, the American investors had every reason to expect that they would receive an affirmative response. To the i r surprise, Ottawa responded that the transaction would indeed be taxable. The deal f e l l through. By comparing interviews with four members of the Dome board at the time (Gallagher and Redpath from the management group; John Loeb and William Morton from the American finan-ciers) , i t i s possible to suggest that Bruce Matthews used his influence as an important member of the Canadian corporate e l i t e to swat the federal government i n the d i r e c t i o n of the managers. It is; s i g n i f i c a n t that t h i s was-the;-first such . - 'r intervention in the history of the Canadian petroleum industry, the f i r s t time that the federal state intervened i n favour of a small group of Canadian managers and against a group of American f i n a n c i e r s . The intervention points to the fact that the Canadian state was prepared to intervene i n favour of enhancing c a p i t a l accumulation i n Canada, rather than favouring 161. a s p e c i f i c group of i n v e s t o r s . There were t h e n , s i x o k i n d s o f n o n - i n t e g r a t e d o i l companies o p e r a t i n g i n the Canadian o i l i n d u s t r y i n 1965. T h e i r c o r p o r a t e s t r e n g t h v a r i e d c o n s i d e r a b l y . The d r i l l i n g s y n d i c a t e s had been s h a t t e r e d by the new o r g a n i z a t i o n o f c a p i t a l i n the wake of the Leduc d i s c o v e r y . S e v e r a l o f the f o r e i g n independent companies were p u r p o s e f u l l y w i t h d r a w i n g from Canada. Only a h a n d f u l o f the Canadian-based, n o n - p r o d u c i n g companies s u r -v i v e d the h a r d economic t i m e s o f the l a t e 1950s. N e v e r t h e l e s s , the dozen companies t h a t s u r v i v e d t o 1965 were v i a b l e e n t e r p r i s e s w i t h l a n d , a s s e t s and o i l r e s e r v e s . They were j o i n e d by a few o t h e r companies t h a t c o u l d a t t r i b u t e t h e i r s u c c e s s t o h i s t o r i c a l c o n s t a n t s : the r a i l w a y l a n d g r a n t s t h a t e n a b l e d the C a l g a r y and Edmonton C o r p o r a t i o n t o s u r v i v e ( u n t i l 1965) d e s p i t e a l a c k o f c a p i t a l and the a s s i s t a n c e g i v e n t o Dome P e t r o l e u m by a board member w i t h r o o t s i n t h e Canadian m i n i n g e l i t e . By 1965, the Canadian o i l i n d u s t r y had p a s s e d t h r o u g h a f u l l c y c l e o f i t s development, from boom t o d e p r e s s i o n . W h i l e the i n t e g r a t e d companies had grown t o be a s t r o n g , u n i t e d group, a b l e t o e x e r t c o n s i d e r a b l e p o l i t i c a l p r e s s u r e , the n o n - i n t e g r a t e d , p r o d u c i n g companies, p a r t i c u l a r l y t h o s e t h a t were Canadian-owned, were fragmented and weak, and o n l y be-g i n n i n g t o f l e x t h e i r p o l i t i c a l muscle. 162, C. T r a n s m i s s i o n Companies I n t h e pre-Leduc e r a , t h e r e were o n l y a few s h o r t p i p e -l i n e s i n e x i s t e n c e i n Canada. There were l i n e s r u n n i n g from the d w i n d l i n g o i l f i e l d s o f s o u t h e r n O n t a r i o t o r e f i n e r i e s and t i l o r e were l i n e s r u n n i n g from t h e Turn e r V a l l e y and Bow I s l a n d t o C a l g a r y . Most o f Canada's crude o i l came i n t o t h e c o u n t r y by r a i l w a y from t h e U n i t e d S t a t e s o r by t a n k e r from V e n e z u e l a and t h e M i d d l e E a s t . I n t h e post-Leduc p e r i o d , i t was t h e f o r e i g n , i n t e g r a t e d companies t h a t came t o dominate t h e t r a n s m i s s i o n o f o i l . I m p e r i a l O i l was b e h i n d t h e c o n s t r u c t i o n o f t h e I n t e r p r o -v i n c i a l P i p e l i n e ; a c o n s o r t i u m o f i n t e g r a t e d companies spon-s o r e d the Transmountain P i p e l i n e . The A l b e r t a and Southern P i p e l i n e was con n e c t e d d i r e c t l y i n t o t h e American p i p e l i n e network. Only t h e Pembina P i p e l i n e , under t h e c o n t r o l of Home O i l , b e l o n g e d t o a Canadian company. Thus, by 1965 f o r e i g n - b a s e d companies c o n t r o l l e d 3,000 m i l e s o f o i l p i p e -l i n e , compared t o 76 m i l e s c o n t r o l l e d i n Canada. S u r p r i s i n g l y , t h e ownership s t r u c t u r e o f gas p i p e l i n e s was v e r y d i f f e r e n t . I n 1952, a f t e r a R o y a l Commission recommended husbanding t h e p r o v i n c e ' s gas f o r home and i n d u s -t r i a l c onsumption, A l b e r t a p l a c e d a l l n a t u r a l gas t r a n s m i s -s i o n , under t h e c o n t r o l o f t h e p u b l i c a l l y - s p o n s o r e d , p r i -v a t e l y - o w n e d c a r r i e r , A l b e r t a Gas Trunk L i n e . A.G.T.L. was 163. t o be r e i m b u r s e d on a " c o s t of s e r v i c e " b a s i s w i t h an an n u a l r e t u r n o f 7h% on i t s i n v e s t m e n t . As a consequence o f i t s monopoly, the company's network expanded r a p i d l y ; by 1965, i t owned.1,938 m i l e s o f p i p e l i n e . The two major p i p e l i n e s c a r r y i n g n a t u r a l gas from t h e A l b e r t a b o r d e r , TransCanada P i p e L i n e s and Westcoast T r a n s m i s s i o n , a l s o r e c e i v e d much more s c r u t i n y from the s t a t e than the n a t i o n a l o i l c a r r i e r s . Each p r o p o s a l had t o pass t h r o u g h both the Canadian and American r e g u l a t o r y systems. A p i p e l i n e company had t o be i n c o r p o r a t e d i n P a r l i a m e n t . The proposed p i p e l i n e had t o g e t a p p r o v a l from the A l b e r t a government, a u t h o r i t y from the Canadian Board o f T r a n s p o r t Commissioners t o b u i l d the l i n e , an e x p o r t p e r m i t from the Department o f Trade and Commerce and a p p r o v a l from t h e U.S. F e d e r a l Power Commission. The TransCanada P i p e L i n e s p r o p o s a l d e v e l o p e d t h r o u g h the c o m p e t i t i o n of two groups - Western P i p e L i n e s was sponsored by two of Canada's most i m p o r t a n t i n v e s t m e n t houses O s i e r , Hammond and Nanton o f Win n i p e g , and N e s b i t t Thompson. (A m i n o r i t y o f the company was h e l d by I n t e r n a t i o n a l U t i l i t i e s o f New Yo r k , the company t h a t owned two o f A l b e r t a ' s gas u t i l i t i e s . ) Western proposed t o send A l b e r t a gas t o Winnipeg and then south t o the U n i t e d S t a t e s market. O s i e r , Hammond and Nanton's P r e s i d e n t t o l d the A l b e r t a P e t r o l e u m and N a t u r a l Gas C o n s e r v a t i o n Board t h a t an a l l - C a n a d i a n r o u t e t o Toronto was not e c o n o m i c a l l y f e a s i b l e (Grey 1970:182). 164 . The o t h e r c o n t e n d i n g company was TransCanada P i p e L i n e s , a wholly-owned s u b s i d i a r y o f Canadian D e l h i O i l , w h i c h was i n t u r n owned by Texas o i l m a n C l i n t M u r c h i s o n . M u r c h i s o n p r o m i s e d an a l l - C a n a d i a n r o u t e t o t a k e A l b e r t a gas t o T o r o n t o consumers. I r o n i c a l l y t h e n , a company e s t a b l i s h e d by two o f the o l d e s t f i n a n c i a l houses i n Canada proposed t o move n a t u r a l gas t o the U n i t e d S t a t e s , and an American-owned company promised t o move the same gas d i r e c t l y t o Canadian markets. I n 1951, a t the j o i n t u r g i n g o f A l b e r t a P r e m i e r Manning and f e d e r a l Trade and Commerce M i n i s t e r C D . Howe, the two companies j o i n e d i n an e q u a l p a r t n e r s h i p . The a l l - C a n a d i a n r o u t e was endorsed by b o t h f e d e r a l and O n t a r i o governments. Two problems f a c e d TransCanada P i p e L i n e s : markets and f i n -a n c i n g . The f i r s t p roblem was s o l v e d by a l l o w i n g t h r e e p o w e r f u l , American-owned companies t o buy a 51% i n t e r e s t i n the c o n s o r t i u m . Tennessee Gas T r a n s m i s s i o n , G u l f O i l and Hudson's Bay O i l and Gas c o n t r o l l e d l a r g e q u a n t i t i e s o f A l b e r t a gas and a l a r g e p a r t o f the U.S. n a t u r a l gas system. The problem of f i n a n c i n g was s o l v e d by a $118 m i l l i o n l o a n advanced by the f e d e r a l government t o b u i l d t h e n o r t h e r n O n t a r i o p o r t i o n o f the p i p e l i n e , and a $80 m i l l i o n l o a n t o f i n a n c e the remainder o f the system. The debate s u r r o u n d i n g the government f i n a n c i n g p r e c i p i t a t e d the TransCanada P i p e L i n e p a r l i a m e n t a r y c r i s i s , and s u b s e q u e n t l y , t h e f a l l o f the L i b e r a l government. 165 . D e s p i t e the f a c t t h a t the c o n s t r u c t i o n o f the p i p e l i n e was c a r r i e d out w h i l e the company was m a j o r i t y - o w n e d by an American c o n s o r t i u m , a f t e r - c o n s t r u c t i o n p u b l i c f i n a n c i n g o f the company put h a l f o f TransCanada's e q u i t y up f o r s a l e t o Canadians. S u b s e q u e n t l y , a l a r g e b l o c k o f s h a r e s , c o n t r o l l i n g i n t e r e s t , was p u r c h a s e d by Home O i l Company. By 1969, TransCanada P i p e L i n e s was more t h a n 90% owned by Canadians. W estcoast T r a n s m i s s i o n , on the o t h e r hand, owed much o f i t s i n i t i a l s u c c e s s t o t h e f a c t t h a t i t was i n i t i a t e d by a Canadian e n t r e p r e n e u r , Frank McMahon. McMahon announced a t the b e g i n n i n g t h a t h i s l i n e would pass t h r o u g h Canada and t h a t he was w i l l i n g t o s e r v e Canadian communities a l o n g fhe p i p e l i n e r o u t e . Both the Canadian and A l b e r t a n governments gave West c o a s t ' s a p p l i c a t i o n t h e i r a p p r o v a l , and a l l c o m p e t i t o r s i n Canada had been e l i m i n a t e d by 1952. I n the U n i t e d S t a t e s however, the F e d e r a l Power Commission r e f u s e d t o g i v e W e s t c o a s t T r a n s m i s s i o n the n e c e s s a r y a p p r o v a l t o b r i n g gas i n t o t h e w e s t e r n r e g i o n , on the grounds t h a t the U n i t e d S t a t e s would t h e n become dependent on a f o r e i g n c o u n t r y f o r i t s gas s u p p l y . I n s t e a d the F.P.C. l i c e n c e d a p i p e l i n e companv owned by an American e n t r e p r e n e u r , Ray F i s h . The s t a l e m a t e l a s t e d months b e f o r e McMahon agreed t o s e l l 200 m i l l i o n c u b i c f e e t o f gas a day t o F i s h a t the U.S. b o r d e r . 166 . I n 1960 t h e n , most o f Canada's n a t u r a l gas was b e i n g t r a n s p o r t e d by Canadian c a r r i e r s . T o g e t h e r , Westcoast T r a n s -m i s s i o n , TransCanada P i p e L i n e s and A l b e r t a Gas Trunk L i n e a c c o u n t e d f o r 5,227 m i l e s o f gas p i p e l i n e . I n each c a s e , the f e d e r a l and p r o v i n c i a l governments had been c r i t i c a l t o a s c e r t a i n i n g t h a t c o n t r o l over the p i p e l i n e s would l i e i n Canadian hands. The Canadian c o n t r o l o v er gas p i p e l i n e s weakened somewhat i n 1960, when Frank McMahon l o s t c o n t r o l o f P a c i f i c P e t r o l e u m s , and hence W e s t c o a s t T r a n s m i s s i o n , t o P h i l l i p s P e t r o l e u m o f Oklahoma. D- ' S e r v i c e Companies' S h o r t l y a f t e r the Leduc d i s c o v e r y , d r i l l r i g s , s e i s m i c equipment and s e r v i c e r i g s began t o move a c r o s s the i n t e r n a t i o n a l b o r d e r i n t o A l b e r t a and Saskatchewan. There were two s o u r c e s f o r t h i s equipment. The i n t e g r a t e d companies were a b l e t o draw upon r i g s and p e r s o n n e l from t h e i r o p e r a t i o n s i n the U n i t e d S t a t e s and around the w o r l d . 167 . The o t h e r o p t i o n was t o o b t a i n s e r v i c e equipment from s p e c i a l i z e d companies, most of which were based i n Texas and Oklahoma. Large i n t e r n a t i o n a l s e r v i c e companies such as Schlumberger, De H o l y e r and McNaughton, and Hughes T o o l opened o f f i c e s i n C a l g a r y t o s u p p l y the s u p p o r t s e r v i c e s f o r t h e r a p i d l y - e x p a n d i n g i n d u s t r y . By 1965, t h i s s i t u a t i o n had a l t e r e d c o n s i d e r a b l y . A major C a l g a r y - b a s e d s e r v i c e company, Bow V a l l e y I n d u s t r i e s , o p e r a t e d 26 d r i l l r i g s , 4 t e s t r i g s and 11 s e i s m i c o u t f i t s . I n a d d i t i o n , the company had d i v e r s i f i e d t o p r o v i d e a range of s e r v i c e s t o the p e t r o l e u m i n d u s t r y - i n c l u d i n g t h e s a l e o f o i l f i e l d s u p p l i e s and the manufacture and s a l e o f d r i l l b i t s . Commonwealth P e t r o l e u m S e r v i c e s L t d . , a C a l g a r y - b a s e d company t h a t had been a c t i v e s i n c e the T u r n e r V a l l e y boom o f 1926, o p e r a t e d 29 d r i l l r i g s and owned a s u b s i d i a r y i n v o l v e d i n the c o n s t r u c t i o n o f s p e c i a l i z e d d r i l l i n g equipment. F i n a l l y , P a r k e r D r i l l i n g Company of Canada owned 14 d r i l l r i g s . By 1965, t h e s e companies had s e t t h e i r s i g h t s beyond A l b e r t a and were j o i n i n g f o r c e s t o compete f o r j o b s i n the U n i t e d S t a t e s and A u s t r a l i a . The v e r y s p e c i a l i z e d n a t u r e o f some of t h e s e r v i c e s needed i n the p e t r o l e u m i n d u s t r y b r o u a h t about the growth of hundreds of s m a l l companies i n t h e e a r l y 1960 s. N i c k e l ' s O i l ' R e g i s t e r mentions 900 s e r v i c e and s u p p l y companies d o i n g a v a r i e t y o f t a s k s - from tank c l e a n i n g t o mud m i x i n g and s a f e t y i n s p e c t i o n s . 168. Table X: Independent O i l R e f i n i n g Companies: 1965 Company C a p a c i t y / b p d Golden E a g l e R e f i n i n g (Newfoundland) 8,500 New Brunswick O i l f i e l d s 300 Sun O i l 30,000 Consumers' Coop R e f i n e r y ( R e g i n a , Saskatchewan) 22,500 N o r t h e r n P e t r o l e u m (Saskatchewan, Kanasack) 1,200 T o t a l C a p a c i t y o f Independent R e f i n e r s 62,500 T o t a l C a p a c i t y o f Canadian-owned r e f i n e r s 23,700 T o t a l C a p a c i t y o f f o r e i g n - o w n e d r e f i n e r s 38,800 ( F i n a n c i a l P o s t Survey o f O i l s : 1965) 169 . The same p u b l i c a t i o n names over 120 e n g i n e e r i n g , d e s i g n , f a b r i c a t i n g and c o n s t r u c t i o n companies, 40 l a n d b r o k e r s , 50 o i l w e l l c o n t r a c t o r s and 60 o i l w e l l s e r v i c e r s . I n a d d i t i o n t o h a v i n g a marked e f f e c t on t h e p e t r o l e u m i n d u s t r y , t h e s e companies began t o t e s t t h e i r p o l i t i c a l s t r e n g t h . I n 19 6,1?, the Independent P e t r o l e u m A s s o c i a t i o n o f Canada (IP AO) was e s t a b l i s h e d as a l o b b y group f o r the Canadian-owned o p e r a t i n g and s e r v i c e companies. The i n d u s t r y l o b b y group had t r a d i t i o n a l l y been the Canadian P e t r o l e u m A s s o c i a t i o n , but by the l a t e 1960 s, t h i s o r g a n i z a t i o n had come t o r e p r e s e n t the i n t e r e s t s o f the f o r e i g n - b a s e d , i n t e g r a t e d companies. A l t h o u g h IP AC was l e d by Canadian o i l and gas p r o d u c i n g f i r m s such as Home O i l , the s e r v i c e and s u p p l y companies, by s h e e t f o r c e o f numbers, formed the h e a r t o f the o r g a n i z a t i o n . I n t h i s f a s h i o n , the s e r v i c e companies, d e s p i t e t h e i r many d i s p a r a t e o c c u p a t i o n s , came t o h o l d some p o l i t i c a l as w e l l as economic w e i g h t w i t h i n the p e t r o l e u m i n d u s t r y . E. Independent O i l R e f i n i n g Companies In 1947, t h e r e were e l e v e n independent r e f i n i n g companies o p e r a t i n g i n Canada. By 19 6 5,. the number of n o n - i n t e g r a t e d r e f i n e r s had dropped t o f i v e . Three o f t h e s e were American-170 .-Table X: A C o m p a r i s i o n o f P r i c e I n c r e a s e s f o r S e l e c t e d Items : 1961-1973 P r e p a r e d f o r the Energy Resources C o n s e r v a t i o n Board 19 61 = 100 1973 (1971) Food: Sausage Beef H a l i b u t B u t t e r M i l k . Eggs Canned Peaches C e l e r y Tomatoes Bananas A p p l e s Bread Motor G a s o l i n e 156.8 170.5 313.1 111.3 155.3 158.8 160. 3 139. 3 177. 7 69.9 177.5 172.3 111.4 (116.6) (141.2) (187.3) (106.0) (141.9) ( 87.3) (133.8) (141.6) (162.2) ( 76.2) (118.8) (130.5) Taken from t h e Consumer P r i c e Index, January 1974 171. Tab le X I : G a s o l i n e P r i c e s In the U n i t e d S t a t e s , .1945-1980 172. owned and two were owned i n Canada. From T a b l e , X i t i s p o s s i b l e t o see t h a t the Sun O i l r e f i n e r y , owned by a l a r g e American o i l company, had the g r e a t e s t c a p a c i t y , and t h a t the Regina Co-op R e f i n e r y , owned by the Saskatchewan Co-op movement, was t h e o n l y o t h e r l a r g e independent r e f i n e r y . I n t h e y e a r s between 1947 and 1965 many s m a l l , r e g i o n a l r e f i n e r i e s d i s a p p e a r e d . These f i r m s had been owned by l o c a l e n t r e p r e n e u r s , and t hey were v i a b l e o p e r a t i o n s o n l y as l o n g as t h e y purchased t h e i r o i l from f o r e i g n s u p p l i e r s (as d i d t h e i r c o m p e t i t o r s ) and c a t e r e d t o a s m a l l b u t c o n s t a n t market. W i t h th e development of the o i l f i e l d s o f A l b e r t a , the i n t e g r a t e d companies were a b l e t o f l o o d t h e market w i t h cheap g a s o l i n e . A study a t t h e Energy Resources C o n s e r v a t i o n Board shows t h a t g a s o l i n e p r i c e s r o s e much more s l o w l y than f o o d p r i c e s d u r i n g t h e s i x t i e s . w h e n compared t o the i n d e x o f i n f l a t i o n (Table X I and X I I ) . C o n s e q u e n t l y , the r e g i o n a l r e f i n e r s , w h i c h s t i l l had t o purchase crude o i l from d i s t a n t s u p p l i e r s , were unable t o s e l l t h e i r g a s o l i n e a t c o m p e t i t i v e p r i c e s . Many s o l d t h e i r r e f i n e r i e s t o l a r g e r companies.only t o see t h e i r o p e r a t i o n s c l o s e d down c o m p l e t e l y s h o r t l y a f t e r w a r d . In c o n c l u s i o n , we see t h a t t h e s t r u c t u r e o f the Canadian p e t r o l e u m i n d u s t r y changed markedly a f t e r t h e o i l d i s c o v e r y a t Leduc. In 1947, t h e i n d u s t r y had been d i v i d e d i n t o a few 173 . d i s c r e t e segments. By 1965, b o t h the i n t e g r a t e d and non-i n t e g r a t e d s e c t o r s had become much l a r g e r and t h e i r b r e a k -down was more complex. The r a m i f i c a t i o n s t h i s has f o r Canadian p o l i t i c a l economy are examined i n the n e x t c h a p t e r . 174 . V I : Some T h e o r e t i c a l C o n s i d e r a t i o n s A t t h e b e g i n n i n g o f t h i s t h e s i s , t h r e e a r e a s o f t h e o r e t i c a l c o n c e r n were i d e n t i f i e d . The development o f the p e t r o l e u m i n d u s t r y was t o be i n v e s t i g a t e d as an example o f a r e s o u r c e -e x t r a c t i v e i n d u s t r y l i n k i n g t h e Canadian economy t o a g i a n t m e t r o p o l i s , t h e U n i t e d S t a t e s . What e f f e c t d i d t h i s new i m p o r t a n t s t a p l e have on the growing l i n k a g e between the two c o u n t r i e s . S e c o n d l y , i t was i m p o r t a n t t o i n v e s t i g a t e the e f f e c t t h a t the development o f t h e new s t a p l e had on the Canadian b o u r g e o i s i e . F i n a l l y , the r o l e o f the s t a t e i n the development of the new s t a p l e was t o be examined. A. The C l a s s S t r u c t u r e and the Canadian P e t r o l e u m I n d u s t r y : Some T h e o r e t i c a l O b s e r v a t i o n s I n t h e i r book, Economy and S o c i a l S t r u c t u r e , Crompton and Gubbay s t a t e t h a t an i m p o r t a n t tendency i n modern c a p i t a l i s m has been the l i n k a g e o f s e v e r a l c a p i t a l s i n a s i n g l e c o r p o r a t e e n t i t y - t h e v e r t i c a l l y i n t e g r a t e d company. They b e l i e v e t h a t because the i n t e g r a t e d company does n ot have t o g i v e away a p o r t i o n o f i t s p r o f i t t o o t h e r c a p i t a l s , i t w i l l p r o b a b l y become s t r o n g e r than t h e n o n - i n t e g r a t e d company, which must s e t a s i d e some of i t s p r o f i t t o pay s e r v i c e , p r o p e r t y , f i n a n c i a l o r commercial c a p i t a l s . The d a t a t h a t have been d e v e l o p e d on the s t r u c t u r e o f the Canadian o i l i n d u s t r y are c o n s i s t e n t w i t h Crompton and Gubbay 1s p r o p o s i t i o n . The i n t e g r a t e d o i l companies, r e g a r d l e s s of n a t i o n a l i t y , have been t h e s t r o n g e s t s e c t o r o f t h e Canadian o i l i n d u s t r y . I n 1947, and i n 1965, the a s s e t s o f each o f t h e i n t e g r a t e d companies were g r e a t e r t h a n th e a s s e t s o f any.one n o n - i n t e g r a t e d company. The i n t e g r a t e d companies performed as p r o d u c t i o n c a p i t a l s i n t h r e e ways - as p r o d u c e r s of o i l and gas, as t r a n s m i s s i o n agenfs and a s - m a n u f a c t u r e r s of g a s o l i n e . A t the same t i m e , they performed many of the t a s k s o f s e r v i c e c a p i t a l ; t h ey conducted t h e i r own g e o l o g i c a l and g e o p h y s i c a l s u r v e y s , and t h e y owned t h e i r own d r i l l i n g and s e r v i c e r i g s . Thus some of t h e j o b s t h a t would n o r m a l l y have been performed by s e r v i c e c a p i t a l , i n d e e d t h a t n o n - i n t e g r a t e d companies had t o pay s e r v i c e companies t o do, were under the d i r e c t c o n t r o l of the i n t e g r a t e d companies. The l i n k between i n d u s t r i a l and c ommercial c a p i t a l s a l s o p r o v e d c r i t i c a l f o r the i n t e g r a t e d f i r m s . I f t h e f o r e i g n , i n t e g r a t e d f i r m s are compared w i t h the f o r e i g n , n o n - i n t e g r a t e d f i r m s , we f i n d t h a t the i n t e g r a t e d f i r m s expanded r a p i d l y , l a r g e l y due t o t h e i r c o n t r o l o v er t h e i r own m a r k e t i n g networks. The n o n - i n t e g r a t e d companies, w i t h o u t r e f i n i n g and m a r k e t i n g n e t w o r k s , had o n l y moderate s u c c e s s . These d i f f e r e n c e s , cannot be e x p l a i n e d 176 . by c a p i t a l i z a t i o n s i n c e b o t h groups were w e l l c a p i t a l i z e d , o r by d i f f e r i n g i n c e n t i v e s s i n c e b o t h were o f f e r e d t a x b r e a k s f o r e s t a b l i s h i n g Canadian s u b s i d i a r i e s . The p r i n c i p a l d i f f e r e n c e between the groups l a y i n t h e i n t e g r a t e d companies' l i n k a g e o f t h r e e i n d u s t r i a l p r o c e s s e s -p r o d u c t i o n , t r a n s m i s s i o n and r e f i n i n g - w i t h c o n t r o l o ver t h e m a r k e t i n g s e c t o r , a commercial c a p i t a l . T h i s a l l o w e d them t o r e t a i n t h e p r o f i t s c r e a t e d a t a l l t h r e e l e v e l s o f i n d u s t r i a l a c t i v i t y . The n o n - i n t e g r a t e d companies, on the o t h e r hand, d e r i v e d t h e i r p r o f i t s from one l e v e l o f i n d u s t r i a l a c t i v i t y a l o n e . F o r the t r a n s m i s s i o n , r e f i n i n g and m a r k e t i n g o f p e t r o l e u m and i t s p r o d u c t s they were f o r c e d t o g i v e up a p o r t i o n o f t h a t p r o f i t t o t h e i n t e g r a t e d companies. As n o t e d , the l i n k between p r o p e r t y and i n d u s t r i a l c a p i t a l s i s a p e c u l i a r one on the Canadian o i l i n d u s t r y . Only i n r a r e i n s t a n c e s are p r o p e r t y and i n d u s t r i a l c a p i t a l s l i n k e d . Where t h i s l i n k has been e s t a b l i s h e d , i t has been v e r y advantageous. Hudson's Bay O i l and Gas, f o r example, f a r e d much b e t t e r t h a n o t h e r f o r e i g n , n o n - i n t e g r a t e d o i l companies because o f i t s o u t r i g h t ownership o f l a r g e t r a c t s o f m i n e r a l r i g h t s . The C a l g a r y and Edmonton c o r p o r a t i o n , s i m i l a r l y , became a l e a d e r of c o n s o r t i a of Canadian-based, n o n - i n t e g r a t e d companies because i t p o s s e s s e d t h e m i n e r a l r i g h t s t o v a l u a b l e t r a c t s 177. of land. In the case of both of these companies, the e a r l i e r existence of a strong c a p i t a l (the Hudson's Bay Co. functioned as a commercial c a p i t a l where the Calgary and Edmonton Corporation functioned as an i n d u s t r i a l capital) allowed for the branching out of the corporation into new endeavours involving linked c a p i t a l s . The integrated companies did not have the advantage of this l i n k with property c a p i t a l ; however, through the intervention of the Alberta government, they were able to set up a land tenure regime that allowed them to operate as property c a p i t a l s . The land tenure regulations of the province of Alberta permitted companies to take out large tracts of land for a nominal fee per acre. As we have seen, immediately after the Leduc discovery, the integrated companies, both Canadian- and foreign-based, took out reservations and leases on great areas of the o i l b e l t . Using c a p i t a l earned i n the l u c r a t i v e r e f i n i n g and marketing sectors, these companies were also able to purchase mineral rights at p r o v i n c i a l auctions. Under the relaxed regulations of the Alberta government (which contrasted sharply to the regulations i n e f f e c t i n neighbouring Saskatchewan), tenure of these large areas of land was both cheap and secure, so the integrated companies were able to turn around and lease large areas of land out to non-integrated companies. 178. As E r i c K i e r a n s p o i n t e d out i n h i s r e p o r t t o the M anitoba government ( K i e r a n s 1973), and as Mel Watkins r e i t e r a t e d i n h i s s t u d y o f the Northwest T e r r i t o r i e s (Watkins 1977), when the r e n t s c l a i m e d by governments are low, t h e e x c e s s r e n t o r "super p r o f i t " i s t a k e n by the r e s o u r c e - e x t r a c t i o n c o r p o r a t i o n s . So i n A l b e r t a d u r i n g the f i f t i e s and s i x t i e s , the i n t e g r a t e d companies r e t u r n e d a s m a l l r e n t t o the government, and then i n t u r n became r e n t i e r s , e x t r a c t i n g an a d d i t i o n a l r e n t from the n o n - i n t e g r a t e d companies. F i n a l l y , the most i m p o r t a n t l i n k between c a p i t a l s was t h a t between f i n a n c e and i n d u s t r i a l c a p i t a l s . Here, t o o , the i n t e g r a t e d companies had the advantage. As s e v e r a l a u t h o r s have shown (Laxer 1970,; Sh e a r e r 1964) , the i n t e g r a t e d o i l companies are a b l e t o f i n a n c e much of t h e i r e x p a n s i o n i n t e r n a l l y . Thus, i n t h e immediate post-Leduc p e r i o d , companies l i k e I m p e r i a l O i l and B r i t i s h American O i l s , by u s i n g some o f the p r o f i t from t h e i r m a r k e t i n g o p e r a t i o n s ( l a r g e l y ) i n E a s t e r n Canada, were a b l e t o f i n a n c e l a n d a c q u i s i t i o n and e x p l o r a t i o n i n the West. I n t e g r a t e d companies such as S h e l l and Texaco, w h i c h had not had any o p e r a t i o n s i n Western Canada were a b l e t o i n t e g r a t e "backwards" i n t o the p r o d u c t i o n s i d e o f the i n d u s t r y by u s i n g the p r o f i t g e n e r a t e d by t h e i r E a s t e r n Canadian r e f i n e r i e s . 179 . (The n o n - i n t e g r a t e d companies, o f c o u r s e , d i d not have the op t i o n - ) , As a consequence, the i n t e g r a t e d companies were not as dependent on Canadian f i n a n c i a l i n s t i t u t i o n s as were t h e n o n - i n t e g r a t e d companies. So, a l t h o u g h the i n t e g r a t e d companies d i d not i n c o r p o r a t e the f u n c t i o n o f f i n a n c i a l c a p i t a l s , ( t h a t i s , t h ey d i d not become l e n d i n g i n s t i t u t i o n s skimming a p a r t of the s u r p l u s v a l u e c r e a t e d by i n d u s t r i a l c a p i t a l ) , t h ey d i d possess an i n t e r n a l s t r u c t u r e t h a t a l l o w e d them t o l o s e p r o p o r t i o n a l l y l e s s o f t h e i r p r o f i t t han the n o n - i n t e g r a t e d companies. We have seen, t h e n , t h a t the i n t e g r a t e d companies r e g a r d l e s s o f t h e i r n a t i o n a l i t y , had a s t r u c t u r e t h a t a l l o w e d them t o r e t a i n a l a r g e p r o p o r t i o n o f t h e s u r p l u s v a l u e produced by t h e i r i n d u s t r i a l o p e r a t i o n s , and hence, t o have the g r e a t e s t measure o f growth i n t h e Canadian o i l i n d u s t r y . Each o f them performed t h r e e r o l e s as' i n d u s t r i a l c a p i t a l s as w e l l as f u n c t i o n i n g i n the commercial s p h e r e . T h e i r owner-s h i p o f l a r g e p a r c e l s o f l a n d p e r m i t t e d them t o f u n c t i o n as q u a s i - p r o p e r t y c a p i t a l s , a b s o r b i n g some o f the revenue t h a t might have gone t o the s t a t e . And t h e v e r y d i v e r s i t y of t h e i r own o p e r a t i o n s , l i n k i n g t h e s e c a p i t a l f u n c t i o n s i n t o one e f f i c i e n t o p e r a t i o n , p e r m i t t e d them t o r a i s e much o f t h e i r c a p i t a l i n t e r n a l l y , a v o i d i n g a dependency on f i n a n c i a l c a p i t a l . 180. T h i s was as t r u e f o r B r i t i s h American O i l s and Canadian O i l Companies as i t was f o r I m p e r i a l and S h e l l . I t was a l s o t r u e t h a t T i d e w a t e r and Amerada d e s p i t e t h e i r c a p i t a l i z a t i o n i n the U n i t e d S t a t e s , d i d not grow t o match the s t r e n g t h o f the i n t e g r a t e d companies. The s t r u c t u r e o f the i n t e g r a t e d company, i t s a b i l i t y not t o l o s e p r o f i t t o o t h e r c a p i t a l s , was the fundamental f a c t o r i n t h e s u c c e s s o f the i n t e g r a t e d f i r m s . Thus the f i r s t l e v e l o f a n a l y s i s recommended by Crompton and Gubbay has been u s e f u l i n e x p l a i n i n g the emergence of the i n t e g r a t e d companies, b o t h f o r e i g n and Canadian, as t h e s t r o n g e s t segment of the p e t r o l e u m i n d u s t r y i n the immediate post-Leduc p e r i o d . N e v e r t h e l e s s , i t has not been a b l e t o e x p l a i n why the i n t e g r a t e d o i l companies, a f t e r 1962, were a l l f o r e i g n - o w n e d . To u n d e r s t a n d t h i s development, i t i s n e c e s s a r y t o examine the arguments of Canadian p o l i t i c a l e c o n o m i s t s . Over the l a s t decade, the work o f W a l l a c e Clement has been d e d i c a t e d t o u n d e r s t a n d i n g the p r o c e s s by w h i c h f o r e i g n f i r m s have come t o dominate c e r t a i n s e c t o r s o f the Canadian economy. He broke th e b o u r g e o i s i e i n Canada i n t o t h r e e d i s t i n c t f r a c t i o n s : t h e comprador b o u r g e o i s i e , t h e dominant i n d i g e n o u s b o u r g e o i s i e , and t h e m i d d l e - r a n g e i n d i g e n o u s b o u r g e o i s i e . 181. Clement would explain the domination of the comprador bourgeoisie by pointing out the union of f i n a n c i a l and i n d u s t r i a l c a p i t a l i n the United States, which has produced a well-financed manufacturing and resource sector. In Canada, he wrote,, the dominant f r a c t i o n of the bourgeoisie has tended to invest i n areas of the economy that brought a surer return on t h e i r c a p i t a l , such as u t i l i t i e s and transportation. Interestingly enough, the most important national force i n the Canadian o i l industry i s based in the f i n a n c i a l community. The guiding hand behind two of the largest and most important integrated Canadian o i l companies was the investment house, Nesbitt Thompson. Both Dean Nesbitt and J.A. Thompson were powerful forces i n Montreal f i n a n c i a l c i r c l e s and they pressed the two o i l companies under t h e i r control into expanding t h e i r production operations i n the West and t h e i r marketing operations across Canada. S i m i l a r l y , the Winnipeg investment house, Osier Hammond and Nanton, was an aggressive force behind the develop-ment of Canadian O i l Companies. Thus, of the four largest integrated Canadian o i l companies, only B r i t i s h American O i l was not under the control of a major f i n a n c i a l house; i n the American mould, i t had been founded by a single entrepreneur and financed by issuing shares and borrowing on the market. 182. Thus, none of the major integrated Canadian o i l firms seems to f i t comfortably i n the model that Clement has outlined. In the o i l industry, at least, Canadian financiers do not seem to have been reluctant or cautious about investing i n an i n d u s t r i a l venture, and they did not give up t h e i r control over the integrated o i l companies e a s i l y . At the same time, the linkage of f i n a n c i a l and i n d u s t r i a l c a p i t a l that t y p i f i e d American industry occurred i n Canada i n the development of B r i t i s h American O i l . Thus Clement's three segments of the Canadian bourgeoisie seem to be somewhat too r i g i d to describe the s i t u a t i o n of the Canadian petroleum industry, c e r t a i n l y i n the f i r s t decade a f t e r Leduc. The entrepreneurship and the int e r e s t were present among the corporate e l i t e . So why did the owners and managers of the Canadian integrated companies lose control of these firms? If the circumstances of each of the corporate takeovers i s examined, i t becomes clear that i n each case the Canadian owners were unable to amass enough c a p i t a l to prevent foreign buyers from purchasing t h e i r companies. At the beginning of the Leduc boom, the Canadian o i l companies were i n a p a r t i c u l a r l y vulnerable po s i t i o n . These companies were, at the end of World War II, p r i n c i p a l l y manufacturing firms. They bought most of t h e i r crude o i l from abroad, refined i t i n t h e i r Ontario and Quebec r e f i n e r i e s and sold i t through t h e i r d i s t r i b u t i o n networks. 183 . They i n v o l v e d , as we have seen, a union of i n d u s t r i a l and commercial c a p i t a l s . With the discovery of o i l at Leduc, these four large Canadian firms began to i n t e g r a t e "backwards". With the exception of B r i t i s h American O i l s , none had experience i n the o i l f i e l d s of the West. A l l of the a v a i l a b l e surplus from the eastern Canadian r e f i n i n g operations was put to a i d the wholesale expansion of the e x p l o r a t i o n and production side of the e n t e r p r i s e . Over the f i r s t years a f t e r the boom these companies moved from being p r i n c i p a l l y manufacturers to being n a t u r a l resource companies as w e l l . The f o r e i g n i n t e g r a t e d f i r m s , on the other hand, functioned as i n t e g r a t e d companies w i t h i n i n t e g r a t e d empires. When they wished to expand, they could c a l l not only upon the resources of t h e i r r e f i n i n g and s a l e s operations i n Eastern Canada, but a l s o on the p r o f i t s gained from the parent company's production and r e f i n i n g operations abroad. This network provided not only the c a p i t a l f o r expansion i n t o production a c t i v i t i e s i n Western Canada, but a l s o f o r the purchase of the assets of i n t e g r a t e d Canadian companies. 184 . I n comparing the two gro u p s , t h e n , i t seems t h a t the i n t e g r a t e d Canadian companies c o u l d c a l l upon c a p i t a l f o r r e i n v e s t m e n t from one a r e a - t h e i r r e f i n i n g o p e r a t i o n s - whereas the f o r e i g n - b a s e d , i n t e g r a t e d companies c o u l d c a l l upon p r o f i t s from f o u r phases o f i t s o r g a n i z a t i o n . By the time t h e f o r e i g n companies d e c i d e d t o t a k e over the Canadian f i r m s , the i n t e g r a t e d Canadian companies had committed t h e i r main s o u r c e o f c a p i t a l t o t h e e x p a n s i o n o f t h e i r p r o d u c t i o n o p e r a t i o n s i n Western Canada, and i t was t o o l a t e t o use t h a t c a p i t a l t o fen d o f f the t a k e o v e r b i d . The s t r u c t u r e o f branch p l a n t c a p i t a l i s m , not the tendency f o r Canadian c a p i t a l i s t s t o choose o t h e r s e c t o r s of t h e economy f o r i n v e s t m e n t , was the fundamental r e a s o n f o r the f a i l u r e o f Canadian c a p i t a l i s t s t o m a i n t a i n c o n t r o l o f t h e i n t e g r a t e d , Canadian o i l companies. A second i m p o r t a n t segment o f the Canadian p e t r o l e u m i n d u s t r y i s made up o f tho s e companies i n v o l v e d i n the t r a n s m i s s i o n o f o i l and gas. W a l l a c e Clement's t h e o r e t i c a l approach suggested t h a t t h e s e t r a n s m i s s i o n systems would be under Canadian c o n t r o l , because the dominant i n d i g e n o u s b o u r g e o i s i e has t r a d i t i o n a l l y made s t r o n g i n v e s t m e n t s i n u t i l i t i e s and t r a n s p o r t a t i o n . In f a c t we f i n d t h a t Canadian o i l p i p e l i n e s have been, from the Leduc e r a f o r w a r d , under t h e almost e x c l u s i v e c o n t r o l o f 185. foreign-owned i n t e g r a t e d companies. The o i l i n d u s t r y has t r a d i t i o n a l l y r e g a r d e d o i l p i p e l i n e s as e x t e n s i o n s o f the p r o d u c t i o n system, as a r t e r i e s t h a t t a k e the raw p e t r o l e u m from th e p o i n t o f p r o d u c t i o n t o the p o i n t o f r e f i n i n g . V e r t i c a l l y i n t e g r a t e d companies f i n d i t t o t h e i r f i n a n c i a l advantage t o m a i n t a i n c o n t r o l o f the o i l t hey produce u n t i l i t r e aches th e r e f i n i n g s t a g e , s i n c e t h a t i s where the g r e a t e s t m a rgin o f p r o f i t i s t o be made. W h i l e i t may be t r u e , as Clement a s s e r t s , t h a t the Canadian b o u r g e o i s i e would be w i l l i n g t o i n v e s t i n o i l p i p e l i n e s , i n f a c t t h e y have not been g i v e n t h e o p p o r t u n i t y . The f o r e i g n - b a s e d i n t e g r a t e d companies have m a i n t a i n e d a s t r a n g l e h o l d on Canada's major o i l p i p e l i n e s s i n c e the I n t e r p r o v i n c i a l P i p e L i n e was f i r s t proposed i n 1949. There was i n f a c t one s i z a b l e , p i p e l i n e e s t a b l i s h e d by a Canadian o i l company i n the p e r i o d under r e v i e w . A f t e r i t s d i s c o v e r y o f the Swan H i l l s f i e l d , Home O i l b u i l t t h e 76-mile P r o d u c e r s P i p e l i n e t o Edmonton. T h i s p i p e l i n e , once a g a i n , was i n t h e hands of the p r i n c i p a l p r o d u c i n g company i n t h e f i e l d , and n e i t h e r the comprador s e c t o r o f the i n d u s t r y nor the d o m e s t i c i n d i g e n o u s f r a c t i o n o f the b o u r g e o i s i e was g i v e n an o p p o r t u n i t y t o p a r t i c i p a t e i n the ownership of i t . T h i s s u g g e s t s t h a t ownership o f the t r a n s m i s s i o n s e c t o r o f t h e p e t r o l e u m i n d u s t r y depends more on ownership of the r e s o u r c e t han i t does on t h e t r a d i t i o n a l s t r e n g t h o f the dominant i n d i g e n o 186 . b o u r g e o i s i e , and i n d e e d , the dominant n a t i o n a l s e c t o r o f the b o u r g e o i s i e may be f r o z e n out o f a p o t e n t i a l a r e a o f i n v e s t m e n t by b o t h t h e comprador b o u r g e o i s i e and t h e m i d d l e -range b o u r g e o i s i e . T r a n s m i s s i o n p a t t e r n s i n the n a t u r a l gas i n d u s t r y a r e v e r y d i f f e r e n t . The n a t u r a l gas i n d u s t r y was not as h i g h l y i n t e g r a t e d as t h e p e t r o l e u m i n d u s t r y , nor d i d i t g i v e t h e same r a t e of r e t u r n on i n v e s t m e n t . I n t h e e a r l y y e a r s , the market f o r n a t u r a l gas was s m a l l , and t h e r e were many f i r m s competing t o s e l l n a t u r a l gas a t a low r a t e o f r e t u r n . C o n s e q u e n t l y , the l a r g e o i l companies s o l d o f f many o f t h e i r g a s - p r o d u c i n g p r o p e r t i e s t o s m a l l e r Canadian companies. The c a r r i e r s , t o o , were c o n f i n e d t o a low p r o f i t r a t e r e g u l a t e d by t h e s t a t e -u s u a l l y 7%%. Thus i t would n ot have been s u r p r i s i n g t o see gas t r a n s m i s s i o n companies under the c o n t r o l o f Canadian companies. N e v e r t h e l e s s , i n the f i r s t decade o f p i p e l i n e c o n s t r u c t i o n , the l a r g e s t n a t u r a l gas p i p e l i n e , TransCanada P i p e L i n e s ' n a t i o n a l c a r r i e r , was under the c o n t r o l o f f o r e i g n - b a s e d f i r m s . I t was o n l y when c o n s t r u c t i o n was complete and the p i p e l i n e was i n o p e r a t i o n t h a t the f o r e i g n owners s o l d out t o Canadian s h a r e h o l d e r s . By t h a t time the o r i g i n a l s t o c k had i n c r e a s e d i n v a l u e m a n y f o l d , and the f o r e i g n p i p e l i n e companies were a b l e t o s e l l out a t an immense p r o f i t . 187. Thus, gas transmission f a c i l i t i e s did come under Canadian control, but only because the greatest portion of p r o f i t had already been r e a l i z e d by the foreign-companies that owned them, not because of any f i n a n c i a l strength or entrepreneurship i n t r i n s i c to the purchasers. Clement's theory also suggested that i t would be the dominant indigenous bourgeoisie that would control the transmission sector. But the company that bought out the U.S.-owned intere s t i n TransCanada Pipe Lines was Home O i l ; i t s owners did not conform to the d e f i n i t i o n of the dominant indigenous e l i t e . They were, rather, members of the middle-range domestic bourgeoisie. Thus i t would seem that Clement's breakdown of the Canadian corporate e l i t e into three mutually-exclusive groups (the comprador bourgeoisie, the dominant indigenous and the middle-range indigenous bourgeoisie) runs into numerous problems when applied to the petroleum industry i n i t s f i r s t two decades. The theory seems to run into problems because i t was developed synchronically; i t projects backward i n time to explain how the s i t u a t i o n that existed i n the 19 70 s came to be. As Niosi has suggested, the structure of the bourgeoisie i s highly mobile, responding to d i f f e r e n t stimuli at d i f f e r e n t times, and Clement's three-part d i v i s i o n of the Canadian bourgeoisie, with each f r a c t i o n destined to play a single.role over decades, i s 188. not s u f f i c i e n t l y f l e x i b l e to account for the changes that took place i n the o i l industry as i t entered i t s f i r s t major boom period. The body of t h i s thesis also raises questions about the work of John Richards and Larry Pratt. They proposed the notion of a regional bourgeoisie, made up of "...leading indigenous entrepreneurs, managers and upper income professionals, l i n k i n g private and public sectors i n a quasi corporatist a l l i a n c e of i n t e r e s t s " (Pratt and Richards 1979:167). They implied that t h i s regional bourgeoisie would band together to defend i t s i n t e r e s t against the i n t e r e s t of an Eastern-based, national bourgeoisie. The data i n t h i s thesis provide some material for examining the degree to which the various segments of the petroleum industry function as a single c l a s s . In the f i r s t place, t h i s thesis suggests that there are many more fragments i n the petroleum industry than Pratt and Richards have referred to. In addition to the integrated companies, six separate segments of the non-integrated producing companies were i d e n t i f i e d . There were also a group of transmission companies and a group of independent r e f i n e r s . The analysis contained i n Chapter IV would indicate that there are profound cleavages d i v i d i n g the segments of the petroleum industry. The deepest d i v i s i o n has been shown to 189. e x i s t between t h e i n t e g r a t e d , f o r e i g n - o w n e d companies and th e n o n - i n t e g r a t e d , Canadian-owned f i r m s . I n a l l t h r e e a r e a s t h a t were examined - t a x a t i o n p o l i c y , m i n e r a l r i g h t s l e a s i n g and e x p o r t p o l i c y - t h e s e two f r a c t i o n s came i n t o c o n f l i c t . A b r i e f r e c a p i t u l a t i o n o f t h e s e s t r u g g l e s w i l l a s s i s t i n c l a r i f y i n g the c h a r a c t e r and depth o f t h e d i v i s i o n between t h e s e two segments o f the p e t r o l e u m i n d u s t r y . The a r e a f o r w h i c h the g r e a t e s t d ocumentation e x i s t s i s the b a t t l e f o r e x p o r t m a r k e t s . From 1949 u n t i l t h e announcement o f the N a t i o n a l O i l P o l i c y , the Canadian, n o n - i n t e g r a t e d companies and t h e f o r e i g n , i n t e g r a t e d companies took d i a m e t r i c a l l y opposed p o s i t i o n s t h a t c o r r e s p o n d e d t o t h e i r d i f f e r e n t i n t e r e s t s . The Canadian companies sought a g u a r a n t e e d market f o r t h e i r o i l i n E a s t e r n Canada; t h e f o r e i g n companies sought t o m a i n t a i n t h e i r p r i v i l e g e d p o s i t i o n i m p o r t i n g t h e i r cheap o i l from abroad t o the l a r g e E a s t Coast market w h i l e k e e p i n g t h e i r A l b e r t a o i l w e l l s p r o d u c i n g f o r t h e Western market. There was a t h i r d group o f companies, n o n - i n t e g r a t e d f i r m s owned by f o r e i g n i n t e r e s t s . They wanted t o expand the market f o r A l b e r t a o i l i n t o the U.S. mid-west, where i t would not t h r e a t e n the hegemony of the f o r e i g n i n t e g r a t e d f i r m s i n Canada. 190. I f t h e s e t h r e e segments o f the i n d u s t r y f u n c t i o n e d as a s i n g l e c l a s s i t would be e x p e c t e d t h a t t h e y c o u l d have rea c h e d some r e s o l u t i o n o f t h i s c o n f l i c t i n t e r n a l l y . T h i s was not so. Over th e two y e a r c o u r s e o f t h e h e a r i n g s o f t h e R o y a l Commission on Energy, the t h r e e o p p o s i n g segments o f t h e i n d u s t r y became more e n t r e n c h e d i n t h e i r p o i n t s o f v i e w . I t took t h e government imposed s e t t l e m e n t , the Ottawa V a l l e y l i n e , t o b r i d g e t h e gap. I n the case o f A l b e r t a m i n e r a l r i g h t s l e g i s l a t i o n the Canadian, n o n - i n t e g r a t e d companies a g a i n came i n t o c o n f l i c t w i t h t h e f o r e i g n , i n t e g r a t e d f i r m s . An i n t e r e s t i n g s i t u a t i o n a r o s e i n 19 48; I m p e r i a l O i l had amassed over two m i l l i o n a c r e s i n m i n e r a l r i g h t s , and was under p r e s s u r e from, a l l segments of the i n d u s t r y t o w i t h d r a w from b i d d i n g on t h e n e x t p r o v i n c i a l l a n d a u c t i o n . Faced w i t h a near monopoly p o s i t i o n , t h e company c o m p l i e d . A t the a u c t i o n , most of the l a n d p a r c e l s were won by B r i t i s h American O i l s . I n t h i s c a s e , a l l s e c t o r s o f the o i l i n d u s t r y were i n agreement t h a t a monopoly s i t u a t i o n would have done the i n d u s t r y harm, and a compromise was r e a c h e d w i t h o u t an open b r e a c h . Two y e a r s l a t e r , the n o n - i n t e g r a t e d companies p r e c i p i t a t e d a n o t her c o n f l i c t by a c c u s i n g the i n t e g r a t e d companies, as a group, of m o n o p o l i z i n g m i n e r a l r i g h t s t e n u r e i n the p r o v i n c e . In t h i s 191. c a s e , the i n t e g r a t e d companies, b u t t r e s s e d by t h e p r o v i n c i a l government, i n s i s t e d t h a t t h e m i n e r a l r i g h t s t e n u r e system was f a i r , and r e f u s e d t o cede any o f t h e i r advantages. As a r e s u l t , many of t h e ' C a n a d i a n , n o n - i n t e g r a t e d companies went b a n k r u p t , and many o t h e r s moved t h e i r o p e r a t i o n s t o Saskatchewan. I f t h e CCF government i n Saskatchewan had not implemented a p r o -Canadian m i n e r a l r i g h t s t e n u r e system i t i s l i k e l y t h a t v e r y few Canadian companies would have s u r v i v e d t h e f i f t i e s . I t would seem, t h e n , t h a t P r a t t and R i c h a r d s ' d e s c r i p t i o n o f t h e o i l e l i t e a c t i n g as a s i n g l e c l a s s i s somewhat e x a g g e r a t e d . The c l e a v a g e between th e C anadian, n o n - i n t e g r a t e d companies and t h e f o r e i g n , i n t e g r a t e d ones was r e a l and p r o f o u n d . The s u c c e s s o f the f o r e i g n f i r m s was p r e d i c a t e d on the m a i n t a i n e n c e o f t h e i r c o n t r o l o ver a l l a s p e c t s o f the o i l i n d u s t r y ; t h e s u r v i v a l o f the n o n - i n t e g r a t e d companies depended on b r e a k i n g down t h e monopoly g r i p o f t h e i n t e g r a t e d companies; and between tho s e two p o s i t i o n s t h e r e was v e r y l i t t l e room f o r n e g o t i a t i o n . N o i s i , a l o n g w i t h P r a t t and R i c h a r d s , has p o s i t e d the n o t i o n t h a t t h e r e i s a n a t i o n a l b o u r g e o i s i e i n c o m p e t i t i o n w i t h t h e r e g i o n a l b o u r g e o i s i e o f A l b e r t a . T h i s i d e a does not h o l d up v e r y w e l l when examined i n the l i g h t o f the d a t a g a t h e r e d h e r e . The t h r e e s c h o l a r s have i d e n t i f i e d an O n t a r i o - b a s e d n a t i o n a l b o u r g e o i s i e w i t h r o o t s i n the m a n u f a c t u r i n g i n d u s t r i e s o f E a s t e r n Canada, and an A l b e r t a - b a s e d b o u r g e i o s i e w i t h i t s r o o t s i n t h e p e t r o l e u m i n d u s t r y and i t s a f f i l i a t e s . Y e t , as we have seen, 192 . the petroleium i n d u s t r y i s not c o n f i n e d t o A l b e r t a . Indeed, the most p o w e r f u l segment o f t h e i n d u s t r y , the i n t e g r a t e d f i r m s , has v e r y s t r o n g bonds c o n n e c t i n g i t s E a s t e r n and Western o p e r a t i o n s . Are P r a t t , R i c h a r d s and N i o s i s u g g e s t i n g t h a t t h e members o f the A l b e r t a - e l i t e would a l l o w t h e i r r e g i o n a l sympathies t o t a k e precedence over t h e n a t i o n a l good o f the f i r m ? The c o n c l u s i o n o f t h i s t h e s i s i s t h a t the i n t e g r a t e d companies f u n c t i o n i n a c o h e s i v e f a s h i o n , because, as Crompton and Gubb y p o i n t o u t , t h e i r p r i n c i p a l aim i s the c r e a t i o n o f p r o f i t . R e g i o n a l c o n c e r n s , t o the e x t e n t t h a t t h e y e x i s t , a t e o f f a r ' l e s s i m p o r t a n c e . A t i t s h e a r t , t h i s t h e s i s has argued t h a t the s t r u c t u r e o f the Canadian o i l i n d u s t r y i s more complex than i s u s u a l l y n o t e d . There are. e i g h t s e p a r a t e segments of t h e i n d u s t r y t h a t have been i d e n t i f i e d h e r e . The fundamental d i v i s i o n i n t h e i n d u s t r y i s between i n t e g r a t e d and n o n - i n t e g r a t e d companies, s i n c e i t i s the degree o f i n t e g r a t i o n o f t h e f i r m t h a t s e t s t h e l i m i t s o f i t s p o t e n t i a l t o accumulate s u r p l u s v a l u e . A second c r i t i c a l c l e a v a g e s p r i n g s from the n a t i o n a l i t y o f the f i r m . W h i l e t e n s i o n has e x i s t e d between the f o r e i g n , i n t e g r a t e d f i r m s and most o t h e r segments o f t h e i n d u s t r y , d o m e s t i c and f o r e i g n , t h e m u l t i n a t i o n a l s have been p a r t i c u l a r l y a t odds w i t h the Canadian, n o n - i n t e g r a t e d f i r m s . 193 . F i n a l l y , we have found t h a t r e g i o n a l i s m , as d i v o r c e d from c l a s s , p l a y s o n l y a s m a l l r o l e i n the development of t h e Canadian p e t r o l e u m i n d u s t r y . The n a t i o n a l and i n t e r n a t i o n a l s t r u c t u r e o f the p e t r o l e u m i n d u s t r y , and the o v e r r i d i n g g o a l o f m a x i m i z i n g s u r p l u s v a l u e , m i l i t a t e d a g a i n s t the A l b e r t a -based companies f u n c t i o n i n g as a u n i t e d , r e g i o n a l l y - b a s e d c l a s s . 194 . B: THE STATE AND THE PETROLEUM INDUSTRY: SOME THEORETICAL OBSERVATIONS One o f the fundamental i s s u e s r a i s e d by Canadian p o l i t i c a l e c o n omists i s the r e l a t i o n s h i p between s e c t o r s o f the b o u r g e o i s i e and t h e f e d e r a l and p r o v i n c i a l s t a t e s . To what degree does the s t a t e have the power t o h e l p o r h i n d e r the development o f any one c l a s s f r a c t i o n ? And w i t h w h i c h c l a s s f r a c t i o n s has the s t a t e a l l i e d i t s e l f i n the past?' W a l l a c e Clement, i n h i s es s a y i n the P a n i t c h c o l l e c t i o n , wrote t h a t " . . . ( i ) n terms o f f r a c t i o n s o f the c a p i t a l i s t c l a s s , l a r g e f o r e i g n and Canadian c a p i t a l i s t s have been e f f e c t i v e i n u s i n g the s t a t e a p p a r a t u s t o a g g r a n d i z e t h e i r own power i n t h e i r spheres o f c o n c e n t r a t i o n w h i l e s m a l l e r n a t i o n a l c a p i t a l i s t s have o f t e n been l e f t t o 'fend f o r t h e m s e l v e s ' " ( i n P a n i t c h 1977:226). I f we- t u r n t o the s i t u a t i o n o f the Canadian o i l i n d u s t r y i n the post-Leduc p e r i o d , we f i n d t h a t the s t a t e , b o t h p r o v i n c i a l l y and f e d e r a l l y , was a l l i e d w i t h t h e comprador b o u r g e o i s i e . A t the f e d e r a l l e v e l , t he s t a t e f o r m u l a t e d the t a x regime t h a t a l l o w e d b e n e f i t s t o a c c r u e t o the f o r e i g n companies t h a t e s t a b l i s h e d s u b s i d i a r i e s i n Canada. When t a k e n i n c o n j u n c t i o n w i t h the t a x i n c e n t i v e s o f f e r e d by t h e American government t o encourage U.S. companies t o i n v e s t abroad, the Canadian laws formed an i n t e g r a l 195 . p a r t o f t h e l e g i s l a t i v e system t h a t p e r m i t t e d American o i l companies t o dominate the Canadian p e t r o l e u m i n d u s t r y . W i t h o u t the Canadian t a x i n c e n t i v e s , t h e f o r e i g n - b a s e d , i n t e g r a t e d companies would not have had t h e freedom t o move l a r g e q u a n t i t i e s of c a p i t a l i n t o Canada t o purchase t h e i n t e g r a t e d Canadian o i l f i r m s ; nor would t h e y have been a b l e t o move t h e i r p r o f i t s back t o the U n i t e d S t a t e s . Thus, the f e d e r a l s t a t e , t h r o u g h i t s t a x a t i o n system, p l a y e d a c r i t i c a l r o l e i n t h e c r e a t i o n and sustenance o f a l a r g e , s t r o n g comprador b o u r g e o i s i e i n t h e p e t r o l e u m i n d u s t r y . A t the same t i m e , f e d e r a l t a x laws s t r e n g t h e n e d the hand o f the U.S. f i n a n c i a l e l i t e i n Canada. The t a x r e g u l a t i o n s t h a t p e r m i t t e d the i n v e s t m e n t o f m i l l i o n s o f d o l l a r s i n t a x s h e l t e r e d i n v e s t m e n t f r u n d s , e n a b l e d American i n v e s t o r s t o c o n t r o l a l a r g e r p r o p o r t i o n o f the f o r e i g n - b a s e d , i n t e g r a t e d o i l companies than was c o n t r o l l e d d i r e c t l y from t h e U n i t e d S t a t e s . They p e r -m i t t e d the s p e c i a l l y - e s t a b l i s h e d i n v e s t m e n t funds t o own l a r g e b l o c k s o f shares' i n many o f the . C a n a d i a n , n o n - i n t e g r a t e d companies. I n a few c a s e s , t h e f e d e r a l t a x regime r e s u l t e d i n t h e c r e a t i o n o f . Canadian o i l companies by t h e American f i n a n c i a l e l i t e , something t h a t d i d not happen i n the o i l i n d u s t r y i n t h e U n i t e d S t a t e s . A l t h o u g h Clement's schema does n ot d i s t i n g u i s h between t h e U.S. c o r p o r a t e and f i n a n c i a l e l i t e s , i t f i t s w i t h h i s o v e r a l l t h e o r e t i c a l 196 . s t r u c t u r e t h a t t h e s e two s e c t o r s o f t h e American b o u r g e o i s i e b o th b e n e f i t e d from the t a x s t r u c t u r e put i n p l a c e by the Canadian s t a t e i n the post-war p e r i o d . On t h e i s s u e o f o i l m a r k e t i n g , t h e f e d e r a l government a l s o p l a y e d a c r u c i a l r o l e i n the s u c c e s s o f d i f f e r e n t c l a s s f r a g m e n t s . I t was, once a g a i n , the f o r e i g n , i n t e g r a t e d companies t h a t b e n e f i t e d most from the p o l i c i e s o f the f e d e r a l government. As M e l i s s a C l a r k (1978.) showed i n h e r t h e s i s , t h e Department o f Trade and Commerce a s s i s t e d i n the development o f t h e e a s t - w e s t market d i v i s i o n t h a t b e s t s u i t e d the m u l t i n a t i o n a l companies. The Department o f E x t e r n a l A f f a i r s p l a y e d a key r o l e i n n e g o t i a t i n g i m p o r t / e x p o r t r e l a t i o n s h i p s w i t h t h e U n i t e d S t a t e s t h a t e n a b l e d t h e f o r e i g n , i n t e g r a t e d companies t o .use Western Canadian o i l t o open up new markets f o r the m u l t i n a t i o n a l s i n the mid-Western U n i t e d S t a t e s . As a consequence, d u r i n g t h e 1950s t h e p e t r o l e u m t r a d i n g p a t -t e r n i n Canada emerged a l o n g a n o r t h - s o u t h a x i s t h a t d i d not make a g r e a t d e a l o f sense i n terms o f Canada's e x p o r t / i m p o r t b a l a n c e . Large amounts o f p e t r o l e u m were i m p o r t e d from t h e M i d d l e E a s t and V e n e z u e l a i n t o E a s t e r n Canada, where the l a r g e s t Canadian market l a y , w h i l e s m a l l e r q u a n t i t i e s o f o i l were e x p o r t e d from Western Canada t o the U n i t e d S t a t e s . I t was a m a r k e t i n g p a t t e r n t h a t e x i s t e d t o s t r e a m l i n e the o p e r a t i o n s o f t h e fo r e i g n - o w n e d companies. A t t h e same time i t k e p t t h e Canadian p e t r o l e u m economy v u l n e r a b l e t o a shutdown o f American o i l i m p o r t s , t o a 197 . slowdown i n shipments from o f f s h o r e p r o d u c e r s and t o an i n t e r -n a t i o n a l o i l g l u t . Y e t t h e f e d e r a l government s a n c t i o n e d and encouraged the deepening dependency between t h e Canadian and American economies t h r o u g h o u t the 1950s. Clement a l s o h y p o t h e s i z e s t h a t the dominant i n d i g e n o u s b o u r g e o i s i e w i l l b e n e f i t from t h e a s s i s t a n c e o f the s t a t e . How-e v e r , as we have seen, t h e segment o f the Canadian o i l i n d u s t r y c o n t r o l l e d by the dominant b o u r g e o i s i e , the' Canadian, i n t e g r a t e d oiT-i.compahies.7 owas t a k e n over by t h e f o r e i g n i n t e g r a t e d s e c t o r i n t h e f i f t e e n y e a r s t h a t f o l l o w e d Leduc. D e s p i t e the p u b l i c o u t c r y a t the time o f t h e f i n a l p u r c h a s e o f a Canadian i n t e g r a t e d company (White Rose, 1962), t h e r e was no move by the s t a t e t o i n t e r v e n e i n t h e p u r c h a s e . I t would f o l l o w t h a t , i n c o n f l i c t s where the i n t e r e s t s o f t h e comprador b o u r g e o i s i e r a n d i r e c t l y c o u n t e r t o the i n t e r e s t s o f t h e dominant, i n d i g e n o u s b o u r g e o i s i e , the s t a t e would accede t o t h e needs o f t h e foreig n - o w n e d companies. At t h e same t i m e , by the terms o f Clement's t h e s i s , we would e x p e c t t h e s t a t e t o a s s i s t t he dominant, i n d i g e n o u s b o u r g e o i s i e t o c o n t r o l t h e t r a n s m i s s i o n s e c t o r o f t h e p e t r o l e u m i n d u s t r y . T h i s p r o v e s n o t t o be t h e c a s e . The t r a n s m i s s i o n o f o i l i s c o n t r o l l e d by the f o r e i g n , i n t e g r a t e d companies and i n t h e e a r l y 1950s the s t a t e h a s t e n e d t o p r o v i d e t h e l e g i s l a t i o n n e c e s s a r y f o r t h a t d o m i n a t i o n t o t a k e p l a c e . The major n a t u r a l gas t r a n s m i s s i o n l i n e was o r i g i n a l l y owned by a f o r e i g n - c o n t r o l l e d c o n s o r t i u m . 198. . Both th e f e d e r a l government and the government o f A l b e r t a p l a y e d r o l e s i n b r i n g i n g more f o r e i g n p a r t n e r s i n t o t h e c o n s o r t i u m and hence i n d i l u t i n g t h e p a r t i c i p a t i o n o f the Canadian f i n a n c i e r s who had been i n s t r u m e n t a l i n r a i s i n g t h e i n i t i a l p r o p o s a l . And when the American owners o f TransCanada P i p e L i n e s s o l d o u t , i t was a company b e l o n g i n g t o the m i d d l e - r a n g e d o m e s t i c b o u r g e o i s i e t h a t made the p u r c h a s e . T h i s s u g g e s t s t h a t t h e dominant, d o m e s t i c b o u r g e o i s i e d i d not have as c l o s e a r e l a t i o n s h i p : w i t h the s t a t e as Clement b e l i e v e s . Clement has a l s o h y p o t h e s i z e d t h a t t h e s t a t e ' s i n f l u e n c e would not be used t o s e r v e the needs o f t h e m i d d l e - r a n g e , d o m e s t i c b o u r g e o i s i e . Y e t , as has been shown, the m i d d l e - r a n g e , i n d i g e n o u s e l i t e came t o w i e l d c o n s i d e r a b l e i n f l u e n c e w i t h the Canadian s t a t e . In the immediate p o s t - L e d u c p e r i o d , t h e s e companies found them-s e l v e s a t a s e r i o u s d i s a d v a n t a g e . They c o u l d not t a k e advantage of f e d e r a l t a x l e g i s l a t i o n t o draw i n d r i l l i n g monies from Cana-d i a n i n v e s t o r s . They c o u l d not w r i t e o f f t h e i r e x p l o r a t i o n ex-penses a g a i n s t t h e i r income. Yet t h e r e was one p i e c e o f t a x l e g i s l a t i o n t h a t proved t o be the s a l v a t i o n o f the n o n - i n t e g r a t e d companies: the p r o v i s i o n o f t a x i n c e n t i v e s f o r f o r e i g n i n v e s t -ment f u n d s . M i l l i o n s o f d o l l a r s o f i n v e s t m e n t c a p i t a l e n t e r e d the n o n - i n t e g r a t e d ' companies t h r o u g h t h e s e funds i n a p e r i o d when the ..Canadian banks were h e s i t a n t t o advance funds t o d o m e s t i c o i l companies. I t i s p r o b a b l y not an e x a g g e r a t i o n t o say t h a t the l e g i s l a t i o n t h a t p r o v i d e d c a p i t a l from the American i n v e s t -ment funds was the fundamental f a c t o r i n the s u r v i v a l o f the Canadian, n o n - i n t e g r a t e d segment o f the i n d u s t r y . A second a r e a o f s t a t e a c t i v i t y t h a t had a p r o f o u n d e f f e c t on t h e development o f the n o n - i n t e g r a t e d , Canadian companies was t h e f e d e r a l government's d e c i s i o n t o put the q u e s t i o n o f a M o n t r e a l p i p e l i n e on the agenda of the a l r e a d y - p r o c l a i m e d R o y a l Commission on Energy, The i s s u e was debated a t l e n g t h and Bob Brown of Home O i l appeared b e f o r e t h e Commission on more than one o c c a s i o n t o update th e e v i d e n c e on the f e a s i b i l i t y o f a p i p e l i n e t o M o n t r e a l . None of t h i s was c o m p a t i b l e w i t h t h e b e h a v i o r o f a government det e r m i n e d n o t t o n e g o t i a t e a change i n p o l i c y f a v o u r a b l e t o the Canadian b o u r g e o i s i e . Indeed, the con-c l u s i o n s o f t h e R o y a l Commission, e x t e n d i n g the E a s t e r n boundary of Western o i l shipments t o Ottawa, i n c r e a s e d the market a r e a f o r A l b e r t a o i l c o n s i d e r a b l y and i n some measure s a t i s f i e d the n o n - i n t e g r a t e d companies' demands. A t the same time the f e d e r a l government was a b l e t o argue s u c c e s s f u l l y w i t h t h e U.S. a d m i n i s -t r a t i o n t h a t Canada s h o u l d be exempt from o i l i m p o r t q u o t a s . The r e s o l u t i o n o f the e x p o r t and M o n t r e a l p i p e l i n e debate was a compromise between the demands of the f o r e i g n , i n t e g r a t e d companies and the d o m e s t i c , n o n - i n t e g r a t e d f i r m s . N e i t h e r group r e c e i v e d a l l t h a t i t s e t out t o a c h i e v e . Y e t , t h e v e r y f a c t t h a t 200. a compromise was re a c h e d was a s t e p f o r w a r d f o r the Canadian f i r m s . The c o n c l u s i o n s o f the R o y a l Commission on Energy marked the f i r s t o c c a s i o n s i n c e the Leduc d i s c o v e r y t h a t the Canadian, n o n - i n t e g r a -t e d f i r m s had f o r c e d a c o n f r o n t a t i o n and had won a s i g n i f i c a n t v i c t o r y . In c o n c l u s i o n , i t would seem t h a t W a l l a c e Clement's hypotheses run i n t o some d i f f i c u l t y when a p p l i e d t o the Canadian o i l i n d u s t r y o f the f i f t i e s . The f e d e r a l s t a t e c l e a r l y d e v e l o p e d p o l i c i e s t h a t a s s i s t e d the growth o f the f o r e i g n s e c t o r o f the i n d u s t r y a t the expense of the Canadian-owned companies. N e v e r t h e l e s s , i n the o i l i n d u s t r y a t l e a s t , the dominant i n d i g e n o u s b o u r g e o i s i e was not a b l e t o c a l l upon the f e d e r a l s t a t e f o r p o l i c y i n i t i a t i v e s t o p r o t e c t i t s i n t e r e s t a g a i n s t the f o r e i g n o i l c o n c e r n s . S i m i l a r l y , Clement's argument cannot account f o r the i n f l u e n c e t h a t the m i d d l e - r a n g e , d o m e s t i c b o u r g e o i s i e was a b l e t o e x e r t on t h e f e d e r a l s t a t e . C l e a r l y , a n o t h e r e x p l a n a t i o n f o r t h e s t a t e ' s r e l a t i o n s h i p w i t h the b o u r g e o i s i e w i l l have t o be found. L a r r y P r a t t and John R i c h a r d s have t r i e d t o e x p l a i n the r e l a t i o n s h i p between f r a c t i o n s of t h e b o u r g e o i s i e and t h e s t a t e by g i v i n g prime importance t o the r o l e . o f r e g i o n a l i s m . A c c o r d i n g t o P r a t t and R i c h a r d s , a r e g i o n a l s p i r i t l i n k s t he o i l - b a s e d e l i t e and the c h i e f f u n c t i o n a r i e s o f t h e p r o v i n c i a l s t a t e i n A l b e r t a i n t o " . . . i n a q u a s i - c o r p o r a t i s t a l l i a n c e o f i n t e r e s t s " ( P r a t t and R i c h a r d s 1979:167). These s c h o l a r s b e l i e v e t h a t t h i s 201. r e g i o n a l l i n k a g e o f b o u r g e o i s i e and s t a t e i s i n d i r e c t c o m p e t i t i o n w i t h the n a t i o n a l b o u r g e o i s i e and i t s r e l a t i o n s h i p w i t h the f e d e r a l s t a t e . z. As was o u t l i n e d p r e v i o u s l y , t h e r e are s e r i o u s problems w i t h the a u t h o r s ' i d e a of a r e g i o n a l b o u r g e o i s i e , s i n c e t h e s t r u c t u r e of the o i l i n d u s t r y n e c e s s i t a t e s a pan-Canadian r a t h e r than a s t r i c t l y r e g i o n a l approach. S i m i l a r l y , the concept of o u t r i g h t c o m p e t i t i o n between a p r o v i n c i a l and a n a t i o n a l s t a t e runs i n t o d i f f i c u l t i e s . I f we l o o k t o t h e 1950s f o r examples, we f i n d t h a t on many i s s u e s b o th th e f e d e r a l and p r o v i n c i a l governments s i d e d w i t h the f o r e i g n , i n t e g r a t e d p e t r o l e u m companies. In the body of t h i s t h e s i s we have examined how t a x p o l i c y and m i n e r a l r i g h t s t e n u r e both tended t o encourage the l a r g e , e x p e r i e n c e d f i r m s t o buy i n t o Canada and t o expand t h e i r networks from c o a s t t o c o a s t . C D . Howe and P r e m i e r Manning c o o p e r a t e d i n s p e e d i n g o i l and n a t u r a l gas p i p e l i n e s toward c o n s t r u c t i o n . Both governments removed the b a r r i e r s t o i n c r e a s e d o i l and gas e x p o r t s t o t h e U n i t e d S t a t e s . On a p l e t h o r a o f i s s u e s i t seemed t h a t the f e d e r a l and p r o v i n c i a l governments were c o o p e r a t i n g t o a s s i s t i n t h e e x p a n s i o n o f t h e power of the m u l t i n a t i o n a l o i l companies i n Canada. I n the l a t e 1960s t h a t s i t u a t i o n began t o change p e r c e p t i b l y . The f i r s t c l e a r l y documented change i n p o l i c y took p l a c e d u r i n g the h e a r i n g s o f the R o y a l Commission on Energy. There the Canadian and f o r e i g n companies took o p p o s i n g p o s i t i o n s , w i t h the d o m e s t i c com-202. p a n i e s s e e k i n g a guaranteed market f o r t h e i r o i l i n M o n t r e a l and the f o r e i g n , i n t e g r a t e d companies s e e k i n g t o m a i n t a i n t h e i r p r i v i -l e g e d p o s i t i o n as i m p o r t e r s o f o i l f o r the E a s t e r n Canadian market. Both groups l o b b i e d e x t e n s i v e l y i n Ottawa and Edmonton. Among o f f i c i a l s o f the p r o v i n c i a l government, the Canadian com-p a n i e s found s u p p o r t . A l b e r t a ' s o i l revenues had f a l l e n s h a r p l y because of the i n t e r n a t i o n a l o i l g l u t , and the p r o v i n c e , l i k e the Canadian o i l companies, wished t o i n c r e a s e markets f o r Western cr u d e . P r e m i e r Manning's s u b m i s s i o n t o the R o y a l Commission on Energy stopped s h o r t o f a d v o c a t i n g an o i l p i p e l i n e t o M o n t r e a l , but i t d i d recommend t h a t t h e f e d e r a l government s e r i o u s l y examine the o p t i o n s f o r f i n d i n g new markets f o r Western o i l . I n t h i s q u e s t , the A l b e r t a government and the Canadian com-p a n i e s " d i d f i n d something c l o s e t o an a l l y i n the f e d e r a l g overn-ment. The N a t i o n a l O i l P o l i c y o f 1960 e s t a b l i s h e d the Ottawa V a l l e y l i n e and TTestern o i l went.1 .foa?athe f i r s t time beyond S a r -n i a . T T h i s suggests t h a t the g r e a t e s t d i f f e r e n c e i n the r o l e o f the s t a t e o c c u r r e d n o t , as P r a t t and R i c h a r d s s u g g e s t , between th e f e d e r a l and p r o v i n c i a l s t a t e s , b u t i n the v e r y d i f f e r e n t a t t i t u d e s t h a t b o t h governments adopted i n the f i f t i e s and s i x t i e s . I n t h e e a r l i e r decade b o t h seemed t o be bent on a t t r a c t i n g f o r e i g n i n -vestment t o Canada w i t h l i t t l e r e g a r d f o r the l o n g - t e r m conse-quences on t h e s t r u c t u r e o f the i n d u s t r y . But by t h e e a r l y s i x t i e s 203. b o t h f e d e r a l and p r o v i n c i a l governments were f i n d i n g t h a t they c o u l d b e t t e r a c h i e v e t h e i r own g o a l s by s i d i n g , on o c c a s i o n , w i t h Canadian-owned f i r m s . The f o r e g o i n g would t e n d t o s u p p o r t the work of J o r g e N i o s i . N i o s i has argued t h a t t w e n t i e t h c e n t u r y Canadian h i s t o r y can be d i v i d e d i n t o f o u r c o n s e c u t i v e e r a s . He d e s c r i b e s the post-war e r a as a time o f t h e m a x i m i z a t i o n o f t h e power o f the comprador b o u r g e o i s i e , w h i l e the p o s t -1970 e r a sees a growth i n the power and i n f l u e n c e o f the Canadian b o u r g e o i s i e . U n f o r t u n a t e l y , N i o s i ' s remarks, though they a c c u r a t e l y d e s c r i b e the s i t u a t i o n as i t d e v e l o p e d i n t h e Canadian o i l i n d u s t r y , are made from o b s e r v a t i o n . He does n ot g i v e a t h e o r e t i c a l b a s i s f o r u n d e r s t a n d i n g why one c l a s s f r a c t i o n s h o u l d suddenly s t r e n g t h e n . He d e s c r i b e s t h e weakening o f the comprador b o u r g e o i s i e i n terms o f a f a d i n g o f the American empire around the w o r l d , and i n terms o f the i n t e r n a t i o n a l o i l c r i s i s . To make a c o n t r i b u t i o n t o a st u d y o f the r o l e t h a t the s t a t e p l a y s i n the development of the b o u r g e o i s i e , h i s schema needs a s t r o n g e r t h e o r e t i c a l base. N e v e r t h e l e s s , N i o s i ' s v i s i o n o f the b o u r g e o i s i e i s unique because i t i s so f l e x i b l e . He sees the Canadian b o u r g e o i s i e as a u n i t e d c l a s s , but one t h a t i s f r a u g h t w i t h t e n s i o n s based on n a t i o n a l i t y and r e g i o n a l i s m . He agrees w i t h o t h e r Canadian p o l i t i c a l e c o nomists t h a t the fundamental c o n t r a d i c -204 . t i o n i n the b o u r g e o i s i e i s between t h e comprador and Canadian owned f r a c t i o n s , b u t he b e l i e v e s t h a t t h e Canadian s e c t o r i s paramount, both i n i n t e r n a l s t r e n g t h and c o h e s i o n , and i n terms o f i t s r e l a t i o n s h i p w i t h t h e s t a t e . N i o s i r e j e c t s the n o t i o n t h a t the s t a t e i s s i m p l y an e x t e n s i o n of the b o u r g e o i s i e ; he g r a n t s i t a measure o f power t o i n f l u e n c e the r i s e and f a l l o f d i f f e r e n t c l a s s i n t e r e s t s . "(T)he s t a t e . . . has the power t o s e t the g u i d e -l i n e s of a s o c i a l group's p a t h t o c a p i t a l i s t development; t h r o u g h t h i s p r o c e s s , some s o c i a l c l a s s e s are c r e a t e d w h i l e the growth o f o t h e r s i s s t u n t e d " ( N i o s i 1980:21). I f we examine t h i s i d e a a g a i n s t the d a t a g a t h e r e d i n t h i s t h e s i s , we f i n d t h a t , a t d i f f e r e n t p o i n t s i n the development of t h e o i l i n d u s t r y , t h e f e d e r a l and p r o v i n c i a l s t a t e s made d e c i s i o n s t h a t were c r u c i a l t o the development o f the bour-g e o i s i e . But d i d i t i n f a c t s e t g u i d e l i n e s f o r the. growth o f the c l a s s f r a c t i o n s ? And d i d i t have the power t o c r e a t e s o c i a l c l a s s e s ? The most o b v i o u s segment of the o i l i n d u s t r y t o grow and s t r e n g t h e n i n the y e a r s a f t e r the Leduc d i s c o v e r y was t h e n o n - i n t e g r a t e d o i l companies. T h e i r power was j u s t b e i n g f e l t a t the b e g i n n i n g of t h e 1960s; i n t h e 1970s they became a p o w e r f u l p o l i t i c a l f o r c e i n t h e i n d u s t r y . D i d t h i s power a c c r u e 205 t o them as a r e s u l t o f the i n t e r v e n t i o n o f the s t a t e , o r as a r e s u l t o f t h e i r own i n t e r n a l j o c k e y i n g w i t h o t h e r c l a s s f r a c t i o n s ? I n the body o f t h i s t h e s i s we i s o l a t e d f o u r f a c t o r s t h a t c o n t r i b u t e d t o the r i s e o f the Canadian o i l companies: the p r o v i s i o n o f development money th r o u g h the t a x exemptions o f f e r e d t o U.S. f i n a n c i a l o r g a n i z a t i o n s ; the l e g a c y o f l a n d and m i n e r a l r i g h t s t e n u r e from the r a i l w a y companies of, the n i n e t e e n t h c e n t u r y ; the e x i s t e n c e o f p r o - C a n a d i a n m i n e r a l r i g h t s l e g i s l a t i o n i n Saskatchewan; and the n e g o t i a t i o n o f new markets f o r Western Canadian o i l . Of t h e s e f o u r f a c t o r s , two - t h e e x i s t e n c e o f ; p r o - : " Canadian m i n e r a l r i g h t s l e g i s l a t i o n i n Saskatchewan and t h e n e g o t i a t i o n o f new markets f o r Western Canadian o i l - can be s a i d t o be t h e a c t i o n s o f a s t a t e c o n s c i o u s l y a s s i s t i n g t h e development o f t h e Canadian o i l companies. ( The l e g i s l a t i o n g o v e r n i n g t r u s t i n v e s t m e n t was aimed t o b e n e f i t t h e American f i -nance community and t h e l a n d and m i n e r a l r i g h t s l e g i s l a t i o n had been e n a c t e d by a government o f the p r e v i o u s c e n t u r y . ) So i t i s w o r t h w h i l e t o examine t h e s e two cases f o r t h e degree t o which the s t a t e was a b l e t o s e t g u i d e l i n e s and c o n t r o l the development o f the n o n - i n t e g r a t e d Canadian companies. The Saskatchewan government o f T.C. Douglas came i n t o power 206 . i n 1944 on a p l a t f o r m t h a t emphasized l o c a l c o n t r o l o f r e s o u r c e s . S h o r t l y a f t e r assuming power, t h e CCF r e j e c t e d I m p e r i a l O i l ' s r e q u e s t f o r a l a r g e r e s e r v a t i o n i n t h e p r o v i n c e and announced t h a t i t s o i l l a n d s l e a s i n g p o l i c y would g i v e p r e f e r e n c e t o Canadian-owned companies and the c o o p e r a t i v e movement. I t i s wo r t h r e m a r k i n g t h a t t h i s p o l i c y came i n t o e f f e c t b e f o r e the d i s c o v e r y o f o i l a t Leduc. I n the t h r e e y e a r s f o l l o w i n g t h e i n i t i a t i o n of t h e p o l i c y , the f o r e i g n - o w n e d o i l companies b o y c o t t e d Saskatchewan. D r i l l i n g r i g s and s t a f f were moved t o A l b e r t a , a move t h a t c u l m i n a t e d i n t h e Leduc d i s c o v e r y of e a r l y 1947. I n t h e y e a r b e f o r e t h e 1948 e l e c t i o n i n Saskatchewan, the forei g n - o w n e d o i l companies conducted a v i g o r o u s p u b l i c r e l a t i o n s campaign, s u g g e s t i n g t h a t t h e d i f f e r e n c e s between t h e economies o f the two p r o v i n c e s c o u l d be a t t r i b u t e d t o the Saskatchewan o i l p o l i c y . S h o r t l y b e f o r e t h e Saskatchewan e l e c t i o n , the CCF government sen t out l e t t e r s t o t h e major o i l companies i n v i t i n g them t o t a k e o ut r e s e r v a t i o n s i n t h e p r o v i n c e on more moderate terms. The upshot o f t h e c o n f r o n t a t i o n was t h a t t h e Saskatchewan government d e v e l o p e d a system f o r r e g u l a t i n g the p e t r o l e u m i n d u s t r y t h a t was not u n l i k e t h a t o f n e i g h b o u r i n g A l b e r t a , a l t h o u g h s p e c i a l arrangements c o n t i n u e d t o be made t o p r o v i d e Canadian-owned o i l companies w i t h d r i l l i n g r i g h t s . The f o r e i g n 207. o i l companies r e t u r n e d t o Saskatchewan s l o w l y , so t h a t f i n a l l y t he p r o f i l e o f t h e i n d u s t r y t h e r e matched t h a t i n o t h e r o i l -p r o d u c i n g a r e a s o f the w o r l d . The b o y c o t t , t h e u l t i m a t e t o o l o f the p o w e r f u l , m u l t i n a t i o n a l companies, had worked . .:. q u i c k l y t o moderate a n a t i o n a l i s t p o l i c y i n a p r o v i n c e dependent on a few n a t u r a l r e s o u r c e s . The second example o f t h e s t a t e moving t o a l t e r an e x i s t i n g p o l i c y was the debate t h a t l e d t o t h e p r o c l a m a t i o n of the N a t i o n a l O i l P o l i c y . I n t h i s c a s e , the s t a t u s quo was t h e o i l i m p o r t / e x p o r t p a t t e r n o f the f o r e i g n , i n t e g r a t e d o i l companies. The D i e f e n b a k e r government approached the p o s s i b i l i t y o f l i m i t i n g the power of t h e f o r e i g n o i l companies g r a d u a l l y , f i r s t p e r m i t t i n g the Canddian o i l companies t o p l a c e the i s s u e of a i ' o n t r e a l p i p e l i n e b e f o r e the R o y a l Commission on Energy, then opening the i s s u e f o r n a t i o n a l debate. Yet the D i e f e n b a k e r government r a n i n t o the same problem as t h e Douglas government had f a c e d . The f o r e i g n , i n t e g r a t e d o i l companies, the most p o w e r f u l s e c t o r o f the Canadian o i l i n d u s t r y , t h r e a t e n e d t o d i s r u p t the.: i n d u s t r y . As t h e R o y a l Commission o b s e r v e d r u e f u l l y : " . . . t h e M o n t r e a l r e f i n e r s a re i n a p o s i t i o n t o b l o c k any p l a n s f o r the use o f Canadian crude i n the M o n t r e a l r e f i n i n g a r e a and no p i p e l i n e f a c i l i t i e s c o u l d i n f a c t be b u i l t w i t h o u t t h e i r a p p r o v a l and c o o p e r a t i o n " ( R o y a l Commission on Energy 1959:6-29). 208 . as a r e s u l t , the government was f o r c e d t o implement a compromise: the Ottawa V a l l e y l i n e and i n c r e a s e d o i l e x p o r t s t o t h e U n i t e d S t a t e s . B o th t h e p r e c e d i n g examples would s u g g e s t t h a t J o r g e N i o s i has been o p t i m i s t i c i n c l a i m i n g t h a t t h e s t a t e has the means a t i t s d i s p o s a l t o s e t t h e g u i d e l i n e s f o r the growth o f c l a s s f r a c t i o n s or> i n d e e d t o c r e a t e c l a s s e s . As l o n g as t h e bour-g e o i s i e has the power t o s e t t h e i n d u s t r i a l machine i n motion and as l o n g as i t i s t h e b o u r g e o i s i e t h a t accumulates t h e c a p i t a l n e c e s s a r y t o keep the economy moving, t h e s t a t e w i l l p l a y a dependent r o l e . I t i s t r u e t h a t t h e s t a t e can make changes t h a t e n a b l e a c l a s s f r a c t i o n t o s u r v i v e - i t has been shown t h a t w i t h o u t c e r t a i n s t a t e i n t e r v e n t i o n t h e n o n - i n t e g r a t e d companies would n o t have e x i s t e d i n 1965 - b u t i t cannot c r e a t e c l a s s e s w i t h o u t the t a c i t s u p p o r t o f the dominant c l a s s e s i n e x i s t e n c e . We have, t h e n , s e t the l i m i t s w i t h i n w hich a d i s c u s s i o n o f the r o l e o f the s t a t e w i l l t a k e p l a c e . C l e a r l y the s t a t e does no t have the power t o c r e a t e c l a s s e s , .as N i o s i s u g g e s t e d , but on the o t h e r hand i t i s n o t j u s t a t o o l t o c r e a t e p o l i c y i n the i n t e r e s t o f the dominant f r a c t i o n s o f the b o u r g e o i s i e , as W a l l a c e Clement's work i n d i c a t e d . Where, t h e n , does t h e " r e l a t i v e autonomy" o f t h e s t a t e l i e ? I n t h e i r book, Economy and C l a s s S t r u c t u r e , Rosemary Cromp-209 . t o n and Jon Gubbay a t t a c k t h e problem o f the s t a t e i n c a p i t a l i s t s o c i e t y from f i r s t p r i n c i p l e s . A c c o r d i n g t o t h e s e a u t h o r s , t h e s t a t e ' s p r i m a r y aim i s t o a s s i s t i n the a c c u m u l a t i o n o f c a p i t a l ; i t f a c i l i t a t e s t h e m a x i m i z a t i o n o f s u r p l u s v a l u e produced by i n d u s t r i a l and s e r v i c e c a p i t a l and i t c r e a t e s an atmosphere i n w h i c h f i n a n c i a l , c o m m e r c i a l , and p r o p e r t y c a p i t a l s may make the g r e a t e s t g a i n s . I n the Canadian o i l i n d u s t r y , t h e f e d e r a l and p r o v i n c i a l s t a t e s have p l a y e d t h i s r o l e . I n a l l t h r e e a r e a s under study -t a x a t i o n , m i n e r a l r i g h t s and e x p o r t p o l i c y - t h e s t a t e ' s i n t e r v e n t i o n has f a c i l i t a t e d c a p i t a l a c c u m u l a t i o n . I n a few areas t h e s t a t e has been p a r t i c u l a r l y generous. Tax measures a l l o w i n g t h e f r e e f l o w o f r o y a l t y money out o f t h e c o u n t r y were more generous than the r e g u l a t i o n s i n s e v e r a l European c o u n t r i e s a t the same t i m e . C o r p o r a t i o n t a x e s were a l s o l o w e r . The A l b e r t a government's c o m b i n a t i o n o f l e a s e s , r e s e r v a t i o n s and a u c t i o n s proved t o be a tremendous bonanza f o r tho s e com-p a n i e s w e a l t h y enough t o t a k e advantage o f i t . F i n a l l y , t he f e d e r a l s t a t e took much o f the r e s p o n s i b i l i t y f o r f i n d i n g markets f o r Canadian o i l and gas, u s i n g i t s b a r g a i n i n g power w i t h the U.S. government t o g a i n a c c e s s t o new o i l - h u n g r y a r e a s o f the U n i t e d S t a t e s . I n t h i s case t h e f e d e r a l government p l a y e d - f r e e o f charge - t h e r o l e o f commercial agent, f a c i l i -210. t a t i n g the s a l e o f Western Canadian raw r e s o u r c e s abroad. I n a l l o f t h e s e r o l e s the s t a t e n u r t u r e d a growing i n d u s t r y , a l l o w i n g i t t o maximize i t s p r o f i t m a r g i n s . But t h e r o l e o f the s t a t e d i d not end t h e r e . In t h e v iew o f Crompton and Gubbay, i n modern c a p i t a l i s t s o c i e t y the s t a t e a l s o a c t s as a b r o k e r , m e d i a t i n g i n d i s p u t e s between c a p i t a l s . J u s t as t hey a c c e p t the n o t i o n o f s p l i t s between c a p i t a l s , so t hey acknowledge t h a t r u p t u r e s may t a k e p l a c e w i t h i n c a p i t a l s , on n a t i o n a l and r e g i o n a l l i n e s . I f we a n a l y z e the Canadian o i l i n d u s t r y k e e p i n g i n mind t h a t t h e s t a t e may choose t o champion one f r a c t i o n o v e r a n o t h e r because of t h e r o l e t h a t the f r a c -t i o n may p l a y i n the a c c u m u l a t i o n o f c a p i t a l , we g i v e o u r s e l v e s a new p e r s p e c t i v e . T h i s p e r s p e c t i v e assumes t h a t the s t a t e w i l l n o t a c t i n the i n t e r e s t o f a c l a s s f r a c t i o n s i m p l y because of i t s economic s t r e n g t h , but r a t h e r t h a t the s t a t e w i l l t a k e i n t o account the l o n g - t e r m p o t e n t i a l f o r c a p i t a l a c c u m u l a t i o n . Which f r a c t i o n w i l l r e t u r n the g r e a t e s t b e n e f i t t o the c a p i t a l i s t system as a whole? Crompton and Gubbay's t h e s i s can be t e s t e d a g a i n s t two o f the unanswered q u e s t i o n s t h a t have emerged i n t h i s work. The f i r s t dilemma d e v e l o p e d from W a l l a c e Clement's h y p o t h e s i s , w hich was unable t o e x p l a i n why the Canadian government s i d e d w i t h the comprador b o u r g e o i s i e r a t h e r than th e dominant i n d i -211. genous b o u r g e o i s i e i n the c o n s t r u c t i o n o f a l l o f the major o i l p i p e l i n e s and t h e TransCanada n a t u r a l gas p i p e l i n e . I f t h a t d e c i s i o n i s examined i n the l i g h t o f Crompton and Gubbay?s work, i t becomes c l e a r t h a t the f e d e r a l government, i n s i d i n g w i t h the comprador b o u r g e o i s i e , was c h o o s i n g t h o s e com-p a n i e s t h a t s t o o d t o accumulate the g r e a t e s t amount o f c a p i t a l . The f o r e i g n , i n t e g r a t e d o i l companies' ownership o f the major o i l a r t e r i e s a l l o w e d them t o r u n t h e i r o p e r a t i o n s - from o i l w e l l t o gas pump - as a s i n g l e i n t e g r a t e d system, w i t h o u t the need t o cream o f f a p o r t i o n o f the p r o f i t t o pay f o r t r a n s m i s s i o n o f the raw m a t e r i a l . P l a c i n g the c o n t r o l of the t r a n s m i s s i o n f a c i l i t i e s i n t h e hands of the dominant Canadian b o u r g e o i s i e would have n e c e s s i t a t e d a t r a n s f e r o f the r e s o u r c e , which would have d e c r e a s e d the p r o f i t margins t h a t c o u l d be skimmed o f f . The f o r e i g n . i n t e g r a t e d companies, because of t h e i r v e r t i c a l i n t e g r a t i o n , won t h e a p p r o b a t i o n o f the s t a t e . S i m i l a r l y , i t was the c o m b i n a t i o n o f the f e d e r a l and p r o v i n c i a l governments t h a t encouraged the l a r g e , f o r e i g n -owned gas t r a n s m i s s i o n comanies t o j o i n t h e c o n s o r t i u m b e h i n d the TransCanada p i l e l i n e . Tennessee Gas T r a n s m i s s i o n , t h e l a r g e s t n a t u r a l gas t r a n s m i s s i o n company i n the w o r l d , j o i n e d the c o n s o r t i u m i n the hope t h a t i t would be a b l e t o use Canadian n a t u r a l gas t o break i n t o the mid-Western U n i t e d s t a t e s . 212. The f e d e r a l government, on the o t h e r hand, wished t o g e t the American g i a n t i n v o l v e d t o ensure t h a t enough c a p i t a l would be b r o u g h t i n t o the p r o j e c t t o g e t i t under c o n s t r u c t i o n . The f a c t t h a t the e n t r y o f the f o r e i g n company weakened the p a r t i c i -p a t i o n o f the Canadian f i n a n c i a l houses t h a t had owned 50% of the o r i g i n a l c o n s o r t i u m was o f l i t t l e c o n c e r n when compared t o the government's urgency t o g e t the p r o j e c t underway. Both o f the e v e n t s took p l a c e i n the f i f t i e s , and on b oth o c c a s i o n s t h e f e d e r a l s t a t e a c t e d r a t i o n a l l y - t h a t i s , i n the i n t e r e s t o f p r o m o t i n g th e g r e a t e s t p o s s i b l e c a p i t a l a c c u m u l a t i o n -i n c h o o s i n g t o f a v o u r the comprador b o u r g e o i s i e o v er the i n d i -genous f r a c t i o n . I n the 1960s, the s i t u a t i o n a l t e r e d . By t h a t time the w o r l d was i n the t h r o e s o f an o i l g l u t and t h e m a r k e t i n g p a t t e r n t h a t had emerged i n the post-Leduc p e r i o d was b e g i n n i n g t o cause s e r i o u s s t r a i n s on the Canadian economic system. The A l b e r t a o i l p r o -ducers were unable t o s e l l t h e i r p r o d u c t , the A l b e r t a g o v e r n -ment found i t s revenues f a l l i n g , and the Canadian d o l l a r was weakening. The i m p o r t s of l a r g e q u a n t i t i e s o f o i l from abroad was becoming a burden. I n t h a t s i t u a t i o n , the d e c i s i o n of the f e d e r a l and p r o v i n c i a l s t a t e s t o i n v e s t i g a t e the p o s s i b i l i t y o f a M o n t r e a l p i p e l i n e has some l o g i c . The d o m e s t i c f i r m s were a r g u i n g t o i n c r e a s e the 213 . use o f Canadian o i l by depending on the i n t e r n a l market. By c h o o s i n g t o e x t e n d the use o f A l b e r t a o i l e a s t w a r d t o Ottawa and t o expand markets f o r o i l i n t o the U n i t e d S t a t e s , the f e d e -r a l s t a t e found two methods of p r o m o t i n g c a p i t a l a c c u m u l a t i o n i n Canada. Thus, by t h e 1960s, the government was p r e p a r e d t o a l t e r i t s p r e v i o u s dependence on the f o r e i g n , i n t e g r a t e d f i r m s and f i n d new c l a s s f r a c t i o n s t h r o u g h which t o i n c r e a s e c a p i t a l a c c u m u l a t i o n w i t h i n t h e n a t i o n s t a t e . The f o r m u l a t i o n o f Crompton and Gubbay i s a l s o a h e l p i n b r i d g i n g t h e impasse t h a t appears i n the work of J o r g e N i o s i . E a r l i e r i n t h i s p a p e r , N i o s i was quoted w i t h r e s p e c t t o the s t a g e s i n the h i s t o r y o f the Canadian b o u r g e o i s i e . A l t h o u g h he had p e r c e i v e d t h a t t h e l a s t two decades have seen the r i s e o f a s t r o n g segment o f the Canadian b o u r g e o i s i e , N i o s i was unable t o e x p l a i n t h e o r e t i c a l l y why t h a t took p l a c e . U s i n g Crompton and Gubbay 1s a n a l y t i c a l t o o l s , i t i s p o s s i b l e t o s uggest t h a t t h e c o m p l e x i t y o f the c l a s s s t r u c t u r e g i v e s the s t a t e , w i t h i n l i m i t s , the power t o c r e a t e c o n d i t i o n s t h a t a l l o w i n c r e a s e d c a p i t a l a c c u m u l a t i o n by one c l a s s f r a c t i o n . The a l -t e r a t i o n s on t h e p a r t o f the s t a t e may be v e r y s m a l l , but they are s u f f i c i e n t t o m o d i f y th e r e l a t i o n s h i p between c l a s s f r a c t i o n s , g i v i n g one f r a c t i o n the p o t e n t i a l o f r a p i d e x p a n s i o n a t the expense o f i t s r i v a l s . S i g n i f i c a n t a l t e r a t i o n s produce upheavals 214 . that bring previously dependent class fractions to the fore. Thus, Crompton and Gubbay 1s formulation, because i t i s able to examine the role of the state i n c a p i t a l i s t society as a whole, has broken through some of the li m i t a t i o n s posed by other t h e o r e t i c a l models. 215. C. STAPLES THEORY AND THE PETROLEUM INDUSTRY I n h i s c l a s s i c , The Fur Trade i n Canada, H a r o l d I n n i s d e s c r i b e d the " s t a p l e s t r a p " , the p r o c e s s bv which the economic s t r e n g t h o f a r e s o u r c e - p r o d u c i n g h i n t e r l a n d i s sapped by an i n d u s t r i a l m e t r o p o l i s . The s t a p l e s t r a p i s c h a r a c t e r i z e d by a c u m u l a t i v e dependency i n which the h i n t e r -l a n d becomes o v e r l y s p e c i a l i z e d i n t h e p r o d u c t i o n o f raw r e s o u r c e s and f a i l s t o d e v e l o p secondary i n d u s t r y . In I n n i s 1 view, the s t a p l e s t r a p r e s u l t e d i n c y c l i c a l economic c r i s e s i n t he h i n t e r l a n d , boom and b u s t c y c l e s t h a t caused the l o c a l economy t o speed up and then s u d d e n l y slow. One o f the problems o f t h i s t h e s i s was t o examine whether the i d e a of a s t a p l e s t r a p c o u l d be f r u i t f u l l y used t o des-c r i b e the Canadian o i l i n d u s t r y as i t deve l o p e d between 1947 and 1965. The f o r e g o i n g d a t a would I n d i c a t e t h a t the e x p o r t of p e t r o l e u m and n a t u r a l gas d i d form an i m p o r t a n t ' l i n k be-tween the Canadian and American economies d u r i n g t h i s p e r i o d . E x p o r t s d e v e l o p e d r a p i d l y , as I n n i s would have p r e d i c t e d . From 1951 u n t i l 1963, the n a t i o n ' s o i l e x p o r t s r o s e from 400,000 b a r r e l s a y e a r t o 91,580,000 b a r r e l s a y e a r . S i m i l a r e x p o r t s of n a t u r a l gas grew from 112.5 b i l l i o n c u b i c f e e t i n 1960 t o 404.7 b i l l i o n c u b i c f e e t o n l y f i v e y e a r s l a t e r ( K i l -bourne 1970:203). D u r i n g the same p e r i o d , p e t r o l e u m and 216 . n a t u r a l gas p l a y e d an i n c r e a s i n g l y i m p o r t a n t r o l e i n Cana-d i a n - A m e r i c a n t r a d e r e l a t i o n s , w h i l e the p r o p o r t i o n o f manu-f a c t u r e d goods e n t e r i n g Canada from t h e U n i t e d S t a t e s a l s o r o s e . I t i s c l e a r t h e n , t h a t i n t h e post-war p e r i o d , the p a t t e r n o f exchanging raw r e s o u r c e s f o r manufactures was e s t a b l i s h e d as the fundamental u n d e r p i n n i n g of Canada-U.S. t r a d e . T h i s p a t t e r n was c l e a r l y more i m p o r t a n t t o the economic h e a l t h of Canada than i t was t o the U n i t e d S t a t e s , and i n t h i s sense a r e l a t i o n s h i p grew up between the two c o u n t r i e s , o r i n t e n s i f i e d between t h e two c o u n t r i e s , w i t h Canada as the dependent p a r t n e r . The i m p o s i t i o n o f i m p o r t quotas show t h e degree o f d i s l o c a t i o n t h a t t o o k p l a c e i n the two c o u n t r i e s i n the y e a r s i l 1957-58. The 118,000 b a r r e l s a day o f o i l t h a t e n t e r e d the U n i t e d S t a t e s b e f o r e t h e Suez c r i s i s and b e f o r e i m p o r t quotas r e p r e s e n t e d 12% o f t o t a l U.S.imports ( S h a f f e r 1968:128). With the c u t b a c k s , U.S. independent o i l companies were a b l e t o i n c r e a s e t h e i r s a l e s . T h e ' s w i t c h f r o m i C a n a d i a n o i l was made r a p i d l y ; the U n i t e d S t a t e s saved $50 m i l l i o n i n f o r e i g n exchange and the independent American o i l companies were k e p t happy. C l e a r l y , Canadian i m p o r t s had not been c r i t i c a l t o the maintenance o f the U.S. energy b a l a n c e i n t h e p r e v i o u s decade. The. e f f e c t o f the i m p o r t quotas o f the Canadian economy 217. was more pronounced. I t has been shown t h a t a d e v a s t a t i n g change took p l a c e i n the p e t r o l e u m i n d u s t r y : e x p l o r a t i o n and d r i l l i n g p l u m e t t e d and p r o d u c t i o n was reduced by a h a l f . The $50 m i l l i o n l o s s t o t h e Canadian economy was t e l l i n g . D u r i n g the f i f t e e n months o f .cutbacks the Canadian government used a l l of i t s powers of p e r s u a s i o n t o r e g a i n a c c e s s t o t h e A m e r i -can p e t r o l e u m market. W i t h i n a decade o f the Leduc d i s c o v e r y , t h e n , a dependent r e l a t i o n s h p had grown up between the U n i t e d S t a t e s and Canada, w i t h the Canadian o i l i n d u s t r y f e l y i n g on U.S. markets t o ab-s o r b more th a n h a l f o f i t s p r o d u c t i v e c a p a c i t y . The two c o u n t r i e s were l o c k e d i n t o an e x p o r t / i m p o r t p a t t e r n r e m i n i -s c e n t o f those t h a t I n n i s d e s c r i b e d i n h i s s t u d i e s of metro-p o l i s and h i n t e r l a n d . In a s e m i n a l 1964 e s s a y , Mel Watkins framed I n n i s 1 s t a p l e s i d e a as "the s t a p l e s t h e o r y o f economic growth". He n o t e d t h a t s t a p l e s - l e d development was a k i n d o f economic growth t h a t o c c u r r e d under v e r y s p e c i f i c c i r c u m s t a n c e s , i n new, r e l a t i v e l y u n p o p u l a t e d c o u n t r i e s w i t h "an absence of i n h i b i t i n g t r a d i t i o n s " (Watkins 1967:53). S i n c e the c o u n t r y has no competing economic modes, s t a p l e s p r o d u c t i o n l e a d s the economy. Watkins a l s o p o i n t e d out t h a t a l t h o u g h the markets f o r s t a p l e s d e v e l o p rap-i-d-l-y-, t hey ar.e_a.l.sx> r a p i d l y f i l l e d , l e a d i n g t o c y c l i c a l 218. p e r i o d s o f d e p r e s s i o n . F o r a s t a p l e s - l e d economy t o grow, i t r e q u i r e s a s h i f t from one r e s o u r c e t o a n o t h e r . New s t a p l e s must c o n s t a n t l y be added t o t h e n a t i o n ' s c o r n u c o p i a o f raw m a t e r i a l e x p o r t s . F o l l o w i n g I n n i s , Watkins b e l i e v e s t h a t each s t a p l e w i l l e x h i b i t s p e c i a l c h a r a c t e r i s t i c s o f growth; each w i l l push the development o f the n a t i o n a l economy i n t o a somewhat d i f f e r e n t c o n f i g u r a t i o n . He s u g g e s t s t h a t a s t a p l e can be examined by d e f i n i n g t h r e e s a l i e n t s e t s o f c h a r a c t e r i s t i c s : I t s backward l i n k a g e ( i n p u t s ) , i t s f o r w a r d l i n k a g e ( p r o -c e s s i n g ) and i t s f i n a l demand l i n k a g e (the p r o d u c t i o n o f consumer goods). The Canadian p e t r o l e u m i n d u s t r y can be examined as t o the degree t h a t i t has formed t h e s e l i n k a g e s . The backward l i n k a g e , i n t o the p r o d u c t i o n o f g e o p h y s i c a l and d r i l l i n g equipment has been l i m i t e d i n Canada. I n an e a r l i e r s e c t i o n o f the paper i t was shown t h a t a p a r t o f the Canadian-based s e r v i c e i n d u s t r y grew up around the p r o d u c t i o n o f d r i l l i n g equipment, p a r t i -c u l a r l y d r i l l b i t s , a l t h o u g h t h e p r i n c i p a l companies i n v o l v e d i n t h i s were s t i l l t h e f o r e i g n g i a n t s , Hughes T o o l and Western Rock B i t . I n r e c e n t y e a r s , as t h e i n d u s t r y has t u r n e d t o e l e c t r o n i c s , A l b e r t a companies have been d e v e l o p i n g new r e c o r d i n g , and t e s t i n q systems f o r t h e undergrou nd. On t h e 219. t r a n s p o r t s i d e o f the o i l i n d u s t r y , Canadians have made a c o n s i d e r a b l e c o n t r i b u t i o n t o the p r o d u c t i o n of a l l - t e r r a i n v e h i c l e s , snowmobiles and s e i s m i c t r u c k s . Thus i t can be s a i d t h a t t h e r e have been examples o f backward l i n k a g e i n the p e t r o l e u m i n d u s t r y a l t h o u g h t h i s has tended t o t a k e p l a c e i n s p e c i a l i z e d , l o c a l a c r e a s o f p r o d u c t i o n r a t h e r than on an i n d u s t r y - w i d e b a s i s . I n terms o f f o r w a r d l i n k a g e , the Western Canadian economy has n o t ta k e g r e a t s t r i d e s . N a t u r a l gas r e q u i r e s o n l y m i n i m a l p r o c e s s i n g t o upgrade i t t o a s t a n d a r d f o r shipment and s a l e . N a t u r a l gas p r o c e s s i n g i s done i n t h e f i e l d and r e q u i r e s v e r y few p e o p l e . Hence i t s v a l u e as a f o r w a r d l i n k e d p r o d u c t i s l i m i t e d . I n Canada, o i l has been c h i e f l y t r a n s f o r m e d i n t o g a s o l i n e , o i l s and l u b r i c a n t s , i n an i n d u s t r i a l p r o c e s s t h a t , a l t h o u g h r e l a t i v e l y s i m p l e , r e q u i r e s the i n p u t o f c o n s i d e r a b l e c a p i t a l . The v a l u e added by t h i s p r o c e s s i s p r o p o r t i o n a l l y l a r g e , but t h e r e i s o n l y a s i n g l e m a n u f a c t u r i n g p r o c e s s r e q u i r e d . G a s o l i n e and l u b r i c a n t s cannot be f o r t h e r t r a n s -formed i n t o o t h e r p r o d u c t s . The most i m p o r t a n t f o r w a r d l i n k a g e i n t h e p e t r o l e u m i n d u s t r y i n v o l v e s t h e c r e a t i o n o f o i l and n a t u r a l gas based p e t r o -c h e m i c a l s . I n t h e n a t u r a l gas i n d u s t r y the f o r w a r d l i n k a g e s inc.l.ude_ the manufacture of e t h y l e n e , v i n y l c h l o r i d e monomer 220. ammonia, p o l y e t h y l e n e , and p o l y v i n y l c h l o r i d e as w e l l as some i n d u s t r i a l c h e m i c a l s . As E r i c Hanson has p o i n t e d o u t , t h e p r o d u c t i o n o f p e t r o -c h e m i c a l s i n A l b e r t a got o f f t o a slow s t a r t . A decade a f t e r the Leduc d i s c o v e r y , o n l y s m a l l amounts o f ammonia, c e l l u l o s e a c e t a t e and p o l y e t h y l e n e were produced i n the p r o v i n c e . ( H a n s o n 1958:220). The f o r e i g n companies i n charge o f p e t r o c h e m i c a l t e c h n o l o g y argued t h a t i n s p i t e o f the cheap raw m a t e r i a l a v a i l a b l e i n A l b e r t a , t h e i n d u s t r y ' s economics d i c t a t e d t h a t p e t r o c h e m i c a l s be produced c l o s e t o t h e f i n a l market, t h a t i s on the U.S. G u l f C o a s t . Indeed, i t has o n l y been s i n c e the mid-s e v e n t i e s t h a t the most m i n i m a l s t e p s have been t a k e n toward the c r e a t i o n o f a gas-based P e t r o l e u m i n d u s t r y i n A l b e r t a , and even then the i n d u s t r y has grown o n l y w i t h the s u b s i d i z a t i o n o f f e e d s t o c k p r i c e s o f t h e p r o v i n c i a l government ( P r a t t and R i c h a r d s 1979 :245) . The p r o d u c t i o n o f o i l - b a s e d p e t r o c h e m i c a l s i s a l s o an im-p o r t a n t f a c e t of f o r w a r d l i n k a g e i n the p e t r o l e u m i n d u s t r y . There t o o the s t a t e has p l a y e d an i m p o r t a n t r o l e , by e s t a b l i s h i n g the S a r n i a r e f i n e r y d u r i n g the war and th e n i n t e g r a t i n g i t w i t h A l b e r t a o i l when i t came on stream i n t h e 1950s. There has been no f o r w a r d l i n k a g e i n t o the f i e l d o f o i l - b a s e d p e t r o l c h e m i -c a l s - i n A l b e r t a . . I r o n i c a l l y , by the. time the A l b e r t a government 221. began i t s s p o n s o r s h i p o f t h e p e t r o c h e m i c a l i n d u s t r y , o i l e x p o r t s t o e a s t e r n Canada and the U n i t e d S t a t e s had de-p l e t e d the r e s o u r c e . I n terms o f f i n a l demand l i n k a g e , n e i t h e r o i l nor gas has spawned a wide range o f consumer goods, and many thousands o f consumer items m anufactured i n the U n i t e d S t a t e s and elsewhere c o n t i n u e t o be i m p o r t e d i n t o Canada. D e s p i t e the p r o d u c t i o n o f e t h y l e n e i n A l b e r t a , the p r o v i n c e has not become a c e n t r e f o r the p r o d u c t i o n o f p o l y e t h y l e n e p r o d u c t s ; s i m i l a r l y , the development o f p o l y v i n y l c h l o r i d e has not l e d t o t h e p r o d u c t i o n o f more th a n a h a n d f u l o f consumer items i n the p r o v i n c e . I n many c a s e s , . t h e a p p r o x i m a t e l y f i f t y p l a s t i c s p r o c e s s o r s i n A l b e r t a purchase p e t r o c h e m i c a l r e s i n s from the U n i t e d S t a t e s and m e l t and e x t r u d e the f i n a l p r o d u c t i n A l b e r t a . The most i m p o r t a n t f i n a l demand p r o d u c t produced i n A l b e r t a c o n t i n u e s t o be ammonia, wh i c h i s t r a n s f o r m e d by a v e r y s i m p l e p r o c e s s i n t o f o u r f e r t i l i z e r s f o r t h e l o c a l a g r i -c u l t u r a l market. The range o f consumer p r o d u c t s manufactured i n A l b e r t a can be seen i n Appendix C. Thus the p e t r o l e u m i n d u s t r y seems t o adhere g e n e r a l l y t o the p a t t e r n t h a t Watkins o u t l i n e d f o r a s t a p l e i n d u s t r y . Raw e x p o r t s are h i g h ; backward l i n k a g e s a re weak; f o r w a r d l i n k a g e s do e x i s t b u t they have t a k e n on an e x p o r t p a t t e r n o f t h e i r own. Almost 222 . a l l o f the e t h y l e n e produced i n the p r o v i n c e i s e x p o r t e d . F i n a l demand l i n k a g e s are r e l e g a t e d t o a narrow group o f con-sumer p r o d u c t s w i t h r e l a t i v e l y l i t t l e impact on the economy. The o n l y a r e a t h a t Watkins d i d not d e l i n e a t e i n h i s t h e o r y was the r o l e o f the s t a t e i n the development o f f o r w a r d l i n k a g e s . L a r r y P r a t t and John R i c h a r d s p o i n t e d t h i s o ut f o r c e f u l l y . I n t h e i r book, P r a i r i e C a p i t a l i s m , t hey a s s e r t t h a t the i n v o l v e m e n t of t h e s t a t e i n t h e energy i n d u s t r y i s p r o d u c i n g a s t r o n g e r , l e s s dependent p r o v i n c i a l economy. A l t h o u g h they admit t h a t t h e p r o v i n c i a l s t a t e s t a r t e d out i n a dependent r o l e , t hey r e j e c t the i d e a t h a t " p r o v i n c e s h e a v i l y dependent on the e x p l o i t a t i o n and s a l e o f s t a p l e s a r e t h e r e b y p l a c e d i n a permanent p o s i t i o n o f dependency v i s a v i s e x t e r n a l c a p i t a l " ( P r a t t and R i c h a r d s 1979:8). One of t h e i r p r i n c i p a l examples i s t h a t of the c o n s t r u c t i o n o f a w o r l d - s c a l e p e t r o c h e m i c a l complex i n A l b e r t a , w i t h t h e p a r t i -c i p a t i o n o f the p r o v i n c i a l government. Y e t , as the d a t a j u s t c i t e d i n d i c a t e , the i n t e r v e n t i o n o f t h e s t a t e , w h i l e i t has been i n s t r u m e n t a l i n the c o n s t r u c t i o n o f (now) s e v e r a l e t h y -l e n e f a c i l i t i e s , has not r e s u l t e d i n the e x p a n s i o n o f manu-f a c t u r i n g i n d u s t r i e s . Where once A l b e r t a was a. e x p o r t e r o f raw n a t u r a l gas, now i t e x p o r t s e t h y l e n e f o r u p g r a d i n g e l s e w h e r e . Moreover, the o p t i o n t o become an e t h y l e n e e x p o r t e r has 223 . been p u r c h a s e d a t c o n s i d e r a b l e c o s t . The A l b e r t a government had t o agree t o p r i c e r e s t r i c t i o n s on the c o s t o f ethan b e f o r e A l b e r t a Gas E t h y l e n e would b e g i n c o n s t r u c t i o n . T h i s s u g g e s t s t h a t w h i l e P r a t t and R i c h a r d s are c o r r e c t i n s t a t i n g t h a t the s t a t e does p o s s e s s th e l e v e r a g e t o a f f e c t e n t r e p r e n e u r s h i p , the e x e r c i z e may s e r v e o n l y t o upgrade the s o r t o f s t a p l e t h a t i s e x p o r t e d . The fundamental p a t t e r n of dependency i s not changed. I n 1970, K a r i L e v i t t p u b l i s h e d S i l e n t S u r r e n d e r , an a t t empt t o merge the s t a p l e t h e o r y w i t h an u n d e r s t a n d i n g o f t h e f u n c -t i o n o f m u l t i n a t i o n a l c o r p o r a t i o n s . ,;She argued t h a t the development o f t h e m u l t i n a t i o n a l s i n Canada has caused "the s t u l t i f i c a t i o n o f an i n d i g e n o u s e n t r e p r e n e u r i a l c l a s s and the r e g r e s s i o n t o a c o n d i t i o n o f u n d e r d e v e l o p m e n t " ( L e v i t t 1974:58). She p o i n t s t o the f l o w o f e a r n i n g t o f o r e i g n c a p i t a l i s t s and remarks t h a t not o n l y was i t a h a r d s h i p i n t h e development of: a b a l a n c e d economy, but t h a t i t a l s o r e p r e s e n t e d an a p p r o p r i a t i o n o f economic s u r p l u s t h a t c o u l d never be r e g a i n e d . I n c o n n e c t i o n w i t h t h i s p r o g r e s s i v e underdevelopment o f the economy, L e v i t t sees the m u l t i n a t i o n a l s p r o g r e s s i v e l y weakening the power o f the Canadian s t a t e . "The t h r e a t t o the n a t i o n s t a t e i s r e a l " , she c o n c l u d e s ( L e v i t t 1974:37) . The body of t h i s t h e s i s would suggest t h a t L e v i t t has o v e r -224 . s t a t e d t h e c a s e . W h i l e i t i s t r u e t h a t i n many a r e a s t h e growth of the m u l t i n a t i o n a l s has t a k e n p l a c e a t the expense o f the dome s t i c companies, n e v e r t h e l e s s t h e r e l a t i o n s h i p between t h e two f r a c t i o n s o f t h e o i l i n d u s t r y has not been e n t i r e l y one s i d e d . R e p r e s e n t a t i v e s o f the n o n - i n t e g r a t e d , Canadian com-p a n i e s have o f t e n n o t e d the u n l i k e l i h o o d , o r t h e tremendous r e t a r d a t i o n i n , t h e d i s c o v e r y o f o i l i n the deep s t r u c t u r e s o f the Canadian p r a i r i e s , i f t h e m u l t i n a t i o n a l s had not un d e r t a k e n t h e i r massive e x p l o r a t i o n programmes. S i m i l a r l y , t he v e r y l a r g e amounts o f c a p i t a l t h a t were i n v e s t e d i n g e o l o g i c a l and g e o p h y s i c a l s u r v e y s i n the i n i t i a l y e a r s b e n e f i t e d t he e n t i r e i n d u s t r y . The d i s c o v e r y o f the Pembina f i e l d (by Home O i l ) , Rainbow (by B a n f f O i l ) and Zama (by Dome Petroleum) would n o t have been p o s s i b l e w i t h o u t t h e f o r e i g n , i n t e g r a t e d companies. At t h e same t i m e , farmouts from the majors e n a b l e d some com-p a n i e s t o s t r i k e o i l o r gas w i t h o u t i n c u r r i n g h i g h l a n d c o s t s . Thus, L e v i t t seems t o have o v e r l o o k e d the f a c t t h a t i n some a s p e c t s of the i n d u s t r y , the. m u l t i n a t i o n a l s .and th e - C a n a d i a n companies d e v e l o p e d a s y m b i o s i s t h a t was m u t u a l l y advantageous. In t h e same way, L e v i t t ' s a s s e r t i o n t h a t t he growth o f domestic i n d u s t r y has been s t u l t i f i e d does n ot c o r r e s p o n d t o t h e f i n d i n g s o f t h i s work. In 1948, t h e r e were over 150 o i l companies c a p i -t a l i z e d i n Canada. The two i n t e g r a t e d Canadian.companies were 225. bought up by t h e i r most i m p o r t a n t f o r e i g n r i v a l s . Many o f t h e n o n - i n t e g r a t e d companies were t a k e n o v e r d u r i n g t h e r e c e s s i o n o f t h e l a t e 1950s. N e v e r t h e l e s s , due t o the i n f l u e n c e o f h i s t o r i c a l f a c t o r s and t h e i n t e r v e n t i o n of t h e Canadian s t a t e , a dozen o f t h e s e companies grew t o t a k e a s t r o n g p o l i t i c a l and economic p o s i t i o n i n t h e Canadian p e t r o l e u m i n d u s t r y . The growth of t h i s segment o f t h e i n d u s t r y between 1945 and 1965 can by no means be d e s c r i b e d as " r e g r e s s i o n t o a c o n d i t i o n o f underdevelopment" ( L e v i t t 1974:58). F i n a l l y , t h e r e i s L e v i t t ' s c o n t e n t i o n t h a t t h e d e v e l o p -ment o f the m u l t i n a t i o n a l s has weakened the power o f the Canadian s t a t e . There i s r e a s o n t o b e l i e v e t h a t t h e growth of m u l t i n a t i o n a l c o r p o r a t e power l e a v e s t h e s t a t e weaker th a n i t might have been, had i t been a b l e t o a p p r o p r i a t e some o f t h e s u r p l u s t h a t was s e n t abroad as r o y a l t y and o t h e r payments. However, i t i s c l e a r a l s o t h a t i n t h e s h o r t term t h e s t a t e has been e n r i c h e d by t h e i n j e c t i o n o f c a p i t a l from abroad. The emergence o f a more complex c l a s s s t r u c t u r e has g i v e n the Canadian s t a t e c l e a r e r o p t i o n s f o r i n t e r v e n i n g on t h e s i d e o f one o r an o t h e r f r a c t i o n o f t h e i n d u s t r y , t h u s enhancing r a t h e r t h a n d i m i n i s h i n g t h e im-p o r t a n c e o f t h e s t a t e . I t i s a l s o t r u e t h a t t h e Canadian s t a t e , i n a l l o w i n g f o r the c o n t r o l o f a fundamental r e s o u r c e by f o r e i g n c o r p o r a t i o n s has 226 . p e r m i t t e d a whole range of d e c i s i o n s o v e r the development of t h a t r e s o u r c e t o be made o u t s i d e o f Canada. The r e s t r i c t i o n o f the f l o w o i l o i l d u r i n g the 1973-4 w i n t e r i s the most d r a m a t i c r e c e n t example o f the i n t e r e s t s o f a c o r p o r a t e s e c t o r h o l d i n g a g o v e r n -ment hostage w i t h r e g a r d t o the p r o v i s i o n o f a v i t a l n a t u r a l r e s o u r c e . N e v e r t h e l e s s , t h e Canadian government i s not unique i n t h i s dependency. The government of t h e U n i t e d S t a t e s has had d i f f i -c u l t i e s i n e x e r c i z i n g l e v e r a g e over t h e power of the m u l t i n a t i o n a l s . T h i s power s p r i n g s from t h e s t r u c t u r e o f the m u l t i n a t i o n a l companies, t h e i r a b i l i t y t o f a v o u r one a r e a o f the w o r l d a t the expense of a n o t h e r . I t comes, as Crompton and Gubbay have n o t e d , from the dependence o f the s t a t e on t h e c a p i t a l g e n e r a t i o n o f the c o r p o r a t e s e c t o r , and t h i s i s a c o n s t a n t t h r o u g h o u t the c a p i t a l i s t would. In r e c e n t y e a r s , a c h a l l e n g e t o t h e t h i n k i n g o f the "new m e r c a n t i l i s t " s t a p l e s t h e o r i s t s had emerged i n t h e work of a number of s c h o l a r s . P u b l i s h i n g i n S t u d i e s i n P o l i t i c a l Economy (Volume 6, Autumn, 1981), Leo P a n i t c h and D a v i d M c N a l l y q u e s t i o n t h e a b i l i t y o f s t a p l e s t h e o r y t o l i v e c o m f o r t a b l y w i t h Marxism. Mc-N a l l y a c c u s e s s t a p l e s t h e o r y o f b e i n g a modern Canadian form o f commodity f e t i s h i s m and r e j e c t s i t as "a t h e o r y t h a t a c c e p t s the commodity (and i t s p h y s i c a l - t e c h n i c a l c h a r a c t e r i s t i c s ) as t h e 227 . p r i m a r y datums ( s i c ) o f h i s t o r i c a l e x p e r i e n c e " ( M c N a l l y 1981:51). M c N a l l y argues t h a t because of the fundamental o p p o s i t i o n o f Marxism and s t a p l e s t h e o r y , the two cannot be s u c c e s s f u l l y mixed. S i m i l a r l y , P a n i t c h has argued t h a t the modern s t a p l e s t h e o r i s t s i n t h e i r ' c o n c e r n w i t h the t r a d e r e l a t i o n s and t h e development of new i m p o r t / e x p o r t p a t t e r n s , have f a i l e d t o f u l l y u n d e r s t a n d the e f f e c t t h a t the growth of Canada's economy has had on t h e development of c l a s s r e l a t i o n s . . "The i m p o r t a t i o n o f c a p i t a l i n t h i s form i s not the i m p o r t o f a t h i n g , b u t o f c e r t a i n s o c i a l r e l a t i o n s h i p s . . . " , he w r i t e s ( P a n i t c h 1981:9). LIS t h e r e i n f a c t a fundamental s c h i s m between s t a p l e s t h e o r y and Marxism? T h i s t h e s i s has argued t h a t i t i s p o s s i b l e t o exa-mine the development of a new s t a p l e and t h e e f f e c t t h a t t h a t de-velopment has on the c l a s s r e l a t i o n s i n the dominant s o c i e t y . As a consequence of the development o f new c l a s s r e l a t i o n s , t h e r e w i l l be c o r r e s p o n d i n g a l t e r a t i o n s i n t h e c o n f i g u r a t i o n and the b e h a v i o r of the s t a t e . T h i s work began by l o o k i n g a t t h e c l a s s r e l a t i o n s i n the o i l i n d u s t r y p r e v i o u s t o the Leduc d i s c o v e r y . I n t h a t e a r l y p e r i o d , p e t r o l e u m was not a s t a p l e , y e t the i n d u s t r y a l r e a d y showed s i g n s o f d o m i n a t i o n by c o r p o r a t e e n t i t i e s t h a t were complex c a p i t a l s ; moreover, the i n t e g r a t e d o i l companies a l r e a d y showed the c o n t r o l o f f o r e i g n c a p i t a l a t a time when p e t r o l e u m was b a r e l y m e e t i n g th e 228 . needs o f a l o c a l p o p u l a t i o n . The dependence on f o r e i g n c a p i t a l r e s o u r c e s , t h e n , i s not a phenomenon t i e d t o s t a p l e s p r o d u c t i o n . R a t h e r , i t i s a fundamental f a c e t o f Canadian c a p i t a l i s m i n the t w e n t i e t h c e n t u r y . N e v e r t h e l e s s , the d i s c o v e r y o f o i l and n a t u r a l gas i n q u a n t i t y c r e a t e d a s i t u a t i o n i n which the e v o l u t i o n o f t h i s c l a s s s t r u c -t u r e may be examined. The t r a n s i t i o n from a l o c a l r e s o u r c e t o a s t a p l e e x p o r t i n t e n s i f i e d the p r e - e x i s t i n g c l a s s d i v i s i o n s . The i n t e g r a t e d companies became more p o w e r f u l and t h e f o r e i g n f i r m s took c o n t o r . a s t h e o p p o r t u n i t i e s f o r c a p i t a l a c c u m u l a t i o n expanded. A t t h e same t i m e , the sheer q u a n t i t y o f a c c u m u l a t i o n t h a t was p o s s i b l e i n the bonanza p e r i o d , e n a b l e d weaker f r a c -t i o n s t o come i n t o b e i n g and t o s t r e n g t h e n . The e n t i r e p e t r o l e u m i n d u s t r y was s u b j e c t t o o p p o s i n g c u r r e n t s o f c o n f l i c t and c o o p e r a t i o n . A l l segments c o o p e r a t e d i n t h o s e i s s u e s t h a t t h r e a t e n e d t h e a b i l i t y t o accumulate c a p i t a l : on t h e need f o r m a r k e t s , on the i s s u e o f r o y a l t i e s , and on r e g u l a t o r y s t r u c t u r e s . At t h e same t i m e , t h e r e were deep s e a t e d c o n f l i c t s be-tween the fragments of t h e i n d u s t r y on i s s u e s where the o l i g o p o -l i s t i c power o f the f o r e i g n , i n t e g r a t e d f i r m s seemed l i k e l y t o d e s t r o y t h e weaker groups. Over t i m e , h i s t o r i c a l : p r e r o g a t i v e s and t h e d i s c r e t i o n a r y power _o_f_ t h e _ s _ t a t e _ a s s . i s t e d - i n c r e a t i n g — a - c o m p l e x — c l a s s — s t r u c -229. t u r e i n t h e i n d u s t r y . I n many ways t h i s s t r u c t u r e bore the marks of a s t a p l e s i n d u s t r y i n a dependent economy. The m a r k e t i n g p a t t e r n of the r e s o u r c e was d i c t a t e d by the p o s s i b i l i t i e s f o r c a p i t a l a c c u m u l a t i o n i n new market a r e a s of the U n i t e d S t a t e s , not by t h e l o n g - t e r m i n t e r e s t o f t h e h o s t c o u n t r y . The o u t f l o w o f c a p i t a l t h r o u g h r o y a l t y and o t h e r payments was a s e r i o u s d r a i n on the Canadian economy. Secondary manufactures have not d e v e l o p e d . Yet a t t h e same t i m e , t h e r e are i m p o r t a n t elements i n the growth of the c l a s s s t r u c t u r e o f t h e i n d u s t r y t h a t are n o t t i e d t o the development of o i l and n a t u r a l gas as e x p o r t s t a p l e s . The d o m i n a t i o n o f the i n d u s t r y by i n t e g r a t e d f i r m s , and p a r t i c u -l a r l y by f o r e i g n ones, would have happened w i t h or w i t h o u t the development of a l a r g e f o r e i g n market f o r o i l - as can be seen by the p r e s e n t s i t u a t i o n i n which t h e f o r e i g n f i r m s c o n t i n u e t o c o n t r o l the i n d u s t r y d e s p i t e t h e t e r m i n a t i o n o f o i l e x p o r t s . Thus, c o n t r a r y t o t h e v iews of D a v i d M c N a l l y , the s t a p l e s argument need n o t be c o n s t r u e d as s i m p l e commodity f e t i s h i s m . The s t a p l e s paradigm need not overwhelm an argument based on the M a r x i s t p r e m i s e s o f c a p i t a l a c c u m u l a t i o n and the d e v e l o p -ment of c l a s s e s . As l o n g as the s t a p l e i t s e l f i s not t h e most i m p o r t a n t element under s t u d y (but r a t h e r the s o c i a l r e l a t i o n s t h a t emerge from the p r o d u c t i o n o f t h e s t a p l e ) , Marxism and s t a p l e s t h e o r y can c o e x i s t . 230 .. Appendix A Sponsors of the B r i e f from the N o n - I n t e g r a t e d , A l b e r t a - b a s e d P e t r o l e u m Companies Canadian Devonian Petroleums L i m i t e d Canadian Homestead O i l s L i m i t e d Canpet E x p l o r a t i o n L t d . C o l o r a d o O i l & Gas L t d . C o n s o l i d a t e d E a s t C r e s t O i l Company L i m i t e d C o n s o l i d a t e d Mic Mac O i l s L t d . Home O i l Company L i m i t e d M e d a l l i o n P etroleums L i m i t e d M e r r i l l P e troleums L i m i t e d O k a l t a O i l s , L i m i t e d Westburne O i l Company L t d . Western D e c a l t a p e t r o l e u m L i m i t e d Canadian Husky O i l L t d . Canadian A s s o c i a t i o n of O i l w e l l D r i l l i n g C o n t r a c t o r s Fargo O i l s L t d . Scurry-Rainbow O i l L i m i t e d West Canadian O i l & Gas L i m i t e d B a n f f O i l L t d . Round V a l l e y O i l Co. L t d . A l i d a O i l Company L i m i t e d W h i t e h a l l Canadian O i l s L t d . Midcon O i l and Gas Company L i m i t e d Canadian D e l h i O i l L t d . Pembina P i p e L i n e L t d . 231. Appendix B Companies Sponsoring the Submission of the Bayley Selburne Group, Royal Commission on Energy Dome . E x p l o r a t i o n (Western) L t d . M e d a l l i o n Petroleum Great P l a i n s Development Co. of Canada L t d . Bayley Selburne O i l and Gas L t d . Amurex O i l Co. Canadian Husky O i l L t d . Canadian Export Gas L t d . Banff O i l L t d . 232. BIBLIOGRAPHY Arm s t r o n g , Hugh, i n P a n i t c h , Leo ( E d i t o r ) , The Canadian S t a t e , M c C l e l l a n d and S t e w a r t , T o r o n t o , 1977. 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