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The Canol Project Boondoggle, 1944

The Canol Project: Oil for Victory

The Lethbridge Herald (Lethbridge, Alberta) - January 10, 1944

(Canadian Press Staff Writer)

    WASHINGTON, Jan. 10. - (C.P.) - Completion or abandonment of the "Canol" oil project in northwest Canada was left to the discretion of the war department in the report of the senate Truman committee made public Saturday.

    But the committee strongly criticized the war department for entering upon this $134,000,000 project and said that if it was to be completed every effort should be made to negotiate new agreements with Canada and the Imperial Oil Company in order to safeguard post-war values for the United States.


    Bluntly, the committee asserted that the project was a mistake from the beginning and that its continuance had been unpardonable.

    Nevertheless it left its future to the war department which sponsored it and which defended it throughout lengthy committee hearings.

    The committee estimated that less than $17,000,000 of the total estimated cost could be saved if the project were abandoned now.

    It criticized the haste and lack of consideration exhibited by the war department in embarking upon the project in April, 1942, but observed that "prompt action should be commended, especially in time of war, even when subsequent events prove the action to be unwise," and added

    "Any intelligent action is better than none at all - but the action must be intelligent.

    "The contracts with Imperial Oil and the Canadian government were improvidently drawn without even an effort to obtain fair and reasonable terms from them.

    "There is no indication that Canada would have refused to discuss fully the equities of the situation or that it would not have been possible to have obtained a more equitable contract from Canada.

    The report set forth the history of the project which was authorized by Lt-Gen. Brehon Somervell, chief of the army service forces, in a directive issued April 30, 1943, and later approved by President Roosevelt. Total cost was borne by the United States.


    It proposed to develop existing oil resources at Norman Wells, N.W.T., on the Mackenzie River, carry the oil by pipeline to a new refinery at Whitehorse, Y.T., and thence by pipeline to the sea at Skagway, Alaska.

    Another pipeline would take products from the refinery down the route of the Alaska highway to Watson Lake in Canada.

    Somervell, last witness before the committee, testified, as had others, that the project was never looked upon as economically feasible but was undertaken at a time when the United States were desperately in need of oil and when it seemed possible water transportation to the Alaska peninsula might be interrupted by enemy action.

    He also intimated that the oil fo be produced by Canol might yet play an important part in an offensive against Japan from the Alaskan area.

    The committee found that the Canol project was undertaken "without adequate consideration or study," and that the information Somervell acted upon was deficient in the following particulars:

    1. Inadequate technical knowledge of the probable production capacity of the Norman Wells field.

    2. There was no study or estimate of costs which reflect use of critical materials and man-power.

    3. The date of completion set was on its face impossible of accomplishment when examined by any experienced engineer.

    4. There was no consideration of possible alternative methods of obtaining the same or greater supplies of oil.

    The war department was criticized for ignoring repeated warnings by responsible persons that the project was unsound and excessively costly.

    In his evidence, which was reviewed in the report, Somervell said that while the original plan was to obtain about 3,000 barrels of oil a day, and the known resources were comparatively small, development had shown a likelihood of uncovering from 100,000,000 to 150,000,000 barrels - one of the most important oil prospects found on the North American continent in the last 15 years.


    Taking cognizance of recommendations from Navy Secretary Frank Knox, Interior Secretary Harold Ickes as petroleum administrator and Donald M. Nelson, chairman of the war production board, that the United States should abandon the project immediately, salvage what materials it can and take its loss, the committee declared:

    "The question as to whether the project is worth completing at the present time must be determined upon the present situation and the estimated future cost of operations, replacements and maintenance.

    "What has been done, has been done. It is too late now to go back and rectify past mistakes... .

    "This project was undertaken by the war department and has been so largely completed that only a small amount, proportionately, could be saved by abandoning it now. The committee therefore believes that the decision as to whether it should be abandoned now should be made by the war department."

    It recommended:

    1. That no portion of a $7,000,000 allocation for further drilling in the Norman Wells vicinity be spent until the war department negotiates new contracts with Imperial Oil Co., Ltd., Canadian subsidiary of Standard Oil of New Jersey, and "unless there is clear expectancy that some benefit can be obtained therefrom during the war equal to the cost in materials and manpower involved."

    2. That completion of the four-inch pipeline from Norman Wells to Whitehorse and of the aviation refinery at that point be determined by the war department only after it makes "equitable arrangements" with the Canadian government and Imperial Oil for "suitable rights" and can state flatly that "the project in its present state is worth the materials and manpower necessary to complete it."

    3. That authority over the entire program for obtaining petroleum - abroad as well as in the United States - be concentrated in Petroleum Administrator Ickes who should have been consulted "before the Canol project was undertaken."

    The report reviewed developments leading up to the directive by Somervell June 30, 1942, based on a recommendation from James H. Graham, $l-a-year engineering assistant and dean of engineering at the University of Kentucky, calling for the project's completion in October of that year.


    While it was designed to provide a near source of aviation gasoline and oil for the defence of Alaska at a time when the submarine menace was at its height and the enemy was on the advance everywhere, the committee declared that it will not operate until May, 1944, and that Somervell never thought it would be ready before the summer of 1943.

    Asserting that Imperial Oil advised the war department that there was "no conclusive evidence" the Norman Wells fields would produce even the 3,000 barrels of oil a day then contemplated, the project was undertaken and continued, the committee said, despite:

    1. An assertion by Maj.-Gen. T. M. Robins of the army engineers that "10 times the volume of delivery contemplated could be made by barges already available from inland U.S. rivers at one-tenth the cost and effort."

    2. A warning from the Standard Oil Company of California, hired by the war department as a consultant, that the project couldn't be completed by October, 1942, in which it proposed an alternative method of transporting oil products from the United States and storing them in the area with the advantage, it said, that supplies could be brought to the area months before the Canol project could be completed.

    3. Repeated protests from Ickes against completing the project after he first heard of it "through outside gossip."


    Although Somervell first talked of developing the Norman Wells as early as January, 1942, said the report, and had Graham and Brig.-Gen. Walter G. Bryan, war department oil consultant and former Gulf Oil vice-president, look into it, "practically no information was obtained with respect to it" beyond that offered by Imperial at a conference the day before the directive.

    A few days after this conference, continued the report, Imperial "questioned the feasibility of the project and suggested that consideration be given to transporting oii products to Whitehorse by cargo plane."

    Under existing agreements with Canada, drawn up by the war department itself, said the report, the United States obtained only the right to construct the pipeline and refinery - the latter brought to Whitehorse from Corpus Christi, Texas - and explore crown lands, with no post-war rights other than to sell the project to the Canadian government and the commercial value, then called doubtful.

    Elaborating on its recommendation that the war department determine the advisability of further explorations based on new contracts, the committee said:

    "Under proper agreements with Canada and Imperial Oil, the oil pool found in the vicinity of Norman Wells might well be of use for military purposes after the war."


    It contrasted late estimates by Imperial Oil of a present indicated reserve in the Norman Wells vicinity of 35,000,000 with Somervell's estimate of from 50,000,000 to 100,000,000 barrels and recalled that the refinery and pipeline are large enough only for the originally-hoped 3,000-barrel a day output and added that much of the reserve "lies under the bed of the Mackenzie river where ice floes would destroy equipment."

    The committee said the prospecting and developing of the wells would cost $17,000,000. The pipeline, $21,000,000; the refinery, $24,000,000 and winter and summer routes for transportation over the Great Slave Lake-Mackenzie river route, $27,000,000 while outside oil products, distribution lines and storage facilities would involve another $35,000,000.

    Since the committee began investigating, the report said, the war department has pushed the project so vigorously that to abandon it now might mean a saving of even less than the $17,000,000 Somervell estimated on Dec. 1 it would take to complete it.