Western dreams

How one man's vision built a Canadian energy icon

Mike McNicholas' personal history with Westcoast Energy only began in 1979, but his almost encyclopedic knowledge of the company would suggest that he was sitting right next to Frank McMahon when the founder of Westcoast saw that Pouce Coupe gas well burst into flames in 1921.

"I was working on the Queen Charlotte Islands," said McNicholas, reminiscing about his introduction to the company where he still works today.

"And some oldtimer there told me I should go to Fort Nelson and work for Westcoast Transmission. I didn't know anything about the business or what Westcoast Transmission was about, but I was prepared to get out there and see what it was. So, he phoned our hiring office and said, 'I'm sending this guy in. Go ahead and hire him.' With that, I had a job in Fort Nelson."

He spent seventeen years at the gas plant in Fort Nelson before moving to the McMahon plant in Taylor for five years.

"Then moved on to the transmission system," he added. "And I've been there for a dozen years.

"In that length of time, you get to know a lot of people and a lot of the history of the organization. Come across a lot of the archives for the company. A lot of old photo albums and that. And it was really interesting just to get to look at the history of the people, particularly on the transmission system, since that was the original facility. It's really neat, because we have second and third generations of those original employees. That was my big interest."

It was also the story of Frank McMahon that caught his attention.

"He was a wildcatter," said McNicholas. "He was just out there to do the wildest things. And some paid off and some didn't. He went broke many times But when he struck it rich, it paid off big time.

"And he followed the dream. His dream of building the Westcoast Transmission company - that took him 20 years. It took an awful lot of work. He had to get acts of parliament changed. He took many trips to Washington because there was a lot of people in Washington objecting to the fact that Canadian gas was going to flow down into the U.S."

McMahon's dream of creating Westcoast really began when he saw the flame from that gas well that was struck by Imperial Oil geologists in 1921.

Imperial had no interest in the well. Gas was almost seen as a nuisance byproduct of producing oil. Besides, there was no market for Pouce Coupe gas and nobody to build a pipeline to transport the fuel regardless. It was too remote.

The tale sounds vaguely familiar to talk of the Horn River Basin shale gas play and the quest for liquids-rich gas in the Montney and Duvernay today.

"But there are still the dreamers out there that are looking further out than that," said McNicholas. "And they don't worry about cycles. There have been so many cycles in the natural gas business since Frank McMahon's day.

"We know that there will be change," he continued. "A few years ago, we didn't know that there was going to be such a glut of gas. That glut of gas is a great opportunity to create new industries."

Imperial Oil had no interest in that gas well, but McMahon thought it could be the first clue to a Peace River gas field big enough to rival the prolific Viking play in Alberta, not to mention one that could supply Vancouver - and possibly the Northwest United States - with natural gas.

Construction of the Westcoast pipeline that would finally accomplish that goal didn't officially begin until 1956.

The work actually started in October of 1955.

"What happened at that time," McNicholas explained, "was that he was really confident that he was going to get approval for the pipeline, but he did not have approval from the National Energy Board."

He secured a $19 million loan from the bank and went about the business of convincing "everybody that the safest place to store thirty inch pipe was in the ground."

Construction was soon underway.

"Originally, they were just going to put the pipe up in the northern sections," said McNicholas. "Out of sight. But, no, they started right at the U.S. border. Put the pipe in the ground and took that gamble that they would get approval.

"When they bought the 30 inch pipe," he continued, "it was just sitting around. And they weren't too concerned about that because they knew that they could resell the pipe. Once you put the pipe in the ground, it's really hard to dig it up and sell it and make any money on it. So, they took quite a gamble there about getting approvals."

Of course, a lot happened in the 36 years between the day McMahon witnessed the fire of the Pouce Coupe gas well and the day the pipeline was complete, not the least of which were the Great Depression and the Second World War.

Engineers had drawn the first map of what would eventually be that Westcoast transmission line in 1937, but that was two years after the provincial government in British Columbia decided oil and gas would be developed by the province alone.

They wouldn't be selling any mineral rights.

"He was very much a capitalist," McNicholas said of McMahon and his aversion to that policy, especially since it stood in the way of achieving his dream.

"He didn't mind taking gambles," McNicholas added. "And as you read more about him, you find that he was very successful, and he would take risks in other areas. He wanted to be the wildcatter, invest that money, and make a return on it."

McMahon's perseverance paid off in 1947 when the failure of a $1 million exploration and development project known as Commotion Creek prompted the government to leave the oil and gas business to private companies.

Meanwhile, McMahon and his brothers had struck it rich in Alberta's Turner Valley oilfield with their oil company, West Turner Valley Petroleum. Producing 3500 barrels of oil per day in the winter of 1938, the well was the most prolific that the play had ever produced.

He was able to put that oil money to good use when it came time to build the pipeline.

"One of the advantages that he had at that point in time was that he was really one of the richest men in the country," said McNicholas.

"He was worth about $50 million, which, in 1955, was an awful lot of money."

McMahon had a bit of good luck, too.

"Once things started going good for him, they went really well," said McNicholas. "He invested in race horses just simply because he thought it would be a tax write off. He just bought winners. So, he just made lots of money on horses.

"His second wife introduced him into the movie business and he invested in movies there. Again, couldn't go wrong. Instead of a tax write off, he had a tax burden, because all these movies that he invested in just did wonderful."

Westcoast wasn't faring quite as well, however. The company didn't make a profit during its eight years preceding construction or the ten years following construction.

"He was a really good salesman to be able to convince the investors to keep putting money into it," said McNicholas.

Westcoast gained a measure of financial security by cutting a deal with El Paso Natural Gas that saw the U.S. company buy 70 per cent of gas traveling through Westcoast's main transmission line.

El Paso needed the gas Wescoast was providing just as much as Westcoast needed the money, but the gas sales still weren't sufficient.

Consequently, McMahon launched the plan to build a pipeline from the main line in Prince George to Prince Rupert and start a retail natural gas business known as Pacific Northern Gas (PNG).

The plan was trouble from the start.

It required a $36 million pipeline when projected revenue would only allow for a $28 million pipeline.

McMahon and his crew simply defied convention and reduced costs by leaving large sections of the line exposed above ground as it wound its way to the coast.

"They only built that line under a lot of pressure from the government at the time," said McNicholas.

"Because there was no economics to justify putting that line in. But they were coerced to do it and they did it. They didn't have enough money, of course. And what they had to do in some areas, where it was just impossible to bury the pipe, they just had it strung along, hanging off the mountain.

"It was anchored off trees in different places," he added. "And that particular section of pipeline, that has suffered from slides many times over the years. There's been lots of landslides there, rockslides, and it takes out the pipeline."

Eventually, Westcoast was purchased by Duke Energy in September of 2001.

"When Duke bought Westcoast, we really didn't see an awful lot of change," said McNicholas.

"Duke accepted that Westcoast was a very strong company. And they didn't come marching in to make a whole lot of changes. It was the existing management that stayed in place and just kept running business as usual.

"But at about the same time," he added, "the Enron organization imploded, and that had a huge impact on oil and gas business all over North America."

That meant that there had to be a few changes.

"Duke was a really big organization," McNicholas explained. "They finally said, 'Okay, we're not getting the full value for our shareholders, because folks can't understand us being too complex.' Because, at that point, they had all this oil and gas stuff. And they had nuclear and coal.

"So, they split the company," he continued. "And Duke kept all of the electrical business. And they formed a new company, Spectra Energy, which was all the oil and gas and pipeline stuff.

"I think the timing of that was really good, too, because they formed Spectra and then there's a resurgence in the business and things have been going really well for Spectra ever since."

It is obvious that McNicholas firmly believes that he has been part of something for the the last 33 years that has been genuinely important and valuable to the province of B.C.

"When they were doing the opening ceremonies for the Westcoast Transmission system in Vancouver," he said, "the very same night, [Premier] W.A.C. Bennett, he announced the kick off for the [W.A.C.]Bennett Dam. So, you had all of this stuff happening at the same time.

"All of that helped promote farming and opened up the country big time," he added. "It was huge. I couldn't even hazard a guess at how much money has been spent in the last sixty something years. Oil and gas producers, they have spent fortunes. The wealth that's been taken out of here has just been phenomenal."

Of course, the legacy of Westcoast extends beyond British Columbia.

"It's all interconnected so much," said McNicholas.

@ Copyright Pipeline News North