Canadian city thrives on gas, like a ‘wealthy little country’
Energy resources help create fund for future generations.
MEDICINE HAT, ALBERTA — This isolated river city smack dab in the middle of Alberta’s badlands is a little bit like Norway. Both have sizable oil and gas reserves that spin big money relative to their small populations.
Now, Medicine Hat is setting up the equivalent of Nor way ’s f a mous s ove reign wealth fund, a pool of money that should make more money for generations to come.
“We could separate from the world, and we’d be totally s el f- suff i c i ent , ” s ai d Ted Clugston, the mayor, sipping coffee in Medicine Hat’s award-winning, architect-designed brick-and-glass City Hall. “We’d be a very, very wealthy little country, except we have no military.”
Medicine Hat is one of the last cities in North America to own its energy resources; it has more than 4,000 gas wells and hopes to grow its oil production from 1,500 to as much as 5,000 barrels of oil a day.
It has its own gas-fired power plant and is a leader in municipally owned renewable energy, with a wind farm and a solar thermal power plant. The city even provides incentives to homeowners to buy solar electric panels.
The city was once known in the United St ates as a s o u r c e o f b a d we a t h e r : B e c a u s e o n e o f t h e f e w weather stations in western Canada was there, United States weather reports often s t a t e d t h a t s t o r ms were “coming down from Medicine Hat.” In fact, however, Medicine Hat is one of the sunniest places in Canada, with more than 2,500 hours of sunshine a year.
The city’s curious name comes from an indigenous legend that a Blackfoot shaman lost his feathered war bonnet — c a l l e d a medicine hat by early settlers — in a battle with the Cree and that the headdress was later found near an oxbow bend in the river. The place became known as Medicine Hat.
It is a quiet community of 63,000 people, with a downtown hugging the river in a wide furrow worn into the prairie and newer development spread out on the benchland above. The city is home to a popular junior hockey team, the Tigers, and a winter music festival with the inspired name Tongue on the Post.
But it is what is under the city that really sets it apart: massive reserves of natural gas.
Much of Alberta is the floor of an ancient sea that scientists call the Western Interior Seaway, which once sepa- rated the Rocky Mountains from the Appalachians. It was full of life, swimming with giant reptiles that grew as much as 60 feet long.
Detritus from dead plants and animals that settled to the bottom was buried by sediment and broke down into methane after million of years. Geologists today call the remains of that seabed the Medicine Hat Sandstone. It contains the largest and oldest pool of natural gas in Canada.
The indigenous people of the plains knew there was something mysterious in the ground around here because lightning strikes would occasionally set off gas flares that burned brilliantly until snuffed out by wind or rain — they called the gas vents “burning springs.”
Then in 1883, the Canadian Pacific Railway bridged the South Saskatchewan River at Medicine Hat and dug a well farther west looking for water to replenish steam engines o n t h e d r y p l a i n s . T h e y instead struck gas, “which, on taking fire emits a flame sufficient to light up the surrounding country,” a newspaper reported at the time.
The railroad kept digging wells and hitting gas, which it primarily used to create flares to dazzle visitors. After witnessing one such display, Rudyard Kipling famously wrote, “this part of the country seems to have all hell for a basement, and the only trap door is Medicine Hat.”
The first wells were shallow and the gas was mixed with water, which would freeze in the winter, making distribution impossible. Then in 1904, the town fathers decided to drill a deeper well.
At 1,000 feet, the coffers ran dry, but the mayor said he would find more money and ordered the drilling to continue. Ten feet later, the drill hit gas, spitting the drill bit out of the ground like a watermelon seed. The mayor was just getting dressed and ran down to the well with his suspenders hanging around his knees, according to a city historian.
Re m a r k a b l y, t h e c i t y turned down a bid by a private company to buy the gas franchise and instead decided to develop it as a public utility. The city raised money to install gas lines that ran through buildings and from home to home. Street lamps burned around the clock because the gas was so plentiful it was less expensive than turning them off and relighting them daily, a reality that earned Medicine Hat a mention in “Ripley’s Believe It or Not!” (The gas mantles in the lamps have since been replaced by light-emitting diodes.)
Learning how to safely harness the invisible, odorless resource took some time. Many a building was blown to matchwood because of leaking gas. In 1908, a mattress factory exploded.
Medic ine Hat , by then incorporated as a city, started offering industry tax holidays, free building sites and free natural gas; thousands of factories came. Vincent Scully, a former Irish politician, declared that Medicine Hat would become “the Pittsburgh of western Canada,” and for a while, it looked as if he might have been right. By the time the Great War began, Medicine Hat factories were producing dozens of products, “from manhole covers to candy,” according to Medicine Hat’s history museum.
The prairie that stretches out from the city is dotted with gas wells today, marked by U-shaped pipes sticking out of the ground like abandoned hitching posts. Some of the wells have been producing gas for more than 100 years.
“There’s not much that we’re wanting for,” said Bill Cocks, a city councilor and chairman of the city’s energy and utilities committee, who said he was sometimes introduced at provincial meetings as “Alderman Cocks from the Independent Principality of Medicine Hat.”
Cocks is president of the Cypress Club, a leather-andtrophy-head-bedecked private club founded in 1903 that has long been the social hub of Medicine Hat power brokers.
Income from the oil and gas sales funds much of the municipal budget, allowing Medicine Hat to keep taxes low — it has the lowest propert y taxes of any major municipality in Canada. When energy prices were high, the city built up about 500 million Canadian dollars in reserves.
But t he n pr i c e s pl ummeted and the profits evaporated, and this year Medicine Hat faced a budget shortfall for the first time in memory. The city will close the gap with reserves and raise property taxes by 2 percent annually for the next 10 years, but the shortfall served as a warning to the City Council.
As a result, Medicine Hat i s s e t t i ng up a “heri t a ge fund,” similar to the sovereign wealth funds operated by Norway, China, Singapore and other wealthy countries. The city won provincial approval to invest in stocks, a privilege allowed to only two other cities in Alberta: Calgary and Edmonton, each more than a dozen times Medicine Hat’s size.
Once money goes into the fund, it cannot come out — only dividends can. The city hopes the fund will grow and that dividends will eventually cover a lot of the city budget, maybe someday even making property taxes a thing of the past. “We’ll monetize these assets,” said Brian Mastel, the finance commissioner, “into an endowment fund for the community.”