The Northern Miner’s – 1978 “Mining Man of the Year” John (Jack) Gallagher – by M.R. Brown

Since 1915, the Northern Miner weekly newspaper has chronicled Canada’s globally significant mining sector.

The most exciting exploration undertaking of 1978 in this country, unquestionably, has been the bold and costly Beaufort Sea project of Dome Petroleum. This has not only caught the imagination of North American investors, it is attracting worldwide interest. There are many who believe that this single play holds the greatest potential of any oil exploration theatre in the world.

It is for this reason that the Northern Miner has chosen that company’s driving force, John P. Gallagher, chairman and chief executive officer, as our MAN OF THE YEAR.

“Jack Gallagher is a tremendously imaginative man,” James B. Redpath, a long-time president of the parent Dome Mines, told this reporter, adding that while exploration-oriented, he was always “looked over his shoulder for cash income, at which he has also been very, very successful”.

Founded in 1950, ‘Dome Pete’ is now a name that comes up wherever oil men meet. The financial fraternity, too, considers it to have more ‘sex appeal’ than any company in the business today. It could well be the big newsmaker of 1979. the company’s early history is interesting, for it represents the first move by an Canadian mining company to get ito the oil exploration business, whereas today there is a flood of them.

Originally known as Dome Exploration (Western) Ltd., it was the brainchild of the late J. G. McCrea of Dome Mines-Campbell Red Lake fame, who felt that Canadians had an oil play coming up following Imperial Oil’s Alberta Redwater discovery but weren’t in it. Happily, for Dome’s shareholders, McCrea “decided to take a whack at it”. But there simply wasn’t that kind of money on Bay Street in those days. Because Dome Mines didn’t have enough money to “go it alone”, it brought New York and Boston money into the picture. “That’s why Dome Mines hasn’t gotten a bigger position, (26%)” Mr. Redpath explains.

Things started to look good for the Dome’s young oil arm almost immediately so McCrea, who was essentially a miner, decided he needed an oil man to run it. He pounced on Gallagher, a young geologist, to head up Dome Petroleum Ltd. in what Mr. Redpath describes as “a great thing for Dome Mines and one of the wisest moves Jim McCrea ever made.”

Born in Winnipeg, the young Gallagher graduated from the University of Manitoba in 1937. In two of his undergraduate summer seasons, he worked in the Canadian Arctic for the Canadian Geological Survey. He joined Shell Oil in 1939 as a field geologist, working in California and Egypt. He then went to work for Standard Oil Co. (New Jersey) as field geologist to the exploration manager. In 1949, he was posted to the Western Canadian division of Imperial Oil, joining Dome Pete as vice-president and general manager in 1950. He became president in 1953 following the death of Mr. McCrea and was named chief executive officer in 1974.

From its modest beginning with a working capital of $250,000 in 1950, the company has grown by leaps and bounds. And there is no stopping in sight. Revenues last year exceeded half a billion dollars, with earning before deferred income taxes of $139,000,000 or $12.29 per share. The company doesn’t pay any dividend, ploughing everything back into exploration. Its consolidated balance sheet at Dec. 31, 1977 showed total assets of approximately $1.3 billion. How it has grown.

In addition to its significant oil and gas production, Dome Pete has built up extensive utility-type money-making operations including a vast natural gas liquids production and marketing system, petrochemicals, pipelines etc. Again, with an eye on cash flow, it recently acquired a 22% interest in TransCanada Pipelines and a sizable interest in Siebens Oil & Gas of Calgary. Too, it is becoming increasingly involved in heavy oil developments.

Well established as one of this country’s most active explorers, the 61-year-old Gallagher just seems to have the knack of showing up in all the hot areas. It is hardly surprising, therefore, to find Dome heavily involved in the big new Elmworth gas field as well as in West Pembina.

But Gallagher’s real claim to fame, however, it being established in the frontier areas of the Canadian Arctic, where the company’s main efforts are being directed (and where the bulk of its money is being spent). It is there that the Dome-built team has become a true leader, developing the unique technology needed to conduct Arctic offshore exploration.

The company is building its own super icebreaker that should demonstrate the economics of tanker movement in the High Arctic, one of Gallagher’s pet dreams. It should also greatly extend the Beaufort drilling season, another goal for which he has been fighting. He feels it logical to move oil and/or gas out of the Arctic areas initially at least by icebreaker tankers, assisted by this vessel. Such a method would require the development of only a small fraction of the reserves that a pipeline would call for and would require a much smaller capital investment as well as providing greater flexibility.

At a recent meeting of the fifth International Ocean Development Conference in Tokyo, Dome Pete’s President W.E. Richards said that Dome is developing a new drillship designed to enable drilling to be extended over a substantially longer season in the Beaufort Sea and on a year-round basis throughout the inter-island areas of the High Arctic. These ships would have a Canadian Arctic Class 10 hull and other unique features that which would remove ice forces from the mooring system.

In addition to its major Beaufort Sea program, Dome has a continuing interest in Arctic Island exploration where it holds some 22 million gross acres as well as a 4.5% direct and indirect interest in Panarctic Oils which in turn has title to 71,000,000 acres. Gallagher, in fact, had a great deal to do with putting the whole Panarctic project together.

Something of a loner, Mr. Gallagher seems to enjoy a somewhat closer rapport with Ottawa officialdom than do most Westerners, which should prove helpful in the pioneering work his company is doing in developing shipping and environmental safeguards for that harsh locale. Too, he has won tax writeoff concessions for his Arctic program far exceeding those that apply to other resource developments elsewhere in Canada. This should be a big help in his plans to raise as much as $90,000,000 for his 1979 drilling fund (the largest in Canadian history).

It seems only natural that much of the high-risk investment required for Dome’s frontier oil-gas exploration should come from the domestic mining sector. Mining money backing its Beaufort Sea program includes not only funds from the parent Dome Mines and its sister companies – Campbell Red Lake and Sigma Mines – but substantial funds from Canada Tungsten, Brenda Mines and the Hollinger-controlled Labrador Mining and Exploration.

Although Dome’s enormous gamble in frontier oil-gas exploration was given a tremendous boost in 1978 with the discovery of significant oil and gas showings from offshore drilling in the Beaufort Sea, the full extent of that exciting play has yet to unfold – probably in 1979.