Mr. Higgins When we adjourned this report we
were dealing with water-power.
[3] The table has
been read, and Mr. Banfield was to give us some
figures of estimated horsepower. I would ask you
to mark on the tables the figures which Mr. Banfield will read out. I would like to
say we cannot
vouch for the accuracy of these figures. We are
giving them to you as we got them. We are
informed they are only an estimate. They will
give you some idea, though not very accurate, of
the potential horsepower in the country.
Mr. Banfield
| Mobile River |
3,000 hp |
| Petty Harbour |
1,800 |
| Tors Cove & Rocky River |
4,493 |
494 NATIONAL CONVENTION April 1947
| Terra Nova |
No data. |
| Fort Union |
No data. |
| Exploits River |
54,000 |
| Kaipokok River |
No data. |
| Muskrat Falls |
No data. |
| S.E. Brook entering into S.W. Arm |
No data. |
| Black River, RE. |
No data. |
| Pipers Hole River |
No data. |
| Pismire Brook |
No data. |
| Indian Brook, Halls Bay |
2,000 |
| Rattling Brook |
2,000 |
| Rocky River, Colinet |
1,500 |
| Great Rattling Brook |
No data. |
| Badger Brook |
4,975 |
| Main Gander River |
50,000 |
| Little River |
100,000 |
| Wild Cove Brook |
No data. |
| Middle Arm Brook |
No data. |
| Black Bay Brook |
3,800 |
| Corner Brook, Bay of Islands |
No data. |
| Grand River |
No data. |
| Colliers |
No data. |
| LaManche |
1,000 |
| Main River, St. Lawrence |
500. |
Mr. Smallwood With reference to 12 rivers
given in this list, in each of them it says from two
years (in three cases three years) after granting
the water-power, they were supposed to develop
them. The grants were issued 1910, 1911, 1912,
1913, 1914, 1896, 1897, 1921 and 1924. All
these, according to the conditions, were supposed
to be developed within two or three years. Could
Mr. Banfield tell us the position with regard to
these water-powers? Are they still under grant, or
did the grant lapse when they failed to develop?
Mr. Banfield All these pay annual rentals with
the exception of three rivers — Rattling Brook,
Indian Brook and Pismire Brook.
Mr. Smallwood How can they pay in the case
of Pipers Hole? They have to pay one peppercorn
on demand. Also Black River. In other cases they
pay 25 cents a horsepower developed. In these
cases here, they pay annual rental or royalty on
10, 20, 25. I cannot understand it. Does the acceptance of these rentals cover the
leases of the
water-powers?
Mr. Banfield I may say that they have not
developed the water-powers, but I think they
have some other agreement to pay an annual
amount to hold the water-powers.
Mr. Smallwood Take the case of Little River
(Burgeo and Lapoile), 100,000 horsepower. According to agreement they have paid $1
a year
since 1911 — a 99 year lease on 100,000 hp of
hydro-electric energy, on the condition they shall
develop water-power on the river. The condition
of getting that tremendous grant was that within
two years they would develop the water-power
and the same table says "no development". Is the
government accepting $1 a year on potential
horsepower from John Finlay Stewart of England
and Bowaters? Can they tie it up for 99 years?
Suppose I want to go up there and develop? Does
it mean that for the remainder of 99 years no one
can develop that 100,000 hp or any of it?
Mr. Starkes There must be some
misunderstanding — Indian Brook, Halls Bay —
Mr. Banfield gave out the Operating horsepower,
2,000?
Mr. Smallwood That "could be" developed.
That is the capacity. Could Mr. Banfield tell us if
the government has the figures as to the total
water-power in Newfoundland? I know a
hydroelectric engineer is coming down; but does
that mean the government does not know what
the water-power in Newfoundland is?
Mr. Banfield That is the situation. That man is
here at the present time. He is going to make a
survey.
Mr. Smallwood What is the total income of the
government on account of these royalties paid by
all persons or companies who have water-powers
granted to them, developed or not?
Mr. Banfield
| Rentals and |
royalties, |
| 1940-41... |
$l,527 |
| 1941-42... |
1,672 |
| 1942-43... |
1,870 |
| 1943-44... |
4,387 |
| 1944-45... |
3,690 |
| 1945-46... |
4,460 |
Mr. Smallwood Could you tell me why they
vary? It jumped from $1,800 to $4,460. Why?
Mr. Banfield The jump is due to the erection of
new plants, but the decline is due to adeposit paid
April 1947 NATIONAL CONVENTION 495
either by Newfoundland Light and Power or
United Towns
[1] of $1,000; it was paid one year,
and the decline was next year.
Mr. Fudge In the case of Pismire Brook and
Rocky River, the resident holder of that particular
lease is unknown. The unknown party must pay
25 cents per hp. The lease is for 99 years. It states:
"shall develop within two years." If he does not
develop within two years, who owns it?
Mr. Higgins I understand in some of these particular leases, in spite of that paragraph in the
lease, they have accepted rentals; which means
the government waived the conditions. The
government has not struck them off the roll.
Mr. Fudge The reason is that they do not know
the owner.
Mr. Higgins They can, in spite of that, have
them deleted by legislation — have the grant
taken off.
Mr. Higgins If he has paid rent, that would be
considered the waiving of that condition.
Mr. Smallwood If he is to pay $1 a year, but also
has to develop and fails to do so, goes on paying
the rent, the government accepts the rent, and
because the government accepts it, they cannot
break the lease?
Mr. Smallwood "999 years — Newfoundland
Pulp and Pine Co. — H.J. Crowe, Great Rattling
Brook; Badger Brook, Bishop's Falls." Badger
Brook, no development in the other two, they
paid $3,000 in 1907 in payment of rents for 999
years. No labour has been given.
Mr. Harrington We all remember ten years ago
in Mexico, where the government expropriated
oil concessions and in the long run it worked out.
As far as Newfoundland is concerned, there are
a lot of water-powers and various other properties
leased; what is the position on that?
Mr. Higgins You will remember the judgement
of Hon. Mr. Justice Fox in regard to the Housing
Corporation.
[1]
Mr. Smallwood You mean if the government
wanted to cancel these leases by legislation, they
cannot do it if the owner or someone else concerned objects?
Mr. Higgins My recollections are it cannot be
done summarily. The Governor is not empowered to authorise such an act. It must go
through the Dominions Office.
Mr. Smallwood Here is a Convention trying to
assess our natural resources; and here we find all
these water-powers tied up in the hands of private
owners who are not developing, and they are
getting away with $10 to $20 a year. We have to
decide whether it is possible for a future government to get revenue out of these
water-powers.
Mr. Higgins The Mining Committee will consider this and give you an opinion at a later date.
Mr. Hollett I must agree with Mr. Smallwood.
l was amazed to see the terms under which
various individuals and corporations were given
these water-power leases. One is for one peppercorn a year. Harveys has a lease for
payment of
one peppercom a year on demand.
[2] I suggest we
go to Harveys and ask them for 50-odd peppercorns. Then these other leases granted
a considerable amount of water-power on terms of $1 up
to $5 a year. In those leases there was a proviso
that in up to five years they were to develop the
water-power. I am sure that those I know have
done no development. Why the government
should accept a $1 fee in order to assist these
individuals, I cannot understand, and I would like
to go on record as suggesting when the time
comes round for these people to pay their fee, the
government refuse to accept it, and then act on
the proviso which says they must develop within
two to five years. A good many people are holding on, waiting for someone to come
in and
develop, and then make a scoop. I would suggest
that the government cancel the leases if those
people do not develop the water-power. This is
preventing people from coming in and developing these water-powers. Then when we look
at
the paltry amount paid into the revenue, it does
not give a pleasant taste in your mouth.
[The section was adopted]
Mr. Higgins The next section is Labrador and
so as not to be confused, I would suggest we stop
in the middle of page 6, where we have completed
496 NATIONAL CONVENTION April 1947
dealing with the acts, and discuss that part of the
paragraph.
Mr. Vardy I would like to clear up the question
of the tariff on machinery for the making of brick.
I consulted the Customs and found they reduced
the rate on power machinery from 45% to 20%.
There is no provision in the tariff for free entry;
it would have to be approved by the government.
For special machinery coming in, if the duty is
over $100 and the matter was approved by the
Board of Customs, it comes in duty free....
Mr. Smallwood ....With respect to Bell Island,
the Mining Regulations Act of 1908 governs that.
The return of value is the value of the crude
material. At Bell Island the figure would be the
value of the ore when it is raised to the surface,
irrespective of operation of equipment on the
surface, or transporting it on the surface. The
weighing is not done at Bell Island but at Sydney.
Mr. Ashbourne Thank you for the explanation.
That figure $2.55 does not reflect the true present
day value of ore.
Mr. Smallwood The fact of the matter is that the
figures showing the value of iron ore exported
from Newfoundland, we might as well tear up. It
is the value taken up and laid on the surface, not
the export value. My complaint is with the Customs. If you will recall, every budget
speech
would contain the values of iron ore exported
from Newfoundland, and not one word was
worth the paper it was written on. It was a sort of
nebulous value of the ore as it comes out of the
ground and not the export value. What country in
the world does not know the value of its exports?
The only thing we have in Newfoundland to
enable us to determine the amount of wealth, the
gross national production, is our figures of exports. Here is one where our figures
are inaccurate.
Mr. Ashbourne I understand this company or
other companies associated with Bell Island have
exported up to 40 million tons of ore. I would like
to know the real value of that ore, not the nominal
value. Everything that goes out of the country
should have some value. I do not see why, if
Buchans has to put down the present day value,
this company should not do it....
[Mr. Higgins answered a number of questions
concerning the legislation governing the Labrador Mining and Development Company]
Mr. Cashin I am glad of the opportunity to say
a few words in connection with the Labrador
Mining and Development Company. Consequently I will begin from 1935. Some of my
remarks may not be quite accurate, but I trust the
Convention will forgive me, as I have no notes
here.
In 1935 the Weaver Minerals applied to the
Newfoundland government for the right to
prospect 20,000 square miles of territory in
Labrador. I should say that to Mr. A.H. MacKay,
whose name is signed to the application, would
have to go the credit for any big development. At
that time, this Mr. MacKay and three other individuals joined and formed this Weaver
Minerals. They applied and received, through a
letter (no act), the right. There was no act passed
until 1938. They undertook to spend $50,000 on
Labrador. This particular area had been held by
local interests who were unable to finance it.
Mr. MacKay and his associates spent $80,000.
People in Newfoundland did not know that. A lot
of money went up in the air. He employed
Dr. Retty, geologist. The following year they felt
they were throwing money away and were
prepared to forget it. But this gentleman,
Mr. MacKay, was a speculator. He and his associate carried on. The following year
Mr. MacKay's associate died and he had to carry
on alone. Then Mr. Timmins of the Hollinger
Co. contacted Mr. MacKay in Montreal. Hollinger Co. is a large gold producing company.
Hollinger controls 30% of the stock in the Noranda mine. MacKay's money was nearly
all gone.
Eventually a deal was made. After Hollinger
became interested, they probably spent about $1
million; $200,000 of which is going up in the air;
they have to fly in supplies and machinery.
I have noticed in the 1938 act
[1] that this
Labrador Mining Company "shall be in British
territory." Now the idea is to electrify that railway. When they electrify it they
are going to run
it into Canada. Are they going to run only to the
border line? Is the government going to charge
export rate? If so they are going to have difficulty,
because they will have to tell them to haul it the
rest of the way. It is anticipated this Labrador
April 1947 NATIONAL CONVENTION 497
Mining Co. will have a production of 10 million
tons a year. I am sorry we did not know of the
1944 act.
[1] I claim that is taking $1 million
revenue away from Newfoundland. Under the
1938 act they were getting 10 cents a ton royalty
plus 3% on the gross value of other materials.
Now under the 1944 act that is changed, and we
get 5% on the net profits. I say we will get
nothing. I am not giving the legal interpretation
of the act, but I say 15 cents per hp is nothing.
Here we have the greatest water-power in the
world and the Commission of Government gave
it away for 15 cents a horsepower.
Mr. Cashin There is an application in for the
right to export power.
Mr. Higgins It would be the subject of an independent act. After the comments made by Major
Cashin and by the Finance Committee, maybe it
will not.
Mr. Cashin Let us see what it means: assuming
they would produce 5 million tons a year and
employ 2,500 people. If we are going to get no
profits tax — I say that iron ore can produce a
profit of half a million a year...
Mr. Cashin Let us assume they produce 5 million tons of ore annually; 60% of that is in Newfoundland
and 40% is in Canada. Three million
tons would be our share. What does it mean in
earning power? There will be no profits tax. They
will say they made no profits. We had a job
getting it out of Dominion Iron and Steel. Add it
on to our present economy and it means $60
million to $70 million a year; ten years from now
the timber area and the Labrador Mining Co. will
be instrumental in creating in Newfoundland a
great asset. Do you know that they have to pay
30% on mining machinery coming into Quebec?
And in Newfoundland they get it free. We hold a
trump card in getting it here instead of in Quebec.
I have that from one of the officials of the
Labrador Mining Co. The export of power should
be given particular attention, and I am glad the
Finance Committee has been instrumental in
bringing it to the attention of the government, and
that they are considering doing something about
it. It was our only way to drive it home, to see
they did not give any more away. We had that in
mind when Major Flinn was before the Committee. He indicated that in his opinion the
waterpower was practically under the control of the
Labrador Mining Company.
Mr. Bailey The answer he made to us was we
should not say anything about it in case the
Labrador Mining Co. should hear about it.
Mr. Smallwood I would like to ask Mr. Higgins
— in the part of the repon read out, possible
development, 1,163,000 horsepower at Grand
Falls;
[2] they are going to be given the right at 15
cents per hp to develop that. Can they have all of
Grand Falls?
Mr. Higgins If the conduct of their operations
requires it. The 15 cents is not settled.
Mr. Ashbourne lunderstand the administration
of the Labrador act
[3] is under the Commissioner
of Public Utilities?
Mr. Higgins The water-powers come under
Natural Resources but the Geological Survey is
under the Department of Public Utilities.
Mr. Ashbourne That was the reason the Commissioner for Natural Resources did not know the
terms of the act.
Mr. Higgins To conclude the explanation on the
matter of water-power, I would like to point out
that the company is given permission to develop
power only in the area of Labrador. That is the
only interest the Labrador Exploration Co. has. I
am of the opinion that if and when negotiations
are made to develop, no government of Newfoundland would permit the power to be exported
on conditions not advantageous to the country.
Mr. Hollett Why change the 1938 act to the
1944 act, wherein it was changed from 10 cents
a ton to 5% of net profits? We were told that they
were not mining men at all, but a bunch of fools
to consent to 10 cents on iron ore; that it was an
unfair tax. Bell Island has been paying 10 cents a
ton royalty for a number of years. We were also
informed on no less an authority than Mr. Timmins that possibly 10 million tons would
be
produced; at 10 cents a ton that would mean $1
498 NATIONAL CONVENTION April 1947
million revenue to the country. They came down
here after the Labrador Exploration took over and
they cajoled our mining experts — got them to
change that section and gave them under the new
act 5% net profits. What the revenue hopes to get
out of this 5% tax is absolutely nil.... The company is allowed to take 15% of all
monies which
they put into this area before they start to calculate the profits. I maintain whoever
was responsible did not know what they were talking about.
For some reason or other somebody was persuaded to have this go through. The only
thing
we as a country will get from the development of
these mines is the payment for the labour, and
probably some income tax from the men who
laboured. Royalty might just as well be cutout.
Mr. Higgins The difference between the 1938
act and the 1944 act is very great. In the 1938 act
there were no deductions provided for....
Mr. Smallwood Page 3 of the report — "or to
be developed." Are they going to pay 15 cents per
hp on horsepower that they have not develop-ed,
but which may be developed?
Mr. Higgins That paragraph would have to be
read in conjunction with "power required for
efficient conduct of the operations."
Mr. Smallwood ....Surely the tax in Quebec on
water-power is more than 15 cents per hp?
Mr. Burry As far as the 15 cents is concerned,
I notice that the Convention is jumping to the
conclusion that 15 cents will be the tax charged... It may be 80 cents, or it may
be $1 which
is the price in Quebec. We feel that when the
government goes into the question, they will take
nothing less than $1. I wish you would not stick
too close to the 15 cents.
Mr. Smallwood The 1938 act says 15 cents.
Surely this is an act of parliament? Is that
amended in the 1944 act?
Mr. Smallwood Surely the government cannot
argue themselves out of that.
Mr. Burry We are not defending the Commission of Government or making any excuse for the
company. We understand that when it was drawn
up the government did not know what figure to
put in there for that isolated area. They did not
have much to base its recommendation on. They
probably thought 15 cents was all right. It is still
wide open.
Mr. Smallwood The point is the matter is not
wide open. It is a matter of law.
Mr. Smallwood Page 5 — Rent. If you are
going to pay a tax on net profits, you must know
the gross receipts. Less 3% in Quebec; 5% in
Newfoundland. So far it would look as if the
government made a better bargain.
Mr. Higgins It is provided in the Quebec act
[1]
that all iron mined in Quebec must be milled in
Quebec.
Mr. Smallwood In the Commission of Government neither of them is an industrialist; neither a
financier; neither a man accustomed to dealing
with mining corporations in Canada. Did they
find out exactly what the equivalent company on
the other side of the border would have to pay to
Quebec?
Mr. Higgins In answer to that we were informed the government got the best advice possible. We
did not follow that up. The Quebec act
was passed in 1946. There was no copy in the
country; only through the courtesy of Mr. Cook
did we get one.
[Mr. Higgins read the Quebec act]
Mr. Starkes We talk about 15 cents per hp. I
wonder did they find what they usually charge
private individuals? I understood it was $65 per
hp per year.
Mr. Higgins In St. Lawrence the power is supplied. In Labrador they have to develop it. It is
an
extremely isolated pan of the world.
Mr. Higgins We were told they had the best
advice possible. I would like to continent on one
section of the report, page 6, Reduction of Royalties. We point out there, "Your Committee
does
not find itself in a position to accept this explanation." With reference to the 1944
Income Tax
Act,
[2] "Where an incorporated company conducts
its business...." That is up to the watchdog of the
income tax department. The meaning of our paragraph is that the iron ore was not being
sold for
fair prices, but was sold to a parent company and
not at regular market prices. The Assessor will go
into the business of the company and make the
company pay the difference
April 1947 NATIONAL CONVENTION 499
Mr. Higgins I know. If the iron ore was valued
at $2, and if the selling price was $6 a ton, do you
mean to tell me that Mr. Allen is going to let that
crowd get away with that?
[The committee rose and reported progress, and the Convention adjourned]
