Newfoundland National Convention, 16 April 1947, Debates on Confederation with Canada


April 16, 1947

Report of the Mining Committee:[2] Committee of the Whole

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
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. Smallwood Can they also do it where they have paid rentals?
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. Higgins The last years they have waived it.
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 If we had the old Letters Patent?
Mr. Higgins I do not know.
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. Higgins It is greater this year.
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. Higgins It is not given away.
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. Smallwood We will never get a cent.
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. Higgins No.
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. Higgins I am afraid I have to agree with you.
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. Reddy Who advised the government?
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
Mr. Smallwood The company is in another country.
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]


Newfoundland. The Newfoundland National Convention, 1946-1948 Vol 1: Debates. Edited by J.K. Hiller and M.F. Harrington Montreal: Memorial University of Newfoundland by McGill-Queen's University Press, 1995).



Selection of input documents and completion of metadata: Gordon Lyall.

Notes de bas de page:

  • [2] Volume II:313. [Volume II is not in The Confederation Debates Collection]
  • [3] Volume II:354. The editors were unable to find the table on water-power. [Volume II is not in The Confederation Debates Collection]
  • [1] Newfoundland Light and Power, formed in 1924, provided electricity to St. John's. The United Towns Electric Company, incorporated in 1902, provided electric service to the remaining communities on the Avalon Peninsula.
  • [1] Dillon vs, Canning and the St. John's Housing Corporation, l946, Decisions of the Supreme Court of Newfoundland 1941-1946, pp. 386—416.
  • [2] The lease on Pipers Hole River, Placentia Bay.
  • [1] An Act for the Confirmation of An Agreement Between the Government and Labrador Mining and Exploration Company Limited. 2 Geo. VI, c41, 1938. Volume II:354. [Volume II is not in The Confederation Debates Collection]
  • [1] An Act further to amend the Act No. 41 of 1938 entitled "An Act for the Confirmation of an Agreement Between the Government and Labrador Mining and Exploration Company, Limited," 8 Geo. V1, c47, 1944. Volume II:354. [Volume II is not in The Confederation Debates Collection]
  • [2] New Churchill Falls.
  • [3] Refers to the 1938 act and the 1944 act.
  • [1] An Act to Promote Mining and Industrial Development within New Quebec, 10 Geo. Vl, c42, 1946.
  • [2] An Act Respecting Taxes Upon Certain Incomes, 8 Geo. VI, c53, 1944.

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