1943-04-14

[Stage Direction]
(Questions answered orally are indicated by an asterisk.)
M. & C. AVIATION COMPANY LIMITED
["1. 10.\n2.\tProduction: Ottawa Dairy, Ottawa, Ont., 1,039.260 lbs.; Canadian Doughnut Company, Trenton, Ont., 2,373,200 lbs.; Swift Canadian Co., Toronto, Ont., 1,692,670 lbs.; Cow & Gate, Gananoque, Ont., 266,305 lbs.; Bordens Limited, Belmont, Ont., 2,093,815 lbs.; Bordens Limited, Winnipeg, Man., 617,845 lbs.; Joe Lowe Corporation, Winnipeg, Man., 1,190,187 lbs.; Canada Egg Products, Saskatoon, Sask., 1,864,083 lbs.; Alberta Poultry Producers' Ltd., Edmonton, Alta., 172,563 lbs.; Burns & Co. Ltd., Calgary, Alta., 586,480 lbs.\n3.\t97-4 per cent.\n4.\t2-6 per cent.\n5.\tNo subsidy is granted to these plants by the federal government. Five new plants, constructed specifically to take care of the war-time requirements of the federal government, are granted accelerated depreciation of 20 per cent per annum on machinery and equipment. These plants are Burns & Co., Calgary, Alta., Alberta Poultry Producers, Edmonton, Alta., Canada Egg Products, Saskatoon, Sask., Bordens Limited, Winnipeg, Man., and Swift Canadian Co., Toronto, Ont."]
Mr. DIEFENBAKER:: What amounts, if any, in each of the years 1940-42 inclusive, and 1943, to date, have been paid by the Department of National Defence for Air, to the M. & C. Aviation Company Limited, Prince Albert, Saskatchewan, and what amount, if any, still remains unpaid?


Mr. POWER:: Jan. 1-Dec. 31, 1940	 Nil
Jan. 1-Dec.	31,	1941	
$154,508	43Jan. 1-Dec.	31,	1942	
964,468	98Jan. 1-Mar.	25,	1943	
308,146	49Total	$1,427,123 90
No outstanding bills due and payable remain unpaid.



Mr. DIEFENBAKER:: 1.	Is Dr. Aime Chartier, of Montreal, Quebec, in the employ of the government in connection with the administration of the Government Employees' Compensation Act? If so, in what capacity and upon what terms of appointment?
2.	How much has been paid to him for medical services and examinations in each of the years 1940-42 inclusive, and in 1943 to date?
3.	In addition to such payments, is any amount due and outstanding to him, or have additional bills been rendered? If so, for what amount, and for what period?


Mr. MICHAUD:: 1.	No; but his services are engaged from time to time as an expert in assessing disabilities of government employees in the province of Quebec.
Under the laws of the province of Quebec, an employee who has been injured has the right to select his physician for treatment, and the expense therefor is paid by the employer at the rates established by the Quebec workmen's compensation commission.
2.	The total amounts paid to Dr. Chartier for expert services and for the services of his clinic in the cases of government employees who have engaged his services, for the period mentioned, are as follows:
Re	Re
Employees Employees of	of
Fiscal	Government	Defence	Year	Departments	Projects	Total1940-41	$18,532 45	$18,532 451941-42	19,495 25	$13,831 50	33,326 751942-43	12,182 70	26,142 50	38,325 20
3. Approximately $2,500 outstanding covering current accounts in process of audit.


MEDICAL SERVICES IN RURAL AREAS
Mr. CASTLEDEN:: What arrangements have been made to provide medical services for people in rural areas where the doctors have left the area and no medical services are available?


Mr. McLARTY:: The Canadian medical procurement and assignment board, operating under the Department of National Defence, has been given power to survey the national situation with respect to available supply of physicians, with respect to disposition as between the armed services and civilian practice, and with respect to distribution in civilian practice. Much of this work has been done, and when it has been completed the Minister of Labour will be in a position to ascertain whether the findings of the board indicate a need for any change or expansion in the present civilian man-power regulations.


DURUM WHEAT
Mr. ROSS (Souris):: 1.	What was the total acreage of durum wheat grown in Canada, 1942?
2.	What was the total number of bushels of durum wheat produced in Canada, 1942?
3.	What was the total number of bushels of 1942 durum wheat marketed by producers between August 1, 1942, and April 1, 1943?
4.	What was the to^al number of bushels of durum wheat exported between August 1, 1942, and April 1, 1943?

Questions


Mr. MacKINNON (Edmonton West):: 1.	Second preliminary estimate 259,000 acres.
2.	Second preliminary estimate 6,800,000 bushels.
3 . 2,578,000 bushels.
4.	526,000 bushels.


MOBILIZATION ACT-POSTPONEMENTS
John George Diefenbaker: From the inception of the call-up under the National Resources Mobilization Act to date, how many men have been granted postponements because they are engaged in, (a) agriculture; (b) munitions manufacture; (c) for other reasons?


Norman Alexander McLarty: Returns are at present available only to January 31, 1943. They are broken down to war industries but not to munitions manufacture.
From the inception of the call-up until January 31, 1943, the following numbers of men have been granted postponement: (a) 86,596-because they are engaged in agriculture; (b) 34,463-because they are engaged in war industry; (c) 56,016-for other reasons.


EGG DRYING PLANTS
Mr. FRASER:: (Peterborough West):
1.	How many egg drying plants are there in Canada, what are their names, and where are they situated?
2.	What was the total production from each plant in 1942?
3.	What percentage of the products produced in these plants in 1942 were sold to the federal government or any of its agencies?
4.	What percentage of the said products were consumed in Canada?
5.	Are any of these plants granted a subsidy by the federal government?


Mr. GARDINER:: 1. 10.
2.	Production: Ottawa Dairy, Ottawa, Ont., 1,039.260 lbs.; Canadian Doughnut Company, Trenton, Ont., 2,373,200 lbs.; Swift Canadian Co., Toronto, Ont., 1,692,670 lbs.; Cow & Gate, Gananoque, Ont., 266,305 lbs.; Bordens Limited, Belmont, Ont., 2,093,815 lbs.; Bordens Limited, Winnipeg, Man., 617,845 lbs.; Joe Lowe Corporation, Winnipeg, Man., 1,190,187 lbs.; Canada Egg Products, Saskatoon, Sask., 1,864,083 lbs.; Alberta Poultry Producers' Ltd., Edmonton, Alta., 172,563 lbs.; Burns & Co. Ltd., Calgary, Alta., 586,480 lbs.
3.	97-4 per cent.
4.	2-6 per cent.
5.	No subsidy is granted to these plants by the federal government. Five new plants, constructed specifically to take care of the war-time requirements of the federal government, are granted accelerated depreciation of 20 per cent per annum on machinery and equipment. These plants are Burns & Co., Calgary, Alta., Alberta Poultry Producers, Edmonton, Alta., Canada Egg Products, Saskatoon, Sask., Bordens Limited, Winnipeg, Man., and Swift Canadian Co., Toronto, Ont.



MUNITIONS AND SUPPLY-TELEPHONE AND TELEGRAPH CHARGES

['1. (a) Satisfactory tonnages of anthracite coal are presently being received by the Toronto dealers to meet all current demands, (b) Dealers will be advised as to the probable\n\nQuestions as Orders for Returns\nquantity of anthracite coal that may be expected and will be instructed to procure other types of fuel to supplement their supply of anthracite.\n2. (a) War tax of 10 per cent has been waived on anthracite coal, (b) Subsidies have been made available to meet increased costs of coal, (c) Importers and dealers have been advised as to sources of supply, etc.']
Mr. ROSS (Souris):: What are the total amounts of charges within the Department of Munitions and Supply by the month, January 1, 1942, to January 1, 1943,	(a) for telephone calls and telephone
services; (b) for telegraph calls and telegraph services?


Mr. HOWE:: (a)
Department of Munitions and Supply Statement of Long Distance Telephone Costs Private Wires and Toll Service-January, 1942, to January, 1943, inclusive
Period	Private wire	Private wire	Regular toll	1942	to Toronto	to Montreal	charges	TotalJanuary-February 	
$1,123 75	$528 75	$18,165 47	$19,817 97February-March 	
1,009 81*	471 38*	23,932 26	25,413 45March-April 	
1,123 75	528 75	22.671 47	24,323 97April-May 	
1,123 75	528 75	25,893 07	27,545 57May-June 	
1,123 75	528 75	26,357 81	28,010 31June-July	
1,123 75	528 75	25,453 35	27,105 85July-August 	
1,123 75	528 75	27,042 61	28,695 11August-September	
1,123 75	528 75	25,949 55	27,602 05September-October 	
1.123 75	528 75	27,015 51	28,668 01October-November 	
1,123 75	524 05*	29,450 83	31,098 63November-December 	
1,123 75	528 75	22,039 01	23,691 511942-43 December-January 	
1,123 75	528 75	13,024 40	14,676 90
* Reduction due to wire failure.
Questions

Statement of Teletype Circuit Costs January, 1942, to December, 1942, inclusive
Total
January .. February . March ...
April....
May	
June	
July ....
August ... September October .. November December

6.993	08 7.356 62 7,336 62 7.533 29 9,032 64 9,067 64
9.994	65 10,081 41 10,377 22 10,965 38
Note.-The United Kingdom government pays its proportionate share of the total cost of teletype services. An accounting is made semi-annually and the proportionate share of each government is determined. For the last period ending December 31, 1942, the United Kingdom share was forty per cent.
(b)
Statement of Telegraph Costs January, 1942, to December, 1942, inclusive
Period
1942	Telegrams	Cables	January 	
$5,403	45	$3,673	77February 	
4,546	52	3,636	44March	
5,546	78	4.219	99April 	
5,317	56	4,374	49May 	
6,077	58	5,130	51June	
6,262	05	4,301	91July	
7,508	88	4.507	70August 	
7,242	91	4,431	87September	
7,098	33	4,649	21October 	
7,301	38	5,615	77November	
6,221	33	4,776	70December 	
6,310	11	5,319	63



Mr. McGREGOR:: 1.	Are Raymond Truehon and Daniel LaGasse employed in national defence headquarters records office?
2.	If so, in what capacity?
3.	What are their ages?
4.	Are they physically fit?


Mr. RALSTON:: 1.	Raymond Tmchon-Resigned 3rd April, 1943, effective 10th April, 1943 (called up for military service). Daniel LaGasse-Yes (appointed 24th December, 1940).
2.	R. Truehon-clerk, grade 1; D. LaGasse -typist, grade 1.
3.	R. Truehon-22 years old; D. LaGasse- 24 years old.
4.	Yes, so far as is known.


INSPECTION OF PRISONS AND PENITENTIARIES
Mr. CHURCH:: 1.	Who inspects prisons and penitentiaries?
2.	Are grand juries at the assizes allowed to inspect them in all provinces?
Mr. ST. LAURENT:
1.	Officers of the penitentiaries branch or persons specially authorized by the Minister of Justice, inspect penitentiaries.
No information as to other prisons.
2.	Grand juries do not inspect penitentiaries.
No information as to other prisons.


RADIO BROADCASTING-REPORTS OF SPECIAL COMMITTEES
Mr. CHURCH:: 1.	How many reports were presented to the house in 1940, 1941, and 1942, by the select committee on radio matters?
2.	Will consideration be given to the report of the committee of 1942?
Mr. LaFLECHE:
1.	(a) 1940, no report; (b) 1941, no report; (c) 1942, first report presented May 6, 1942; second report presented July 7, 1942; third and final report presented July 25, 1942.
2.	The reports have received consideration.


MILITARY SERVICE-POSTPONEMENT FOR FARM PURPOSES-S. H. EDGAR
Mr. NICHOLSON:: 1.	Has S. H. Edgar, of Buchanan, Sask., advised the national war services board as to whether any men called for military service are essential in agriculture?
2.	How many applications for postponement have been referred to Mr. Edgar for advice as to whether or not postponement of military service should be granted?


Mr. McLARTY:: 1.	S. H. Edgar, of Buchanan, Sask., is a member of one of the civilian recruiting committees. From time to time the committees do make reports and inquiries are directed to them.
2.	No record is available of the number of applications Mr. S. H. Edgar may have dealt with.


FUEL SITUATION IN TORONTO
Mr. CHURCH:: 1.	What steps are being taken by the government to relieve the fuel situation in Toronto during, (a) the balance of this season; (b) as to next fall and winter?
2.	What has been done in this respect since the matter was before this house last session?


Mr. HOWE:: 1. (a) Satisfactory tonnages of anthracite coal are presently being received by the Toronto dealers to meet all current demands, (b) Dealers will be advised as to the probable

Questions as Orders for Returns
quantity of anthracite coal that may be expected and will be instructed to procure other types of fuel to supplement their supply of anthracite.
2. (a) War tax of 10 per cent has been waived on anthracite coal, (b) Subsidies have been made available to meet increased costs of coal, (c) Importers and dealers have been advised as to sources of supply, etc.



QUESTIONS PASSED AS ORDERS FOR RETURNS


Mr. POULIOT:: 1.	Who are the inspectors of the wartime prices and trade board, (a) for the province of Quebec, and (b) for each one of the other provinces?
2.	What is the grade and salary of each one?


Mr. ILSLEY:: Return tabled.


NATIONAL SELECTIVE SERVICE ADMINISTRATION
Mr. DIEFENBAKER:: 1.	Who is presently the director of national selective service for Canada?
2.	Have any associate directors or assistant directors been appointed in connection with this service? If so, how many, and what are their names?
3.	Does any director, associate director or assistant director hold any other public office, and if so, what office?
4.	How many administrative divisions are there under the national selective service administration of Canada?
5.	What officers, professional or other, and what other employees, are engaged in each division in Canada? In the city of Ottawa?
6.	How many investigators and/or enforcement officers are engaged in this service?
7.	What salary, other remuneration, allowances and/or expenses have been paid to each of the personnel mentioned in the foregoing questions 1 to 6 inclusive?


PRODUCTION OP DOMESTIC COAL
Mr. SHAW:: 1.	What was the actual production of domestic coal in Canada for the following periods: (a) January 1, 1941. to March 31, 1941; (b) January 1, 1942, to March 31. 1942; (c) January 1, 1943, to March 31, 1943?
2.	What was the actual number of miners engaged in the production of domestic coal in Canada for the periods stated in question 1?
3.	What are the duties of the emergency coal production board?
4.	What steps have been taken by the government, and/or by the emergency coal production board, to see that the production of domestic coal is maintained at the highest possible level?


MILITARY SERVICE-RECRUITS EMPLOYED BY DEPARTMENTS OR BOARDS
Mr. POULIOT:: 1. Is it true that in the three military districts of Toronto, Kingston, and Montreal, recruits of military age employed either by one
of the three national defence departments, or by the Department of Trade and Commerce, or by the wartime prices and trade board, or any other commission, board, or mission, under the control of the Department of Trade and Commerce, being physically fit for military training, have asked any mobilization board for an adjournment which was refused, and, after such refusal, have volunteered and been given by the military authorities a leave for the duration of the war?
2. If so, what is (a) the name; (b) the birthplace; (c) the age; (d) the regimental number; (e) the regiment; (f) the salary, and (g) the occupation in each department, commission, board or mission, of each one of those soldiers on leave?


ISSUE OF REGISTERED NON-INTEREST BEARING CERTIFICATES
Mr. KNOWLES:: 1.	What is the total amount loaned to the government to March 31, 1943, by the purchase of registered non-interest bearing certificates (series A), within each of the following classifications, or within brackets close thereto: certificates of $5 or less; from $5.01 to $25; from $25.01 to $50; from $50.01 to $100; from $100.01 to $1,000; from $1,000.01 to $10,000; over $10,000?
2.	What is the total number of certificates issued within each of the above classifications?
3.	What is the total amount redeemed, to the same date, within each of the above classifications, and how many certificates are covered by such redemptions?
4.	What is the total amount loaned to the government, to March 31, 1943, by the purchase of registered non-interest bearing certificates (series B), within each of the following classifications, or within brackets close thereto: certificates of $5 or less; from $5.01 to $25; from $25.01 to $50; from $50.01 to $100; from $100.01 to $1,000; from $1,000.01 to $10,000; over $10,000?
5.	What is the total number of certificates issued within each of the above classifications?
6.	What is the total amount redeemed, to the same date, within each of the above classifications, and how many certificates are covered by such redemptions?



MOTIONS FOR PAPERS


Mr. CRUICKSHANK:: For a copy of the agreement or lease in connection with the rental of Tashme Japanese camp in British Columbia, together with a statement showing the amount of iron pipe purchased in connection with the said camp and the price paid for same.


Norman Alexander McLarty: I table .the return to this motion.



WARTIME PRICES AND TRADE BOARD-ORDER NO. 251

Mr. SHAW:: For a copy of all letters, telegrams, petitions or other documents received by the government or by the wartime prices and trade board, from March 22, 1943, to date, relating to wartime prices and trade board order No. 251.
Feed Grain



FEED GRAIN


[Stage Direction]
On the orders of the day:
Mr. H. E. BRUNELLE (Champlain):: Mr. Speaker, I should like to ask a question of the Minister of Agriculture concerning a matter of some urgency. What is being done to assist eastern farmers in obtaining from the west the necessary supplies of feed grains, of which there seems to be a scarcity?


Hon. J. G. GARDINER (Minister of Agriculture) :: A number of inquiries have come in from eastern Canada having to do with the possibility of obtaining feed grains with which to finish live stock. There has been some difficulty getting feed grain moved from the west to the east. Those who make the inquiries would seem to have the opinion that there is a shortage somewhere. There is a vast quantity of feed grain in Canada that may be moved to the areas in which it is required. The difficulty is one of obtaining cars with which to move it. We have been accustomed to moving feed grain east, on the lakes, during the summer months, and having it stored in storage warehouses in Toronto and elsewhere for use in the winter months. That was not done to the same extent last year as in preceding years, possibly partly because the government pays the freight. The farmers are compelled to depend upon getting their feed in carload shipments from Fort William in the winter months. The hard winter with its heavy snow-falls created difficulties in moving the feed, but arrangements have been made with the railway companies to get as many cars as possible for that purpose.
There seems also to be the view that grain is being allowed to go to the United States, rather than to feeders in eastern Canada. That is scarcely true either. Feeders in the United States are having at least as much difficulty in having grain shipped into the United States as is being experienced by eastern Canadian farmers in having the grain shipped to eastern Canada. The reason is a shortage of cars on both sides of the boundary line.
An effort is being made at the present time to take care of the situation until such time as boats begin to move on the lakes. I should like to emphasize the importance of farmers and dealers, immediately that happens, making provision this summer for storing as much feed as they can during the summer months. There is a great supply of good feed grain available to be moved in the summer from the west, and if it is stored on farms or other storage warehouses throughout eastern Canada before close
[Mr Shaw.]
of navigation it will be helpful in producing results next year. Every possible effort, including a preference in movement east, is being made, and we are getting assistance from the United States to secure cars from that country to move grain south without interfering with the facilities necessary to move grain east.



BUSINESS OF THE HOUSE


Right Hon. W. L. MACKENZIE KING (Prime Minister) moved:: That on Wednesday, the 14th of April, 1943, the sitting shall in every respect be under the same rules as provided for other days.


[Stage Direction]
Motion agreed to.

[Stage Direction]
On the orders of the day:
Mr. GORDON GRAYDON (Leader of the Opposition):: In view of the fact that we are nearing the Easter recess, will the Prime Minister be in a position some time before the house rises for the recess to indicate what additional legislation the government contemplates bringing down before the end of the session? I am speaking, of course, of legislation which does not appear already on the order paper. I do not know whether the Prime Minister is in a position at this time to give such information to the house, but we would like to know as early as possible what the complete programme will be.


William Lyon Mackenzie King: Mr. Speaker, I mentioned a day or two ago that it was hoped we might be able to begin the Easter recess on Friday of this week. I have been careful, on each occasion that I have referred to the Easter recess, to say that whether we would adjourn on Friday evening would depend upon the progress we might make between the time of the making of the statement and Friday evening. I must say it looks at present as though it were not going to be possible by that time to get before the deputy of his excellency for assent, the bills arising out of the resolutions on the budget. The government is most anxious, if at all possible, to have royal assent given to these measures before the Easter recess. If we are able to conclude the discussions in both houses on the resolutions, and have the bills ready for royal assent on either Friday or Saturday of this week, we may find it possible to adjourn for the Easter recess this week. If not, it will be necessary, I think, for us to continue on into next week-and as

Price Control
far into next week as may be necessary to make the progress we should like to have made.
The leader of the opposition has asked me what further legislation the government may have to bring down, notice of which has not already appeared on the order paper. The government will require a little time to give thought to some of the measures which may still have to be introduced before the close of the session. One purpose of having a recess of a fortnight, as I explained some time ago, is to afford the government that opportunity. In the circumstances it is intended, whenever adjournment comes, to hold to a recess of a fortnight. But whether that recess will begin on Friday night or some day next week will depend upon the progress we may make from now on. I am not in a position now, nor shall I be in a position until after the recess, to answer my hon. friend's question. However, after the Easter recess I shall seek to give the house such information as I may then be in a position to give with respect to the question the leader of the opposition has asked.


Mr. COLDWELL:: Did I understand the
Prime Minister to say that if we did not conclude on Friday evening we would sit on Saturday?


William Lyon Mackenzie King: No; I said if we did not conclude on Friday evening we would continue on into. the next week. In making reference to Saturday I was assuming that discussions might be concluded by Friday night; if not in time for assent at night, we might arrange for assent to the bills on Saturday. But that would have to be by consent of the house, or by a formal resolution. Otherwise we would continue on into Monday, Tuesday, Wednesday or Thursday.


Major James William Coldwell: I had in mind a formal resolution. If so, notice would have to be given.


William Lyon Mackenzie King: Yes. I would place a notice on the order paper if I were perfectly sure of sufficient progress between now and Friday. Not being in a position to decide the point is the reason I say a Saturday assent would have to be by consent, if all else were concluded.


Major James William Coldwell: I had in mind the
advisability of sitting on Saturday, rather than extending into next week, because many hon. members have made arrangements to go home to take part in the victory loan campaign.



PRICE CONTROL


[Stage Direction]
On the orders of the day:
Mr. JEAN-FRANGOIS POULIOT (Temis-couata): Mr. Speaker, I hold in my hand a return tabled to-day in response to a request for the names of the inspectors of the wartime prices and trade board in the province of Quebec and each of the other proyin.ces, and the grade and salary of each inspector. The return contains only a part answer; salaries are given, but not grades. Will it be necessary for me to ask a second question to learn the grades of each one, or will it be possible for the minister to have the return completed?
I would ask the Secretary of State (Mr. McLarty) to tell me when another return, in which I ask for the names of all inspectors throughout Canada connected with a certain department, will be tabled?
James Lorimer Ilsley: With regard to the hon. member's first question, if any information was asked and not given, I will see that it is given in the form of a supplementary return. The hon. member seems to assume that there are grades such as grade 1, grade 2, grade. 3 and so on, as applied' to investigaters. I do not think that is so, and it is my belief that that is the reason the grades are not given. But if I am wrong about that I will see that the hon. member gets the information.



CANADIAN FORCES


[Stage Direction]
On the orders of the day:
Mr. LIGUORI LACOMBE (Laval-Two Mountains):: I should like to ask a question of the Prime Minister. When will the government take the necessary steips to obtain from this house an expression of confidence concerning the enforcing, in conformity with the statement made by the Prime Minister on July 23, 1942, of all orders in council authorizing the sending overseas, for instance to Jamaica and Newfoundland, of recruits mobilized for the defence of Canada?


William Lyon Mackenzie King: My answer would be that I cannot say, but they will be taken when the occasion is necessary, if it should arise.

Canadian Forces



LIABILITY OF AUTOMOBILE OWNER CARRYING MEMBERS OF ARMED FORCES AS PASSENGERS

[Stage Direction]
On the orders of the day:
Mr. DOUGLAS G. ROSS (St. Paul's): On Monday, April 12, I asked a question in connection with the liability of automobile owners who were carrying members of the armed forces as passengers. My question was:
Has the Department of Justice given any opinion as to the liability of an automobile owner in case of an accident to a member of the armed forces while being driven as a passenger?
The answer of the Minister of National Defence was:
The answer is in the affirmative.
Will the minister have that opinion tabled?
Hon. J. L. RALSTON (Minister of National Defence):: That whole matter is under consideration, along with the matter referred to yesterday by the hon. member for York-Sunbury (Mr. Hanson) regarding the action which is to be taken in view of the judgment of Mr. Justice Thorson respecting the non-liability of the crown for accidents due to the negligence of members of the forces while driving cars. I do not know that there is any particular objection to bringing down the opinion from the point of view of its contents. Sometimes opinions are brought down, and sometimes they are not brought down. I myself feel that it is a matter perhaps of concession to bring down opinions which are given by the law officers of the crown, and when I tell my hon. friend and the house that the very matter is being considered, along with the other question, perhaps that will be sufficient for him.


Mr. HANSON (York-Sunbury):: Do the instructions cover the whole field? I hope they do, because these are only one or two aspects of the whole question.


James Layton Ralston: Consideration is being given, first, to the question which my hon. friend raised, that is, what attitude shall be taken with regard to accidents which are found or which might be found to be due to the negligence of members of the armed forces when driving cars, having regard to the decision of Mr. Justice Thorson who held, as I remember it, that the crown was not liable, the soldier or the member of the forces not being a servant of the crown. The other point that is being considered is the point which the hon. member who asked the question (Mr. Ross) has in mind-that is, what attitude will be taken by the crown in the case of members of the forces who are injured while gratuitous passengers in civilian cars.


Richard Burpee Hanson: Only those two points.


James Layton Ralston: That first point is a very broad one.



INTERNATIONAL CURRENCY


William Lyon Mackenzie King: If the house will consent to reverting to motions I should like to table copies of the text of a paper containing proposals by British experts for an international clearing union; also text of the statement on international stabilization currencies which Secretary Morgenthau presented to the United States senate committees on April 5, 1943; and preliminary draft outline of proposals for a united and associated nations stabilization fund. These are the documents which were asked for by the hon. member for Lethbridge (Mr. Blackmore).


Major James William Coldwell: Will they be printed?


William Lyon Mackenzie King: That very
question was in my mind. If they are to foe printed, I think they should be printed on an order by this house. If I am gauging the situation aright, I assume that the house would wish to have copies printed and I would move that five hundred copies be printed in English and two hundred and fifty copies in French.


Richard Burpee Hanson: And distributed to hon. members.


[Stage Direction]
Motion agreed to.


[Stage Direction]
The house in committee of ways and means, Mr. Bradette in the chair.
16. That all drilling costs on wells spudded-in during the period January 1, 1943, and March 31, 1945, and abandoned within six months after completion of drilling and all exploration costs including all general geological and geophysical expenses incurred between the said dates may be allowed as a deduction against current income of companies whose principal business is the production and/or refining and/or marketing of petroleum and/or petroleum products; provided, however, that the tax saving hereunder shall be limited to 40 per cent of such expenditures.
Clarence Decatur Howe: Mr. Chairman, when the committee rose last night I had discussed the steps which were being taken by the government to obtain immediate supplies of crude oil from Canadian sources, and I had also

Income War Tax
discussed the claims of discrimination against the so-called royalty companies. I should like to discuss the points that have been raised, which suggest discrimination against Turner valley producers in the matter of the price of crude oil in that area.
It has been suggested that subsidies have been paid on oil brought in from another country. The fact is that no subsidies have been paid by any agency on crudes imported into western Canada prior to April 1, 1943. The importations of crudes during the last several months have been in small quantity, and the refineries were able to absorb the extra cost. Now, however, when the quantity must be increased in order to satisfy our demands we are obliged to move farther afield than Montana, namely, to Wyoming and Kansas. The situation has changed-costs are greater and a subsidy must be paid. The primary duty of the office of oil control is that of supply, and this supply must be obtained from whatever source is available, regardless of increased costs.
Immediately prior to the war, the price of Turner valley crude oil was related competitively with the price of Cut Bank, Montana, crude oil, with the result that the laid down cost of Turner valley crude was approximately the same at Saskatchewan refineries as the laid down cost of Montana crude, adjusted for differences in quality. Since the outbreak of the war the oil controller has authorized two increases in the price of Turner valley crude oil, totalling 42 cents per barrel, of which 27 cents was authorized on July 16, 1941, and 15 cents on April 1,1943. 'The Cut Bank, Montana, crude price, on the other hand, has been increased by only 20 cents per barrel in United States funds, which compares with increases of 20 cents per barrel in United States gulf fields, and 15 cents in mid-continent and east Texas fields. Therefore the price increases permitted for Turner valley crude are greatly in excess of those enjoyed by any other producing field in the United States. There is no discrimination in this connection.
Cut Bank, Montana, crude now costs more at Regina refineries than Turner valley oil, notwithstanding the greater price increase permitted with respect to the latter. This may be attributed to war exchange tax, exchange on United States funds and slightly higher freight rates, all of which have occurred as the result of the war. When the western producer charges that there is a price discrimination because of the higher laid down cost of imported crudes, he is contending that the domestic price should include war exchange tax and foreign exchange. Obviously if the domestic price reflected these factors, the 72537-1374
consumer price would have to be increased accordingly, with the result that the prairie consumer would be paying an import tax and foreign exchange directly to the producer. Obviously also this would not be fair to the consumer, and if permitted the consumer could very well charge discrimination.
As to discrimination because of the payment of subsidies, it is obvious that someone must pay for the more costly oil which Turner valley is unable to produce. These expenses must be paid for by the consumer, the refiner, the domestic producer, or the government by way of subsidies. There is no intention of recommending that the consumer price ceilings be punctured. If refineries were asked to absorb the increasing financial burden of this outside supply, it would prevent them from paying the higher price for Turney valley crude. It was therefore decided to subsidize the additional cost of the imported crude which had to be obtained to meet our requirements and ask the refineries to pay the highest price possible for domestic production, within consumer price ceilings. The payment, therefore, of subsidies on imports is not discriminating against the Turner valley producer; on the contrary, the payment of subsidies made possible a substantial increase in production revenue.
The whole question of price discrimination may be summed up in the proposition whether or not the prairie farmer, who is also a producer, should pay the Turney valley producer war exchange tax and foreign exchange on his production. There should be no difficulty in anticipating the consumer's answer to this proposition.
At the last sitting of the committee I promised to make a statement on the obtaining of oil from the tar sands of northern Alberta. I will do so at this time.
There seems to be an erroneous idea in the minds of many regarding these tar sands. Whether these ideas are due to propaganda, supported by wishful thinking, I do not know. Judging by what one hears at times, one would think that oil is running out of these sands, and that all that has to be done is to tap or pipe the oil, and this country would overcome its serious oil shortage. The facts do not bear out any such idea.
While I make this statement, I do not wish to suggest that these tar sands have not possibilities. They may have, but many problems must be solved before anything can be produced which will have real beneficial value.
I know of no more aggressive body of men in industry than those directing the large oil companies. They have explored all likely
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areas in the world to obtain supplies of this precious product, oil, and it is significant to know that they have turned away from these sands rather than undertake the solution of the many problems incident to their development, and the production of products equal in quality and which can be sold at competitive prices with the same products procured elsewhere.
For thirty years the tar sands of Alberta at and around McMurray, have been under investigation. by engineers of the Department of Mines and Resources.
While it was known that there are large deposits of these sands, there were, and still are, many problems to be solved before they can be commercialized and/or can be used to produce marketable products such as gasoline, diesel oil, fuel oil, et cetera.
The following problems had to be solved:
(1)	Economic methods of mining the sands.
(2)	Separation of bitumen from the sands.
(3)	Treatment of the bitumen after it is separated to produce marketable products.
(4)	Removal, or at least substantial reduction of the high sulphur content of the crude products obtainable from the extracted bitumen. With the high sulphur content of the bitumen, there is consequently high sulphur in the lighter fractions, i.e. gasoline, diesel oil, et cetera. This sulphur must be removed to obtain marketable products.
(5)	A thick uniform rich deposit of sands with a light overburden had to be located.
(6)	A solution had to be found for the disposal of the overburden and waste so as not to pollute any navigable stream or body of water. When it requires a ton of sand to produce a little less than a barrel of bitumen, in a deposit of the type on Horse river, the magnitude of the tonnage of tailings to be disposed of can be understood more readily.
(7)	Transportation had to be found for the movement of the. products to the market at reasonable cost.
Since 1913 field and laboratory investigations have been carried on by the federal Department of Mines and Resources. These included laboratory studies of methods for separating the bitumen from the sand and refining of the bitumen by cracking and hydrogenation for the production of sulphur-free commercial products.
In 1926 four reservations, aggregating 2,068 acres, were made by the parks branch of the dominion government in order to ensure an adequate supply of road surface material for national parks.

In 1930 the national resources, including these tar sands, were transferred by the dominion to the province of Alberta, reserving, however, for the parks branch, the 2,06S acres before mentioned.
In the year 1930, Max W. Ball of Denver, Colorado, entered into an agreement with His Majesty King George V, represented by the minister of the Department of the Interior, which department has since been amalgamated with the Department of Mines and Resources, to mine bituminous sands on the Horse river block and to extract therefrom the bitumen and other hydrocarbons contained therein, on a basis whereby a share of the resulting products would belong to His Majesty for the benefit of national parks. This original agreement was superseded by an agreement entered into on February 18, 1935. This agreement was later assigned to the Canadian Northern Oil Sand Products Limited. This company changed its name by supplementary letters patent under date of April 25, 1935, the name of the new company being Abasand Oils Limited. The present agreement was entered into on February 18, 1942.
In 1935, preparations were made by Abasand Oils Limited for the construction of a 250 tons per day separation plant on Horse river. This plant was completed in September, 1936; it operated a short time, sufficient only to indicate that certain modifications were necessary. A road was also constructed by this company from the plant to Waterways.
In 1937, an enlargement of the plant to 400 tons per day capacity, together with a refinery, was commenced on the same site. Due to difficulties in mining the sand, construction was discontinued temporarily and resumed in 1939. This plant was finally completed in 1940. Subsequently, a small pipeline was built to Waterways, which is the terminal of the railroad from Edmonton, and the shipping point for northern areas.
Production began again in May, 1941, but again mining difficulties were encountered and production fell. Further, there were only intermittent operations.
In November, 1941, the separation plant and power house was destroyed by fire and all production ceased. In 1942, the plant was rebuilt.
By agreement of February 18, 1942, Abasand Oils Limited was granted the exclusive right to a tract consisting of 100 acres, being part of the 581 acres on Horse river, and retained by the federal government for parks purposes; further, to have the right to mine and process bituminous sands therefrom, to sell and transport products made from these sands and erect such buildings and install such equipment as

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necessary. The operator undertook: (a) to erect on the tract a plant capable of extracting the bitumen from 250 tons of sand per day; (b) to erect and equip a refinery in the province of Alberta to manufacture gasoline, asphalt and other products, to the satisfaction of the Minister of Mines and Resources; (c) to mine and treat 25,000 tons of sand in the year 1942, subject to certain terms and conditions set forth in detail in the agreement itself.
The oil controller was appointed in June, 1940. and in July of the same year had his first meeting with offiicals of Abasand Oils Limited. At that date the Abasand officials were satisfied that they had developed the McClave process for the separation of the bitumen from the sands to a point where they could proceed with the solution of the other problems involved. At that time the problem of mining the sands was giving them serious concern. They were developing a shale planer. Within a few months, however, this method proved a failure and was abandoned. Shortly after, operations ceased for that year.
Again, in the spring of 1941, Abasand Oils Limited renewed activities -towards a solution of their many -problems; mechanical difficulties were constantly encountered. As a result, a continuous run of the plant was impossible, and it was out of the question to procure a sample of the bitumen required for research purposes. In the- fall, as hereinbefore stated, this plant was burned down and, naturally, all operations had to be suspended.
Owing to the urgency of -the situation and in the hope of speeding up the solution of the many problems ye-t to be, dealt with, the government entered' into an agreement with the Consolidated Mining and Smelting Company-the cooperation of Abasand Oils Limited was secured-and an appropriation of $75,000 was made to carry out the work. This appropriation was later increased to $200,000. Consolidated Mining and Smelting company undertook the work without profit, but on the assurance that they would1 suffer no loss. We were assured by Abasand Oils Limited that their plant would be reconstructed early in the summer and that they would be in a position to carry on a continuous operation, from which we could make studies of the success of the McClave process, et cetera, and procure samples to determine what products -could be produced from the bitumen, and estimate costs of the operation. To this end) negotiations were -carried on by the oil controller with the office of the petroleum administrator for war in Washington, with a view to having organizations in the United
States make thermal and catalytic cracking, and hydrogenation tests of the samples, particularly in respect to the possibility of obtaining aviation gasoline, motor gasoline, diesel oil and fuel oil. As a result, arrangements were made for laboratory tests by Universal Oil Products of Chicago on thermal and catalytic cracking, and by Standard Oil Development Company of Baton Rouge on hydrogenation. Inasmuch as hydrogenation on a large scale would require an expenditure of possibly $12,000,000 or more, the research by Universal Oil Products on thermal and catalytic cracking was considered advisable, since, if it were successful, the cost-although substantial-would be less. The great advances made in all refining operations, particularly since the war, unquestionably should-help in the solution of the refining an-d sulphur reduction problems. *
Unfortunately the plant of Abasand Oils Limited, as reconstructed after the fire, could only operate intermittently, and the information we hoped to get from this plant was not obtainable.
Further, owing to bottlenecks in the plant, we were unable to procure samples of the bitumen of the type required for research investigation to give the quickest results, and we were unable to procure the quantity of bitumen necessary for the plant test at Baton Rouge.
Details of the highlights of the agreement with Consolidated Mining and Smelting Company Limited were the following:
Under this agreement the company undertook :
(a)	Test drilling of the bituminous sand areas in the vicinity of Fort McMurray, Alberta, to provide reliable information as to the location of areas which might support large-scale developments for production of oil on the scale of 10,000 to 20,000 barrels per day;
(b)	Study of the plant of Abasand Oils Limited with regard to costs, efficiency, et cetera;
(c)	Research to discover the kinds and qualities of products that could be produced from the bitumen.
The report of Consolidated reads in part as follows:
Deposit. There are tremendous deposits of oil sands in the McMurray area, but much of this area is overlain by heavy overburden and lean oil sands. The exploration problem was to find an area with a large tonnage of high grade sand under light overburden with necessary natural advantages for a plant.
Two areas judged from previous work to be most promising were selected for drilling. The drilling done shows clearly that the deposits
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are generally interlayered with clay and lean sand and vary widely within short distances, both horizontally and vertically to a greater degree than had been expected.
We are of the opinion from the results to date, that large tonnages of high grade sand 

about 16 per cent bitumen and 5 per cent minus 200 mesh-similar to that now being treated by Abasand will not be readily found. Large tonnages of sand containing about 12 per cent bitumen and high in minus 200 mesh material-25 per cent-could probably be readily blocked out. Until complete data on capital cost, operating costs and details of products which can be produced are available, it is impossible to determine the minimum grade of sand that will make an operation a practical proposition. In any case from the operating costs quoted later it will be seen that a thorough search for a high grade deposit is very desirable.
Then come the reports on two areas, the Wheeler Island and the Steepbank river areas.


Major James William Coldwell: From whose report has the minister quoted?


Clarence Decatur Howe: 
Major James William Coldwell: Has it been taken over under -the arrangement the minister mentioned last night, that it will be handed back to the company?


Clarence Decatur Howe: Yes, we are simply taking it over to conduct certain experiments. We hope to recover from paving material produced for the Alaska highway the costs we expend, and the property will not be returned until the money is recovered.


Major James William Coldwell: But after the process has been developed the plant will be handed back to the company?


Clarence Decatur Howe: At that time we can either buy it or hand it back.


Mr. JOHNSTON (Bow River):: We take
the risk and the company subsequently takes [DOT]the profit?

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Clarence Decatur Howe: Well, there is no certainty of profit. What we are trying to do is to find a process for developing the sands. After the process is found we shall know whether it is more suitable for government or for private developme'nt. Perhaps that will be a matter for another minister to decide, at the rate this is going. In any event, we are taking any steps we believe will hasten the conclusion of the investigation. I sincerely hope we shall be able to find the solution of many problems by the autumn of this year. One difficulty is that the plant has never operated in the winter months; it has always been a summer operation. If no way can be found of making it a twelve months in the year operation, that will be a serious handicap. Efforts are being made to overcome the obstacles to winter operation. All "these things are being driven forward as rapidly as possible. We hope to have a small commercial operation, as a by-product of the research this summer, producing bituminous material for the Alaska highway, so that there will be some revenue to offset the expenditure. But one would have to be very optimistic to believe that we shall be able to start any large-scale construction before the spring of
1944.


Mr. DOUGLAS (Weyburn):: Has any report been submitted to the minister by the national research council? I understand that a number of years ago a chemical engineer named Gower made some submission of formulae which he had worked out for extracting gasoline and oil from the tar. Has the minister any information on that?


Clarence Decatur Howe: The Department of Mines and Resources is working with us on this problem. Two or three experts of that department were on the ground the greater part of last summer; they were checking the operating results and advising on the location of test drilling. Another representative of the department is following the experimental work in laboratories in the United States. Everything that has been submitted to the Department of Mines and Resources, the vast amount of data they have accumulated over the years, is being checked. I would remind my hon. friend that for some thirty years the Department of Mines and Resources has been actively studying this situation. Every known process has been tried, and to-day I think the fact is that no satisfactory process either for mining the tar sands or for extracting the oil in an economical way has been wholly perfected.
Mr. MaeNICOL: Yesterday we listened to what I thought were two excellent speeches from the hon. member for Calgary East and the hon. member for Calgary West respectively. I was impressed by both. I gathered
from them that the independent companies in the Turner Valley were not being supported as they should be. If those statements are correct, as I have no doubt they are, since those two gentlemen come from the locality and must know the situation there, their statements were indeed alarming to me. After listening to the minister I am again much alarmed. I want to see oil produced in this country. If we have the resources, why do we import up to $100,000,000 worth of oil and its products yearly?
The minister read a report presented by the Consolidated Mining and Smelting company I have nothing but the highest respect for that company, but it is a gold mining company. I do not know what its experience has been with oil, or whether the engineers who deal with gold production are also qualified to produce oil. But when the government determined to make an investigation into the oil sands, why did they not send engineers from the Department of Mines and Resources to make the investigation? If the statement just made by the minister is correct then I cannot understand the statements that have been issued during the years by the Department of Mines and Resources.
Last summer I paid my second visit to Fort McMurray and spent several days at the little plant the minister has been reading about. While I was there I met one of the greatest oil geologists in the world, who is close to the chief of the department in Washington. He was strong in his praise of the possibilities of the oil sands on the Horse river and Athabaska river and that whole area. Other great engineers have been there, and they have all, so far as I know, stated that there is a vast volume of oil in that locality. Had Doctor Camsell, head of the Department of Mines and Resources, been sent up there or had he been requested to send his engineers to make an investigation, without passing any comment upon the report which has been made, I would have felt much better, because of the fact that the engineers of the Department of Mines and Resources have been off and on that job for many years. One of them, Doctor S. C. Ells-* the minister knows him very well-all down through the years since 1911 has stated, and backed up his statement with facts and figures, that there is a very large volume of oil there. I have the statement by Doctor Ells under my hand; it was to the effect that there are at least a hundred billion barrels of oil in that area. Of course he is careful to say that approximately a billion barrels are readily accessible. The hundred billion barrels, as the
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minister has said, are in sands about which, over which and under which are other kinds of sand or dirt.
I like to see things for myself, and I went over that area fairly comprehensively. 1 saw a great deal of oil sand, and in my hand at the moment I have a chunk of oil sand. While the report read by the minister would lead one to believe that there are very few areas with any large quantities of oil sand, my own observation is that on the Athabaska river there are many areas with large quantities of this sand. For the life of me I cannot understand what is blocking the production of oil in Canada in a large way, if I may use that expression to give my own opinion. Is some sinister influence at work? I do not know;
I do not say there is, but who is blocking the production of oil in a large way in Canada? Great English oil geologists have been up there and have stated in very strong. language that there is a very large volume of oil to be obtained in that locality. I believe Mr. Bosworth, of London, England, representing the Royal Geological Society, visited the Athabaska district and on his return to London made a somewhat startling statement at a meeting of that society. His statement was:
. . . should there never be a drop of oil found in a well in western Canada, there was enough oil in sight in the sands of the Athabaska river to supply the British empire for a thousand years.
I may add that I quoted what Mr. Bosworth said from a very old book pertaining to oil sands, entitled, "Particulars of Tar Sand Lease No. 15, known as the Murphy Claim," published in 1915, which also quotes statements made by Doctor Ells. Last June, however, Doctor Ells wrote another article in the Canadian Geographic Journal, in which he said:
Certain factors are definitely favourable to the production of crude oil from Alberta bituminous sands by methods now proposed, and, to a large extent, already demonstrated. Production of 30,000 barrels per day could be maintained over a period of not less than fifty years.
That is not a large production; it is nothing like the doctor's previous statement in regard to a hundred billion barrels, but even 30,000 barrels a day is worth while. I believe we are producing at Turner valley about 26,000 barrels per day.	[DOT]
The report read by the minister said something about sulphur. I heard about this some time ago; in fact I was told about it last summer or last fall by an engineer at Fort McMurray, not the engineer to whom I referred a few moments ago who came from

Washington, but another engineer. Since that time I have been making an investigation, as extensive as I can make it, into the r moval of sulphur from oil, and as to how much sulphur there is in oil produced from other sources. I find that the 'crude oil being refined here in Canada contains anything from -1 per cent up to 2-15 per cent of sulphur. In the reports of the sands on the Athabaska I find that the sulphur content varies, apparently depending on where the sample is taken. In one sample the sulphur content was 4-6 per cent; in another it was 1-5 per cent; in another it was as low as -3 per cent and in still another it was 3-0 per cent. The minister said something about Germany having the hydrogenation process for the removal of sulphur. I would not care what process was used, but if Canada is going into the oil business to produce oil in a large way, ini an endeavour to wholly eliminate the importation of $100,000,000 worth of oil a year, if $30,000,000 is the cost of a large plant using the German process, in my judgment that is not too much to spend for this purpose. Everyone knows that to-day Germany is producing its gasoline from lignite coal or from a brown grade of bituminous coal. Everyone knows that these coals contain sulphur to a large extent, at least to the extent of the oil sands of Alberta; yet Germany produces the highest grade of gasoline in this way. Further, we all know that benzol and benzine and naphtha, which are used to pep up German gasoline and give it -high performance-I presume these things are used here also-are also taken from the coal. So I am not a bit worried about having to remove sulphur from these oil sands. If we have the determination to take it out, we can take it out.
In regard to the mining end of it, as far as I could see last year they had pretty well overcome their mining troubles. They did have trouble when I was there two years ago, when, as the minister said, they were using scrapers. The difficulty was not that they could not scrape off the sand, but they could not produce enough scrapers to do it. When I was in business we used to sandblast iron, and I know the effect of sand on iron, so that after a few days their scrapers were finished. Last summer they were blasting it out, as they would blast in any other mine, and as far as I could see they were having great success. I believe they had about six rows of holes in depth and perhaps twenty-five or thirty in length along the face of the pit. They would blow them all off at one time, and it seemed to me to break up the sand into very small pieces. That had been

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their big trouble previously. As to the plant itself, I cannot say whether or not they were having satisfactory results, but I do know that engineers both at Yellowknife and at the Box mine on Athabaska lake told me that the diesel oil produced by Abasand was first class. Everyone knows that if there is much sulphur in diesel oil it will pit the valves of the diesel engines, and surely these engineers would not make the statement that the diesel oil was good if it was not good.
I am not blaming the minister for what has happened. I will say a word for him in a' moment, for I think he is trying to find out whatever he can. I should like to know, however, if there is any sinister influence blocking the production of oil in a big way in this country. At Abasand they take it out by a hot water process. I dio not know that that is a first class method, but the fact remains that they do seem to get the oil out of the sand. Some engineers say, however, that it is not as good as it should be. The hydrogenation process is better.
Someone mentioned Charles Gower of Regina. Last summer when I was in Regina I went to see a plant which had been operated by Charles Gower. I found him to be a bright young engineer. As a matter of fact he was at Abasand two years ago when I was there. He used a solvent method. Has that method been tried? I dlo not know. Is it being tried on the job? I do not know. I say the minister should make every effort in every possible way to produce oil. We have an oil controller who is doing good work, a man for whom I have the highest praise. But what we want is an oil producer. Why cannot the government nominate an oil producer, giving him power to produce oil? If oil is up there the minister should instruct a vigorous oil producer, with plenty of backing, to produce oil, just as it is now controlled. I am looking not only to the duration of the war but to the time after the war.
With our great oil resources goodness knows we must get out of the class of an oil importer. Our importations have been at the rate of about 8100,000,000 a year. If we have an oil producing plan, then we have the resources here from which to produce, and we might better use our own people to produce it.
Where are we to get the oil if we do not produce it? We produce only about 12,000,000 barrels a year in Canada. In fact we are one of the smallest oil producers in the world. Egypt is last with about 6,000,000 barrels, Bahrein about 7,000,000 and Burma about 6,000,000. Yet Canada, a country covering
half a continent, is one of the smallest producers. We heard last night about our oil resources, stretching right from the international boundary up into northern Alberta. It is about time we began to produce oil in this country in a large way.
There are three methods used. One is the hot water method, another is the Gower solvent method and the third is the situ method, where they drill a hole down through the sands and apply some kind of heating apparatus which melts the oil. They get it out in that way, although I do not think it is a good system. Then the last method is by hydrogenation.
The minister has full control of the situation. He is a vigorous minister, and does not allow anything to block him. If he is going to try to do something, he tries to do it. If he had to put in a hydrogenation process, even at a cost of some millions of dollars-[DOT] that is what they paid in the United States- I should not think it would be an insurmountable obstacle, if we were then able to produce oil in a big way. That is the whole object I have in mind, namely the production of oil in a big way.
I said a moment ago I would say a word for the minister. Last year I discussed this matter on June 29, and at that time he was very kind. After the house rose he did engage Consolidated Smelters to send engineers into that area. At the time I was there there were said to be thirty-two engineers on hand, and all of them were splendid men. I had met some of them before, and had the highest regard for them. As I said before, they were gold engineers; as to whether they were also oil engineers I cannot say. The minister did that however, and also had something to do with trying to produce oil at Commotion creek in northern British Columbia. About $600,000 or $700,000 was spent there, and after drilling a well 6,000 or 7,000 feet oil was not found. Then, in the Pouce Coupe area of Alberta a large amount of money was spent, although I am not sure that it was spent by the .government. I have never heard what the results were. I talked to one of the engineers, who did not seem to be very optimistic. What the results were I cannot say.
Lately I have been speaking to the minister about trying to produce oil near Peace River, Alberta. I went down the Peace river quite a few miles, I have forgotten just how far. to see five wells. I have pictures here of those wells, and I also have pictures of Abasand. I might add that I take my own pictures. Those five wells were shooting oil, water and gas into the air about fifty feet. They were burning gas, just as we see it in
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the Turner valley. To see that gas blazing away, twenty-four hours of the day since about 1912, strikes one as a shocking waste. On the Peace river the wells were drilled to around a thousand feet or more.
If I have any influence with the minister I suggest that he send someone to drill in Peace River area. Any operations carried on there could not be less successful than the drilling at Commotion creek. All I can say is that there are evidences of oil along the Peace river. The mere fact that five wells were drilled many years ago is evidence of that. I saw quite a lot of oil. There may be a lot of sulphur in oil lying on the top of the ground. Any oil on the top of the ground for any considerable length of time loses its volatile qualities, and the sulphur content increases. I would not be discouraged because of that; I would drill a well to find out if there is better oil under the ground.
It would seem, if we may judge from newspaper articles, that an oil shortage is anticipated in the United States. They have been producing about 1,350,000,000 barrels a year, or over half the total amount produced in the world. Whether they are trying to frighten us or not, I cannot say. However the newspapers recently carried the suggestion of an approaching oil shortage.
In the Montreal Daily Star under date of April 12 appears a short article entitled "Oil Shortage Ahead in the United States '. This article refers to a meeting then taking place in Detroit of the American Chemical Society, in which a speech was delivered by Doctor Benjamin T. Brooks, consulting chemist of New York city. Doctor Brooks went on to say that owing to dwindling resources of petroleum the United States will have to abandon the heating of residences by oil. That will be a serious problem over there, and also serious here. In the United States there are about 1,500,000 oil burners used in the heating of domestic buildings. I believe we have about 75,000 buildings in Canada in which oil-burning equipment is used. If we have to remove those oil burners, a cost of about $25,000,000 or $50,000,000 would be involved. I should think it would be more advisable to spend the same amount in the building of a hydrogenation plant to produce oil such as we find in the United States and in Germany.
Let us take note of what Germany has done in the matter of hydrogenation. They do not have gasoline supplies such as we have. They have not oil wells of much capacity and for that reason they process coal. I believe they were producing about 15,000,000 tons of oil per year from coal. They used the hydrogenation
[Mr. Howe.l
process to obtain the gas. Their capacity would not give them more than about 80,000,000 barrels of gasoline, but it is possible that they have greatly increased their plant
capacity.
I believe the minister is in earnest, and that he wishes to do the best he can. But I was alarmed when I heard the observations of hon. members from Calgary and, as I said at the beginning of my observations, I was alarmed when I heard the minister. I hope my cause for alarm is unfounded.
May I close with these remarks: Let nothing stop the minister from producing oil. He has been doing a fine job. If he has to do it, let him name an oil producer. He already has an oil controller to take care of that end of the matter. Clothe the oil producer with all the necessary power and tell him to go out and get the oil wherever he can and produce it in large volume. I am sure the mines and resources branch, Doctor Camsell and his engineers, will do the best they can to assist. If Canada has these resources, all that is needed is to put the country in a position to produce all the oil and gasoline we require and perhaps to export some of it.
Mr. COLDWELL; Some little time ago, having heard a statement made by a man in New York of international reputation regarding the tar sands in Alberta, I put on the record a portion of one of a series of lectures to which he referred me. I should like to refer to that this afternoon.
I listened with a great deal of interest to the statement made by the minister. I realize that the minister, handling the public funds of the country as he is, must of necessity be guided by the advice he receives. I am sure, however, that that advice should not be taken as the last word. On a previous occasion I referred to a statement made by Mr. Wallace E. Pratt. I shall not repeat the lengthy quotation I gave at that time, but I should like to put on the record one or two sentences from a lecture which he gave in 1941 before the university of Kansas. He said:
But the Athabaska tar sands contain oil itself. At the surface to be sure the oil is waxy and inspissated but underground, downdip from the outcrop, the tar sands yield a heavy oil through wells. There is little doubt that as a source of oil they could be exploited commercially to-day; eventually they may well come to be looked upon as one of the important energy resources of North America.
It might be interesting to see just who Wallace E. Pratt is. After all, what a man is and what he does gives some clue as to how his opinion should be weighed. A few minutes ago I sent out and got a copy of

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Who's Who in America, volume 22, from 1942 to 1943. I do not intend to read all that is said about Mr. Pratt, but I wish to give some of the facts as to his standing as an oil expert. He is a graduate of several universities, and his work as a geologist is assessed in this way:
Assistant on Kansas geological survey, 19081909; geologist bureau of science, Manila, Philippine islands, 1909-1912; chief, division of mines, bureau of science, 1913-1915; geologist, Texas company, Houston, 1916-1918; chief geologist, Humble Oil and Refining Company, Houston, 1918-1923, director, 1923-33, vicepresident, 1933-37; director and member executive committee, Standard Oil Company (N.J.), since 1937. Director American petroleum institute, 1928-34; fellow geological society of America, American geological society, A.A.A.S.; member, society of economic geologists, American association petroleum geologists.
There are numerous other notations which I shall not read. Here is a man, a member of the executive committee and a director of Standard Oil of New Jersey, who makes the statement that the development of oil from the oil sands is commercially feasible. I have copies of four of his lectures, in one of which he makes the statement that there are from 200 billion to 250 billion barrels of oil in the Athabaska tar sands. He states that the present developed supply of oil in the world to-day is 81 billion barrels outside of that area.
I am not questioning the right of the minister to accept the advice which is contained in the report he has tabled this afternoon. That is all a minister can do. But I strongly urge, as the hon. member for Davenport (Mr. MacNicol) has done, that he do not stop there. Here is a man, a director of a company-I was going to say one of the most powerful oil corporations in the world, but I shall go even further and say it is probably the most important and strongest oil company in the world-who makes the statement to which I have already referred. I suggest that it would be in the public interest if the minister would get in touch with this outstanding authority, for such he evidently is, and endeavour to find . out the ground upon which he bases his opinion. Having done that, if might be possible to arrive at an appraisal of this opinion as against the opinion the minister has placed on the record this afternoon.-


Clarence Decatur Howe: There is no possible way in which he could have estimated, even roughly, the quantity of oil in the sands, or the quantity of sands. The only accurate information is that obtained last summer.


Major James William Coldwell: I do not know who is
doing the drilling. The Abasand company is doing some work.


Clarence Decatur Howe: The drilling was done by
parties sent in by the Consolidated- Mining and Smelting company. It does not matter who drills the oil well; once it is drilled, measurements can be taken.


Major James William Coldwell: I believe a great deal
of prospecting for oil is going on at the present time in, the north country of Saskatchewan and extending into Alberta. We have not heard anything about that, but I have been told that Imperial Oil has been given the concession to do this particular work.
I should like to say something about the method of carrying on this search for oil. Last evening the minister was speaking about the desirability of owners in certain proven areas going on with their work and in semiproven areas trying to get more oil. He went on to say, as reported on page 2140 of Hansard: '
. . . or if the owner is unable or unwilling to finance the development, the lease will be taken over by a crown company which has recently been formed.
I should like to ask the minister the significance of the words, "if the owner is unable or unwilling." Does that mean that a company such as Imperial Oil, who have the facilities to undertake this work, will be given the opportunity to come under this arrangement, or will they be debarred and expected to do this work themselves? I should like to know just what is meant by those words. The minister went on to say:
The crown company will become the owner of the lease and will undertake the drilling of the well. After the well has been paid for, including the drilling costs and all other expenses incurred by the crown company, the well will be turned back to its former owner, for such further returns as the well may produce. That is the object of the crown company.
In other words the crown company undertakes to do the searching, the drilling and the proving up of a well.


Clarence Decatur Howe: These are sites in proven
areas. I said last night that we were not wildcatting.


Major James William Coldwell: It is potentially a proven well in a proven area; is that right? It will most probably be productive?


Clarence Decatur Howe: We believe it is productive.


Major James William Coldwell: You believe it is productive. That makes what I am going to say a little more definite than it otherwise might have been. We go into a proven field and the crown company undertakes to drill a well. Then having taken out enough oil to pay for the drilling and the undertaking, the well is handed over to the company which originally owned the lease.
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Clarence Decatur Howe: From whom we took it without payment.


Mr. COLD WELL:: 'From whom you took it without payment, but to whom you are returning a producing well. We have heard a great deal in the house this session about free enterprise. We are told that one of the bases of free enterprise is this, that people are willing to undertake risks which the government will not undertake. Here we have another one of many examples that we have had of late years where the government does the initial job, undertakes all the initial risks; then the private company comes along and, if there is any profit to be made out of the undertaking, it gets the profit. We have our research bureaux doing all kinds of research work in connection with industry. To-day we have reached the stage where instead of corporations, entrepreneurs, if you will, going out and taking risks and opening up new undertakings, the government takes the risks, opens up new undertakings, and then the private corporation steps in and reaps the benefit of the public development that has been done. I think we should be very clear on just what this crown company is doing.


James Lorimer Ilsley: May I suggest to the hon. member that in a period of extremely high taxes, excess profit taxes such as we must have to-day, the development he speaks of is a natural one and does not reflect at all on the willingness of private enterprise to take risks under normal conditions. A system of taxation which takes most of the profits away, if there are profits, but would leave the company to take the losses, if there are losses, naturally has a dampening effect upon the desire of a company to take risks.


Thomas Miller Bell: Of course the minister's viewpoint is governed by this fact, that he looks forward after the war to a diminution in demand for all kinds of consumer goods. Therefore the private company cannot be expected to take a risk which must carry over into the post-war period. That is' quite an understandable point of view.


James Lorimer Ilsley: I do not necessarily do that. There may be a change in demand that would have the same effect with many companies as a diminution of demand. All it means is that in a highly abnormal war period if taxation of the type of the excess profits tax is very high, as it has to be and as I believe it ought to be, you cannot reasonably expect private enterprise to take the risks which they otherwise would take, because if there are profits they cannot benefit from them.


Major James William Coldwell: I agree with what the minister has just said, but I am pointing out that so far as we are concerned we do not. believe that this is the proper way of doing public business. We believe that at the present time, under the pressure of war and the argument that the corporations are taking risks, we are handing over some of the most valuable concessions we have. There is not only this oil concession. There are the huge power resources, such as those at Shipshaw which are being taken out of the public domain and placed in perpetuity into the hands of private corporations, like the Aluminum company, which are tremendously strong and a tremendous menace to the people of this country. I do not know what the hon. member for Davenport referred to when he spoke a few moments ago of sinister influences, but those of us who come from western Canada and know the history of the oil business in Canada, and in the United States more particularly, know exactly what those sinister influences have been in the past. Hon. members know the story of the Rockefeller fortune, and of the Standard Oil company. There is no more disreputable story of brigandage and of what is sometimes called in the United States robber barons than you will find in the history of the oil industry.


Richard Burpee Hanson: We are on resolution 16. Let us get back to the resolution.


Major James William Coldwell: I do not make a habit of growling when the hon. member for York-Sunlbury is speaking.


Richard Burpee Hanson: I rise to a point of order, Mr. Chairman. We are on resolution 16 and I submit that it is out of order for the hon, member to discuss how John D. Rockefeller got his millions.


Mr.   CHAIRMAN@: On the point of order I understand that the hon. member for Rosetown-Biggar is speaking in answer to the minister's statement on resolution 16 and made that reference incidentally.


Major James William Coldwell: I am discussing the report which was placed before the house by the Minister of Munitions and Supply and I intend to continue discussing it if I am in order, Mr. Chairman.
I was going on to say that you will find that an investigation was made as recently as last year into the practices of the Standard Oil of New Jersey, of which. Imperial Oil is a subsidiary. Because I suppose the name would be more acceptable to certain people in Canada, it was called Imperial. You will

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find that they did! everything they could in the United States to interfere with the making of the necessary war supplies from petroleum, synthetic rubber and so forth and were linked up by an agreement with I. G. Farbenindus-trie in the German reich. That is well known, and I say that we have no right as a parliament to continue to alienate our resources to monopolistic corporations such as these which have operated through their whole history against the public interest. I am protesting against it.
I would ask the minister to answer the question I asked shortly after I rose. If the owner is unable or unwilling to finance the development, does that mean that a powerful company like the Imperial Oil Company will be able to charge up any portion of this development against its ordinary business, including the business of refining oil and the sale of oil in this country?


Clarence Decatur Howe: I think my hon. friend misunderstands the situation. The proven area in Turner valley is comparatively limited in extent. It is definitely limited in the north and south ends and at the margins. There are, however, a limited number of sites in the proven area which have not been drilled. Provincial law defines the size of an area which warrants a well, and the sites I am speaking of are one-well sites. What we are trying to do is to drill out Turner valley to its full activity this year. There is immediate need of more production from that area. Imperial Oil agreed at once to drill out the remainder of the sites which they own, at their own expense. Other large companies did likewise. But there are certain areas there which are owned by companies which are simply owners of the lease. These are the so-called small men whom we are trying to help. We could not call on the owner to do the development because he is not in that type of business. That is the kind of site we intend to drill out.


Richard Burpee Hanson: I have no desire to get into a controversy this afternoon with the hon. member for Rosetown-Biggar on questions of private enterprise when, by keeping silent, I can help the minister get his resolution through.


Major James William Coldwell: That would be a change.


Richard Burpee Hanson: The hon. member can sneer if he likes; but I venture to suggest, and I put myself on the judgment of the members of this house, whether I have not made more constructive suggestions in the three sessions which have passed than all the members of his group put together.


Major James William Coldwell: That is egotistical, if you like.


Richard Burpee Hanson: I put myself in the judgment of the house if I have not given more cooperation to the government than the hon. member for Rosetown-Biggar and his whole group.


Major James William Coldwell: That is a matter of opinion.


Richard Burpee Hanson: I merely rise to emphasize what the minister has said, that in these days of extreme taxation, of 100 per cent excess profits, no private individual or private company can undertake the expansion of the natural resources of this country and shoulder all the losses and then give back to the government all the increase above a certain small minimum. It is not in the ordinary course of free enterprise that a man should go on under those circumstances; and as long as that position obtains-and it obtains because the nation is at war-private enterprise is throttled;. Neither the government nor anyone else can demand of such a one, "Yes, you can go on and make this investigation and incur this expenditure and achieve a success, but we will step in and take all the fruits of your labour. If you lose, you must sustain the loss yourself." That is an impossible position in which to put private enterprise. It cannot function on that basis.
At the same time, and in the interests of the province from which I come, I would ask the minister to make a brief statement, either now or at a later stage, with respect to the Albert county oil shales. There is a good . deal of disappointment in New Brunswick because, in our search for oil, nothing has been done there. I know something about the situation. I had conversations and correspondence with the oil controller, and I must express my disappointment at the lack of results and at the reasons given me personally for the absence of any action. That may be justified.
I do not know. I do not press the minister to speak on the matter to-day if he has not the information here, but I ask him to make a statement at some time so that it will be put on the record.


Mr. DECHENE:: May I take a few minutes of the time of the committee? I hesitate a great deal in doing so, because we are all anxious to proceed with this legislation a little more quickly than we have done so far. I have not hitherto occupied any time, either in committee or in the house; but as the tar sands to which references have been made are in the constituency which I have the honour to represent, I may be able to tel1
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the hon. member for Davenport something not only about what has happened in the past two years in which he has taken an interest in this development, but about what has been done by the people of Edmonton and district and others, including myself, in the last thirty years for the development of these resources. If he wants to know something as to the paternity of this development process, I might remind him that it was a government of the political colour to which he belongs that in 1916 cancelled all our leases and made us lose every dollar we had invested in the McMurray Oil company and the Fort McKay Asphalt and Oil company. It was local capital, contributed by the people of Edmonton and district, which was invested in order to develop these great natural resources, but the last war had not gone on very long when, because of the statutes and regulations then put in force, we were unable to proceed any further. We pointed out then the very difficulties which have arisen lately, namely lack of men and of material, but our representations were made to no purpose. In contrast with the care and attention paid to the development of these resources and to the interests of local people, as exhibited by the present government and the present minister, the government of that day cancelled our leases and we lost all the money we invested. The effect was to retard development for many years. People with money were unwilling to take the risk of investing it in the development of the resources of the province of Alberta.
Just to put the record right, I have to disagree with the hon. member for Davenport, and to point out that it was in February of the last session that I brought up this matter by placing a resolution on the order paper asking the government to look into the development of the oil sand resources.
I cannot agree with the leader of the Cooperative Commonwealth Federation in his criticism of the present arrangement. Although I am inclined to believe that the government is proceeding a little too carefully, from the studies I have been able to make, and records I have from engineers as celebrated as those referred to by the hon. member for Rosetown-Biggar, I am convinced that the possibility of the mining and the extraction of oil from those sands has been proved. I know also that lately an authority, whom I believe the minister mentioned in his statement, has declared to a shareholder of the Abasand Oil company, whose letter I have here, that the separation of the sulphur creates no great impediment, and that as a matter of fact in many fields in the United States,

though we have few in Canada, where the same condition exists, separation of the sulphur has been done at very little cost and has not prevented these fields from competing with others.
The paving qualities of the material were proved long ago. Hon. members who have travelled in Alberta may remember that for many years a part of what was formerly known as the Fort Saskatchewan trail out of Edmonton has been paved with the tar sands of the McMurray district.


Mr. MacNICOL:: It was built in 1911.


Joseph Miville Dechene: This pavement is still good and in constant use. Part of the main road leading to the parliament buildings in Edmonton is also paved with this material, which has proved just as good as any which was imported from Trinidad and other parts of the world.
I am disposed to agree with the hon. member for Davenport that we would be justified in going a little faster. The immensity of the field is proved. The location mentioned in the report is only one small percentage of the great field available. These tar sands extend all the way down the river to Fort McKay. I saw them years ago, long before the hon. member for Davenport knew there were tar sands in that region, long before the railway came. And these tar sands extend a considerable distance up the Clearwater river which falls into the Athabaska at Fort McMurray. I suggest to the minister that it would be a golden opportunity to use these tar sands for paving the Alaska highway. I know we are spending a large amount of money, but I appeal to hon. members who saw the picture this morning of the great battle in Egypt and Libya and from it got a conception of the tremendous organization entailed by this war, the immense amount of material used, the stupendous quantities of gasoline and oil that go to the fighting of battles of this kind; it gives us some idea of what the cost will be when we have to invade the continent of Europe with an army three or four or five times as large in order to bring victory to the united nations on the soil of Germany. And I am afraid we shall have to carry on that organization for years to come. We know we shall have to keep it up to a greater extent than we have done so far.
It seems to me we would be justified in using public money to help the Abasand Oil Company or any other company, although I do not think there is any other working there just now. We would be justified in constructing a

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highway from Lac la Biche. There is a highway now from Edmonton to Lac la Biche- not a first-class highway, but it could be made first-class with a comparatively small expenditure, and it should be extended to Fort McMurray. The construction of a highway would be a very small expenditure, having regard to the great need for this oil. The hon. member for Davenport pointed out that we are paying hundreds of millions of dollars for importations of oil that we must have not only in time of war but at any time. As I said last summer, no nation will be great after this war or can take its rightful place in the field of advancement unless it has possession of this most vital of all requirements for this age of machinery, namely, oil and gasoline. The greatest supply not only in Canada but in the British empire is in that locality. I congratulate the minister on what he has achieved so far, although the hon. member for Davenport claims that he is the man who did it. I claim I had something to do with it also.


John Ritchie MacNicol: I did not claim that.


Joseph Miville Dechene: It was some forty years ago I was at Fort McMurray and Fort McKay. Some thirty years ago, when we had a little money, we hired geologists and men of experience and spent our own money in order to try to develop that field. Now the government is stepping in. I repeat that we should go to the extent of providing for construction of the highway. It would cost only a small percentage of the amount expended by the United States to build the Alaska highway in order to reach the battlefields of Asia, and the oil would be valuable hot only during the war but afterwards. Furthermore there is plenty of good land along that road once you reach House river, where soldiers could settle after the war if the highway were constructed.
I put this idea before the government to-dav because I am convinced that we should not be true to ourselves or show the confidence we ought to have in Canada if we do not go ahead now, when we have to tax people to the extent we do, in order to bring about the development of these vast resources. If the United States of America developed so fast in this line, as was mentioned yesterday by the hon. member for Calgary West, it is because they were not so much afraid as is the hon. member for Rosetown-Biggar to let individual interests have their chance to make some money by developing the country's resources. In many states the oil rights and mineral rights belong to the owners of the soil, and that has induced more development
than any other thing we could do, by way of bonus or anything else. When oil possibilities were located by the geologists the big companies could not come along from abroad and go to the land office and file on the land and pay a few dollars to the man on top while they took millions out of the ground from the natural resources that belong to the people.
I said many times in the provincial house in Alberta that what we should have done there was to give the owners of the soil the title to the mineral rights. Up to 1890 when a man filed on a piece of land in Alberta or Saskatchewan he obtained the rights to the mineral under the land. Then that right was taken away, I do not know why, and the result was that development was retarded. It brought into the hands of a few the control of these resources and the poor farmer on top got nothing.
I believe the day will come when a great reservoir of gas and oil will be found between the great gas field at Medicine Hat, where more gas has gone into the air in the last half century than anywhere else in the world, up to the outcrop of tar sands hundreds of miles farther north. Somewhere between those points is a great reservoir of oil which some day will be found. I have an idea that the pool is somewhere in the country I live and that I represent. Be that as it may, if it were found there to-morrow the farmers and pioneers who went on that land and gave their best of soul and muscle to make that great land what it is now' would not benefit to the extent of a single dollar; it would go to some of the big companies while the men who own the topsoil can only stand and see the barrels rolling from their door and someone in Montreal or Toronto getting the benefit.
Hon. members will remember some years ago when Imperial Oil developed the great field at Fort Norman, where a pipeline is being constructed to deliver the oil to the Alaska highway. There was no possibility of bringing this oil dowm. The company came to Edmonton and asked for a pipeline charter. We all know what happened. The United Farmers of Alberta were then all-powerful, just a few months before they made a sweep of the then government; strong protest was made against the pipeline and the charter was not granted. There was no outlet for the oil until the great mineral development took place at Great Bear lake by the La Bines and other gold mining camps. I have great admiration for the initiative and enterprise and courage of these people. After the last war a number of us sent a man to Fort Norman
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to file on some claims, in the hope that we who had been in Alberta all our lives might be able to do something to bring about the early development of these new resources.
I do not think I need say anything more. I am convinced that we would be fully justified in building a highway to Fort McMurray, and that we would be justified in spending a large amount of money on machinery for the separation of the oil and in proving this field. I know the Department of Mines and Resources has done its share. Last summer an engineer in this field sent me a sample of these tar sands. The engineers of the department who were working there said that in their experience there was nothing anywhere in the world finer than the tar sands which are found a few miles from Fort . McMurray. So that I say the government has done its share, and I am satisfied that we shall accomplish something. But as the member for that constituency, knowing the fight that has been carried on for many years to oring about the development of this great resource and to have a highway constructed,. I say there is no doubt that the best method of extracting sulphur is known already. I do not know who made the report which the minister read this afternoon, but I agree with the hon. member for Rosetown-Biggar that this is no secret. It is known that it can be carried out without great cost, and that there is machinery which can be used to separate the oil from the sand. The only difficulty has been in getting sufficient money to instal this machinery on the scale necessary. Years ago one of the men who did a great deal in this connection, a young scientist from the university of Alberta, had one of these machines in operation. He showed it to a committee of the Alberta legislature, actually extracting oil from sand he had brought from McMurray. That machine did a thorough job; it extracted-all the oil, and the sand was left clear. The only problem was to ascertain whether this machine could be constructed id the size necessary in order to produce to the capacity required to make this a paying proposition in competition with other fields, or whether some changes would be needed before that could be done. So that I say we are justified in going ahead and spending money on this development. I am not much concerned as to how the government does it, as long as it is done.
I say to you, Mr. Chairman, and to the members of this committee that if we carry on this work now we shall reap the benefits long after the wounds of this war have been healed, as they will, God be thanked, be healed. The time will come when we shall not feel

so keenly our losses; when we shall no longer look with sorrow at the vacant places where dear ones used to sit; when we shall not feel so keenly the loss of those who gave their lives for this country. God always grants that these things do pass, though of course we shall always have remembrance in our hearts and souls for those who gave their lives in such a noble cause. We do not forget; we remember, but the deep sorrow passes away. After this is all over; when the storm clouds pass away; when the blood tinge that we now see everywhere in this world has vanished and the glorious sun shines on the land again, because of our great natural resources we shall be able to compete with anyone in the world. We have the initiative, the men, the materials, and everything else. This land is peopled by the descendants of the greatest and best human stock that God1 ever created. We have everything necessary to make Canada a great independent nation after the war, in what will be truly the great machine age. Therefore I say, let us develop these oil sands; let us bring them into production immediately, during the war, because we need oil so badly. No matter what happens to us in a political way, when our time comes to lay down the burden and let it be carried by someone better able to do so, at least we shall be able to say that we have done something really worth while for this country in addition to fighting a war.


Mr. ROSS (Calgary East):: Last evening I dealt with a number of things that I thought would be helpful in connection with the production of oil in Alberta. I wish now to refer to one matter that will not be helpful. Speaking in this house on March 22, 1943, the hon. member for Lethbridge (Mr. Blackmore) had this to say, as reported at page 1424 of Hansard,:
Has the government been informed that in at least one case in Alberta an oil well which produced 576 barrels daily of clean, frothy, pipeline oil, was cemented over and has been left closed to this present day?
This is a very serious charge. The hon. member says that at least one producing well in Alberta, and perhaps more, has been closed down at this time when oil is needed so badly for the war effort. That is a reflection on every oil, operator in Alberta. I suggest that the hon. member should come through and prove his charge. Let him say who is closing down these wells, and where are the wells that are being closed down, or if he cannot prove it let him apologize to the oil operators for what he has said.


Mr. BLACKMORE:: Mr. Chairman-

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George Henry Ross: Let the hon. member be patient until I get through; he can apologize afterward.


John Horne Blackmore: If the hon. member casts a reflection on me, I have a right to reply. I merely asked a question; I made no charge at all. If the hon. member wants to be fair he can see that.
The CHAIRMAN; There is a rule which is always applied during debates in the house or in committee, that it is up to the hon. member who has the floor whether or not he will permit any interruptions or answer any questions put to him.


George Henry Ross: The hon.
member says he merely asked a question, but he stated that at least one oil well producing 576 barrels a day had been closed down. If that is a question I cannot see it.


John Horne Blackmore: I have the evidence to back it up.


George Henry Ross: Then the hon. member had better bring forth his evidence and have the man prosecuted who is doing that sort of thing. If the hon. member cannot have him prosecuted he should apologize to the oil operators.


John Horne Blackmore: That is not my
business.


George Henry Ross: No; it is the *business of the province of Alberta. The government of Alberta have made regulations with regard to oil drilling and the closing down of wells. That is a matter which comes within the jurisdiction of the provincial government, and here are the regulations of the provincial government in that connection:
No operator shall indefinitely suspend or cause or permit to be suspended operations at or abandon or cause or permit to be abandoned or remove or cause or permit to be removed the rig, derrick or other operative structure therefrom or disrupt or cause or permit to be disrupted any part of the casing in the well without first obtaining the written approval of the board so to do, provided that in any particular case such approval may first be given orally.
In approving such suspension or abandonment the board shall give such directions and impose such requirements as in its opinion are necessary and practical for the proper suspension or abandonment of the well.
In making that charge the hon. member reflected not only on the oil industry of Alberta but also on the government of that province-


John Horne Blackmore: Would the hon.
member permit a question?


George Henry Ross: -but he cast a serious reflection on a competent and
capable official whose duty it is to administer these regulations and see that they are carried out.


John Horne Blackmore: Will the hon. member permit a question?


George Henry Ross: The hon. member should either bring the case to the attention of the attorney general and have the person responsible prosecuted, or. apologize to the oil operators, to the government of Alberta and to this competent official who he suggests has been breaking the regulations.


John Horne Blackmore: Will the hon. member
permit a question?


George Henry Ross: Certainly.


John Horne Blackmore: Will the hon. member tell me when the regulations to which he has referred were passed?


George Henry Ross: I cannot say the day it was passed, but it is to be found at page 9 of the drilling and production regulations of the department of lands and mines of Alberta.
May I say a word to the Minister of Finance. With respect to production costs I note that the new scale applies to 1942. For that I am grateful. The industry in Alberta will appreciate it. I should like to put this question to the minister: If a well were started in 1940, and if it were producing in 1940, 1941 and 1942, the write-offs under the old regulations would be smaller than under the present regulations. Has an operator the privilege of accumulating the write-offs of the three years to apply in his 1942 statement, so as to get the benefit of this provision for those three years?


James Lorimer Ilsley: I shall work that out. There has been some argument about it, because it is a technical matter. I shall take the example the hon. member has mentioned, and refer to it later.


George Henry Ross: I should like to know the same with regard to depreciation. Then, what the minister had to say about depletion will be helpful to the industry. As a result of it I think a small operator can get along without his capita! being taxed. If that is the effect, it is certainly a great concession.
I am sorry I cannot commend the Minister of Munitions and Supply in the same way for what he said last night. Among other things he said this:
I heard a member of the committee state that in no part of the United States were more liberal tax concessions made to the oil industry than were being offered by this government.
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I have been making a study of taxation of the oil industry in the United States. I admit it is a complicated subject, and I may not have arrived at the correct conclusion. But the conclusion I have reached is that the United States is more generous than is Canada in its taxation of the oil industry. The conclusions to which I have come is that the concessions the minister is now granting were given to the industry in the United States some time ago. As I have said, I may be in error, but I have given my best thought to the matter, and that is the conclusion I have reached. It seems to me that the man who so advised the minister did not understand the subject very well.


James Lorimer Ilsley: There is something to be said on the other side, too.


George Henry Ross: That may be
true. In connection with the crown company the minister is setting up, he is going to take over the oil site, drill it to production, take his cost of production and turn the site back to the .owner. If he is taking an oil well site he would be in the same or even a more attractive position if he were to take the three wells to which I referred last night. He could take over those three wells now down to a depth of approximately 8,000 feet, complete them, take the cost of completion out of production, and turn the wells back to the owners. I must commend him for his attitude in this respect. In so doing I am not saying anything one way or the other with regard to the rest of his crown company objectives.
The minister made an attack on royalty companies, upon which I cannot compliment him. A share company, like a royalty company, must have acquired a lease before it can begin drilling. In acquiring that lease the lessor would retain the lessor's royalties. He would obtain the same royalty, in the case of a share company, as he would in the case of a royalty company. He would retain a gross royalty, in so far as that well is concerned.
Drilling in unproven structure is a highly speculative and honest venture. It costs no more to sell royalty shares than to sell shares in a share company. In fact it costs less to sell royalties than to sell shares in Calgary, because the pebple understand the royalty companies. They like those companies, and they will buy royalties more freely than they will shares.
They like them for two reasons in particular. In the first place the life of an oil well is from four to six years. If they invest in a share company they cannot, at the end of four or five years, go to the company and say, "I want my money back; here are my shares."

But in the case of a royalty company, when production is taken at the end of four or five years they get their money back, and they are through. They know definitely where they stand.
The second reason for their preference for royalty companies is, as I said last night, and I now repeat it, that no board of directors can divert that money to drilling for other oil wells, or divert it in any other speculative way. The realization of the well does not belong to the company, it belongs to the royalty holder. And no one but the royalty holder can reinvest it or deal with it.
For these reasons they prefer the buying of royalties to the buying of shares. I must point out further that no company can sell royalties in a royalty company or shares in a share company without first laying its plans before the public utilities commissioner, and receiving his consent. The public utilities commissioner is a quasi judicial official. It is his duty very carefully to check the contracts concerning royalties, or reserve shares for the entrepreneur. He checks up on the commissions paid on the sale of shares and on the sale of royalties. He must have a favourable report from a reputable geologist. He checks with meticulous care the plans of every company proposing to drill. In other words he is a most capable, efficient and painstaking official. I may say that I have appeared before him. on behalf of different companies, and I know whereof I speak. By his attack the minister has reflected upon this competent official, and it was also an attack upon our geologists and upon a number of royalty oil operators in Alberta. I suggest, to the minister that before he attacks the oil operators of Alberta or any other reputable class of citizens he should get correct information. Instead of going to the oil controller who is more than 1,000 miles away from the operations-I do not wish to cast any reflection upon the oil controller because he must get his information at second hand; the minister gets it at third hand or worse-he should go to this competent public utilities commissioner who knows his business. He would thus get his information at first hand. If he is too busy to go to Alberta, let him have this official come here. It would be a good thing if he came to Ottawa during the Easter holidays.
Let him have this official come here and arrange a conference with the Minister of Finance, Mr. Elliott, Doctor Eaton and the Minister of National Revenue. Let them all go into the matter and decide whether or not this official has been acting judicially in allowing these companies to sell shares and carry on business the way they are doing.

Income War Tax
I think it will be found that there are good reasons for the action he has taken. The oil controller cannot know those reasons, and the Minister of Munitions and Supply certainty does not know them or he would not have made the statement he did.


Clarence Decatur Howe: Perhaps my hon.. friend will tell me what statement I made that is not correct.


George Henry Ross: If the minister will read the speech he will see that there are a number of reflections cast on this official.	*


Clarence Decatur Howe: I cast no reflection on any official. I made certain statements which I believe to be correct. If they are not, I should be glad if my hon. friend1 would set me right.


George Henry Ross: The statements were more in the form of innuendoes, rather than direct statements. I think a number of the statements would be found to be quite questionable if they were checked up.


James Lorimer Ilsley: What impressed me most was the statement that fifteen wells had been drilled by fifteen royalty companies in an unproven area and that thirteen had been abandoned. It struck me that that might seem to be a lack of economy and efficiency, particularly in time of war.


George Henry Ross: I do not say that I approve the drilling of all those wells, but they might just as well have been drilled by share companies as by royalty companies. The minister was attacking the royalty companies. In the land immediately to the south they got the biggest production ever obtained in any part of the Turner valley. There was then a rush into that particular area. While that rush may have been too great, I think if the matter were taken up with the official who passed on it, it would be shown that he was justified and that there was good reason for granting these permits.
In conclusion, let me again urge upon the Minister of Finance to grant to syndicates of small investors who may pool their capital to drill the right to offset the cost of drilling a dry hole against their individual income assessments. That would do a great deal to stimulate these highly speculative but honest ventures which are so essential to opening up of unproven areas. Without that stimulation I doubt if we are likely to discover many new oil wells. As I pointed out yesterday, it is the small operators who do the speculating. I also urge the minister to extendi the benefits of this resolution to wells already commenced, whether they were spudded-in on or before January 1, 1943.


Mr. EDWARDS:: I have just one or twc observations to make following the announcement by the Minister of Munitions and Supply in regard to crown companies. I was concerned about his culminating statement with respect to royalty companies having drilled some thirteen wells in the north end of the field which he said were failures.


Clarence Decatur Howe: I did not say they were failures; I said they had been abandoned.


Manley Justin Edwards: That may be correct, but I should like to have more assurance than the mere statement that that is the situation. They may now have been closed temporarily, which is not an uncommon thing to happen. The continuation of drilling will probably depend upon the results obtained in some adjoining well on the structure. I believe that but for the finance resolutions and the taxing programme of this government a year ago, funds would have been available and some of these wells would have been sunk to the depth required to test the structure.
I have it as an opinion from a competent and reliable geologist that the northern end of that valley is still a potential oil field if the wells are sunk deep enough. Many of the wells have discontinued drilling at two, three and four thousand feet whereas the major production is obtained at seven, eight, nine and sometimes ten thousand feet. With all due deference, I do not think it is a correct statement to say that they have been abandoned.


Clarence Decatur Howe: Several of the wells were drilled to ten thousand feet, which is nearly two miles.


Manley Justin Edwards: Ten thousand feet is not an exceptional depth in certain oil fields. They have gone much deeper than that in California; companies have gone back the second and third time to drill a well a little deeper. Look at the actual record. I shall take the Daily Oil Bulletin of March 10, 1943, and see whether the minister is justified in the statement he made with regard to oil royalty companies. First, I should like to quote what the minister said as reported on page 2141 of Hansard. He said:
A good deal has been said about the royalty companies. The lack of interest in royalty companies has been attributed to the government's taxation. I suggest that the lack of interest in royalty companies is due to the record of the royalty companies. They are peculiar to Alberta, and peculiarly to Turner valley. The royalty companies were started, I think, in 1939.
I have before me a list of the wells which I will give to the committee. Prior to 1938 there were five royalty companies drilling; in 1938 there were seven royalty company wells drilled; in 1939 there were eleven royalty wells drilled; in 1940 there were ten royalty

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company wells producing; in 1941 there were eleven royalty company wells producing; in 1942 there1 were nine royalty company wells brought into production. During that period from 1937 to 1942, fifty-three wells produced 3,113,940 barrels of oil. In other words, in 1942 fewer than twenty-five per cent of the wells in- Turner valley produced thirty-two per cent of all the oil produced in Turner valley, and for the period under review produced 25-2 per cent of the cumulative total of all the oil produced by all companies of every kind. So that the record speaks for itself.
In another place the minister would have led us to believe that the royalty companies had drilled unproven structures and that they had nothing to do with the exploration and discovery of new wells. In the same bulletin from which I have quoted, in answer to the question, "Who made the discoveries in the Turner valley area?" here is the record:
Southwest Flank. Turner valley royalties No. 1 (independent, royalty financed), provided first important oil strike on West Flank, started the large scale development of the Southwest Flank in 1936. Bulk of the extension drilling in this area done by independents.
South Extension. Northwest-Hudson Bay Nos. 6, 8 and 12 (Imperial Oil group), extended the proven area a further three-quarters of a mile south in 1942 and early 1943.
Central West Flank. Arrow Oil Royalties No. 1 (independent, royalty financed), provided the first major production on the Central Flank, led to the large scale development along a five-mile front in 1940-41-42.
Northwest Flank. Model Oils No. 1 (independent, company financed) provided first evidence of a crude oilbearing West Flank following completion in 1930, while Anglo Canadian-Philips No. 1 (independent, company financed) provided the first production at great depth on West Flank, and led to considerable development in this area in 1940-41-42.
North Extension. Home-Millarville No. 2 (independent, company financed), extended the proven area a mile northwest of previously indicated limits in 1939, and started aggressive extension programme resulting in successful completion in 1940 of Alberta Oil Incomes No.
2,	in 1941 of Major Oil Investments Nos. 2 and
3,	in 1942 Atlas-British Dominion Nos. 2 and 3, in early 1943 of Northclonmel Royalties No. 1 (all these wells being independent, royalty financed). These completions gradually extended proven area more than three miles north and west of Home-Millarville No. 2, and resulted in large drilling programme in 1941-1942 which is now providing nearly 40 per cent of Turner valley production.
"East of Crest" area: Major Oil Investments No. 9 (independent, royalty financed), opened up for development a potentially great new source of oil in mid-1942, when it found production in limestone encountered at considerable depth east of. the structure crest, an area previously generally condemned. This oil strike is now being exploited by a substantial extension drilling programme, both by independents and the Imperial Oil group.
HVtr. Edwards.]
Moreover, the names of the wells are all listed and the daily and monthly production derived from them is givdn.	.
Because something is new or peculiar to a certain district, because something is out of the ordinary, something that has not been tried before, is it to be condemned? There is nothing sinister about a royalty company. In fact the royalty company grew out of, shall I say, the malpractices of share companies as such, because it was found that the people who bought shares in an oil company which brought in a well did not get what they thought they were getting. They did not get the production from the oil well -because the company used the money from the proceeds just as they saw fit and did not distribute the proceeds by way of dividends to the shareholders. In that way the financing of oil wells was discouraged, and it became difficult for an oil company to get a charter from the securities commissioner of Alberta until the system of royalty companies was set up.
A royalty company is really a misnomer. There is no such thing. There is a royalty agreement, and it ig this: The owners of certain leases deposit with a trust company a trust deed or agreement, including the lease. All the funds arising from the sale of royalties-the price at which the royalty shall be sold is fixed by the commissioner and the commission that shall be paid on the sale of that royalty is also fixed-go into the trust company and must be handled- under the trust agreement for no other purpose than to drill a well on a specific piece of property. The company or promoter as such has no control or jurisdiction and no right of disposal of the production derived from that well because, perforce, the trustee pays the drilling company on the certificate of the engineer. The trustee pays out the trust moneys in his hands. When production is found and the oil starts to come out, the pipeline company turns over a cheque direct to the gross royalty holders. Who are they? The crown in the right of the province and the owner of the lease. The owner of the lease gets from 10 to 124 per cent, or may get as high as 15 per cent. It may be recalled that last year in- this house my primary objection to the amendment to the Alberta resources agreement was that the province of Alberta was contemplating raising the royalty which it would take from any oil produced from any of the alienated oil lands. As I was saying, so much goes to the crown in the right of the province. It is the common and accepted practice, although it varies, that the owner of the lease shall get a gross royalty of 10 to 124 per cent. Throughout the United States 124-

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per cent is recognized. So that the gross royalty which was spoken of by the minister goes to the crown and the owner of the lease in the first instance; next comes the preferred royalty holder, who gets his out of the next production, until all his investment is paid back to him; then the deferred royalty holders come into the picture, and we have the commission brokers and those who have bought large blocks of preferred royalty interest. But the promoters and brokers do not get anything until the preferred royalty holder gets all his money back. The advantage of the royalty set-up of financing is that nobody can interfere with a person's one per cent, two per cent or ten per cent interest in the oil which comes out of that well; it cannot be diverted by any director or board of directors or management into some other field of exploration.
It would seem as though there were something terrible about a commission of twenty or twenty-five per cent for selling an interest in an oil well. I venture to say that in every province of the dominion twenty to twenty-five per cent is recognized as a fair commission for selling mining shares. It is not excessive. At least, it is known to and approved by the Ontario securities commission and by the securities commission of Alberta. So that there is nothing unhallowed, unfair or unconscionable in the royalty set-up as we have it at the present time.
The minister's observations at the opening of his remarks yesterday caused me some concern. He said, as reported in Hansard, at page 2139:
I may say that the oil controller, who was confronted with this problem . . .
That is, of improving the yield of oil in Canada.
. . . appointed a committee of experienced producers with headquarters at Calgary. This committee was made up of small operators-


Clarence Decatur Howe: And large operators.


Manley Justin Edwards: -and representatives of the large oil companies.
I should like to know who the small operators were and who was speaking on their behalf. I do not know of any. The committee as advertised to the public in the press consisted of whom? Mr. McLeod, of the Royalite and Imperial Oil, a subsidiary of the Standard Oil of New Jersey; Mr. Galloway, of the Standard Oil of British Columbia, a subsidiary of the Standard Oil of California; Mr. Hunt, a representative of the McColl Frontenac and Texas corporation; Mr. Kemp, of the Alberta conservation board; and Mr. Brown, Jr., of the Brown Oil company, who organized many of the earlier royalty companies, the first major royalty company having
been organized by Mr. Brown's father, and who has lately undertaken some wildcat ventures with the Shell Oil company, which has no production in Canada. I am curious to know who was speaking on behalf of the independent companies, of the royalty companies, the pioneers of the oil industry in Alberta.
I would refer now if I may to the finance minister's amendments. I think the three changes which he announced last evening will be received with general appreciation and applause, particularly by those who are interested in the development of our oil resources. But I still believe that the crux of the problem is depletion allowances, and I should like a statement from the Minister of Finance as to why, having regard to the necessities of the case, we still retain that old 33^ per cent depletion allowance, when the United States of America in peace time and long after the oil industry had become a giant and well able to take care of itself, and despite repeated attempts to change it, still allow a depletion allowance of 27i per cent of the gross production up to a maximum of 50 per cent of the net production from any well; yet we start in and say, 33i per cent of the net and no more. "Depletion" is a confusing term, and the significance of it is not apparent unless you apply yourself to the problem. It is an allowance for a wasting or non-recurring asset; that is all. In other words, you allow one who goes out and produces to retain a certain portion of what he produces, free of tax.


Mr. JACKMAN:: Would the hon. gentleman permit a question?	*


Manley Justin Edwards: Certainly.


Harry Rutherford Jackman: It is simply on this depletion allowance. First of all, in the hands of the trustee, who I understand is subject to eighteen per cent tax under the legislation brought down last year, is any depletion allowance allowed whatsoever? The second question is: did the depletion allowance about which the hon. member spoke refer only to the amount given to the holder of the interest in the royalty; or would he be more specific in the comparison between the depletion allowance under our act as compared with the depletion allowance in the United States? I was not quite clear.


Manley Justin Edwards: I was referring to the
depletion allowance in the United States as compared with the depletion allowance in Canada, namely, to the oil company as such, or on the proceeds in the case of a royalty company; the depletion allowance on the production of the well before distribution to the investor.
Income War Tax


Harry Rutherford Jackman: What are these percentages?


Manley Justin Edwards: The percentages were
33^ of the net in Canada, and in the United States 27i per cent of the gross up to but not exceeding 50 per cent of the net.


James Lorimer Ilsley: What consideration does the shareholder get in the United States?


Manley Justin Edwards: I do not know, nor am
I concerned with that at the present moment.


James Lorimer Ilsley: It is rather relevant. I
understand the shareholder does not get as much consideration as we give the shareholder in Canada.


Manley Justin Edwards: I cannot answer the
minister.


James Lorimer Ilsley: I believe the shareholder
gets none whatever unless he has a capital gain. If he has a capital gain he gets some depletion allowance on the tax on his capital gain. I believe that is the situation in regard to shareholders and unit holders in the United States.


Harry Rutherford Jackman: I am not certain of that, I rather recall that there is allowance for depletion on income from oil producing companies in the United States. Apart from capital appreciation I think you are allowed to write off for depletion a certain amount of the income received from dividends from an oil producing company.


Manley Justin Edwards: I would welcome a statement from the Minister of Finance as to why, if oil is necessary, the concessions provided by resolution 16 should be limited to those companies whose principal business is the production and/or refining and/or marketing of petroleum and/or petroleum products. For example, if the Canadian Pacific Railway company decided that there was a national emergency and oil was desirable in the national interest, if they started in they would get no benefit under resolution 16. Why not throw the field wide open to anybody, not limit it to a producing, distributing or processing company? Why should some little, fellow who has a little refinery get the benefits and concessions but somebody else, you or I, get no benefit, particularly when it will make little or no difference to these people who are in this business because any losses they sustain here they can easily write off against the profits on their manufacturing or distributing end? I suggest that there should be no limitation.


Richard Burpee Hanson: The hon. member's point is that the resolution as drawn

and the legislation based on it will operate entirely in favour of the big producing companies?


Manley Justin Edwards: Quite.


Mr. SLAGHT:: Has the hon. member collected any data on where these companies are controlled, whether they are under Canadian or foreign control largely?


Manley Justin Edwards: I have not. There is
Imperial Oil, British American Oil, the Texas Company and McColl-Frontenac, the two latter being, I believe, one and the same.


Arthur Graeme Slaght: And Shell?


Manley Justin Edwards: Shell. Those are probably the major ones in the business in Canada at the present time.


John Horne Blackmore: I think I should refer to the statement made by the hon. member for Calgary East. I did not make a charge. I had sufficient information on which to base the question. I think that is as far as my responsibility goes.


James Lorimer Ilsley: I have to make a statement which will take ten or fifteen minutes on this matter. Perhaps we had better call it six o'clock.


Richard Burpee Hanson: In the
statement will the minister deal with the point raised by the hon. member for Calgary West? That is a very important point.
At six o'clock the committee took recess.
After Recess
The committee resumed at eight o'clock.


James Lorimer Ilsley: business, were in fact in businesses connected with oil production. But we always said and felt that we could not extend the provisions of the War Exchange Conservation Act to the whole range of business in Canada. We felt certainly that we could not extend it to the whole body of taxpayers, the Canadian public, who have nothing but a speculative interest in the matter, who have no connection with the oil business, and who, so far as their own future is concerned, have no direct interest in the preservation of the supply of oil.
We felt that we would be going entirely too far afield if we undertook to offer these inducements to any sort of organization- department stores, possibly, or anybody who had some money he desired to use in drilling for oil. We did not want to say to them, "Go ahead and drill, and you will receive ' the tax advantage". We felt that wre must draw the line somewhere, and it was our opinion that the proper place to draw it was between companies interested in the production of oil for their own purposes and for the carrying out of their own business objectives, and others. That is where the line was drawn. I would' not care to extend it any further.


John Horne Blackmore: Listening to the minister I am wondering whether the government was primarily interested in the production of oil. If it were primarily interested in producing oil, then what difference did it make to the government whether the Hudson's Bay company, the Canadian Pacific Railway company or any other company did the drilling?


James Lorimer Ilsley: One must always balance the objective against the cost.


Harry Rutherford Jackman: How can you?


James Lorimer Ilsley: Let us take the instance given last night respecting the fifteen wells sunk, thirteen of which were abandoned, and no oil obtained. I am not familiar with the circumstances, with the exception of what I heard last night-but that may be paying entirely too high a cost.


Harry Rutherford Jackman: Who says the cost was too high on the wells being drilled? As I understand it, according to information from a source I believe to be reliable, many of these wells which were being drilled, and which temporarily have ceased drilling, have done so because money has run short. They cannot attract enough money, under the present fiscal arrangements brought down by the minister. In this instance there was a total of thirteen wells, six or seven of which

shut down on account of lack of funds. While it may occur to the minister that some wells have not been brought in, and that perhaps the whole business of oil royalties may not be economically sound and helpful to the war effort, in view of the great number of failures, nevertheless there seems to be some opinion from authentic -sources which indicates that the trouble is lack of funds rather than any lack of ability to explore nature.


James Lorimer Ilsley: The hon. member may have his source of information; but after hearing what I heard last night as to the depth to which these wells have gone, I was fairly well convinced that there was no oil there.


Manley Justin Edwards: The Minister of Munitions and Supply did not tell us to what depths the wells had been drilled. I took occasion afterwards to inquire, and found out that most of them had not gone below 4,000 or 5,000 feet.


James Lorimer Ilsley: I shall not enter into that controversy. But I am saying there is such a thing as spending too much and devoting too much energy even to the finding of oil-if you do not find it. What I am also saying is that I do not think the government would be justified in saying to the great body of taxpayers in Canada, individuals and others, "Go ahead and, instead of paying the taxes you owe us, spend that money in trying to get something"-whether it be oil, or something of the kind-"because that is just as good as paying taxes". I do not think we would be justified in saying that. Many hon. members are very generous with taxation

* much 'more generous than I am.


John Horne Blackmore: I am wondering
whether there is not as much danger from one of the established companies drilling as there would be if it were done by the Hudson's Bay company or the Canadian Pacific Railway. If one of the established oil companies, such as the Imperial Oil company, drilled wells which failed to materialize, the government would be bearing the cost.


James Lorimer Ilsley: One can find cases on each side of the border-line. He can also find companies which would be just as likely to make a good job of it as would one of the oil companies. He could also find, I suppose, oil companies which would be just as likely to make a poor job of it as some company on the other side of the line. But unfortunately we have to draw the line somewhere. As I said before, I certainly will not agree to throwing open the *treasury of Canada to the whole public of Can-

Income War Tax
ada, and saying, "Go ahead and drill wells indiscriminately, wherever you like, at the expense of the treasury." I am not going to do that.


George Henry Ross: Only forty per cent would be at the expense of the treasury. The remaining sixty per cent would be the expense of the oil operator or speculator.


James Lorimer Ilsley: That is all right; but they might very' well want to take that chance, and I am not prepared to do it. And when I come to some other resolutions where the same principle is at stake, I shall take the same position.
This resolution is in line with the practice we have been following for the last year or two. We have considered very carefully the limits of the concessions-if they are concessions-that we would give. We decided to limit it to people in the business, because if we got outside that the field would be unlimited.


Thomas Clement (Tommy) Douglas: What provision is there for checking on this forty per cent which they actually spend in carrying on investigations? If a firm spends a certain amount of money, and charges forty' per cent of it against its taxes, how does the Department of National Revenue ascertain whether or not the company actually spent that amount of money? It seems to me it would be possible to pad the account so that actually the treasury of Canada would be paying much more than forty per cent, unless the whole situation were carefully canvassed.


James Lorimer Ilsley: There may be fraud in anything, but the presumption is that there is no fraud. There are ways of checking it. The books are open, and the business practices of the company are fairly well known. It is also subject to audit. I would say there would not be much danger of that difficulty.


Thomas Clement (Tommy) Douglas: Oil men have told me that unless an actual oil man were checking the expenses it would be difficult to know what should be considered a proper amount of money to spend on a certain project. Unless the man himself had some experience in oil well drilling it would be difficult to tell whether or not the amount of money had actually been spent.


James Lorimer Ilsley: They might waste some, but they are wasting some of their own along with some of ours. There is an incentive to them not to waste.


John Horne Blackmore: A large percentage of the oil companies are foreign, mostly United States and some other countries, while the companies likely to come under the other
category would be mainly Canadian companies, such as the Canadian Pacific Railway company. Has the minister made allowance for the possibility of giving over too much of our rights to foreign companies? '


James Lorimer Ilsley: I must admit that I have not. The important thing is to get oil.


Mr. POULIOT:: 
James Lorimer Ilsley: I undertook to make a statement on this, but I have been questioned so much that I am in danger of losing the continuity of what I intended to say. Listening to the criticisms which have been made in the chamber and reading some of the briefs which have been circulated, one might think we had done nothing for the oil industry, or at least nothing worth while. Let me go over the list of concessions already made and those now being offered. I invite the attention of members of the committee to this.
Under the Excess Profits Tax Act from 1940 on, a special and very important concession was made to oil companies, including royalty companies, in that the Minister of National Revenue was authorized by the act to adjust the standard profits of taxpayers engaged in the operation of oil wells, having regard to any substantial increase or decrease in volume of production in the year of taxation as compared with the average volume of production during the standard period. In practice this has meant that the oil producers do not get into the 100 per cent tax bracket, but only into the 40 per cent.
Last year we increased the depletion allowance in the case of oil wells from 25 per cent to 33^ per cent of net revenues. Under the War Exchange Conservation Act wre have been willing to enter into and have entered into agreements with oil companies providing for the write-off against income of the cost of drilling "off property" dry holes. A couple of months ago we removed the customs duties and sales taxes on all exploratory and development machinery used in the oil industry. It is

Income War Tax


George Henry Ross: The Minister
of Munitions and Supply stated that the setup of the royalty companies had been standardized, and that that standardization was worked out at various meetings of operators, brokers and security commissioners, held about a year ago. These men would have no right to standardize the operations of the royalty companies. The only one who could standardize or pass upon their set-up was the public utilities commissioner of Alberta, and the minister's statement suggests that the public utilities commissioner has been ousted from his functions, which have been taken over by the operators, brokers and security commissioners. After stating that this is the set-up the minister then went on to give what he said was the set-up, and he pictured a very gloomy outlook for the investors. As I have said, these operators, brokers and security commissioners have no right to fix the set-up. That is done by the public utilities commissioner, and when the minister states that it was done by these other people I must say that for my part I do not believe that statement is correct. If the minister had taken a little time to reflect upon what he was saying before he said it, I think he would not have made the statement.
72537-138J


[Stage Direction]
Amendment agreed to.
Resolution as amended agreed to.
17.	That exploration expenses incurred during the period January 1, 1943, to March 31, 1945, by companies formed for the exploration and drilling for oil may be accumulated and allowed as an expense against the income from any well found hereafter by such company.
James Lorimer Ilsley: I have an amendment to propose to this resolution, as follows:
That resolution No. 17 of the resolutions to amend the Income War Tax Act be deleted and the following substituted therefor:
"17. That exploration and drilling expenses incurred during the period January 1, 1943, to March 31, 1945, by companies, associations, syndicates or exploration partnerships formed for the exploration and drilling for oil or natural gas may be accumulated and allowed as an expense against the income from any well found hereafter by any such entity, provided however that the tax saving hereunder shall be limited to 40 per cent of such expenditures."


Clarence Decatur Howe: I move accordingly, Mr. Chairman.


[Stage Direction]
Amendment agreed to.
Resolution as amended agreed to.
18.	That payments of oil royalties shall be subject to a deduction at the source at the rate of 7 per cent.
Resolution agreed1 to.
19.	That all companies mining metalliferous and strategic minerals shall be allowed a deduction of their exploration expenses incurred in searching for base metals and strategic minerals in respect of expenses incurred during the period January 1, 1943, to March 31, 1945;: provided, however, that such tax saving shall not exceed 40 per cent of the expenses so-incurred.
Mr. McKINNON (Kenora-Rainy River)-Mr. Chairman, I approve this resolution except that in my opinion it does not go anywhere nearly far enough. It overlooks the prospector, one of the pioneers of our country who dowm through the years has gone out with a packsack on his back and has been respon- [DOT] sible for the mineral production in the mining areas throughout this country. I feel that he should have been given some consideration in this resolution.
I would also suggest that the resolution be extended to include gold mining companies.. While at the moment the government may not consider gold as essential, nevertheless it is-necessary for gold mining companies to be prospecting all the time if they want to be prepared to develop their properties further and keep their plant operating to capacity. In the district I have the honour to represent there is a large number of operating gold mining companies which pay a large amount of revenue to the dominion treasury. Around:
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[Stage Direction]
these mining developments there have been built up through the years communities which in my opinion we should do * everything we can to encourage and assist. The gold mining industry will be one of the most important sources of employment after the war. We have a reconstruction committee of this house sitting now searching for ways and means of taking care of our people when they come back from the war and of those who may be out of employment when our war industries close down. There is no place that I know of where a finer opportunity exists for improvement than in the gold mining areas of this dominion, and I believe the minister will be well advised to extend these provisions to prospectors and gold mining companies.
John George Diefenbaker: The representation I intended to make has been put forward by the hon. member who has just taken his seat. If the government's desire is to encourage production of minerals, everything should be done to encourage prospectors and syndicates in exploration work. Is the resolution as now drafted restrictive in operation to companies heretofore incorporated, or will it apply to any companies which may be incorporated after this date whose purpose is to explore for base metals?
In this connection, I should mention the situation in Saskatchewan, where there are .great mineral possibilities, but where up to -the present time those engaged in this work have been unable to secure assistance from the joint fund provided by the United States iand Canadian governments to assure an ade-*quate production of base metals. There are [DOT]areas immediately north of Prince Albert, Saskatchewan, which contain great possibilities, but where up to the present no help has been available to those who over a period of years have continued the work of exploration for metals. In this connection I should like to hear from the Minister of Munitions and Supply. Saskatchewan has received very little in the way of war industry. Outside of one industry in Regina and one in Prince Albert, our industrial economy is much the same as it was before the outbreak of the war. If we are to build up a diversified economy-and we have resources available for the purpose-I bespeak assistance by the minister to those who have borne the brunt of the search for minerals up to the present time, so that the base metals which are there will be rendered available for the war effort, and when the war is over a further industry will have been in process of development.


James Lorimer Ilsley: The question asked by the hon. gentleman was whether the benefits of the resolution would extend to companies incorporated in the future. Is that correct?


John George Diefenbaker: That is right.


James Lorimer Ilsley: Yes; that is my understanding of the resolution. But I would point out that, if this resolution applies to mining companies, a new company would not be likely to have any income against which to write off the expenditure. It seems to me that the point is not an important one; it is almost academic, because the application is to companies which actually have income. It may be that a company incorporated in the future would gather up enough income in the course of a year or two to spend some of it in this form of activity. The resolution is designed to apply to existing mining companies, although I see no reason why it should not apply to future mining c companies.


Mr. McIYOR:: I wish, briefly to support the statements of the hon. member for Kenora-Rainy River. The Minister of Munitions and Supply knows, perhaps better than I do, the resources which lie at the head of * the lakes in the Thunder bay district. I have received many samples which, upon being tested, have been pronounced high grade ore by the department of .mines of Ontario. Many places where these deposits exist are waiting for the sort of assistance which the Minister of Mines and Resources provided for the haematite mine at Steep Rock. They jnst need the wherewithal to give them the "go" sign. As the hon. member for Kenora-Rainy River said, we have resources in all kinds of metals which are well worth developing, and the ministers would be well advised to keep their eyes on that .part of Canada.


Mr. NOSE  WORTHY@: I should like first to endorse what was said by the hon. member for Kenora-Rainy River. To judge by the wording of this resolution, it would look very much as though prospectors, and groups of individuals not actually engaged in mining, are to get no assistance or relief from or by means of this resolution. The minister should tell us how those who really find these minerals will benefit from the exemptions which are provided under the resolution.
Another question I would ask is, to what extent the government is assisting in the production of those essential minerals which are already known to exist in commercial quantities?

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A booklet published by the Department of Mines and Resources and the Department of Munitions and Supply, entitled "The Industrial Front," tells us, for instance, that the Canadian output of aluminum has increased many-fold during the war, that we are now producing more than the total production of the rest of the world in 1939, and that the Aluminum Company of Canada is producing forty per cent of the supplies used by the united nations. Then we learn that the principal requirements for the making of aluminum in Canada are, bauxite from the tropics of South America- British Guiana, I understand-cryolite from the arctic expanses of Greenland, acid-grade fluorspar from the United States; and the contribution which Canada makes is the electric power from the rivers of Quebec. In other words, every pound of raw material which goes into the millions of pounds of aluminum produced in this country is imported. Notwithstanding the shipping necessities of the present time, and notwithstanding the fact that numerous railway sidings all across this country are blocked with the products of our factories now needed at the front, we are still using valuable shipping space to bring in from South America every pound of the raw' material that goes to the making of this aluminum. In contrast with that I w'ish to read an excerpt from the Northern Miner of April 1, 1943, page 20:
The United States bureau of mines is speeding up the development of alumina-bearing earth materials and low grade bauxite in an effort to render the country independent of foreign sources of raw material for production of aluminum. A grant of $500,000 has been given by congress to this end and seven laboratories and pilot plants have been assigned to the work. . . .
Canada has a potential source of alumina in the extensive deposits of nepheline syenite, and experiments already conducted have indicated commercial success on a production basis. Nothing is being done to further this project, as Ottawa has refused priorities for the necessary plant construction material.
In the light of the facts that I have stated regarding the importation of raw material and the fact that it is well known that at Lakefield and on the north shore of lake Superior there are literally mountains of this aluminabearing material, and it is generally known that there is a process fairly well perfected by which aluminum can be produced from this nepheline syenite, the only reason I can see why we are not taking steps to use that material is in the first place that the bauxite from British Guiana has a little higher percentage of alumina and, second, that it can be mined there with native labour and brought to this country so that a greater profit can be
made from the manufacture of the finished product by the aluminum trust. We are entitled to some explanation as to whether any steps are being taken to produce aluminum from the raw material that exists in this country.
A second metal to which I wish to refer briefly is cobalt. To-day, notwithstanding the abundance of cobalt-bearing ore in Ontario, we are bringing the material from which cobalt is made, a residue from copper mining, from Rhodesia and hauling it to Hastings in Ontario and Niagara Falls, refining it there and shipping it back to England. Canadian-produced cobalt ore, cobalt produced in the Cobalt camp, where there is an. abundance of ore left over as a residue of the silver mining that took place years ago when cobalt was a drug on the market, is being stock-piled far the United States government. I have a return which shows that at the time the Deloro Smelting company which, owns the only smelter in this country for the smelting of cobalt, made an agreement with the British government to process quantities of Rhodesian cobalt, they had on hand 636,385 pounds of' cobalt partly processed from Canadian material, when the plant changed its method of processing in order to process the ore brought in from Rhodesia.
There- is a great deal of questioning being done by those interested in the production of cobalt in Ontario. They are handicapped, first, because the only mill in the camp is, I understand, an old one, thirty years of age, that formerly belonged to the O'Brien interests, the same interests that now own, I believe, the Deloro smelting plant, It is now owned and operated, I am told, by a formeT employee of the O'Brien interests. Producers in that camp tell me that the charge for milling is exorbitant, that recovery is very low, and that they are being cheated out of much of the value of their ore. That ore contains a considerable amount of silver; but only silver running more than fifty ounces to the ton is paid for; nickel is paid for only when it runs more than five per cent, and then it is only paid for at 5J cents a pound, while the market price is 35 cents. The cobalt ore is fairly rich in arsenic, but no return is made to the producer for the arsenic. In other words,- the producers in that camp believe that they are being held up by the one mill which is operating. They are being further held up by the one smelter, owned by the Deloro or O'Brien interest.
Attempts have been made to interest United States capital. I have seen correspondence
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which would indicate that United States capital was prepared to invest in an additional milling and smelting plant in Cobalt had it, been possible to get the approval of the metals controller. That correspondence would indicate that it was impossible to get that approval.
While that situation is developing in Cobalt, I find, according to a return I have, that cobalt is being mined north of Kenora, at Wemer lake, Ontario, away in from the railroads. Some four hundred tons of cobalt have been flown out of that camp and sold to United States interests. At the present time, according to the return, a mill is being flown into that camp. What is interesting to me is that the person interested in the Werner lake affair is the adviser to the metals controller.


Clarence Decatur Howe: I think I should say there is no government money invested in that mill.


Mr. NOSEWORTHY:: I did not say there was.


Clarence Decatur Howe: It is entirely a private
matter. I suggest to the hon. member that when he names a man, and names an interest, he should make it perfectly clear that the man is not using his interest to obtain any government intervention.
_ Mr. NOSEWORTHY:	The point I am
interested in is that the cobalt producers in Cobalt have been finding it extremely difficult to produce, mill and refine Canadian-produced cobalt, while the smelter at Deloro is treating ore brought all the way from Rhodesia. I have a pamphlet called "Metal and Mineral Markets", which is a weekly news service published by the Engineering and Mining Journal, in which I find an article dated November 14, 1935, as follows:
The Association of German Cobalt Producers and the Cobalt Association, consisting of Union Miniere du Haut-Katanga, Deloro Smelting and Refining Company,-
That is the one in Ontario.
-Rhokana Corporation, and Miniere de Bou-Azzer et du Craara (Morocco) have signed a trade pact on the marketing of cobalt and cobalt salts, according to S. B. Redecker, United States consul at Frankfort-on-Main.
Back in 1935 it was stated:
The pact is hailed with enthusiasm in German metal circles, for the reason that it takes into consideration Germany's difficult foreign exchange situation by giving preference to the importation into Germany of ore rather than finished metal or intermediate materials; is designed to improve the position of German producers, as well as foreign, in striving for a gradual improvement of prices; and guarantees an adequate supply of cobalt indispensable for German needs. The pact, moreover, gives Ger-
IMr. Noseworthy.]
man producers entire freedom in the utilization of cobalt raw materials of domestic origin as well as foreign materials in which the cobalt content is very small or less than one per cent, to the working of which German smelters have long been accustomed.
Previously existing foreign agreements regarding cobalt ores and residues have been assimilated into the new pact with Germany, and an understanding concerning finished cobalt metal. Provision is also made for an export quota for German cobalt manufactures corresponding to the average relation in recent years of German exports to the sales of the foreign members of the pact.
The question I placed upon the order paper asked whether the government had knowledge of the fact that the Deloro Smelting company was, prior to the war and I understand until about 1939 or 1940, a member of the international cobalt cartel. Apparently the government had no knowledge of that fact.
I would ask the minister to consider these facts together. Here we have what is definitely a retardation of the production of cobalt, a vital mineral. The amount of cobalt required and its uses, as set out in the minister's own booklet, will indicate that it is an essential war mineral. We have a retardation of the production of cobalt in northern Ontario, where it exists in abundance. We are bringing it from mines in Rhodesia, owned by one member of that international cobalt trust, all the way to Ontario, where it is smelted in a plant that belongs to another member of that international cobalt trust, and we then ship the finished product back to England. All the while our own Canadian-produced cobalt has been stock-piled without having been used for war purposes at all. Producers in Cobalt are being handicapped severely in the production of this mineral and, I am told by a member, get no support or encouragement whatever from the controller of metals or the government for the development of their industry. I should like the minister to give us an explanation.


Clarence Decatur Howe: I have listened with interest to what the hon. member for York South has told us about aluminum and cobalt. As for aluminum, it is true that the raw materials, the bauxite, the cryolite and the flux material, are not of Canadian origin. However, I doubt if that is a source of weakness to Canada's interest in the industry', for at least it is not depleting our raw materials. The only Canadian element they' use at all is the water that runs down the river in any event, and with that small drain on our natural resources we have a tremendous industry which is a great employer of labour and a great buyer of manufactured commodities.

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The hon. member suggests that possibly a source of the raw material could be found in Canada. It is true, I believe, that about one-sixth of the earth's surface contains alumina, but it is a question of the concentration. The richest form in which alumina is found is in the bauxite of South and Central America. The Canadian company owns extensive deposits in British Guiana and has recently opened up other deposits in Jamaica. That happens to be the cheapest raw product that can be obtained. It is true that there is bauxite in Arkansas which, while it is a much lower grade than the central American bauxite, is probably the highest concentration to be found on this continent. We have deposits in Canada that could be used, at a cost. That possibility has been explored thoroughly; experiments have been made in the laboratories of the aluminum plant and in the research laboratories at Ottawa. If the worst came to the worst we could, at a very large capital expenditure, obtain the alumina element in this country. It is all a matter of cost. Canada is a very large user of aluminum at the moment, and naturally it is to the advantage of Canada to have a low-cost product here. If Canada wishes to maintain the industry at anything like its present scale, it is necessary that the Canadian industry shall sell its product in world markets at world competitive costs. Therefore it is necessary, if the Canadian company is to maintain its position, that it obtain its raw products in the lowest cost market, and I see nothing detrimental to the Canadian economy in that. I may say that the aluminum industry is a privately-owned industry. The Canadian government has no investment in it whatsoever. We were very fortunate to have that industry in Canada. I gave the story of it the other day, and pointed out the contribution it is making to the war effort of the allies. It is an industry of which Canada may be immensely proud.
Canada is a producer of cobalt. It happens that North Africa produces cobalt ore as a byproduct from other operations, and from that country ore is immensely cheaper than the Canadian product, so much so in fact that it can be shipped from North Africa to Canada, smelted in Canada, and sent on to the consuming markets at a lower cost than the similar product made from ore mined in Canada. There is nothing much Canada can do about that situation. Perhaps it could close down the smelter. The smelter is privately owned. We could close the industry, or we could say that we refuse to handle north African ore. But the only result would be that north
African ore would be smelted elsewhere, and our product would continue to be a drug on the market.
My hon. friend says the department has taken no interest in the cobalt ore. I tell him that if my department had not taken an active interest in cobalt ore mining operations would have stopped some years ago. Very early in the war the government financed a stock pile of that ore. Later on, our metals controller persuaded an agency of the United States government to pay considerably more than the price at which north African ore could be imported, in order to continue and increase the stock pile. As a result of those efforts the miners in the Cobalt area have been able to find a market for their product.
My hon. friend makes a great point of Deloro's being included in a cartel. He says he is speaking for the miners in the Cobalt area. Whether the cartel exists to-day or not, I cannot say, but, if so, I do not know whether that would be detrimental. As I understand it. the purpose of a cartel is to hold up the price of a product. The higher the price of the product, the greater the chance the cobalt miners have to receive a higher price for their product. Therefore, whether a cartel exists or not, I suggest he did not make his point that the result of the cartel is detrimental to the interests of the miners in the Cobalt area.
The hon. member says that a building permit for a plant to develop alumina from Canadian raw materials was refused. I say that no application has been made. My department, and the government as a whole, has taken an active interest in investigating the possibilities of obtaining raw materials in Canada. Had the companies shown any desire to make the investment required to use Canadian raw materials we would certainly have cooperated fully.
Similarly, in the Cobalt area, if anyone wishes to build a smelter to smelt Canadian cobalt ores, in line with the property which he mentioned and in which he said an adviser in my department is interested, my department will give that man any and every assistance. But no one has come forward who wishes to undertake such a project. I do not think I can add anything further at this time.


Arthur Graeme Slaght: I have one or two suggestions in connection with an extension of the provisions of resolution 19. I have put the suggestions before the Minister of National Revenue, in a written memorandum.
Before dealing with them, however, I should like briefly to pay tribute to the foresight and good judgment of the Minister of Finance, the Minister of Munitions and Supply and the Minister of National Revenue in the vision
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they had a year ago when they included from British Columbia to Nova Scotia for the
section 10A in the Income War Tax Act, which is chapter 28 of last year's statutes. The committee will recall that provision is there made for a forty per cent exemption for contributions to syndicates or mining partnerships organized for prospecting in Canada for base metals or strategic minerals, and then there were placed certain limitations on the amount which any one man might invest, and obtain his forty per cent exemption.
There was also a provision made last year for a similar exemption for amounts actually expended by a mining or exploration company in prospecting for those two types of metals. While I would not say they have been entirely due to that legislation, the fact is that the results obtained in Canada in the last fourteen months in the matter of important discoveries and contributions to the war by way of strategic materials is almost a romance.
I shall trouble the committee with only four examples, stating them as briefly as I can. I take these examples from our official handbook for 1943 issued only last week by the government. At page 96 under the heading "Mines and Minerals" we find these four items recorded. Undoubtedly the Department of Mines and Resources was consulted when this part of the handbook was edited. It states:
The demand for metals of all kinds increases rapidly in war time, and Canada soon found deficiencies in the supplies of magnesium, tungsten, molybdenum. . . . Ores of most of these metals were known to exist, and mining companies and prospectors assisted by officers of the mines departments of the dominion and provincial governments immediately commenced a reprospecting of old ground, and the search for new, promising geological territory.
Then, it deals with magnesium in this way:
Perhaps the most outstanding achievement during the present war in the production of strategic metals is the manufacture of magnesium. ... In the new plant of Dominion Magnesium Limited, near Renfrew, Ontario-
About fifty miles from this chamber.
-a method developed at the national research council uses dolomite as the raw material.
That plant has revolutionized the production in Canada of magnesium, a strategic war material.
Then at page 98 we find this reference to tungsten:
Canada's very important place in the manufacture of war equipment created an unprecedented demand for tungsten. Tungsten alloy steels are extensively used in making armour plate and armour-piercing projectiles.
Skipping a bit, we find the following:
Geologists from government departments and from private companies have been in the field 
past year and a half searching for tungsten ores and their efforts have not gone unrewarded. A very important discovery has been made in British Columbia which will be operated as a government enterprise.
Mercury is referred to on page 99 as follows:
Prior to the present war, practically all of Canada's mercury requirements were imported, but a mercury deposit has been brought into production at Pinchi lake. British Columbia, which can more than supply the needs of this country.
The next mineral dealt with is something of which I have personal knowledge. I acted for the widow of the unfortunate young prospector who made a mica discovery near Mattawa in Ontario and who lost his life in an accident a few months after. The report on mica is as follows:
Among the non-metallic minerals, mica, graphite, fluorspar and magnesite might be considered the most strategic. Mica finds its greatest use as an insulator in the making of electrical equipment. . . . An extremely important deposit of white mica has been discovered near Mattawa, Ontario, and is now in production.
I had the privilege of attending a conference with engineers from the United States who have advised the largest producers of mica in that country. They believe that in the discovery near Mattawa we have the greatest mica deposit in the world. I shall not spend any more time with these strategic minerals. With our wonderful production of munitions and raw materials which is expanding all the time and will expand under this legislation we bid fair to become the arsenal of the empire as in the past we became the granary of the empire. I understand from the minister that my memorandum will perhaps be acceptable, so that I shall not labour it.
Resolution 19 refers to all companies mining metalliferous and strategic minerals, but it does not cover the exploring for such minerals. I have suggested that we should add the exploration companies as well as syndicates and mining partnerships. We would then be giving encouragement to the small fellow. This point was raised this afternoon in connection with oil, and it can be raised much more powerfully with regard to mining. I had the privilege of spending ten years in the mining camps of northern Ontario and knowing intimately the prospector and his bravery, fortitude and courage, and the hardships which he has to endure. If the larger companies are to be given this exemption in connection with exploration costs, we should include the smaller exploration company and the syndicate and the

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prospector himself. I ask the minister and his advisers to consider this matter, which has been brought up already by one of my hon. friends.
I wish strongly to support the suggestion made by the hon. member for Kenora-Rainy River (Mr. McKinnon) that exploration for gold should be included in the exemption. The committee will realize that a gold mining company, which is a company mining metalliferous minerals, which prospects for base metals or strategic materials can secure an exemption on such costs. This resolution does not provide any exemption for the expenses of prospecting for gold. My experience of years ago and such intimacy as I have had with the industry since has shown me beyond per-adventure that it is not the great corporation or the great mining operating company which makes the original discovery; it is the prospector, supported quite frequently by a few of his friends or by a small mining syndicate. I have been in many of them in days gone by. You lose eight out of ten times, but if you strike it once you may be rewarded. It has been the little fellow, the man of small means, who has made this country noted as the most powerful mineral producing country in the world.
I should like to submit for the consideration of the minister one or two reasons why gold prospecting should be included. Prospecting for gold has become almost non-existent in the last five or six or seven years. I do not ask the committee to take my word for that. I should like hon. members to bear with me for a moment while I quote an authority which I feel sure the two ministers who are present will commend as being one that should be listened to. Doctor R. C. Wallace is the head of Queen's university where there is a very important science and mining school. He has been engaged for the past year and a half on what has been known as the James committee under Doctor James. With the aid of the department of mines he has given special attention to this problem of prospecting and the danger of prospecting drying up. I should like to quote from the report of the proceedings of the special committee on reconstruction and reestablishment before which Doctor Wallace appeared. I quote first from page 105 of the proceedings, as follows:
With regard to mining, there too we have very full data material, and there are two problems in mining which I might simply outline.
I am not going to go into those two problems because it is not necessary to do so. I commend to the department the language which appears on page 106.


Mr. MacINNIS:: I do not wish to interrupt the hon. gentleman, but I understand it is against the rules of the house to quote from a report of a committee which is at present sitting. The hon. member for Lethbridge (Mr. Blackmore) was stopped from doing this a few days ago.


The CHAIRMAN:: If the committee has not brought in a report covering the matter mentioned by the hon. member, it would be out of order.


Arthur Graeme Slaght: I am not quoting the report of the committee; I am quoting the evidence given by Doctor Wallace before the committee.
I shall not be long, and I think it would be helpful if we had this before us.


Angus MacInnis: I am only asking that the rules be applied impartially. If my hon. friend is allowed to read this to-night, that is all right, but if I wish to read something tomorrow I do not want to be stopped.


Joseph-Arthur Bradette: I have already given my decision that it is out of order to quote any part of a report which a committee that is at present sitting may make.


Arthur Graeme Slaght: Let me say then, without quoting any express language from Doctor Wallace, that he has been engaged by this government to investigate this very important question, and as a result of his investigation, to sum it up, he has reached the conclusion that the danger is, as he would put it, that we are in a lower level of employment in mining than the normal one when the war is over. He puts it that the training of men as prospectors is very important. He puts it that a great number of the new discoveries to be made in Canada are under clay, and not on bare rock and that that training needs ito be given. I must not use his exact language; I am trying to paraphrase the effect of what he has told us. He puts it that there is practically no incentive to invest money in. mining enterprise to-day, that it is a very ticklish and speculative business-I do not think we need an eminent man like Doctor Wallace to tell us that.
But here is the danger, that if we let prospecting for gold dry up or if we fail to encourage it, then as soon as peace, which we all hope will shortly be declared, comes, we shall have a tremendous need for goods and foreign exchange, in order to continue our pre-war purchases from the United States. The committee will remember that two years ago the then Minister of Finance- I think it was in the regime of Mr. Ralston-

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met with the gold mining industry and urged them in the strongest possible way to increase the production of gold, because it was then thought essential that we should dlo so in order to have sufficient foreign exchange to buy the- goods we needed. The gold mining companies responded in varying degrees. They increased, their plants and their expenditures and: increased the production of gold. More recently-the Minister of Finance himself knows better than I as to this-the generous policy of the United States toward us has, I believe, enabled us to secure the goods we require for war purposes without our having to pay for them on the barrelhead with foreign, exchange or even with products of our owTn for what we get from them. Therefore the minister might properly tell us that the need of to-day for gold as a medium of foreign exchange is not so great as it was heretofore. But I venture to predict this, that at the conclusion of the war the generous policy of the United States toward us will of necessity cease, and from the conclusion of the peace treaty onwards we shall be expected to pay that country either in goods or in gold' for our annual requirements from it, such as anthracite, cotton, corn, iron ore and half a dozen other commodities for which we are largely dependent upon our good neighbours to the south.
If that be so, the .policy of permitting the prospector to disappear or of failing to take all reasonable measures to secure new discoveries of gold is a policy that in my submission would be an improper one for us to follow. From the time a prospector makes a discovery, no matter how rich or important it may be, one cannot count on any production for a period of at least three years, and if we have a short-sighted policy in this regard we might find, when the war ends, that we have overlooked one of the easiest methods of providing work, and foreign exchange with which to .purchase our requirements. I venture to say that the expenditures under these exemptions would not be great and that the loss of taxes owing to the amendment of last year has not cost the finance department $2,000,000. The encouragement to the individual prospector and the encouragement to prospect for gold should undoubtedly be continued1.
The amendment necessary to this resolution would be very simple. All that the minister would' have to do would .be to add before the word "base" in the third line the two words, "metalliferous ores", so that it would read "their exploration expenditures

incurred in searching for metalliferous ores, base metals and strategic materials," and so on. It is as simple as that in language, but it involves a matter and a problem of major importance, and I commend it to the consideration of the ministers who have to do with it.
Mr. MaeINNIS: I should like to ask the hon. member for Parry Sound a question. I understand that it is not the policy of the government at the present time to encourage gold mining. I think that certain actions which were taken during the last year or two by the government have been to discourage gold mining. What would be the object of encouraging gold prospecting and discouraging gold mining?


Arthur Graeme Slaght: I shall be very happy to answer that. 1 think the explanation is one that it is not difficult to apprehend. It is this. The policy of the government has not been to discourage gold mining but the result of the policy of the government, its call for manpower-there are splendid young men in all our mines as the hon. member for Cape Breton South and the hon. member for Vancouver East know-forced as we have been to interfere more or less with all industries, found a very ready response from the type of men, skilled miners, to be found in the gold mines. In the first year and a half of the war the recruiting results in the gold mining camps were remarkable. They denuded the gold mines of the necessary labour to keep up their production, and I would say that they are running at practically only two-thirds of their peace-time production to-day, due entirely to the scarcity of skilled labour, caused entirely by the contribution to the war made by the employees in the mines, many of whom are overseas to-day. While that is a most creditable result, it was not'something done to discourage gold mining. Let me point out this to my hon. friend, and it is apropos of his question. I do not wish to go into the matter too deeply, but let us say that one-third of the skilled miners in this country are now away from the mines and in the armed forces. What will happen to them when they come back from this war? We have to think now of absorbing them into industry, and if we stop making gold discoveries-and it must be remembered that our present mines are necessarily depleting their gold reserves, because a mine has only a given life and it is not too long-it does seem to me that we should be failing in this way to make provision for absorbing a great many of our young men who are trained in mining and

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many others who would enter that wonderful calling when they come back from the war. Since it would help to solve that unemployment problem which we all recognize, that in itself is an argument in favour of prospecting for gold.


Angus MacInnis: -My hon. friend made a very good1 argument but did not answer my question at all. I can well understand how he can win cases in court if one does not pay close attention to him.


Arthur Graeme Slaght: I am very sorry. What was the question?


Angus MacInnis: Why should the government discourage gold mining or the use of man-power in gold mining and at the same time encourage prospecting for gold? My hon. friend did not say anything about the government's policy of withdrawing men from gold mining.


Arthur Graeme Slaght: My hon. friend's question contains as a statement of fact entirely false premises. I am asked w'hy the government discouraged the gold mining industry-


Angus MacInnis: No. no.


Arthur Graeme Slaght: -and I told my hon. friend that the government did not discourage the gold mining industry.


Angus MacInnis: They declared it nonessential.


Arthur Graeme Slaght: Yes, and I would agree with that.


Angus MacInnis: I am agreeing with the government's policy.


Arthur Graeme Slaght: They have not discouraged the gold mining industry. They have declared it non-essential, because they realize that the greater need is for men in the base metal mines and in mines where strategic minerals are being produced for war purposes. It is most unfair to suggest that the government have attempted to discourage gold mining. Gold mining has suffered, like every nonessential industry.


Mr. LITTLE:: I had not intended to hold up the proceedings at this time. The hon. member for Parry Sound and the hon. member for Kenora-Rainy River have gone over what I should have liked to say. However, having the honour of representing some of the largest gold mines in Canada, I feel that I have the right to say a few words here. I have lived in that part of the country for forty-one years. I believe I know every prospector and how every one of those claims was staked. In my
riding are twelve gold mines producing and paying dividends. Within two miles in the township of Teck there are seven, and not' one of those was staked by a mining company.
I could give the committee the name of every man that staked each mine. I know who staked the Hollinger, the McIntyre and the Noranda.
An hon. member was insisting that there is no point in looking for gold1 or starting new gold mines. When Noranda was staked, it was staked for a gold mine, and what has it turned out to be? That brings out the point that when you are out looking for minerals you never know what you will find. Noranda found, after mining some time, that they had a copper mine, and they are now producing great quantities of copper for our war effort. Kamascotia is another example; I believe the government have had something to do with it. The Hollinger gold mine is undertaking part of that work. I believe there is a lot of copper up in that district; that remains to be seen. At any rate it has been staked by syndicates. I believe the minister would do well, as the hon. member for Parry Sound has already pointed out, to allow syndicates and exploration parties the same opportunity that he has given to the mining companies. That is all they are asking for; if they receive the same privileges which are accorded to mining companies they will be well satisfied.
The prospector should have consideration. I have watched prospectors, big strong fellows, go out and after six weeks come back all flybitten and thin. No one knows what these men go through to find the minerals which we have found in that section of the country. As the hon. member for Parry Sound remarked, what are you to do when these men come back from the war? I believe Kirkland Lake provided as many recruits for its size as any town in the country. The reason for that is that every man who works underground is fit; he must be fit before he can do that work.
I believe the minister would be well advised to accept the suggestion which has been made in this connection.


Mr. QUELCH:: I was rather astonished at
the remarks of the hon. member for Parry' Sound. I believe, and I hope the majority of hon, members agree with me, that- the production of gold during the war cannot help in any shape or form our war effort, namely, the war effort of the joint allied nations.
Whether the production of gold will be of any value to this country after the war is, of course, another matter. But take the postwar period. It will not be necessary to have
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gold as a backing against our currency internally. Both the governor of the Bank of Canada and Doctor Cyril James have admitted that. So far as our internal currency is concerned there is no need of a metallic backing. On the other hand, if it is argued that gold will be needed to settle an unfavourable balance of trade, I ask, is there any reason to believe that Canada after the war will have with any nation an unfavourable balance of trade? I would think our main difficulty after the war will be that, as a result of our favourable balance of trade, other nations will find the greatest difficulty in shipping us a sufficient quantity of goods to maintain an even balance. I cannot visualize Canada having any difficulty in paying by the exportation of goods for any imports she may require after the war; and if we do not need gold after the war to pay off an unfavourable balance of trade, of what possible advantage can it be to this country to expand its production?
At the present time we are able to export in the neighbourhood of $200,000,000 worth of gold. Surely that will be ample to meet any unfavourable balance of trade which we may have with any part of the world. Our great difficulty after this war will be to find markets. We shall have to accept imports in return for exports, and it is only further complicating the problem to increase the production of gold in order to increase our exports, because when you increase your exports you also have to increase your imports. I can see no justification for utilizing labour at this time to prospect for gold, when w'e are already in a position to produce far more gold than we require.
If this country were poor as regards the production of other forms of wealth; if we had a shortage of agricultural products or of manufactures, it might be desirable to increase our production of gold so that we could receive more imports. But would any hon. member suggest for one minute that Canada after this war will not be in a position to produce enough goods to pay for all the imports we want? Unless it can be shown that we cannot do so, there can be no justification for wasting labour at this time to find ways and means of producing more gold after this war.


Joseph William Noseworthy: Would the Minister of Munitions and Supply give me a little further information regarding a statement he made? He told me that if we did not smelt imported cobalt in Canada it would be smelted elsewhere and Canadian cobalt would remain a drug on the market. Does the minister not know that the production of cobalt in Canada last year was the lowest it has been since
(Mr. Queldh l	.
1931; that it was only half the amount mined ini Canada in 1936; that the price of cobalt is fixed by an international cartel and to-day there is a world price in cobalt; that the Canadian producer has to sell his cobalt at the same price as the south African? I wonder who is getting the benefit of the cheaper production from South Africa. Is it the British government, or the company which mines it, or the company that is smelting? Is not the fact that the company which is mining this ore and the company which is smelting it in Canada are members of the same international cartel, the determining factor in this situation? Is not that the fact which determines why we are smelting this imported ore in Canada, and leaving our own ore on the stock pile?


Clarence Decatur Howe: I am not very close to this situation. I see these things pass through; I give the facts as I remember them. Deloro always was a customs smelter; that is, it buys ore and sells the product. There is a world price for cobalt. I dare say it is fixed by the cartel, as is the world price for a good many metals. I suppose the spread between the cost of the ore at the smelter and the selling price of the product determines the profit. Deloro did use a certain small amount of cobalt to meet a very limited demand before the war. I suppose they did find that they could bring in ore in shiploads cheaper than the Canadian product. Canada is a very small user of cobalt, and therefore we are not greatly concerned with the market price. We buy in the open market as we require it. But my comment about the cartel was that if the price were lower it would be that much more difficult for the Canadian producers to carry on. I repeat that we have financed a stock pile of cobalt here beyond our immediate needs. We also arranged with our friends across the line to stock-pile a further amount, so that we now have, I think, more cobalt in stock than we have ever had before, and by that means we have kept the industry about normal.


Mr. ADAMSON:: I find myself in almost complete agreement with what the hon. member for Parry Sound has just said. I would go even further than he suggested in the matter of tax reduction for prospectors. During a war economy many unsound practices occur in the mining industry. These practices may be both financial and engineering. If it had not been for the war, prospecting for such metals as tungsten, molybdenum,' mercury and chromium oxide would probably not have been encouraged. I think the government is to be commended for having encouraged them.

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These are strategic metals, absolutely essential for the carrying on of hostilities. They are war metals. But-and this is the point-when we come back to a peace-time economy we shall probably find that many of these deposits which the government is working or in different ways assisting private industry to work-Wartime Metals I believe is the company-are not commercially workable; in other words, they do not pay because in other parts of the world there are larger, richer and more easily worked deposits which now, owing to the war or to enemy occupation, are denied to us. When the war is over, these deposits will again become available to us. What I suggest to the minister is that allowance should be made up to 100 per cent for the work done to bring these deposits of strategic minerals into production. I believe such undertakings should be treated in exactly the same way as the oil producing companies are treated. I think the case for these companies is even stronger, because I'do not think anyone would deny that, after the war,'oil, no matter where you get it, will be salable, a valuable commodity. But many mineral deposits that we are necessarily opening up now will not be economically workable when the peace comes.
Another and even more important point that I do not believe hon. members fully appreciate is the dire strait Canada is in at the present time on account of the lack of the development of new metal deposits in the last ten or fifteen years. The deposits we have developed of chromite, mica, magnesium and other metals of which the hon. member for Parry Sound spoke are emergency operations. I believe a very good case can be made out that in the main these are not economic developments. But I am speaking of our chief base metals, copper, lead, zinc, nickel. I am not including aluminum, because it is not mined in any great volume in Canada. But of those four strategic metals in the production of which we as a nation excel there have been no major discoveries, I think I am safe in saying, since the discovery of Noranda in 1927. A mining industry cannot flourish unless discoveries are being made all the time; that is almost axiomatic. We have not done that. We have not done it because of our taxation policy. I disagree with our taxation policy on the development of metals, and that includes the previous administration as well as this one.
The discovery and mining of mineral deposits are as hazardous as, or even more hazardous than, prospecting and drilling for oil, the difference being that for oil you drill your hole and if it is a "duster", if it is
dry, everything is gone, you are out your original stake. But in mining, you start off and get teased along; the vein looks good; the diamond drilling shows good values over narrow widths. You put up more money, sink a shaft, put in a little plant, develop one or two levels. It still looks good. You continue to put up more money, and by the time you develop the property to four or five hundred feet you find that you have spent three or four times your original stake. Then the ore pinches out, and you have nothing. Our policy of taxation has been that if you lost money, that was just too bad; but if you made a mine, immediately you were taxed. You were not allowed any deduction for the work you had done or the money you had invested in prospecting. The net result has *been that prospecting has virtually died on our hands. The individual prospector, the small syndicate, the man who knows the bush, has not been able to get a grub-stake. He has languished in unemployment, and the country has gone undeveloped. That is a situation the seriousness of which cannot possibly be over emphasized. We have to continue with the development of our metal resources'..
The main mines in Canada-I will mention them: International Nickel, Noranda. Consolidated Smelter and Hudson Bay, not to mention the smaller ones-have done everything possible since the war to increase production. They have had just one goal ahead of them-to increase production and get the. metal overseas. The result has been that1 unsound practices have been followed in connection with several of these properties in order to obtain the maximum production of metal. In some instances the mines have' been high-graded. By that I mean the rich ore has been mined at a far greater rate than it would have been under a normal economy, and you have a great deal of low grade ore remaining in the mines that normally would have been taken out. Once you mine a vein or a stope and go by, you can never go back and get what you have left. That is lost to the country for all time. That is what we are doing; that is what we have had to do in order to obtain greater production, and that makes it even more important that we should encourage in every possible way prospectors, individuals, mining companies, speculators or whatever you want to call them; we should encourage money to go into prospecting in order to develop the mineral resources of this country.
The suggestions made by Principal Wallace have been summarized in the press, and L

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think they are so important that they should be mentioned in this house. The six points that have been made are these:
1.	That the relatively short life of a mine requires heavy total investment, which calls for a substantial return.
2.	War-time conditions have thrust gold mining into the background, with the result that no new properties are coming up and the post-war employment possibilities of the base
. metal mines are in question. That is the point I was making a moment ago.
3.	The present rates of taxation are not only discouraging financial investment in mining, but they are also lowering the actual amount of available ore that can be mined. That was my second point to-night.
4.	The speculative character of mining removes it as a suitable field for government operation.
5.	The hope of the future lies with the prospectors employed by private companies, but possibly encouraged and trained under a scheme of government education. I would suggest that the geological survey of the Department of Mines and Resources under Doctor Camsell has done and is doing excellent work in the training of prospectors.
6.	Canada's surplus of electric power after the war may enable our entry into the ferroalloy industry on a very important scale. That is particularly important when we think of the possible shift to aluminum. We are passing into the age of light metals and alloys. We shall find that magnesium, aluminum, tungsten and other light alloys will be the metals of the future.


John Ritchie MacNicol: And lithium.


Agar Rodney Adamson: Yes; lithium is another. We shall find that the motorcar of the future, for instance, will be a great deal lighter and easier to propel; that our motive-power engines will be smaller and more efficient. The use of light metals will become paramount. To fit ourselves for the future, the production of these new light metals must be encouraged, and the government must encourage them now. We cannot afford in the future to allow other countries to usurp our rightful place in the metallurgical life of the world.
I had not intended to say anything about gold, but I cannot allow the statements that have been made to go quite unchallenged. Gold is now and will be in future a vital metal, an important sinew of war and peace. As the minister well understands, from now on, until some type of stabilization occurs, we shall find ourselves faced with an extremely dangerous inflationary period. And we shall find ourselves facing the necessity of having the ,
people of this continent trusting paper money. We shall have to show that we have gold coverage, not only for our paper money but for the bonds we are to issue in great volume very soon, and probably on several more occasions before peace comes.
That is why we need gold internally. After all, when the banks closed their doors in 1933, during the panic in the United States, what was it the United States people wanted-although they did not realize it? Why was there a run on the banks? They wanted their money; they wanted gold. We shall need gold coverage. The history of the world has shown that to occur after every war and after every revolution-and we are in a revolution now, whether we realize it or not. We shall need gold, from now on, just as much as we needed it for United States exchange, when the United States was a neutral country.
I agree with the hon. member for Parry Sound that encouragement should be given to gold prospecting, not only for the reasons I have already stated but for those suggested by the hon. member for Timiskaming. When one goes prospecting -and Noranda is the historic example-he looks for a certain metal, and he may find almost anything. Under our extremely complicated geological formations, and the extreme complications in the formation of the pre-cambrian shield, we may find anything. It has frequently been found that goldbearing ore will contain many other important metals.
The three major united nations, namely, Russia, the United States and the British empire, are all primary gold producers. In fact, among them they produce nearly all of the world's gold. It will be their duty-and the future peace of the world depends upon whether they perform their duty-to see to it that the new world in which we hope to live is brought into being. One of the most important considerations will be that of currency, and another -that of food. The united nations have said, and particularly Mr. Morgenthau on behalf of the United States treasury, that the international currency of the future will be based on gold. In view of that, I do not see how we can possibly any longer ignore gold prospecting and discovery.
Mining is a wasting asset. The mining industry is decreasing, and at this very hour is in grave danger. Unless the government takes steps immediately to enourage people to enter that industry, andi to encourage mines to use their surpluses in developing the country, we shall have a northland of ghost towns, and the dead-hand of decay will be laid on what must be, if we are to prosper, the greatest and brightest spot in the Canadian economy.

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Mr. McCANN:: The legislation contemplated in this resolution is of a character which I am sure will commend itself to any who have been engaged or interested in the mining industry. The fault I find with it is that its scope is not broad enough. I agree with the hon. member for Parry Sound in that it should include prospectors as well as companies, or other individuals, who might be engaged in the mining industry.
One perhaps might wonder why I have anything to say in respect of this matter, but I can tell the committee that I spent the early days of my professional career in the mining country. Since that time I have been interested in the development of mining and, like many others, I have been connected with syndicates, and with the backing of prospectors who have gone into the wild areas of Canada in conquest of minerals of one kind and another.
When I hear talk to-night about Cobalt, I hear it from men who quite evidently know nothing, or very little, of the history of Cobalt.
I was there in the early days of that camp. The reason why cobalt is brought into this country from Africa is that it can be brought here cheaper than it can be mined in our own country.


Joseph William Noseworthy: Is that the only consideration in the war?


James Joseph McCann: If my hon. friend will wait until I have finished he might understand a little bit about it. From what he has already said it is'evident that he does not understand very much about it.
Cobalt of itself is not mined in Canada for its own sake; it has been a by-product of silver mining. When silver demanded a price of $1.25 an ounce the by-product cobalt was then of very little value. The hon. member for York South referred to the Deloro smelter. The reason why great quantities of cobalt were found at that smelter is that it was left there by several customs silver mining companies w'ho were sending their silver to be refined at Delora. There was a stock pile of it at one time as large as this chamber. .Cobalt then became of some value and was shipped to Europe, to Germany principally, where it was used for dyeing purposes. It then began to be used in connection with the hardening of steel, and other uses have developed during the war. If the government wishes to stimulate the mining of cobalt, the proper approach would be to increase the price of silver. If silver were back to $1 or SI .25 an ounce, there would be plenty of cobalt. The silver mines in the Cobalt area which are closed down and
which contain considerable silver and cobalt would be back into operation, and there would be plenty of this metal to meet the needs of the country.
Mining is one of the most important industries we have in this country. The precambrian shield runs across the northern part of Canada. In this shield is found a great diversification of mineral wealth, the development of which has added greatly to the national wealth of this country. The mining area in Ontario was not opened up through the efforts of prospectors; it was discovered by accident during the development of the Timiskaming and Northern Ontario railway from North Bay to Cochrane. The first discovery was made at Cobalt, and the town was named after the mineral that was found1. In this connection it might be interesting to hon. members to know that the town of Copper Cliff was so named because it was thought that a deposit of copper was being found, but. this proved to be the world's richest deposit of nickel. The Timiskaming and1 Northern Ontario railway was promoted originally to open up the clay belt in that part of the country for agricultural purposes. Prospectors have gone in and made great discoveries. They have rolled back the frontiers of this country, particularly the frontiers of northern Ontario and northwestern Quebec and have been responsible for the establishment, of large industries and communities.
I want to ask those hon. gentlemen who are not favourable to the continuation of the gold mining industry: what will happen to those communities which have been built up as a result of the development of the mining industry? The city of Timmins with 30,000 to 40,000 people, the city of Kirkland Lake with 20,000 to 25,000, Noranda, Rouyn, the Larder lake district-all these communities have been built up as a result of the mining industry. Enormous investments have been made in everything that goes to make up a modern community-homes, schools, industries and everything that is concomitant to the mining industry.
What we should do in this country is to encourage the mining industry. Anything that can be done in the way of passing legislation to make it easier for prospectors or mining companies to carry on their prospecting should be done. It must be remembered that mining is a depleting industry. If these communities are to be maintained, new prospects will have to be found. The communities which have been built up are centres
Income War Tax

of a great development. I am told that since the beginning of the war fifty-four mines in northern Ontario and in northwestern Quebec have been closed down. Most of these are gold mines.
One reason for this closing down has been the inability of these companies to secure workers and steel and drilling equipment and explosives. These things are needed more and in a different direction in our war effort, and the mining fraternity have no quarrel with the government for having put restrictions upon the materials and equipment used in their industry. If these communities are to become active in the post-war period it will be necessary that some concessions be made to permit their rehabilitation. New prospects will have to be looked for and developed. If prospectors, mining companies and individuals are granted the concession embodied in this resolution, three, four or five years from now, when the war- is over, there will be a number of new prospects to be developed.
Reference has been made to-night to the development of base metals and minerals. I am interested, of course, in the magnesium which is being developed in the county of Renfrew. This is not a new prospect by any means because it was discovered over thirty years ago and was mined for a brief period at. that time. But the process of separating the magnesium from the ore is new. As hon. members know, this process was developed in the national research council. It was the four mining companies of Ventures, God's Lake, Moneta and Bobjo which put- their money into Dominion Magnesium and carried on the experimental work with reference to this development.
Had these people not been in the mining industry and been able to furnish the experienced help which they transferred from northern Ontario we would not be in the splendid position in which we are to-day in reference to this particular product. As I say, this prospect was found many years ago. The development took place a year ago February, the first concrete being poured) on February 19, 1942. By August they were in production, and from August 19 up to the end of March this company has produced 2,000,000 pounds of magnesium, which is one of the strategic minerals of this war. Not one pound was produced prior to the development in Renfrew county. A thousand pounds go into every aeroplane, and the total production is being used for war purposes.
I mention this to the minister because I believe there are many other prospects of this 
type throughout the country. They will be developed only by the individual prospector or the syndicate or company which is interested in mining. If -we can grant concessions to these people in order that other developments of this type may be found in other parts of the country, then we shall be doing something not only for the mining industry but for the war effort as well. Therefore I am very happy to agree with those who have already spoken and taken the position that this concession should not only be given to companies but be extended also to prospectors and syndicates.


James Lorimer Ilsley: There are a few points that should, I think, be cleared up before the resolution is carried. The suggestion has been made that the resolution should cover not only exploration companies but syndicates, mining partnerships and individual prospectors. In our legislation of last year we provided by section 10A (5):
A taxpayer shall be entitled to deduct from the sum total of the income tax payable by him under this act and the excess profits tax payable under the Excess Profits Tax Act, 1940, forty per centum of the following:
(b) An amount not exceeding five thousand dollars actually expended by any mining or exploration company in prospecting for base metals or strategic minerals in Canada by means of its own prospectors.
The omission of exploration company in the resolution was not intentional, an exploration company can be added in the bill. This merely follows the policy of last year's act.
With regard to the further suggestion that syndicates, mining partnerships and individual prospectors should be placed in the same category, I should like to give that a little consideration because, as at present advised, I am not able to see that it would be of any benefit to them whatever. What has been urged upon us very strongly is that contributions by outside parties, individuals and others, to prospecting syndicates should be allowed as deductions from the income of those individuals for income tax purposes up to a certain point. That has been the proposal-not the proposal that has been placed before the committee to-night by several hon. gentlemen who have spoken, and I say I do not think that the proposal put forward to-night would be of benefit.
Take the individual prospector. I am informed by the commissioner of income tax that if a prospector makes a discovery of value he is not taxed on that at all, so that it would be of no benefit to give him a deduction for income tax purposes of what he spent from

Income War Tax
his income. He has no income; he has a capital gain. He has something that is not taxed. As I say, however, I will give consideration to the suggestion, although I do not think it would be a helpful one.
When we go back to the proposal that has been made in correspondence and by personal interviews, and so on, on behalf of prospectors and prospecting syndicates, what is that proposal? It is that we enlarge our provision of last year. Our provision of last year was that individuals could deduct from their incomes for income tax purposes up to a certain limit:
Contributions to associations, syndicates or mining partnerships registered or otherwise recognized under the laws of any province of Canada and organized for the purpose of prospecting in Canada for base metals or strategic minerals, not exceeding in the case of any one association, syndicate or mining partnership five hundred dollars, and not exceeding five thousand dollars in respect of the aggregate of the contributions made to all such associations, syndicates or mining partnerships.
The origin of that provision was a request made to the government in the early part of last year, long before the budget came down. Consideration was given to that request. Although it was of a most unusual nature and asked for governmental action which has no counterpart elsewhere so far as I know, we dtecided that we would accede to that request and I made a statement to the House of Commons early in the year, long before the budget, that this tax relief would be given to contributors, to associations or to mining partnerships.
It was represented, too, that there were here in Canada a great many prospectors, some of them getting along in years. I do not know that I would be strictly correct in calling most of them elderly, but at any rate some of them were, and it was represented that they needed some financial assistance to get them out searching for base metals and strategic minerals. It was represented that they did not need very much but that if we would provide, as we did, taxation relief in respect of contributions up to $500 for persons, and not exceeding S5.000 in all, so that an individual could contribute $500 here. $500 there and so on, it would be of great benefit in getting prospectors busy. We did that. I am not in a position to report to the committee as to the results obtained. I have tried to ascertain the extent of those results, but I am not able to report on them accurately and shall not attempt to do so. The fact that I am not able shows that the results were not very great. There were some results; there is no doubt about that, but they were not as great as I had hoped.
That is not due to any fault in the policy or in anybody connected with the policy. It is perhaps due to the conditions that existed last year.
When I had to give consideration to the request to increase greatly these amounts, to increase the $5,000, to increase the $500,
I had to consider whether it was desirable to extend that practice of allowing individuals to show on their income tax returns to be deducted from their incomes for income tax purposes, contributions for this, that or the other purpose, and -1 came to the conclusion, rightly or wrongly, that the practice should not be extended. In fact, I am somewhat concerned about having introduced it. However, we are extending this provision for the year 1943. It is not in the resolution because that is not necessary, but it will be in the act. There will be an extension of the provision in the act for the year 1943. It is a year by year thing. It was done for 1942 last year and it will be done for 1943 this year, but I do not think it should be extended. This is what was asked for last year, and the grounds for the request were then veiy clearly set up. But as I say, I do not think we would be justified in extending it.
With regard to last year's section, I wish to place on record my interpretation of that phrase relating to the forty per cent.
A minor change will have to be made in renewing the tax concession granted under section 8 of the act last year in respect of contributions to prospecting syndicates.
As the law stood for 1942, the concession was in the form of a straight credit against the tax bill rather than in the form of a deduction from income. The result was that companies which were receiving a depletion allowance received a tax credit of forty cents on every dollar of contribution, whereas if the concession had been in the form of a deduction from income the concession would have resulted in a tax saving of 26J per cent of the amount of their contribution. In renewing this provision for 1943 the intention is to continue the present tax credit for individuals and companies not in receipt of a depletion allowance at the rate of 40 per cent of the amount contributed, -but to limit the tax credit to 26$ per cent in the case of subscriptions by companies receiving a 33$ per cent depletion allowance. I may -say that this is not unfair, nor can it be regarded as discriminatory treatment, since the adoption of the tax credit device was merely a means of simplifying the mechanism. The principle behind the concession is that taxpayers may take their contributions to the syndicates as a deduction
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from income for tax purposes, with the provision that the tax saving should not be greater than that which would be realized by a taxpayer paying tax at the 40 per cent rate. Under this principle the actual tax saving to those receiving a depletion allowance of one-third would be 26f per cent, while those not receiving the depletion allowance would make a tax saving of 40 per cent.
I made the same explanation about the limitation of 40 per cent in regard to oil.
I do not remember just what points were raised in the course of the debate; but one of them raised and repeated by several speakers was this, that we ought to amend our resolution or draft our act in such a way as to give encouragement to prospecting for gold as well as for base metals and strategic minerals. I am afraid we cannot do that. The argument which is used for amending the act in this way is that we must make preparation for the post-war period, that gold will be of great importance to us then, and that now is the time to start to prepare for it.
I think the only policy which we can properly follow in this country is to confine extraordinary tax concessions, which really amount to expenditures, to objectives which have to do with the war. I do not think we would be justified in making these tax concessions at this period purely for post-war purposes. There is so much to do to win the war; there is so much production which- we require for war purposes, that we should confine these extraordinary concessions and privileges and expenditures to those purposes. And I am sure that, whether that is correct or not, the nations with which -we are associated in this struggle think it is correct, and they would think anything else was a most improper course to pursue. If we at this stage of this critical struggle were to devote any considerable proportion of our energies, our materials, our man-power, our resources to preparations for post-war prosperity, instead of to war efforts, I am afraid that we would place ourselves in an indefensible position.


James Joseph McCann: For what are all these rehabilitation and reconstruction and social security committees set up, if it is not for that purpose?


James Lorimer Ilsley: They are not making expenditures.


James Joseph McCann: They are contemplating a lot.


James Lorimer Ilsley: Not immediately; and I
may say that none are authorized.


James Joseph McCann: I beg the minister's
pardon?


James Lorimer Ilsley: No expenditures are authorized.


James Joseph McCann: Well, then, there is a lot
of wasted time on them.


James Lorimer Ilsley: It will probably be some
time before expenditures are authorized. In any event, these committees are not asking for tax concessions or anything of that kind.


James Joseph McCann: I should like just to say
to the minister, that this is what he said about prospecting: when men go out prospecting, under this provision they are to be encouraged to prospect for base metals.


James Lorimer Ilsley: Yes.


James Joseph McCann: A man may go out, or a
syndicate may send a man out, and he prospects for six months and, perhaps, does not make a find till the last week, and what he finds may not- be a base metal; he may be prospecting all the time for base metals and run across a gold discovery. Yet, because he has not, according to this resolution, found something of the nature of molybdenite or copper or scheelite or tungsten, but finds gold, he is not to be allowed the concession. I submit to the minister that to deal with people in that manner would not be fair nor would it be within the spirit of this resolution.


Agar Rodney Adamson: There is just one more
suggestion I should like to make to the minister. A great deal of prospecting is now being done on land, as yet not adequately surveyed, which is covered by large deposits of clay or earth put there by glacial action. I might mention the district between the Porcupine camp and the Kirkland Lake strike; that is covered with clay. On geological grounds I believe there are veTy large deposits of metal in that area. Also it is reasonable to suppose that it contains, as we have discovered at Dome and other places, considerable deposits of metal such as scheelite. In the. first place, it is>
extremely expensive to get through that clay. The prospector does it with difficulty, using a diamond drill, and probably finds a deposit which contains a mixture. All our ores are "mixtures," to use a lay term, and part consists of gold, but there is also scheelite or some other strategic metal. Are we to penalize that man because he makes a gold discovery? It is there, I think, that the minister is taking the wrong premise, on this matter of excluding gold. As he said, it will not take a great amount of man-power or money or anything else, and

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you will simply penalize the fellow because he discovers gold. I think that is wrong; it is unscientific and untenable.


[Stage Direction]
Resolution agreed to.
20. That contractual payments made in respect of any dominion government annuity contract shall be permitted as a deduction against the refundable portion of the income tax payable.
Mr. HARRIS (Danforth):: This raises again the question which is so contentious of the differentiation between capital and income in the matter of dominion government annuity contracts. I think the minister ought to give the committee a short statement, and in doing so perhaps he could answer one or two questions that arise in the minds of some members. First, contractual payments made in respect of any dominion government annuity contract, whether capital or income, are to be allowed, as I read this resolution, as a deduction against the refundable portion of the income tax payable. The income tax payable will in most instances be from revenue, with the result that the contractual payment of cash which is made out of capital will be used to refund a portion of the income tax payable which is pure income tax. The government is entrenching itself with regard to this whole annuity problem that arises when capital is being taxed when it is returned to the annuitant. This situation, coupled with succession duties, complicates the issue very much. I think the minister should make a short statement.


James Lorimer Ilsley: The question of taxability of annuities- does not arise under this resolution at all.


Joseph Henry Harris: What will this *concession do?


James Lorimer Ilsley: This merely adds contractual annuity payments to the list of payments that may be offset against the refundable part of the tax.


Richard Burpee Hanson: This is the item that the minister resisted so strongly a year ago.


James Lorimer Ilsley: Yes.


Richard Burpee Hanson: He is now *conceding this to purchasers of annuity contracts. I congratulate him upon that. I think it is a fair thing, and we should congratulate him for having done it. It is just as much a saving as the payment of interest on a mortgage.


James Lorimer Ilsley: I do not wish to argue against my own action, but the reason why I am *doing it is the extreme difficulty of explaining
the difference between contractual annuity payments and these other types of payment.
I think in principle I was right last year, but it is so hard to explain that from the point of view of practicality that I think it is better to do it than to be arguing all the time.


Joseph Henry Harris: Consequently, whether this payment originates from capital or income, it will be allowed as a deduction from the income tax payable?


James Lorimer Ilsley: Yes; that does not make any difference. I do not think the hon. gentleman appreciates the meaning of the resolution. The payment is a payment toward the purchase of an annuity. The source of the money the annuitant pays in has nothing to do with the problem.


Joseph Henry Harris: When the annuitant receives the money, that is taxable?


James Lorimer Ilsley: It certainly is.


Joseph Henry Harris: Whether the origin of the money in the first place was capital or income?


James Lorimer Ilsley: That is correct.


Mr. McNIVEN:: I brought this question to the attention of the minister last year.


Richard Burpee Hanson: So did many others.


Donald Alexander McNiven: That may be. In any event the minister indicated then that he was not prepared to give the relief which I then requested. I wish to thank him for having done so now. Whatever motivated him in making the change, it has brought relief to a great many purchasers of dominion government annuities, particularly those who had contracted for annuities many years ago and whose annuities would mature in the early future. They had budgeted for the payment of those annuities and the provisions of last year's budget with regard to compulsory savings bore especially heavily upon those individuals. I know the minister's action now will meet with the general approval of those who have purchased dominion government annuities.
I understand from the press that the minister intends to make some provision in the near future whereby the principal of annuities will not be taxable. May I ask if any such provision is contemplated at this time?


James Lorimer Ilsley: In the bill I shall bring forward a section dealing with annuities payable under wills. It will probably not go as far as some hon. gentlemen expect. But I wish to leave that until I bring the bill in, because
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even yet I am not quite sure what I ought to do about it. It will certainly not change the situation in regard to contractual annuities.
Mr. HANSON (York-Sunburyl: To be consistent the minister should make this retroactive to last year.


James Lorimer Ilsley: Yes, this resolution will be retroactive to last year.


Richard Burpee Hanson: Let us have it clearly understood then that those who paid on their annuity contracts under the legislation of last year and did not get any allowance for compulsory saving will have a credit on account of the payment last year.


James Lorimer Ilsley: That is correct. It must be understood that it relates only to annuities purchased before June 23 of last year. That was the dead-line.


[Stage Direction]
Resolution agreed to.
Progress reported.
At eleven o'clock the house adjourned, without question put, pursuant to standing order.	.
Thursday, April 15, 1943