April 14, 1943

IND

Liguori Lacombe

Independent Liberal

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?

Topic:   CANADIAN FORCES
Subtopic:   NATIONAL RESOURCES MOBILIZATION ACT-SERVICE IN JAMAICA AND NEWFOUNDLAND
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LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Right Hon. W. L. MACKENZIE KING (Prime Minister):

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

Canadian Forces

Topic:   CANADIAN FORCES
Subtopic:   NATIONAL RESOURCES MOBILIZATION ACT-SERVICE IN JAMAICA AND NEWFOUNDLAND
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LIABILITY OF AUTOMOBILE OWNER CARRYING MEMBERS OF ARMED FORCES AS PASSENGERS


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?


LIB

James Layton Ralston (Minister of National Defence)

Liberal

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.

Topic:   LIABILITY OF AUTOMOBILE OWNER CARRYING MEMBERS OF ARMED FORCES AS PASSENGERS
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NAT

Richard Burpee Hanson

National Government

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.

Topic:   LIABILITY OF AUTOMOBILE OWNER CARRYING MEMBERS OF ARMED FORCES AS PASSENGERS
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LIB

James Layton Ralston (Minister of National Defence)

Liberal

Mr. 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.

Topic:   LIABILITY OF AUTOMOBILE OWNER CARRYING MEMBERS OF ARMED FORCES AS PASSENGERS
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NAT

Richard Burpee Hanson

National Government

Mr. HANSON (York-Sunbury):

Only those two points.

Topic:   LIABILITY OF AUTOMOBILE OWNER CARRYING MEMBERS OF ARMED FORCES AS PASSENGERS
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LIB

James Layton Ralston (Minister of National Defence)

Liberal

Mr. RALSTON:

That first point is a very broad one.

Topic:   LIABILITY OF AUTOMOBILE OWNER CARRYING MEMBERS OF ARMED FORCES AS PASSENGERS
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INTERNATIONAL CURRENCY

TABLING OF DOCUMENTS AND MOTION FOR PRINTING

LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Right Hon. W. L. MACKENZIE KING (Prime Minister):

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).

Topic:   INTERNATIONAL CURRENCY
Subtopic:   TABLING OF DOCUMENTS AND MOTION FOR PRINTING
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CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

Will they be printed?

Topic:   INTERNATIONAL CURRENCY
Subtopic:   TABLING OF DOCUMENTS AND MOTION FOR PRINTING
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LIB

William Lyon Mackenzie King (Prime Minister; Secretary of State for External Affairs; President of the Privy Council)

Liberal

Mr. 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.

Topic:   INTERNATIONAL CURRENCY
Subtopic:   TABLING OF DOCUMENTS AND MOTION FOR PRINTING
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NAT

Richard Burpee Hanson

National Government

Mr. HANSON (York-Sunbury):

And distributed to hon. members.

Topic:   INTERNATIONAL CURRENCY
Subtopic:   TABLING OF DOCUMENTS AND MOTION FOR PRINTING
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Motion agreed to.


WAYS AND MEANS

INCOME WAR TAX ACT


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.


LIB

Clarence Decatur Howe (Minister of Munitions and Supply)

Liberal

Hon. C. D. HOWE (Minister of Munition? and Supply):

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

Income War Tax

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

Income War Tax

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

Income War Tax

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.

Topic:   WAYS AND MEANS
Subtopic:   INCOME WAR TAX ACT
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April 14, 1943