March 17, 1949

LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Mr. Abbott:

It might have.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

Arthur Leroy Smith

Progressive Conservative

Mr. Smith (Calgary West):

You cannot have it both ways, can you? Then he went on to say that from a realistic view our dollar, on account of the business we carried on, was in fact probably worth more than par. I think I am correct in saying that. If from a realistic standpoint our dollar is worth more than par, and if that fact in turn will decrease the cost of living, why in the world do we not let it go to its proper level, its real value more than par, and therefore cheapen the cost of living for the people who live in this country?

In my amateurish way I intend to relate this problem of dollars to an economic effort about which I know at least a little bit. I

29087-101i

Foreign Exchange Control refer to the oil business in Alberta. I undertake, Mr. Speaker, to show that relationship quite clearly; and having met your displeasure last evening I warned myself that I must not stray from the subject we have before us. Those fields-because instead of one there are now at least nine of them-are today producing approximately fifty-three thousand barrels of oil per day. At $3 a barrel, which is a minimum price that I am using, that means $150,000 per day to this country in terms of American dollars, because these fields are supplying a necessity which formerly was supplied by the United States, the South American and other countries. In that way we are saving for ourselves at least that much per day through the fields we now have as they are developed at the present time.

I speak of these oil fields for two reasons. The first is the effect of their development- and I hope it will be rapid-in connection with our economic situation. But I refer to them for another reason, and events may prove that this is the greater one. We all know that during the last war, aside from the directly killing instruments, oil was something upon which the war was fought. In fact the situation in this continent became so critical that the United States government built a pipe line right across the Rocky mountains from Norman Wells as it is now called-it used to be called Fort Norman- on the Mackenzie river, right across to Whitehorse. Tremendous sums of money were expended and the refineries were built. It is not there any more. As a matter of fact, it has been moved down to Edmonton. This move was, in my opinion, one of the finest pieces of engineering that we have known in this country for a long time. The increase in this output was dealt with by, I believe, the first vice-president of the Chase National Bank in New York, when he was speaking either here or in Toronto. He gave us some idea of what that development might be, and he used this figure. To develop that area to the point where it will be producing not forty thousand barrels per day, as it was when he spoke, but four hundred thousand barrels per day, as it seems it is easily capable of doing, the cost would be one billion dollars.

One billion dollars is a tremendous amount of money. One billion is a tremendous amount of anything. Certainly I cannot visualize it. I think the most of anything that I have ever seen was at practically the last roundup which was held in western Canada, in which I had a part; and by a part, I mean astride a horse. I had a part in that way. I saw about eleven thousand cattle at one time, which is the most of anything I have ever

Foreign Exchange Control seen at one time. I cannot therefore visualize this billion dollars. But I do know that we cannot get that money in the Dominion of Canada.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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LIB

Clarence Decatur Howe (Minister of Trade and Commerce)

Liberal

Mr. Howe:

Why?

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

Arthur Leroy Smith

Progressive Conservative

Mr. Smith (Calgary West):

Because it is not here. The other day we read about the Imperial Oil selling its interests in the International Company for $80 billion.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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?

An hon. Member:

No, $80 million.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

Arthur Leroy Smith

Progressive Conservative

Mr. Smith (Calgary West):

I can confuse these amounts in the way the Minister of Agriculture did the other night when he was tossing them about.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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LIB

James Garfield Gardiner (Minister of Agriculture)

Liberal

Mr. Gardiner:

I usually have them right.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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PC

Arthur Leroy Smith

Progressive Conservative

Mr. Smith (Calgary West):

It is $80 million, of which $30 million is being spent at the present time to build the 485-mile pipe line from the fields to Regina.

In answer to the point made a moment ago by the Minister of Trade and Commerce, I want to give the net figures as to the inflow and outflow of capital in Canada. Let me tell him that in 1947, in the capital formation of eleven oil companies, they got 48 per cent from external operations; 37 per cent was borrowed; 13 per cent was preferred stock; and 2 per cent was by sale of common stock.

What have we been doing with respect to capital in Canada from 1945 on? These figures are in millions. At least I shall get them right this time. In 1945, the United Kingdom, minus 33-5; the United States, plus 222-1; and other countries, plus 2-4. The plus means the influx of capital into this country. In 1946, the United Kingdom, minus 35-4; the United States, plus 170-2; other countries, minus -2. In 1947, the United Kingdom, minus 9-1; the United States, minus 10-5; and other countries, plus 1-6. In eleven months of 1948, the United Kingdom, minus 1-3; the United States, minus 16-6; and other countries, plus -7. The over-all picture is this: for 1945, plus 191; 1946, plus 134-6;

1947, minus 18; and for the eleven months of

1948, minus 17-2. I am unable to make the fine distinction between the brick and mortar money, and the investment money in top securities, which was made by the minister; but, sir, I have given you the over-all picture.

If you will look at page 22, table 9, of the foreign exchange control board report you will find tfae situation set out in the first column, which shows only the inflow of funds. I have taken the outflow and have given you the net position after that has been done. The point I am making is that never at any time has it been more important that we

should have an inflow of capital, certainly in connection with the one industry which I have just named, than now. I confess that somebody may very well say that in the province in which I live we are having an inflow of capital in connection with this same industry. That is quite true; but having regard to the general picture, it is only in driblets so to speak, as compared with the total amount which will be necessary to make that complete development there.

The house might be interested in just a few facts which have emerged in the last two or three weeks since the hon. member for Calgary East (Mr. Harkness) spoke with respect to it. There is a field out there which was discovered a couple of weeks ago. By that I mean that the bit penetrated the oilbearing formation. In drilling an oil well, if you have a decent porosity, which means these interstices in the rock or in the sand, which will hold the oil, in conjunction with the gas, you are all right. We used to think that if we could find a yard, three feet, or better still two yards or so of that stratum, then we really had found something. And you have that situation, not exactly that, but quite a great deal more than that, in the oilbearing zones in the Turner valley; but in the last Calgary paper which I saw, which was three or four days old, in this new field at Schoepp, which is the field that is now called the golden spike field, they found oil in one oil-bearing stratum which is 232 feet thick. It was that thickness when they discovered it, and there was no water underneath. I mention that to show the immensity of the possibilities which are there. I also mention the Redwater field, which was discovered within the past year, and which is today producing more oil than the Turner valley field at the present time. I mention these things to show what is there and what the development may mean both economically and, as I said a moment ago, in connection with the hemispheric or continental defence.

We must have an influx of capital, and that must flow in as easily as it possibly can. I am not in a position to follow, nor do I intend to try to follow, the ramifications of just what deflation of so many cents would mean. I have not sufficient understanding- perhaps I am not clever enough to follow the gyrations of the experts who deal with matters of that kind. But I remember what happened to the pound and to the dollar after the first war. Let me admit at once that I know the destruction in Europe today is infinitely greater than it was at that time, and that there was no destruction on this continent after either war. But nevertheless

there was very considerable destruction in Europe at that time. I do not remember the exact figures, but in New York the British pound went down to $3.70 or $3.50. I am told I am wrong; it is $2.75. The point I am making is that it was a substantial depreciation. For a time I think our dollar went down as low as seventy-five cents. At that time there were no restrictions. Governments were not placing fictitious values on their money. Within six months after selling at these lows, both the pound and the Canadian dollar sold at a premium in New York.

I am not arguing that the two cases are entirely parallel. Conditions change and they are different after the last war from what they were after the first one.

Then, again, in my amateurish way let me say that the sooner we can let our dollar find its level, the better. According to the Minister of Finance (Mr. Abbott), there would be an increase rather than a decrease in its value. Why do we not let it go there and, in the trade and markets of the world, find its own value? I do not know whether that means a devaluation or an evaluation-and frankly, as a simple person trying to get along, I don't care very much. But I do know this, that no country yet has successfully, either by law or by edict, or anything of that kind, fixed a currency at a given value without ultimately ending up in chaos. The story of all the European countries after the last war proves that completely. Not in one case did any of them emerge from the difficulties they were in by this effort to blow up their balloon with respect to the value of their own currency.

Some experts may find fault with what I have said, but I give it to you as the judgment of one whose sight is not clouded by the intricacies of these experts, a simple person who knows that a dollar is worth only what it will buy, whether it be in oranges, about which the hon. member for Spadina (Mr. Croll) cried, or an ounce of gold from someone's gold mine.

It is now twenty-five minutes past ten, Mr. Speaker, and I close with this appeal on behalf of the oil industry-a selfish appeal, if you like. But in the oil industry you cannot be selfish about as big a thing as that. If allowed to grow, that industry will some day supply the dominion. And that is not all. We all know that in the search for oil it has been shown that Alberta is practically underlaid with gas. That is not only the history in other fields; it has been completely proven in Alberta. Gas is there in tremendous quanti-

Foreign Exchange Control ties. Only recently a commission has been endeavouring to find the extent of the reserves. The amount runs up into so many trillions of feet that I just cannot follow it. However, I do know that it is something immense, something that has never been heard of in Canada before, and shows signs of outstripping those tremendous fields in the state of Texas.

And so the oil developed with the gas. The value is not only in the fuel made available. Chemists tell us that many things can be made from it, including plastics-although they may not meet the competition of plastics made in other ways and in conformity with the great advances made in chemistry.

But let me tell the house one little thing. Up on the Willingdon line, which is east and then north of Edmonton, a couple of small local oil companies joined together to do one thing. They met Mr. Richie Donald, whom the Minister of Trade and Commerce (Mr. Howe) knows very well, and who I know is one of the great chemists in Canada. He wanted two things. First he wanted to find salt. He wanted a hole which, if bored, would show a salt and produce natural gas. He had another condition, that it must be beside a railway track. That was done.

He was asked how much salt he wanted, and he said it should be at least six feet thick. A friend of mine, who was in charge, of putting down that hole, got his gas-of course he knew it was there. But he did not find six feet of salt; he found a thousand feet of pure salt. And salt, with natural gas, I am told by the chemists, forms the basis of many different products. That is an outgrowth of the business of finding oil.

I should have said that the usual price for heat anywhere in Canada to produce a ton of refined salt is somewhere between $6 and $8. In their refining process the price of producing that salt is exactly 75 cents per ton. That, of course, will overcome a great deal of difficulty in connection with freight rates.

On motion of Mr. Smith (Calgary West) the debate was adjourned.

Topic:   FOREIGN EXCHANGE CONTROL ACT
Subtopic:   CONTINUANCE IN FORCE UNTIL SIXTY DAYS AFTER OPENING OF FIRST SESSION OF PARLIAMENT IN 1951
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BUSINESS OF THE HOUSE

LIB

Alphonse Fournier (Minister of Public Works; Leader of the Government in the House of Commons; Liberal Party House Leader)

Liberal

Mr. Fournier (Hull):

Tomorrow we will continue with this resolution, and take up resolution No. 7, national emergency powers; and then resolution No. 5, agricultural products; and resolution No. 8.

At ten-thirty the house adjourned, without question put, pursuant to the order of the house passed on March 14, 1949.

Friday, March 18, 1949

Topic:   BUSINESS OF THE HOUSE
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March 17, 1949