November 11, 1957 (23rd Parliament, 1st Session)


Alexander Barrett Macdonald

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

Mr. Macdonald (Vancouver-Kingsway):

this debate reference has been made to something of great concern to British Columbia, namely the fabulous profits that have been reaped by the natural gas pipe line promoters. The hon. member for Rosetown-Biggar placed on Hansard the other day an indictment of these interests that should not fall on deaf ears anywhere in this house. But what has the Conservative party done after all the election promises, after the campaign oratory in which they promised to protect the people of Canada from those whom they described as "piratical profiteers and buccaneers"? Their answer has been to set up a royal commission, the last resort of a government which wants delay, delay, delay. Here is what the Financial Post says-and it is a paper which should be close to Conservative thinking- about that royal commission. In its issue of October 19, 1957 there is a story headed "Tory move picks gas out of current politics" and it is therein stated:
Politically the move is being looked at with great interest. The Conservatives made a lot of noise in the recent session against Trans-Canada Pipe Lines in particular, but most of them now think that the pipe line deal was pretty good.
By setting up the royal commission, which may take months in its investigation, the Tories effectively take the pipe line out of current politics, and they have an answer to the C.C.F. which is expected to move for nationalization of the whole line.
There it is, the time-honoured or rather time-dishonoured method of getting a government off the hook. But even worse in this case, it is a method of getting the pipe line profiteers off the hook. For that commission, with its wide terms of reference, will take at least 18 months, I would say, to complete its hearings and make its report. Then how long after that will it be before the government contemplates action? Well after the next election, I dare say, as hon. members opposite are no doubt thinking. But by that time it will be too late and the millions of dollars in illicit profits that have been made by these pipe line profiteers will have been built into the gas rates charged to the Canadian consumer.
All across Canada the story of profiteering in this public service has been the same. It has been a story of profiteering on a scale that would make the robber barons of 100 years ago wet their lips with envy. A recent issue of Time magazine stated that the tax-free capital gains netted by the promoters of Trans-Canada up to July 1 of this year were estimated at $300 million.

That amount, going into a few pockets taxfree, is almost three times what this house voted a week ago as an addition to the old age security legislation and in almost every province of Canada the story has been the same-Quebec natural gas, Alberta Trunk, northern Ontario-all stories of private killings at public expense. All, I should say with the exception of the province of Saskatchewan which at the local level at least made sure that this public service has been put under public ownership for the benefit and under the control of the people it serves.
My province of British Columbia is particularly concerned with this problem. The company which services us with natural gas is the Westcoast Transmission Company; that is a company which is substantially controlled by a giant United States firm called Sun-Ray Midwestern Oil; also holding a substantial interest of course is Mr. Frank McMahon, the man the Conservatives favoured to receive the rights on the trans-Canada pipe line just a year ago. Westcoast gathers natural gas across the Alberta border and in the British Columbia-Peace river area and brings it down to the coast by pipe line, some 650 miles, to Vancouver and to a United States outlet at Huntington and by a branch line into the interior of British Columbia.
I would simply like to present to the house a few of the hard facts of this operation. .First Mr. Frank McMahon was given an option to purchase 155,000- shares of the company at five cents a share. Before the line was open his profit on that transaction amounted taxfree to $5,600,000.
Second, the same Frank McMahon was given an option to purchase 200,000 shares of the company's stock at $6, exercisable at any time up to 1960. Before the line had opened he had made another profit of $6 million on that.
Third, a United States investment firm and some other United States firms were given the same options as above and netted a taxfree capital gain of $23 million.
Fourth, a firm owned by the big United States company, El Paso Company was given an option to purchase Westcoast shares at $5 per share. The option covered 1,128,000 shares and that netted them a capital gain of $35 million.
Fifth, the total of these capital gains made by the promoters of Westcoast Transmission adds up to the grand sum of $69 million. Now British Columbia is, in resources, a wealthy province, but that figure which will be paid for by the consumers of natural gas
The Address-Mr. A. B. Macdonald in that province, namely $69 million, is almost as much as the province collects for a whole year from its sales tax of 5 per cent.
Sixth, the board of transport commissioners has jurisdiction over Westcoast Transmission which crosses the Alberta border. It is interprovincial and while the Pipe Lines Act passed by this parliament makes as yet no provision for the control and regulation of natural gas rates no doubt that power will be given to the board of transport commissioners. However, how do they go about fixing a fair return to Westcoast Transmission? It will have to be a fair return on capital which includes that $69 million of watered stock. I do not know how you could have a fair return on watered stock, but that will be the way it will end up.
Seventh, with respect to Westcoast Transmission Company this is the last hard fact I have to offer. This United States controlled firm has entered into a contract with United States distributors to sell natural gas across the line at 22 cents per thousand cubic feet while at the same time it is selling the same natural gas to its British Columbia distributor at 32 cents per thousand cubic feet.

Topic:   II. 1957
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