June 10, 1924 (14th Parliament, 3rd Session)


Henry Lumley Drayton

Conservative (1867-1942)


Thank you, Mr. Speaker. That is one of the things that we have to put up with. It is something at which my hon. friends across the way are adepts As I say, this is the production of a Canadian raw materal which, according to my hon. friend's own doctrine, ought to be encouraged. And my hon. friend's predecessors in office- not their immediate predecessors, but their more distant ones, those of the Liberal faith as understood perhaps at a time when the Liberal doctrine meant something and was at least the outcome of thinking along straight lines, a doctrine that led somewhere-my hon. friend's own party gave effect to it.
This condition of affairs was brought to the attention of the government of the Honourable Alexander Mackenzie then in power. The necessity of protection for our Canadian oil industry was recognized and that government placed an import duty on crude petroleum and its products. This import duty had a stabilizing
Customs Tariff

effect and our producers were able to carry on.
3. This import duty with some changes continued through the different governments down to the year 1904.
4. Consumption of the different manufactured products from petroleum was increasing enormously while the Canadian production was steadily declining. The tax upon the people through the tariff on oil was heavy and was the subject of constant attacks upon the hustings and in parliament.
I do not think my hon. friends will disagree with anything that this Liberal politician says, at least down to that point.
5. Introducing his budget at the session of 1904 the Hon. Mr. Fielding after investigation and consultation with our oil producers suggested the discontinuance of the duty on the large amounts of crude petroleum entering the country and substituting for it the present bounty of one and a half cents.
It will be observed that the condition of affairs in that section of country whose people had adapted their activities to oil production was brought about by a policy inaugurated by the Right Hon. Mr. Fielding himself in 1904. Mr. Fielding's reasons for the change are found in the House of Commons Debates, session of 1904, volume 3, pages 4359-00. I now quote Mr. Greenizen, who quotes from Mr. Fielding as follows-page 4359:
" The oil industry has a fair claim on our consideration." And further on he says: - "What we desire to do is to bring about a reduction in the duties on oil in such a way that the consumers shall have cheaper oil and that no injustice shall be done to the oil industry, but that it shall have as fair a chance as others."
Do my hon. friends take any exception to those statements of Mr. Fielding made in 1904? I do not think they can.
Again at .page 4360 he says his desire was " to deal fairly and generously with the people who have invested their money in the industry of producing crude oil."
6. The necessity of protecting the crude oil producing industry was recognized and the bounty was in substitution for the previous duty.
7. Since the introduction of the bounty in 1904 the oil producing industry has been free from attack. No individual or party in parliament has attacked it, nor is there any evidence that the public generally was demanding its repeal. The substitution of the bounty for a duty was a good business move, and resulted in the building up of a large oil refining industry employing several thousand men. The discontinuance of the bounty announced by Mr. Fielding when introducing his last budget came as a surprise to the oil producers. No investigation was made upon the ground here as to the effect this change would have upon the oil producers.
Let me again remind the House that I am but giving voice to the protests of the head of the local Liberal organization; it is he who says that this action was taken without the slightest investigation and without the slightest thought as to its effect upon the industry.
Investigation will show that our oil producers cannot carry on without a bounty or a protective tariff,
and large amounts of invested capital will be wiped out if the change goes into effect.
Again I pause to interpolate: As I understand it-and my hon. friend will correct me at once if I am wrong-an investigation into this question was asked for and was made by the Geological branch of the Mines department. A report was made, I think by Dr. Hume-if I have the names wrong my hon. friend will inform me. No one has yet seen the report; I have never seen it, but I am further told that it substantiates Mr. Greenizen's claim. That report would be in my hon. friend's hands now.
8. We operate about 3,500 wells with some 216 separate power plants. I have no means of accurately arriving at the capital investment, but it undoubtedly runs into several millions.
9. Delivering his budget speech, May 11th, 1923, in
dealing with this matter of the bounty on crude petroleum, Mr. Fielding said: "The total amount
paid in the form of bounty in 1922 was $93,636. The amount is not large, and if we had to consider only the condition which existed when the bounty was applied it might not be worth our while to make any change. But oil has been found in our western country. There is a widespread conviction that we are on the eve of great oil discoveries in the far west and north." And further on he said: "If there should be, as may very likely occur, great strikes of oil in the western country, the bounties we are called upon to pay would be a very serious charge upon the treasury." It is to be noted that the moving cause for the removal of the bounty was the fear of large production being found in the West, and I think it fair to conclude from Mr. Fielding's statement that he would not have discontinued the bounty if he had not such fear in his mind.
Hon. gentlemen will recall that Right Hon. Mr. Fielding found no fault whatever with a bounty policy. Why, he put on more bounties last year. He gave bounties last year, for example, in connection with some form of copper production in the West, at any rate, in relation to a large smelting company there. No objection was offered to the principle; no argument was made that a bounty was not required in order to keep the industry going. But there was the fear that large oil resources would be found in the West or in the north and that the country's treasury would be subjected to very heavy demands. Well, there Being nothing wrong with the principle, there being no room for debate as to the necessity-provided, of coursfe, that these farmers were to be looked after and the busines kept going-the suggestion came from the hon. member for West Lambton (Mr. LeSueur), if I remember rightly, that the bounty should be limited to five barrels a day per well. The whole idea of that was to apply the bounty only to the small production; it would be of no use to large commercial ooncems. Just

Customs Tariff
imagine five barrels a day with a bonus of 52J cents a barrel, a total amount of $2.60 a day that each well could earn. The whole idea was to make it clear that the class of people we wanted to help were the small producers who could not otherwise carry on -that and that alone. Moreover, if a great gusher was found in the West or in the north, it would be entitled only to $2.60 a day, so that all fear was removed of any injury to the treasury had that proposal been adopted. Well, it was not, and my right hon. friend, although pressed for it, could not and did not give any reason why it should not be adopted. Now I come
back to Mr. Greenizen. He proceeds:
It is now nearly a year since Mr. Fielding delivered this speech. Hundreds of thousands of dollars have been spent in the search for oil in the West but without a favourable result. Investigation of the position of the crude oil produced would have shown a much diminished production as compared with 1904, and that owing to the increased cost of labour and supplies it was costing nearly three times as much to get this production as it cost in 1904, and such investigation would further have shown the impossibility of carrying on at a profit without the bounty. We believe that if Mr. Fielding had seen his way clear to protect the treasury against the possibility of large production, and at the same time protect our industry here, he would have continued the bounty. We suggest that the act passed last session be repealed and the bounty restored, with the proviso that such bounty shall only apply to wells and groups of wells producing an average per well of one barrel or less per day.
That is a most modest request, a far more modest request than the real legitimate claim of the district entitles them to. That cuts it down to a bounty of 52| cents per day. It seems too small altogether, but even that small consideration has been denied. It goes on:
This will enable producers here to carry on. The government cannot be charged with sectionalism in the legislation.
10. Our oil production for the year 1923 was 158,511 barrels. If the removal of the bounty results in closing down our wells this oil will have to be replaced by purchase from United States producers, at a cost of about {400,000 per year.
11. I am unable to state definitely the number of workmen employed in the industry, but I believe several hundred men derive their livelihood directly and indirectly from the business.
12. Our oil fields have been a training school for
oil well drillers. Many of these find employment in the oil fields in different foreign countries. Their drilling contracts are usually for a term of three years, and their families remain here and considerable sums of money are returned to this country from this source. _
13. Property owners in the town of Petrolia and in other producing districts in Ontario will suffer a serious loss if our wells are forced to close, as most of our workmen employed about the wells would be forced to leave, and no doubt most of them would secure employment in different fields in the United States.
Again, Mr. Speaker, I point out that this is not the opinion of a Conservative politician, but of a Liberal politician, who says, and says deliberately, that the direct effect of this legislation is to deny employment and to further assist in the process of expatriating the Canadian. I further point out, so clear from all doubt is the real situation here, that during the whole of his submissions to this government he has done only one thing, and that is to absolutely endorse the position taken by us in this section of the House when this legislation was proposed. The file I have does not show why or on what ground relief has not been extended to these people.
There were other documents also put before my hon. friend. We have a document here which further reinforces Mr. Greenizen's appeal. Before reading that I am going to read from a statement which shows the average price received per barrel of crude petroleum each year, but omitting the bounty, the cost of production, the net profit or loss per barrel. The statement goes back as far as the year 1905, and its effect is to show just where these small producers would be without the bounty:
Price ex - Cost per Loss per Profit perYear Bounty barrel barrel barrel1905.. .. .. 1.29 1.347 .057 1906.. .. .. 1.328 1.448 .12 1907.. .. .. 1.337 1.62 .283 1908.. .. .. 1.421 1.43 .009 1909.. .. .. 1.288 1.54 .252 1910.. .. .. 1.214 1.66 .446 1911.. .. .. 1.225 1.467 .242 1912.. .. .. 1.457 1.55 .093 1913.. .. .. 1.793 1.59 .2031914.. .. .. 1.505 1.612 .107 1915.. . .. 1.42 1.742 .322 1916.. . .. 1.99 1.691 .2991917.. . .. 2.335 2.20 .1351918.. . .. 2.675 2.60 .0751919.. . .. 2.81 2.322 .4881920.. . .. 4.097 3.51 .5871921.. . .. 2.662 2.736 .074 1922.. . .. 2.663 2.541 .122
Average for period 1.815.
Apart from the bounty, 11 years of the 18 produced crude at a loss and 7 years at a small profit.
The aggregate profits for the whole period, exclusive of bounty, amounted to 12 per cent on the capital invested, an average of 2-3 of one per cent per year. No charge has been made for depreciation or depletion of the properties and no large salaries paid.
During this period the bounty in the aggregate was 84 per cent of the whole profits and 29 per cent of the full price received by us from the purchasers.
Now that statement, which was filed with my hon. friend, was made by the Canada Crude Oil producers, Limited, signed by W. McIntosh, Secretary-Treasurer. It shows at least that there are no undue profits being made, and on its face it bears out what I
Customs Tariff

have been saying, that without some continuance of this bounty system-let it be cut down as I suggest-the small producers must of necessity stop. My hon. friend had that information and it was reinforced by-

Full View