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

CON

Henry Lumley Drayton

Conservative (1867-1942)

Sir HENRY DRAYTON:

I know what
my hon. friend's views are, but I think that very often we get along better by helping each other a little rather than by continually helping the foreigner. We are more likely by such a policy to make Canada the great, prosperous and self-contained country which it ought to be. After all, the
4. p.m. amount in question here is very small. It is so small that the Right Hon. Mr. Fielding himself stated that we need not bother about it; last year the whole amount of the bounty was only $84,000. So the cessation of the bounty was never proposed on the ground of the cost of the present commitments to the country; the present finance minister was never rash enough to make such an argument as that. The whole tenor of his argument rather was that there would be such a tremendous commercial development from the oil industry that it would rain the treasury to pay the bounty. At that time the minister had the statement in question from Mr. Greenizen; he also had a statement from the Canada Oil Producers Limited in connection with this question. I now read from that statement:
The production of crude petroleum in Canada dates from the year 1858, when oil was first struck in what is now the village of Oil Springs. The discovery of oil in Oil Springs was followed a short time later by the striking of oil in Petrolia. In the early days of these fields the wells produced very prolifically and for a considerable period there was an excess of production over consumption. As time went on production diminished and consumption increased. Extensive oil fields were developed in the United States and crude oil, owing to the extremely large production there, reached a price where our Canadian producers could not compete with these large producing wells in the United States.
I have already given the history of this industry from a statement by Mr. Greenizen who was a lawyer. I am now giving it from the point of view of the efforts for the preservation of the industry.
Tor the preservation of the business here a duty was placed on the importation of crude petroleum into this country. This duty saved the situation. Producers here were able to carry on and the field continued to expand and grow in extent for a great many years. A number of refineries were established nearly altogether in the town of Petrolia for the refining of our locally produced crude oil. This import duty on crude oil continued until the year 1904 when it was removed by the present Minister of Finance and a bounty of one and one-half cents per gallon was allowed Canadian producers. At the time of this abandonment of the duty and the introduction of the bounty the minister was in conference with our representatives from Petrolia who were able to convince him at that time that producers here could not carry on without this bounty. As

Customs Tariff
matters turned out the wiping out of the duty and the substitution of the bounty resulted very beneficially for the country. At the time of the change the Imperial Oil Company were operating one refinery at Sarnia of small capacity as compared to what it has at present. There may have been one or two other small refining plants in the country at that time but as to this I am not able to speak with certainty. At the present time the Imperial Oil Company has seven large refineries scattered throughout the country and there are possibly half a dozen other refining plants, so that at present the refineries in the country are taking care of practically all our domestic consumption. Large quantities of the raw material are imported from the United States free of duty and manufactured in our Canadian plants by Canadian workmen.
The present move on the part of the Minister of Finance in announcing the discontinuance of the crude oil bounty came as a shock and surprise to Canadian producers. We had heard of no clamour on the part of the public for the removal of this bounty, in fact, ever since the establishment of the bounty the oil business has been practically free from public criticism while in the old days of the duty the producers were being continually called upon to meet a tax upon their business.
The total number of wells in opersftion in western Canada is 3,574. These figures are furnished by the official inspector of oil and gas wells. There are in operation 216 power plants for the operation of these wells and outside the value of the lands these wells and power plants represent an invested capital of upwards of $2,000,000. The following is a statement of a comparative production of the western Ontario oil fields for the different years from 1915 to 1922 both inclusive:
These details are of importance for the purpose of showing the total absence of any iarge drain on the treasury. This is a very small thing as regards the Dominion; it is a very vital thing to the people of Lambton and Kent:
Total production
Year in barrels
1915 214,440
1916 196,900
1917 203,000
1918 288,760
1919 220,110
1920 181,749
1921 172,858
1922 164,731
I again interpolate. 1 want hon. gentlemen to note that small production in comparison with the number of wells. The great number of wells gives some indication of the number of farmers that are interested. This is no large crushing corporation; this is something entirely removed from excess business profits taxes and all that sort of thing. This is very largely a side adjunct, a side activity of the Canadian farmer. We have 3,574 wells, producing chiefly at a loss if it were not for this bounty, and altogether producing in the yeaz 1922 only 164,731 barrels. The statement continues :
The above figures are furnished by the official supervisor of bounties on crude petroleum. There is a further small production in New Brunswick and a
trifling amount of oil is produced in Alberta. The total production for the whole of the Dominion of Canada at the present time is now about 180,000 barrels. The oil producers affected by this removal claim that it will result in the complete closing down of their wells and the cessation of production of oil in Ontario and in substantiation of their claim that this will be the result they submit signed statements from some twenty representative producers showing the cost of producing a barrel of oil from their properties. It is fair to assume that men are not going to continue to operate their wells at a loss and in some instances a serious loss so the result will be undoubtedly as stated above the wiping out of the business of oil production in Canada and the wiping out of millions of dollars invested in the business, leaving to the men with this amount of money invested nothing but a trifle they may be able to realize from the junk-dealer.
I would ask my hon. friend when he speaks, to advise the committee whether the industry is to continue or not; what his honest view is; if his honest view is that these gentlemen who are in the business are all wrong, where they are wrong; how he expects their business to be carried on; whether he is indifferent to their business closing or not, as it will; whether he sees any reason why the small well should not be allowed to continue when it can continue without the slightest risk to the country; why the farmer should not be able to have the right to take one or two or three barrels a day from his well, resulting in a total which will be very much less than the total now paid, cutting it down in that way, and as regards which total the present Minister of Finance (Mr. Fielding) himself said that we need not bother about the amount and to let things stand as they were. The historical statement continues:
The Minister of Finance in announcing the removal of the bounty stated: The amount paid annually is about $92,000-
It is less than that now. If the information I have is correct, it is more like $85,660, but there is not very much difference anyway, only about $6,000.
-representing a per capita tax of one cent per year or thereabouts as the burden the people of this country are bearing for the maintenance of this industry. If the bounty is removed what will happen is this; With the removal of one-half the bounty in July of 1924 which is the proposal of the Minister of Finance a certain number of wells will close, possibly as much as 50 per cent, With the removal of the balance of the bounty in the following year 75 per cent or more of the balance will close down. The small balance remaining will attempt to carry on, possibly a few producers whose all is invested in the business and who do their own work may be able to make fair wages for a period. A couple of properties at Bothwell and perhaps one at Oil Springs can carry on until they reach the point where they will have to replace worn out equipment with new, and they also will be forced to close.
Bothwell, I may interpolate, is a point in Kent, and both Kent and Lambton are vitally affected.
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It is only a matter of three or four years until every property will be closed down. Another feature of the business, which might compel even properties which can operate at a profit for a time with the bounty removed, to close almost immediately on the removal of the bounty is this: the only market our Ontario producers have for their oil is the Imperial Oil Company at Sarnia. This company has receiving stations quartered throughout the territory where the oil is received. It is then collected in tanks in Petrolia and shipped by pipe line to Sarnia. With such a limited production as will immediately follow the wiping out of the bounty the Imperial Oil Company cannot maintain the staff of employees and equipment necessary for handling this oil and this will mean that any producers with oil for sale would have to make delivery themselves at Sarnia. The cost of handling oil in this way would so cut the producers profit that even the few large producers remaining would be forced out of business.
This is something that will .be apparent to every hon. member. The economies that are effected in oil production consist in the pipe lines, the getting rid of transportation, and so on. The business can only be carried on if there is a certain volume, and unless this is assured the wells will not be operated. The statement proceeds:
The 180,000 barrels per year produced by these Canadian wells is refined in our Canadian refining plants and to that extent, small though it may be as compared to total consumption, goes to satisfy the demand in this country. If this 180,000 barrels per year is cut off the source from which the shortage will be made up is the United States and it means that we will have to send out of the country somewhere about one half a million dollars a year for oil to replace what is now produced here. On the one hand, the country is contributing to the maintenance of this oil business one cent per year per head of our population and is saving to the country an industry which is adding to the wealth of the country as a natural resource half a million dollars per year. Wipe out the bounty and we pay the Americans this half million dollars in addition to the millions we are already paying them for oil. There is a little more to this question than simply closing down of the oil wells and the scrapping of the equipment of these oil operators and the wiping out of the two million dollars or more that these men have invested in the business. Take the town of Petrolia. This town has always been the centre of the oil producing busines. This is now a town of some three thousand inhabitants and dates back some sixty years. During all this time the town has continued to progress and to-day it is one of the most liveable small towns in the country. It has good business blocks, numerous comfortable homes, paved streets, a good sewerage system, water system taking water from lake Huron some eleven miles away and in every way a town and community that should be preserved rather than killed.
I wonder what my hon. friend will say to that. Petrolia is a town that should be "preserved rather than killedand if this industry is killed, what will take its place? Or does my hon. friend expect that the expatriation will continue in the case of this town as it has done in so many others?
The oil busines puts in circulation in Petrolia somewhere about $200,000 per year and every person in this
community no matter whether he is an oil producer himself or engaged in any line of business is largely dependent upon this business and if the business is wiped out it will undoubtedly have a serious effect upon a great many people who are not directly connected with the business. We cannot carry on as a place with our present population if the oil business is wiped out. People gradually drift away, those connected with the oil business will likely go to the United States and others will likely follow adding our few hundreds to the tide of emigration to that country which is even now serious.
According to the figures given above, the closing down of our oil business here will result in an immediate loss to the country of upwards of $400,000 a year or the difference between the bounty paid and the amount we will have to send out of the country to replace the oil now produced here.
Another considerable loss will result. The oil regions of Western Ontario for years have been a training school for oil well drillers and these oil well drillers find employment in other oil fields in the British Empire and in a great many foreign fields. We have hundreds of Canadian drillers in the fields in Asia, Africa and South America. These men usually enter into a three-year contract and they invariably arrange to have their earnings over and above their trifling expenses in the field transmitted to our Canadian banks. Two banks in Petrolia report average deposits of upwards of $100,000 a year by these drillers and considerable sums are deposited in the home towns of other drillers. It is estimated that at least one-half million dollars a year comes into the country from our Canadian drillers in foreign fields. These men return to this country when finished with their foreign drilling and the money they have returned is spent here. Of the proceeds received from the sale of oil produced in this country practically every dollar is expended for wages, oil well equipment and otherwise in the country.
My hon. friend has said in his budget that he is in favour of primary production, and when assistance is taken away from an industry and that industry is left without the protection which enabled it to exist, it must certainly be looked after by some method such as the remission of the sales tax or the remission of certain customs duties.
I do not know whether my hon. friend has ever had time to read these representations. I am inclined to think that he has never done so; I do not think that Mr. Greenizen sufficiently impressed him with the great importance of this matter to western Ontario, because if he had, the minister would have extended to the people who are engaged in the oil producing business at least as good treatment as he gave the manufacturers of agricultural implements and other things. These people are directly engaged in a primitive industry, and the minister should certainly give them at least as good a chance as he would those who are employed in any other primitive production. But they are overlooked; I do not think he has considered their position at all, because there is no duty whatever in this case. As I have just received the information I have not been able to

Customs Tariff
check the accuracy of what I will now give my non. friend, but he will have the facts, for he knows what he did. My recollection however is that this is correct, that the exemptions from duty, the reductions of duty, and the rebate:', in his general bill are all in connection with raw materials to be used in the production of articles classified under certain customs items. In other words, it does not
make, let us say, brass or steel free, or give a rebate on brass or steel, unless these materials are used in the manufacture of agricultural implements or something of that kind; it is not general. This is what these people say and the list is in my hon. friend's hands. It is a list of articles used in operating and drilling for crude petroleum. These are the articles and the rates of duties:
Commodity
1. Brass tubing
Item Rate of Duty
348c 10 per cent when in lengths of over six feet
(plus 5 per cent sales tax).
2. Well-drilling machinery and apparatus and
parts thereof, of a class not made in Canada, drawn or seamless iron or steel tubing over 4 inches in diameter, for drilling for water, natural gas and oil, and for prospecting for minerals, not to include motive power
3. Wire rope lines to be used as cables
4. Lapwelded tubing of iron or steel, not less than
4 inches in diameter, threaded and coupled or not
469 Free of duty (this would not apply to 4f casing as it is only 4 inches in diameter).
408 25 per cent plus 5 per cent sales tax.
30 per cent but subject to a drawback of 50 per cent of duty in casing oil and natural gas wells also exempt from sales tax (not over 4 inches in diameter).

Topic:   CUSTOMS TARIFF, 1907, AMENDMENT
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