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A benefit-cost analysis of the coal development of Kaiser Resources Ltd. Mohr, Patricia M. 1969

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A BENEFIT-COST ANALYSIS OF THE COAL DEVELOPMENT OF KAISER RESOURCES LTD., by PATRICIA M. MOHR  ;  B.A., U n i v e r s i t y o f B r i t i s h Columbia,  1968  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS  i n the Department of Economics  We accept t h i s t h e s i s as conforming t o t h e r e q u i r e d standard  THE UNIVERSITY OF BRITISH COLUMBIA October,  1969  In p r e s e n t i n g t h i s  thesis  an advanced degree at the L i b r a r y I  the U n i v e r s i t y  s h a l l make i t  f u r t h e r agree tha  in p a r t i a l  freely  f u l f i l m e n t o f the requirements f o of B r i t i s h  avaiIable'for  Columbia, I agree  that  reference and. study.  p e r m i s s i o n f o r e x t e n s i v e copying o f t h i s  thesis  f o r s c h o l a r l y purposes may be granted by the Head o f my Department o r by h i s of  this  representatives.  It  i s understood that  thesis for financial  gain s h a l l  written permission.  Department o f  Economics  The U n i v e r s i t y o f B r i t i s h Columbia Vancouver 8, Canada  D  a  t  e  i  If  A  9  copying o r p u b l i c a t i o n .  not be allowed without my  ABSTRACT T h i s paper i s a b e n e f i t - c o s t a n a l y s i s of the c o a l development undertaken by K a i s e r Resources L t d . i n the Crowsnest area of B r i t i s h Columbia.  The  benefit-cost analysis i s  undertaken from the " p o i n t of view" of r e s i d e n t s l i v i n g i n the East Kootenay p r i o r t o the development.  The a n a l y s i s  seeks t o examine the p r o d u c t i o n e f f i c i e n c y of the  alloca-  t i o n of r e s o u r c e s r e s u l t i n g from the p r o j e c t from the p o i n t of view of East Kootenay r e s i d e n t s . The  p r o j e c t w i l l provide primary  gross b e n e f i t s i n the  form of p a y r o l l income t o l o c a l l a b o u r .  The  s o c i a l oppor-  t u n i t y cost of the use of t h i s l o c a l l a b o u r must be  sub-  t r a c t e d from;?payroll income t o o b t a i n the net primary fit.  The  bene-  s o c i a l o p p o r t u n i t y cost of l a b o u r i s the value of  the marginal product  of the l a b o u r i n a l t e r n a t i v e employment.  A secondary b e n e f i t w i l l accrue to l o c a l f a c t o r s i n the form of an i n c r e a s e i n l o c a l income through an expansion i c e and r e t a i l  industries.  The  expansion  of s e r v -  w i l l r e s u l t from  the r e g i o n a l m u l t i p l i e r e f f e c t of the i n c r e a s e i n p a y r o l l i n come i n the East Kootenay. was  The  g e n e r a l l e v e l of unemployment  h i g h i n the E a s t Kootenay p r i o r to the development, and  I assume t h a t s u f f i c i e n t l o c a l l a b o u r and f a c i l i t i e s  exist  t o supply the i n c r e a s e i n demand f o r s e r v i c e s without r e q u i r i n g i m p o r t a t i o n of l a b o u r or c a p i t a l .  Income generated  the r e g i o n a l m u l t i p l i e r w i l l t h e r e f o r e accrue t o l o c a l  by fac-  t o r s , l o c a t e d i n the E a s t Kootenay p r i o r t o the development. I n t a n g i b l e b e n e f i t s i n the form of t r a i n i n g i n c o a l mining  ii and  an  increase  i n the c u l t u r a l a c t i v i t i e s of the  community-  w i l l a l s o occur. The  c o s t s a t t r i b u t a b l e t o the p r o j e c t  t i v e e x t e r n a l i t y e f f e c t on w i l d l i f e and  i n c l u d e the nega-  the d e t e r i o r a t i o n  of the q u a l i t y of the environment i n the East Kootenay. d e c l i n e of w i l d l i f e w i l l decrease the v a l u e added by labour  i n supplying  hunters.  The  s e r v i c e s to n o n - r e s i d e n t and  consumers* s u r p l u s  obtained  hunting w i l l d e c l i n e , since greater i n c u r r e d elsewhere f o r the ing.  The  tourist  Kootenay.  The  residents  by r e s i d e n t s  expenditures w i l l  i n d u s t r y w i l l a l s o d e c l i n e i n the  decrease i n l o c a l v a l u e added due  from be  tourism  can be  East  to a decline  estimated.  How-  cost t o r e s i d e n t s of the East Kootenay from d e t e r i -  o r a t i o n of the q u a l i t y of the environment cannot be and  local  same or a lower q u a l i t y of hunt-  i n the q u a l i t y of h u n t i n g and ever, the  A  estimated  the e f f e c t i s denoted as an unmeasurable i n t a n g i b l e cost*. The  cumulative present v a l u e of net measurable b e n e f i t s  a t 9% i s $ l * r , 7 1 7 . 9 8 3 .  A d e c i s i o n concerning the  desirability  of the p r o j e c t cannot be made on the b a s i s of t h i s c a l c u l a t i o n alone.  The  unmeasurable i n t a n g i b l e c o s t s and  must a l s o be t a k e n i n t o account. r e l a t i v e valuations placed  The  community, u s i n g  on i n c r e a s e d  c o s t s and  b e n e f i t s are.  measurable b e n e f i t s and  the  r e g i o n a l income versus  the q u a l i t y of the environment as expressed i n a consensus, must decide how  benefits  political  l a r g e the unmeasurable i n t a n g i b l e  The  p r o j e c t i s d e s i r a b l e when only  c o s t s are  considered.  However, i f the  cumulative present v a l u e of net unmeasurable i n t a n g i b l e s i s  iii n e g a t i v e and exceeds i n magnitude the cumulative  present  v a l u e of net measurable b e n e f i t s , the K a i s e r p r o j e c t be  terminated.  should  iv TABLE OF CONTENTS Page ABSTRACT.....*-.*  i  TABLE OF CONTENTS  iv  LIST OF TABLES  vi  ACKNOWLEDGEMENT  .7  vii  CHAPTER I INTRODUCTION  1  I I BENEFIT-COST ANALYSIS AS AN EVALUATION PROCEDURE  8  I I I BENEFIT-COST ANALYSIS OF THE COAL DEVELOPMENT OF KAISER RESOURCES LTD. FROM THE "POINT OF VIEW"OF RESIDENTS LIVING IN THE EAST KOOTENAY PRIOR TO THE COAL DEVELOPMENT (a) Primary Income B e n e f i t s and Costs  Ik Ik  ( i ) Primary Income B e n e f i t s and Costs from the O p e r a t i n g Phase..  Ik  ( i i ) Primary Income B e n e f i t s and Costs from C o n s t r u c t i o n Phase  19  ( i i i ) Prismary Income B e n e f i t s and Costs from p r o d u c t i o n of Mine O p e r a t i n g S u p p l i e s (t>) Secondary  Income B e n e f i t s and Costs  ( i ) The M u l t i p l i e r E f f e c t ( i i ) A p p r e c i a t i o n of Land Values (c) I n t a n g i b l e B e n e f i t s and Costs and Externalities ( i ) Negative E x t e r n a l i t y E f f e c t on Tourism, W i l d l i f e and the Sport F i s h e r y  20 21 21 2k 2k 25  V  TABLE OF CONTENTS (Continued) Page ( i i ) Summary of B e n e f i t s and Costs i n c l u d i n g Intangibles  39  (d) B e n e f i t - C o s t A n a l y s i s  k6  IV SUMMARY AND CONCLUSIONS FOOTNOTES  .  50  .  62  BIBLIOGRAPHY APPENDIX  31  •,  I (A) A D e s c r i p t i o n of t h e S t r i p Mining t o be c a r r i e d out by K a i s e r Resources L t d . . . . . . . . . .>. (B) F a c t o r s Leading t o the R e v i t a l i z a t i o n of the Coal Mining Industry i n the East Kootenay  6?  ?0  (C) The Technology of U n i t T r a i n s and t h e 73  Roberts Bank P o r t II  (A) The H i s t o r y of Coal Mining i n the East Kootenay and Reasons f o r i t s D e c l i n e .  ?6  (B) D e s c r i p t i o n of the East Kootenay Economy p r i o r t o the p r o j e c t - Unemployment and per c a p i t a Income.  80  FOOTNOTES TO APPENDICES  ................  9^  vi LIST OP TABLES Page I The S o c i a l Opportunity Cost of L o c a l Labour employed i n Operating Phase of K a i s e r Project.... II  17  Income a c c r u i n g t o Residents of the East Kootenay from Annual E x p e n d i t u r e s by L o c a l Hunters on E a s t Kootenay Hunting  28  Income a c c r u i n g t o R e s i d e n t s of the East Kootenay from Annual E x p e n d i t u r e s by Non-resident Hunters on East Kootenay Hunting...  29  P r o j e c t e d Annual L o s s of L o c a l Income from d e c l i n e of Hunting and Tourism i n the East Kootenay....,  32  V Sources of B e n e f i t s and Costs from the " p o i n t of view" of R e s i d e n t s of t h e East Kootenay due t o -the c o a l - p r o j e c t of K a i s e r Resources L t d  33  III  IV  VI Cumulative Present Value of Net B e n e f i t s from " p o i n t of view" of R e s i d e n t s , L i v i n g i n the East Kootenay p r i o r t o t h e development, due t o the c o a l p r o j e c t of K a i s e r Resources Ltd VII  Comparison of c . i . f . P r i c e of East Kootenay Coal b e f o r e and a f t e r Cost Reducing . T r a n s p o r t a t i o n Improvements.  kl .  .  V I I I Unemployment Rates f o r the East Kootenay', West Kootenay and B r i t i s h Columbia, I 9 6 5 - I 9 6 8 . . . . IX Unemployment by Occupation f o r the East Kootenay, I 9 6 5 - I 9 6 9  72  83 86  XXBreakdown of Unemployment by Occupation f o r E a s t Kootenay, 1 9 6 7 , 1 9 6 8 , 1 9 6 9 . .  88  XI Comparison Between East and West Kootenay of Unemployment by Occupation, I 9 6 5 - I 9 6 8 (Absolute Numbers)  89  XII  I n d u s t r i a l Mix I 9 6 I % D i s t r i b u t i o n of Labour F o r c e by I n d u s t r y . .  92  vii ACKNOWLEDGMENTS  Mrs. W i s k i n , Mr. Jack Smith, Mr. S.L. Young and s p e c i a l thanks t o Mr. D.M. Roussel of t h e Department of Manpower and Immigration.  Mr. L.C. Reed, f o r m e r l y of Hedlin-Menzies & A s s o c i a t e s L t d .  Drs. C. Eaton and M. K e l l y , Department of Economics, U.B.C  CHAPTER I Introduction T h i s paper examines by means of a b e n e f i t - c o s t a n a l y s i s the economic impact on the East Kootenay of the c o n t r a c t by which K a i s e r Resources L t d . i s t o supply 'ierhntf^tiveuJ.inllMi.on l o n g tons of c o a l over a f i f t e e n year p e r i o d to Japanese steel firms.  P r o d u c t i o n of the c o a l w i l l take p l a c e i n the  Crowsnest area of the E a s t Kootenay near the communities of F e r n i e , N a t a l and M i c h e l . arose due  P u b l i c c o n t r o v e r s y over the p r o j e c t  to f e a r that" the E a s t Kootenay would be  subjected  to the same f a t e t h a t b e f e l l the mountainous beauty of E a s t Kentucky when s t r i p mining was  introduced.  East Kentucky  now  c o n t a i n s m i l e s of devastated t e r r a i n and mountain v a l l e y s p o l l u t e d with p o o l s of s u l p h u r i c a c i d caused by contour ping.''" T h i s mining technique  i n v o l v e s e x c a v a t i n g the e a r t h  from the mountain and pushing c o a l seam. l a n d was  strip-  i t over the s i d e to reach the  L e g l i s l a t i o n r e q u i r i n g r e c l a m a t i o n of s t r i p mined  a t f i r s t absent and then i n e f f e c t i v e i n p r e v e n t i n g  d e t e r i o r a t i o n of the E a s t Kentucky environment. The P r o v i n c e of B r i t i s h Columbia has  instituted  l a t i o n r e q u i r i n g r e s t o r a t i o n of s t r i p mined l a n d . Resources L t d . w i l l i n i t i a l l y  s t r i p mine 2.k  legis-  Kaiser  square m i l e s .  However, the p o s s i b l e extent of s t r i p mining by K a i s e r c o u l d be g r e a t , s i n c e the f i r m h o l d s 108,000 a c r e s , purchased  from  Crows Nest I n d u s t r i e s L t d . , and an a d d i t i o n a l 7,657 a c r e s i n coal licences.  2  2 The  annual volume of c o a l p r o d u c t i o n and  E a s t Kootenay had  been d e c l i n i n g s i n c e 1950  s a l e s i n the  due  to a decrease  i n demand i n B r i t i s h Columbia f o r locomotive consumption f o r h e a t i n g homes and d u s t r i e s L t d . had  commercial b u i l d i n g s .  Crows Nest  been unable t o compete i n the  E a s t e r n Canadian and  and In-  expanding  world markets f o r m e t a l l u r g i c a l c o a l .  High t r a n s p o r t a t i o n c o s t s i n c r e a s e d the d e l i v e r e d p r i c e of Crowsnest c o a l above t h a t of other producers s u p p l y i n g l u r g i c a l markets.-^ The 53% of  1965  t r a n s p o r t a t i o n c o s t of c o a l  metal-  represented  the t o t a l d e l i v e r e d c o s t of Crowsnest c o a l i n Japan i n  and  1966.^ In order t o lower t r a n s p o r t a t i o n c o s t s and t o  o b t a i n the c o a l c o n t r a c t with expanding Japanese s t e e l f i r m s , K a i s e r persuaded the f e d e r a l and  p r o v i n c i a l governments to  c o n s t r u c t the Roberts Bank P o r t and across  the Lower Mainland t o the  The berths  railway access  facilities  port.  p o r t w i l l lower b u l k l o a d i n g c o s t s and  will  provide  of s u f f i c i e n t depth t o accommodate the l a r g e s t sea  going b u l k c a r r i e r s . A  u n i t t r a i n o p e r a t i o n undertaken by  the Canadian P a c i f i c Railway w i l l run from the c o a l mines a t F e r n i e t o the p o r t and c o s t of c o a l . ernment had  w i l l a l s o reduce the  P r i o r t o the K a i s e r p r o j e c t , the f e d e r a l gov-  s u p p l i e d a subvention of approximately  t o n t o be s u b t r a c t e d  a subsidy  Kootenay, and  subvention rep-  t o the c o a l mining i n d u s t r y i n the  w i l l be d i s c o n t i n u e d  longer required.  $ 3 » 0 0 per  from the c . i . f . p r i c e of c o a l , so t h a t  the d e l i v e r e d p r i c e c o u l d be reduced.^ The resented  transportation  i n 19?0  East  s i n c e i t i s no  I t i s the r e d u c t i o n of t r a n s p o r t a t i o n  3 c o s t s , r a t h e r than p r o d u c t i o n  c o s t s , which has l e d t o  the  economic r e v i t a l i z a t i o n of the c o a l mining i n d u s t r y i n the 7  E a s t Kootenay. A controversy access  a r o s e due  t o the l o c a t i o n of the  f a c i l i t i e s t o the p o r t .  railway  Rather than u s i n g the  exist-  i n g r a i l w a y c o r r i d o r a l o n g the F r a s e r R i v e r , the B.C.  Hydro  and Power A u t h o r i t y reached agreement with the Canadian P a c i f i c Railway, the Canadian N a t i o n a l Railway and  the Great  Northern Railway, on the c o n s t r u c t i o n of t r a c k s from Matsqui a c r o s s the farming  and  r e s i d e n t i a l a r e a s of Langley,  and D e l t a m u n i c i p a l i t i e s , and  thence a l o n g the  Surrey  northern  o  shore of Boundary Bay  t o Roberts Bank.  t r a c k s a c r o s s farming and  r e s i d e n t i a l areas w i l l  r e l o c a t i o n of farmers and home owners. r a i l w a y t o Boundary Bay  C o n s t r u c t i o n of  The  necessitate  proximity  w i l l be t o the detriment  the  of  the  of w i l d l i f e  i n a unique h a b i t a t and w i l l r e t a r d development of a p o t e n t i a l r e c r e a t i o n a l area.  Running of a h i g h speed c o a l t r a i n  a l s o be d e t r i m e n t a l . t o  the q u a l i t y of the environment of  r e s i d e n t i a l area through which the t r a i n passes. costs represent  will  negative  The  the  above  e x t e r n a l i t i e s , a t t r i b u t a b l e to  the  c o a l p r o j e c t , imposed on r e s i d e n t s of the Lower Mainland. In a n a l y z i n g the p r o j e c t , I s h a l l be concerned with i t s e f f e c t on both the q u a n t i t y and standard  of l i v i n g achieved,  The  the  or i n more d e s c r i p t i v e terms,  the per c a p i t a r e a l income and respectively.  the q u a l i t y of  c o n d i t i o n of the environment  K a i s e r c o a l development i s expected to  have an e f f e c t on both the per c a p i t a income of Columbia and E a s t Kootenay r e s i d e n t s and  British  on the q u a l i t y of  the environment.  The  E a s t Kootenay economy has  i n the  past  e x h i b i t e d a low average p e r c a p i t a income and a h i g h average unemployment r a t e .  High unemployment has p e r s i s t e d i n c l e r -  i c a l , r e t a i l t r a d e , s e r v i c e , c o n s t r u c t i o n and o t i o n s from 1965  t  1968  o  inclusive.  The  f o r e s t occupa-  c o a l development  w i l l permanently a l l e v i a t e a s u b s t a n t i a l amount of unemployment i n c l e r i c a l , r e t a i l t r a d e and Unemployment i n c o n s t r u c t i o n and d u r i n g the c o n s t r u c t i o n The  service  occupations.  forestry w i l l also decline  period.  r a t i o n a l e behind o b j e c t i o n s t o the c o a l development  l i e s i n doubts over whether the b e n e f i t s of t h i s  industrial  o p e r a t i o n w i l l exceed the c o s t s when d e g r a d a t i o n of the i t y of the environment i s c o n s i d e r e d . development t h e r e of i n c r e a s e d  Behind any  industrial  i s always a t r a d e - o f f between the  economic a c t i v i t y and  increased  qual-  benefits  environmental  p o l l u t i o n , whether water, s o i l or a i r p o l l u t i o n , or a change i n the appearance of the landscape d e t r i m e n t a l thetic  to i t s aes-  qualities.  Increased  c o a l mining i n the E a s t Kootenay w i l l  have a d e t r i m e n t a l  e f f e c t on w i l d l i f e and  h u n t i n g i n the a r e a .  The  also  the q u a l i t y of  East Kootenay and  particularly  the E l k and F l a t h e a d R i v e r V a l l e y s are noted f o r the e x i s t ence of an abundant and obtained  v a r i e d supply  from non-resident  w i l l d e c l i n e due  of w i l d l i f e.^Revenue  hunters' expenditures i n the  area  t o expanded c o a l mining.  I s h a l l evaluate  the p r o j e c t by means of a b e n e f i t - c o s t  a n a l y s i s from the " p o i n t of view" of r e s i d e n t s l i v i n g  i n the  5 E a s t Kootenay p r i o r t o the c o a l development.  The  effect  of  the p r o j e c t from the " p o i n t of view" of B r i t i s h Columbia r e s i d e n t s i s not present  value  examined, but  I expect t h a t the  cumulative  of the net b e n e f i t s w i l l be s m a l l . ^ T h e g r o s s  primary b e n e f i t t o B r i t i s h Columbia r e s i d e n t s w i l l not the v a l u e  of the  increased  be  c o a l output a t t r i b u t a b l e t o  12 K a i s e r , s i n c e most of the i n c r e a s e w i l l be exported.  A  gross primary b e n e f i t w i l l occur i n the form of f a c t o r i n come from c o n s t r u c t i o n and  o p e r a t i o n of the Roberts Bank  P o r t , the r a i l w a y a c c e s s f a c i l i t i e s and operation.  Factor  unit  train  income w i l l a l s o stem from p r o d u c t i o n  B r i t i s h Columbia of equipment and K a i s e r mines.  the CPR  operating  in  s u p p l i e s f o r the  However, the s o c i a l o p p o r t u n i t y  f a c t o r s w i l l approximate the f a c t o r income.  cost of  The  net  b e n e f i t , from the p o i n t of view of r e s i d e n t s l i v i n g  the  primary i n the  East Kootenay p r i o r t o the development, i n the form of i n creased  p a y r o l l income t o East Kootenay l a b o u r ^ w i l l  represent  1  a net primary b e n e f i t to B r i t i s h Columbia as a  whole, i f i t i s assumed t h a t E a s t Kootenay l a b o u r g r a p h i c a l l y immobile. geographically  i s geo-  Even i f the East Kootenay l a b o u r were  mobile, the r e t u r n on l a b o u r and  the marginal product might s t i l l be h i g h e r  the v a l u e  Columbia and a net b e n e f i t w i l l s t i l l  occur.  b e n e f i t w i l l a l s o accrue t o the P r o v i n c e  The  province  A net  British  primary  of B r i t i s h Columbia  i n the form of taxes from the o p e r a t i o n and  l4  of  i n the c o a l opera-  t i o n s than i n a l t e r n a t i v e employment i n other p a r t s of  the mine.  also  c o n s t r u c t i o n of  w i l l r e c e i v e approximately  $552,500  6  a n n u a l l y from the mining t a x on p r o p e r t y owned by K a i s e r and the r o y a l t y payments on p r o p e r t y under c o a l l i c e n c e . - ' Twenty 1  per cent of t h e c o r p o r a t i o n income t a x p a i d by K a i s e r Resources L t d . w i l l a l s o accrue t o B r i t i s h Columbia.  Welfare  payments made t o East Kootenay r e s i d e n t s w i l l d e c l i n e due t o the employment p r o v i d e d by the K a i s e r p r o j e c t .  On t h e c o s t  s i d e , i n a d d i t i o n t o the s o c i a l o p p o r t u n i t y c o s t of r e s o u r c e s , n e g a t i v e e x t e r n a l i t y e f f e c t s w i l l a l s o be a t t r i b u t a b l e t o the project.  The p o r t w i l l a d v e r s e l y a f f e c t waterfowl and p e r -  haps t h e salmon f i s h e r y i n the a r e a .  The l o c a t i o n of the  r a i l w a y a c c e s s f a c i l i t i e s w i l l cause the n e g a t i v e e f f e c t s mentioned above.  spillover  The d e t e r i o r a t i o n of the q u a l i t y  of h u n t i n g i n t h e East Kootenay w i l l probably reduce the revenue o b t a i n e d from B r i t i s h Columbia l i c e n c e f e e s and from s e r v i c e expenditures i n B r i t i s h Columbia by non-resident hunters.  The enjoyment of the a r e a by B r i t i s h Columbia  hunters w i l l d e c l i n e and f u t u r e expenditures i n c u r r e d by r e s i d e n t s on h u n t i n g elsewhere  f o r the same o r a lower  quality  of h u n t i n g experience may i n c r e a s e . In the b e n e f i t - c o s t a n a l y s i s t o be performed p o i n t of view of r e s i d e n t s l i v i n g to  from the  i n t h e E a s t Kootenay p r i o r  the development, I s h a l l be concerned w i t h the extent and  form of primary, secondary and i n t a n g i b l e b e n e f i t s and with the s o c i a l c o s t , i n terms of t h e s o c i a l o p p o r t u n i t y c o s t of r e s o u r c e s and t h e n e g a t i v e e x t e r n a l i t y e f f e c t s a t t r i b u t a b l e to the p r o j e c t .  \  Data problems e x i s t i n p l a c i n g d o l l a r v a l u e s  on i n t a n g i b l e b e n e f i t s and  c o s t s and  n i t u d e of the p o s i t i v e o p p o r t u n i t y  i n determining  the mag-  c o s t of r e s o u r c e s .  b e n e f i t - c o s t a n a l y s i s w i l l c l a r i f y the p r o d u c t i o n  A  efficiency,  from the p o i n t of view of East Kootenay r e s i d e n t s , of the a l l o c a t i o n o f resources  r e s u l t i n g from the p r o j e c t .  In the f o l l o w i n g chapter,  I s h a l l d e s c r i b e the  nique of b e n e f i t - c o s t a n a l y s i s .  tech-  In Chapter I I I I s h a l l  pres-  ent a b e n e f i t - c o s t a n a l y s i s of the c o a l development from the p o i n t of view of r e s i d e n t s l i v i n g t o the development. conclusions.  i n the East Kootenay p r i o r  Chapter IV w i l l c o n t a i n a summary and  CHAPTER I I Benefit-Cost  A n a l y s i s as an E v a l u a t i o n Procedure  B e n e f i t - c o s t a n a l y s i s i s an e v a l u a t i o n procedure f o r examining the p r o d u c t i o n  e f f i c i e n c y of the a l l o c a t i o n o f r e -  sources r e s u l t i n g from a p r o j e c t o r i n v e s t m e n t .  1  By produc-  t i o n e f f i c i e n c y i s meant an a l l o c a t i o n of r e s o u r c e s which w i l l produce t h e maximum v a l u e of goods and s e r v i c e s from those r e s o u r c e s .  The technique may be a p p l i e d t o both  p u b l i c and p r i v a t e ' p r o j e c t s .  The procedure i n v o l v e s  spec-  i f y i n g the b e n e f i t s and c o s t s a t t r i b u t a b l e t o the p r o j e c t i n money terms, f i n d i n g t h e annual net b e n e f i t s and d i s c o u n t i n g by a n a p p r o p r i a t e  r a t e t o f i n d the cumulative  present v a l u e of net b e n e f i t s over the l i f e of the p r o j e c t . I f t h e cumulative present value of net b e n e f i t s i s p o s i t i v e , t h e n the p r o j e c t may be termed e f f i c i e n t .  However, i f bene-  f i t - c o s t a n a l y s i s i s b e i n g used t o choose among competing p r o j e c t s , then i n order f o r t h i s p r o j e c t t o be most d e s i r able,  i t s cumulative p o s i t i v e present value o f net b e n e f i t s  must be g r e a t e r  than t h a t produced by a l t e r n a t i v e p r o j e c t s .  Other d e c i s i o n r u l e s , such as the r a t i o of t h e cumulative present v a l u e o f b e n e f i t s t o the cumulative present v a l u e of c o s t s , may be used t o determine t h e d e s i r a b i l i t y of a p r o j e c t o r t o choose among a l t e r n a t i v e p r o j e c t s .  However,  I s h a l l use the cumulative present v a l u e of net b e n e f i t s t o examine the K a i s e r development.  B e n e f i t - c o s t a n a l y s i s with a c c u r a t e d a t a p r o v i d e s a measure  of the p r o d u c t i o n  e f f i c i e n c y of a p r o j e c t , but does not  e v a l u a t e changes i n the d i s t r i b u t i o n of income which may cur due  t o the p r o j e c t .  oc-  B e n e f i t - c o s t a n a l y s i s takes as  given  the d i s t r i b u t i o n of income which e x i s t s a t the time of a project.  Many government investments, however,, are not  under-  t a k e n f o r p r o v i s i o n of a good i n the most e f f i c i e n t manner, but r a t h e r as a form of i n t e r - r e g i o n a l income r e d i s t r i b u t i o n . The  economic development and  population  the g o a l of a p u b l i c p r o j e c t .  of a r e g i o n may  be  I f t h i s i s the case, then a  b e n e f i t - c o s t a n a l y s i s must be q u a l i f i e d by c o n s i d e r i n g success of the p r o j e c t i n a c h i e v i n g  the  the above g o a l s .  In o r d e r t o undertake a b e n e f i t - c o s t a n a l y s i s the evant " p o i n t of view" must be s t a t e d .  The  e f f i c i e n c y of  the r e s u l t i n g a l l o c a t i o n of r e s o u r c e s from the view" of r e s i d e n t s of a r e g i o n may  rel-  "point.of  be d i f f e r e n t from the  f i c i e n c y from the " p o i n t of view" of a l a r g e r r e g i o n , ,  ef-  for  2  example B r i t i s h Columbia.  The  cumulative present v a l u e of  net b e n e f i t s w i l l change as the r e f e r e n c e The  l a r g e r the s i z e of the r e f e r e n c e  t a n t are  secondary b e n e f i t s and  p r o j e c t may  group v a r i e s .  group, the l e s s impor-  costs.  F o r example,  induce a f i r m t o l o c a t e i n a r e g i o n .  of output of the f i r m may  be d e s c r i b e d  value  as a gross secondary 3  b e n e f i t from the p o i n t of view of the r e g i o n . from the p o i n t of view of the l a r g e r area, output of the f i r m does not represent  The  the  However,  the v a l u e of  a gross secondary  b e n e f i t , i f the f i r m would have l o c a t e d elsewhere i n the l a r g e r a r e a i n the absence of the  project.  the  10..  The b e n e f i t s and c o s t s a r e d e s c r i b e d as primary r e s u l t d i r e c t l y from the p r o j e c t .  I n the case of a  i f they govern-  ment Investment t o produce h y d r o e l e c t r i c power, the g r o s s primary The  income b e n e f i t w i l l be the v a l u e of power produced.  gross primary  income c o s t w i l l be the v a l u e of t h e goods  or s e r v i c e s foregone by the use of r e s o u r c e s i n h y d r o e l e c t r i c power p r o d u c t i o n .  The s o c i a l o p p o r t u n i t y c o s t of the  use of r e s o u r c e s i s t h e v a l u e of the good o r s e r v i c e f o r e gone by t h e use of i n p u t s i n the p r o d u c t i o n of another or s e r v i c e .  If full  good  employment of f a c t o r s of p r o d u c t i o n i s  assumed, then the s o c i a l o p p o r t u n i t y cost of the f a c t o r s i s measured by t h e money o u t l a y spent on the f a c t o r s . .The gross primary  Income c o s t i s t h e r e f o r e the money o u t l a y on  f a c t o r s of p r o d u c t i o n , i f f u l l  employment of f a c t o r s i s a s -  sumed. The b e n e f i t s and c o s t s a r e d e s c r i b e d as secondary i f they r e s u l t i n d i r e c t l y from the p r o j e c t .  A gross  secondary  income b e n e f i t may be i n the form of the v a l u e of a good o r s e r v i c e produced, which would not have been produced i n the absence of t h e p r o j e c t .  The gross secondary  income c o s t i s  the money o u t l a y on f a c t o r s of p r o d u c t i o n , i f f u l l  employ-  ment of the i n p u t s i s assumed. B e n e f i t s and c o s t s a r e d e s c r i b e d as i n t a n g i b l e , i f t h e i r v a l u e i s not u s u a l l y measured i n money terms i n the market. While i t i s p o s s i b l e t o p l a c e a money v a l u e on some i n t a n g i b l e b e n e f i t s and c o s t s , many i n t a n g i b l e s cannot be e v a l u L a t e d and may be denoted as unmeasurable. an example of a n unmeasurable i n t a n g i b l e .  S c e n i c beauty i s The value o f  11  w i l d e r n e s s p r e s e r v e d f o r r e c r e a t i o n and  h u n t i n g may  be  es-  timated by measuring the expenditures i n c u r r e d by u s e r s t o p a r t a k e of the  resource.  Many Investment p r o j e c t s i n v o l v e e x t e r n a l i t y or over e f f e c t s , which may  be b e n e f i t s and/or c o s t s .  t e r n a l i t i e s must be considered  maker and  therefore  e f f e c t s are not  ex-  investment  d e c i s i o n s of another d e c i s i o n  the a l l o c a t i o n of r e s o u r c e s .  considered  These  i n a benefit-cost analysis.  A t e c h n o l o g i c a l e x t e r n a l i t y stemming from an p r o j e c t a l t e r s the p r o d u c t i o n  spill-  Externality  i n the revenue or cost  considera-  t i o n s of the o r g a n i z a t i o n u n d e r t a k i n g the p r o j e c t .  For  ample, K a i s e r Resources L t d . has  detrimen-  tal  not c o n s i d e r e d  the  e f f e c t which s t r i p mining w i l l have on the w i l d l i f e  the Crowsnest area.  Revenue t o l o c a l r e s i d e n t s , who  ex-  of  lived  i n the a r e a p r i o r t o the c o a l development, from h u n t e r s ' p e n d i t u r e s on s e r v i c e s and due  food and  ex-  l o d g i n g w i l l decrease  t o the d e c l i n e i n the q u a l i t y of h u n t i n g .  The  latter  c o s t i s a n e g a t i v e e x t e r n a l i t y which must be taken i n t o a c count i n a b e n e f i t - c o s t a n a l y s i s from the p o i n t of view of E a s t Kootenay r e s i d e n t s l i v i n g i n the a r e a p r i o r t o Kaiser  the  project.  Most b e n e f i t - c o s t a n a l y s e s assume f u l l the f a c t o r s of p r o d u c t i o n  employment of  used i n the p r o j e c t .  presented i n Chapter I I I does not assume f u l l High unemployment has  employment. -  p e r s i s t e d f o r a number of y e a r s i n  c e r t a i n occupations i n the E a s t Kootenay. on l a b o u r and  The.- a n a l y s i s  other p r o d u c t i o n  The  money o u t l a y  f a c t o r s -will therefore  not  1 2  v  always r e p r e s e n t the t r u e s o c i a l o p p o r t u n i t y c o s t . The  f o l l o w i n g statements may be a p p l i e d t o examine the  r e l a t i o n s h i p between the s o c i a l o p p o r t u n i t y c o s t o f l a b o u r and the money o u t l a y o r wage expended on t h i s l a b o u r . ^ The s o c i a l o p p o r t u n i t y c o s t of l a b o u r i s z e r o , i f the l a b o u r had been unemployed and had no p r o s p e c t i v e means of employment i n t h e same o r i n another  occupation.  I n t h i s case the  money o u t l a y o r wage r e p r e s e n t s a net g a i n t o the worker. The  s o c i a l o p p o r t u n i t y c o s t of l a b o u r i s p o s i t i v e but l e s s  than the money o u t l a y , i f the l a b o u r had been employed p r i o r t o the p r o j e c t , but i f the v a l u e of i t s marginal product had been lower.  I n the absence of i n f l a t i o n the s o c i a l oppor-  t u n i t y c o s t o f l a b o u r approximates the money o u t l a y on labour, i f the l a b o u r had been employed p r e v i o u s l y and i f t h e value of i t s marginal product had approximated t h a t i n the new employment.  The same a n a l y s i s may be a p p l i e d t o examine the  r e l a t i o n s h i p between the s o c i a l o p p o r t u n i t y c o s t of other f a c t o r s of p r o d u c t i o n and the money o u t l a y expended on these factors. The  primary  gross income b e n e f i t s from the p o i n t of  view o f E a s t Kootenay r e s i d e n t s from the K a i s e r p r o j e c t w i l l 6 accrue  i n the form of p a y r o l l income t o l o c a l l a b o u r .  The  E a s t Kootenay r e s i d e n t s r e f e r r e d t o a r e those r e s i d e n t i n the a r e a p r i o r t o the K a i s e r p r o j e c t .  The s o c i a l  opportunity  c o s t of l o c a l l a b o u r , i n t h e form of a p r e v i o u s wage r a t e , must be s u b t r a c t e d from t h e wage r a t e p a i d by K a i s e r t o obt a i n the net primary  income b e n e f i t .  13.  The b e n e f i t - c o s t a n a l y s i s presented  i n Chapter I I I w i l l  produce the cumulative present value of measurable b e n e f i t s l e s s measurable c o s t s .  However, many of the c o s t s which  have been the source of p u b l i c c o n t r o v e r s y a r e i n t a n g i b l e and unmeasurable.  The r e s u l t of the a n a l y s i s must t h e r e f o r e  be q u a l i f i e d i n order t o reach a c o n c l u s i o n on the d e s i r ability  of the p r o j e c t .  I f the cumulative present v a l u e of  net unmeasurable i n t a n g i b l e s i s n e g a t i v e and i f the cumulat i v e present v a l u e of measurable b e n e f i t s l e s s measurable c o s t s i s p o s i t i v e , the p r o j e c t should only be continued i f the cumulative present v a l u e of net measurable b e n e f i t s exceeds the magnitude of the cumulative  present v a l u e of net  7 unmeasurable i n t a n g i b l e s . ' The p r o j e c t should be d i s c o n t i n u e d i f the /- cumulative PV of net unmeasurable i n t a n g i b l e s / >/ + cumulative PV of net measurable b e n e f i t s / .  The  government  u s i n g a p o l i t i c a l consensus can d e c i d e i f t h i s i s so.  8  CHAPTER I I I B e n e f i t - C o s t A n a l y s i s of the c o a l development of K a i s e r Resources L t d . from the " p o i n t of view" of living  Residents  In the East Kootenay p r i o r to the Coal Development  The  E a s t Kootenay i s Census D i v i s i o n One  and  contains  the c i t i e s of Cranbrook, Kimberley, Golden, Invermere and Fernie.  The  a n a l y s i s w i l l be undertaken from the p o i n t of  view of r e s i d e n t s l i v i n g development.  i n the East Kootenay p r i o r t o  F o r the purpose of t h i s a n a l y s i s , l o c a l  the labour  i s t h e r e f o r e d e f i n e d as l a b o u r l o c a t e d i n the E a s t Kootenay p r i o r t o the development. be i n c l u d e d i n b e n e f i t s and  W i n d f a l l g a i n s and l o s s e s w i l l costs,  (a) Primary Income B e n e f i t s and The  Costs  gross primary income b e n e f i t s stemming from the  p r o j e c t w i l l occur  i n the form of p a y r o l l income or wages  a c c r u i n g t o l o c a l l a b o u r from the o p e r a t i n g phase and  the  c o n s t r u c t i o n phase.  local  Income w i l l a l s o a c c r u e t o other  f a c t o r s of p r o d u c t i o n used i n producing and  f i x e d p l a n t and  operating  supplies  equipment f o r the K a i s e r p r o j e c t .  ( i ) Primary Income B e n e f i t s and  Costs from the  Operating  Phase Before  commencement of the p r o j e c t , Grows Nest Indus-  t r i e s L t d . had tions.  1  employed 500  Of these approximately 220  underground mining, 165 neering, and  people i n i t s c o a l mining operahad  been employed i n  i n s u r f a c e mining and 115  c l e r i c a l d u t i e s , p r o c e s s i n g and m a t e r i a l s  t r u c k and  tractor driving.  i n engihandling  In i t s o p e r a t i n g phase K a i s e r  15. Resources L t d . w i l l employ a t o t a l of nine hundred workers c o n s i s t i n g of 4-00 200  underground miners, 300  s u r f a c e miners and  workers employed i n e n g i n e e r i n g , c l e r i c a l s e r v i c e s , p r o c -  2 e s s i n g and m a t e r i a l s h a n d l i n g and t r u c k and t r a c t o r d r i v i n g . The  t o t a l i n c r e a s e i n employment of c o a l miners w i l l  f o r e be 315. imported  there-  I assume t h a t one-half of t h i s l a b o u r w i l l  i n t o the a r e a from A l b e r t a .  The  w i l l be s u p p l i e d from the E a s t Kootenay.  remainder,  be  157»  K a i s e r i s undertak-  i n g a t r a i n i n g program f o r i n e x p e r i e n c e d l o c a l workers h a v i n g 3 a grade twelve  education. ^ The -  i n c r e a s e i n employment i n  e n g i n e e r i n g , c l e r i c a l s e r v i c e s , p r o c e s s i n g and  materials  h a n d l i n g and  I assume t h a t  one-half  t r u c k and t r a c t o r d r i v i n g i s 85.  of t h i s l a b o u r w i l l be imported  w i l l be s u p p l i e d l o c a l l y .  and t h a t  one-half  S k i l l e d r e p a i r mechanics, t r u c k  and t r a c t o r d r i v e r s and Japanese engineers w i l l be  imported.  The annual wages which would have been:earned i n a l t e r n a t i v e occupations the 500 L t d . and  r e p r e s e n t the s o c i a l o p p o r t u n i t y c o s t s of  workers p r e v i o u s l y employed by Crows Nest I n d u s t r i e s of the a d d i t i o n a l 200  l o c a l workers.  A net b e n e f i t  w i l l accrue t o the l o c a l l a b o u r i f the wages of the workers i n c r e a s e due wages of the 200 foregone  t o the K a i s e r p r o j e c t and/  500  or i f the  e x t r a workers a r e g r e a t e r than the wages  i n a l t e r n a t i v e employment.  A summary of the mag-  n i t u d e of the s o c i a l o p p o r t u n i t y c o s t of the 700  local  workers i s p r o v i d e d i n Table I, where I have examined the amount of past unemployment i n the E a s t Kootenay i n those occupations  i n which the a d d i t i o n a l 200  jobs a r e being o f -  16. fered.  A p o r t i o n of the 200  employed.  e x t r a workers may  However, i n o r d e r t o a s s i g n a zero  have been unopportunity  cost t o t h i s l a b o u r , i t must be shown not only t h a t the l a b o u r had been unemployed i n t h a t o c c u p a t i o n i n which i t had  experience,  immobile and ployment.  but a l s o t h a t i t had been o c c u p a t i o n a l l y  so had no p r o s p e c t i v e means of a l t e r n a t i v e  The  em-  r e l a t i o n s h i p between .the money o u t l a y on -  l a b o u r and the s o c i a l  o p p o r t u n i t y c o s t of l a b o u r was  ex-  amined i n Chapter I I . The and  t o t a l annual p a y r o l l income a c c r u i n g t o both  imported  l a b o u r from the o p e r a t i n g phase i s  T o t a l employment i s 900 labour.  of which 700  $6,000,000,  times 900 worker o b t a i n s the same annual wage. o p p o r t u n i t y cost of the 500  employed i s 500 times  900  $6,000,000  operating-phase  assuming t h a t each  I assume t h a t the  l o c a l workers p r e v i o u s l y or  $3,333,330.  t h a t the o p p o r t u n i t y c o s t of the a d d i t i o n a l 200 workers i s z e r o . The  net primary  The  I assume  local  I s h a l l d i s c u s s t h i s assumption below. b e n e f i t a c c r u i n g t o l o c a l l a b o u r from the  o p e r a t i n g phase i s t h e r e f o r e  500  local  An estimate of the p a y r o l l income or gross: primary  $4,666,662 or 700  social  $6,000,000.  i s p r o v i d e d by  b e n e f i t a c c r u i n g t o l o c a l l a b o u r from the is  local  $1,333,332.  net b e n e f i t assumes t h a t the annual wages of the-  workers, p r e v i o u s l y employed, d i d not change a f t e r  commencement of the K a i s e r p r o j e c t . is therefore  probably  The  o p p o r t u n i t y cost  -  17. TABLE I The S o c i a l Opportunity Cost of L o c a l Labour employed In O p e r a t i n g Phase of K a i s e r P r o j e c t L o c a l Labour employed In O p e r a t i n g Phase  Value Of S o c i a l Opportunity Cost of L o c a l Labour  500 workers p r e v i o u s l y employed by Crows Nest Industries Ltd. i n coal mining, p r o c e s s i n g and materials handling, truck and t r a c t o r d r i v i n g , c l e r i c a l d u t i e s and engineering services.  The v a l u e of the s o c i a l opp o r t u n i t y c o s t i s l a r g e , but w i l l be below the p a y r o l l i n come from K a i s e r Resources L t d . i f wages r i s e .  Increase of 200 local workers t o be employed by K a i s e r c o n s i s t i n g o f : 157 c o a l miners  A maximum of 21 of these p o s i t i o n s c o u l d have been taken up i n 1968 by unemployed l a b o u r experienced i n m i n e r a l e x t r a c t i o n . " I f t h i s l a b o u r had been o c c u p a t i o n a l l y immobile and had no p r o s p e c t i v e means of employment i n o t h e r mining v e n t u r e s , then the v a l u e of the o p p o r t u n i t y c o s t of the l a b o u r i s low. The remaining 136 workers w i l l be obtained from l a b o u r p r e v i o u s l y employed i n o t h e r occ u p a t i o n s . Some of the l a b o u r may be r e c r u i t e d from workers p r e v i o u s l y employed as c o a l miners who had entered other occupations when the c o a l mini n g i n d u s t r y d e c l i n e d i n the 1950*s. K a i s e r i s p r o v i d i n g t r a i n i n g f o r inexperienced workers having a grade twelve e d u c a t i o n . Average unemployment i s h i g h i n the E a s t Kootenay. However, c o a l miners w i l l not be obtained from the hard core unemployed i n c o n s t r u c t i o n and f o r e s t r y , s i n c e t h i s l a b o u r has a low educational l e v e l . ' A s c a r c i t y  18  TABLE I (Continued)  L o o a l Labour employed i n O p e r a t i n g Phase  Value of S o c i a l Opportunity Cost of L o c a l Labour of s u i t a b l y q u a l i f i e d l a b o u r f o r c o a l mining may e x i s t i n the E a s t Kootenay. L o c a l l a b o u r drawn i n t o c o a l mining w i l l have a p o s i t i v e opport u n i t y c o s t i n the form of a l t e r n a t i v e wages i n other occupations. However, the v a l u e of the s o c i a l o p p o r t u n i t y c o s t may be lower than p a y r o l l i n come, i f wages i n c o a l mining are higher.  M-3 workers employed i n m a t e r i a l s h a n d l i n g and processing, c l e r i c a l d u t i e s and s e r v i c e s and t r u c k and t r a c t o r d r i v ing.  The v a l u e of the s o c i a l opport u n i t y c o s t i s low, because the p o s i t i o n s w i l l be taken up by unemployed l a b o u r . The average monthly unemployment of c l e r i c a l workers i n the E a s t Kootenay i n 196? was 113, while a monthly average of 65 t r u c k and t r a c t o r d r i v e r s were unemployed i n 1968. The p e r s i s t e n t h i g h l e v e l of unemployment i n the above occupations between 196,5 and 1968 i s indicat i v e of the o c c u p a t i o n a l and/or g e o g r a p h i c a l immobility of the workers.°  19. overstated.  Data i s not a v a i l a b l e on changes i n the wage  r a t e s of these workers. I t i s r e p o r t e d t h a t s t r i p miners employed by K a i s e r 9  a r e p a i d the h i g h e s t s t r i p mining wage r a t e s i n Canada. The  r a t e s a r e between $3.01  and $4.15  an hour.  Wage r a t e s  f o r s t r i p miners may have i n c r e a s e d over those p a i d by Crows Nest I n d u s t r i e s L t d . due t o an i n c r e a s e i n l a b o u r p r o d u c t i v i t y i n a c a p i t a l intensive operation. annual wage o f  $6,600  f o r the  900  The average  workers t o be employed i n  the o p e r a t i n g phase compares f a v o u r a b l y with t h e average wage of  $4,363 earned  by E a s t Kootenay r e s i d e n t s i n  The above net b e n e f i t of opportunity ployed  $1,333,332  c o s t of the a d d i t i o n a l 200  i s zero.  As T a b l e  1966.^ 1  assumes t h a t t h e  l o c a l workers em-  I i n d i c a t e s , t h e s o c i a l oppor-  t u n i t y c o s t of approximately  t h r e e - q u a r t e r s of t h i s  labour  i s p o s i t i v e and should be s u b t r a c t e d from t h e p a y r o l l i n come t o o b t a i n the net b e n e f i t a c c r u i n g t o t h e 200 I have not adequately opportunity  workers.  taken i n t o account the p o s i t i v e  c o s t s of l o c a l l a b o u r induced  or t h e i n c r e a s e of wage r a t e s t o the 500  i n t o c o a l mining l o c a l workers  p r e v i o u s l y employed because o f data i n s u f f i c i e n c i e s . two  The  f a c t o r s tend t o o f f s e t each o t h e r , s i n c e one would de-  crease the income b e n e f i t s , w h i l e the o t h e r would i n c r e a s e the income b e n e f i t s . ( i i ) Primary Income B e n e f i t s and Costs from C o n s t r u c t i o n Phase The  t o t a l c o n s t r u c t i o n employment p r o v i d e d  is  800."'""''  20 I assume t h a t 180 opportunity  of the 800  cost.  workers a r e l o c a l with  The .average monthly unemployment i n con-  s t r u c t i o n occupations i n the East Kootenay i n 196? was  180  and  3^0  zero  workers r e s p e c t i v e l y .  and  1968  Unemployment has  been  h i g h i n c o n s t r u c t i o n occupations i n the East Kootenay from 1965  t o 1968 The  inclusive.  1 2  ,  t o t a l annual c o n s t r u c t i o n p a y r o l l t o be  i n the f i r s t and  expended  second years of the p r o j e c t i s $8,500,000.1  I have assumed t h a t the p o r t i o n of t h i s p a y r o l l a c c r u i n g l o c a l l a b o u r with n e g l i g i b l e o p p o r t u n i t y  cost i s 180  to  times  "500 #8,500,000  or  $1,912,500.  t i o n workers occurred  An  i n f l u x of t r a n s i e n t  i n the s p r i n g of 1969*  construc-  These workers  w i l l compete w i t h l o c a l c o n s t r u c t i o n l a b o u r f o r employment. I have not  included  i n the net benefit, the p o s s i b l e  i n wages of l o c a l c o n s t r u c t i o n workers, now K a i s e r , who  increase  employed by  were employed p r e v i o u s l y i n other  construction  work a t a lower wage. ( i i i ) Primary Income B e n e f i t s and Mine O p e r a t i n g  f i x e d p l a n t and  purchase o p e r a t i n g  employed by the f i r m s .  increase i n f a c t o r other l o c a l  inputs  a net primary Income b e n e f i t ,  because most o p e r a t i n g  w i l l be obtained  East  I assume t h a t the i n c r e a s e i n i n -  come, which would r e p r e s e n t  States.  An  a c c r u e t o l o c a l l a b o u r and  w i l l be low,  supplies  equipment from f i r m s l o c a t e d i n the  Kootenay p r i o r t o the development. income may  of  Supplies  K a i s e r Resources L t d . may and  Costs from P r o d u c t i o n  s u p p l i e s and  from other p a r t s of Canada and  equipment the  United  21. (b) Secondary Income B e n e f i t s and  Costs  ( i ) The M u l t i p l i e r A r e g i o n a l m u l t i p l i e r e f f e c t , stemming from the i n creased p a y r o l l income of l o c a l l a b o u r and come of imported l a b o u r ,  the p a y r o l l i n -  w i l l produce a gross secondary  income b e n e f i t i n the form of income a c c r u i n g bour and  to l o c a l l a -  l o c a l c a p i t a l from an expansion of the  r e t a i l and  other l o c a l i n d u s t r i e s .  exhibited a high general  The  service,  East Kootenay  has  l e v e l of unemployment from  19^5  t o 1968.^ Average unemployment i n the East Kootenay i n  1967 and I968 was t h a t both the  7.0%  and  capacity  8.5%  respectively.  of s e r v i c e f a c i l i t i e s ,  I assume located  the East Kootenay p r i o r t o the development and r e s i d e n t s , and w i l l be  be  increase  The  labour  i n the demand f o r  I t h e r e f o r e assume t h a t l o c a l s e r v i c e  were c h a r a c t e r i z e d ment.  owned by  the supply of s u i t a b l y q u a l i f i e d l o c a l  s u f f i c i e n t t o supply the  services.  in  facilities  by excess c a p a c i t y p r i o r t o the develop-  s e r v i c e f a c i l i t i e s owned by r e s i d e n t s could  also  expanded. I f the above two  conditions  the r e g i o n a l income due  do not h o l d , an  occur, i f c a p i t a l and l a -  bour were imported i n t o the area.  However, the  a c c r u e t o the  l a b o u r and  The  in  t o an expansion of s e r v i c e i n d u s t r i e s  i n the East Kootenay would s t i l l  inputs.  increase  imported c a p i t a l and benefits accruing  income would  not t o  local  t o r e s i d e n t s l i v i n g i n the  East Kootenay p r i o r t o the development from i n d u s t r y a t t r a c t e d from other r e g i o n s f i r m was  would be low,  a l s o imported.  i f the l a b o u r  employed by  the  L o c a l wages might r i s e , however, i f  22. the l a b o u r imported  i n t o the area i n c r e a s e d the demand f o r  the s e r v i c e s or goods produced by l o c a l  labour.  The average monthly unemployment i n the East Kootenay of male workers experienced  i960 was 105,  i n the s e r v i c e i n d u s t r i e s i n  out of a l a b o u r f o r c e of approximately  A p e r s i s t e n t h i g h l e v e l of unemployment of l a b o u r i n the s e r v i c e i n d u s t r i e s ; h a s e x i s t e d from 1965 clusive.  15,000.  experienced  t o 1968  in-  Unemployed l a b o u r might a l s o be drawn i n t o the  serv-  i c e i n d u s t r i e s from f o r e s t and c o n s t r u c t i o n occupations.  How-  ever, t h i s i s u n l i k e l y because the l a t t e r l a b o u r has been occ u p a t i o n a l l y immobile and would have d i f f i c u l t y  i n adapting  t o some s e r v i c e occupations, because of i n e x p e r i e n c e and a 17 low e d u c a t i o n a l l e v e l . L o c a l l a b o u r p r e v i o u s l y employed i n the s e r v i c e i n d u s t r i e s c o u l d be u t i l i z e d more i n t e n s i v e l y . I a l s o assume t h a t s u f f i c i e n t excess  c a p a c i t y of  facilities  and l o c a l l a b o u r e x i s t s t o handle the i n c r e a s e d volume of r e t a i l s a l e s i n the a r e a . J u l y 1967  was  Unemployment i n r e t a i l s a l e s i n  56.  A r e g i o n a l income m u l t i p l i e r of 1.3  i s a p p l i e d t o the  i n c r e a s e i n p a y r o l l income a c c r u i n g t o both l o c a l and 18 p o r t e d l a b o u r from the o p e r a t i n g phase.  I have  im-  excluded  the m u l t i p l i e r e f f e c t of the i n c r e a s e i n c o n s t r u c t i o n income, because the income i n j e c t i o n i n t o the economy w i l l not  be  permanent, and t h e r e f o r e w i l l not r e s u l t i n an i n c r e a s e i n e q u i l i b r i u m r e g i o n a l income.  The  i n c r e a s e i n employment of  23  l o c a l and imported  l a b o u r i n c o a l mining o p e r a t i o n s i s  4 0 0 ( 9 0 0 - 5 0 0 ) and t h e annual p a y r o l l income a c c r u i n g t o . t h i s l a b o u r i s 4 0 0 times $ 6 , 0 0 0 , 0 0 0 o r $ 2 , 6 6 6 , 6 6 4 .  The  900  t o t a l annual  income generated  i n the r e g i o n from t h e oper-  a t i n g phase i s t h e r e f o r e 1 . 3 times $ 2 , 6 6 6 , 6 6 4 o r $ 3 , 4 6 6 , 6 6 3 . The annual  secondary  or approximately  b e n e f i t i s thus $ 3 , 4 6 6 , 6 6 3 - $ 2 , 6 6 6 , 6 6 4  $800,000.  As e x p l a i n e d above, I assume  t h a t a l l o f t h e income generated  by t h e m u l t i p l i e r  effect  i s r e c e i v e d by l a b o u r and o t h e r i n p u t s l o c a t e d i n the a r e a p r i o r t o t h e development.  I assume t h a t t h e $ 8 0 0 , 0 0 0 an-  nual i n c r e a s e i n income due t o the m u l t i p l i e r e f f e c t  occurs  every year from the f i r s t year of p r o d u c t i o n t o the f i f t e e n t h year, when t h e present s a l e s c o n t r a c t t e r m i n a t e s . The  o p p o r t u n i t y c o s t of Inputs used i n t h e expansion of  s e r v i c e s and r e t a i l t r a d e i s low, because t h e expansion w i l l absorb p r e v i o u s l y unemployed l a b o u r and because l i t t l e a l t e r n a t i v e p r o d u c t i o n w i l l be foregone by more i n t e n s i v e use of l a b o u r a l r e a d y employed i n s e r v i c e s and r e t a i l t r a d e . Other c o i n c i d e n t c o a l developments, such as t h e p r o j e c t of F o r d i n g Coal Co., w i l l add t o t h e growth of p o p u l a t i o n and market s i z e of t h e E a s t Kootenay.  Full  utilization  of e x i s t i n g l o c a l f a c i l i t i e s and l o c a l l a b o u r i n s u p p l y i n g s e r v i c e s w i l l be reached  i n a s h o r t e r p e r i o d of time.  The  assumption made above, t h a t the amount of induced i n d u s t r y l o c a t i n g i n t h e a r e a w i l l be s m a l l , must be q u a l i f i e d when the o t h e r c o a l developments a r e c o n s i d e r e d . investment  and Importation of l a b o u r w i l l  Some induced  occur.  24. I assume t h a t most of the induced investment from other r e g i o n s would be i n s e r v i c e and r e t a i l  attracted outlets.  I do not expect t h a t a s i g n i f i c a n t amount of i n d u s t r y prod u c i n g consumer d u r a b l e s would be a t t r a c t e d i n t o the a r e a , because of the l a r g e c a p i t a l investment market s i z e r e q u i r e d .  i n v o l v e d and l a r g e  Induced investment  i n t o the E a s t  Kootenay would b r i n g i n both c a p i t a l and l a b o u r ; the i n crease i n f a c t o r incomes a c c r u i n g t o l a b o u r and  other i n -  puts l o c a t e d i n the a r e a p r i o r t o the development would be small.  While the t o t a l r e g i o n a l income would i n c r e a s e , the  p e r c a p i t a b e n e f i t t o p r i o r r e s i d e n t s would be low.  The  income e f f e c t of p o t e n t i a l induced Investment from o t h e r r e g i o n s and  i m p o r t a t i o n of l a b o u r i s not c o n s i d e r e d i n the  b e n e f i t - c o s t c a l c u l a t i o n performed. The main i n c r e a s e i n l o c a l employment stemming from the K a i s e r p r o j e c t w i l l occur i n the s e r v i c e and trade occupations.  retail  The p e r s i s t e n t unemployment of con-  s t r u c t i o n and f o r e s t r y workers w i l l only be t e m p o r a r i l y a l l e v i a t e d due  t o the K a i s e r p r o j e c t ,  ( i i ) A p p r e c i a t i o n of l a n d v a l u e s Residents  of the E a s t Kootenay may  receive a  capital  g a i n i n the form of an a p p r e c i a t i o n of p r o p e r t y v a l u e s ing  the f i r s t year of the p r o j e c t .  dur-  I t must be p o i n t e d out  t h a t while the average v a l u e of p r o p e r t y i n down-town F e r n i e will  i n c r e a s e , the v a l u e of some p r o p e r t y w i l l decrease  to p o l l u t i o n and the d e c l i n e of t o u r i s m . (c) I n t a n g i b l e B e n e f i t s and Costs and Coal mining  due  -  Externalities  i n the E a s t Kootenay w i l l produce n e g a t i v e  25 e x t e r n a l i t y e f f e c t s i n the form of p o l l u t i o n and t i o n of the environment.  deteriora-  Income obtained by l o c a l l a b o u r ,  i n the E a s t Kootenay from t o u r i s m and h u n t i n g w i l l be v e r s e l y a f f e c t e d by the development, and the annual income foregone  ad-  local  should be c o n s i d e r e d i n the c o s t s a t t r i b u t -  a b l e t o the p r o j e c t . ( i ) E x t e r n a l i t y E f f e c t on Tourism. W i l d l i f e and  the  Sport F i s h e r y Cranbrook C i t y obtained a gross revenue of a p p r o x i mately  |196,000  1968.^ The  from t o u r i s m and  $4,000  from h u n t i n g i n  gross revenue from t o u r i s m i s s i g n i f i c a n t t o  the economy of Cranbrook, when compared t o the v a l u e of  20 f a c t o r y shipments of manufactured goods of  $841,000.  Gross revenue from t o u r i s m i n the Cranbrook, Golden and  Kimberley,  Invermere areas i s not l i k e l y t o be a d v e r s e l y  a f f e c t e d by the c o a l development.  However, gross revenue  i n the F e r n i e a r e a c o u l d be a f f e c t e d by the d e t e r i o r a t i o n of scenery.  The annual gross revenue p r e v i o u s l y obtained  from t o u r i s m i n F e r n i e i s not l i k e l y t o have exceeded the  $196,000  o b t a i n e d i n Cranbrook, s i n c e Cranbrook i s a  v e n i e n t stopover f o r highway t r a v e l l e r s . mum  annual l o s s of  $196,000  con-  I assume a maxi-  i n gross revenue from the  exist-  i n g s t a t e of t o u r i s m i n F e r n i e and t h e r e f o r e i n the E a s t Kootenay due t o the c o a l p r o j e c t .  However, the  $196,000  r e p r e s e n t s gross revenue or expenditures and not l o c a l v a l u e added.  26 The 196l Canadian census f i g u r e s f o r i n d u s t r i e s i n the P r o v i n c e of B.C. i n d i c a t e the r e l e v a n t r e t a i l b u s i n e s s e s have a l o c a l income component (value-added) of 25 per cent of gross s a l e s , while the comparable i f i g u r e f o r s e r v i c e s o u t l e t s i s 33 per cent. 2  I s h a l l assume t h a t  29 per  cent of the  $196,000  ($56,840)  r e p r e s e n t s l o c a l income foregone from the e x i s t i n g  state  of t o u r i s m i n the f i r s t year of c o a l p r o d u c t i o n . The d e c l i n e of t o u r i s t expenditures w i l l be  reduced  due t o l e g i s l a t i o n r e q u i r i n g r e s t o r a t i o n of s t r i p mined land.  The government i s attempting t o put the c o s t of l a n d  r e c l a m a t i o n i n t o the c o s t c a l c u l a t i o n s of s t r i p mining f i r m s by r e q u i r i n g them t o post a  $500  bond with the p r o v i n c i a l  22  Mines Department f o r every a c r e s t r i p mined. I f the f i r m f a i l s t o r e s t o r e l a n d , the government w i l l r e c l a i m the l a n d 23 w i t h the proceeds  of the bond.  J  The s o c i a l c o s t being  s i d e r e d i s the d e t e r i o r a t i o n of the appearance of the  conen-  vironment. The  ranges of the E l k and F l a t h e a d R i v e r V a l l e y s of the  E a s t Kootenay a r e noted f o r t h e i r v a r i e t y and abundance of wildlife.  The a r e a ig. one of the best big-game h u n t i n g d i s -  t r i c t s i n B r i t i s h Columbia and abounds with Rocky Mountain B i g h o r n sheep, moose, e l k , mountain goat, deer and and b l a c k bear.  The a r e a i s p o p u l a r w i t h both  grizzly  British  Columbia and non-resident hunters from o t h e r p a r t s of Canada and the U n i t e d S t a t e s . The w i l d l i f e of the a r e a w i l l be a d v e r s e l y a f f e c t e d a i r and water p o l l u t i o n and the l o s s of ranges.  While  by  leg-  i s l a t i o n r e q u i r i n g r e s t o r a t i o n and r e f o r e s t a t i o n of s t r i p mined l a n d w i l l tend t o reduce the d e t e r i o r a t i o n of the  en-  27  vironment  caused by s t r i p mining,  i t i s debatable whether  r e c l a m a t i o n and r e f o r e s t a t i o n w i l l be adequate t o r e s t o r e w i l d l i f e ranges.  The e f f e c t of the c o a l mining w i l l depend  on the a b i l i t y of w i l d l i f e t o migrate and adapt on o t h e r ranges, and on the importance  to conditions  t o w i l d l i f e of those  24  p a r t i c u l a r ranges as s t r i p mining  s t r i p mined.  i s extended  The problem w i l l i n c r e a s e  i n the E a s t Kootenay through  commencement of mining by other c o a l producers e r n ranges of the E l k R i v e r V a l l e y .  the  i n the n o r t h -  The more s o u t h e r l y ranges  t o be s t r i p mined by K a i s e r a r e not important as w i n t e r f e e d i n g ranges f o r w i l d l i f e . the E l k R i v e r The the big  However, ranges  i n the n o r t h of  25  V a l l e y a r e important. extent and c o n d i t i o n of w i n t e r ranges i s major l i m i t i n g f a c t o r of E a s t Kootenay game p o p u l a t i o n s .  The m u l t i p l i c i t y of w i n t e r range requirements of b i g h o r n sheep g r e a t l y r e s t r i c t s the d i s t r i b u t i o n and d e n s i t y of t h i s s p e c i e s , and r e s u l t s i n the development of male l o c a l popul a t i o n s which a r e very s u s c e p t i b l e t o i n t e r f e r e n c e from human a c t i v i t i e s . 27 The q u a l i t y of h u n t i n g i n terms of the p r o b a b i l i t y of hunter success was  v e r y h i g h i n the E a s t Kootenay.  Table II  p r o v i d e s an estimate of the annual v a l u e added by l o c a l l a bour from the expenditures of r e s i d e n t h u n t e r s .  Table I I I  p r o v i d e s an estimate of the income obtained by r e s i d e n t s from the expenditures of non-resident  hunters.  TABLE I I Income a c c r u i n g t o Residents of the E a s t Kootenay Hunters on E a s t Kootenay Annual Expenditures  (1)  Guides'and Packers' Fees and Horse H i r e  r 1.565  from Annual E x p e n d i t u r e s by L o c a l Hunting  28  Annual Value Added by L o c a l  (2) r  1.565  307,774 153,607  101,565  and Storage  82,263  27,1^7  S p e c i a l Equipment and Miscellaneous  46.440  11.610  T r a v e l and Lodging Food and A l c o h o l Taxidermy  #591,649  Labour  38,402  #180,289  I assume t h a t 33$ of expenditures on s e r v i c e s and 25% on r e t a i l expenditures r e p r e s e n t L o c a l Value added. Source:  The f i g u r e s i n column (1) were obtained-from P e t e r H. Pearse and Gary Bowden, B i g Game Hunting i n the East Kootenay, Study Report No. 1 on the Economics of W i l d l i f e and R e c r e a t i o n , sponsored by the F i s h and W i l d l i f e Branch o f the Department of R e c r e a t i o n and C o n s e r v a t i o n , V i c t o r i a , B.C., 1966, p. 26.  TABLE I I I Income a c c r u i n g t o Residents of the East Kootenay from Annual Expenditures by Non29 r e s i d e n t Hunters on East Kootenay Hunting Non-resident hunters a r e hunters from other p a r t s of B.C., Canada and the U.S.A. Annual Value Annual Expenditures Added by R e s i "incurred in Annual Expenditures dents o f East E a s t Kootenay Kootenay i n c u r r e d i n B.C. (2) (3) (1) Guides'and Packers' Pees and Horse H i r e  $ 396,246  ^396,246  T r a v e l and Lodging  305,707  ,229,280  75*662  Food and A l c o h o l  258,589  i93.942  48,486  35,102  26,327  8,688  Taxidermy and Storage S p e c i a l Equipment and Miscellaneous  §7t7fl> pi, 083,394  ^ 8l3 tell,608 k  y  #396,246  16^ fW57535  The expenditures i n column (1) were i n c u r r e d i n B.C. by non-resident hunters on h u n t i n g i n the E a s t Kootenay. I assume that J/4 of these expenditures were i n c u r r e d i n the East Kootenay. ( A l l of the expenditure on guides* and packers' f e e s and horse h i r e was made i n the East Kootenay.) I assume t h a t 3 3 $ of expenditures i n c u r r e d i n E a s t Kootenay on s e r v i c e s and 25% of expenditures on r e t a i l Items i n the E a s t 'Kootenay r e p r e s e n t e d v a l u e added by E a s t Kootenay r e s i d e n t s . Source:  The f i g u r e s i n column (1) were obtained from P e t e r H. Pearse and Gary Bowden, B i g Game Hunting In the East Kootenay, Study Report No. 1 on the Economics of W i l d l i f e and R e c r e a t i o n , sponsored by the F i s h and W i l d l i f e Branch of the Department of R e c r e a t i o n and Conservation, V i c t o r i a , B.C., 1966, p. 26.  30. The t o t a l annual revenue a c c r u i n g t o l o c a l l a b o u r from  the  present s t a t e of h u n t i n g i n the E a s t Kootenay i s t h e r e f o r e  $725,824.  I assume t h a t h a l f of the acreage  i n the East 30  Kootenay c o n t a i n i n g c o a l r e s e r v e s i s h e l d by K a i s e r .  If  the w i l d l i f e were spread evenly over a l l ranges, the maximum  foregone l o c a l income from the h u n t i n g i n d u s t r y i n the  f i r s t year of the c o a l development would be  $362,912.^  The  f u t u r e o p e r a t i o n s of o t h e r c o a l o p e r a t o r s i n the East Kootenay will  i n c r e a s e the magnitude of foregone revenue.  Local i n -  come from h u n t e r s ' expenditures a l s o r e s u l t s i n a m u l t i p l i e r e f f e c t i n the E a s t Kootenay. does not c o n s i d e r the foregone The  The above f i g u r e of  $362,912  income from the m u l t i p l i e r .  s p o r t f i s h e r y of the E l k R i v e r V a l l e y i s p o p u l a r  w i t h fishermen.  The a r e a abounds w i t h Rainbow, C u t - t h r o a t  and E a s t e r n Brook Trout as w e l l as D o l l y Varden and Koka32 nee.  S u l p h u r i c a c i d forms when water comes i n t o c o n t a c t  with c o a l .  Crows Nest I n d u s t r i e s L t d . had caused water p o l -  l u t i o n and d e s t r u c t i o n of f i s h by l o c a t i n g s l a g heaps ad33 jacent t o s t r e a m s . D a t a  i s not a v a i l a b l e on past  annual  income obtained by r e s i d e n t s from expenditures by r e s i d e n t and non-resident s p o r t fishermen. income may  be foregone  A p o r t i o n of annual  local  i f adequate care i s not taken t o p r e -  vent water p o l l u t i o n and s i l t a t i o n of  streams.  I assume t h a t i n the absence of c o a l mining,  income a c -  c r u i n g t o r e s i d e n t s from t o u r i s m and hunting would have i n creased c u m u l a t i v e l y by 10 production.  per cent d u r i n g every year of c o a l  I assume t h a t a l l of t h i s revenue i s foregone.  31. Table  IV p r e s e n t s  h u n t i n g and  t o u r i s m over the f i f t e e n years  34  duction.  the annual l o c a l income foregone from of c o a l pro-  I assume t h a t i n the absence of the c o a l  de-  velopment, the annual r a t e of growth of l o c a l income from /  i'  t o u r i s m and h u n t i n g would have been h i g h . Hunting p r o v i d e s an important source of r e c r e a t i o n t o r e s i d e n t s , s i n c e over 55  per cent of the hunter-days spent  35 i n the East Kootenay i s a t t r i b u t a b l e t o l o c a l  hunters.  A s i g n i f i c a n t p r o p o r t i o n of the l o c a l male p o p u l a t i o n hunts.  Hunting expenditures  i n c u r r e d by r e s i d e n t s of  East Kootenay do not take i n t o account the consumers s u r p l u s obtained  by l o c a l hunters.  q u a l i t y of h u n t i n g consumers' s u r p l u s .  the  1  D e t e r i o r a t i o n of  the  i n the East Kootenay w i l l decrease t h i s L o c a l hunters may  f o r the same q u a l i t y of hunting  spend more elsewhere  experience.  ( i i ) Summary of B e n e f i t s and  Costs i n c l u d i n g I n t a n g i b l e s  T a b l e V p r e s e n t s a summary of the sources of b e n e f i t s and  c o s t s from the p o i n t of view of r e s i d e n t s ? l i v i n g i n the  E a s t Kootenay p r i o r to the development. some i n t a n g i b l e b e n e f i t s and above d i s c u s s i o n .  The  table includes  c o s t s not considered  i n the  When c o n s i d e r i n g the n e g a t i v e e x t e r n a l i t y  e f f e c t s on the community from a i r and water p o l l u t i o n , i t must be noted t h a t p o l l u t i o n had a l r e a d y been p r e v a l e n t the area due The  t o the o p e r a t i o n s  of Crows Nest I n d u s t r i e s L t d .  b e n e f i t - c o s t t a b l e does not  i n c l u d e the two  homes to be b u i l t by K a i s e r f o r the c o a l miners. w i l l be l e a s e d by K a i s e r and t h e i r users.  in  hundred  These homes  t h e r e f o r e l a r g e l y p a i d f o r by  However, c o n s t r u c t i o n of the homes w i l l  represent  32 TABLE IV P r o j e c t e d Annual Loss of L o c a l Income from d e c l i n e of Hunting and Tourism i n the E a s t Kootenay Years of Goal P r o d u c t i o n  Loss of L o c a l Income  1 2 "3 4 5 6 7 8 9 10 11 12 1 3 14 15  $ 419,752 461,727 507,900 558,690 614,559 676,015 743,617 817,979 899,777 989,755 1,088,731 1,197,604 1,317,364 1,449,100 1,59^,010  a small amount o f b e n e f i t t o r e s i d e n t s , because K a i s e r Resources L t d . w i l l l e a s e o r s e l l these homes a t lower than  36 prevailing interest rates.  I assume t h a t expenditure on  r e s i d e n t i a l housing i s i n c l u d e d i n consumption and t h e r e f o r e t h a t the income e f f e c t o f the c o n s t r u c t i o n has a l r e a d y been i n c l u d e d i n the m u l t i p l i e r e f f e c t caused by p a y r o l l income.  The o p p o r t u n i t y  cost of c o n s t r u c t i o n l a b o u r  i s as-  sumed t o be low and a l l l a b o u r used i n c o n s t r u c t i o n i s obtained  locally.  The  e f f e c t o f the p e r s o n a l  income t a x has not been  taken i n t o account i n the estimates o f i n c r e a s e d p a y r o l l income and i t s m u l t i p l i e r e f f e c t o r i n the estimates of l o c a l income foregone duetto a d e c l i n e i n t o u r i s m and hunting.  Since  I assume t h a t unemployed l a b o u r w i l l be taken  up by the c o a l p r o j e c t , w e l f a r e  payments t o r e s i d e n t s  will  TABLE V Sources o f B e n e f i t s and Costs from the " p o i n t of view" of R e s i d e n t s of the E a s t Kootenay due t o the c o a l p r o j e c t of K a i s e r Resources L t d . ( r e s i d e n t s are l i m i t e d t o those who l i v e d i n the E a s t Kootenay p r i o r t o the development) D e s c r i p t i o n of Annual Gross B e n e f i t s  Annual Gross Benefits  D e s c r i p t i o n of Annual Gross Costs  Annual Gross Costs  (A) Primary Income B e n e f i t s  (A) P r i m a r y I n c o m e  ( 1 ) Annual P a y r o l l Income t o accrue to the 500 l o c a l workers p r e v i o u s l y employed i n the c o a l mining operations of Crows Nest Industries L t d . plus  ( 1 ) O p p o r t u n i t y c o s t of the 500 l o c a l workers p r e v i o u s l y employed i n t h e c o a l mining o p e r a t i o n s of Crows Nest Industries Ltd. plus the o p p o r t u n i t y c o s t of the add i t i o n a l 200 l o c a l workers t o be emp l o y e d by K a i s e r from the f i r s t t o t h e f i f t e e n t h y e a r of p r o duction.  Annual P a y r o l l Income t o accrue to the a d d i t i o n a l 200 l o c a l workers t o be employed by K a i s e r from t h e f i r s t t o the f i f t e e n t h year o f p r o d u c t i o n . (The net b e n e f i t t o l o c a l l a b o u r w i l l occur In the form of the i n crease i n the wages of the 500 workers p r e v i o u s l y employed by Crows Nest I n d u s t r i e s Ltd. i n c o a l mining operations p l u s the i n c r e a s e s i n the wages of the add i t i o n a l 200 l o c a l workers t o be employed.)  r,  666,662  Costs  13,333,330  TABLE V (Continued) D e s c r i p t i o n of Annual Gross B e n e f i t s  Annual Gross Benefits  D e s c r i p t i o n of Annual Gross Costs  (2)  $1,912,500  (2)  (3)  Annual C o n s t r u c t i o n Income a c c r u i n g t o l o c a l labour d u r i n g the f i r s t s and the second years of the p r o j ect. Income t o l o c a l c a p i t a l and other l o c a l i n p u t s , employed by f i r m s a l r e a d y e s t a b l i s h e d i n the East Kootenay, used i n producing opera t i n g s u p p l i e s and f i x e d p l a n t and equipment f o r the c o a l development.  Data not a v a i l - (3) able. I assume that the income w i l l be low, because K a i s e r w i l l o b t a i n most of i t s operating s u p p l i e s and e% qulpment from other p a r t s of B.C., Canada and the U.S.A.  (B) Secondary Income B e n e f i t s (4)  Annual secondary b e n e f i t a c c r u i n g t o l o c a l l a b o u r from a r e g i o n a l income m u l t i p l i e r of 1.3* The income m u l t i p l i e r w i l l r e s u l t i n an expansion of l o c a l s e r v i c e and r e t a i l i n d u s t r i e s i n which there was excess c a p a c i t y p r i o r t o the development.  Annual Gross Costs  Opportunity cost of the l o c a l l a bour employed i n the c o n s t r u c t i o n phase. Opportunity cost of the l o c a l i n puts used i n p r o ducing operating s u p p l i e s and f i x e d p l a n t and equipment f o r the c o a l development.  Data not available. I assume the opport u n i t y cost w i l l be large.  Secondary Income Costs $  800,000  Opportunity cost of l o c a l l a b o u r .  Low  TABLE V  (Continued)  Annual Gross D e s c r i p t i o n of Annual Gross Benefits..., B e n e f i t s  D e s c r i p t i o n of Annual Gross Costs  Annual Gross Costs  (5)  C a p i t a l Loss on prope r t y owned by r e s i dents i n the E a s t Kootenay, due t o p o l l u t i o n and d e c l i n e of tourism.  Data not available.  C a p i t a l g a i n on p r o p e r t y owned by r e s i d e n t s i n the E a s t Kootenay. The c a p i t a l g a i n w i l l occur i n the f i r s t year of the p r o j e c t . Value of property i n down-town Fernie w i l l increase.  (C) I n t a n g i b l e B e n e f i t s and Externalities  Positive  Data not available.  (C) I i t a n g l b l e Costs and Externalities  Negative  (6)  (6) Loss of l o c a l income i n the f i r s t y e a r of c o a l p r o d u c t i o n due t o a dec l i n e i n the l o c a l gross revenue obtained from the e x i s t i n g s t a t e of tourism.  (7)  (?)Decrease i n v a l u e added by l o c a l l a b o u r from r e s i d e n t and n o n - r e s i dent h u n t e r s ' expendit u r e s i n the E a s t Kootenay. Non-resident hunters are from other a r e a s of B.C., Canada and the U.S.A. The ex-  $56,840  $362,912  TABLE V  D e s c r i p t i o n of Annual Gross B e n e f i t s  (Continued) D e s c r i p t i o n of Annual Gross Costs  Annual Gross Benefits  Annual Gross Costs  penditures referred t o a r e i n c u r r e d on h u n t i n g i n t h e E a s t Kootenay. S t r i p mining and the l o c a t i o n of industry i n the E l k River V a l l e y w i l l r e s u l t i n the l o s s of w i n t e r f e e d i n g ranges. Water and a i r p o l l u t i o n w i l l a l s o be d e t r i m e n t a l t o w i l d l i f e and t o the q u a l i t y of h u n t i n g . The f i g u r e represents f o r e gone l o c a l income i n the f i r s t y e a r of c o a l p r o duction. (8)  (  I assume t h a t i n the ab- Items sence of the c o a l de(6) and velopment, l o c a l income (7) a r e from t o u r i s m and h u n t i n g added and would have expanded cumu- a r e i n l a t i v e l y by 10% each year, creased I assume t h a t a l l of the cumui n c r e a s e w i l l be foregone, l a t i v e l y by 10% each year  TABLE V (Continued)  D e s c r i p t i o n of Annual Gross B e n e f i t s  D e s c r i p t i o n of Annual Gross C o s t s  Annual Gross Benefits  Annual Gross Costs from the 2 n d t o the 1 5 t h year of product i o n to p r o duce the annual l o s s of revenue from t o u r i s m and h u n t i n g .  (9)  (9)  Annual l o s s of l o c a l data not income from n o n - r e s i - a v a i l a b l e , dent and r e s i d e n t sport f i s h e r m e n , due t o d e t e r i o r a t i o n of the environment and the sport f i s h e r i e s , caused by water p o l l u t i o n and s i l t a t i o n .  (10)  (10)  Decrease i n t h e ennon-estimjoyment from h u n t i n g a b l e , and the outdoors by r e s i d e n t s of the E a s t Kootenay. Denser p o p u l a t i o n and the det e r i o r a t i o n of the q u a l i t y of the e n v i r o n ment may a l s o be a d i s b e n e f i t t o r e s i d e n t s of the a r e a .  TABLE V (Continued)  D e s c r i p t i o n of Annual Gross B e n e f i t s  Annual Gross Benefits  (11) The c u l t u r a l a c t i v i t i e s a v a i l a b l e to residents are l i k e l y to i n crease due t o the expansion of p o p u l a t i o n i n the East Kootenay. A g r e a t e r v a r i e t y of s e r v i c e s and goods i n r e t a i l s t o r e s w i l l be a v a i l a b l e t o r e s i d e n t s .  non-estimable.  non-estimable. (12) The s o c i a l b e n e f i t due t o the t r a i n i n g of inexperienced workers as c o a l miners. The t r a i n i n g w i l l be provided by K a i s e r .  D e s c r i p t i o n of Annual Annual Gross Costs Gross Costs (ID  (12) The cost of t r a i n i n g r e s i d e n t s as c o a l miners w i l l be borne by K a i s e r and not by the community. Theref o r e , the s o c i a l opp o r t u n i t y cost of the t r a i n i n g t o the community w i l l be n e g l i gible.  39. also decline.  This effect  i s a l s o not taken i n t o account i n  the b e n e f i t - c o s t t a b l e . I have a l s o not table.  i n c l u d e d the u s e r cost of c o a l i n the  The.marginal u s e r cost i s "the present  value  of  the  f u t u r e p r o f i t foregone by a d e c i s i o n t o produce a u n i t of output  today."37 I do not expect the p r i c e of h i g h q u a l i t y  coking  c o a l t o i n c r e a s e i n the world market i n the  World supply do not  future.  of c o a l i s abundant r e l a t i v e t o demand, and  expect t h i s s i t u a t i o n t o c h a n g e . T h e c o a l  with M i t s u b i s h i S h o j i Kaisha was  obtained  I  contract  because K a i s e r  was  a b l e t o lower the d e l i v e r e d p r i c e of c o a l i n Japan by  apply-  i n g cost r e d u c i n g  inter-  technology.  I t would not be i n the  est of the East Kootenay t o decrease the r a t e a t which c o a l w i l l be mined by K a i s e r , s i n c e i n c r e a s e s p r i c e s are u n l i k e l y .  i n future coal  I assume t h a t K a i s e r has  of output which i s e f f i c i e n t .  chosen a r a t e  I t must a l s o be p o i n t e d  out  t h a t u s e r cost i s a r e l e v a n t c o n s i d e r a t i o n t o East Kootenay r e s i d e n t s only i f the p o s s i b l e i n c r e a s e d present net p r o f i t s by d e l a y i n g p r o d u c t i o n t o them.  and  of  were i n p a r t d i s t r i b u t e d  However, user cost i s an important  from the p o i n t of view of B.C.  value  consideration  Canada, s i n c e  increased  f a c t o r income ( i n c l u d i n g r e t a i n e d earnings) would be  forth-  coming i f the marginal u s e r cost exceeded the marginal p r o f i t from p r o d u c t i o n The  today.  marginal u s e r cost would be zero i f the i n t e r e s t  r a t e were i n f i n i t e l y l a r g e or i f a d e l a y i n c o a l  production  would mean d i s c o n t i n u a t i o n of f u t u r e p r o d u c t i o n .  Whether  m  39a  another  f i r m would have r e v i t a l i z e d c o a l mining i n the a r e a ,  i n the absence of K a i s e r Resources L t d . , i s u n c e r t a i n .  It  i s c o n c e i v a b l e t h a t a Canadian producer might have i n c r e a s e d c o a l p r o d u c t i o n i n the E a s t Kootenay i n the f u t u r e .  The  present v a l u e of income a c c r u i n g t o Canadian f a c t o r s might have been h i g h e r than t h a t produced by K a i s e r , which i s a s u b s i d i a r y of a U n i t e d S t a t e s f i r m . of net revenue a c c r u i n g t o B.C.  While the present  value  and Canada might have i n -  creased, E a s t Kootenay r e s i d e n t s might not have gained by a delay i n production.  A crown c o r p o r a t i o n might a l s o have  been e s t a b l i s h e d by the f e d e r a l government to i n c r e a s e c o a l production. (d) B e n e f i t - C o s t A n a l y s i s T a b l e VI p r o v i d e s the annual gross b e n e f i t s and  costs  a t t r i b u t a b l e t o the c o a l p r o j e c t , the annual net b e n e f i t s and the present v a l u e of the annual net b e n e f i t s f o r each year of p r o j e c t l i f e . f i t s and  T a b l e VI i n c l u d e s only those bene-  c o s t s on which money v a l u e s have been p l a c e d .  measurable i n t a n g i b l e b e n e f i t s and  c o s t s a r e not i n c l u d e d  i n T a b l e VI or i n the c a l c u l a t i o n of the cumulative v a l u e of net b e n e f i t s .  Un-  present  40 Under the present  c o n t r a c t the p r o j e c t w i l l  c o a l f o r f i f t e e n - y e a r s . While continued  produce  coal production  is  l i k e l y beyond t h i s date, I assume t h a t the p r o j e c t ends a f t e r the present  sales contract  i s completed.  l e n g t h of p r o j e c t l i f e w i l l be 16  years,  w i l l be devoted t o c o n s t r u c t i o n and cur.  I assume t h a t s i n c e the f i r s t  no p r o d u c t i o n  In the second year both c o n s t r u c t i o n and  t i o n w i l l take p l a c e .  the  will  year  oc-  c o a l produc-  I assume t h a t revenue foregone from  t o u r i s m and h u n t i n g commences i n the second year of  the  project. Several discount  r a t e s are used t o show the e f f e c t  d i f f e r e n t r a t e s on the cumulative present urable benefits.  I n t e r e s t r a t e s of 8% and  flect  the o p p o r t u n i t y  1969,  as determined by present  est  r a t e s of 16%  value  and  of  of net meas-  9% are used t o r e -  c o s t of c a p i t a l to a p u b l i c agency i n  18%  economic c o n d i t i o n s .  are used to r e f l e c t  c o s t of c a p i t a l t o a p r i v a t e f i r m i n 1 9 6 9 . income t a x i s considered  i n the l a s t  two  the The  Inter-  opportunity corporation  interest rates.  I  assume t h a t the f i r s t year of the p r o j e c t takes p l a c e In present.  Therefore  the  I b e g i n d i s c o u n t i n g annual net measurable  b e n e f i t s i n the second year. The  cumulative present  values  of net measurable b e n e f i t s  are $ 1 5 , 3 1 2 , 2 8 4 ; $ 1 4 , 7 1 ? , 9 8 3 ; $11,606,882 and when i n t e r e s t r a t e s of 8%,< 9%, tively.  16%  and  Changing the i n t e r e s t r a t e has  $11,010,596  18%. a r e used  respec-  not a f f e c t e d the  con-  c l u s i o n t o be drawn from the a n a l y s i s , when only measurable b e n e f i t s and  c o s t s are considered,  which i s t h a t the p r o j e c t  TABLE VI Cumulative Present Value of Net B e n e f i t s from " p o i n t of view" o f R e s i d e n t s ,  living  In the East Kootenay p r i o r t o the development, due t o the c o a l p r o j e c t o f K a i s e r Resources Ltd* Year of P r o j e c t  1 2 3 4 ,. 5 6 7 8 9 10 11 12 1 3 14 15 16  Annual Gross. B e n e f i t s  $1,912,500 7,379,162 5,466,662 5,466.662 5,466,662 5,466,662  5,466,662 5,466,662 5,466,662 5,466,662 5,466,662 5,466,662 5,466,662 5,466,662 5,466,662 5,466,662  Annual Gross Costs  0 $3,753,082 3,795,057 3,841,230 3,892,020 3,947,889 4,009,345 4,076,947 4,151,309 4,233,107 4 ,323,085 4,422,061 4,530,934 4,650,694  Annual Net B e n e f i t s  $1,93/2,500 3,626,080 1,671,605 1,625,432 1,574,642 1,518,773 1,457,317 1,389,715 1,315.353 1,233.555 1.143.577 1,044,601 935.728  4,782,430  4,927,340  The b e n e f i t s and costs a r e those which a r e measurable i n money v a l u e s .  815,968  684,232  539,322  TABLE VI (Continued) Year of Project  PV of Net Benefits ® 8%  1 2 3 4 5 6 7 8 9 10 11 12 1 3 14 1 5 16  11,912,500 3,372,254 1,437,580 1,284,091 1,165,235 1,032,766 918,110 806,035 710,291 616,778 526,045 449,178 374,291 301,908 232,639 172,583  Cumulative Present Value of Net B e n e f i t s = $15312,284  PV of Net Benefits  PV of Net Benefits @ 16%  PV of Net Benefits @ 18%  $1,912,500 3,335.99^ 1,404,148 1.251,583 1,117,996 987,203 874,390 7 64,343 657*677 567,435 480,302 407,394 336,862 269,269 205,270  $1,912,500  $1,912,500  145,617.  •  $14,717,983  3.118,429  1,236,988 1,040,277 866,053  729.011 597,500 486,400 407,759 320,724 263,023 198,474 159,074 122,395 88,950 59,325  $11,606,882  3,082,168  1,203.556 9 91,514 818,814 668,260 539,207 430,812 355.145 283,718 217,280 167.136  131,002 97.916 68,423 43,146  $11,010,596  43. is  e f f i c i e n t and  should be continued.  However, the l e n g t h  of  p r o j e c t l i f e assumed i n t h i s a n a l y s i s may  have, a  signif-  i c a n t e f f e c t on the cumulative present v a l u e of net measurable benefits.  I f the p r o j e c t l i f e were extended by p e r -  haps another f i f t e e n years, the present v a l u e of measurable c o s t s , due; t o i n c r e a s e d foregone revenue from h u n t i n g  and  tourism, might have exceeded the present'. v a l u e of the measurable b e n e f i t s .  I have assumed a v e r y r a p i d r a t e of r e v -  enue growth from h u n t i n g and t o u r i s m i n the absence of the coal project. i n foregone  The 10 per cent cumulative annual  increase  revenue would not continue, i n d e f i n i t e l y ,  be-  cause t h e r e a r e l i m i t s on the maximum a b i l i t y of the a r e a to  sustain wildlife.  reduced of  by overcrowding.  i n c r e a s e i n foregone  s t a n t annual of  The q u a l i t y of h u n t i n g i s a l s o s e v e r e l y  foregone  A f t e r a number of y e a r s , the r a t e revenue w i l l decrease and a con-  revenue w i l l p r e v a i l .  I f the e x i s t e n c e  e c o n o m i c a l l y e x p l o i t a b l e c o a l r e s e r v e s were the only con-  s i d e r a t i o n f o r continued c o a l p r o d u c t i o n by K a i s e r , then c o a l p r o d u c t i o n c o u l d continue f o r a s u b s t a n t i a l p e r i o d a f t e r 39 the present c o n t r a c t . I t must a l s o be p o i n t e d out t h a t I assumed t h a t a l l of the l o c a l income p r e s e n t l y obtained from t o u r i s m and w i l l be foregone due  to the p r o j e c t .  s i d e r a t i o n , the cumulative  hunting  Taking t h i s i n t o con-  present v a l u e s of net measurable  b e n e f i t s a r e l i k e l y t o be u n d e r s t a t e d .  I o v e r s t a t e d the  magnitude of t h i s n e g a t i v e e x t e r n a l i t y e f f e c t , because the magnitude i s u n c e r t a i n and  I wished t o s u b j e c t the p r o j e c t  44.  t o a severe t e s t . The  cumulative present v a l u e s of net measurable bene-  f i t s obtained do not take i n t o account due  the i n t a n g i b l e c o s t s  t o p o l l u t i o n , d e t e r i o r a t i o n of the environment, and  de-  c l i n e of the enjoyment obtained by l o c a l r e s i d e n t s from h u n t i n g and f i s h i n g . account  The  c a l c u l a t i o n s a l s o do not take  into  the l o s s of l o c a l revenue from the s p o r t f i s h e r y . .  From t h i s p o i n t of view, the cumulative present v a l u e s of net measurable b e n e f i t s a r e overstatements the p r o j e c t .  of the worth of  The unmeasurable i n t a n g i b l e b e n e f i t s a r e a l s o  not c o n s i d e r e d i n the cumulative present v a l u e s c a l c u l a t e d . I n o r d e r t o reach a d e c i s i o n on the d e s i r a b i l i t y of the p r o j e c t , the cumulative present v a l u e of net unmeasurable i n t a n g i b l e s must be compared with the cumulative v a l u e of net measurable b e n e f i t s .  present  The p r o j e c t should be  d i s c o n t i n u e d i f the cumulative present value of net unmeasu r a b l e i n t a n g i b l e s i s n e g a t i v e and exceeds i n magnitude the cumulative present v a l u e of net measurable b e n e f i t s .  At  9% the cumulative present v a l u e of net unmeasurable i n t a n g i b l e s would have t o be - $ 1 4 , 7 1 7 , 9 8 3 t o r e q u i r e t e r m i n a t i o n 40  of the p r o j e c t .  However, i f the measurable negative  ex-  t e r n a l i t y e f f e c t s on h u n t i n g and t o u r i s m have been overestimated, then a s t i l l  g r e a t e r n e g a t i v e cumulative present .  v a l u e of net unmeasurable i n t a n g i b l e s c o u l d be borne by  the  community without r e q u i r i n g t e r m i n a t i o n of the p r o j e c t .  The  measurable b e n e f i t s and c o s t s must be good estimates i n o r d e r t o determine  what cumulative present v a l u e of net  un-  measurable i n t a n g i b l e s would r e q u i r e d i s c o n t i n u a t i o n of the  45. project. I t i s the r e s p o n s i b i l i t y of the community or l o c a l government t o e v a l u a t e the net unmeasurable i n t a n g i b l e s the l i f e of the p r o j e c t .  An  evaluation  over  can only be accom-  p l i s h e d by r e f e r r i n g to the v a l u e judgments s p e c i f i e d i n a p o l i t i c a l consensus ,or by d e s i g n a t i n g count.  Only i n t h i s way  whose v a l u e s are  can a d e c i s i o n be made concerning  the r e l a t i v e d e s i r a b i l i t y of i n c r e a s e d  regional  r e s i d e n t s l i v i n g i n the E a s t Kootenay before the v e r s u s the q u a l i t y of the  to  environment.  income t o project  CHAPTER IV Summary and The  cumulative  Conclusions  present v a l u e s of net measurable bene-  f i t s from the K a i s e r p r o j e c t are  $11,606,882 and $11,010,596  $15,312,284;  $14,717,983;  when i n t e r e s t r a t e s of 8%,  16% and 18% a r e used r e s p e c t i v e l y .  The  9%*  c o a l development  w i l l produce n e g a t i v e e x t e r n a l i t y e f f e c t s i n the E a s t Kootenay i n the form of p o l l u t i o n , d e t e r i o r a t i o n of the environment and a d e c l i n e i n the enjoyment of r e s i d e n t s from hunting and the outdoors.  These e x t e r n a l i t y  effects  a r e unmeasurable i n t a n g i b l e c o s t s , which are not taken account  i n the present v a l u e c a l c u l a t i o n s .  into  In a d d i t i o n to  the above e x t e r n a l i t i e s , l o c a l v a l u e added from the expendi t u r e s of r e s i d e n t and non-resident hunters and from t o u r ism w i l l d e c l i n e .  These measurable e x t e r n a l i t i e s have been  taken i n t o account  i n the present v a l u e c a l c u l a t i o n s .  I  assume t h a t i n the absence of the c o a l development, l o c a l v a l u e added from h u n t i n g and t o u r i s m would have i n c r e a s e d rapidly.  The above cumulative  present v a l u e s of net meas-  u r a b l e b e n e f i t s are understatements, foregone  l o c a l income i s o v e r s t a t e d .  t a n g i b l e b e n e f i t s due  i f the magnitude of The unmeasurable i n -  to t r a i n i n g and a p o t e n t i a l i n c r e a s e  i n the c u l t u r a l a c t i v i t i e s of the community a r e a l s o not c o n s i d e r e d i n the The  calculations.  cumulative  present v a l u e s of net measurable bene-  f i t s were c a l c u l a t e d from the p o i n t of view of r e s i d e n t s  4?. l i v i n g i n the East Kootenay p r i o r t o the development. b e n e f i t s and  The  c o s t s do not n e c e s s a r i l y represent those a t -  t r i b u t a b l e t o the p r o j e c t from the p o i n t of view of a l l B r i t i s h Columbia r e s i d e n t s . The K a i s e r p r o j e c t may  a l s o have an i n t e r r e g i o n a l i n -  come r e d i s t r i b u t i o n e f f e c t which has not "been examined. While b e n e f i t s w i l l accrue to r e s i d e n t s i n other r e g i o n s of B r i t i s h Columbia from p r o v i n c i a l tax revenues^" and a  decrease  i n w e l f a r e payments t o the E a s t Kootenay, c o s t s w i l l a l s o be borne i n the form of the n e g a t i v e e x t e r n a l i t y e f f e c t s r e s i d e n t s of the Lower Mainland f a c i l i t i e s and the p o r t .  due t o the r a i l w a y access  A decrease  i n the revenue obtained  from B r i t i s h Columbia l i c e n c e f e e s from non-resident and  on  hunters  i n the q u a l i t y of h u n t i n g obtained by r e s i d e n t s f o r the  same expenditure w i l l a l s o be c o s t s a t t r i b u t a b l e t o the p r o j ect.  From the p o i n t of view of r e s i d e n t s i n other r e g i o n s  of B r i t i s h Columbia, the cumulative present v a l u e of a l l c o s t s may fits.  exceed the cumulative present value of a l l bene-  I f t h i s i s the case, an i m p l i c i t t r a n s f e r of income  i s t a k i n g p l a c e between other r e g i o n s of B r i t i s h and the E a s t Kootenay. cause of the depressed  T h i s may  Columbia  be deemed d e s i r a b l e , be-  s t a t e of the E a s t Kootenay economy.  However, the K a i s e r p r o j e c t w i l l only be  j u s t i f i e d on income  r e d i s t r i b u t i o n grounds, i f the p o s i t i v e cumulative  present  2 value  of a l l b e n e f i t s l e s s a l l c o s t s from t h e , p o i n t of view  of East Kootenay r e s i d e n t s exceeds the n e g a t i v e  cumulative  present v a l u e of a l l b e n e f i t s l e s s a l l c o s t s t o the r e s t B r i t i s h Columbia.  Otherwise,  of  the r e s i d e n t s of o t h e r r e g i o n s  48. c o u l d r e d i s t r i b u t e income by a simple t r a n s f e r t o the East Kootenay a t l e s s cost than they would i n c u r due t o the Kaiser project.  ,  ,  Coal p r o d u c t i o n w i l l probably continue i n the East Kootenay f o r a s u b s t a n t i a l p e r i o d of time a f t e r the of the present c o a l c o n t r a c t . K a i s e r p r o j e c t may  termina-  The l o n g - r u n e f f e c t of the  be disadvantageous  with r e g a r d to both  the l e v e l of per c a p i t a income and the s o c i a l w e l f a r e of r e s i d e n t s i f the c o a l development encourages l o c a l l a b o u r t o r e l y h e a v i l y on c o a l mining f o r economic support and  i f resi-  dents a r e not o c c u p a t i o n a l l y and/or g e o g r a p h i c a l l y adaptable 3 i n the f u t u r e when the c o a l i n d u s t r y d e c l i n e s . s t a p l e p r o d u c t i o n expands or develops  I f other  i n the East Kootenay  i n the f u t u r e , the requirement  f o r labour emigration a f t e r  the d e c l i n e of c o a l mining may  be  reduced.  East Kentucky i s an example of an a r e a which  experienced  h i g h average unemployment and a low per c a p i t a income, because l o c a l l a b o u r was  unable t o adapt i n other areas  the d e c l i n e of c o a l mining. Kentucky l a b o u r was  low.  The  The  after  e d u c a t i o n a l l e v e l of East  i n d u s t r y of the r e g i o n had  not  been a b l e to absorb the l o c a l l a b o u r r e l e a s e d from c o a l mining. ^ In c o n c l u s i o n , while the K a i s e r p r o j e c t i s d e s i r a b l e on the b a s i s o f the cumulative :  present value of net measur-  a b l e benefits,fche unmeasurable i n t a n g i b l e b e n e f i t s and must a l s o be taken i n t o account. t h a t the cumulative  costs  I f the community d e c i d e s  present v a l u e of net unmeasurable i n t a n -  49. g i b l e s i s n e g a t i v e and exceeds i n magnitude the  cumulative  present v a l u e of net measurable b e n e f i t s , the K a i s e r p r o j ect should be terminated, p r o v i d e d t h a t the measurable benef i t s and c o s t s are good estimates. cumulative  I t i s p o s s i b l e t h a t the  present v a l u e of net i n t a n g i b l e s may be p o s i t i v e ,  i n which case the p r o j e c t xrould d e f i n i t e l y be d e s i r a b l e from the p o i n t of view of the East Kootenay. l i k e l y t o be an important  Intangibles are  d e c i d i n g f a c t o r , s i n c e the per  c a p i t a present value of net measurable b e n e f i t s i s low.  FOOTNOTES Chapter  I  1 Bryce W i l l i a m s , "Time f o r S t r i p Mine Law Is Right Now, Says E x p e r t , " The Vancouver Sun, Vancouver, Monday, 27 January, 1 9 6 9 , pp. 1-2. 2 Bob McMurray, Business E d i t o r , "The Coal C o n f l i c t , " The P r o v i n c e . Vancouver, Wednesday, 29 January, 1 9 6 9 , p. 13. A d e s c r i p t i o n of the s t r i p mining t o be undertaken by K a i s e r Resources L t d . i s p r o v i d e d i n (A) of Appendix I. 3 Crows Nest I n d u s t r i e s L t d . had employed a c o s t l y form of r a i l t r a n s p o r t a t i o n and m a t e r i a l s h a n d l i n g techniques. Other competitors were c l o s e r t o m e t a l l u r g i c a l markets than Crows Nest I n d u s t r i e s L t d . The importance of l o w e r i n g t r a n s p o r t a t i o n c o s t s f o r Crows Nest was t h e r e f o r e g r e a t e r than f o r o t h e r competitors. 4 I.S. Ross, President,. Swan Wooster E n g i n e e r i n g Co. L t d . , Coal a t Roberts Bank - Now a R e a l i t y , paper presented a t the Twentieth Dominion - P r o v i n c i a l Conference on C o a l , Quebec C i t y , Quebec, 12 and 13 September, I 9 6 8 , p. 4 . 5 "Roberts Bank i n s t e p w i t h superport t r e n d , " The Vancouver, Tuesday, 3 June, 1 9 6 9 , p. 17A.  Province,  6 Canada, F u e l s and Mining P r a c t i c e D i v i s i o n , Mines Branch, Department of Energy, Mines and Resources, T . E . ^ T i b b e t t s and J.C. Botham, "Coal and Coke," Canadian M i n e r a l s Yearbook: 1 9 6 6 . p r e p r i n t s , no. 15, Queen's P r i n t e r , Ottawa, 1 9 6 5 , 1966, 1967,  P.  5.  7 P a r t (A) of Appendix I I and p a r t s (B) and (C) of Append i x I c o n t a i n a more d e t a i l e d d i s c u s s i o n of the h i s t o r y of c o a l mining i n the E a s t Kootenay, the reasons f o r " i t s dec l i n e and the c o s t r e d u c i n g technology and other f a c t o r s which have l e d t o i t s r e v i t a l i z a t i o n . 8 E x e c u t i v e D i r e c t o r and T e c h n i c a l S t a f f of the B.C. Lower Mainland R e g i o n a l P l a n n i n g Board, " R a i l S e r v i c e t o the . Roberts Bank P o r t F a c i l i t y , " 5, Submissions t o the Aug. 28 p u b l i c h e a r i n g on the proposed B.C. Hydro r a i l r o u t e from Matsqul t o Roberts Bank, 28 August, 1 9 6 8 , pp. 11-15. 9 F o r a d i s c u s s i o n of the i n d u s t r i a l s t r u c t u r e and p r i o r c o n d i t i o n of the E a s t Kootenay economy r e f e r t o p a r t (B) of Appendix I I .  51. 10 P e t e r H. Pearse and the East Kootenay, Study W i l d l i f e and R e c r e a t i o n , Branch of the Department V i c t o r i a , B.C., 1966, p.  Gary Bowden, B i g Game Hunting I n Report No. 1 on the Economics o f sponsored by the P i s h and W i l d l i f e of R e c r e a t i o n and Conservation, 10.  11 The f o l l o w i n g d i s c u s s i o n of b e n e f i t s and c o s t s a t t r i b u t a b l e t o t h e K a i s e r p r o j e c t from the p o i n t of view of B r i t i s h Columbia r e s i d e n t s i d e n t i f i e s t h e most import a n t b e n e f i t s and c o s t s , but i s not an attempt t o enumerate every b e n e f i t and c o s t . 12 Markets i n B r i t i s h Columbia f o r m e t a l l u r g i c a l c o a l have been s m a l l . Approximately tons have been s o l d a n n u a l l y t o B r i t i s h Columbia producers. K a i s e r Resources L t d . i s not c o n c e n t r a t i n g on i n c r e a s i n g c o a l s a l e s i n B r i t i s h Columbia o r other p a r t s of Canada. R e f e r t o p a r t (A) of Appendix I I f o r a d i s c u s s i o n of past East Kootenay c o a l s a l e s i n Canadian markets. However, a small b e n e f i t from the K a i s e r o p e r a t i o n may accrue t o B r i t i s h Columbia producers i f t h e t r a n s p o r t a t i o n cost o f c o a l t o B r i t i s h Columbia u s e r s r e p r e s e n t s a s i g n i f i c a n t p o r t i o n of t h e t o t a l d e l i v e r e d c o s t , s i n c e t h e t r a n s p o r t a t i o n c o s t s of Crowsnest c o a l have been reduced. However, t h e r e d u c t i o n i n the cost p e r t o n o f c o a l t o these u s e r s i s a l s o l i k e l y t o be low, because the t r a n s p o r t a t i o n system was designed s p e c i f i c a l l y f o r export c o a l t o be shipped through the Roberts Bank P o r t . I t must be p o i n t e d out t h a t i f t h e v a l u e of i n c r e a s e d c o a l p r o d u c t i o n had represented a p r i mary gross b e n e f i t , f a c t o r income c o u l d not a l s o be taken as a gross b e n e f i t , s i n c e double counting would have occurred.  450,000  13 T h i s net primary b e n e f i t from the p o i n t of view o f r e s i d e n t s l i v i n g i n t h e E a s t Kootenay p r i o r t o t h e development i s d i s c u s s e d i n Chapter I I I . Some c o n s t r u c t i o n l a b o u r may be imported i n t o t h e East Kootenay from other p a r t s o f B r i t i s h Columbia, and a net b e n e f i t w i l l occur i f the payr o l l income t o t h i s l a b o u r i s above the s o c i a l o p p o r t u n i t y cost of the labour. 14 A net primary b e n e f i t w i l l a c c r u e from taxes, s i n c e I assume t h a t i n the absence of K a i s e r Resources L t d . , i n creased c o a l p r o d u c t i o n would not have taken p l a c e i n t h e E a s t Kootenay and s i n c e I assume a low t a x revenue from a l ternative production p o s s i b i l i t i e s u s i n g t h e same East Kootenay r e s o u r c e s . The taxes designated as net primary b e n e f i t s should.be l i m i t e d t o those payments a t t r i b u t a b l e t o increased coal production. The taxes which would have been p a i d by Crows Nest I n d u s t r i e s L t d . i n the absence of K a i s e r should not be i n c l u d e d i n the net t a x b e n e f i t due t o K a i s e r . Both the Roberts Bank P o r t and t h e r a i l w a y a c c e s s f a c i l i t i e s a c r o s s t h e Lower Mainland w i l l be s e l f - f i n a n c i n g . Only t h e f i r s t phase o f the Roberts Bank P o r t i s a t t r i b u t a b l e t o K a i s e r and i n c l u d e s r e c l a m a t i o n of 50 a c r e s of l a n d and con-  52 s t r u c t i o n of. a causeway between the Mainland and the r e claimed l a n d . K a i s e r Resources L t d . w i l l l e a s e the f a c i l i t i e s of the f i r s t phase,from the N a t i o n a l Harbours Board. The c o n s t r u c t i o n cost of $5.1 m i l l i o n plus accruing i n t e r est w i l l be.paid back through f e e s over a 30 y e a r p e r i o d . Bulk h a n d l i n g f a c i l i t i e s w i l l be I n i t i a l l y c o n s t r u c t e d and owned by K a i s e r Resources L t d . R e f e r t o p a r t (C) of Append i x I f o r a d e s c r i p t i o n of the Roberts Bank P o r t . The r a i l way a c c e s s f a c i l i t i e s w i l l be s e l f - f i n a n c i n g due to u s e r f e e s p a i d by the r a i l w a y s . The t o t a l c o n s t r u c t i o n cost i s $10 m i l l i o n and $4 m i l l i o n of t h i s w i l l be p a i d d i r e c t l y by CPR. 15 The B.C. M i n i n g Tax w i l l amount to 10^ per ton and the r o y a l t y on p r o p e r t y under c o a l l i c e n c e w i l l be 25^ per ton. See Bob McMurray, Business E d i t o r , "The Coal C o n f l i c t , " The P r o v i n c e , Vancouver, Wednesday, 29 January, 19^9» P« 14.  53. Chapter I I 1 The a r t i c l e s t o which I have r e f e r r e d a r e : A.R. P r e s t and R. Turvey, " C o s t - B e n e f i t A n a l y s i s : A Survey," Economic J o u r n a l . December pp. J u l i u s M a r g o l i s , "Secondary B e n e f i t s , E x t e r n a l Economics and the J u s t i f i c a t i o n of P u b l i c Investment," Review o f Economlcs and S t a t i s t i c s , v o l . 39 (August 1957), PP. 284-291. Otto E c k s t e i n , "Survey of the Theory of P u b l i c Expenditure C r i t e r i a , " i n NBER, P u b l i c F i n a n c e s : Needs, Sources and U t i l i z a t i o n , P r i n c e t o n , 1961, pp. 439-504. Robert Haveman and John K r u t i l l a , "Unemployment, Excess C a p a c i t y , and B e n e f i t - C o s t Investment C r i t e r i a , " The Review of Economics and S t a t i s t i c s , v o l . XLIX, no. 3 (August 1967), PP. 382-392. W.R.D. S e w e l l , J . D a v i s , D.W. Ross and A.D. S c o t t , Guide t o B e n e f i t - C o s t A n a l y s i s , Ottawa, Queen's P r i n t e r , 1961.  1965,  683-735.  ~~  2 The cumulative present value o f net b e n e f i t s from the " p o i n t o f view" o f r e s i d e n t s , l i v i n g i n the East Kootenay p r i o r t o the K a i s e r p r o j e c t , w i l l probably d i f f e r g r e a t l y from the cumulative present value o f net b e n e f i t s from the " p o i n t o f view" o f B r i t i s h Columbia r e s i d e n t s . 3 F o r a d i s c u s s i o n o f secondary b e n e f i t s see. W.R.D. S e w e l l , J.Davis, D.W. Ross and A.D. S c o t t , op. c i t . , p. 5. The net secondary b e n e f i t i s the i n c r e a s e i n value added by l o c a l f a c t o r s i n the r e g i o n . I f a f i r m i s merely t r a n s f e r r e d from one r e g i o n t o another, but the l o c a l v a l u e added does not i n c r e a s e i n the new r e g i o n , a net secondary benef i t does not occur from the p o i n t o f view o f the region*; 4 F o r a d i s c u s s i o n o f measurable and unmeasurable i n t a n g i b l e s see W.R.D. S e w e l l , J . D a v i s , D.W. Ross and A.D. S c o t t , op. c i t . , pp. 6 and 19. 5 F o r a d i s c u s s i o n of the r e l a t i o n s h i p between the opport u n i t y c o s t of f a c t o r s and the money o u t l a y expended on them see W.R.D. S e w e l l , J.Davis, D.W. Ross and A.D. S c o t t , op. c i t . , pp. 19-21. 6 F o r a d i s c u s s i o n o f p a y r o l l income t o l o c a l l a b o u r and the m u l t i p l i e r e f f e c t o f the income as b e n e f i t s from a r e g i o n a l p o i n t of view see W.R.D. Sewell, J . Davis, D.W. Ross and A.D. S c o t t , op. c i t . , pp. 20-21. 7 The annual unmeasurable i n t a n g i b l e cost may vary and an unmeasurable i n t a n g i b l e cost may extend beyond the l i f e of the p r o j e c t .  54  8 S i n c e v a l u e s must be p l a c e d on unmeasurable i n t a n g i b l e c o s t s and on unmeasurable i n t a n g i b l e b e n e f i t s and s i n c e the v a l u e s of d i f f e r e n t i n d i v i d u a l s v a r y and cannot be compared, i t i s necessary to d e c i d e whose v a l u e judgments a r e to p r e vail. A p o l i t i c a l consensus may be used t o e v a l u a t e the worth of d i f f e r e n t goods and s e r v i c e s . It i s interesting t o note that the s o c i a l w e l f a r e f u n c t i o n of East Kootenay r e s i d e n t s may d i f f e r from the s o c i a l w e l f a r e f u n c t i o n of the m a j o r i t y of B.C. r e s i d e n t s . If a benefit-cost analysis were performed from the " p o i n t of view" of B.C. r e s i d e n t s , the v a l u e p l a c e d on unmeasurable i n t a n g i b l e s might d i f f e r from the v a l u e p l a c e d on unmeasurable i n t a n g i b l e s by East Kootenay r e s i d e n t s . , . ?  55,  Chapter I I I 1 T h i s i n f o r m a t i o n was obtained from an i n t e r v i e w with Mr. L.C. Reed, f o r m e r l y of Hedlin-Menzies and A s s o c i a t e s L t d . i n June I 9 6 9 . 2 " K a i s e r S t r i p Mine Y i e l d 'Less than Underground ," Vancouver Sun, Vancouver, 1 9 6 9 . 1  The  3 T h i s i n f o r m a t i o n was obtained from Mr. D.M-Roussel, D i s t r i c t Economist, Okanagan-Kootenay D i s t r i c t , Department of Manpower and Immigration by l e t t e r of 14 J u l y , I 9 6 9 . 4 I am e x c l u d i n g the p o s s i b i l i t y of g e o g r a p h i c a l m o b i l i t y which would be d e s i r a b l e from the " p o i n t of view" of l o c a l l a b o u r , i f the r e t u r n from the same o c c u p a t i o n were h i g h e r i n another r e g i o n i n which p o s i t i o n s were a v a i l a b l e . I f l o c a l l a b o u r were both o c c u p a t i o n a l l y and g e o g r a p h i c a l l y mobile, i t would be d e s i r a b l e f o r l o c a l l a b o u r t o immigrate to other areas i f h i g h e r p a i d p o s i t i o n s i n a l t e r n a t i v e occupations c o u l d be obtained. 5 Bob McMurray, Business E d i t o r , "The Coal C o n f l i c t , " The P r o v i n c e , Vancouver, Wednesday, 29 January, 1 9 6 9 . p.  13.  6 Refer to Table X of p a r t (B) of Appendix I I . 7 R e f e r t o p a r t (B) of Appendix I I f o r a d i s c u s s i o n of unemployment i n the E a s t Kootenay. 8 R e f e r to Tables IX and X of p a r t (B) of Appendix I I f o r unemployment f i g u r e s . 9 "Coal mining resumes i f i n j u n c t i o n obeyed," The Vancouver, F r i d a y , 11 J u l y , I 9 6 9 , p. 1 6 .  Province,  10 The average wage of $ 4 , 3 6 3 r e f e r s t o 1966 income tax r e t u r n s which were t a x a b l e . Canada, Department of N a t i o n a l Revenue, T a x a t i o n D i v i s i o n , T a x a t i o n S t a t i s t i c s , P a r t One I n d i v i d u a l s , Table 6 , Ottawa, 1968, p. 98. 11 T h i s i n f o r m a t i o n was obtained from an i n t e r v i e w w i t h Mr. L.C. Reed, f o r m e r l y of Hedlin-Menzies and A s s o c i a t e s L t d . i n June 1 9 6 9 . 12 R e f e r to T a b l e XI of p a r t (B) of Appendix I I f o r unemployment f i g u r e s i n c o n s t r u c t i o n occupations. C o n s t r u c t i o n of the r a i l w a y s , roads and p l a n t f o r the K a i s e r p r o j e c t and the 200 homes f o r the c o a l miners i n Sparwood w i l l c r e a t e a c o n s t r u c t i o n boom a b s o r b i n g unemployed cons t r u c t i o n and f o r e s t r y l a b o u r . Unemployment i n c o n s t r u c t i o n and l o g g i n g and lumber manufacture was h i g h e r a b s o l u t e l y i n the E a s t Kootenay than i n the West Kootenay between 1965 and  56; 1 9 6 8 , even though the West Kootenay l a b o u r f o r c e was approxi m a t e l y double t h a t of the East Kootenay. R e f e r t o Table XI of p a r t (B) of Appendix I I . The number of f o r e s t r y workers unemployed i n 1968 i n the East Kootenay was 5 4 . Unemployment In c o n s t r u c t i o n and f o r e s t r y was not e n t i r e l y a l l e v i a t e d even d u r i n g peak c y c l i c a l p e r i o d s . O c c u p a t i o n a l i m m o b i l i t y was prevented by a low e d u c a t i o n a l l e v e l and i n experience i n other o c c u p a t i o n s . The l a t t e r i n f o r m a t i o n was obtained from Mr. D.M. Roussel, D i s t r i c t Economist, OkanaganKootenay D i s t r i c t , Department of Manpower and Immigration by l e t t e r of 14 J u l y , 1 9 6 9 . G e o g r a p h i c a l i m m o b i l i t y was prevented due-to the u n c e r t a i n t i e s i n v o l v e d w i t h a r e l o c a t i o n and due t o the absence of employment o p p o r t u n i t i e s i n the same o c c u p a t i o n i n adjacent a r e a s . Unemployed c o n s t r u c t i o n and f o r e s t r y workers a l s o e x i s t i n the West Kootenay. The c o n s t r u c t i o n boom w i l l only a l l e v i a t e the l a t t e r unemployment f o r s e v e r a l y e a r s . 13 Bob McMurray, Business E d i t o r , "The Coal C o n f l i c t , " The P r o v i n c e , Vancouver, Wednesday, 29 January, 1969» P«  13.  14 T h i s i n f o r m a t i o n was obtained from Mr. D.M. R o u s s e l , D i s t r i c t Economist, Okanagan-Kootenay D i s t r i c t , Department of Manpower and Immigration by l e t t e r of 14 J u l y , 1 9 6 9 . 15 R e f e r t o T a b l e V I I I of P a r t (B) of Appendix I I .  -  16 R e f e r t o T a b l e IX of p a r t (B) of Appendix I I . 17 That l o c a l c o n s t r u c t i o n l a b o u r i s o c c u p a t i o n a l l y immobile and of a low e d u c a t i o n a l l e v e l was c i t e d by Mr. D.M. R o u s s e l , D i s t r i c t Economist, Okanagan-Kootenay D i s t r i c t , Department of Manpower and Immigration by l e t t e r of 14 J u l y , 1969. 18 The r e g i o n a l income m u l t i p l i e r i s : 1  1 - (b - e)  b= marginal p r o p e n s i t y t o spend e= marginal p r o p e n s i t y t o import See. Hugh 0 . Nourse, R e g i o n a l Economics, A Study In the Economic S t r u c t u r e , S t a b i l i t y and Growth of Regions, Seymour E. H a r r i s , E d i t o r , Economics Handbook S e r i e s , McGraw-Hill Book Co., New York, New York, I 9 6 8 , p. 1 6 0 . The v a l u e of 1 . 3 assumed f o r the r e g i o n a l income m u l t i p l i e r i s a c o n s e r v a t i v e estimate. Approximately 58$ of the l a b o u r f o r c e of the a r e a i s employed i n nonbasic i n d u s t r i e s , def i n e d as those producing goods f o r l o c a l consumption o n l y . The f i g u r e of 5 8 $ was obtained from data on the I 9 6 I l a b o u r f o r c e employed i n d i f f e r e n t i n d u s t r i e s i n the E a s t Kootenay. See P r o v i n c e of B.C., Bureau of Economics and S t a t i s t i c s , Department of I n d u s t r i a l Development, Trade and Commerce, R e g i o n a l Index of B r i t i s h Columbia, January, 1 9 6 6 , p. 5*  57. The employment m u l t i p l i e r of an economic base model i s def i n e d as the r a t i o of t o t a l employment t o b a s i c employment and i n t h i s case equals 2.4. • B a s i c employment i s the number of workers employed i n producing exports. The employment m u l t i p l i e r of an economic base model serves as a proxy f o r an income m u l t i p l i e r , but i s l i k e l y to be too h i g h . F o r a d i s c u s s i o n of the a s s u m p t i o n s behind the m u l t i p l i e r of an economic base model, see Hugh 0. Nourse, op. c i t . , pp. l 6 l 163. The r e g i o n a l Income m u l t i p l i e r f o r the East Kootenay i s l i k e l y t o be between 1.3 and 2.4. 19 T h i s i n f o r m a t i o n was obtained from M.L. McFarlane, S e c r e t a r y T r e a s u r e r , Granbrook Chamber of Commerce, Cranbrook, B.C. by l e t t e r of 22 J u l y , 1969. 20 P r o v i n c e of B.C., Bureau of Economics and S t a t i s t i c s , Department of I n d u s t r i a l Development, Trade and Commerce, R e g i o n a l Index of B r i t i s h Columbia. January, 1966, pp. 10-11. 21 P e t e r H-. Pearse and Michael E. Laub, The Value of The Kootenay Lake Sport F i s h e r y , Study Report No. 3 on the Economics of W i l d l i f e and R e c r e a t i o n , sponsored by the F i s h and W i l d l i f e Branch of the Department of R e c r e a t i o n and C o n s e r v a t i o n , V i c t o r i a , B r i t i s h Columbia, 19&9. P» 58.< 22 Bryce W i l l i a m s , " W i l d l i f e B r i e f t o Government U.S. Type C o n t r o l Urged f o r S t r i p Mining i n B.C.," The Vancouver Sun, Vancouver, 19&9. 23 The bonds a r e to cover a c t u a l s t r i p mine s i t e s and areas where rock and e a r t h overburden are p l a c e d . Those companies which f a i l t o o b t a i n a permit b e f o r e mining and t o d e p o s i t the performance bond with the government w i l l be f i n e d up t o $1,000 a day. I f the o f f e n c e continues a f t e r w r i t t e n n o t i c e from the Mines Department, the f i r m w i l l be f i n e d a minimum of $100 and a maximum of $1000 a day. The government may a l s o c l o s e down the mine i f the o f f e n c e cont i n u e s . As of February 10, I969 approximately 240 square m i l e s or 150,000 a c r e s of the E l k R i v e r and F l a t h e a d R i v e r V a l l e y s i n the E a s t Kootenay were under c o a l l i c e n c e s . An a d d i t i o n a l 50,000 a c r e s a r e h e l d under c o a l l i c e n c e s i n o t h e r p a r t s of B r i t i s h Columbia. The p o s s i b l e extent of s t r i p mining i n B r i t i s h Columbia Is thus g r e a t . The l e g i s l a t i o n does not s p e c i f i c a l l y set out what i s . , meant by continuous r e c l a m a t i o n of s t r i p mined l a n d and the B.C. W i l d l i f e F e d e r a t i o n i s concerned t h a t adequate r e s t o r a t i o n w i l l not be forthcoming as a r e s u l t of the l e g i s l a t i o n . F o r e s t and g r a s s cover a r e r e q u i r e d t o prevent s o i l s l i p page. The r e a l l y s e r i o u s problems of s u r f a c e mining a r e those of s i l t a t i o n and l a n d s l i p p a g e , both d u r i n g and a f t e r the o p e r a t i o n , and...continuous g r a d i n g and i n s p e c t i o n and the q u i c k s t a b i l i z a t i o n of s o i l by cover crops i s the key t o a succ e s s f u l r e c l a m a t i o n program.  58. See Bryce W i l l i a m s , " W i l d l i f e B r i e f t o Gov't.U.S. - Type C o n t r o l Urged f o r S t r i p Mining i n B.C.," The Vancouver Sun, Vancouver, 19^9• ~ 24 Problems have been encountered i n r e f o r e s t i n g and i n growing grasses on s t r i p mined l a n d i n the U n i t e d S t a t e s . There i s some debate over whether s t r i p mined l a n d can be recovered with the same type o f - v e g e t a t i o n which e x i s t e d p r i o r t o c o a l mining. P a r t i c u l a r ranges are important to w i l d l i f e because of the type of v e g e t a t i o n cover. The w i l d l i f e may be l o s t , even i f l a n d i s r e c l a i m e d . 2 5 s T h e l e g i s l a t i o n w i l l not be s u c c e s s f u l i n i n s e r t i n g the s o c i a l c o s t of l o s t w i l d l i f e i n t o the c o s t c a l c u l a t i o n s of mining f i r m s . ;Ranges i n the E l k and F l a t h e a d R i v e r V a l l e y s vary s u b s t a n t i a l l y i n t h e i r importance as w i n t e r f e e d i n g grounds f o r w i l d l i f e . See Bob McMurray, Business E d i t o r , "The Coal C o n f l i c t , " The P r o v i n c e , Vancouver, Wednesday, 29 January, 1969, p. 14. A c c e s s to p a r t i c u l a r w i l d l i f e ranges has not b e e n - r e s t r i c t e d i n the past by a - p r i c e mechanism and so the v a l u e of l a n d i n t h i s use has not been r e p r e s e n t e d i n the market. The l a n d a l l o c a t i o n d e c i s i o n among the comp e t i n g uses of c o a l mining and hunting can only be made by a p u b l i c a u t h o r i t y . Each s t r i p mine o p e r a t i o n should be c o n s i d e r e d i n d i v i d u a l l y t o take i n t o account the v a r y i n g marginal s o c i a l o p p o r t u n i t y c o s t of c o a l mining i n d i f f e r e n t ranges.  26 W.G. Smith, The S t a t u s , Requirements, and Management of the E a s t Kootenay Game Resource, A Report t o the B.C. Game Commission, January, 1 9 5 7 * P» 5 » 27  Ibid.-, p. 9.  28 The annual expenditures r e f e r to 1964. I have assumed t h a t the 1968 f i g u r e equals the 1964 figure. 29 The annual expenditures r e f e r t o 1964. I have assumed t h a t the 1968 f i g u r e equals the 1964 figure. 30 K a i s e r Resources L t d . has purchased 108,000 a c r e s from Crows Nest I n d u s t r i e s L t d . and has obtained an a d d i t i o n a l 7 , 6 5 7 acres i n coal licences. There a r e 1 2 2 , 8 9 4 acres i n the E l k R i v e r V a l l e y p r e s e n t l y h e l d i n c o a l l i c e n c e s . Kaiser Resources L t d . t h e r e f o r e h o l d s a s i g n i f i c a n t p r o p o r t i o n of the c o a l r e s e r v e s . See Bob McMurray, Business E d i t o r , "The Coal C o n f l i c t , " The P r o v i n c e , Vancouver, Wednesday, 29 January, 1969, P. 13. 3 1 I assume t h a t i f expenditures by l o c a l hunters d e c l i n e , the r e s i d e n t s do not spend the r e l e a s e d income on other forms of r e c r e a t i o n i n the E a s t Kootenay. L o c a l hunters are l i k e l y t o hunt o u t s i d e the East Kootenay. I a l s o assume t h a t l o c a l l a b o u r employed due t o hunting i n the area has no a l t e r n a t i v e income sources.  59 32 P r o v i n c e of B.C., Bureau of Economics and S t a t i s t i c s , Department,of I n d u s t r i a l Development, Trade and Commerce, R e g i o n a l Index of B r i t i s h Columbia, January, 1966, p. 16. 33 T h i s i n f o r m a t i o n was obtained a t a seminar on s t r i p mining h e l d by the F a c u l t y of F o r e s t r y a t U.B.C. i n the s p r i n g of 1969. The guest speakers were Dr. Warren, Dr. S c o t t , Dr. Thirgood of U.B.C. and Mr. P a i s h of the B.C. W i l d l i f e Federation.  A.D.  34 The estimate of foregone income i n the f i r s t year of c o a l p r o d u c t i o n i s l i b e r a l , s i n c e I have assumed t h a t a l l of the present annual l o c a l v a l u e added due to t o u r i s m and h u n t i n g i n the Crowsnest w i l l be foregone. I have a l s o a s sumed t h a t over the f i f t e e n y e a r p e r i o d t h e r e a r e no a l t e r n a t i v e income sources f o r workers who would have been e a r n i n g income from t o u r i s m and hunting. The d e c l i n e i n v a l u e added by l o c a l i n p u t s w i l l t h e r e f o r e not be o f f s e t by an i n c r e a s e i n the v a l u e added by t r a n s f e r of the r e l e a s e d l o c a l i n p u t s t o other i n d u s t r i e s i n the E a s t Kootenay. The K a i s e r p r o j e c t w i l l t h e r e f o r e r e s u l t i n a d e c l i n e of employment i n those s e r v i c e and r e t a i l i n d u s t r i e s l i n k e d w i t h hunting and t o u r ism. I have assumed t h a t l o c a l value added from t o u r i s m and h u n t i n g would have i n c r e a s e d c u m u l a t i v e l y by 10%. This i s the same as assuming t h a t t o u r i s t and hunters' expenditures i n the E a s t Kootenay would have i n c r e a s e d c u m u l a t i v e l y by 10%, i f i t i s a l s o assumed t h a t the p r o p o r t i o n of l o c a l v a l u e added remains constant. 35 P e t e r H. Pearse and the East Kootenay, Study W i l d l i f e and R e c r e a t i o n , Branch of the Department V i c t o r i a , B.C., I 9 6 6 , p.  Gary Bowden, B i g Game Hunting i n Report No. 1 on the Economics of sponsored by the F i s h and W i l d l i f e of R e c r e a t i o n and Conservation, 13.  36 T h i s i n f o r m a t i o n was obtained from an i n t e r v i e w with Mr. L.C. Reed, f o r m e r l y of Hedlin-Menzies and A s s o c i a t e s L t d . i n June 196.9. 37 A.D. S c o t t , "The Theory of the Mine Under C o n d i t i o n s of C e r t a i n t y , " E x t r a c t i v e Resources and T a x a t i o n , ed. Mason Gaffney, The U n i v e r s i t y of Wisconsin P r e s s , Madison, 1967» P. 34. 38 R e f e r t o p a r t (A) of Appendix I I f o r a d e s c r i p t i o n of the world market f o r c o a l . 39 T o t a l estimated c o a l r e s e r v e s i n the E l k R i v e r V a l l e y a r e 15 i & i l l i o n t o n s . F i f t y per cent of these r e s e r v e s a r e e c o n o m i c a l l y r e c o v e r a b l e by today's mining standards. K a i s e r Resources L t d . holds a s i g n i f i c a n t p r o p o r t i o n of the c o a l r e s e r v e s . The c o a l p r o j e c t of K a i s e r Resources L t d . would be expected t o continue f o r many y e a r s , i f 5 m i l l i o n tons  60. were mined a n n u a l l y and i f the a v a i l a b i l i t y of economically e x p l o i t a b l e c o a l r e s e r v e s were the only c o n s i d e r a t i o n . See McMurray, op. c i t . , p. 13. The n e g a t i v e e x t e r n a l i t i e s from s t r i p mining i n the form of l o s s of w i l d l i f e and l o c a l h u n t e r s consumer s u r p l u s w i l l continue i n d e f i n i t e l y a f t e r t e r m i n a t i o n of the p r o j e c t . The l o s s of w i l d l i f e w i l l be i r r e v e r s i b l e . The present v a l u e of these n e g a t i v e e x t e r n a l i t i e s a f t e r the 15 years of c o a l prod u c t i o n have not but should be i n c l u d e d i n the c a l c u l a t i o n of the cumulative present v a l u e of net measurable b e n e f i t s . D e c l i n e i n w e l f a r e payments and the p e r s o n a l income tax have not been taken i n t o account i n the b e n e f i t s and c o s t s . I assume t h a t per c a p i t a w e l f a r e payments a r e #150 per month. The number of workers w i t h low p r e v i o u s o p p o r t u n i t y cost employed by K a i s e r has been estimated a t (180+43+200) or 423. The annual w e l f a r e payments foregone would t h e r e f o r e be x x or |76l,400. The l o s s of these w e l f a r e payments r e p r e s e n t s a c o s t which should be subt r a c t e d from gross income b e n e f i t s . The expansion of s e r v i c e i n d u s t r i e s would a l s o l e a d t o a decrease i n w e l f a r e payments not i n c l u d e d i n the above f i g u r e . P e r s o n a l income t a x may be estimated a t 10% of income and should be s u b t r a c t e d from p a y r o l l income due t o the o p e r a t i n g and c o n s t r u c t i o n phases and from the m u l t i p l i e r e f f e c t . The foregone income from t o u r i s m and h u n t i n g should a l s o be adj u s t e d downwards f o r p e r s o n a l income tax. 1  #150  12  423  35»000  40 Assuming an E a s t Kootenay p o p u l a t i o n of prior t o the development, the per c a p i t a n e g a t i v e cumulative p r e s ent value of net unmeasurable i n t a n g i b l e s would have t o be $421 t o r e q u i r e t e r m i n a t i o n of the p r o j e c t . The unmeasurable i n t a n g i b l e c o s t s a r e l i k e l y t o be h i g h . I t was estimated t h a t i n 1964 the weighted average consumer s u r p l u s from h u n t i n g i n the E a s t Kootenay over a l l income c l a s s e s was $197 per B.C. hunter. See P e t e r H. Pearse, "A New Approach to the E v a l u a t i o n of Non-Priced R e c r e a t i o n a l Resources," Land Economics, v o l . XLIV, no. 1, February 1968, p.  96.  61. Chapter IV 1 P r o v i n c i a l t a x revenues and revenue from B.C. h u n t i n g l i c e n c e f e e s a r e a l s o b e n e f i t s i n p a r t t o r e s i d e n t s of the East Kootenay. 2 I assume i n t h i s statement t h a t the cumulative v a l u e of a l l b e n e f i t s l e s s a l l c o s t s i s p o s i t i v e .  present  3 The income of both the l a b o u r which emigrates t o r e gions where p r o d u c t i o n o f f e r s a h i g h e r r a t e of r e t u r n and of t h e l a b o u r which remains i n t h e d e c l i n i n g area w i l l r i s e due t o e m i g r a t i o n of some of t h e l o c a l l a b o u r . Labour r e maining i n t h e a r e a becomes s c a r c e and i t s r a t e of r e t u r n rises. See A.D. S c o t t , " P o l i c y f o r D e c l i n i n g Regions: A T h e o r e t i c a l Approach," i n D. Woods, ed., Areas of Economic S t r e s s i n Canada, Queen's U n i v e r s i t y , K i n g s t o n , O n t a r i o , 1965,  PP.  73-85.  4 F o r an e f f i c i e n t a l l o c a t i o n of r e s o u r c e s , l a b o u r should s t i l l emigrate from t h e r e g i o n even i f jobs a r e a v a i l a b l e i n t h e r e g i o n , i f t h e r a t e of r e t u r n o f f e r e d these workers would be h i g h e r i n o t h e r a r e a s . 5 Mary Jean Bowman and W. Warren Haynes, Resources and People i n E a s t Kentucky, Problems and P o t e n t i a l s of a Lagg i n g Economy, p u b l i s h e d f o r Resources f o r t h e F u t u r e , I n c . by t h e Johns Hopkins P r e s s , B a l t i m o r e , Maryland, 1 9 6 3 , PP.  25-35, 204-227,  243-264,  289-308,  336-384,  420-434.  BIBLIOGRAPHY Baldwin, R.E. "Export Technology and Development from a S u b s i s t e n c e L e v e l . " Economic J o u r n a l . (March  73  pp. 80-92.  1963).  Baldwin, R.E. 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The Value o f t h e Kootenay Lake Sport F i s h e r y . Study Report No. 3 on t h e Economics of W i l d l i f e and R e c r e a t i o n , sponsored by t h e F i s h and W i l d l i f e Branch o f t h e Department o f Recreat i o n and C o n s e r v a t i o n , V i c t o r i a , B.C., 1969. P r e s t , A.R. and Turvey, R. " C o s t - B e n e f i t A n a l y s i s : A Survey." Economic J o u r n a l . December PP.  1965,  683-735.  P r i c e Waterhouse & Co. The Growth and Impact of t h e Mining I n d u s t r y i n B r i t i s h Columbia. Study done f o r the Mining A s s o c i a t i o n of B.C., Vancouver, k December, 1968. P r o v i n c e of B.C., Bureau of Economics and S t a t i s t i c s , Department of I n d u s t r i a l Development, Trade and Commerce, R e g i o n a l Index of B r i t i s h Columbia. January, 1966. P r o v i n c e of B.C., E x e c u t i v e D i r e c t o r and T e c h n i c a l S t a f f of the Lower Mainland R e g i o n a l P l a n n i n g Board. R a i l S e r v i c e t o t h e Roberts Bank P o r t F a c i l i t y . A p r o p o s a l presented w i t h i n the p e r s p e c t i v e of t h e o v e r a l l p l a n n i n g f o r t h e Lower Mainland Region. A B r i e f t o t h e Lower Mainland R e g i o n a l P l a n n i n g Board, t h e Lower Mainland M u n i c i p a l i t i e s and the P r o v i n c e of B.C. August, 1968. P r o v i n c e -of B.C., M i n i s t e r o f Mines and Petroleum Resources, Annual Report, f o r the year ended December,  31  I962-I967.  P r o v i n c e of B.C. Submissions t o the Aug. 28 p u b l i c h e a r i n g on the proposed B.C. Hydro r a i l r o u t e from Matsqul t o Roberts Bank. Hearing h e l d by t h e Lower Mainland R e g i o n a l P l a n n i n g Board, 28 August, 1968. Raybould, V . J . , Research D i r e c t o r , E m p l o y e r s ' C o u n c i l I n t e r v i e w with the w r i t e r . August, 1969. 1  Reed, L.C. I n t e r v i e w with t h e w r i t e r . June,  o f B.C.  1969.  Research Department, The I n d u s t r i a l Bank of Japan, L t d . (Nippon Kogyo Ginko)-. "The I r o n and S t e e l Industry., B a s i c Problems and P o l i c y G u i d e l i n e s . " Q u a r t e r l y Survey of Japanese Finance and Industry, v o l . XVIII, no. 4, October-December, 1966. "Roberts Bank i n step with superport t r e n d . " The P r o v i n c e , Vancouver, Tuesday, 3 June, 1969, p. 17 A.  66. Ross, I.S., P r e s i d e n t , Swan Wooster E n g i n e e r i n g Co. L t d . "Coal A t Roberts Bank -. now a R e a l i t y . " Paper'presented t o the Twentieth Dominion - P r o v i n c i a l Conference on C o a l . Quebec C i t y , Quebec, 12 and 13 September, 1968. R o u s s e l , D.M., D i s t r i c t Economist, Okanagan Kootenay D i s t r i c t , Department of Manpower and Immigration, L e t t e r t o t h e w r i t e r , 14 J u l y , 1969. S c h u r r , Sam H., N e t s c h e r t , Bruce C. w i t h E l i a s b e r g , Vera P., L e r n e r , Joseph, and Lahdsberg, Hans H. 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The Vancouver Sun, Vancouver, 1969.  APPENDIX I (A) A D e s c r i p t i o n of the S t r i p Mining t o be c a r r i e d out byK a i s e r Resources L t d . K a i s e r Resources L t d . p l a n s t o continue o p e r a t i o n s of t h r e e e x i s t i n g underground t i o n a f o u r t h underground to are  mines and t o b r i n g i n t o mine.  In a d d i t i o n , K a i s e r p l a n s  employ open p i t mining and s t r i p mining, both of which forms of s u r f a c e mining.  i n i t i a l l y be r e s t r i c t e d t o 2.4  The open p i t mining  other mountain t o p s .  y i e l d about of  5i  operation.  transferred  The open p i t mining i s expected t o  m i l l i o n tons p e r year i n the f i r s t The underground  the l o n g run and over the l i f e  However, i n  of the c o n t r a c t , the output  mining i s expected t o exceed t h a t  by open p i t m i n i n g .  few years  mining i s expected t o y i e l d  f o u r m i l l i o n tons a y e a r over the same p e r i o d .  from underground  will  square m i l e s of l a n d on a  mountain top, but the o p e r a t i o n w i l l l a t e r be to  produc-  produced  1  S u r f a c e mining, i n c l u d i n g both s t r i p and open p i t mining,  e n t a i l s s t r i p p i n g o f f the s u c c e s s i v e l a y e r s of c l a y ,  g r a v e l l y c l a y , l i m e s t o n e , gray s h a l e , l i m e s t o n e and b l a c k s l a t e t o r e a c h the c o a l seam.  A l a r g e s t r i p p i n g s h o v e l and  wheel, d r a g l i n e and b u l l d o z e r and sometimes b l a s t i n g a r e used t o excavate the overburden.  The c o a l i s then loosened  from the seam by use of d r i l l i n g or r i p p i n g equipment and i s hauled i n t o t r u c k s by l o a d i n g s h o v e l s .  The c o a l i s  t h e n prepared by use of a t i p p l e f o r s c r e e n i n g and a c l e a n -  68. i n g p l a n t f o r removing i m p u r i t i e s . The  2  p a r t i c u l a r form i n which s t r i p mining appears  pends on the c h a r a c t e r of the t e r r a i n .  de-  F o r example, con-  t o u r mining augmented by auger mining i s used i n East Kentucky because of the mountainous t e r r a i n . r a i n , s t r i p mining simply over the l a n d producing 3 banks.  On l e v e l  ter-  i n v o l v e s moving back and f o r t h  a s e r i e s of p a r a l l e l rows of  spoil  K a i s e r Resources L t d . w i l l employ h y d r a u l i c mining i n i t s s t r i p mining o p e r a t i o n s .  This involves spraying  jets  of h i g h l y p r e s s u r i z e d water on exposed c o a l seams i n order t o cut the c o a l from the seams. and  re-used.  The  T h i s technique has been employed i n Japanese  c o a l mines but has  never b e f o r e been used i n the  of the K a i s e r S t e e l C o r p o r a t i o n .  K a i s e r i n the use  of t h i s new  operations  Japanese engineers  been imported i n t o the Crowsnest area  The  water w i l l be r e c y c l e d  have  i n order t o a s s i s t  technique.  assurance of a long-term market f o r c o a l from  Kaiser's p r o p e r t i e s permitted  investment i n development of  huge t r u c k s t o h a u l the c o a l .  These t r u c k s are capable of  h a u l i n g up t o 100  and  200  tons of c o a l , and were developed  i n T u l s a , Oklahoma, where the t r u c k s and  repair parts  will  be manufactured. It  i s i n t e r e s t i n g to note t h a t c o n t r a r y to the  s i o n c r e a t e d i n newspaper and  impres-  other media r e p o r t s concern-  i n g the K a i s e r p r o j e c t , p r o d u c t i o n by s t r i p mining has  in  the past represented  coal  a s u b s t a n t i a l p r o p o r t i o n of t o t a l  69. output  i n both the East Kootenay area and  1967, 614,590 s h o r t  tons of c o a l were mined i n B.C.  underground methods compared t o mining.^ The  593»096 short  In by  tons by  strip  r a t i o of p r o d u c t i o n by s t r i p mining t o produc-  t i o n by underground mining has several years.  i n c r e a s e d r a p i d l y i n the  last  K a i s e r Resources L t d . i s not i n t r o d u c i n g  s t r i p mining t o B r i t i s h In 1967  i n Canada.  Columbia.  c o a l p r o d u c t i o n i n Canada by s t r i p mining  was  5,911t438 short tons and p r o d u c t i o n by c o n v e n t i o n a l under-  5,484,316  ground mining was  short t o n s . ^ P r o d u c t i o n by  mining i n A l b e r t a i n a l l t h r e e years was p r o d u c t i o n by underground methods.  The  strip  more than double g r e a t e r use of  strip  m i n i n g - i n A l b e r t a , r e l a t i v e t o B r i t i s h Columbia, may  indicate  a more r a p i d adjustment t o the use of more e f f i c i e n t  produc-  t i o n methods on the p a r t of A l b e r t a , but d i f f e r e n c e s i n t e r r a i n with r e l a t e d d i f f i c u l t i e s i n adequately mining may  strip  a l s o have c o n t r i b u t e d t o the . d i f f e r e n c e i n the  r a t i o of output mining.*  employing  by s t r i p mining t o gutput  by underground  S t r i p mining i s c a p i t a l i n t e n s i v e and may  the use of a s m a l l e r amount of l a b o u r than  entail  conventional  underground mining, but the q u a l i t y and t h e r e f o r e the c o s t of t h i s l a b o u r may  be much h i g h e r .  I n i t s - s t r i p mining  op-  e r a t i o n s , K a i s e r w i l l employ s k i l l e d machine repairmen and t r u c k and  shovel o p e r a t o r s , and  only t o those  intends t o o f f e r employment  i n e x p e r i e n c e d miners, who  have had a grade  7 twelve  education.  These standards  of l a b o u r w i l l a l s o be  a p p l i e d t o the employment p o l i c y used i n h i r i n g miners f o r  70. the underground o p e r a t i o n s . ployed  The  q u a l i t y of the l a b o u r  by K a i s e r Resources L t d . i s h i g h e r than t h a t  em-  formerly  employed by Crows Nest I n d u s t r i e s L t d . (B) F a c t o r s Leading t o the R e v i t a l i z a t i o n of the Coal Industry The  i n the East  c o a l mining i n d u s t r y has  Mining  Kootenay been r e v i t a l i z e d due  the a p p l i c a t i o n of the f o l l o w i n g cost reducing  to  technological  improvements, which have lowered the d e l i v e r e d p r i c e of c o a l i n Japan: development and  use  of h i g h speed u n i t t r a i n s t o  c a r r y the c o a l between N a t a l and Vancouver; c o n s t r u c t i o n of the Roberts Bank P o r t , capable of accommodating the l a r g e s t b u l k sea c a r r i e r s being developed and  t o be developed  Japanese t r a d i n g f i r m s ; development of 100 t r u c k s t o h a u l the c o a l and i n s t r i p mining.  the use  t o n and  200  by ton  of an h y d r a u l i c technique  An a n a l y s i s of renewed p r o f i t a b i l i t y  of  c o a l mining i n the Crowsnest area must take i n t o account only improvements i n supply  c o n d i t i o n s but a l s o  c o n d i t i o n s on the demand s i d e .  not  favourable  Favourable Japanese s t e e l  markets have c r e a t e d a g r e a t e r induced demand f o r m e t a l l u r g i c a l coal. Japanese s t e e l producers experienced a p e r i o d of i n c r e a s e dn the r a t e of growth of exports and  great  Japanese demand  8 between 1958  and  1962.  A s i g n i f i c a n t decrease i n the  rate  of growth of Japanese demand and a slow down i n the r a t e of growth of exports occurred 1965  between 1962  and  1965.  Since  the s t e e l i n d u s t r y i n Japan has a g a i n been on the  swing, and  up-  t h i s forms p a r t of the reason f o r the Japanese  71. c o a l c o n t r a c t with K a i s e r Resources L t d . The  l e n g t h of K a i s e r s 1  c o n t r a c t t o supply  Japanese  s t e e l f i r m s has encouraged investment i n a new form of r a i l transportation.  The p r o f i t a b i l i t y of such an undertaking  was ensured by t h e e x i s t e n c e  of a c e r t a i n long-term market  f o r the commodity t r a n s p o r t e d . and  Use of t h e CPR u n i t  c o n s t r u c t i o n of time and cost r e d u c i n g  train  facilities for  l o a d i n g c o a l i n t o b u l k c a r r i e r s a t the p o r t w i l l  sufficiently  reduce the t r a n s p o r t a t i o n c o s t s a p p l i c a b l e , t o Crowsnest c o a l t o enable s e l l i n g t h e c o a l a t a competitive without s u b v e n t i o n a s s i s t a n c e . to s e l l coal at  $17.00  c.i.f.  price  Competitors had been a b l e  p e r t o n c . i . f . , w h i l e t h e former  $19.50  p r i c e of Crowsnest c o a l had been of t h e subvention a s s i s t a n c e .  without  subtraction  The p r i c e of c o a l d e l i v e r e d  i n Japan w i l l now be reduced t o  $16.00  p e r ton.  A compari-  son of t h e estimated cost of c o a l c . i . f . b e f o r e and a f t e r the t r a n s p o r t a t i o n improvements has been made by Swan Wooster Engineering  Co. L t d . and i s presented b n t h e f o l l o w i n g page. ;  Transportation to  $7.00  p e r ton.  c o s t s have thus been reduced from  I t has been the r e d u c t i o n of t r a n s p o r t a -  t i o n c o s t s r a t h e r than p r o d u c t i o n  c o s t s a t t h e mine, which  has made Crowsnest c o a l competitive. remained a t  $9.00  $10.50  p e r ton.  Production  c o s t s have  While the p r o j e c t may r e q u i r e  a s m a l l e r amount of l a b o u r p e r t o n mined due t o s t r i p mining, the r e d u c t i o n i n the r e q u i r e d amount of l a b o u r w i l l be o f f set by a r i s e i n p r o d u c t i v i t y and t h e r e f o r e wage r a t e s and/or by a g r e a t e r amount of c a p i t a l investment p e r t o n mined.  TABLE V I I Comparison of o . l . f . p r i c e of East Kootenay c o a l b e f o r e and a f t e r cost r e d u c i n g transportation  f.o.b. mine p r i c e  Improvements  12ii  1970  $99.00 per ton (U.S)  $ 9.00  p e r t o n (U.S.)  5.50 1.00 4.00  3.50 .50 3.00 $16.00  l e s s the subvention of  $19.50 2.50  g i v i n g an approximate cost of  $17.'00  ^16.00 per ton  r a i l f r e i g h t t o west coast deep sea t e r m i n a l ocean f r e i g h t and demurrage f o r a t o t a l of  Source: I.S. Ross, P r e s i d e n t , Swan Wooster E n g i n e e r i n g Co. L t d . , Coal a t Roberts Bank - Now a R e a l i t y , paper presented a t the Twentieth Dominion - P r o v i n c i a l Conference on Coal, Quebec C i t y , Quebec, 12 and 13 September, 1968, p. 4.  73.  Thus the commencement of the c o a l p r o j e c t of K a i s e r Resources L t d . has  e n t a i l e d the i n s t i t u t i o n of many new  r e d u c i n g t e c h n o l o g i c a l developments and t e c h n i q u e s .  cost  The  v i t a l i t y of the c o a l s t a p l e i n the E a s t Kootenay has been renewed due t o these developments. have been and w i l l ing  Transportation costs  i n the f u t u r e be most important  i n secur-  c o a l markets, because of the d i s t a n c e t o c o a l markets  and the absence of l a r g e markets i n  B.C.  (C) The Technology of U n i t T r a i n s and the Roberts Bank P o r t I n t h i s s e c t i o n I s h a l l d e s c r i b e the u n i t t r a i n s t o be used by the Canadian P a c i f i c Railway  i n t r a n s p o r t i n g the  c o a l and the h i s t o r y of the Roberts Bank P o r t . system w i l l  The  railway  c o n s i s t of t h r e e 1 0 5 - c a r t r a i n s each of which  w i l l make the round t r i p between the"mine s i t e ,  the  Roberts  9 Bank P o r t and back a g a i n i n seventy-two hours.  I t i s en-  v i s i o n e d t h a t w h i l e one t r a i n i s l o a d i n g i n N a t a l , the second w i l l be u n l o a d i n g a t the dock s i t e and the t h i r d be back on r o u t e t o the mine s i t e , a f t e r h a v i n g i t s coal.  will  delivered  At N a t a l the c o a l w i l l be loaded while i n motion  by an automatic  conveyor system, and a t the dock an  auto*  matic dumping system w i l l be used t o unload the t r a i n w h i l e in transit. lay  and  The  operation w i l l  i n v o l v e a minimum of c a r de-  s w i t c h i n g time, and the time r e q u i r e d f o r l o a d i n g  and u n l o a d i n g w i l l be minimized.  There w i l l thus be  no  n e e d l e s s t y i n g up of c a r s w h i l e w a i t i n g i n the dock t o l o a d and then t o be reconnected locomotives w i l l be remotely  t o g e t h e r once more.  un-  The  c o n t r o l l e d t o improve h a n d l i n g  74.  under the severe o p e r a t i n g c o n d i t i o n s o c c a s i o n a l l y encount e r e d i n the Rockies.  Use  of u n i t t r a i n s , which a r e  de-  signed t o serve a p a r t i c u l a r s h i p p e r and market, a l s o tend to  e l i m i n a t e s e a s o n a l i t y , ensure the r e g u l a r i t y of s h i p -  ments, s t a n d a r d i z e i n - t r a n s i t times and maximize the use multiple-car handling.  T h i s form of r a i l w a y f r e i g h t  t i o n i s becoming most important  of  opera-  i n the h a n d l i n g of l a r g e  amounts of bulk commodities s o l d i n world markets. T u r n i n g now was  to the Roberts Bank P o r t , the development  encouraged by K a i s e r Resources L t d .  p o r t p l a n n i n g and  investments  f a l l s with the N a t i o n a l Har-  bours Board of the f e d e r a l government. future increased port t r a f f i c  Responsibility for  I n a n t i c i p a t i o n of  and the need f o r b e r t h s a b l e  to accommodate the l a r g e s t bulk l o a d c a r r i e r s , the N a t i o n a l Harbours Board i n 1966  expanded the extent of the P o r t of  Vancouver from f o r t y - n i n e square m i l e s w i t h i n - B u r r a r d to  Inlet  two hundred square m i l e s extending from the C i t y of  Vancouver t o the U n i t e d S t a t e s border. """^ C o n s t r u c t i o n of the f i r s t stage of the Roberts Bank P o r t was and  begun i n  c o n s i s t s of a t h r e e m i l e causeway connecting the Lower  Mainland  with f i f t y a c r e s of r e c l a i m e d l a n d .  The  cost of  t h i s f i r s t stage of the development i s estimated at m i l l i o n i n c l u d i n g the cost of u t i l i t i e s and first of  1968  stage has been c o n s t r u c t e d mainly  services.  |5»1 This  t o serve the needs  K a i s e r Resources L t d . , which i s i n c u r r i n g the cost of b u l k  h a n d l i n g f a c i l i t i e s f o r e f f i c i e n t l o a d i n g of c o a l i n t o the ocean c a r r i e r s . be owned and  Bulk h a n d l i n g f a c i l i t i e s a t the p o r t  operated  by t h e i r u s e r s .  will  The b e r t h s i t e and  as-  75. s o c i a t e d acreage w i l l be l e a s e d t o K a i s e r Resources L t d . i n such a way  as t o " r e c o v e r the a c t u a l cost of the c a p i t a l i n -  vestment, i n c l u d i n g i n t e r e s t a c c r u i n g d u r i n g over a p e r i o d of 30 y e a r s . "  1 1  The  construction,  l e a s e of l a n d and  berth  s i t e s t o other users w i l l be handled i n a s i m i l a r f a s h i o n . The  N a t i o n a l Harbours Board p l a n s to r e c l a i m  mately 1400  acres  approxi-  i n the next s e v e r a l years as d i c t a t e d by  f u t u r e demand f o r p o r t f a c i l i t i e s .  "Two  p r i n c i p a l deepwater  channels with a minimum depth of 65 f e e t w i l l p r o v i d e  almost  12  nine m i l e s of p o t e n t i a l b e r t h f a c e . " B r i t i s h Columbia has  The  Government of  i n a d d i t i o n assembled i n d u s t r i a l backup  acreage of approximately 3600 a c r e s on the mainland, and B.C.  Hydro and Power A u t h o r i t y i s p r o v i d i n g r a i l access  the from  Matsqui t o the causeway a t Roberts Bank. In a d d i t i o n t o c o n s t r u c t i o n of the Roberts Bank P o r t , which w i l l form the outer port f o r Vancouver, the  National  Harbours Board p l a n s t o undertake a program t o dredge B u r r a r d I n l e t to a l l o w the passage of deep sea bulk c a r r i e r s w i t h i n the i n n e r port of Vancouver.  APPENDIX I I (A) The H i s t o r y of Coal Mining  In the East Kootenay and •  Reasons f o r I t s D e c l i n e The  r i s e and f a l l  o f the c o a l mining i n d u s t r y w i l l be  a n a l y z e d by r e f e r e n c e t o changing market p a t t e r n s and t r a n s portation costs.  Settlement  of the East Kootenay was l a r g e l y  a response t o the presence of c o a l d e p o s i t s when demand f o r c o a l f o r domestic h e a t i n g and r a i l w a y consumption was h i g h . The M i c h e l C o l l i e r y of t h e Crow's Nest Pass Coal Co. was opened i n 1888 l a r g e l y t o supply the Canadian P a c i f i c way.  Rail-  The c o a l p r o p e r t i e s of the Crow's Nest Pass Coal Co.,  which were a c q u i r e d by K a i s e r Resources L t d . i n 1 9 6 8 , have produced the major p o r t i o n of c o a l mined i n B r i t i s h The  Columbia.  economy of the East Kootenay has d i v e r s i f i e d i n t o the  p r o d u c t i o n of other s t a p l e s of the f o r e s t and mining tries.  The S u l l i v a n Mine a t Kimberley,  B r i t i s h Columbia was  opened i n I 8 8 9 and i s one of t h e world's l a r g e s t of l e a d and z i n c c o n c e n t r a t e s . an important  indus-  producers  A g r i c u l t u r e has never p l a y e d  r o l e i n the East Kootenay.  P r o d u c t i o n of c o a l i n B r i t i s h Columbia and i n the East Kootenay reached a h i g h i n the 1 9 5 0 ' s and has experienced a secular- d e c l i n e s i n c e then.  The demand f o r c o a l f o r domes-  t i c and commercial h e a t i n g has d e c l i n e d .  The s u b s t i t u t i o n  of o i l and n a t u r a l gas f o r c o a l i n domestic h e a t i n g has occ u r r e d , because of the lower c o s t of u s i n g s u b s t i t u t e s and the g r e a t e r convenience and c l e a n l i n e s s of n a t u r a l gas and  77. oil.  S u b s t i t u t i o n of d i e s e l o i l f o r c o a l i n locomotive use  has o c c u r r e d , not because of the g r e a t e r cost of c o a l per BTU,  but because of the g r e a t e r e f f i c i e n c y i n the use of  diesel o i l .  " D i e s e l engines proved so much more e f f i c i e n t  and cheaper t o m a i n t a i n than c o a l - b u r n i n g steam l o c o m o t i v e s t h a t the change t o o i l proved more economical d e s p i t e the f a c t t h a t i t s cost p e r BTU  i s h i g h e r than c o a l . "  1  The  rail-  way market f o r c o a l has a l s o d e c l i n e d , because of the dec l i n i n g r e l a t i v e importance of the r a i l w a y s as a form of transportation.  Coal i s now used mainly as a raw m a t e r i a l  i n the p r o d u c t i o n of s t e e l and f o r o t h e r m e t a l l u r g i c a l purposes.  This shift  i n u s e r markets has o c c u r r e d i n both the  Canadian and i n the world market f o r c o a l . . Coal p r o d u c t i o n i n the E a s t Kootenay has not  responded  w e l l t o the s h i f t f o r a number of d i f f e r e n t reasons.  Pro-  duction f o r domestic h e a t i n g and r a i l w a y purposes had been c a r r i e d out mainly t o serve the B.C. markets  market.  The major c o a l  i n Canada f o r m e t a l l u r g i c a l c o a l and coke a r e l o -  cated i n the east.  The market i n B.C.  f o r coke t o be used  i n the b l a s t f u r n a c e and f o r m e t a l l u r g i c a l c o a l i s s m a l l . However, a s m a l l foundry market f o r coke has been developed i n western Canada and i n the western U n i t e d S t a t e s . amount of coke has been s o l d t o the p i g i r o n p l a n t  2  A small  located  3  i n Kimberley and operated by COMINCO. L t d . was  Crows Nest  the o n l y western producer of coke.  These  Industries markets  have not expanded s u f f i c i e n t l y t o o f f s e t the d e c l i n e i n domest i c and r a i l w a y  markets.  78. Grows Nest I n d u s t r i e s L t d . thus was lenge of t a p p i n g  the m e t a l l u r g i c a l markets i n E a s t e r n  or of extending s a l e s on the the Port Eastern  faced with the  of Vancouver.  chal-  Canada,  i n t e r n a t i o n a l market through  Crowsnest c o a l d i d not p e n e t r a t e  the  Canadian market f o r h i g h grade c o a l , probably because  of p r o h i b i t i v e l y h i g h t r a n s p o r t a t i o n c o s t s .  Substantial i n -  vestment i n improving the e f f i c i e n c y of r a i l  transportation  would have been r e q u i r e d .  In 1965  "about 12.5  the c o a l output of B r i t i s h Columbia was and  cent of  shipped to Manitoba L  3 per cent went t o markets i n O n t a r i o . "  producers a l s o d i d not  per  Alberta  coal  e f f e c t i v e l y p e n e t r a t e the Ontario  or  Quebec markets. Between 60  and  70  Canada between  1965  and  per cent of the  I967  w a  s  c o a l consumed i n  imported from the  United  S t a t e s , w i t h o c c a s i o n a l l y small amounts imported from United  Kingdom.  Approximately o n e - t h i r d  was  high grade m e t a l l u r g i c a l c o a l used by  and  Quebec.-5 The  the U n i t e d  of the c o a l industry  the imported  in  Ontario  t r a n s p o r t a t i o n c o s t s of c o a l imported from  S t a t e s were probably s u b s t a n t i a l l y below the  trans-  p o r t a t i o n c o s t s which would have been i n c u r r e d i n moving Crowsnest c o a l t o The United duction  Ontario.  f o l l o w i n g f i g u r e s , r e f e r r i n g t o c o a l mined i n the  States,  g i v e the r a t i o of the r a i l  cost per u n i t of c o a l . ^ The  charge t o the  f i g u r e s i n d i c a t e the  portance of t r a n s p o r t a t i o n c o s t s i n d e t e r m i n i n g the cost of c o a l .  proim-  delivered  79; Average Value per ton, f f o . b . mine  Average Revenue per t o n hauled on C l a s s I Railroads  (1)  Year  1959 1958 1957 1956  (2) as percentage of  (1)  (3) 73.4$ 73.7 70.3 71.6  (2)  #3.57 3.58 3.57 3.45  #4,86 4.86 5.08 4.82  C o n t r a c t s with the Japanese were a l s o e l u s i v e and were made f o r short time p e r i o d s of t h r e e y e a r s . cent of c o a l p r o d u c t i o n i n B.C.  7  Japan.  Approximately  i n B.C.  was  i n 1965  Forty-one  was  exported  per  to  n i n e t y per cent of the c o a l produced  mined i n the East Kootenay.  However, the volume  of p r o d u c t i o n of c o a l i n the E a s t Kootenay i n 1965  was  only  8 1,058,446  s h o r t tons.  Subvention a s s i s t a n c e was  needed t o lower the cost of  Crowsnest c o a l and thus to enable  i t t o compete on a p r i c e  basis, i n a world market c h a r a c t e r i z e d by an abundant of h i g h grade coking c o a l .  The  supply  l a t t e r can be obtained from  such d i v e r s e c o u n t r i e s as A u s t r a l i a , Poland, S t a t e s , China, Russia and Western Europe.  the U n i t e d  The f a c t of an  abundant supply of m e t a l l u r g i c a l c o a l , i n c r e a s i n g p r o d u c t i o n e f f i c i e n c y i n the use of m e t a l l u r g i c a l c o a l i n s t e e l making, European n a t i o n a l p o l i c i e s o f m a i n t a i n i n g a minimum annual :  p r o d u c t i o n of c o a l which has r e s u l t e d i n stock p i l i n g , r  a b i l i t y of n a t u r a l gas and  the  o i l to be s u b s t i t u t e d i n thermal  e l e c t r i c i t y g e n e r a t i o n and domestic the i n c r e a s i n g p r i c e competitiveness  and  commercial h e a t i n g ,  of n a t u r a l gas and o i l  compared t o c o a l and the a n t i c i p a t e d g l u t on the world market has l e d t o v i g o r o u s p r i c e c o m p e t i t i o n i n the  energy  world  80. c o a l market. The d e l i v e r e d p r i c e of Crowsnest c o a l has not been comp e t i t i v e because of h i g h t r a n s p o r t a t i o n and h a n d l i n g  costs.  The l e n g t h of c o a l c o n t r a c t s which buyers were w i l l i n g t o g i v e Crowsnest c o a l was perhaps shortened by the f e a r that production  and t r a n s p o r t a t i o n c o s t s would r i s e d u r i n g the  p e r i o d of the c o n t r a c t might be  or t h a t the government  subvention  discontinued.  (B) D e s c r i p t i o n of the East Kootenay Economy p r i o r t o the p r o j e c t - Unemployment and P e r - c a p i t a  Income  The i n d u s t r i a l mix of an area may be d i v i d e d i n t o b a s i c 9  and non-basic i n d u s t r i e s .  The b a s i c i n d u s t r y i s the s t a p l e  or export around which other non-basic i n d u s t r i e s a r e b u i l t , in  order t o supply  producer and consumer goods and s e r v i c e s  to l o c a l businesses,  government and households.  The economic  base of the East Kootenay economy i s composed e s s e n t i a l l y of the f o r e s t and mining I n d u s t r i e s .  In the f o r e s t i n d u s t r y  I am I n c l u d i n g both l o g g i n g and lumber manufacture. ment i n l o g g i n g , lumber manufacture and mining  4.3$, 11.4$ and 14.7$ of the  I96I  represented  labour force r e s p e c t i v e l y .  The l o g g i n g and lumber i n d u s t r i e s compete  The lumber market i s p r i m a r i l y a " r a i l "  seasonal  inelastic.  market t o the P r a i r i e s  S t a t e s Midwest, and i s s e n s i t i v e t o the c o n d i 11  t i o n of the economy i n these a r e a s .  1 0  i n a market i n  which demand i s h i g h l y p r i c e s e n s i t i v e and income  and the U n i t e d  Employ-  The lumber i n d u s t r y i s  with demand f o r lumber i n c r e a s i n g i n the s p r i n g as  w h o l e s a l e r s b u i l d up t h e i r stocks and d e c l i n i n g i n the f a l l ,  81. as buyers do. not wish to c a r r y over l a r g e i n v e n t o r i e s d u r i n g the w i n t e r .  In the past t h e r e has been an excess  supply of  l a b o u r i n l o g g i n g and lumber manufacture which has not been completely The  e l i m i n a t e d even d u r i n g the peak p r o d u c t i o n season.  Canada Manpower Centre  stability  i n P e n t i c t o n i s h o p e f u l t h a t the  of employment i n lumber manufacture w i l l be a i d e d  i n the f u t u r e by the c o n s t r u c t i o n of modern lumber manufacturing  p l a n t s and a pulp m i l l and by the a p p l i c a t i o n of new  niques of  i n logging.  However, due  tech-  t o the g e n e r a l l y lower l e v e l  e d u c a t i o n i n the a r e a , unemployment i n the f o r e s t i n d u s t r y  could i n c r e a s e i n the f u t u r e , because of the requirement  for  l a b o u r of a h i g h e r q u a l i t y i n the newly automated sawmills, r e p l a c i n g the o l d e r c o n v e n t i o n a l m i l l s . Centre  The  Canada Manpower  i s h o p e f u l t h a t t h i s s i t u a t i o n can be avoided  through  retraining. While the S u l l i v a n mine a t Kimberley,  operated by COMINCO,  has p r o v i d e d a s t a b l e economic base f o r Kimberley,  increases  i n employment i n i t s f e r t i l i z e r , p i g i r o n and mining t i o n s have been l i m i t e d , due  opera-  t o t e c h n o l o g i c a l improvements  * 12 i n p r o d u c t i o n and i n c r e a s i n g p r o d u c t i v i t y of l a b o u r . Coal mining, as a l r e a d y mentioned, has been a d e c l i n i n g i n d u s t r y f o r many y e a r s . With regard t o the manufacturing approximately  19.5$  of the 1961  industry, i t represented  l a b o u r f o r c e , compared to  13 29.4$  i n the West Kootenay.  adjacent  West Kootenay i s an area  t o the East Kootenay, but with a much d i f f e r e n t i n -  d u s t r i a l mix and of  The  employment and  income r e c o r d .  Over one-half  the above f i g u r e f o r the East Kootenay r e p r e s e n t s  employ-  82.  ment i n lumber manufacture. The c o n s t r u c t i o n Industry  i n the East Kootenay i s  c h a r a c t e r i z e d by h i g h unemployment of both s k i l l e d and uns k i l l e d workers. dustry,  The s e a s o n a l i t y of the c o n s t r u c t i o n I n -  which i s normally a l s o experienced i n other  i s heightened by the very  areas,  severe w i n t e r c o n d i t i o n s which 14  e x i s t i n the East Kootenay.  The c o n s t r u c t i o n i n d u s t r y a l s o  tends t o be c y c l i c a l l y s e n s i t i v e , s i n c e the demand f o r i t s s e r v i c e s tend t o be income e l a s t i c .  W i t h i n the c o n s t r u c t i o n  i n d u s t r y , h i g h unemployment e x i s t s i n m a t e r i a l s h a n d l i n g i n t r u c k and t r a c t o r d r i v i n g .  There i s a l s o h i g h  ment i n the s e r v i c e and t o u r i s t s a l e s occupations. it  and  unemploy-  i n d u s t r y and i n c l e r i c a l and  The s e r v i c e i n d u s t r y i s seasonal,  since  i s s e n s i t i v e t o the l e v e l of a c t i v i t y i n the t o u r i s t i n -  dustry. From the above d i s c u s s i o n , i t can be concluded t h a t the i n d u s t r i a l base of the community  i s unstable  both s e a s o n a l i t y and c y c l i c a l s e n s i t i v i t y .  i n terms of Significant  employment a l s o e x i s t s i n non-basic I n d u s t r i e s ice- and c o n s t r u c t i o n .  un-  including'serv-  The unemployment r a t e s f o r the East  Kootenay area, the West Kootenay area and B r i t i s h Columbia are p r o v i d e d  i n Table VIII.  I t can be seen t h a t the average  unemployment r a t e i n the East Kootenay has i n the past comparatively  high.  been  The causes of t h i s unemployment have  been due.to the u n s t a b l e  market c o n d i t i o n s f o r lumber and  c o a l , the h i g h degree of s e a s o n a l i t y experienced i n the cons t r u c t i o n , s e r v i c e and f o r e s t i n d u s t r i e s and the g e n e r a l l y low s k i l l l e v e l and l a c k of m o b i l i t y of the l a b o u r  force.  83. TABLE V I I I Unemployment Rates f o r the East Kootenay, West Kootenay and B r i t i s h Columbia, West Kootenay (estimated) I  Quarter Year  3.9  8.7  6.1 2,7 4.6  4.2 3.3 3.4  3.2 2.4  8.59 7.33 4.44 5.85  4.4 3.8 4.7  1966  1.6  2.0  1967  1st 2nd 3rd 4th Year  B.C.  3.1  1.6 2.1  1st 2nd 3rd 4th Year  East Kootenay (estimated) I I  1965  1st 2nd 3rd 4th Year  1965-1968  3.28  6.88 7.00 5.92 8.30  4.6$ 3.17 2.89 2.46  9.11 11.05 8.97 5.66  2.94  2.29 1.64  1968  1st 2nd 3rd 4th Year I969 1st  6.2  5.0  3.8 5.6 II  6.7  n.a.  I Unemployment r a t e s a r e f o r f u l l time workers, workers a r e not i n c l u d e d .  7.3 6.3 4.9 5.4 6.3 P a r t time  I I The l a r g e unemployment r a t e s w i l l be due t o c y c l i c a l f l u c t u a t i o n s and t o an i n f l u x of workers due t o the K a i s e r P r o j e c t . Source:  Unemployment r a t e s f o r East and West Kootenay were c a l c u l a t e d from data o b t a i n e d from t h e Cranbrook and T r a i l Canada Manpower Centres, Department of Manpower and Imm i g r a t i o n , Report of R e g i s t e r e d C l i e n t s and V a c a n c i e s , Form 757, monthly from January 1965 t o January, 1969. Labour f o r c e s t a t i s t i c s were o b t a i n e d from D.M. R o u s s e l , D i s t r i c t Economist, Okanagan-Kootenay D i s t r i c t , Department of Manpower and Immigration by l e t t e r of J u l y 14, Unemployment r a t e s f o r B.C. were taken from DBS, Catalogue No. Monthly, V o l . 24, No. Vol. No. and 4, p.  I969. 25,  71-001 1  8.  4,7,10,  84 T a b l e s IX and X p r o v i d e the o c c u p a t i o n a l breakdown i n \ a b s o l u t e numbers of t h i s unemployment i n the East Kootenay. T h i s data was  obtained from monthly r e p o r t s of the Canada  Manpower Centre at Cranbrook, and thus the accuracy  of the  d i s t r i b u t i o n of unemployment by o c c u p a t i o n i s s u b j e c t t o the degree of manpower c e n t r e p e n e t r a t i o n of the l a b o u r market. I t i s i n t e r e s t i n g to note t h a t unemployment i n c o a l and mining does not show up t o any great extent  i n the  other  figures,  although unemployment i n c o a l mining i n the F e r n i e a r e a must have been s i g n i f i c a n t  i n some y e a r s .  d e c l i n e d between 195&  and 19&1,  The  p o p u l a t i o n of lEernie  which i s i n d i c a t i v e of the  16 d e c l i n i n g c o n d i t i o n ' of the c o a l mining i n d u s t r y . T a b l e XI p r o v i d e s a comparison between the East and West Kootenays of unemployment i n c e r t a i n occupations c h a r a c t e r i z e d by h i g h unemployment.  Even though the a b s o l u t e l a b o u r f o r c e  of the West Kootenay, d u r i n g the p e r i o d being i n v e s t i g a t e d , was  approximately  double t h a t of the E a s t Kootenay, the amount  of unemployment i n a b s o l u t e numbers i n the East Kootenay o f t e n exceeded t h a t i n the West Kootenay. and  s e m i - s k i l l e d occupations  Unemployment i n s k i l l e d  i n lumber and lumber products  much h i g h e r i n the East than i n the West Kootenay i n  I966 and 1967.  I n s k i l l e d and  was  1965.  s e m i - s k i l l e d c o n s t r u c t i o n oc-  c u p a t i o n s , the unemployment i n the East Kootenay exceeded t h a t i n the West Kootenay i n  I966 and 19&7.  l u t e amounts were almost the same.  In  19&5  t  n  e  t  w  0  abso-  In t r a n s p o r t a t i o n occupa-  t i o n s ( t a x i , t r u c k and t r a c t o r d r i v e r s ) , unemployment i n the E a s t Kootenay exceeded t h a t i n the West Kootenay from 19&5 1968  inclusive.  In u n s k i l l e d occupations  i n lumber and  t  o  lumber  85. products,unemployment between 1965  a  n  (  i  1968.  i n the East Kootenay was a l s o h i g h e r I n u n s k i l l e d c o n s t r u c t i o n occupa-  t i o n s , unemployment i n a b s o l u t e numbers was g r e a t e r i n the West Kootenay i n 1965 and 1966  and approximately  equal i n  1967. A comparison among the East Kootenay, West Kootenay and the Lower Mainland  of the percentage d i s t r i b u t i o n of the  l a b o u r f o r c e by i n d u s t r y i s p r o v i d e d i n T a b l e X I I .  8°"  TABLE 'XX UNEMPLOYMENT BY OCCUPATION FOR THE EAST KOOTENAY, 1965-1969 Number of Employe es Registered for F u l l Time Employment  T  Male  Total  January February March April May June July August September October November December  673 758 953 849 494 364 213 216 216 222 389 612  962 1,121 1,333 1,160 683 569 363 366 355 401 574 849  1966 I I  Male'-  Total  January February March April May June July August September October November December  752 730 955 912 658 576 363 319 396 345 5 90 709  1967 I I I  Male  January February March April May June July August September October November December  n.a. 625 700 n.a. 926 356 813 530 n.a. 557 843 1,002  1965  Prof-Tech Managerial  Machine Trades  Bench  Structural  Miscellaneous  2 1 1 4 5  11 12 15 14 7 4 2 4 5 2 4 3  72 71 98 181 51 29 21 22 22 21 33 48  0 0 0 0 0 0 1 0 0 0 0 0  93 106 89 78 47 45 19 27 36 34 54 85  110 128 209 217 109 40 22 24 27 30 61 108  242 272 363 292 172 157 79 68 53 56 128 214  Farm, Fish Forestry  Processing  Machine Trades  Bench  Structural  Mi see1laneous  U.I.C. (T400's)  36 22 20 15 12 25 12 13 7 10 24 20  81 71 98 114 79 57 42 34 45 30 78 87  0 0 0 0 0 0 0 0 0 0 0 0  248 240 249 214 191 208 131 114 143 124 192 277  264 245 460 444 282 213 108 85 115 106 204 249  n.a. n.a. n.a. n .a. n .a. n.a. n .a. n.a. n.a. n.a. n.a. n.a.  Processing  Machine Trades  Bench  Structural  Miscellaneous  6 12  6 11  35 43  0 0  72 79  90 117  275 297  173 180 116 120  8 4 26 12  13 5 4 1  75 45 189 30  0 0 3 2  94 82 338 326  205 120' 325 80  402 601 0* 0  57 75 84  15 26 41  0 9 11  54 64 91  2 4 3  242 372 412  139 220 291  26 31 23  Sales  Services  8 10 17 14 18 14 12 14 11 12 13 15  15 15 17 8 2 5 5 1 4 5 8 12  61 84 90 75 48 48 40 45 50 53 69 89  Prof-Tech Managerial  Clerical  Sales  Services  1,057 1,071 1,275 lj211 890 804 551 516 595 514 866 939  12 11 11 10 6 5 4 5 7 3 6 13  99 118 111 112 99 103 94 94 98 86 147 75  77 85 67 58 56 61 39 50 50 41 63 46  213 251 230 221 155 122 111 115 125 113 149 165  Total  Prof-Tech Managerial  Clerical  Sales  Services  16 12  101 107  50 57  97 164  8 8 12 16  109 133 92 75  50 73 56 43  9 26 24  9 8 11  4 8 11  n.a. 860 946 n.a. 1,187 1,020 1,007 708 n.a. n.a. n.a. n.a.  1  7 8 13 8 5 3  -  3 5 8  Farm, F i s h Forestry  Processing  Clerical  4 5 4 1 11 4  -  27 28 29 23 10 10 10 6 5 1 3 7 Farm, F i s h Forestry  U n s k i l l e d Occ.  U n s k i l l e d Occup.  New Form  * The form changed i n J u l y 1967.  87 TABLE  Farm,  Prof-Tech 1968  Male  IV  Total  Managerial  Clerical  Sales  (Continued)  tX,  Fish  Machine  Temporary  Services  Forestry  Processing  Trades  Bench  Structural  Miscellaneous  UIC  January  1,163  1,199  28  9  21  66  49  13  17  0  536  286  53  February  1,170  1,695  25  16  23  103  48  14  85  3  524  271  58 67  March  891  1,320  6  17  27  103  36  5  61  1  302  266  April  1,240  1,877  16  26  35  166  80  16  97  5  397  390  12  May  1,201  1,777  14  16  36  106  61  5  74  3  505  341  40  June  988  •  1,577  10  13  29  132  53  7  73  4  376  258  33  1,003  1,602  14  16  20  133  44  13  63  2  387  244  67  August  935  1,482  13  12  19  129  37  9  60  1  352  215  88  September  660  1,058  20  7  19  147  18  3  61  5  193  95  October  516  19  1  41  3  211  141  November  546  December  782  July  785  9,  753  11 7  22  1,081  11  11  12  68  14  34  20  4  38  1  241  165  18  71  20  3 .  56  1  385  206  Prof-Tech  Farm,  V  Male  Total  Managerial  Clerical  January  864  1,033  32  90  1969  Sales  Forestry  96  29  43  I  The  unemployment  figures  for  1965  are  for  male  workers.  II  The  unemployment  figures  for  1966  are  for  male  and  female  workers  III  The  unemployment  figures  for  1967  are  for  male  and  female  workers.  IV  The  unemployment  figures  for  1968  are  for  male  workers.  V  The  unemployment  figures  for  1969  are  for  male  and  VI  The  figures  VII  Structural  include and  transportation Source:  The  figures  Department Form  757,  clients  registered  miscellaneous  for  occupations  full  female  time  include  Fish  Services  Machine Processing 2  workers.  employment  only.  positions  in  construction,  Cranbrook  Canada  forestry  and  industries. were of  obtained  Manpower  monthly  from  and  from  reports  Immigration,  January  1965  to  of  the  Report January  of  Registered  1969.  Manpower  Clients  and  Centre, Vacancies,  92 20 '  7 13  U.I.C.  Trades  Bench  52  1  Structural 447  Miscellaneous 241  Layoffs  (T400's)  Reg.  (T400's) 239  8S  TABLE y BREAKDOWN Number Prof.-Tech.Clerical  Total A l l  occupations  Sales  of  Employees  Services  OF UNEMPLOYMENT  Registered  Farm,Fish  for  Processing  BY  Full-Time  Machine  OCCUPATION FOR E A S T Employment  Trades  Bench  Cranbrook,  East  1967,  1968,  Kootenay  1969  Canada  Manpower  Structural  Centre  Miscellaneous  UIC  Reg.  Total  Work  Forestry  Mana-  at  KOOTENAY,  UIC  gerial  &  Full  Time  Classification  620  Male  & Female  1968  1350  16  1967  955  15  Jan.  1969  Male  1033 Classification  Annual  Average :.:  660 669  & Female  for  820  840  850  -829-849  -859-860  869  900  920  T o t a l - ' . 906  915-929  930  940  •939-949  Total  Workers 41  8  na  ,.na  na  61  3  na  na  na  na  na  na  na  367  65  na  na  21  54  240  46  1396  na  na  na  17  "7  na  na  na  69  2  na  na  na  na  na  na  na  312  na  na  na  na  na  265  na  na  43  96  29  17  13  17/  52  20  56  70  259  447  61  20  80  15  40  241  239  105  II  90  Number  810  -809-819  23  Workers  32  Male  800 Total  13  Occupation  1272  Type  441-449  Forestry  (includes  only  620-625  Motorized  vehicle  repair  626-639  Machinery  mechanics  660-669  Cabinet  Under  626  -625-639  no.  makers,  Lumber  manufacture)  & repairmen  pattern  makers,  wood,  a l l  other  -  woodworking  Structural  800-809  Riveters,  810-819  Welders,  F i t t i n g ,  820-829  E l e c t r i c a l  840-849  Constr.  flame  bolting,  cutters  assembling,  and  and  screwing  installing  maintenance  and  r e l . ,  Tinsmiths,  cop'smiths,  sh.metalwork  and  boilermakers,  a l l  other  -  metal  fabricating.  r e l .  painters  and and  repairing paperhangers,  Plasterers  and  r e l .  occupations,  waterprodfers,  concrete  finishing  and  related,  a l l  other  -  painting, and  850-859  Excavating,  860  Carpenters  869  A l l  Under  other  grading and  -  and  drainage,  concrete  and  asphalt  paving,  a l l  other  -  excavating,  grading,  paving  and  plastering cemeting.  related  related  construction  Miscellaneous  900-906  Concrete  915  Attendants  mixing and  920-929  Packaging,  hoisting  930-939  Boring,  940-949  Timber  d r i l l i n g , cutting  UIC  Temporary  na  Not  I II Source:  Unemployment A l l  the  The  data  monthly  was from  dump  truck  and  lots  conveying,  cutting  and  drivers  park, and  related,  moving  related  log  :  and  ser. and  f a c i l i t i e s storing  (minerals),  inspection,  materials,  blasting,  grading,  a l l  loading  scaling  and  other and  -  packaging  conveying,  related,  log  and  materials  crushing,  sorting,  handling  screening  gathering,  and  storing  related, and  a l l  other  -  Extraction  related,  a l l  other  figures  are  annual  -  of  minerals  logging  layoffs  available  figures  figures  and  servicemen,  for  for  obtained January  1967  January from 1967  and  1969  1968 are  reports to  of  January  from  for  the  male  the 1969.  Prof.  and  -  female  Cranbrook  Tech.  -  Managerial  Classification  on  are  for  male  workers  only.  The  averages.  workers.  Canada  Manpower  Centre,  Department  of  Manpower  and  Immigration,  Report  of  Registered  Clients  and  Vacancies,  Form  757,  69 T A B L E ' X I . .. r  COMPARISON UNEMPLOYMENT  BETWEEN  E A S T AND WEST KOOTENAY  BY O C C U P A T I O N ,  Skilled  and  1965-1968  Semi-Skilled  OF  (ABSOLUTE NUMBERS)  Occupations Transportation  Lumbering West  and Lumber  Products East  Kootenay  Construction West  Kootenay  Kootenay  East  Kootenay  1965  1966  90  99  n.a.  89  106  34  104  96  35  99  123  59  119  99  45  169  138  n.a.  88  68  8  90  97  112  60  2  1  33  52  57  5  2  n.a.  17  28  August  2  5  n.a.  17  Sept.  3  4  n.a.  October  6  7  Nov.  9 18  1965  1966  Jan.  55  31  Feb.  38  March  1965  1966  n.a.  87  62  n.a.  30  1  86  59  59  36  9  132  April  45  28  6  May  16  8  June  5  July  Dec.  *  The  form  from  1967*  1967*  1967*  (Taxi,  1965  1966  1967*  West 1965  1966  n.a.  67  66  105  66  65  86  101  77  37  74  86  44  28  47  49  23  25  n.a.  33  18  16  n.a.  25  17  15  n .a.  n.a.  19  11  5  n.a.  38  7  n.a.  43  which  these  figures  were  Truck  and  Tractor)Drivers  Kootenay 1967*  East  Kootenay  1965  1966  n.a.  68  96  n.a.  44  23  83  94  58  85  33  35  129  166  72  n.a.  64  28  26  129  159  n.a.  53  83  43  25  n.a.  52  91  116  37  44  69  27  13  17  22  44  78  n.a.  14  23  n.a.  24  16  n .a.  15  33  n .a.  38  n.a.  22  37  n.a.  21  34  n.a.  17  31  n.a.  24  19  n.a.  29  37  n.a.  16  22  n.a.  20  35  n.a.  n.a.  28  14  n.a.  29  38  n.a.  24  17  n.a.  20  33  n.a.  42  n.a.  46  32  n.a.  46  60  n.a.  27  25  n.a.  41  68  n.a.  53  n.a.  70  34  n.a.  78  82  n.a.  31  29  n.a.  72  87  n.a.  taken  was  changed  i n July  1967.  1967*  90 TABLE  XI  .. - ( C o n t i n u e d  Unskilled Lumber  and  Lumber  East  1966  1967 n.a.  Occupations Construction  Products  West:Kootenay '1965  )  1965 83  West  Kootenay  Kootenay  East  Kootenay  1966  1967  1965  1966  1967  1965  1966  1967  113  n. a.  169  193  n.a.  133  119  n. a.  75  187  168  153  140  125  172  Jan.  109  55  Feb.  61  43  6  101  March  55  36  14  128  152  70  165  134  236  .204  142  196  April  46  22  14  139  145  n. a.  159  141  229  118  126  n. a.  May  23  15  18  70  97  103  199  166  236  86  125  252  June  10  6  9  44  103  114  309  222  224  98  143  443  July  12  5  n.a.  28  45  n. a.  190  106  n.a.  47  98  n. a.  August  7  6  . n . a .  20  36  n. a.  73  119  n.a.  42  67  n. a.  Sept.  6  7  n.a.  18  50  n. a.  51  85  n.a.  28  93  n.a.  October  4  2  n.a.  15  41  n. a.  102  82  n.a.  .34  80  n. a.  November  14  5  n.a.  50  77  n. a.  99  138  n.a.  64  125  n. a.  December  31  15  n.a.  106  109  n. a.  123  143  n.a.  90  143  n. a.  99  TABLE- X i : :  -( C o n t i n u e d )  1968 (The the  figures change  for  in  1968  form  are  used  listed  by  the  separately  Canada  Concrete  Structural  Work  Miscellaneous  because  Manpower mining  and  drivers,  tractor  drivers,  a l l  Occupations  freight  of  Centres) dump  truck  Blasting,  t r a i l o r  other  motor  conveying, a l l  occupations  other  boring,  loading  crushing,,  extraction drilling,  related East  Kootenay  West  536  Jan.  Kootenay  East  Kootenay  West  Kootenay  East  Kootenay  West  Kootenay  East  and  screening,  of  minerals;  cutting  Kootenay  West  Kootenay  624  286  157  68  67  30  15  106  93  48  29  10  Feb.  524  674  271  March  302  600  266  129  92  54  2  13  April  397  328  390  65  108  22  44  6  May  505  353  341  62  85  21  31  5  June  376  478  258  78  61  24  27  6  July  387  396  244  58  66  19  28  3  August  352  311  215  46  55  20  28  3  Sept.  193  250  95  52  12  20  8  8  October  211  273  48  42  17  5  5  November  241  271  165  58  47  21  10  8  December  385  268  206  47  56  17  11  2  Timber  cutting  scaling sorting, and East  and  inspecting,  log  and  Kootenay  related,  grading,  related,  gathering,  related,  141  log  storing,  a l l other West  logging  Kootenay 33  Jan.  76  Feb.  57  14  March  77  18  April  84  17  May  60  11  June  63  12  July  54  14  Source:  The  figures  Trail,  were  Canada  August  46  6  Sept.  22  5  Immigration,  October  25  6  Form  November  36  7  December  47  4  757,  obtained  Manpower Report  monthly  of  from  from  Centres,  reports  Registered January  of  Department Clients  1965  to  the of and  January  and  (minerals)  Cranbrook Manpower  and and  Vacancies, 1969.  92. TABLE X I I I n d u s t r i a l Mix 1961  % D i s t r i b u t i o n of Labour F o r c e by I n d u s t r y West Kootenay  Industry Agriculture F o r e s t r y (logging) F i s h i n g and T r a p p i n g Mines, Q u a r r i e s & O i l Construction Wholesale Trade R e t a i l Trade Service Industries Manufacturing (lumber manufacture)  2.2$  4.3 0.1 WeUJs.:6.2 4.3 2.6 10.2  37.7 29.4 7.35  East Kootenay  Lower Mainland  2.9$ 4.3 0.1  2.9$  7 .9 2.0  6.8  14.6  9.4  37.0  1 9.5 11.4  1 .5 0.6 0.7  7.2  12.3 46.2 18.9  Source: P r o v i n c e of B.C., Bureau of Economics and S t a t i s t i c s , Department of I n d u s t r i a l Development, Trade and Commerce, R e g i o n a l Index of B r i t i s h Columbia, January, pp. 41,  1966,  5.  155.  "~~  The i n d u s t r i a l mix of t h e West Kootenay i s thus d i f f e r e n t from that of t h e East Kootenay.  There i s l e s s r e l i a n c e on  lumber manufacture and t h e c o n s t r u c t i o n i n d u s t r y .  A stable  economic base i s p r o v i d e d i n the form of t h e s m e l t i n g operat i o n s of COMINCO, which i s i n c l u d e d i n the manufacture c l a s s i fication.  The comparison between the E a s t and West Kootenay  serves t o p o i n t out the depressed economic c o n d i t i o n of the E a s t kootenay.  The d i f f e r e n c e i n t h e amount of unemployment  i n lumber manufacture, l o g g i n g , c o n s t r u c t i o n and t r a n s p o r t a t i o n which has p e r s i s t e d over a number of years i s a l s o i n d i c a t i v e of t h e g e o g r a p h i c a l and o c c u p a t i o n a l Immobility of l a b o u r i n these occupations i n t h e East Kootenay.  93. Average wage r a t e s a r e a l s o lower i n the East than i n the West Kootenay. all  The average annual wage computed from  t a x r e t u r n s , i n c l u d i n g those which were nontaxable, i n  the East Kootenay i n 1966 was $3,571. while f o r t h e West  17 Kootenay t h e f i g u r e was $4,218.  The percentage of the t o t a l  number of a l l r e t u r n s below $3,000 was g r e a t e r i n the East than i n t h e West Kootenay. tial  The e x i s t e n c e of t h i s  ,  differen-  i s a l s o i n p a r t i n d i c a t i v e of i m m o b i l i t y out of the E a s t  Kootenay.  Thus t h e E a s t Kootenay has i n the past been a de-  pressed area i n terms of both h i g h unemployment and low average  income.  FOOTNOTES TO THE APPENDICES AppendixSI (A)  ,  I " K a i s e r S t r i p Mine Y i e l d 'Less than Underground ," The Vancouver Suh, Vancouver, 1969. 1  2...C...L. C h r i s t e n s o n , Economic Redevelopment i n Bituminous Goal, The S p e c i a l Case of T e c h n o l o g i c a l Advance i n U n i t e d S t a t e s Coal Mines, Harvard U n i v e r s i t y P r e s s , Cambridge, 1962, p. 129.  1930-1960,  3 Ibid.,  pp.  129-130.  4 T h i s i n f o r m a t i o n was obtained from an i n t e r v i e w with Mr. L.C. Reed f o r m e r l y of Hedlin-Menzies and A s s o c i a t e s L t d . i n June  I969.  5 Canada, F u e l s and Mining P r a c t i c e D i v i s i o n , Mines Branch, Department of Energy, Mines and Resources, T.E.. T i b b e t t s and J.C. Botham, "Coal and Coke," Canadian M i n e r a l s Yearbook: 1966, P r e p r i n t s , no.^ 15» Queen's P r i n t e r , Ottawa, 1965, 1966, p.  1967,  8.  6 I b i d . , p.  8.  7 T h i s i n f o r m a t i o n was obtained from D.M. Roussel, D i s t r i c t Economist, Okanagan-Kootenay D i s t r i c t , Department of Manpower and Immigration by l e t t e r of 14 J u l y , 1969. (B) 8 Research Department, The I n d u s t r i a l Bank of Japan L t d . (Nippon Kogyo Ginko), "The I r o n and S t e e l Industry, B a s i c Problems and P o l i c y G u i d e l i n e s , " Q u a r t e r l y Survey of Japanese Finance and Industry, v o l . XVIII, No. 4, October-December, 1966, p.  3.  (C>  9  "105-car u n i t t r a i n s f o r c o a l run," The P r o v i n c e , Vancouver, Tuesday, 3 June, 1969, p. 7A. 10 N a t i o n a l Harbours Board, Vancouver Outerport a t Roberts Bank, Press Release, 23 June, 1969, pp. 1-2. I I T h i s i n f o r m a t i o n was obtained from Mr. Yvan Gagnon, A c t i n g D i r e c t o r , Research & Development Branch, N a t i o n a l Harbours Board, Ottawa, by l e t t e r of J u l y 17, 1969. 12 N a t i o n a l Harbours Board, Roberts Bank, P o r t of Vancouver Outer P o r t Development, unpublished, 1969, p. 1.  95. Appendix I I (A) 1 Sam H. S c h u r r and Bruce C. N e t s c h e r t with Vera E. E l i a s b e r g , Joseph L e r n e r , and Hans H. Landsberg,. Energy, i n the American Economy. 1 8 5 0 - 1 9 7 5 , an economic study of I t s h i s t o r y and p r o s p e c t s , p u b l i s h e d f o r Resources f o r the F u t u r e , Inc. by the Johns Hopkins P r e s s , B a l t i m o r e , Maryland, I960,  pp.  77-78.  2 Canada, F u e l s and Mining P r a c t i c e D i v i s i o n , Mines Branch, Department of Energy, Mines and Resources,. .T...E. T i b b e t t s and J.C. Botham, "Coal and Coke," Canadian M i n e r a l s Yearbook: 1966, p r e p r i n t s , no. 15, Queen's P r i n t e r , Ottawa, 1 9 6 5 , 1 9 6 6 , 1967, p. 16. 3 P r i c e Waterhouse and Co., The Growth and Impact of the Mining I n d u s t r y i n B r i t i s h Columbia, study done f o r the Mining A s s o c i a t i o n of B.C., Vancouver, 4 December, I 9 6 8 , p.  30.  4 Canada, F u e l s and Mining P r a c t i c e D i v i s i o n , op. c i t . , p.. 4. 5 I b i d . , p. 4. 6 S c h u r r , N e t s c h e r t w i t h E l i a s b e r g , L e r n e r , and Landsberg,  op. c i t . , p. 335*  7 Canada, F u e l s and Mining P r a c t i c e D i v i s i o n , o p . c i t . , p. 4. 8 P r o v i n c e of B.C., M i n i s t e r of Mines and Petroleum Resources, Annual Report, f o r the year ending December 31, 1 9 6 5 , pp. 3 8 6 and 401. (B) 9 Hugh 0 . Nourse, R e g i o n a l Economics, A Study i n the Economic S t r u c t u r e , S t a b i l i t y and Growth of Regions, Seymour E. H a r r i s , E d i t o r , Economics Handbook S e r i e s , McGraw-Hill Book Co., New York, New York, I 9 6 8 , pp. I 6 I - I 6 3 . 1 0 T h i s i n f o r m a t i o n was o b t a i n e d from D.M. R o u s s e l , D i s t r i c t Economist, Okanagan-Kootenay D i s t r i c t , Department of Manpower and Immigration by l e t t e r of 14, J u l y , 1969. The o r i g i n a l source was the 1961 Census of Canada. 1 1 T h i s i n f o r m a t i o n was o b t a i n e d from D.M. R o u s s e l , D i s t r i c t Economist, Okanagan-Kootenay D i s t r i c t , Department of Manpower and Immigration by l e t t e r of 14 J u l y , 1969.  96 12 P r o v i n c e of B.C., Bureau of Economics and S t a t i s t i c s , Department of I n d u s t r i a l Development, Trade and Commerce, R e g i o n a l Index of B r i t i s h Columbia, January 1966, p. 83. 13  I b i d . , pp. 5 and 41.  14 D.M.  R o u s s e l , op. c i t . , by l e t t e r .  15 D.M.  R o u s s e l , op. c i t . , by l e t t e r .  16 P r o v i n c e of,B.C., Bureau of Economics and S t a t i s t i c s , Department of I n d u s t r i a l Development, Trade and Commerce, op. c i t . , p.  17.  17 Canada, Department of N a t i o n a l Revenue, T a x a t i o n D i v i s i o n , T a x a t i o n S t a t i s t i c s , P a r t One - I n d i v i d u a l s , T a b l e 6, Queen's P r i n t e r , Ottawa, 1968, p. 98."  

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