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COAL AND PETROLEUM PRODUCTS COMMISSION (BRITISH COLUMBIA) Volume II. Report of the Commissioner The Honourable… British Columbia. Legislative Assembly 1937

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 COAL AND PETROLEUM PRODUCTS COMMISSION
(BRITISH COLUMBIA)
Volume II.
Report of the Commissioner
The Honourable Mr. Justice M. A. Macdonald
relating to
The Coal Industry
(Being Paragraph 1 and part of Paragraph 3 of the
Terms of the Commission)
September 27th, 1937
VICTORIA,  B.C. :
Printed by Charles F. Banfield, Printer to the King's Most Excellent Majesty.
1937.
	  To His Honour the Lieutenant-Governor in Council:
May it please Your Honour:
I, the undersigned Commissioner appointed under Your Honour's Royal Commission
dated the 28th day of November, a.d. 1934, to cause inquiry to be made into and concerning
the matters therein referred to, have the honour to report finally on the subjects referred to
in Paragraph 1 thereof, with additional report on matters more particularly referable to
Paragraph 3.
In due course a further final Report will be submitted on the matters referred to in Paragraph 3 not already dealt with.
I have the honour to be,
Sir,
Your humble and obedient servant,
M. A. MACDONALD,
Commissioner.
Victoria, B.C., September 27th, 1937.  (b.)
(c)
(d.)
(e.)
(/•)
(0.)
"PUBLIC INQUIRIES ACT."
His Honour the Lieutenant-Governor in Council has been pleased to appoint the Honourable Mr. Justice M. A. Macdonald, one of His Majesty's Justices of Appeal of British
Columbia, a sole Commissioner under the " Public Inquiries Act" to inquire into the following
matters:—
1. The following matters respecting coal mined in or imported into British Columbia and
used for fuel purposes in British Columbia:—
(a.)  The cost of production:
The manner and cost of preparation for the wholesale and retail trades respectively :
The cost of transportation:
The cost to dealers in British Columbia:
The cost to consumers in British Columbia:
The profits made by persons or corporations owning or operating coal-mines in
British Columbia:
The profits made by persons or corporations engaged in the business of buying
and selling coal in British Columbia.
2. The following matters respecting petroleum products, that is to say, gasoline, fuel-oil,
lubricating-oil, kerosene, and other petroleum products imported into or refined or produced
in British Columbia and used or designed for use therein for fuel purposes, lighting purposes,
or in the operation of internal-combustion engines:—
(a.)  The cost of importation or production:
The cost of refining or preparation for use:
The cost of transportation:
The cost to dealers in British Columbia:
The cost to consumers in British Columbia:
The profits made by persons or corporations engaged in the importation of
petroleum products into British Columbia, or in refining, producing, or supplying petroleum products for use in British Columbia.
3. Generally, all matters tending to show the comparative value of coal and petroleum
products for economic use as aforesaid in British Columbia, and the value to the economic
welfare of British Columbia of the development of industry based upon the production of the
fuels enumerated, or tending to show whether or not the prices charged for coal and petroleum
products respectively are unjust or unreasonable; and all such further matters as the Commissioner may consider to be incidental to any of the foregoing matters of inquiry.
(6.)
(c.)
(d.)
(e.)
A. W. GRAY,
Acting Provincial Secretary.
Provincial Secretary's Office,
November 29th, 19S4-  PREFACE.
A final report is presented in this Volume on the questions outlined in Paragraph 1 of the
Commission relating to coal mined in British Columbia or imported into the Province for
domestic and industrial use. The terms of Paragraph 1 will be found on the preceding page.
It necessitated a thorough investigation into costs of production at the mine and through all
subsequent stages in transit and in the hands of dealers until it reached the ultimate consumer; also into profits made, if any, by the coal companies or by others engaged in the
business.
To answer inquiries of this nature with reasonable accuracy and to arrive at the conclusion, in the interests of the consumer and of the industry itself, as well as to enable coal to
compete more successfully with its chief competitor—viz., heavy fuel-oil—that reductions
should be made in its selling price, after allowing a fair return on a fair capitalization,
involved a detailed investigation aided by technical advisers, with knowledge of the mining
industry, and particularly by Chartered Accountants as it was essentially a cost problem.
As in the case of the Report filed with the Provincial Secretary on October 21st, 1936, on
the questions referred to in Paragraph 2 of the Commission relating to oil and petroleum
products, we have for convenience embodied in this report as incidental to the matters
referred to in Paragraph 1 part of the subject-matter referred to in Paragraph 3, more
particularly the latter part of that paragraph reading as follows: " all matters tending to
show whether or not the prices charged for coal . . . are unjust or unreasonable." This
branch of the inquiry provided for in Paragraph 3 could best be dealt with when considering
the questions of costs specifically referred to in Paragraph 1.
In the Oil and Petroleum Report we found that heavy fuel-oil used in industry did not
carry its own fair load of costs. The Tariff Board of Canada, after a prolonged investigation
based, as to British Columbia conditions, largely on the evidence adduced in this inquiry,
stated that this contention was not refuted by the Oil Companies. The Tariff Board also
stated that there was no reason why the price of gasoline in Vancouver should be higher than
in Seattle at that date. Approximately that would mean, as selling prices of gasoline stood
at the time, that it should be sold at about the figure we found in our Petroleum Report. In
this volume relating to coal we also find that it may be sold at reduced prices. With cheaper
coal on the one hand and heavy fuel-oil bearing its own burden of cost on the other, competition between these fuels would be placed on a more fair and equitable basis.
As coal production declined in recent years, adversely affecting economic conditions, not
only in coal mining centres but throughout the Province, and this decreased production
(gains have been made recently) is a matter of general knowledge and concern, one might
wonder if, under such conditions, reductions in the selling price of coal could properly be
recommended in this Report. That of course depends upon the facts, not on any general
surmise. A perusal of the Report will disclose in a very detailed way grounds for our conclusions on this point.
While smaller companies were not neglected, we were chiefly concerned with the two
largest coal companies in the Province—viz., Canadian Collieries (Dunsmuir), Limited (including Western Fuel) and the Crow's Nest Pass Coal Company, Limited, as their operations
account for 86.7 per cent, of the total production in, for example, 1936. These two Companies,
in a sense, are not in competition. It is difficult for the latter to invade the large domestic
and industrial Coast market in which the Island Companies have had, and still have, while
not a monopoly, an overwhelming advantage in comparision with the Crow's Nest and Alberta
Companies. That is due to geography, freight rates and a short water haul. I have not
found that any reductions should be made by the Crow's Nest Pass Coal Company,
Limited, in the selling price of coal over the period 1930-1936. Reasons for this finding will
be found in Section 12, Chapter XII.    These reasons do not apply to the Island Companies.
The coal industry at present is in a state of flux. By reason of the gradual increase in
use of automatic stokers and modern fuel burning appliances, the demand for lump coal,
selling at $10.50 a ton in Vancouver and $10.75 in Victoria, while still substantial, is declining,
and the demand for finer coals, used with stokers and selling for less, is increasing. The
tendency in the future will be—it is now evident at least to some degree—for a reversal of
this position in respect to selling prices—viz., that finer coals, increasingly in greater
demand, will gradually approximate the selling price of lump coal while the selling price of PREFACE.
the latter will decrease; or, on the other hand, both reach a common price level. For
example, the selling price of Island pea coal was advanced recently by 50 cents a ton. We
find in our Report that the selling price in Vancouver under present conditions should be $8.10
and $7.25 and $6.00 per ton respectively under conditions set out in Tables 78, 79 and 80.
Lump coal, however, selling at $10.50 or $10.75, should be reduced under existing conditions
to $8.10, and to a lesser amount under changed conditions. All sizes of coal from the same
mine, cost the same to produce (except in the case of special preparation) and can be sold at
the same price subject to variations in distribution costs. Detailed finding in respect to
reductions will be found in Chapters XI. and XII. and Tables 69 to 80, inclusive.
The mining centres of Vancouver Island and the Crow's Nest Pass have a special interest
in maintaining conditions that will enable companies to operate the mines at a fair profit,
with adequate wages paid to miners and proper reserves created to ensure safe and profitable
operation for the future, and no recommendations should be made in this Report that would
prevent it. It would be equally unwise, however, to permit a company to insist upon the
retention of an inflated capital structure, or on maintaining unnecessarily high costs of production, involving higher prices to the consumer and generally unsatisfactory conditions.
The reductions recommended in the selling price of coal by the Canadian Collieries (Dunsmuir), Limited and Western Fuel are based upon an allowance of an 8 per cent, return,
subject to income taxes, on a fairly capitalized capital structure. This conclusion is arrived
at after a prolonged study and detailed computations made in the first instance, with the
assistance of Mr. H. B. Pratt, a senior accountant whose work was supervised by Mr. H. G.
Hinton, Victoria Manager of Geo. A. Touche & Company, a firm of chartered accountants of
international repute.
I purposely place the foregoing statements—-viz., that with the reductions recommended approximately an 8 per cent, return could be secured by the companies—prominently
in the forefront of this Report because of suggestions, possibly to some extent, made, as it
were, in terrorem, that if any reductions are found it would adversely affect the mining
centres referred to, so vitally interested, by interfering with profitable operations. I feel
satisfied that the results arrived at, if acted upon, will redound to the benefit of labour, the
companies concerned and the great body of consumers, domestic and industrial.
I had the necessary assistance in this inquiry of an outstanding consulting coal mining
engineer, Mr. George W. Evans, of Seattle, a member for many years of the American Institute of Mining and Metallurgical Engineers and sometime consulting engineer to the United
States. He has personal knowledge of the Vancouver Island and Crow's Nest fields as well as
of coalfields in Alberta, Washington, Utah, Wyoming and Pennsylvania. He was first
presented as a witness in the inquiry by the Canadian Collieries (Dunsmuir), Limited, and
I was impressed with his evidence. Feeling the need of professional assistance, after inquiries into his qualifications and long experience, I employed him in a professional and
advisory capacity to the Commission. His report to me after personal examination of the
mines on the Island and in the Crow's Nest and in the neighbouring State of Washington was
of great value. It ought to assist at least to dispel the view that reductions will jeopardize
the industry. I quote here what is said in Chapter XL, Section 5 (d), of this Report. It is
as follows:—
" In scrutinizing closely the costs of coal production we have in mind that in the neighbouring
State of Washington more than one coal operation, facing extinction through high costs of production, has been successful by modernization of mining and cleaning methods, in substantially
reducing the over all costs of production and in recapturing a large part of the markets lost to
California fuel oil several years ago. These Washington operators have experienced a substantial
increase in employment with better wages for workmen as well as financial returns on the capital
invested. The coal industry in this Province should take advantage of the successful experience
of coal operators elsewhere; install modern mining equipment and secure the resultant advantages
of lower production costs with attendant greater volume of sales and production, accompanied as
well by lower prices to the consumer and more profit to the coal companies."
As intimated, the inquiry centred largely around the activities of the Canadian Collieries
(Dunsmuir),, Limited and Western Fuel operating mines at Cumberland and Nanaimo and the
Crow's Nest Pass Coal Company operating in East Kootenay. It was essential, if we were
to answer the questions in Paragraph 1, coupled with part of Paragraph 3, that we should
investigate in the greatest detail the capital structure of Canadian Collieries (Dunsmuir),
Limited (and Western Fuel)  and its many subsidiary Companies in and out of the Province PREFACE. ix.
from its inception to the present time. This inquiry led us through a labyrinth of intricate
financial activities. The Company's inception was not auspicious. It was unfortunate to
investors and to the industry itself. The purchasers of the property from the late Mr.
Dunsmuir in 1910, for a price more than double the fair value of the assets transferred, even
allowing for the optimism of the day, were not coal mine operators, but promoters. The
Company was saddled with a load at the outset that (if it could be carried at all, and it could
not) it was only possible to do so by charging excessive prices for coal. If, having paid an
excessive sum for the property, far beyond its commercial value, the true situation had been
realized at an earlier date and a reduced re-capitalization effected as outlined in Section 6 of
Chapter VIIL, lower prices of coal would have been possible, losses of bondholders greatly
reduced, and the condition of the Company materially improved.
I had as Commissioner throughout the inquiry the invaluable aid of Mr. G. F. Gyles, a
partner in the Vancouver office of Price, Water house & Co., internationally known Chartered
Accountants. He attended the sessions held at Nanaimo, where the cost structure of Canadian Collieries and Western Fuel were under investigation; also at Fernie, where the cost
structure of the Crow's Nest Pass Coal Company, Limited was investigated.
Mr. Gyles studied the Report at my request, and I have his authority to say that the
portions relating to capital structures, capitalizations, depreciation, profit position and a fair
return on a reasonable capitalization have his approval. Naturally, neither Mr. Gyles nor
other Commission advisers, to whom reference is subsequently made, have any responsibility
for conclusions which in the last analysis it was my duty to find.
The Report abounds in facts, tables and computations progressively leading to the conclusions stated in the final chapter. As intimated, all computations have been made and
checked by Mr. H. B. Pratt, of George A. Touche & Co., also as stated internationally known
Chartered Accountants, under the supervision of Mr. H. G. Hinton, the Victoria Manager.
Mr. Pratt was steadily engaged in the work of the Commission for over a year. In assisting
in the compilation of a report of this extensive and detailed character his unremitting and
careful works merits  the highest praise.
As in the Petroleum Report, considerable material was submitted as Exhibits and otherwise, and tentatively received as confidential. I stated that should it become necessary to
refer to these statements to properly carry out the Terms of the Commission I would do so.
One of the grounds, among others, for asking for confidential treatment was to prevent competitors from receiving undue advantages. That feature, for reasons intimated, does not
arise to any considerable degree. I have endeavoured to use statements of this character,
however, in a manner that would not reveal their full import to competitors or injure the
company.    All material used was a necessary and essential feature of the Report.
I desire to acknowledge assistance given by Dr. W. A. Carrothers, Professor of Economics
at the University of British Columbia, whom I consulted as occasion required. As already
pointed out, the Terms of Paragraph 1 of the Commission relating to coal are concerned with
costs, computations and company methods where the assistance of Charterer Accountants and
coal mining Engineers was of primary importance. Matters relating to " economic welfare "
are referred to in Paragraph 3, dealt with in part only in this Report, and that not chiefly in
its economic aspects. The assistance of Mr. Kenneth Moodie, Combustion Engineer of the
Provincial Department of Public Works, was indispensable. The advantage derived from his
technical knowledge and practical experience in the coal mining industry is gratefully
acknowledged, and, in addition, I am indebted to him for many services rendered to the
Commission throughout the inquiry.
I also received valuable assistance from Mr. Bruce Robertson, Counsel for the Canadian
Collieries and Western Fuel; and on special occasions, when he appeared, from Senator J. W.
deB. Farris, K.C. Mr. Robertson was of great assistance not only in the examination of
witnesses, but in furnishing me with a detailed and valuable written submission at the close
of the inquiry. Mr. A. R. MacDougall, Barrister, of Vancouver, representing about twenty
coal dealers, including some who sold Alberta coal, rendered valuable aid. Mr. J. P. Hogg,
too, Assistant Counsel to the Commission until some months ago when he assumed another
position, was of particular value in eliciting facts in the coal inquiry. Indeed, with their
assistance and that of Mr. O'Halloran, Chief Counsel to the Commission—and again, as in the
Petroleum Report, I cannot speak too highly of the valuable detailed assistance given by him x. PREFACE.
and the thoroughness and magnitude of his work—I was placed in the favourable position of
not being obliged to reach conclusions without the most detailed assistance on the many questions arising in the course of the inquiry and in the compilation of the Report. Mr. R. W.
Hartley, who remained as Secretary during the greater part of the coal inquiry, performed
his many duties in a highly satisfactory manner.
For convenience, a general summary of the Coal Report will be found in Chapter XIII.
A further synopsis in skeleton form based upon the general summary will be found in the
first part of the Report.
May I here refer to the Oil and Petroleum Report filed on October 21st, 1936. The data
as to costs and prices in that report were necessarily based on 1934 figures, although we
stated that 1935 conditions were not materially different. In view of the time elapsing since
these computations were made giving rise to the question as to whether or not the same
results ought to be arrived at based on data, for example, in 1936 or 1937, or indeed in any
later year, we said in Chapter XV., paragraph 17, of the Petroleum Report:-—■
" To bring the costs up to date the curent laid down prices of crude in Vancouver and processing charges may be compared with the data supplied in Table 44 and applied to Tables 73
to 82."
Similarly, as to future coal costs and prices, the current costs of production and of marketing and distribution of coal on the basis found in the Coal Report may be compared with
the data supplied in Tables 69, 78, 79 and 80 in Chapters XI. and XII. of the Report. I make
this brief reference, without going into details, to indicate that an inquiry of a restricted
character only would be necessary for this purpose.
M. A. MACDONALD,
Commissioner.
Victoria, B.C., September 27th, 1937. BRIEF SYNOPSIS OF SOME OF THE MAIN FEATURES INCLUDED IN
THE GENERAL SUMMARY FOUND IN CHAPTER XIII.
1. The people of this Province expended about $7,000,000.00 for coal and coke in 1936 and
in the last ten year period approximately $100,000,000.00.
2. In the year 1936 British Columbians expended approximately $29,000,000.00 for gasoline, fuel-oil and other petroleum products as well as in coal and coke purchases, or about
$300,000,000.00 over a ten year period.
3. Canada possesses about one-sixth of the world's coal resources; British Columbia
among Canadian Provinces, with coal reserves estimated at 76,034,942,000 metric tons, takes
second place to Alberta.
4. In 1936 the twenty-two active coal mines in the Province produced 1,402,630 short
tons of coal, employing 2,814 men, of which 2,035 were employed underground. For number
of days worked in each mine refer Tables 26a and 26b.
5. Canadian Collieries (Dunsmuir), Limited, on Vancouver Island and Crow's Nest Pass
Coal Company, Limited, at Fernie produced 86.7 of the British Columbia coal production in
1936.
6. To the end of 1936 British Columbia produced 96,056,118 short tons of coal, with an
estimated value at the mines of $340,699,557.00.
7. British Columbia coal production in 1935 was the lowest since 1903, having decreased
by 47.23 per cent, since 1929.
8. In 1936 sales of British Columbia coal outside the Province increasd to 18.15 per cent,
of total sales as compared with 12.15 per cent, in 1934, due mainly to increased sales in
Manitoba and the United States.
9. Coal is sold generally as lump, egg, nut, pea and slack, although many other descriptive names are used. In Vancouver and Victoria at least seventy-six different descriptions
of coal are sold. For definitions refer paragraph 14, Chapter XIII. There is no uniformity
in the sizes of coal either at the mines or as sold to the consumer.    This creates confusion.
10. The calorific or heat value of coal is not, as it should be, a governing factor in its
price to the domestic consumer.
11. With modern mechanization and co-operation between men and management, a reduction in over all costs—underground and surface in the Vancouver Island mines can be made
of 70 cents to $1.00 per short ton on a tonnage basis equivalent to the tonnage mined during
the past two years at Comox.    Modified reductions are applicable to all British Columbia
12. The present system of marketing and distribution of coal is wasteful and uneconomic,
adding unduly to the price paid by the domestic consumer.
13. The specific reductions in the price of coal to the domestic consumer recommended
in this Report under the different conditions therein referred to are set out in Tables 78, 79
and 80 in Chapter XII. Because of changing conditions in the coal industry at the present
time, the reader will find it difficult to follow the summary of reduced prices in paragraphs
14 to 18 without turning to and studying the tables referred to. xii. SYNOPSIS OF THE MAIN FEATURES.
14. Coal delivered to the domestic consumer in Greater Vancouver and Victoria should
not exceed $6.00 per short ton. This includes retailers' distribution charges, which should not
exceed $1.00 per ton. This price is conditional upon the establishment of central coal distributing depots to take the place of the present method of retailing; delivery to the consumer in
bulk instead of in sacks and the general use of automatic stokers or other modern coal burning appliances. The reductions in the prices of specific coals under these conditions are set
out in Table 80, Section 10 (6), Chapter XII.
15. Until modern coal burning appliances are in general use and also delivery in bulk
(but with central coal distributing depots), the price of coal delivered to the domestic consumer should not exceed $6.75 per short ton. This includes retail distribution charges, which
should not exceed $1.75 per ton.
16. Without the establishment of central coal distributing depots, the price of coal
delivered to the domestic consumer should not exceed $6.50 per ton. This includes distribution charges which should not exceed $1.50 per ton. This price is conditional upon the general use of modern coal burning appliances coupled with delivery in bulk.
17. Until modern coal burning appliances are in general use, coupled with delivery in
bulk, the price of coal delivered to the domestic consumer without the establishment of central coal distributing depots should not exceed $7.25 per short ton. This includes distribution charges which should not exceed $2.25 per ton. The reductions in the prices of specific
coals are set out in Table 79, Section 10  (a), Chapter XII.
18. Even under conditions as they exist today, the price of coal sacked, delivered to the
domestic consumer should not exceed $8.10 per short ton. This includes distribution charges
not exceeding $2.25 per ton. The reductions in the prices of specific coals are set out in
Table 78, Section 9  (6), Chapter XII.
19. The reduced prices arrived at in the previous paragraphs are based on Canadian Collieries coal from Vancouver Island which dominates Coast domestic, industrial and transportation coal markets, owing principally to distances and railway freight charges, particularly from the Crow's Nest Pass. In 1936 Canadian Collieries and Crow's Nest Pass Coal
Company produced 86.7 per cent, of the coal mined in British Columbia. As the rail freight
from Fernie to Vancouver is $4.20 per short ton (Table 30), Crow's Nest Pass Coal Company
cannot compete in the Coast market with Vancouver Island coal (refer Table 22). For
example, the laid down cost of Vancouver Island coal in Vancouver is $6.82 (Comox) and
$6.95 (Nanaimo-Wellington) per short ton, as compared with the laid down cost of Michel
lump in the sum of $8.70 per short ton  (Table 30).
20. In all other points in the Province outside Greater Vancouver and Victoria the prices
to the domestic consumer should not exceed those stated in paragraphs 14 to 18 hereof, irrespective of the origin of the coal, but subject to any additional freight rates; in fact, if Michel
or other coal is purchased, the price to the domestic consumer may be lower than stated,
depending on the freight rate from the particular coal mine to the purchasing point and the
cost of production of coal at the particular mine. For example, Michel pit head costs in
1936 were 25.53 per cent, lower than Comox as revealed by a comparative analysis (paragraph 63, Chapter XIII.).
Coalmont and Middlesboro productions are absorbed almost entirely by railways; Blue
Flame and Pleasant Valley (Sunrise), near Princeton, have recently closed down; Tulameen
mines, near Princeton, have not had a representative production since 1933. Corbin Collieries,
in the Crow's Nest Pass area, closed down in May, 1935.
21. The price reductions in paragraphs 14 to 18 are based upon an 8 per cent, per annum
return to the coal producer upon a fair capitalization; and in so far as distribution is concerned, a reasonable return on investment, a profit to contracting truckers, and reasonable
costs of distribution. SYNOPSIS OF THE MAIN FEATURES. xiii.
22. In the case of sales to other than domestic consumers where coal is not handled
through the usual retail distribution, reductions due to delivery in bulk and elimination of all
retail services should apply; and the price then should be built upon the cost at mine, coal
producers' profit, sales expense (if any) plus freight from mine and any handling charge to
point of delivery (refer Division (III.), of Table 77, Section 8 (a), Chapter XII.).
23. All sizes of coal from the same mine cost the same to produce (except in the case
of special preparation). Lump selling at $10.50 a ton in Vancouver and $10.75 in Victoria,
and pea coal selling at $8.00 in both places, can therefore be .sold at the same price.
24. The increasing demand for pea coal and slack is causing a change in the coal industry.
The price of pea coal to the consumer was recently increased by 50 cents to $8.00 per short
ton. A condition should not be permitted to arise where pea coal by reason of increasing
demand will be raised in price to $10.50 per ton, the present price of lump coal in Vancouver.
25. The establishment of central coal distributing depots (refer paragraphs 20, 21 and
22, Chapter XIII.) is a practical way of relieving the consumer from excessive distribution
charges. One depot in Victoria and five or six in Greater Vancouver would serve the coal
requirements in those centres.
26. Delivery of coal to the domestic consumer is at present unnecessarily expensive, occasioned mainly by the sacking of the coal and consequent handling and delivery.
27. Modern coal burning appliances using only pea coal or a mixture of pea and slack
should be in general use because of increased heating efficiency, less expense and a greater
convenience to the householder. They should be available at lower prices on " easy " terms,
or on a monthly rental.
28. Basements should be so constructed and furnaces installed that coal can be received
in a mechanical and cleanly manner.
29. Houses should be so constructed and driveways and approaches built so that full
advantage can be taken of coal chutes to convey the coal to the basement, coal room, or other
receptacle.
30. It should be the duty of architects, contractors, municipal building inspectors and
persons having to do with designing and building houses and approving plans, to alter this
condition.
31. Approximately 80 per cent, of householders' furnaces in Victoria and Vancouver are
not properly installed, or are not functioning properly, causing unnecessary expense, annoyance and inconvenience to the householder.
32. The conditions pointed out in paragraphs 27 to 31 should be remedied by the enactment of municipal by-laws and their enforcement.
33. Canadian Collieries (Dunsmuir), Limited, was incorporated in 1910, with an excessive
capital structure of $25,000,000.00. It consisted of $10,000,000.00 common stock issued without cash or any apparent consideration; $5,000,000.00 preference stock issued for cash and a
$10,000,000.00 bond issue.
34. In the same year it acquired the coal mine properties and holdings of James Dunsmuir for $11,000,000.00. The capital value of the assets acquired has not been shown to
exceed $4,199,984.38. SYNOPSIS OF THE MAIN FEATURES.
35. In its first balance sheet in June, 1911, Canadian Collieries (Dunsmuir), Limited,
stated its capital assets at $22,362,695.85—viz., $11,362,695.85 more than the purchase price
and $18,362,695.85 in excess of any apparent commercial value.
36. No dividends were ever paid on the $10,000,000.00 common stock, and none on the
$5,000,000.00 preference shares since 1912; no interest was paid on the $10,000,000.00 bond
issue after June 30th, 1914, and in March, 1915, the bondholders postponed interest payments
until the conclusion of the Great War, forming a bondholders' committee to keep in close touch
with the company; control of the company was then placed in the hands of this committee
through the deposit of a majority of the shares in a voting trust.
37. In 1920 Canadian Collieries (Dunsmuir), Limited, was re-organized by a re-arrangement of securities; the common stock being decreased by 99 per cent, and the preference stock
by 70 per cent.; a new bond issue was arranged with special powers to the bondholders' committee for control of the Company. The reduced capital was then increased from $1,600,-
000.00 to an authorized capital of $6,027,000.00, as at present, by the creation of 340,000 preference shares of $10.00 each and 1,027,00 ordinary shares of $1.00 each; there was authorized in all $1,127,000.00 common and $4,900,000.00 7 per cent, preference shares. Common
shares of $925,98.00 and preference stock of $2,101,960.00, a total of $3,027,940.00 new shares
were then issued in satisfaction of accrued interest on the 1910 bond issue and special loans.
The total issued capital then stood at $4,627,940.00 ($1,025,980.00 common and $3,601,960.00
preference) ;  it includes $1,600,000.00 " old shares " and $3,027,940.00 " new shares."
38. To complete the re-organization, a band issue of $9,012,872.00 5 per cent, bonds was
issued ($987,154.67 having been paid on the 1910 $10,000,000.00 bond issue), divided equally
into " A" and " B " income debentures.
39. While the 1920 re-organization " wrote off " $9,900,000.00 common stock, which was
not represented by any apparent consideration, and $3,500,000.00 of the preference stock
which was, it created additional shares of $3,027,940.00 which had no consideration but the
arrears of interest upon the old 1910 bond issue and special loans, with the result that the
reduction in capital structure extended to $472,060.00 only of capital invested; and if commissions and discounts in securing the original money were deducted, and $100,000.00 of the
old common stock considered, there was no reduction in fact, but an " overload " of $806,-
934.09 still remained not represented by capital invested. Actually the re-organization
resulted in 65.43 per cent, of the issued capital being allotted in satisfaction of arrears of
interest upon the old 1910 bond issue and special loans.
40. In 1928 the shareholders of Western Fuel Corporation of Canada, Limited, were able
to sell to Canadian Collieries for $1,730,000.00 cash share holdings which cost them $250,000.00
less than five years before, and upon which no dividends had ever been paid—a profit to
Western Fuel shareholders of $6.00 for every dollar invested less than five years before.
41. As of June 30th, 1934, Canadian Collieries had depreciated its plant, buildings and
equipment by 88.28 per cent, and Western Fuel by 46.5 per cent., showing $1,788,004.01 as
the combined depreciated value of their assets.
42. Adding coal land values, the depreciated book value of the capital assets of both
companies on June 30th, 1934, stood at $2,488,004.01 as against their combined capital structure of $15,878,109.00 which consisted of issued capital of $7,627,940.00 and stated outstanding
bond issue of $8,250,169.00.
43. Between 1923 and 1934 the total bond indebtedness of both companies was in fact
reduced by $6,775,967.27. Canadian Collieries (1921-1934) and Western Fuel (1924-1934)
combined paid in bond interest $2,245,967.32. SYNOPSIS OF THE MAIN FEATURES. xv.
44. Between 1924 and 1934 the sum of $3,451,673.57 net was forwarded in cash to the
Canadian Collieries' Montreal office by both companies. From March 4th, 1935, to June 12th,
1936, a further sum of $400,000.00 was remitted.
45. The net profits of Canadian Collieries from 1921 to 1934 are found to be $4,293,125.46
instead of $1,669,980.99 as shown by the books of the company. The net profits of Western
Fuel from 1924 to 1934 are found to be $2,845,802.15 instead of $321,125.43 as shown. The
net profits of the two companies combined from 1929 to 1934 are found to be $2,870,493.62
instead of $880,083.32 as shown.
46. The two companies combined charged excessive depreciation or depletion or other
charges in the sum of $2,571,494.22 in the periods 1921-1934 (Canadian Collieries) and 1924-
1934 (Western Fuel). This added unduly to the cost of coal. The coal companies measured
depreciation in terms of " life " of plant, buildings and equipment, instead of in terms of the
" life " of the coal mines (refer paragraph 47 hereof), as we have found it ought to be
measured.
47. In a coal mining operation depreciation and depletion should be charged on the same
basis; that is to say, the charges therefor should be distributed over the entire tonnage to
be recovered and become a part of the per ton cost of mining each ton of coal; renewals,
replacements and capital additions should be amortized over the remaining life of the mine
in the same manner, and the additional rate per ton added in each year; where additional
coal reserves are developed the rate therefor should be determined on the increased tonnage.
This method has not been adopted by the British Columbia coal mining companies, resulting
in higher coal production costs, which to the extent of excessive depreciation or depletion
charges are really profits, not shown as such.
48. Wellex Securities, Limited, was incorporated in Montreal by Canadian Collieries in
1928; as a wholly owned subsidiary of Canadian Collieries it became the sole shareholder of
Western Fuel. As of June 30th, 1934, it held $3,013,264.60 of Canadian Collieries and
Western Fuel bonds, while the same were treated as outstanding obligations in the balance-
sheets of the said companies. Companies doing business in the Province should be required
to publish consolidated statements and thus furnish information of all holdings by subsidiaries.
49. As of June 30th, 1934, $2,661,525.47 of Canadian Collieries "A" debentures were
redeemed or acquired and held by a subsidiary (Wellex Securities) at an average rate of
34.66 cents on the dollar; $2,024,941.80 of the Canadian Collieries "B" debentures were
acquired and held by Wellex Securities, Limited (but not redeemed), at an average rate of
9.66 cents on the dollar; $1,089,500.00 of the Western Fuel 1928 bond issue were redeemed or
acquired and held by a subsidiary (Wellex Securities) at an average rate of 58.49 cents on
the dollar.
50. The Canadian Collieries 1920 plan of re-organization was a " re-arrangement of
securities," placing the bondholders' committee virtually in charge of the operations of the
company and its five subsidiaries, in effect as if such committee were a mortgagee in possession. The bond issue was continued in the face of the stated inability of the company to pay
bond interest and provide annual sinking fund for redemption of bonds. An expedient was
adopted virtually postponing the payment of principal and interest, which had the effect of
placing the bondholders in a worse position in respect to income than if they had become common shareholders, in that no income was presently payable on one-half of the bond issue and
only one-half of the " net earnings " was applicable to income on the other half of the bond
issue.
This expedient depressed the value of the first half of the bond issue (" A " debentures)
and acknowledged in effect that the second half of the bond issue (" B " debentures) had no
security behind them. SYNOPSIS OF THE MAIN FEATURES.
51. In the 1920 Canadian Collieries re-organization, a capitalization of $5,000,000.00
without bond issue, instead of the re-organized capital structure of $13,640,812.00 would have
more accurately represented the commercial value of the assets and undertaking. In 1924 a
capitalization of $2,500,000.00 without bond issues, instead of $5,000,000.00 would have more
accurately represented the commercial value of the assets and undertaking of Western Fuel.
Following the acquisition of Western Fuel in 1928, a Canadian Collieries capitalization of
$5,000,000.00 (including Western Fuel, the purchase price of which represented Canadian
Collieries depreciation reserve) would have more accurately represented the commercial value
of assets and undertakings instead of the then combined capital structure of $18,640,812.00.
52. The net profits of the two companies combined in the periods mentioned in paragraph
45 hereof totalled $7,138,927.61 instead of $1,991,106.31, as stated by the companies. Without
taking into consideration profits which would accrue from improved methods of mining:—
(1.) Canadian Collieries, exclusive of Western Fuel, for the sixteen year period,
1921 to 1936, and subject to income-tax requirements, could have paid a uniform
dividend of 6 per cent, per annum if it had been recapitalized in 1920 at
$5,000,000.00 without bonds.
(2.) Western Fuel for the thirteen year period, 1924 to 1936, subject to income-tax
requirements, could have paid a uniform dividend of 8 per cent, per annum if
it had been recapitalized in 1924 at $2,500,000.00 without bonds.
(3.) The two companies combined, for the period 1929 to 1936, subject to income-tax
requirements, could have paid a dividend rate of 8 per cent, per annum if they
had been recapitalized in 1929 at $5,000,000.00 without bonds (refer paragraph
46, Chapter XIII.).
53. Canadian Collieries' bondholders in England suffered great losses by failure of their
committee in 1920 to convert their bonds into shares and limit the issued share capital to a
figure consistent with the commercial value of assets and undertaking. For example, 52 per
cent, of the bondholdings were liquidated at a loss of $3,568,384.96 exclusive of interest loss
between 1921 and 1934.
54. The Crow's Nest Pass Coal Company, Limited, issued capital of $6,212,666.66 is
represented by $4,712,666.66 subscribed in cash and $1,500,000.00 shares allotted in consideration of transfer of coal properties and rights.
55. For some years prior to 1930 the company paid a uniform dividend rate of 6 per cent,
per annum. With the loss of the Great Northern Railway contract in 1929, in order to
maintain its uniform 6 per cent, dividend rate, the company adopted a plan permitted under
the Dominion " Companies Act " of paying out to its shareholders sufficient monies from its
depreciation and depletion reserves for that purpose; at the same time explaining to the
shareholders it would have the effect of reducing the company's capital by the amount of such
payments from the reserve.
56. The Crow's Nest Pass Coal Company, Limited, charged excessive depreciation and
depletion of $1,516,567.10 over the period of 1924-1934, resulting in an average increase in
cost of 25.644 cents per long ton during that period.
57. We find that share capitalization of $5,500,000.00 between 1924 and 1931 and
$4,800,000.00 from 1932 to 1936 would have accurately reflected the commercial value of the
undertaking of The Crow's Nest Pass Coal Company, Limited. On this recast capitalization,
after allowing for the adjustments which we consider should be made in depreciation and
depletion over the thirteen-year period 1924-1936, an average dividend rate of 7% per cent,
per annum could have been maintained subject to income-tax requirements.
58. Having in mind the low comparative costs of production of Michel and an 8 per cent,
return upon a reasonable capitalization, coupled with the decrease in  specific industrial SYNOPSIS OF THE MAIN FEATURES.
markets, we do not find for any specific reductions in cost of production which could be passed
on to the consumer by the Crow's Nest Pass Coal Company, Limited, over the period 1930-
1936.
59. Depreciation and depletion charges should be treated as costs of operation. A
separate fund should be set up therefor, restricting the use of depreciation and depletion
reserves to replacements and renewals. In the case of coal mining companies incorporated
under the British Columbia " Companies Act," payments from depreciation and depletion
reserves should be available to the shareholders, subject to the approval of creditors, and to
reduction of a company's paid-up capital thereby.
60. Company financial statements should contain facts, and if they are founded in whole
or in part on expressions of opinion or accounting conventions, it should be so stated, with
the basis therefor, and uniformity adhered to from year to year. A condition should not be
permitted to exist which enables it to be said that two equally legitimate methods of accountancy may give widely different results for a given period.
61. Labour costs constituted 67.85 per cent, in 1934, 69.47 per cent, in 1935, and 74.55
per cent, in 1936 of the direct costs of producing coal in Canadian Collieries mines. Wages
have increased by 55 per cent, since 1914, applicable to thirty-one standard wage rates.
62. When public monies are used to subsidize a shipping service (using coal burners)
from British Columbia ports, it would be a corresponding assistance to British Columbia coal
if such subsidies were made subject to a stipulation that Canadian coal should be utilized at
least to the extent of taking the vessels from Canadian ports to the first foreign coaling
station.
63. In 1934 Canadian railways received from the Dominion Government $1,720,943.00 for
movement of Nova Scotia coal to Quebec and Ontario; $333,977.46 for Alberta coal and
$119,346.21 for British Columbia coal mined in the Crow's Nest Pass, moved eastward.
British Columbia coal sales to Manitoba and Ontario increased from 1,155 tons in 1929 to
120,642 tons in 1936; Dominion Government subventions for coal mined in British Columbia
and " sold for fuel for ships' stores " amounted to $113,324.14 in 1936, applicable only to oceangoing vessels; this tonnage increased from 62,753 tons in 1931 to 143,324 tons in 1936. Under
the " Domestic Fuel Act," chapter 52, Statutes of Canada, 1927, $40,769.00 was paid to British
Columbia gas companies for use of British Columbia coal.
64. For the year ended March 31st, 1935. the Dominion Government received in tariff
revenue from imports of coal and coke into Canada $8,500,000.00 after deducting drawbacks.
In 1935 Ontario imported 10,003,043 tons of coal from the United States, 30,517 tons from
Great Britain, and 29,760 tons from Indo-China; while Quebec imported 1,616,478 tons from
Great Britain, 776,323 tons from the United States, 201,679 tons from Germany, 67,220 tons
from Belgium, and 24,687 tons from Indo-China.
65. Alberta coal has been displacing British Columbia coal in this Province to an unwarranted extent. One hundred and twenty-six thousand two hundred and sixty-two tons of
Alberta coal were brought into the Province in 1920; this rose to 267,478 tons in 1928,
decreased to 116,723 tons in 1933, and then increased from 123,968 tons in 1934 to 214,650
tons in 1935 and 244,946 tons in 1936, constituting that year 16.82 per cent, of the total coal
sales in British Columbia.
66. Including sales of Alberta coal, the domestic market in 1935 absorbed 30.25 per cent,
of all coal sales in British Columbia; it constituted 36.07 per cent, of British Columbia
produced coal sold in that year. SYNOPSIS OF THE MAIN FEATURES.
67. Alberta coal sales in British Columbia are assisted in part by discriminatory freight
rates westward:—
(1.) The freight rate from Drumheller, Alberta, to Vancouver, a distance of 740
miles, is $5 per ton, whereas the freight from Drumheller to Kamloops, a distance of 487 miles, is $4.90 per ton.
(2.) The freight from Coalspur, Alberta, to Vancouver, a distance of 662 miles, is
$3.90 per ton, whereas the freight from Coalspur to Kamloops, a distance of
406 miles, is $4.20 per ton.
In both instances the coal must pass Kamloops.
68. The coal industry has suffered because of high costs and prices and uneconomic competition by fuel-oil. Adoption of the full reductions in cost of production and distribution
found herein will necessitate increased mechanization at the mines and displacement of an
excessive number of coal dealers. Lower costs and prices will result in economic gain because
of increased purchasing-power. Greater employment both in the mines and in distribution
will ensue, and, as already indicated, a fair return upon a fair capitalization will be received
by the coal companies. GENERAL INDEX.
PaG-L
CHAPTER   I.—INTRODUCTORY   CHAPTER,   RELATING   TO   THE    NATURE,
KIND AND CHARACTERISTICS OF COAL, COST PROBLEMS AND THE
POSITION OF THE BRITISH COLUMBIA COAL INDUSTRY  1
Sec.   1.—Terms of the Royal Commission  1
(a.)  Outline of Terms of the Commission  1
(b.) Amounts spent by the People of British Columbia on Coal and Matters to
be considered in this Report  1
Sec.   2.—Some Cost Problems  1
(a.)  Relation of " Profit," " Selling Price " and " Cost "  1
(6.)  Difficulty in ascertaining " Profits "  2
(c.) Difficulty in ascertaining " Cost "  2
(d.)   Capital Value in relation to Earning Capacity  3
(e.)   Confusion in Use of Term "Value"  3
(/.)  Recommendation of a Committee of the American Institute of Accountants
relating to Interpretation of Corporation Balance Sheets  4
(g.)  Importance of Consideration of these Problems  4
Sec.   3.—Origin of Coal  4
Sec.   4.—Coal in Canada  4
(a.)   Canada's Estimated Coal Reserves by Provinces  4
(6.)  Accuracy of such Estimates  5
(c.)  Relation  of such  Estimates to  Commercial  Recovery of  Coal  in  British
Columbia Mines   5
Sec.   5.—Classification of Canadian Coals  6
(a.)   General Classification  .  6
(6.)  A more Detailed Classification  6
(c.)  Distribution of Estimated Coal Reserves by Classification and Provinces  6
Sec.   6.—Explanation of the Term "British Thermal Unit"  (B.T.U.)  7
(a.)  Definition of British Thermal Unit  7
(&.)  Matters considered in Analyses of Coal for Commercial Use  7
(c.)  Importance of considering Calorific Value in determining Price of Coal  7
Sec.   7.—Analyses of British Columbia Coals  8
(a.)  Sampling Methods  8
(6.)   Some Analyses of British Columbia Coals  8
(c.)   Some Analyses of British Columbia Coals  9
(d.)  Remarks thereon   10
Sec.   8.—Condition of the British Columbia Coal Industry  10
(a.)  Importance of Coal  10
(6.)   Decline of the Industry  10
(c.)   Coal and Coke Production in the Province  10
(d.)   Study of Coal Costs in relation to Paragraph 3 of the Commission Terms  12
CHAPTER IL—THE PRODUCTION AND CONSUMPTION OF COAL IN BRITISH
COLUMBIA  13
Sec.   1.—Coal producing areas of the Province  13
(a.)  Production by Areas..:  13
(6.)  Production by Mines  13
Sec.   2.—Coal consumed by Railway Locomotives  17
(a.)   Consumption by Railway Locomotives  17
(b.)  Tonnage sold Railways by Canadian Collieries and Western Fuel  18
(c.)  Tonnage sold Railways by Crow's Nest Pass Coal Company, Ltd  18
(d.)  Tonnage sold Railways by Nicola-Princeton Mines  19
Sec.   3.—Industrial Consumption of Coal in:
(a.)  Gas Plants  20
(6.)   Logging Operations  21
(c.)   General Manufacturing Industries  21 GENERAL INDEX.
CHAPTER IL—Continued. PAGE-
Sec.   4.—Coal utilized in Production of Coke  22
(a.)   Coke Sales of Crow's Nest Pass Coal Co., Ltd  22
(6.)  The Market for Coke ,  23
Sec.   5.—Consumption in Institutional, Government and Public Buildings  23
Sec.   6.—Coal consumed in the Domestic Trade _ ____ 23
(a.)  British Columbia Coal consumed in the Domestic Trade  23
(6.)   Increasing Demand for Smaller sized Coals  23
Sec.   7.—Bunkering of Ships  24
Sec.   8.—Coal sold for Consumption outside British Columbia  25
Sec.   9.—Subventions relating to:
(a.)   Shipments to Manitoba and Ontario  25
(b.)  Extent of Assistance to British Columbia Mines therefrom  25
(c.)  Particulars thereof  26
(d.)  " Ships' Stores " and " Export "  26
(e.)  Necessity of requiring Canadian Coal to be used when any Subsidy given  28
(/.)  Reference to Losses now sustained otherwise by British Columbia under
present Tariff Set-up ,  28
(g.)  Crow's Nest Pass Coal Co., Ltd., Sales in Manitoba  29
Sec. 10.—The Relation of the Coal-producing Areas to the Coal-consuming Areas  29
(a.)  Vancouver Island Area  29
(6.)  Crow's Nest Pass Area  30
(c.)   Nicola-Princeton Area  31
(d.)  Northern Area  31
Sec. 11.—Consumption of Coal from other Provinces and from other Countries  31
(a.)  From other Provinces  31
(6.)   From Alberta and elsewhere  32
(c.)  Importance of Domestic Trade  33
Sec. 12.—Per Capita Production in Various British Columbia Mines  33
(a.)  Number of Tons of Coal mined per Underground Employee daily  33
(6.)   Confusion in Term " Man-days "  36
(c.)  Dominion Advisory Board on  Tariff and Taxation Proceedings in  1927
regarding Production per Man  36
(d.)  Losses in " Washing "  37
(e.)  " Company Use "  38
(/.)   Employment in Mines  39
CHAPTER III.—METHOD AND COST OF MARKETING AND DISTRIBUTION OF
COAL  41
Sec.   1—Classification of Retail Coal Dealers  41
(a.)  Dealers in Coast Cities with Waterfront Yards and Railway Trackage  41
(6.)   Dealers having Yards with Railway Trackage only  41
(c.)   Dealers owning Yards without either Railway or Water Facilities  41
(d.)  Dealers not owning a Yard, but owning Delivery Equipment  41
(e.) Pedlars  41
(/.)  " Leased Yards " in the Vancouver Area  41
Sec.   2.—Handling of Coal by the Retailer  42
(a.)   Transportation of Coal from Mine to Coalyard  42
(6.)  Unloading Coal from Scow or Car  42
(c.)  Storing and Handling of Coal in Dealers' Yards  43
(d.)   Screening and Sacking  43
Sec.   3.—Sizes of Coal and Discussion of Terms applied in the Coal Trade  43
(a.) " Screenings " and " Run of Mine "  43
(6.)  Variations in Sizes of Coal  43
(c.)  Requirement of " Coal Sales Act" respecting " Size of Coal purchased or
sold"  44
(d.)  Lack of Uniformity in Descriptive Names of Coals sold and Explanation
of some Terms  44 GENERAL INDEX.
CHAPTER III.—Continued. ?*<*■
Sec. 3—Continued.
(e.)  Lack of Relation of Prices and Sizes to Calorific Value  44
(/.)   Registration of Names of Coals and other Requirements of " Coal  Sales
Act"  44
(g.)   Lack of Sales Record and Uniformity of Sizes  46
(h.)  Necessity for Statutory Standards  46
Sec.   4.—The cost of Marketing and Distribution of Coal by the Coal Dealer to the
Consumer  46
(a.)  Information from Dealers  46
(6.)   Dealers' Information summarized in Tables 30 and 32  46
Sec.   5.—The Marketing and Distribution of Coal in Greater Vancouver and Victoria 47
(a.)   Table 30  47
(b.)  Discriminatory Freight Rates  54
(c.)  Table 31—Representative Dealer " Spreads " in Vancouver and Victoria  54
Sec.   6.—The Marketing and Distribution of Coal in Centres outside Vancouver and
Victoria  55
(a.)   Some Kamloops Sales  55
(6.)   Rail Freight Rates  56
(c.)   Sales of Local Coal in the Interior  56
(d.)  Table 32—Coals sold at some Interior Points  56
(e.)  Variety of Coals sold by Alberta Coal Agencies  59
Sec.   7.—Degradation  59
(a.)  What it is .  59
(6.)  Increasing Demand for Smaller Sized Coals  59
(c.)   Utilization thereof in Automatic Stokers  60
Sec.   8.—Present Methods of Marketing and Distribution of Coal are wasteful  60
(a.)   Excessive Number of Coal Dealers  60
(b.)  System of " Approved Dealers "  61
(c.)  Effect of Coal Sales of " Approved Dealers " System  61
(d.)   Some Results thereof  61
(e.)   Summary  61
Sec.   9.—Methods conducive to a Substantial Reduction in Cost of Marketing and
Distribution of Coal  62
(a.)  Inability of Coal Companies to control Situation  62
(6.)   Central Coal Distributing Depots  62
(c.)  Present Wasteful Methods of Delivery to Household Consumer  63
(d.)  Necessity of planning Homes and Buildings for Better Reception of Coal____ 63
(e.)  Necessity of Architects, Builders, Contractors and Municipal Inspectors,
realizing Importance thereof   64
Sec. 10.—Prices of British Columbia Coal in Seattle  64
(a.)   1929-30 Prices   64
(6.)   1935 Prices  65
(c.)   British Columbia Coal sells at Greater Prices in Seattle than in Vancouver 65
Sec. 11.—Outline of Succeeding Chapters  66
CHAPTER  IV.—A  REVIEW  OF   THE   CAPITAL   STRUCTURE   OF   CANADIAN
COLLIERIES    (DUNSMUIR),   LTD.,   AND   SUBSIDIARIES   FROM   ITS
INCORPORATION IN 1910 UNTIL ITS RE-ARRANGEMENT IN 1920  67
Sec.   1.—General Outline  68
(a.)  The Parent Company and its Subsidiaries  68
(b.)  View Points considered  68
Sec.   2.—Preliminary Statement of some Elementary Principles  69
(a.)  Some Results from raising Capital by Shares and Bonds respectively  69
(6.)   Comparative Positions of Shareholders and Bondholders  69
(c.)  Effect on Competitive Cost of Production  70
(d.)  If Bond Issue is for Excessive Amount..   70 GENERAL INDEX.
CHAPTER IV.—Continued. PAGE-
Sec.   3.—The  Assets  acquired by  Canadian Collieries   (Dunsmuir),  Ltd., upon  its
Incorporation in 1910  71
(a.)  Assets of Wellington Colliery Co., Ltd., in 1910  71
(6.)   Purchase Price paid by Canadian Collieries  (Dunsmuir), Ltd  71
Sec.   4.—Incorporation  of  Canadian  Collieries   (Dunsmuir),  Ltd.,  and  its  Capital
Set-up  72
(a.)  Issuance of Common and Preference Stock  72
(6.)   Capital Structure of Canadian Collieries (Dunsmuir), Ltd., as disclosed in
its First Balance Sheet (1911)  72
(c.)  Purchase Price paid by Canadian Collieries  (Dunsmuir), Ltd., compared
with Commercial Value of Assets  73
Sec.   5.—Value of Assets acquired in 1910 in relation to Capital Structure of the
Company  73
(a.)  No Valuation of Plant or Equipment  73
(6.)  Report of Sir William Mackenzie (1911)  73
(c.)  Assets purchased from Dunsmuir  74
(d.)  Coal Rights  74
(e.)  As to 20,000 Acres of Coal Lands  74
(/.)  Land Acreage  74
(g.) No Evidence as to Coal Land Acreage  74
(h.)  Coal Reserves and Distribution thereof  75
(i.)   Stated Acreage of Coal Lands held by Canadian  Collieries   (Dunsmuir),
Ltd., and Subsidiaries  75
(j.)  Basis of Valuation of Coal Lands held by Canadian Collieries  76
(k.)  Valuation of Coal Lands held by Western Fuel  76
(..)   Basis  of Valuation of Coal Lands approved by  Committee of American
Institute of Mining and Metallurgical Engineers  77
(in.)  Authorities relating to holding Large Reserves  78
Sec.   6.—Improvements,   Expenditures,  and  other   Capital  Additions   of  Canadian
Collieries in relation to the Capital Structure  78
(a.)  Tables 35 and 36—Annual Production, 1901-36, of Coal Mines acquired
from Dunsmuir Interests  78
(6.)  Additional Expenditures  80
(c.)  Wellington Colliery Railway Co  80
(d.)  Wellington Colliery Co., Ltd _  80
(e.)  Table  37—Increases  and  Decreases,  Canadian  Collieries   Capital  Assets,
1911-20  80
(/.)   Review thereof  81
Sec.   7.—-Incorporation of Wellington Comox Agency, Ltd., and its  Place in the
Capital Structure of Canadian Collieries  (Dunsmuir), Ltd  81
(a.)  Incorporation  81
(6.)   Agreement of July 1st, 1914  81
(c.)   Second Agreement of July 1st, 1914  82
(d.)   Some Features of (6) and (c)  82
(e.)  No reason for Existence of Wellington Comox Agency, Ltd.—  82
Sec.   8.—Outline of Company's Condition leading to the Arrangement of 1920  82
(a.) £40,000   Second   Mortgage   Debentures  82
(6.)   Bondholders' Committee and Moratorium  (1915)  82
(c.)  1918 Appraisal  82
(d.)  Observations thereon  83
(e.)   1919 Plan of Re-arrangement :  83
(/.)  Company's Position in 1919  83
(g.)  Further Aspects  84
Sec   9.—Conclusions in this Chapter  85 GENERAL INDEX.
Page.
CHAPTER V.—RE-ARRANGEMENT OF THE CAPITAL STRUCTURE OF CANADIAN COLLIERIES (DUNSMUIR), LTD.; THE ACQUISITION OF
WESTERN FUEL CORPORATION OF CANADA, LTD., IN 1928; THE
FORMATION OF WELLEX SECURITIES, LTD., IN 1929; AND THE
RE SULTING CAPITAL STRUCTURE     87
Sec.   1.—Re-arrangement of Capital Structure in 1920  87
(a.)  Plan of Re-arrangement  87
(6.)  The Bond Issue  87
(c.)  Common and Preference Shares issued  87
(d.)  Relation of Re-arrangement to Original Capital Structure  87
(e.) Relation of Re-arrangement to Original Capital Structure  88
(/.)  "Property" written off  88
(g.)  "Property" written off  88
Sec.   2.—In the Light of what has been said in Chapter IV. and particularly Sections 2, 8, and 9 thereof, what should have been the Reorganization of
Capital Structure in 1920  88
(a.)  Re-organization was literally a Re-arrangement of Securities  88
(6.)   Unwieldy Capital Structure in 1919_
(c.)   Form of Re-organization 1920 Re-arrangement should have taken     88
(d.)  Bondholders' Committee remained in Charge     89
(e.)   Subsequent Effect of Re-arrangement on Value of Bonds     89
(/.)   Capitalization should not have exceeded $5,000,000.00     89
Sec. 3.—Provisions of the 1920 Trust Deed in relation to " Net Earnings " and the
Application thereof in the Company Balance Sheets in Payment of Bond
Interest and Principal     89
(a.)  Definition of " Net Earnings " in Trust Deed     89
(6.)   Further Provisions of Trust Deed regarding " Net Earnings "     90
(c.)  Plan of Payments to Bondholders under " Net Earnings " Provisions in
Trust Deed     90
(d.)  Effect of such Provisions on Redemption of " A " and " B " Bonds     90
(e.)   Relation of " Net Earnings " Provisions to Depreciation Provisions     91
(/.)  " Net Earnings " Provisions not clear in Published Statements     91
(g.)  Different Meanings of Terms "Net Earnings," "Net Income," and "Net
Profit"     92
Sec.   4.—-The Relation of Wellington Comox Agency to the 1920 " Re-arrangement"
of Canadian Collieries (Dunsmuir), Ltd     92
(a.)  Agreement of June 30th, 1920     92
(6.)   Revenue of Wellington Comox Agency, Ltd., from its Incorporation (1914)
to June 30th, 1920     93
(c.)   Financial Position of Wellington Comox Agency immediately after Agreement of June 30th, 1920     93
(d.)  Revenue of Wellington Comox Agency, Ltd., from 1920 to 1924     94
(e.)   Financial Position of Wellington  Comox Agency, Ltd., as  at June 30th,
1924       94
(/.)  Operations of Wellington Comox Agency, Ltd., after 1924     95
Sec. 5.—Capital Structure of Western Fuel Corporation of Canada, Ltd., up to
September 1st, 1928, when it was acquired by Canadian Collieries (Dunsmuir), Ltd     95
(a.)   Capital Structure and Coal Production of " The Western Fuel Co." (a California Incorporation), 1903-12     95
(b.)  History of " The Western Fuel Co." from Reports filed with the Registrar
of Companies     96
(c.)  Capital Structure of " The Western Fuel Corporation of Canada, Ltd."
(the 1921 Company)     96
(d.)  Capital Structure of " The Western Fuel Corporation of Canada, Ltd."
(the 1923 Company) .'     96 GENERAL INDEX.
CHAPTER V.—Continued. Pagb-
Sec.   6.—The Acquisition of Western Fuel by Canadian Collieries (Dunsmuir), Ltd.,
through the Medium of Wellex Securities, Ltd     97
(a.)  Acquisition of Western Fuel in September, 1928     97
(b.)  Remarks on Ability of Canadian Collieries to acquire Western Fuel     97
(c.)  Source of Funds used in Purchase of Western Fuel     97
Sec.   7.—Capital Structure of Western Fuel and Canadian Collieries since 1928     97
(a.)  Management of the Two Companies     97
(6.)  Table 38—Coal Production of Western Fuel Corporation of Canada, Ltd.—    98
(c.)   References to Acquisition of Western Fuel Corporation of Canada, Ltd., in
Annual Reports of Canadian Collieries     98
(d.)  Published Statements of Canadian Collieries (Dunsmuir), Ltd., do not include Subsidiaries    99
Sec.   8.—Wellex Securities, Ltd., and its relation to Canadian Collieries and Western
Fuel     99
(a.)   Capital Structure, History, and Reason for Incorporation of Wellex Securities, Ltd     99
(6.)  Investments of Wellington Comox Agency, Ltd  100
(c.)  Table 40—Dealings of Wellex Securities, Ltd., in Debentures of Canadian
Collieries   101
(d.)   Summary   of   Position   of   Bonded   Indebtedness   of   Canadian   Collieries
(Dunsmuir), Ltd., and Western Fuel Corporation of Canada, Ltd., as of
June 30th, 1934  101
Sec.   9.—Status of Canadian Collieries and Western Fuel Bond Issues (1934)  102
(a.)   Canadian Collieries Bond Issue  102
(6.)  Western Fuel Bond Issue  102
(e.)   Canadian Collieries Published Statement is not a Consolidated Statement
showing Bond and Debenture Holdings of Subsidiaries  102
CHAPTER VI.—EXPENDITURES AND EARNINGS OF CANADIAN COLLIERIES
(DUNSMUIR), LTD., AND WESTERN FUEL CORPORATION OF CANADA, LTD., BEFORE AND AFTER THEIR CONTROL UNDER ONE
OWNERSHIP IN 1928 AS STATED BY BOTH COMPANIES, AND
FACTORS AFFECTING SAME, MORE PARTICULARLY IN RELATION
TO CHARGES APPEARING FOR DEPRECIATION, DEPLETION, BOND
INTEREST, BOND REDEMPTION, AND EXPLORATION AND DEVELOPMENT WORK  105
Sec.   1.—Consolidated Position of Both Companies as presented in Exhibit 168 in
relation to Costs of Production, Expenditures and Earnings  105
(a.)  Table 41—Brief Analysis of Exhibit 168  105
(6.)   Reference to Separate Mine Cost Statements  106
(c.)  1934 as "Pivotal Year" for Basis of Analysis  106
(d.)  Analysis in Table 42 of Consolidated Statement of Two Companies presented to Commission by Canadian Collieries  107
(e.)  Evidence showing (d) not an Accurate Cost Statement  109
Sec.   2.—The Position of Canadian Collieries as presented by its Balance Sheet and
Profit and Loss Accounts (Exhibit 171) and distinct from the Consolidated
Statement (Exhibit 168) filed with the Commission  110
(a.)  Explanation of Table 43—Analysis of Canadian Collieries  110
(6.)  " Exploration and Development Work" in Canadian Collieries Statements.. 113
(c.)   Depreciation Charges in Canadian Collieries Statements  113
(d.)  Depletion not charged by Canadian Collieries  114
(e.)  Reference to Bond Interest Payments and Bond Redemptions by and Net
Profits of Canadian Collieries  114
Sec.   3.—The position of Western Fuel as presented by its Balance Sheets and Profit
and Loss Accounts  114
(a.)  Explanation of Table 44—Analysis of Western Fuel  114 GENERAL INDEX.
CHAPTER VI.—Continued. PA0E-
Section 3—Continued.
(b.)  " Exploration and Development Work " in Western Fuel Statements  117
(c.)   Depreciation Charges in Western Fuel Statements  117
(d.)  Depletion Charges in Western Fuel Statements  117
(e.)   Reference to Net Profit or Loss of Western Fuel from  Coal  Operations
alone   117
(/.)  Reference to "Total Profit or Loss" of Western Fuel  118
(g.)   Sinking Fund Provisions in Western Fuel Trust Deeds  118
(h.)  Bond Interest Payments, Bond Redemptions  and Dividend  Payments of
Western   Fuel  118
(i.)  Effect of Bond Interest and Bond Redemption Payments on Cost  119
Sec.   4.—The Combined Position of Western Fuel and Canadian Collieries based on
Tables 43 and 44 in relation to Costs of Production, Expenditures and
Earnings   119
(a.)   Explanation   of   Table   45—Combined   Statement   of   Western   Fuel   and
Canadian   Collieries  120
(6.)   Comparison of Coal Production Figures of Western Fuel before and after
Canadian Collieries acquired Control  123
(c.)   Comparison of Charges of the Two Companies for Exploration and Development   Work  124
(d.)  Comparison of Charges of the Two Companies for Depreciation  124
(e.)  Comparison of Charges of the Two Companies for Depletion  124
(/.)  Comparison of Bond Interest Payments by the Two Companies  124
(g.)   Comparison of Funds set aside by the Two Companies for Repayment of
Bond Principal  125
(h.)   Comparison of Net Profits of the Two Companies  125
(i.)  Comparison of " Total Profit or Loss " of the Two Companies  125
Sec.   5.—The  Facts  established by the  Comparisons between  the Two  Companies
made in the Previous Section, coupled with the Purchase of Western Fuel
by Canadian Collieries in September, 1928 '_  125
(a.)   Financial Position of Western Fuel from 1924 to 1928  125
(b.)   Financial Position of Canadian Collieries from 1924 to 1928  125
(c.)   Condition of Western Fuel at June 30th, 1930  125
(d.)  Source of Canadian Collieries Net Profit in 1929 and 1930  126
(e.)   Study of Net Loss of Western Fuel in the Period 1931 to 1934 in relation
to Net Profit of Canadian Collieries during the Same Period  126
(/.)   Management of Western Fuel in 1929 and 1930 immediately after Acquisition  by   Canadian   Collieries        126
(g.)   Comparison of Net Current Assets of Western Fuel in 1928 and 1934  126
(h.)   Effect of  Company's  Published  Statements  126
Sec.   6.—Bond Redemptions of the Two Companies from 1924 to 1934  127
(a.)  Place of Bond Issues in Financing of the Companies  127
(6.)   Amounts by which Bond Issues of Two Companies were reduced between
1921 and 1934  127
(c.)  Bond Redemptions considered  127
(d.)  Adequacy of Security for Bond Issues of the Two Companies  128
(e.)  Conclusions to be drawn from this Section .  128
Sec.   7.—Comparison of the Combined Operations of the two Companies as shown
in Table 45 with the Consolidated Statement thereof presented by Canadian
Collieries as analysed in Tables 41 and 42  128
(a.)   Explanation of Table 46  128
(6.)  Comparison of Depreciation Figures contained in Tables 42, 45, and 46  130
Sec.   8.—Importance of Depreciation and Depletion as Cost Factors  130
(a.)  Result if Figures for Depreciation given in Exhibit 168 were adopted  130
(6.)  Efficiency of Canadian Collieries and Western Fuel in relation to Depreciated Plant and Equipment  130 GENERAL INDEX.
Paob.
CHAPTER VII.—DEPRECIATION AND DEPLETION RESERVES; THE
AMOUNTS ACTUALLY CHARGED; THE WITHDRAWAL FROM CANADIAN COLLIERIES AND WESTERN FUEL OF FUNDS REPRESENTING
SUCH RESERVES AND THEIR APPLICATION THEREAFTER AND THE
RESULTANT  EFFECT  UPON  THE   COMPANIES  131
Sec.   1.—Introductory Discussion  131
(a.)  Importance of Provisions for Depreciation and Depletion  131
(6.)  Excessive Depreciation and Depletion Charges conceal Profits  131
(c.)   Depreciation and Depletion are True Production Costs  131
Sec.   2.—Depreciation and Depletion Reserves of Canadian Collieries   (Dunsmuir),
Ltd.  (exclusive of Western Fuel)   132
(a.)  Value of Capital Assets of Canadian Collieries at Date of 1918 Appraisal  132
(6.)   Rate of Depreciation at Date of 1918 Appraisal  132
(c.)  Depreciation Reserve at Date of 1918 Appraisal  133
(d.)  Depreciation Reserve and Depreciated Value at June 30th, 1920  133
(e.)  Depreciation charged and Depreciated Value at June 30th, 1934  133
(/.)   Effect if Assets had been depreciated as stated by Company in Exhibit 168 133
(g.)   Policy of Company in regard to Depletion Charges   133
Sec.   3.—Depreciation and Depletion Reserves of Western Fuel   133
(a.)  Value of Capital Assets of Western Fuel at Inception of Present Company
(December,  1923)     133
(6.)   Additional Amounts spent from 1924 to 1934   133
(c.)   Amount of Depreciation charged by Company   133
(d.)  Book Value of Plant in December, 1923, and December, 1934  134
(e.)   Depreciated Values of Assets of Company   134
(/.)   Policy of Company in regard to Depletion Charges   134
(g.)  Amount of Company's Depletion Reserves   134
Sec.   4.—Withdrawal and Disposition of Funds representing Depreciation and Depletion Reserves   134
(a.)  Total Amount charged by each Company for Depreciation and Depletion
from 1924 to 1934   134
(6.)   Amounts forwarded by Canadian Collieries and Subsidiaries to Montreal
Office   134
(c.)   Evidence References as to Source of Funds remitted to Montreal Office  135
(d.)   Source of Funds remitted to Montreal Office by Canadian Collieries  136
(e.)   Source of Funds remitted by Western Fuel  136
(/.)   Stated Use of Funds remitted to Montreal Office   136
Sec.   5.—The Real Effect of the Depreciation Position at June 30th, 1934, as revealed
in  Section  4 preceding   136
(a.)  Use of Western Fuel Depreciation and Depletion Reserves  136
(6.)  Investment of  Canadian  Collieries  Reserves  in  Government  Bonds  and
Wellex Securities Investments  136
(c.)  Effect of Use of Canadian Collieries Funds to purchase Common Stock of
Western Fuel   137
Sec.   6.—The Nature of Depreciation and Depletion   137
(a.)  Present Depreciated Value of Capital Assets of both Companies  137
(6.)  Meaning of " Depletion "   138
(c.)  " Depreciation "     138
(d.)   Functional   Depreciation  138
(e.)  Relation of Annual Repairs, Renewals and Obsolescence to Depreciation  138
(/.)   Evidence References as to Efficiency of Canadian Collieries Plant  139
Sec.   7.—Withdrawal of Funds representing Depreciation Reserves   139
(a.)  Effect of Excessive Depreciation Reserves   139
(6.)   True Purpose of Depreciation Reserves  ;_ 140
(c.)   Effect of investing Depreciation Reserves in the Undertaking  140 GENERAL INDEX.
CHAPTER VII.—Continued. PA°E-
Section 7—Continued.
(d.)  Method used by Original Western Fuel Company to deal with Depreciation
and Depletion   141
(e.)   Summary of Section  141
Sec.   8.—Depletion and Depreciation Reserves and Bond Redemption and  Sinking
Fund Requirements   141
(a.)  Distinction between Depreciation and Sinking Fund Reserves  141
(b.)  Purpose of Sinking Fund   142
Sec.   9.—Depreciation and Depletion considered from the Legal Point of View  142
(a.)  Reason therefor  142
(6.)   Provision for Depreciation or Depletion not required under Dominion or
Provincial Companies Acts   142
(c.)  Lee v. Neuchatel Decision  143
(d.)  Impairment of Capital   143
(e.)   Thomas v. Crabtree Decision   144
(/.)  Discussion of Real Effect of Lee v. Neuchatel Decision  144
Sec. 10.—Some Conclusions arising in This Chapter  145
(a.)   Depreciation and Depletion Provisions are Proper Costs   145
(b.)  Necessity  of   Adequate   and   Uniform  but   not   Excessive   Reserves   for
Depreciation and Depletion  145
CHAPTER VIIL—A RECOGNIZED ECONOMIC AND COMMERCIAL METHOD
OF ASCERTAINING DEPRECIATION AND DEPLETION; THE APPLICATION THEREOF TO A RE-ORGANIZED CAPITAL STRUCTURE,
WHEREUNDER THE SHARE CAPITAL IS BASED ON THE CONVERSION OF THE OUTSTANDING BONDS INTO SHARES, AND IS ALSO
BASED ON THE COMMERCIAL VALUE OF THE UNDERTAKING  147
Sec.   1.—Outline of an Accepted Method  of applying Depreciation and  Depletion
in the Coal Mining Industry  147
(a.)  Amortization of Exploration and Development Work  147
(6.)   Extracts from Report of the National Coal Association of the United States
and Standard Mine Accounting  147
(c.)   Extracts from Report of Committee of American Institute of Mining and
Metallurgical Engineers on " Methods of valuing Coal Properties," 1934  149
(d.)  Extract from Address read at Annual Meeting of Institute of Chartered
Accountants of Nova Scotia, 1936     149
(e.)   Method used by the Crow's Nest Pass Coal Co., Ltd., from 1908 to 1912  150
(/.)   Method used by Original Western Fuel Company between 1902 and 1912  150
Sec.   2.—Application of the  Principle of Depreciation and  Depletion  discussed in
Section 1   150
(a.)   Bases of Data in Tables 48 and 49   150
(6.)   Computations used  (Table 48)    150
(c.)   Explanation of Table 49   151
(d.)  Assests of Canadian Collieries taken in Table 49 at 1918 Appraisal Value  152
(e.)  Assets of Western Fuel taken in Table 49 at Book Value in 1923 Balance
sheet  152
(/.)   Reason Expenditures for Renewals and Improvements by Western Fuel and
Canadian Collieries not included and Effect thereof  153
(g.)  Future Computations based thereon  153
(h.)  Assets of both Companies combined  153
Sec.   3.—Ascertainment of the Combined Depreciation and Depletion on the Method
outlined in Sections 1 and 2 hereof _  153
(a.)  Explanation of Table 50   153
(6.)  Conclusions to be drawn from Table 50 when read with Tables 43, 44 and 54 157
(c.)   Reasons  for  the   Amortization   of   Canadian   Collieries   Exploration   and
Development Work  157 GENERAL INDEX.
CHAPTER VIIL—Continued. PA0B-
Sec.   4.—Findings in Section 3 extended to Rate per Ton  157
(a.)   Explanation of and Comment on Table 51   157
(6.)   Explanation of and Comment on Tables 52 and 52a  161
(c.)  Explanation Table 52a  165
Sec. 5.—The Capital Structure of Canadian Collieries as re-organized in 1920 was
inconsistent with the Commercial Value of the Undertaking and its Prospective Earnings;  the Course adopted gave no Assurance that the Company
would be placed on a Profit Basis   169
(a.)   Modification in 1935 of the Terms of Western Fuel Trust Deed and Reasons
for a Detailed Discussion of a Correct Capital Structure of both Companies 169
(6.)   The Form the 1920 Re-organization  of Canadian Collieries  should have
taken  .169
(c.)  Results of 1920 "Re-arrangement"  169
Sec.   6.—Discussion of Capital Structures consistent with the Commercial Values of
the Undertakings and their Prospective Earnings   170
(a.)   Method of arriving at Commercial Value of Capital Assets   170
(b.)  Relation of Earning Capacity to Value of Capital Assets and Capitalization
of Canadian Collieries   171
(c.)   A Reasonable Capitalization of Western Fuel   171
Sec.   7.—Analyses of Canadian Collieries and Western Fuel based on  a  Capital
Structure as discussed in Section 6 of this Chapter  171
(a.)   Explanation of Table 53   171
(6.)  Net Profits of both Companies as found in Table 53   175
(c.)  Net Percentage Income Return for both Companies as found in Table 53  175
(d.)   Combined Capitalization in 1929 at $5,000,000.00  175
(e.)  Reconciliation of Net Profits as found by Commission with Actual Payments
out  175
(/.)  Effect of Net Profits as found on Cost per Ton  176
(g.)  Explanation of Tables 54 and 54a  176
(h.)  Actual Payments made by both Companies during the period 1921-34  181
(..)   Proper Place of Bond Issues in Company Financing    181
Sec.   8.—Necessity for Stability and Equalization in Dividends   181
(a.)  Review of Dividend History of both Companies and Failure to stabilize
Financial  Affairs    181
(6.)  Dividend Rates that could have been maintained (subject to Income Taxes)  182
(c.)  Authorities cited concerning Effect of Regularity  and  Stability of Dividends     182
Sec. 9.—Comparision of the Result to Bondholders if the Re-organization in 1920
had been effected by the Cancellation of Bonds and Adjusted Share Capital,
together with Proper Method of Depreciation and Depletion and Amortization of Exploration and Development  183
(a.)  Losses to Holders of Bonds in Canadian Collieries, 1920 Issue  183
(6.)  Position of Bondholders if in 1920 Shares had been issued to them instead
of Bonds    183
(c.)  Value of 1920 Bond Issue if related to Sales Price of Bonds   183
(d.)  Bondholders suffered by perpetuating Bond Issue in 1920 " Re-arrangement "  183
(e.)  Position of " B " Debentures of Canadian Collieries   183
(/.)  Why was  the  Canadian   Collieries   " Re-arrangement"   of   1920  carried
forward    184
CHAPTER IX.—THE   CROW'S   NEST   PASS  COAL   CO.,   LTD.,  AND   OTHER
BRITISH COLUMBIA COAL MINING OPERATORS  185
Sec.   1.—Capital Structure of the Crow's Nest Pass Coal Co., Ltd.   185
(a.)  Incorporation and Short History of Company   185 GENERAL INDEX.
CHAPTER IX.—Continued. page.
Section 1—Continued.
(b.)   Sales   of   Shares     185
(c.)   Capital Structure as of 1934   185
(d.)  Subsidiaries of Company   185
Sec.   2.—The Position of the Crow's Nest Pass Coal Co., Ltd., as presented by its
Published Balance Sheets and Profit and Loss Accounts  186
(a.)  Analysis of Company Statements in Table 55  186
(6.)   Improvements   and   Development   Work  189
(c.)   Dividends paid out. of Depreciation and Depletion Reserves   189
(d.)  Assets "written down" in 1915—" written up" in 1924  189
Sec.   3.—Capital Assets and Expenditures of the Crow's Nest Pass Coal Co., Ltd.,
since Incorporation up to 1924  190
(a.)  Assets acquired by Company on Incorporation in 1897 and Consideration
therefor   190
(6.)   Expenditures by Company on Plant and Equipment in Periods 1898 to 1912
and 1912 to 1924   190
Sec.   4.—Basis of Computation to ascertain  Commercial Rate per Long Ton for
Depreciation and Depletion to be applied to the  Crow's Nest Pass Coal
Co., Ltd.   190
(a.)  Amount of Company's Depreciation and Depletion Reserve and Method of
arriving at Rate per Long Ton   190
(6.)  Table 56—Values and Coal Tonnage   190
(c.)   Expenditures on Plant, Equipment and Mines Development and Improvements from 1897 to 1924 as stated in Table 56   191
(d.)  Inclusion in Table 56 of Investment in Subsidiaries  191
(e.)  Method of arriving at Available Coal Tonnage in Table 56  192
(/.)  Method of calculating Combined Rate of Depreciation and Depletion in
Table 57   192
Sec.   5.—What is a Commercial Capital Structure for the Crow's Nest Pass Coal
Co.,  Ltd.?     192
(a.)   Fair Capitalization between 1924 to 1931   193
(b.)  Fair Capitalization from 1932 onward _  193
(c.)   Relation of Net Profits and Dividends to Capitalization  193
(d.)  Market Quotations of Company's Shares and Dividend Payments  193
Sec.   6.—Income Return upon a Capital Structure as found in Section 5 after Application of  Combined  Depreciation,  Depletion,  and  Amortization  Rate  as
found in Table 57   194
(a.)   Explanation of Tables 58 and 58a   194
(6.)   Relation of Balance Sheet Values to Commercial Value  199
(c.)   Commercial Value of Assets in relation to depreciation as charged  199
Sec.   7.—Analysis of the Result shown in Tables 58 and 58a during Period 1924-34____ 199
(a.)  Excessive Depreciation and Depletion charged as disclosed by Table 58  199
(6.)  "Writing-down" of Assets and Depreciation Reserve in 1928  199
(c.)  Net Profits as disclosed by Table 58   200
(d.)  Income Return upon Basis set out in Table 58a  200
(e.)  Stabilized Dividends available as disclosed by Table 58a  200
(/.)  Stabilized Dividend Rate which could have been maintained by the Company
on its own Stated Profits and Capitalization   200
Sec.   8.—Some Concluding Observations in respect to the Crow's Nest Pass Coal Co.,
Ltd.,  Statements   201
(a.)  Relation of Depreciation and Depletion Reserve to Tangible Assets  201
(6.)  Depreciation and Depletion Reserves as "Working" Capital  201
Sec.   9.—Other British Columbia Coal Companies   202
(a.)   Coalmont Collieries, Ltd.   202
(6.)   Middlesboro Collieries, Ltd.   202 GENERAL INDEX.
CHAPTER IX.—Continued. Page-
Section 9—Continued.
(c.)   Pleasant Valley Mining Co., Ltd.  (N.P.L.)    202
(d.)  Wilson Mining and Investment Co., Ltd.   202
(e.)   Corbin Collieries, Ltd.  203
(/.)  Tulameen Collieries, Ltd  203
(g.)  Bulkley Valley Collieries, Ltd.   204
(h.)  Skeena Development Syndicate   204
(i.)  The Lake Kathlyn Anthracite Coal Co., Ltd.  (N.P.L.)   204
0'.)   Canada Coal Development Co., Ltd.  (N.P.L.)    204
(k.)   Bromley Vale Collieries, Ltd.  (N.P.L.)  204
(..)   Cascade Coal Co., Ltd. (N.P.L.)   204
(m.)  Red Triangle Coal Co.   205
(n.)  Lantzville Collieries, Ltd.   205
(o.)   Fiddiek Mine  _:  205
(p.)  Ida Clara Colliery or Richardson Bros.' Mine   205
(q.)  Biggs' Mine 205
(r.)  Jingle Pot Mine  205
(s.)   Stronach Mine  205
(t.)   Chambers' Mine  205
(u.)  Beban's Mine   205
(v.)   North Thompson Coal Co.   205
(w.)  Cariboo Coal and Clay Products, Ltd.  (N.P.L.)  206
(x.)  West Coast Collieries, Ltd.   206
(y.)  Black Diamond Collieries, Ltd.   206
Sec. 10.—Some Coal Mining Companies struck off the British Columbia Register
of Companies during Recent Years  206
(a.)  Ashington Coal Co., Ltd.  206
(6.)   Buckley Valley Coal Mines, Ltd.   206
(c.)  Dominion Coal and By-products, Ltd. (N.P.L.)   206
(d.)   Marble Canyon Coal Co., Ltd.   207
(e.)  Normandale Collieries, Ltd.   207
(/.)   Northern Coal and Coke Co., Ltd.   207
(g.)   Northern Pacific Collieries, Ltd.  (N.P.L.)    207
(h.)   Okanagan Collieries, Ltd.  (N.P.L.)    207
(i.)   Prince Rupert Coal Fields, Ltd.   207
(j.)   Sun Blaze Coal Co., Ltd.  (N.P.L.)   207
(k.)  Telkwa Collieries, Ltd.   208
(I.)   White Lake Collieries, Ltd.  (N.P.L.)   208
CHAPTER X.—THE COST OF PRODUCTION OF COAL IN BRITISH COLUMBIA— 209
Sec.   1.—Nature of Production Cost Information submitted to the Commission  209
(a.)  " Cost per Short Ton at Pithead "  210
(6.)  " Total Direct Cost of Production per Short Ton "  210
(c.)  "Total Cost of Production per Short Ton"   210
(d.)  Lack of Uniformity in Terms used  211
(e.)  Distinction between "Commercial Production" and "Production available
for Sale"   211
Sec.   2.—Cost of Production per Short Ton at Pithead in the Larger Operating
Mines in the Province   212
(a.)  Analysis of the Cost of Production per Short Ton at Pithead in Vancouver
Island Mines—Tables 59 and 59A   212
(b.)   Canadian Collieries " Power " Costs   217
(c.)  Analysis of the Cost of Production per Short Ton at Pithead, Crow's Nest
Pass Coal Co., Ltd., Mines—Tables 60 and 60a  217
(d.)  Analysis  of the Cost of Production per Short Ton  at Pithead,  Nicola-
Princeton District Mines—Tables 61, 62, and 63   221 GENERAL INDEX.
CHAPTER X.—Continued.                                                                                                          Page-
Sec.   3.—Analysis of the " Total Direct Cost per Short Ton " in the Larger Operating Mines in the Province—Tables 64, 64a, and 64b   225
Sec.   4.—Analysis of the " Total Cost of Production per Short Ton " in the Larger
Operating Mines in the Province  233
(a.)  Explanation of Tables 65, 65a, and 65b   233
(6.)   Comparison of Total Direct Cost of Production at Nanaimo  No.  1  and
Comox No.  5  Mines  241
(c.)  Mining of Thin Seams   242
(d.)  Detail of some Comparative Costs at Nanaimo No. 1 and Comox No. 5
Mines   242
(e.)  Reference to Total Cost of Production at Michel and Comox No. 5 Mines  243
Sec.   5.—Some Factors to be considered in studying the Company Costs of Production as analysed in Tables 65, 65a and 65b  243
(a.)  Efficiency of Mining Operations   243
(6.)   Lack of Modern Methods  243
(c.)   Further Observations thereon   243
Sec.   6.—Comparision of Physical Features in the Michel Mines, in the Crow's Nest
Pass Area, and Comox No. 5 Mine, Vancouver Island, entering into the
Respective Costs of Production   244
(a.)  Comox Mining Costs stated as 90 per Cent, more than Michel  244
(6.) Report of George Watkin Evans, Esq., upon Relative Efficiency of the
Michel Mines in the Crow's Nest Pass Area and the No. 5 Mine in the
Comox Area on Vancouver Island, showing Greater Physical Difficulties
at Comox—Tables 66, 67  and 68  244
(c.)  Greater Costs at Comox not satisfactorily explained by Greater Physical
Difficulties   246
(d.)  Necessity for More Intensive Study of Coal Mining Conditions, Costs and
Methods of Production and Utilization of Coal and its Products  247
Sec.   7.—Labour Costs   247
(a.)  Increases in Wages and Wage Percentage of Mining Cost of Coal  247
(6.) Increased Employment and Greater Production depend on Greater Consumption, which involves Reductions in Production Costs and Selling Price
to compete with other Fuels  247
CHAPTER XL—THE PRICES OF COAL TO THE CONSUMER IN RELATION TO
ITS COST OF PRODUCTION, MARKETING, AND DISTRIBUTION;
WHETHER SUCH PRICES ARE UNJUST OR UNREASONABLE WITHIN
THE TERMS OF PARAGRAPH 3 OF THE ROYAL COMMISSION; AND
REDUCTIONS   IN   COSTS   OF  PRODUCTION   AND   TRANSPORTATION
FROM MINE WHICH CAN BE EFFECTED   249
Sec.   1.—Some Introductory Considerations   249
(a.)  Difficult State of Coal Industry generally  249
(6.)   Heavy Losses shown by Canadian Collieries  249
(c.)   Canadian Collieries published Financial Statements did not show as Large
Losses as presented to Commission   250
(d.) Payment by Canadian Collieries and Western Fuel out of Coal Profits
and Funds representing Depreciation and Depletion Reserves in the Period
1921 to 1934  250
(e.)  Recapitulation of Depreciation and Depletion Charges of both Companies,
separately and combined, for the Period 1921-1934  251
Sec.   2.—The Real Profit Situation of Canadian Collieries and Western Fuel  251
(a.) Excessive Depreciation charged by both Companies, separately and combined   251
(6.)  The True Net Profit Position of both Companies, separately and combined  251
(c.)  Dividend Rates payable by both Companies, separately and combined, on
a Reasonable Capitalization  251 GENERAL INDEX.
CHAPTER XL—Continued. PAGB-
Sec.   3.—Some Additional Considerations before dealing with Reductions that may
be made in the Price of Coal to the Consumer   252
(a.)  Vancouver Island Coal Companies have made Profits in the Last Ten to
Fifteen Years despite Reduced Production  252
(6.)  Reference to Crow's Nest Pass Coal Co., Ltd.   252
(c.)  Output per Underground Employee daily greater at Crow's Nest Pass Coal
Co. than in Vancouver Island Mines   252
(d.)  Reference to Smaller Mines in the Province   252
(e.)  Reductions that may be passed on to the Consumer  253
(f.)  All Sizes of Coal from the Same Mine cost the same to produce (except in
Case  of   Special  Preparation)  253
(g.)  Reductions based on Fair Return of Capital as well as Payment of Fair
Wages   253
Sec.   4.—Reductions which could have been made in the Cost of Coal Production
in the Years 1932 to 1936, inclusive   253
(a.)  Summary of Reductions set out in Table 69   253
(6.)   Reductions attributable to Depreciation and Depletion in Table 69  257
(c.)   Reductions attributable to Bond Interest in Table 69 ___.._    ._   257
(d.)  Reductions attributable to Railway Profits as set out in Table 69  257
(e.)  Reductions attributable to Revenue from Hydro-electric Plant as set out in
Table 69   257
(/.)  Advice of Mr. G. W. Evans as to Reductions which may be made in the Cost
of Mining on Vancouver Island and in British Columbia Mines, and Detail
thereof, as set out in Table 69  258
Sec.   5.—Certain Factors not included in Section 4 which have an Important Bearing
in reducing Costs of Coal Production   259
(a.)  Management   259
(6.)   Present Demands for Smaller Sized Coal  260
(c.)  Daily Output per Man, with Detailed Comparisons at Coal Creek, Michel,
Comox, Nanaimo and a Washington State Mine  260
(d.)  Experience of Coal Mines in the State of Washington  263
Sec.   6.—Consideration of a Fair Income Return upon Capital invested and thereafter
the Reduction in Cost of Production that can be passed on to the Consumer
in the Price of Coal  263
(a.)  A Fair Return upon Investment essential   263
(6.)   Returns upon a  Capitalization of $5,000,000.00  263
(c.)   Eight per Cent. Return upon Investment and Analysis thereof in Table 70____ 263
(d.)  Amount per Short Ton available to be passed on to the Consumer after
allowing 8 per Cent, upon Investment as detailed in Table 71  264
Sec.   7.—Analysis of Company Sales stated by Company to be below Cost of Production, as compared to such Sales on Basis of Cost of Production as found by
the Commission   265
(a.)  If 60 per Cent, of Sales shown at a Profit and 40 per Cent, at a Loss,
Resultant Profit is misleading  265
(6.)   Analysis of Company Sales based, first, on Company's Cost Figures, and,
secondly, upon Commission's production Costs, and as detailed in Tables 72,
72a, 72b, 72c, and 72D   265
(c.)   Summary thereof in Table 73   266
(d.)  No Justification for Sales below Cost of Production  279
(e.)   Sales below Cost not an Important Consideration in view of Commission's
Cost Findings   279
(/.)   Explanation of Appendices "U" and "V"   279
Sec.   8.—Reductions which can be made in Transportation of Coal from Mine to
Coal Yard   280
(a.)  Towing Rates compared to certain Contract Rates   280
(6.)   Reductions in Towing Rates and Reference to Railway Rates   280 GENERAL INDEX.
Page.
CHAPTER XII.—REDUCTIONS   WHICH   CAN   BE   MADE   UNDER   PRESENT
CONDITIONS   IN   THE   COST   OF   MARKETING   AND   DISTRIBUTION
FROM DISTRIBUTION POINT TO THE DOMESTIC CONSUMER  281
Sec.   1.—The Spread of Coal Dealers  281
(a.)  Leased Yard and other Dealers' Spreads   281
(b.)  Coal Agencies are Secondary to other Primary Business   281
(c.)   Plan of Reduction Discussion   281
Sec.   2.—Effect  of the  Leased  Yard  Agreement  upon   Coal   Dealers'   Spread  in
Vancouver    282
(a.)  Reductions in Price affected by Leased Yard Agreements  282
(b.)   Terms of Yard Agreement Leased  282
(c.)  Spread allowed under Leased Yard Agreements—Table 74  283
(d.)  Average  Spread received by Leased  Yard  Dealers—Table  75  283
(e.)  Allowances to Truckers, Pedlars and Small Dealers  284
(/.)  Degradation  _  284
Sec.   3.—Further Discussion of some Conditions existing at the Time the Leased
Yard Agreements were entered into and some Resulting Conditions as well 284
(a.)  Reduction in Price and Spread  284
(6.)   Some Negotiating Advantages held by Dealers   285
(c.)  Increase of Small Dealers and Pedlars after Leased Yard Agreements
came into Existence   285
(d.)   Certain   Conditions  favouring  Existence   of   Pedlar  286
(e.)  Central Coal Distributing Depots provide Remedy  286
Sec.   4.—Consideration of Breakdown of Spread allowed Leased Yard Dealers  in
Comparison with other Large Dealers   286
(a.) Breakdown of Leased Yard Handling Allowances shows Greater Allowance than received for Similar Services by other Large Dealers  286
(6.)   Confirmatory Evidence thereon     287
(c.)  Analysis of Delivery Charges for Sacked Coal   287
(d.)  Analysis of Reasons why Delivery in Bulk to Domestic Consumer stated
impracticable   at  Present    287
(e.) Retail Advertising not Necessary in view of Advertising by Coal Producer 287
(/.)  Administrative  Overhead    287
Sec.   5.—Reasonable Charges for Distribution to the Domestic Consumer under the
Present System   289
(a.)  Sacked Coal Distribution at $2.25 per ton  289
(6.)  Distribution in Bulk at $1.50 per ton   289
(c.)  Above Findings relate solely to Present Conditions   290
Sec.   6.—Additional  Reductions in  Cost of Marketing and Distribution which can
be made through the General Use of Modern Coal Burning Appliances such
as the Automatic Stoker   290
(a.)  Reductions which can be affected by More Modern Methods   290
(6.)  Advantages of Automatic  Stoker    290
(c.)  Delivery in Bulk general in Prairie Cities   290
(d.) General Use of Automatic Stoker delayed through lack of Effective Merchandising   291
(e.)  Reasons for lack of Effective Merchandising  291
(/.)  Distribution in Bulk to Domestic Consumer should not exceed $1.50 per
ton   292
Sec.   7.—Central Coal Distributing Depots and Reductions resulting therefrom  292
(a.)  Would eliminate Duplication of Services in Mining, Transportation, and
Distribution  ,  292
(6.) Marketing and Distribution Costs with Central Coal Distributing Depot
should not exceed $1.75 for Sacked Coal and $1.00 a Ton for Delivery in
Bulk   292 xxxiv. GENERAL INDEX.
CHAPTER XII.—Continued. Page-
Section 7—Continued.
(c.)  Distribution to Domestic Consumer should not exceed $1 per ton if Consumer is to receive Full Protection  293
(d.)  Economic Gain will result from Establishment of Central Coal Distributing
Depots   293
Sec.   8.—Recapitulation of all  Necessary Production,  Marketing  and  Distribution
Costs of Coal   294
(a.)  Detail thereof in Table 77   294
(6.)   Explanation of Costs at Mine in Column 1 of Table 77   295
(c.)   Explanation of Coal producer's Profit in Column 2 of Table 77  295
(d.)  Explanation of Transportation Cost from Mine in Column 3 of Table 77  295
(e.)  Explanation of Sales Expense in Column 4 of Table 77  295
(/.)   Terms upon which Table 77 founded   295
(g.)  Division I., Table 77, based on Sacked Coal   295
(h.)  Division IL, Table 77, based on Deliveries in Bulk   295
(i.)  Division III., Table 77, based on Establishment of Central Coal Distributing Depots  295
(j.)  Reductions in Table 77 apply wholly to Purchase by Domestic Consumer ___ 295
Sec.   9.—Reductions  which  can  be made  at  Present  in the  Price of   Coal  to  the
Domestic Consumer.     295
(a.)  Explanation of Tables  78,  79  and 80  295
(6.)  Detail of Table 78   296
(c.)   Explanatory References of Table 78   296
Sec. 10.—Reductions in Price which the Domestic Consumer might reasonably expect
with the Introduction of More Efficient Methods in Production, Marketing
and Distribution   297
(a.)  Detail of Table 79   297
(6.)  Explanation of Table 80   297
(c.) Victoria City Reductions as covered by Tables 78, 79 and 80  298
Sec. 11.—Reductions in Distribution Charges outside Greater Vancouver and Victoria
and Applicability of Tables 77, 78, 79 and 80 thereto  298
(a.)   Distribution   Charges   as  found   apply  elsewhere   in   Province   subject   to
Freight Differences   298
(6.)   Reductions elsewhere in Province   298
(c.)   Railway  Transportation    299
Sec. 12.—Findings as to Reductions in Cost of Mining in Vancouver Island Mines as
apply to other British Columbia Mines   299
Sec. 13.—The Price of Coal to the Consumer should be based on its calorific or Heat
Value, coupled with Suitability for Purpose of Use   300
Sec. 14.—Brief Summary of Some Findings in Chapters XI. and XII.   300
(a.)  Findings as to the Prices of Coal   300
(6.)  Reference to Crowsnest Pass Freight Rate   301
(c.)  Other Points in Province outside Greater Vancouver and Victoria  301
(d.)  Other Mines in the Province   301
(e.)  Prices to other than Domestic Consumer  301
(/.)  Conditions requisite for Greater Consumption of Coal  301
CHAPTER XIIL—GENERAL SUMMARY   303
APPENDICES   327
COMMISSION EXHIBITS RELATING TO COAL REPORT, VOLUME II  409 INDEX OF TABLES.
Table _
Number. Subject-matter. PAGE.
1. Estimated Coal Reserves in Canada by Provinces   5
2. A Classification of Canadian Coals   6
3. Diagram showing Distribution of Various Classifications of Coal by Provinces  7
4. An Analysis of British Columbia Coals (1925-1928)  9
5. A Further Analysis of British Columbia Coals  (1931-1932)  9
6. Annual British Columbia Coal Production, with Annual Estimated Value thereof
at Mine  .  11
7. Annual British Columbia Coke Production, with Annual Estimated Value thereof
at Coke-ovens  12
8. Annual Production of Coal by Areas in British Columbia for the Years 1920-36  13
9. Coal Producing Areas and Producing Mines, with Commercial Production for the
Years 1932-36   15
10. Railway Locomotive Consumption of British Columbia Coal, 1922-1936, in relation
to Railway Mileage  17
10a. Particulars in Table 10 in Percentage of 1926 Railway Locomotive Coal Consumption     18
11. Canadian Collieries Railway Sales, 1932-1936  18
12. Crow's  Nest Pass  Coal  Company,  Ltd.,  Railway  Sales,  1925-1936  19
13. Middlesboro  Mine Railway Sales, 1923-1936  19
14. Coal Tonnage sold by Canadian Collieries (Dunsmuir), Ltd., and Western Fuel for
use in the Production of Gas in Vancouver and Victoria for the Years Ended
June 30th, 1932 to 1936, inclusive.     (Long Tons.)  20
14a. Subsidies paid B.C. Electric Power & Gas Co., Ltd., 1933-1937  21
15. Canadian  Collieries  Sales  to  Logging  Operators,  1932-1936  21
16. Canadian Collieries Sales to General Manufacturing Industries, 1932-1936  21
17. Crow's Nest Pass Coal Co., Ltd., Coke Sales in Canada and United States, 1925-1936 22
18. Crow's Nest Pass Coal Co., Ltd., Coke Sales to Consolidated Mining & Smelting
Company at Trail, 1925-1936  22
19. Coal consumed in Bunkering Ships in British Columbia, 1922-1936  24
19a. Particulars in Table 19 expressed in Percentage of 1926 Bunkering Consumption— 24
20. British Columbia Coal sold outside the Province, 1922-1936  25
20a. Movements of  Crow's  Nest Pass  Coal   (British  Columbia)   to  the  Provinces  of
Manitoba  and  Ontario,  1930-1936,  under  Subventions  26
20b. Movements of Vancouver Island Coal sold as " Ships' Stores " and " for Export,"
under  Subventions,  1931-1936  27
21. Analysis of Sales of the Canadian Collieries  (Dunsmuir), Ltd., and Western Fuel,
■    1934-1936   30
22. Nature of the Coal Market of Crow's Nest Pass Coal Co., Ltd., 1934-1936    30
23. Nicola-Princeton   Mines   Production   1934-1936  31
24. Coal brought into the Province for Consumption, 1920-1936  32
25. Sizes of Alberta Coal Sold in British Columbia, 1933-1935  33
26a. Per Capita Production in British Columbia Mines   34
26b. Per Capita Production in British Columbia Mines   35
27. Losses in Washing   38
27a. " Company Use " Consumption  39
28. Number of Employees in British Columbia Mines  ,    40
29. Registered Names of British Columbia Coals, approved by the Chief Inspector of
Mines  45
30. " Breakdown " of Prices of Principal Coals sold in Greater Vancouver and Victoria 48-53
31. " Breakdown "  of  " Spreads "  stated  by  Representative  Vancouver   and  Victoria
Dealers    55
32. Illustrative  Statement of Prices of some Alberta  and British  Columbia  Coals in
Various Interior Centres J__           57
33. Canadian Collieries Sales to British Columbia Coal Dealers, 1926-1936  60
33a. Seattle Retail Prices of British Columbia Coal, 1929-1930  65 INDEX TO TABLES.
Table Pipp
Number. Subject-matter. -TAW-.
33b. Seattle Retail Prices of Vancouver Island Coal, 1935    65
34. Subsidiaries of Canadian Collieries (Dunsmuir), Ltd.       68
35. Annual Coal Production, Dunsmuir Mines (Wellington Colliery Co., Ltd.), 1901-1909 79
36. Annual Coal Production, Canadian Collieries (Dunsmuir), Ltd.  (1910-1936)  79
37. Canadian Collieries   (Dunsmuir), Ltd.—Increases and Decreases in Capital Assets
(1911-1920)         80
38. Annual Coal Production, Western Fuel Corporation of Canada, Ltd. (1910-1936)—   98
39. Wellington Comox Agency, Ltd., Holding of Canadian Collieries Debentures, April,
1929   100
40. Wellex Securities, Ltd.—Purchases and Sales of Canadian Collieries " A " and " B "
Income Debenture Stock, June 30th, 1929 to June 30th, 1934  101
40a. Comparative " Liability "  Statement of Canadian Collieries as published and as
consolidated by Commission Accountants   103
41. Brief   Analysis   of   Exhibit   168—Consolidated   Statement   of   Western   Fuel   and
Canadian Collieries presented to Commission   105
42. More Detailed Analysis of Consolidated Statement of Western Fuel and Canadian
Collieries Operations assembled from Statement presented by Canadian Collieries
(Dunsmuir), Ltd.—Exhibit 168  107
43. Analysis of Canadian Collieries   (Dunsmuir), Ltd., published Balance  Sheets and
Profit and Loss Accounts, 1921-36 (to June 30th in each year), exclusive of
Western Fuel Corporation of Canada, Ltd. ..  111
44. Analysis of Western Fuel Corporation of Canada, Ltd., Balance Sheet and Profit
and Loss  Accounts,   1924-1936  115
45. Combined Analysis of Canadian Collieries and Western Fuel, 1924 to 1936   121
45a. Comparative Coal Outputs of both Companies expressed in Percentage of 1926
Outputs :  123
46. Comparison of the Canadian Collieries' Statement of both Companies Consolidated
in Exhibit 168, with the Actual Charges set out in Exhibits 171 and 191-A
combined   129
47. Cash Remittances to Canadian Collieries Montreal Office      135
48. Values and Coal Tonnage, Canadian Collieries and Western Fuel   151
49. Method of calculating Combined Rate of Depreciation and Depletion   152
50. Computation   of   Combined   Depreciation,   Depletion   and   Amortized   Exploration
and Development for Canadian Collieries, Western Fuel and Joint Operations
of the Two Companies at the rates set forth in Table 49 and Appendix " H "  155
51. Comparative Statement showing Rate per Long Ton of Commercial Production of
Depreciation, Depletion and Amortized Exploration and Development charged
by Canadian Collieries, Western Fuel and Joint Operation of the Two Companies compared with Combined Rate in Table 50, and comparison of Total Rate
per Long Ton of Production available for sale for the Years 1932-36  159
52. Comparative Statement showing Decrease in Rate per Commercial Long Ton in
Charges for Depreciation, Depletion and Amortized Exploration and Development by reason of Combined Rate per Long Ton arrived at in Tables 49, 50
and 51  163
52a. Comparative Statement showing Decrease as in Table 52, but on a Basis of Production available for Sale  (1923-1936)  167
53. Statement showing the Net Profits or Losses of Canadian Collieries, Western Fuel
and Joint Operation of the Two Companies resulting from the Application of
the Combined Rates of Depreciation, Depletion and Amortized Exploration and
Development set forth in Table 49 and Appendix " H," and the Exclusion of
Bond Interest, and the Net Percentage Income Return on an adjusted Share
Capital    173
54. Comparison between Net Profit per Commercial Ton produced on Basis of Company
Statements and Net Profit per Commercial Ton produced on Basis applied in
Table   53     177
54a. Table 54 applied to Production available for Sale for the Years 1932-1936  179 INDEX TO TABLES.
Table p,._
Number. Subject-matter. rAGE.
55. The Position of the Crow's Nest Pass Coal Co., Ltd., from Balance Sheets and Profit
and Loss Accounts, 1924 to 1934   187
56. The Crow's Nest Pass Coal Co., Ltd., Values and Coal Tonnage  191
57. Method of calculating Combined Rate of Depreciation and Depletion to be applied
to Crow's Nest Pass Coal Co., Ltd., 1924-1934  192
58. Statement showing the Net Profits of the Crow's Nest Pass Coal Co., Ltd., resulting
from the Application of the Combined Rate of Depreciation and Depletion, etc.,
set forth in Table 57, and the Net Percentage Income Return on an Adjusted
Capital    195
58a. Comparative Table showing Per-ton Cost Analysis and Income Percentage Return
on  Adjusted  Capital    195
59. Analysis  Cost of production per  Commercial  Ton  at  Pithead,  Vancouver  Island
Coal Mines, compiled from Company Cost Figures, exclusive of Subsequent
Costs such as Preparation for Market by Mining Company, Depreciation, Depletion, Management and other General Costs  (Short Tons)  213
59a. Table 59 reduced to Basis of " Production available for Sale "      215
60. Analysis Cost of Production per Commercial Short Ton at Pithead, Crow's Nest
Pass  Mines, compiled from  Company  Cost  Figures,  exclusive of  Subsequent
Costs, such as Depreciation, Depletion, Management and other General Costs  219
60a. Table 60 reduced to Basis of Production available for Sale   219
61. Analysis of Cost of Production per Commercial Ton at Pithead, Coalmont Collieries
Mines     223
62. Analysis of Cost of Production per Commercial Ton at Pithead, Middlesboro Col
lieries   223
63. Analysis of Cost of Production per Commercial Ton at Pithead, Princeton Area  223
64. Analysis of " Total Direct Cost " of Coal Production per Commercial  Short Ton,
Canadian Collieries, Western Fuel, and Crow's Nest Pass Co.  227
64a. Similar Analysis based on Production available for Sale   229
64b. Analysis Similar to 64 in respect to Coalmont, Middlesboro, " Blue Flame " and
" Sunrise"     231
65. Analysis of Total Cost of Production per Commercial Short Ton produced, Canadian
Collieries, Western Fuel and Crow's Nest Pass Co  235
65a. Table 65 based on Production available for Sale    237
65b. Analysis similar to Table 65 in respect to Coalmont, Middlesboro, " Blue Flame "
and  " Sunrise "       239
66. Outline of No. 5 Mine at Cumberland (Comox), B.C., and of " B " BED, Michel, B.C.
  Between 246-7
67. Cross Sections of Coal Beds at Cumberland  (Comox), Nanaimo and Michel, B.C.,
and One Coal Bed in a State of Washington Mine  Between 246-7
68. Outline of a Washington State Coal Mine _„_ Between 246-7
69. Cost of Coal per Ton of Production available for Sale, as stated by Vancouver Island
Coal Companies and as adjusted by Application of the Method of Depreciation
and Depletion, dealt with in Chapter VIIL; Omission of Bond Interest, Reduction of Costs by Net Operating Revenue from Railway and Hydro-electric Plant,
and Revision of Costs of Mining   255
69a. Comparative Statement in Detail of Daily Output per Man at Coal Creek, Michel,
Comox, Nanaimo, and a Washington State Mine   261
70. Eight per cent. Return upon $5,000,000.00 Capitalization, less Income Return upon
Depreciation and Depletion Reserve   264
71. Amount per Short Ton available to be passed on to the Consumer after providing for
8 per Cent. Profit per Annum to Coal Producer upon Reasonable Capitalization 265
72. Analysis of Profit or Loss on Sales of Canadian Collieries and Western Fuel as
stated by the Companies to Consumers, classified as to Use, compared with what
Profit on such Sales would be after Reductions of Costs in Table 69, for the
Year 1932  267 INDEX TO TABLES.
Table Pirir
Number. Subject-matter. -TAi_-_.
72a. Analysis of Profit or Loss on Sales of Canadian Collieries and Western Fuel as
stated by the Companies to Consumers, classified as to Use, compared with what
Profit on such Sales would be after Reductions of Costs in Table 69, for the
Year 1933   269
72b.  Similar Information for the Year 1934  271
72c.  Similar Information for the Year 1935  273
72d.  Similar Information for the Year 1936   275
73. Summary of Information contained in Tables 72 to 72d  277
74. Dealers' " Spread " under Leased Yard Agreements  283
75. Actual " Spread " received by Leased Yard Dealers  283
76. Canadian Collieries Sales Expenses per Short Ton (1932-36)  288
77. Recapitulation of Necessary Costs and Allowances per Short Ton entering into a
Just and Reasonable Price to Domestic Consumer: (1) Under Present System of
Retail Marketing and Distribution; (2) with More General Use of Automatic
Stoker, coupled with Delivery in Bulk; (3) under System of Central Distributing Depots -_._. _.__  ,  294
78. Reductions in the Price of Coal per Short Ton which can now be made  (1937)  to
Domestic Consumers        296
79. Reductions in the Price of Coal per Short Ton which may be made by More Efficient
Methods of Mining, together with Reductions provided for in Table 78  297
80. Reductions in the Price of Coal per Short Ton which may be made by the Elimina
tion of Sacking and Establishment of Central Coal Distributing Depots, together
with the Reductions provided for in Tables 78 and 79   298 INDEX TO APPENDICES.
Oistinguishing -_,
Letter. Subject-matter. PAGE.
"A."    Analyses of some British Columbia Coals  (1930-31)   (refer Section 7   (a),
Chapter I.)  '.  327
" B."    Extract from " Summary of Tests on British Columbia Coals when used as
Pulverized Fuels " (1932)  (refer Section 7 (c), Chapter I., and Table 5)  333
" C." Extract from Opening Address of C. H. O'Halloran, K.C., Commission Counsel,
on February 6th, 1935 (refer Section 8 (a), Chapter I., and Introduction
to Chapter IV.)   337
" D."    Brief presented to the Commission by the Fernie Board of Trade   (Exhibit
461)  (refer Section 8 (b), Chapter I.)  339
" E." Brief presented to the Commission by a Joint Committee of the Nanaimo City
Council, Nanaimo Board of Trade, and Vancouver Island Bureau of
Mines and Commerce (Exhibit 461-A)   (refer Section 8 (6), Chapter I.)   351
" F." Form of Questionnaire forwarded Retail Coal Dealers throughout the Province (refer Exhibit 506 and Section 4 (a), Chapter III.)  357
" G." Form of Questionnaire forwarded Producing Companies in the Province
(Exhibit 10) (and refer Introduction to Chapter IV. and Section 1 (a),
Chapter VI., and Introduction to Chapter X.)  363
" H."    Manner of calculating Annual Rate for Amortization of Development and
Exploration Work of Canadian Collieries (Section 3 (a), Chapter VIIL)  367
" J." Summary of Interest Payable from 1920 to 1934 on Canadian Collieries
(Dunsmuir), Ltd., 1920 Bond Issue, presuming such Interest to be cumulative (instead of being payable out of " Net Earnings " as is the Case),
making Due Allowance for the Redemptions made of " A " Bonds (refer
Section 5 (c), Chapter VIIL)   369
" K." Expenditures on Plant and Equipment and Mine Development by the Crow's
Nest Pass Coal Co., Ltd., 1898 to 1912, inclusive (refer Section 3 (b),
Chapter IX.)    371
" L." Estimated Tonnage available at December, 1936, of the Crow's Nest Pass Coal
Co., Ltd., as furnished by the General Manager (refer Exhibit 465-C),
and Extract from the President's Address to the Shareholders of the
said Company (refer page 15, 1927 Annual Report, Exhibit 466) (refer
Section 4 (e), Chapter IX.)      373
" M." Analysis of the Relation of Depreciation and Depletion Reserve to the Value
of Fixed Assets for the Years 1924 to 1934 (inclusive) of the Crow's
Nest Pass Coal Co., Ltd. (refer Section 7 (6), Chapter IX.)  375
" N."    Blank Form of Operating Statement used by Canadian Collieries (Dunsmuir),
Ltd. (refer Section 1(d), Chapter X.)   377
" O." " Code of Operating Accounts" (Glossary of Mining Terms) as used by
Canadian Collieries (Dunsmuir), Ltd., and Western Fuel Corporation of
Canada, Ltd. (Exhibit 175)  (refer Section 1 (d), Chapter X.)         379
" P." Extract from (pages 2 to 5, being " Limit of Workable Thickness ") " The
Mining of Thin Coal Seams as applied to the Eastern Coal Fields of
Canada," by J. F. Kellock Brown, issued by Dominion Department of
Mines, being Bulletin 15, published in 1917 (refer Section 4 (c), Chapter X.)   383
" Q." Memorandum prepared from the Evidence of Comparative Difficulties of Coal
Production at Mines in the Crow's Nest and Nicola-Princeton District
(refer Section 6 (a), Chapter X.) ._  385
" R." Basis of Calculation of Rate for Amortization of Capital Additions, Improvements, and Development, Crow's Nest Pass Coal Co., Ltd., 1924-1934
(refer Tables 57 and 58 and Section 4 (f), Chapter IX.)   389
" S." Extract from Evidence relating to Radio Advertising in Seattle of Vancouver
Island Coal at Prices less than available in British Columbia (refer Section 10, Chapter III.)  391
" T."    Correspondence with Canadian Collieries regarding " Coal used in Company
Operations—Company Use" (refer Section 1 (e), Chapter X.)  393 xl. INDEX TO APPENDICES.
Distinguishing __,
Letter. Subject-matter. PAGE.
" U." Illustrative Tables (A and B) showing Profit or Loss on Sales of Coal to
Consumers, classified as to Use, by Canadian Collieries and Western
Fuel, compared with what Profit or Loss on such Sales would be after
Reductions of Cost in Table 69 (refer Section 7 (/), Chapter'XI.)  397
n yi>    Tonnage sold (Canadian Collieries and Western Fuel) by Districts, 1934, and
Graduated Prices received (refer Section 7 (/), Chapter XI.)  401
" W." Calculation of Profit per Short Ton on Production available for Sale on the
Basis of 8 per Cent, per Annum on a Capitalization of $5,000,000 less
3% per Cent, per Annum Income Return upon Depreciation and Depletion Reserves (Western Fuel and Canadian Collieries) (refer Section
6 (c), Chapter XI.)  403
" X." Manner of calculating Average Rate per Short Ton of Transportation of Coal
from Mine at Nanaimo and Union Bay to Vancouver and Victoria
Dealers' Yards (refer Section 8 (6), Chapter XI.)  405
" Y."    Sample of Contract for Installation of " Blower "  407

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