"b2fc8d31-31f2-44e7-a7db-1b624bad9dc3"@en . "CONTENTdm"@en . "PREFACE. "@en . " SYNOPSIS OF THE MAIN FEATURES. "@en . " GENERAL INDEX. "@en . " INDEX TO TABLES."@en . "http://resolve.library.ubc.ca/cgi-bin/catsearch?bid=1198198"@en . "Sessional Papers of the Province of British Columbia"@en . "British Columbia. Legislative Assembly"@en . "2016"@en . "[1937]"@en . "https://open.library.ubc.ca/collections/bcsessional/items/1.0307366/source.json"@en . "application/pdf"@en . " COAL AND PETROLEUM PRODUCTS COMMISSION\n(BRITISH COLUMBIA)\nVolume II.\nReport of the Commissioner\nThe Honourable Mr. Justice M. A. Macdonald\nrelating to\nThe Coal Industry\n(Being Paragraph 1 and part of Paragraph 3 of the\nTerms of the Commission)\nSeptember 27th, 1937\nVICTORIA, B.C. :\nPrinted by Charles F. Banfield, Printer to the King's Most Excellent Majesty.\n1937.\n\t To His Honour the Lieutenant-Governor in Council:\nMay it please Your Honour:\nI, the undersigned Commissioner appointed under Your Honour's Royal Commission\ndated the 28th day of November, a.d. 1934, to cause inquiry to be made into and concerning\nthe matters therein referred to, have the honour to report finally on the subjects referred to\nin Paragraph 1 thereof, with additional report on matters more particularly referable to\nParagraph 3.\nIn due course a further final Report will be submitted on the matters referred to in Paragraph 3 not already dealt with.\nI have the honour to be,\nSir,\nYour humble and obedient servant,\nM. A. MACDONALD,\nCommissioner.\nVictoria, B.C., September 27th, 1937. (b.)\n(c)\n(d.)\n(e.)\n(/\u00E2\u0080\u00A2)\n(0.)\n\"PUBLIC INQUIRIES ACT.\"\nHis 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\nColumbia, a sole Commissioner under the \" Public Inquiries Act\" to inquire into the following\nmatters:\u00E2\u0080\u0094\n1. The following matters respecting coal mined in or imported into British Columbia and\nused for fuel purposes in British Columbia:\u00E2\u0080\u0094\n(a.) The cost of production:\nThe manner and cost of preparation for the wholesale and retail trades respectively :\nThe cost of transportation:\nThe cost to dealers in British Columbia:\nThe cost to consumers in British Columbia:\nThe profits made by persons or corporations owning or operating coal-mines in\nBritish Columbia:\nThe profits made by persons or corporations engaged in the business of buying\nand selling coal in British Columbia.\n2. The following matters respecting petroleum products, that is to say, gasoline, fuel-oil,\nlubricating-oil, kerosene, and other petroleum products imported into or refined or produced\nin British Columbia and used or designed for use therein for fuel purposes, lighting purposes,\nor in the operation of internal-combustion engines:\u00E2\u0080\u0094\n(a.) The cost of importation or production:\nThe cost of refining or preparation for use:\nThe cost of transportation:\nThe cost to dealers in British Columbia:\nThe cost to consumers in British Columbia:\nThe profits made by persons or corporations engaged in the importation of\npetroleum products into British Columbia, or in refining, producing, or supplying petroleum products for use in British Columbia.\n3. Generally, all matters tending to show the comparative value of coal and petroleum\nproducts for economic use as aforesaid in British Columbia, and the value to the economic\nwelfare of British Columbia of the development of industry based upon the production of the\nfuels enumerated, or tending to show whether or not the prices charged for coal and petroleum\nproducts 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.\n(6.)\n(c.)\n(d.)\n(e.)\nA. W. GRAY,\nActing Provincial Secretary.\nProvincial Secretary's Office,\nNovember 29th, 19S4- PREFACE.\nA final report is presented in this Volume on the questions outlined in Paragraph 1 of the\nCommission relating to coal mined in British Columbia or imported into the Province for\ndomestic and industrial use. The terms of Paragraph 1 will be found on the preceding page.\nIt necessitated a thorough investigation into costs of production at the mine and through all\nsubsequent 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\nbusiness.\nTo 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\ncompete more successfully with its chief competitor\u00E2\u0080\u0094viz., heavy fuel-oil\u00E2\u0080\u0094that reductions\nshould be made in its selling price, after allowing a fair return on a fair capitalization,\ninvolved a detailed investigation aided by technical advisers, with knowledge of the mining\nindustry, and particularly by Chartered Accountants as it was essentially a cost problem.\nAs in the case of the Report filed with the Provincial Secretary on October 21st, 1936, on\nthe questions referred to in Paragraph 2 of the Commission relating to oil and petroleum\nproducts, we have for convenience embodied in this report as incidental to the matters\nreferred to in Paragraph 1 part of the subject-matter referred to in Paragraph 3, more\nparticularly the latter part of that paragraph reading as follows: \" all matters tending to\nshow whether or not the prices charged for coal . . . are unjust or unreasonable.\" This\nbranch of the inquiry provided for in Paragraph 3 could best be dealt with when considering\nthe questions of costs specifically referred to in Paragraph 1.\nIn the Oil and Petroleum Report we found that heavy fuel-oil used in industry did not\ncarry its own fair load of costs. The Tariff Board of Canada, after a prolonged investigation\nbased, as to British Columbia conditions, largely on the evidence adduced in this inquiry,\nstated that this contention was not refuted by the Oil Companies. The Tariff Board also\nstated that there was no reason why the price of gasoline in Vancouver should be higher than\nin Seattle at that date. Approximately that would mean, as selling prices of gasoline stood\nat the time, that it should be sold at about the figure we found in our Petroleum Report. In\nthis volume relating to coal we also find that it may be sold at reduced prices. With cheaper\ncoal 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.\nAs coal production declined in recent years, adversely affecting economic conditions, not\nonly in coal mining centres but throughout the Province, and this decreased production\n(gains have been made recently) is a matter of general knowledge and concern, one might\nwonder if, under such conditions, reductions in the selling price of coal could properly be\nrecommended in this Report. That of course depends upon the facts, not on any general\nsurmise. A perusal of the Report will disclose in a very detailed way grounds for our conclusions on this point.\nWhile smaller companies were not neglected, we were chiefly concerned with the two\nlargest coal companies in the Province\u00E2\u0080\u0094viz., Canadian Collieries (Dunsmuir), Limited (including Western Fuel) and the Crow's Nest Pass Coal Company, Limited, as their operations\naccount for 86.7 per cent, of the total production in, for example, 1936. These two Companies,\nin a sense, are not in competition. It is difficult for the latter to invade the large domestic\nand industrial Coast market in which the Island Companies have had, and still have, while\nnot a monopoly, an overwhelming advantage in comparision with the Crow's Nest and Alberta\nCompanies. That is due to geography, freight rates and a short water haul. I have not\nfound that any reductions should be made by the Crow's Nest Pass Coal Company,\nLimited, in the selling price of coal over the period 1930-1936. Reasons for this finding will\nbe found in Section 12, Chapter XII. These reasons do not apply to the Island Companies.\nThe coal industry at present is in a state of flux. By reason of the gradual increase in\nuse of automatic stokers and modern fuel burning appliances, the demand for lump coal,\nselling at $10.50 a ton in Vancouver and $10.75 in Victoria, while still substantial, is declining,\nand the demand for finer coals, used with stokers and selling for less, is increasing. The\ntendency in the future will be\u00E2\u0080\u0094it is now evident at least to some degree\u00E2\u0080\u0094for a reversal of\nthis position in respect to selling prices\u00E2\u0080\u0094viz., that finer coals, increasingly in greater\ndemand, will gradually approximate the selling price of lump coal while the selling price of PREFACE.\nthe latter will decrease; or, on the other hand, both reach a common price level. For\nexample, the selling price of Island pea coal was advanced recently by 50 cents a ton. We\nfind in our Report that the selling price in Vancouver under present conditions should be $8.10\nand $7.25 and $6.00 per ton respectively under conditions set out in Tables 78, 79 and 80.\nLump coal, however, selling at $10.50 or $10.75, should be reduced under existing conditions\nto $8.10, and to a lesser amount under changed conditions. All sizes of coal from the same\nmine, cost the same to produce (except in the case of special preparation) and can be sold at\nthe same price subject to variations in distribution costs. Detailed finding in respect to\nreductions will be found in Chapters XI. and XII. and Tables 69 to 80, inclusive.\nThe mining centres of Vancouver Island and the Crow's Nest Pass have a special interest\nin maintaining conditions that will enable companies to operate the mines at a fair profit,\nwith adequate wages paid to miners and proper reserves created to ensure safe and profitable\noperation for the future, and no recommendations should be made in this Report that would\nprevent it. It would be equally unwise, however, to permit a company to insist upon the\nretention of an inflated capital structure, or on maintaining unnecessarily high costs of production, involving higher prices to the consumer and generally unsatisfactory conditions.\nThe 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,\nsubject to income taxes, on a fairly capitalized capital structure. This conclusion is arrived\nat after a prolonged study and detailed computations made in the first instance, with the\nassistance of Mr. H. B. Pratt, a senior accountant whose work was supervised by Mr. H. G.\nHinton, Victoria Manager of Geo. A. Touche & Company, a firm of chartered accountants of\ninternational repute.\nI purposely place the foregoing statements\u00E2\u0080\u0094-viz., that with the reductions recommended approximately an 8 per cent, return could be secured by the companies\u00E2\u0080\u0094prominently\nin the forefront of this Report because of suggestions, possibly to some extent, made, as it\nwere, in terrorem, that if any reductions are found it would adversely affect the mining\ncentres referred to, so vitally interested, by interfering with profitable operations. I feel\nsatisfied that the results arrived at, if acted upon, will redound to the benefit of labour, the\ncompanies concerned and the great body of consumers, domestic and industrial.\nI had the necessary assistance in this inquiry of an outstanding consulting coal mining\nengineer, 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\nStates. He has personal knowledge of the Vancouver Island and Crow's Nest fields as well as\nof coalfields in Alberta, Washington, Utah, Wyoming and Pennsylvania. He was first\npresented as a witness in the inquiry by the Canadian Collieries (Dunsmuir), Limited, and\nI 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\nadvisory capacity to the Commission. His report to me after personal examination of the\nmines on the Island and in the Crow's Nest and in the neighbouring State of Washington was\nof great value. It ought to assist at least to dispel the view that reductions will jeopardize\nthe industry. I quote here what is said in Chapter XL, Section 5 (d), of this Report. It is\nas follows:\u00E2\u0080\u0094\n\" In scrutinizing closely the costs of coal production we have in mind that in the neighbouring\nState 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\nreducing the over all costs of production and in recapturing a large part of the markets lost to\nCalifornia fuel oil several years ago. These Washington operators have experienced a substantial\nincrease in employment with better wages for workmen as well as financial returns on the capital\ninvested. The coal industry in this Province should take advantage of the successful experience\nof coal operators elsewhere; install modern mining equipment and secure the resultant advantages\nof lower production costs with attendant greater volume of sales and production, accompanied as\nwell by lower prices to the consumer and more profit to the coal companies.\"\nAs intimated, the inquiry centred largely around the activities of the Canadian Collieries\n(Dunsmuir),, Limited and Western Fuel operating mines at Cumberland and Nanaimo and the\nCrow's Nest Pass Coal Company operating in East Kootenay. It was essential, if we were\nto answer the questions in Paragraph 1, coupled with part of Paragraph 3, that we should\ninvestigate in the greatest detail the capital structure of Canadian Collieries (Dunsmuir),\nLimited (and Western Fuel) and its many subsidiary Companies in and out of the Province PREFACE. ix.\nfrom its inception to the present time. This inquiry led us through a labyrinth of intricate\nfinancial activities. The Company's inception was not auspicious. It was unfortunate to\ninvestors and to the industry itself. The purchasers of the property from the late Mr.\nDunsmuir in 1910, for a price more than double the fair value of the assets transferred, even\nallowing for the optimism of the day, were not coal mine operators, but promoters. The\nCompany was saddled with a load at the outset that (if it could be carried at all, and it could\nnot) it was only possible to do so by charging excessive prices for coal. If, having paid an\nexcessive sum for the property, far beyond its commercial value, the true situation had been\nrealized at an earlier date and a reduced re-capitalization effected as outlined in Section 6 of\nChapter VIIL, lower prices of coal would have been possible, losses of bondholders greatly\nreduced, and the condition of the Company materially improved.\nI had as Commissioner throughout the inquiry the invaluable aid of Mr. G. F. Gyles, a\npartner in the Vancouver office of Price, Water house & Co., internationally known Chartered\nAccountants. 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\nstructure of the Crow's Nest Pass Coal Company, Limited was investigated.\nMr. Gyles studied the Report at my request, and I have his authority to say that the\nportions relating to capital structures, capitalizations, depreciation, profit position and a fair\nreturn on a reasonable capitalization have his approval. Naturally, neither Mr. Gyles nor\nother Commission advisers, to whom reference is subsequently made, have any responsibility\nfor conclusions which in the last analysis it was my duty to find.\nThe 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\nchecked by Mr. H. B. Pratt, of George A. Touche & Co., also as stated internationally known\nChartered Accountants, under the supervision of Mr. H. G. Hinton, the Victoria Manager.\nMr. Pratt was steadily engaged in the work of the Commission for over a year. In assisting\nin the compilation of a report of this extensive and detailed character his unremitting and\ncareful works merits the highest praise.\nAs 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\nrefer to these statements to properly carry out the Terms of the Commission I would do so.\nOne 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\narise to any considerable degree. I have endeavoured to use statements of this character,\nhowever, in a manner that would not reveal their full import to competitors or injure the\ncompany. All material used was a necessary and essential feature of the Report.\nI desire to acknowledge assistance given by Dr. W. A. Carrothers, Professor of Economics\nat the University of British Columbia, whom I consulted as occasion required. As already\npointed out, the Terms of Paragraph 1 of the Commission relating to coal are concerned with\ncosts, computations and company methods where the assistance of Charterer Accountants and\ncoal mining Engineers was of primary importance. Matters relating to \" economic welfare \"\nare referred to in Paragraph 3, dealt with in part only in this Report, and that not chiefly in\nits economic aspects. The assistance of Mr. Kenneth Moodie, Combustion Engineer of the\nProvincial Department of Public Works, was indispensable. The advantage derived from his\ntechnical knowledge and practical experience in the coal mining industry is gratefully\nacknowledged, and, in addition, I am indebted to him for many services rendered to the\nCommission throughout the inquiry.\nI also received valuable assistance from Mr. Bruce Robertson, Counsel for the Canadian\nCollieries and Western Fuel; and on special occasions, when he appeared, from Senator J. W.\ndeB. Farris, K.C. Mr. Robertson was of great assistance not only in the examination of\nwitnesses, but in furnishing me with a detailed and valuable written submission at the close\nof the inquiry. Mr. A. R. MacDougall, Barrister, of Vancouver, representing about twenty\ncoal dealers, including some who sold Alberta coal, rendered valuable aid. Mr. J. P. Hogg,\ntoo, Assistant Counsel to the Commission until some months ago when he assumed another\nposition, was of particular value in eliciting facts in the coal inquiry. Indeed, with their\nassistance and that of Mr. O'Halloran, Chief Counsel to the Commission\u00E2\u0080\u0094and again, as in the\nPetroleum Report, I cannot speak too highly of the valuable detailed assistance given by him x. PREFACE.\nand the thoroughness and magnitude of his work\u00E2\u0080\u0094I was placed in the favourable position of\nnot 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.\nHartley, who remained as Secretary during the greater part of the coal inquiry, performed\nhis many duties in a highly satisfactory manner.\nFor convenience, a general summary of the Coal Report will be found in Chapter XIII.\nA further synopsis in skeleton form based upon the general summary will be found in the\nfirst part of the Report.\nMay I here refer to the Oil and Petroleum Report filed on October 21st, 1936. The data\nas to costs and prices in that report were necessarily based on 1934 figures, although we\nstated that 1935 conditions were not materially different. In view of the time elapsing since\nthese computations were made giving rise to the question as to whether or not the same\nresults ought to be arrived at based on data, for example, in 1936 or 1937, or indeed in any\nlater year, we said in Chapter XV., paragraph 17, of the Petroleum Report:-\u00E2\u0080\u0094\u00E2\u0096\u00A0\n\" 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\nto 82.\"\nSimilarly, 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\nthe data supplied in Tables 69, 78, 79 and 80 in Chapters XI. and XII. of the Report. I make\nthis brief reference, without going into details, to indicate that an inquiry of a restricted\ncharacter only would be necessary for this purpose.\nM. A. MACDONALD,\nCommissioner.\nVictoria, B.C., September 27th, 1937. BRIEF SYNOPSIS OF SOME OF THE MAIN FEATURES INCLUDED IN\nTHE GENERAL SUMMARY FOUND IN CHAPTER XIII.\n1. The people of this Province expended about $7,000,000.00 for coal and coke in 1936 and\nin the last ten year period approximately $100,000,000.00.\n2. 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\n$300,000,000.00 over a ten year period.\n3. Canada possesses about one-sixth of the world's coal resources; British Columbia\namong Canadian Provinces, with coal reserves estimated at 76,034,942,000 metric tons, takes\nsecond place to Alberta.\n4. In 1936 the twenty-two active coal mines in the Province produced 1,402,630 short\ntons of coal, employing 2,814 men, of which 2,035 were employed underground. For number\nof days worked in each mine refer Tables 26a and 26b.\n5. Canadian Collieries (Dunsmuir), Limited, on Vancouver Island and Crow's Nest Pass\nCoal Company, Limited, at Fernie produced 86.7 of the British Columbia coal production in\n1936.\n6. To the end of 1936 British Columbia produced 96,056,118 short tons of coal, with an\nestimated value at the mines of $340,699,557.00.\n7. British Columbia coal production in 1935 was the lowest since 1903, having decreased\nby 47.23 per cent, since 1929.\n8. In 1936 sales of British Columbia coal outside the Province increasd to 18.15 per cent,\nof total sales as compared with 12.15 per cent, in 1934, due mainly to increased sales in\nManitoba and the United States.\n9. 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\nof coal are sold. For definitions refer paragraph 14, Chapter XIII. There is no uniformity\nin the sizes of coal either at the mines or as sold to the consumer. This creates confusion.\n10. The calorific or heat value of coal is not, as it should be, a governing factor in its\nprice to the domestic consumer.\n11. With modern mechanization and co-operation between men and management, a reduction in over all costs\u00E2\u0080\u0094underground and surface in the Vancouver Island mines can be made\nof 70 cents to $1.00 per short ton on a tonnage basis equivalent to the tonnage mined during\nthe past two years at Comox. Modified reductions are applicable to all British Columbia\n12. The present system of marketing and distribution of coal is wasteful and uneconomic,\nadding unduly to the price paid by the domestic consumer.\n13. The specific reductions in the price of coal to the domestic consumer recommended\nin this Report under the different conditions therein referred to are set out in Tables 78, 79\nand 80 in Chapter XII. Because of changing conditions in the coal industry at the present\ntime, the reader will find it difficult to follow the summary of reduced prices in paragraphs\n14 to 18 without turning to and studying the tables referred to. xii. SYNOPSIS OF THE MAIN FEATURES.\n14. Coal delivered to the domestic consumer in Greater Vancouver and Victoria should\nnot exceed $6.00 per short ton. This includes retailers' distribution charges, which should not\nexceed $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\nbulk 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\nout in Table 80, Section 10 (6), Chapter XII.\n15. Until modern coal burning appliances are in general use and also delivery in bulk\n(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\nshould not exceed $1.75 per ton.\n16. Without the establishment of central coal distributing depots, the price of coal\ndelivered 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.\n17. Until modern coal burning appliances are in general use, coupled with delivery in\nbulk, 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\ncoals are set out in Table 79, Section 10 (a), Chapter XII.\n18. Even under conditions as they exist today, the price of coal sacked, delivered to the\ndomestic consumer should not exceed $8.10 per short ton. This includes distribution charges\nnot exceeding $2.25 per ton. The reductions in the prices of specific coals are set out in\nTable 78, Section 9 (6), Chapter XII.\n19. 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\nCompany produced 86.7 per cent, of the coal mined in British Columbia. As the rail freight\nfrom Fernie to Vancouver is $4.20 per short ton (Table 30), Crow's Nest Pass Coal Company\ncannot compete in the Coast market with Vancouver Island coal (refer Table 22). For\nexample, the laid down cost of Vancouver Island coal in Vancouver is $6.82 (Comox) and\n$6.95 (Nanaimo-Wellington) per short ton, as compared with the laid down cost of Michel\nlump in the sum of $8.70 per short ton (Table 30).\n20. In all other points in the Province outside Greater Vancouver and Victoria the prices\nto 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\nor other coal is purchased, the price to the domestic consumer may be lower than stated,\ndepending on the freight rate from the particular coal mine to the purchasing point and the\ncost of production of coal at the particular mine. For example, Michel pit head costs in\n1936 were 25.53 per cent, lower than Comox as revealed by a comparative analysis (paragraph 63, Chapter XIII.).\nCoalmont and Middlesboro productions are absorbed almost entirely by railways; Blue\nFlame and Pleasant Valley (Sunrise), near Princeton, have recently closed down; Tulameen\nmines, near Princeton, have not had a representative production since 1933. Corbin Collieries,\nin the Crow's Nest Pass area, closed down in May, 1935.\n21. The price reductions in paragraphs 14 to 18 are based upon an 8 per cent, per annum\nreturn 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\ncosts of distribution. SYNOPSIS OF THE MAIN FEATURES. xiii.\n22. In the case of sales to other than domestic consumers where coal is not handled\nthrough the usual retail distribution, reductions due to delivery in bulk and elimination of all\nretail services should apply; and the price then should be built upon the cost at mine, coal\nproducers' profit, sales expense (if any) plus freight from mine and any handling charge to\npoint of delivery (refer Division (III.), of Table 77, Section 8 (a), Chapter XII.).\n23. All sizes of coal from the same mine cost the same to produce (except in the case\nof special preparation). Lump selling at $10.50 a ton in Vancouver and $10.75 in Victoria,\nand pea coal selling at $8.00 in both places, can therefore be .sold at the same price.\n24. The increasing demand for pea coal and slack is causing a change in the coal industry.\nThe price of pea coal to the consumer was recently increased by 50 cents to $8.00 per short\nton. A condition should not be permitted to arise where pea coal by reason of increasing\ndemand will be raised in price to $10.50 per ton, the present price of lump coal in Vancouver.\n25. The establishment of central coal distributing depots (refer paragraphs 20, 21 and\n22, Chapter XIII.) is a practical way of relieving the consumer from excessive distribution\ncharges. One depot in Victoria and five or six in Greater Vancouver would serve the coal\nrequirements in those centres.\n26. 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.\n27. Modern coal burning appliances using only pea coal or a mixture of pea and slack\nshould be in general use because of increased heating efficiency, less expense and a greater\nconvenience to the householder. They should be available at lower prices on \" easy \" terms,\nor on a monthly rental.\n28. Basements should be so constructed and furnaces installed that coal can be received\nin a mechanical and cleanly manner.\n29. Houses should be so constructed and driveways and approaches built so that full\nadvantage can be taken of coal chutes to convey the coal to the basement, coal room, or other\nreceptacle.\n30. It should be the duty of architects, contractors, municipal building inspectors and\npersons having to do with designing and building houses and approving plans, to alter this\ncondition.\n31. Approximately 80 per cent, of householders' furnaces in Victoria and Vancouver are\nnot properly installed, or are not functioning properly, causing unnecessary expense, annoyance and inconvenience to the householder.\n32. The conditions pointed out in paragraphs 27 to 31 should be remedied by the enactment of municipal by-laws and their enforcement.\n33. Canadian Collieries (Dunsmuir), Limited, was incorporated in 1910, with an excessive\ncapital 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\n$10,000,000.00 bond issue.\n34. 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\nexceed $4,199,984.38. SYNOPSIS OF THE MAIN FEATURES.\n35. In its first balance sheet in June, 1911, Canadian Collieries (Dunsmuir), Limited,\nstated its capital assets at $22,362,695.85\u00E2\u0080\u0094viz., $11,362,695.85 more than the purchase price\nand $18,362,695.85 in excess of any apparent commercial value.\n36. No dividends were ever paid on the $10,000,000.00 common stock, and none on the\n$5,000,000.00 preference shares since 1912; no interest was paid on the $10,000,000.00 bond\nissue after June 30th, 1914, and in March, 1915, the bondholders postponed interest payments\nuntil the conclusion of the Great War, forming a bondholders' committee to keep in close touch\nwith the company; control of the company was then placed in the hands of this committee\nthrough the deposit of a majority of the shares in a voting trust.\n37. 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\nby 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,-\n000.00 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\nshares of $925,98.00 and preference stock of $2,101,960.00, a total of $3,027,940.00 new shares\nwere then issued in satisfaction of accrued interest on the 1910 bond issue and special loans.\nThe total issued capital then stood at $4,627,940.00 ($1,025,980.00 common and $3,601,960.00\npreference) ; it includes $1,600,000.00 \" old shares \" and $3,027,940.00 \" new shares.\"\n38. To complete the re-organization, a band issue of $9,012,872.00 5 per cent, bonds was\nissued ($987,154.67 having been paid on the 1910 $10,000,000.00 bond issue), divided equally\ninto \" A\" and \" B \" income debentures.\n39. While the 1920 re-organization \" wrote off \" $9,900,000.00 common stock, which was\nnot represented by any apparent consideration, and $3,500,000.00 of the preference stock\nwhich was, it created additional shares of $3,027,940.00 which had no consideration but the\narrears of interest upon the old 1910 bond issue and special loans, with the result that the\nreduction 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\nold common stock considered, there was no reduction in fact, but an \" overload \" of $806,-\n934.09 still remained not represented by capital invested. Actually the re-organization\nresulted in 65.43 per cent, of the issued capital being allotted in satisfaction of arrears of\ninterest upon the old 1910 bond issue and special loans.\n40. In 1928 the shareholders of Western Fuel Corporation of Canada, Limited, were able\nto sell to Canadian Collieries for $1,730,000.00 cash share holdings which cost them $250,000.00\nless than five years before, and upon which no dividends had ever been paid\u00E2\u0080\u0094a profit to\nWestern Fuel shareholders of $6.00 for every dollar invested less than five years before.\n41. As of June 30th, 1934, Canadian Collieries had depreciated its plant, buildings and\nequipment by 88.28 per cent, and Western Fuel by 46.5 per cent., showing $1,788,004.01 as\nthe combined depreciated value of their assets.\n42. Adding coal land values, the depreciated book value of the capital assets of both\ncompanies 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\nbond issue of $8,250,169.00.\n43. Between 1923 and 1934 the total bond indebtedness of both companies was in fact\nreduced by $6,775,967.27. Canadian Collieries (1921-1934) and Western Fuel (1924-1934)\ncombined paid in bond interest $2,245,967.32. SYNOPSIS OF THE MAIN FEATURES. xv.\n44. Between 1924 and 1934 the sum of $3,451,673.57 net was forwarded in cash to the\nCanadian Collieries' Montreal office by both companies. From March 4th, 1935, to June 12th,\n1936, a further sum of $400,000.00 was remitted.\n45. The net profits of Canadian Collieries from 1921 to 1934 are found to be $4,293,125.46\ninstead of $1,669,980.99 as shown by the books of the company. The net profits of Western\nFuel from 1924 to 1934 are found to be $2,845,802.15 instead of $321,125.43 as shown. The\nnet profits of the two companies combined from 1929 to 1934 are found to be $2,870,493.62\ninstead of $880,083.32 as shown.\n46. The two companies combined charged excessive depreciation or depletion or other\ncharges in the sum of $2,571,494.22 in the periods 1921-1934 (Canadian Collieries) and 1924-\n1934 (Western Fuel). This added unduly to the cost of coal. The coal companies measured\ndepreciation in terms of \" life \" of plant, buildings and equipment, instead of in terms of the\n\" life \" of the coal mines (refer paragraph 47 hereof), as we have found it ought to be\nmeasured.\n47. In a coal mining operation depreciation and depletion should be charged on the same\nbasis; that is to say, the charges therefor should be distributed over the entire tonnage to\nbe recovered and become a part of the per ton cost of mining each ton of coal; renewals,\nreplacements and capital additions should be amortized over the remaining life of the mine\nin the same manner, and the additional rate per ton added in each year; where additional\ncoal reserves are developed the rate therefor should be determined on the increased tonnage.\nThis method has not been adopted by the British Columbia coal mining companies, resulting\nin higher coal production costs, which to the extent of excessive depreciation or depletion\ncharges are really profits, not shown as such.\n48. Wellex Securities, Limited, was incorporated in Montreal by Canadian Collieries in\n1928; as a wholly owned subsidiary of Canadian Collieries it became the sole shareholder of\nWestern Fuel. As of June 30th, 1934, it held $3,013,264.60 of Canadian Collieries and\nWestern Fuel bonds, while the same were treated as outstanding obligations in the balance-\nsheets of the said companies. Companies doing business in the Province should be required\nto publish consolidated statements and thus furnish information of all holdings by subsidiaries.\n49. As of June 30th, 1934, $2,661,525.47 of Canadian Collieries \"A\" debentures were\nredeemed or acquired and held by a subsidiary (Wellex Securities) at an average rate of\n34.66 cents on the dollar; $2,024,941.80 of the Canadian Collieries \"B\" debentures were\nacquired and held by Wellex Securities, Limited (but not redeemed), at an average rate of\n9.66 cents on the dollar; $1,089,500.00 of the Western Fuel 1928 bond issue were redeemed or\nacquired and held by a subsidiary (Wellex Securities) at an average rate of 58.49 cents on\nthe dollar.\n50. The Canadian Collieries 1920 plan of re-organization was a \" re-arrangement of\nsecurities,\" placing the bondholders' committee virtually in charge of the operations of the\ncompany 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\nbond interest and provide annual sinking fund for redemption of bonds. An expedient was\nadopted virtually postponing the payment of principal and interest, which had the effect of\nplacing 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\nonly one-half of the \" net earnings \" was applicable to income on the other half of the bond\nissue.\nThis expedient depressed the value of the first half of the bond issue (\" A \" debentures)\nand acknowledged in effect that the second half of the bond issue (\" B \" debentures) had no\nsecurity behind them. SYNOPSIS OF THE MAIN FEATURES.\n51. In the 1920 Canadian Collieries re-organization, a capitalization of $5,000,000.00\nwithout bond issue, instead of the re-organized capital structure of $13,640,812.00 would have\nmore accurately represented the commercial value of the assets and undertaking. In 1924 a\ncapitalization of $2,500,000.00 without bond issues, instead of $5,000,000.00 would have more\naccurately represented the commercial value of the assets and undertaking of Western Fuel.\nFollowing the acquisition of Western Fuel in 1928, a Canadian Collieries capitalization of\n$5,000,000.00 (including Western Fuel, the purchase price of which represented Canadian\nCollieries depreciation reserve) would have more accurately represented the commercial value\nof assets and undertakings instead of the then combined capital structure of $18,640,812.00.\n52. The net profits of the two companies combined in the periods mentioned in paragraph\n45 hereof totalled $7,138,927.61 instead of $1,991,106.31, as stated by the companies. Without\ntaking into consideration profits which would accrue from improved methods of mining:\u00E2\u0080\u0094\n(1.) Canadian Collieries, exclusive of Western Fuel, for the sixteen year period,\n1921 to 1936, and subject to income-tax requirements, could have paid a uniform\ndividend of 6 per cent, per annum if it had been recapitalized in 1920 at\n$5,000,000.00 without bonds.\n(2.) Western Fuel for the thirteen year period, 1924 to 1936, subject to income-tax\nrequirements, could have paid a uniform dividend of 8 per cent, per annum if\nit had been recapitalized in 1924 at $2,500,000.00 without bonds.\n(3.) The two companies combined, for the period 1929 to 1936, subject to income-tax\nrequirements, could have paid a dividend rate of 8 per cent, per annum if they\nhad been recapitalized in 1929 at $5,000,000.00 without bonds (refer paragraph\n46, Chapter XIII.).\n53. Canadian Collieries' bondholders in England suffered great losses by failure of their\ncommittee in 1920 to convert their bonds into shares and limit the issued share capital to a\nfigure consistent with the commercial value of assets and undertaking. For example, 52 per\ncent, of the bondholdings were liquidated at a loss of $3,568,384.96 exclusive of interest loss\nbetween 1921 and 1934.\n54. The Crow's Nest Pass Coal Company, Limited, issued capital of $6,212,666.66 is\nrepresented by $4,712,666.66 subscribed in cash and $1,500,000.00 shares allotted in consideration of transfer of coal properties and rights.\n55. For some years prior to 1930 the company paid a uniform dividend rate of 6 per cent,\nper annum. With the loss of the Great Northern Railway contract in 1929, in order to\nmaintain its uniform 6 per cent, dividend rate, the company adopted a plan permitted under\nthe Dominion \" Companies Act \" of paying out to its shareholders sufficient monies from its\ndepreciation and depletion reserves for that purpose; at the same time explaining to the\nshareholders it would have the effect of reducing the company's capital by the amount of such\npayments from the reserve.\n56. The Crow's Nest Pass Coal Company, Limited, charged excessive depreciation and\ndepletion of $1,516,567.10 over the period of 1924-1934, resulting in an average increase in\ncost of 25.644 cents per long ton during that period.\n57. We find that share capitalization of $5,500,000.00 between 1924 and 1931 and\n$4,800,000.00 from 1932 to 1936 would have accurately reflected the commercial value of the\nundertaking of The Crow's Nest Pass Coal Company, Limited. On this recast capitalization,\nafter allowing for the adjustments which we consider should be made in depreciation and\ndepletion over the thirteen-year period 1924-1936, an average dividend rate of 7% per cent,\nper annum could have been maintained subject to income-tax requirements.\n58. Having in mind the low comparative costs of production of Michel and an 8 per cent,\nreturn upon a reasonable capitalization, coupled with the decrease in specific industrial SYNOPSIS OF THE MAIN FEATURES.\nmarkets, we do not find for any specific reductions in cost of production which could be passed\non to the consumer by the Crow's Nest Pass Coal Company, Limited, over the period 1930-\n1936.\n59. Depreciation and depletion charges should be treated as costs of operation. A\nseparate fund should be set up therefor, restricting the use of depreciation and depletion\nreserves to replacements and renewals. In the case of coal mining companies incorporated\nunder the British Columbia \" Companies Act,\" payments from depreciation and depletion\nreserves should be available to the shareholders, subject to the approval of creditors, and to\nreduction of a company's paid-up capital thereby.\n60. Company financial statements should contain facts, and if they are founded in whole\nor in part on expressions of opinion or accounting conventions, it should be so stated, with\nthe basis therefor, and uniformity adhered to from year to year. A condition should not be\npermitted to exist which enables it to be said that two equally legitimate methods of accountancy may give widely different results for a given period.\n61. Labour costs constituted 67.85 per cent, in 1934, 69.47 per cent, in 1935, and 74.55\nper cent, in 1936 of the direct costs of producing coal in Canadian Collieries mines. Wages\nhave increased by 55 per cent, since 1914, applicable to thirty-one standard wage rates.\n62. When public monies are used to subsidize a shipping service (using coal burners)\nfrom British Columbia ports, it would be a corresponding assistance to British Columbia coal\nif such subsidies were made subject to a stipulation that Canadian coal should be utilized at\nleast to the extent of taking the vessels from Canadian ports to the first foreign coaling\nstation.\n63. In 1934 Canadian railways received from the Dominion Government $1,720,943.00 for\nmovement of Nova Scotia coal to Quebec and Ontario; $333,977.46 for Alberta coal and\n$119,346.21 for British Columbia coal mined in the Crow's Nest Pass, moved eastward.\nBritish Columbia coal sales to Manitoba and Ontario increased from 1,155 tons in 1929 to\n120,642 tons in 1936; Dominion Government subventions for coal mined in British Columbia\nand \" 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\nthe \" Domestic Fuel Act,\" chapter 52, Statutes of Canada, 1927, $40,769.00 was paid to British\nColumbia gas companies for use of British Columbia coal.\n64. For the year ended March 31st, 1935. the Dominion Government received in tariff\nrevenue from imports of coal and coke into Canada $8,500,000.00 after deducting drawbacks.\nIn 1935 Ontario imported 10,003,043 tons of coal from the United States, 30,517 tons from\nGreat Britain, and 29,760 tons from Indo-China; while Quebec imported 1,616,478 tons from\nGreat Britain, 776,323 tons from the United States, 201,679 tons from Germany, 67,220 tons\nfrom Belgium, and 24,687 tons from Indo-China.\n65. 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\nAlberta coal were brought into the Province in 1920; this rose to 267,478 tons in 1928,\ndecreased to 116,723 tons in 1933, and then increased from 123,968 tons in 1934 to 214,650\ntons in 1935 and 244,946 tons in 1936, constituting that year 16.82 per cent, of the total coal\nsales in British Columbia.\n66. Including sales of Alberta coal, the domestic market in 1935 absorbed 30.25 per cent,\nof all coal sales in British Columbia; it constituted 36.07 per cent, of British Columbia\nproduced coal sold in that year. SYNOPSIS OF THE MAIN FEATURES.\n67. Alberta coal sales in British Columbia are assisted in part by discriminatory freight\nrates westward:\u00E2\u0080\u0094\n(1.) The freight rate from Drumheller, Alberta, to Vancouver, a distance of 740\nmiles, is $5 per ton, whereas the freight from Drumheller to Kamloops, a distance of 487 miles, is $4.90 per ton.\n(2.) The freight from Coalspur, Alberta, to Vancouver, a distance of 662 miles, is\n$3.90 per ton, whereas the freight from Coalspur to Kamloops, a distance of\n406 miles, is $4.20 per ton.\nIn both instances the coal must pass Kamloops.\n68. 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\nfound herein will necessitate increased mechanization at the mines and displacement of an\nexcessive number of coal dealers. Lower costs and prices will result in economic gain because\nof increased purchasing-power. Greater employment both in the mines and in distribution\nwill ensue, and, as already indicated, a fair return upon a fair capitalization will be received\nby the coal companies. GENERAL INDEX.\nPaG-L\nCHAPTER I.\u00E2\u0080\u0094INTRODUCTORY CHAPTER, RELATING TO THE NATURE,\nKIND AND CHARACTERISTICS OF COAL, COST PROBLEMS AND THE\nPOSITION OF THE BRITISH COLUMBIA COAL INDUSTRY 1\nSec. 1.\u00E2\u0080\u0094Terms of the Royal Commission 1\n(a.) Outline of Terms of the Commission 1\n(b.) Amounts spent by the People of British Columbia on Coal and Matters to\nbe considered in this Report 1\nSec. 2.\u00E2\u0080\u0094Some Cost Problems 1\n(a.) Relation of \" Profit,\" \" Selling Price \" and \" Cost \" 1\n(6.) Difficulty in ascertaining \" Profits \" 2\n(c.) Difficulty in ascertaining \" Cost \" 2\n(d.) Capital Value in relation to Earning Capacity 3\n(e.) Confusion in Use of Term \"Value\" 3\n(/.) Recommendation of a Committee of the American Institute of Accountants\nrelating to Interpretation of Corporation Balance Sheets 4\n(g.) Importance of Consideration of these Problems 4\nSec. 3.\u00E2\u0080\u0094Origin of Coal 4\nSec. 4.\u00E2\u0080\u0094Coal in Canada 4\n(a.) Canada's Estimated Coal Reserves by Provinces 4\n(6.) Accuracy of such Estimates 5\n(c.) Relation of such Estimates to Commercial Recovery of Coal in British\nColumbia Mines 5\nSec. 5.\u00E2\u0080\u0094Classification of Canadian Coals 6\n(a.) General Classification . 6\n(6.) A more Detailed Classification 6\n(c.) Distribution of Estimated Coal Reserves by Classification and Provinces 6\nSec. 6.\u00E2\u0080\u0094Explanation of the Term \"British Thermal Unit\" (B.T.U.) 7\n(a.) Definition of British Thermal Unit 7\n(&.) Matters considered in Analyses of Coal for Commercial Use 7\n(c.) Importance of considering Calorific Value in determining Price of Coal 7\nSec. 7.\u00E2\u0080\u0094Analyses of British Columbia Coals 8\n(a.) Sampling Methods 8\n(6.) Some Analyses of British Columbia Coals 8\n(c.) Some Analyses of British Columbia Coals 9\n(d.) Remarks thereon 10\nSec. 8.\u00E2\u0080\u0094Condition of the British Columbia Coal Industry 10\n(a.) Importance of Coal 10\n(6.) Decline of the Industry 10\n(c.) Coal and Coke Production in the Province 10\n(d.) Study of Coal Costs in relation to Paragraph 3 of the Commission Terms 12\nCHAPTER IL\u00E2\u0080\u0094THE PRODUCTION AND CONSUMPTION OF COAL IN BRITISH\nCOLUMBIA 13\nSec. 1.\u00E2\u0080\u0094Coal producing areas of the Province 13\n(a.) Production by Areas..: 13\n(6.) Production by Mines 13\nSec. 2.\u00E2\u0080\u0094Coal consumed by Railway Locomotives 17\n(a.) Consumption by Railway Locomotives 17\n(b.) Tonnage sold Railways by Canadian Collieries and Western Fuel 18\n(c.) Tonnage sold Railways by Crow's Nest Pass Coal Company, Ltd 18\n(d.) Tonnage sold Railways by Nicola-Princeton Mines 19\nSec. 3.\u00E2\u0080\u0094Industrial Consumption of Coal in:\n(a.) Gas Plants 20\n(6.) Logging Operations 21\n(c.) General Manufacturing Industries 21 GENERAL INDEX.\nCHAPTER IL\u00E2\u0080\u0094Continued. PAGE-\nSec. 4.\u00E2\u0080\u0094Coal utilized in Production of Coke 22\n(a.) Coke Sales of Crow's Nest Pass Coal Co., Ltd 22\n(6.) The Market for Coke , 23\nSec. 5.\u00E2\u0080\u0094Consumption in Institutional, Government and Public Buildings 23\nSec. 6.\u00E2\u0080\u0094Coal consumed in the Domestic Trade _ ____ 23\n(a.) British Columbia Coal consumed in the Domestic Trade 23\n(6.) Increasing Demand for Smaller sized Coals 23\nSec. 7.\u00E2\u0080\u0094Bunkering of Ships 24\nSec. 8.\u00E2\u0080\u0094Coal sold for Consumption outside British Columbia 25\nSec. 9.\u00E2\u0080\u0094Subventions relating to:\n(a.) Shipments to Manitoba and Ontario 25\n(b.) Extent of Assistance to British Columbia Mines therefrom 25\n(c.) Particulars thereof 26\n(d.) \" Ships' Stores \" and \" Export \" 26\n(e.) Necessity of requiring Canadian Coal to be used when any Subsidy given 28\n(/.) Reference to Losses now sustained otherwise by British Columbia under\npresent Tariff Set-up , 28\n(g.) Crow's Nest Pass Coal Co., Ltd., Sales in Manitoba 29\nSec. 10.\u00E2\u0080\u0094The Relation of the Coal-producing Areas to the Coal-consuming Areas 29\n(a.) Vancouver Island Area 29\n(6.) Crow's Nest Pass Area 30\n(c.) Nicola-Princeton Area 31\n(d.) Northern Area 31\nSec. 11.\u00E2\u0080\u0094Consumption of Coal from other Provinces and from other Countries 31\n(a.) From other Provinces 31\n(6.) From Alberta and elsewhere 32\n(c.) Importance of Domestic Trade 33\nSec. 12.\u00E2\u0080\u0094Per Capita Production in Various British Columbia Mines 33\n(a.) Number of Tons of Coal mined per Underground Employee daily 33\n(6.) Confusion in Term \" Man-days \" 36\n(c.) Dominion Advisory Board on Tariff and Taxation Proceedings in 1927\nregarding Production per Man 36\n(d.) Losses in \" Washing \" 37\n(e.) \" Company Use \" 38\n(/.) Employment in Mines 39\nCHAPTER III.\u00E2\u0080\u0094METHOD AND COST OF MARKETING AND DISTRIBUTION OF\nCOAL 41\nSec. 1\u00E2\u0080\u0094Classification of Retail Coal Dealers 41\n(a.) Dealers in Coast Cities with Waterfront Yards and Railway Trackage 41\n(6.) Dealers having Yards with Railway Trackage only 41\n(c.) Dealers owning Yards without either Railway or Water Facilities 41\n(d.) Dealers not owning a Yard, but owning Delivery Equipment 41\n(e.) Pedlars 41\n(/.) \" Leased Yards \" in the Vancouver Area 41\nSec. 2.\u00E2\u0080\u0094Handling of Coal by the Retailer 42\n(a.) Transportation of Coal from Mine to Coalyard 42\n(6.) Unloading Coal from Scow or Car 42\n(c.) Storing and Handling of Coal in Dealers' Yards 43\n(d.) Screening and Sacking 43\nSec. 3.\u00E2\u0080\u0094Sizes of Coal and Discussion of Terms applied in the Coal Trade 43\n(a.) \" Screenings \" and \" Run of Mine \" 43\n(6.) Variations in Sizes of Coal 43\n(c.) Requirement of \" Coal Sales Act\" respecting \" Size of Coal purchased or\nsold\" 44\n(d.) Lack of Uniformity in Descriptive Names of Coals sold and Explanation\nof some Terms 44 GENERAL INDEX.\nCHAPTER III.\u00E2\u0080\u0094Continued. ?*<*\u00E2\u0096\u00A0\nSec. 3\u00E2\u0080\u0094Continued.\n(e.) Lack of Relation of Prices and Sizes to Calorific Value 44\n(/.) Registration of Names of Coals and other Requirements of \" Coal Sales\nAct\" 44\n(g.) Lack of Sales Record and Uniformity of Sizes 46\n(h.) Necessity for Statutory Standards 46\nSec. 4.\u00E2\u0080\u0094The cost of Marketing and Distribution of Coal by the Coal Dealer to the\nConsumer 46\n(a.) Information from Dealers 46\n(6.) Dealers' Information summarized in Tables 30 and 32 46\nSec. 5.\u00E2\u0080\u0094The Marketing and Distribution of Coal in Greater Vancouver and Victoria 47\n(a.) Table 30 47\n(b.) Discriminatory Freight Rates 54\n(c.) Table 31\u00E2\u0080\u0094Representative Dealer \" Spreads \" in Vancouver and Victoria 54\nSec. 6.\u00E2\u0080\u0094The Marketing and Distribution of Coal in Centres outside Vancouver and\nVictoria 55\n(a.) Some Kamloops Sales 55\n(6.) Rail Freight Rates 56\n(c.) Sales of Local Coal in the Interior 56\n(d.) Table 32\u00E2\u0080\u0094Coals sold at some Interior Points 56\n(e.) Variety of Coals sold by Alberta Coal Agencies 59\nSec. 7.\u00E2\u0080\u0094Degradation 59\n(a.) What it is . 59\n(6.) Increasing Demand for Smaller Sized Coals 59\n(c.) Utilization thereof in Automatic Stokers 60\nSec. 8.\u00E2\u0080\u0094Present Methods of Marketing and Distribution of Coal are wasteful 60\n(a.) Excessive Number of Coal Dealers 60\n(b.) System of \" Approved Dealers \" 61\n(c.) Effect of Coal Sales of \" Approved Dealers \" System 61\n(d.) Some Results thereof 61\n(e.) Summary 61\nSec. 9.\u00E2\u0080\u0094Methods conducive to a Substantial Reduction in Cost of Marketing and\nDistribution of Coal 62\n(a.) Inability of Coal Companies to control Situation 62\n(6.) Central Coal Distributing Depots 62\n(c.) Present Wasteful Methods of Delivery to Household Consumer 63\n(d.) Necessity of planning Homes and Buildings for Better Reception of Coal____ 63\n(e.) Necessity of Architects, Builders, Contractors and Municipal Inspectors,\nrealizing Importance thereof 64\nSec. 10.\u00E2\u0080\u0094Prices of British Columbia Coal in Seattle 64\n(a.) 1929-30 Prices 64\n(6.) 1935 Prices 65\n(c.) British Columbia Coal sells at Greater Prices in Seattle than in Vancouver 65\nSec. 11.\u00E2\u0080\u0094Outline of Succeeding Chapters 66\nCHAPTER IV.\u00E2\u0080\u0094A REVIEW OF THE CAPITAL STRUCTURE OF CANADIAN\nCOLLIERIES (DUNSMUIR), LTD., AND SUBSIDIARIES FROM ITS\nINCORPORATION IN 1910 UNTIL ITS RE-ARRANGEMENT IN 1920 67\nSec. 1.\u00E2\u0080\u0094General Outline 68\n(a.) The Parent Company and its Subsidiaries 68\n(b.) View Points considered 68\nSec. 2.\u00E2\u0080\u0094Preliminary Statement of some Elementary Principles 69\n(a.) Some Results from raising Capital by Shares and Bonds respectively 69\n(6.) Comparative Positions of Shareholders and Bondholders 69\n(c.) Effect on Competitive Cost of Production 70\n(d.) If Bond Issue is for Excessive Amount.. 70 GENERAL INDEX.\nCHAPTER IV.\u00E2\u0080\u0094Continued. PAGE-\nSec. 3.\u00E2\u0080\u0094The Assets acquired by Canadian Collieries (Dunsmuir), Ltd., upon its\nIncorporation in 1910 71\n(a.) Assets of Wellington Colliery Co., Ltd., in 1910 71\n(6.) Purchase Price paid by Canadian Collieries (Dunsmuir), Ltd 71\nSec. 4.\u00E2\u0080\u0094Incorporation of Canadian Collieries (Dunsmuir), Ltd., and its Capital\nSet-up 72\n(a.) Issuance of Common and Preference Stock 72\n(6.) Capital Structure of Canadian Collieries (Dunsmuir), Ltd., as disclosed in\nits First Balance Sheet (1911) 72\n(c.) Purchase Price paid by Canadian Collieries (Dunsmuir), Ltd., compared\nwith Commercial Value of Assets 73\nSec. 5.\u00E2\u0080\u0094Value of Assets acquired in 1910 in relation to Capital Structure of the\nCompany 73\n(a.) No Valuation of Plant or Equipment 73\n(6.) Report of Sir William Mackenzie (1911) 73\n(c.) Assets purchased from Dunsmuir 74\n(d.) Coal Rights 74\n(e.) As to 20,000 Acres of Coal Lands 74\n(/.) Land Acreage 74\n(g.) No Evidence as to Coal Land Acreage 74\n(h.) Coal Reserves and Distribution thereof 75\n(i.) Stated Acreage of Coal Lands held by Canadian Collieries (Dunsmuir),\nLtd., and Subsidiaries 75\n(j.) Basis of Valuation of Coal Lands held by Canadian Collieries 76\n(k.) Valuation of Coal Lands held by Western Fuel 76\n(..) Basis of Valuation of Coal Lands approved by Committee of American\nInstitute of Mining and Metallurgical Engineers 77\n(in.) Authorities relating to holding Large Reserves 78\nSec. 6.\u00E2\u0080\u0094Improvements, Expenditures, and other Capital Additions of Canadian\nCollieries in relation to the Capital Structure 78\n(a.) Tables 35 and 36\u00E2\u0080\u0094Annual Production, 1901-36, of Coal Mines acquired\nfrom Dunsmuir Interests 78\n(6.) Additional Expenditures 80\n(c.) Wellington Colliery Railway Co 80\n(d.) Wellington Colliery Co., Ltd _ 80\n(e.) Table 37\u00E2\u0080\u0094Increases and Decreases, Canadian Collieries Capital Assets,\n1911-20 80\n(/.) Review thereof 81\nSec. 7.\u00E2\u0080\u0094-Incorporation of Wellington Comox Agency, Ltd., and its Place in the\nCapital Structure of Canadian Collieries (Dunsmuir), Ltd 81\n(a.) Incorporation 81\n(6.) Agreement of July 1st, 1914 81\n(c.) Second Agreement of July 1st, 1914 82\n(d.) Some Features of (6) and (c) 82\n(e.) No reason for Existence of Wellington Comox Agency, Ltd.\u00E2\u0080\u0094 82\nSec. 8.\u00E2\u0080\u0094Outline of Company's Condition leading to the Arrangement of 1920 82\n(a.) \u00C2\u00A340,000 Second Mortgage Debentures 82\n(6.) Bondholders' Committee and Moratorium (1915) 82\n(c.) 1918 Appraisal 82\n(d.) Observations thereon 83\n(e.) 1919 Plan of Re-arrangement : 83\n(/.) Company's Position in 1919 83\n(g.) Further Aspects 84\nSec 9.\u00E2\u0080\u0094Conclusions in this Chapter 85 GENERAL INDEX.\nPage.\nCHAPTER V.\u00E2\u0080\u0094RE-ARRANGEMENT OF THE CAPITAL STRUCTURE OF CANADIAN COLLIERIES (DUNSMUIR), LTD.; THE ACQUISITION OF\nWESTERN FUEL CORPORATION OF CANADA, LTD., IN 1928; THE\nFORMATION OF WELLEX SECURITIES, LTD., IN 1929; AND THE\nRE SULTING CAPITAL STRUCTURE 87\nSec. 1.\u00E2\u0080\u0094Re-arrangement of Capital Structure in 1920 87\n(a.) Plan of Re-arrangement 87\n(6.) The Bond Issue 87\n(c.) Common and Preference Shares issued 87\n(d.) Relation of Re-arrangement to Original Capital Structure 87\n(e.) Relation of Re-arrangement to Original Capital Structure 88\n(/.) \"Property\" written off 88\n(g.) \"Property\" written off 88\nSec. 2.\u00E2\u0080\u0094In 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\nCapital Structure in 1920 88\n(a.) Re-organization was literally a Re-arrangement of Securities 88\n(6.) Unwieldy Capital Structure in 1919_\n(c.) Form of Re-organization 1920 Re-arrangement should have taken 88\n(d.) Bondholders' Committee remained in Charge 89\n(e.) Subsequent Effect of Re-arrangement on Value of Bonds 89\n(/.) Capitalization should not have exceeded $5,000,000.00 89\nSec. 3.\u00E2\u0080\u0094Provisions of the 1920 Trust Deed in relation to \" Net Earnings \" and the\nApplication thereof in the Company Balance Sheets in Payment of Bond\nInterest and Principal 89\n(a.) Definition of \" Net Earnings \" in Trust Deed 89\n(6.) Further Provisions of Trust Deed regarding \" Net Earnings \" 90\n(c.) Plan of Payments to Bondholders under \" Net Earnings \" Provisions in\nTrust Deed 90\n(d.) Effect of such Provisions on Redemption of \" A \" and \" B \" Bonds 90\n(e.) Relation of \" Net Earnings \" Provisions to Depreciation Provisions 91\n(/.) \" Net Earnings \" Provisions not clear in Published Statements 91\n(g.) Different Meanings of Terms \"Net Earnings,\" \"Net Income,\" and \"Net\nProfit\" 92\nSec. 4.\u00E2\u0080\u0094-The Relation of Wellington Comox Agency to the 1920 \" Re-arrangement\"\nof Canadian Collieries (Dunsmuir), Ltd 92\n(a.) Agreement of June 30th, 1920 92\n(6.) Revenue of Wellington Comox Agency, Ltd., from its Incorporation (1914)\nto June 30th, 1920 93\n(c.) Financial Position of Wellington Comox Agency immediately after Agreement of June 30th, 1920 93\n(d.) Revenue of Wellington Comox Agency, Ltd., from 1920 to 1924 94\n(e.) Financial Position of Wellington Comox Agency, Ltd., as at June 30th,\n1924 94\n(/.) Operations of Wellington Comox Agency, Ltd., after 1924 95\nSec. 5.\u00E2\u0080\u0094Capital Structure of Western Fuel Corporation of Canada, Ltd., up to\nSeptember 1st, 1928, when it was acquired by Canadian Collieries (Dunsmuir), Ltd 95\n(a.) Capital Structure and Coal Production of \" The Western Fuel Co.\" (a California Incorporation), 1903-12 95\n(b.) History of \" The Western Fuel Co.\" from Reports filed with the Registrar\nof Companies 96\n(c.) Capital Structure of \" The Western Fuel Corporation of Canada, Ltd.\"\n(the 1921 Company) 96\n(d.) Capital Structure of \" The Western Fuel Corporation of Canada, Ltd.\"\n(the 1923 Company) .' 96 GENERAL INDEX.\nCHAPTER V.\u00E2\u0080\u0094Continued. Pagb-\nSec. 6.\u00E2\u0080\u0094The Acquisition of Western Fuel by Canadian Collieries (Dunsmuir), Ltd.,\nthrough the Medium of Wellex Securities, Ltd 97\n(a.) Acquisition of Western Fuel in September, 1928 97\n(b.) Remarks on Ability of Canadian Collieries to acquire Western Fuel 97\n(c.) Source of Funds used in Purchase of Western Fuel 97\nSec. 7.\u00E2\u0080\u0094Capital Structure of Western Fuel and Canadian Collieries since 1928 97\n(a.) Management of the Two Companies 97\n(6.) Table 38\u00E2\u0080\u0094Coal Production of Western Fuel Corporation of Canada, Ltd.\u00E2\u0080\u0094 98\n(c.) References to Acquisition of Western Fuel Corporation of Canada, Ltd., in\nAnnual Reports of Canadian Collieries 98\n(d.) Published Statements of Canadian Collieries (Dunsmuir), Ltd., do not include Subsidiaries 99\nSec. 8.\u00E2\u0080\u0094Wellex Securities, Ltd., and its relation to Canadian Collieries and Western\nFuel 99\n(a.) Capital Structure, History, and Reason for Incorporation of Wellex Securities, Ltd 99\n(6.) Investments of Wellington Comox Agency, Ltd 100\n(c.) Table 40\u00E2\u0080\u0094Dealings of Wellex Securities, Ltd., in Debentures of Canadian\nCollieries 101\n(d.) Summary of Position of Bonded Indebtedness of Canadian Collieries\n(Dunsmuir), Ltd., and Western Fuel Corporation of Canada, Ltd., as of\nJune 30th, 1934 101\nSec. 9.\u00E2\u0080\u0094Status of Canadian Collieries and Western Fuel Bond Issues (1934) 102\n(a.) Canadian Collieries Bond Issue 102\n(6.) Western Fuel Bond Issue 102\n(e.) Canadian Collieries Published Statement is not a Consolidated Statement\nshowing Bond and Debenture Holdings of Subsidiaries 102\nCHAPTER VI.\u00E2\u0080\u0094EXPENDITURES AND EARNINGS OF CANADIAN COLLIERIES\n(DUNSMUIR), LTD., AND WESTERN FUEL CORPORATION OF CANADA, LTD., BEFORE AND AFTER THEIR CONTROL UNDER ONE\nOWNERSHIP IN 1928 AS STATED BY BOTH COMPANIES, AND\nFACTORS AFFECTING SAME, MORE PARTICULARLY IN RELATION\nTO CHARGES APPEARING FOR DEPRECIATION, DEPLETION, BOND\nINTEREST, BOND REDEMPTION, AND EXPLORATION AND DEVELOPMENT WORK 105\nSec. 1.\u00E2\u0080\u0094Consolidated Position of Both Companies as presented in Exhibit 168 in\nrelation to Costs of Production, Expenditures and Earnings 105\n(a.) Table 41\u00E2\u0080\u0094Brief Analysis of Exhibit 168 105\n(6.) Reference to Separate Mine Cost Statements 106\n(c.) 1934 as \"Pivotal Year\" for Basis of Analysis 106\n(d.) Analysis in Table 42 of Consolidated Statement of Two Companies presented to Commission by Canadian Collieries 107\n(e.) Evidence showing (d) not an Accurate Cost Statement 109\nSec. 2.\u00E2\u0080\u0094The Position of Canadian Collieries as presented by its Balance Sheet and\nProfit and Loss Accounts (Exhibit 171) and distinct from the Consolidated\nStatement (Exhibit 168) filed with the Commission 110\n(a.) Explanation of Table 43\u00E2\u0080\u0094Analysis of Canadian Collieries 110\n(6.) \" Exploration and Development Work\" in Canadian Collieries Statements.. 113\n(c.) Depreciation Charges in Canadian Collieries Statements 113\n(d.) Depletion not charged by Canadian Collieries 114\n(e.) Reference to Bond Interest Payments and Bond Redemptions by and Net\nProfits of Canadian Collieries 114\nSec. 3.\u00E2\u0080\u0094The position of Western Fuel as presented by its Balance Sheets and Profit\nand Loss Accounts 114\n(a.) Explanation of Table 44\u00E2\u0080\u0094Analysis of Western Fuel 114 GENERAL INDEX.\nCHAPTER VI.\u00E2\u0080\u0094Continued. PA0E-\nSection 3\u00E2\u0080\u0094Continued.\n(b.) \" Exploration and Development Work \" in Western Fuel Statements 117\n(c.) Depreciation Charges in Western Fuel Statements 117\n(d.) Depletion Charges in Western Fuel Statements 117\n(e.) Reference to Net Profit or Loss of Western Fuel from Coal Operations\nalone 117\n(/.) Reference to \"Total Profit or Loss\" of Western Fuel 118\n(g.) Sinking Fund Provisions in Western Fuel Trust Deeds 118\n(h.) Bond Interest Payments, Bond Redemptions and Dividend Payments of\nWestern Fuel 118\n(i.) Effect of Bond Interest and Bond Redemption Payments on Cost 119\nSec. 4.\u00E2\u0080\u0094The Combined Position of Western Fuel and Canadian Collieries based on\nTables 43 and 44 in relation to Costs of Production, Expenditures and\nEarnings 119\n(a.) Explanation of Table 45\u00E2\u0080\u0094Combined Statement of Western Fuel and\nCanadian Collieries 120\n(6.) Comparison of Coal Production Figures of Western Fuel before and after\nCanadian Collieries acquired Control 123\n(c.) Comparison of Charges of the Two Companies for Exploration and Development Work 124\n(d.) Comparison of Charges of the Two Companies for Depreciation 124\n(e.) Comparison of Charges of the Two Companies for Depletion 124\n(/.) Comparison of Bond Interest Payments by the Two Companies 124\n(g.) Comparison of Funds set aside by the Two Companies for Repayment of\nBond Principal 125\n(h.) Comparison of Net Profits of the Two Companies 125\n(i.) Comparison of \" Total Profit or Loss \" of the Two Companies 125\nSec. 5.\u00E2\u0080\u0094The Facts established by the Comparisons between the Two Companies\nmade in the Previous Section, coupled with the Purchase of Western Fuel\nby Canadian Collieries in September, 1928 '_ 125\n(a.) Financial Position of Western Fuel from 1924 to 1928 125\n(b.) Financial Position of Canadian Collieries from 1924 to 1928 125\n(c.) Condition of Western Fuel at June 30th, 1930 125\n(d.) Source of Canadian Collieries Net Profit in 1929 and 1930 126\n(e.) Study of Net Loss of Western Fuel in the Period 1931 to 1934 in relation\nto Net Profit of Canadian Collieries during the Same Period 126\n(/.) Management of Western Fuel in 1929 and 1930 immediately after Acquisition by Canadian Collieries 126\n(g.) Comparison of Net Current Assets of Western Fuel in 1928 and 1934 126\n(h.) Effect of Company's Published Statements 126\nSec. 6.\u00E2\u0080\u0094Bond Redemptions of the Two Companies from 1924 to 1934 127\n(a.) Place of Bond Issues in Financing of the Companies 127\n(6.) Amounts by which Bond Issues of Two Companies were reduced between\n1921 and 1934 127\n(c.) Bond Redemptions considered 127\n(d.) Adequacy of Security for Bond Issues of the Two Companies 128\n(e.) Conclusions to be drawn from this Section . 128\nSec. 7.\u00E2\u0080\u0094Comparison of the Combined Operations of the two Companies as shown\nin Table 45 with the Consolidated Statement thereof presented by Canadian\nCollieries as analysed in Tables 41 and 42 128\n(a.) Explanation of Table 46 128\n(6.) Comparison of Depreciation Figures contained in Tables 42, 45, and 46 130\nSec. 8.\u00E2\u0080\u0094Importance of Depreciation and Depletion as Cost Factors 130\n(a.) Result if Figures for Depreciation given in Exhibit 168 were adopted 130\n(6.) Efficiency of Canadian Collieries and Western Fuel in relation to Depreciated Plant and Equipment 130 GENERAL INDEX.\nPaob.\nCHAPTER VII.\u00E2\u0080\u0094DEPRECIATION AND DEPLETION RESERVES; THE\nAMOUNTS ACTUALLY CHARGED; THE WITHDRAWAL FROM CANADIAN COLLIERIES AND WESTERN FUEL OF FUNDS REPRESENTING\nSUCH RESERVES AND THEIR APPLICATION THEREAFTER AND THE\nRESULTANT EFFECT UPON THE COMPANIES 131\nSec. 1.\u00E2\u0080\u0094Introductory Discussion 131\n(a.) Importance of Provisions for Depreciation and Depletion 131\n(6.) Excessive Depreciation and Depletion Charges conceal Profits 131\n(c.) Depreciation and Depletion are True Production Costs 131\nSec. 2.\u00E2\u0080\u0094Depreciation and Depletion Reserves of Canadian Collieries (Dunsmuir),\nLtd. (exclusive of Western Fuel) 132\n(a.) Value of Capital Assets of Canadian Collieries at Date of 1918 Appraisal 132\n(6.) Rate of Depreciation at Date of 1918 Appraisal 132\n(c.) Depreciation Reserve at Date of 1918 Appraisal 133\n(d.) Depreciation Reserve and Depreciated Value at June 30th, 1920 133\n(e.) Depreciation charged and Depreciated Value at June 30th, 1934 133\n(/.) Effect if Assets had been depreciated as stated by Company in Exhibit 168 133\n(g.) Policy of Company in regard to Depletion Charges 133\nSec. 3.\u00E2\u0080\u0094Depreciation and Depletion Reserves of Western Fuel 133\n(a.) Value of Capital Assets of Western Fuel at Inception of Present Company\n(December, 1923) 133\n(6.) Additional Amounts spent from 1924 to 1934 133\n(c.) Amount of Depreciation charged by Company 133\n(d.) Book Value of Plant in December, 1923, and December, 1934 134\n(e.) Depreciated Values of Assets of Company 134\n(/.) Policy of Company in regard to Depletion Charges 134\n(g.) Amount of Company's Depletion Reserves 134\nSec. 4.\u00E2\u0080\u0094Withdrawal and Disposition of Funds representing Depreciation and Depletion Reserves 134\n(a.) Total Amount charged by each Company for Depreciation and Depletion\nfrom 1924 to 1934 134\n(6.) Amounts forwarded by Canadian Collieries and Subsidiaries to Montreal\nOffice 134\n(c.) Evidence References as to Source of Funds remitted to Montreal Office 135\n(d.) Source of Funds remitted to Montreal Office by Canadian Collieries 136\n(e.) Source of Funds remitted by Western Fuel 136\n(/.) Stated Use of Funds remitted to Montreal Office 136\nSec. 5.\u00E2\u0080\u0094The Real Effect of the Depreciation Position at June 30th, 1934, as revealed\nin Section 4 preceding 136\n(a.) Use of Western Fuel Depreciation and Depletion Reserves 136\n(6.) Investment of Canadian Collieries Reserves in Government Bonds and\nWellex Securities Investments 136\n(c.) Effect of Use of Canadian Collieries Funds to purchase Common Stock of\nWestern Fuel 137\nSec. 6.\u00E2\u0080\u0094The Nature of Depreciation and Depletion 137\n(a.) Present Depreciated Value of Capital Assets of both Companies 137\n(6.) Meaning of \" Depletion \" 138\n(c.) \" Depreciation \" 138\n(d.) Functional Depreciation 138\n(e.) Relation of Annual Repairs, Renewals and Obsolescence to Depreciation 138\n(/.) Evidence References as to Efficiency of Canadian Collieries Plant 139\nSec. 7.\u00E2\u0080\u0094Withdrawal of Funds representing Depreciation Reserves 139\n(a.) Effect of Excessive Depreciation Reserves 139\n(6.) True Purpose of Depreciation Reserves ;_ 140\n(c.) Effect of investing Depreciation Reserves in the Undertaking 140 GENERAL INDEX.\nCHAPTER VII.\u00E2\u0080\u0094Continued. PA\u00C2\u00B0E-\nSection 7\u00E2\u0080\u0094Continued.\n(d.) Method used by Original Western Fuel Company to deal with Depreciation\nand Depletion 141\n(e.) Summary of Section 141\nSec. 8.\u00E2\u0080\u0094Depletion and Depreciation Reserves and Bond Redemption and Sinking\nFund Requirements 141\n(a.) Distinction between Depreciation and Sinking Fund Reserves 141\n(b.) Purpose of Sinking Fund 142\nSec. 9.\u00E2\u0080\u0094Depreciation and Depletion considered from the Legal Point of View 142\n(a.) Reason therefor 142\n(6.) Provision for Depreciation or Depletion not required under Dominion or\nProvincial Companies Acts 142\n(c.) Lee v. Neuchatel Decision 143\n(d.) Impairment of Capital 143\n(e.) Thomas v. Crabtree Decision 144\n(/.) Discussion of Real Effect of Lee v. Neuchatel Decision 144\nSec. 10.\u00E2\u0080\u0094Some Conclusions arising in This Chapter 145\n(a.) Depreciation and Depletion Provisions are Proper Costs 145\n(b.) Necessity of Adequate and Uniform but not Excessive Reserves for\nDepreciation and Depletion 145\nCHAPTER VIIL\u00E2\u0080\u0094A RECOGNIZED ECONOMIC AND COMMERCIAL METHOD\nOF ASCERTAINING DEPRECIATION AND DEPLETION; THE APPLICATION THEREOF TO A RE-ORGANIZED CAPITAL STRUCTURE,\nWHEREUNDER THE SHARE CAPITAL IS BASED ON THE CONVERSION OF THE OUTSTANDING BONDS INTO SHARES, AND IS ALSO\nBASED ON THE COMMERCIAL VALUE OF THE UNDERTAKING 147\nSec. 1.\u00E2\u0080\u0094Outline of an Accepted Method of applying Depreciation and Depletion\nin the Coal Mining Industry 147\n(a.) Amortization of Exploration and Development Work 147\n(6.) Extracts from Report of the National Coal Association of the United States\nand Standard Mine Accounting 147\n(c.) Extracts from Report of Committee of American Institute of Mining and\nMetallurgical Engineers on \" Methods of valuing Coal Properties,\" 1934 149\n(d.) Extract from Address read at Annual Meeting of Institute of Chartered\nAccountants of Nova Scotia, 1936 149\n(e.) Method used by the Crow's Nest Pass Coal Co., Ltd., from 1908 to 1912 150\n(/.) Method used by Original Western Fuel Company between 1902 and 1912 150\nSec. 2.\u00E2\u0080\u0094Application of the Principle of Depreciation and Depletion discussed in\nSection 1 150\n(a.) Bases of Data in Tables 48 and 49 150\n(6.) Computations used (Table 48) 150\n(c.) Explanation of Table 49 151\n(d.) Assests of Canadian Collieries taken in Table 49 at 1918 Appraisal Value 152\n(e.) Assets of Western Fuel taken in Table 49 at Book Value in 1923 Balance\nsheet 152\n(/.) Reason Expenditures for Renewals and Improvements by Western Fuel and\nCanadian Collieries not included and Effect thereof 153\n(g.) Future Computations based thereon 153\n(h.) Assets of both Companies combined 153\nSec. 3.\u00E2\u0080\u0094Ascertainment of the Combined Depreciation and Depletion on the Method\noutlined in Sections 1 and 2 hereof _ 153\n(a.) Explanation of Table 50 153\n(6.) Conclusions to be drawn from Table 50 when read with Tables 43, 44 and 54 157\n(c.) Reasons for the Amortization of Canadian Collieries Exploration and\nDevelopment Work 157 GENERAL INDEX.\nCHAPTER VIIL\u00E2\u0080\u0094Continued. PA0B-\nSec. 4.\u00E2\u0080\u0094Findings in Section 3 extended to Rate per Ton 157\n(a.) Explanation of and Comment on Table 51 157\n(6.) Explanation of and Comment on Tables 52 and 52a 161\n(c.) Explanation Table 52a 165\nSec. 5.\u00E2\u0080\u0094The Capital Structure of Canadian Collieries as re-organized in 1920 was\ninconsistent with the Commercial Value of the Undertaking and its Prospective Earnings; the Course adopted gave no Assurance that the Company\nwould be placed on a Profit Basis 169\n(a.) Modification in 1935 of the Terms of Western Fuel Trust Deed and Reasons\nfor a Detailed Discussion of a Correct Capital Structure of both Companies 169\n(6.) The Form the 1920 Re-organization of Canadian Collieries should have\ntaken .169\n(c.) Results of 1920 \"Re-arrangement\" 169\nSec. 6.\u00E2\u0080\u0094Discussion of Capital Structures consistent with the Commercial Values of\nthe Undertakings and their Prospective Earnings 170\n(a.) Method of arriving at Commercial Value of Capital Assets 170\n(b.) Relation of Earning Capacity to Value of Capital Assets and Capitalization\nof Canadian Collieries 171\n(c.) A Reasonable Capitalization of Western Fuel 171\nSec. 7.\u00E2\u0080\u0094Analyses of Canadian Collieries and Western Fuel based on a Capital\nStructure as discussed in Section 6 of this Chapter 171\n(a.) Explanation of Table 53 171\n(6.) Net Profits of both Companies as found in Table 53 175\n(c.) Net Percentage Income Return for both Companies as found in Table 53 175\n(d.) Combined Capitalization in 1929 at $5,000,000.00 175\n(e.) Reconciliation of Net Profits as found by Commission with Actual Payments\nout 175\n(/.) Effect of Net Profits as found on Cost per Ton 176\n(g.) Explanation of Tables 54 and 54a 176\n(h.) Actual Payments made by both Companies during the period 1921-34 181\n(..) Proper Place of Bond Issues in Company Financing 181\nSec. 8.\u00E2\u0080\u0094Necessity for Stability and Equalization in Dividends 181\n(a.) Review of Dividend History of both Companies and Failure to stabilize\nFinancial Affairs 181\n(6.) Dividend Rates that could have been maintained (subject to Income Taxes) 182\n(c.) Authorities cited concerning Effect of Regularity and Stability of Dividends 182\nSec. 9.\u00E2\u0080\u0094Comparision of the Result to Bondholders if the Re-organization in 1920\nhad been effected by the Cancellation of Bonds and Adjusted Share Capital,\ntogether with Proper Method of Depreciation and Depletion and Amortization of Exploration and Development 183\n(a.) Losses to Holders of Bonds in Canadian Collieries, 1920 Issue 183\n(6.) Position of Bondholders if in 1920 Shares had been issued to them instead\nof Bonds 183\n(c.) Value of 1920 Bond Issue if related to Sales Price of Bonds 183\n(d.) Bondholders suffered by perpetuating Bond Issue in 1920 \" Re-arrangement \" 183\n(e.) Position of \" B \" Debentures of Canadian Collieries 183\n(/.) Why was the Canadian Collieries \" Re-arrangement\" of 1920 carried\nforward 184\nCHAPTER IX.\u00E2\u0080\u0094THE CROW'S NEST PASS COAL CO., LTD., AND OTHER\nBRITISH COLUMBIA COAL MINING OPERATORS 185\nSec. 1.\u00E2\u0080\u0094Capital Structure of the Crow's Nest Pass Coal Co., Ltd. 185\n(a.) Incorporation and Short History of Company 185 GENERAL INDEX.\nCHAPTER IX.\u00E2\u0080\u0094Continued. page.\nSection 1\u00E2\u0080\u0094Continued.\n(b.) Sales of Shares 185\n(c.) Capital Structure as of 1934 185\n(d.) Subsidiaries of Company 185\nSec. 2.\u00E2\u0080\u0094The Position of the Crow's Nest Pass Coal Co., Ltd., as presented by its\nPublished Balance Sheets and Profit and Loss Accounts 186\n(a.) Analysis of Company Statements in Table 55 186\n(6.) Improvements and Development Work 189\n(c.) Dividends paid out. of Depreciation and Depletion Reserves 189\n(d.) Assets \"written down\" in 1915\u00E2\u0080\u0094\" written up\" in 1924 189\nSec. 3.\u00E2\u0080\u0094Capital Assets and Expenditures of the Crow's Nest Pass Coal Co., Ltd.,\nsince Incorporation up to 1924 190\n(a.) Assets acquired by Company on Incorporation in 1897 and Consideration\ntherefor 190\n(6.) Expenditures by Company on Plant and Equipment in Periods 1898 to 1912\nand 1912 to 1924 190\nSec. 4.\u00E2\u0080\u0094Basis of Computation to ascertain Commercial Rate per Long Ton for\nDepreciation and Depletion to be applied to the Crow's Nest Pass Coal\nCo., Ltd. 190\n(a.) Amount of Company's Depreciation and Depletion Reserve and Method of\narriving at Rate per Long Ton 190\n(6.) Table 56\u00E2\u0080\u0094Values and Coal Tonnage 190\n(c.) Expenditures on Plant, Equipment and Mines Development and Improvements from 1897 to 1924 as stated in Table 56 191\n(d.) Inclusion in Table 56 of Investment in Subsidiaries 191\n(e.) Method of arriving at Available Coal Tonnage in Table 56 192\n(/.) Method of calculating Combined Rate of Depreciation and Depletion in\nTable 57 192\nSec. 5.\u00E2\u0080\u0094What is a Commercial Capital Structure for the Crow's Nest Pass Coal\nCo., Ltd.? 192\n(a.) Fair Capitalization between 1924 to 1931 193\n(b.) Fair Capitalization from 1932 onward _ 193\n(c.) Relation of Net Profits and Dividends to Capitalization 193\n(d.) Market Quotations of Company's Shares and Dividend Payments 193\nSec. 6.\u00E2\u0080\u0094Income Return upon a Capital Structure as found in Section 5 after Application of Combined Depreciation, Depletion, and Amortization Rate as\nfound in Table 57 194\n(a.) Explanation of Tables 58 and 58a 194\n(6.) Relation of Balance Sheet Values to Commercial Value 199\n(c.) Commercial Value of Assets in relation to depreciation as charged 199\nSec. 7.\u00E2\u0080\u0094Analysis of the Result shown in Tables 58 and 58a during Period 1924-34____ 199\n(a.) Excessive Depreciation and Depletion charged as disclosed by Table 58 199\n(6.) \"Writing-down\" of Assets and Depreciation Reserve in 1928 199\n(c.) Net Profits as disclosed by Table 58 200\n(d.) Income Return upon Basis set out in Table 58a 200\n(e.) Stabilized Dividends available as disclosed by Table 58a 200\n(/.) Stabilized Dividend Rate which could have been maintained by the Company\non its own Stated Profits and Capitalization 200\nSec. 8.\u00E2\u0080\u0094Some Concluding Observations in respect to the Crow's Nest Pass Coal Co.,\nLtd., Statements 201\n(a.) Relation of Depreciation and Depletion Reserve to Tangible Assets 201\n(6.) Depreciation and Depletion Reserves as \"Working\" Capital 201\nSec. 9.\u00E2\u0080\u0094Other British Columbia Coal Companies 202\n(a.) Coalmont Collieries, Ltd. 202\n(6.) Middlesboro Collieries, Ltd. 202 GENERAL INDEX.\nCHAPTER IX.\u00E2\u0080\u0094Continued. Page-\nSection 9\u00E2\u0080\u0094Continued.\n(c.) Pleasant Valley Mining Co., Ltd. (N.P.L.) 202\n(d.) Wilson Mining and Investment Co., Ltd. 202\n(e.) Corbin Collieries, Ltd. 203\n(/.) Tulameen Collieries, Ltd 203\n(g.) Bulkley Valley Collieries, Ltd. 204\n(h.) Skeena Development Syndicate 204\n(i.) The Lake Kathlyn Anthracite Coal Co., Ltd. (N.P.L.) 204\n0'.) Canada Coal Development Co., Ltd. (N.P.L.) 204\n(k.) Bromley Vale Collieries, Ltd. (N.P.L.) 204\n(..) Cascade Coal Co., Ltd. (N.P.L.) 204\n(m.) Red Triangle Coal Co. 205\n(n.) Lantzville Collieries, Ltd. 205\n(o.) Fiddiek Mine _: 205\n(p.) Ida Clara Colliery or Richardson Bros.' Mine 205\n(q.) Biggs' Mine 205\n(r.) Jingle Pot Mine 205\n(s.) Stronach Mine 205\n(t.) Chambers' Mine 205\n(u.) Beban's Mine 205\n(v.) North Thompson Coal Co. 205\n(w.) Cariboo Coal and Clay Products, Ltd. (N.P.L.) 206\n(x.) West Coast Collieries, Ltd. 206\n(y.) Black Diamond Collieries, Ltd. 206\nSec. 10.\u00E2\u0080\u0094Some Coal Mining Companies struck off the British Columbia Register\nof Companies during Recent Years 206\n(a.) Ashington Coal Co., Ltd. 206\n(6.) Buckley Valley Coal Mines, Ltd. 206\n(c.) Dominion Coal and By-products, Ltd. (N.P.L.) 206\n(d.) Marble Canyon Coal Co., Ltd. 207\n(e.) Normandale Collieries, Ltd. 207\n(/.) Northern Coal and Coke Co., Ltd. 207\n(g.) Northern Pacific Collieries, Ltd. (N.P.L.) 207\n(h.) Okanagan Collieries, Ltd. (N.P.L.) 207\n(i.) Prince Rupert Coal Fields, Ltd. 207\n(j.) Sun Blaze Coal Co., Ltd. (N.P.L.) 207\n(k.) Telkwa Collieries, Ltd. 208\n(I.) White Lake Collieries, Ltd. (N.P.L.) 208\nCHAPTER X.\u00E2\u0080\u0094THE COST OF PRODUCTION OF COAL IN BRITISH COLUMBIA\u00E2\u0080\u0094 209\nSec. 1.\u00E2\u0080\u0094Nature of Production Cost Information submitted to the Commission 209\n(a.) \" Cost per Short Ton at Pithead \" 210\n(6.) \" Total Direct Cost of Production per Short Ton \" 210\n(c.) \"Total Cost of Production per Short Ton\" 210\n(d.) Lack of Uniformity in Terms used 211\n(e.) Distinction between \"Commercial Production\" and \"Production available\nfor Sale\" 211\nSec. 2.\u00E2\u0080\u0094Cost of Production per Short Ton at Pithead in the Larger Operating\nMines in the Province 212\n(a.) Analysis of the Cost of Production per Short Ton at Pithead in Vancouver\nIsland Mines\u00E2\u0080\u0094Tables 59 and 59A 212\n(b.) Canadian Collieries \" Power \" Costs 217\n(c.) Analysis of the Cost of Production per Short Ton at Pithead, Crow's Nest\nPass Coal Co., Ltd., Mines\u00E2\u0080\u0094Tables 60 and 60a 217\n(d.) Analysis of the Cost of Production per Short Ton at Pithead, Nicola-\nPrinceton District Mines\u00E2\u0080\u0094Tables 61, 62, and 63 221 GENERAL INDEX.\nCHAPTER X.\u00E2\u0080\u0094Continued. Page-\nSec. 3.\u00E2\u0080\u0094Analysis of the \" Total Direct Cost per Short Ton \" in the Larger Operating Mines in the Province\u00E2\u0080\u0094Tables 64, 64a, and 64b 225\nSec. 4.\u00E2\u0080\u0094Analysis of the \" Total Cost of Production per Short Ton \" in the Larger\nOperating Mines in the Province 233\n(a.) Explanation of Tables 65, 65a, and 65b 233\n(6.) Comparison of Total Direct Cost of Production at Nanaimo No. 1 and\nComox No. 5 Mines 241\n(c.) Mining of Thin Seams 242\n(d.) Detail of some Comparative Costs at Nanaimo No. 1 and Comox No. 5\nMines 242\n(e.) Reference to Total Cost of Production at Michel and Comox No. 5 Mines 243\nSec. 5.\u00E2\u0080\u0094Some Factors to be considered in studying the Company Costs of Production as analysed in Tables 65, 65a and 65b 243\n(a.) Efficiency of Mining Operations 243\n(6.) Lack of Modern Methods 243\n(c.) Further Observations thereon 243\nSec. 6.\u00E2\u0080\u0094Comparision of Physical Features in the Michel Mines, in the Crow's Nest\nPass Area, and Comox No. 5 Mine, Vancouver Island, entering into the\nRespective Costs of Production 244\n(a.) Comox Mining Costs stated as 90 per Cent, more than Michel 244\n(6.) Report of George Watkin Evans, Esq., upon Relative Efficiency of the\nMichel Mines in the Crow's Nest Pass Area and the No. 5 Mine in the\nComox Area on Vancouver Island, showing Greater Physical Difficulties\nat Comox\u00E2\u0080\u0094Tables 66, 67 and 68 244\n(c.) Greater Costs at Comox not satisfactorily explained by Greater Physical\nDifficulties 246\n(d.) Necessity for More Intensive Study of Coal Mining Conditions, Costs and\nMethods of Production and Utilization of Coal and its Products 247\nSec. 7.\u00E2\u0080\u0094Labour Costs 247\n(a.) Increases in Wages and Wage Percentage of Mining Cost of Coal 247\n(6.) Increased Employment and Greater Production depend on Greater Consumption, which involves Reductions in Production Costs and Selling Price\nto compete with other Fuels 247\nCHAPTER XL\u00E2\u0080\u0094THE PRICES OF COAL TO THE CONSUMER IN RELATION TO\nITS COST OF PRODUCTION, MARKETING, AND DISTRIBUTION;\nWHETHER SUCH PRICES ARE UNJUST OR UNREASONABLE WITHIN\nTHE TERMS OF PARAGRAPH 3 OF THE ROYAL COMMISSION; AND\nREDUCTIONS IN COSTS OF PRODUCTION AND TRANSPORTATION\nFROM MINE WHICH CAN BE EFFECTED 249\nSec. 1.\u00E2\u0080\u0094Some Introductory Considerations 249\n(a.) Difficult State of Coal Industry generally 249\n(6.) Heavy Losses shown by Canadian Collieries 249\n(c.) Canadian Collieries published Financial Statements did not show as Large\nLosses as presented to Commission 250\n(d.) Payment by Canadian Collieries and Western Fuel out of Coal Profits\nand Funds representing Depreciation and Depletion Reserves in the Period\n1921 to 1934 250\n(e.) Recapitulation of Depreciation and Depletion Charges of both Companies,\nseparately and combined, for the Period 1921-1934 251\nSec. 2.\u00E2\u0080\u0094The Real Profit Situation of Canadian Collieries and Western Fuel 251\n(a.) Excessive Depreciation charged by both Companies, separately and combined 251\n(6.) The True Net Profit Position of both Companies, separately and combined 251\n(c.) Dividend Rates payable by both Companies, separately and combined, on\na Reasonable Capitalization 251 GENERAL INDEX.\nCHAPTER XL\u00E2\u0080\u0094Continued. PAGB-\nSec. 3.\u00E2\u0080\u0094Some Additional Considerations before dealing with Reductions that may\nbe made in the Price of Coal to the Consumer 252\n(a.) Vancouver Island Coal Companies have made Profits in the Last Ten to\nFifteen Years despite Reduced Production 252\n(6.) Reference to Crow's Nest Pass Coal Co., Ltd. 252\n(c.) Output per Underground Employee daily greater at Crow's Nest Pass Coal\nCo. than in Vancouver Island Mines 252\n(d.) Reference to Smaller Mines in the Province 252\n(e.) Reductions that may be passed on to the Consumer 253\n(f.) All Sizes of Coal from the Same Mine cost the same to produce (except in\nCase of Special Preparation) 253\n(g.) Reductions based on Fair Return of Capital as well as Payment of Fair\nWages 253\nSec. 4.\u00E2\u0080\u0094Reductions which could have been made in the Cost of Coal Production\nin the Years 1932 to 1936, inclusive 253\n(a.) Summary of Reductions set out in Table 69 253\n(6.) Reductions attributable to Depreciation and Depletion in Table 69 257\n(c.) Reductions attributable to Bond Interest in Table 69 ___.._ ._ 257\n(d.) Reductions attributable to Railway Profits as set out in Table 69 257\n(e.) Reductions attributable to Revenue from Hydro-electric Plant as set out in\nTable 69 257\n(/.) Advice of Mr. G. W. Evans as to Reductions which may be made in the Cost\nof Mining on Vancouver Island and in British Columbia Mines, and Detail\nthereof, as set out in Table 69 258\nSec. 5.\u00E2\u0080\u0094Certain Factors not included in Section 4 which have an Important Bearing\nin reducing Costs of Coal Production 259\n(a.) Management 259\n(6.) Present Demands for Smaller Sized Coal 260\n(c.) Daily Output per Man, with Detailed Comparisons at Coal Creek, Michel,\nComox, Nanaimo and a Washington State Mine 260\n(d.) Experience of Coal Mines in the State of Washington 263\nSec. 6.\u00E2\u0080\u0094Consideration of a Fair Income Return upon Capital invested and thereafter\nthe Reduction in Cost of Production that can be passed on to the Consumer\nin the Price of Coal 263\n(a.) A Fair Return upon Investment essential 263\n(6.) Returns upon a Capitalization of $5,000,000.00 263\n(c.) Eight per Cent. Return upon Investment and Analysis thereof in Table 70____ 263\n(d.) Amount per Short Ton available to be passed on to the Consumer after\nallowing 8 per Cent, upon Investment as detailed in Table 71 264\nSec. 7.\u00E2\u0080\u0094Analysis 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\nthe Commission 265\n(a.) If 60 per Cent, of Sales shown at a Profit and 40 per Cent, at a Loss,\nResultant Profit is misleading 265\n(6.) Analysis of Company Sales based, first, on Company's Cost Figures, and,\nsecondly, upon Commission's production Costs, and as detailed in Tables 72,\n72a, 72b, 72c, and 72D 265\n(c.) Summary thereof in Table 73 266\n(d.) No Justification for Sales below Cost of Production 279\n(e.) Sales below Cost not an Important Consideration in view of Commission's\nCost Findings 279\n(/.) Explanation of Appendices \"U\" and \"V\" 279\nSec. 8.\u00E2\u0080\u0094Reductions which can be made in Transportation of Coal from Mine to\nCoal Yard 280\n(a.) Towing Rates compared to certain Contract Rates 280\n(6.) Reductions in Towing Rates and Reference to Railway Rates 280 GENERAL INDEX.\nPage.\nCHAPTER XII.\u00E2\u0080\u0094REDUCTIONS WHICH CAN BE MADE UNDER PRESENT\nCONDITIONS IN THE COST OF MARKETING AND DISTRIBUTION\nFROM DISTRIBUTION POINT TO THE DOMESTIC CONSUMER 281\nSec. 1.\u00E2\u0080\u0094The Spread of Coal Dealers 281\n(a.) Leased Yard and other Dealers' Spreads 281\n(b.) Coal Agencies are Secondary to other Primary Business 281\n(c.) Plan of Reduction Discussion 281\nSec. 2.\u00E2\u0080\u0094Effect of the Leased Yard Agreement upon Coal Dealers' Spread in\nVancouver 282\n(a.) Reductions in Price affected by Leased Yard Agreements 282\n(b.) Terms of Yard Agreement Leased 282\n(c.) Spread allowed under Leased Yard Agreements\u00E2\u0080\u0094Table 74 283\n(d.) Average Spread received by Leased Yard Dealers\u00E2\u0080\u0094Table 75 283\n(e.) Allowances to Truckers, Pedlars and Small Dealers 284\n(/.) Degradation _ 284\nSec. 3.\u00E2\u0080\u0094Further Discussion of some Conditions existing at the Time the Leased\nYard Agreements were entered into and some Resulting Conditions as well 284\n(a.) Reduction in Price and Spread 284\n(6.) Some Negotiating Advantages held by Dealers 285\n(c.) Increase of Small Dealers and Pedlars after Leased Yard Agreements\ncame into Existence 285\n(d.) Certain Conditions favouring Existence of Pedlar 286\n(e.) Central Coal Distributing Depots provide Remedy 286\nSec. 4.\u00E2\u0080\u0094Consideration of Breakdown of Spread allowed Leased Yard Dealers in\nComparison with other Large Dealers 286\n(a.) Breakdown of Leased Yard Handling Allowances shows Greater Allowance than received for Similar Services by other Large Dealers 286\n(6.) Confirmatory Evidence thereon 287\n(c.) Analysis of Delivery Charges for Sacked Coal 287\n(d.) Analysis of Reasons why Delivery in Bulk to Domestic Consumer stated\nimpracticable at Present 287\n(e.) Retail Advertising not Necessary in view of Advertising by Coal Producer 287\n(/.) Administrative Overhead 287\nSec. 5.\u00E2\u0080\u0094Reasonable Charges for Distribution to the Domestic Consumer under the\nPresent System 289\n(a.) Sacked Coal Distribution at $2.25 per ton 289\n(6.) Distribution in Bulk at $1.50 per ton 289\n(c.) Above Findings relate solely to Present Conditions 290\nSec. 6.\u00E2\u0080\u0094Additional Reductions in Cost of Marketing and Distribution which can\nbe made through the General Use of Modern Coal Burning Appliances such\nas the Automatic Stoker 290\n(a.) Reductions which can be affected by More Modern Methods 290\n(6.) Advantages of Automatic Stoker 290\n(c.) Delivery in Bulk general in Prairie Cities 290\n(d.) General Use of Automatic Stoker delayed through lack of Effective Merchandising 291\n(e.) Reasons for lack of Effective Merchandising 291\n(/.) Distribution in Bulk to Domestic Consumer should not exceed $1.50 per\nton 292\nSec. 7.\u00E2\u0080\u0094Central Coal Distributing Depots and Reductions resulting therefrom 292\n(a.) Would eliminate Duplication of Services in Mining, Transportation, and\nDistribution , 292\n(6.) Marketing and Distribution Costs with Central Coal Distributing Depot\nshould not exceed $1.75 for Sacked Coal and $1.00 a Ton for Delivery in\nBulk 292 xxxiv. GENERAL INDEX.\nCHAPTER XII.\u00E2\u0080\u0094Continued. Page-\nSection 7\u00E2\u0080\u0094Continued.\n(c.) Distribution to Domestic Consumer should not exceed $1 per ton if Consumer is to receive Full Protection 293\n(d.) Economic Gain will result from Establishment of Central Coal Distributing\nDepots 293\nSec. 8.\u00E2\u0080\u0094Recapitulation of all Necessary Production, Marketing and Distribution\nCosts of Coal 294\n(a.) Detail thereof in Table 77 294\n(6.) Explanation of Costs at Mine in Column 1 of Table 77 295\n(c.) Explanation of Coal producer's Profit in Column 2 of Table 77 295\n(d.) Explanation of Transportation Cost from Mine in Column 3 of Table 77 295\n(e.) Explanation of Sales Expense in Column 4 of Table 77 295\n(/.) Terms upon which Table 77 founded 295\n(g.) Division I., Table 77, based on Sacked Coal 295\n(h.) Division IL, Table 77, based on Deliveries in Bulk 295\n(i.) Division III., Table 77, based on Establishment of Central Coal Distributing Depots 295\n(j.) Reductions in Table 77 apply wholly to Purchase by Domestic Consumer ___ 295\nSec. 9.\u00E2\u0080\u0094Reductions which can be made at Present in the Price of Coal to the\nDomestic Consumer. 295\n(a.) Explanation of Tables 78, 79 and 80 295\n(6.) Detail of Table 78 296\n(c.) Explanatory References of Table 78 296\nSec. 10.\u00E2\u0080\u0094Reductions in Price which the Domestic Consumer might reasonably expect\nwith the Introduction of More Efficient Methods in Production, Marketing\nand Distribution 297\n(a.) Detail of Table 79 297\n(6.) Explanation of Table 80 297\n(c.) Victoria City Reductions as covered by Tables 78, 79 and 80 298\nSec. 11.\u00E2\u0080\u0094Reductions in Distribution Charges outside Greater Vancouver and Victoria\nand Applicability of Tables 77, 78, 79 and 80 thereto 298\n(a.) Distribution Charges as found apply elsewhere in Province subject to\nFreight Differences 298\n(6.) Reductions elsewhere in Province 298\n(c.) Railway Transportation 299\nSec. 12.\u00E2\u0080\u0094Findings as to Reductions in Cost of Mining in Vancouver Island Mines as\napply to other British Columbia Mines 299\nSec. 13.\u00E2\u0080\u0094The Price of Coal to the Consumer should be based on its calorific or Heat\nValue, coupled with Suitability for Purpose of Use 300\nSec. 14.\u00E2\u0080\u0094Brief Summary of Some Findings in Chapters XI. and XII. 300\n(a.) Findings as to the Prices of Coal 300\n(6.) Reference to Crowsnest Pass Freight Rate 301\n(c.) Other Points in Province outside Greater Vancouver and Victoria 301\n(d.) Other Mines in the Province 301\n(e.) Prices to other than Domestic Consumer 301\n(/.) Conditions requisite for Greater Consumption of Coal 301\nCHAPTER XIIL\u00E2\u0080\u0094GENERAL SUMMARY 303\nAPPENDICES 327\nCOMMISSION EXHIBITS RELATING TO COAL REPORT, VOLUME II 409 INDEX OF TABLES.\nTable _\nNumber. Subject-matter. PAGE.\n1. Estimated Coal Reserves in Canada by Provinces 5\n2. A Classification of Canadian Coals 6\n3. Diagram showing Distribution of Various Classifications of Coal by Provinces 7\n4. An Analysis of British Columbia Coals (1925-1928) 9\n5. A Further Analysis of British Columbia Coals (1931-1932) 9\n6. Annual British Columbia Coal Production, with Annual Estimated Value thereof\nat Mine . 11\n7. Annual British Columbia Coke Production, with Annual Estimated Value thereof\nat Coke-ovens 12\n8. Annual Production of Coal by Areas in British Columbia for the Years 1920-36 13\n9. Coal Producing Areas and Producing Mines, with Commercial Production for the\nYears 1932-36 15\n10. Railway Locomotive Consumption of British Columbia Coal, 1922-1936, in relation\nto Railway Mileage 17\n10a. Particulars in Table 10 in Percentage of 1926 Railway Locomotive Coal Consumption 18\n11. Canadian Collieries Railway Sales, 1932-1936 18\n12. Crow's Nest Pass Coal Company, Ltd., Railway Sales, 1925-1936 19\n13. Middlesboro Mine Railway Sales, 1923-1936 19\n14. Coal Tonnage sold by Canadian Collieries (Dunsmuir), Ltd., and Western Fuel for\nuse in the Production of Gas in Vancouver and Victoria for the Years Ended\nJune 30th, 1932 to 1936, inclusive. (Long Tons.) 20\n14a. Subsidies paid B.C. Electric Power & Gas Co., Ltd., 1933-1937 21\n15. Canadian Collieries Sales to Logging Operators, 1932-1936 21\n16. Canadian Collieries Sales to General Manufacturing Industries, 1932-1936 21\n17. Crow's Nest Pass Coal Co., Ltd., Coke Sales in Canada and United States, 1925-1936 22\n18. Crow's Nest Pass Coal Co., Ltd., Coke Sales to Consolidated Mining & Smelting\nCompany at Trail, 1925-1936 22\n19. Coal consumed in Bunkering Ships in British Columbia, 1922-1936 24\n19a. Particulars in Table 19 expressed in Percentage of 1926 Bunkering Consumption\u00E2\u0080\u0094 24\n20. British Columbia Coal sold outside the Province, 1922-1936 25\n20a. Movements of Crow's Nest Pass Coal (British Columbia) to the Provinces of\nManitoba and Ontario, 1930-1936, under Subventions 26\n20b. Movements of Vancouver Island Coal sold as \" Ships' Stores \" and \" for Export,\"\nunder Subventions, 1931-1936 27\n21. Analysis of Sales of the Canadian Collieries (Dunsmuir), Ltd., and Western Fuel,\n\u00E2\u0096\u00A0 1934-1936 30\n22. Nature of the Coal Market of Crow's Nest Pass Coal Co., Ltd., 1934-1936 30\n23. Nicola-Princeton Mines Production 1934-1936 31\n24. Coal brought into the Province for Consumption, 1920-1936 32\n25. Sizes of Alberta Coal Sold in British Columbia, 1933-1935 33\n26a. Per Capita Production in British Columbia Mines 34\n26b. Per Capita Production in British Columbia Mines 35\n27. Losses in Washing 38\n27a. \" Company Use \" Consumption 39\n28. Number of Employees in British Columbia Mines , 40\n29. Registered Names of British Columbia Coals, approved by the Chief Inspector of\nMines 45\n30. \" Breakdown \" of Prices of Principal Coals sold in Greater Vancouver and Victoria 48-53\n31. \" Breakdown \" of \" Spreads \" stated by Representative Vancouver and Victoria\nDealers 55\n32. Illustrative Statement of Prices of some Alberta and British Columbia Coals in\nVarious Interior Centres J__ 57\n33. Canadian Collieries Sales to British Columbia Coal Dealers, 1926-1936 60\n33a. Seattle Retail Prices of British Columbia Coal, 1929-1930 65 INDEX TO TABLES.\nTable Pipp\nNumber. Subject-matter. -TAW-.\n33b. Seattle Retail Prices of Vancouver Island Coal, 1935 65\n34. Subsidiaries of Canadian Collieries (Dunsmuir), Ltd. 68\n35. Annual Coal Production, Dunsmuir Mines (Wellington Colliery Co., Ltd.), 1901-1909 79\n36. Annual Coal Production, Canadian Collieries (Dunsmuir), Ltd. (1910-1936) 79\n37. Canadian Collieries (Dunsmuir), Ltd.\u00E2\u0080\u0094Increases and Decreases in Capital Assets\n(1911-1920) 80\n38. Annual Coal Production, Western Fuel Corporation of Canada, Ltd. (1910-1936)\u00E2\u0080\u0094 98\n39. Wellington Comox Agency, Ltd., Holding of Canadian Collieries Debentures, April,\n1929 100\n40. Wellex Securities, Ltd.\u00E2\u0080\u0094Purchases and Sales of Canadian Collieries \" A \" and \" B \"\nIncome Debenture Stock, June 30th, 1929 to June 30th, 1934 101\n40a. Comparative \" Liability \" Statement of Canadian Collieries as published and as\nconsolidated by Commission Accountants 103\n41. Brief Analysis of Exhibit 168\u00E2\u0080\u0094Consolidated Statement of Western Fuel and\nCanadian Collieries presented to Commission 105\n42. More Detailed Analysis of Consolidated Statement of Western Fuel and Canadian\nCollieries Operations assembled from Statement presented by Canadian Collieries\n(Dunsmuir), Ltd.\u00E2\u0080\u0094Exhibit 168 107\n43. Analysis of Canadian Collieries (Dunsmuir), Ltd., published Balance Sheets and\nProfit and Loss Accounts, 1921-36 (to June 30th in each year), exclusive of\nWestern Fuel Corporation of Canada, Ltd. .. 111\n44. Analysis of Western Fuel Corporation of Canada, Ltd., Balance Sheet and Profit\nand Loss Accounts, 1924-1936 115\n45. Combined Analysis of Canadian Collieries and Western Fuel, 1924 to 1936 121\n45a. Comparative Coal Outputs of both Companies expressed in Percentage of 1926\nOutputs : 123\n46. Comparison of the Canadian Collieries' Statement of both Companies Consolidated\nin Exhibit 168, with the Actual Charges set out in Exhibits 171 and 191-A\ncombined 129\n47. Cash Remittances to Canadian Collieries Montreal Office 135\n48. Values and Coal Tonnage, Canadian Collieries and Western Fuel 151\n49. Method of calculating Combined Rate of Depreciation and Depletion 152\n50. Computation of Combined Depreciation, Depletion and Amortized Exploration\nand Development for Canadian Collieries, Western Fuel and Joint Operations\nof the Two Companies at the rates set forth in Table 49 and Appendix \" H \" 155\n51. Comparative Statement showing Rate per Long Ton of Commercial Production of\nDepreciation, Depletion and Amortized Exploration and Development charged\nby Canadian Collieries, Western Fuel and Joint Operation of the Two Companies compared with Combined Rate in Table 50, and comparison of Total Rate\nper Long Ton of Production available for sale for the Years 1932-36 159\n52. Comparative Statement showing Decrease in Rate per Commercial Long Ton in\nCharges for Depreciation, Depletion and Amortized Exploration and Development by reason of Combined Rate per Long Ton arrived at in Tables 49, 50\nand 51 163\n52a. Comparative Statement showing Decrease as in Table 52, but on a Basis of Production available for Sale (1923-1936) 167\n53. Statement showing the Net Profits or Losses of Canadian Collieries, Western Fuel\nand Joint Operation of the Two Companies resulting from the Application of\nthe Combined Rates of Depreciation, Depletion and Amortized Exploration and\nDevelopment set forth in Table 49 and Appendix \" H,\" and the Exclusion of\nBond Interest, and the Net Percentage Income Return on an adjusted Share\nCapital 173\n54. Comparison between Net Profit per Commercial Ton produced on Basis of Company\nStatements and Net Profit per Commercial Ton produced on Basis applied in\nTable 53 177\n54a. Table 54 applied to Production available for Sale for the Years 1932-1936 179 INDEX TO TABLES.\nTable p,._\nNumber. Subject-matter. rAGE.\n55. The Position of the Crow's Nest Pass Coal Co., Ltd., from Balance Sheets and Profit\nand Loss Accounts, 1924 to 1934 187\n56. The Crow's Nest Pass Coal Co., Ltd., Values and Coal Tonnage 191\n57. Method of calculating Combined Rate of Depreciation and Depletion to be applied\nto Crow's Nest Pass Coal Co., Ltd., 1924-1934 192\n58. Statement showing the Net Profits of the Crow's Nest Pass Coal Co., Ltd., resulting\nfrom the Application of the Combined Rate of Depreciation and Depletion, etc.,\nset forth in Table 57, and the Net Percentage Income Return on an Adjusted\nCapital 195\n58a. Comparative Table showing Per-ton Cost Analysis and Income Percentage Return\non Adjusted Capital 195\n59. Analysis Cost of production per Commercial Ton at Pithead, Vancouver Island\nCoal Mines, compiled from Company Cost Figures, exclusive of Subsequent\nCosts such as Preparation for Market by Mining Company, Depreciation, Depletion, Management and other General Costs (Short Tons) 213\n59a. Table 59 reduced to Basis of \" Production available for Sale \" 215\n60. Analysis Cost of Production per Commercial Short Ton at Pithead, Crow's Nest\nPass Mines, compiled from Company Cost Figures, exclusive of Subsequent\nCosts, such as Depreciation, Depletion, Management and other General Costs 219\n60a. Table 60 reduced to Basis of Production available for Sale 219\n61. Analysis of Cost of Production per Commercial Ton at Pithead, Coalmont Collieries\nMines 223\n62. Analysis of Cost of Production per Commercial Ton at Pithead, Middlesboro Col\nlieries 223\n63. Analysis of Cost of Production per Commercial Ton at Pithead, Princeton Area 223\n64. Analysis of \" Total Direct Cost \" of Coal Production per Commercial Short Ton,\nCanadian Collieries, Western Fuel, and Crow's Nest Pass Co. 227\n64a. Similar Analysis based on Production available for Sale 229\n64b. Analysis Similar to 64 in respect to Coalmont, Middlesboro, \" Blue Flame \" and\n\" Sunrise\" 231\n65. Analysis of Total Cost of Production per Commercial Short Ton produced, Canadian\nCollieries, Western Fuel and Crow's Nest Pass Co 235\n65a. Table 65 based on Production available for Sale 237\n65b. Analysis similar to Table 65 in respect to Coalmont, Middlesboro, \" Blue Flame \"\nand \" Sunrise \" 239\n66. Outline of No. 5 Mine at Cumberland (Comox), B.C., and of \" B \" BED, Michel, B.C.\n Between 246-7\n67. Cross Sections of Coal Beds at Cumberland (Comox), Nanaimo and Michel, B.C.,\nand One Coal Bed in a State of Washington Mine Between 246-7\n68. Outline of a Washington State Coal Mine _\u00E2\u0080\u009E_ Between 246-7\n69. Cost of Coal per Ton of Production available for Sale, as stated by Vancouver Island\nCoal Companies and as adjusted by Application of the Method of Depreciation\nand Depletion, dealt with in Chapter VIIL; Omission of Bond Interest, Reduction of Costs by Net Operating Revenue from Railway and Hydro-electric Plant,\nand Revision of Costs of Mining 255\n69a. Comparative Statement in Detail of Daily Output per Man at Coal Creek, Michel,\nComox, Nanaimo, and a Washington State Mine 261\n70. Eight per cent. Return upon $5,000,000.00 Capitalization, less Income Return upon\nDepreciation and Depletion Reserve 264\n71. Amount per Short Ton available to be passed on to the Consumer after providing for\n8 per Cent. Profit per Annum to Coal Producer upon Reasonable Capitalization 265\n72. Analysis of Profit or Loss on Sales of Canadian Collieries and Western Fuel as\nstated by the Companies to Consumers, classified as to Use, compared with what\nProfit on such Sales would be after Reductions of Costs in Table 69, for the\nYear 1932 267 INDEX TO TABLES.\nTable Pirir\nNumber. Subject-matter. -TAi_-_.\n72a. Analysis of Profit or Loss on Sales of Canadian Collieries and Western Fuel as\nstated by the Companies to Consumers, classified as to Use, compared with what\nProfit on such Sales would be after Reductions of Costs in Table 69, for the\nYear 1933 269\n72b. Similar Information for the Year 1934 271\n72c. Similar Information for the Year 1935 273\n72d. Similar Information for the Year 1936 275\n73. Summary of Information contained in Tables 72 to 72d 277\n74. Dealers' \" Spread \" under Leased Yard Agreements 283\n75. Actual \" Spread \" received by Leased Yard Dealers 283\n76. Canadian Collieries Sales Expenses per Short Ton (1932-36) 288\n77. Recapitulation of Necessary Costs and Allowances per Short Ton entering into a\nJust and Reasonable Price to Domestic Consumer: (1) Under Present System of\nRetail Marketing and Distribution; (2) with More General Use of Automatic\nStoker, coupled with Delivery in Bulk; (3) under System of Central Distributing Depots -_._. _.__ , 294\n78. Reductions in the Price of Coal per Short Ton which can now be made (1937) to\nDomestic Consumers 296\n79. Reductions in the Price of Coal per Short Ton which may be made by More Efficient\nMethods of Mining, together with Reductions provided for in Table 78 297\n80. Reductions in the Price of Coal per Short Ton which may be made by the Elimina\ntion of Sacking and Establishment of Central Coal Distributing Depots, together\nwith the Reductions provided for in Tables 78 and 79 298 INDEX TO APPENDICES.\nOistinguishing -_,\nLetter. Subject-matter. PAGE.\n\"A.\" Analyses of some British Columbia Coals (1930-31) (refer Section 7 (a),\nChapter I.) '. 327\n\" B.\" Extract from \" Summary of Tests on British Columbia Coals when used as\nPulverized Fuels \" (1932) (refer Section 7 (c), Chapter I., and Table 5) 333\n\" C.\" Extract from Opening Address of C. H. O'Halloran, K.C., Commission Counsel,\non February 6th, 1935 (refer Section 8 (a), Chapter I., and Introduction\nto Chapter IV.) 337\n\" D.\" Brief presented to the Commission by the Fernie Board of Trade (Exhibit\n461) (refer Section 8 (b), Chapter I.) 339\n\" E.\" Brief presented to the Commission by a Joint Committee of the Nanaimo City\nCouncil, Nanaimo Board of Trade, and Vancouver Island Bureau of\nMines and Commerce (Exhibit 461-A) (refer Section 8 (6), Chapter I.) 351\n\" F.\" Form of Questionnaire forwarded Retail Coal Dealers throughout the Province (refer Exhibit 506 and Section 4 (a), Chapter III.) 357\n\" G.\" Form of Questionnaire forwarded Producing Companies in the Province\n(Exhibit 10) (and refer Introduction to Chapter IV. and Section 1 (a),\nChapter VI., and Introduction to Chapter X.) 363\n\" H.\" Manner of calculating Annual Rate for Amortization of Development and\nExploration Work of Canadian Collieries (Section 3 (a), Chapter VIIL) 367\n\" J.\" Summary of Interest Payable from 1920 to 1934 on Canadian Collieries\n(Dunsmuir), Ltd., 1920 Bond Issue, presuming such Interest to be cumulative (instead of being payable out of \" Net Earnings \" as is the Case),\nmaking Due Allowance for the Redemptions made of \" A \" Bonds (refer\nSection 5 (c), Chapter VIIL) 369\n\" K.\" Expenditures on Plant and Equipment and Mine Development by the Crow's\nNest Pass Coal Co., Ltd., 1898 to 1912, inclusive (refer Section 3 (b),\nChapter IX.) 371\n\" L.\" Estimated Tonnage available at December, 1936, of the Crow's Nest Pass Coal\nCo., Ltd., as furnished by the General Manager (refer Exhibit 465-C),\nand Extract from the President's Address to the Shareholders of the\nsaid Company (refer page 15, 1927 Annual Report, Exhibit 466) (refer\nSection 4 (e), Chapter IX.) 373\n\" M.\" Analysis of the Relation of Depreciation and Depletion Reserve to the Value\nof Fixed Assets for the Years 1924 to 1934 (inclusive) of the Crow's\nNest Pass Coal Co., Ltd. (refer Section 7 (6), Chapter IX.) 375\n\" N.\" Blank Form of Operating Statement used by Canadian Collieries (Dunsmuir),\nLtd. (refer Section 1(d), Chapter X.) 377\n\" O.\" \" Code of Operating Accounts\" (Glossary of Mining Terms) as used by\nCanadian Collieries (Dunsmuir), Ltd., and Western Fuel Corporation of\nCanada, Ltd. (Exhibit 175) (refer Section 1 (d), Chapter X.) 379\n\" P.\" Extract from (pages 2 to 5, being \" Limit of Workable Thickness \") \" The\nMining of Thin Coal Seams as applied to the Eastern Coal Fields of\nCanada,\" by J. F. Kellock Brown, issued by Dominion Department of\nMines, being Bulletin 15, published in 1917 (refer Section 4 (c), Chapter X.) 383\n\" Q.\" Memorandum prepared from the Evidence of Comparative Difficulties of Coal\nProduction at Mines in the Crow's Nest and Nicola-Princeton District\n(refer Section 6 (a), Chapter X.) ._ 385\n\" R.\" Basis of Calculation of Rate for Amortization of Capital Additions, Improvements, and Development, Crow's Nest Pass Coal Co., Ltd., 1924-1934\n(refer Tables 57 and 58 and Section 4 (f), Chapter IX.) 389\n\" S.\" Extract from Evidence relating to Radio Advertising in Seattle of Vancouver\nIsland Coal at Prices less than available in British Columbia (refer Section 10, Chapter III.) 391\n\" T.\" Correspondence with Canadian Collieries regarding \" Coal used in Company\nOperations\u00E2\u0080\u0094Company Use\" (refer Section 1 (e), Chapter X.) 393 xl. INDEX TO APPENDICES.\nDistinguishing __,\nLetter. Subject-matter. PAGE.\n\" U.\" Illustrative Tables (A and B) showing Profit or Loss on Sales of Coal to\nConsumers, classified as to Use, by Canadian Collieries and Western\nFuel, compared with what Profit or Loss on such Sales would be after\nReductions of Cost in Table 69 (refer Section 7 (/), Chapter'XI.) 397\nn yi> Tonnage sold (Canadian Collieries and Western Fuel) by Districts, 1934, and\nGraduated Prices received (refer Section 7 (/), Chapter XI.) 401\n\" W.\" Calculation of Profit per Short Ton on Production available for Sale on the\nBasis of 8 per Cent, per Annum on a Capitalization of $5,000,000 less\n3% per Cent, per Annum Income Return upon Depreciation and Depletion Reserves (Western Fuel and Canadian Collieries) (refer Section\n6 (c), Chapter XI.) 403\n\" X.\" Manner of calculating Average Rate per Short Ton of Transportation of Coal\nfrom Mine at Nanaimo and Union Bay to Vancouver and Victoria\nDealers' Yards (refer Section 8 (6), Chapter XI.) 405\n\" Y.\" Sample of Contract for Installation of \" Blower \" 407"@en . "Legislative proceedings"@en . "J110.L5 S7"@en . "1937_V02_14_i_xl"@en . "10.14288/1.0307366"@en . "English"@en . "Vancouver : University of British Columbia Library"@en . "Victoria, BC : Government Printer"@en . "Images provided for research and reference use only. For permission to publish, copy or otherwise distribute these images please contact the Legislative Library of British Columbia"@en . "Original Format: Legislative Assembly of British Columbia. Library. Sessional Papers of the Province of British Columbia"@en . "COAL AND PETROLEUM PRODUCTS COMMISSION (BRITISH COLUMBIA) Volume II. Report of the Commissioner The Honourable Mr. Justice M. A. Macdonald relating to The Petroleum Industry (Bring Paragraph 2 and part of Paragraph 3 of the Terms of the Commission) September 27th, 1937"@en . "Text"@en . ""@en .