The St. Lawrence Deep Waterway Project: A Canadian View of Its Economic Aspects

Introduced by PRESIDENT FENNELL, MR. GOFORTH said: I have been informed by some of my Toronto friends that they are surprised that anyone from Montreal should dare to discuss the St. Lawrence Project except in terms of rank abuse. I assure you, however, that there are scores of Montreal engineers, lawyers, business men and even a few academic souls like myself who have come to the conclusion that this great scheme of improved communication and electrical development must inevitably be proceeded with, that it is now only a question of time and the proper methods; and that it must be treated not as a political foot-ball to be kicked and abused, but as a future certainty, which must be carefully studied in all its complicated detail, so as to adapt the process of its development to the most efficient service of industrial and social requirements as they arise in the path of this nation's progress. We also fully realize, and are frequently reminded by certain of our Honourable Senators, and others, that every care must be exercised to prevent any infringement of our territorial entity or impairment of our sovereign jurisdiction over land or water, power or navigation rights which lie within our borders, or which properly constitute our equity in the potential electrical wealth of the St. Lawrence River.

There are few, even among the most optimistic supporters of the Deep Waterway Project, who would question the statements of the Honourable Messrs. Graham and Reid that there are serious obstacles to be surmounted, and thorny problems to be solved before we can safely and profitably embark on this great venture. Inordinate haste--and immature decisions based upon a brief and superficial study are certainly to be avoided at all costs. At the same time public apathy and indifference or unreasoning opposition and indefinite procrastination are almost equally harmful. Our progress as a nation has not been marked by the philosophy of Aesop's frog who waited for the fly to enter his mouth, but by a vigorous series of great forward steps, by an ambitious and optimistic bridging of physical barriers, by the transforming of natural obstacles such as our waterfalls and rapids into the motive energy of our industrial life.

It can hardly be questioned that this deep-waterway project with its by-product to Canada alone of nearly 4,000,000 horse power is such a forward step,--that it has been more exhaustively studied and scrutinized,--and that its potential advantages as well as its dangers have been more carefully weighed than in the case of any previous measure of similar importance in our history as a Dominion. There were quite as many preachers of "blue-ruin" when the Pacific Railroad was being discussed fifty odd years ago as there are today with reference to the St. Lawrence question.

Now I feel that the best way to deal with this question, to make it intelligible in so brief an allotment of time is first to give you the most important objections to the project on the various vital issues involved, and then to indicate what appear to be the most constructive answers to these objections. I wish it to be clearly understood that I am not here to propagandize for the deep waterway, but merely to state my considered opinion after careful study in my own particular field which is that of power, and after consultation with several authorities, far more competent than myself, to pronounce on their respective spheres of study. I do not claim that these, answers are final or complete, nor that in every case a valid reply can yet be given. If there is any value in them, it is that they are suggestive rather than dogmatic. Nor do I believe that the joint engineering Board, or the International Joint Commission, or your own Hydro Commission in its excellent report of 1921, or the National Advisory Committee, from what has leaked out of its recommendations, has said the last and best word on these objections. Much more of intensive study and research will have to be carried out before we can safely and profitably embark upon this gigantic venture, and needless to say such study should be of the strictly uninfluenced variety.

I have listed nine objections which I think cover at least the most vital points. I make no attempt at giving them in any definite order of logical sequence.

(1) That the accepted estimate of $650,000,000 would inevitably be exceeded as in the case of numerous other canal projects of similar magnitude.

(2) That it would result in little or no decrease in costs (and therefore rates) for the movement of grain and other commodities from the Head of the Lakes to their ultimate markets, because transhipment at Montreal would still be necessary, and ocean vessels would not ply up to Lake ports.

(3) That Montreal would suffer as an entrepot centre by the alternative of through navigation.

(4) That it would shorten the navigation season on the Lower St. Lawrence by inducing earlier surface freezing through the elimination of rapids between Montreal and Prescott.

(5) That the ultimate establishment of an United States controlled "Canal Zone" would be the inevitable result of the project if proceeded with.

(6) That as far as the United States is concerned the project is nothing but a "power steal" with insidious possibilities of injuring rather than benefiting the navigation facilities of the Canadian outlet in order to enhance the competitive position of American Atlantic ports against Montreal and Quebec City.

(7) That Canada could not absorb such a vast increment of power as her share of the whole development would involve. (Such share being nearly 4,000,000 installed h.p.)

(8) That export of the power to the United States would thus be unavoidable, and in some quarters is actually recommended.

(9) That it would place an extra per-capita burden upon the Canadian taxpayer without any proportionate compensation, in other words, that its cost even at the $650,000,000 is, considering all points of view, economically prohibitive.

(1) First Objection. That the accepted estimate of $650,000; 000 would inevitably be exceeded as in the case of numerous other canal projects of similar magnitude.

Reply: In dealing with the first objection it is necessary to point out first that the estimate is for the more expensive of the alternative schemes, namely, the two-stage plan known as "Plan B" in your Hydro Commissioner's report of 1921, with the canals of the international section on the Canadian side, and that it covers all costs including full development of power as well as navigation works for a 25 foot waterway. The analogy which has been drawn between other canal projects is hardly valid, as those which have been cited in comparison were nearly all constructed during periods of rising prices. The Suez during the period of 1847 to 1871, when the prices of industrial commodities in Europe such as iron and steel, were rising abruptly, and the Panama and Kiel were similarly built during the" general price rise from 1896 to 1914. When we examine the probable trend of prices for the next two decades during which the St. Lawrence Deep Waterway will almost certainly be proceeded with, we find practically all monetary experts agreed that there will either be a gradually declining level if we are dependent upon the technical extent of the gold supply (see Gustav Cassell's second memorandum on "The World's Monetary Problems"), or at least a stationary level of prices if we are, as Mr. Montagu suggests, dependent upon the credit policy of the Federal Reserve Board. It may interest you to know that the confidential estimate of the engineers retained by a private syndicate seeking the Power Charter for one of the three sections in the St. Lawrence scheme, are substantially lower than those of the joint Engineering board for that section. I think we may, therefore, safely assume that the estimate of $650,000,000 is a reasonable maximum upon which we may pretty definitely rely.

(2) Second Objection, That it would result in little or no decrease in costs (and therefore rates) for the movement of grain and other commodities from the Head of the Lakes to their ultimate markets, because transhipment at Montreal would still be necessary, and ocean vessels would not ply up to Lake Ports.

To answer this question fully, would enable us to dispose of several other objections, so I propose to deal with numbers (3) and (4) jointly with number (2), namely,

(3) That Montreal would suffer as an entrepot centre by the alternative of through navigation.

(4) That it would shorten the navigation season on the Lower St. Lawrence by including earlier surface freezing through the elimination of rapids between Montreal and Prescott.

Reply: Perhaps it will be simpler if I deal with the physical objection of number (4) first. In this connection I consulted Dr. Howard Barnes, celebrated physicist, knowing him to be a foremost authority on ice problems in general, and particularly those of the St. Lawrence River. His opinion briefly is this : That the objection is valid in that the replacing of rapids by slow flowing, damned-up pools, would cause a slightly earlier surface freezing, a matter of possibly one week at the end of the navigation season. But he went much further and showed that works which may be combined at very slight extra expense with the whole St. Lawrence improvement scheme, would not only offset the disadvantage just mentioned, but in his opinion, would prolong the present navigation season on the Lower St. Lawrence, both above and below Montreal for several weeks. He explained that the two chief factors in the rapid cooling of Lake Ontario waters as they pass down the St. Lawrence, are, first, the still shallows around the Thousand Islands, and, secondly by the icy waters of the Ottawa River, which enter the St. Lawrence both on the east and west sides of the Island of Montreal. These he states could be very easily eliminated, with actual improvement of present power and navigation conditions, by strategically located dams to concentrate the flow of the river into a main channel at the Thousand Islands, by blocking the St. Anne's rapids on the west side of Montreal Island, and by utilizing the natural submarine ridge extending for a considerable distance from the westward tip of the island. He would accomplish this by merely filling in the ridge to water level, thus effectively separating the Ottawa waters from the St. Lawrence to within striking distance of tide water.

Now we turn to the question of whether Ocean vessels will or will not pass through Montreal as a result of the improved waterway. There is extreme divergence of opinion on this point, but I have found on the whole that engineers and others who have approached the subject with an open and "uninfluenced" mind, have come to substantially similar conclusions. While I do not claim that this estimate is final and strictly accurate from the viewpoint of quantities, yet it is at least suggestive. In the first place, ocean liners on account of their much higher ratio of overhead expenditure would almost certainly not go above Montreal, however great the improvements in St. Lawrence navigation. Secondly, the specialized construction and much lower relative overhead of lake steamers, will almost certainly retain for them their present predominance in the grain trade, as also in the internal iron ore and coal traffic. There is however, a further point, which appears to have been overlooked in recent discussions of the subject, but which, in my opinion, in common with several other students of the Project, constitutes the deciding factor of mutual advantage to both Montreal and the Lake ports, including your Queen City. It concerns the movement and chartering of tramp vessels. These, as you know, are not tied to any definite route, and have the advantage over liners of a much lower relative overhead cost. Expert opinion pretty well agrees that a large proportion of this group of ocean vessels may economically operate to interior Lake Ports. This does not imply any necessary loss to Montreal as an entrepot or transhipment point. On the other hand, because of the peculiar exigencies of the Charter market, its importance should be greatly enhanced. The explanation is not far to seek. New York, at the present time, enjoys the strong competitive advantage of being the best tramp or charter market on this continent, not so much because of its more strategic location as an entrepot, but because vessels calling there with cargoes from Europe or South America, etc., are able to reckon on a great variety of possible charterings not only for strictly New York traffic, but from a great array of other ports scattered along the arms of the angle, of which New York is the apex. The risk of returning empty or light is thus reduced to a minimum, and the rates for equivalent distances are materially lower than tramp rates from Montreal--a difference which is in no way explained by higher insurance charges on the St. Lawrence, or even by the limitations of the navigation season. It is because Montreal has no such group of alternative ocean ports dependent upon it, Quebec being merely an outport for Montreal, and Halifax and St. John being too far distant to be classed as dependent. The construction of a 25 foot waterway with very considerable reduction in lockage delays, will, however, change the whole complexion of Montreal's adverse position as a charter market. A group of Canadian and American ports, including Toronto, with a potentially larger volume of traffic than New York's dependencies will now become tributary to Montreal's charter market. Ocean rates for bulk commodities moving in either direction across the Atlantic to and from Montreal or the Great Lakes ports should then approximate those from New York, because again the risk of returning light is reduced to a minimum. When I made a statement before the Montreal Canadian Club a few weeks ago that a reduction in the costs of moving grain from our Western Provinces via the St. Lawrence to its ultimate market in Europe, of from 3 to 9 cents a bushel, I was severely criticised by some of the "die-hard" opponents of the project, on the grounds that my maximum of 9 cents was inconceivable. They pointed out that the minimum rate from Fort William to Montreal is even now as low as 10 cents a bushel during certain months of the year. After carefully checking up my calculations, however, and allowing for the condition of tramp rates just mentioned, in addition to the advantages of the Barnes' proposal, if carried out, and including the improvements contemplated on the St. Lawrence below Montreal to reduce insurance charges, I still consider a 9 cent reduction per bushel as a conservative maximum. As for the minimum it is likewise ultra-conservative, for not only does Dr. Ritter, backed by Mr. Hoover, stake his reputation on 3 cents as a minimum reduction on Lake traffic alone, but even a member of the National Advisory Committee has endorsed this estimate of the minimum potential reduction in a recent Senate speech. Their reasons for making this estimate I take to be too well known to all of you for me to repeat them here, but the real importance of these conclusions, if we take 6 cents as a conservative average reduction in wheat rates, is in the resultant enlargement of the western grain area, tributary to the St. Lawrence, and in the proportion of this new traffic which will take the Montreal rather than the Buffalo-New York route. Taking the average rate per wheat-bushel-mile on the Prairie and halving the distance which the six cent rate would cover, with the present competitive outlet via Vancouver and the potential outlet via Hudson Bay, and making due allowance for the location and direction of railway lines, and the seasonal fluctuations in water rates, I have computed an increment of slightly over 28,000 square miles, or approximately 15,000,000 acres of agricultural land to the area served by the St. Lawrence route. Without going any further into details of the probable increase in grain traffic from this new region, as well as the undoubted increase of production in the region already served as a result of the six cent stimulus, all things being equal, I think it is unnecessary to say any more on this point in order to demonstrate the material growth of entrepot grain traffic through Montreal and Lake ports which may be reasonably anticipated if the Deep-Waterway scheme is realized. Nor does this include the vast hinterland of twenty-two states of the American Union, which, according to Dr. Ritter will thus become tributary for international trade to the St. Lawrence Route.

This brings us naturally to the international question. That which concerns the respective spheres of provincial and federal control is before the Supreme Court, and therefore is not a suitable subject for discussion. The question of United States influence or control is, however, one of vital national interest and importance, and cannot be overlooked. I fail to appreciate the validity of the Hon. Dr. Reid's warning regarding injury to navigation by joint control, or even American control of works located in their territory at Barnhart Island in the International Section of the river. The navigation aspects of the scheme are from the American viewpoint so insistent and paramount, effecting as they do some 40,000,000 of their people on their own estimate, that I fail to see how a mere million horse-power, or at the most, 1Y4 million, distributed even at the maximum radius of 300 miles among a population of only 20,000,000 can ever endanger our vital navigation interests in the Lower St. Lawrence. Even admitting that self-interest, unscrupulous self-interest, will ultimately determine the policy of a larger nation to one having only a twelfth of its population, yet self-interest in this case would force any American government to protect the navigation feature of the project, quite apart from treaty commitments past, present or future. The danger lies not in this million odd horse power, but in two quite different directions. We have far more to fear from the massed insistence of superior numbers that the whole waterway from Lake Ontario to the Sea, be under United States jurisdiction, if this crude materialism which has been attributed to her in some quarters, is the real basis of American foreign policy. If such is the case then we can expect nothing better by procrastination than merely postponing for a few years the evil day when the big fish shall swallow the little one, when the rising tide of economic pressure for the water way from the marooned states of the middle-west, will break the dykes of our national self-sufficiency, and take things into their own hands. I have merely carried to its ridiculous conclusion the motive which several of our countrymen have ascribed to our republican neighbours. Such. a process of thought in international relations is not only harmful, but is not in accordance with the facts. It is libelous to consider the few William Hale Thompsons as typical of the intelligent and honorable majority of American citizens. They may be past-masters at driving hard bargains when they hold the trump cards, as they did in 1909 when they skillfully worked into the Boundary Waters Treaty a clause excluding previous diversions from the application of the Treaty, and persuaded our negotiators and statesmen to sign away their rights to the 8,600 cubic feet per second diversion of the Chicago Sanitary District, which we now know was actually being diverted before the treaty was signed. I do not imply that our legal position is hopeless for recovery of damages from the diversion, but it is certainly not as promising as it would have been if the treaty had not been signed. We in Canada, descendents of a race that for a hundred odd years have lived at peace with our neighbours, may accuse them of being shrewd, but not of unscrupulous treatment, and not of forcible encroachments upon our territorial or administrative entity. The analogies of Panama and Nicaragua are quite irrelevant. There was no question of Columbian enterprise undertaking the gigantic task which Geothals & Gorgas so brilliantly achieved for the United States, and with American capital. The chaotic condition of Nicaragua, where foreign lives and property were at the mercy of political marauders, can hardly be cited as an illustration of the conscienceless imperialism of the American government and people.

In the St. Lawrence Deep Waterway question the game is to be played between us as in the past, according to Hoyle, except that we hold the trumps. We can dictate the terms, for the simple reason that we have no vast marooned hinterland insisting upon its completion. The United States has! What terms shall we then insist upon? That the United States pay all the navigation costs including our expenditure on the new Welland Canal? It is not unconceivable that such terms would be accepted, because on their own calculations it would be well worth it. Nevertheless I think this would be a short-sighted policy. Whatever honourable intentions they may have for respecting our sovereignity, there would always remain with the American people a sense of proprietorship in this vital artery of Canadian communication. Certainly the fairest division of costs, and in this I include both the Welland and the expense of deepening and improving the upper channels and canals, would be on the basis of benefits to be received, since no tolls are to be charged. There is little doubt that the navigation benefits to the United States would be at least double in volume to those of Canada. Ritter considers their relative gain as considerably higher. I therefore throw out this suggestion as a solution of both the international bogey and an unfair burden upon the Canadian taxpayer:

That Canada pay a share of navigation costs slightly more than the agreed benefit ratio would impose upon her, such extra amount being stipulated in the projected treaty as a definite and permanent quit-claim on the part of the United States for any control or jurisdiction over power or navigation works or routes lying wholly within Canadian territory.

Such a sacred declaration between two friendly nations, could hardly be open to abuse by a people that has always prided itself on the rigid observance of the sanctity of international promises.

We now come to the second danger which arises out of the objections numbers (7) and (8), namely,

Our ability or inability to absorb the power, and the strong influences which will undoubtedly be brought to bear, to export that 4,000,000 of Canadian horse-power on the St. Lawrence to drive the wheels of industry in the New Ungland and New York States.

I know that there are many outstanding economists in Canada who consider the export of power as of no more consequence' than that of wheat or paper, who would even be so true to their training in the Manchester School, as to say that a power embargo would be contrary to the Law of Comparative costs and therefore injurious, to the best interests of Canada. They point out that in that great American semi-circle of 300 miles reside over 20,000,000 persons, that this region supplies a large portion of our imports and takes 12°0 of our exports, that its shortage of power,"has driven many industries, notably cotton-mills, into the South Atlantic States, that a wealthy, industrious neighbouring region supplied with our power would be a distinct asset to and market for Canada. Very plausible this sounds in theory, but it does not fit the practical teaching of experience, nor the peculiarities of this elusive product, electricity. It is now very generally recognised that electricity once exported is irrevocably lost--that it is such a basic and all-pervasive factor in modern industrial and social life, that cessation of supply would be considered as almost a "casus belli". Toronto experienced darkened streets during many critical nights of the Great War, because the American government rebuffed Canada's request for a return of exported power for her needy munition plants, with the terse statement that such a cessation of power export would be "considered as an unfriendly act."

What then are the prospects of our utilizing this power in Canada. They are bright indeed. In fact present trends, even if interpreted conservatively, would indicate the urgent necessity of nearly all of this enormous increment of electricity by the time the whole St. Lawrence Improvement Project is completed. The safest and soundest estimates which I have had from reliable and disinterested engineers is that 12 years would be required for its full construction. We can expect among the slow moving wheels of government and international negotiation, at least five years to elapse before work can actually be commenced. So in this 17 year period what are the prospects of our electrical requirements, and how can they best be satisfied.

At the present time Canada's installation of Hydro Electric energy has reached almost 5,000,000 horse power, or about one-eight of our potential total. Much that remains can only be developed at prohibitive cost, much more is permanently out of range for utilization in our heavily industrialized portions of Ontario and Quebec. It is the rate of our development and utilization which has shown the most astounding strides during recent years,--quite out of proportion to our increase in population. Since 1921 our hydro-electric development has risen in a geometric curve, doubling at the rate of once every six years, while consumption in kilowatt hours has increased even more rapidly (or once in 5 years) in other words, the load factor of our power industry has improved steadily. If this rate were to continue, even allowing for other projected developments, Central Canada would require all of its share in St. Lawrence Power by 1937 or 1938 at the latest, or 7 to 8 years before it could all be available. I hesitate to accept such a calculation however. I consider that this meteoric post-war expansion in the Hydro Electric industry as a reaction from the artificially restricted and retarded development resulting from the Great War, and the reconstruction period which followed it. For this reason I do not anticipate much more than a maintenance for several decades to come of our arithmetic increment of the past six years. But even this would bring us to an urgent requirement of St. Lawrence Power by 1945 or 16, or 17 to 18 years hence.

I am informed authoritatively that your Ontario Hydro Commission would be able and willing to market its whole equity in the International Section of the St. Lawrence, within this province, as soon as it is available. Quebec Province, as you know, is already granting a charter to a private syndicate for the partial development of the central section of the St. Lawrence, under a plan which may be readily combined with the whole projected scheme when necessary. A substantial part of the 300,000 h.p. which will be available there is already spoken for, in connection with extensive electro-chemical and metallurgical industries to be located in the close vicinity of the site, and which will ultimately require up to 3-4 million horse-power. While present conditions do not warrant wide-spread railway electrification, yet the Canadian National railways have completed plans for a gigantic electrified terminal in Montreal to replace the archaic Bonaventure, except for local freight.

Traffic density on Canadian railways which has increased 30% during the past seven years is rapidly approaching the level where complete electrification of trunk lines will be economically desirable, if present average fuel prices are not reduced. Within the narrow radius of 100 miles from the main Canadian power sites live 2,000,000 Canadians including both our federal capital and our commercial metropolis (apologies due to Toronto!) The latter's population is increasing at a rate which, if maintained, would, including suburbs, reach 2,000,000 by 1945. Within the wider transmission radius of 300 miles live over half the population of Canada, or approximately 5,000,000 people, including your own city, and your would-be rival, Hamilton.

Such industrial development as I have indicated will of necessity draw large numbers of people into the area. There are indications that regional drain to supply such population requirements in new industrial areas has about reached its limit. Mr. R. H. Coats, Dominion Statistician, expressed this interesting opinion to me the other day in Ottawa, and added that such requirements as those I have indicated must certainly be met by immigration. It should go a long way towards solving this knotty problem at least for a few decades to come. I cannot agree with Senator MacDougald's estimate of an increment of population amounting to 7,700,000, directly resulting from the projected development of the St. Lawrence Power. This figure after careful examination appears over-optimistic, but even my own estimate of a 2,000,000 increase attributable to this development, a figure based upon the average of several previous developments, and with the elimination of several possibilities of error, indicates the potentially great economic benefit to Canada not only from improved transportation and communication, but from the vast electrical treasure which the St. Lawrence holds, and which there is little likelihood of our parting with.

For sixty years by girdling railways and protective tariffs we have sought to transform a natural North and South community of economic intercourse, into an Last and West chain of solidly-welded links. Some have called it an artificial chain, but it is nevertheless a sturdy one. I foresee in this improved waterway from Fort William to the Sea, a means of crystalizing in a natural and advantageous form the East and West outlook which is the basis of our Nation's history, an ideal of which our grandfathers dreamed, for which our fathers laboured, and which we in the fullness of time shall realize.

The thanks of the meeting were cordially tendered to Mr. Goforth.