Canada's Coal Problem

RIGHT HONOURABLE C. D. HOWE: In casting about for a subject that may interest the membership of the Empire Club, I have chosen from among the many rather prosaic responsibilities of the Department of Reconstruction and Supply that of "Canada's Coal Problem". Although coal has been replaced by electricity for many industrial uses, and by oil for many heating purposes, it is still a major source of industrial energy, as well as a major source of domestic heating, to an extent that any serious shortage of supply must result in curtailment of industrial production, consequential unemployment, and suffering in Canadian homes.

Because coal is essential for industrial production and for domestic heating, it was the first basic material to be placed under control after the outbreak of war. From 1939 to the end of 1946, when coal was decontrolled, Canada's coal supply has been my responsibility. I have had many anxious hours on that account. Coal control has moved from crisis to crisis, but somehow or other has succeeded in providing the coal sufficient to maintain full industrial production and in addition a full supply for every household consumer. On December 31st last coal control ended, with the current supply position excellent. I can only hope that private enterprise, which is always critical of bureaucrats, will maintain that position.

The hardships that can result from even a temporary shortage of coal are apparent in the United Kingdom today, where industry is suffering from paralysis and even domestic lighting is rationed. Lack of coal has been, and continues to be, the major deterrent in the rehabilitation of Europe. The same lack is handicapping industry in South American countries. Without constant vigilance on the part of those responsible for our continuing coal supplies, Canada may yet be in similar position. Our coal industry has a responsibility to the nation of no small magnitude.

Canada's coal is situated in Vancouver Island, in the mountain region of British Columbia, in Alberta, in southern Saskatchewan and in New Brunswick and Nova Scotia. Broadly speaking, the area west of the OntarioManitoba boundary is supplied from Canadian mines, as are the three Maritime Provinces. Western coal moves into Ontario, aided by freight subventions, but transportation limitations confine that movement to not much more than one million tons. Maritime coal, in pre-war years, moved into Quebec and Ontario, aided by freight subventions, but at present Maritime production does not exceed the amount consumed in the Maritime provinces. Thus Ontario and Quebec are almost wholly dependent for coal on United States mines. At present, Canada produces about 17 million tons of coal, and imports about 25 million tons of coal.

The urgent need for coal during the war period, and the necessity for obtaining production almost regardless of cost, has created difficult problems for our continuing peacetime coal industry. As a help in solving these problems the government, in 1944, appointed a Royal Commission on Coal, to report on all aspects of the problems relating to coal. The report, tabled in Parliament a few days ago, represents months of careful and conscientious study by the Commissioners, and is well worth reading. The factual information that it contains is the most exhaustive yet made available. Its conclusions may not be acceptable to all, but they result from a most thorough study of Canada's coal in all its aspects.

Much has been said and written about the Canadian coal problem. This is not a single problem--we have many coal problems, differing in kind and degree. There is the problem of maintaining an adequate supply of coal for our national requirements, and there is also the problem of building up in Canada a sound and healthy producing industry. There is the problem of finding steady and adequate markets for Canadian coal, and the problem of providing reasonably full employment at fair wages for our miners. Each section of Canada has its own coal problem differing from that of other sections.

The Report of the Royal Commission on Coal accepts the necessity for industries in Central Canada to secure the major portion of their coal requirements from the United States. Developments in low cost production, and transportation, may possibly alter this concept in some measure in the future, but it would appear that, for many years, industry and households in Central Ontario will continue to secure supplies from the nearest source, namely, the immense deposits in the Appalachian field in the United States. However, this finding need not preclude the growing development of a stable and prosperous producing industry within this country, nor the provision of an increasing and remunerative field of employment for Canadian coal miners.

The Commission has found that the government policy of subventions to assist transportations of coal, arising out of investigations made by a Special Committee of the House of Commons in 1921, has been both well designed and reasonably adequate, and should be continued. This subvention policy has been directed primarily to the marketing phase of the Canadian coal industry. The problem of providing and maintaining an adequate market for Canadian coal is constantly changing, and does not, by its very nature, lend itself to the establishment of a rigid and invarying policy. Therefore, the Commission recommends that the present Dominion Fuel Board, composed of civil servants, be replaced by a new statutory body, which will serve full time in the administration of present subvention policies, and such new measures of assistance as may be required from time to time. In this way the marketing problem will receive the constant attention of a body set up for the purpose, and I do not propose to follow that phase of the matter further at present.

I will now discuss the other main problem, namely, the production of coal throughout Canada at the lowest possible cost. The report of the Commission gives the salient features of the operations in each of Canada's main coal fields. In normal times, and during the war, the industry has been in a healthy state in Saskatchewan and in Alberta, including the southeast corner of British Columbia. On the other hand, operations on Vancouver Island, and particularly in the Maritime Provinces, have not for many years been in a healthy condition. The mines producing industrial and railway coal in the mountain regions in British Columbia have had a particularly good record. The profits of the group are not excessive, but in wages paid, in constant and increasing output, and in efficiency of production, these operations stand out over the general average. The production of domestic coal in Alberta has suffered from seasonal operation, inherent in the nature of the coal, but even under this handicap, shows a sound and encouraging record. The lignite coal mines in Saskatchewan have built up by their own efforts a sound and profitable market, and have a record of expansion that is by no means ended. There are few serious problems in the operation of this section of the industry that cannot be solved by the industry itself. The provision of a stable market for the industrial and railway coals is bound up with the general prosperity of the country, but there would appear to be good prospects for the maintenance of an adequate and orderly marketing of the output from this area. The greatest improvement can be effected by developments in research that will solve the present seasonal fluctuations in the production of domestic coal in both Alberta and Saskatchewan. When the solution for this problem can be found, the freight subvention policy recommended in the Commission's report should be adequate.

The coal fields of Vancouver Island represent a special problem. The output per man clay has been consistently lower than in the mountain and prairie mines, and the market has been restricted and highly competitive as against other fuels, such as oil and wood. For the past four or five years there has been a market for every ton of coal that could be produced, but, for a variety of reasons, the mines have not increased their output to meet the challenge. In fact, production has gone down, and it has been necessary to sustain operations by means of production subsidies. The ending of production subsidies, which cannot be long delayed, will call for a reorganized production programine, required to maintain a sound and healthy coal producing industry on Vancouver Island.

A still more serious outlook is presented by present conditions in the Maritime Provinces, and particularly in the Cape Breton area. We have here the largest concentration of the Canadian coal mining industry, located in a heavily populated area that is almost wholly dependent on this industry for means of livelihood. The other large Maritime industry, steel, depends for its well being upon an adequate supply of coal, at a cost that will permit the sale of its products at competitive prices. Maximum production from the Maritime coal fields has been a matter of national necessity during the two great wars within our generation. Thus the Maritime coal problem is of the highest importance, not only to that locality, but to all parts of Canada.

Mining has been carried on continuously in the Cape Breton field for a longer period than in any other Canadian area, and part of the problem arises from the technical difficulties, inherent both in the nature of the deposits, and in the very fact that mining operations have continued along lines laid down years ago. The methods adapted to mining of coal in earlier years may not be best adapted to the present situation. The Royal Commission Report devotes considerable space to mining methods in these areas.

There is evident in the Cape Breton area a social problem that has a definite effect on coal production. This is the concentration, in a comparatively restricted area, of a large population depending almost wholly on the coal industry, and its partner the steel industry, for a livelihood. While many Cape Bretoners have migrated to other parts of Canada, there has been a steady pressure on the labour market for employment in coal or steel, except in war years. It is reasonable to believe that in this situation may lie the root causes of some of the undesirable trends in labour relations in this field. Wage rates in the mining industries in Cape Breton have been in the past consistently lower than in the United States or in Western Canada. These lower wage rates, together with the advantage of a cheap water haul to the St. Lawrence River market, permitted substantial marketing in Ontario and Quebec, in the years before the war, in competition with United States coal, even though the production in Cape Breton per man day of some 2Y2 tons was considerably lower than the competitive U. S. figure of about five tons per man day. The Royal Commission Report states that competent engineers report that an output of 3 1/2 tons per man day can be realized in the chief mines of this area under proper conditions. These conditions stem back to a sound and mutually trustful relationship between labour and management. It would appear from the report that only through the development of that relationship can a prosperous industry and a self-supporting community be created and maintained.

The production of coal in the Maritime Provinces since early in the war has presented an increasingly difficult and distressing problem. Production in this area has dropped by over two million tons per annum from normal, and the cost of production has skyrocketted to the point that the Federal Government has been obliged to provide upwards of twenty million dollars to the mine owners since January 1st, 1942, in production subsidies, to prevent the industry from collapsing. The operators have placed the blame for decreased efficiency and higher cost of labour, and in turn, labour has been very critical of the management.

Canada is fast approaching the time when special production subsidies no longer can be justified. The Royal Commission recommends the ending of production subsidies, but two of the Commissioners suggest continued Government aid to the Maritime industry for a short reconversion period. The report is definite in its indication that the industry must expect to stand on its own feet, except for enlargements of its markets through freight subventions. Unless increased production can be obtained, subvention assistance is likely to be of little benefit, as production of coal and its consumption are at present about in balance within the Maritime Provinces.

During the war period there have been significant increases in the wage rates of labour, and, because of full working time, the total weekly and annual earning of labour have increased even more. Certain increases in labour rates have been compensated for by increased selling prices, and Maritime coal at the present price scale remains in about the same competitive position as at the outbreak of war. This present price scale, however, is only maintained by the payment of heavy production subsidies. From a labour cost of $2.00 per ton in 1939, labour cost had risen to $4.14 per ton in 1944. The reason for this lies in the fact that the output of coal per man day in 1939 was 2.70 net tons, which in 1944 had fallen to 1.70 net tons, a clear loss of one ton of coal per man day worked and paid for. Had the pre-war rate of output been maintained, the 1,950,000 odd man days worked in 1944 would have produced 1,950,000 more tons of coal, which would have produced some $8,970,000 additional revenue, and obviated the necessity of any subsidy. In addition, the pre-war production rate would provide for the wage increase the workers are demanding at this moment.

In the emergency of war, there may have been justification for the payment of production subsidies on the scale I have mentioned, but it is unrealistic to contemplate the maintenance of such payments into the future. There is unanimity on this point in the recommendations of the Commissioners, even though it is proposed by two of the Commissioners that some payment should continue for a short interim period. The cessation of assistance from public funds will, under present conditions require an immediate increase in price, but while some increase can possibly be realized in some areas, the higher prices will inevitably contract the market, cut down output and reduce working time.

In pre-war years wages for coal miners in the Maritime Provinces have been lower than in other fields, and the necessity for this disparity was recognized and accepted. It is, however, an unsound policy to attempt to perpetuate an industry through low wages. Therefore, every effort must be exerted to provide, through a return to low cost and efficient production, for the payment of wages that will return a fair and reasonable standard of living to the workers. We are faced with the outstanding fact that, if production in the mines were brought up only as far as the pre-war level of efficiency, the present difficulty would fade and disappear. Such an improvement would provide for the elimination of the present production subsidy and for increases in wage scale, as well as for surplus available to management for necessary mine improvements. The fact is noted in the coal report that one mining operation in this area, operating with the same type of labour, in the same coal seams, and under the same conditions, has been able to maintain output efficiency and operate without subsidy, throughout the war period.

I have said that a return of pre-war efficiency in output would solve the immediate situation, which is true, but the thorough rehabilitation of this area requires even higher output rates. The coal report presents expert opinions that a production rate of 3%2 tons per man day should be possible. Production at the rate of 3% tons per man day would protect the industry against a drop in competitive coal prices, and would permit the industry to look forward with confidence to a stable and reasonably prosperous future. The objective can be attained only through the closest and most whole-hearted co-operation between management and labour, and by the preparation and consistent pursuit of a competent and inclusive plan of operation. The reinvigoration of the industry, once accomplished, would provide inducement for the entry into coal mining of young men, to supplement the labour of those older men who now represent the larger part of the working forces.

I would sum up the Maritime situation by saying that, unless the problems facing the industry are quickly solved, the industry is heading for disaster. All parties concerned must adopt a new attitude and both labour and management must forget ancient grievances and disputes. The problem of restoring the coal industry of the Maritime Provinces to a healthy condition is wrapped up with the continued prosperity of the area, and constitutes a plain challenge to private enterprise, as it is also a challenge to organized labour.

The coal report concludes with both majority and minority recommendations, but it is interesting to note that there is in fact a substantial measure of unanimity. All Commissioners have agreed that it is not practical to contemplate an all-Canadian coal supply, and that the continued importation of coal from the United States will be necessary. There is agreement that this should not preclude the maintenance of a coal producing industry in Canada, upon a level that will afford a reasonable prosperity to the operators, a fair level of employment and wages to labour, and some assurance of adequate coal supply to the nation. There is agreement with the policy of assisting Canadian coal to find a wider market by means of subventions and the present tariff, as that policy has been developed and administered in the past, is sound, and should be continued, although there are some small differences of opinion as to the future scope of the policy. The Commissioners are unanimous in the opinion that nationalization of the industry, in whole or in part, does not offer any promise of improvement over present conditions. There is agreement that a Statutory Board should be established, to carry on the functions of the Dominion Fuel Board, and to assume additional responsibilities in the national interest.

Returning to the supply problem in Ontario and Quebec, geography and economics make it inevitable that these provinces must depend largely on imported coal. Thus the supply is subject to interruptions beyond the control of Canada. Vie had an example last summer, when you will recall that a protracted coal strike in the United States was followed by a protracted seaman's strike in Canada. Strikes in the steel industry in the United States, and later in Canada, curtailed our normal supplies of coke. The combined result was that at September 1st our imports were three and one-half million tons lower for that period than would supply our minimum requirements. I had every reason to fear that Canada would face a situation this winter similar to the present situation in the United Kingdom. However, the Coal Controller and his staff combined with the Canadian Shipping Board, both of which had war emergency powers, in a determined effort to correct the situation. Lake carriers were taken out of their normal trades, and diverted to the carriage of coal. Emergency arrangements were made to transport Alberta coal to Ontario markets, and to move American coal by rail into this area. The result was that the close of navigation found us with our minimum requirements provided for, plus one and one-half million tons of bituminous coal, and one million tons of anthracite coal, as an additional cushion against further interruptions to supply. This correction could not have been made without the agency of over-riding emergency powers. If, in future, Ontario and Quebec is to have reasonable security of coal supply, it seems necessary that the new statutory board must be clothed with emergency adequate to enable that Board to deal quickly with any situation that may arise.

I offer this analysis of Canada's coal problem, based on the recently published report of the Royal Commission on Coal, with the thought that responsible Canadians who are not likely to read the report should have some knowledge of its contents. Whether he knows it or not, the well being of every Canadian citizen can be affected by-coal. Looking back over the period of coal control, it seems to me that we have been more fortunate than we had any right to expect. Had any one of a number of impending disasters to our coal supply actually occurred, Canada's war time experience could have been changed greatly for the worse. The future years may not be as fortunate, and for that reason, if for no other, the joint problem of Canada's coal supply, and the well being of our coal industry; deserves the thoughtful consideration of every Canadian citizen.

I hope that I have made some small contribution to your basic information on this subject.