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History of Saskatchewan and The Old North West
Chapter XVII - The Building of the Canadian Pacific Railway

Sandford Fleming's Reconnaisance—Sir Hugh Allan Organizes Company—The Pacific Scandal—Mackenzie's Railway Policy —Railway Reserves—Tupper's Announcement of New Railway Policy (1879) —Futile Mission to England (1879)—Successful Mission (1880)—Blake's Criticism of C. P. R. Charter—Counter-Proposition of Canadian Capitalists—Why Rejected— Services of Van Horn and Stephen—Bankruptcy Narrowly Averted—Unprecedented Speed of Construction.

The building of the Canadian Pacific Railway has exercised, and will for long continue to exercise, an extraordinary influence on the history of Saskatchewan. To this great enterprise we shall therefore devote the present chapter.

An exploratory reconnaisance was made for railway purposes in 1871 by Mr. Sand ford Fleming, acting for the Dominion Government. The task set Mr. Fleming and his associates was stupendous. From Ottawa to the Red River the line passed through a country hitherto all but impenetrated. The vast prairies presented relatively few engineering difficulties, but any previous accurate knowledge of the geographical details regarding the Territories was meagre in the extreme, and it was necessary to prospect the line to avoid the most formidable river crossings, to serve the best agricultural country, and to follow the shortest possible route to the mountain passes through the Rocky Mountains. The difficulties of the survey are beyond all description. The cost of these preliminary operations ran well over three million dollars up to December 31, 1879. and they were unavoidably marked by much hardship, and even by many tragedies. Fleming and his colleagues favored a route much to the north of that finally adopted in the North West, and in consequence much of the fruit of their labors was lost; but their investigations rendered available a wealth of information regarding the country and did much to facilitate its settlement.

It is to be remembered that by the terms upon which British Columbia entered Confederation in 1871. the Federal Government promised the immediate construction of a railway from the Pacific toward the Rocky Mountains and thence eastward to connect with the railway systems of Canada, and that the Dominion agreed to complete this transcontinental railway by 1881. During the session of 1871 a bill was introduced to charter a Pacific Railway Company. However, most of the prominent members of the proposed company were American capitalists, and the terms they offered were unsatisfactory to the Government. Consequently this bill was dropped. Next year an act was passed to provide for the required railway. The Government was given power to arrange terms with any railway company and to subsidize it to the extent of thirty million dollars of money in addition to a vast land grant. Two companies presented themselves for incorporation in competition for the charter—The Canadian Pacific Company, organized and under the presidency of Sir Hugh Allan, and the Inter-Oceanic, under Senator D. S. McPherson. An attempt was made to amalgamate these concerns, and on its failure Sir Hugh organized a new company, composed exclusively of Canadians. Its board of directors included a group of men widely known and trusted.

In the session of 1872 the charter of this company was duly ratified, but hi the following year matters came to a standstill as a result of the charge that Sir Hugh Allan had obtained the favor of the Government by corruptly furnishing money for election purposes. A committee of the House commenced an investigation which was ultimately transferred to a special royal commission. The evidence adduced proved that Allan had contributed largely to the political funds of the dominant party, and, though no personal appropriation of any of the money by any of the cabinet was proved, public indignation over this so-called "Pacific Scandal" obliged Sir John A. Macdonald to announce his resignation in November, 1873.

The new premier, the Hon. Alexander Mackenzie, declared that, while the speedy construction of the transcontinental railway was essential, it should be consummated at the minimum expense; consequently use should be made of all possible natural links in the way of navigable waters and the building of the line through regions unsuited for settlement should be postponed and obviated for the time being by establishing communication with American lines. He considered that the original bargain with British Columbia was incapable of fulfillment, and proposed to treat with that province for some modification of its terms. The road, moreover, was to be built by the Canadian Government itself. Mackenzie's railway policy was unsatisfactory to the West, and to the people of British Columbia in particular; and, indeed, for a time it endangered the unity of the Dominion. In 1876 the Government published an advertisement calling for tenders for the building of sections of the Canadian Pacific Railway between Lake Supcrior and the Pacific Ocean. This proposed departure from the cabinet's policy of building the road as a Government work met with a discouraging reception, as capitalists could not be induced to undertake the contract. Accordingly the building of the road under the Government supervision continued.

The Pacific Railway Act, under which provision was made for its building, had provided for the reservation of large areas along the line, the sale of which would ultimately reimburse the Government. The Territories had no representatives in the House of Commons, but the members from Manitoba vigorously protested against the locking up of these reserves, and in 1877 the law was slightly changed, and the purchase of such land by actual settlers was rendered possible. Even yet, however, in the settlement belt, there was left a tract of about a hundred and fifty thousand acres of public lands, upon which numerous pioneers were already living, but which was officially declared to be withdrawn from sale 01* settlement. The Honorable Mr. Mills, however, after visiting the country, opened these lands also for purchase at $5.00 in scrip per acre, which really meant $2.50 per acre. The disputes over these land regulations of course delayed the building of the railway, and relatively little had been accomplished, when in October, 1878, the Mackenzie Government was defeated and Sir John Macdonald returned to power.

In .May of the following year the lion. Charles Tupper, Minister of Public Works, announced the new Pacific Railway policy. It provided for the appropriation of ten million acres of land for the purposes of constructing the road. This again filled the West with alarm, and the first land regulations were so objectionable that the Government was forced to amend them a few months later. Into these we cannot enter. Those ultimately adopted by the then Government were some improvement upon those introduced by Mr. Mackenzie, but they entailed upon the West the loss of many thousand of desirable immigrants, who turned to the western States, where the laws relating to the settlement and the acquirement of public lands were less onerous.

In this same year Messrs. Macdonald and Tupper visited England in an effort to raise capital for the railway, but the mission failed, and the Government was obliged to fall back on the policy of its predecessors, conducting the building of the road as a Government work. A resolution was now passed to increase the appropriation of land for construction purposes, in Manitoba and the Territories, to the stupendous area of a hundred million acres. In other words, the West was to pay for the railway.

By the end of 1879, 833 miles of the road had been completed. By June 30, the close of the fiscal year, the total expenditure on the work to date amounted to about twelve and a half million dollars.

In July, 1880, the Premier and Sir Charles Tupper, together with Lieutenant-Colonel Dennis and the Hon. J. C. Pope, again went to England to secure the aid of capitalists, and on their return Sir John announced the successful formation of a great syndicate. On December 10, when Parliament assembled, the contract was laid before the House. The historic debate upon the terms of the charter commenced three days later and closed on January 28, 1881.

The terms of the new charter were bitterly resisted by the Hon. Edward Blake, now leader of the opposition. He pointed out that the Act of 1874 provided for the submission of tenders, and that the Government, while materially altering the conditions under which the work was to be performed, had departed from the Act by failing to invite tenders under the new terms. Under the Act the land grant to the company would have been taxable, while under the contract it was exempted from all taxation, Dominion, Provincial or Municipal, for a period of twenty years, unless previously sold. By the Act, Parliament had reserved to the Government unrestricted power in the regulation of tariffs; but by the contract this right was to be in abeyance unless and until the company should be making a net revenue exceeding ten per centum on the capital invested. The Government had also forfeited its control over the accommodation to be provided and its right to acquire the railway at any time that public interest might demand. In many other important respects the proposed charter violated the provisions previously laid down by Parliament, and in every instance to the company's immense advantage.

Mr. Blake pointed out that five weeks after the new conditions had been made public Canadian capitalists of high standing, including Sir William P. Howland, William Hendry, John Walker, George A. Cox and many other men of ample means, credit and business ability, had caused to be laid on the table of the House an offer in terms much more favorable to the country. While the proposed charter called for a cash subsidy of $25,000,000 and a land grant of 25.000,000 acres, these gentlemen offered to undertake the work for three million dollars less in cash, and three million acres less in land. The new tenderers proposed to accept $6,600,000 and 1,000,000 acres instead of $9,000,000 and 11,250,000 acres for the prairie section of nine hundred miles. A similar reduction was offered upon the western section to Kamloops. While the contract exempted the company from customs duties on construction material, the new offer involved no such exemptions, and even surrendered the proposed immunity from ordinary taxation. The tenderers were furthermore willing to leave with the Governor-in-Council unrestricted powers for the regulation of their tolls, and had placed on deposit, as security for the fulfillment of the contract if their tender were accepted, the sum of $1,400,000.

To present-day westerners familiar with the grievances resulting from the Canadian Pacific Railway Company's immunity from taxation and from Government supervision regarding accommodation and rates, it is rather bewildering to find a Government rejecting the offer of the Howland Syndicate on the plea that it was not genuine, and confirming the contract as introduced by the Government. However, Sir John believed that the proposed agreement embodied the only chance of having the road built within a reasonable time, and on January 28, 18S1, he introduced a bill for the incorporation of the Canadian Pacific Railway Company. Resistance to his policy now entered on a new stage and the opposition fought the bill persistently; nevertheless, it became law on the 15th of February.

Air. William C. Van Home (who was subsequently knighted) was presently appointed general manager of the new company (upon the recommendation of Mr. James J. Hill), and Air. George Stephen, better known by his later title of Lord Mount Stephen, was chiefly entrusted with the charge of financing the company in England. The difficulties surmounted by these two remarkable men were enormous. Incidentally, by persistently advertising Canada, and especially the North West to facilitate the sale of their lands, they unquestionably performed an indirect public service to the Dominion, the value of which can never be calculated.

By the fall of 1883 only $65,000,000 of the $100,000,000 capital stock had been sold, and the company's lands failed to provide as yet any considerable revenue. Nearly all their funds had already been expended, and for a time the company was face to face with bankruptcy. Even the action of the Dominion Government in now guaranteeing three per cent dividends on C. P. R. stock failed to reassure the investing public, and in 18S4 it was necessary to apply to the Government for a loan which raised the indebtedness of the company to the Government to the stun of $29,880,000. Furthermore, Mr. Stephen and Mr. Donald A. Smith (Lord Strathcona), in order to tide over the crisis, pledged their own personal means. But for the heroic faith of these two men and their immediate colleagues, the enterprise would have collapsed in general failure and ruin. Nor must we of today, who enjoy the results of western development that the building of the Canadian Pacific Railway rendered possible, fail to accord the gratitude justly due to the Government of the hour. When the public realized that the Dominion Authorities were determined to ensure the immediate and successful performance of the work, no matter what the odds against it. the company's position in the money market commenced to improve, and by 1887 it had freed itself from all indebtedness to the Government. Had the company failed, it would not only have brought about the defeat of the Government, but would have overwhelmed Canada in financial disaster.

While Messrs. Stephen, Smith, R. B. Angus and their co-directors were fighting the financial battles of the company, Air. Van Home was pressing forward its construction with a speed unexpected, and, indeed, unprecedented. The contract had allowed ten years for the work, but on November 7, 18S5, Mr. Donald A. Smith was called upon to drive the last spike. Two thousand four hundred miles of new railway had been built, equipped and put in operation in five years. More than three hundred miles of the road consisted of cuttings through the solid rock, and space would fail us to detail the engineering difficulties that had been overcome.

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