Volume 5    Number 2    March - April 1966

Land Grants:  The Facts of the Matter

For generations many Canadians have been told that, in the early days, the Canadian Pacific was presented with a gift of 25 million acres of the best land in western Canada and $25,000,000. of the people's money. They have been taught that the Company has made untold millions out of this gift, which it is duty bound to apply in aid of its benefactors. But, they have never heard that this money and land were the skimpiest kind of payment for the fantastic risks and obligations that the Company took off the shoulders of the Government in agreeing to build the railway.
 
It is never mentioned that the $25,000,000. and much more was used up in the first construction of the line; that the land was valueless until it had been made accessible by construction of the railway; nor that after the completion of the line had made the land valuable, the Government obliged the Company to surrender its rights to 6,800,000 acres in cancellation of a debt, allowing the company only $1.50 an acre.
 
The public is never informed of the millions of acres of farm lands the company sold to settlers at a few dollars an acre with 20 years or more to pay. Nor do they hear of the thousands of farmers whose balance of indebtedness was cancelled by the Company during the depression. No one remembers the $21,000,000. the Company spent to develop one and a quarter million acres of its lands as an irrigated area, after which it supplied farmers with water at one-quarter of the cost, and finally handed the whole enterprise, including the land, over to a committee of farmers with a grant of $300,000. to get them started.
 
One does hear of the mineral rights retained by the Company when it sold its land to the settlers; but never of the fact that the settlers were not interested in paying more for their lands to acquire the mineral rights.
 
It is appropriate to review here the circumstances which prevailed at the time the agreement was made between the Government of Canada and the Company in regard to the construction of the railway.
 
One of the basic conditions under which the Province of British Columbia entered Confederation in 1871 was that the Dominion Government should provide a transcontinental railway. The pertinent section of the agreement reads:

At that time the following resolution was passed by the House of Commons:

Pending completion of negotiations with private syndicates, the Dominion Government undertook extensive surveys. In negotiations with a syndicate headed by Sir Hugh Allan, the Government offered to contribute thirty million dollars in cash and fifty million acres of land towards the construction of the railway, but the proposal was abandoned when it was revealed that capitalists identified with the Northern Pacific were backing him. The Conservatives resigned office, to be replaced by a Liberal Government, which ( according to Sir Alexander Campbell, speaking in the Senate on 3 February 1881 ) was prepared, in 1874, to offer $27,970,000. in cash, $20,977,500. under a 4 percent guarantee, and a land subsidy of 55,940,000 acres to private enterprise willing to undertake construction. Eventually, however, Hon. Alexandar MacKenzie, the Liberal Premier, decided to proceed with government construction.
 
Progress was slow, and nothing was done to implement the promise to construct the railway from the Pacific towards the Rocky Mountains, so that when Sir John A. MacDonald returned to power in 1878, he realized that action must be taken to prevent a threatened secession of British Columbia from Confederation. The result was that a contract was let to Andrew Onderdonk for construction in that Province. In 1879, Parliament by resolution appropriated 100,000,000 acres of land, from the proceeds of which it was hoped to finance construction.
 
Sir John A. MacDonald soon realized that building a railway meant much more than the construction of a roadbed. It involved also heavy expenditures for equipment and maintenance, and cost much more as a government enterprise than under private auspices. The report of the Royal Commission, which in 1882 investigated this cost, stated:

Finding the burden of financing construction too great a drain on the Treasury, the Prime Minister went to England, hoping to secure aid either from the Grand Trunk or the British Government. The Grand Trunk directors at that time declared themselves opposed to promoting a transcontinental railway through Canadian territory, and the British Government also declined assistance. The Prime Minister then turned to George Stephen, President of the Bank of Montreal, whom he persuaded to form a syndicate to take over the completion and operation of the Canadian Pacific transcontinental line. The opinion in banking circles at the time was that the syndicate was coming to the rescue of the government. A letter in the Canadian Archives from George Stephen to Sir John A. MacDonald, dated 27 September 1880, describes the proposed contract as one "which my friends and my enemies agree in affecting to think will be the ruin of us all". This contract was executed on 21 October 1880.
 
The preamble to the Act of 15 February 1881, ratifying the contract, reads as follows:

The terms agreed upon were that the Company undertook to complete the transcontinental railway by 1 May 1891, and to "thereafter and forever efficiently maintain, work, and run the Canadian Pacific Railway". The consideration stated in the contract was that the government agreed to grant to the company $25,000,000. in cash, 25,000,000 acres of Crown Lands, and the lines already constructed or under contract totalling 713 miles, together with certain customs and tax concessions, and the agreement went on to specify the exact purpose of these grants, which was that:

During construction, almost insurmountable obstacles were encountered and at times it appeared that the venture could not succeed. Some of the Directors were compelled to give their personal guarantees for large amounts to save the enterprise from collapse. It was such determination that pushed the railway to completion five years ahead of the contract date.
 
Many people ignore the fact that the government merely transferred the title to land of little immediate worth to gain important public ends. Some have endeavored to estimate the value of the land to the Company on the basis of the gross selling prices established years later. This is manifestly improper. For example, the Company relinquished to the Government in 1886 6,793,014 acres of the main line grant of 25,000,000 acres in part payment of a loan made by the Government to aid construction of the railway. The value per acre agreed upon at that time, five years after the grant and a year after completion of the railway, was $1.50. The Company actually gave the land its commercial value, a value which was also imparted to all other lands tributary to its lines. From the outset, it has followed the broad policy of developing western Canada as quickly as possible. The Company's expenditures for colonization, land settlement, irrigation, and other similar works have been very large, and the country had received great benefits from the sound settlement and development policies pursued by the Company.
 
When the Canadian Pacific Railway Company was incorporated, Canada was little more than a geographical expression and the population west of the Great Lakes did not exceed 170,000. With completion of the CPR's main line, the country became a nation.