Prelude to Construction: The Crowsnest Agreement
Although the Canadian Pacific Railway has been a shareholder-owned private company since its incorporation, it has always been closely tied to government decisions and policies. Particularly in the early days of railway construction across Canada, the federal and provincial governments took a key role in railway development. Governments approved routes, granted lands and subsidies for construction, and could determine rates and right-of-way issues. Governments also guaranteed railway loans for construction and, as in the case of the Canadian Northern and Grand Trunk Pacific, ultimately became the owners of bankrupt railways.
In the 1890s, the CPR struggled with the immense task of placing the new transcontinental railway on a paying basis. Branch lines were needed, terminals needed expansion and hundreds of new locomotives and cars were required. At the same time, the economy of North America went into a severe recession or depression in 1893 that took many businesses, including a number of railroads in the United States, into bankruptcy. The Canadian Pacific escaped financial ruin but its resources were stretched to the limits during this period.
Summarizing the situation, William
C. Van Horne, CPR president, wrote to British Columbia Premier John
H. Turner on February 7, 1896:
To finance construction the CPR had
to raise money through the sale of stocks or by issuing bonds and
there was a limit, management felt, on how far the company's resources
could be stretched. Van Horne pushed for a government subsidy, loans
and land grant to help with construction but the political climate
was not always sympathetic and the 1890s were a time of some turmoil
in Ottawa before Wilfred Laurier came to power and formed an effective
government. Frustrated by delays and at the same time lobbying for
support, Van Horne wrote to J. S. Williams, editor of Toronto's Globe
newspaper on April 11, 1896:
Van Horne was a tireless advocate
of the railway and the development of southern British Columbia. On
July 17, 1896 he extolled the virtues of the B.C. mining districts
to the editor, Mr. Clarke, of The London Advertiser in London,
The CPR and the Federal Government negotiated for months and in the meantime the CPR acquired the charter for the Crows Nest Pass Railway in 1897 which gave them the authority to build the line west of the Crowsnest Pass and authorized a land grant from British Columbia of 20,000 acres per mile (5 029 ha/km) of completed railway.
The negotiations were a delicate balance of politics and business. The government could not be seen to be giving away too much to the CPR without concessions particularly those that would benefit business interests in central Canada. Moreover, there was widespread concern about the monopoly of the CPR in the west and a trade off of subsidies for some government control of rates was appealing. In the end, the agreement between the Federal Government and the Canadian Pacific Railway, formalized in legislation called "An Act to authorize a Subsidy for a Railway through the Crow's Nest Pass," made the following provisions:
Several of the clauses in the agreement had very little to do directly with the construction or operation of the railway through the Crowsnest Pass but they became inseparably associated with the railway in Canadian politics and economics because they defined the "Crow Rates" relating to the shipment of western grain from the Prairies.
A formal contract was worked out after the passage of the legislation. The agreement also provided for the development of the coal mines. The Canadian Pacific retained only 3,840 acres (1 554 ha) of coal reserves in the pass and the remainder, except for the federal government reserve described in the legislation, was transferred to the Crow's Nest Pass Coal Company for development. The area was approximately 240,000 acres (97 000 ha). This company was not a CPR enterprise and control of it was gained within a few years by the CPR's rival, the Great Northern Railway.t the same time, the CPR and the federal and provincial governments were under pressure to provide better rail connections between Vancouver and the rich mining districts of the Kootenays. Van Horne could see the need for this extension of the railway but considered the costs, particularly of the sections between the Boundary District and the Fraser Valley to be excessive. However, the company did construct an important branch line south from Revelstoke to the head of Upper Arrow Lake and another from the lower end of Slocan Lake to Slocan Junction west of Nelson. These lines greatly improved services to the West Kootenay and at the same time, the CPR purchased the steamer line of the Columbia & Kootenay Steam Navigation Company which operated most of the sternwheelers on the Columbia River and on Kootenay Lake.