• July 1, 1942, Canadian Pacific Air Lines started operations.

• August 1950, railway unions held the first nationwide strike in Canada - legislation was passed to send the strikers back to work after nine days.

As Canada approached its 71^st birthday in the spring of 1938, newspapers delivered daily reports of the latest skirmishes in Spain's civil war and of the growing menace of fascism as Adolf Hitler's shadow crept ominously across Europe.

At home, the national economy was shaking off the lethargy that had gripped it for almost a decade in the Great Depression.

On May 17, the Canadian Press reported that "more than 585,000 motor vehicle licences have been taken out in Ontario this year, 61,000 more than in the same period last year."

A few days later, the Ottawa Citizen reported that "three days ahead of schedule, the Dibblee Construction Company started work this morning on grading Uplands Airport for Trans-Canada Air Lines, preparatory to laying two runways. ...Work on the airport is being rushed so that the runways will be ready by June."

On July 2, the Citizen reported that the federal Cabinet was still working, although Parliament had been prorogued the day before, on the Dominion holiday. "Governor General Lord Tweedsmuir was on hand for the prorogation ceremony at midnight Thursday night (June 30) but when it was found impossible to wind up business by that time, Prime Minister Mackenzie King advised him not to postpone his vacation trip to England.. ...Mr. Justice Cannon, acting as deputy to the Governor General, prorogued the session at 3:40 p.m. (on July 1)."

The House had been occupied with the passage of several bills in its last days before the summer break. One of the bills passed was the Transport Act, which created the Board of Transport Commissioners with authority over inland waterways and airlines, along with jurisdiction over railways, telegraphs, telephones, and express companies, inherited from its predecessor, the Board of Railway Commissioners.

The press made little mention, during those formative days, of the man who had directed the Board's creation. But for the next 19 years of its existence the Board of Transport Commissioners would constantly be aware of C.D. Howe's presence and of his power over transportation policy.

Howe was 49 years old in 1935 when he won the Port Arthur riding in Northwestern Ontario. Mackenzie King, recognizing him as a shrewd, tough-minded businessman, pulled him into his new cabinet.^[1]

By 1938, as the Minister of Transport, Howe had made major policy changes to the transportation industry. He had no patience, however, for the political life and he made no bones about it. A typical remark was: "I do not think I'm doing anything useful when I sit in the House and listen to the kind of blather that's being talked here."^[2]

Despite his shortcomings in diplomacy, Howe was one of Mackenzie King's most successful cabinet ministers. In 1937, he had spearheaded the organization of operating and ground services for Canada's first transcontinental air system. He then oversaw the creation of Trans-Canada Air Lines, the country's first publicly owned airline, as a subsidiary of the publicly owned CNR, and with a monopoly over the international and transcontinental routes, and over airmail service. Throughout his political career, TCA would remain Howe's favourite project.

According to the Transport Act, the Board was given authority over air and water transport, but its powers over these two modes were much more limited in scope than over railways. For instance, with inland water transportation, the Board had jurisdiction over licensing and rates, but not over other matters. In the aviation sector, the Board had power of approval for licensing and rates for air service between specified points in Canada, or between specified points in Canada and outside, but the actual points and places of its jurisdiction would be determined by cabinet.

A TCA crew aboard a Canadair DC-4M North Star, 1950, CSMT/CN000256

The Transport Act also gave the Board the power to approve agreed-upon charges between carriers and shippers. This section of the Act allowed the heavily regulated railways to compete in specific areas with the unregulated truckers, for instance, by making agreements for special rates with large-volume shippers for a minimum quantity of freight.

The new Board continued with the same commissioners who had been appointed to the previous Board, and with the same staff.

The Annual Report of 1939 describes the added workload: "A great deal of correspondence, discussion and detailed work has been necessary in respect to the licensing provisions of the Transport Act, particularly so in respect to aviation," wrote W.E. Campbell, director of the Traffic Department. "A large amount of educational work has been necessary in the preparation and the filing of tariffs; also, it has been necessary to investigate alleged violations of licences, tariffs, etc., much of which might have been avoided had there not been such an extraordinary lack of co-operation among the various companies, and a greater appreciation of the necessity to comply with the principles laid down in the Act."

The Annual Report made no mention of the cataclysmic events of the late summer of 1939 that would take Canada into another world war. For several years, tensions had been building in Europe as Germany's Hitler led a campaign of aggression against neighbouring countries. In 1938, there were plans afoot for a British Commonwealth Air Training program to be set up in Canada. When Hitler invaded Poland in the fall of 1939, there was no turning back. On September 10, 1939, Canada declared war on Germany.

In the 1940 Annual Report, Chief Engineer D.G. Kilburn wrote that besides the normal work of the department, "war conditions have imposed additional duties. Many new industrial war plants and air fields have been constructed and existing plants enlarged. The consequent increased traffic on the railways brought about additions to existing railway track facilities and, to meet growing war-time demands for railway transportation services, further additions are under consideration. These increased facilities involve examination, inspection and approval."

World War II created a boom in Canada's transportation industry. By the second year of the war, CNR reported revenues of over $300 million and, for the first time in many years, it was not dependent on the public purse. ^[3]

Meanwhile, the approval of freight rates was removed from the Board's jurisdiction during the war. As noted in the Annual Report of 1941, "Order in Council P.C. 8527 of November 1^st, 1941, imposed restrictions upon the rates charged for transportation and communication services. The facilities of this department are being utilized to assist the Wartime Prices and Trade Board in carrying out the provisions of the Order in Council." The government froze prices and wages to the level prevailing between September and October 1941.

As the Board reiterated in later war-time reports, "There can be no increase in any rates or charges for transportation of goods or passengers ... without the concurrence of the Wartime Prices and Trade Board."

Meanwhile, the Board carried on with its regular duties of issuing licenses, approving abandonment and construction of railway lines, administering the Railway Grade Crossing Fund, and investigating railway accidents and fires.

On November 3, 1939, Hugh Guthrie, the Board's chief commissioner, died at the age of 73. Guthrie's successor was Colonel James Albert Cross who had been Saskatchewan's attorney general from 1922 to 1927, under two Liberal premiers. In World War I, he had served as an officer with the 28^th Battalion and had been made a companion of the Distinguished Service Order.

On April 1, 1940, the Ottawa Journal described Cross as "a modest soldier-lawyer, who once was elected to the Saskatchewan legislature without making a single speech" and "at 63, he looks a good ten years younger."

On April 9, C.D. Howe became Minister of Munitions and Supply, a department specifically created to give the government control over industry during the war years. He also kept the post of Minister of Transport.

Throughout his career, Howe maintained a protective interest in Trans-Canada Air Lines. He considered the airline his own creation, and watched closely any Board decisions that affected the air industry. (In fact as late as June 20, 1950, when Howe was Minister of Trade, Opposition Leader George Drew passed a motion in the House of Commons to have jurisdiction over TCA turned over to the Transport Minister, and out of Howe's control. The motion was voted down.)

The Board's role in aviation was unclear from the first. The Transport Act stipulated that the Board had jurisdiction over points and places that were specifically named by cabinet. In several instances, when the Board made a decision regarding an air licence, the cabinet overruled the Board by "unnaming" the route, and thus removing it from the Board's jurisdiction. Also, if the Board turned down a licence for an air operator to fly to a place which had been named by cabinet, the ruling could be circumvented by the air operator flying to an "unnamed" place near the named place.^[4]

Soon after TCA was created, Canadian Pacific Railways, which briefly had been included in a proposal to create the national airline, decided to create its own air service. On July 1, 1942, Canadian Pacific Air Lines started operations. It had bought up several air routes from smaller operations, and with Board approval had air licences that expanded its territory into several markets.

One of its purchases was an air company that flew between Victoria and Vancouver. At the time, TCA did not fly between the two cities because there was not a proper landing site at Victoria for its larger planes. But when an airport was built that TCA could use, it applied to the Board of Transport Commissioners for a licence to deliver mail and provide passenger service to Victoria.

The Board was faced with a difficult decision that would, on the one hand allow the duplication of services, and on the other hand block the publicly-owned TCA from fulfilling its transcontinental mandate. The Board ruled that TCA could deliver mail between Vancouver and Victoria and also that it could provide air passenger service, but only as a continuation of its transcontinental route. That left the local passenger service, which represented the majority of the traffic, to Canadian Pacific Air Lines.^[5]

In the House of Commons, on June 11, 1944, Howe expressed his opinion of the Board's performance: "The Board of Transport Commissioners is bound by the Transport Act and is concerned chiefly with railway problems. The effect of the administration of the Board was this. In 1938, when the Act was passed, there were a great number of independent air operations in this country. Four years later, there was only one independent air operation. Every other air operation in the Dominion was owned and operated by the railway companies." Canadian Pacific, under Board approval, had bought more than 40 air operations in those years. Howe was concerned that the private railway company had been allowed to purchase such a large share of the domestic air services.

On the matter of the Victoria-Vancouver route, Howe said: "The Board ruled that Trans-Canada Air Lines must operate from Vancouver to Victoria with empty seats, because there was another air operation connecting the two centres. The fact that the other operation was overcrowded and could not begin to handle the traffic, and could not obtain planes sufficient to carry the traffic did not weigh with the Board."

On September 11, 1944, the Transport Act was amended to provide for "the removal of commercial air services from the jurisdiction of the Board of Transport Commissioners."

The Aeronautics Act, at the same time, created a new Air Transport Board to provide licensing and regulatory functions. In the House of Commons, Howe explained the new Aeronautics Act: "A much more scientific as well as a fairer method, a method more in keeping with the supremacy of Parliament is being adopted."

Mackenzie King had made an earlier policy statement about the airline industry. "Competition between air services over the same route will not be permitted," he had baldly stated in the House of Commons on April 2, 1943. And although he had added that there would be areas where private enterprise would participate, Mackenzie King made it clear that the government's air policy was to effect for Canada "a freedom of action in international relations because it was not limited by the existence of private interests in international air services." At the end of World War II, the government wanted to control the air industry and ensure its development, avoiding the problems the railway industry had suffered at the hands of private enterprise.

The Air Transport Board's role was clearly laid out in the Act as an administrative body, subject to close ministerial control. The Air Transport Board could issue licences and regulations, but only subject to the approval of the Minister of Transport. Also, the Air Transport Board was responsible for recommending policy changes to the Minister. In effect, it had none of the independence of the Board of Transport Commissioners.

Another policy change introduced by C.D. Howe involved ownership of the airlines by the railways. On March 17, 1944, Howe stated: "It is becoming obvious that ownership of airways by our competing railway systems implies extension of railway competition into transport by air, regardless of the government's desire to avoid competition between air services. The government has decided that the railways shall not exercise any monopoly of air services. Steps will be taken to require our railways to divest themselves of ownership of airlines to the end that, within a period of one year from the ending of the European war, transport by air will be entirely separate from surface transportation."

The effect of requiring the CPR to divest itself of the Canadian Pacific Air Lines would be considerable expense and time spent on the reorganization. As was apparent in this and other policy statements, Howe was determined to advance the cause of the publicly owned Trans-Canada Air Lines at the expense of private enterprise. (The divestiture policy was reversed, however, in 1946 and CPR was allowed to keep its airline.)

The first chairman of the Air Transport Board was R.A.C. Henry, who had worked for CNR and had been deputy minister of Railways and Canals in 1929 to 1930. In 1940, he had assisted in the development of the Department of Munitions and Supply. The two other members were Air Vice Marshall Alan Ferrier of the Royal Canadian Air Force, an aeronautical engineer, and J.P.R. (Roméo) Vachon, a pioneer in the Canadian aviation industry with experience in both flying and aeronautical engineering.

In future years, many of the members appointed to the Air Transport Board were drawn from the civil service. This practice reinforced the already close relationship between the Air Transport Board and government.^[6]

The Air Transport Board was not required to submit its own annual reports, another indication of its lack of autonomy. However, it did issue one report for the period September 11, 1944 to December 31, 1946. That document was directed to the Minister of Reconstruction and Supply, a new position created for C.D. Howe in late 1944.

That Air Transport Board Annual Report, which was published in 1947, clearly advanced the government's thinking: "In accordance with laid down policy, direct competition is not permitted on scheduled air routes. The reason is that, at the present stage in the development of air transportation in Canada, the volume of traffic is such that there is not room for competing services and it is considered uneconomical to try to divide the small available business between two or more carriers. While at some later date a policy of competition might be justified, at the present time it would be disastrous and is considered to be against the public interest."

As Minister of Reconstruction, Howe had a mandate to direct the post-war reorganization of industries and manpower. He still held the portfolio for Munitions and Supply, and was on his way to earning the sobriquet "Minister of Everything."

Howe was also still in a position to direct transportation policy after the war. The Board of Transport Commissioners' Annual Report, covering the period of 1945, stated: "During the year the Board of Transport Commissioners was asked by the Department of Reconstruction to make a survey of possible railway crossing eliminations at certain priority points throughout Canada, having in mind public convenience and necessity, together with possible post-war employment."

A Bureau of Transportation Economics was created in 1946 to provide economic and statistical studies for both the Board of Transport Commissioners and the Air Transport Board.

Wage and price controls were dropped at the end of the war, and soon a clamour for higher wages was heard. In 1946, both the Canadian National and Canadian Pacific railways raised their wages in response to union agitation.^[7]

Inevitably, the Railway Association of Canada, representing CNR and CPR, applied for a general increase in freight rates to offset the increased operating costs and declining volume of post-war traffic. After 150 days of hearings, the Board rejected the railways' application for a 30 per cent increase.

On March 30, 1948, the Board settled on an increase of 21 per cent, using a cost-revenue methodology. Seven of the nine provinces (not Ontario or Québec) appealed the decision to cabinet, claiming the Board had lost the public's confidence by its methodology. While the government reviewed the decision, it asked the Board on April 7, 1948, to conduct a general freight rates investigation. Meanwhile, the Railway Association sought another 20 per cent increase from the Board.^[8]

On June 30, 1948, Chief Commissioner Cross, now 72, in poor health and worn down by the contentious freight rates issue, resigned. There was nothing in the local papers on July 1, 1948, about Cross's resignation – or about his replacement, Justice Maynard Brown Archibald. The big news on that day was Prime Minister Mackenzie King's announcement in the House of Commons that he would be retiring.

Justice Archibald had been appointed to the Supreme Court of Nova Scotia in 1937, and was appointed to the Exchequer Court of Canada on the same day that he was appointed to the Board of Transport Commissioners. The Board's Annual Report for 1948 explained that an amendment to the Railway Act that year provided that the Chief of the Board of Transport Commissioners would be a judge of the Exchequer Court (now the Federal Court).

Meanwhile, the Board continued to hear the Railway Association's second request for a freight rate increase. The Board decided to give an interim increase of 8 per cent on July 27, 1948. CPR appealed to the Supreme Court and the Court ruled that the Board should make a final decision.

In October 1948, the government rejected the appeal by the provinces in what came to be known as the 21 per cent case, the rate increase originally approved by the Board in March 1948, and asked the Board to review its decision. The government also decided to set up a royal commission to study transportation. In January 1949, W.F.A. Turgeon, formerly a judge in Saskatchewan, was appointed to head a royal commission that would study freight rates and transportation policy.

And the Board, following the Supreme Court order, authorized a freight-rate increase of 16 per cent, but again the Railway Association returned, claiming the Board had miscalculated the shortfalls. The Board's final decision was a 20 per cent increase announced on July 27, 1949.

In 1948, the Board had also dropped the mountain scale (established in 1914 as a higher railway rate for traffic in the Rockies) in response to an application from British Columbia.

It was a tumultuous time for the railways and by extension for the Board of Transport Commissioners. The combination of fierce competition from trucking and air operations exacerbated by higher operating costs was putting extreme pressure on the railways, which were already shackled by stiff regulations.

Meanwhile, the shipping industry had experienced a huge burst of expansion in the war years, most of it created by the federal government. In 1947, in an effort to stem the post-war decline in the industry, the government created the Canadian Maritime Commission. The Commission's responsibilities included administering subsidies and recommending policies to the Minister of Transport.

The Board of Transport Commissioners continued to approve licences and rates for inland water transport, and still had jurisdiction over telegraph, telephone and express companies. In 1949, it was given jurisdiction over licensing of oil and gas pipelines. But the majority of the Board's workload remained railway regulation.

In August 1950, railway unions seeking higher wages and better benefits held a nationwide strike, the first in Canadian history. Legislation was passed to send the strikers back to work after nine days. The government appointed Mr. Justice R.L. Kellock, of the Supreme Court of Canada, as an arbitrator to settle the dispute. After hearing both sides, Kellock granted a wage increase and directed that a 40-hour, five-day week should be instituted as of June 1, 1951. This ultimately would put more pressure on the railways to increase their rates.^[9]

The Board of Transport Commissioners, meanwhile, was the target of criticism from various quarters for its handling of the railway problems. A particularly scathing attack against the Board was delivered in the House of Commons on June 21, 1950, by Opposition Leader George Drew. At this point, the Liberals had been in power in Ottawa for 15 consecutive years and Louis St. Laurent had been the prime minister for two of those years.

Victoria inner harbour looking southeast, British Columbia 1947, photographer: W. Atkins, CSMT/CN000238

Drew began with a denunciation of the Board of Transport Commissioners, saying "it had demonstrated itself to be incompetent by its own actions during this extended period (of freight rate hearings)." Then he launched into a long diatribe liberally laced with the word "incompetent", and recommended that the Board be disbanded and that a new board be created. In response to the criticism, it was noted in the House that Justice Archibald, the Board's chief Commissioner, was "gravely ill."

The report from the Turgeon Royal Commission was tabled in the House of Commons on March 15, 1951. It recommended an equalization of freight rates; that the Board of Transport Commissioners establish a uniform system of classification of rates throughout Canada, excluding the Maritimes; that the Board establish a uniform system of accounts and reports for the railways; and that the lower rates on grain and flour as set out in the Crowsnest Pass Agreement of 1897 continue. It also recommended that the Board deal with applications at a speedier rate.

On October 30, 1951, Transport Minister Lionel Chevrier dealt with more criticism about the Board of Transport Commissioners. The resignation of the 60-year-old Justice Archibald was set for the next day, and Opposition members took the opportunity to attack the Board again. In defending the Board's members, Chevrier blamed the problems on staff shortages.

"The Board is lacking in expert staff. That is a fact," Chevrier told the House of Commons. "The Board has not the required traffic advisers that it should have. ... Traffic experts are almost impossible to find in this country."

The new Chief Commissioner was John D. Kearney, a lawyer and career diplomat.^[10] He had held several foreign posts that had earned him a reputation as an incisive and astute arbitrator. He had headed the Canadian mission in Dublin from 1941 to 1945, and, in 1947, became the first Canadian High Commissioner to India after that country achieved independence. Kearney's appointment to the Board coincided with his appointment as a Justice of the Exchequer Court of Canada. An amendment to the Railway Act in 1952 would make the appointment of Chief Commissioner an automatic appointment to the Court of the Exchequer.

In January 1952, the Board began hearings on rate equalization. After a long series of consultations, equalization on class rates finally went into effect in March 1955.

A new department of Accounts and Cost Finding was set up by the Board to handle the uniform classification of rates and associated accounting systems.

While the Board continued to deal with freight-rate applications, other issues were brewing.

In 1949, Newfoundland joined Confederation. The new province's railways became part of the CNR system, and eventually decisions about the province's freight rates and other railway issues fell within the Board's jurisdiction.

In 1955, the Railway Act was amended to increase Parliament's annual appropriation of funds to the Railway Grade Crossing Fund to $5 million. The amendment was based on a report submitted on May 10, 1954, after the Board carried out a Canada-wide investigation of railway-highway crossing problems.

An amendment to the Transport Act in 1955 removed the necessity of the Board's approval for agreed charges. The amendment gave greater freedom to carriers to make specific agreements on charges, the only requirement being that the charges be filed with the Board 20 days prior to their taking effect.

The Liberal government, in 1955, commissioned Walter Gordon, an accountant who had worked for the Bank of Canada and the Finance Department, to head a royal commission on Canada's economic prospects. One section of that study was dedicated to transportation, under the supervision of J.C. Lessard, a former deputy minister of transport. The report, issued in 1956, highlighted the changing trends in passenger and freight transportation in the 25-year period from 1928 to 1953. In 1928, almost 60 per cent of passenger travel had been by private automobile while close to 40 per cent used rail transport. In 1953, close to 80 per cent was by private car and just over 10 per cent by railway. Buses represented close to 7 per cent of passenger travel in 1953 and airplanes 3 per cent.

Similarly, the 1950s saw widened freight competition with the expansion of long-haul trucking companies, the introduction of gas and oil pipelines and the construction of the St. Lawrence Seaway, which allowed larger ships to travel from Montréal through the Great Lakes as far as Thunder Bay.

The discovery of oil in Leduc, Alberta, on February 13, 1947, had created a new domain over which the Board was given jurisdiction – oil and gas pipelines crossing interprovincial or international boundaries. Other oil fields had been opened up in Canada in previous years, but the Leduc find set off a burst of oil development. The Board's Annual Reports document a succession of applications and approvals for pipeline construction over the next few years.

As the wealth of Alberta's oil and gas resources became apparent, the search for profitable markets got under way. Although U.S. markets could easily be reached over Alberta's southern border, Ottawa expounded a policy of serving Canadian markets first. In practice, however, companies were allowed to build pipelines to both American and Canadian destinations because Canadian markets alone could not support the costs of constructing the lines.

In 1953, C.D. Howe, now in the Trade and Commerce portfolio, seized upon a scheme put forth by TransCanada PipeLines, to build a gas pipeline from Alberta to Ontario and Québec. Howe envisioned the cross-Canada pipeline as a national project reminiscent of previous transcontinental endeavours, like the Canadian Pacific Railway in 1885.^[11]

In 1954, TransCanada PipeLines applied for a permit to construct the 2,188-mile pipeline from the Alberta-Saskatchewan border through Manitoba and Ontario as far as Montréal. The Board of Transport Commissioners granted the application subject to the company satisfying the Board that it had financing for the project by December 31, 1954, and that it had a completion date of December 31, 1957.

TransCanada soon realized, however, that the cost of construction was beyond its means. The company, which was partly American-owned, applied to Ottawa for financial aid, but was refused. In August 1955, Howe proposed a Crown corporation that would build the unprofitable section of the pipeline from the Manitoba border to Kapuskasing, in northern Ontario. Northern Ontario Pipe Line Crown Corporation would then lease the pipeline back to TransCanada. Howe's plan was a circuitous way of helping the company, without giving it money outright.

TransCanada PipeLines then sought financial backing to buy the actual pipe needed for the project. An American company agreed to supply the pipe in return for part ownership. That deal brought American ownership of the cross-Canada pipeline to more than 75 per cent, along with a stipulation that the order for the pipe would expire on June 7, 1956.

Construction problems did not end there. Howe introduced legislation to set up the Northern Ontario Pipe Line Crown Corporation in March 1956. By May, the Federal Power Commission in the United States still had not approved import of gas to that country, part of the scheme that would see a branch pipeline crossing into Minnesota. This rejection dissolved hopes for American financial help to build the rest of the line.

On May 8, 1956, the Canadian government proposed lending to TransCanada PipeLines 90 per cent of the cost of the line between Alberta and Winnipeg. By then, the deadline for passage of the TransCanada PipeLines bill was a month away, on June 7.

Opposition to Howe's plan had been building in the House of Commons. On May 14, the Toronto Globe and Mail announced that the government planned to use closure "to ram through its pipeline legislation in short order."

When the Opposition complained, the Globe wrote: "Howe sprang to the attack charging his opponents with 'a vacancy of mind, a refusal to face the facts, or the easy irresponsibility of those who need not produce a workable course of action.' "

When the Opposition cried that the pipeline legislation was a "sellout," Howe dismissed it as words "one might expect to hear from a banana republic revolutionary, but not from any Canadian statesman."

On May 24, the Board of Transport Commissioners gave permission to TransCanada PipeLines for construction of the Western section from Alberta to Winnipeg. Mitchell Sharpe, then the assistant deputy minister of Trade and Commerce, attended the hearing on behalf of Howe. Sharpe read a statement supporting the permit.

The battle that ensued in the House of Commons was one of the most ferocious of the 1950s. The opposition parties claimed that the government was subsidizing a pipeline that was owned largely by American interests. A united front of Conservatives and the Co-operative Commonwealth Federation conducted a filibuster with long speeches, a steady barrage of questions, points of order and objections to prevent the tabling of the bill and to stall voting. The government retaliated with closure, a rarely used device to put the bill to a vote at various stages without further debate.

In the early morning of June 6, 1956, the TransCanada PipeLines bill was passed in the House of Commons, and then quickly passed in the Senate. It was given royal assent on June 7, six hours before the option for the purchase of the pipe would have expired.

Opposition Leader George Drew called for a vote to censure Speaker René Beaudoin for "subordinating the rights of the House to the will of the government." That vote was lost, but the Liberals continued to be derided for their undemocratic methods in pushing the pipeline bill through Parliament.

On January 15, 1957, Justice John D. Kearney resigned as Chief Commissioner of the Board. At the age of 63, he went to sit on the Exchequer Court. Clarence Day Shepard, a 42-year-old corporate lawyer, moved into the Chief Commissioner's chair on the same day. Shepard had the distinction of being the youngest man to serve as Chief Commissioner since the first Board was appointed 53 years before, and the first veteran of World War II. He had served on the boards of several major companies, and had the vigour and energy of his youth.

The country went to the polls on June 10, 1957, and ended more than 20 years of Liberal rule. The new government would be formed by the Conservatives, under John Diefenbaker, a firebrand lawyer from the Prairies who had already established himself as a tough opponent in the House of Commons.

In the next few days, however, while Ottawa eagerly awaited the arrival of the new prime minister, Diefenbaker was occupied with travel arrangements. He and his wife, Olive, wanted to fly with his staff to Ottawa on an overnight TCA flight from Saskatoon. But as the Globe and Mail reported on June 14: "The Diefenbakers have been dickering with TCA in an attempt to get at least one staff member on the all-night flight."

In the end, TCA could not accommodate the staff members and Diefenbaker had to send his staff ahead. The Globe reported: "The next prime minister has been left to answer his own telephone today, and to carry and check his own and his wife's baggage tonight."

The TCA episode had nothing to do with the Conservative government's later announcement that it would allow competition on the transcontinental air route. But it could not have endeared the publicly owned airline to the new prime minister. The airline would now be in a precarious position, with its main ally, C.D. Howe, gone from the House of Commons. Howe had lost his Port Arthur seat in the election and subsequently retired from politics.

Diefenbaker's campaign platform had included calls for more competition and less government interference in business. If he were to keep his election promises, TCA's monopoly position was in jeopardy.

It was not the first time that TCA's routes had been threatened. In the early 1950s, Canadian Pacific Air Lines and another Western-based airline, Pacific Western, had made applications to the Air Transport Board for transcontinental freight and passenger services. The Air Transport Board had held cross-country hearings, but then had passed the matter to the cabinet, where it had died. (In 1945, the Air Transport Board had been given jurisdiction to hear complaints with the powers of a superior court and in 1950, it had been given the power to initiate hearings, but it still remained under the authority of the Minister of Transport.) In 1952, Transport Minister Lionel Chevrier had announced that TCA's monopoly on the transcontinental route would remain in place, but that competition would be allowed on regional routes.

Although TCA continued to hold the trans-Atlantic routes in 1957, its monopoly was already being eroded. Canadian Pacific held the Pacific routes, and had won South American and Mexican routes in 1952. It was granted a polar flight to Amsterdam in 1955, and was given the Lisbon and Madrid routes early in 1957.^[12]

When Diefenbaker installed George Hees as the new transport minister, both Canadian Pacific and Pacific Western were working on applications to the Air Transport Board for transcontinental routes. Hees hired Stephen Wheatcroft, a British economist, to conduct a study of airline competition in Canada.

After just a few months in office, Diefenbaker called another election, seeking to strengthen his weak minority government. In March 1958, the Conservatives received the largest majority yet seen in Canadian government – 208 seats.

The Wheatcroft report, meanwhile, had been delivered on February 7, 1958. It suggested that limited competition on the transcontinental route would be healthy.

On October 6, the Air Transport Board began country-wide hearings into the Canadian Pacific's application for a transcontinental route. The Air Transport Board issued its report in December and Transport Minister Hees announced the decision on January 21, 1959. The Air Transport Board had recommended against additional transcontinental air services. But it did recommend a single daily return service for Canadian Pacific from Vancouver to Winnipeg, Toronto and Montréal to connect with its international service.^[13]

A Globe editorial on January 23, 1959, suggested that the Air Transport Board decision had not gone far enough in introducing competition in the skies.

"The Board's logic is surrounded by befuddlement," The Globe stated. "Transport Minister Hees reiterated last February (while he was campaigning for re-election) that the prime responsibility for introducing competition would rest with the Air Transport Board. That Board has now done the government a disservice by suggesting that when its present members (of government) were in opposition, they did not mean what they said about ending the TCA monopoly (a Conservative campaign platform). The Board's policy appears to be 'Competition if necessary, but not necessarily competition.' "

Although there was some discontentment with TCA's monopoly on transcontinental routes, the daily Canadian Pacific flights put a dent in the publicly owned airlines' budget. In 1960, TCA reported its first deficit – others would follow.^[14]

The railways were not faring much better. Through the late 1950s, they continued to deal with union demands for higher wages, and declining passenger travel. Meanwhile, they continued to seek higher freight rates. The Board of Transport Commissioners had granted a rate increase of 17 per cent effective December 15, 1958. In April 1959, the railways demanded a further 12 per cent increase.

In response to shippers' complaints, Parliament passed the Freight Rates Reduction Act, directing the Board to reduce the 17 per cent rate increase to 10 per cent, while the government would reimburse the rail companies for their loss in revenue. The legislation would be a temporary measure. The Board was put in charge of the reimbursement fund.^[15]

At the same time, the government established a Royal Commission on Transportation that would look, not only at the railway freight rates, but at all aspects of transportation in Canada.

In May 1960, and again in 1961, the Freight Rates Reduction Act was extended, as the royal commission, headed by M.A. MacPherson, held hearings.

The Board of Transport Commissioners continued its regular business. An interruption to normal proceedings arose in 1958 when Chief Commissioner Shepard was seconded to the Air Transport Board, while the chairman of that board was ill. Then late in 1958, Shepard resigned to take a position as vice-president of the British American Oil Corporation. Mr. S. Bruce Smith, an Edmonton lawyer, was appointed, but because of family illness, resigned before taking office. In a quick succession of events, Roderick Kerr, who had served the Board of Transport Commissioners for several years as senior counsel and then briefly as Assistant Chief Commissioner, took over the Chief's position.

Another change for the Board involved its loss of jurisdiction over gas and oil pipelines in 1959, when legislation was passed to create the National Energy Board.

Canadian National Railways passernger train Newfie Bullet en route to St. John's, Port aux Basques, Newfoundland and Labrador, 11 September 1967, photographer: G. Richard, CSMT/CN001777

The MacPherson Commission issued its findings in three volumes in 1961-1962. The Commission defined the objective of Canada's national transportation policy as "the movement of Canadian goods and people with minimum demands on the human and material resources." The Commission recommended that the transportation policy be achieved through competition rather than regulation, a radical shift from the government's approach for the past 60 years.^[16]

The report foresaw a reduced role for railways, and recommended that railways could only compete with other modes of transport if the burden of regulation was lifted. Where the obligations could not be lifted, the railways should be compensated for the expense of service. Four areas in which the railways were hindered, according to the commission, were passenger services, branch lines, grain rates and free transportation privileges.

The report also recommended that all modes of transport should be treated equally, and that each mode be allowed to compete with another, and that financial aid to particular shippers should not be disguised as transportation subsidies.

The final recommendations of the MacPherson Commission were released in 1962, at a time when the Conservative government was nearing the end of its four-year mandate. On January 23, Diefenbaker, tabled the second volume of the report, saying the documents would be "thoroughly examined."

On April 12, 1962, Finance Minister Donald Fleming said, "The recommendations contemplate a radical departure from the basis of rate-making as provided for in the present provisions of the Railway Act. The two volumes would involve a fundamental reconstruction of much of our railway legislation, particularly on the financial and regulatory side."

With an election in the offing, it was not the time to start "a radical departure" or "a fundamental reconstruction" in transportation policy. It was time to campaign for re-election.

The Conservatives won a minority government in June 1962. But, unhappy with the small win, they returned to the polls on April 8, 1963 – and lost.

The Liberals returned to power with a minority government and a new prime minister, Lester B. Pearson, a former civil servant and winner of the Nobel Peace Prize. On November 8, 1965, the third election in just over three years was called and this time another Liberal minority government was voted in.

Although transportation policy and the MacPherson Commission had been shoved to the sidelines, they had not been forgotten in the intervening years. Subsidies to railways, initiated by the Freight Rates Reduction Act in 1959 as a temporary measure, were still being doled out. The Conservative government, and then the Liberal government in 1963, continued to work on legislation to change the freight rates policy. A bill was introduced in 1963. Then, a cabinet shuffle put John Whitney Pickersgill in charge of the Transport portfolio.

Jack Pickersgill had earned legendary stature on the Hill by the time he took over transportation policy in February 1964. Originally a professor of history, Pickersgill had joined the civil service in the late 1930s and was quickly promoted to the office of Mackenzie King. He became King's personal secretary and confidant, and later St. Laurent's. He had served as Clerk of the Privy Council and Secretary of State.

In 1952, he won a seat in the House of Commons and became a major player in Liberal politics. There was nothing about the running of government or the workings of Parliament that Pickersgill did not know. When he had worked as secretary to the prime ministers, a popular comment had been "Clear it with Jack."^[17] As a politician, he earned the nickname Jumping Jack because he popped up from his seat so often in the House of Commons. Unlike his predecessor, C.D. Howe, Pickersgill revelled in parliamentary debate. In fact, he had been involved in planning the closure tactics used in 1956 to get the pipeline bill through Parliament.

Now he was ready to take on the reconstruction of transportation policy, and he was determined to create a bill that would stand the test of time.

On January 27, 1967, the Winnipeg Press reported, "A massive transportation bill that will revolutionize Canadian railroading passed its final debating hurdle on Thursday night. Transport Minister Pickersgill won a round of applause from both sides of the chamber as the final vote was taken to end 15 days of clause-by-clause study. Only routine third reading and Senate approval remain before the bill goes to royal assent."

The National Transportation Act was based on the MacPherson Royal Commission completed five years before. It had been introduced in the House in September 1966, before it was sent to committee for two months of study. The 30,000-word bill had 60 amendments, but remained mostly intact.

The main points of the bill were: the establishment of the Canadian Transport Commission to direct all forms of transportation under federal control – railways, shipping, airlines and interprovincial trucking; that railways would have the freedom to set freight rates without regulation; and that railways would be able to abandon uneconomic branch lines and passenger services unless the government specifically ordered otherwise in the public interest, and then paid their deficits.

There was one point in which Pickersgill did not manage to change transportation policy, and that was the Crowsnest Pass Agreement. A legacy from the time of Andrew G. Blair, the Crow rate had been passed in 1897, giving the CPR a subsidy for Crowsnest Pass construction in return for a reduced freight rate in perpetuity. Although there was no political desire to remove the Crow rate, Pickersgill did attempt to put an amendment into the bill that would allow for a cost study of it at a later date. That was soundly defeated.

On March 27, 1967, another major policy shift was announced, this time regarding airlines. Canadian Pacific was allowed to double its transcontinental service to two return flights a day. It also was allowed to add Calgary, Edmonton and Ottawa to its transcontinental route. (The route had been Vancouver, Winnipeg, Toronto and Montréal.) The policy decision was based on a study by Stephen Wheatcroft, the British economist who had recommended the first expansion of Canadian Pacific into transcontinental service in 1958.

The first intimations of change at the Board of Transport Commissioners came in the Annual Report for 1966, published early in 1967. The opening pages of the report contained this announcement: "While this report deals with the work of the Board during the 62 years since its establishment in 1904, it may well mark a historic turning point in the field of transportation regulation in Canada and may be the last report submitted by the Board. ... If legislation (Bill C-231) is enacted, the Board of Transport Commissioners for Canada will be merged with the Air Transport Board and the Canadian Maritime Commission into a new Canadian Transport Commission."

A historic turning point had indeed been reached. The National Transportation Act was passed and became law. And it was Canada's centennial year. The nation was getting ready to celebrate.

Notes for Chapter 2

The Board of Transport Commissioners' annual reports (1938-1966) are the main source for this chapter. The House of Commons Debates were used for relevant discussions or decisions in Parliament. Canadian newspapers were used as noted in the text.

Other sources include:

[1].Reginald Whitaker, The Government Party, Organizing and Financing the Liberal Party of Canada, 1930-1958, p. 88 and p.180.

[2]. John Robert Columbo, Columbo's Canadian Quotations, p. 269.

[3]. G.R. Stevens, History of the Canadian National Railways, P. 383.

[4]. A.W. Currie, Economics of Canadian Transportation, p. 544.

[5]. Ibid, p. 549.

[6]. Fred Paul Gosse, in his unpublished thesis, The Air Transport Board and Regulation of Commercial Air Services, for Carleton College, Ottawa, April, 1955, commented that civil servants were posted to the Air Transport Board. Two chairmen of the Air Transport Board, J.R. Baldwin and W.J. Matthews, were both senior civil servants in the Department of Transport.

[7]. A.W. Currie, p. 403.

[8].Ibid. p. 101-152. Currie gives a good explanation of the series of freight rate cases heard between 1946 and 1951.

[9]. Ibid, p. 405.

[10]. Who's Who in Canada, 1957. The Board of Transport Commissioners Annual Reports also carried some biographical information about the Board chairmen.

[11]. Two sources discuss C.D. Howe's role in the TransCanada PipeLine debate: C.D. Howe: A Biography by Robert Bothwell and William Killbourn, and Seeing Canada Whole, A Memoir, by J.W. Pickersgill.

[12]. Peter Pigott, National Treasure, The History of the Trans-Canada Air Lines, p. 382-385.

[13]. Ibid, p. 387.

[14]. Ibid, p. 382.

[15]. Board of Transport Commissioners, Annual Report, 1959.

[16]. John Saywell, editor, Canadian Annual Review, 1962, p. 209.

[17]. John Robert Columbo. Columbo's Canadian Quotations, p. 475.

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